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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Point Solutions Ltd v Focus Business Solutions Ltd & Anor  EWCA Civ 14 (23 January 2007)
Cite as:  EWCA Civ 14
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
HER HONOUR JUDGE KIRKHAM
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE HALLETT
MR JUSTICE LINDSAY
| POINT SOLUTIONS LIMITED
|- and -
FOCUS BUSINESS SOLUTIONS LIMITED
WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Dr Peter Colley (instructed by Moore, Unit 11, Lillyhall Business Centre, Jubilee Road, Workington, Cumbria CA14 4HA) for the Respondents
Crown Copyright ©
Lord Justice Chadwick :
The underlying facts
"What has happened between Focus and Point Solutions is strikingly similar to what has happened between Focus and Synaptic. As a result of this and particularly the speed at which you have launched a competing product, I am sure you will understand that I need confirmation that you have not undertaken any copying of Focus' software and solutions. I strongly suggest that before you reply, that you give serious thought to what constitutes copying. Indeed, Synaptic failed to understand that copying covers more than just literal code copying, it also covers, for example, the use of the structure of the product as a 'springboard' in producing your own product. . . .
We wish to assert that Focus products are original copyright and to which the copyright vests in Focus.
Without a court order for advance disclosure or the carrying out of further investigations (including the analysis of your product) we are not in a position to confirm that no copyright or infringement has taken place. Therefore we are requesting both a written confirmation from you in this respect and a voluntary disclosure by Point Solutions of such material that would confirm that no copyright infringement has taken place. We believe such material would be made available through a court order were we to seek any advance disclosure and, indeed case law supports the principle that an unreasonable refusal by you now to make advance disclosure may deny you the costs of doing so if a court is minded later so to order.
We are concerned to establish a voluntary agreement to determine that no copyright infringement has taken place and we look forward to hearing from you accordingly."
"I understand your concern following your experience with Synaptic.
I am therefore happy to confirm that we have neither copied code nor based any of our product suite on Focus'software or solutions. I would also like to make it clear that we have not used the structure of any of your products as a 'springboard' in producing our Acuo product suite.
We have been developing our Acuo product suite for over 15 months, and during the height of development have had a team in excess of 20 people working on it. We estimate that more than 20 man-years of work have been carried out in the development of Acuo.
Because we believe that the architectural approach that we have taken provides us with a strong competitive advantage over other providers of PAC technology, including Focus, we would be unwilling to allow Focus representatives to have access to our source code.
We are, however, happy to make a voluntary disclosure of such material that would confirm that no copyright infringement has taken place, to a mutually agreeable third party. This is provided that Focus pay for all costs incurred and is on the understanding that no products, architectural diagrams, or source code will leave our premises.
I believe that it is in the interest of both companies to resolve this issue as soon as possible and clear any doubt over the provenance of our software.
. . . "
"Our offer to enter into a non-determinative review made on the 25 August 2003 was on the understanding that Focus Solutions would move quickly forward with the review and that the process would commence within 2 weeks of Focus Solutions receiving the quote from the experts.
This clearly has not happened, the quote was received in September . . .
We have suspected for a long time that Focus Solutions were trying to prolong the process and their inaction over the last six months has added further weight to this viewpoint. If Focus Solutions genuinely believed that we have infringed their copyright then they would have moved forward with the review without hesitation.
. . . As a result of the inaction over the past six months and a change in our own circumstances our approach to this issue has now changed. We are not prepared to allow Focus Solutions to use this issue as an open ended threat and will not expend any more time, effort, or expense in any process that is non-determinative.
Instead we are now embarking on our own process to seek resolution. . . ."
The judge rejected, as unfair, the suggestion, made by Mr Green in that letter of 18 April 2004, that Focus had been dragging their feet. It was her view that Point had decided, for its own reasons, that it would not proceed with the expert scrutiny process "but did not get around to telling Focus until their letter of 18 April 2004".
"Since before the issue of the Claim Form herein, the Defendants have asserted that the Claimant's Acuo software infringes the Defendant's copyright in their Focus software as follows . . ." [giving particulars]
Paragraph 4 pleads that:
"The Defendants assertions are untrue."
