THJ Systems Ltd v Daniel Sheridan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Arnold,Lady Justice Asplin,Lord Justice Moylan |
| Judgment Date | 20 November 2023 |
| Neutral Citation | [2023] EWCA Civ 1354 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-000920 |
[2023] EWCA Civ 1354
Lord Justice Moylan
Lady Justice Asplin
and
Lord Justice Arnold
Case No: CA-2023-000920
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY
COURTS OF ENGLAND AND WALES, BUSINESS LIST (ChD)
John Kimbell KC sitting as a Deputy High Court Judge
Royal Courts of Justice
Strand, London, WC2A 2LL
Ted Loveday (instructed by Maddox Legal) for the Defendants
Richard Davis KC (instructed by Freeths LLP) for the Claimants
Hearing date: 7 November 2023
Approved Judgment
Introduction
There are two appeals before the Court against parts of an order made on 12 May 2023 by John Kimbell KC sitting as a Deputy High Court Judge for the reasons given in his judgment 26 April 2023 [2023] EWHC 927 (Ch). The Defendants appeal against the judge's declaration that “[t]he graphic user interface, the graphic displays produced by the Software when in use, and the ONE logo … are artistic works: a. in which copyright subsists; b. of which Andrew Mitchell is the author; and c. of which THJ is the owner”. The Software referred to in this declaration is a program called OptionNET Explorer. The Claimants cross-appeal against the judge's dismissal of their claim for copyright infringement. I granted permission for both appeals, but on both occasions I recommended mediation to the parties. It is unfortunate that the parties have been unable to resolve their differences, because it seems likely that the costs of the appeals will have greatly exceeded what is at stake.
Background
As the judge noted, the main issue in the proceedings was whether Andrew Mitchell had validly expelled the First Defendant, Daniel Sheridan, from his membership of the Second Claimant (“the LLP”).
Mr Mitchell is a computer software developer who lives and works in the UK. Mr Sheridan is an American citizen resident in Chicago who provides training and mentoring to members of the public who are interested in options trading.
In 2009 Mr Mitchell created the Software to help himself with options trading. The Software displays financial information about the performance of options in the market. It takes live (or historic) market data and presents it in the form of a table of “call” and “put” positions. These are displayed side by side with a graph showing the “risk profile”.
The two men went into business together in 2010/2011, setting up the LLP and entering into a suite of licence and partnership agreements. At a high level, the business model was that Mr Mitchell and his company, the Second Claimant (“THJ”), would provide the Software for Mr Sheridan and his company, the Second Defendant (“SOM”), to use in his mentoring business. In exchange, Mr Sheridan would advertise and promote the Software to his students and mentees.
The parties fell out in 2014/2015. Mr Mitchell sought to expel Mr Sheridan from the LLP, raising a wide range of complaints about alleged serious and persistent breaches of the parties' agreements. The Claimants also terminated the Defendants' licence to use the Software, and brought claims in passing-off and copyright infringement concerning alleged use of the Software by the Defendants after termination.
The bulk of the judge's judgment was devoted to the LLP expulsion dispute. The judge went through all the alleged breaches in turn. He found that many of them were not made out, or were not sufficiently serious to justify Mr Sheridan's expulsion from the LLP. On the other hand, the judge found that there were a number of breaches by Mr Sheridan which had been proven and which justified the expulsion. Accordingly, the judge held that Mr Mitchell had validly expelled Mr Sheridan. The judge also held that the Claimants had validly terminated the Defendants' licence to use the Software by no later than 25 January 2016.
The judge dismissed the claim in passing-off. The judge held that copyright subsisted in the works identified in the declaration he made, but dismissed the claims for copyright infringement on grounds that no infringement had been proved. Although the claims before the judge concerned both copyright in the Software as a literary work and copyright in graphical displays produced by the Software as artistic works, the appeals are only concerned with the latter.
The Claimants' pleaded case
So far as relevant to the appeals, the Claimants' pleaded case in their Re-Re-Re-Amended Particulars of Claim was as follows:
“38. … The Claimants' position regarding copyright in the Software is as follows …:
…
38.2. Further, the Software produces when used images including, but not restricted to, risk and price charts. Each of the images generated by the use of the Software are the intellectual creation of Mr Mitchell as author of the Software and comprised and comprises an artistic work pursuant to section 4 of the 1988 Act of which Mr Mitchell is the author under section 9(3) of the 1988 Act, THJ is the Owner, and the LLP is the exclusive licensee;
…
(together, the ‘Works’).
39. The copyright in the Works is subsisting. Mr Mitchell is a British Citizen, and is domiciled and resident in the United Kingdom.
40. By letter dated 28 January 2016, [the Claimants' then solicitors] identified at least seven occasions on which SOM continued to use images generated by the Software after termination of the SOM Software Sub-Licence Agreement on 25 January 2016 without the licence of the Claimants or either of them. … By way of example only, … images generated by the Software were used in:
40.1. A presentation published on YouTube on 27 January 2016;
40.2. An Earnings class hosted on Mr Sheridan's website on 27 January 2016. …
The Claimants reserve the right to plead further instances of infringement following the provision of disclosure by the Defendants.
…
42. In the premises, the Defendants have infringed THJ's copyright in the Works … as follows, doing so, in each case, without the licence of the Claimants or either of them:
42.1. The Defendants have communicated the images generated by the Software to the public in the UK, contrary to section 20 of the 1988 Act”.
The Defendants' pleaded case
The Defendants' pleaded case in their Re-Re-Amended Defence (with the re-re-amendments made on 9 May 2022 underlined) was as follows:
“49. As to sub-paragraph 38.2, it is admitted that the Software, when used, generates images including risk and price charts. The Defendants do not plead to any other images, as the Re-Re-Amended Particulars of Claim do not contain any allegations of copyright infringement in respect of any other types of images …. It is denied that the risk and price charts generated by the Software are the intellectual creation of Mr Mitchel as alleged or at all. The risk and price charts comprise simple graphs which plot third party data, selected by the user, against time: the data plotted originates from outside the Software. Furthermore, to the extent that there is any intellectual creation in the images generated by the Software, which is denied, that is provided by the user selecting which option to depict and the time period over which to display it: that user is the ‘person by whom the arrangement necessary for the creation of the [artistic] work are undertaken’ in accordance with section 9(3) of the Copyright, Designs and Patents Act 1988 and accordingly the author of the images generated by the Software, to the extent that they are copyright works at all. Accordingly, it is denied that the types of image pleaded by the Claimants amount to artistic works authored by Mr Mitchell and owned by THJ in which copyright is capable of subsisting as alleged or at all. In the premises, if copyright exists in the images pleaded to, the Defendants are the copyright owners or co-owners of the copyright in displayed images and image outputs generated by their use of the Software.
…
51. For the reasons set out above, paragraph 39 is denied, insofar as it relates to the pleaded images generated by the Software. Save as aforementioned, paragraph 39 is admitted.
51A. Paragraphs 40 and 41 and the sub-paragraphs to paragraph 40 are admitted, insofar as they refer to use of images generated by the Software. It The notice served on Mr Sheridan purported to expel him from the LLP as of 7 January 2016 and the SOM Software Sub-Licence Agreement was not terminated until 25 January 2016. … It is admitted that Mr Sheridan made some nominal use of the Software in the period between 25 January 2016 and 27 January 2016: … it … is not accepted that THJ had the authority to expel Mr Sheridan from the LLP or to terminate the SOM Software Sub-Licence Agreement to use the Software …. Mr Sheridan has made no use of the Software since his access to it was terminated on 27 January 2016. Save as aforementioned, it is denied, if it is alleged, that Mr Sheridan used the Software to generate any of those images after being expelled from the LPP: and the SOM Software Sub-Licence Agreement being terminated: it is admitted, however, that the images that appear in these two examples at the sub-paragraphs to paragraph 40 were generated in the short period after … his expulsion from the LLP [and] the SOM Software Sub-Licence Agreement was terminated but before access was removed …. The reservations of rights are noted. The Defendants position is that the question of whether or not copyright subsists in the works is a matter for the trial of liability and can be determined on the basis of the pleaded examples. The question of the extent of use is a matter for the trial of quantum and, if liability is found, the Defendants will provide disclosure in respect of all such use.
51B. … For the avoidance of doubt, it is...
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