Regular readers may recall our article on the High Court judgment in this English case last year. The decision of Peter Smith J has since been appealed by EPI. In this article we outline the decision of the Court of Appeal.
The first matter of interest is the fact that the Court of Appeal provided its judgment to the parties to edit prior to publication so as to exclude all references to matters which are alleged to be trade secrets. Since that reduced the intelligibility of the judgment the court saw no point in setting out background explanatory matter, and the decision deals only with the legal arguments, with substantial editing whenever the judgments deal with issues touching on the composition of the relevant products.
While not set out in the judgment, the key background facts are that between 1997 and 2003, pursuant to various licence and confidentiality agreements, EPI supplied prodegradant additives to Symphony for use in the manufacture of a range of thin film plastic products such as plastic bags. Prodegradants are additives which cause the plastic to oxidise relatively rapidly after it is used and discarded, thereby making the product degradable. This is accordingly a valuable industrial process. The materials which EPI provided to Symphony during their commercial relationship included details of the constituent parts and manufacturing process of EPI’s additives. This was regarded by EPI as confidential information falling within the confidentiality provisions of the licence and confidentiality agreements entered into between EPI and Symphony. Symphony then produced its own product, which did not replicate EPI’s product identically, but was similar. In a detailed judgment, the High Court judge concluded that Symphony had not copied EPI’s product.
On appeal, EPI was seeking to overturn a finding of fact, which meant that it had to establish that the judge was wrong, i.e. had made a material mistake regarding that factual finding. The judgments of the Court of Appeal are notable in the following respects:
The court rejected EPI’s argument that there were facts which shifted the evidential burden onto Symphony to establish that it had independently derived its product (rather than copying EPI’s product). EPI’s argument reasoned by analogy from the approach taken in copyright infringement cases, where a court will be prepared to infer copying in cases where there is a marked objective similarity between the relevant works and the original was available to the alleged copier. While the Court of Appeal accepted that such an approach was sensible when comparing artistic or musical works, the court did not consider it to be appropriate when the issue was whether one industrial product or chemical formula sufficiently resembles another. The court also emphasised that proof of similarity merely places on the defendant an obligation to give an explanation of that similarity, which the court then considers together with all the other facts; and that the burden of proof remains with the plaintiff.
Two aspects of EPI’s expert evidence are worth noting:
On the question of copying, EPI's expert witness expressed the view that the degree of replication observable was attributable to a process of substantial copying. The reasons for that view however included various matters which were not technical (e g motive), and accordingly went beyond the expert’s area of expertise and instead became an opinion on the ultimate question, which was for the judge. This resulted in the court treating that evidence with caution, and the witness as having acted as an advocate.
EPI’s expert witness also gave evidence to the effect that Symphony’s formulation contained an additive in functionally and numerically similar amounts and proportions to EPI’s formulation. EPI submitted that this was expert evidence that Symphony’s formula sufficiently resembled EPI’s formula to satisfy a test of substantial similarity; and that Symphony’s expert had agreed with that analysis (because he had not listed the observation in his reservation from the joint report of the two experts). The court noted that this submission “only goes to demonstrate that if a scientific finding is to be made the basis of a significant legal argument it has to be made clear that that is what is being done, and the experts on the other side be given a fair chance to comment.”
In order to argue that the trial judge had been wrong to conclude that there had been no copying, EPI argued that there had effectively been a conspiracy amongst a number of defence witnesses to manufacture evidence and to lie to the court. The court described this as “a bizarre – near fanciful case“, and as involving many points which were essentially “speculative inferences”. After considering the conspiracy theory, and the various respects in which the trial judge was said to have been wrong, the Court of Appeal rejected it, indicating that not only was the judge not shown to have been wrong, but that had they been considering the matter the appeal judges would have reached the same conclusion as the trial judge.
Although the court concluded that there was no basis for overturning the trial judge’s finding that there had been no copying, and the appeal accordingly failed, EPI nevertheless asked the court to rule on two further issues which had become academic. The first was whether the breach of confidence claim would also fail by virtue of the fact that the key features of EPI’s recipe had been published, thus destroying anything confidential about them. The second was whether the “no analysis” clause in the licence could prevent an analysis which yielded only public domain information. Unsurprisingly, the court declined to rule on these academic issues. One important reason for not doing so was that such issues might well be fact-sensitive and should not therefore be decided as an academic point.
With the exception of the Appeal Court’s rejection of the argument that a copyright approach (i.e. shifting the burden of proof in cases of marked objective similarly) can be applied in a claim for breach of confidence in relation to technical information, the Appeal Court’s judgment is mainly of interest on the procedural issues set out above. Having been upheld on appeal, the High Court judgment will remain of interest to any party to the provision of confidential information or know-how who is concerned at the prospect of reverse engineering.
For more information on intellectual property issues please email Alan Ringwood or call Alan on 64 9 916 8925.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.