Vestergaard Frandsen A/S & Ors v Bestnet Europe Ltd & Ors [2009] EWHC 1456 (Ch)

[2009] EWHC 1456 (Ch)Case No HC06C04408
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26 June 2009
Before
THE HON MR JUSTICE ARNOLD
Between
VESTERGAARD FRANDSEN A/SClaimantsVESTERGAARD FRANDSEN SAClaimantDISEASE CONTROL TEXTILES SAClaimantBESTNET EUROPE LIMITEDDefendants3T EUROPE LIMITEDDefendantINTECTION LIMITEDDefendantINTELLIGENT INSECT CONTROL LIMITEDDefendantTORBEN HOLM LARSENDefendantTRINE ANGELINE SIGDefendant
Mark Platts-Mills QC, Tom Moody-Stuart and James Whyte (instructed by Field Fisher Waterhouse LLP) for ClaimantsPeter Prescott QC and George Hamer (instructed by McGuireWoods London LLP) for DefendantsHearing Hearing date: 21 May 2009
JudgmentApproved Redacted JudgmentMR JUSTICE ARNOLD :Introduction
[1]On 3 April 2009 I handed down in private a confidential judgment in this matter ([2009] EWHC 657 (Ch), “the main judgment”) holding that the Defendants were liable for breach of confidence through misuse of VF’s trade secrets. (Subsequently a redacted version of the main judgment has been made available to the public.) In the main judgment I left over for further argument the question of what remedies VF were entitled to. This is my judgment on that question and a number of related matters.

Applications to re-open the judgment

[2]The main judgment was made available to the parties in draft in advance of 3 April 2009 and the parties were invited to submit proposed corrections to typing and other obvious errors in the usual way. Both sides submitted proposed corrections to typing errors. Neither side suggested that there was any matter which had not been properly dealt with in the main judgment.[3]On 22 April 2009 counsel for VF wrote to me to notify me of some additional typing errors which they had spotted. In addition, however, counsel for VF suggested that the finding in the main judgment at [513] that the Defendants had submitted nets for WHOPES I in March 2006 which derived from sample 114 in the Netprotect database was called into question by a point which they had omitted to notice during the trial but had realised subsequently. On 8 May 2009 junior counsel for the Defendants wrote to me to say that, if VF were to be permitted to re-open the finding at [513], then the Defendants would wish to re-open certain findings at [342] and [625]. I indicated to the parties that, if either side wished to apply to re-open the main judgment, then a proper application should be made.[4]On 13 May 2009 VF duly issued an application for the finding at [513] to be re-opened. On 18 May 2009 the Defendants issued an application for findings at [342], [606] and [625] to be re-opened.[5]These applications were both listed for hearing on 21 May 2009. Just before the hearing, however, counsel for VF informed me that VF would not be proceeding with their application. In response, counsel for the Defendants informed me that the Defendants would not proceed with their application either. During the course of the hearing, however, counsel for the Defendants explained to me that these were matters which the Defendants would nevertheless wish to pursue on appeal. In the light of that explanation, and for reasons that will appear, I consider that I should nevertheless deal with the points that have been raised.

Separate analyses

[6]In the main judgment at [342] I stated:
“In the Defendants’ closing submissions it was pointed out that the figures for analysed deltamethrin for samples 9 and 11 recorded in the database are calculated from two other figures. It was suggested that this was because the samples had been analysed twice, once at Gembloux and once at VF’s Hanoi laboratory. No evidence was cited in support of this submission, and it is difficult to reconcile with the fact that the calculation takes the ratio of the two figures and not the average. In any event, I do not consider that this point is of any particular significance.”
[7]The Defendants contend that I misdirected myself because there was evidence to support the submission. The statement that “no evidence was cited” is, I believe, correct. No evidence (other than the fact that the relevant entries in column AI of the Fence database state “gem/VCH/VBH” and “GEM/VCH”) was cited in the relevant paragraph of the Defendants’ written closing submissions, namely paragraph 12 of Confidential Annex 1. Nor was any evidence cited by counsel for the Defendants in his closing oral submissions so far as I can see from a brief review of the transcript. Now that it has been drawn to my attention, however, I accept that there was evidence in Dr Skovmand’s seventh witness statement to support the submission.[8]In his seventh statement Dr Skovmand said that the VF Chemical Laboratory in Hanoi did a re-analysis of these two samples and found lower deltamethrin values than those found by Gembloux. He suggested that this may have been due to methodological errors by Gembloux. As he himself said, however, there are just two data points for Hanoi in this set of analyses and they are not in a constant ratio to the Gembloux data. Furthermore, his suggestion that Gembloux may not have been able to extract all the deltamethrin does not explain the difference between the results, since, as Mr Howe pointed out in his third report, that would mean that the Gembloux figures should be lower, not higher, than the Hanoi ones. In my judgment the evidence does not establish that the Hanoi analyses are more reliable than the Gembloux ones.[9]More importantly, I adhere to the view that this point is not of any particular significance. First, since only two samples were re-analysed at Hanoi, when comparing these samples with others, let alone other samples with others, one is thrown back on the Gembloux analyses. Secondly, even now it remains unexplained why the figures recorded in the Fence database are the ratios. Thirdly, this point does not affect the wash test data. Indeed, if anything, it suggests that samples 9 and 11 were even better than one would otherwise think, since their good performance was obtained with an even lower deltamethrin content. Fourthly and most importantly, I do not consider that this point adds anything substantial to the general point made by the Defendants regarding the analysed deltamethrin values which I dealt with elsewhere in the main judgment.

Migration rate

[10]In the main judgment at [606] I said:
“(4) It was said that the migration rate was strongly affected by the polymer composition and so the Fence results were useless in principle. This submission was unsupported by evidence. To the contrary, Mr Howe gave unchallenged evidence that the available data does not enable any such conclusion to be drawn”
[11]The Defendants again contend that I misdirected myself since there was evidence that the migration rate affected the polymer composition. I am perhaps guilty of having expressed myself insufficiently precisely in [606]. It is true that there was evidence that the migration performance of insecticide-incorporating PE nets is affected by the base polymer type used, but the question is whether the addition of LDPE in the quantities used by the Defendants had an important effect. Mr Howe’s unchallenged evidence was that the available data did not establish this. Mr Howe also pointed out that it was unclear what polymer blends the Defendants had used when or how they had been developed. This again is a matter I have dealt with elsewhere in the main judgment.

Liability of Mrs Sig, 3T and Intection Ltd

[12]In the main judgment at [625] I said:
“In the present case, the argument has focussed upon whether Dr Skovmand committed an actionable breach of confidence in developing Netprotect. The Defendants did not dispute that, if he did, Mr Larsen, Mrs Sig, Bestnet, 3T and Intection Ltd were also liable on one basis or another. Nevertheless, it is worth noting that, to the extent that the work was done by Mr Larsen, there is no dispute that he was subject to an express contractual obligation of confidence as set out above.”
[13]The Defendants contend that I misdirected myself because the Defendants did not concede that they, and in particular Mrs Sig, 3T or Intection Ltd, would be liable even if Dr Skovmand had committed an actionable breach of confidence.[14]I had understood that the Defendants did not dispute this for the following reasons. Counsel for VF dealt in detail with the liability of each of the Defendants in their skeleton argument for trial. They also dealt with this topic in their closing written submissions. By contrast, counsel for the Defendants did not address the question in their skeleton argument, written closing submissions or oral closing submissions.[15]If the Defendants considered that I had wrongly treated them as having conceded a point which they had not conceded, the correct time at which to have drawn this to my attention was when they received the draft judgment. I find it remarkable that it was first mentioned over a month after the judgment was handed down. Nevertheless, I shall now deal with the point. For completeness, I shall also deal with the position of Mr Larsen and Bestnet.[16]Mr Larsen. As I held in the main judgment at [305] and [625], Mr Larsen was subject to an express contractual obligation of confidence. For the avoidance of doubt, I would construe that obligation as continuing after the termination of his employment. After termination, however, the obligation is only enforceable in so far as it prevents Mr Larsen from misusing VF’s trade secrets. In the absence of an express term, Mr Larsen would be subject to an implied term to that effect. In my judgment it is clear that Mr Larsen is liable for breach of confidence. He was aware of the contents of the Fence database, he was aware of the circumstances which lead to the conclusion that the information from which Dr Skovmand derived the initial Netprotect recipes constituted VF’s trade secrets, he knew what Dr Skovmand was doing and he was closely involved in carrying out the October 2004 trials and some of the later trials to develop Netprotect.[17]Bestnet. VF argue that Bestnet is liable on two alternative bases. First, VF contend that the knowledge of Mr Larsen is to be attributed to Bestnet, and accordingly Bestnet was subject to an equitable obligation of confidence in respect of VF’s trade secrets from its incorporation. Secondly, VF contend that Bestnet participated in a common design with Dr Skovmand and IIC and accordingly is jointly liable with them for breach of confidence.[18]In my judgment Bestnet is liable on the first basis in so far as there has been any misuse of VF’s secrets since it was incorporated on 20 October 2005 (as to which, see below).[19]As to the second basis, the doctrine of joint tortfeasorship is normally applied to common law or statutory torts. Strictly speaking, breach of confidence is not a tort: see Kitetechnology BV v Unicor GmbH Plastmaschinen [1995] FSR 765 at 777-778. (Misuse of private personal information may stand in a different position: see Campbell v MGN Ltd [2004] UKHL 22, [2004] 2 AC 457 at [14] per Lord Nicholls of Birkenhead.) On the other hand, breach of confidence has been treated as being analogous to a tort in cases such as Seager v Copydex Ltd (No 2) [1969] 1 WLR 809 and Dowson & Mason Ltd v Potter [1986] 1 WLR 1419, and it is sufficiently akin to a tort to be dealt with in textbooks on tort such as Clerk & Lindsell. At the risk of being accused of muddling equity and the common law, I believe that it is consistent with equitable principle to hold that a person who participates in a common design with a second person to act in breach of the second person’s equitable obligation of confidence is jointly liable with the second person. For this purpose, the principles laid down in cases such as Unilever plc v Gillette (UK) Ltd [1989] RPC 583 at 608-609 may be applied. In so holding, I am following the approach of Carnwath J (as he then was) at first instance in Lancashire Fires Ltd v S.A. Lyons & Co Ltd [1996] FSR 629 at 650-651. The Court of Appeal at 675-678 did not reach any clear conclusion as to the correctness of this approach, but concentrated on the different question of whether an injunction should be granted against a recipient of the confidential information (as to which, see below).[20]In the present case, however, I have held that Dr Skovmand acted in breach of a contractual obligation of confidence, not an equitable obligation of confidence. Accordingly, the analysis set out in the preceding paragraph is not applicable.[21]I would add two points. The first is that, in so far as Dr Skovmand continued to act in breach of his contractual duty of confidence after 20 October 2005, it is at least arguable that Bestnet would be liable for procuring that breach. It does not appear to me, however, that VF has pleaded its claim against Bestnet on that basis.[22]The second is that, even if Bestnet were not liable for any financial remedy for past breaches of confidence, it could still be restrained by injunction from misusing VF’s trade secrets, assuming that an injunction is otherwise appropriate, now that it knows from the main judgment that the information in question has that character: see e.g. Printers & Finishers Ltd v Holloway [1965] RPC 239 at 253 and 257.[23]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.[24]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 [1967] 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.[25]3T. As I have held in the main judgment, 3T is the vehicle through which Mr Larsen and Mrs Sig provide their services to Bestnet. As such, it is liable on the same bases as Bestnet.[26]Intection Ltd. To the extent that it was active at all in the short period before the incorporation of Bestnet, Intection Ltd is liable on the same bases as Bestnet. As counsel for VF observed in VF’s skeleton argument for trial, however, the debate over Intection Ltd’s liability is a sterile one given that(a) the Defendants contend that it never traded and(b) it is now in liquidation anyway. Injunction The law

