This month we report on the ECJ's decision in the L’Oréal v Bellure case on smell-alikes and three cases on confidential information from the High Court, including Vestergaard v Bestnet where the issues of liability and injunctive remedy were considered>
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|Application (and where applicable, earlier mark)
- milk with cocoa (30)
- milk and milk products (29)
- cocoa, chocolate, chocolate and cocoa products, bakery, pastry and confectionary products, sugar confectionary, ices (30)
||The CFI dismissed the appeal by Vivartia, upholding the BoA’s finding that there was a likelihood of confusion between the two marks under Article 8(1)(b).
The overall impression of the signs was that they were similar. Although the mark applied for contained a number of additional elements that distinguished it from the earlier mark, the figurative element would be perceived as ornamental. The Greek ‘ΔΕΛΤΑ’ component occupied a position of secondary importance in the mark as a whole and would tend to be omitted when referred to orally. MILKO and MILKA were very similar phonetically.
The goods at issue were similar, if not identical, and the earlier mark had a high level of distinctiveness in relation to chocolate and chocolate products. The CFI therefore agreed with the BoA that there was a likelihood of confusion.
The CFI disregarded a decision of the administrative trade marks committee in Greece that there was no likelihood of confusion. The Community trade mark regime was an autonomous system which applied independently of any national system.
|Application (and where applicable, earlier mark)
- information, advisory consultancy and research services relating to finance and investments (36)
- arranging and conducting of conferences and seminars relating to finance; publication of financial information (41)
- financial affairs (36)
The CFI upheld the BoA’s finding that there was a likelihood of confusion between the two marks under Article 8(1)(b).
The BoA was correct to find that the signs were visually and phonetically similar. The mere inversion of the elements of a mark could not lead to the conclusion that there was no visual or phonetic similarity. Further, the figurative element of the signs, including the colour of the mark applied for and geometric shapes of the earlier mark were insignificant as the attention of the public would be drawn to the verbal elements of the mark. The varying use of upper and lower case characters was likewise insufficient to distinguish the signs.
The BoA was correct to conclude that the Class 41 services applied for were similar to those of the earlier mark (the identity of the Class 36 services was not in issue).
Having regard to the identical nature of some of the services and the similarity of others, as well as to the high degree of similarity between the signs, there was a likelihood of confusion with regard to both the average consumer and the specialised public.
Bastos Viegas, SA v OHIM; Pierre Fabre Médicament SA
|Application (and where applicable, earlier mark)
- surgical tissues; gauze for dressings; medical bandages; dressings (medical); cotton wool for medical use, except eye treatment preparations (5)
- pharmaceutical products (5)
(French national registration)
The CFI dismissed the appeal, upholding the decision of the BoA that there was a likelihood of confusion under Article 8(1)(b) between the marks in relation to the Class 5 goods applied for.
The CFI held that the goods were highly complementary and that the marks were visually and phonetically very similar.
|Application (and where applicable, earlier mark)
- tweezers (8)
The CFI found that the three dimensional mark lacked distinctive character.
The appeal against the decision of the BoA to reject the application was therefore dismissed under Article 7(1)(b).
|Application (and where applicable, earlier mark)
- connectors (9)
- plastic insulators (17)
The CFI found that the mark was descriptive of the goods applied for.
The appeal against the decision of the BoA to reject the application was therefore dismissed under Article 7(1)(c).
|Application (and where applicable, earlier mark)
- electric apparatus and instruments for the creation, administration, storage, evaluation, monitoring and transmission of product and machine data and external data (9)
The CFI found that the mark was descriptive of the goods applied for.
The appeal against the decision of the BoA to reject the application was therefore dismissed under Article 7(1)(c).
|Application (and where applicable, earlier mark)
- various scientific, optical and electrical devices (9)
- telecoms and reporting services (38)
- research and design; software and hardware development; consultancy (42)
- library cataloguing software (9)
- online services, hotline help services (38)
- software creation, design and translation (42)
The BoA partly allowed the opposition under Article 8(1)(b) in respect of certain goods and services in Classes 9, 38 and 42 on the basis of the similarity of the marks and a likelihood of confusion.
The CFI dismissed the appeals by the Claimant and the intervener against the BoA’s decision.
Similarity (or not) of marks
Victor Guedes – Indústria e Comércio SA v OHIM; Consorci de l’Espai Rural de Gallecs (CFI (Eighth Chamber); T-151/08; 11.06.09)
The CFI upheld the BoA decision that there was no likelihood of confusion between the figurative mark incorporating the word GALLECS and earlier figurative marks incorporating the word GALLO.
Consorci de I’Espai Rural de Gallecs filed an application for the registration of a figurative sign (reproduced below) for various foodstuffs in Classes 29 and 31.
Victor Guedes opposed the application under Article 8(1)(b) on the basis of five earlier marks (one CTM and four Portuguese marks, all registered in Class 29) depicted below:
Earlier Mark 1
Earlier Mark 2
Earlier Mark 3
Earlier Mark 4
Earlier Mark 5
OHIM rejected the opposition and the BoA dismissed the appeal. Victor Guedes appealed to the CFI.
The CFI upheld the BoA’s decision for the following reasons:
- The CFI rejected Victor Guedes’ submission that it was only the word elements (GALLECS and GALLO) which needed to be compared visually. In the mark applied for the figurative element occupied over half the mark. Earlier Marks 1, 3, 4 and 5 all contained the figure of a cockerel which in all cases is larger than the word GALLO. It was agreed, however, that the word GALLO was the dominant element in Earlier Mark 2. Considering the marks as a whole, the BoA was entitled to conclude that they were visually dissimilar.
- Phonetically, the words GALLECS and GALLO shared the same initial part (“gall”), however, the pronunciation resulting from the end of the words made them phonetically different. Although, generally, the beginning of word elements plays an essential phonetic role, the difference in pronunciation of the word endings in this instance was significant.
- Conceptually, the figure of the church had nothing in common with the figure of a cockerel. Victor Guedes’ submission that the marks were based on a shared religious aspect was rejected.
The CFI concluded that the marks were not similar and therefore there was no likelihood of confusion.
The CFI also rejected Victor Guedes’ opposition under Article 8(5). The three conditions in Article 8(5) are cumulative. Victor Guedes’ failure to satisfy the first condition (namely that the marks were similar or identical) was detrimental to the claim.
L'Oréal and Ots v Bellure and Ots (ECJ (First Chamber); C-487/07; 18.06.2009)
L’Oréal is a manufacturer of high quality perfumes and other beauty products aimed at the luxury end of the perfume and cosmetics market. Bellure and others (the Defendants) imported, distributed and sold a range of perfumes which comprised copies of some of L’Oréal’s products. These copies were not counterfeit in the normal sense, but were ‘smell-alikes’ and were marketed in packaging which L’Oréal alleged took advantage of its products’ names, packaging and brand image.
At first instance the High Court held that L’Oréal had established trade mark infringement under Article 5 of the Trade Marks Directive in relation to some (but not all) of the packaging and bottle shapes and in relation to the use of certain word marks on comparison lists (the lists which indicated which of the Defendants’ range of products smelled like each of the premium brands). On appeal, the CoA referred five questions to the ECJ.
The first four questions referred related to the use by the Defendants of L’Oréal’s trade marks in the comparison lists, and the interpretation of Article 5(1) of the Trade Marks Directive and the conditions under Article 3a(1) of the Comparative Advertising Directive which comparative advertisements must satisfy in order to be permitted. The fifth question related to the use by the Defendants of the packaging and bottles similar to those of L’Oréal and concerned the interpretation of Article 5(2) of the Trade Marks Directive.
The fifth question
The ECJ dealt with the fifth question first, which asked whether a third party that uses a sign similar to that of a trade mark with a reputation can be said to take “unfair advantage” of the mark, where such use gives that party an advantage in the marketing of his goods, without risking causing detriment to the mark or to its proprietor.
The ECJ noted that Article 5(2) protects against three types of injury:
a) detriment to the distinctive character of the mark;
b) detriment to the repute of the mark; and
c) unfair advantage taken of the distinctive character or repute of the mark.
Any one of these three types of injury is sufficient for the purposes of Article 5(2). The ECJ re-iterated the guidance it gave in Intel (Case C-252/07) in relation to (a), but without reference to the controversial requirement that to prove detriment to the distinctive character of the mark required evidence of a change in the economic behaviour of the average consumer of the goods/services for which the earlier mark was registered consequent on the use of the later mark.
In relation to (b), the ECJ concluded that detriment to the repute of the mark (also referred to as ‘tarnishment’ or ‘degradation’) is caused when the goods or services for which the identical/similar sign is used by a third party may be perceived by the public in such a way that the trade mark’s power of attraction is reduced. The ECJ noted that a likelihood of this may arise if the goods or services offered by the third party possess a characteristic or quality which is liable to have a negative impact on the image of the mark.
The concept of unfair advantage in (c) (also referred to as ‘parasitism’ or ‘free-riding’) relates to the advantage gained by the third party as a result of its use of the identical/similar sign. In particular, it covers cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical/similar sign, there is a clear exploitation on the coat-tails of the mark with a reputation. The ECJ thus concluded that an advantage taken by a third party of the distinctive character or repute of a mark may be unfair, even if that use is not detrimental either to the distinctive character or to the repute of the mark or its proprietor. To determine whether such use does take an unfair advantage a global assessment should be carried out taking into account all factors relevant to the case, including:
• strength of the mark’s reputation;
• degree of distinctive character of the mark;
• degree of similarity between the marks at issue;
• the nature and proximity of the goods or services concerned; and
• the fact that there is a likelihood of dilution or tarnishment of the mark.
