First Conferences Services Ltd & Anor v Bracchi & Anor

This judgment arises out of the trial of this action which I heard between 21st and 24th July 2009. On the last day after closing submissions I indicated to the parties that I had formed the view that the Claimants had established its case on all claims save for the lack of effort claim for breach of the First Defendant’s contract of employment. With the proximity of the end of term I indicated that I would be in great difficulties being able to hand down the judgment by that time. Of fundamental importance was a clear indication in advance of the two conferences that the rival contenders are proposing to hold in September and October. I therefore decided that it was appropriate to tell the parties the results and grant final relief at least in relation to those. I would then formally hand down judgment and ancillary relief and costs and permission to appeal could be dealt with at that time.

Accordingly I indicated that I would grant a permanent injunction against the Defendants and the explanation for that would be granted later.

This judgment sets out the reasons for my determining that the Claimants case has been in the main established against the Defendants.

The proceedings came before me in the following circumstances. On 12th June 2009 the Claimants issued an application for a Search Order. On 15th June 2009 Floyd J (sitting in private) granted the Claimants a Search Order in respect of the Defendants’ premises and computers.

I heard the return day in respect of the Search Order on 22nd June 2009. I directed that the negative and mandatory relief granted by Floyd J should be continued until trial or further order.

I directed that the trial should take place before me commencing on 16th July 2009. There was some slight slippage in that but nevertheless the action came to trial within some 4 weeks of the commencement of the proceedings.

The First Defendant (Mr Bracchi) whilst he had advice from solicitors appeared unrepresented at trial. He also in effect represented the Second Defendant his company.

As with all cases of this nature they are complicated enough with lawyers but Mr Bracchi faced a difficult task in coping with the material. This led to him needing latitude in the way in which he presented his case. For example he did not realise that he would have to cross examine the Claimants’ witnesses. Someone had apparently advised him that there would be no cross examination until he went into the witness box.

That led to the case being adjourned for a short period to enable him to prepare his cross examination. Insofar as it is proper for me I asked questions of the Claimants’ witnesses of the type that I would have expected Counsel representing the Defendants to ask. I also suggested on occasions the areas of cross examination that Mr Bracchi ought to explore.

The Claimants carry on a business of organising conferences. 90% of its revenue comes from conferences and the remainder from other business information products such as reports and magazines.

There are 7 major sectors of which EyeforPharma is one. It is the biggest of all 7 and accounted for 45.15% of the Claimants’ total profits in the calendar year ending 31st December 2008.

It has one main office in London but has satellite offices around the world in South Africa, New York and Australia. There are 112 employees in the office in London. Of these 50 are Conference Organisers; the rest are support and management staff. The vast bulk of conferences are organised from the London office.

The Claimants have developed a massive volume of contacts which is fundamental to its business. There are currently 64,963 for EyeforPharma. These contacts are stored in the Claimants Sales Logix database system. The database is developed in a number of ways. Generally the Claimants do not buy data in bulk from other companies. They gather data for example by advertising and offering to pay people or offering reporting services. People who respond find (probably unknowingly) that their contact details are then kept on the Claimants’ database. They also use resources such as “LinkedIn” a business networking website. The Claimants do not currently outsource any database gathering.

The First Defendant applied to the Claimants for a job as a International Event Manager on 13th December 2005. At that time he was aged 22. His CV was impressive apparently for his age but turns out to have been somewhat deceptive. He gave the impression that he graduated from the University of Cambridge. His CV described his degree as “Cambridge APU University”. In fact his university was Anglia Polytechnic University. His website profile just described it as University of Cambridge. I was also not convinced with his explanation of the reference to work experience with a company called Propriotus Superbus when no such company existed. This turned out not to be an auspicious start to his employment in reality.

He was employed from 6th March 2006 until 3rd November 2008. He worked from the Claimant’s London office Monday to Friday but also frequently worked from home often in the evenings. The Claimants were unable to find his contract of employment but believed he will have signed one. The First Defendant denied he had ever signed one. However that did not rest easily between an exchange of emails between him and the Claimants’ general manager Mr Simms on 6th July 2006 where the First Defendant referred to a probation review and stated that it was in his contract.

The First Defendant was employed in the EyeforPharma team. He was employed as a conference organiser and assigned to various projects. However his major focus was the November 2007 to November 2008 as a developer of the Forecasting sector.

He gave one months notice of termination of his employment expiring on 3rd November 2008. He explained (according to Mr Simms) that he was leaving to start his own company and said expressly that he had no interest in working in the events industry any more. Mr Simms stated in evidence that if he had said that he was going to go into the same business in competition he would have been questioned about his future proposals. As he stated he was not going to be a competitor the Claimants were relaxed about his departure and kept him on as a freelancer for 2-3 weeks following his departure in the travel sector.

The First Defendant denied he gave such an impression. I reject that evidence. I accept Mr Simms’ evidence in preference to the First Defendant on this and several other points.

It is significant in my view that whilst the First Defendant expressed dissatisfaction with his employment in the Claimants (he apparently believing he was entitled to a higher commission) the email of 6th October 2008 that he sent to Mr Simms raise no such issues and further suggests that he was going to become involved in projects not connected with the Claimants’ business. In cross examination he suggested that he had given that notice on the spur of the moment and had not been planning it for sometime. I reject that. The reason why he says that is as appears further in this judgment he needs to explain downloading of the Claimants’ information to his personal internet account me.com just before this notice was given.

The Claimants contend that the First Defendant incorporated the Second Defendant in a business relationship with Miss Joan Weingaertner. Setting up such a competing business the Claimants allege that he provided his company with a lift by transferring to it large amounts of the Claimants’ customer database, details of its sales records in the Forecasting area and transferred to his name the domain name “Forecaster.com”.

In addition the Claimants allege that he has set up conferences for September and October and passed his conferences off as having been conferences associated with the Claimants and has further in emails suggested that the Claimants conferences are “poor imitations” of his own conferences.

Further the Claimants contend that the First Defendant in transferring their database material to the Second Defendant breached their rights under article 16 of the Database Regulations.

Finally they allege that he did not work with the full commitment thereby sabotaging the successful European Business Forecasting event scheduled to take place in March 2009 so that after he left the event had to be cancelled.

This latter claim has not been put forward with any vigour and I found no credible evidence to substantiate such a claim. I accordingly dismiss that claim on the part of the Claimants.

It is becoming increasingly common with the computerisation of information for employees who wish to set up their own competing business to help themselves to their employers’ confidential information. Some of this material is not necessarily confidential as such and is capable of being found with hard work. However the employees do not wish to go through the hard work and in effect what they do is they seek to take advantage of their employers’ time effort and expense in putting together valuable material which provides a tool to an emerging business. Instead of doing their own work using their own brains they simply hijack the employers gathered material. This gives them what is called “a springboard” for their business to be up and running almost immediately at the expense of the former employer. I reviewed all of the authorities in this area in Crowson Fabrics Ltd v Rider & Ors [2007] EWHC 3942 (ch).

All of this is very easy now because of the computerisation of information. It is easily therefore transportable. In the olden days (not so long ago in reality) before the photocopier and certainly before the computerisation of material it was very difficult for employees to help themselves to material. Card indexes are not quite as accessible in a nefarious way as computers. This is one of the prices paid for modern technology. Databases cannot be made completely safe.

As part of the exercise of damage limitation afterwards however it is often the case that mistakes are made by the downloaders of the material. The mistakes can range widely. Thus in Crowson they left the fingerprints of their activities on their employers’ mainframe.

In the present case the First Defendant failed to have all the tracks of his wrongful activities wiped clean from the records. This in addition to the material obtained as regards as a result of the search order shows in my view for the reasons that I will set out further in this judgment that the Claimants’ allegations are justified and made out.

The First Defendant referred me to the decision of Arnold J in Vestergaard Frandsen A S v Bestnet Europe Ltd [2009] EWHC 1456. He submits that the case is authority which “casts considerable doubt on the proposition that a permanent injunction can be granted to prevent a defendant from benefiting from a past misuse of confidential information”.

I have considered the Vestergaard case but it is not in my view authority for the proposition put forward by the First Defendant. The present case is far more similar to the Crowson case. This is not a situation where the use of confidential information has ceased. The Defendants continued to use the information of the Claimants and passed off their business as being that of the Claimants right up until they were restrained by injunction from so doing. It follows that the evidence is that they would have continued acting improperly but for the injunction.

It is quite clear from the evidence that the First Defendant set up conferences to rival the Claimants in September and October of this year in the same locations and with the same topics. In doing that he sought to obtain the services of speakers who had attended the conferences held by the Claimants the year before. Further his website in advertising his Pharma Forecasting Innovation 2009 suggested that speakers who were going to address the conference were previous speakers. They cannot of course be previous speakers for the Defendants as they had never previously had conferences at which they were speakers. Most of them were previous speakers at the Claimants’ previous conferences. The suggestion by the First Defendant that he meant previous conferences where he had dealt with them (as his capacity as an employee of the Claimants) is disingenuous in my view.

In addition to the straight forward misleading aspect of his website it is clear from the email information the Claimants adduced in their evidence that the First Defendant on behalf of the Second Defendant tried to pre-empt the Claimants conferences by approaching their speakers from previous conferences and inviting them to participate in his conference. That of course would not be actionable. The Claimants have no right to restrain competition of itself absent a restrictive covenant. Nor can they stop him using information which is not a trade secret which has not been improperly obtained (for example by pre-emptively downloading from their databases before his departure) but is for example memorised in his head or obtainable in public elsewhere. The existence of the past speakers is in the public domain. There is nothing to stop the Defendants from contacting past speakers who have been identified in the public material of the Claimants.

He did not do that however. He suggested wrongly to the proposed speakers that he was inviting them to participate again by agreeing to speak at the conference he was organising for September/October 2009. In so acting it is clear he was attempting to damage the Claimants’ conferences by “poaching” their speakers before they had contacted them. That of itself is not actionable per se. However the way he did it was by suggesting that his conference was a follow up of the Claimants previous one. This is shown by the various emails adduced by the Claimants which the First Defendant sent to prospective speakers. I need not set them out but the most striking one is that dated 11th May 2009 sent by him to Joachim Larson which said:-

Subject: Speaking: Business Forecasting and Planning Joachim, I’d like to invite you to speak as a keynote at the Las Vegas Business Forecasting and Planning summit you attended last year…..”

It is difficult to see a more blatant example of the Defendants passing off their business as that of the Claimants. The First Defendant in cross examination initially suggested that he was not clear about passing off and what the law meant when he sent this email. That did not stand scrutiny; he had received a shot across the bows from the Claimants’ solicitors in December 2008. Ultimately he admitted that this was a case of passing off.

In my view all the other instances were passing off. It is clear that the First Defendant tried to destroy the Claimants proposed conferences and in so doing attempted to mislead their speakers. Finally to add insult to injury in an email of 21st May 2009 to Sara Park concerning his conference he pointed out that she had agreed to speak at his event rather than the Claimants. He also stated that many of the speakers that the Claimants had listed as confirmed had contacted him directly letting him know that was not the case. In fact the evidence was to the contrary. Finally he said that “I’d hate for you to attend a poor imitation event”.

As a result of this confusion Ms Park sent an email to both the Claimants and the Defendants declining to attend either conference. This was because of confusion and her desire not to be involved in either taking sides or being pulled into an unnecessary confrontation. It is ironic indeed for the First Defendant to seek to trade off the Claimants reputation as conferences to approach speakers and then simultaneously describe their event as being the imitation one when the converse is actually true.

It follows that in my view the passing off claim is clearly established and the Claimants are entitled to an injunction and damages by reason of such passing off.

The First Defendant acquired this domain name. Contrary to his evidence it is plain he acquired it in his capacity as an employee of the Claimants. The cost of the acquisition of the domain name was paid by Mr Simms’ credit card at the First Defendant’s request. The same applied to the separate website theforecaster.com used by the Claimants from early 2008. In both cases the First Defendant continued to use the domain name for the new business and cut off the domain from the Claimants businesses. In the case of theforecaster.com group this was done by re-branding it as IE group. That is the trading name of the Second Defendant.

Both of these actions are further instances of passing off by the Defendants. The First Defendant came up with no justification for this whatsoever.

The Claimants’ case is that during his employment and after, the First Defendant made extractions from the Claimants’ database with the intention of making and keeping copies of parts of the Claimants’ database for the Second Defendant’s use.

His method of getting the information off the Claimants’ computer system was to email his personal email account (“me.com”) attaching the database extractions. The First Defendant then uploaded the extractions from the Claimants’ database in to a “vertical response” mailing account and performed mailshots.

The result of the search order revealed that a considerable amount of the Claimants’ database was received into the me.com account and then transferred on as set out in paragraph 28 of Mr Stowell’s witness statement dated 22nd June 2009. No credible reason was given by the First Defendant for this occurring. Of significance in particular are items 7 and 8 which show that the First Defendant emailed the sales information from his account at theforecaster.com to me.com and then within minutes forwarded it on to Joan Weingaertner. It will be appreciated that this occurred whilst he was still working out his notice with the Claimants.

The First Defendant’s reasons for this transfer of material to his private me.com account were not only extremely unlikely but they also varied. First (as set out in his witness statement dated 20th June 2009) he suggested that the purpose for transferring it was to ensure business continuity for the Claimants in the event of the server going down. He modified this by suggesting it had to be done because he used an apple mac computer. That computer was not compatible with the Microsoft systems generally operated. This too was unconvincing. He had his own non Apple personal computer provided by the Claimants but suggested it was not working. I found this unconvincing as well.

In the event the material that he downloaded was not material that would be necessary for conferences. He downloaded many thousands of contact names from the database. This was not necessary for the conference. Nor was the material sent to Joan Weingaertner which included financial information. Finally in this context on inquiry by me his sent box at the Claimants’ email addresses allocated to him were examined. It showed that he only sent material to the me.com account 8 times and all of those events occurred in October/November 2008. It follows that there was no general pattern of downloading material to me.com for the purposes alleged in his witness statement.

It is quite plain the purpose of the downloading was to transfer the material for improper use by the First Defendant after his employment terminated. Further as can be seen from paragraph 28 of Mr Stowell’s witness statement referred to above some of the emails sent to the me.com account were sent from an email address ptemp@firstconf.com. This is a temporary email address account which is operated by temporary employees of the Claimants. Before the trial and during it the First Defendant suggested that other employees had access to that account and that he did not have access to that account after his employment terminated on 3rd November 2008. This was ultimately shown to be untrue. He admitted that he was the person responsible for sending those emails. Thus he retained access to that account after the termination of his employment and as that paragraph of Mr Stowell’s report shows used it to access and download the Claimants’ material to his me.com account as late as 15th June 2009 i.e. just before the Claimants obtained the search order.

The other telling evidence against the First Defendant was the fact that the Claimants “seeded” their contacts. Although the specific seeds that were planted as set out in paragraphs 65-69 of Mr Butt’s affidavit dated 12th June 2009 were not shown on an examination of the Second Defendant’s database I accept the reason put forward by the Claimants to explain that. The use of the database EyeforPharma (in which the specific contacts were seeded) was limited to 800 only by the Second Defendant out of a database contact number of approximately 60,000. Given that it is quite explicable that that was a specific number of emails created by the First Defendant out of the global database of the Claimants which he thought would be initially useful in dealing with the initial mailshot for his first pharmaceutical conference. Given that as he would not know the seedings in particular that explains why they did not come up.

