Celgard (CA) – What amounts to sufficient particularisation of allegedly misused trade secrets depends on the circumstances of the case

The Facts

The parties were both companies which made battery separators – the claimant doing so in the US, and the defendant in China. While the claimant was negotiating a contract with a customer in the UK, it came to suspect that the defendant was seeking to import a rival product into the UK for evaluation by the same customer. The claimant suspected that the rival product had been developed using its trade secrets, which the defendant had obtained through one of the claimant’s former employees. The claimant feared that misuse of its trade secrets would help the defendant to enter the UK market by undercutting the claimant, and, if the claimant then lost the contract with the UK customer, it would suffer damage that would be very difficult to quantify.

On 30 April 2020, the claimant applied for an interim injunction. On 7 May 2020, Mann J made an order until 21 May 2020 or further order that the defendant “shall not make, offer, put on the market, import, export or store for any of those purposes the [rival product] in the United Kingdom”. On 6 August 2020, Trower J granted a continuation of the interim injunction. The judge had before him a draft of the particulars of claim and a confidential annex. The claimant’s case was that the defendant was liable, either directly or vicariously through the claimant’s former employee, for breaches of an equitable duty of confidence and/or reg.3 of the Trade Secrets (Enforcement, etc.) Regulations 2018.

The defendant appealed the order granting the interim injunction, arguing that the claimant had not established a serious issue to be tried because it had not sufficiently particularised the trade secrets which had allegedly been misused.

The Principles

It is well established that in a claim for breach of the equitable duty of confidence, the claimant has to particularise with precision both the alleged secret and its misuse, and that the failure to do so may be an abuse of process. The Court set out key passages from Laddie J’s decisions in Ocular Sciences Ltd v Aspect Vision Care Ltd (No.2) [1997] R.P.C. 289 at 359-360 and CMI Centers for Medical Innovation GmbH v Phytopharm Plc [1999] F.S.R. 235 at [27]. These passages explain the rationale underpinning this principle, and confirm that it applies with equal force at any interlocutory stage. The Court then held that this requirement for particularity applies with equal force to claims for breach of the 2018 Regulations [para 34].

The Arguments

Save for one exception (‘the Binder issue’), the claimant did not dispute that it had not pleaded the specific trade secrets it relied on, rather than pleading their nature and the documents in which they were recorded. The claimant’s argument was that it had provided the best particulars that it could at this stage. The relevant trade secrets to which the former employee had access occupied 20 filing cabinets. Further, the defendant had not allowed the claimant to analyse a shipment of the rival product and had withheld access to relevant documents that accompanied the shipment. The claimant submitted that it would probably be able to provide better particulars once it had been able to inspect the relevant shipping documents and certainly once it had been able to analyse the product.

In any event, the claimant argued that it had provided sufficient particulars concerning the Binder issue i.e. the trade secrets about how specific binders are used to manufacture the claimant’s products, and that this was sufficient for the purposes of establishing a serious issue to be tried.

The Decision

The Court of Appeal decided that the judge was correct to conclude that the claimant had established a serious issue to be tried despite the failure to particularise its trade secrets other than for the Binder issue. The Court held that the breadth of the injunction, which the defendant also challenged, was plainly intended to ensure that the defendant knew what it could not do, and to avoid the determination of issues arising at trial in order to establish whether or not it had been complied with [para 47]. It was therefore unnecessary to determine whether the claimant had given sufficient particulars of its other trade secrets. Nonetheless, the Court went on to say that the claimant’s arguments about it having done as much as it could at that stage had merit.

I do not wish in any way to diminish the importance of proper particulars of trade secrets being provided in cases of this nature. What amounts to sufficient particularisation must depend on the circumstances of the individual case, however. Furthermore, a lesser degree of particularisation may be acceptable at the outset of a case than at later stages of the case. Still further, I accept that it is relevant to take into account the claimant’s ability to provide further particulars, and the extent to which the claimant has been hampered by obstructiveness, or at least non-cooperation, on the part of the defendant. In the circumstances of the present case, I consider that Celgard has done enough for now, although it will undoubtedly have to give further particulars at a later stage. [para 48]

Thoughts

The Court of Appeal’s comments will be welcomed by claimants. It recognises potential practical difficulties associated with particularising breach of confidence claims early on in litigation and seeks to ensure that courts approach such issues fairly. Many future claimant manufacturers will find themselves in Celgard’s position – namely, where the volume of trade secrets to which a former employee had access (and which could potentially have been misused) is vast; where it is difficult to provide precise particulars of the trade secrets allegedly misused until the competing product is analysed; and where the defendant is not rushing to cooperate. The Court of Appeal’s comments put defendants on notice (if they were not already) that a lack of cooperation will not be allowed to result in a tactical advantage. For all these reasons, this is an important decision for advisors to keep in their back pocket.

The full judgment can be read here.