Markem Corporation & Anor v Zipher Ltd

This is the judgment of the court on four appeals. They fall into two classes. Firstly, and mainly, the appeals and cross-appeals from parts of the judgments of HHJ Fysh given on 4^th July, 21st July and 1^st August 2003. They are reported as Markem Corpn. v Zipher Ltd Nos. 1, 2 and 3 at [2004] RPC 233 (No. 1), [2004] RPC 264 (No. 2) and [2005] RPC 43 (No. 3). These three judgments were given in what were called “the entitlement proceedings.” The remaining appeal is from his judgment of 26^th January 2005 refusing to strike out a subsequent breach of confidence action.

Although there are several companies on either side, nothing turns on their individual identity – we will call the claimants’ collectively Markem and the defendants collectively Zipher. “Zipher” also includes its associated companies Tenzen and Claricom. In the breach of confidence action in addition to Zipher Ltd the defendants include four personal defendants, Messrs Buckby, McNestry, Hart and Buxton.

The entitlement proceedings are about entitlement to patents or parts of patents. Before the Judge there were originally three groups of patents in dispute. The parties resolved one without the need for a ruling. The Judge ruled entirely in favour of Zipher in respect of a second group (the “Inkjet Printer Group”). From that there is no appeal. So these appeals are concerned solely with the remaining group, called “the Thermal Printer” group. Speaking broadly the Judge held that various claims of these patents belong to Markem or Zipher or are owned jointly. He granted complicated relief by way of cross-licences and consequential matters.

The cases are about inventions concerned with printers used, for instance, to put “best before” dates on packages such as crisp packages. Unlike the main artwork used for such packages, which is printed on the material well in advance, this information must be printed at the same time as the contents are put in the package. So, typically, one has a line which takes uncut, pre-printed packaging material from a roll, prints the “best before” information on to it, cuts and turns the material into a bag, and finally fills and seals it.

The printing machines work by “thermal printing”. This uses a ribbon carrying ink which prints by the application of heat. A printhead consisting of a row of tiny heatable heads is used. The head is pressed against the ribbon which is itself in contact with the packaging material (“substrate”). When a tiny head is activated, a tiny dot of ink is transferred to the substrate. The whole head moves relative to the substrate. It does not matter, of course, whether the head is stationary and the ribbon and substrate move, or the other way round – it is relative movement which matters. Ingenious electronics with which we are not concerned, activate and de-activate appropriate tiny heads so as to produce the desired image on the substrate as the whole head moves across it.

Before Zipher was formed in March 2000, Markem was in the business of providing thermal printing machines. By then there were two companies, Markem Corporation (a US company) and Markem Technologies Ltd. (its UK subsidiary). The subsidiary was acquired in 1996, before which it was called Prestek Ltd. The key employees of Zipher with which this case is concerned had previously worked for Markem and, prior to that, for Prestek. They left Markem at various dates during 1999 and 2000.

In detail the key individuals were Mr Buckby, Mr McNestry, Mr Hart, Mr Buxton and Mr Butcher. Their roles and dates of leaving Markem and joining Zipher are as follows:

Markem’s machines current before the employees left were called SmartDate 2i and SmartDate 2c. The “i” and “c” stand for “intermittent” and “continuous”. To describe these it is first necessary to say a little more about the rest of the packaging line. Originally while bags were being filled the line had to stop for this to be done. So it operated in a stop-start fashion – hence the name “intermittent”. When the line was stationary the printer could be used upstream of the filling operation. The substrate abutted a pad (“platen”) with the ribbon against it. The thermal head moved forward to press against the ribbon and then moved across it, printing as it moved. It then retracted and the line moved on. As it did the ribbon was moved on so as to expose a fresh length of ribbon and the printer head went back to its start position. When the line stopped again, the operation was repeated. The device, the SmartDate 2i, looks like this:

There are some other points to notice. First, that the ribbon is pulled off the feed spool by a motorised take-up spool. Obviously it is necessary to keep the ribbon under some tension – if it went slack there would be trouble. And likewise it is important that the ribbon is not put under too great a tension or it will break. Tension is achieved by a clutch mechanism consisting of a spring and a felt pad under the feed spool. The clutch system has to cope with different torque and different tension as the diameter of the pay-out reel decreased.

Secondly the motor is a “stepper” motor. This provides movement in steps, rather than a constant torque as provided by a DC motor. Software has to provide for an appropriate number of steps depending on the diameter of the take-up reel (which obviously grows during use).

At some point in the 1990’s (the exact date does not matter) a way was found to fill the bags on the run. So there was no need for the line to be intermittent from the point of view of bag making and filling. This created a need to do something about the printer so that it could print onto what was essentially a continuously moving substrate. What Markem devised was a way of speeding up and slowing down the ribbon so that at the moment of printing it is moving at the same speed as the substrate. This was the SmartDate 2c which looks like this:

In this device the printhead is stationary and the ribbon and substrate pass under it as it prints. Of course you do not want the ribbon to be travelling at the same speed as the substrate all the time: if you did that you would waste all the ribbon which passed when the head was not actually printing. So Markem devised a system using a shuttle. This moves under control so that the ribbon is brought up to speed at the right time for printing and then it is slowed down. The shuttle and general speed of take up is controlled so that each print operation uses the length of fresh ribbon immediately adjacent the last “used” length.

The system still involves the use of a felt/spring clutch mechanism. This has the disadvantage of not being entirely reliable – customers complained that sometimes the ribbon broke with all the consequent downtime. There are two other disadvantages. First, the shuttle system involves the use of a further motor and is inherently complicated. Second the shuttle system takes up space, leaving room for only “thin” spools of tape, which thus need changing more frequently than would a fatter spool. No doubt a bigger box could be used but only at additional cost. Despite these disadvantages the SmartDate 2c was a market leader in its time.

There was one further problem. There is an upper limit to the speed at which a thermal printer printhead can print. It passes over the ribbon (or the ribbon passes under it) and the tiny heads need a finite time to heat up and cause the printing of a pixel. In the continuous machine there is therefore a limit to the speed at which the substrate can run past the printer. This in turn imposes a limit at which the whole line can run. Markem had the idea of a “relative motion” printer. It is the subject of published patent No. 2,302,523. In this proposed device the printhead, instead of being stationary, itself moves in the same direction as the substrate. So the speed at which the substrate moves can be higher even though the relative rate at which it passes the printhead is within the head’s capabilities. The following is a picture of the idea:

We state at the outset an important and critical matter. In the entitlement proceedings Markem do not assert that Zipher or any of its employees did anything wrong or unlawful in either their work at Zipher or in making the patent applications the subject of the dispute. No case of breach of confidence, breach of contract, breach of fiduciary duty or other wrong is advanced. It is not claimed that the employees’ conscience is, or ought to be, touched by anything they did. So it is not alleged that Markem have an entitlement by reason of operation of any other rule of law. It is important to hold fast to this – for at times Mr Watson QC for Markem insinuated or advanced such a contention.

