Point Solutions Ltd v Focus Business Solutions Ltd

JurisdictionEngland & Wales
JudgeLord Justice Chadwick,Lady Justice Hallett,Mr Justice Lindsay
Judgment Date23 January 2007
Neutral Citation[2007] EWCA Civ 14
CourtCourt of Appeal (Civil Division)
Date23 January 2007
Docket NumberCase No: A3/2006/0061

[2007] EWCA Civ 14

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

HER HONOUR JUDGE KIRKHAM

HC04C03870

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

Lord Justice Chadwick

Lady Justice Hallett and

Mr Justice Lindsay

Case No: A3/2006/0061

Between
Point Solutions Limited
Claimant/Appellant
and
Focus Business Solutions Limited and Another
Defendants/Respondents

Mr Iain Purvis and Mr Giles Fernando (instructed by Withers LLP, 16 Old Bailey, London EC4M 7EG) for the Appellant

Dr Peter Colley (instructed by Moore, Unit 11, Lillyhall Business Centre, Jubilee Road, Workington, Cumbria CA14 4HA) for the Respondents

Lord Justice Chadwick
1

This is an appeal from an order made on 16 December 2005 by Her Honour Judge Kirkham, sitting as a Judge of the High Court in the Chancery Division, in proceedings brought by the appellant, Point Solutions Limited, against Focus Business Solutions Limited and Focus Solutions Group plc. In the context of these proceedings it is unnecessary to distinguish between the two Focus companies: the first is owned and controlled by the second.

2

The relief sought in those proceedings was unusual. As the judge put it in her judgment, [2005] EWHC 3096 (Ch): “I am being asked to make a declaration that software, which I have not seen, does not infringe any copyright in another software product which I have not seen and in respect of which copyright has not been demonstrated”. She declined to grant that relief and dismissed the action with costs on an indemnity basis. Permission to appeal was granted by Lord Justice Lloyd on 16 February 2006.

The underlying facts

3

Point Solutions Limited (“Point”) carries on business as a provider of computer software services – in particular, as a provider of software for the creation and use of electronic application forms for use in the financial service sector. At the material time the respondents (together “Focus”) had for some years been the dominant supplier in that market.

4

In April 2001 Point and Focus had entered into an outsourcing agreement under which Point undertook work for Focus, including a review of a module in Focus' Goal software – Builder Tool. That work was carried out by Mr David Green, the managing director of Point. In connection with that work Point was provided with three modules of Goal software – Goal: Builder versions 2 and 2.1, Goal: Renderer version 1.43 and Goal: Utilities.

5

In the course of its business Point supplies a product known as Acuo Software. That product – which comprises three modules, Acuo Enable/Professional, Acuo Web and Acuo SDK—was developed over a period between 2 July 2001 and August 2002 in response to an approach from Clerical Medical International (“CMI”), a well known pension provider.

6

The outsourcing agreement between Point and Focus came to an end in or about October 2001. It seems that Focus learnt that Point had been awarded the CMI contract, for which Focus had made an unsuccessful bid, and that Point intended to bid for a contract with Halifax (the parent of CMI) in competition with Focus. Focus asked for the return of the Goal software: a request with which Point claims to have complied.

7

On 9 October 2002 Mr Frank Murray, the Chief Technology Officer at Focus wrote to Point “to seek confirmation of the provenance of the software you have developed in order to compete with Focus”. After referring to the return of the Focus software and manuals in 2001, to a dispute between Focus and Synaptic Systems Limited (a company with which Focus had been in a “partner relationship”) in which, it was said, Synaptic had been forced to admit copying of Focus software, and to the April 2001 outsourcing agreement, the letter went on:

“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….

Copyright works

We wish to assert that Focus products are original copyright and to which the copyright vests in Focus.

Confirmation request

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.”

8

Mr Green replied, on behalf of Point, by a letter dated 15 October 2002:

“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 1 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.

…”

9

Despite that apparently promising start, the parties did not resolve the issue whether, in the course of developing its Acuo product, Point had made use of the knowledge of Focus software—which had, plainly, been available to it – by the 'agreed expert' route which Point had suggested and with which Focus were content. The attempts to reach an agreed procedure are set out in detail by the judge at paragraphs [22] to [37] of her judgment. It is not, I think, necessary to rehearse them in this judgment. It is enough to note that the parties agreed the identity of the experts who were to be instructed; and agreed terms of reference on the basis of which the experts should be asked to act. Those terms of reference were set out in a letter dated 25 August 2003. They provided (amongst other matters) for each party to produce a technical primer containing such information as the parties believed the experts might require “to understand and to efficiently carry out their examination of the software”.

10

The judge accepted that Focus did put in hand the preparation of a technical primer; but she found that “matters did not otherwise proceed with any urgency”. The Focus primer had been completed by 19 March 2004. Point had taken no steps to prepare a primer. On 18 April 2004 Mr Green wrote:

“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”.

11

Be that as it may, on 28 May 2004,...

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