The ECJ commented that the stronger the mark’s distinctive character and reputation are, the easier it would be to accept that detriment had been caused to it. Furthermore, the more immediately and strongly the mark is brought to mind by the sign, the greater the likelihood that the use of the sign would take unfair advantage or be detrimental to the mark.
The CoA had already held that there was a link between the packaging used by the Defendants and L’Oréal’s marks. It was apparent that such a link conferred a commercial advantage on the Defendants and that the similarity was created intentionally by the Defendants with the aim of facilitating the marketing of the imitations. It was for the CoA to decide, taking these factors into account, whether an unfair advantage was being taken. However, the ECJ stated that where a third party attempts to ‘ride on the coat-tails of a mark with a reputation in order to benefit from its power of attraction, the reputation and the prestige of that mark and to exploit, without financial compensation, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark’, the advantage obtained by such behaviour must be considered to be unfair.
The first and second questions
The first and second questions referred asked whether Article 5(1) of the Trade Marks Directive entitled a registered trade mark owner to prevent use of its mark in comparative advertisements where such use is not capable of jeopardising the essential function of the mark (namely, to guarantee the origin of the goods or services) but nevertheless plays a significant role in the promotion of the goods or services of the third party.
The ECJ commented that the comparison lists were a form of comparative advertising and that use of a mark in comparative advertisements can be regarded as infringements under Article 5. However, a comparative advertisement which satisfies all the conditions set out in Article 3a(1) of the Comparative Advertising Directive will be protected from Article 5.
In this case, because the signs and goods at issue were identical, Article 5(1)(a) was the relevant provision and there was no need to prove a likelihood of confusion. The ECJ noted that this provision protected not only against use by third parties which was liable to affect the essential function of the trade mark, but also the mark’s other functions, such as the guarantee of the quality of the goods or services and those of communication, investment or advertising.
To the extent that it does not fulfil all the Article 3a(1) conditions, the use of a sign in a comparative advertisement identical to a registered trade mark (and in relation to identical goods) which does not jeopardise the essential function of the mark can nevertheless be prevented by the trade mark owner provided such use is liable to affect one of the other functions of the trade mark.
The third and fourth questions
Two of the Article 3a(1) conditions for a permissible comparative advertisement are that the advertisement must not:
(i) present goods or services as imitation or replicas of goods or services bearing a protected trade mark; and
(ii) take unfair advantage of the reputation of a trade mark.
The third and fourth questions asked whether an advertiser who indicates through a comparison list, without in any way causing confusion or deception, that his product has a major characteristic similar to that of a product marketed under a well-known mark, of which the advertiser’s product constitutes an imitation, would fall foul of (i) or (ii) referred to above.
The ECJ noted that the purpose of the Article 3a(1) conditions was to stimulate competition by allowing competitors to objectively highlight the merits of various comparable products whilst prohibiting anti-competitive or unfair practices or practices which affect the interests of the consumers.
In relation to (i), the ECJ confirmed that it prohibits not only advertisements which explicitly evoke the idea of imitation or reproduction, but also those which, having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea. The ECJ further confirmed that it was irrelevant whether the advertisements relate to an imitation of the mark as a whole or an essential characteristic of the product as such, i.e., the smell. The object and effect of the comparison lists at issue were to draw the attention of the public to the original fragrance of which the Defendants’ products were imitations. The lists presented the goods marketed as being imitations of L’Oréal’s goods and thus fell foul of the condition in (i).
In relation to (ii), the ECJ noted that the term “unfair advantage” in that condition must be given the same interpretation as “unfair advantage” in Article 5(2) of the Trade Marks Directive. The ECJ concluded that the advantage gained by the advertiser as a result of advertisements which presented the advertiser’s products as imitations was unlawful and therefore must be considered to be an unfair advantage within the meaning of (ii).
The case will now be returned to the Court of Appeal.
Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH (ECJ (First Chamber); C-529/07; 11.06.09)
The ECJ was asked by the Austrian Court to provide substantive guidance on the meaning of bad faith in Article 51(1)(b).
Since the early 1950s, Lindt has produced and marketed chocolate Easter bunnies, although their exact presentation has varied slightly. Since July 2001, Lindt has been the registered proprietor of a three dimensional CTM in the shape of a bunny wrapped in gold foil with red and brown markings, a red ribbon and bell around its neck and ‘Lindt Goldhase’ stamped on its haunch (below, left). Hauswirth has produced and marketed chocolate bunnies since 1962, decorated with a ribbon and with a label fixed to the underside (below, right).
