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Tuesday, 4 August 2009

Net profit saved though springboard loses its spring?

A few short but busy weeks have passed since the IPKat first received word of Vestergaard Frandsen A/S and others v Bestnet Europe Ltd and others [2009] EWHC 657 (Ch) and its sequel at [2009] EWHC 1456 (Ch), these being Chancery Division for England and Wales judgments of Mr Justice Arnold. Now he has the time to deal with them.

The dispute in question related to technical information concerning mosquito nets which was contained in a database. The action was brought by the Vestergaard group of companies against a variety of defendants, including two ex-employees. The judge found that a consultant, who was initially engaged by Vestergaard but then worked with the defendants in developing their own competing mosquito net, had been bound by both express and implied obligations of confidence. He also found that the information in the database constituted trade secrets that belonged to Vestergaard.

Holding that the obligation of confidentiality continued even after the consultant's relationship with Vestergaard had ended, Arnold J rules that his use of recipes and test results contained in the database, in order to devise the initial recipes for the defendants' competing product, amounted to a misuse of confidential information for which all the defendants were liable.

In a complex and long judgment, Arnold J the factors to apply when determining whether there has been a misuse of confidential information consisting of technical information. Both he and the parties accepted that the consultant's position was analogous to that of an employee, which meant that the Court of Appeal's well-established guidance relating to the position of employees, laid down in Faccenda Chicken Ltd v Fowler [1987] Ch 177, could be deployed when determining whether the consultant could use the information once his relationship with Vestergaard was over.

Having held in favour of Vestergaard, the next issue for Arnold J to determine was whether injunctive relief was appropriate, given that Vestergaard's secret information wasn't quite so secret any more. On this issue the judge picked his way carefully through a minefield of conflicting (or complementary) principles and case law. Granting injunctive relief (though not as much as Vestergaard had hoped for), he held as follows:

* In the absence of specific discretionary reasons for the refusal of an injunction, where a claimant establishes that a defendant has breached an equitable obligation of confidence and that there is a sufficient risk of repetition, an injunction will be granted unless there are exceptional circumstances;

* There had never been any sound authority for the proposition that an injunction could be granted to restrain continued misuse of confidential information even once the information had ceased to be confidential. Neither Terrapin v Builders Supply Co (Hayes) [1967] RPC 375 nor Cranleigh Precision Engineering Ltd v Bryant [1965] 1 WLR 1293 QBD was authority for that proposition [If Kats could blush, this one would be pretty pink -- he's sure he has persuaded a generation of students of the opposite, confident that Speed Seal Products Ltd v Paddington [1985] 1 WLR 1327 CA said this was the case];

* There was strong authority for the proposition that publication of confidential information brought the obligation of confidence to an end, regardless of whether the information was published by the confider, a stranger or by the confidant himself. This being so, no injunction could be granted to restrain continued misuse of confidential information once the information had ceased to be confidential;

* If the "springboard" doctrine was understood to mean that an injunction could be granted to restrain continued misuse of confidential information once the information had ceased to be confidential, then it should now be regarded as having been laid to rest [if you listen very quietly you can probably hear the sound of the IPKat's lecture notes being gently shredded ...];

* As the law stood, it was not clear whether an injunction could be granted to prevent a defendant from benefiting from past misuse, and in general the remedy for past misuse of confidential information was a financial one. .

* On the facts, Vestergaard had established misuse of their trade secrets. There remained a clear risk of further use or disclosure if an injunction were not granted, in which case neither damages nor equitable compensation would be an adequate remedy.
The IPKat is still taking this all in. Merpel's quite positive about it though. She points out that Arnold J offered two other possible interpretations of the springboard doctrine: (i) information might still be worth protecting if it had a limited degree of confidentiality even though it could be ascertained from public domain sources;(ii) an injunction could be granted to prevent a defendant benefiting from a past misuse of confidential information even if it was no longer confidential.

Mosquito nets here
Springboards here
Mosquito cat association here
Rusty Springboard here

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