HomeInsightsCourt of Appeal rules on particularisation of trade secrets relied on in claim for misuse of confidential information

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Facts

Celgard LLC issued proceedings against Shenzhen Senior Technology Material Co Ltd for misuse by Shenzhen Senior of Celgard’s trade secrets through the importation and marketing of battery separator film. Both companies make battery separators used in lithium-ion batteries to separate the anode and the cathode of the battery.

From July 2005 to October 2016, Dr Zhang Xiaomin had been employed by Celgard and, Celgard said, had access to a body of trade secrets concerning its battery separators. Dr Zhang subsequently left Celgard and joined Shenzhen Senior in China.

Celgard alleged that Shenzhen’s misuse of its trade secrets, which it had acquired from Dr Zhang, amounted to a breach of an equitable obligation of confidence and/or a breach of Regulation 3 of the Trade Secrets (Enforcement, etc) Regulations 2018. Celgard argued that, by misusing its trade secrets, Shenzhen Senior was about to enter the UK market by undercutting Celgard causing Celgard to lose a significant contract with a UK customer.

At first instance, Mr Justice Trower granted Celgard: (i) permission to serve the claim form in the proceedings on Shenzhen Senior out of jurisdiction; and (ii) an interim injunction to restrain Shenzhen Senior from importing battery separator film into, or marketing such battery separator film in, the UK.

Shenzhen Senior appealed, contending that Trower J had erred in concluding that: (i) Celgard had established a serious issue to be tried; (ii) English law applied; and (iii) England was the proper forum to try the claims.

Decision

Serious issue to be tried

Shenzhen Senior said that Celgard had not adequately particularised its alleged trade secrets, as it had not set out the actual recipes used.

Celgard said that it had given sufficient particulars at this stage and, in any event, had provided details of the recipe of a binder substance that it used and its properties.

Arnold LJ found that Trower J had been correct to conclude that Celgard had established a serious issue to be tried. The case on the binder was adequately pleaded, he said, and in any event, the Court of Appeal could not review Trower J’s assessment of the evidence. Further, Celgard’s argument that it had given sufficient particulars of its other trade secrets at this stage, had merit; a lesser degree of particularisation may be acceptable at the outset of a case than at later stages. Further, what amounted to sufficient particularisation depended on the circumstances of the individual case and it was relevant to take into account Celgard’s ability to provide further particulars, and the extent to which it had been hampered by obstructiveness, or at least non-cooperation, on the part of Shenzhen Senior. In the circumstances of this case, Celgard had done enough for now, although it would undoubtedly have to give further particulars at a later stage.

Applicable law

Celgard argued that Article 4(1) of the Rome II Regulation (864/2007/EC) led to English law being the applicable law because the direct damage caused by the wrongdoing had occurred (and would, if not restrained, continue to occur) in the UK, that being the country into which the infringing goods (i.e. the shipment to the UK customer and any future shipments) had been (and would be) imported, causing damage to Celgard’s market here.

Shenzhen Senior said that Trower J should have concluded that the applicable law was Chinese law. It said that confidential information was intangible property and that damage to intangible property was located at the time and place it became irreversible.

Arnold LJ rejected Shenzhen Senior’s arguments, finding that confidential information is not property and there was nothing in the Trade Secrets Directive to suggest that trade secrets should be treated any differently. The Directive did not create a species of IP, but instead recognised a particular species of unfair competition, he said.

Further, Arnold LJ said, the act of unfair competition was the importation into, and marketing in, the UK of infringing goods. That was the market affected by the act of unfair competition in this case and that was where the direct damage was (and would be) sustained. The fact that the infringing goods were manufactured in China was immaterial.

Applicable forum

Shenzhen argued that Trower J had wrongly characterised the dispute for the purposes of considering the proper forum.

Arnold LJ disagreed, finding that Trower J had focussed on the substance of the dispute and correctly concluded that it concerned whether Celgard’s UK market for battery separators had been (or would be, if not restrained) damaged by the importation into, and marketing in, the UK of what were alleged to be infringing goods. Thus, the location of the wrongful acts and of the loss, as well as the probable applicability of English law, pointed to England as being the appropriate forum.

Whilst it was true that the question of whether the goods were infringing goods depended on what was done in China, which involved Chinese documents and witnesses, the dispute also involved American documents and witnesses who would speak to whether the information relied upon by Celgard qualified as trade secrets. Moreover, Shenzhen Senior had chosen to use two English-speaking expert witnesses based outside China (one in Massachusetts and one in Paris).

Further, Trower J’s characterisation of the dispute was supported by the decision in Unwired Planet International Ltd v Huawei Technologies Co Ltd [2020] UKSC 37, in which the Supreme Court found that it would have upheld the lower courts’ characterisation of the dispute. (Shenzhen Senior Technology Material Co Ltd v Celgard LLC [2020] EWCA Civ 1293 (9 October 2020) — to read the judgment in full, click here).

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