FEDERAL COURT OF AUSTRALIA
Telephonic Communicators International Pty Ltd v Motor Solutions Australia Pty Ltd [2004] FCA 942
COPYRIGHT – Computer programs – Breach of confidence – Software developer developing software under contract and upon instructions – Passing off – Anshun estoppel
Copyright Act 1968 (Cth)
Law of Property Act, 1936 (SA)
Trade Practices Act 1974 (Cth)
Computer Software Protection (1994)
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Data Access Corporation v Powerflex Services Pty Ltd (1999) 202 CLR 1
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Australian Video Retailers Association Ltd v Warner Home Video (2001) 114 FCR 324
Brookfield v Davey Products Pty Ltd [2000] FCA 448
TS & B Retail Systems Pty Ltd v 3fold Resources Pty Ltd (2003) 57 IPR 530
Roban Jig Tool Co Ltd & Elkadort Ltd v Taylor & Ors [1979] FSR 130
Acorn Computers Ltd v MCS Microcomputer Systems Pty Ltd (1984) 57 ALR 389
Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244
King & Rylands v Milpurrurru & Ors (1996) 66 FCR 474
Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231
Breen v Williams (1996) 186 CLR 71
Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389
Smith Kline & French Laboratories (Australia) Ltd & Others v Secretary, Department of Community Services & Health (1990) 22 FCR 73
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Commonwealth v John Fairfax & Sons Ltd & Ors (1980) 147 CLR 39
Maggbury Pty Ltd v Hafele Australia Pty Ltd & Anor (2001) 210 CLR 181
Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services & Health (1991) 28 FCR 291
Forkserve Pty Ltd v Pacchiavotta (2000) 50 IPR 74
TELEPHONIC COMMUNICATORS INTERNATIONAL PTY LTD (ACN 007 990 098) v MOTOR SOLUTIONS AUSTRALIA PTY LTD (ACN 003 952 627) & ORS
S 802 of 2003
SELWAY J
21 JULY 2004
ADELAIDE
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IN THE FEDERAL COURT OF AUSTRALIA |
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SOUTH AUSTRALIA DISTRICT REGISTRY |
S 802 OF 2003 |
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BETWEEN: |
TELEPHONIC COMMUNICATORS INTERNATIONAL PTY LTD ACN 007 990 098 APPLICANT
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AND: |
MOTOR SOLUTIONS AUSTRALIA PTY LTD ACN 003 952 627 FIRST RESPONDENT
MICHAEL MURRAY SECOND RESPONDENT
HELGA MURRAY THIRD RESPONDENT
SCRIBE COMMUNICATIONS PTY LTD ACN 008 145 720 FOURTH RESPONDENT
LOGEA IT SOLUTIONS PTY LTD ACN 101 420 464 FIFTH RESPONDENT
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SELWAY J |
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DATE OF ORDER: |
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WHERE MADE: |
ADELAIDE |
THE COURT ORDERS THAT:
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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SOUTH AUSTRALIA DISTRICT REGISTRY |
S 802 OF 2003 |
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BETWEEN: |
TELEPHONIC COMMUNICATORS INTERNATIONAL PTY LTD ACN 007 990 098 APPLICANT
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AND: |
MOTOR SOLUTIONS AUSTRALIA PTY LTD ACN 003 952 627 FIRST RESPONDENT
MICHAEL MURRAY SECOND RESPONDENT
HELGA MURRAY THIRD RESPONDENT
SCRIBE COMMUNICATIONS PTY LTD ACN 008 145 720 FOURTH RESPONDENT
LOGEA IT SOLUTIONS PTY LTD ACN 101 420 464 FIFTH RESPONDENT
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JUDGE: |
SELWAY J |
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DATE: |
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PLACE: |
ADELAIDE |
REASONS FOR JUDGMENT
1 In these proceedings the applicant (TCI) claims against the second to fifth respondents seeking damages and other relief for alleged breach of contract, breach of copyright, breach of confidence, passing off and misleading conduct. The action by TCI against the first respondent (MSA) has already been dismissed by consent. (A cross claim by MSA against the second to fifth respondents remains outstanding and is not considered in these reasons.) The remaining parties have agreed that they only wish to proceed at this stage on the question of liability. Damages and other relief have not been argued or considered pending the determination of whether any of the second to fifth respondents are liable to the applicant and if so, for what. For the reasons given below it is my view that the second to fifth respondents are not liable in these proceedings to TCI. The application must be dismissed.
2 In about 1990 Mr Wayne Phillis, who was then operating a motor vehicle dealership, began to develop various tools and systems for training persons involved in selling motor vehicles. He has continued to develop such systems since that time. The various tools and systems are sold in the market place. Such intellectual property as Mr Phillis would otherwise have had in any of the material that he developed or caused to be developed was owned by companies controlled by him and his wife. Such intellectual property was eventually transferred in 1996 to the applicant (TCI) being a company owned by the family company in which Mr Phillis and his wife were and still are the only shareholders. Mrs Phillis is the current director of TCI. TCI has continued to hold and own that intellectual property. TCI has continued to develop, or cause to be developed, further tools and systems for the training of persons involved in selling motor vehicles. Mr Phillis has been actively and personally involved in such developments, both by writing various written materials used in the training systems and in engaging others to develop various other materials in accordance with his instructions. It is accepted that TCI owns the intellectual property in any material developed by Mr Phillis and for which he would otherwise own the intellectual property rights.
3 For the purposes of his training systems Mr Phillis sought to develop hardware and software that would record telephone calls. Such hardware and software was intended to be used for the purpose of training persons involved in selling motor vehicles about retailing techniques. In particular, it was intended to be used as an integrated manner with the other material provided as part of the training system. Neither Mr nor Mrs Phillis have any particular expertise in computer programming or in the development or production of computer or telephonic hardware.
4 Although another consultant had originally been engaged to develop the necessary software and hardware, in early 1996 Mr Phillis engaged the fourth respondent (‘Scribe’) to develop the necessary software for the training system. For all practical purposes Mr Phillis can be treated as acting as an agent for TCI in his dealings with Scribe. The second respondent (Mr Murray) was an employee of Scribe. Again, for all practical purposes he can be treated as an agent of Scribe.
5 In June 1996 the arrangement between TCI and Scribe was varied in that Scribe became responsible for the development of both software and hardware.
6 There may have been some differences in relation to the first products or services provided by Scribe to TCI. However, at least from 1998 it would seem that Scribe produced for TCI hardware ‘boxes’ that were intended to be connected to telephone lines and to a computer. Software was also produced to be loaded onto the computer. This software operated the equipment in the hardware box so as to record telephone calls. The software also directed the computer to carry out various operations in relation to the information gathered by the equipment in the hardware box. Various software systems were developed – each being an improvement or enhancement on the preceding version: Ausphone 2000; Ausphone 3000; E-call.com and E-call24.com. Scribe had commenced to develop the software for another system called Lifeline.com, and had developed the hardware for that system, when the arrangements between TCI and Scribe were brought to an end in June 2002.
7 The hardware boxes and software were developed and produced by Scribe in accordance with instructions given by Mr Phillis. Although there was some dispute as to the nature of the instructions, it would seem that Mr Phillis informed Mr Murray of TCI’s functional requirements of any computer or telephonic system and Mr Murray then developed the hardware and software necessary to meet those functional requirements. Initially Scribe was paid on an hourly basis for Mr Murray’s time. This changed in 2000 to a monthly retainer fee of $6,000 subsequently reduced in 2001 to a monthly retainer fee of $4,000. In addition Scribe charged TCI for each hardware box it delivered to TCI.
8 TCI then supplied the hardware boxes and software to its clients in the motor vehicle retaining industry, together with written and other training material that Mr Phillis had developed or otherwise put together.
9 The arrangements between TCI and Scribe came to an end primarily as a result of financial difficulties that Scribe was facing. The extent of the business generated by TCI had reduced as a result of Mr Phillis being unwell in late 2000 and during much of 2001. The reduction in the retainer from $6,000 to $4,000 was a result of this reduction in business. It caused some difficulties to Scribe. In an attempt to ameliorate those difficulties TCI agreed that one of the TCI customers should be ‘taken over’ by Scribe. This was done, but did not answer the problem. In March 2002 Scribe entered discussions with the first respondent (MSA) which was a competitor to TCI. The discussions centred on whether Scribe would provide the E-call24.com software and hardware box to MSA. In May 2002 Scribe agreed to enter into a contract to provide the E-call24.com product to MSA.
10 In June 2002 TCI was informed that Scribe intended to sell to MSA. On 21 June 2002 TCI issued legal proceedings in the Supreme Court of South Australia (Action No 828 of 2002) seeking to restrain Scribe from delivering the E.call24.com product to MSA. The Statement of Claim filed in those proceedings bears a marked similarity to the Statement of Claim filed in these proceedings. It alleged that, by seeking to sell the software and hardware box to MSA, Scribe, Mr Murray and the other respondents had breached TCI’s copyright, had breached the contract between Scribe and TCI, were liable in passing off, had engaged in misleading and deceptive conduct and had breached duties of confidence owed by Scribe to TCI.
11 In face of those proceedings Mr Murray sought to avoid the potential effects upon his business. He arranged to cancel the contract between Scribe and MSA. Instead he arranged for the fifth respondent (‘Logea’) to be incorporated. Mr Murray rewrote the relevant software. The new product comprising the software and the hardware box was called ‘Phone Wizard’. Plainly enough it had similar functionality to E-call24.com but according to Mr Murray it was a different product. A contract dated 29 July, 2002 was entered into between Logea and MSA for the supply of the Phone Wizard by Logea to MSA. Evidence was given that about 10 of the Phone Wizard products (both software and hardware boxes) were delivered by Logea to MSA prior to 15 January 2003 and about 60 thereafter.
12 In the meantime the Supreme Court action was settled on 15 January 2003 pursuant to a deed made between Scribe and TCI and pursuant to orders made by Besanko J of the Supreme Court on that day. Pursuant to the deed, Scribe transferred to TCI the intellectual property referred to in the orders made by Besanko J and agreed to consent to the making of those orders. The terms of the orders made by Besanko J were as follows:
‘THE COURT ORDERS THAT:
1. The orders of The Honourable Justice Mullighan made on 21 June 2002 be discharged.
2. The first, second and third defendants be permanently restrained:
2.1 From representing any continuing or past association with the plaintiff or the Plaintiffs’ Intellectual Property.
2.2 From contacting any of the plaintiff’s clients.
2.3 Not to perform any work or supply any hardware to any of the plaintiff’s clients relating to the Plaintiff’s Intellectual Property.
2.4 Using, assigning or otherwise dealing with any of the Plaintiff’s Intellectual Property.
3. The first, second and third defendants, within 30 days of the date of this order, deliver up to the plaintiff’s solicitors the following:
3.1 All hardware and software created in relation to the plaintiff’s business.
3.2 All written material, however stored, provided to the first, second and third defendants including but not limited to training manuals, presentations, spreadsheets and all correspondence between the plaintiff and any third party.
3.3 All hardware and software and written material relating to or comprised of the Plaintiff’s Intellectual Property specifically supplied or provided to the fourth defendants or any other third party.
4. All other claims made by the plaintiff against the first, second and third defendants in this action be dismissed, with no order as to costs.
For the purpose of this order the Plaintiffs Intellectual Property is defined as:
1. The Plaintiff is the copyright owner of training manuals, spreadsheets, scripts, and other written and electronic material relating to the development and implementation of dealer training programs known as the ‘Sales Performance Management System’.
2. The Plaintiff is owner of confidential information relating to the development and implementation of specific elements of the dealer training programs known as the ‘Sales Performance Management system’.
3. The Plaintiff is the copyright owner of the following computer programs and databases:
3.1 “Ausphone Svstem”
3.2 “Ausphone 2000”
3.3 “E-call24.com”
3.4 “Ausphone 3000”
3.5 “Lifeline. Com”’
13 It is clear that that agreement and those orders fully disposed of the proceedings as they were then constituted. It is also clear that the applicant may be estopped from now raising issues that should have been raised in those proceedings, but which were not: see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. It will be necessary to return to this issue later in these reasons. For present purposes it is sufficient to say that the practical effect of the principles of res judicata, issue estoppel and Anshun estoppel in relation to this case is that TCI can only now pursue such claims as were not reasonably within TCI’s knowledge at the time that the previous proceedings were issued. In that regard I am satisfied that TCI was not aware at that time or, indeed, at the time that those proceedings were resolved, that Logea had developed or was distributing the Phone Wizard. In my view TCI can pursue in these proceedings its claims relating to the development, publication and sale of the Phone Wizard.
CONTRACT
14 On the other hand, the issue of Anshun estoppel is sufficient to dispose of at least one of the claims made by TCI in these proceedings. The claim by TCI for breach of contract is based upon the contract between TCI and Scribe for the supply of the Lifeline.com software. TCI says that Scribe breached that contract by failing to deliver to TCI the completed software. It would not seem that that action was pleaded in those terms in the Supreme Court. Nevertheless, all relevant facts were known before the date that those proceedings were issued, namely that the software for Lifeline.com had not been delivered by Scribe but that the contract between Scribe and TCI had been terminated. If those actions had given rise to a claim in contract, it should have been pursued in those proceedings. It cannot now be pursued in this court.
15 This still leaves the claims by TCI for copyright, breach of confidence and misleading and deceptive conduct by the Logea in relation to the Phone Wizard.
COPYRIGHT
16 The sensible starting point for the analysis of the copyright claim is to look first at the sales of the Phone Wizard software in the period following the orders made by Besanko J on 15 January 2003. In relation to that period the transfer of the copyright in the software and the terms of the orders made by Besanko J mean that there is no doubt that TCI owned the copyright in the transferred software, whatever may have been the position in the absence of that agreement. After 15 January 2003 the only issue is whether Logea breached that copyright in selling the copies of the Phone Wizard to MSA.
17 TCI put its argument squarely on the basis that Logea had breached TCI’s copyright in the computer programs comprising the Phone Wizard. TCI did not seek to argue that the visual representation displayed on a computer screen in the operation of the Phone Wizard comprised an artistic or literary work separate from the program that generated that display. Although some evidence was given which might be thought to be relevant to that issue, it does not need to be further considered. The issue can be considered solely in relation to the computer program.
18 For the purposes of the Copyright Act 1968 (Cth) (‘the Act’) a computer program is a ‘set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result’ (see definition of ‘computer program’ in s 10 of the Act). A computer program is a ‘literary work’ (see definition of ‘literary work’ in s 10 of the Act). Subject to a number of qualifications (some of which are considered further below) the original author of a computer program has the copyright in that program: s 35(2) of the Act. The copyright entitles the owner to various monopoly rights in relation to the program, including the right to reproduce and copy it, to make an adaptation of it, to publish it to the public and to enter into a commercial rental arrangement in relation to it (s 31 of the Act). Breach of those monopoly rights is an infringement of the copyright. It is not necessary that the relevant reproduction be an exact copy. It is sufficient if there is a reproduction or copying of a ‘substantial part’ of the program: s 14(1) of the Act. Copyright is also infringed by the sale of the computer program without the permission of the copyright owner in circumstances where the person selling it knew, or should reasonably have known, that the making of the program was a breach of copyright: s 38 of the Act.
19 Plainly enough the actions of Logea after 15 January 2003 in reproducing the Phone Wizard (or any computer program comprised within it) and in selling it to MSA was a breach of the copyright of TCI if TCI had the copyright in the Phone Wizard. The question then becomes, was the software program(s) for the ‘Phone Wizard’ a copy of a ‘substantial part’ of the software program(s) in which TCI held the copyright pursuant to the deed made on 15 January 2003?
20 It is clear that Mr Murray was the original author of all of the relevant software programs. The relevant software programs were ‘applications programs’ (see the definition in the Glossary of Terms in the Report of the Copyright Law Review Committee Computer Software Protection (1994) (‘the Report’) and see Appendix N of that Report). In order to write the applications programs Mr Murray used a programming language called Pascal. This language provides structure for writing computer code (the instructions) within a piece of software that tells a computer what to do which instructions can be interpreted by the relevant operating system, in this case, Windows. In order to simplify the programmer’s task Mr Murray also used a software system called Delphi. This operates with Pascal so as to enable the programmer to create the various screen objects that he or she seeks to have displayed on the screen by the program. This includes the various permutations of size, colour, shape, position and so on that the programmer wishes to have displayed by the program. Delphi then writes the relevant computer code in order to achieve that outcome. The programs written by Mr Murray included both ‘source code’ and ‘object code’. For present purposes ‘source code’ is code capable of being read and understood by humans. ‘Object code’ is code capable of being read and understood by machines. Mr Murray wrote the source code using Pascal and Delphi. Those programs and the Windows operating system then produced the relevant object code to enable the computer to give effect to the instructions contained within the source code.
21 It is obvious that some of the computer code written by Mr Murray in different programs will necessarily have some similarity to other code in different programs even if the programs do not involve any breach of copyright. So, for example, Pascal requires that the first couple of lines of code contain various identifying words. The order in which these words are entered can be varied, but it might be expected that any programmer using Pascal might usually write these lines in the same way. Similarly, if the programmer uses Delphi to develop the Pascal code for (say) displaying a blue dialogue box of a particular size and position on the computer screen then the resulting computer code will be the same if the box is the same, even if the programs have nothing to do with each other. The Windows operating system also imposes its own constraints and conventions upon the programmer. The result is that it can be expected that there will be some similarity in computer code even if there is no copying. Of course, this is not a surprising result. It is comparable to the constraints imposed by the conventions of language, spelling and grammar in relation to other forms of literary works.
22 Mr George, a research fellow and software engineer at the University of South Australia gave evidence in relation to the similarity between some of the software on which TCI had the copyright under the deed of 15 January 2003 and some of the software for the ‘Phone Wizard’. It would appear that some of the object code necessary to make the software operational was not supplied to Mr George. The result was that Mr George could not actually operate the programs, other than E-call24.com and Phone Wizard. Nor could he identify what use particular files might serve either in those programs or in other programs.
23 Notwithstanding those limitations, he was able at least to compare the various software files that had been provided to him. Accepting, as he did, that some similarity was the inevitable result of the constraints of computer language and of computer syntax and of operating systems, Mr George conceded that a numerical comparison of the number of lines of code that were exactly the same was unlikely to mean very much by itself. He accepted in particular, that such comparisons were of limited value in relation to short lines of code and in relation to short files. Instead he attempted to ‘rank’ particular computer program files on the basis of the number of long lines of code (more than 25 characters in the line) that were exactly the same. The purpose of doing so was to identify the particular computer files that should then be compared line by line in order to identify relevant similarities. As he put it in his evidence:
‘HIS HONOUR: Mr George, as I have understood your evidence - and tell me if I have misunderstood - your mathematical calculations and comparisons drive you to a ranking of files?---That’s correct.
And for the purpose of seeing in fact what are the files that you should be looking at more closely?---Yes.
And you have then looked at them more closely, line by line, and that is your appendix 2?---Yes.
The mathematical calculations identify all sorts of things but the consequence of it is you look at it line by line, which is your appendix 2, and then you look at those lines and see what they show you?---Yes.’
24 The result of that ‘ranking’ was the identification of two files to be compared. The first was a Phone Wizard file called phonewiz_svr.pas. The other was a much longer file called aus3000_1.pas. It was accepted by both parties that the file aus3000_1.pas was one of the files contained on a disc delivered to TCI pursuant to the Supreme Court order. It can be accepted that aus3000_1.pas was a file in which TCI held and holds the copyright. It is not altogether clear what product that file formed part of. Mr George was unable to say. His evidence was that the file was to be found in a directory ‘\edgley\Ecall24_src\’. This may suggest that the file formed part of the E-call24.com product, but no evidence was led to establish that it did so. Mr George’s evidence was that he was unable to say what product the file was associated with. (The question of what was the relevant ‘computer program’ is discussed further below).
25 Some 86% of the lines of code in phonewiz_svr.pas are exactly the same as lines of code in aus3000_1.pas. On the other hand, given the greater length of aus3000_1.pas, only 28% of the lines of code in that file are exactly the same as those in phonewiz_svr.pas. Accepting Mr George’s evidence, these mathematical similarities are of only limited relevance in themselves. The purpose of doing the mathematical exercise is to identify the relevant files which then needed to be compared line by line. For this purpose Mr George prepared a document which set out, line by line, the code for the two files. All lines of code that were exactly the same as a line of code in the other file were marked (see exhibit A 14).
