COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION INTELLECTUAL PROPERTY
The Hon Mr Justice Arnold
Strand, London, WC2A 2LL
B e f o r e :
THE RT HON LORD JUSTICE JACKSON
SIR JOHN CHADWICK
| Vestergaard Frandsen S/A (now called MVF3 APS)
Vestergaard Frandsen SA
Disease Control Textiles SA
|- and -
|Bestnet Europe Ltd
3T Europe Ltd
Intelligent Insect Control Ltd
Torben Holm Larsen
Trine Angeline Sig
(instructed by Field Fisher Waterhouse) for the Claimants
Mr Martin Howe QC and Mr George Hamer
(instructed by McGuireWoods London LLP) for the Defendants
Hearing dates: 16/17/18 March 2011
Crown Copyright ©
Lord Justice Jacob:
i) The "Main Judgment," 3rd April 2009,  EWHC 657 (Ch);
ii) The "Remedies Judgment," 26th June 2009,  EWHC 1456 (Ch);
iii) The "Whopes I" Judgment," 7th July 2009,  EWHC 1623 (Pat); and
iv) The "Remittal Judgment", 7th March 2011,  EWHC 477 (Ch).
The Main, Remedies and Remittal Judgments exist in both full and redacted forms. The full forms contain confidential trade secrets of both parties. The above references are to the redacted forms. I shall endeavour to write this judgment so as to omit any matter said to constitute trade secrets.
General Background and the nature of the appeals and cross-appeals
I invited both counsel during their closing submissions to provide me with their side's respective proposed findings of fact. I made it clear to counsel for the Defendants that I considered the most important factual question in the case was how the Defendants had developed their product, and that so far as that was concerned what I was expecting was a historical recitation. In the event, counsel for the Defendants did not provide me with such a history in his closing submissions. I infer that the reason why he did not do so was because the state of his clients' evidence did not enable him to.
 Dr Skovmand did misuse the information in the Fence database, in particular the information relating to samples 7-16 and more particularly the information relating to samples 8, 9 and 13, by using it to devise the initial NetProtect recipes which were tested in October 2004.
 I think that it is fallacious to divorce the recipes from the results. Furthermore, I consider that Dr Skovmand did use the results, in that he used them to identify which recipes were worth repeating and to decide what variations should be tested.
The Main Appeal: the finding that the Fence Database was used
[352, 353 and 354] The data contained in the Fence database demonstrates that [Additive A] acts as a "high migration" additive which increases the migration of deltamethrin from the bulk to the surface of the fibres, producing an increase in the number of washes before the mortality rate drops below 80%. It also demonstrates that [Additive C] acts as a "low migration" additive which reduces the migration of deltamethrin from bulk to surface.
39 samples were subjected to wash tests. Of these, 24 used deltamethrin in 14 unique formulations. All these samples are based on a deltamethrin content of [Figure 1] or [Figure 2] g/kg. All of the samples which were washed more than 21 times are based on deltamethrin. As noted above, three samples reached or got close to 20 washes before mortality dropped below the 80% mortality threshold, namely samples 8, 9 and 11. The best performing sample was sample 11.
The best performing sample in four and eight month outdoor exposure tests and in one month Kenyan exposure tests was sample 9. The best performing samples in UV-B exposure tests were samples 7 and 8.
 I conclude that the NetProtect October 2004 trials were not a well-designed set of experiments which were planned to avoid problems with co-linearity in the way that samples 7-15 in the Fence database were, and that the explanation for the choice of [Figure 15] was not Dr Skovmand's "mathematical protocol".
During the course of cross-examination Dr Skovmand came up with an explanation for his use of the same number in the NetProtect recipes (as to which, see below), which I consider is the explanation for its use in samples 7-20 in the Fence database. I shall explain this in more detail below, but in short Dr Skovmand chose [Figure 3] with the intention of avoiding problems of co-linearity in linear regression analysis of the experiments.
Mr Howe suggested that the coincidence was therefore merely of the same man doing the same thing all over again. But the Judge specifically rejected that, and I can find nothing to show he was wrong.
The Remittal Judgment appeal
 There be remitted for determination by the Chancery Division before Arnold J the following questions of fact, namely:
(i) how strongly the migration rate of deltamethrin is affected by the addition of LDPE to the polymer mix;
(ii) how that effect (if any) compares to the effect of the three additives referred to in paragraphs 121(i)-(iii) of the judgment of Arnold J dated 3 April 2009;
(iii) whether the outcome of issues (i) and (ii) above renders the Fence results not useful for the formulation of the Defendants' product
i) In general terms, the addition of LDPE to a polymer matrix otherwise consisting of pure HDPE would be expected to increase the migration rate of deltamethrin, with higher percentages of LDPE having a greater effect than lower percentages; but there is no evidence that the addition of LDPE in the quantities used by the Defendants (i.e. [REDACTED]% where present) has a significant effect on migration rate.
ii) [ADDITIVE A] acts, and was known to Dr Skovmand to act, as a migration enhancer. [ADDITIVE C] acts, and was known to Dr Skovmand to act, as a migration inhibitor. The effect of [ADDITIVE A] can be seen even in a polymer matrix containing [REDACTED]% LDPE. Apart from that, the relative effect of LDPE on the one hand and [ADDITIVE A]/[ADDITIVE B]/[ADDITIVE C] on the other hand on deltamethrin migration is unknown.
