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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> EPI Environmental Technologies Inc & Anor v Symphony Plastic Technologies Plc & Anor [2004] EWHC 2945 (Ch) (21 December 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/2945.html Cite as: [2005] 1 WLR 3456, [2005] FSR 22, [2005] WLR 3456, [2004] EWHC 2945 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21 December 2004

Mr Justice Peter Smith :

INTRODUCTION

1. This claim is about the creation by the Defendants (collectively for the purposes of this judgment called “Symphony”) of an additive, which is introduced in the process of manufacturing thin film plastic products, such as carrier bags, in order to make them degradable. Environmentally the problem posed by non-degradable plastic products is well known.
2. Symphony's additive for the purposes of this litigation is BD92384. The Claimants' (collectively for the purposes of this judgment known as “EPI”) primary claim is that it is a substantial copy of EPI's formulation of its own additive DCP 509.
3. It is alleged by EPI that the formulation of BD92384 was in breach of various confidentiality agreements entered into between Symphony and EPI and was a misuse of information provided confidentially to Symphony by EPI during the course of the Agreements. Finally, it is alleged that Symphony has passed its products off as being associated with EPI's products.
4. On 20^th April 2004 Lawrence Collins J imposed various restrictions for the protection and preservation of the confidentiality of the information at issue in these proceedings. That order was supplemented by an order I made on 21^st May 2004, whereby a “Confidentiality Club” was created, which provided the Relevant Documents as defined in that order should be deemed to be confidential pending any findings as to confidentiality and that those documents might only be reviewed by the Approved Persons as defined in that order and as subsequently varied. On 23^rd July 2004 Rimer J varied the order.
5. At the opening of the trial counsel for EPI (Mr Geoffrey Hobbs QC appearing with Mr George Hamer) requested directions for the protection and preservation of confidentiality at the trial under CPR 39.2(3)(c) and 31.22(2), 32.13(2) and (3)(d) and an inherent jurisdiction so far as the documents were not part of the court record. The purpose of seeking that was to preserve the confidentiality of the information contained in the Relevant Documents and prevent anybody else having access to those matters pending the determination of the trial.
6. Symphony supported such an approach. On analysis it was difficult, if not impossible to see how the trial could be handled satisfactorily if it was only partially held in private as it would make cross examination of witnesses difficult and would give rise to the possibility of Relevant Documents and the information contained therein inadvertently coming into the public domain. Accordingly, I made an order that the trial should proceed in private and that there be no inspection of the Court File and the documents contained therein unless an order of the court was made permitting such inspection.
7. Once again at the joint instigation of the parties the resulting judgment I deliver is split into two halves. This half of my judgment relates to the parts of the trial which are not confidential and the legal principles applicable to the dispute between the parties. Finally, it also includes my conclusions without giving any details of the information contained in the Relevant Documents and the matters in the trial, which have lead to those conclusions.
8. The separate half of my judgment relates to the consideration of the information contained in the Relevant Documents at trial, including the openings, submissions, transcripts and cross-examination of the witnesses.
9. I am grateful to the detailed assistance provided to me by lawyers in the parties' respective teams and the experts who have grappled with the difficult task of explaining concepts to a Judge who's familiarity with some of the concepts has remained undisturbed for several decades. Nevertheless, at the end of the exercise I am quite satisfied that I had enough material together with the explanations provided by the Experts and the submissions of the parties to be in a position fully to understand all the material that was put before me. Accordingly, I declined a suggestion made by Mr Prescott QC (who with Ms Iona Berkeley appears for Symphony) at the conclusion of the evidence that I should appoint an assessor to assist me. In preparing for this judgment (including considering the written and oral closing submissions) I have not felt it necessary to revise that decision.

THE PARTIES

10. Between 1^st January 1997 and 17^th June 2003 EPI and Symphony were parties to a business relationship for the purpose of which EPI supplied Symphony with prodegradant additives for use in the manufacture of a range of thin film plastic products. Symphony were supplied with various of EPI's additives, namely DCP508, 590, 510, 560, 561, 615, 739 and ZSK1221. By far the largest quantities were DCP509 and the conflicts in this action have largely (but not exclusively) revolved around that designated additive.
11. The relationship was terminated by EPI by notice in writing dated 17^th June 2003, under clause 12.5 of the then current Agreement.

THE PRODUCTS

12. In order to understand the judgment it is necessary to set out the purpose of the additives in a general way without referring to the information contained in the Relevant Documents.
13. There are many polyethylene products that have a short use life and are then discarded in one of several environments such as landfills, litter or on arable land outdoors in agriculture or in composting operations. It is not necessary to prolong the time during which their useful properties are maintained; the inherent longevity is the disadvantage. Thus it is estimated that rubbish bags and carrier bags containing food and garden waste in a landfill can last for decades. Environmental and economic benefits can be obtained if these bags can be made to degrade and disintegrate in a matter of months in landfill or if the empty bags end up as litter. The rate of the degradation of the plastic out of which these bags are fabricated depends on the rate at which hydro-peroxide groups form on the molecules of the plastic and on the rate at which they decompose to cause the loss of the physical properties of the bag. Additives have been developed that speed up this decomposition sequence once it has been initiated by heat or mechanical stress or near-UV light or by some combination of these.
14. One way to produce that is to incorporate in the plastic an additive that causes the relatively rapid oxidation of the plastic after it is used and discarded. In some environments (e.g. in composting, on arable land, in a landfill) the oxidised, even partially oxidised plastic will be biodegradable. That part of the additive in the action before me is categorised as the prodegradant.
15. However, in addition to the prodegradant aspect of the additive it is essential to protect the molecules from heat while they are undergoing processing (commonly extrusion moulding and the like) from lesser heat during storage and use from mechanical stresses and from exposure to sunlight during use. The purpose of this additive therefore is to ensure that the prodegradant process does not operate prematurely. This part of the additive has been described variously in the trial as the anti-oxidant or stabiliser.
16. It is the make-up of the relevant additives to assist in the process of manufacture and in the subsequent degradation after use of the product has ceased that is at the heart of the dispute between the parties.
17. This is EPI's claim against Symphony. As I have said above, EPI alleges breaches of the Agreements (details of which are set out in the confidential part of this judgment), breaches of confidence (breaches of which are once again set out as alleged in the confidential part of the judgment) and passing off (which is given similar treatment).

NON-CONFIDENTIAL TERMS OF AGREEMENTS

18. The relationship between the parties, was as I have said regulated by successive agreements commencing with a License Agreement dated 1^st January 1997 and culminating in a Manufacturing and Know How Licence with Incidental Trade Mark Rights dated 20^th June 2000 (“the Licence”) and an appended Confidentiality Agreement of the same date (“the Confidentiality Agreement”).
19. The Licence was varied on 18^th December 2000, again on 15^th March 2001 and was augmented by a Supplementary Agreement dated 23^rd July 2001. Finally, it was amended by a Second Supplementary Agreement dated 8^th November 2002.
20. That second Supplementary Agreement provided for the Licence to operate thereafter as amended in the manner shown in the attached Revised Licence Agreement Amended 5^th November 2002 (“the Revised Licence”).
21. The action for breach of contract concerns the following provisions of the Licence and the Revised Licence:-

i) Clause 8.10 (8.10 after revision) which contains a restriction on disclosure of confidential information to associated companies and/or joint ventures.

ii) Clause 11.2 (11.1 after revision) which gives a right of first refusal to negotiate a non-exclusive agreement for manufacture and/or distribution of certain products have the same functionality as the Products.

iii) Clause 14.4 (14.4 after revision) which provides for the return of Know How and copies or extracts there-from and labels promotional literature and items bearing any of the Trade Marks upon termination of the Agreement.

iv) Clause 14.8 (14.8 after revision) contains provisions upon termination of the Agreement, which require Symphony to cease holding itself out as Licensee of the Trade Marks and cease manufacturing and selling the Products (subject to an exception in clause 14.7).

22. The Confidentiality Agreement has the following provisions of relevance to the trial:-

i) Clause 5 contains restrictions on the use of disclosure of Confidential Information.

ii) Clause 7 prohibits analysis or an attempt to analyse DCP additives together with the restriction preventing their use for any purpose not permitted by the Licence.

23. Symphony in its defence contended that the contractual provisions should be regarded as void and unenforceable for being in restraint of trade “to the extent that they purport to restrict the use of any information”. That is no longer seriously relied upon by Symphony in its closing submissions.
24. Even if the provisions are void, EPI contends it can still enforce its rights under the general law relating to breach of confidence; see Triplex Safety Glass Co Ltd –v- Scorah [1938] RPC 21 at pages 27 to 29.
25. The most significant variation in the Second Supplemental Agreement dated 5^th November 2002, was the introduction of a right on the part of Symphony to use any other additives, patent, know how or other intellectual property rights to manufacture products whether they might compete or not with the Products for any sale in the world. As a matter of courtesy it was provided that Symphony would advise EPI when considering trials or proceeding to commercialisation of any products incorporating the above or the intended use of Environmental Claim Statements (“ECS”) (clause 2.13).
26. Clause 11.2 was varied to create a new clause 11.1, which provided that if Symphony developed or acquired ownership of the technology for products which have the same functionality as the Products, but do not require the use of the Know How, then without prejudice to any other right that EPI might have if it was Symphony's intention to enter negotiations with a third party to manufacture and/or distribute such products, EPI should be given the right of first refusal to negotiate with Symphony a non-exclusive agreement for the manufacture and/or distribution of such products provided that nothing should oblige Symphony to conclude an agreement with EPI following the exercise of such option.
27. I will deal with the confidential aspects of the two agreements in the other part of the judgment (including the associated provisions applicable thereto).

THE GENERAL LAW RELATING TO BREACH OF CONFIDENCE

28. The basis on which law imposed liability for breach of confidence was considered by the House of Lords in Attorney General –v- Guardian Newspapers Ltd (No. 2) [1990] 1 AC 109 and Campbell –v- MGN Ltd [ 2004] AC 457.
29. In Campbell Lord Nicholls (paragraphs 13 – 14 at page 464 – 465) summarised the law of confidence as being “[the imposition] of a duty of confidence whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as confidential”. Although he dissented on the facts (as did Lord Hoffmann) both they and Lord Hope agree the principle; see paragraphs 44 – 48 pages 471 to 472 (Lord Hoffmann) and paragraphs 85 and 86 page 480 (Lord Hope).
30. Symphony do not disagree with that analysis.
31. Symphony does however emphasise that the information or secrets, which are sought to be protected must be confidential, i.e. not in the public domain. In particular, Symphony submits that where the information has been published in a patent application by or with the consent of EPI, from that moment onwards it ceases to be secret as a matter of law and falls into the public domain; see O Mustad & Son –v- Dosen [1928] (reported) [1964] 1 WLR 109. That decision was approved by the House of Lords in AG –v- Guardian Newspapers (No. 2) [1990] 1 AC 109 at pages 268, 285 and 286. EPI does not accept that it is applicable to the present case.

WHAT IS TO BE PROTECTABLE

32. This led to a lively debate between Mr Hobbs QC and myself, of the type envisaged by Megarry J (as he then was) in Cordell –v- Second Clanfield Properties Ltd [1969] 2 Ch 9 page 16 “argued law is tough law … I would expose those views to the testing and refining process of argument. Today, as of old, by good disputing shall the law be well known”.
33. The starting point in the dispute is identifying what it is that EPI claim to be protected. That involves an analysis, first of the law appertaining to confidence to see what can be protected under that regime and specific to the case, and secondly what contractual protection is given over and above the general law of confidence.
34. In this case the debate centres around protection of matters which are confidential. For there to be a successful claim two requirements have to be satisfied. First, there must be information which is private or confidential and second, it must be communicated to a person and that person receives it when he knows or ought fairly and reasonably to know it is to be regarded as confidential.
35. In the dispute before me there is no question that the second requirement has been satisfied, i.e. the communication by EPI to Symphony of (I will use a neutral word at the moment) material, which Symphony knew was said by EPI to be regarded as confidential.
36. The collision occurs in attempting to identify what it is that is private or confidential. The Confidential Particulars set out in great detail items, which broadly reveal details of the constituent parts and manufacturing process of EPI's additives. There is of course no difficulty in enforcing those if they are private or confidential. Symphony's case is that the material thus categorised i.e. the additive's contents and manufacturing processes are (for reasons which I will set out in the confidential part of the judgment) actually in the public domain. Thus Symphony submits that if it can demonstrate that all of the items are in the public domain, even if (which it denies) they achieve those by analysing EPI's products there is no breach of confidence if the presence of those material ingredients and processes is in the public domain. I should stress that Symphony's stance is that this defence is available to them whether or not they utilise public sources.
37. Mr Hobbs QC put it very differently. He says there can be no objection self evidently to the use of information about the material which is in the public domain provided it is the public domain information which is accessed as opposed to deriving the same information by analysis of EPI's product, which was supplied confidentially. He submits forcefully that it is not open to Symphony to analyse EPI's product in an attempt to find the material which is in the public domain and assert that it is free to use the information it has thus acquired by that avenue, as opposed to going through the public domain information route. Mr Hobbs QC described this as “trite” law. I do not agree that it is trite. He also submitted that manufacturing licences were proceeded with on a daily basis on the law being as he submitted it was. In effect he was saying that the make-up of EPI's product itself was confidential. It was not legitimate he said (and this was an increasing feature of litigation like this he submitted) for defendants to scour the internet to find details of a party's products with a view to using the public domain aspect of that search as a justification for utilising material they discover by an expressly or impliedly forbidden process of analysis.
38. It is important to see where Mr Hobbs QC's arguments go. He concedes, quite rightly, that subject to patent law protection, it is open to any person if that person can acquire the Claimants' products, free of restriction, to analyse them in an attempt to find their constituent make-up. He acknowledges (although he submits it is a difficult process) that it may [day 11/p.1758] be possible to achieve a breakdown of EPI's products by an analysis of the finished products, i.e. the plastic bags. To that extent the details of EPI's products are in the public domain and readily discernable. What in effect he seeks to do is to transform public domain material into private material by virtue of the confidential relationship that arises between EPI and Symphony.
39. This is shown by the question I posed to him, what is it that it is being protected? He said, that it was the make-up of the additive and the fact that the particular formulation of it worked successfully. I have great difficulty with that. He referred to this a number of times. It is self evident to my mind that the product works, because EPI are selling it. When the product is sold, it is sold with claims as to its suitability. If it did not work there would presumably be a contractual claim arising out of that sale. Mr Hobbs QC suggests that there is a particular confidentiality about each of EPI's products. It seems to me that that is not sustainable. The whole world knows EPI sells additives that are added to plastic products for the purpose of making them degradable. EPI's website pronounces that. Equally, the whole world knows (from EPI's own website) that “totally degradable plastic additives (TDPA) are comprised of a proprietary blend of prodegradants, stabilisers and fillers in thermoplastic polymers for use in various products for photo, thermal and mechanical stress degradation of the finished products incorporating this additives.” Further information is freely available from EPI's representatives.
40. It seems to me, that the fact that EPI generally provides additives comprised of ingredients in that way is in the public domain and none of those matters can be said to be private/confidential.
41. Mr Hobbs QC submits that that is the wrong approach. He started his submissions by referring to the well known extract from Saltman Engineering Co Ltd –v- Campbell Engineering Co Ltd [1948] 65 RPC 203 set out by Plowman, J. in Suhner & Co. AG v. Transradio Ltd. [1967] 329 at page 333, as follows:-

