Vestergaard Frandsen AS & Anor v Bestnet Europe Ltd & Ors

Factual and Procedural Background

This claim concerns misuse of confidential information involving technical trade secrets related to long-lasting insecticidal mosquito nets ("LLINs"). The Plaintiff manufactures and sells a polyester LLIN under the trademark PermaNet. The Defendants, two former employees of the Plaintiff and associated companies, established a competing business producing a polyethylene LLIN called Netprotect, marketed by a third party under the trademark Icon Life.

The Plaintiff alleges that in developing Netprotect, the Defendants misused confidential information contained in a database known as the Fence database, which records development work for the Plaintiff. The Defendants deny using any such information and dispute the obligation of confidence regarding the database.

The litigation follows earlier proceedings in Denmark involving similar parties and claims, including copyright infringement and misuse of trade secrets. The Plaintiff also pursued related actions in France and India. This claim was issued in the English courts on 19 December 2006, initially naming additional parties who were later excluded.

The case involved extensive confidential material and was partly heard in secret due to the sensitive nature of the trade secrets. The court imposed confidentiality regimes restricting document use and disclosure. The procedural history includes multiple disclosure orders, applications to strike out, and adjournments related to evidence and expert reports.

Central to the dispute are two databases compiled by a key individual, Dr Skovmand, who was a consultant to the Plaintiff and later involved with the Defendants. These databases contain formulation data, test results, and other technical information about the Plaintiff's and Defendants' products.

The Plaintiff's witnesses included company executives, laboratory managers, and experts in polymer technology and entomology. The Defendants' witnesses included Dr Skovmand and former employees, whose credibility the court found questionable. The court also considered expert evidence on the technical aspects and statistical analyses of the formulations and test results.

Legal Issues Presented

1. Whether the information contained in the Fence database possessed the necessary quality of confidence and constituted trade secrets of the Plaintiff.
2. Whether the Defendants, and in particular Dr Skovmand, owed an obligation of confidence to the Plaintiff regarding the information in the Fence database.
3. Whether the Defendants misused the confidential information in developing the Netprotect product.
4. The scope and extent of any such obligation of confidence, including the use of Ciba's additive recommendations.
5. The appropriate remedies for any breach of confidence found.

Arguments of the Parties

Plaintiff's Arguments

• The Fence database contained confidential technical information and trade secrets developed at considerable cost and effort.
• Dr Skovmand and others were under express and implied contractual and equitable obligations to keep this information confidential.
• The initial recipes for Netprotect were derived from the Fence database, representing misuse of the Plaintiff's trade secrets.
• The Defendants' explanations for the similarities in formulations and use of certain numerical values were unsatisfactory and inconsistent.
• The Plaintiff sought an injunction to restrain continued misuse and commercial exploitation of the trade secrets.

Defendants' Arguments

• The Defendants denied using any confidential information from the Fence database in developing Netprotect.
• They contended that the information in the Fence database was either not confidential or did not constitute trade secrets.
• Dr Skovmand claimed to have started development of Netprotect "from scratch," relying on publicly available information and Ciba's recommendations.
• The similarities in formulations were explained by the fact that the same person developed both products using similar trial and error methods.
• The Plaintiff's evidence was challenged as speculative and the claim alleged to be vexatious and abusive.
• The Defendants argued that the odd numerical values in formulations had innocent explanations related to experimental design.
• The Extract DB documents disclosed by the Defendants were genuine and not fabricated.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed factual analysis, reconstructing the development histories of both the Plaintiff’s PE products and the Defendants’ Netprotect product primarily from documentary evidence and unchallenged witness testimony. The court found the key witnesses for the Defendants, Dr Skovmand and Mr Larsen, to be unreliable and their accounts inconsistent.

The court considered the nature and contents of the Fence database, concluding that it contained confidential information and trade secrets of the Plaintiff, including recipes and bioassay results for specific samples that had been tested and shown promising results.

It was found that Dr Skovmand had an express contractual obligation to keep information arising from his work confidential and that, even if no express term existed, such an obligation was implied or arose in equity. The court accepted that the scope of the obligation extended to the Ciba recommendations given confidentially to Dr Skovmand, which were not freely usable by him for other clients.

The court carefully examined the Defendants’ claim that the Netprotect recipes were independently developed starting from publicly available information and Ciba’s recommendations. The court rejected this, finding that Dr Skovmand started from the Fence database formulations, particularly samples 7-16, and used the confidential information to devise the initial Netprotect recipes.

The court analyzed the significance of certain numerical values used in both databases, concluding that their repetition was best explained by Dr Skovmand’s use of the Fence database rather than independent derivation. Attempts by Dr Skovmand to explain these values as part of a “mathematical protocol” were found unsatisfactory, and expert evidence indicated that the experimental design of the Netprotect trials was inferior to that of the Fence trials.

The court also examined the provenance and reliability of certain Extract DB documents disclosed by the Defendants. It found that two of the documents were of doubtful provenance, possibly fabricated, and that the Defendants’ explanations for discrepancies were implausible. Responsibility for these documents was primarily attributed to Mr Larsen, with Dr Skovmand complicit or aware of their questionable nature.

Regarding the information submitted to the Danish court by Dr Skovmand, the court found that he misled the Danish court about the nature of the insecticide used in Netprotect, downplaying the use of deltamethrin which had been the dominant insecticide in initial formulations and trials.

On the legal principles, the court applied established English law on breach of confidence, including the Coco test and related authorities. It confirmed that the Defendants owed a duty not to misuse trade secrets after termination of employment or consultancy, but could use general knowledge and experience.

The court concluded that the Defendants, and in particular Dr Skovmand, misused the Plaintiff’s trade secrets in developing Netprotect, using confidential recipes and test results from the Fence database.

The court reserved detailed consideration of remedies, noting the Defendants’ further development of Netprotect and differences in the final product, including polymer composition and additives, which complicated the question of injunction scope.

Holding and Implications

The court held that the Defendants are liable for breach of confidence.

The court found that the Defendants misused trade secrets contained in the Plaintiff’s Fence database, in particular by using confidential formulations and bioassay results to develop the competing Netprotect product.

The court recognized that the Defendants’ subsequent development work resulted in a product differing in significant respects from the Plaintiff’s formulations. The question of appropriate remedies, including whether to grant an injunction preventing manufacture and sale of the current product, was reserved for further argument.

No new legal precedent was established; the decision applied established principles of confidentiality, trade secrets, and misuse of confidential information under English law.

The direct effect is that the Defendants are found liable, but the extent of relief remains to be determined.