Once bitten twice shy: Mosquito nets and Springboard injunctions

Once bitten twice shy: Mosquito nets and Springboard injunctions

Published By

03/01/2011 19:05:54

Keywords: Intellectual property, injunctive relief, springboard injunction, trade secrets, reverse engineering, misuse of confidential information.

At first instance, Vestergaard Frandsen (“VF”), a company selling mosquito nets treated with insecticides, brought a claim for misuse of confidential information. The claim was made against four companies in competition with VF which were connected to two exemployees (Mr Larson and Mrs Sig) and Dr Skovmand, an ongoing consultant who worked for VF in the research and development of ‘insecticidal fabrics’. In the course of product development, Dr Skovmand oversaw various experiments for VF and created a database which contained details of additives used in conjunction with insecticides. Mr Larson, with Dr Skovmand’s assistance, was alleged to have used this confidential information as a basis for developing a competing product, ‘NetProtect’. Mrs Sig was not personally involved in developing NetProtect nor was she aware of any breach of confidence.

Arnold J held in the first instance that the defendants breached their duty of confidentiality in using the confidential information in competing products. As a result, an injunction was awarded against the defendants’ product NetProtect, but not against any further products developed at a later stage.
The appeal was brought by the defendants’ on the grounds that:

  1. the information in the database could not have gainfully been used to develop the defendants’ product;

  2. the ratio of the mixture of plastics used in the defendants’ netting was notably different from VF’s product and its effects made the information within the database immaterial in comparison; and

  3. Mrs Sig could not owe an implied duty of confidentiality if she did not have any personal involvement in the misuse of confidential information. A cross-appeal was also brought by VF to extend injunctive relief to subsequent derivative products.

Held, dealing with each of the grounds in turn:

  1. Although none of the defendants’ products shared the exact ratio and ingredients found in VF’s database, there were close similarities. It was also apparent from the defendants’ selective experimentation that VF’s database had been advantageously used as a basis for developing the NetProtect product to save time. Jacob LJ further commented that the defendants’ surreptitious behaviour and unreliable witness statements ([2009] EWHC 1456(Ch)) was indication enough to the court that VF's database was used to the defendants' benefit. The appeal on this ground was dismissed.

  2. Jacob LJ dismissed the appeal on this ground on the basis that there was insufficient evidence to support the defendants' claims that the ratio of different plastics used in the manufacture of netting made any significant differences to the product.

  3. Jacob LJ overturned the previous ruling of contractual breach of confidentiality in relation to Mrs Sig, stating that the judge at first instance incorrectly considered Seager v Copydex Ltd [1967] 1 WLR 923 (“Seager”). Jacob LJ distinguished the present case from Seager as it had not been shown or suggested that Mrs Sig had either personal access to or knowledge of the confidential information. This was considered to be different from the defendants' position in Seager, where the defendants had implied knowledge by personally using confidential information imparted to them. Additionally, Jacob LJ commented that there could not be an implied term of confidentiality without establishing knowledge, as this would be too harsh and contrary to the principles of contract law and rules of equity.

The cross-appeal

Jacob LJ upheld Arnold J’s reasoning in his first instance remedies judgment ([2009] EWHC 1456 (Ch)). In his judgment, Arnold J considered VF’s request to restrain the defendants by injunction from:

a) continuing to produce products embodying the confidential information; and
b) producing derivative products which are connected to the confidential information of a past breach.

With regard to (a), Arnold J distinguished between the approach taken by Lord Goff in Attorney General v Guardian Newspapers Ltd (No 2) [1988] UKHL 6 (“Spycatcher”) and the judgment in Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375 (“Terrapin”). In the Spycatcher case it was found that once the confidential information from the contents of a book had been released to the public, it was beyond the scope of injunctive relief and damages were sufficient. However, in Terrapin, where a product based wholly on a trade secret was released to the public, the judge in that instance awarded a ‘springboard’ injunction to the Claimant.

Arnold J found that, even in circumstances where trade secrets were already released to the public and may be reverse engineered or are discoverable after conducting research, there is still ‘relative confidentiality’ reflecting the time taken to determine the confidential information (Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd, Roger Bullivant Ltd v Ellis [1987] FSR 172 and Coco v AN Clark Engineers Ltd [1969] RPC 41 considered), the difference being that other forms of confidential information ceased to retain any element of confidential information upon release into the public (Attorney General v Guardian Newspapers Ltd (No 2) and Attorney General v Blake [1998] Ch 439 considered).

With regards to (b), it was held that, even though there were some later products considered to be closely derived from NetProtect and therefore related to the confidential information, the additional research and time taken to develop these derivative products diminished the ‘springboard’ effect
(Attorney General v Guardian Newspapers Ltd (No 2), Coco v AN Clark and Ocular Sciences Ltd v Aspect Vision Care &Ors [1997] RPC 289 considered). Accordingly, the cross-appeal was dismissed.

Jacob LJ also commented on the relevance of the concept of the 'passage of time' and proportionality with respect to the discretion of the court in granting injunctive relief. Specifically, he noted that, as the evidence suggested that independent development of the product was possible, it was within the judge's discretion to consider that the time spent developing derivative products diminished the head start gained by the misuse of the confidential information. Therefore, the time taken to reverse engineer a trade secret once it is released into the public, may not necessarily reflect the length of a ‘springboard’ injunction that may be enforced. Jacob LJ also noted that proportionality is now an express consideration relevant to injunctive relief for infringement of intellectual property rights that was established by the Enforcement Directive (2004/48/EC).

Nicholas Kempton, Powell Gilbert LLP