Thus, he submitted, “they just carried on as if they had not left Markem”. The innuendo is that they were not entitled so to do. But they were entitled to “just carry on” because they used no trade secrets, and were not in breach of any contract.

Again Mr Watson suggested that because patent claims were in contention they were, as such, inherently confidential – he called them “Chicken 4.” This is a reference to Faccenda Chicken v Fowler (pun accidental) [1985] FSR 105 where Goulding J described the class of trade secret which the law would protect by an action for breach of confidence after the employee had left his employment:

We do not think it was open to Mr Watson so to suggest or insinuate. That would be to advance a case of entitlement because of a breach of confidence. But it is just that which is disclaimed. If Mr Watson had advanced such a case the evidence would certainly have been different. For most of the matters relied upon amount to no more than nebulous, inchoate, ideas of the sort “It would be nice if we had a machine which could do so and so” rather than concrete proposals. It would have been said that, as such, they were self-evident desiderata not, in themselves, amounting to a true, enabled, invention and not forming “Chicken 3” matter. Even without the specific allegation that the matter relied upon was confidential it is noticeable that the witnesses, from time to time, said that the general desiderata were obvious.

So we have to decide whether there can be an entitlement in A to a patent sought or obtained by B, even though B has done no wrong by claiming the invention for himself. We also have to decide whether the Judge was right to hold that the defendants made use of information, albeit non-confidential, discussed whilst at Markem.

To understand the issues better it is convenient to start by outlining what actual work was done at Zipher and how the patents and claims came to be as they are.

The story begins with a memorandum of Mr Butcher of 14^th May 2000. At that time he was with Zipher’s associate company Claricom, but nothing turns on that. He was the man who, both at Markem and then at Zipher, kept contact with customers, finding out what the problems were and what customers would like. He was asked to consider the requirements of an improved thermal printer. His memo is headed “Thermal Transfer Coder-Requirements”. It includes, amongst other detail the following:

SD2 ribbon drive is less reliable than desirable, particularly on the SD2c. Often caused by roller wear it is difficult to determine the nature of the fault or for the user to be sure wear is the problem.

The requirement for air is an increasing downside. Many new host m/c no longer have air, especially labelling machines.

Mr Butcher said that he prepared the memo based on market knowledge gained from working in the industry for his working life and having kept up with developments since he had left Markem (which was in May 1999, a year before). Again we emphasise that nothing in the memo is said to be confidential to Markem.

A meeting took place shortly thereafter to discuss the way forward – it was called a “brainstorming meeting”. Present were Mr Buckby, Mr McNestry, Mr Hart and Mr Podmore. The effect of the evidence, which was essentially unchallenged, was that the meeting focused on the last part of Mr Butcher’s memorandum – the inconsistent performance of the SmartDate. The meeting agreed that the problem was caused by the clutch mechanism. The other ideas (e.g. unhanded and continuous/intermittent motion) were also discussed. Mr Podmore gave unchallenged evidence that the ideas were “obvious in concept but with no known means at the time of achieving them, at least not in a commercially viable form.” Mr McNestry was to consider clutch design as Mr Podmore’s notebook showed. Also considered was an idea, described on a white board as “no clutch and use motors in a clever way.” At the time no one had any “clever way” in mind.

It was a few days following the meeting that Mr McNestry thought of his “clever way.” He realised that as the tension went up the driving motor used more power. So current consumption could be used to monitor tension and in turn used to control the motors. By using two motors one could do away with clutches altogether and the device could be bi-directional. Later he realised that it would also be possible to monitor spool diameter using the back e.m.f. from the motors (this does not need further explanation here). The idea was followed through, Mr Buxton joined the team and was put in charge of making a prototype. He and Mr Hart made it. The upshot was a machine which looks like this:

There is no clutch or shuttle mechanism. The device is bi-directional. It can work intermittently or continuously (the print-roller for continuous use is shown in dotted lines). The device works because of Mr McNestry’s insight. It seems self-evident that the machine, known as a Zodiac, is superior to the SmartDate. Mr Watson told us that in the confidential information action Markem would wish to claim many millions of pounds by way of damages. But nothing considered at Markem contained anything like Mr McNestry’s elegant idea with its consequential major improvement in the machine. It is very dubious at best that Zipher could have made substantial sales without Mr McNestry’s insight.

After the prototype was made and it was seen that the idea actually worked, Zipher applied for what became the patents in dispute. The first priority document was filed at the Patent Office on 11^th September 2000. Further work was done on matters of detail resulting in three other priority documents filed during the year. The application itself was made on 5^th September 2001. We have not been shown the priority documents, neither side suggesting anything turns on them.

It was Mr Buckby who undertook the job of liasing with patent agents. He was experienced in so doing from his time at Markem. Initially he went to one firm. They acted for Zipher until June or July 2001. It was that firm which was responsible for all the priority documents. Mr Buckby was not happy with their advice and moved the prosecution work to Marks & Clerk, specifically Mr Allman of their Manchester Office. It was Mr Allman who drafted the specification as filed.

Two applications were made – Nos. 2,369,326 entitled “versatile printer” and 2,369,602 which has been called “ribbon drive.” By the time of commencement of the entitlement proceedings ‘326 had matured into a granted patent with, therefore, finally determined claims. ‘602 was still in the application stage though it has now been granted.

Mr Allman gave evidence at trial. He was found to be “an entirely satisfactory witness.” In his witness statement he said:

The emboldened sentence was not challenged in cross-examination. This is important. The Judge said:

As will be seen below the Judge formed an adverse view of Mr Buckby’s evidence – a position which in the end Mr Watson was driven not to support. In particular the Judge held that Mr Buckby knew all about an internal Markem proposal called Adkin and had that in mind when the width of the claims were being discussed (for more detail see below). Given that is no longer maintained, coupled with the unchallenged evidence that it was Mr Allman who led on the width of the claims, the only conclusion can be that there is no nexus via Mr Buckby between anything in Adkin and the scope of the claims.

Actually what is described by Mr Allman and Mr Buckby is nothing more than the sort of co-operation between patent agent and client which is not only desirable, but an example of just how things should go when they are working well.

The nearest Mr Watson came to supporting the Judge on a nexus between Mr Buckby and claim width was to rely upon Mr Buckby’s instruction (called “Brief to Marks & Clerk”) to Mr Allman – a document written in July 2001 after all the priority documents had been filed. It said:

Mr Watson submitted that the bits of this letter we have italicised are to be found in Adkin and certain other material of Markem’s. He said this showed that the width of the claims was indeed due to Mr Buckby’s input and that it was derived from Markem. This misses the point, indeed two points. First they are generalisations flowing from the specific ideas of Mr McNestry – they needed no, and did not have any, input from anything done at Markem. Second, the letter was not even put to Mr Buckby in cross-examination – though he specifically referred to it in his witness statement (para. 138). In the circumstances, we do not think it is open to Mr Watson in this Court to suggest for the first time by implication that what was in the briefing note was in any way derived from anything done or said at Markem.

Mr Buckby gave the following answer during the course of a hostile cross-examination:

Another aspect of the patenting process was the naming of Messrs McNestry, Buxton and Hart as the inventors of the patents under dispute. The Judge thought there was something sinister in this. He said:

We are quite unable to see what Mr Buckby or anyone else did wrong, as is clearly implicit in this passage. Before us the “scattering” allegation formed no part of Mr Watson’s submissions. In truth what happened was perfectly routine, normal and innocent. The actual devisor of the basic concept which led to the patents was Mr McNestry. He was aided at later stages by the practical work of the other two. It was the new machine which lay at the heart of the patent applications and forms the heart of the description in both patents. The patenting process led to generalisation – as it should. And that is that. Although the named inventors took no part in the generalisation process, it was their work which lay at the heart of the invention. They were properly named and we see no reason why Mr Buckby (or indeed Mr Allman) should also have been named.

Behind the criticism about naming of inventors is the insinuation that Mr Buckby was deliberately concealing his own contribution to the invention – a contribution he had taken from Markem. That was never put to him. It would be quite wrong and unjust for any such conclusion to be drawn, as we think the Judge did although he did not actually say so (see below).

There are essentially three materials:

This played such a crucial part of the Judge’s reasoning that he set it out in full as an appendix to his first judgment (p.262 of [2004] RPC 262). For present purposes it is convenient merely to set out the drawing and the relevant part of the text, noting that the memorandum purports to set out what was discussed at a meeting on 17^th October 1997 between Messrs Hart, Buxton, McNestry and Adkin.

This took place in September 1998. Mr Butcher prepared two papers for it shortly before. The relevant part of the first says:

The relevant part of the second says:

Increased linear print speeds for the new generation of high speed wrapping machines.

Increased uptime at higher speeds.

Maintained MTBF/Running costs despite higher speeds

Additional Ribbon save features to minimise running costs and increase the use of TT.

Enhanced repeat rates for continuous motion coding applications

A 4” continuous motion machine is added to the “SD family”.

Customer has common machine, common spares, common complete spare machine and common cassettes across all machines.

Bi-direction ribbon drive allows a whole selection of other features/enhancements over the current SD2 including:

Although both papers are headed “Company Confidential – Do not Circulate” we emphasise again that it is not part of the case advanced in the entitlement proceedings that anything relevant in them is confidential. That makes sense – proposing, for example, a machine which uses 4 inch ribbon is hardly the stuff of confidence. Other matters discussed may have been confidential. We do not, and are not concerned, to know.

This took place on May 13^th 1999, though the note of it is dated June 1999. Mr Buckby had left Markem before the meeting. The only Markem employee who later went to Zipher and who was present at the CCL meeting was Mr Buxton. CCL (“Cambridge Consultants Ltd”) were engaged by Markem to help update the SmartDate. The memo says:

DC take-up and Stepper delivery:

Dancer Arms

The Judge clearly held that all those involved with the development at Zipher (particularly the three named inventors and Mr Buckby) were well aware of the matter in these three documents and used it in the course of that development. As we have said he particularly focussed on the Adkin memorandum. This is what he held:

Mr Thorley submitted that although couched in the language of “little confidence” the Judge actually found Mr Buckby to be a liar when he said (as he clearly did in his witness statement) that he knew nothing about Adkin. Likewise he found that the three inventors were not only liars but that they had concocted a “tale of collective amnesia.” The language used by the Judge in the first judgment as finally given was indeed toned down from that used in the draft judgment as first handed down. Mr Watson did not dissent from Mr Thorley’s submission and we think it is right.

As for Windsor, the Judge merely said that:

In relation to CCL the Judge held that a Mr Nelson of CCL, called not by Markem but by Zipher, was a witness of truth. He said of what was discussed at the meeting:

As we have said it is now conceded that the Judge was wrong to make the adverse findings about Mr Buckby and the inventors. But it was only conceded after Mr Thorley had advanced before us in detail two broad grounds of attack on the findings, first that the Judge was not entitled to make them on the grounds of procedural unfairness and second on the ground that his reasons were inadequate. In the circumstances – particularly that the judgment besmirches the reputation of the witnesses found to be liars – we think it right to deal with the findings, even though the point is now conceded.

Mr Buckby’s evidence in chief stated:

He was never challenged on that. The entire cross-examination of Mr Buckby about the Adkin memorandum is as follows:

So it was never even suggested that his evidence in chief was false. Yet the Judge has held it was so. And that was despite the fact that Mr Watson in his closing speech did not invite such a finding.

As regards the named inventors, two said they had no, and the other the vaguest, recollection of the Adkin discussion. They were not challenged on that. It was never put to any of them that they had the Adkin proposal in mind when they carried out their work at Zipher. The questions they were asked were about the technical nature of the document, as if it were a disclosure to a skilled man, and about a comparison between what is in Adkin with some of the patent claims. Yet the Judge has held they concocted a tale of collective amnesia.

In his closing speech before the Judge Mr Watson did not attack the witnesses but did leave it open to the judge to make adverse findings. The material passage reads:

When the Judge handed down his judgment in draft, Mr Speck made an application to him to withdraw these findings pursuant to the jurisdiction to alter an unperfected judgment confirmed in Re Barrell Enterprises [1973] 1 WLR 19. The Judge refused to do so, [2004] RPC 264 though he did tone down some of what he had said. At that point Markem supported the findings.

Zipher say it was not open for the Judge to make such findings. In their skeleton argument they relied upon Art. 6 of the ECHR and English v Emery Reimbold [2002] 1 WLR 2409 at 2417. The argument was that the Judge had not given adequate reasons for his adverse findings. But there is a second ground which we consider first, namely that procedural fairness not only to the parties but to the witnesses requires that if their evidence were to be disbelieved they must be given a fair opportunity to deal with the allegation.

Prior to the hearing before us we drew the attention of the parties to the decisions of the House of Lords in Browne v Dunn (1894) 6 R 67 and the Australian case of Allied Pastoral Holdings v Federal Commissioner of Taxation (1983) 44 ALR 607. One member of the court was aware that Australian practitioners were very alive to the rule in Browne v Dunn (so also, he has ascertained, are Canadian practitioners). The case reference and the Pastoral Holdings decision were supplied to him through the helpfulness of Justice Heerey of the Australian Federal Court.

Browne v Dunne is only reported in a very obscure set of reports. Probably for that reason it is not as well-known to practitioners here as it should be although it is cited in Halsbury for the following proposition:

Because the decision is so difficult to lay hands on we take the opportunity here of citing all the material passages. We do so via the decision of Hunt J in Allied Pastoral because his judgment also contains his own valuable comments. He said (p.623):

Hunt J concluded (p.634):

We think all that applies here. It is not necessary to explore the limits of the rule in Browne v Dunn for this case falls squarely within it. Indeed the position is stronger here, for the Judge was not even asked to disbelieve the witnesses. Mr Watson was right not to support the Judge’s findings – the only puzzle is why he did not take that position earlier.

We are also satisfied that the Judge’s reasons for the adverse findings were inadequate. He did not find the witnesses to be liars by reason of their bearing or demeanour so we can form our own view on the transcript. His reasons are quoted at para 46 above. In his paragraph 27 the “first reason” given is that it was Mr Buckby who “primarily determined the broad scope of the claims.” But that cannot stand with the unchallenged evidence of Mr Allman which we have quoted. The Judge’s second reason was the “nomination” of the three named inventors “without apparent consultation with them”. We think the nomination was entirely justified. There was no need to consult them specifically or anything blameworthy about not doing so. Finally the judge held that the relevant claims covered subject matter with which Mr Buckby was intimately familiar at Markem. This reason is expanded upon in his paragraph 21. The judge assumes that Mr Buckby knew about Adkin as part of the ongoing SmartDate enhancement programme which itself assumes that Adkin formed part of that programme.

Further we think the Judge erred in failing fully to evaluate the evidence about the Adkin memorandum before holding that Messrs Hart, Buxton and McNestry had fabricated a tale of “collective amnesia.” We proceed to do so.

First it is necessary to consider how Adkin came into the case. When the entitlement proceedings were commenced, Markem did not rely upon it. A Mr Mills (who was Markem’s sole witness) was given the job of putting together all the materials for a case against Zipher. In the course of doing that he spoke to Mr Adkin who was still at Markem. Mr Adkin mentioned the memorandum. It was quickly introduced into the case by an amendment (actually a proposed amendment which was consented to). There is no evidence about any of the following matters:

Where the document was found – in particular whether or not it or a copy of it was to be found in the files of any the individuals concerned, though they surely left files behind. One may perhaps infer that no copy was found in any of those files since those would be the first place one would look when trying to build up a case against Zipher, as was Mr Mills’ brief.

Whether there was more than one copy;

Whose writing was on the document – Mr Mills said that some of it was not Mr Adkin’s.

What is clear is that Mr Adkin reported to Mr Mills who in turn reported to Mr Buckby. Mr Mills said he had no recollection of the document. One would surely have expected a copy to be in his files if it had been circulated but he does not say that. It is of particular significance that Mr Mills had no recollection of the document. As Mr Thorley asked forensically “If Adkin’s boss did not remember it, why should Adkin’s boss’s boss?”

It seems clear that nothing whatever was done in relation to the proposal. None of the suggested follow-up work was even started. All the other material relied upon (Windsor, CCL and the other incidents) make no mention of Adkin or the proposal.

Although he was still with Markem, Mr Adkin was not called. He could surely, if he had remembered, have given relevant evidence on a number of matters:

Whether the memorandum had been circulated at all;

What the meeting was called for and what the proposal was for;

As to exactly what was discussed. In this connection there were rival views as to what could be inferred from certain parts of the memorandum. Mr Adkin might simply have known.

Why there is a discrepancy between what is in his memorandum and the only other contemporaneous document – a couple of drawings in Mr Buxton’s notebook which show, not 2 stepper motors but one stepper and one “torque limited DC motor.”

Why nothing was done about the proposal.

Mr Watson, before the Judge, suggested that the reason for not calling Mr Adkin was that he was a junior employee. This was not accurate. Nor, even if it was so, was that a good reason. As the author of the memorandum, junior or not, he was likely to be in the best position to know about it.

There are a number of other important points about the Adkin proposal:

No-one else left at Markem gave any evidence about it. Mr Watson makes the point that many had gone. That is true but does not meet the point because others (besides Mr Mills and Mr Adkin) remained.

There is no evidence that anyone ever mentioned the Adkin proposal at the Windsor conference less than a year later – yet if it were at all in people’s minds it surely would have been discussed as a follow-up to Mr Butcher’s papers.

It is not actually clear what the proposal was. Mr Watson relied upon the sentences from the memorandum we have quoted above. But they are ambiguous: clearly there is to be “tension roller”. And there is some sort of feedback to control motor B (not, it seems, A). But is the tension constant or variable? Adkin does not say. Only if the roller were arranged to send feedback based on the tension in the ribbon would there be some sort of alternative embodiment of a generalisation of Mr McNestry’s idea- another “clever way”. For that one would need the roller to respond to ribbon tension, rather than merely ribbon length. The reference to “calibration” followed by the position of the tension roller determining minor drive alterations does not readily fit with the notion of response merely to tension. Mr Watson’s cross-examination of the witnesses was not about what was actually discussed (for they could not remember) but about what might be inferred from the document. The use of a linear spring to provide feedback based on tape length was, in the end, accepted by Mr Mills as a possible interpretation. The Zipher witnesses were in favour of it. We do not have to resolve the matter – because what mattered on Mr Watson’s case was what was actually discussed, not what an expert might infer from the memorandum.

The Adkin specific proposal with a dancer arm on a spring (whether constant tension or responsive to tension) was very different from Mr McNestry’s “clever way.” Whether or not the Adkin idea was practical was never explored. Only by generalising both ideas can one come to a common generalisation – control the motors by feedback. So the idea is not a very likely starting point for Mr McNestry.

It is not clear what the context of the Adkin proposal was. Zipher suggested it was a proposed low cost version of the SmartDate for some Eastern markets, not an enhancement of the SmartDate. If that be right, it explains why Adkin was quickly forgotten because the idea of a low-cost version was itself dropped shortly after the meeting. We do not go to the documents which bear this out.

The importance of the last point is substantial. The Judge declined to make a finding based on the surrounding circumstantial evidence contained in the documents, saying he preferred to rely upon the title to the memorandum which of course includes the word “Enhancement”. But if Adkin was truly part of an enhancement project it seems impossible to explain why it was not followed up at all – a matter on which, as we have said, Mr Adkin might have been able to shed some light.

The upshot of all this is that it was neither right nor fair to make any adverse findings about any of the Zipher witnesses. Their evidence as to the making of the inventions and the subsequent patenting process must be accepted. The whole thing stemmed from the initial memorandum of Mr Butcher. Mr Watson eventually fastened on that as demonstrating a “link” between the prior Markem work and the Zipher patents. Whether that is sufficient we consider further, after dealing with the law.

We begin by setting out the relevant parts of the statutory provisions to which we must refer. They are spread across the Patents Act 1977. Where they have been amended (either before or subsequently) we set out the version applicable to this case, though neither side suggested that any amendments had any material effect.

We deal with three points, which are more than enough to dispose of the appeals in the entitlement proceedings. Firstly there is the question of whether an entitlement under s.7 to apply for a patent can, of itself, give rise to any claim for entitlement under s.8, 12 or 37 as the case may be. Second there is the extent to which validity may be an issue in entitlement proceedings. Third whether the terms of the claims are relevant in proceedings under those sections.

Markem started these proceedings by invoking the provisions of s.37 for ‘326. ‘602, which was still in the application stage and thus subject to s.8 was brought in by amendment after Markem found Adkin. The provisions of s.12 are also invoked because there are corresponding foreign applications.

Neither side suggested there was any material difference between the sections. So we can decide the whole dispute on the basis of s.8. The key question is whether Markem are “entitled to be granted a patent for that invention or has or would have any right in or under any patent so granted or any application for such a patent.”

Markem say they derive their entitlement from s.7. They say that the inventions the subject of some of the claims (particularly claims 1 of 602 and ‘326) were made at Markem and that this gives them entitlement to Zipher’s patents or a share in Zipher’s patents, particularly in the light of certain of the claims. The allegation extends to some of the subsidiary claims. For the purposes of our decision it will only be necessary to consider the main claims.

The first major question we have to decide is whether s.7 itself can, alone, found the basis of an application under s.8. For as we have said, entitlement to Zipher’s patents or any part of them is not founded on any allegation of wrongdoing by Zipher or any of its personnel.

We begin by observing that it is conceded that if A is to be entitled to a patent or part of a patent applied for by B, then there must be some sort of link between the two. If A makes an invention but does not apply for a patent, and B independently comes up with the same idea and applies first, A cannot either complain or claim any part of B’s patent. Like nearly all countries (save for the USA) we operate on a first to file system.

It follows that it is not enough for A to assert that the invention or concept (we use the expression loosely at this stage) was known to its employees and that that itself gave A an entitlement to make an application under s.7 What has to be shown is that A is entitled to B’s application or part of it. In the usual run of case, such an entitlement will arise by reason of the operation of some independent rule of law, such as contract, breach of confidence or the like. So, for example, if an employee in breach of confidence takes a trade secret consisting of an invention and applies for a patent in his own name, the employer can properly say the employee was not entitled (i.e. had no right) to apply for the patent by reason of the fact that the invention (i.e. the right to deal with and use the relevant information) belonged to the employer. Or, where two people co-operate in making an invention, there will be some agreement express or implied about who is to own any corresponding patent. Probably there will be joint ownership. There may be an inquiry as to who actually contributed relevantly to the concept, but that inquiry will not alone determine the matter. In the end the question is always “who was to own the invention and the corresponding patent?” The question is about “title” and that involves a question of legal rights.

We think it follows that, whether or not A is entitled to apply for a patent pursuant to s.7 is, as such, irrelevant to whether or not he can claim an entitlement to an application by B. For the latter he must be able to show that in some way B was not entitled to apply for the patent, either at all or alone. It follows that A must invoke some other rule of law to establish his entitlement – that which gives him title, wholly or in part, to B’s application.

We also observe that were the rule otherwise, there would be great uncertainty and damage to freedom of employment and research. We have in mind particularly the case of ex-employees. Whether whilst still employed or thereafter they cannot use “chicken 3” material, whether for themselves or for their new employer. That is a rule founded in conscience and enforced by equity. But information which they are free to use is different. If the law imposed any sort of impediment on that the consequences would be serious. So if they use part of their “permitted” information to make an invention, they (or their new employer) should be entitled to apply for a patent.

Mr Watson suggests this is all very unfair. It would mean that the ex-employee (or his new employer) may take out a patent using information devised by the employee when working for his former employer and thus stop that employer from using his own invention. That, submitted Mr Watson, cannot be right. He illustrated his point first by reference to claim 1 of ‘326 (we need not consider separately the similar point made about claims 1-4 of ‘602). This reads:

Mr Watson submitted that this mass of words boiled down to a claim to a printer which can be switched from intermittent to continuous mode and vice versa. Such an idea, he submitted, was actually disclosed by Markem in its relative motion patent. Mr Thorley disputed this, but for present purposes, suppose Mr Watson were right. How unfair, cried Mr Watson, for Zipher to get a claim for such a machine, a claim which could stop Markem, even though the desirability of a machine falling within the claim was discussed at Markem, not only in their own patent but also, for instance, at Windsor.

Moreover, submitted Mr Watson, it can hardly be the case that Parliament intended to confer on the Comptroller a jurisdiction to consider breach of confidence – he was just given a simple jurisdiction over entitlement. We think that a thoroughly bad point. The word “entitlement” clearly imports notions of “title” – of legal rights between the parties. To decide an entitlement question one is bound to have to go not only into who was responsible for devising what but also into the legal rights of the rival claimants with respect to each other. Doubtless that will sometimes involve complicated questions of fact or law (whether in breach of confidence), contract or in some other way. And doubtless that is why the Comptroller is empowered under s.8(7). s.12(2) and s.37(8) to decline to decide the question of entitlement if it would more properly be decided by a court. As happened here.

Nor are we impressed by Mr Watson’s alleged unfairness. If the subsequent patent consists of material which is not the confidential information of the former employer it can hardly be patentable. It will be old or obvious. The former employer’s remedy is not to claim entitlement to such a claim, but to have it revoked. The “unfairness” only arises in relation to such a case. If the employee has taken secret information there will be no unfairness – for the action for breach of confidence as well as an entitlement under s.8 will lie at the suit of the employer.

This also is the answer to Mr Watson’s other rhetorical question: “How can it be right for the same employee to re-invent for employer B that which he invented before for employer A?” In the usual case it is not – but that is because the employee will be using the confidential information of A. If he says he does not remember the first invention he will probably not be believed – particularly if the first invention contains significant detail rather than consists of just some rather self-evident desiderata.

It is perhaps worth noting in passing that although s.8 provides a remedy in such a case, so also does the action for breach of confidence. For no-one disputes that if an invention consisting of secret information is unlawfully taken and used for a patent application, equity will compel the taker to hand over the “proceeds” of his wrong. Oddly s.8 seems to be drafted in the absence of any recognition of the independent action for breach of confidence (save perhaps impliedly by reason of the s.8(7) power). Neither counsel could explain this. The Report of the Committee to Examine the Patent System and Patent Law (the “Banks Committee Report”, Cmnd.4407) which in part led to the 1977 Act recommended that jurisdiction be conferred on the Comptroller to deal with disputes about entitlement but makes no mention of the fact that the law already provided a remedy. One thing the Comptroller’s jurisdiction does do is to cover complicated situations where, for instance, an invention is made partly using information in breach of confidence and partly information added to that – where the applicant has added his own ingenuity to robbery.

This brings us to the next point. Mr Watson submits that under s.8 the validity of the patent is completely irrelevant. The only question is: who is entitled? Mr Thorley accepted that s.8 proceedings cannot turn into a full-scale inquiry into validity in a difficult case but that where an unanswerable case of validity was raised, the Comptroller can act upon it. He drew an analogy with proceedings for amendment of a patent where a roving inquiry into validity is not permitted but one can inquire as to whether a proposed amendment dealt with the reason advanced for making it, Great Lakes Carbon’s Patent [1971] RPC 117.

We have no doubt that Mr Thorley is right. If the patent or part of it is clearly and unarguably invalid, then we see no reason why as a matter of convenience, the Comptroller should not take it into account in exercising his wide discretion. The sooner an obviously invalid monopoly is removed, the better from the public point of view. But we emphasise that the attack on validity should be clear and unarguable. Only when there is self-evidently no bone should the dogs be prevented from fighting over it.

Moreover Mr Watson’s submission goes as far as an illogical conclusion. He openly submits, for example, that claim 1 of ‘326 is invalid, but that that invalidity should be considered irrelevant to Markem’s entitlement claim. That cannot be right. There is simply no point in the Comptroller handing rights in an invalid monopoly from one side to another.

This same illogicality indeed applies to the whole of Markem’s case. For since it is not suggested that the employees did anything wrong in using their background knowledge – essentially of what would be desirable in a machine rather than how actually to produce a practical machine - what is relied upon to establish entitlement could equally be relied upon to establish invalidity. We think that if an inherent part of a claim to entitlement is also an assertion of or acceptance of invalidity, the entitlement claim must fail.

We next turn to the final point on the law. The parties were in dispute as to what place the claims of the patent application (s.8) or patent (s.37) had in entitlement proceedings. Mr Watson submitted they were near determinative of the subject matter (and were in the case of a granted patent). So, he submitted, one looked at each claim and asked specifically “who contributed to that?” Mr Thorley submitted that the claims as such were only one factor: what really mattered was what was really invented, not the generalisation or sub-claims which form part of the patenting process. The Deputy Judge accepted Mr Watson’s submission. It was on that basis that his complicated judgment on remedies operated on a claim-by-claim basis.

The reason the point arose is this. Markem are able to identify in the broadest claims things which were discussed within Markem as being desirable, such as a bi-directional printer, a dual function (continuous and intermittent) printer (essentially claim 1 of ‘602) and so on. So if one goes on a claim-by-claim approach, one can assert of a particular claim that “that claim is Markem’s because it was first proposed at Markem”. We have already identified why that approach is not good enough. On top of that, however, we think the claim-by-claim approach is itself fallacious and not what is called for by the Act.

Mr Watson relies upon s.125(1) to submit that “invention” as used in s.8 and the other entitlement provisions means what is claimed. But s.125 contains the key words “unless the context otherwise requires.” And there are quite a lot of places in the Act where that is so, as we set out in more detail below.

Before doing so, we begin by what must be the rational way to approach this Act, whatever section is under consideration. Parts of it are intended to implement the European Patent Convention of 1972. In a peculiarly cack-handed way the draftsman chose to re-number and re-write some of these and then say, in s.130(7) in effect that his re-writing does not count – that the relevant provision is “so framed as to have, as nearly as practicable, the same effect in the UK as it has in the EPC”. No one has ever identified any difference in meaning between a 1977 Act provision and the meaning of a corresponding provision of the EPC and we do not suppose anyone ever will.

So the first thing to do is identify whether the provision in question is an EPC-derived provision or is home-grown. The EPC derived provisions are likely to form a coherent whole whereas the home-grown provision may be free-standing. Here, for instance, it is to be noted that in s.8, 12 and 37 (save for the here-irrelevant sub-section (5)) the key provisions in issue are home-grown – having no corresponding provision in the EPC and not being referred to in s.130(7).

By contrast other provisions or sets of provisions set out above do have corresponding EPC provisions. Thus s.14(5) is derived from Arts. 84 and 82 of the EPC. In particular the requirement in s.14(5)(d) that the claim or claims shall “relate to one invention or to a group of inventions which are so linked as to form a single inventive concept” comes from Art. 82 which says:

s.26 is related to this – making any decision about unity of invention immune from subsequent attack. In both cases the word “invention” cannot mean just what is in each claim.

s. 125(1) is itself said to be derived from the EPC. Obviously the relevant provision is Art. 69 and its Protocol. Art. 69 is about “the extent of protection”. So s.125(1) – the section on which Mr Watson relies – is essentially about the monopoly granted, not inventive concepts – Eureka moments.

Even s.125 contains an example of context otherwise requiring. Sub-section (2) (about priorities of different inventions in the same claim) makes no sense if the “invention” is only what is claimed.

So what then about s.8? Does “invention” there mean what is claimed or does the context otherwise require? We think it must have some more general meaning than what is in the claims. The most obvious reason for that is that s.8 applies to situations where there are no claims at all – indeed even prior to a patent application. And applications themselves are not required to have claims. The question of entitlement can therefore arise before any claims exist – and in principle must remain the same whatever claims later emerge. Moreover, as the Deputy Judge observed, it is often the practice of patent agents to put in first drafts which are wider than they expect to end up with so as to draw a wide search. As for the final claims in the patent as granted, their form and content will depend upon a number of individual factors – what has turned up in the prior art forcing reduction in scope, what subsidiary claims the patent agent has formulated based on the description and what monopoly is actually thought to be valuable (there is no point in claiming wider).

Accordingly we think one is driven to the conclusion that s.8 is referring essentially to information in the specification rather than the form of the claims. It would be handy if one could go by the claims, but one cannot. s. 8 calls for identification of information and the rights in it. Who contributed what and what rights if any they had in it lies at the heart of the inquiry, not what monopolies were actually claimed.

It is not possible to be very specific about how this is to be done. But as a general rule one will start with the specific disclosure of the patent and ask whether that involves the use of information which is really that of the applicant, wholly or in part or as joint owner. Here the specific disclosure of the Zipher patents is clearly Mr McNestry’s basic idea – his particular “clever way.” Without that the disclosure would be near valueless. True the patent would have claims covering bi-directional or dual purpose printers, but without any practical way of achieving them. What one is normally looking for is “the heart” of the invention. There may be more than one “heart” but each claim is not to be considered as a separate “heart” on its own. That is consistent with the view of Laddie J in University of Southampton’s Appn. [2005] RPC 11.

Likewise we think that Christopher Floyd QC, sitting as a Deputy Judge was right when he said in Stanelco Fibre Optics v. Bioprogress (unrep. 1^st October [2004] EWHC 2187 Ch):

We would qualify his last comment slightly – for the reasons we have indicated novelty and obviousness are relevant where they are inherent or implicitly accepted in the case advanced to establish entitlement.

We have already dealt with Adkin. There is little to add about Windsor and CCL. As far as Windsor is concerned, the only material relied upon is that which we have italicised. Some of it is repeated in Butcher’s memorandum. But such a generalised “wish-list” hardly amounts to an invention on its own. Without any practical embodiment nothing has really been invented. McNestry made the point when he said in cross-examination that nothing had been invented at the time of the Butcher memorandum. And if (as Mr Watson conceded when he came to the strike-out case) it was hardly the stuff of confidence there is simply no reason why any ex-employee should not use it.

As for CCL there is really no link at all. The only link could be through Mr Buxton. But he did not join Zipher until Mr McNestry had thought of his clever way. Besides the unchallenged evidence of Mr Nelson shows how unrealistic was the case based on CCL.

In the result we conclude:

The Judge was not entitled to and gave inadequate reasons for disbelieving the inventors and Mr Buckby;

The ultimate form of the wide claims to which Markem lay claim was essentially the result of a natural generalisation from the specific ideas of Mr McNestry and owed nothing to Markem;

Markem’s backstop case based on reliance on Mr Butcher’s memorandum is flawed because firstly that memorandum contains nothing confidential, describing no more than that which would be desirable if an invention could be made and secondly the case was not put to the witnesses on that basis;

Section 7 does not in itself create an entitlement claim under s.8. For such a claim to be made the applicant must show breach of some rule of law by the patentee or applicant for a patent or those from whom he claims to derive his rights to apply. He must show why he is entitled to (or entitled to a share in) the application. It is not enough merely to show he could have made his own application.

A claim-by-claim approach is not appropriate in proceedings under s.8. The proper approach is to identify what information was used which should not have been used or should not have been used solely by the applicant, and use that to formulate the appropriate consequential order.

That being so, we do not need to consider the further points on relief which were raised on appeal and by way of cross-appeal. We simply allow Zipher’s appeal and dismiss all the cross-appeals.

There are only two other matters to consider. Zipher say that claims 1-4 of ‘602 are invalid by reason of a prior patent about airline ticket printing machines called Datamax (US Patent 4,909,648). Mr Thorley sought to introduce it into the hearing before us but was not allowed to for the simple reason that it was being raised essentially for the first time. The question nonetheless arises as to whether we should, in these proceedings, allow Zipher to amend on the basis of its claim. Although that might be convenient, the public have had no opportunity to consider the proposed amendment (which would consist essentially of combining claims 1 to 4 with claim 5). We would therefore have had to require advertisement of the proposed amendment with the possibility of opposition. It seems to us clear that it would be better for all this to take place in specific proceedings for amendment before the Comptroller. We ourselves do not therefore allow the proposed amendment.

Finally, as we have said, Markem say that claim 1 of ‘326 is invalid. Zipher dispute that (though Mr Allman advised during prosecution that it was “thin”). It is not necessary or desirable that we should make any finding about this and we decline to do so.

We turn now to the separate action brought by Markem against Messrs Buckby, McNestry, Hart, Buxton and Zipher Ltd in which Markem claim that the defendants “have breached various obligations of confidence owed to them under agreements and by operation of law, in respect of trade secrets and confidential information in relation to the Claimants’ thermal printing technology”. Proceedings were commenced on 10^th June 2004. It is common ground that the facts relied upon are substantially the same as those pleaded by Markem in their re-amended Particulars of Claim in the patent entitlement action in which judgment had been delivered in 2003.

On 27^th August 2004 the defendants in the action for breach of confidence (hereinafter referred to as Buckby and others) applied to strike out the action as an abuse of process under CPR 3.4. The application notice was supported by a witness statement from Mr Gold, the solicitor for Buckby and others, which explains the basis of the application. It was that the fresh action, arising out of exactly the same factual background as the patent entitlement action, could and should have been brought at the same time as the entitlement proceedings. In response to the application there was served on or about 12^th October 2004 a witness statement by Mr Moodie, solicitor for Markem, and the matter came on for hearing before Judge Fysh QC in December 2004. Judgment was reserved, and was delivered on 26^th January 2005. The judge refused to grant the relief sought, and also refused permission to appeal. Buckby and others renewed their applications for permission to appeal to this court, and on 16^th February 2005 Jacob LJ referred the application to the court hearing the appeals in the entitlement action, with an indication that if permission were granted the court might go on to hear the appeal. That is what happened. On 28^th February we granted permission to appeal, and then proceeded to hear the appeal.

The power to strike out on the basis that the fresh proceedings amount to an abuse of process is discretionary. That is clear from the wording of CPR 3.4, so this court will only interfere with the decision of a judge if that decision is plainly wrong. In the present case the principle upon which Buckby and others rely is the well-known principle that where a matter becomes the subject of litigation parties to that litigation should bring forward at the same time everything they want to litigate (Henderson v Henderson (1843) 3 Hare 100). That principle was considered by the House of Lords in Johnson v Gore Wood & Co [2002] AC 1. In that case solicitors acting for a company in which the plaintiff held almost all of the shares advised solicitors acting for the defendant in litigation concerned with the exercise of an option that the plaintiff also had a personal claim arising out of the same matter which he would pursue in due course. That claim was discussed. However, when the personal claim was brought after the company’s claim had been settled the defendants sought to invoke the Henderson principle. Lord Bingham at 23 E, after citing from Henderson, continued -

At 24 A Lord Bingham noted that -

Then at 27 F Lord Bingham cited from his own judgment in Barrow v Bankside Agency Ltd [1996] 1 WLR 257 at 260 where he said -

At 28 E Lord Bingham also cited with approval the judgment of May LJ in Manson v Vooght [1999] BPIR 376 in which he said -

Zipher’s Zodiac printer was first marketed in the summer of 2001. The specifications of the two patent applications were published on 29^th May 2002 (‘326) and 5^th June 2002 (‘602).

Markem do not say when they became aware of the patent applications or of the printer, but they very probably knew of both well before 1^st November 2002. It was then when, without notice but with some publicity, they referred to the Patent Office their contention that Markem was the rightful owner of ‘326 and the other two groups of patents no longer relevant. The reference contended that the patents granted to Zipher Ltd and applications for the patents made by Zipher Ltd “rightfully belonged to Markem and/or MTL by virtue of relevant contracts of employment and by the operation of section 39(1)(a) of the Patents Act 1977.”