Injunction

[27]In order to determine whether any, and if so what, injunction should be granted, it is first necessary to identify the applicable principles. This is not an easy task. Furthermore, it is a matter upon which I received very little assistance from counsel at the hearing. Neither counsel addressed me at any length on the law. The only authority cited by counsel for VF at the hearing was the one he had cited at trial. Counsel for the Defendants did not cite any authorities at the hearing at all, but subsequently drew two to my attention. For this reason, most of what follows is the product of my own researches. I am conscious that I have not had the benefit of argument from the parties on many of the points discussed. If either side is dissatisfied with this, I will give the parties a further opportunity to address me; but I trust this will not be necessary.[28]In order to ascertain the relevant principles, it is necessary to consider, and to attempt to disentangle, five closely related topics. The first is the general principles applicable to the grant of injunctions to restrain misuse of confidential information, and in particular the circumstances in which an injunction may be refused on the ground that financial compensation is an adequate remedy. The second topic is the so-called “springboard” doctrine. The third topic is information which has a limited degree of confidentiality as a result of relative inaccessibility. The fourth topic is whether, and if so in what circumstances, an injunction may be granted to prevent a defendant from continuing to benefit from a past misuse of confidential information. The fifth topic is whether, and if so in what circumstances, an injunction may be granted to prevent a defendant from continuing to manufacture and sell products which are derived from a misuse of confidential information, but do not themselves embody or disclose that information.[29]Before turning to consider these topics, I will begin by putting them in context. Neither Dr Skovmand nor IIC is a party to these proceedings, and therefore no injunction is sought against either of them. In the case of Mr Larsen and Mrs Sig, I have found that they are in breach of contractual obligations of confidence. Thus an injunction could be granted either in the exercise of equity’s auxiliary jurisdiction to enforce legal rights or under the common law power originally conferred by section 79 of the Common Law Procedure Act 1854. In the case of Bestnet and 3T, I have held that they have been subject to an equitable obligation of confidence since they were incorporated. Thus an injunction could only be granted in the exercise of equity’s exclusive jurisdiction. Since the primary target of an injunction, as the principal corporate defendant, would be Bestnet, in what follows I shall concentrate upon the exclusive jurisdiction.[30]Finally, I should make it clear that I am not concerned with a case of misuse of private personal information, which may raise different considerations.[31]General principles. An injunction is an equitable remedy. It is a discretionary remedy, but one which is granted or refused in accordance with the principles originally established by the Court of Chancery and subsequently developed by the courts having equitable jurisdiction. Historically, the ground on which courts of equity intervened by injunction was the inadequacy of damages and other remedies at law. Thus the claimant had to show that legal remedies such as damages would not put him in the same position. Even if he did so, the defendant could invoke specific discretionary considerations as to why an injunction should not be granted, such as laches and acquiescence. More recently, adequacy of damages has ceased to be regarded as a jurisdictional threshold, but it remains relevant to the exercise of discretion. Furthermore, where the claimant has established both the invasion of a legal right and a sufficient risk of repetition, the claimant is generally regarded as entitled to an injunction save in exceptional circumstances. In such a case, damages are ordinarily not regarded as an adequate remedy even if the expected injury to the claimant’s rights is relatively minor.[32]Section 2 of the Chancery Amendment Act 1858, commonly known as Lord Cairns’ Act, provided that “in all cases in which the Court of Chancery has jurisdiction to entertain an application for an injunction … against the commission or continuance of any wrongful act … it shall be lawful for the same Court, if it thinks fit, to award damages to the party injured, either in addition or in substitution for such injunction…”. The leading authority on the exercise of this jurisdiction, which is now contained in section 50 of the Supreme Court Act 1981, is Shelfer v City of London Electric Lighting Co. [1895] 1 Ch 287, although there is a considerable body of subsequent authority which refines the principles laid down in that case. In Shelfer A.L. Smith LJ said at 322-323:
“Many Judges have stated, and I emphatically agree with them, that a person by committing a wrongful act (whether it be a public company for public purposes or a private individual) is not thereby entitled to ask the Court to sanction his doing so by purchasing his neighbour's rights, by assessing damages in that behalf, leaving his neighbour with the nuisance, or his lights dimmed, as the case may be. In such cases the well-known rule is not to accede to the application, but to grant the injunction sought, for the plaintiff's legal right has been invaded, and he is prima facie entitled to an injunction. There are, however, cases in which this rule may be relaxed, and in which damages may be awarded in substitution for an injunction as authorized by this section. In any instance in which a case for an injunction has been made out, if the plaintiff by his acts or laches has disentitled himself to an injunction the Court may award damages in its place. So again, whether the case be for a mandatory injunction or to restrain a continuing nuisance, the appropriate remedy may be damages in lieu of an injunction, assuming a case for an injunction to be made out. In my opinion, it may be stated as a good working rule that — (1.) If the injury to the plaintiff's legal rights is small, (2.) And is one which is capable of being estimated in money, (3.) And is one which can be adequately compensated by a small money payment, (4.) And the case is one in which it would be oppressive to the defendant to grant an injunction:— then damages in substitution for an injunction may be given. There may also be cases in which, though the four above-mentioned requirements exist, the defendant by his conduct, as, for instance, hurrying up his buildings so as if possible to avoid an injunction, or otherwise acting with a reckless disregard to the plaintiff's rights, has disentitled himself from asking that damages may be assessed in substitution for an injunction. It is impossible to lay down any rule as to what, under the differing circumstances of each case, constitutes either a small injury, or one that can be estimated in money, or what is a small money payment, or an adequate compensation, or what would be oppressive to the defendant. This must be left to the good sense of the tribunal which deals with each case as it comes up for adjudication.”

