26 January 2006

Trade Secrets: Environmental Technologies v Symphony

Two fascinating decisions from the Court of Appeal today: Environmental Technologies Inc (EPI) and another v Symphony Plastic Technologies Plc and another[2006] EWCA Civ 3 (26 Jan 2006) in which the Court dismissed the claimant's appeal from the decision of Mr Justice Peter Smith at [2004] EWHC 2945 (Ch) (21 Dec 2004) and Koninklijke Philips Electronics NV v Remington Consumer Products Ltd [2006] EWCA Civ 16 (26 January 2006) on shape marks. For no better reason than that Mr Justice Peter Smith used to practise in Manchester and we sometimes found ourselves against each other, I shall start with Symphony and leave the shavers for tomorrow or whenever I can next get round to them.

As I have indicated in the title, Symphony was about trade secrets. To prevent those secrets escaping beyond the Strand, both Mr Justice Peter Smith and the Court of Appeal sat in private. Both tribunals delivered judgments that were published only in part. The trial judge delivered an open portion which set his findings and a confidential one that contained his analysis. The Court of Appeal delivered just one judgment but it contains more redactions that a search for Falun Gong on a Chinese search engine. As Lord Justice Jacob feared that this editing would reduce the judgment's overall intelligibility 9paragraph [4]). His lordship never said a truer word.

For all that, the judgment is still worth reading and I think that the best bit is who has to carry the burden of proof in a breach of confidence claim. The claimants' case was that it ought to have been born by the defendants because they could raise a prima facie presumption of confidence breaching. The facts that they relied upon were as follows:
(1) The similarity of the defendants' ingredients in nature and quantities to the claimants.
(2) The fact that the defendants wanted a "seamless transition" from the claimants' product to its replacement.
(3) The fact that just over a year before the alleged analysis of the claimant's product, a Dr Whiteman, whose evidence the Judge accepted, said that at a job interview he had been asked whether he could analyse a product that was probably the claimants'.
(4) The fact that the defendants arrived at a successful formulation surprisingly quickly and without any trial and error.
(5) The fact that the defendants' witnesses were disbelieved in respect of a number of matters.

By analogy with the practice in copyright litigation that the burden of proof shifts where a claimant can show objective similarity between an original and putative copy and an opportunity for the defendant to have made a copy of the original.

Lord Justice Jacob made the point that the practice in copyright law
"is not so much a rule of law as one of rational weighing of evidence. It is simply this: if the degree of similarity between the work alleged to have been copied and the alleged piratical work is unlikely to have come about by coincidence, it is for the defendant to prove that it was. This is of course no more than an example of a shifting evidential burden."

On the facts before him his Lordship did not think the comparison the court was asked to make remotely raised an inference of copying. Lord Justice Buxton went further. He did not seem to see any point in drawing an analogy with copyright at all. There were other points but the deletions make it hard to understand them. Suffice it to say that the Court of Appeal was unimpressed.

There was another point. At trial the defendants admitted that they had failed to return confidential materials which was a clear breach of contract but it did not appear to have done any harm. The judge awarded £2 damages. The claimants sought an enquiry on the basis that the defendants had failed to return a quantity of the licensed product which fell within the definition of materials. That had not been raised at trial and in the Court's view it was far too late to raise it on appeal.

The final treat from the cookie jar is the following observation of Lord Justice Buxton in the last paragraph of the judgment:

"I for my part find it by no means straightforward to reconcile on the one hand the apparently blanket rule that any claim of breach of confidence must fail if the material in question is in the public domain (see e.g. Saltmann v Campbell Engineering (1948) 65 RPC 203 at 215.10 and Mustad v Dosen [1964] 1 WLR 109); and on the other hand the "springboard" cases, that seem to inhibit use of even public domain material if it is conveyed in circumstances that aspire to confidence: a difficulty that, with respect, is not resolved by the observations in the House of Lords in A-G v Guardian Newspapers [1990] 1 AC 109 at 285. These may be questions of considerable general importance that call for an answer in this court or, quite likely, at a higher level."

That's a judicial hint if ever I saw one. Trade marks tomorrow - shavers and if I can get round to it Antipodean UGH boots.

No comments: