![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Patents Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Patents Court) Decisions >> Destra Software Ltd v Comada (UK) LLP & Ors [2013] EWHC 1575 (Pat) (11 June 2013) URL: https://www.bailii.org/ew/cases/EWHC/Patents/2013/1575.html Cite as: [2013] EWHC 1575 (Pat) |
[New search]
[Context]
[View without highlighting]
[Printable RTF version]
[Help]
![]() ![]() ![]() ![]() ![]() ![]() ![]() | ||
CHANCERY DIVISIONPATENTS
COURT
The Rolls Building Fetter Lane London, EC4A 1NL |
||
![]() |
B e f o r e :
____________________
Destra Software Ltd |
Claimant |
|
- and - |
||
(1) Comada (UK) LLP (2) Comada Limited (3) MAT Services Limited (4) Gertrud Keazor (5) Christopher John Mitchell (6) Robert David Mitchell |
Defendant |
____________________
James Abrahams (instructed by Macfarlanes LLP) for the Defendant
Hearing dates: 1 & 2 May 2013
____________________
Crown Copyright ©
Mr Justice Norris :
a) Gertrud Keazor, who had been involved in client support activities for the hedge fund industry since the early 1990s and had a specialism in the building of websites and in the analysis and specification of web-based applications:
b) Christopher Mitchell who (after a background in programming, analysis, design and project management of IT systems) had developed an expertise in online transaction processing: and
c) Robert Mitchell ("Bob Mitchell") who is the brother of Chris Mitchell and also has a background in software development for hedge fund management.
a) Comada (UK) LLP ("Comada") an English partnership formed in 2004 (though then with different members) and which now provides client support services and undertakes marketing activities: and
b) MAT Services Ltd ("MAT Services") a Bermuda company through which the software and software services are provided to clients and with whom those clients enter into agreements for services.
a) That whilst Comada Cayman can host the MAT:share software on its own servers it cannot permit its clients to run the software on their own servers:
b) That whilst Comada is entitled to host MAT:share on its own servers it was not entitled to permit MAT Services either to run the software or to sub-licence others to run it:
c) That Comada is not entitled to develop new versions of the software or to adapt it to suit the needs of particular clients.
"MAT:share is the subject of copyright. It is properly described as a single programme, but it does not affect the case if it is also considered to be a collection of programmes."
"We are intending to market a system which is similar to [Fund Nexus] but different in many ways, primarily in that [it is] intended for in-house use rather than as a separate system in its own right. So we'll be licensing the system for them to use, rather than getting them to sign up to a user agreement for "our" system and servers. But we'll be happy to arrange hosting for them of course. The system itself will be significantly different, but a lot of the functionality will be similar…"
In a later email they explained funding in these terms:-
"Development funding would come either from licensing, if we felt the changes were of use to others and should be part of the base system, or from the client as an extra charge by Comada for their specific requirement, customised interfaces to their other internal systems for example".
"Would Comada still be hosted offshore and the customers access it over the net, as with Fund Nexus? Or would it be possible that custom installations would be deployed at clients' sites?"
To this enquiry Chris Mitchell responded:-
"Both are being suggested. Whatever the client wants!"
a) "MAT-sale", a solution for the distribution of fund securities, internally and to third parties:
b) "MAT-order", a fund of funds operational tool maintaining a complex mix of information on holdings and trades
c) "MAT-trade", a product that provided a solution for the handling by investment banks and custodians of their trade functions (including execution, clearing, settlement and safekeeping):
d) "MAT-price", focused on electronic price distribution i.e. the collection and collation of price data amongst work groups.
The product on which development focused was MAT-share, of which Mr Hughes had been sent a product specification. But it is clear that this was simply part of a portfolio of developments which could be packaged and re-packaged in a number of ways. By what licensing arrangements these different product packages were to be exploited was not discussed.
"Although I don't have the share offer in writing yet, I thought I would start to look at the MAT:share next week. I'll look at the spec and think about ways of implementing the new functionality".
This provoked an email under the heading "Confirming our arrangement" which was in these terms:-
"This is to confirm our understanding of the arrangement with which you are happy to work with us on the MAT-ware software for Comada… we will transfer to you 0.5% of the share capital in Comada as soon as we incorporate the holding company in Bermuda. The Comada holding company will fully own Comada (UK) LLP. We are waiting to incorporate the Bermuda company until we have our first client… we will transfer to you the same number of shares again at the end of July 2004 … you will programme with us without fees are required until the end of July 2004 … we will start to pay you full commercial rates for your work from 1 August 2004, or earlier, when we have paying clients and are able to cover the costs of operating the website and basic business expenses… in other words, we intend to start paying you for some or all of your time as soon as we can, and certainly before we start to pay ourselves anything".
"Under this Agreement before or after the date of this Agreement, or conceived developed or produced by [Destra] whether alone or jointly with others in connection with or pursuant to [Destra's] performance under this agreement".
Clause 7(d) provided that all Protected Works should be deemed "work for hire" and be owned exclusively by Comada Cayman: and to the extent that it could not be "work for hire" Destra assigned all intellectual property rights in the Protected Works. Clause 7(b) said that the term "Protected Works" should not include any specified items, declaring
"These are and will remain the property of [Destra] even though they may be used in or made part of the work performed under this Agreement".
But no works were so specified.
"This should be the last change now, as I am pretty sure this would be IR35 water-tight and I'd be happy to sign it if these small changes can be included".
The Consultancy Agreement in that form (described in the minutes as "amended and finalised") was approved by the board of Comada Cayman on the 4 April 2005. The board minutes specifically recorded that the Consultancy Agreement "served to ensure … that the intellectual property developed through the software was retained by Comada Limited".
"I've just received the minutes of the Comada board meeting 4 April 2005 and I would like to confirm my agreement".
In oral evidence he said that he only wrote in those terms because he believed that he was a legal requirement for all shareholders to "approve" the minutes i.e. to accept them even if they disagreed with the contents. But the answer was singularly unconvincing. Mr Hughes directed that the Consultancy Agreement should be sent to his Australian address for signature, and this was done on 28 April 2005, having been signed on behalf of Comada Cayman.
"Software development fee, as agreed, for the next version of the Comada MAT:share website".
Destra sent a further invoice dated 31 (sic) June 2005 with the same narrative, also in the sum of £10,000. The reference "as agreed" can I think only be a reference to the Consultancy Agreement (Clause 3 and the collateral arrangement), for Mr Hughes did not (and could not) allege an agreement in some other terms for his periodic remuneration, effective after 1 April 2005.
a) That "the consultancy agreement whereby you agreed to engage our client's service… in actual fact commenced since in or about 2004"
b) That the agreement should not be for a fixed term but should be until terminated by either side on notice:
c) That there were some drafting points:
d) That the termination provisions were open to challenge and (crucially)
e) That "all (sic) intellectual property rights in connection with the system and the web pages belong at all times to our client" and to seek to insert into the consultancy agreement a provision for Comada to pay a licence fee.
"The program as it then stood was the very foundation of the venture. Moreover even if he had not contributed to it by way of programming, [the dealer] contributed to it in other ways – by considerable discussion as to what the program should do and by some payment… He was for some time with [the programmer] intending that the developments should result in a vendible product… I think it was indeed "absolutely necessary" that the company should own the copyright in the program as it was in 1982. If the position were otherwise once the program was established commercially [the programmer] could have left the company and sold the same product on his own account. Or if there was a third party pirate, it would not be the company's right to sue for infringement and claim damages. Neither of these would make any commercial sense".
a) The very foundation of the venture conducted by Comada (later Comada Cayman) was the MAT:ware software. The idea that the actual copyright in the MAT:ware software should not belong to Comada/Comada Cayman makes no more commercial sense than it did in IBCOS. MAT:ware is not a tool that is deployed in Comada's business: it is the very business itself. It is what the whole enterprise was about.
b) The object of the business was that MAT:ware should be exploited in whatever way proved to be beneficial. If an informed bystander had been asked "Does anyone have a veto over the way in which Comada Cayman exploits the software?" he or she would have said "Of course not: it is up to the company through its directors and shareholders what they do. Everyone's efforts in establishing the enterprise are reflected in their shareholdings and their individual contractual arrangements".
c) One of the principal means of exploiting the software was by licensing: it was necessary for Comada Cayman to have full rights of enforcement in multiple jurisdictions. That is secured by assignment but not by licensing.
d) The ultimate aim of the project was to dispose of the enterprise to the maximum advantage of the participants: it is necessary to the attainment of that goal that Comada Cayman should own the intellectual property rights and be able to dispose of them freely without requiring any purchaser of the business to negotiate with multiple Claimants to the copyright in the core product in order to gain complete control.
e) The MAT:ware software was a collaborative effort: it makes no sense for individual team members to retain property rights of any sort in what that member produced.
f) There cannot be any special implied term relating to what Mr Hughes produced because Mr Hughes never disclosed to any other participator either that he was creating something called "the Destra platform" or that he was incorporating part of it in the work that he was doing on the MAT:ware software. Implied terms are based on what is obvious given the common knowledge of the parties. You cannot create an implied term out of secret knowledge held by one party alone. That was the view I expressed in Burrows v Smith [2010]EWHC 22 (Ch) at paragraph [44]: and I adhere to it. That is why the actual decision in Clearsprings does not assist in this case: in Clearsprings it was common knowledge that in performing the commission the contractor would be using software that already existed.