In my opinion, it may be stated as a good working rule that —

[33]It has been argued with some force that Lord Cairns’ Act does not apply to a breach of a purely equitable obligation such as a duty of confidence: see Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (4th ed) at 23-010, 23-105 and 41-135. On the other hand, there is a line of authority, including Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 219 (unattributed), Nichrotherm Electrical Ltd v Percy [1957] RPC 207 at 213 (Lord Evershed MR), Malone v Metropolitan Police Commissioner [1979] 1 Ch 344 at 360 (Sir Robert Megarry V-C), Talbot v General Television Corporation Pty Ltd [1981] RPC 1 at 19 (Harris J) and 21-22 (Marks J) and Attorney General v Guardian Newspapers Ltd (No 2) (“Spycatcher”) [1990] 1 AC 109 at 286 (Lord Goff of Chieveley, quoted below), in which it has been expressly stated to apply to claims for breach of an equitable duty of confidence.[34]It has also been argued that, although damages are not available for breach of a purely equitable obligation such as a duty of confidence, the remedy of equitable compensation is available: see Meagher, Gummow & Lane at 41-135 and Toulson & Phipps, Confidentiality (2nd ed) at 2-083 to 2-088. On the other hand, there are cases in which a remedy labelled “damages” has been awarded for breach of an equitable obligation of confidence, notably Seager v Copydex and Douglas v Hello! Ltd (No 3) [2008] 1 AC 1.[35]It is not necessary for me to decide whether Lord Cairns’ Act is applicable or whether equitable compensation is available, although I am inclined to the view that the answers to these questions are no and yes. What seems clear is that, either way, financial compensation can be awarded to a claimant who has suffered loss as a result of a defendant’s breach of an equitable obligation of confidence. In the alternative, of course, a claimant can claim an account of the profits made by the defendant as a result of the breach.[36]A question which has exercised the courts in a number of breach of confidence cases is whether, and if so in what circumstances, a final injunction may be refused on the basis that financial relief is an adequate remedy. So far as I am aware, a final injunction has only been refused on this basis in one case.[37]Seager v Copydex is sometimes said to be such a case, but in that case the plaintiff represented himself in the Court of Appeal and it is not clear whether he sought an injunction. Furthermore, it appears that by the time of the hearing in the Court of Appeal, if not before, all the information in question was in the public domain.[38]Counsel for the Defendants relied on a passage in Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41 at 48-49. In this passage Megarry J began by referring to the springboard doctrine, which I shall consider below. For reasons that will appear, I do not consider that the springboard doctrine, however it might be interpreted, was relevant to the situation that confronted Megarry J in that case. Megarry J went on, however, to say this: “Suppose a case where there is a confidential communication of information which is partly public and partly private; suppose that the recipient of the information adds in confidence ideas of his own, improving the initial scheme; and suppose that the parties then part, with no agreement concluded between them. How is a conscientious recipient of the ideas to comply with the requirements that equity lays upon him? For in the words of Lord Denning at page 931 in the Seager case, he ‘must take special care to use only the material which is in the public domain. He should go to the public source and get it: or, at any rate, not be in a better position than if he had gone to the public source. He should not get a start over others by using the information which he received in confidence.’ Suppose that the only confidential information communicated is that some important component should be made of aluminium instead of steel and with significant variations in its design and dimensions. The recipient knows that this change will transform a failure into a success. He knows that, if he had persevered himself, he might have come upon the solution in a week or in a year. Yet he is under a duty not to use the confidential information as a spring-board or as giving him a start. What puzzles me is how, as a law-abiding citizen, he is to perform that duty. He could, I suppose, commission someone else to make the discovery anew, carefully abstaining from saying anything to him about aluminium or the design and dimensions which will achieve success; but this seems to me to be artificial in the extreme. Yet until this step is taken and the discovery made anew, he cannot make use of his own added ideas for the further improvement of the design which he had already communicated in confidence to the original communicator, ideas which would perhaps make a success into a triumph. He cannot build his superstructure so long as he is forbidden to use the foundations. Nor is the original communicator in a much better case. He is free to use his own original idea, which converted failure into success; but he cannot take advantage of the original recipient's further ideas, of which he knows, until such time as he or someone one commissioned by him would, unaided by any confidence, have discovered them. For those who are not law-abiding and conscientious citizens there is, I suppose, a simple answer, ignore the duty, use the information, and then pay damages. This may be the course which Lord Denning envisaged in the Seager case: for after stating that the recipient should not get a start over others by using the confidential information, he continued on page 932: ‘At any rate, he should not get a start without paying for it. It may not be a case for injunction or even for an account, but only for damages, depending on the worth of the confidential information to him in saving him time and trouble.’ I also recognise that a conscientious and law-abiding citizen, having received confidential information in confidence, may accept that when negotiations break down the only honourable course is to withdraw altogether from the field in question until his informant or someone else has put the information into the public domain and he can no longer be said to have any start. Communication thus imposes on him a unique disability. He alone of all men must for an uncertain time abjure this field of endeavour, however great his interest. I find this scarcely more reasonable than the artificiality and uncertainty of postponing the use of the information until others would have discovered it. The relevance of the point, I think, is this. If the duty is a duty not to use the information without consent, then it may be the proper subject of an injunction restraining its use, even if there is an offer to pay a reasonable sum for that use. If, on the other hand, the duty is merely a duty not to use the information without paying a reasonable sum for it, then no such injunction should be granted. Despite the assistance of counsel, I feel far from assured that I have got to the bottom of this matter. But I do feel considerable hesitation in expressing a doctrine of equity in terms that include a duty which law-abiding citizens cannot reasonably be expected to perform. In other words, the essence of the duty seems more likely to be that of not using without paying, rather than of not using at all. It may be that in fields other than industry and commerce (and I have in mind the Argyll case) the duty may exist in the more stringent form; but in the circumstances present in this case I think that the less stringent form is the more reasonable. No doubt this matter may be canvassed and resolved at the trial; but on motion, in a case where both the probabilities and the evidence support the view that the fruits of any confidential communication were to sound in monetary compensation to the communicator, I should be slow to hold that it was right to enjoin the defendant company from making any use of the information.” ‘must take special care to use only the material which is in the public domain. He should go to the public source and get it: or, at any rate, not be in a better position than if he had gone to the public source. He should not get a start over others by using the information which he received in confidence.’ ‘At any rate, he should not get a start without paying for it. It may not be a case for injunction or even for an account, but only for damages, depending on the worth of the confidential information to him in saving him time and trouble.’[39]As I read this passage, Megarry J was essentially agreeing with the observations of Lord Denning MR in Seager which he quoted. In a case where, to use Megarry J’s words, “there is a confidential communication of information which is partly public and partly private” and “the recipient of the information adds … ideas of his own, improving the initial scheme”, but negotiations between the two prove abortive, then the court should be slow to enjoin the defendant from making any use of the information, but rather should require the defendant to pay a reasonable sum for the use of the information. It is not clear what jurisprudential basis Megarry J had in mind for this view. What is clear is that he was not purporting to reach a final conclusion on the point.[40]The case in which an injunction was refused on the ground that financial relief was an adequate remedy is Ocular Sciences Ltd v Aspect Vision Care Ltd & Ors [1997] RPC 289. In that case Laddie J refused at 404-407 to grant an injunction to restrain the use of confidential information contained in the claimants’ drawings applying the principles laid down in Shelfer. (For good measure, he went on at 407-408 to hold that it should also be refused on the grounds that in many respects the plaintiffs’ proceedings had been vexatious and two of its key witnesses had given dishonest evidence. On the other hand, at 409 he granted an injunction against disclosure of the information.)[41]I therefore conclude that, in the absence of specific discretionary reasons for the refusal of an injunction, where the claimant has established that the defendant has acted in breach of an equitable obligation of confidence and that there is a sufficient risk of repetition, the claimant is generally entitled to an injunction save in exceptional circumstances. In deciding whether there are exceptional circumstances which justify the refusal of an injunction, the approach laid down in Shelfer is applicable, if not directly then by analogy.[42]The springboard doctrine. The springboard doctrine stems from the judgment of Roxburgh J in Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375 (the judgment was given in 1959 but only reported in 1967). It has been considered, or at least referred to, in a considerable number of subsequent cases. I shall not refer to all of them, but I shall consider some of the principal authorities.[43]In Terrapin the plaintiff contracted the first defendant to manufacture prefabricated portable buildings to the plaintiff’s designs, and in particular a design referred to as the Mark 24. The plaintiff disclosed to the first defendant all the drawings, specifications, technical information and know-how needed to make the Mark 24 in confidence and solely for the purpose of the contract. Subsequently the plaintiff also disclosed to the first defendant in confidence proposals for a new and improved design featuring a flat roof and a stressed skin construction, later referred to as the Mark 36, which the plaintiff originally proposed to make itself, but later suggested that the first defendant should manufacture. Subsequently negotiations between the parties for a renewal of the contract broke down, and it expired. Four months after the end of the contract the defendants launched a portable building called the Swiftplan with a flat roof and stressed skin construction, the design of which it had commenced during the currency of the contract.[44]On a motion for an interlocutory injunction to restrain breach of confidence, which rather unusually featured cross-examination of three witnesses, Roxburgh J held that, on the facts which he found established for the purposes of the motion, the first defendant had misused the plaintiff’s confidential information in two distinct ways. The first was by using its knowledge of the plaintiff’s information relating to the design of the Mark 24 as the starting point for a new and competing design. It was in this connection that Roxburgh J introduced the metaphor of the springboard at 390:
“When, therefore, Mr Chambers was instructed on behalf of the first defendants to design a new building unit … he could not have avoided starting his dive into the future from the springboard of the confidential information acquired by the first defendants and by Mr Chambers as their servant.”
The second way was by using its knowledge of the plaintiff’s proposed improvements in incorporating those improvements into the Swiftplan.[45]Counsel for the defendants argued that the obligation to treat both forms of information as confidential was discharged when the plaintiff published the features of the Mark 24, and later the Mark 36, by marketing those buildings. (He also relied upon brochures published by the plaintiff, but accepted that these did not disclose the details of how the units were constructed.) Roxburgh J rejected this argument at 391-392 (emphasis added):
“Frankly [counsel for the defendants] admitted that there is no suggestion of such a doctrine in any reported case. I go further and say that it is inconsistent with the principles stated by Lord Greene in Saltman’s case. As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a spring-board for activities detrimental to the person who made the confidential communication, and spring-board it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public. … The dismantling of a unit might enable a person to proceed without plans or specifications, or other technical information, but not, I think, without some of the know-how and certainly not without taking the trouble to dismantle. I think it is broadly true to say that a member of the public to whom the confidential information had not been imparted would still have to prepare plans and specifications. He would probably have to construct a prototype, and he would certainly have to conduct tests. Therefore, the possessor of the confidential information still has a long start over any member of the public. … It is, in my view, inherent in the principle upon which the Saltman case rests that the possessor of such information must be placed under a special disability in the field of competition in order to ensure that he does not get an unfair start…”
[46]This reasoning needs to be considered in the context of the two types of misuse which Roxburgh J had found. So far as the first type of misuse is concerned, the Mark 24 was on the market when the first defendant began to design the Swiftplan. The question, therefore, was whether that meant that the information relating to the Mark 24 had ceased to be confidential by then. On this point, I agree with the analysis of Roxburgh J’s reasoning in Gurry, Breach of Confidence at 247-249. Roxburgh J accepted that a member of the public could ascertain all the information relating to the Mark 24 by a process of reverse engineering, but held that this would take time and effort. It follows that, despite the marketing of the Mark 24, the information retained a limited degree of confidentiality which could be expressed in terms of the time it would take to obtain it by reverse engineering. By using the plaintiff’s information rather than reverse engineering, the first defendant had gained a head start. It had therefore acted in breach of confidence.[47]What remedy is appropriate in such circumstances is a separate question. Roxburgh J did not explicitly address this question, but he appears to have regarded his reasoning as justifying the grant of an injunction in order to deprive the first defendant of the head start which it had wrongly obtained (i.e. not merely compensation or an account of profits). This clearly implies that such an injunction should be for a limited period. What is less clear is whether the purpose of the injunction is to restrain continued misuse of the confidential information or to restrain the defendant from continuing to benefit from its past misuse of the confidential information. As I read Roxburgh J’s judgment, however, I think that what he had in mind was the latter.[48]So far as the second type of misuse is concerned, Roxburgh J did not distinguish this from the first type of misuse in this passage. Instead, he applied precisely the same reasoning to both. He therefore appears to have accepted that the plaintiff had disclosed to the first defendant information relating to the proposed improvements which it would take a member of the public time and effort to obtain by reverse engineering the Mark 36. Again, therefore, the information had a limited degree of confidentiality even after the marketing of the Mark 36.[49]It should be noted, however, that there was a significant difference between the two types of misuse. It is not clear from the judgment when the Mark 36 was first marketed, but it appears that this happened some time after the first defendant started designing the Swiftplan. There are certain indications in the judgment which suggest that it was not long before the first defendant launched the Swiftplan. It follows that the information relating to the improvements was on any view confidential at the time the first defendant started to use it. Even if the claim in respect of the first type of misuse had been dismissed on the ground that information relating to the Mark 24 was in the public domain at the relevant time by virtue of the marketing of the Mark 24, the claim in respect of the second type of misuse would still have succeeded. Furthermore, even if it had been accepted that the information relating to the improvements had ceased to be confidential by the time of the hearing, it could still have been argued that an injunction should be granted to stop the first defendant from continuing to benefit from its past misuse of that information.[50]It can be seen that the principle articulated by Roxburgh J in the passage I have italicised, which has been quoted and applied in a number of subsequent cases, is expressed in terms which can be understood as meaning that it continues to be a breach of confidence to use information disclosed in confidence even after the information has ceased to be confidential at all, and therefore an injunction can be granted to restrain such continued use. For the reasons I have given, however, I do not think that this is what Roxburgh J meant. Instead, I consider that what he meant was that a limited degree of confidentiality can remain even once information can be ascertained by a process of reverse engineering. As a separate point, he appears to have considered, although he did not actually say, that an injunction may be granted to stop a defendant from continuing to benefit from its past misuse of confidential information.[51]When the Terrapin case reached the Court of Appeal, counsel for the defendants did not argue the point which he had argued before Roxburgh J: see [1960] RPC 129 at 130. Instead, counsel for the defendants argued that Roxburgh J had wrongly prejudged matters which were issues for trial. It is perhaps worth noting that in the Court of Appeal attention appears to have been focussed upon the second type of misuse found by Roxburgh J.[52]In Cranleigh Precision Engineering Ltd v Bryant [1965] 1 WLR 1239 and [1966] RPC 81 (the former report contains a slightly fuller statement of the facts while the latter includes a note of the arguments), the first defendant was an inventor who had been the plaintiff’s managing director. Among his inventions was an above-ground swimming pool with two unique features. In 1959 the plaintiff filed a patent application for a swimming pool naming the first defendant as inventor. In December 1961 the Patent Office cited a patent in the name of Bischoff which had been published in 1958 against this application. The Bischoff patent disclosed a similar pool to the plaintiff’s pool, but lacking the two special features. In March 1962 the plaintiff’s patent agents informed the first defendant, in his capacity as managing director of the plaintiff, about the Bischoff patent. The first defendant did not disclose this information to the plaintiff’s board, but (so Roskill J found) deliberately concealed it with a view to his own advantage. Subsequently the plaintiff’s application was withdrawn or abandoned. In September 1963 the first defendant left the plaintiff. Shortly afterwards, the plaintiff brought an action against the first defendant, and a company formed by him some time before leaving the plaintiff, which included a claim for misuse of confidential information relating to the plaintiff’s swimming pools, and in particular the two special features. After the writ in the first action was issued, the first defendant instructed the defendants’ patent agents to make an offer to buy the Bischoff patent on behalf of an unidentified client for £50. This led to the first defendant’s son obtaining an assignment of the Bischoff patent for £76, which the son then assigned to the first defendant. In their defence the defendants relied on the Bischoff patent as an answer to the claim for breach of confidence, and counterclaimed for infringement of it. The plaintiff subsequently brought a second action for breach of contract, duty and confidence in respect of the Bischoff patent. In this action the plaintiff alleged that the first defendant had received information about the Bischoff patent in confidence and had acted in breach of confidence by procuring the assignment of it. Roskill J gave judgment for the plaintiff in both actions.[53]So far as the information relating to the two features of the swimming pools was concerned, Roskill J held that this was confidential information. He briefly dismissed an argument that the information had been put into the public domain by the marketing of the swimming pools, applying Terrapin. It is not clear from the judgment, however, whether or not all the information which he found to be confidential could have been ascertained by reverse engineering.[54]Turning to the second action, it is important to appreciate how the plaintiff put its case. Roskill J summarised it in this way [1964] 1 WLR 1293 at 1313:
“I can perhaps best state the plaintiffs’ argument in this way: it was not what appeared in Bischoff specification itself which was confidential. It was the knowledge of the possible effect to and upon the plaintiffs [of] the existence and publication of this specification which was confidential in the hands of the one person who was in a position to assess its true significance because of the knowledge which he, as the plaintiffs’ managing director, possesses of all the facts of the plaintiffs’ swimming and their business connected therewith.”
[55]It is also important to appreciate how the defendants put their case. Roskill J summarised it in this way at 1314:
“The defendants' main answer to this line of argument was to say that everything in the Bischoff specification, by virtue of its publication, was public property, and, therefore, there could be nothing confidential about any aspect of the Bischoff specification, either as such or in its effect upon the plaintiffs. As already stated, the defendants in support of this contention relied on the decision in O. Mustad & Son v. Dosen [1964] 1 W.L.R. 109.”
[56]Roskill J distinguished Mustad in the following way at 1316:
“The effect of that decision clearly is that if the master had published his secret to the whole world (as had the appellants in that case) the servant is no longer bound by his promise to the master not to publish that same secret, but it is important to observe that the publication in that case was publication by the master. In the present case the publication was by Bischoff, who was never the master of Bryant. Bryant's master was the plaintiffs and the plaintiffs have never published anything, even their own specification.”
[57]Roskill J went on to consider the defendants’ argument that, no matter by whom the publication took place, all attributes of secrecy which might otherwise have attached to the information in the first defendant’s possession automatically disappeared by virtue of publication. In support of this argument the defendants relied on Saltman. Counsel for the defendants accepted that the italicised passage from the judgment of Roxburgh J in Terrapin was contrary to his argument, but submitted that the passage was inconsistent with Mustad and wrong. Counsel pointed out that Mustad had not been cited in Terrapin because, although Mustad was decided in 1928, it was not reported until 1964. Roskill J rejected this argument at 1319:
“It may be that … it would be open to me to hold that the passage in Roxburgh J.'s judgment misstated the law. I apprehend that it would be my duty to so do if I were convinced that it conflicted with the decision in the Mustad case, but in my judgment there is no such conflict because the two matters are separate and distinct. I would respectfully borrow and adopt the passage as correctly stating the law which I have to apply, and I respectfully agree with the judge in stating that the principle, as he stated it, is a logical consequence of the decision of the Court of Appeal in Saltman's case. Mustad was, as I have said, a case where the employer made the publication in question. In the present case, Bryant, as possessor of what I have held to be the plaintiffs' confidential information, is seeking to free himself from his obligations of confidence, not because of what the plaintiffs have published, for they have published nothing, but because of what Bischoff published — a publication of which Bryant only became aware because of his contractual and confidential relationship with the plaintiffs.”
