12 December 2007

Design Right and Personal Liability of Directors: Societa Esplosivi Industriali Spa v Ordnance Technologies (UK) Ltd Round 2

This was the second round of a case that had already been partly decided by Mr Justice Lewison nearly 4 years ago (see Societa Esplosivi Industriali SPA v Ordnance Technologies Ltd. and Others [2004] EWHC 48 (Ch) (21 Jan 2004)). That judge had declined to decide certain issues at that trial because the defendants had failed to give adequate disclosure. The issues that remained were:
- whether the defendant Ordnance Technologies Ltd. and its former managing director were in breach of contract;
- whether they had infringed the claimant's copyright;
- whether they had breached obligations of confidence and equitable confidence; and
- whether they had infringed the claimant's design right.
The dispute concerned weapons systems, namely multiple warhead systems and dense metal penetrators. By the time the adjourned issues came on for trial, Ordnance Technologies Ltd. had been wound up and the dispute was essentially between the claimant and that company's former managing director. These remaining issues came before Mr. Justice Lindsay.

Why this Case is worth reading
The judge disposed of the contract, copyright and confidence claims in short order. Most of the meat of his judgment concerned the construction of s.213 and s.226 (1) (b) and the personal liability of the director. There's not really much new law but some well known principles are conveniently expressed.

"Commonplace" revisited
The one point on subsistence was whether a conical projectile design which applied design principles that had been known since the 19th century could be described as commonplace. The judge dealt with this point as follows:
"Whilst, in that design field, conical liners, for example, are not at all unusual, it has been made clear to me that small variations in shape, internal and external, can make large difference to the charges' performance. So far as concerns the shape, the thickness, constant or otherwise, in the walls of the cone, the rectilinearity or curve of the sides of the cones, the angle of the sides of the cone to one another, the extent to which the point of the cone is sharp or is rounded and its thickness at that point are all factors varying from one design to another and which lead to significantly different performance. Liners, albeit commonly broadly conical, are, so to speak, bespoke, tailored, along with the whole of the shaped charge, very much to the classes of targets at which they are intended to be aimed and which they are intended to destroy and tailored also to how they are to be delivered to the target. Further, evidence was given to me of Lancer 2 shaped charges having a performance which, at the time, was unmatched anywhere in the world, a performance in the attainment of which the particular shaped charge liner and the shape of that crucial component was, with other features, an important factor. That tends to suggest the shape of the relevant liners was uncommon. No evidence was led which suggested the ordinariness of the Lancer 2 shaped charge either as a whole or as to any of its parts and I am left in no doubt but that neither in whole or in part was the Lancer 2 shaped charge warhead "commonplace" within the intendment of section 213(4). Both the design of its parts and the design of the whole were original designs for the purposes of the Act."
None of the authorities on the commonplace exception was referred to by the judge.

Construction of "making a design document recording the design for the purpose of enabling such articles to be made"
The issue here was the mental element necessary for liability under s.226 (1) (b) imported by the words "for the purpose of". That is really the only part of the judgment that is novel. The judge said
"it is, in point of construction, a necessary component of a successful allegation within the documents class of section 226(l)(b) that it should be proved of the alleged infringer that at the material time what he did or authorised to be done by way of the making of a design document recording the design in question was done with the purpose in him that articles to the design should thereby be enabled to be made. It is not required that he should have the purpose that he or he whom he authorises should himself or themselves make or be enabled to make such articles but rather that within the infringer there should be the purpose of enabling the articles to be made. Moreover, as with any other state of mind, its proof is not necessarily to be negatived by a denial by the defendant concerned; whether the necessary purpose did or did not exist at some material time is likely to require an evaluation of all surrounding circumstances, amongst which the defendant's own denial, if there has been one, is merely a part and not necessarily a credible part."

This is the part of the case that is most likely to be remembered.

Directors' Liability
Mr Justice Lindsay found that design right did subsist and that it had been infringed by Ordnance Technologies Ltd. Since that company no longer existed the question was whether the director should be personally liable. In concluding that he was, the judge applied the reasoning of the Court of Appeal in MCA Records Inc v Charly Records Limited [2002] FSR 26 401.

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