28 May 2012

Rabbits - Chocoladefabriken Lindt & Sprungli v OHIM

In Case T-336/08 Chocoladefabriken Lindt & Sprüngli v OHIM (shape of a chocolate rabbit with a red ribbon) [2010] EUECJ T-336/08, the General Court  dismissed Lindt & Sprunglli's action for annulment of the decision of the Fourth Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 11 June 2008 (Case R 1332/2005-4) concerning its application for registration of a three-dimensional mark comprising the shape of a chocolate rabbit with a red ribbon as a Community trade mark on the ground that the applications are devoid of distinctive character within the meaning of art 7 (1) (b) of the Community trade mark regulation (Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark).

The manufacturer appealed against that decision to the Court of Justice of the European Union essentially on the ground that there was no evidence for the conclusion that the "the shape of a sitting or crouching rabbit............... are one of the typical shapes that chocolate and chocolate products may take, particularly at Easter".   Lindt argued that its three-dimensional chocolate rabbit wrapped in gold foil had already been registered by 15 member states.  If the trade mark registrars of those states had found that it was distinctive, that ought to be good enough for OHIM.

In Case C-98/11 P Chocoladefabriken Lindt & Sprungli v OHIM  [2012] EUECJ C-98/11_P the Court of Justice dismissed the appeal.   Directing itself at paragraph [41] that "trade marks which are devoid of any distinctive character are not to be registered" and "that the distinctive character of a trade mark, within the meaning of that provision, must be assessed, firstly, by reference to the goods or services in respect of which registration has been sought and, secondly, by reference to the perception of them by the relevant public (see, inter alia, Henkel v OHIM, paragraph 35; Case C-25/05 P Storck v OHIM [2006] ECR I-5719, paragraph 25, and Case C-238/06 P Develey v OHIM[2007] ECR I-9375, paragraph 79) it concluded at paragraph [42] that 
"Only a mark which departs significantly from the norm or customs of the industry and thereby fulfils its essential function of indicating origin is not devoid of any distinctive character for the purposes of Article 7(1)(b) of Regulation No 40/94 (Deutsche SiSi-Werke v OHIM, paragraph 31)".
It appeared to the Court of Justice that the General Court had "correctly identified and followed the criteria established by the relevant case-law in that regard."

27 May 2012

Patents: Unilever v Johnson

The most remarkable aspect of Unilever Plc v S C Johnson & Son Inc [2012] EWPCC 19 (25 May 2012) is that this action took place in the Patents County Court rather than the Patents Court or before the Comptroller.  As the Patents County Court Guide notes at paragraph 1.3
"the Patents County Court was established to handle the smaller, shorter, less complex, less important, lower value actions and the procedures applicable in the court are designed particularly for cases of that kind. The court aims to provide cheaper, speedier and more informal procedures to ensure that small and medium sized enterprises, and private individuals, are not deterred from innovation by the potential cost of litigation to safeguard their rights."
Judge Birss QC remarked at paragraph [4] of his judgment:
"One might ask whether a case between two multinational corporations is suitable for the PCC. Since neither side suggested the matter should be transferred, the question did not arise. I can say this much. In terms of the issues to be decided, the case is clearly suitable for the PCC. There has been no disclosure and the evidence consists only of reports from in-house experts on both sides. The legal representation consisted of junior intellectual property counsel (Andrew Norris and Simon Malynicz) instructed by firms of patent attorneys (Potter Clarkson and Carpmaels & Ransford) for Unilever and SC Johnson respectively. The trial took 1 ½ days. As far as I can tell it has been run expeditiously and without major cost."
As I said in my latest solicitors' newsletter, I have been a fan of the PCC ever since the days of Judge Ford.    It  is encouraging that two multinationals (which could no doubt afford to litigate anywhere) have confidence in this tribunal.

The claim before Judge Birss was for revocation of two patents, namely GB 2 389 547 and GB 2 403 169. entitled "Automated cleansing sprayer" on grounds of anticipation and obviousness. The latter patent was divided out from the application which had led to the former.   The patents related to the cleaning of bath and shower enclosures which become mildewed or coated with soap, hard water scale and the like. Normally removing these deposits requires a human being. The invention was a device for automatically spraying the walls of the enclosure with cleanser. When a user is about to leave the shower, he or she presses a button on the device (which is probably hanging from the shower head) and then leaves, closing the shower door or curtain behind. The device counts down for (say) 20 seconds and then sprays the walls with cleanser, stopping automatically after a period. The device can work with commercially available bottles of cleanser and obviates the need for a person to remember to spray the shower after use.

The judge construed the claims in accordance with Kirin-Amgen Inc and others v Hoechst Marion Roussel Ltd and others [2005] RPC 169, [2005] RPC 9, [2004] UKHL 46, (2005) 28(7) IPD 28049, 2005] 1 All ER 667 and Virgin Atlantic Airways Ltd v Premium Aircraft Interiors UK Ltd [2009] EWCA Civ 1062, [2010] RPC 8.  Referring to Synthon BV v. Smithkline Beecham plc [2005] UKHL 59, [2006] 1 All ER 685, [2006] RPC 10 and General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1972] RPC 457 he directed himself that the test for anticipation is strict.   He said, at paragraph [84] "To deprive a claim of novelty the prior art must disclose something with (sic) the claims."  I assume the judge meant "within the claims".  As for obviousness he applied Lord Justice Jacob's methodology in Pozzoli Spa v BDMO SA and another [2007] EWCA Civ 588, [2007] FSR 37:
"(1) (a) Identify the notional person skilled in the art;
      (b) Identify the relevant common general knowledge of that person;
(2) Identify the inventive concept of the claim in question or if that cannot readily be done, construe it;
(3) Identify what, if any, differences exist between the matter cited as forming part of the "state of the art" and the inventive concept of the claim or the claim as construed;
(4) Viewed without any knowledge of the alleged invention as claimed, do those differences constitute steps which would have been obvious to the person skilled in the art or do they require any degree of invention?"
His Honour identified the "person skilled in the art" at paragraph [107] as "someone working on household care products in a company developing and selling such goods" who is looking to improve cleaning products in general. Earlier in his judgment, at paragraph [14] he said that such a person (or rather a team) would
"have experience of bathroom care products and also related products like cleaning products, air fresheners, household pest control products and fragrances. They would have a general knowledge over a broad range of the technologies needed to develop mass produced cleaning appliances incorporating electronic controls. That will include general knowledge of spraying, pumps, vents, seals, electronic controls, batteries and materials selection."      
However, those persons would not have specialist expertise in spraying or electronics.. Finally, the judge noted that
"In the real world I strongly suspect that the people working in household care in FMCG (fast moving consumer goods) companies are highly innovative and are paid to invent and innovate. However I remind myself that the legal construct – the person skilled in the art – has no inventive faculty. He never misses the obvious and always misses the inventive step."
The one big issue in dispute appears to have been over common general knowledge and whether a particular text book on spraying formed part of it.  That particular text book was in the claimant's library but not in the defendant's. Its absence from the defendant's library persuaded the judge that the book was not common general knowledge (see paragraph [22]) but His Honour regarded the text as "representative of the kind of technical resource a skilled person would know existed and which would be consulted if they had already decided to look seriously at options in spraying technology."

After considering the prior art the judge concluded that 169 was wholly invalid for want of novelty and an inventive step and that most but not all of the claims of 547 were invalid for obviousness.  Should anyone wish to discuss this case with me he or she should  call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

15 May 2012

Passing off - Lumos Skincare Ltd v Sweet Squared Ltd.

In Stannard v Reay [1967] RPC 589, and Stacey v 2020 Communications [1991] FSR 49.it had been established that even a very modest goodwill can support an action for passing off.  Just how modest such goodwill can be was tested in Lumos Skincare Ltd v Sweet Squared Ltd and Others [2012] EWPCC 22 (10 May 2012).

This was a claim by a skincare distributor which markets a "pure redesnsifying serum", a "pure regenerating serum", a "deep exfoliating mask" and a "pure firming serum" under the brand names "Lumos one" to "four" to beauty salons and through its online shop against the manufacturer and distributor of a range of nail care products.  As Mr. Recorder Campbell noted at paragraph [35] of his judgment, the women's skincare market is huge. He referred to an undated article in The Times which stated that "sales of women's facial skincare products in Britain are expected to generate about £1 billion this year".  Lumos Skincare's share of that market
"averaged about £2000 per quarter from the beginning of 2008 until September 2009, and then gradually rose to about £10 000 per quarter in September 2010. Nearly all of this was due to trade sales. Internet sales averaged only around £1 000 per quarter."
The prices of those products at that time were even higher than they are now. "Lumos one" which now retails for £78 a bottle once sold for £120 (see paragraph [25]). The learned recorder divided those sales figures by 100 to conclude that the claimant was selling about 100 bottles of its potions a quarter, mainly to the trade.   "Very modest use" concluded Mr. Campbell at paragraph [35] and "very small in absolute terms but are also very small as a proportion of the skincare industry."

The defendants sold "top coat" and "bottom coat" nail care products for £10 per bottle mainly to nail technicians.  The recorder found at paragraph [58] "a degree of overlap in terms of the outlets through which the products were sold, in that some of the salons where the Defendants' products were sold also sold skincare products" but although there were some salons that sold both the claimant's products and the defendants' none were found that stocked both the claimant's skin care and the defendants' nail care products.

Mr Campbell concluded at paragraph [87] that there had been no confusion for the following reasons:
"(1) As at October 2010 the Claimant's Lumos mark had only a very modest reputation and goodwill, which was limited to high end anti-ageing products in the skin care industry.
(2) In addition the reputation and goodwill of this mark was substantially limited to the Claimant's small customer base and in particular to those with whom the Branns had personally dealt. There is no evidence that the mark had made any significant impact outside this group. The Claimant's promotional activities, such as the Daily Mail article, had had only a modest and temporary effect on sales.
(3) Accordingly the number of people who were in a position to whom the Defendants' activities could even amount to a material misrepresentation was very limited.
(4) There is a clear division between the skincare industry and the nail care industry, although both form part of the beauty industry generally and there are some trade outlets which offer both skincare and nail care products and/or services. This clear division is recognised in the industry's own classification tools, in trade magazines, and in the way in which exhibitions are organised.
(5) The Claimant's case depends upon establishing that a substantial number of members of the public would be misled into purchasing the Defendants' product in the belief that it was the Claimant's product but the Claimant did not show that there was even a single person in this category. There is nothing like the sort of evidence of customer confusion which was obtained in Neutrogena. Nor is there any mass of emails demonstrating customer confusion, such as there was in Phones4U.
(6) Moreover, Neutrogena, Phones4U, and indeed Stacey all involved companies which were both in the same industry. It is more difficult to accept that there is a likelihood of deception where the relevant industries are distinct. It is true that they are both part of the overall beauty industry, but this umbrella term covers a number of distinct areas. The Claimant was unable to give any examples of any other skincare brands being successfully transplanted into the nail care industry.
(7) The high point of the evidence of confusion was Ms MacMillan's email. As I have said, the evidential weight of this email is small given the lack of cross-examination and the fact that it is not to be interpreted as strictly as a legal document. It is unclear whether Ms MacMillan herself was deceived, or merely confused, and in any event unclear how far her views were influenced by plans for commercial collaboration. Moreover the emails from Ms Danin and Ms Mendez suggest that Ms MacMillan's view was a minority one even within the Claimant's small number of customers.
(8) The lack of evidence of customer confusion is not in itself surprising bearing in mind the lack of side by side trading. However I noted that the Claimant went out of its way to exhibit hearsay evidence which it said demonstrated confusion among its customers, whilst not calling any direct evidence from its customers.
(9) Certainly if there had been any deception among the Claimant's 25 or so actual customers then it seems likely that the Claimant would have been the first to know about it, and would have been able to clarify the position before any damage was suffered: see Teleworks Ltd v Telework Group plc [2002] RPC 27, a decision of Christopher Floyd QC as he then was.
(10) As it is, the lack of any such evidence suggests to me that the Claimant's customers may have known that the Defendants were not connected with the Claimant. This certainly appears to have been the view of both Ms Danin and Ms Mendez. Their views cannot be ignored since their emails formed part of the very material which Mr Brann had chosen to include in his evidence on confusion."
There being no misrepresentation the action failed.

This is but the latest example of the efficient yet fair way in which the Patents County Court disposes of actions of passing off. Before October 2010 a claim like this would have taken months if not years to come on, consumed the better part of a week and cost a bomb in the Chancery Division. Thanks to the new rules for litigation in the Patents County Court the cost of intellectual property litigation is plummeting like the cost of skincare (see my article "New Patents County Court Rules" 1 Oct 2010). If anyone wants to discuss this case with me they should call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

07 May 2012

Enforcing Small IP Claims: Sullivan v Bristol Film Studios

In Sullivan v Bristol Film Studios Ltd    [2012] EWCA Civ 570 (3 May 2012) the Court of Appeal dismissed an appeal from a strike out of a claim for copyright, moral rights and performers' rights infringement and breach of contract under CPR 3.4 by the Chancery interim applications judge sitting in Bristol. The claim was struck out as an abuse of the process of the court not because it was bound to fail, but because even if it were to succeed the costs of fighting it would be out of all proportion to the amount that the claimant was likely to recover.

The claim was brought by a hip hop artist who had contracted with the defendant film company to make a video. The film was to have been a joint venture.  The claimant, Tony Sullivan (also known as Rudey Soloman ("Mr. Soloman"), made the sound track and appeared in the film.  The film company made the film in return for a share of the sales or other revenues.   After the film had been made, it was uploaded to YouTube.   Unfortunately, Mr. Soloman did not like what he saw.   He insisted on its removal from YouTube and after 5 days the film was taken down.

Mr. Soloman issued proceedings out of the Bristol District Registry claiming £800,000 for the causes of action mentioned above.  He applied to the interim applications judge for delivery up of infringing materials.   In the course of his application the studio made a cross-application to strike out his claim form and particulars of claim.   In considering the cross-application the judge worked out the maximum damages that could possibly be awarded under the claim.   In the words of Lord Justice Lewison at paragraph [13]:
"He considered the evidence about what had happened during the short period that the video had been viewable on You Tube. There was evidence before him that showed that during the period that the video had been posted on You Tube it had been viewed nearly 100 times. That is not to say that it had been viewed by 100 different people, because You Tube only records "hits" which may be multiple hits by the same person. But the judge concluded that apart from BFS' own personnel a maximum of some 50 people had seen the video. He assumed, in Mr Soloman's favour, that the video in its unfinished state was "derogatory" treatment within the meaning of the CPDA. He reasoned as follows. There were three possible consequences of 50 persons having seen the video. First, having seen its poor quality, they would decide not to buy the record when it eventually came out. On the basis of figures given to him by Mr Soloman the judge decided that Mr Soloman stood to make a maximum of £1.20 for each record sold. The judge was prepared to assume in Mr Soloman's favour that of the 50 people who saw the video, 40 would have bought the record once it had been released but for the poor quality of the video. This would produce for him a recovery of approximately £50. Second it was possible that those 40 people would themselves disparage or bad mouth the video. The judge was not prepared to make that assumption in Mr Soloman's favour since there was no evidence that anyone had done that. Nor is there now. Third, the 50 people might have liked the video so much that they bootlegged it. Again the judge was not prepared to make this assumption in Mr Soloman's favour in the absence of any evidence that this had in fact happened. Again there is no evidence now of any bootlegging. I might also add that there would in any event be a considerable overlap between this way of putting the claim and the first way, because the lost sales attributable to bootlegging would have been to some extent the mirror image of the lost sales due to people not buying the record at all."
The judge assessed the maximum possible recovery at £50. Noting that on addition to the categories of damage to which the judge referred, it was also possible that Mr Soloman would recover a modest amount of damages for derogatory treatment amounting to a breach of his moral rights, Lord Justice Lewison concluded at paragraph [27] that the judge had been right to approach the case on the basis that the recoverable damages were likely to be extremely modest, on the assumption that Mr Soloman established liability. As Mr. Solomon had already conceded in argument that if indeed his claim was worth only £50 or thereabouts, it should not go forward to trial, the Court of Appeal dismissed the appeal.

Both the Court of Appeal and the judge below had relied on the decisions of the Court of Appeal and Mr. Justice Eady in Dow Jones & Co Inc v Jameel [2005] 2 WLR 1614, [2005] EMLR 353, [2005] EWCA Civ 75, [2005] EMLR 16, [2005] QB 946. In that appeal Lord Phillips MR had said at paragraph [70]:
"It would be an abuse of process to continue to commit the resources of the English court, including substantial judge and possibly jury time, to an action where so little is now seen to be at stake. Normally where a small claim is brought, it will be dealt with by a proportionate small claims procedure. Such a course is not available in an action for defamation where, although the claim is small, the issues are complex and subject to special procedure under the CPR."
The important point of that passage is that Jameel had been struck out not because it was small but because there was no small claims procedure for defamation claims.   Lord Justice Lewison added at paragraph [29] of his judgment in Sullivan:
"The mere fact that a claim is small should not automatically result in the court refusing to hear it at all. If I am entitled to recover a debt of £50 I should, in principle, have access to justice to enable me to recover it if my debtor does not pay. It would be an affront to justice if my claim were simply struck out."
In his Lordship's judgment "it is only if there is no proportionate procedure by which a claim can be adjudicated that it would be right to strike it out as an abuse of process."

In Lord Justice Lewison's view there was a proportionate procedure for intellectual property claims and that was the Patents or indeed the Bristol County Court.   He said at paragraph [32]:
"In my judgment in principle a claim like Mr Soloman's could have been tried in the PCC if its true value had been recognised at the outset. When in future a judge is confronted by an application to strike out a claim on the ground that the game is not worth the candle he or she should consider carefully whether there is a means by which the claim can be adjudicated without disproportionate expenditure. As I have said, in addition to the PCC the claim could also have proceeded in the Bristol County Court."
Although intellectual property claims are allocated initially to the multitrack by CPR 63.1 (3) there was nothing in the rules to prevent its reallocation to the small claims track under CPR 26.10.   Since the small claims track is the normal track for claim which has a value of not more than £5,000, the learned Lord Justice was inclined to think that the best solution would have been for a small claim for copyright infringement to have been allocated to that track in the Bristol county court. Both Lord Justice Etherton and Lord Justice Ward agreed with Lord Justice Lewison.

If anyone wants to discuss this case with me they should call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

Injunctions against ISPs Part IV: Dramatico Entertainment Ltd and Others v British Sky Broadcasting Ltd. and Others (No. 2)

In Dramatico Entertainment Ltd and Others v British Sky Broadcasting Ltd and Others [2012] EWHC 268 (Ch) (20 Feb 2012) Mr. Justice Arnold concluded that both users and the operators of the Pirate Bay website infringed the copyrights of the claimants (and those they represent) in the UK. That had been the trial of preliminary issues that Mr. Justice Henderson had ordered in respect of applications by various businesses in the music industry for injunctions requiring the defendant internet service providers to block access to The Pirate Bay under s.97A of the Copyright Designs and Patents Act 1988.   I wrote about the case in "Injunctions against ISPs Part III: Dramatico Entertainment Ltd and Others v British Sky Broadcasting Ltd. and Others" (21 Feb 2012). In Dramatico Entertainment Ltd and Others v British Sky Broadcasting Ltd and Others (No. 2) [2012] EWHC 1152 (Ch) (02 May 2012) the judge granted the blocking order.

Analysing s.97A the judge directed himself that he had to be satisfied that:
  1. the persons against whom the injunctions are to be awarded are "service providers" within the meaning of s.97A (3) of the Copyright, Designs and Patents Act 1988;
  2. their services are used by their customers to infringe copyright; and
  3. the service providers had actual knowledge of such infringement.
It was common ground that the first and second conditions were satisfied.   As to the second, there was expert evidence that "out of 3,299,337 instances where an IP address for a device connected to the internet and making available sound recordings from a list of 15,000 titles using an internet service provided by one of the Defendants had been identified, 970,529 instances related to Virgin, 386,268 to TalkTalk, 596,872 to Sky, 439,181 to Everything Everywhere and 6,363 to O2."

