10 November 2010

Confidential Information: EFH Technologies Ltd and another v. Rytium Technology FZC and another

This decision of Lord Turnbull in EFH Technologies Ltd. and another v Reytium Technology FZC and another [2010] ScotCS CSOH_143 (29 Oct 2010) highlights differences between the procedures in Scotland for obtaining the equivalent of interim injunctive relief and those of the rest of the United Kingdom.

This was an application for an interim interdict (the equivalent of an interim injunction) to restrain the defender (defendant) from manufacturing, distributing or selling a product called NaturAD Shrimp Treat. This is used to prevent freshly caught prawns from turning black and unsightly. The pursuer (claimant) alleged that NaturAD Shrimp Treat was a copy of its own product called Prawnfresh. The pursuer's product had not been patented - though a patent application had been filed in December 2009 several years after Prawnfresh had first been marketed. The pursuer therefore had to rely on the law of confidence - again notwithstanding that the product had been in the stream of commerce and hence, presumably, available for purchase and analysis, for some time. His Lordship entertained the application even though the pursuer had been aware of the defender's product since 2008 yet had done nothing about except to commission an expert's report.

In American Cyanamid v Ethicon Ltd. Lord Diplock had said:
"It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations."
Even though the evidence before him could not be tested by cross-examination, that is precisely what Lord Turnbull did. Although the defender appears to have argued that the product was no longer in the public domain there was no discussion in the judgment as to whether the product could have been purchased on the open market and reverse engineered.

The two years delay between first learning of the defender's product and the issue of the application was excused by "the amount of time which had been taken up obtaining scientific reports from different sources and seeking to be able to rely on the work of an expert of indisputable world standing...." The factors that the defender's product accounted for 75% of its revenue, that an interdict would imperil its existence, that a proof (trial) could not take place until well into the New Year and that there was no evidence of the pursuer's ability to compensate the defender in damages seem to have carried very little weight with the judge. What does appear to have impressed His Lordship was the incorporation of the defender in Sharjah Free Zone rather than the UK supposedly making it difficult for the pursuer to recover damages. As The Global Competitiveness Report of The World Economic Forum for 2010 to 2011 placed the legal system of the United Arab Emirates 22nd in the world ranking for efficiency in settling disputes - well behind the UK's which came in 8th but well ahead of the USA's which was 33rd - that was surprising. Notwithstanding all these considerations the judge held that the balance of convenience favoured the pursuer and granted the interdict.

If anyone would like to discuss this case (or indeed the law of confidence generally) with me they should contact me on 0800 862 0055 or through this form.

No comments: