Vestergaard Frandsen A/S & Ors v Bestnet Europe Ltd & Ors

A claim for damages or equitable compensation should not be struck out merely because the manufacture and sale of a later product was not itself a misuse of confidential information. Where the product formulation was derived from misuse, the law may remain sufficiently uncertain and developing to require an inquiry into the necessary facts and the appropriate legal basis for relief. A claimant should distinguish between products directly embodying the misuse and later products allegedly benefiting from a head start. The pleading may require further particularisation, but that is ordinarily addressed by a request for further information rather than strike-out.

The claimants had established that the defendants misused confidential information in developing mosquito-net products. An injunction restrained further misuse, but did not extend to products submitted for WHOPES I or WHOPES II evaluation, because their manufacture and sale were not themselves misuse, although their formulations derived from the misuse.

The claimants elected an inquiry as to damages or equitable compensation and pleaded lost profits, alternatively a notional royalty, in respect of five product categories. The defendants applied to strike out the claims concerning the later products and products sold by reference to the WHOPES evaluations. The issue was whether those claims were legally unsustainable at the pleading stage.

1. Application dismissed. The relevant paragraphs of the Amended Points of Claim were not struck out.
2. The fact that manufacture and sale of the WHOPES I and WHOPES II products did not itself constitute misuse did not necessarily exclude a claim for damages or equitable compensation. The formulation had been derived from misuse, and the claimant could potentially advance a case that the defendants obtained a head start through that misuse.
3. The law concerning products whose formulation has been derived from misuse of confidential information was unclear and developing. It was therefore inappropriate to determine the issue summarily. The matter should proceed to an inquiry, where the necessary facts could be established and the law properly considered.
4. The pleading failed to distinguish adequately between the original NetProtect product, whose manufacture and sale had been held to amount to misuse, and the later products. It was also expressed at a high level of generality and did not contain all the factual matters on which the claimants proposed to rely.
5. There was consequently scope for a request for further information seeking greater particularisation. That procedural course was not, however, the application before the court.

The judgment records earlier stages in the same litigation:

• High Court (Chancery Division) — findings of misuse and confidentiality relief were given in [2009] EWHC 657 (Ch), [2009] EWHC 1456 (Ch) and [2009] EWHC 1623 (Ch).
• Court of Appeal — the conclusions on the scope of the injunction were upheld in [2011] EWCA Civ 424.
• High Court (Chancery Division) — the present application to strike out parts of the damages claim was dismissed.