 In summary, the invention disclosed and claimed in the PCT Application is that the migration of deltamethrin in insecticidal polyethylene fibres and fabrics can be optimised by using a mixture of HDPE and LDPE. A ratio of 9:1 (i.e. 10% LDPE) is particularly preferred, but no experimental data is disclosed to support the choice of 10% LDPE. The specification points out that migration is also affected by other factors, including (i) the presence of PBO (and the ratio PBO to deltamethrin), (ii) the presence of "migration promotors and inhibitors" and (iii) the thickness of the fibre.
LDPE percentage is considered as key driving factor in controlling migration in PE bednet.
The other is a report of some trials done in May 2007. It contains the following statement:
A,B,C: confirm LDPE drives migration significantly and dominantly.
To some extent, the level of LDPE in the yarn would also be important, as LDPE can be used as a migration rate regulator.
Mr Howe submitted that with the "key driving factor" and "dominantly" documents in his hand, counsel cross-examining her at the time would have been able to show she had grossly understated the effect, merely saying "to some extent" when in truth the ratio was dominant.
The Liability of Mrs Sig
(ii) Clause 8 of Mrs Sig's contract of employment provided as follows; "[Ms Sig] shall keep absolutely confidential all information relating to the employment and any knowledge gained in the course of her employment and which inherently should not be disclosed to any third party. The absolute duty of confidentiality also applies after [Ms Sig] has terminated the employment with [the First Claimant]".
(iii) The following terms were express, alternatively implied, terms of Mrs Sig's and Mr Larsen's contracts of employment with the First Claimant under Danish Law.
(a) That each owed a duty of good faith and fidelity to the First Claimant;
(b) That each owed a duty so long as the contract of employment subsisted not to use any information confidential to the Claimants or to disclose such information to any third party; and
(c) That each owed a duty following the termination of the contract of employment, not to disclose any trade secrets or other highly confidential information of the Claimants, including the Confidential Information, or to use such information for their own purposes or the purposes of third parties.
[23 Remedies Judgment] Mrs Sig. Mrs Sig was subject to an express obligation of confidentiality contained in clause 8 of her contract of employment. This obligation explicitly continued after termination of her employment. After termination, however, the obligation is only enforceable in so far as it prevents Mrs Sig from misusing VF's trade secrets. In the absence of an express term, Mrs Sig would be subject to an implied term to that effect. Although Mrs Sig was not personally involved in devising the initial NetProtect recipes or carrying out the trials, she was closely involved in setting up both Intection and Bestnet and in the commercial side of the development of NetProtect. In my judgment, this is sufficient to render her liable for breach of her own obligation of confidence.
 Counsel for the Defendants submitted that Mrs Sig could not be liable for breach of confidence absent a finding that she knew that the initial NetProtect recipes were derived from the Fence database. I do not agree. 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  1 WLR 923. I would agree that a person who is not otherwise subject to an obligation of confidence (e.g. by contract) will not come under an equitable obligation of confidence purely as a result of the receipt of confidential information unless and until he or she has notice (objectively assessed by reference to a reasonable person standing in the shoes of the recipient) that the information is confidential; but that is a different point.
 I accept VF's case [i.e. for an injunction] to the extent that I consider that the manufacture and sale of the NetProtect product launched by the Defendants in October 2005 did amount to misuse of VF's trade secrets. This is because it was made in accordance with the [redacted] formulation (that is to say, a formulation which was close to some of the VF recipes in the Fence database and which the information in the database indicated would be well worth trying, which formed part of the October 2004 trials and which was the Defendants' reference formulation for their development work) and differed little from VF's recipes in terms of polymer composition and other additives.
 By contrast, I consider that the manufacture and sale of mosquito nets made in accordance with the formulation submitted by Bestnet for WHOPES II evaluation does not amount to misuse of VF's trade secrets, although that formulation derived from such misuse. This is partly because it was a [redacted] formulation, which is further away from VF's recipes. More importantly, as counsel for the Defendants submitted, I have already found that this formulation differed from any of VF's recipes, in particular in terms of its polymer composition, inclusion of [redacted] and inclusion of [redacted]. Counsel for VF relied upon Dr Skovmand's evidence that it was "not very different"; but in my judgment it was different enough.
 I also consider that, contrary to the submission of counsel for VF, the passage of time since October 2004 is of relevance. Although this is not a case in which the confidential information could be readily ascertained by reverse engineering (some information can undoubtedly be obtained by chemical analysis, but the Defendants have not suggested that the precise recipe could be ascertained), the identities of the three principal additives can be obtained from public domain sources and suitable proportions of them can be worked out by trial and error, which after all is what Dr Skovmand did. Thus I am confident that an independent consultant could have come up with similar recipes after the expenditure of a certain amount of time and effort. By misusing VF's trade secrets, Dr Skovmand saved the Defendants that time and effort. As indicated above, it seems to me that this is a relevant consideration even where the confidential information has neither been published nor is readily ascertainable from public domain sources.
 In short, the remedy should be proportionate to the wrong. Having regard to the matters outlined above, I consider that an injunction to restrain the manufacture and sale of the product submitted for WHOPES II evaluation would be disproportionate.
My decision with regard to the product submitted for WHOPES I approval in March 2006 is that I will not grant an injunction in respect of that. I can quite see that it is closer to the October 2005 product than the WHOPES II product, and therefore closer to the VF recipes. Nevertheless there are differences and, taking into account the passage of time for the reasons given in the remedies judgment I think it would be disproportionate to grant an injunction in respect of the WHOPES I product.
Sir John Chadwick:
Lord Justice Jackson: