Claim No: HC03C01267
Neutral Citation No. 2003 EWHC 1928 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: Friday August 1 st August 2003
B e f o r e :
Mr CHRISTOPHER FLOYD OC
sitting as a Deputy High Court Judge
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X LIMITED Claimant
-and-
(1) STEAN NOWACKI Defendants
(2) CLAIRE NOWACKI
(together trading as LYNTON PORCELAIN
COMPANY
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Thomas Graham (instructed by BP Collins for the Claimant)
Bryan McGuire (instructed by Bakewells for the Defendants)
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JUDGMENT APPROVED FOR HANDING DOWN
This is an approved judgment of the Court and I direct that no further note or transcript be made.
Christopher Floyd QC 1 st August 2003
Christopher Floyd QC
1. By his order dated 11th April 2003, Blackburne J ordered the expedited trial of a preliminary issue in this action, namely:
“all issues as to the nature and extent of the parties’ respective rights and obligations asserted by the Claimant in paragraphs 3-12 of the Particulars of Claim to be heard by a judge specialising in intellectual property work prior to 31st July 2003”.
This is my judgment following the trial of those preliminary issues.
2. The paragraphs of the Particulars of Claim identified in Blackburne J’s order allege that the Claimant has rights under a succession of agreements as well as under the general law of confidence and of copyright. The remaining paragraphs in the Particulars of Claim concern specific allegations of breach of those contracts, breach of confidence and infringement of copyright.
3 I have to say that it struck me even before the trial commenced that there were likely to be difficulties in approaching a trial of this kind by means of a preliminary issue concerned only with the existence and scope of rights. For example, in a breach of confidence case, the issue will normally be whether the information actually used by the Defendant was confidential information of the Claimant. Much time and effort may be spent on a preliminary issue deciding that certain information is confidential only to discover that the allegation of use is not made out. Moreover information may be confidential only if used in combination with other information: until one knows what has been used, a finding about confidentiality can be fraught with difficulty. Similarly, in a copyright case, the issue on infringement is often whether the Defendant has appropriated a substantial part of the relevant skill and labour which went into making the work. On a preliminary issue the Court may conclude that there was indeed skill and labour involved in making the work, but will not have its attention focused on that part of the skill and labour which is relevant to the allegation of infringement. There is a danger that the Court will not make sufficiently specific findings on the preliminary issue to enable the breach/infringement part of the case to proceed. I have felt these difficulties acutely in the course of this trial. Nevertheless it is the approach adopted by consent in the present case, and I must do my best to resolve it in a manner which will assist the ultimate resolution of the dispute.
4. I was invited by Mr McGuire, who appeared for Lynton, to go behind the case management directions already made and decline to decide some issues if I felt they were better decided against a background of the evidence as a whole. He referred me to the fact that these were issues to be addressed in a forthcoming judgment of the Court of Appeal (Jewson v Kelly [2003] EWCA Civ 1030), then confidential. After the trial he supplied me and Mr Graham with a copy. Notwithstanding what is said in the judgment of Sedley LJ in paragraphs 81 to 84 in that case, and except to the limited extent which I indicate in the course of this judgment, I decline Mr McGuire’s invitation to re-open these case management issues. To do so would effectively destroy any chance that the time and money spent by the parties on this hearing would prove worthwhile in resolving the dispute. Moreover, as will be apparent from a reading of this judgment, Lynton’s position on many of the issues has been one of somewhat bald denial of the existence of rights which I hold do exist. It may be that once this becomes clear, the pathway to a resolution of the remaining issues may become clearer.
The Parties
5. The Claimant is a wholesaler of high value, ornate tableware such as china, glass and crystal. Its wares are purchased in middle eastern countries, sometimes by the ruling families of the Gulf States. It accepts orders for matching sets of tableware, sometimes with the end user’s name and/or crest on the underside of the china items: referred to as a “back-stamp”. It does business mainly through intermediaries. Its directors, Mr A and Mr B made witness statements on their behalf, but only Mr A was cross examined. I found Mr A to be a very fair witness.
6. Mr and Mrs Nowacki are a husband and wife partnership who run a porcelain factory in Lynton Street, Derby. It is called the Lynton Porcelain Company. The porcelain they make is elaborately decorated to its designs and those of others. Mr Stefan Nowacki is, according to one of the Claimant’s brochures which is in evidence, “probably the most accomplished ceramic artist of his generation”. Mrs Claire Nowacki runs the business and administration side of the partnership. Both Mr and Mrs Nowacki made witness statements and were cross examined. Mr Graham, who appeared on behalf of The Claimant, made a serious attack on them as witnesses he suggests that in one particular respect they were actively seeking to mislead the Court by suggesting that a particular agreement had not been concluded, and that they had fabricated a document for the express purpose of persuading the Court that this was so. I will have to deal with this allegation later in this judgment. It arises in connection with the 2002 Agreement. I turn first to the history of the relations between the parties.