“The first is (at 213, line 7) where Lord Greene says:

“The defendants knew that those drawings had been placed in their possession for a limited purpose, namely, the purpose only of making certain tools in accordance with them, the tools being tools required for the purpose of manufacturing leather punches. … I need not go into the law, which I think is correctly stated in a formula which Mr Heald himself accepted. I will read it: 'If a defendant is proved to have used confidential information, directly or indirectly obtained from a plaintiff, without the consent, express or implied, of the plaintiff, he will be guilty of an infringement of the plaintiff's rights.'”

Then (at 215, line 8) he says:

“ I think that I shall not be stating the principle wrongly if I say this with regard to the use of confidential information. The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document be it a formula, a plan, a sketch, or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.

What the defendants did in this case was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby to save themselves a great deal of labour and calculation and careful draftsmanship. No doubt, if they had taken the finished article, namely, the leather punch, which they might have bought in a shop, and given it to an expert draftsman, that draftsman could have produced the necessary drawings for the manufacture of machine tools required for making that particular finished article. In at any rate a very material respect they saved themselves that trouble by obtaining the necessary information either from the original drawings or from the tools made in accordance with them. That, in my opinion, was a breach of confidence.”

The second reason why I said that it seemed to me that the defendants' evidence was to a great extent, beside the point was that the plaintiffs' complaint, as I understand it, is not that the defendants manufactured connectors directly from the drawings which had been supplied by the plaintiffs or, not that the defendants could manufacture connectors direct from those drawings. I think that they could not. The complaint is that they made use of those drawings in preparing their manufacturing drawings and that is not a use for which the drawings were handed over and, therefore, within the Saltman case is a breach of confidence”.

42. He referred me to a number of authorities as support for the proposition that EPI's product itself was capable of protection and not merely the confidential constituent parts that made it up. He first referred to Franklin –v- Giddins [1978] QdR 72. His submission (day 11 page 1766) was that this case was an example of how a physical material could be the subject matter of a secret. He drew a further analogy, such as a physical concentrate supplied by a drinks manufacturer, such as CocaCola. I can understand that, but in both the Franklin case and the well-used example of the secret formulation of Coca-Cola, whilst there is a physical product, there is still a secret about the creation of that physical product. The item in question, as the judgment shows, was a uniquely created item, which could not be reproduced in any satisfactory way. The judge likened the parent tree as being a safe within which are locked a number of copies of a formula for making a nectarine tree with special characteristics, which make it valuable (page 74). It could not be grown from seed and it was impossible to repeat the cross breeding programme. It is difficult to see how this case is support for Mr Hobbs QC's proposition unless the EPI products have a similar secrecy. I have already observed, and I do not believe that the characteristics and some of the contents of the EPI products have an element of secrecy akin to that in the Franklin case.
43. Next he referred me to Lancashire Fires Ltd –v- S A Lyons & Co Ltd. [1996] FSR 629 and in particular page 668. He referred this to me as a case which showed that it is illegitimate to dismember the body of information put forward for protection. In fact, the case does not say that in absolute terms. The references (page 668) are to the cases to which I have already made reference. They reiterate that a document or product must be of a confidential nature. It is appreciated that the creation of that product or document may well involve construction solely from materials in the public domain and thus possess the necessary quality of confidentiality. It is on the basis that something new and confidential has been brought into being by the application, skill and ingenuity of the human brain. Novelty depends on the thing itself and not upon the quality of its constituent parts. As was reiterated, the more novel or striking the novelty the more commonplace might be its components.
44. There is to my mind, no absolute proposition as put forward by Mr Hobbs QC. It is necessary to look at the product and its constituent parts and determine whether the product itself has a secret or confidential nature of itself by virtue of the work that has been done on it. As I have set out further in this judgment, this too was a possibility that the House of Lords were alive to in the main case relied upon by Mr Prescott QC of O. Mustad & Son below. I do not see that the existence of EPI's products themselves, that they are successful and that their purpose is to encourage the degradation of plastics products is a secret. In my judgment, it is clear that the secret if any of EPI's products lies in how they are made up.
45. Mr Hobbs QC also submitted that Lord Denning MR in Seager –v- Copydex Ltd (No 1) [1967] RPC 349 suggested that it was not permissible to dismember a body of information and that one must go to public sources.
46. With respect to Mr Hobbs QC, I do not accept that that is precisely what Lord Denning MR said. The part of the judgment (page 368) is as follows:-

“The law on this subject does not depend on any implied contract. It depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent. The principle is clear enough when the whole of the information is private. The difficulty arises when the information is in part public and in part private. As, for instance, in this case. A good deal of the information which Mr Seager gave to Copydex Ltd. was available to the public, such as the patent specification in the Patent Office, or the KLENT grip, which he sold to anyone who asked. If that was the only information he gave them, he could not complain. It was public knowledge. But there was a good deal of other information he gave them which was private, such as the difficulties which had to be overcome in making a satisfactory grip; the necessity for a strong, sharp, tooth; the alternative forms of tooth; and the like. When the information is mixed, being partly public and partly private, then the recipient 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”.