[58]Roskill J expressed his conclusion as follows at 1319:
“Applying the law as I conceive it to be, I have no doubt that Bryant acted in grave dereliction of his duty to the plaintiffs in concealing from the plaintiffs' board the information which he received from the plaintiffs' patent agents, and in taking no steps whatsoever to protect the plaintiffs against the possible consequences of the existence and publication of the Bischoff patent. I also have no doubt that Bryant acted in breach of confidence in making use, as he did as soon as he left the plaintiffs, of the information regarding the Bischoff patent which he had acquired in confidence and about its various effects on the plaintiffs' position, for his own advantage and for that of the defendant company. Any other conclusion would involve putting a premium on dishonesty by managing directors.”
[59]It can be seen that Roskill J’s first finding was that the first defendant had acted in breach of his duty to the plaintiff in concealing the information about the Bischoff patent from the board and in taking no steps to protect the plaintiff from the consequences of its existence. This has nothing to do with breach of confidence. I interpret it as a finding of breach of fiduciary duty. Roskill J’s second finding was that the first defendant had acted in breach of confidence “in making use, as he did as soon as he left the plaintiffs, of the information regarding the Bischoff patent … and about its various effects on the plaintiffs’ position, for his own advantage and that of the defendant company”. Thus he accepted the plaintiffs’ case as summarised above.[60]Four points may be made about these findings. The first point is that the key finding is the first one. As Roskill J went on to hold, if the first defendant had complied with his duty and disclosed the existence of the Bischoff patent to the Board and taken the appropriate steps, the plaintiff would probably have acquired the Bischoff patent. The second finding adds nothing to this.[61]The second point is that, as Toulson & Phipps point out at 4-027, the first defendant’s use of the information for his own advantage can readily be analysed as part of the first defendant’s breach of fiduciary duty even though the Bischoff patent was only acquired after the duty came to an end.[62]The third point is that it did not matter to the plaintiff’s case who had published the Bischoff’s patent, since the information which the plaintiff contended was confidential was not the existence of the Bischoff patent, nor the information contained in it, but the relevance of the Bischoff patent to the plaintiff’s business. It follows, in my judgment, that Roskill J’s analysis of the relationship between Mustad and Terrapin was strictly obiter.[63]The fourth point is that a question which Roskill J’s analysis does not answer is what would have happened if the first defendant had discovered the Bischoff patent shortly after leaving the plaintiff, for in those circumstances its relevance to the plaintiff’s business would have been equally apparent to him, yet surely there could have been nothing to stop him acquiring it.[64]In Speed Seal Products Ltd v Paddington [1985] 1 WLR 1327, the plaintiff brought a claim for breach of confidence. It was common ground that the alleged confidential information had subsequently been published by the defendants. The defendants applied to strike out the claim for an injunction. The plaintiff argued that it was still entitled to an injunction on the springboard principle. The Court of Appeal held that the claim for an injunction should not be struck out, because until all the facts had been found one could not say whether an injunction was appropriate or not. Fox LJ held that Cranleigh was authority for the proposition that publication of confidential information by a stranger did not necessarily release a confidant who owed a duty of confidence from his obligation, and that the confidant could be in no better position. There was no reference to the facts of Cranleigh, and no analysis of Roskill J’s reasoning, in Fox LJ’s judgment. Nor was Terrapin discussed in the judgment, although it had been cited in argument.[65]In Roger Bullivant Ltd v Ellis [1987] FSR 172, the plaintiffs made various claims against an ex-employee, the first defendant, who had set up the second defendant in competition with the plaintiffs. One was for breach of confidence in respect of a card index of customer contacts, a copy of which the first defendant had taken with him when he left the plaintiffs. That copy had been recovered on the execution of an Anton Piller order. Falconer J granted various interlocutory injunctions, including an injunction restraining the defendants from entering into or fulfilling any contract with a person who had been approached by them at a time when they were in possession of the card index. The Court of Appeal held that the plaintiffs had a strong prima facie case of misuse of confidential information, and that the injunction had been properly granted. Nevertheless the Court limited the duration of the injunction to one year, which was the duration of a restrictive covenant contained in what the plaintiffs contended was the first defendant’s contract of employment.[66]Falconer J had expressed himself as granting the injunction in order to prevent the defendants from taking unfair advantage of the springboard which they had built up by their misuse of the card index. Nourse and May LJ between them cited not only the famous passage from Terrapin and part of the passage I have quoted from Coco v Clark, but also dicta from Potters-Ballotini Ltd v Weston-Baker [1977] RPC 202 at 206 (Lord Denning MR), Harrison v Project & Design Co (Redcar) Ltd [1978] FSR 81 at 87 (Graham J) and Fisher-Karpark Industries Ltd v Nichols [1982] FSR 351 at 353 (Whitford J). They concluded that, as Nourse LJ put it at 184:
“All these observations support the view that the injunction should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue. That is in my judgment the period for which an injunction should normally be granted in springboard cases.”
[67]Three points may be noted about Bullivant. First, it was not a case in which it was suggested that the information in question had ceased to be confidential, but it was a case in which the first defendant could have substantially reconstituted it from public domain sources. Second, the injunction was explicitly one which prevented the defendants from continuing to benefit from past misuse of confidential information, rather than from continuing to misuse the information. Thirdly, the Court of Appeal definitively recognised the logic of limiting such an injunction to such period as will deprive the defendant of the illegitimate advantage he has gained.[68]In Spycatcher the majority of the House of Lords held that no injunction could be granted to prevent newspapers from serialising the book, because the entire book was in the public domain. The speech which is now generally regarded as most authoritative is that of Lord Goff. Having identified the broad general principle which applied in breach of confidence cases, he referred to three limiting principles. He expressed the first as follows at 282:
“The first limiting principle (which is rather an expression of the scope of the duty) is highly relevant to this appeal. It is that the principle of confidentiality only applies to information to the extent that it is confidential. In particular, once it has entered what is usually called the public domain (which means no more than that the information in question is so generally accessible that, in all the circumstances, it cannot be regarded as confidential) then, as a general rule, the principle of confidentiality can have no application to it.”
[69]He returned to this at 285-286:
“As I have already indicated, it is well established that a duty of confidence can only apply in respect of information which is confidential: see Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd., 65 R.P.C. 203, 215, per Lord Greene M.R. From this it should logically follow that, if confidential information which is the subject of a duty of confidence ceases to be confidential, then the duty of confidence should cease to bind the confidant. This was held to be so in O. Mustad & Son v. Dosen (Note) [1964] 1 W.L.R. 109. That was however a case in which the confidential information was disclosed by the confider himself; and stress was placed on this point in a later case where the disclosure was not by the confider but by a third party and in which O. Mustad & Son v. Dosen was distinguished: see Cranleigh Precision Engineering Ltd. v. Bryant [1965] 1 W.L.R. 1293. It was later held, on the basis of the Cranleigh Precision Engineering case, that, if the confidant is not released when the publication is by a third party, then he cannot be released when it is he himself who has published the information: see Speed Seal Products Ltd. v. Paddington [1985] 1 W.L.R. 1327. I have to say however that, having studied the judgment of Roskill J. in the Cranleigh Precision Engineering case, it seems to me that the true basis of the decision was that, in reliance on the well known judgment of Roxburgh J. in the ‘springboard’ case, Terrapin Ltd. v. Builders' Supply Co. (Hayes) Ltd. [1967] R.P.C. 375, the defendant was in breach of confidence in taking advantage of his own confidential relationship with the plaintiff company to discover what a third party had published and in making use, as soon as he left the employment of the plaintiff company, of information regarding the third party's patent which he had acquired in confidence: see [1965] 1 W.L.R. 1293, 1319. The reasoning of Roskill J. in this case has itself been the subject of criticism (see e.g. Gurry, Breach of Confidence, at pp. 246-247); but in any event it should be regarded as no more than an extension of the springboard doctrine, and I do not consider that it can support any general principle that, if it is a third party who puts the confidential information into the public domain, as opposed to the confider, the confidant will not be released from his duty of confidence. It follows that, so far as concerns publication by the confidant himself, the reasoning in the Speed Seal case (founded as it is upon the Cranleigh Precision Engineering case) cannot, to my mind, be supported. I recognise that a case where the confider himself publishes the information might be distinguished from other cases on the basis that the confider, by publishing the information, may have implicitly released the confidant from his obligation. But that was not how it was put in O. Mustad & Son v. Dosen (Note) [1964] 1 W.L.R. 109, 111, in which Lord Buckmaster stated that, once the disclosure had been made by the confider to the world. ‘The secret, as a secret, had ceased to exist.’ For my part, I cannot see how the secret can continue to exist when the publication has been made not by the confider but by a third party.”
[70]It is important to note that Lord Goff did not disapprove of the springboard doctrine in this passage. It is not clear precisely what Lord Goff understood the springboard doctrine to be; but it is clear both from this passage and other passages quoted below that he cannot have meant that an injunction could be granted to prevent misuse of confidential information after the information had ceased to be confidential.[71]Although their speeches are slightly less clear on the point, Lord Keith of Kinkel (at 259) and Lord Brightman (at 266-267) apparently agreed that there was no subsisting duty of confidence which could be enforced by injunction once the information had entered the public domain. Nevertheless, they contemplated that an injunction might be granted against Peter Wright, the author of the book, on the basis that he should be precluded from benefiting from his own wrongdoing.[72]Lord Goff began his examination of the proposition that Peter Wright should not be allowed to profit from his own wrongdoing at 286-287 by reasoning that it could make no difference so far as the grant of an injunction to enforce the obligation of confidence was concerned:
“The statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case. That there are groups of cases in which a man is not allowed to profit from his own wrong, is certainly true. An important section of the law of restitution is concerned with cases in which a defendant is required to make restitution in respect of benefits acquired through his own wrongful act - notably cases of waiver of tort; of benefits acquired by certain criminal acts; of benefits acquired in breach of a fiduciary relationship; and, of course, of benefits acquired in breach of confidence. The plaintiff's claim to restitution is usually enforced by an account of profits made by the defendant through his wrong at the plaintiff's expense. This remedy of an account is alternative to the remedy of damages, which in cases of breach of confidence is now available, despite the equitable nature of the wrong, through a beneficent interpretation of the Chancery Amendment Act 1858 (Lord Cairns' Act), and which by reason of the difficulties attending the taking of an account is often regarded as a more satisfactory remedy, at least in cases where the confidential information is of a commercial nature, and quantifiable damage may therefore have been suffered. I have to say, however, that I know of no case (apart from the present) in which the maxim has been invoked in order to hold that a person under an obligation is not released from that obligation by the destruction of the subject matter of the obligation, on the ground that that destruction was the result of his own wrongful act. To take an obvious case, a bailee who by his own wrongful, even deliberately wrongful, act destroys the goods entrusted to him, is obviously relieved of his obligation as bailee, though he is of course liable in damages for his tort. Likewise a nightwatchman who deliberately sets fire to and destroys the building he is employed to watch; and likewise also the keeper at a zoo who turns out to be an animal rights campaigner and releases rare birds or animals which escape irretrievably into the countryside. On this approach, it is difficult to see how a confidant who publishes the relevant confidential information to the whole world can be under any further obligation not to disclose the information, simply because it was he who wrongfully destroyed its confidentiality. The information has, after all, already been so fully disclosed that it is in the public domain: how, therefore, can he thereafter be sensibly restrained from disclosing it? Is he not even to be permitted to mention in public what is now common knowledge? For his wrongful act, he may be held liable in damages, or may be required to make restitution; but, to adapt the words of Lord Buckmaster, the confidential information, as confidential information, has ceased to exist, and with it should go, as a matter of principle, the obligation of confidence. In truth, when a person entrusts something to another - whether that thing be a physical thing such as a chattel, or some intangible thing such as confidential information - he relies upon that other to fulfil his obligation. If he discovers that the other is about to commit a breach, he may be able to impose an added sanction against his doing so by persuading the court to grant an injunction; but if the other simply commits a breach and destroys the thing, then the injured party is left with his remedy in damages or in restitution. The subject matter is gone: the obligation is therefore also gone: all that is left is the remedy or remedies for breach of the obligation. This approach appears to be consistent with the view expressed by the Law Commission in their Report on Breach of Confidence (Cmnd. 8388), paragraph 4.30 (see also the Law Commission's Working Paper No. 58, paragraphs 100-101). It is right to say, however, that they may have had commercial cases in mind, rather than a case such as the present. It is however also of interest that, in the Fairfax case, 147 C.L.R. 39, 54, Mason J. (as he then was) was not prepared to grant an injunction to restrain further publication of a book by the defendants on the ground of breach of confidence, because the limited publication which had taken place was sufficient to cause the detriment which the plaintiffs, the Commonwealth of Australia, apprehended. If however the defendants had published the book in breach of confidence, it is difficult to see why, on the approach so far accepted in the present case, the defendants should not have remained under a duty of confidence despite the publication and so liable to be restrained by injunction.”
[73]In Ocular Sciences Laddie J had to consider a number of the issues with which I am now concerned. He began at 396 as follows:
“Before considering whether in this case it would be appropriate to restrain the defendants from using their current technology or running their business, it is right to consider precisely what the injunction is going to stop and how that relates to the plaintiffs' rights which have been breached. In particular what is the effect of an injunction, as sought here, which prohibits a defendant from ‘making any use of’ the confidential information? Where the defendant continues to possess the confidential information and his products incorporate or disclose it or their manufacture continues to use it, an injunction against use will automatically restrain continued operation of the process and sale of products. But what would be the effect of an injunction in those terms where the defendant's products or process do not themselves continue to incorporate or disclose confidential information although they were brought into existence or were perfected or owe their commercial success to the fact that confidential information was used in the past? Such products or processes can be referred to conveniently as ‘derivative’ or ‘derived’. If exploitation by the defendant of such derived products and processes is considered to be continued use of the information employed in their creation or development, an injunction against use would have the effect of prohibiting further exploitation of the derived matter. If that is so, the court should consider whether injunctive relief which goes that far is intended and appropriate. There are at least two types of case in which derivative works may be in issue. The first is where, at the date of judgement, the information is no longer confidential but it was at the time the products were made or when the production equipment or process was designed or constructed. In that case even if the products incorporate or disclose, or the process uses, the information, it is not confidential information. This touches upon a part of the so-called ‘spring-board’ principle based on the well known passage in Roxburgh J’s judgment in Terrapin [which he then quoted] This could be understood as meaning that, after the information has become public knowledge, it can still be the subject of an injunction. I do not think that is what Roxburgh J meant. All that he indicated was that where confidential information has been used by a defendant to get a head start, that head start is still illegitimate even if, at a subsequent date, the information becomes public. It does not address what relief should be granted.”
[74]Laddie J then proceeded at 397-401 to consider passages from Coco, Balston v Headline Filters Ltd [1987] FSR 330 (Scott J, as he then was) and Spycatcher, including passages from Spycatcher which I have quoted above and below. The first part of his conclusion on this point at 401 (the second part is quoted below) was as follows:
“This is not a simple issue but I must admit that I am attracted by Lord Goff's analysis. It seems to me that, at least in the area of breach of confidence, injunctions are granted not against the continued flow of a wrongful benefit arising out of or caused by breach of the plaintiff's rights but to prevent continuation of the breach. If a continuing activity of the defendant does not constitute a breach of confidence then it ought not to be injuncted even if it produces an unfair benefit to the defendant. Lord Griffiths agreed that that would be a conclusive answer to a claim against a third party recipient of the information. Like Lord Goff, I can not see why it should not be a conclusive answer to a claim against the confidant.”
[75]In Attorney-General v Blake [1998] Ch 439 the Court of Appeal held that, although the defendant owed the Crown a life-long duty of confidence, this did not prevent him from publishing information which had ceased to be confidential. Lord Woolf MR delivering the judgment of the Court of Appeal stated at 453 and 454:
“Equity … does not impose a duty to maintain the confidentiality of that which has ceased to be confidential.” “The duty to respect confidence … subsists only as long as the information remains confidential.”
This statement of the law was not questioned on the subsequent appeal to the House of Lords. The judgment of Lord Phillips of Worth Matravers MR in Attorney General v Times Newspapers Ltd [2001] EWCA Civ 97, [2001] 1 WLR 885 at [20] is to similar effect.[76]From this review of the authorities I draw the following conclusions: i) There never was any sound authority for the proposition that an injunction can be granted to restrain continued misuse of confidential information once the information has ceased to be confidential. Terrapin was not authority for that proposition. Nor was Cranleigh. The Court of Appeal in Speed Seal was in error in treating Cranleigh as authority for that proposition, but that was merely a decision not to strike out a claim before the facts had been found. ii) In any event, it is now clear from Spycatcher, Blake and Times Newspapers that publication of the confidential information brings the obligation of confidence to end. It matters not whether the information has been published by the confider, by a stranger or by the confidant himself. Accordingly, no injunction can be granted to restrain continued misuse of confidential information once the information has ceased to be confidential. iii) If the springboard doctrine is understood to be that an injunction can be granted to restrain continued misuse of confidential information once the information has ceased to be confidential, then it should now be regarded as having been laid to rest. iv) As I have attempted to explain, however, there are two other possible interpretations of the doctrine. The first is that information may have a limited degree of confidentiality even though it can be ascertained from public domain sources. The second is that an injunction may be granted to prevent the defendant from benefiting from a past misuse of confidential information even if it is no longer confidential.[77]Relative confidentiality. I have expressed the opinion above that Roxburgh J’s reasoning in Terrapin was that the information in question had a limited degree of confidentiality. In my judgment this interpretation is supported by a line of subsequent authority which establishes that confidentiality is a relative concept. This line of authority begins with the statement of Cross J (as he then was) in Franchi v Franchi [1967] RPC 149 at 153 that “if relative secrecy remains, the plaintiff can still succeed”. Later cases include Schering Chemicals Ltd v Falkman [1982] QB 1 at 28 (Shaw LJ) and 37 (Templeman LJ, as he then was), Stephens v Avery [1988] Ch 449 at 454 (Sir Nicolas Browne-Wilkinson V-C, as he then was), Spycatcher at 177 (Sir John Donaldson MR) and 282 (Lord Goff) and Attorney General v Greater Manchester Newspapers Ltd (The Times, 7 December 2001, Dame Elizabeth Butler-Sloss P). This principle may apply differently to different categories of confidential information, and it has come to be particularly recognised in cases involving private personal information, but it is not restricted to such cases.[78]Accordingly, if the springboard doctrine is understood to be that information may possess a limited degree of confidentiality even though it can be ascertained by reverse engineering or by a process of compilation from public domain sources, then I consider that it is soundly based.[79]As discussed above, it now seems clear that, where information has a limited degree of confidentiality, then an injunction may be granted, but only for a limited period. What is less clear is the conceptual basis for this. In addressing this question, I think it is important to recognise that the question may arise in at least two different situations.[80]The first situation is where, at the time of the hearing, the defendant is still misusing the confidential information. In such a case, an injunction can be granted to restrain the defendant from continuing to misuse the confidential information. The duration of the injunction should be limited, however, to the time it would take someone starting from public domain sources to reverse engineer or compile the information. This reflects the limited degree of confidentiality that is being enforced. In my view, this principle extends more widely: even technical trade secrets can have a limited “shelf-life”, such that the information may be expected to come into the public domain after (say) 5 or 10 years.[81]The second situation is where the defendant has used the confidential information to get an illegitimate head start, but is no longer using it. For the reasons given above, it seems to me that both Terrapin and Bullivant are examples of this situation. In such a case, an injunction to restrain the defendant from continuing to misuse the information would have no effect. The purpose of an injunction can only be to stop the defendant from benefiting (or continuing to benefit) from the past misuse. Whether this is a sound basis for granting an injunction I shall consider below.[82]Benefiting from past misuse. It can be seen from the foregoing discussion that there are a number of cases prior to Spycatcher which support the proposition that an injunction may be granted to stop a defendant from benefiting from his past misuse of confidential information.[83]In Spycatcher Lord Goff continued his examination of the proposition that Peter Wright could not be allowed to profit from his own wrong at 287-288:
“I have naturally been concerned by the fact that so far in this case it appears to have been accepted on all sides that Peter Wright should not be released from his obligation of confidence. I cannot help thinking that this assumption may have been induced, in part at least, by three factors - first, the fact that Peter Wright himself is not a party to the litigation, with the result that no representations have been made on his behalf; second, the wholly unacceptable nature of his conduct; and third, the fact that he appears now to be able, with impunity, to reap vast sums from his disloyalty. Certainly, the prospect of Peter Wright, safe in his Australian haven, reaping further profits from the sale of his book in this country is most unattractive. The purpose of perpetuating Peter Wright's duty of confidence appears to be, in part to deter others, and in part to ensure that a man who has committed so flagrant a breach of his duty should not be enabled freely to exploit the formerly confidential information, placed by him in the public domain, with impunity. Yet the real reason why he is able to exploit it is because he has found a safe place to do so. If within the jurisdiction of the English courts, he would be held liable to account for any profits made by him from his wrongful disclosure, which might properly include profits accruing to him from any subsequent exploitation of the confidential information after its disclosure: and, in cases where damages were regarded as the appropriate remedy, the confidant would be liable to compensate the confider for any damage, present or future, suffered by him by reason of his wrong. So far as I can see, the confider must be content with remedies such as these. I have considered whether the confidant who, in breach of duty, places confidential information in the public domain, might remain at least under a duty thereafter not to exploit the information, so disclosed, for his own benefit. Suppose that the confidant in question was a man who, unwisely, has remained in this country, and has written a book containing confidential information and has disposed of the rights to publication to an American publishing house, whose publication results in the information in the book entering the public domain. The question might at least arise whether he is free thereafter to dispose of the film rights to the book. To me, however, it is doubtful whether the answer to this question lies in artificially prolonging the duty of confidence in information which is no longer confidential. Indeed, there is some ground for saying that the true answer is that the copyright in the book, including the film rights, are held by him on constructive trust for the confider - so that the remedy lies not in breach of confidence, but in restitution or in property, whichever way you care to look at it: see, in this connection, ante, pp. 210D - 211C, per Dillon L.J. At all events, since the point was not argued before us, I wish to reserve the question whether, in a case such as the present, some limited obligation (analogous to the springboard doctrine) may continue to rest upon a confidant who, in breach of confidence, destroys the confidential nature of the information entrusted to him.”
[84]It can seen from this that, in general, Lord Goff’s opinion was that the claimant’s remedy where information ceased to be confidential as a result of the defendant’s wrongdoing lay elsewhere, but that he left open the possibility that “some limited obligation (analogous to the springboard doctrine)” might continue in such circumstances. As I have discussed above, it is not clear from Spycatcher how Lord Goff interpreted the springboard doctrine. This passage suggests, however, that he may have interpreted it as meaning that an injunction can be granted to prevent a defendant from benefiting from a past misuse of confidential information.[85]In addition to the passage from Coco v Clark cited above, counsel for the Defendants relied upon a passage from the judgment of Sir Donald Nicholls V-C (as he then was) in Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840 at 853-856. In this passage Nicholls V-C accepted the defendants’ case that, in the light of the facts established at trial, an interlocutory injunction which had been granted against them had gone beyond what was required for the proper protection of the plaintiff’s legitimate rights. He began by observing that it was important to distinguish between an injunction to prevent future misuse of confidential information and relief in respect of misuse which had already occurred before the date of the injunction. Next, he pointed out that the interlocutory injunction which had been granted was not aimed at preventing further misuse of confidential information.[86]Nicholls V-C went on to say at 854-855 that in some cases an injunction for a limited period could be justified “as affording the means for putting the parties back into the position they would have occupied had there been no misuse” or “as affording the means of preventing the defendants from benefiting from the springboard effect of their use of the plaintiff’s confidential information”. If the interlocutory injunction had had the effect “simply of restoring the parties to the competitive position they each sought to occupy and that each would have occupied but for the defendants’ misconduct”, “such a form of injunction would be fair and just”.[87]Nicholls V-C held, however, that the interlocutory injunction which had been granted in that case (which was similar to that granted at first instance in Bullivant) went beyond what the plaintiff was entitled to, because it put the plaintiff into a better position than if there had been no misuse of information. This was because, by the time it was granted, sufficient time had expired for the relevant information to have been independently compiled. There was no justification for putting the plaintiff in a better position than if there had been no breach of confidence. In respect of misuse of confidential information which had occurred by that date, he said at 855:
“the commensurate remedy is that the defendants should pay the plaintiff for that which they wrongly took. They should pay compensation for their use of the plaintiff’s property, for the benefit they received.”
[88]Nicholls V-C went on to say that he considered that this analysis was supported by the authorities, including Seager and Bullivant, and suggested that damages could be quantified in accordance with the “user principle” discussed in his earlier judgment in Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406. I note, however, that Spycatcher was not cited in the judgment or in argument.[89]In Ocular Sciences, Laddie J continued at 401 after the passage I have quoted above:
“The way the court reduces or eliminates the unfair benefit is by imposing financial penalties or, possibly, by the creation of a constructive trust.”
Later in the judgment, Laddie J went on to consider the question of a constructive trust and held that it would not be right to impose a constructive trust. So far as the present question is concerned, I note that neither Bullivant nor Universal Thermosensors is referred to in the judgment. The report does not indicate whether they were cited.[90]At this point I think it is necessary to mention two authorities which are not confidential information cases.[91]The first is Attorney General v Blake in the House of Lords. Their Lordships held that, in the exceptional circumstances of that case, the Crown was entitled to an account of profits as a remedy for the defendant’s breach of contract in publishing his autobiography contrary to an undertaking not to divulge official information gained by him as a result of his employment. The leading speech was given by Lord Nicholls. He said that the law could and should grant an appropriate financial remedy to prevent the defendant from profiting from his wrongdoing. Lord Nicholls’ exposition demonstrates various ways in which the courts have prevented wrongdoers from profiting from their wrongdoing by means of restitutionary remedies, and throws sidelights on some of the issues considered above. The question with which I am presently concerned did not arise, however, and therefore Lord Nicholls did not address it.[92]The second is Dyson Appliances Ltd v Hoover Ltd (No 2) [2001] RPC 27. In that case the defendant had infringed the claimant’s patent by making and selling its Triple Vortex vacuum cleaner, which was due to expire within a year. Michael Fysh QC (as he then was) sitting as a High Court Judge granted an injunction restraining the defendant from making and selling the Triple Vortex for a year after expiry. He held that he had jurisdiction to grant such an injunction by virtue of section 37 of the Supreme Court Act 1981. He held that it was just and convenient to do so because, by infringing the patent rather than waiting until it expired, the defendant had “jumped the gun”. Granting the injunction restored the parties to the position they would have been in had the claimant’s rights been respected. I note that none of the cases on breach of confidence considered in this judgment are referred to, nor is Blake. I also note that, although the judge held that, if no injunction was granted, the claimant would be able to claim damages in respect of post-expiry infringement by reason of the antecedent infringement, he did not consider the availability of an account of profits.[93]The conclusions which I draw from this review of the authorities are as follows: i) In general, the remedy for past misuse of confidential information is a financial one. Where appropriate, the claimant can claim a restitutionary remedy, namely an account of profits, which deprives the defendant of the benefit of his wrongdoing. ii) As the law presently stands, it is not clear whether an injunction can be granted to prevent a defendant from benefiting from a past misuse of confidential information. Laddie J in Ocular Sciences interpreted Lord Goff in Spycatcher as having concluded that the answer was no, but I am less confident of this. Bullivant and Universal Thermosensors suggest that the answer is yes, and Laddie J did not consider those cases. iii) In my view, it is significant that Terrapin, Bullivant and Universal Thermosensors are all cases about interim injunctions. When an interim injunction is sought, the court’s task is to hold the ring pending trial. It is not in a position to determine the parties’ legal rights or to award either compensatory or restitutionary remedies. In these circumstances a limited injunction to prevent the defendant from benefiting from his (alleged) past misuse of confidential information may be the best way to preserve the status quo pending trial. If it turns out to have been wrongly granted, the court can require the claimant to compensate the defendant under the cross-undertaking in damages (as occurred in Universal Thermosensors). iv) In any event, it seems to me that the reasoning in both Bullivant and Universal Thermosensors indicates that considerable caution is required both as to whether to grant such an injunction at all and, if so, as to its form and duration. As Nicholls V-C pointed out in the latter case, the court must be careful to ensure that such an injunction does not put the claimant in a better position than if there had been no misuse. As the Court of Appeal pointed out in the former case, the duration of any such injunction should not extend beyond the period for which the defendant’s illegitimate advantage may be expected to continue.[94]Derivative products. There is curiously little authority on the question of derivative products. In Ocular Sciences Laddie J dealt with this topic in detail at 401-404. His exposition merits quotation in full: “The second type of case is where the defendant's derivative products, process or business have been made from or with the assistance of information which is still confidential but where they do not themselves directly disclose or incorporate the information. If the derivative products or process are regarded merely as illicit benefits flowing from misuse of confidential information, then, for the reasons set out above, I do not think that is a basis which would justify the court in granting an injunction. On the other hand it may be possible to argue that the continued use or exploitation of the derived product is to be regarded as a continued use or exploitation of the confidential information which was utilised for their creation. This is of relevance here. Even if I grant an injunction to restrain continued use of the MPS program, the defendant's business will have been assisted by its use in the past and it could be said that continuation of the business represents a continued exploitation of or benefit from it. In addition, Mr. Anthony Galley may have looked at the plaintiffs' Lens Design Program when creating his spreadsheet for the purpose of reassuring himself or confirming the steps he had already taken. The plaintiffs argue that if the defendants continue to use their spreadsheet they are continuing to take the benefit of the still secret Lens Design Program. They want the court to grant injunctions to restrain breach of confidence which would prevent continued operation of the AVCL business and use of the defendants' lens design spreadsheet. The way the plaintiffs put their case is as follows. They say that the court has power to grant an injunction even where the information is not embodied in the product of the use. They submit that the principle stated in Prince Albert v. Strange (1849) 1 Mac. & G. 25 namely: ‘the court will interfere by injunction to prevent a party availing himself in any manner of a title arising out of a violation of right or breach of contract or confidence’ applies here. They say that this should apply regardless of whether the ultimate product of the violation discloses the confidential information. They say that, as a matter of equity, the court should also seek to prevent the defendants benefiting from their unlawful acts. The plaintiffs also rely on Union Carbide Corp. v. Naturin Ltd. [1987] F.S.R. 538. In that case the plaintiff's confidential method of making sausage skins had been stolen and taken abroad where it was used to set up a factory. Sausage skins from the offending factory were imported into England. The skins said nothing about how they were made. The plaintiff brought proceedings for breach of confidence here against the importer. The defendant importer applied to strike out on the ground that the statement of claim disclosed no reasonable cause of action. In the Court of Appeal the application was unsuccessful. Slade L.J. said at page 547: ‘The argument on this issue has been interesting and has raised important questions of law. However, I do not think it appropriate for this court to attempt a definitive answer to them on this striking out application. Suffice it to say that, subject to the important question of notice, to which I will shortly turn, I am of the opinion that the “cardinal principle” referred to by Lloyd-Jacob J. is wide enough to afford the plaintiffs an arguable claim against Naturin on the basis that, by marketing the casings received from Viscofan, they are availing themselves of a title derived from a breach of confidence and are thus to be treated as making use of the confidential information itself. Possibly there may be other conceptually sounder legal routes by which the same result could be reached. However, I am not yet persuaded that a plaintiff whose confidential know-how has been stolen and used by the thief to manufacture a product would necessarily be left without rights or remedies, at least against a third party who was in possession of the product and at all material times had full knowledge of all the circumstances in which the product had come into existence. I am not yet convinced that the arm of the law or of equity would necessarily be too short to reach the third party in such a case.’ In coming to the conclusion that the plaintiff's case was at least arguable, the Court of Appeal relied on the passage in Prince Albert v. Strange cited above and also on a similar passage in the judgment of Lloyd-Jacob J. in Stevenson Jordan Harrison Ltd. v. MacDonald & Evans (1951) 68 R.P.C. 190 . Since Union Carbide was a strike out application, the Court of Appeal did not have to decide whether or not the plaintiffs' claim was maintainable, only whether it was arguably so. I do not read it as supporting the argument that the very broad statement quoted from Prince Albert is adequate of itself to define those cases in which the courts will grant injunctions. Slade L.J.'s suggestion that there might be other conceptually sounder legal routes to support the plaintiffs' case suggests that he also harboured misgivings about simply adopting the statement in Prince Albert as unqualified. A broad principle that courts of equity should grant injunctions to prevent wrongdoers from ‘getting away with it’ has a tabloid appeal. However, it seems to me that the statement in Prince Albert must be treated with the same care as Lord Goff treated the somewhat similar broad statement ‘a man shall not be allowed to profit from his own wrong’. I cannot believe that the use of any title which has arisen in some way, whether direct or indirect, substantial or insubstantial, proximate or remote from a breach of a right or contract will always be stopped by the court. The broad field covered by that statement of principle must contain areas into which it would be quite inappropriate for the arm of equity to reach. It seems to me that whether or not the use of a derived product, say, should be treated as a use of the information employed in its creation must be determined on the particular facts of the case. A very similar question to the one being considered here arose in the last century in relation to patent rights. A number of cases turned on the issue of whether the owner of a process patent here could object to the importation of a product which was made using the patented process abroad. The terms of the royal grant gave to the patentee the exclusive right ‘to make, use, exercise and vend the invention within the United Kingdom, and the right to have and enjoy the whole profit, benefit, commodity, and advantage accruing and arising by reason of the said invention’. In some cases, this was said to give the patentee the right to prevent importation of the foreign made goods. For example in Von Heyden v. Neustadt (1880) 14 Ch. D. 230 James L.J. said: ‘A person who makes or procures to be made abroad for sale in this country, and sells the product here, is surely indirectly making use of and putting in practice the patented invention.’ The importation of the derived goods was treated as a ‘use’ or ‘exercise’ of the patent rights here. However not all imported derivative articles were treated as infringing. In Wilderman v. F.W. Berk & Co. Ltd. (1924) 42 R.P.C. 79 the plaintiff was the owner of a patent relating to improvements in electrolytic cells use for the manufacture of alkaline salts, such as caustic soda and caustic potash. The defendant imported into the United Kingdom caustic potash which had been made in Germany in a plant in which electrolytic cells using the patented improvement were employed. Tomlin J. approached the question of indirect use as follows: ‘It is urged on the plaintiff's behalf that, once I am satisfied that there has been used in connection with the manufacture of an imported article, in however an unimportant or trifling respect, some apparatus or material in respect of which there is a subsisting patent, the importation of the article manufactured is necessarily an infringement. I do not think that the cases to which I have been referred [which included Von Heyden] compel me to accept so wide a proposition, and I do not accept it. I cannot think, for example, that the employment of a patented cutting blow-pipe or a patented hammer in the manufacture of some part of a locomotive would necessarily render the importation of the locomotive an infringement. In my judgment, each case must be determined on its own merits by reference to the nature of the invention, and the extent to which its employment played a part in the production of the article, the importation of which is complained of.’ He dismissed the action because the plaintiff had produced no evidence to show that there was a substantial nexus between the imported potash and the patented improvement. It seems to me that a similar approach is appropriate in breach of confidence cases. It is not every derived product, process or business which should be treated as a camouflaged embodiment of the confidential information and not all ongoing exploitation of such products, processes or business should be treated as continued use of the information. It must be a matter of degree whether the extent and importance of the use of the confidential information is such that continued exploitation of the derived matter should be viewed as continued use of the information.” ‘the court will interfere by injunction to prevent a party availing himself in any manner of a title arising out of a violation of right or breach of contract or confidence’ ‘The argument on this issue has been interesting and has raised important questions of law. However, I do not think it appropriate for this court to attempt a definitive answer to them on this striking out application. Suffice it to say that, subject to the important question of notice, to which I will shortly turn, I am of the opinion that the “cardinal principle” referred to by Lloyd-Jacob J. is wide enough to afford the plaintiffs an arguable claim against Naturin on the basis that, by marketing the casings received from Viscofan, they are availing themselves of a title derived from a breach of confidence and are thus to be treated as making use of the confidential information itself. Possibly there may be other conceptually sounder legal routes by which the same result could be reached. However, I am not yet persuaded that a plaintiff whose confidential know-how has been stolen and used by the thief to manufacture a product would necessarily be left without rights or remedies, at least against a third party who was in possession of the product and at all material times had full knowledge of all the circumstances in which the product had come into existence. I am not yet convinced that the arm of the law or of equity would necessarily be too short to reach the third party in such a case.’ ‘A person who makes or procures to be made abroad for sale in this country, and sells the product here, is surely indirectly making use of and putting in practice the patented invention.’ ‘It is urged on the plaintiff's behalf that, once I am satisfied that there has been used in connection with the manufacture of an imported article, in however an unimportant or trifling respect, some apparatus or material in respect of which there is a subsisting patent, the importation of the article manufactured is necessarily an infringement. I do not think that the cases to which I have been referred [which included Von Heyden] compel me to accept so wide a proposition, and I do not accept it. I cannot think, for example, that the employment of a patented cutting blow-pipe or a patented hammer in the manufacture of some part of a locomotive would necessarily render the importation of the locomotive an infringement. In my judgment, each case must be determined on its own merits by reference to the nature of the invention, and the extent to which its employment played a part in the production of the article, the importation of which is complained of.’[95]Laddie J’s reasoning may be summarised as follows: i) The purpose of an injunction to restrain disclosure or use of confidential information is to prevent further disclosure or use of the confidential information in the future. ii) Where a product embodies or discloses confidential information, or is manufactured using confidential information, then an injunction to restrain use of the confidential information will automatically restrain the continued manufacture and sale of the product. iii) An injunction may also be granted to restrain the manufacture or sale of a derived product where the manufacture of it represents a continued use of the information having regard to the extent and importance of the use of the information. iv) Otherwise, the appropriate remedy in respect of the manufacture and sale of products derived from a past misuse of confidential information is a financial one.[96]Laddie J’s analysis of this question is premised on his previous conclusion that no injunction should be granted purely to prevent a defendant from benefiting from a past misuse of confidential information. For the reasons I have explained, I am less confident that that premise correctly states the law, but I do agree that, at the very least, the court must be cautious in granting such an injunction lest it put the claimant in a better position than if there had been no misuse. If a permanent injunction is granted to restrain the manufacture and sale of a product which is derived from a past misuse of confidential information, but such acts do not amount to a continued misuse of the information, then the risk that the claimant will end up in a better position than if there had been no misuse may become acute. In general, therefore, I consider that Laddie J’s analysis represents the correct approach.