26 When the respective lines of code are compared it is clear that that there are large numbers of lines of code which are not only the same, but which are more or less in the same sequence. For example, lines 304-446 of phonewiz_svr.pas (totalling 142 lines) seem to be not only the same as lines 1187-1332 of aus3000_1.pas (totalling 145 lines), but, save for the addition of an extra 3 lines of code in aus3000_1.pas, they seem to be in the same sequence. Is this evidence by itself, sufficient to establish that there has been a ‘substantial’ reproduction or adaptation so as to involve a breach of copyright?
27 In this regard I note that the High Court has held that in determining whether something is a reproduction of a substantial part of a computer program the ‘essential or material features of the [computer program] should be ascertained by considering the originality of the part allegedly taken’. This is to be assessed with ‘respect to the originality with which it expresses that algorithmic or logical relationship’ which is the essential feature of a computer program: see Data Access Corporation v Powerflex Services Pty Ltd (1999) 202 CLR 1 (‘Data Access’) at 33.
28 What then was the ‘original’ or ‘essential’ aspect of the computer program that it is alleged that the respondents have reproduced? There was little evidence in relation to this question. Mr George was unable to say what either file did. Mr Murray gave evidence that the phonewiz_svr.pas file was part of the source code for ‘Phone Wizard’. He said that it was that part of that product that instructed the relevant computer (in this case the hardware box) to record telephone calls. However, there was no evidence of whether there was anything significant in the various lines of code in either file that were the same. There was no evidence that there was anything particularly original in the files themselves, in the particular code that was the same or in the relevant function being performed.
29 Mr Murray gave evidence that the code in the Phone Wizard (including the file phonewiz_svr.pas) was not the same as the source code in TCI’s software. He acknowledged that there were some similarities, but said that the Phone Wizard had been totally rewritten by him. Such similarities as there were, he ascribed to the constraints of computer language within a context where the functionality of the programs was broadly the same. In relation to the particular lines of code that were the same and which are specifically identified above, Mr Murray said:
‘What explanation do you have as to why they’re the same?---The simplest thing is, it’s very difficult to invent a square wheel. I’ve been dealing with this software for quite some time. I had an almost identical job, with the same hardware constraints, and I guess frankly, your Honour, it’s remarkable that there is so much difference between them.
Yes. If someone else, completely independent of you, was doing the same task, would they end up with it being drafted the same way - that is to say, is the reason it’s the same in part at least because it’s you?---In part, your Honour, but also there are constraints put on by the hardware, and I would be very surprised if it didn’t end up considerably the same - not as much the same, of course - they would probably use different variable names than I’ve used, but other than that, I would be surprised if it wasn’t - what’s your definition of the word ‘considerable’ - but it would be very similar.
This code here was not produced by Delphi? This is your drafting, not the machine’s drafting?---That’s correct, although there are some items in there which are absolutely unavoidable.
Yes?---Like, for instance, on page 76, lines 309, 310, 311, those constructs are demanded by the language that you’re using …’
30 Mr George did not directly deal in his evidence with what conclusions should be drawn from the repetition of specific lines of source code in the different products. He did say, in apparent response to a question asked by Mr Brohir, that he did not think that the duplication of lines in phonewiz_svr.pas and aus3000_1.pas was ‘unremarkable’, but it is not altogether clear what was meant by that answer. Mr George did conclude that the ‘Phone Wizard’ was ‘similar overall’ to TCI’s programs. However, that conclusion would seem to be based not only on ‘some imitation’ in the source code, but also on the similarity in the functionality and the screen appearance of E-call24.com (being the only TCI product that Mr George saw in operation) as against ‘Phone Wizard’. He said that this similarity showed that the ‘Phone Wizard’ was a reproduction of TCI’s copyright. Indeed, both Mr George and Mr Phillis gave evidence of the similarity both of the function and of the appearance of the E‑call24.com and of ‘Phone Wizard’.
31 However, I am not sure what the purpose of that evidence actually was. It may have been based upon a view apparently held by Mr George that if the functionality and the appearance of the two products was the same this would necessarily mean that the computer code was also the same. If this was the view he held then it was a view that did not survive his cross examination. Mr George accepted in cross examination that various programming techniques could be used with the result that differently constructed code could have the same functionality and produce the same screen appearance. As pointed out above, TCI’s case both as pleaded and as argued was squarely based upon breach of TCI’s copyright in the computer program, not in the screen image considered separately from that program. This may have been a sensible approach for TCI to take: see the Report at 9.37 ff. Of course, functionality, as such, is not protected by the law of copyright. The result is that the functionality and the screen appearance are only relevant in this case for what they suggest about the programming code. Those suggestions do not take the matter very far when there is specific evidence of what the programming code is and when the only independent expert accepted that there may not be a direct relationship between similar functionality and screen image, on the one hand, and similar code on the other.
32 In any event, I am not convinced either that the functionality or the screen appearance of E-call24.com and of Phone Wizard are so similar as to suggest improper copying. They are certainly similar. However, Mr George accepted that for the benefit of the consumers and to reduce the amount of training that might otherwise be required the computer industry does attempt to create some similarity in the appearance of software performing similar tasks. The similarity in appearance and practical operation of word-processing programs such as Word and Wordperfect is an obvious example. Such similarities are entirely desirable. They do not involve any breach of copyright. In my view the similarity in appearance and function of E‑call24.com and of Phone Wizard is of a similar order. Such similarity does not suggest or infer any breach of copyright.
33 An even more basic problem with the evidence of similarity in function and appearance is that the file (aus3000_1.pas) identified by Mr George as being that to be compared with phonewiz_svr.pas was not proven to be part of E-call24.com. As Mr George said in his report, ‘The directory structure of the relevant CDs provide clues, but these are inconclusive’. However, the evidence of functional and presentational similarity was limited to E-call24.com and Phone Wizard. In the absence of any evidence establishing that the file aus3000_1.pas was part of E-call24.com, or that the same functional and presentational similarity existed with the other products in which TCI owned the copyright, it is simply not possible to draw any connection between the statistical similarity in the code contained in the two files and the functional and presentational similarity of the two products.
34 The result is that Mr George’s evidence was not particularly helpful on the critical question of whether the fact that lines of code in the two different files (and, indeed, in other files) was the same, necessarily meant that Phone Wizard was a copy of a ‘substantial part’ of the E-call24.com or of any other software of which TCI owned the copyright.
35 In light of the limited exploration in the evidence of whether the Phone Wizard software code is a copy of a ‘substantial part’ of the code in which TCI owns the copyright I am not satisfied that Logea has infringed TCI’s copyright. The only evidence of actual duplication of software code that is before me and on which the applicant can rely to establish an infringement of its copyright was the duplication between the files phonewiz_svr.pas and aus3000_1.pas. The evidence was insufficient to show that that duplication involved anything that was ‘essential’ or ‘original’. The evidence was insufficient to satisfy me that the relevant duplication was other than the consequence of the task being performed, namely the recording of telephone calls for the purpose of training staff. This is not an original or unique function, as anyone who rings an airline can attest. The case that has been put requires a comparison line by line of software code between two particular files and only two files have been proved for that purpose. In each case the code was prepared using a proprietary software language. In these circumstances the evidence, such as it is, is simply insufficient to make any inference that there was some reproduction of the TCI’s software. The only evidence that has been provided deals with the ‘quantity’ of any similarity rather than the ‘quality’ of it. I accept that if the evidence of quantity is very compelling, it may be sufficient by itself: see Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 (‘Accounting Systems’) at 509. However, that is not this case.
36 The above discussion assumes that the relevant files comprise ‘computer programs’. It was not established that they do. It is clear that a computer program is not merely a specific instruction to a computer. Rather it is a set of instructions that are intended to achieve a specific result. Consequently a specific computer file is not necessarily a ‘computer program’. In each case it is necessary to determine what the particular file does and what its relationship is with other files. It seems to me that there is no reason in principle why a computer program cannot form part of a larger computer program. The result may be that the file, considered by itself (which would probably include the relevant hardware and, probably, the relevant operating system), is fully functional, even if it also operates as part of a larger program. However, it is necessary for there be some evidence to show that the relevant file (or files or, even, part of a file), considered by itself, is fully functional such that it can properly be described as a ‘computer program’: see Accounting at 507-508; Data Access at 23-27; Australian Video Retailers Association Ltd v Warner Home Video (2001) 114 FCR 324 at 340-341. There was no such evidence in this case. This diminishes significantly whatever force there may otherwise have been in the statistical comparison of the two files phonewiz_svr.pas and aus3000_1.pas. If those files are not themselves computer programs, the question then becomes whether the similarity between the code in those files is sufficient to show that a ‘substantial part’ of the code in the entire computer program is the same. There is no statistical evidence in relation to that question: contrast Accounting at 391. Indeed, there was no evidence as to what computer program aus3000_1.pas was associated with. Even assuming it formed part of the E-call24.com program, there was no evidence as to what other files formed part of that program. Consequently, even if (contrary to my view) the statistical and line by line comparison of the files phonewiz_svr.pas and aus3000_1.pas did suggest that a substantial quantity of phonewiz_svr.pas was a copy of aus3000_1.pas this would not be sufficient to establish that a substantial quantity of the relevant computer program (be it Phone Wizard or some part of it) was a copy of some computer program in which TCI owned the copyright.
37 Two further matters need to be noted in regard to this issue. The first is that TCI argued that s 21(5) of the Act was relevant to my consideration of this question. That subsection provides:
‘For the purposes of this Act, a computer program is taken to have been reproduced if:
(a) an object code version of the program is derived from the program in source code by any process, including compilation; or
(b) a source code version of the program is derived from the program in object code by any process, including decompilation;
and any such version is taken to be a reproduction of the program.’
In my view that subsection was intended to give effect to the recommendation in par 6.58 and following of the Report. It was intended to address the concern that the adaptation of source code to object code (or vice versa) was not an infringement of the owner’s copyright. There is no suggestion in this case that there has been any relevant adaptation of source code to object code or vice versa. The issue in this case is whether there has been a reproduction of a substantial part of a computer program. For the purposes of this case the relevant code that was considered by Mr George and about which he gave evidence was source code. In my view s 21(5) of the Act has no application to this case. Even if it did, it would not obviate the need to resolve the issue of whether what had been reproduced was a ‘substantial’ part of the program, which is the issue that is dealt with above.
38 The second matter is that TCI placed particular reliance upon various e-mails between Mr Murray and MSA. These e-mails were sent during the course of the Supreme Court litigation between TCI and Scribe. The e-mails do not contain any admission by any of the respondents that any of them was deliberately breaching the rights of TCI. In an e-mail of 28 June 2002 Mr Murray claimed he was ‘altering’ the software so as to make it substantially different. Nevertheless, taken together the e-mails are consistant with Mr Murray’s evidence, namely that he disputed that TCI owned the copyright in any of the software which was the subject of the Supreme Court proceedings, but that he was seeking to avoid whatever consequences might flow to his business from the interlocutory and final injunctions that were made in that litigation. He attempted to do so by incorporating Logea and by seeking to rewrite the software so as to avoid whatever rights TCI might have. Whether he was successful in that is the subject of these proceedings.
39 There is some suggestion in TCI’s pleadings that in attempting to avoid the consequences flowing from the orders of the Supreme Court the respondents, or some of them, abused the processes of the Supreme Court. If that issue is to be pursued it must be done in the Supreme Court. That Court is a superior court of record - it has the jurisdiction, power and entitlement to protect its own processes.
40 Consequently I am not satisfied that the second to fifth respondents have breached TCI’s copyright in any of the software programs transferred to TCI on 15 January 2003.
41 This conclusion has the necessary effect that the actions of the respondents prior to 15 January 2003 in relation to the development and sale of Phone Wizard could not have breached any copyright held by TCI prior to that date. Consequently there is no need to determine whether TCI held the copyright in any of the software programs before the transfer. However, most of the evidence put before me was directed to that issue, notwithstanding that its relevance was limited to the initial development of the Phone Wizard (which would seem to have occurred prior to 15 January 2003) and to the publication and sale of ‘Phone Wizard’ prior to that date. Having been fully argued it is appropriate that I say something in relation to it:
(a) The question of whether TCI held the software in the relevant computer programs before they were transferred to TCI on 15 January 2003 was one of the issues for resolution in the Supreme Court proceedings. The final resolution of those proceedings was the agreement to transfer the copyright and the orders made consequent upon that. One of those orders was an order dismissing the other claims made by TCI other than those in relation to which specific orders were made. This included an order dismissing an application by TCI for a declaration that TCI was the owner of the copyright in the relevant software programs. The second to fifth respondents argued that the effect of the order was that TCI could no longer argue that before 15 January 2003 it had been the owner of the software programs.
There are two answers to this. First, in order to raise the pleas of res judicata or of issue estoppel the order made by the Supreme Court must be a final adjudication on its merits of the cause of action and/or the ultimate facts that are sought to be relitigated in these proceedings: see Brookfield v Davey Products Pty Ltd [2000] FCA 448 at [37]-[39]. Given the terms of the settlement deed and the fact that a declaration may be refused for discretionary reasons I do not think that it can be said that the order of the Supreme Court dismissing TCI’s application for a declaration that it owned the copyright can be considered a final adjudication on the merits of the issue of ownership.
Second, whatever the position might be in relation to the second to fourth respondents, Logea was not a party to the Supreme Court proceeding. Nor, for the reasons given above, was TCI aware of Logea or its role. There was no material before me to suggest that it should have been. Whatever might be said about the other respondents, in my view there is nothing to stop TCI pursuing its claim against Logea and, for that purpose, establishing that TCI owned the relevant copyright.
In my view TCI is not prevented from pursuing a claim for breach of copyright in the development, publication and sale of Phone Wizard by the Supreme Court proceedings or by the agreements and orders which resolved those proceedings.
(b) TCI asserts that Mr Murray, on behalf of Scribe, agreed that TCI should own the copyright in the software programs that he was authoring on the instructions of TCI. It was contended that the agreement was an oral agreement and that it was made at a meeting between Mr Phillis and Mr Murray in early 1996 and that it was renewed or remade subsequently. Mr Degenhardt also gave evidence in relation to the 1996 meeting. He confirmed that Mr Phillis asserted that he would own the intellectual property and that Mr Murray agreed. Mr Phillis also gave evidence that in ‘early 2000’ during the development of the E-call24.com program he asked Mr Murray who would own the software. He said that Mr Murray had agreed that TCI owned the software, but said that ‘if something happened to me my wife would not hold the same view’. Mr Phillis also gave evidence of a meeting involving Mr Murray, Mr Beer and Mr Phillis on 6 May, 2002. His evidence was confirmed by Mr Beer. It was that Mr Phillis asserted ownership of the software on behalf of TCI and that Mr Murray agreed. That agreement was recorded in the minutes taken by Mr Beer of that meeting. However, the minutes taken by Mr Beer also record that the agreement was to be contained in a written agreement to be prepared by TCI’s solicitors. This is consistent with Mr Murray’s version of that conversation.
On the other hand, Mr Murray gave evidence that it was his understanding throughout the relevant period that an oral agreement was completely ineffective to transfer the author’s rights to copyright. Although he was amenable to the transfer of the copyright he said that he told Mr Phillis that a written agreement was required for that purpose. He said that Mr Phillis agreed from time to time to have such a written agreement drawn up, but it was never done:
‘HIS HONOUR: Mr Murray, you’ve given evidence of the discussions that took place between you and Mr Phillis over the years about the ownership of the software?---Yes, your Honour.
Was it your understanding that Mr Phillis wanted to own the software - sorry, the intellectual property?---Well, every time I brought it up he said he would get documents drawn up by Edgley. He never did, so ‑ ‑ ‑
No, I understand that, but this is what I’m trying to suggest to you: your position, as I understand it, was that unless an agreement was drawn up you owned the software?---That’s correct.
You accept that Mr Phillis said that he was going to get some agreements drawn up?---Yes, your Honour.
Was it your understanding that if those agreements had been drawn up on Mr Phillis’s instructions they would have involved Mr Phillis owning the intellectual property?---That’s correct, your Honour.’
His evidence was that at the meeting at which Mr Beer was present he did not agree that Mr Phillis owned the software, only that Mr Phillis would do so after a written agreement was signed. As noted above, the minutes do record that a written agreement was to be prepared.
As can be seen the evidence of what was agreed at the various meetings is not so far apart as the pleadings or witness statements might suggest. There is no dispute that discussions took place as to the copyright in the computer programs. There is no dispute that Mr Phillis was asserting an entitlement to the copyright. There is no dispute that Mr Murray was prepared to transfer the copyright. There is no dispute that no written agreement to assign the copyright to TCI was ever prepared or executed until 15 January 2003. The only issue in dispute is whether Mr Murray asserted to Mr Phillis that it was necessary for any such transfer to be effected by an agreement in writing. On balance I am satisfied that he did make that assertion.
(c) In any event, this factual dispute occurs in a legal context. TCI submitted that, as a matter of law, TCI owned the relevant copyright by reason of s 35(6) of the Act. In the context of this case that subsection has the effect that if an employee made the computer program ‘in pursuance of the terms of his employment by another person under a contract of service’ then it is the employer who owns the copyright rather than the employee.
As a matter of law that submission must be rejected. There may be some cases where it is difficult to distinguish an employee from an independent contractor, or a person engaged under a contract of service from a person engaged under a contract for services: see, for example TS & B Retail Systems Pty Ltd v 3fold Resources Pty Ltd (2003) 57 IPR 530; (‘Retail Systems’) at [13]-[15]. But that is not this case. In this case there is no doubt that TCI engaged Scribe as an independent contractor to provide the relevant services. Mr Murray acted for and on behalf of Scribe. Plainly Scribe was engaged under a contract for services. It was not an employee of TCI. Nor was Mr Murray.
Under the Act the copyright was vested either in Scribe, as Mr Murray’s employer, or in Mr Murray as the author: see s 35 of the Act.
(d) In the alternative, TCI submitted that Scribe had made an equitable assignment of the copyright. This submission was not obviously supported by any pleading. It was not explained in any detail. Section 196(3) of the Act provides, ‘An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.’ An assignment of an equitable interest in a copyright must also be in writing: see Law of Property Act, 1936 (SA) s 29(1)(c) and see Roban Jig Tool Co Ltd & Elkadort Ltd v Taylor & Ors [1979] FSR 130. Prior to the deed of 15 January 2003 there was no written assignment in this case of either the legal or the equitable interest. Nor could any such assignment be implied in the terms of such written agreements as existed between the parties.
Nevertheless, parties can, by an oral agreement given for valuable consideration, create (in contrast to ‘assign’) an equitable interest in copyright, which interest can then be enforced against the copyright owner and others (although the owner of the legal estate may need to be joined as a party): see Acorn Computers Ltd v MCS Microcomputer Systems Pty Ltd (1984) 57 ALR 389, 393-394. However, in this case the applicant has failed to establish any relevant oral agreement to assign the ownership of the copyright. As I have already found, the relevant agreement (such as it was) was that Mr Murray would execute a written transfer of the copyright when it was drafted. It never was, at least until the settlement of the Supreme Court proceedings. In my view it is not established that TCI owned a relevant equitable interest in the copyright in the relevant software prior to 15 January 2003.
It might have been argued that Mr Murray was estopped from denying the right of TCI to assert an equitable or even a legal interest in the copyright: see Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244, 262-264. Whether or not this could have been argued, it was neither pleaded or argued. Given the factual findings that I have made it would seem most unlikely that any such claim could have succeeded if it had been made.
Nothing in this analysis should be taken as suggesting that TCI did not have a licence to rent or sell the software to its customers. It plainly did have such a licence. It was implicit in the written and oral contracts as existed between TCI and Scribe. However, the question of the existence of any such contract, its terms and whether or not it was breached were properly matters that should have been raised in the Supreme Court proceedings, assuming that TCI wished to pursue them. They are not issues that have been pleaded or argued in these proceedings.
42 Consequently it is my view that TCI did not own the copyright in the relevant the computer software comprising E-call24.com (or its precursors) prior to the written assignment of that copyright by the deed dated 15 January 2003. Prior to that time the copyright in relation to the software which was written by Mr Murray was held either by Scribe or by Mr Murray. However, as already mentioned above, the question of who owned the copyright prior to 15 January 2003 strictly does not arise because in my view the creation, production, publication and/or sale of Phone Wizard was not a breach of the copyright, even assuming that it was held by TCI.
43 Before leaving the question of copyright it is probably also sensible to mention the position of Scribe and of the third respondent, Mrs Murray. In relation to Scribe, there was no evidence that it had actually developed the Phone Wizard software or that it sold it. It would appear that Scribe entered into a contract with MSA to sell to MSA the E-call24.com product. Mr Murray claimed that that contract was terminated before the contract was completed. In any event, that attempted sale was known to TCI and formed the basis for TCI issuing the Supreme Court proceedings. Any breach of copyright in relation to E-call24.com was resolved in the Supreme Court proceedings. Mr Murray claimed that it was Logea that developed the Phone Wizard. It would seem to be clear that it was Logea that sold it. There seems to be some understandable confusion as to which company was doing what during the transitional period, but I am not satisfied that Scribe breached any copyright held by TCI in relation to the development and subsequent exploitation of the Phone Wizard, even assuming that TCI held the copyright and the Phone Wizard was a copy of a substantial part of it.
44 Although the pleading alleges that Mrs Murray performed all acts that were otherwise the acts of Mr Murray or of Scribe or of Logea there was no evidence called which showed that Mrs Murray had any role other than as shareholder and sometime director of Scribe and Logea. In particular there was no evidence that she personally wrote, published or sold any software. There was no evidence that she knew of any breach of copyright even assuming that it existed. What evidence there was suggested that all acts in which she could have had any role were supported by legal advice that such acts did not involve any breaches of copyright. Against this background there was no basis for any claim against her personally: see King & Rylands v Milpurrurru & Ors (1996) 66 FCR 474; Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 at 241-246. Whatever may be said in relation to the other respondents, there seemed no proper basis for joining Mrs Murray as a party to this action.
Breach of Confidence
45 There being no breach of copyright, the next question is whether the acts of second to fifth respondents or any of them breached any duty of confidence owed by one or other of them to TCI. For the same reasons as those given above, the claim concerning Scribe and Mrs Murray cannot be sustained. It is only necessary to consider whether Mr Murray and/or Logea breached any duty that either of them may have had to TCI in relation to confidential information.
46 There was no written contract dealing expressly with any duty of confidentiality owed by Logea or Mr Murray to TCI. No implied contract has been pleaded. TCI’s case in relation to confidential information is based upon equitable principles. Equity will act to protect confidential information, or to grant remedies for breach of confidence in certain circumstances. Although the issue may still remain open, the better view is that confidential information is not property and equity does not protect it in that capacity: see Breen v Williams (1996) 186 CLR 71 at 81, 90, 126-129; Retail Systems at [24]-[25]. Nevertheless, it does have some similarity to property in that the information may be protected even in the hands of a third party.
47 The principles upon which equity will protect confidential information were usefully summarised by Goldberg J in Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 405-406:
‘The principles upon which the protection of confidential information is based are well established. Information to be confidential must be capable of being given the attribution or quality of confidence, that is it must be something which is not within the public knowledge: Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, 215; AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] NZLR 515, 521. A useful analysis of relevant indicia of confidential information is found in Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovic [1973] VR 784 at 796-798 and I adopt that analysis. A proceeding for breach of confidence requires the establishment of three elements - the information must have the necessary quality of confidence, the information must have been imparted in circumstances identifying an obligation of confidence and there must be an unauthorised use of that information to the detriment of the person who claims the confidence: Coco v AN Clark (Engineers) Ltd [1969] RPC 41,47; The Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39, 50. The information in respect of which confidentiality is claimed must be capable of being identified with a degree of specificity; it is insufficient to claim confidentiality in general or global terms: O’Brien v Komesaroff (1982) 150 CLR 310, 326-328; Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434, 443. Apart from cases of contract or where property rights are involved, a court will intervene where the circumstances are such that it is unconscionable for a party to use confidential information: Fraser v Evans [1969] 1 QB 349, 361; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 191.’
Reference can also be made to the similar identification of the applicable principles by Gummow J in Smith Kline & French Laboratories (Australia) Ltd & Others v Secretary, Department of Community Services & Health (1990) 22 FCR 73 at 87. (It is noted that Gummow J did not require that there be a ‘detriment’ to the confider of the confidential information. However that distinction may not be critical in most cases given the requirement of ‘unconsionability’ which plainly does require some consideration of the practical effect on the confider of the release of the information).
48 The requirement of ‘unconsionability’ (see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 (‘Lenah’) at 218-219, 244-246) involves some consideration of the broader public interest. Consequently, confidential information in relation to government activity will not be protected if to do so would curtail freedom of speech: see Commonwealth v John Fairfax & Sons Ltd & Ors (1980) 147 CLR 39 at 51-52. Similarly, given the broad policy of the law to protect freedom to trade, confidential information will not be protected in circumstances where such protection, if it were conferred by contract, would involve an unlawful restraint of trade: see, in relation to that policy Maggbury Pty Ltd v Hafele Australia Pty Ltd & Anor (2001) 210 CLR 181 (‘Maggbury’) at 213-215; see also at 202 [54] and see generally Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services & Health (1991) 28 FCR 291 (‘Smith Kline’)at 304-305. It is noted that such contracts might also be unlawful pursuant to the Trade Practices Act, 1974 (Cth) (‘the TPA’) ss 45, 45E, 47 and 51(2)(b). Again, it would not be expected that equity would protect a right where, if the right were expressly conferred by a contract, it would be unlawful.
49 Given these constraints it is not surprising that TCI primarily rested its case on statutory copyright, rather than equitable confidential information. Nevertheless, the claim for breach of confidential information was not withdrawn. As already noted the essence of the claim is the confidentiality of the relevant material. In this case that confidentiality must be inferred from the respective purposes and actions of the parties and from the surrounding circumstances. As it was put by the Full Court in Smith Kline at 302-303:
‘One learned commentator has remarked:
“The test which has found widespread acceptance is whether or not the information was disclosed for a limited purpose. If the information was disclosed for a limited purpose, the confidence crystallises around that limited purpose. The confidant will be bound by an obligation the content of which is not to use or disclose the information for any purpose other than the limited one for which the information was imparted.’: see F Gurry in Finn, Essays in Equity (1985), P 118.”
In many circumstances, that suggested test will produce a proper result, but the circumstances in which confidential information is supplied may vary widely. To determine the existence of confidentiality and its scope, it may be relevant to consider whether the information was supplied gratuitously or for a consideration; whether there is any past practice of such a kind as to give rise to an understanding; how sensitive the information is; whether the confider has any interest in the purpose for which the information is to be used; whether the confider expressly warned the confidee against a particular disclosure or use of the information - and, no doubt, many other matters.’
50 As pleaded the claim seemed to be based upon an inference of confidentiality to be drawn from the disclosure to Mr Murray by Mr Phillis of the various training programs written by Mr Phillis. As already mentioned, the software written and prepared by Scribe was intended to form an integral part of those training packages. However, no detail was given in the evidence as to how that integration operated in fact.
51 Even if such detail had been provided, there would seem to be two fundamental problems with a claim to confidentiality based upon the training packages. First, those training packages were provided to various clients of TCI for use by them. There was no evidence given as to how or to what extent those training packages were confidential or secret. Subject to an assertion by TCI of copyright in relation to the training packages the evidence (limited as it was) was that the training packages were in the market place. They were not relevantly ‘secret’.