In my case note I observed that  nobody seems to have mentioned  Case C-70/10 Scarlet Extended SA v Société belge des auteurs compositeurs et éditeurs (SABAM). [2011] ECR I-0000 or Case C-360/10 Société belge des auteurs compositeurs et éditeurs (SABAM) v Netlog NV on 16 Feb 2eir 012 [2012] ECR I-0000. Mr. Justice Arnold considered those cases in two contexts,   First, he said at paragraph [8]
"For completeness, I would add the following. One of the arguments advanced by BT in 20C Fox v BT was that the order sought by the applicants in that case would be contrary to Article 10 of the European Convention on Human Rights. I did not accept that argument for the reasons I gave at [163]-[177]. In so holding, I distinguished the reasoning of Advocate General Villalón in his Opinion dated 14 April 2011 in Case C-70/10 Scarlet Extended SA v Société belge des auteurs compositeurs et éditeurs (SABAM). Since then, the Court of Justice of the European Union has delivered its judgment in that case on 24 November 2011 [2011] ECR I-0000 and its judgment in Case C-360/10 Société belge des auteurs compositeurs et éditeurs (SABAM) v Netlog NV on 16 February 2012 [2012] ECR I-0000. I have considered those judgments with care, but I do not believe they call into question any of my reasoning in 20C Fox v BT. In particular, I have considered whether it makes any difference if, instead of asking whether the order would be contrary to Article 10 ECHR, it is asked whether the order would be contrary to Article 11 of the Charter of Fundamental Rights of the European Union ("the Charter"), as suggested by those judgments. I do not believe that that would make any difference."
Secondly, he said at paragraph [10]:
 "As I noted in Golden Eye (International) Ltd v Telefónica UK Ltd [2012] EWHC 723 (Ch) at [116], there are two reasons why it is necessary to consider the proportionality of orders in this field. The first is that Article 3(2) of European Parliament and Council Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights ("the Enforcement Directive") imposes a general obligation to consider the proportionality of remedies for the infringement of intellectual property rights: see Case C-324/09 L'Oréal SA v eBay International AG [2011] ECR I-0000 at [139]-[144]. The second is that the CJEU has held that, when adopting measures to protect copyright owners against online infringement, national courts must strike a fair balance between the protection of intellectual property rights guaranteed by Article 17(2) of the Charter and the protection of the fundamental rights of individuals who are affected by such measures, and in particular the rights safeguarded by the applicable Articles of the Charter: see Case C-275/06 Productores de Música de España (Promusicae) v Telefónica de España SAU [2008] ECR I-271 at [61]-[68] andScarlet v SABAM at [42]-[46], [50]-[53]."
I have no doubt that the judge did carry out a fair balancing exercise in weighing up the rights of the copyright owners and those of the persons affected by the blocking injunction but he did not have the benefit of argument on behalf of those persons as he did in Twentieth Century Fox Film Corp v British Telecommunications plc (No 2) [2011] EWHC 2714 (Ch) and Golden Eye.  In the former case I made submissions on behalf of a BT subscriber.   In the latter case the judge heard submissions from Consumer Focus on behalf of alleged file sharers.

If anyone wants to discuss this topic with me they should call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

04 May 2012

Breach of Confidence: Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD and Others
















In Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD and Others   [2012] EWHC 616 (Ch) (21 March 2012), Force India sued  Aerolab and Fondmetal Technologies which had previously carried out wind tunnel tests and aerodynamic development work for Force India for breach of confidence.  Force India's allegation was that those companies had used information gained from such testing and development to help design a car for the first defendant,1 Malaysia and its British subsidiary.   Also sued was the former Chief Technical Officer of Force India who left to join 1 Malaysia.   There was also a counterclaim by Fondmetal for 846,230 euro for unpaid fees.Unusually for the Chancery Division, the master had directed the questions of liability and quantum of damages to be determined at the same hearing.  Force India had originally claimed damages of £15, 255,583 which claim was later reduced to £13, 771, 419.

The Issues
Aerolab admitted that there had been some copying of Force India's files.  The questions for the trial judge, Mr. Justice Arnold, were:
(1) How much copying had taken place?
(2) The extent to which such copying was actionable.
(3) Which, if any, of the defendants was liable for such copying?
(4) What sum (if anything) should be awarded to the claimant?
The only defence to the counterclaim was Force India's claim for breach of confidence.   His lordship dismissed all claims against Force India's former CTO. Save for a finding of copyright infringement in that it copied certain CAD files the copyright of which had belonged  to Force India he threw out the claim against 1 Malaysia.   He found that Aerolab and Fondmetal Technologies had breached obligations of confidence to Force India and awarded it 25,000 euro by way of damages but this sum was more than offset by the 846,20 euro payable by Force India to Fondmetal for unpaid fees.