Lindt brought trade mark infringement proceedings in the Austrian Court against Hauswirth on the grounds that Hauswith’s product was confusingly similar to the registered trade mark. Hauswirth counterclaimed inter alia that the registration was made in bad faith and should be declared invalid in accordance with Article 51(1)(b).
The Austrian Court referred three questions to the ECJ, essentially seeking guidance on the relevant criteria to be taken into consideration in determining whether Lindt had acted in bad faith, within the meaning of Article 51(1)(b).
The ECJ stated that national courts must make an overall assessment, taking into account all factors relevant to a particular case which existed at the time of the filing of the application. Specifically, the national courts should take into account:
- whether the applicant knows or must know that a third party is using, in at least one Member State, an identical or similar sign for an identical or similar product capable of being confused with the sign for which registration is sought;
- the applicant’s intention to prevent that third party for continuing to use such a sign; and
- the degree of legal protection enjoyed by the third party’s sign and by the sign for which registration is sought.
The ECJ went on to state that the fact that an applicant knows, or must know, that a third party has long been using, in at least one Member State, an identical or confusingly similar sign is not sufficient, in itself, to conclude that the applicant was acting in bad faith. Consequently, when determining whether there was bad faith, the applicant’s intention at the time of filing must also be considered. This is a subjective factor which must be determined by reference to the objective circumstances of the particular case.
The applicant’s intention to prevent a third party from marketing a product might, in certain circumstances, be an element of bad faith, particularly if it becomes apparent that the applicant applied for registration with the sole objective of preventing a third party from entering the market or competing unfairly with a competitor who has long used an identical or confusingly similar sign which, because of characteristics of its own, has by the time of filing obtained some degree of legal protection.
The ECJ did not exclude the possibility that, even in the circumstances described above, the application may be in pursuit of a legitimate objective. This may be the case, for example, where the applicant knows, when filing the application for registration, that a third party, who is a newcomer in the market, is trying to take advantage of that sign by copying its presentation, and the applicant seeks to register the sign with a view to preventing use of that presentation.
The nature of the sign applied for may also be relevant. For example, where the sign consists of the entire shape and presentation of a product, the fact that the applicant is acting in bad faith might more readily be established where the competitors’ freedom to choose the shape of a product and its presentation is restricted by technical or commercial factors, so that the trade mark proprietor is able to prevent his competitors not merely from using an identical or similar sign, but also from marketing comparable products.
Furthermore, consideration may be given to the extent of the reputation enjoyed by a sign at the time when the application is filed. The extent of that reputation might justify the applicant’s interest in ensuring a wider legal protection for his sign.
Imagination Technologies Ltd v OHIM (ECJ (Fifth Chamber); C-542/07; 11.06.09)
Imagination Technologies appealed the CFI’s decision to refuse the registration of the word sign PURE DIGITAL in Classes 9 and 38 for a number of electronic goods and services.
In support of its appeal, Imagination Technologies relied on a single submission: that the CFI had erred in its interpretation of Article 7(3) in so far as it took the view that the distinctive character of a trade mark for which registration has been sought should have been acquired before the date of filing of the application.
The ECJ dismissed the appeal and held that Article 7(3) should be interpreted literally. It was apparent from the wording of Article 7(3) and especially from the use of the verbs in the past tense in the phrases “the mark has become” and “in consequence of the use which has been made of it”, that the mark must, at the time of filing of the application for registration, already have acquired distinctive character.
The ECJ found support for this interpretation in the first sentence of Article 3(3) of Directive 89/104, which is in essence identical to Article 7(3) and which states “a trade mark shall not be refused registration or be declared invalid in accordance with paragraph 1 (b), (c) or (d) if, before the date of application for registration and following the use which has been made of it, it has acquired a distinctive character.”
Further, the ECJ stated that a literal interpretation of Article 7(3) was the only interpretation that was compatible with the logic of the Community trade mark system, according to which the date of filing of the application for registration determines the priority of one mark over another.
Relevant date for assessing validity
Frosch Touristik GmbH v OHIM; DSR touristik GmbH (CFI (Fifth Chamber); T-189/07; 03.06.09)
Frosch applied for, and was subsequently granted, a CTM for FLUGBÖRSE (meaning ‘flight database’) in relation to printed matter (Class 16), travel services (Class 39) and accommodation services (Class 42).
DSR applied to invalidate the mark under Articles 51(1)(a) and 7(1)(b), (c) and (g).
OHIM invalidated the mark in respect of all goods and services except for providing food and drink and restaurants in Class 42. The BoA dismissed the appeal, holding inter alia that, in order to be registered, a CTM must meet the Article 7 conditions not only on the date of filing the application but also throughout the registration procedure.
The CFI annulled this decision. The only date relevant to a declaration of invalidity under Article 51(1)(a) is the filing date. To rule otherwise would amount to making the registration of the mark dependant, in part, on a contingency, namely the length of the registration procedure. This finding was consistent with the ECJ’s judgment in Alcon v OHIM (Case C-192/03).