Should there be an injunction at all?

[97]In the main judgment at [672] I expressed doubt as to whether an injunction was an appropriate remedy in the present case. At the resumed hearing, counsel for VF pressed strongly on me the considerations that I had held that:(i) the information in the Fence database, and in particular the recipes contained in that database, constituted VF’s trade secrets;(ii) Dr Skovmand had misused that information despite denying having done so on oath;(iii) Mr Larsen had participated in the misuse of the information despite denying having done so on oath;(iv) the Defendants had had access to all of the information in the Fence database through Mr Larsen during the course of his employment (although it may be the case that VF recovered all his copies during the Danish proceedings) and subsequently through Dr Skovmand; and(v) if no injunction were granted, the Defendants would be free not merely to use, but also to disclose to others, VF’s trade secrets. Accordingly, he submitted that this was not merely an appropriate, but a strong, case for an injunction to restrain further use or disclosure of VF’s trade secrets.[98]For his part, counsel for the Defendants submitted that an injunction should be refused since damages would be an adequate remedy.[99]On reflection, I accept the submission of counsel for VF. VF have established misuse of their trade secrets. Furthermore, I consider that there is a clear risk of further use or disclosure if an injunction is not granted. Counsel for the Defendants did not suggest that this was a case in which an injunction should be refused applying the principles laid down in Shelfer. More generally, I do not consider that damages or equitable compensation would be an adequate remedy for VF.[100]Accordingly, I conclude that VF is entitled to an injunction. Furthermore, VF are entitled to an injunction against Bestnet and 3T, as well as Mr Larsen and Mrs Sig, since Bestnet and 3T now know that the information is confidential to VF and there is a risk they will misuse it. The more difficult question, however, is as to the scope of the injunction.