The Facts
Briefly, Force India had engaged Aerolab and Fondmetal to help it design a racing car for Formula 1 racing, Those companies carried out tests in their wind tunnel and used the results to design parts that maximized the  ratio between downforce and drag.   Force India fell behind with payment of the fees charged by those companies fees for those services and the two sides eventually parted company.   1 Malaysia (then known as "Lotus Racing" or "Team Lotus") engaged Aerolab and Fondmetal and Force India's former CTO to help design a care for them.   A number of Aerolab's employees copied data that had been compiled for Force India to help design parts of their new customer's racing car.   This copying was stopped as soon as it came to the attention of the two companies' senior management but only after the data had been used to design several parts.

Significance of this Case
This case was decided principally on its facts but there were nevertheless some interesting points of law:

  1. The judge followed his approach in  Vestergaard Frandsen A/S and Others v Bestnet Europe Ltd. and Others  [2009] EWHC 657 (Ch) where he had onstructed a chronological account of the facts primarily by reference to disclosed documents and secondarily by reference to unchallenged evidence in order to test disputed evidence.
  2. He reviewed the law of confidence, particularly in so far as it related to "relative confidentiality" and what constitutes a trade secret.
  3. He considered the basis of compensation for breach of confidence.
Although this is a typical Arnoldian judgment with no less than 464 paragraphs of exhaustive consideration of every detail of the case, perseverance will be rewarded by the judge's incisive insights into those questions.

Relative Confidentiality
The judge's starting point was the well known and frequently endorsed summary of the law of confidence by Mr Justice Megarry in Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41 at 47:
"First, the information itself ... must 'have the necessary quality of confidence about it'. Secondly, that information must have been communicated in circumstances importing an obligation of confidence. Thirdly, there must have been an unauthorised use of the information to the detriment of the party communicating it."
In considering what was meant by "quality of confidence" Mr. Justice Arnold opined that "confidentiality is a relative concept" for which proposition he cited Franchi v Franchi [1967] RPC 149 at 153, Schering Chemicals Ltd v Falkman [1982] QB 1 at 28, Stephens v Avery [1988] Ch 449 at 454, Spycatcher at 177 and Attorney-General v Greater Manchester Newspapers Ltd (The Times, 7 December 2001). The judge did not spell our exactly what he meant by that proposition but my understanding is that information that has been disclosed or acquired in confidence does not cease to be confidential merely because it can be accessed lawfully.   If a confidante saves himself time and money by using information that had been disclosed to him in confidence it is no answer to say that he could have achieved the same result by say reverse engineering.   In the words of Lord Greene Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215:
"What the defendants did in this case was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby to save themselves a great deal of labour and calculation and careful draughtsmanship. No doubt, if they had taken the finished article, namely, the leather punch, which they might have bought in a shop, and given it to an expert draughtsman, that draughtsman could have produced the necessary drawings for the manufacture of machine tools required for making that particular finished article. In at any rate a very material respect they saved themselves that trouble by obtaining the necessary information either from the original drawings or from the tools made in accordance with them. That, in my opinion, was a breach of confidence."
Of course, once a secret has ceased to be a secret the obligation of confidence falls away as the House of Lords held in  O. Mustad & Son v Dosen [1964] 1 WLR 109, but there may still be aspects of a design that remain secret and thus subject to an obligation of confidence.   

At paragraph [218] the Mr Justice Arnold said:
"This principle [that confidentiality is a relative concept] may apply differently to different categories of confidential information, and it has come to be particularly recognised in cases involving private personal information, but it is not restricted to such cases."
He amplified his proposition at [222]:
"In cases concerning design drawings like Saltman v Campbell, Terrapin and Alfa Laval v Wincanton, much will depend on the level of generality of the information asserted to be confidential. If the claimant contends that information relating to the shape and configuration of the article depicted in the drawings is confidential, but the shape and configuration of the article can readily be ascertained from inspection of examples of the article which have been sold or are otherwise publicly accessible, then the claim will fail. If, on the other hand, the claimant contends that detailed dimensions, tolerances and manufacturing information recorded in the drawings are confidential, that information cannot readily be ascertained from inspection, but only by a process of reverse engineering and the defendant has used the drawings as a short cut rather than taking the time and effort to reverse engineer, then the claim will succeed."
This doctrine is, of course, related to the springboard principle first expressed in Terrapin v Builders Supply [1967] RPC 375 that a person who has obtained information in breach of confidence is not allowed to use it as a springboard for activities detrimental to the person to whom the obligation of confidence is owed.