Earlier Unregistered National Trade Mark
Last Minute Network Ltd v OHIM; Last Minute Tour SpA (CFI (Seventh Chamber); Joined Cases T-114/07 and T-115/07; 11.06.09)
Last Minute Network Ltd (LMN), the proprietor of the unregistered UK mark LASTMINUTE.COM, applied for invalidity under Articles 51(1)(c) and 8(4) of Last Minute Tour’s (LMT) registration of the figurative mark LAST MINUTE TOUR (below) for inter alia printed goods and packaging in Class 16 and travel and entertainment services in Classes 39 and 42.
LMN submitted that the UK national law of passing off gave it the right to prohibit the use of the mark in the UK and, therefore, to obtain its cancellation. OHIM allowed the application in respect of the Class 39 and 42 services, but not in relation to the Class 16 goods. Both parties appealed. The BoA allowed LMT’s appeal in relation to the Class 39 and 48 services but dismissed LMN’s appeal in relation to Class 16 goods. LMN appealed to the CFI.
The CFI found that, in allowing registration of the mark, the BoA had misinterpreted the applicable criteria of the relevant UK law.
Definition of relevant public
It was clear to the CFI that, according to the national case law, the misrepresentation by the defendant in an action for passing off is a representation which is likely to lead the claimant’s customers to attribute to the claimant the commercial origin of the goods and services offered by the defendant. The BoA had erred in taking the view that the relevant public constituted average users of the goods and services concerned residing in the UK who are reasonably well informed, observant and circumspect, rather than the customers of the proprietor of the unregistered UK mark.
Independent reputation of the expression ‘last-minute’
The CFI noted that a mark may have acquired a reputation for the purposes of passing off even though it originally had a descriptive character or was devoid of distinctive character. Consequently, the BoA could not hold that the unregistered UK mark lacked an independent reputation merely on account of the weak distinctive character and generic nature of the words ‘last minute’.
Assessment of misrepresentation
The CFI held that the BoA could not simply hold on the basis of Article 8(1)(b) that, on account of the weak distinctive character of the marks at issue, the public would focus their attention on the marks’ distinctive and dominant elements in order to make a visual, aural and phonetic comparison. To do so would disregard the requirements in Article 8(4).
UK case law was clear that the examination of the existence of misrepresentation is not limited to a comparative examination of the two marks at issue, but extends to other factors such as the circumstances in which the goods and services are offered.
The CFI noted that there were difficulties in applying the law on passing off to a declaration of invalidity because of the requirement to assess the situation as at the filing date of the CTM and not the date in which the defendant began to offer his goods and services. On the filing date LMT had not yet begun to offer its goods and services under the sign.
However, by merely making a formal comparison of the two signs in issue and by failing to inquire whether the words ‘last minute’ had acquired an independent reputation in the minds of LMN’s customers when considering whether the public in the UK believed that the goods and services from LMT emanated from LMN, the BoA had disregarded the reference in Article 8(4) to the law of the UK governing the unregistered UK mark.
The CFI annulled the decision of the BoA and ordered it to re-examine LMN’s application for a declaration that the mark was invalid in the light of all the requirements of an action for passing off.
Request for proof of use during invalidity proceedings
Harwin International LLC v OHIM; Cuadrado SA (CFI (Third Chamber); T-450/07; 12.06.09)
Harwin registered as a CTM a figurative mark containing the words PICKWICK COLOUR GROUP. Cuadrado applied to invalidate the registration under Article 55 based on its earlier marks containing the term PICK OUIC. The Cancellation Division allowed the opposition. The BoA dismissed the appeal, holding that the Cancellation Division had rightly concluded that it was not entitled to assess whether the earlier marks had been put to genuine use in accordance with Article 56(2) and (3), given that Harwin had not made an express request for proof of use during the invalidity proceedings. The BoA concluded that such a request could not be submitted for the first time at the appeal against the Cancellation Division’s decision.
The CFI annulled the BoA’s decision and noted the following:
- In its application for invalidity, Cuadrado included evidence concerning use of its earlier marks;
- In its observations on the application, Harwin stated that the evidence supplied by Cuadrado was insufficient to prove genuine use (Harwin referred to the BoA’s decision in parallel proceedings in which the BoA had ruled that these documents were insufficient to establish genuine use of one of the earlier marks); and
- In response to the observations, Cuadrado produced additional documents on proof of use.
The CFI held that, on a literal interpretation, Article 56(2) could be understood as referring to a request as set out in Harwin’s observations. This understanding was compounded by Cuadrado’s submission of additional evidence. For those reasons, the CFI found that Harwin had made a request for proof of use expressly and timeously. This was consistent with the CFI’s decision in L’Oréal v OHIM – Revlon (Case T-112/03).
