BACKGROUND

The Complainant in Vestergaard Frandsen S/A v Bestnet Europe Ltd [2011] EWCA Civ 424 is a manufacturer of insecticidal fabrics. It claimed that Bestnet Europe Ltd’s product, a long lasting anti-mosquito bed net called NetProtect, was developed using Vestergaard’s confidential information contained in a database called Fence, which contained the ingredients and proportions of ingredients used to make long lasting insecticidal nets. Vestergaard claimed that use of its confidential information occurred when the individual Defendants, Mr Larsen and Mrs Sig, left Vestergaard in 2004 and set up Bestnet.

The first instance court found that before leaving the company, Mr Larsen and Mrs Sig had embarked on a project to compete with Vestergaard. Mr Justice Arnold granted an injunction in respect of the first version of NetProtect, but decided that subjecting later versions to an injunction would be disproportionate because they were the result of a lot to independent work done after connections with Vestergaard had been severed.

Bestnet and Mrs Sig appealed and Vestergaard cross-appealed Arnold J’s decision not to grant an injunction in respect of later versions of the net.

DECISION

With respect to Bestnet’s appeal, Jacob LJ found that none of the NetProtect chemical combinations were exactly the same as a particular chemical combination found in Fence. However, some of them were close. Jacob LJ noted that the use by an alleged copyist of odd or unusual detail found in the original is often a tell-tale sign of copying. Bestnet tried to argue that the “coincidence” was merely of one man doing the same thing twice. Jacob LJ concluded that there was “ample material” to justify Arnold J’s finding that the Fence database had been used as the basis for the NetProtect product and it was not a matter of the developer, (Mr Skovmand, who also worked for Vestergaard until 2004), using his general skill and knowledge or information in the public domain.

As for the liability of Mrs Sig, her employment contract stated that she owed a duty not to use any confidential information and that the duty continued after termination of her contract. Arnold J had found that Mrs Sig had breached her contract even though it had not been suggested or shown that she had had access to the Fence database or knew that it had been used to develop NetProtect. She had, however, been “closely involved” in setting up Bestnet and in the commercial side of the development of NetProtect. In Arnold J’s judgement, this was sufficient to render her liable for breach of her own obligation of confidence. Arnold J said, “A person can be liable for breach of confidence even if he is not conscious of the fact that what he is doing amounts to misuse of confidential information.”(see Seager v Copydex Ltd [1967] 1 WLR 923).

Mrs Sig argued that Arnold J had erred. First, she could not be said to have misused the confidential information herself because she did not know it and did not know that it was being used. Second, the express term of her contract did not forbid unknowing use of the information and no term forbidding such use should be implied. Vestergaard argued that once the law imposed an obligation of confidence, whether in equity or as a matter of contract, the obligation was broken where the employee used the information, even if unknowingly.  

Jacob LJ found that Vestergaard’s argument was “far reaching” and that an obligation of strict liability was very serious. The issue of use was the key question. Jacob LJ said that Seager v Copydex did not support Vestergaard in its quest to impose strict liability on Mrs Sig as in that case the Defendants had actually used the information imparted to them, albeit unconsciously, whereas, in Jacob LJ’s view, Mrs Sig had not used the information in question. Further, there could be no implied term imposing strict liability and there was no business reason to imply a term of that harsh extent. Accordingly, Jacob LJ found that Mrs Sig had not breached confidentiality.  

As for the cross-appeal, Jacob LJ did not agree with Vestergaard’s argument that the later versions were so close to the original NetProtect product as to embody substantially all the information taken from the Fence database. Jacob LJ found, instead, that Dr Skovmand had made changes to the product after doing a lot of his own work.  

Jacob LJ found that Arnold J had been correct to address proportionality in considering whether to grant an injunction, as the IP Enforcement Directive (2004/48/EC) required it in respect of intellectual property rights and a claim for misuse of technical trade secrets was a claim to enforce an intellectual property right.