Trade Secrets
In determining what is and what is not a trade secret Mr Justice Arnold relied on Sir Robert Megarry V-C's dicta in Thomas Marshall Ltd v Guinle [1979] Ch 227 at 248E-H and Sir Thomas Bingham MR's in Lancashire Fires Ltd v S.A. Lyons & Co Ltd [1996] FSR 629 at 668-669.  In Thomas Marshall, Sir Robert said:
"If one turns from the authorities and looks at the matter as a question of principle, I think (and I say this very tentatively, because the principle has not been argued out) that four elements may be discerned which may be of some assistance in identifying confidential information or trade secrets which the court will protect. I speak of such information or secrets only in an industrial or trade setting. First, I think that the information must be information the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Second, I think the owner must believe that the information is confidential or secret, i.e., that it is not already in the public domain. It may be that some or all of his rivals already have the information: but as long as the owner believes it to be confidential I think he is entitled to try and protect it. Third, I think that the owner's belief under the two previous heads must be reasonable. Fourth, I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements may be entitled to protection as confidential information or trade secrets: but I think that any information which does satisfy them must be of a type which is entitled to protection."
In Lancashire Fires, Sir Thomas added:
"In Faccenda Chicken (at page 137) the Court of Appeal drew attention to some of the matters which must be considered in determining whether any particular item of information falls within the implied term of a contract of employment so as to prevent its use or disclosure by an employee after his employment has ceased. Those matters included: the nature of the employment: the nature of the information itself: the steps (if any) taken by the employer to impress on the employee the confidentiality of the information: and the case or difficulty of isolating the information in question from other information which the employee is free to use or disclose. We have no doubt that these are all very relevant matters to consider. In the ordinary way, the nearer an employee is to the inner counsels of an employer, the more likely he is to gain access to truly confidential information. The nature of the information itself is also important: to be capable of protection, information must be defined with some degree of precision: and an employer will have great difficulty in obtaining protection for his business methods and practices. If an employer impresses the confidentiality of certain information on his employee, that is an indication of the employer's belief that the information is confidential, a fact which is not irrelevant: Thomas Marshall Ltd v Guinle [1979] Ch 227 at 248. But much will depend on the circumstances. These may be such as to show that information is or is being treated as, confidential; and it would be unrealistic to expect a small and informal organisation to adopt the same business disciplines as a larger and more bureaucratic concern. It is plain that if an employer is to succeed in protecting information as confidential, he must succeed in showing that it does not form part of an employee's own stock of knowledge, skill and experience. The distinction between information in Goulding J's class 2 and information in his class 3 may often on the facts be very hard to draw, but ultimately the court must judge whether an ex-employee has illegitimately used the confidential information which forms part of the stock-in-trade of his former employer either for his own benefit or to the detriment of the former employer, or whether he has simply used his own professional expertise, gained in whole or in part during his former employment."
Compensation for Breach of Confidence
The judge observed at paragraph [374] that 
"It is very difficult to find a clear, accurate and comprehensive statement of the principles applicable to the assessment of damages or equitable compensation for breach of confidence. The case law is very confused, and none of the existing commentaries deal entirely satisfactorily with it."
His lordship approached the task by sketching the contours of the problem.   He then examined the authorities and draw some general conclusions before finally addressing specific issues which arose in this case.  From his review of the authorities between paragraphs [374] and [423] the judge concluded at [424]:
"Where the claimant exploits the confidential information by manufacturing and selling products for profit, and his profits have been diminished as a result of the breach, then he can recover his loss of profit. Where the claimant exploits the confidential information by granting licences to others, and his licence revenue has been diminished as a result of the breach, he can recover the lost revenue. Where the claimant would have "sold" the confidential information but for the breach, he can recover the market value of the information as between a willing seller and a willing buyer. Where the claimant cannot prove he has suffered financial loss in any of these ways, he can recover such sum as would be negotiated between a willing licensor and a willing licensee acting reasonably as at the date of the breach for permission to use the confidential information which has been misused in the manner in which the defendant has used it."
This passage is likely to be cited in skeleton arguments, text books and students' essays for years to come. 

Further Information
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