47. As Lord Denning makes clear, the principle is clear enough when information is wholly private, but the difficulty arises when the information is in part public and in part private. If Mr Seager had given them material that was available such as the patent specification or the KLENT grip no complaint could have been made. However, he gave further information, which was private. Lord Denning suggests that where information is mixed partly public and private, then the recipient must take special care to use only the material, which is in the public domain. The key sentence in the judgment in my view is the next sentence “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.”
48. In my judgment, what Lord Denning is saying is that a recipient of mixed information should take care only to use the public information. If he uses the private information he can only do so on pain of payment. Obviously the easiest way to establish that only public information has been obtained is to go to the public sources. It is instructive to see that Lord Denning was of the view (see the cases below) that publication of the patent and the use of the information in the patent would not be actionable. It is clear in my judgment that, in the second part of the sentence however, Lord Denning is acknowledging that it is open to the recipient of the information which is mixed public and mixed private to use the public information, but that he should not be in a better position than if he had gone to the public source. That to my mind means that if he is provided with information, which is in part public, provided that information is a public source, he can use it. It cannot be presumed that Lord Denning would expect the recipient of public source information to have to pay for it. It is clear from the next sentence of the judgment that when he is referring to paying and head start, he is referring to the extra private information that is provided contemporaneously with public information.
49. Relying on Seager, Mr Hobbs QC submits by the provision of the additive itself EPI provided that product in confidence and that product and that provision in that way was confidential private information which Symphony could not use. Thus he submits it was not open to Symphony to argue (as it does) that all the ingredients and processes which they used, which are to be found in EPI's products, are also to be found in the public domain, unless they use that public domain source for the exercise. To my mind it is important to appreciate that if the product is supplied in confidence and is merely copied completely (as occurred in the Saltman case and the Suhner case) I can well see how complaint can be made. If that exercise is done only, Symphony have the product of the use of EPI's brains time and energy in producing a finished product, which they merely replicate.
50. If there is something secret or confidential which they thereby merely copied that would be actionable. However, a thing does not become confidential merely because it is supplied confidentially. A number of examples were debated in argument. The use of examples is always difficult. However, take one example. Suppose EPI supplied Symphony with a formula for making a very special cake which would be very unique to EPI. A lot of the ingredients would be common ingredients, but it would be contended that the resultant product is arrived at by use of the secret formula.
51. Suppose the secret formula is not a secret formula at all, but is actually itself a copy of a cake formula that has been published generally for public use. The product and the formula that EPI provide cannot therefore be confidential.
52. That must equally be true in my view in respect of constituent parts. I have already identified that EPI itself proclaims what type the constituent parts of its products are. Equally, if there is other material in the public domain, which points to specific constituents, I do not see how that can be said to be private and I do not see how Symphony (absent a contractual provision) can be prevented even by examination and analysis of EPI's product of using information they acquire as a result of that exercise which is in the public domain.
53. They do of course take risks if they go that way for the reasons identified by Lord Denning in Seager.
54. This is the collision between the first part of the Saltman judgment referred to above and the second part.
55. It is well illustrated by the decision cited by Mr Prescott QC of O. Mustad & Son-v- Dosen (note) [1964] 1 WLR 109 (H.L.). Junior counsel for Symphony usefully also obtained the Court of Appeal decision from the Lincoln's Inn Law Library.
56. The plaintiff brought an action against an English firm of fishing tackle manufacturers and a man named Dosen. While Dosen was employed by a third party company, Thoring, he had an active role in the invention of an ingenious and invaluable automatic machine for making fish hooks. During the course of his employment with Thoring he signed a confidentiality agreement. The plaintiffs obtained an assignment of the benefit of Dosen's agreement, Thoring having gone into liquidation. It is important to appreciate (see page 279 of the Court of Appeal judgment) that the claim for damages was jettisoned at trial. There was no claim in substance that even nominal damages were claimed. The whole claim therefore revolved around the claim for an injunction and what Lord Justice Bankes (page 280) described as an appeal to the equitable jurisdiction of the court. The whole basis for the claim was the misuse of Thoring's secrets. At the trial of first instance (as Lord Justice Bankes sets out at page 280) there was discussion as to what a trade secret might be, as follows:-

“The learned Judge discussed with the Jury what constitutes a trade secret, but of course it is no good discussing what constitutes a trade secret if the person who is the owner of the particular thing which is claimed to be a trade secret has never made a secret of it. For instance, it is no use suggesting that Thoring's machine was a trade secret if as a matter of fact Thorings had allowed people to inspect the machine during construction or had exhibited it at a trade exhibition or something of that kind. It is no use saying it is very valuable; it is no use saying it might have been a trade secret if I had locked it up and allowed nobody to have access to it, and allowed nobody except a particular man to know how it was constructed, and so forth. No evidence seems to have been given about it – well, I will not say no evidence seems to have been given about it but it seems to have been treated at the trial as though the machine was a trade secret of Thoring's, and a question was put to the Jury, and the only question put to the Jury was on the footing apparently that it was a trade secret, and that in spite of the fact that the only man who knew anything really about it (Dosen) did say, and said more than once in his evidence, that it never was a secret, and that Thorings never treated it as a secret, and that it was quite open to everybody in the works to know exactly what it was and how it had been made, and the progress it was making and all the rest of it. It does seem to me, when one is considering what ought to be done in this case, one cannot overlook the fact that there was before the learned Judge, and there was before Counsel, evidence that this machine really – if the point had been properly investigated – turned out not to be a trade secret at all. However, that point apparently has never been decided.”