The reference then dealt in detail with each of the named inventors. For example it cited from Mr McNestry’s contract of employment with Markem clauses dealing with “non-disclosure of confidential information and protection of trade secrets” before citing a clause dealing with inventions in support of the proposition that -

Reference was made to the Markem product development conference at Windsor in September 1998, and to what was known by Mr Butcher. In paragraphs 49 to 51 the reference stated that -

The Patent Office only had jurisdiction to deal with a claim to entitlement. It had no jurisdiction to adjudicate on claims alleging breach of confidentiality as such. But the Office jurisdiction clearly can involve a consideration of breach of confidence, or indeed other questions of general law such as breach of contract.

Zipher Ltd, Buckby, McNestry, Hart, Buxton, Butcher and three other employees of Zipher Ltd were all so troubled by the allegations of breach of confidentiality and breach of contract made in the references that on 14^th November 2002 they commenced proceedings in the High Court seeking declaratory relief. In that action the claimants referred to the three references made by Markem to the Patent Office (there were two in respect of the patent applications no longer relevant as well as the reference in respect of ‘326) and said in paragraph 11 of their Particulars of Claim that in the reference relating to ‘326 -

Those applications were listed for hearing before Jacob J (as he then was) on 5^th December 2002. Our attention was invited to the skeleton argument for that hearing of Richard Arnold QC, then appearing for Markem. In that document it was made clear that Markem agreed to the entitlement proceedings being brought into the High Court rather than before the Comptroller, and was content to have them determined reasonably promptly. It was then denied that in the entitlement proceedings it had ever been asserted that the individual claimants now seeking declarations breached obligations of confidentiality or breached their terms of employment. The references to the obligation of confidentiality and to the terms of contracts were said to be there only as “relevant background”. That approach did not strike Jacob J as realistic, and the other members of this court completely agree with him. The Comptroller had already decided to refer the entitlement proceedings to the High Court and Jacob J set a timetable for those proceedings to ensure a speedy trial. At 14 B there appears this exchange with counsel -

In order to prepare for the trial fixed to begin on 24^th March 2003 both parties had to examine their records for relevant documents. On 14^th January 2003 Markem found the Adkin memorandum. As we have said we know nothing of how, where or when it was found, other than that Mr Mills had a conversation with Mr Adkin. Mr Watson QC for Markem submits that it was an important milestone in the entitlement proceedings and also in relation to any potential claim by Markem for breach of confidence. Other documents emerged subsequently, such as part of Mr Buxton’s laboratory notebook from his time at Markem, the Troman paper and CCL discussion. The discoveries led to formal amendments of the Particulars of Claim, the first on 19^th March 2003, and the second on 25^th March 2003, pursuant to drafts prepared and exchanged well in advance of those dates. It was by the first amendment (sent in draft on about January 20^th) that the ‘602 patent application was brought into the case. Zipher did not object to either amendment.

The result, it is now conceded, was that by the start of the trial, and in fact well before the start of the trial, Markem had identified and had available all of the information it required to bring a claim for breach of confidence against Buckby and others. Mr Watson told us, and we therefore accept, that in the rush of preparing for trial the possibility of bringing such a claim did not cross his mind. We find that surprising, but plainly, as it seems to us, those advising Markem at that stage should have considered that possibility having regard to the law as set out in Johnson v Gore Wood, and should only have rejected the possibility if a positive decision was made not to pursue allegations of breach of confidence at any stage, save in response to the claim for declaratory relief if, at the behest of Zipher, permission should be given for that claim to be revived.

During the course of the trial hearing which began on 26^th March 2003 the issue of breach of confidence cropped up time and again. It was, to a large extent, the way in which Markem put its case to Messrs Buckby, McNestry, Hart and Buxton, all of whom gave evidence for Zipher Ltd, the only named defendant in the entitlement action. Observations were made by the judge and by counsel about there being no allegation of breach of confidence, and in his interim judgment, handed down on 4^th July 2003 the Judge said -

In May 2004 Markem, not Zipher, sought to have the stay on the declaratory proceedings lifted, making it clear for the first time that if the stay were not lifted they were minded to start proceedings for breach of confidence. The unveiling of that strategy provoked Judge Fysh to observe that “the odour of corporate manoeuvre is redolent.” The judge refused to lift the stay. The declaratory proceedings were dismissed with no order as to costs, and on 10^th June 2004 Markem began this action for breach of confidence.

That brings us back to the decision of the judge, which is now under appeal. After dealing with the facts and the law the judge, at paragraph 39, referred to the proceedings before Jacob J in December 2002, saying that after reading the Order and the transcript -

It seems to us that the judge’s interpretation of the attitude of Zipher to a hypothetical application to allege breach of confidence is not consistent with the known facts. Certainly a late application, soon after the Adkin memorandum was discovered (when the pleadings in the entitlement action were in fact amended to rely on the Adkin memorandum) might have resulted in a short delay, but the named defendants were not strangers to the entitlement action. They were key witnesses, and they wanted their names cleared. That was why they had started proceedings for declaratory relief. If faced with the choice of, on the one hand, an entitlement action to be followed months later by fresh proceedings for breach of confidence and, on the other hand, a short delay to enable all issues to be resolved in the one action, it seems to us obvious that Mr Buckby and others and Zipher would have chosen the latter course. But what is of great importance is a factor not referred to at all by the Judge, namely that Mr Buckby and the others, and for that matter the court, were never given the choice.

The judge acknowledged what he described as the harassment factor, but pointed out, as he was entitled to, that following the takeover of Zipher the personal defendants are apparently “financially cushioned”. That means no more than that further litigation may not ruin them. He stated that if breach of confidence had been alleged the trial would have had been “greatly prolonged with attendant cost implications”. That may be questionable, but even if it is right the true comparator is the length and cost of two separate trials. Plainly in the end if the action for breach of confidence proceeds to a hearing the overall length and the overall costs would be greater than if all issues had been dealt with at the same time.

The judge also referred to the need to get the issues relating to patents and patent applications resolved as soon as possible for the benefit of third parties. We agree that that is a relevant factor, but not one of great weight, and then in paragraph 47 the judge said -

Having examined all of the circumstances with care it seems to us that the decision under appeal was plainly wrong. Once Markem had available all of the information it needed to make the allegations of breach of confidence now being made, that is to say at the latest by the time that the Particulars of Claim in the entitlement proceedings were re-amended, they were under an obligation either to pursue the issue of breach of confidence or to abandon it. What they were not entitled to do was to keep that issue in reserve until after judgment in the entitlement proceedings, to the clear detriment of Buckby and others who could justifiably claim to be harassed. In our judgment everything that was said by the House of Lords in Johnson in the passages to which we have referred makes it clear that on 26^th January 2005 Judge Fysh should have made the order then sought. We therefore allow the appeal and order that Markem’s claims for breach of confidence be struck out as an abuse of the process of the court. If, which we doubt, Markem are thereby deprived of the opportunity to recover a substantial sum by way of damages then they have only themselves to blame.

I agree.

I also agree.