The injunctions sought by VF

[101]VF seek an injunctions to restrain the Defendants from doing the following acts:
“(a) Selling or offering for sale anywhere in the world or manufacturing or applying for WHOPES recommendation in respect of any polyethylene (“PE”) insecticide-containing products according to the recipe of any product sold prior to 5 February 2009 under and by reference to the name Netprotect or IconLife or any recipe developed therefrom. (b) Selling or offering for sale anywhere in the world any product under and by reference to the WHOPES recommendations gained or in the process of being applied for in respect of the Defendants’ Netprotect product at any time prior to 5 February 2009. (c) Utilising the services of Mr Ole Skovmand or Intelligent Insect Control SARL in respect of the development of any insecticidal PE product containing deltamethrin. (d) Using or disclosing any confidential information of the Claimants or either of them relating to the Claimants’ insecticide-containing products as identified in Confidential Schedule 1 to the Amended Particulars of Claim. (e) Authorising, licensing, causing, procuring, enabling or assisting any other person, firm or company to do any of the acts aforesaid.”

Paragraph (d)

[102]The basic injunction is contained in paragraph (d). This goes wider than is justified, since Confidential Schedule 1 to the Amended Particulars of Claim includes categories of information which were not pursued at trial. In my judgment, however, VF are entitled to an injunction restraining the Defendants from using or disclosing to any other person the information contained in the Fence database, since in essence that is the information that I have held constitutes VF’s trade secrets. This should be subject to a proviso that the injunction does not apply to any information which is now in, or subsequently comes into, the public domain.

Paragraph (c)

[103]It is convenient next to deal with paragraph (c). I can see no basis for this whatsoever. It amounts to imposing an ex post facto permanent worldwide restrictive covenant on Dr Skovmand and IIC. It would be a blatant and wholly unjustifiable restraint of trade. As noted above, Dr Skovmand and IIC are not even parties to this claim.

Paragraphs (a) and (b)

(a) and (b)

[104]For the reasons given above, I approach the question of whether to grant these injunctions on the following bases: i) An injunction should be granted to restrain future use or disclosure of VF’s trade secrets. ii) Prima facie the appropriate remedy for the Defendants’ past misuse of VF’s trade secrets is a financial one. As discussed below, VF will be entitled to elect between damages or equitable compensation and an account of profits. Even if an injunction can be granted purely to prevent the Defendants from benefiting from past misuse, I should be cautious before granting such an injunction lest it put VF in a better position than if there had been no misuse of their trade secrets. iii) Nevertheless, an injunction may be granted to restrain manufacture and sale of products derived from a misuse of VF’s trade secrets if this represents a continued use of the information having regard to the extent and importance of the use of the information.[105]So far as paragraph (b) is concerned, in substance this is an injunction to restrain the Defendants from benefiting from past misuse of confidential information. I do not consider that such an injunction is justified. VF’s remedy for past misuse should be a financial one. Granting the injunction sought by paragraph (b) might well put VF into a better position than if there had no misuse.[106]As for paragraph (a), counsel for VF submitted that this was justified on the ground that, in substance, the Defendants were continuing to misuse VF’s trade secrets. Against this, counsel for the Defendants relied on my finding in the main judgment at [672] that:
“the misuse of VF’s trade secrets I have found was merely the starting point for a substantial program of further development which resulted in a formulation which is different from any of VF’s recipes in a number of respects, and in particular (i) the polymer composition (at least in the case of the sample submitted for WHOPES II evaluation), (ii) the inclusion of [ADDITIVE L] and (iii) the inclusion of [ADDITIVE M].”
He submitted that, having regard to this finding, an injunction to restrain the Defendants from manufacturing and selling mosquito nets in accordance with the formulation of the sample submitted for WHOPES II evaluation would not be justified, since that would not amount to continued use of VF’s trade secrets.[107]I accept VF’s case 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.[108]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 [ADDITIVE L] and inclusion of [ADDITIVE M]. Counsel for VF relied upon Dr Skovmand’s evidence that it was “not very different”; but in my judgment it was different enough.[109]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.[110]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.[111]Accordingly, I will grant an injunction to restrain the manufacture and sale of the first Netprotect product, but not the product submitted for WHOPES II evaluation.

Paragraph (e)

[112]In my judgment paragraph (e) is too wide, in particular in restraining “authorising”. The injunction should restrain procuring or assisting others to do the acts.

Delivery up

[113]An order for delivery up in a confidential information case is an ancillary order to enforce the injunction. In general, it should be co-extensive with the injunction. Accordingly, I will grant an order for delivery up of any copies of the Fence database in the Defendants’ possession power or control (except for copies held by the Defendants’ legal representatives for the purposes of these and foreign proceedings) and any remaining quantities of the first Netprotect product. VF have proposed that the latter be donated to charity if that is possible or otherwise destroyed.I accept that proposal.