The relationship between the parties
7. According to Mr A, he and Mr B began trading with Lynton in about 1987. Business developed to the point where it was appropriate for the Claimant, which was incorporated in August 1989 to enter into a formal trading relationship. There were two principal agreements. The first was entered into on 7th August 1990 (“the 1990 Agreement”) and the second on 28th November 1996 (“the 1996 Agreement”). A feature of the trading relationship under both these agreements was that the Claimant was to represent itself to its customers as both manufacturer and supplier of the goods. Thus customers were taken to visit Lynton’s factory as if it were the Claimant’s own, the factory had a brass plate outside with the Claimant’s name and crest, and the Claimant’s brochures contained numerous references to its factory, which was in fact Lynton’s. This was done with Lynton’s agreement and co-operation. To the outside world, whilst this relationship persisted, the Claimant and Lynton were a single company.
The subject matter of the action
8. The information with which the action is concerned is set out in paragraph 10 of the Amended Particulars of Claim as a number of categories. These are preceded by the general rubric that the information is of a confidential character generated by the Claimant in the course of its business and communicated to Lynton in connection with the conduct of business with Lynton. The categories which remained live at the completion of the trial were:
10.1 the identity of the Claimant’s customers
10.2 the identity of the end users of any tableware in respect of which the Claimant placed any order with Lynton (either disclosed in purchase orders or on back stamps or via crests on the tableware itself)
10.3 any information which would be commercially valuable to a competitor of the Claimant in correspondence or Purchase Orders including
(a) details of goods ordered
(b) size of order or other order details
(c) whether the order was from an existing customer or a new customer
10.4 the fact that the Claimant contracts out production
10.5 any sample or other product commissioned by the Claimant from Lynton.
9. Apart from confidential information, the Claimant claim to be the owners of copyright alleged to subsist in
(a) a number of the back stamps prepared for application to the tableware
(b) the patterns applied to a number of articles
and, by a late change of horse prompted, so it would appear, by the provisions of Section 51 of the Copyright Designs and Patents Act 1988 on the unregistered design rights in the design of a butter bowl and a coffee cup. In view of the fact that the claim to design right might raise questions as to whether the designs were commonplace in the design field in question, and perhaps questions as to the duration of such rights, I allowed amendment to allege design right on the basis that all questions as to subsistence and ownership of those rights should be deferred to the main trial.
10. I also raised with counsel the question of legal ownership of the rights in question. Although no point specifically directed to ownership was taken by Lynton, it remained the case that in respect of most of the works relied on it would appear that Lynton were only the owner in equity, rather than the owners at law, or alternatively only exclusive licensees. It was agreed that insofar as I find that copyright subsists in any work relied upon, no relief by way of damages or an account should be granted unless either an assignment is obtained or the relevant legal owner is made a party to the action.
The 1990 Agreement
11. Under the 1990 Agreement, Lynton appointed the Claimant exclusive distributors of
(1) all china or porcelain tableware and
(2) china or porcelain ornamental items commissioned by the Claimant from Lynton.
In return for this exclusivity, the Claimant accepted a minimum purchase obligation of £200,000 in purchase order value. It was further agreed that:
Clause 7.1.2: The Claimant agreed that it would not divulge information relating to Lynton’s affairs or any other information received from Lynton of a confidential nature. There does not appear to have been a corresponding express restriction on Lynton relating to confidential information.
Clause 9.1: The Claimant would market the products under its own name as principal
Clause 9.2: The copyright in the Designs was to be the Claimant’s. The “Designs” were defined as “the designs of and on the Products”, i.e. all china and tableware and commissioned ornaments.
Clause 9.5.2: Lynton agreed not to use or reproduce the Designs or any modification or variation thereof other than for the purposes of the Agreement.
The 1996 Agreement
12. The 1996 Agreement terminated the 1990 Agreement before its 10 year term had expired and created a further exclusive distributorship agreement. The Claimant was still to retain exclusivity in relation to all Lynton’s china and porcelain tableware There was an increased minimum purchase obligation There were comparable provisions to secure the vesting in the Claimant of all intellectual property rights such as copyright and unregistered design right, and restricting Lynton from using the Designs except for the purpose of the Agreement.
13. Clause 11.1 of the 1996 Agreement provided that
“Lynton shall not without the Distributor’s prior written consent use except as permitted by this Agreement nor disclose to any third party the Distributor Intellectual property Rights or the Distributor Materials or the identity or name of any individual whose name or crest appears on the Products or any other information or material disclosed to it in connection with this Agreement or in connection with the Distributor’s affairs which is of a confidential nature (whether so marked or not) except to the extent that such information is or becomes public knowledge through no fault of Lynton, or is required to be disclosed by any law or was in Lynton’s possession prior to receipt from the Distributor or is disclosed to Lynton without any confidence by a third party.”
Termination of the 1996 Agreement
14. Clause 13.2.2 of the 1996 Agreement permitted termination by either party if, amongst other things, one of Lynton’s partners ceased to carry on business. By a letter dated 18th May 2001 Lynton purported to terminate the 1996 Agreement in reliance on this term in the light of the fact that one Merle Owens had retired from the partnership on 31st March 2000, some 13 months earlier. The Claimant contended until a late stage in the proceedings that the purported termination was ineffective on the grounds that the right to terminate had not been exercised within a reasonable time and that Lynton had waived the right to rely or were estopped from relying on the clause. However, in the light of the cross examination of Mr A, Mr Graham very properly accepted in his final speech that, whatever the position in relation to the precise route by which termination had been sought, the parties had very quickly agreed to bring the contract to an end. He was right to do so. In my judgment the 1996 Agreement was terminated by consent by June 2001.
15. Although all breaches and infringements relied upon post-date the termination of the 1996 Agreement, Mr Graham’s concession does not exhaust the relevance of that Agreement. The termination of the Agreement meant that the exclusivity which the Claimant had previously enjoyed in relation to china, porcelain and glassware was at an end. However, its provisions which vested copyright in the Claimant in works created in the course of the Agreement had already taken effect. Moreover, the Claimant contend that the restriction on the use of information in clause 11.1, which I have set out above, was one which survived the termination of the Agreement in relation to material communicated to Lynton during the course of the Agreement. That proposition is not accepted by Lynton.
16. Whether the obligation in clause 11.1 survives the termination of the Agreement appears to me to be solely a question of construction. The relevant considerations appear to me to be:
(a) It can be said for the Claimant that, unlike other clauses in the agreement, this clause is not expressly limited to the duration of the Agreement (see clauses 9.2.2, 9.6, 10.1.3).
(b) However those clauses which are expressly limited to the duration of the Agreement have a degree of overlap with clause 11.1. Thus for example clause 9.6.2 contains a restriction for the duration of the Agreement against using the Designs in which the Intellectual Property Rights are owned by the other party except for the purposes of the Agreement. That is to be contrasted with clause 11.1 which contains a restriction against Lynton using the Distributor Intellectual Property Rights without consent and except for the purposes of the Agreement. If clause 11.1 is read as not limited to the duration of the Agreement it alters the express effect of Clause 9.6.2 at least insofar as it relates to Designs.
(c) It can be also be said for Lynton that the clause is not expressly stated
to survive termination, and that when the Agreement means to create a perpetual right or obligation, it does so expressly (see clause 9.3.2).
17. The balance of the argument comes down, in my judgment, in favour of holding that clause 11.1 is not an obligation which survives the termination of the Agreement. However, I doubt that this matters much, given that the equitable duty of confidence must apply in relation to subsequent use or disclosure of information of a confidential character communicated to Lynton in the course of the Agreement. Moreover clause 11.1 itself makes clear that particular importance is attached by the Claimant to the confidentiality of the name or crest appearing on the Products.
18. Mr Graham sought to make use of the fact that in a letter dated 19th December 2001 (Bundle B page 419) Lynton stated that they would “of course abide by the provisions of [the Agreement] which survived its termination”. He pointed out that the question of obligations which survived termination had been raised by the Claimant’s solicitors in an earlier letter to Lynton’s solicitors dated 1st June 2001 (page 404). That does not change my view that clause 11.1 was not one which survived termination.
Letters of 5 th September and 19 th December 2001
19. The Claimant also contend that certain letters sent by Lynton to the Claimant after the termination of the Agreement give rise to a contract. They rely, firstly, on a letter dated 5th September 2001 to Mr A of the Claimant signed by Claire Nowacki in which there was the following passage:
“TERMINATION OF CONTRACT
With respect to your reaction of being quite pleased with the termination of the contract, especially with the recent loss of your father, both Stefan and myself have accepted this gladly.
The other issue of agreeing to a new exclusivity agreement with a specific area mainly the Middle East we as a company need to sit and think carefully about this. With respect to the confidentiality of your work we will keep the patterns and contract details confidant. The pattern that both Stefan and I have designed we obviously need also to think and discuss this in detail and will contact you in the very near future to let you know our thoughts.” Emphasis supplied.
The second letter relied upon, dated 19th December 2001 signed by both Mr and Mrs Nowacki and addressed to Mr B of the Claimant contained a statement that:
“We will of course keep any previous work done for you confidential, as far as is practical, and have always done so”
20. I do not think that these letters can be said to give rise to any new contract. What they do contain is a general recognition of a duty of confidence in relation to certain matters. That is consistent with the equitable duty, but is insufficient to give rise to any new contract. Even if it did I am not convinced it would take matters any further.
The Purchase Order Terms
21. While the 1996 Agreement was in place the Claimant would place orders on Lynton by means of standard form Purchase Orders. Those Purchase Orders stated at the bottom that “The above items are to be supplied subject to our General Conditions of Purchase. P.T.O.”. Those who followed the invitation to turn over would find detailed printed conditions. It is true that whilst the 1996 Agreement was in force Clause 18 provided that the Agreement was to take precedence over the General Conditions of Purchase annexed to the Agreement and any other document purporting to be the terms and conditions. That does not mean that those conditions could be ignored insofar as they went beyond the Agreement.
22. Following the termination of the 1996 Agreement the Claimant continued to place orders with Lynton on the same Purchase Order Terms.
23. Mr McGuire contended that it was not sufficiently established that the orders were placed on the Purchase Order terms. He said that there was no evidence as to the precise circumstances of any purchase order, for example whether it was oral and then confirmed in writing. All that I should hold, he submitted, is that there was a continual proffering of the Purchase Order document consistent with the Claimant wishing to contract on those terms. He went on to submit that that was not sufficient to suggest that the contract was in fact made on those terms. It was also suggested that Lynton had inadequate notice of the terms, particularly having regard to the fact that they had traded together for 11 years under circumstances where the Purchase Order terms were irrelevant.
24. Despite Mr McGuire’s submissions I am confident that the orders placed following termination were on the terms of the Purchase Orders. Firstly it is not correct to say that there is no evidence that the orders were on the Purchase Order terms. Paragraph 27 of Mr A’s first witness statement alleged that “The Claimant has always done business with Lynton on the Claimant’s standard terms of business, which are printed on the reverse side of all its Purchase Orders” which he then produces. That evidence goes further than suggesting that those terms were proffered, and establishes unless challenged that the contracts were formed on that basis. There was no challenge to that evidence. Accordingly I reject that part of Mr McGuire’s submissions. Secondly, I also reject the submission that there was inadequate notice of the terms, given the reference to other documents in clause 18 of the 1996 Agreement, the reference to the terms on the front of every order, and their presence in print on the back.
25. Clause 11 of the Purchase Order terms is in the following terms which I have divided up into numbered sentences for ease of reading:
(1) The copyright, design right and any other intellectual property rights in any designs, patterns or shapes supplied by the Company or produced for the Company (whether originated by the Supplier or its agents or commissioned from the Supplier) (the “Designs”) shall be the exclusive property of the Company, and the Supplier in consideration of this Order hereby assigns to the Company any such rights in the Designs as may be held or vested in the Supplier.
(2) The Supplier shall not reproduce any of the Designs in their exact form, or a similar form without the express prior written permission of the Company’s authorised representative.
(3) The Supplier shall execute any document and do any acts or things necessary or desirable to confirm the Company’s ownership of the Designs and
(4) The Supplier agrees that, in order to protect and preserve the exclusive nature of the company’s business, upon completion of a particular order, the Supplier shall, at the Company’s request, return any [records, drawings, moulds, prototype and rejects] or confirm that such items have been destroyed and
(5) shall not disclose to any third party or use the Designs or the identity or name of any individual whose name or crest appears on the goods except to the extent that such information is or becomes public knowledge through no fault of the Supplier, or unless otherwise required by the Company for the purpose of this Order.
The 2002 Agreement
26. Following the termination of the 1991 Agreement the Claimant were concerned to obtain exclusive rights in a Lynton design called Robert Adam. This was a design which was Lynton’s intellectual property under the 1996 Agreement and in which they continued to own the rights following termination. It is now common ground that by an agreement entered into in January 2002 (“the 2002 Agreement”) the Claimant were indeed granted exclusivity in relation to this design with a single temporary exception for a particular enquiry.
27. The 2002 Agreement seemed to assume increasing importance in the course of the trial because it was denied in Lynton’s pleadings and evidence that this Agreement had ever been entered into: see Particulars of Claim § 7, Defence § 10 making specific reference to Lynton’s letter of 8th January 2003 (a typographical error for 2002) an error perpetuated in the Further Information given under this paragraph: see also Reply § 9. This was not a bare denial, but was supported by evidence from Mr Nowacki in his first witness statement at § 73. In that statement he said that the Claimant did not enter into the Agreement, and it had never been Lynton’s intention to enter into the Agreement. The documents he produces include the 8th January 2002 letter. The clear impression given by this evidence was that the Agreement had never been entered into. In fact, as the evidence revealed, the 2002 Agreement was subsequently completed by removing the words “Subject to Contract” from the draft, and the work carried out.
28. There is no doubt, therefore, that the Defendants in general and Mr Nowacki in particular were in error in suggesting to the Court that the 2002 Agreement was not entered into. The questions of (a) whether this was a deliberate attempt to deceive the Court, and (b) whether the letter of 8th January 2002 was fabricated in order to lend support to the attempt go only to credit. Nevertheless, I should not sweep such allegations aside without resolving them, as there are issues on which Mr and Mrs Nowacki’s evidence may be important.
29. Mr and Mrs Nowacki were cross examined at some length about these matters. They were taken through the events leading up to the agreement, and it was suggested that the letter of 8th January did not fit in to the chain of correspondence. I accept that suggestion. Although, in terms of its content it fitted in with matters which had been happening up to that point, such as concerns over delivery of glassware, it went further in some respects, by suggesting a withdrawal from the agreement. If that had happened, Mr A’s response the next day, timed at 9.30 a.m. would have been very different. I accept Mr A’s evidence, which was in any event not challenged, that he did not receive the letter, which was said by Mrs Nowacki to have been sent both by fax and by post.
30. In order to support the suggestion that the letter was sent, Mr Nowacki produced a fax transmission report. However it is plain that that document related to a fax also sent on that day, but not to the letter in question. Mrs Nowacki, who assembled the documents to be produced by her husband, said that this was a mistake. I do not accept that explanation. I find that the letter was never in fact sent, and that at least Mrs Nowacki knew that this was so.
31. It remains a possibility, however, that the letter was drafted and signed but never sent. Neither Mr nor Mrs Nowacki suggested that was what had happened, but it is entirely plausible that it is what occurred. The letter is consistent with a decision to take a -. harder negotiating stance, which on second thoughts was not pursued. To find that their letter was fabricated would require clear and convincing evidence, which I do not have in the present case.
32. That finding does not dispose of the question of why Mr and Mrs Nowacki were pursuing a case based on a letter which was never sent. It is a case which in my judgment they must always have known was incorrect. They must have known that the Agreement had been completed and the work done. Whilst I have rejected the suggestion that the letter was a fabrication, they must have known that they were using it in order to put forward a hopeless contention that no agreement was entered into. In my judgment this finding reflects very badly on the credibility of the evidence of both Mr and Mrs Nowacki.
The equitable jurisdiction in confidence
33. It is trite law that equity imposes a duty of confidence when information which has the necessary quality of confidence is communicated in circumstances giving rise to an obligation of confidence. The duty prevents unauthorised use of the information to the detriment of the person communicating it. The three requirements of the tort of breach of confidence are spelled out by Megarry J in Coco v Clark [1969] RPC 41 at 47-8.
34. Of course, information which is in the public domain and readily accessible to the relevant trade or public will not have the necessary quality of confidence. It is equally well established that information which is itself all in the public domain, but has been gathered together into a package and communicated in confidence, may have the necessary quality. The reason that such information is protected is that its use may in some circumstances give the recipient an unfair advantage or “springboard”. For this reason, such cases do not normally lead to an injunction being granted to restrain perpetually the use of information of that kind. The injunction is tailored to the period of any advantage gained by the defendant from using the information. For a discussion of the cases where limited injunctions have been held appropriate, see Roger Bullivant v Ellis [1987] RPC 172. Once the springboard period has expired the information no longer possesses the necessary quality of confidence.
35. Lynton do not say that that the Claimants confidential information has all been published or is otherwise accessible to the public. They do, however, contend that it has all ceased to be protected under the springboard principle. In order to mount such a defence one needs evidence (a) that all the individual components of the package of information were at least discoverable by the public and (b) as to how long a process would be involved in assembling the information. Only then could one assess in relation any specific item of information, on the face of it confidential, whether the period of its protection had expired on the above principles. The operation has to be performed in relation to each category of information relied upon. It would obviously be preferable to decide those matters in the light of evidence as to the precise misuse relied upon, but that is not the path chosen by the parties.
Confidence in the identity of customers and end users
36. It is said that Lynton have learned of the identity of customers from back stamps and from purchase orders and other correspondence. An example is the name of the person for whom the first back stamp was made, to whom I will refer as SO. Lynton fulfilled about ten orders from the Claimant for SO with a back stamp indicating that the tableware was made especially for that person.
37. When the various contracts and the pleadings refer to “the identity of customers and end users”, what they are referring to is the fact that the person concerned is a customer or end user, not his identity in any more general sense. In due course the Claimant will have to prove misuse of this precise fact. Both the 1996 Agreement and the Purchase Order Terms stressed the importance of confidentiality in relation to the name or crest appearing on the Products, which might be both customer and end user, or merely the end user.
38. There are of course circumstances in which the identity of customers in this sense would not be regarded as information having the necessary character of confidentiality. For example there are areas where there is only a limited category of potential customers which would be self evident to anyone entering the industry. Alternatively the customer might be one of a list which could be assembled over some period of time from public sources, and the period of any springboard advantage had expired. The situation here is very different. There is no evidence before me as to how anyone would determine that SO was a customer of the Claimant. The Claimant do not advertise this fact. The tableware is not available in the shops, and there is no evidence to show that any single member of the public would be able to examine the underside of the tableware to see its origin. Even if the fact were to be disclosed to a limited class of persons at the discretion of the end user, the information would still in my judgment be impressed with the necessary quality of confidentiality in Lynton’s hands. Accordingly I hold that the fact that persons identified on the product (whether by name or crest) are customers of the Claimant or end-users of its products in this way was subject to a duty of confidence. There is no question of the confidence in this information having expired under the springboard principle, as it is not accessible to the public at all.
39. Insofar as other names (i.e. those not appearing or identifiable from crests on the products) are concerned, these are not specifically referred to in the 1996 Agreement or Purchase Orders. I have no material on which to make findings as to how, individually or as a group they could be identified by a competitor without access to the Purchase Orders and correspondence in which their names may appear, or how long that would take. It follows that the fact that those names are customers or end users of the Products is equally bound in confidence. I would add that there is very limited evidence before me that Lynton knew who these persons were.
40. This is of course not to pre-judge any question of breach by the Defendants. The inference which the Claimant seek to draw in relation to SO of misuse of confidential information arises from the fact that tableware bearing a similar back stamp but not made to the Claimant’s order was seen at Lynton’s factory. It by no means follows that the work in question was obtained by misusing knowledge that SO was the Claimant’s customer. It could have been the subject of an approach by or on behalf of SO, or by Lynton to someone acting for SO, without any use of prior knowledge that SO was a customer of the Claimant. That question will be for decision later in the light of all the evidence.
Order Details
41. This category comprises details of the goods ordered, the size of the order and whether the customer is a new or existing one. I have found this the most troublesome of the Claimant’s categories. Right minded people would be in no doubt that if the Claimant were to place an order on Lynton and Lynton were then to make use of the details of that order to gain the same business for themselves a breach of confidence would be involved. The difficulty, as Mr McGuire for Lynton rightly points out, is the vagueness of the categories. The fact that an order related to tableware would be a “detail”. But it would not be a breach of confidence for Lynton to disclose to third party customers that it was currently executing an order for tableware. Mr Graham for the Claimant responds by saying that it is only information “which would be commercially valuable to a competitor” which is sought to be protected in this category but this limitation would not exclude the example I have given, nor would it exclude the use of more precise details of the orders: such as the fact that the order was for 500 settings.
42. I have no doubt that it would be wrong for me to declare that the details (such as the description and size of the order) were confidential in general terms. I suspect that the vice which this category is aimed at is the current business opportunity which the order details reveal. However that is not the category which is pleaded against Lynton.
43. It is for just this sort of reason that it is required in litigation of this character to specify with particularity the information which is relied upon. That proposition applies with greater force where the court is asked to rule on matters as a preliminary issue without making findings as to what it is the Defendant has actually done.
44. As to the final group in this category, I have already held that the fact that a person was a customer of the Claimant was confidential. It follows that characteristics of that customer such as whether he is new or existing would also be confidential when combined with knowledge that of the identity of the customer. Such information would, on the evidence, be of value to a competitor. However for Lynton to disclose that they were doing work for a new customer or an existing one would not be a breach of confidence if the identity of the customer is not disclosed.
Contracting out production
45. I have explained that until 2001 the Claimant and Lynton portrayed themselves to customers as a single entity. There was nothing unfair or improper in this arrangement which operated to the benefit of both of them. Mr Nowacki was given wide publicity by the Claimant on the basis that he was the artist responsible for the Claimant’s designs.
46. There is clearly nothing confidential in the fact that Mr Nowacki was responsible for the designs created by the Claimant. Mr Nowacki is free to tell prospective customers of his that he was the artist. Is he entitled to tell those customers that Lynton Porcelain were subcontractors and actually made the tableware? Whilst the 1996 Agreement was in force I would think it plain that he could not do so. The effect would have been to undermine the business of the Claimant by disclosing matter which they had agreed to keep secret from customers.
47. Is the position the same after the Agreement has terminated and when the position is governed by the Purchase Order Terms and the general law of confidence? I believe it is. It is clear that the Claimant continued to trade in the same way after termination, that is to say that they did not disclose the existence of subcontractors, and that Lynton knew this to be so. They believed on reasonable grounds that the existence of their subcontractors was confidential. Lynton must have known that disclosure of the fact that Lynton were sub-contractors could cause the Claimant significant harm. There is no evidence that anyone can discover through public means that the Claimant in fact subcontract.
Samples and Products
48. Samples and products provided by the Claimant to Lynton would in my judgment be provided on the basis that they were to be used only for the purposes for which they were supplied. Although there might be questions as to whether any individual sample or product was confidential, where the sample was for an individual order, the obligation to keep the sample confidential would endure beyond the completion of the order.
Copyright in back stamps
49. The Claimant assert that the back stamps are original artistic works, that is to say graphic works or works of artistic craftsmanship: CDPA 1988 sections 4(1) and (2). This was not accepted by Lynton, both as to originality and as to whether they constituted graphic works.
50. The back stamps are created by arranging the words and the crest on a computer and, from that, via a silk screen process creating a gold transfer or decal which is slid onto the plate before it is fired. A typical process was described by reference to the SO back stamp. The Claimant originally wrote to Lynton asking that a special back stamp be produced. It was arranged as follows (see Bundle A page 82):
CREST
Finest Bone China
MADE IN ENGLAND
Made exclusively for
SO
By
The Claimant
On behalf of RSA France
At this stage the crest was the Claimant’s own crest. It appears that at some stage between 1992 and 2000 this back stamp was changed around to substitute SO’s crest for that of the Claimant, to eliminate the reference to RSA, because the Claimant were dealing directly with the customer, to change the words “Made exclusively for” to “Specially made for” and to reverse the order of the third and fourth lines of text below the crest with the fifth and sixth (see Bundle C page 799). With a further amendment (Bundle C page 799) the back stamp was amended to the way in which it appears in the final product at Bundle A page 848, namely
SO CREST
SPECIALLY MADE FOR
SO
by
The Claimant
Finest Bone China
MADE IN ENGLAND
51. In order for the crest to be reproduced on the scale required for a back stamp it has to be simplified, otherwise the reduction process will cause the features to become too crowded. This was done in relation to the SO crest by Lynton. It seems to me that, quite apart from the position in relation to the composition of the back stamp as a whole, the modified crest qualifies as a graphic work and there must be sufficient original artistic skill and labour in the creation of the modified crest to create copyright therein. Under the 1992 and 1996 agreements and the Purchase Order terms, such copyright would vest in the Claimant.
52. Mr McGuire submitted that there was no copyright in the layout of the back stamp. In the light of my finding about the crest, my decision on this may prove academic. When the crest is put to one side, what is left looks a bit like a typographical arrangement. I must be cautious before holding without proper argument that a mere typographical arrangement can attract artistic copyright as well, because typographical arrangement copyrights are limited both in point of time and in scope: see the discussion in Laddie et al Modern Law of Copyright, 3rd Edn. at paras. 9.3-9.4. However the layout in question here involves the choice of a number of different fonts and their use in combination with a crest. It seems to me that this composition goes further into the field of graphic design than mere typographical arrangement, and that copyright subsists in the work as a whole.
53. It was not suggested that different considerations should apply to the other back stamps. Accordingly copyright subsists in those in their simplified crests and in the overall layouts and combinations of typefaces.
54. It is not necessary for me to decide the further question of whether the back stamps are works of artistic craftsmanship, a matter which was not developed in argument before me.
55. I should only add that it does seem to me that these copyrights are very limited in scope. They will not prevent Lynton from using well known phrases like “Finest Bone China”, “Specially Made for” or “Exclusively Made for” or “Made in England” on their wares. What the copyrights will prevent them from doing is using the crests as modified for the Claimant, and using layouts which reproduce a substantial part of the skill and labour which went into the overall composition of the Claimant’s back stamps.
Copyright in patterns
56. The Claimant also claim copyright, in a number of patterns applied to the tableware. These are: Designs A, B, S/T and RA/crest.
Design A
57. Design A originated in 2001 when Mr A asked a Mr Jackson of a company called Cotelere to prepare artwork for a number of matching individual china and glass items. The idea came from the design worked into a metal plate of a Toledo manufacturer of which Mr A had retained a photograph. Mr Jackson eventually prepared the artwork at page 812 of the Bundle. Although a brave attempt was made in cross examination to suggest to Mr A that there was no originality in this design, it was an attempt which ultimately failed. In the end Mr McGuire very fairly accepted that his allegations of lack of originality in this, and the other pattern copyrights, were not the strongest part of his clients’ case in copyright. Plainly, in my judgment copyright subsists in Design A.
Design B
58. In May 1996 Mr A commissioned an Italian company called Overline to prepare preliminary artwork for a new design, Design B. It was developed further by Cotelere on the Claimant’s instructions. An example of the finished artwork is at page 124. There can be no serious suggestion that the work done by Cotelere and Overline did not involve the exercise of substantial artistic skill and labour. Instead it was suggested to Mr A that the whole design was not unusual. There was really no support for this and Mr A did not accept it. I was not impressed with Mr Nowacki’s evidence to the contrary, particularly given his evidence that Design B which he produced and which I understand to be the subject of the allegation of infringement, took him some 20 hours to complete. I hold that copyright subsists in Design B.
Design S/T
59. In February 1994 the Claimant decided to ask Overline to develop a pre-existing design of the Claimant’s. The ensuing correspondence in which the design was developed was dealt with by Mr A both in his written evidence and in the witness box in some detail. The resulting design named S is page 843, and a simplified version called T is at page 844.
60. Although no such suggestion was put to Mr A in cross examination, Mr Nowacki suggested in the course of his own cross examination that Designs S/T were copies of an earlier design appearing in a catalogue from a firm called Bernardaud. He suggested that the Claimant had asked Lynton to copy this design. I allowed Mr A to be recalled to answer this suggestion if Mr McGuire intended to pursue it. Mr A convincingly rejected the suggestion. In my judgment, it could scarcely be maintained in the light of the documented design record produced by.
61. Accordingly copyright subsists in the Designs S/T.
RA/Crest composite design
62. Finally there is a claim to copyright in the composite arrangement of a Crest with RA design which appears at page 841. It is common ground that although the RA design is the copyright of the Defendant, the combination of the RA design with the crest was created by the Claimant (paras 25 of Particulars of Claim and 26 of Defence). Although the copyright is no doubt a narrow one, I am satisfied that it subsists in this composite design.
Moulds of Arabic coffee cup and Butterchip bowl
63. There is one final matter I should mention. Although there was at one stage an issue as to payment, there was in the end no dispute that I could detect that the moulds for the above items were made to the Claimant’s order and paid for by them. The Butterchip mould was made during the currency of the 1996 Agreement. Clause 10.1 of that Agreement provided via the various definition clauses that moulds paid for by the Claimant were its property. The Arabic coffee cup was made during the currency of the 1990 agreement which contained no comparable provision, but I do not think that makes any difference. The moulds belong to the Claimant.
64. There is no pleaded claim in conversion, but the Claimant have the rights of an owner in relation to the moulds for these two items. There was at one stage an offer that such items be delivered up to the Claimant after termination of the 1996 Agreement, but The Claimant was content at that stage to leave them with Lynton. If they want them delivered up now, they must ask.
Conclusion
65. In the result :
(1) The issues of design right subsistence and legal ownership of copyright and design right be decided at the main hearing if not admitted;
(2) The 1996 Agreement was terminated by consent by June 2001;
(3) The obligation in clause 11.1 of the 1996 Agreement did not survive termination;
(4) There was no contract on the basis of the letters of 5th September and 19th December 2001;
(5) The Purchase Order terms applied to the contracts to which they related;
(6) The 2002 Agreement was duly entered into;
(7) The equitable duty of confidence applied to the information indicated in this judgment in paragraphs 38, 39, 44, 47 and 48
(8) Copyright subsists in the works identified in this judgment in paragraphs 51, 52, 53, 57, 58, 61 and 62
(9) The Claimant own the moulds in Arabic Coffee Cup and Butterchip
66. In the course of the trial I sat in private for at least part of the evidence in order to avoid matters which were said to be confidential becoming part of the public record. I was also asked to make an order preventing disclosure of the parties’ names, in order further to protect certain aspects of the confidential information. I refused to do so on the grounds that it was unsatisfactory to make such an order half way through a trial, when the proceedings had been open to the public up to that point. Nevertheless I indicated that I would be prepared to issue my judgment in a form which avoids disclosing further than necessary any information which I have held to be confidential. At the same time as submitting corrections in the usual way, the parties were asked to submit an agreed form in which, having regard to my findings about what is confidential, the judgment could be handed down in open court, and they have done so. I consider that that the measures taken to protect the information are proper in all the circumstances. The approved judgment is handed down in that agreed form.