The BoA had therefore infringed Article 56(2) and (3) by holding that the issue of genuine use did not have to be examined by the Cancellation Division.
Vestergaard Frandsen A/S and Ots v Bestnet Europe Ltd and Ots* (Arnold J;  EWHC (Ch); 03.04.09; and  EWHC 1456 (Ch); 26.06.09)
Arnold J granted injunctions to prevent Bestnet Europe Ltd and five other Defendants benefiting from their breach of confidence and past misuse of confidential information.
At the main hearing on liability, Vestergaard Frandsen (“VF”), a manufacturer of mosquito nets, claimed for misuse of confidential information consisting of trade secrets by the six Defendants. The Defendants included two ex-employees of VF (Mr Larsen and Mrs Sig) and four companies that were associated with them and which had set up in competition with VF.
VF had created and sold long-lasting insecticidal polyester mosquito nets called PermaNet, which had been very successful. This PermaNet had been developed by VF in conjunction with a consultant, Dr Skovmand, who created a database of the ‘recipe’ for the nets using recommendations he received from a company, Ciba. Dr Skovmand worked for VF under an oral contract and provided copies of his database to VF and, in particular, Mr Larsen. While Mr Larsen and Mrs Sig were still VF employees and before Dr Skovmand had resigned his consultancy the three of them began work to develop a polyethylene net. Once Mr Larsen and Mrs Sig left VF and Dr Skovmand resigned his consultancy, the Defendants finished the development of their polyethylene net called Netprotect.
It was accepted that Dr Skovmand at all times had a copy of the database in his possession and that it contained information that possessed the necessary quality of confidence. The question was whether Dr Skovmand had committed an actionable breach of confidence by using it to develop the Defendants’ Netprotect; if so, it was not disputed that the six Defendants were also liable. Dr Skovmand was not joined as a defendant due to other claims that were proceeding across Europe.
Arnold J held that it was an express term of Dr Skovmand’s oral contract that he would keep information arising out of his work confidential to VF. However, he also held that even if there was no express term, following the guidance from the analogous question of copyright ownership as between contractor and client in Ray v Classic FM ( FSR 622), a term would be implied. VF had paid for the development work, for expenses and for completion of the database and it was understood that any inventions made by Dr Skovmand would belong to VF. Therefore, VF needed the ability to exploit the information and enforce their rights even against Dr Skovmand.
It was agreed that the extent of Dr Skovmand’s duty of confidence was to protect VF’s trade secrets. Other than that he was free to use his own skill, knowledge and experience. Arnold J applied the guidance as to what constitutes a trade secret in Faccenda Chicken v Fowler ( Ch 177), Thomas Marshall v Guinle ( Ch 227) and Lancashire Fires v Lyons & Co ( FSR 629). He held that the recipes in the database constituted VF’s trade secrets as they were separate from Dr Skovmand’s skill, knowledge and experience, they were of commercial value, steps had been taken to protect them and, further, both parties treated them as confidential.
Dr Skovmand was held to have misused the recipes in the database to devise the initial Netprotect recipes for the Defendants and hence he and the Defendants were liable for breach of confidence. Having made these findings of fact Arnold J then said that the question of remedies should be the subject of a second hearing.
At a second hearing, some four months after the trial for liability and three weeks after judgment, the parties made submissions regarding the remedies that were available to and sought by VF. VF argued that it should be entitled to an injunction preventing the Defendants manufacturing and/or selling their Netprotect.
Arnold J considered five separate issues that went to the question of whether VF would be entitled an injunction. First, he considered the general principles applicable to the grant of injunctions to restrain misuse of confidential information, and in particular the circumstances in which an injunction could be refused on the grounds that financial compensation would suffice. Second, he considered the “springboard” doctrine. Third, he considered the situation in which information has a limited degree of confidentiality due to it being relatively inaccessible. Fourth, he looked at whether injunctions could be used to prevent a defendant from continuing to benefit from past misuse of confidential information. Finally, he turned to whether an injunction could be granted to prevent a defendant from continuing to manufacture and sell products that were derived from a misuse of confidential information, but which themselves do not embody or disclose that information.
Arnold J recognised that an injunction is a discretionary equitable remedy. He held that in the absence of specific discretionary reasons for the refusal of an injunction, where there has been a breach of confidence and where there is a sufficient risk of repetition, a claimant is entitled to an injunction save in exceptional circumstances.
The “springboard” doctrine, which comes from Terrapin v Builders’ Supply Co ( RPC 375), refers to using confidential information in order to gain a head start in future exploits (in that case it was the use of designs for building units). Arnold J stated that this doctrine had often been interpreted to mean that use of information that has ceased to be confidential may still continue to be a breach of confidence and therefore carry with it a right to an injunction. However, in his opinion it meant instead that a limited degree of confidentiality could remain even once information could be ascertained by reverse engineering. He held that there had never been any sound authority for the proposition that an injunction could be granted to restrain continued misuse of confidential information once that information has ceased to be confidential. The publication of confidential information brought the obligation of confidence to an end and it did not matter whether the information was published by the confider or the confidant. Therefore, no injunction could be granted to restrain continued misuse of confidential information once that information had ceased to be confidential. Arnold J went on to say that if the “springboard” doctrine was understood to meant that such injunctions could be granted, that should now be regarded as having been laid to rest.
