Vestergaard Frandsen SA ( MVf3 APS) & Ors v Bestnet Europe Ltd & Ors

The Court of Appeal confirms that detailed, proprietary experimental records may be used as the basis for a competitor's product where those records materially inform selection of formulations; but contractual confidentiality should not be interpreted to impose a strict, knowledge-independent liability for use by an employee who neither had nor knew of the specific confidential material. Remedies (in particular injunctive relief) must be proportionate, taking account of subsequent independent development, material differences in formulation and the passage of time.

The appellants challenged multiple findings of Arnold J arising from claims that defendants used confidential experimental data contained in a database called Fence to develop a long-lasting insecticidal net (NetProtect). The appeal bundles include the Main Judgment ([2009] EWHC 657 (Ch)), Remedies Judgment ([2009] EWHC 1456 (Ch)), Whopes I Judgment ([2009] EWHC 1623 (Pat)) and a Remittal Judgment ([2011] EWHC 477 (Ch)). The key issues were (i) whether the Fence database was used to devise the initial NetProtect recipes; (ii) whether subsequent changes to polymer composition rendered the Fence data irrelevant; and (iii) whether an employee who lacked knowledge of the specific confidential material (Mrs Sig) could be liable for breach of contractual confidence. The Court of Appeal largely upheld Arnold J's factual findings that the Fence data informed the initial recipes, dismissed the remittal-based challenge, allowed Mrs Sig's appeal on liability, and confirmed the exercise of discretion on injunctive relief for later product variants.

1. Disposition. The Court of Appeal (majority) dismissed the defendants' appeals against the Main Judgment and the Remittal Judgment, allowed the appeal of Mrs Sig against liability for breach of confidence, and dismissed the claimants' cross-appeal against refusal of injunctions for later product variants (WHOPES I and II). (See paras 1–3, 58.)
2. Use of experimental database as basis for product development. The court held that the trial judge's detailed adverse findings of fact were amply supported by the trial evidence and analysis. The Fence database contained recorded formulations and test results; the initial NetProtect recipes were sufficiently close to particular Fence samples (notably samples 8, 9 and 13) and shared unusual numeric details, such that the judge was entitled to conclude the Fence data materially informed the choice of initial recipes. The appellate court emphasised that similarity of technically significant details and the defendants' attempts to mislead the court reinforced that finding. (See paras 11–24.)
3. On alternative explanation and expert evidence. The court rejected the submission that the defendants had established that NetProtect could as readily have been produced by independent general scientific skill. Even if independent development were scientifically possible, the court held that the fact of possible independent invention does not displace strong evidential indications of actual use of confidential test results. The judge's evaluation of expert cross-examination did not undermine the finding. (See paras 23–24.)
4. Remittal questions and polymer composition. The Court considered material adduced about the effect of LDPE/HDPE ratios (including a published patent application) and remitted technical questions to the trial judge. Arnold J's subsequent answers were affirmed: changes in LDPE proportion used by the defendants did not establish that Fence results were useless for NetProtect formulation; the claimed dominance of LDPE in the disclosed documents did not demonstrate that the additives' effects were swamped. Thus the remitted issues did not alter the Main Judgment conclusions. (See paras 25–41.)
5. Liability of an employee who lacks knowledge of the specific confidential material (Mrs Sig). The court analysed contractual and equitable obligations. It held that an express contractual obligation of confidentiality does not, as a matter of implication, impose an absolute strict-liability rule that makes a person liable for misuse of confidential information of which they had no knowledge; Seager v Copydex was distinguished on its facts where the defendant had in fact used the information unconsciously. There was no business or legal reason to imply into the contract a term imposing such strict liability. Accordingly the trial judge was wrong to hold Mrs Sig in breach of confidence on the basis that she had used confidential information without knowing it. The appeal of Mrs Sig on liability was therefore allowed. (See paras 42–50 and the conclusion in para 58.)
6. Remedies and proportionality. The court underlined that injunctive relief for misuse of technical trade secrets must be exercised proportionately. The trial judge had refused injunctions for WHOPES I and WHOPES II on the basis that those later products were sufficiently different, that the passage of time and the possibility of independent development reduced the utility of injunctive relief, and that some elements could be ascertained from the public domain or by experimentation. The appellate court found no error in the judge's discretionary balancing of these matters and upheld the refusals. The court observed that the Enforcement Directive (2004/48/EC) expressly requires proportionality in enforcement measures. (See paras 51–57.)
7. Orders and further procedure. The Court proposed dealing outstanding costs issues on the basis of written submissions unless a hearing appeared necessary; parties to propose orders in writing. (See para 58.)

• Court of Appeal (Civil Division): Determination of appeals and cross-appeal; judgment delivered 20 April 2011, allowing the appeal of Mrs Sig and otherwise dismissing appeals and cross-appeal. ([2011] EWCA Civ 424).
• High Court, Chancery Division: Trial and principal findings by Arnold J in the Main Judgment and Remedies Judgment: ([2009] EWHC 657 (Ch) and [2009] EWHC 1456 (Ch)); related patent/procedure-related decisions recorded at [2009] EWHC 1623 (Pat) and remittal hearing recorded at [2011] EWHC 477 (Ch).