57. Some of the instances are significant in respect of Mr Hobbs QC's argument, such as the fact that Thoring's machine was allowed to be inspected at a trade exhibition or during construction. That is akin to publishing part of the operations on a website or by patents.
58. The case then proceeded, but unknown to the parties the plaintiffs had applied for registration of a patent after the proceedings had been commenced. The patent described and claimed the identical machine. The existence of the application came out before the trial was completed, but the judge nevertheless accepted the plaintiff's submission (see page 283) that whether or not there was a patent, the plaintiff was still entitled to an injunction because the defendant Dosen, had committed a breach of his confidential relationship. On appeal the Court of Appeal overturned that decision on the basis that as the patent covered the plaintiff's claim against Dosen it could no longer be said to be a secret. The arguments and judgment related solely to a question of injunction. I do not necessarily see the Dosen case addressing a claim for damages, as opposed to an injunction. I will revisit that in the confidential part of this judgment. Lord Justice Bankes put it like this (page 284):-

“It seems to me that once the patent question is admitted to be open to the Defendants, it being admitted that the patent certainly covers the heart of Thorings' machine, no Injunction ought to be granted; it follows therefore that, the claim for damages being jettisoned, and upon the facts as they ultimately emerged, no Injunction ought to have been granted, the Plaintiffs must fail in the action and that the Verdict and Judgment must be set aside and must be entered for the Defendants”.

59. Lord Justice Atkin concurred at page 287:-

“It seems to me, therefore, that there was a complete publication to the public of the construction and operation of the machine, the constructions and operation of which was alleged in the proceedings to be a trade secret, and from that moment it appears to me quite plain that that which before might have been a trade secret, was a trade secret no longer

Now, what is the result of that? It appears to me that the result is that there is no longer any subject matter upon which the agreement could operate. The agreement is not to acquaint strangers with Thorings trade secrets. The injunction is said to be to restrain them in terms from acquainting anybody with or using a trade secret, and I think it was quite conclusively proved that in January 1926, three or four or five months after the action was brought, the trade secret had disappeared. From that time it seems to me it was quite impossible for the Plaintiffs to obtain an injunction or to claim damages in respect of any act done after that date. That seems to me quite sufficient to determine this case, and therefore I think that the Court would not grant an injunction, and inasmuch as the claim for damages had been given up, there was no right left in the Plaintiffs of any sort or kind which they could enforce in the present action. Therefore, while one is not dissenting at all from the proposition that, where there is a negative covenant or a negative agreement, the parties have, in the absence of special circumstances, a right to have that negative covenant enforced by an injunction, yet in a case like this, where the Plaintiffs by their own conduct have, as I say, removed the whole subject matter of the negative covenant and prevented there being any thing upon which it could operate, it plainly is a case where the Court cannot grant an injunction. Therefore, it appears to me that the result is that in this case the appeal should be allowed with costs and Judgment should be entered for the Defendants”.

60. An appeal to the House of Lords was dismissed. Lord Buckmaster gave the leading judgment. The key part is to be found at pages 110 – 111 as follows:-

“My Lords, the most important thing to remember is that, for the purpose of establishing their case in these proceedings, it was essential that the appellants should prove, firstly, that there was special information that Dosen had obtained in their service which he was prevented from disclosing, and, secondly, that he either had disclosed it or had threatened that it should be disclosed. It might well be that, had nothing more happened, the circumstances connected with this case would have been sufficient to support the claim which the appellants put forward; but on January 22, 1926, a few months after the institution of these proceedings, the appellants applied for a patent to protect an invention relating to the manufacture of fish-hooks, which in substance covered the principle of the machine which Dosen had constructed while in the service of Thoring & Co. It consisted of an arrangement by which what was known as the transporter could be operated so that it would alternatively move the pieces of wire along, lift, and depress them in order that they might be brought into contact with the various shaping tools which would perform the operation by means of which a piece of straight wire ultimately assumed the form of a fish-hook. Now that specification was called to the notice of the respondents by a letter from the appellants' solicitors, who informed them that a specification to this effect had been filed, in these words, on June 7, 1926: "Our clients have applied for a British patent of the machine and the application has been accepted." Following on that the respondents' solicitors asked whether the patent covered precisely the same machine as was referred to in the statement of claim, and later repeated the inquiry whether it was the same machine as was the object of the appellants' complaint against the respondents, but this, the appellants' solicitors said, was information which they were not in a position to give - and the matter so remained. Meanwhile the appellants had obtained an interlocutory injunction against the disclosure of secrets by Dosen to the other respondents; they subsequently alleged that that injunction had been broken, and sought the process of committal against the respondents in respect of the breach. Upon that application coming before the Court of Appeal, Mr. Wallington, counsel for the respondents, referred again to this machine and said that the appellants had themselves applied for a patent for the very thing and were now asking that the respondents "be committed to prison for breach of an injunction which relates to the non-disclosure of a secret which they themselves have published to the world." Later on in the course of argument Mr. Rayner Goddard, who appeared for the appellants, accepted the statement to this extent, that when Bankes L.J. said to him, "If Mr. Wallington is right, whatever his knowledge, if it were secret, assuming it was secret, it is now public," he said, "yes, it is now patented in this country." The effect of this conduct and statement must clearly have been to suggest to the respondents that the essential part of this machine had been disclosed in the specification and was the subject of protection by a patent. In that position the matter comes for trial.

Of course, the important point about the patent is not whether it was valid or invalid, but what it was that it disclosed, because after the disclosure had been made by the appellants to the world, it was impossible for them to get an injunction restraining the respondents from disclosing what was common knowledge. The secret, as a secret, had ceased to exist. But the appellants say - and I think say with considerable force - that it might well have been that in the course of the experience which Dosen had gained in their service he had obtained knowledge of ancillary secrets connected with the patented invention which were not in fact included in the invention but which would be of very great service to any person who proceeded to make the machine to which the invention related. Mr. Trevor Watson, in his admirable argument, satisfied me that it was at least probable or possible that such a set of circumstances might have existed; but, having regard to what had taken place and to the express request on the part of the respondents that they should be informed if the patented machine did in fact cover the very matter the disclosure of which was made the subject of complaints, it appears to me that there was thrown upon the appellants the burden of showing that there were in fact these outside matters which were not included in the specification, that they had been or there was reasonable ground for believing they might be disclosed, and that their disclosure would be a wrong against which they were entitled to be protected by injunction. Nothing of the kind occurred. There was no attempt whatever made at the trial to distinguish between those parts of the machine which were outside the patent and those which were within. At no time was evidence led for the purpose of showing the added matter which Dosen might have learned in his former master's service and which he might disclose to the detriment of the present appellants”.

61. Mr Hobbs QC says that that has no application, because the information in the patent was completely and overtly the same as the supposedly confidentially supplied information. I agree that that is significant, but for the opposite reasons put forward by Mr Hobbs QC. As I have already said above, if Symphony had merely copied identically EPI's product there would have been a copying of a product which had material, some of which was in the public domain and some of which was not (for reasons which appear in the confidential part of this judgment). There would have thus been a utilisation of the further special information by analogy outside the patent referred to in Lord Buckmaster's judgment. That demonstrates in my view the fact that it is open to a claimant to allege that there are secrets over and beyond the public information, which ought to be protected, but equally, it is open to a defendant to argue that it has not used that material, but has only used the public domain material. If Mr Hobbs QC's arguments are correct, it seems to me that the Plaintiff in the Mustad case would have still succeeded.
62. In reality, it is, I suspect, a question of fact in each case as to seeing what is the secret, and what use has been made of it. I do not see that the way in which Mr Hobbs QC puts the claim for protection can be sustainable, i.e. the specific products and their makeup prevents a party from analysing that product (provided the contracts allows them so to do) and utilising those parts of the constituents of the product and the method of making up, which are in the public domain. Otherwise, by signing a confidentiality agreement, Symphony would be the only organisation in the world that could not do that. That to my mind would be a bizarre result and is not what is intended by the law of confidence.
63. I therefore reject Mr Hobbs QC's analysis of the legal principles as submitted by him and prefer those as put forward by Mr Prescott QC. I conclude therefore that if I find that Symphony (contrary to their evidence) analysed EPI's products, it is still open to them to show that if as a result of that analysis they used only products and a manufacturing process, details of which are in the public domain, they can thereby assert that they have not used private/confidential information.
64. I say nothing at this stage about whether or not a clause in the contract can prohibit them from analysing. If they so act and the clause prohibits them, that might stop them analysing a product and (subject to the principles of restraint of trade and the like) prevent them from using the results of that analysis even if the parts that they wish to use are in the public domain. I will refer to this further in the confidential part of the judgment. I stress for the purpose of this part of the judgment that EPI concedes that Symphony's product is not an exact copy of its product. The reason for that is the necessary concession, which arises from the lack of identification of the anti-oxidant in the public material used by EPI to manufacture its additives and indeed the lack of revelation of that anti-oxidant to the Court. Neither I, nor Symphony knows what anti-oxidant EPI uses. Of course, if that anti-oxidant had been identified and used by Symphony it would have fallen squarely, in my judgment within the ambit of the extra information referred to by Lord Buckmaster
65. Whether or not the information was truly confidential or a trade secret has been one of the major issues in this case and my analysis of that evidence and conclusions are set out in the confidential part of this judgment.