Paragraph 5 pleads that the defendants, unless restrained, threaten and intend to repeat the untrue assertions "which will cause the claimant to suffer further loss and damage". And paragraph 6 asserts that, in the premises, the claimant is entitled to declaratory and injunctive relief. The relief claimed is:
"A declaration that the Claimant's Acuo software modules, namely (i) Acuo Enable/Professional (ii) Acuo Web (iii) Acuo SDK do not infringe the literary copyright (if any) subsisting in the source code for the Defendant's Focus Goal software of any of its constituent modules, namely (i) Goal Offline viewer (ii) Goal Online Viewer (iii) Goal Builder, or any other copyright (if any) subsisting in any work making up the Defendant's Focus Goal software."
and an injunction to restrain each defendant from representing to any person that the claimant's Acuo software does infringe any copyright owned by the defendants or either of them.
"Pending full and proper particularisation of the Defendants' contentions as to why the Claimant's Acuo software is alleged to infringe the copyright (if any) in the Defendants' Focus Goal software, the Claimant will state as follows:
(1) Each module of the Claimant's Acuo software, namely (i) Acuo Enable/Professional (ii) Acuo Web and (iii) Acuo SDK, was developed and written without reference to the Defendants' source code for any of its equivalent modules, namely (i) Goal Offline viewer (ii) Goal Online Viewer and (iii) Goal Builder respectively. The Claimant is and was aware of the Defendants' Focus Goal software but has never at any stage had sight of the source code for any of the Defendants' software products.(2) The functionality of the Acuo software is derived from the 77-page ORIGO standard entitled 'ISML Definition and Use Version 2.1', client requirements and ordinary and accepted methods of generating user interfaces. The Acuo software does not reproduce any of the source code of the Defendants' Focus software products.(3) In the premises, the Claimant's Acuo software does not infringe any literary copyright (if and to the extent that any subsists) in the Defendant's Goal software source code.(4) Further, the Claimants will aver that, notwithstanding the Defendants' allegations of infringement as particularised above, the Defendants have not at any stage advanced a positive case of infringement."
"The Defendants intend only and truly to repeat their assertions that:
(1) the Claimant's Point Module software or elements of it were produced in what on any objective view was a very 'short time frame'; and
(2) that the Claimant has declined to allow a comparison of its and the Defendants' software by an independent expert."
"Focus have adduced no evidence as to any copyright they might have or as to whether Point's software does copy their own software. Focus have simply challenged Point's evidence in support of its assertions that its Acuo software was independently designed. They are entitled to do so."
And she went on to direct herself that:
"I am not trying a case as to whether or not there has been copying. The relevant element in this case is whether Point have demonstrated, on balance of probabilities independent design. The burden is on Point, not on Focus."
She observed (as was the case) that she was not assisted by any expert evidence.
The judge's reasons
"The absence of a statutory right to a negative declaration does not preclude the court from making such a declaration if satisfied, in all the circumstances, that it would be just to do so. It is open to the court, under its inherent jurisdiction, to consider whether there has been sufficient assertion of the right to trigger the exercise of the discretion to grant a declaration of nature sought by Point. Following FSA, the matters asserted must be established to the court's satisfaction. The court should consider whether in all the circumstances it is appropriate to make the order. In doing so, the court should take into account justice to both claimant and defendant and whether the order would serve any useful purpose, and should consider any other special reason why the court should or should not grant the declaration. The three principles set out by Lord Dunedin in Russian Commercial are of assistance here. Following Wyko the court should be slow to require a party who has made no allegation of copying to answer a negative case of non-copying. In this exceptional case (in the sense that I have limited information) I should proceed with caution."
In saying that she had only limited information, the judge had in mind, I think, that she was not in a position (without the assistance of expert evidence) to make the direct comparison of the Point software and the Focus software that would be usual in a copyright infringement case where the allegation was copying.
"Has there been a sufficient assertion of right to trigger the exercise of the discretion to grant declaratory judgment?
Has Point established on the balance of probabilities that it did not copy Focus' source code in creating its Acuo range of products?
Independent expert scrutiny
Whether the discretion should be exercised in favour of Point?"
". . . a party who claims that facts [already in existence] give him a cause of action should be allowed to commence his own proceedings at a time and in a manner of his own choosing and is not to be brought into court by the opposite party to resist a claim for a declaration of non-liability."
But she accepted that the letter of 9 October 2002 and the statement made to Swiss Life in December 2002 did contain a sufficient assertion of right to satisfy the requirements for what may be described as anticipatory declaratory relief summarised by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade, Limited  2 AC 438, 448:
"The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought."
" In their 9 October 2002 letter, Focus did not expressly allege infringement. Indeed, they specifically stated that they were not in a position to do so, hence their suggestion for a voluntary arrangement for independent expert scrutiny. They specifically did not allege that Point had copied. Having said that, in my judgment, the inference from the letter is that Focus believed that Point had copied Focus' software. In my initial reading and, indeed, in subsequent readings, of that letter, the impression I gained was that Focus were implicitly asserting that Point had copied the Focus Goal software. They asserted that their products were original copyright and that copyright vested in them ie subsistence and ownership. The reference to production of the Point product 'in an impossibly short timeframe' implicitly voices a suspicion that Point had copied or otherwise used Focus' software. The reference to the Synaptic experience supports the inference that Point had copied. The references in that letter to legal action against Synaptic, to a court order for advance disclosure and to the way in which a court might award costs all indicate that Focus considered that legal proceedings might ensue. And the letter indicated that Focus were considering their options including legal action. The letter went further than merely expressing Focus' concerns, as they allege. Of itself, in my judgment the letter does assert, by implication, that Point had copied and it was, at that time, sufficient assertion of right to trigger the exercise of discretion to grant declaratory relief. . . ."
And, at paragraph  of her judgment, she rejected the submission, made on behalf of Focus, that Focus should be allowed to choose its own time at which to commence proceedings for infringement (if that was what it decided to do). The judge observed:.
" . . . It seems to me that an assertion can be made expressly or by implication whether or not a party is ready to come to court to pursue a claim. The natural reading of Focus' letter indicates that court proceedings are an option which Focus are contemplating."
"Just before Christmas I had a 'phone call from Mr Loosmore . . . who told me that Focus are looking to take legal action against Point about breaches of intellectual property rights with the implication that anything Point developed for us would not be legal. It came across as a rather crude attempt to dissuade us from using Point.. . . "
The judge observed that that e-mail was "the closest we have to a contemporaneous document". She went on, at paragraph  of her judgment:.
" . . . That e-mail indicates, in summary, what Mr Leadbeater had understood from the conversation. However carefully Mr Loosmore had tried to phrase the points he was making, Mr Leadbeater had gained the impression that Focus were looking to take legal action against Point with respect to breaches of intellectual property rights. That was the message he understood from Mr Loosmore's subtle phrasing. Indeed, one can see that the nuances of Focus' position - not an outright allegation of copying but a strong hint that something was not right - might easily be lost in the circumstances of the rather difficult call which Mr Loosmore made to Mr Leadbeater. I can also understand that Mr Leadbeater could in his own mind easily have paraphrased Mr Loosmore's message as an assertion of copying by Point. On balance I conclude that, however carefully Mr Loosmore had tried to phrase what he said, Mr Leadbeater's understanding of what had been said was that Focus were contemplating legal proceedings against Point for breach of copyright. In my judgment, that amounted to at least an implicit assertion to a third party of Focus' right and was sufficient, at that time to have triggered the right to ask for a declaration."
" . . . Focus have, however, raised a number of matters both in cross examination of witnesses and in closing submissions to cast doubt on the evidence of independent design. These fall into two broad categories, namely (1) concerns as to the credibility of Mr Green and Mr Blatchford who were most intimately involved with the development of Acuo software and (2) incomplete evidence."
(1) The judge thought that Mr Green "was casual in his approach to the evidence": paragraph . As she put it (ibid):"He was not concerned as to the obvious inaccuracies in the letter of claim. He did not engage carefully with the questions put to him, finding it difficult to distinguish between matters he knew and matters which he said he believed, whether or not there were grounds for such belief."
(2) She found that there was no basis on which it could have been said in the schedule to the letter of claim dated 12 July 2004 that Mr Blatchford had no knowledge of the Focus Goal Technology. As she put it, at paragraph :" . . . That was simply incorrect. Mr Blatchford had (prior even to his joining Point in 2001) been sent a disk containing Focus' software. In his statement he says he was given 'a CD containing the Focus Renderer and Builder ie PAC developer list as an introduction to the software we would be working with and so I could hit the ground running. I took the opportunity to have a look at the Focus software and to familiarise myself with it although of course I had no access to any source code.' He says he looked at this CD for half a day. In giving his evidence, Mr Blatchford sought to make a distinction between an exercise to familiarise himself with software and being familiar with it. Even if there is a valid distinction (which I doubt) it is not one which helps me here. Mr Blatchford had access to Focus software for half a day. Mr Blatchford's role was important. He was the technical architect of the Acuo software. There was no basis on which the letter of claim could say that his knowledge was 'none'."
(3) The letter of claim purported to disclose Mr Green's knowledge of the Focus software, but made no mention of a document dated 11 June 2001 which he had written while working for Focus under the April 2001 outsourcing agreement, in which he reviewed the Focus Goal: Builder Version 2.1. The judge commented (at paragraph ) that:" It is clear that Mr Green's knowledge of Focus' software was sufficiently detailed for him to have written that document recording his appraisal of their software. His explanation as to why the letter of claim made no reference to that part of his knowledge of Focus' software namely that Focus already knew of it so there was no need to mention it, was unconvincing."
It was suggested on this appeal that the judge was not entitled to take the view that she should treat the evidence of both Mr Green and Mr Blatchford with caution. But, plainly, as it seems to me, that was a view which the judge who had heard those witnesses give their evidence could properly take, for the reasons which she gave.
" I am not confident that Mr Green and Mr Blatchford have presented a full and accurate picture. I cannot be confident that Point's approach has been sufficiently transparent and accurate to enable me to conclude, on the basis of largely untested evidence, that Point are entitled to the declaration they seek. Focus have succeeded in casting doubt on Point's claim to have created their Acuo software by independent design to the extent that Point have not discharged the burden of persuading me, on balance of probabilities, that they did achieve the design independently. Point have not proved, on balance of probabilities, that all of the individual literary works comprising the Acuo software, whether written by Point, Vyosoft or Elansoft, were created without copying or adaptation from any corresponding part of Focus' code."
Vyosoft and Elansoft to which the judge made reference in that paragraph were software houses, based in India. The judge had explained their role in the development of the Acuo software earlier in her judgment, at paragraph :
" In their letter of claim of 12 July 2004, Point summarise the projects they undertook, the key dates in the history of the development of the Acuo and a list of members of the project team. The names of nine members of Point staff are given. The letter states that a team of seven developers in India, employed by Elansoft, supported those nine. The letter also stated that Acuo SDK had initially been developed by Vyosoft, a software house based in India and co-owned by Messrs Green, Hillicks and Sidhu."
" Focus criticise Point for not having referred in their letter of claim to all those who had worked on the Acuo software and for not having called to give evidence all those who had worked on that software, even those who are based in India. . . . . It is the case that Point's letter of claim did not identify all those who had worked on the Acuo products. This is illustrated by the time sheets which Point have disclosed for those working on Acuo software. A time sheet for Mr Sharp for the week beginning 9 July 2001 shows that he was working on CMIE-Applications namely PAC Build. Mr Sharp was not listed in either the letter of claim or the Part 18 response. A time sheet for Mr Corp indicates that, in mid November and early December 2001, he did some work in relation to analysis and design of the Acuo software. As Point acknowledge, Mr Sidhu did some work on the Acuo software. The time sheets show that he worked on Point's full blown renderer. He is not mentioned in the letter of claim as a member of the project team. Point's evidence was that Mr Sidhu's work had been of little use and for that reason had not been referred to. That, however, is not the point. He had worked on the project and should have been included in a list which was presumably intended to be comprehensive.