Instead, Arnold J said that if the springboard doctrine is understood to be that information may possess a limited degree of confidentiality even though it can be ascertained by reverse engineering or by a process of compilation from public domain sources, then he considered that it is soundly based. In such circumstances an injunction may be granted. However, it should only be granted for a limited period and last no longer than the time it would take someone starting from public sources to reverse engineer or compile the information. Alternatively, if the information had been used by a defendant to gain a “head start”, the purpose of any injunction should not extend beyond the period for which the defendant’s illegitimate advantage may be expected to continue.
Although Arnold J agreed that, in general, the remedy for past misuse of confidential information was a financial one, an injunction to protect a limited degree of confidentiality that remained or to prevent a defendant benefitting from a “head start” could be awarded. However, the Court would have to be careful that such an injunction was restricted in time and worded appropriately so as not to put the Claimant in a better position than if there had been no misuse in the first place. On the facts, Arnold J was satisfied that the Defendants’ breach of confidence did justify an injunction particularly as there was a clear risk of further use of, or disclosure of, the confidential information by the Defendants.
JN Dairies Ltd v (1) Johal Dairies Ltd and (2) Gurbir Singh* (HHJ David Cook;  EWHC 1311 (Ch); 12.06.09)
Judge Cook decided the preliminary issue in favour of the Claimant, holding that there was an actionable breach of confidence in relation to the Claimant’s invoices.
The Claimant and First Defendant were competing wholesale dairy companies. The Claimant’s customers were principally small shops and independently owned supermarkets, to whom the Claimant supplied bread, milk and other dairy products. These products were bought into the Claimant’s warehouse and then loaded into lorries and vans in the early hours of the morning for delivery to customers. Weekly invoices were prepared, depending on the customer’s requirements the previous week. These invoices were then placed into a series of filing trays on a rack in the Claimant’s warehouse so that each driver could collect and distribute them to customers on Monday morning.
The Claimant alleged that that the Second Defendant, a driver whose employment had been terminated by the Claimant two days earlier, came into the warehouse at about 2:00am on Monday 10 November and took all the invoices from the filing trays. He then handed over the invoices to a director of the First Defendant and began to visit customers on his old round, trying to persuade them to buy from the First Defendant instead.
The Claimant issued proceeding for breach of confidence against the Defendants. The Second Defendant did not contest the proceedings, although he did make a witness statement in which he denied stealing any documents or providing them to the First Defendant.
Findings of Fact
A large numbers of witnesses gave evidence on behalf of the Claimant and First Defendant, much of which contained inconsistencies. However after a detailed analysis, Judge Cook concluded that when taken together the evidence was sufficient to show a coherent picture of events.
The Judge found that that the Second Defendant had stolen the invoices and given them to the First Defendant as part of a pre-arranged plan. The First Defendant had made use of the invoices and/or the information in them for the purpose of approaching and negotiating with various customers of the Claimant.
It was plain that the information contained in the invoices was of considerable commercial value. There was intense competition between the Claimant and First Defendant and, although price was not the sole factor, it was an important consideration for many customers when choosing a supplier.
The Judge rejected the submission that the information was of the type identified in the second limb of Faccenda Chicken v Fowler ( 1 Ch 117) i.e. information which an employee must treat as confidential while employed but which once learned remains in the employee’s head and becomes part of his own skill and knowledge, which he cannot be restrained from using after his employment ends. This case was not authority for a situation where the information had been acquired illegitimately.
A more suitable authority to take as a starting point was Coco v AN Clark (Engineers) ( RPC 41). This case set out a three-stage test requiring that: (i) the information was of a confidential nature; (ii) the information was communicated in circumstances importing an obligation of confidence; and (ii) there was an unauthorised use of the information to the detriment of the person communicating it.
In relation to the first stage, it was clear that information about the quantities of goods purchased by a particular customer and the prices charged to him possessed the necessary degree of confidentiality. Further, information about the identity of the Claimant’s customers, at least as collected together in the form of a list, was confidential to some degree. The fact that it could be discovered (albeit with some effort) through legitimate means was relevant to issues such as discretion in granting injunctive relief, but it was not in itself a reason for concluding that the information was not confidential at all.