SOME WARNINGS AS TO EVIDENCE

66. Credibility in this case is important both as regards the non-expert and expert witnesses. My analysis of that evidence is set out in the confidential part of the judgment.
67. A significant point from EPI's point of view is the lack of documentation showing how Symphony created BD92384.
68. Both parties have reminded me of some well-known judicial observations designed to assist trial judges in how they arrive at factual conclusions.
69. First, EPI referred me to Plowman J in Suhner & Co AG –v- Transradio Ltd [1967] RPC 329 at 333, where he said this:-

“A great deal of the defendants' evidence seems to me to be really beside the point, first of all, because the confidential nature of the document is not dependent on whether the information which it contains is available elsewhere; but, on the question of whether it contains useful information which has been compiled by the plaintiffs for a particular purpose and, if it does contain such information and if it has been compiled and handed over to the defendants for a particular purpose, then, as I understand the law, that document is confidential and the defendants are not entitled to use it for another purpose”.

70. In their closing submissions EPI referred me to the (once again well known) observations of Robert Goff LJ in The Ocean Frost [1985] 1 LL Rep 1 at page 57, as follows:-

“Furthermore it is implicit in the statement of Lord MacMillan in Powell v. Streatham Manor Nursing Home at p. 256 that the probabilities and possibilities of the case may be such as to impel an appellate Court to depart from the opinion of the trial Judge formed upon his assessment of witnesses whom he has seen and heard in the witness box. Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth. I have been driven to the conclusion that the Judge did not pay sufficient regard to these matters in making his findings of fact in the present case”.

71. Not to be out done Symphony in its closing submissions reminded me of the observations of Simon Brown LJ in Biggar –v- London Borough of Havering [2001] EWCA Civ 411:-

“15. The correct approach to the standard of proof and the nature of proof required in the case of grave allegations is to be found in the speech of Lord Nicholls of Birkenhead in In re H (Minors) [1996] AC 563 at 586-587:

"The balance of probability standard means that the court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence. Deliberate physical injury is usually less likely than accidental physical injury. A stepfather is usually less likely to have repeatedly raped and had non-consensual oral sex with his under age stepdaughter than on some occasion to have lost his temper and slapped her. Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.

Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence it did occur before, on the balance of probability, its occurrence will be established. Ungoed-Thomas J expressed this neatly in In re Dellow's Will Trusts [1964] 1 WLR 451,455: 'The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.'

This substantially accords with the approach adopted in authorities such as the well known judgment of Morris LJ of Hornal v Neuberger Products Ltd [1957] 1 QB 247, 266. This approach also provides a means by which the balance of probabilities standard can accommodate one's instinctive feeling that even in civil proceedings a court should be more sure before finding serious allegations proved than when deciding less serious or trivial matters.

No doubt it is this feeling which prompts judicial comment from time to time that grave issues call for proof to a standard higher than the preponderance of probability."“

72. Symphony reinforced this by references to two decisions of Laddie J, namely CMI Centres for Medical Innovation, Dr Christoph von Keudel [1998] EWHC PAT 308 at 49 – 50 and Ocular Sciences [1997] RPC 289, 359. Those judgments respectively address allegations of dishonesty in breach of confidence cases and the caution against allowing breach of confidence actions to be used as a method of trade protection, as opposed to genuine actions for infringements of confidential information.
73. I have borne all of these matters in my mind when assessing the evidence and the result of my assessment is set out in the confidential part of this judgment.
74. I add a few of my own precautions.

i) First, it is essential to evaluate a witness's performance in the light of the entirety of his evidence. Witnesses can make mistakes, but those mistakes do not necessarily affect other parts of their evidence.

ii) Second, witnesses can regularly lie. However, lies are themselves does not mean necessarily that the entirety of that witnesses evidence is rejected. A witness may lie in a stupid attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie. A witness may lie because the case is a lie.

iii) Third, I regard it as essential that witnesses are challenged with the other side's case. This involves putting the case positively. This is important for a judge to enable him to assess that witness's response to the other case orally, by reference to his or her demeanour and in the overall context of the litigation. A failure to put a point should usually disentitle the point to be taken against a witness in a closing speech. This is especially so in an era of pre prepared witness statements. A judge does not see live in chief evidence, thereby depriving the witness of presenting himself positively in his case.

75. None of the above or the helpful assistance provided by the reported authorities is necessarily determinative. All of them provide factors to enable a judge to come to a particular conclusion about the acceptance or rejection of a particular persons evidence.
76. I should stress also that in my view those points also are equally applicable to experts. A judge is very rarely helped by competing expert reports, which express opinions, which are not tested or not maintainable by reference to supporting material. It is not useful simply to leave the judge to find his own analysis of the reports of experts without the experts themselves being put to the test by cross examination. Finally, in the context of experts, with the CPR they have in my view acquired greater responsibilities to the court. Those responsibilities transcend their perceived obligations to the parties whom they give evidence; see Phillips & Others –v- Symes & Others [2004] EWHC 2330 (Ch).
77. With those matters in mind I summarise my conclusions.

CONCLUSION

78. Apart from the claim for breach of clause 14.8 and an entitlement to nominal damages for breach of clause 14.4, I dismiss EPI's claims entirely.