52 Secondly, there was no evidence that Phone Wizard was used either in connection with the training packages produced by Mr Phillis or in connection with other training packages that were similar to those packages. What evidence there was seemed to suggest that the Phone Wizard was sold as a ‘stand alone’ product for the purpose of recording telephone calls. Presumably it was used by those that purchased it for training their staff, but not necessarily as part of any integrated training package. Assuming that the confidential aspect of the information arose out of the integration of the software with the training program, there was no evidence that this aspect had been breached.
53 Although the claim as pleaded was based on the confidentiality of the training packages, in his evidence Mr Phillis referred to other, or at least, more specific, information which he says that he disclosed to Mr Murray. It may be accepted that Mr Phillis had the initial ‘concept’ of integrating telephone recording systems with sales training. As he said in his evidence:
‘I had the concept - a totally new concept - for an application of telephone monitoring in the retail car trade, based on the recording of both the customer’s side of the conversation and the salesperson’s side of the conversation, together with training that was specifically developed to enhance the productivity of the salespeople in the inbound call environment.’
It may also be accepted that he identified the need for various advancements in that concept from time to time, both from his understanding of the retail motor vehicle industry and from his observations, primarily overseas, of other products doing similar tasks.
54 The originality of the concept does not take the issue very far, at least given the periods of time involved in this case and the fact that the relevant products were subsequently developed and released to the market place. Once they had been released to the market place there was no obvious basis for inferring any duty of confidentiality merely because the information was initially original: contrast Maggbury at 198-199.
55 In order to make out its case on this ground TCI needed to show that there was something about the relevant information and/or about the relationship of the parties from which continuing confidentiality might be inferred. No detail was provided to the Court as to the confidentiality of the information. It may be inferred from Mr Phillis’s evidence that the relevant information consisted of details of the retail motor vehicle industry which Mr Phillis imparted to Mr Murray and which were incorporated into the software written by Mr Murray and the hardware produced by him. There was little detail in the evidence about the secrecy of this information. In relation to the Lifeline product Mr Phillis gave evidence that he instructed Mr Murray as to various enhancements that should be contained in that product, including the display of information in graphical form and the exchange of information using e-mails. At least some of those enhancements also appear in the Phone Wizard. However, there was no evidence that any of these enhancements were relevantly ‘secret’.
56 Mr George (who admitted to knowing little about the retail motor vehicle industry) and Mr Phillis both gave evidence about the presentational similarity of some of the screen displays in Phone Wizard to some of those in E-call24.com. I have already remarked on that similarity. None of it seemed to be related to any information proven to have been imparted by Mr Phillis to Mr Murray. The issue that was specifically referred to by Mr George involved a screen display in both E-call24.com and Phone Wizard that referred to ‘present month’ and ‘previous month’ which Mr George thought was significant in not referring to the names of the actual month. Leaving that issue aside, Mr Murray’s evidence was that the design of that feature was made by him on the basis of his understanding of the functionality of the product. In any event, it was not established that any of the relevant similarity involved anything which might be described as confidential.
57 As to the relationship between TCI and Mr Murray, it is clear that Mr Murray was closely involved in the planning for the development of the software. This is reflected in the retainer agreement between Scribe and TCI. Until the breakdown in the arrangements Mr Murray was part of what might be thought of as the ‘development team’, notwithstanding that he remained an independent contractor. It may readily be inferred that Mr Murray (and consequently Scribe and Logea) owed some duties of confidence to TCI. It is unnecessary to explore the detail and nature of such duties. They might include, for example, a duty not to disclose financial information about TCI’s operations. They might include a duty not to disclose customer information. (I note that some information of this sort was disclosed by Mr Murray to MSA. It was not pleaded that such disclosure breached any duty and the evidence was not detailed enough to show that the information was, in fact, confidential: see Forkserve Pty Ltd v Pacchiavotta (2000) 50 IPR 74 at [18]-[19]). As the cases show, this is the sort of information that might be confidential.
58 So too it might be inferred that Mr Murray (and consequently Scribe and Logea) owed a duty of confidence to TCI in relation to the actual software written by Mr Murray for TCI. Consequently it might be inferred that Mr Murray, having been engaged to write software for TCI which TCI intended to exploit as part of its own package, could not then distribute the same software in the market place. Whether or not it would be appropriate to make any such inference in this case is unnecessary to determine. The evidence was that the intention by Scribe to sell the E-call24.com software to MSA was thwarted by the institution of the Supreme Court proceedings. In any event, in light of those proceedings, that issue could not now be pursued in this Court. And I have already held that I am not satisfied that Phone Wizard is relevantly the same product as E-call24.com.
59 Having decided that the Phone Wizard is a different product to E-call24.com then in order for TCI to succeed in its claim based on confidential information it must show that there was something confidential about the functionality of E-call24.com or of one or other of the other products that Mr Murray had developed or had been instructed to develop. There is no evidence to show that the functionality of any of these products was confidential.
60 In relation to all of the products except Lifeline, the products had been released to the market well before the Phone Wizard was first sold to MSA. There is no obvious reason why Mr Murray should be subject to a duty of confidence which would prevent him doing what anyone else could do. On the evidence before me there was no reason why anyone else could not look at the operation and functionality of the E-call24.com system at any of the dealers where those systems were in operation. Anyone else could then rewrite that software so as to achieve similar functionality.
61 The evidentiary problems faced by TCI in relation to this claim also have the effect that TCI was unable to identify with any specificity (or at all) what information it claimed was subject to any duty of confidence.
62 In my view the evidence does not establish that the sale by Logea of Phone Wizard breached any right of confidentiality in TCI. The claim for breach of such a right must be dismissed.
PASSING OFF / MISLEADING CONDUCT
63 TCI claims that the Phone Wizard was deceptively similar to the E-call24.com product with the consequence that the second to fifth respondents by use of the program represented that the Phone Wizard product had a connection with TCI’s product. TCI alleged that the second to fifth respondents breached duties owed to TCI pursuant to the tort of passing off and pursuant to the TPA.
64 The short answer to this claim is that the Phone Wizard was only sold by Logea. It was only sold by it to MSA. It seems clear that Logea informed MSA that the product was not associated with TCI, but was a new product. Against this background it is clear that TCI cannot maintain an action for passing off or for misleading conduct even against Logea or Mr Murray. For the reasons given above, no action could be maintained against Scribe or Mrs Murray in any event.
65 For these reasons I conclude that the second to fifth respondents are not liable in these proceedings to TCI. The application will be dismissed. I will hear the parties as to costs.
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I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway. |
Associate:
Dated: 21 July 2004
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Counsel for the Applicant: |
E B M Jolly with K Freeman |
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Solicitor for the Applicant: |
Doman Lawyers |
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Counsel for the First Respondent: |
N G Rochow with M R Bevilacqua |
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Solicitor for the First Respondent: |
Montgomery & Co |
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Counsel for the Second to Fifth Respondents: |
F C Brohier |
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Solicitor for the Second to Fifth Respondents: |
Mead Robson Steele |
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Date of Hearing: |
31 May – 4 June, 8 June 2004 |
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Date of Judgment: |
21 July 2004 |