In relation to the second stage, it was somewhat artificial to refer to the information being “communicated” when it was in fact stolen. It was clear that the Second Defendant knew when he took the invoices that they contained the Claimant’s commercially valuable information and that he had no right to obtain them or pass them on to anyone else. That was sufficient to impose upon him a duty of confidentiality. It was also clear that when the First Defendant received the invoices it knew, through its director, the confidential nature of the material and the circumstances in which they had been obtained. This was sufficient to impose the same duty of confidentiality on the First Defendant.
As for the final stage, it was again plain from the facts that there had been unauthorised used of the information in the approaches that were made to the Claimant’s customers. This was to the detriment of the Claimant to some degree at least, in that it lost the business of some of those customers or had been obliged to offer better terms in order to keep that business or to win it back.
For these reasons, the Judge decided the preliminary issue in favour of the Claimant.
The Author of a Blog v Times Newspapers Ltd* (Eady J;  EWHC 1358 (QB); 16.06.09)
Eady J refused the application by the Claimant, who was the author of a blog known as “Night Jack”, for an interim injunction to restrain the Defendant from publishing his identity as the person responsible for that blog. The information did not have the necessary quality of confidence. Nor did the Claimant have a reasonable expectation of privacy - essentiality because blogging was a public activity.
The Claimant was a serving detective constable. His blog dealt mainly with his police work and his opinion on a number of social and political issues relating to the police and the administration of justice. The relevant journalist had discovered the Claimant’s identity by a process of deduction and detective work, mainly using information available on the internet.
The Claimant’s case was based both on the traditional law of confidence and upon the more recently developed cause of action arising from the improper disclosure of private information.
In relation to the publication of allegedly private information in contravention of Article 8 of the European Convention on Human Rights (‘ECHR’), the courts adopt a two stage approach: first to consider whether the claimant had a reasonable expectation of privacy in relation to the information in question and, if so, to then enquire whether there is some countervailing public interest such as to justify overriding that prima facie right.
Previous cases where the claimant had relied successfully upon the privacy cause of action in the absence of any pre-existing relationship of confidence had all related to information of a strictly personal nature concerning, for example, sexual relationships or financial affairs. Here, however, there was a significant public element in the information (the identity of the person communicating to the public through his blog). Eady J agreed with the interpretation of Mahmood v Galloway ( EMLR 26) given by the Defendant’s counsel: it advanced the proposition that a journalist who writes under a pseudonym for the purpose of functioning more effectively in his undercover work has no reasonable expectation of privacy in respect of his identity. Although the decision was not binding, it was entirely persuasive and the function that the Claimant performed via his blog was closely analogous.
In conclusion, the Clamant failed at stage one, because blogging was essentially a public rather than a private activity.
Eady J moved on to the second stage, commenting that the exercise was somewhat artificial since he had to proceed on the hypothesis that one or more pubic interest considerations had to be identified which would be capable of outweighing the Claimant’s right to privacy – when he had already held that no such right existed. Nevertheless, he addressed the arguments raised.
Public interest arguments were raised both by the Claimant against the disclosure of his identity and by Defendant in favour of such disclosure.
The Claimant submitted that the disclosure of his identity would inhibit his right under Article 10 ECHR to impart information and ideas to the general public. Against this, the Defendant submitted that there was a public interest in the disclosure of any significant non-compliance by a police officer with his obligations under the relevant statutory code governing police conduct. Further, there was a general public law duty on police officers not to reveal information obtained in the course of police investigations otherwise than for the purpose of performing public duties. Failure to comply with that duty would also, the Defendant submitted, justify public exposure.
Eady J agreed with the Defendant that it was very often useful, in assessing the value of an opinion, to know its source. It was quite legitimate for the public to be told who it was who was choosing to make, in some instances, quite serious criticisms of police activities.
One of the reasons that the Claimant had originally sought to maintain his anonymity was to protect himself against disciplinary measures being brought. His identity had since been revealed to the police service by the Defendant. But even if this were not the case, Eady J noted that it was not part of the court’s function to protect police officers who may be acting in breach of police disciplinary regulations from coming to the attention of their superiors.
Since an injunction would restrain the Defendant from exercising its right of freedom of expression, the provisions of Section 12 of the Human Rights Act 1998 were relevant. Eady J held that it was not likely that the Claimant would succeed at trial in restraining the Defendant from publishing his identity as the author of the blog. Accordingly an injunction was refused.
Katharine Stephens, Zoe Fuller and Alice Sculthorpe
Reporter’s note: We are grateful to our colleagues at Bird & Bird LLP for their assistance with the preparation of this report: Claire Chapman, Clare Wilson, Cristina Garrigues, Geoff Hussey, Hilary Atherton, Nick Boydell and Phillipa Lambert.
Profiles of all of our contributors above can be found on the "our people" page of our site.
ECJ and CFI decisions can be found at http://curia.europa.eu/jcms/jcms/j_6/home and the reported cases marked * can be found at http://www.bailii.org/databases.html#ew