Publication of the judgment

[114]VF seek an order pursuant to paragraph 29.2 of the Practice Direction to CPR Part 63, which implements Article 15 of European Parliament and Council Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights, requiring the Defendants to publicise the main judgment. During the course of argument, substantial agreement was reached that the appropriate course would be to require Bestnet to display on the homepage of its website for a period of one year, or until further order of the Court, a short statement to the effect that this Court has found that the Defendants had misused VF’s trade secrets together with a hyperlink to the redacted version of the main judgment which is available on the British and Irish Legal Information Institute’s website. The parties should endeavour to agree the wording of the statement. It may be appropriate for a hyperlink to a redacted version of this judgment to be included. It will be open to the Defendants, if appropriate, to add a statement to the effect that they are seeking to appeal the main judgment or this judgment (as to which, see below).

Island v Tring disclosure

[115]VF seek an order for disclosure to enable then to elect between damages (or equitable compensation) and an account of profits in accordance with Island Records Ltd v Tring International plc [1996] 1 WLR 1256. VF seek disclosure of the following information by way of a witness statement verified by a statement of truth: “(a) The sales of PE net under the brand Netprotect or any other brand colourably similar thereto to date, broken down by reference to each order for such product, identifying the number of products sold in each case, the party to whom such sales were made and the closing date of any tender process by which such orders were obtained. (b) For each such order of Netprotect;(i) the sale price per net(ii) the cost of sales per net(iii) the date or dates of manufacture of the nets sold.(iv) the recipe(s) of the net supplied. (c) The overheads attributable to the production of all such nets broken down by reference to any period of time that is convenient to the accounts of the Defendants. (d) The sales of PE net under the brand name IconLife or any brand colourably similar thereto [to Syngenta] to date, broken down by reference to each order for such product, identifying the number of products sold in each case. (e) For each such order; (i) the sale price per net (ii) the cost of sales per net (iii) the date or dates of manufacture of the nets sold.(v) the recipe(s) of the net supplied. (f) The overheads attributable to the production of all such IconLife nets broken down by reference to any period of time that is convenient to the accounts of the Defendants (g) The like information in relation to any other insecticide incorporated PE nets manufactured and/or sold by or to the order of the Defendants or any of them under any brand name other than Netprotect or IconLife.” (i) the sale price per net (ii) the cost of sales per net (iii) the date or dates of manufacture of the nets sold. (iv) the recipe(s) of the net supplied. (ii) the cost of sales per net (iii) the date or dates of manufacture of the nets sold. (v) the recipe(s) of the net supplied.[116]Counsel for the Defendants submitted that no order for disclosure should be made at all. In my judgment, an order is justified in principle, but the order sought by VF goes too far in terms of the information which it would require to be provided: see Brugger v Medicaid [1996] FSR 362. In my view, it will be sufficient for the Defendants to set out the number of mosquito nets manufactured and sold(a) by Bestnet and(b) by any licensee, the sums received or receivable in respect of (a) and (b) and, in the case of (a), an approximate estimate of the costs of manufacture and sale together with an explanation as to how the estimate was made. The disclosure should cover all LLINs made and sold by Bestnet and its licensees to date, and not just the product launched in October 2005, since VF have indicated that they are likely to include all such nets within their claim for financial relief. The disclosure should distinguish between (i) the product launched in October 2005, (ii) the product which was submitted for WHOPES II evaluation and (iii) any other product manufactured and sold by Bestnet or its licensees.

Costs

[117]VF seek orders for their costs to date to be assessed on the indemnity basis, interest on costs and an interim payment.[118]In my judgment VF are entitled to their costs. They were successful in establishing their claim for misuse of their trade secrets in the face of determined opposition. Furthermore, they have succeeded in obtaining an injunction, albeit a more limited one than that sought. Counsel for the Defendants submitted that entitlement to costs depended on who, in real terms, was the winner, and that VF would not have won if it failed to obtain an injunction to restrain manufacture and sale of the Defendants’ current product. It is fair to say that VF have not been wholly successful in terms of the relief they have obtained, but I do not think that their limited degree of failure justifies depriving them of any part of their costs.[119]Furthermore, I consider that this is a case which is sufficiently far from the norm to justify assessment of costs on the indemnity basis: see Civil Procedure note 44.4.3 first paragraph. Both of the Defendants’ two main witnesses were found not to be truthful witnesses and I concluded that two key documents produced by the Defendants were not what they purported to be.[120]Interest on costs is a fairly standard order in a commercial case such as this: see Civil Procedure note 44.3.14 last paragraph. VF seek interest at 2% above the Barclays Bank base lending rate from the dates of payments made by VF to their solicitors to 3 April 2009. No specific objection to this was raised by the Defendants and so I shall make that order.[121]Turning to an interim payment, VF have presented a schedule of costs totalling some £4.5m and seek an interim payment of £2m. I accept that the complexity and fact-sensitive nature of the issues, and the manner in which the Defendants defended the claim, have entailed significant work, and therefore expense, on the part of VF’s legal team. Even so, the total sum claimed strikes me as on the high side.[122]Counsel for the Defendants submitted that no interim payment of this magnitude should be awarded since the Defendants would be unable to pay, and it would bankrupt them. As he had to accept, however, the Defendants have not adduced any evidence of their means. Accordingly, this is not a factor I can take into account at this stage. In any event, it seems to me to be a matter which goes to the timing of the payment rather than the principle or the amount.[123]The sum awarded by way of an interim payment should not exceed the irreducible minimum which VF will recover on a detailed assessment: see Mars UK Ltd v Teknowledge Ltd [2000] FSR 138. When the total claimed is so high, I think it is appropriate to err on the side of caution even though I have ordered assessment on the indemnity basis. I will order an interim payment in the sum of £1.5 million.

Expansion of the Confidentiality club

[124]As recorded in the main judgment, the present action is one of a number presently on foot in various jurisdictions regarding the Defendants’ and VF’s misuse of VF’s trade secrets. At present the parties’ legal advisors and the foreign courts, including the court-appointed experts in France, are unable to see the confidential version of the main judgment or unredacted versions of the disclosure documents, witness statements and experts’ reports referred to in it. VF have applied for an order for expansion of the Confidentiality Club which has been established in these proceedings so as to permit this. In addition, VF want to use these materials in aid of contemplated proceedings in Switzerland. The Defendants resist such an order on the ground that it creates an undue risk that the Defendants’ confidential information will leak out.[125]I consider that the order sought by VF is justified for the following reasons.[126]So far as the confidential main judgment is concerned, I can see no valid objection to this being disclosed to the foreign courts (including court-appointed experts) and every reason why it should be disclosed. VF may wish to rely upon it as creating issue estoppels, but even if this is not the case, it is plainly in the interests of justice for the foreign courts not to only to be able to see my conclusions, but also properly to be able to understand my reasoning. It follows that the confidential judgment should also be disclosed to the parties’ legal representatives in those jurisdictions, so to enable them to transmit to the courts and to make representations based upon it.[127]That being so, I consider that it makes sense for the unredacted disclosure documents, witness statements and experts’ reports referred to in it also to be disclosed. That will enable the foreign courts and the parties’ foreign lawyers to see the materials upon which the judgment is based, and thereby (if appropriate) form their own views as to the correctness of my conclusions. As Dr Skovmand himself said in paragraph 153 of his sixth witness statement:
“We have applied for a direction that the experts from Denmark and France can have full access to the expert reports in the UK and even talk to the experts. It would be rather bizarre if experts in different countries obtain different results evaluating the same products.”
[128]This is particularly so given that the basic principle that such documents should be available for use in aid of foreign proceedings has already been established by the Order of Roger Wyand QC dated 30 October 2007, paragraph 15 of which provides:
“The parties have permission under CPR 31.22(1)(b) and 32.12(2)(b) to use documents disclosed in these proceedings and witness statements and expert reports produced for these proceedings and exhibits thereto (‘Documents’) for the purposes of any proceedings abroad to which one or more of the parties is a party PROVIDED THAT the parties in the present proceedings agree in advance in writing in respect of each of the said Documents (i) redactions to the said Documents or (ii) that no redactions are necessary.”
[129]The proviso to this paragraph reflects the legitimate concern of both sides that their confidential information should be protected. Confidentiality can be protected in other ways than redaction, however. I accept that the Defendants are genuinely concerned to prevent public disclosure of their confidential information. VF have equal reason to be concerned about this, however. To meet this concern, VF propose that the documents should only be disclosed to named individuals at the relevant foreign firms of lawyers after they have entered into confidentiality undertakings in accordance with a draft which has been provided. VF have also adduced evidence from their foreign lawyers to confirm that admission to the Confidentiality Club will not oblige them to disclose the documents on an open basis.[130]Counsel for the Defendants did not criticise the principle of identifying named individuals or the terms of the draft undertaking. Nor did he suggest that there was any risk of the individuals in question deliberately not abiding by their undertakings. Rather, he submitted that there was a risk of inadvertent disclosure which was compounded every time an additional person was added to the list of recipients. I accept that there is an increased risk of inadvertent disclosure if the Confidentiality Club is expanded, but in my judgment the risk is a relatively small one. I consider that the risk is outweighed by the factors that favour expansion of the Confidentiality Club.[131]Since a draft of this judgment was made available to the parties, the Defendants have sought for the first time to rely upon a different ground for resisting expansion of the Confidentiality Club. In short, the Defendants allege that VF have misused the Defendants’ confidential information contained in the Netprotect database in developing PermaNet 3.0. The basis for this allegation is an analysis report from Ciba dated 11 July 2008. No explanation has been provided as to why this point was not raised before. VF’s application was made by notice dated 21 April 2009 and supported by a witness statement of Mr Rose dated 27 April 2009. The Defendants served a witness statement of Mr Tackley dated 13 May 2009 in opposition to it, and VF served a witness statement of Ms San Martin dated 18 May 2009 in reply. The new allegation is quite plainly one which VF would need to consider and serve evidence in reply to before the Court could consider it. In my view it is now too late for the Defendants to raise it.[132]In any event, however, I do not consider that this evidence justifies refusal of VF’s application. Even if the Defendants’ allegation has any substance, as to of course which I express no view, it goes to deliberate misuse of the information contained in the Netprotect database by VF themselves, and misuse which has already occurred, not possible future disclosure of confidential information by VF’s foreign lawyers.

Permission to appeal

[133]The Defendants seek permission to appeal against the main judgment on a number of grounds. I do not consider it appropriate to give permission to appeal the main judgment, since the Defendants have not identified any error of law or principle in the main judgment. In substance, the Defendants seek to challenge the findings of fact. In my judgment that challenge has no real prospect of success. In the circumstances, I do not propose to comment on all the grounds advanced by counsel for the Defendants. I will, however, comment on two.[134]First, the gentleman’s agreement. Counsel for the Defendants submitted that the fact that the gentleman’s agreement was intended to be binding in honour only was dispositive of the entire case. This completely ignores what I said in the main judgment at [309]-[316] and the third and fourth points in [327].[135]Secondly, the Ciba recommendations. Counsel for the Defendants complained that VF had not pleaded that the Ciba recommendations were a trade secret of VF’s. This complaint ignores the way in which the issue over the confidentiality of the Ciba recommendations came into the case. It was raised by the Defendants as an answer to VF’s claim, contending that Dr Skovmand had started from, and was entitled to start from, the Ciba recommendations. VF’s response was to dispute both limbs of this contention. VF’s case was clearly set out in its skeleton argument before trial. At no stage did the Defendants object that this case was not open to VF since it was not pleaded.[136]I will grant both sides permission to appeal my decision in this judgment with regard to an injunction. This seems to me to raise difficult questions of principle which merit consideration by the Court of Appeal.[137]I will refuse permission to either side to appeal any other aspect of this judgment since the decisions are exercises of discretion.

Order

[138]The parties should endeavour to agree an order to give effect to this judgment.

Cited in 24 later judgments

and 15 more of the most senior