 In his second witness statement, Mr Murray conducted an analysis of the timesheets which Point disclosed. He calculated that the total time recorded between July 2001 and end October 2002 as spent on the Acuo software, in broad terms, is 9,910 hours. (He has probably included some work not strictly associated with the development of Acuo components). This equates to about 5.46 man years. Of the 9,910 hours, 3,126 are attributable to Vyosoft and 331 to Elansoft. Point acknowledge that personnel at Elansoft and Vyosoft worked on the Acuo project. Mr Green had considered the Vyosoft personnel CVs and had noted that they had no knowledge or previous experience of Focus software. Point say that they did not provide any Focus software to Elansoft or Vyosoft. They sent only Point's code. They sent that code so that the Indian developers could create utilities for Point. Mr Townsend spent a week in India supervising the work of the Indian project team. He and Mr Blatchford scrutinised the work which the Indian team had undertaken. Point used very little of the Indian code; Mr Townsend estimated that only 2% remained in the Acuo suite of products.
 . . . Mr Murray's analysis (to which I have referred) suggests that the Indian developers were responsible for a substantial part possibly as much as one third - of the total time spent on developing the Acuo products.
 Focus criticise Point for not having called to give evidence all those who had worked on the Acuo software. . . . It seems to me that Focus' approach to witnesses is ambivalent. They complain that Point have not called all witnesses, even those based in India, yet it is unlikely that they would have cross examined them as to whether or not they had copied Focus' software if those witnesses had come to court. There must, however, be some concern that relevant Indian developers, whose work appears to have been material, were not called. I am troubled by the omissions from the letter of claim . . . of those who had worked on the Acuo software. It may well be that the contributions . . . were minor, but their omission raises doubts as to the claimants' approach. Point ask for a declaration in circumstances where the court has no opportunity to consider whether or not in fact there has been copying. I am therefore in effect in a position where I must take much of Point's evidence on trust. Any real doubts create difficulties. The lack of transparency in Point's evidence is a matter of concern."
(1) She was not persuaded that the declaration even if Point had established non-infringement would serve any useful purpose. She recognised that, in general, the target market for Point's software product (financial services institutions) was risk adverse; and that the existence of a known dispute might well reduce the chances of customers in that market purchasing the product whose provenance was in doubt. She referred to the observations of Mr Justice Lightman in L'Oreal (UK) Ltd and another v Johnson & Johnson and another  FSR 686, 696, which, as she said, indicated that "the policy is to lift clouds to dispel uncertainty". But she was struck by the facts (i) that there was no pleaded case of general "bad mouthing all over the trade to third parties", (ii) that there was no evidence that sales had been lost (in particular, Swiss Life had proceeded with the transaction with Point despite what it had been told), and (iii) that Point had, itself, told both Swiss Life and Marlborough Stirling of the dispute. And she thought that what she saw as Point's dilatory approach was a factor which suggested that Point did not need the declaration which it sought. She said this, at paragraph  of her judgment:" The dilatory nature of Point's approach to resolution of this dispute is a relevant factor in considering whether there is utility to the declaration sought. A period of 18 months (ie from mid October 2002 until 15 April 2004) elapsed before Mr Green informed Focus that he was no longer willing to proceed down the route of independent expert scrutiny. It is understandable, as Mr Green explained, that he was obliged to continue with his work for customers. I understand the pressures experienced in a small, start-up company. Nevertheless, it is, in my judgement, telling that Mr Green did not press on diligently. It suggests that he had no real need to seek this declaration. Even after the letter of claim was sent, Mr Green did not proceed diligently with commencing proceedings or, once proceedings were commenced, in progressing these. "
(2) She held that, in any event, a declaration should be withheld as a matter of discretion. In that context, also, what she saw as Point's dilatory approach was a factor. She thought that the suggestion, made by Focus in October 2002, for independent expert scrutiny of the codes on a confidential basis "was clearly a sensible one". But "Point dragged its feet at least as much as Focus, indeed probably more: at least Focus took the trouble to prepare its technical primer whereas Point did not even bother to do that." She went on, at paragraph  of her judgment:" The evidence shows that it was Point who pulled out of the process. They have given no good reason for having done so but instead sought to lay the blame at Focus' door. In my judgment the refusal by Point to continue with the independent expert scrutiny process is a factor which weighs against them."
