Invideous Ltd and Others v Jack Thorogood and Others
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose,MRS JUSTICE ROSE |
| Judgment Date | 11 October 2013 |
| Neutral Citation | [2013] EWHC 3015 (Ch) |
| Docket Number | Case No: HC13F00948 |
| Court | Chancery Division |
| Date | 11 October 2013 |
[2013] EWHC 3015 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Rose
Case No: HC13F00948
Ms Holly Stout (instructed by Lewis Silkin LLP) for the Claimants
The First Defendant appeared in person
The Second, Third, Fourth and Fifth Defendants did not appear and were not represented at the hearing
Hearing dates: 6, 9, 10, 11, 12, 13, 18, 19 and 20 September 2013
I. INTRODUCTION
These claims arise out of an allegation that the First Defendant, Mr Thorogood, at the time he was a shareholder in and director and employee of the First Claimant, Invideous Ltd, acted in breach of his duties to Invideous Ltd in various ways. The main allegation is that he took advantage of lucrative business opportunities which came his way during his work for Invideous Ltd and which he should have pursued on behalf of that company. Instead, he pursued them on his own behalf through the vehicle of the Second Defendant, NOVP Doo-Skopje, a company incorporated in Macedonia or the Fifth Defendant, NOVP LLC, a company incorporated in Delaware, USA.
The Second Claimant, Invidius Dooel-Skopje, is a wholly owned subsidiary of Invideous Ltd and is also based in Macedonia. It does not sell products on the market itself but it employs the technical people who design and develop the products supplied by Invideous Ltd. The Claimants allege that Mr Thorogood poached employees of Invidius Dooel-Skopje to work for NOVP Doo-Skopje and that he took funds and property from Invidius Dooel-Skopje that he has not accounted for.
The Third Claimant (Mr Andurand) was an investor in Invideous Ltd. He was joined as a Claimant in the proceedings so that he could provide a cross undertaking in damages in a personal capacity in relation to the interlocutory injunctions that were granted on the Claimants' application.
The Third Defendant (Mr Micov) met Mr Thorogood in September 2011. He was an employee of Invidius Dooel-Skopje working with Mr Thorogood and they became good friends as well as colleagues. He and Mr Thorogood together set up NOVP Doo-Skopje. The Fourth Defendant, NOVP Ltd, was incorporated in the United Kingdom in May 2012 but has never traded. An application has been filed to have the company struck off the company register but that application has been postponed pending the outcome of these proceedings. NOVP LLC was incorporated in Delaware by Sherra Pierre-March who was interested in joining forces with Mr Thorogood and Mr Micov in developing NOVP's products. It is alleged that Mr Micov, NOVP Ltd and NOVP LLC all conspired with Mr Thorogood in these breaches of the duties owed by Mr Thorogood to Invideous Ltd.
The Claimants seek a range of remedies against Mr Thorogood and the other Defendants, including injunctive relief, damages and an account of profits.
Mr Thorogood denies that he has acted in breach of any duties owed to Invideous. He accepts that he set up NOVP Doo-Skopje with Mr Micov and NOVP LLC with Ms Pierre-March. He denies that the business opportunities that they pursued were opportunities that were within the sphere of Invideous Ltd's business. He argues that when properly analysed, the businesses of the two companies are not competing but are complementary to each other. He denies therefore that the Claimants are entitled to any relief.
The Defendants other than Mr Thorogood did not appear and were not represented at the trial of these claims. Mr Micov and NOVP Ltd were debarred from defending the claim by Order of David Richards J because they did not file defences. NOVP Doo-Skopje and NOVP LCC filed Defences but did not play any further part in the proceedings. The liability of Mr Micov and the corporate Defendants is therefore contingent on the findings that I make in respect of Mr Thorogood's liability to the Claimants.
The companies' products and services
At this point it is helpful to describe in brief what it is that these companies actually provide. They are both concerned, very broadly, with monetising video content on the internet. There are many videos available to be viewed on the world wide web, ranging from home-movie style content to professionally produced websites which complement television programmes or newspapers. The vast majority of this material can be viewed by end-users without payment. An important issue for businesses which make and own video content is how to generate revenue, or 'monetize' that material. At the moment this is primarily done by including advertising on the web page in various ways. Another way is to charge the user for watching the material. In the latter situation, the website contains a payment mechanism and provides both the content owner and the user with choices about the scope of the rights that the user will acquire for different levels of payment.
All these websites require a complex combination of different components; a programme which makes sure that the correct video is displayed in accordance with the user's click instruction; a programme to enable payments to be collected; a programme to provide metadata to the content owner or to advertisers about who is using the site and how many times particular videos are requested; a programme to keep material secure so that only those who have paid for it can access it. All these different elements must be knitted together to provide the user with a seamless and almost instantaneous service. A service provider may develop some of the elements in-house using its own programmers and may buy in other elements to include in the bundle it supplies to the customer. Some elements are based on open-source products which are standard in the industry but which can then be customised and adapted for a particular customer's needs.
Both Invideous Ltd and NOVP Doo-Skopje's work in this general area by providing some or all of these components. The precise scope of their current businesses is a matter of contention and I set out my findings on that later.
The main opportunity which it is alleged Mr Thorogood diverted from Invideous Ltd to NOVP Doo-Skopje was the opportunity to provide a product for the media company Technicolor SA ('Technicolor'). This product is known as the Technicolor 'Showcase' portal. I saw a demonstration of the Showcase portal as it currently operates during the course of the trial. The idea is that video content owners (such as the Hollywood film studios) contract with Technicolor to make their videos available to certain people. The content owner identifies to whom it wants the video or an excerpt of that video to be made available and gives that person the information they need to log into the Showcase portal and view the video. There are various reasons why a content owner might want to make the video available to a particular person or group. For example the portal could be used to send a sample episode or extract of a film or TV series to television channel owners looking to buy material to broadcast in their territory; to send the 'rushes' from a day's filming for viewing to people involved in making the film; to send examples of possible trailers to the people who decide which trailer is most likely to draw cinema-goers in; to send the whole movie to people who are going to add subtitles or other 'localisation' features to the foreign language version of the movie. The important feature of the Showcase is that it is secure, and there are various levels of security which the content owner can use. Clearly it is essential, if a movie is going to be moved round the internet before it is released to cinemas, to ensure that it remains within the confines of a service where it is protected from pirates.
One of the characteristics of the industry which came out clearly from the evidence was that a company like Invideous Ltd or NOVP Doo-Skopje will receive very many approaches and queries from potential clients in the course of a week or month. Only a few of these actually generate paid work for the provider. Much of Mr Thorogood's work both for Invideous Ltd and NOVP Doo-Skopje comprised discussions with potential clients and 'pitching' for business.
The history of Invideous Ltd
The business of Invideous has its origins in a company called Swiffen Ltd that Mr Thorogood set up in October 2008 with a business partner Colin Philips. That business was still at an early stage in March 2010 when Mr Thorogood made a presentation to two people from Dolphin Television Ltd ('Dolphin'), hoping to interest them in investing in Swiffen Ltd. The people from Dolphin were David Goffin and his colleague John Doyle. There were three areas that Swiffen Ltd was involved in but Mr Goffin and Mr Wells were only interested in investing in one of the areas that Mr Thorogood presented. That area was described in the presentation given by Mr Thorogood as 'In-video ads and micropayments'. The slide I have seen of Mr Thorogood's presentation says that the focus of the Swiffen Ltd business is 'on making money and creating cash; all products have strong revenue models and global potential'.
Dolphin decided that it would invest money in the business and provide Swiffen Ltd with office space and commercial services. Initially Mr Goffin thought Dolphin would do this by investing in Swiffen Ltd itself. To that end they wanted Mr Thorogood to have a formal contract of employment with Swiffen Ltd. Mr Thorogood signed a service agreement with the company on 7 April 2010. In June 2010, Mr Thorogood also became a director of Swiffen Ltd.
Dolphin subsequently decided to set up a new company to be the vehicle for their investment,...
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