However four other seeds did come up they were “mattTest”, “R”, “DighenisDighenis”, and “SpiroSpiro”. All of those were found in both the Claimants’ and the Defendants’ database. The First Defendant gave various explanations for the seeds. First he said that the information on his database was obtained from 3rd party sources and it appears to be the same source as the Claimants hence the identical seeding. In cross examination this changed to an allegation that he obtained the seeds by his own screen scraping and then it changed into an allegation that the seeds were obtained by an intern screen scraping, then to screen scraping by another employee Jo Miles. In further cross examination difficulties arose when one of the seeds was in his own name he then said it was done by Indian employees of a company he retained to provide the database who would not know his surname. This is the major difficulty about the seeds. One of the seeded persons is actually himself (“R”) went to his email address RBracchi@forecaster.com.

Similarly as was shown from paragraph 44 of Mr Stowell’s witness statement identical emails that were apparent on both databases bounced back. This is a further example of evidence which the First Defendant needed to explain which he failed to do.

In evidence he suggested the emails to Pinjuan Huang (the first 6 emails identified in paragraph 28 of Mr Stowell’s witness statement) were messages by him that he sent to her during a busy meeting for the purpose of deletion. Pinjuan Huang was a temporary intern and is not available to give evidence. I find all of this completely unconvincing.

Finally as I set out above he initially attempted to suggest other employees of the Claimants namely Maria and Rachael Magson were responsible for the ptemps activity but admitted that he had done it in cross examination.

Accordingly in my view the Claimants’ evidence overwhelmingly provides the explanation as to how the material came to be on the Defendants’ computers. In my view and I so find the First Defendant decided to leave, set up the Second Defendant and then arranged towards the end of his employment to have material that he thought might be useful to him emailed to his me.com account for future use. The material was important in two respects. First the database is a very important tool as it provides an immediate base which he can use to start up his new business. This is a classic springboard operation. Second the sales information is of importance to Joan Weingaertner as she presumably was about to go into business with him in the Second Defendant by showing her the sales information he shows to her how profitable he hopes the new business to be.

Access to the Claimants’ information continued after his departure. As set out in paragraphs 52-64 of Mr Gardiner’s affidavit of 8th July 2009 the First Defendant accessed the Claimants’ databases and created files on 4th November 2008. He accessed at that stage remotely using the “ptemp” profile after he ceased to be employed.

I accept Mr Onslow’s submissions that the conduct of the First Defendant is indistinguishable from the conduct of the Defendants in the Crowson case.

It is plain therefore that he has misappropriated the Claimants’ confidential information in order to generate a springboard to give the Second Defendant an unfair advantage over the Claimants. That aspect of the Claimants case is also made out.

The evidence of Mr Simms and Mr Butts (which was unchallenged on this aspect) shows a considerable expense and time was spent by the Claimants in generating their database. The information extracted by the First Defendant from their database is the large number of customer contacts, the sales information and the other material identified in the emails summarised in Mr Stowell’s witness statement as referred to above. This is a case of extraction and in my view a breach of article 16(1) of the Copyright and Rights in Database Regulations 1997. It is clear that the database was created using substantial investment in obtaining verifying or presenting its contents. Once again the investment is of human or technical resources as set out in the Claimants’ evidence.

As I have set out above it is the only conclusion I can draw from the evidence is that the First Defendant copied the Claimants’ databases. Thus he is also in breach of article 16.

Save in respect of the employment claim above (i.e. the reduced efficiency claim) I am satisfied that the Claimants have established the entirety of their claims against the Defendants. At the conclusion of the submissions as I have said I granted permanent injunction relief due to the proximity of the conferences in respect of the clearly established passing off and confidential information rights which I informed the parties was established.

I will hear the parties submissions on what further orders I should make when this judgment is formally handed down.