And, at paragraphs  and  the judge said this:" A consequence of granting the declaration which Point seek would be that Focus would be prevented from bringing a claim for infringement if Focus subsequently had reason to believe that there were grounds to make such a claim. That is a serious concern. In balancing fairness to Point and fairness to Focus, it seems to me that a factor which weighs heavily in Focus' favour is that to grant the declaratory relief would shut Focus out of any future claim. It would be unjust to do so in circumstances where the court had not examined the evidence which a court would normally expect to see to be able to determine, on all available evidence, whether or not there had been infringement. I am conscious that a refusal to grant the declaration may leave Point in a worse position than that before proceedings began. That, however, is a consequence of the way in which they have pursued their claim. It is a factor which does not weigh heavily in favour of Point."
"The Judge's approach to the question of non-infringement was confused and riddled with errors. Despite the fact that Focus had chosen not to allege copying and had not put copying to any witness, she permitted Focus to attack the credibility of such witnesses for the purpose of suggesting that their evidence of non-copying should not be believed. She decided the case on the 'burden of proof' even though there was no shortage of evidence which would have permitted a proper finding of fact. She treated the failure by Focus to cross-examine Point's witnesses or to call evidence of their own (such as expert evidence) as somehow undermining the strength of Point's evidence and making it more difficult for Point to establish its case. She never engaged in a proper exercise of weighing the evidence against copying against the evidence of copying had she done so she would inevitably have found that Point had proved its case on the balance of probabilities."
"19 . . . the judge was not confronted by conflicting evidence as to whether or not Acuo was copied from Goal. She had no evidence at all to suggest that it was copied. In the circumstances, the question before her was simply whether Point's unchallenged evidence that the software had not been copied did in fact establish that it was more likely than not that the software had not been copied.
20. In those circumstances Point could only lose if the evidence presented to the Court was simply inadequate to support a conclusion even on the balance of probabilities that Acuo had not been copied from Goal. It is possible to conceive how this could happen: eg if the evidence was given by people who had no actual knowledge of all the circumstances in which Acuo had been written, or simply did not deal with the creation of the software or some substantial parts of it. But no such criticisms can be made of the evidence here. It was careful and thorough. It consisted of (i) an account of the process of development of the software by Mr Green, the MD of Point; (ii) two statements from Mr Blatchford, Chief Technical Architect of Point, explaining in some detail the development process of the various Acuo products, including at PDB 2 a lengthy development summary; (iii) a statement from Mr Townsend, a technical consultant who (with Mr Blatchford) was the primary designer of Acuo; (iv) a statement from Mr Gale, a trainee who had developed some of the PACs used in Acuo; (v) a statement from Mr Helm, another trainee who had developed PACs; (vi) a statement from Ms Horn, another trainee who had developed PACs and written some code for the Acuo Web renderer. The only other people with any involvement at all in the creation of code were a couple of temporary trainees and some coders sub-contracted in India. The evidence explained that the involvement of those others was minimal and there was no reason to suspect that they had ever accessed the Focus software. Each of the witnesses confirmed in his own words that they had not copied anything from Focus' software. The evidence also pointed out that the Acuo software was written in a completely different language (Visual Basic and C++) from the Goal software (Java), so it would be hard to imagine how copying could have occurred anyway, let alone what motive there would be for copying in such circumstances. The evidence confirmed that there was no question of the software having even a 'look and feel' similar to the Goal software." [emphasis added]
Lady Justice Hallett:
Mr Justice Lindsay:
"I accept that such a finding is a theoretical possibility but where all the relevant persons are before the court, and where it appears that all the relevant documents are before the court, I should be extremely slow to reach a decision purely on onus". [my emphasis added]
Note 1 Electronic application forms as they appear on a computer screen are generated by running the XML (extensible mark-up language) string (known as a product application component (PAC)) through a programme known as a renderer.
Note 1 Electronic application forms as they appear on a computer screen are generated by running the XML (extensible mark-up language) string (known as a product application component (PAC)) through a programme known as a renderer. [Back]