FEDERAL COURT OF AUSTRALIA

IPC Global Pty Ltd v Pavetest Pty Ltd (No 4) [2017] FCA 260

ORDERS

THE COURT DECLARES THAT:

1.    The first respondent, by the third respondent reproducing the source code for the system library and the test modules UTS001, UTS002, UTS003, UTS004, UTS006, UTS018 and UTS019 of the original computer program known as “Universal Testing Software” (UTS Software) onto the computer provided to Mr Bin Li (Mr Li) in or around November 2012, has infringed the copyright subsisting in the UTS Software.

2.    The first respondent, by the creation, development, reproduction and distribution of version 1 of the software known as the “Pavetest TestLab Software” (Pavetest TestLab Software), has infringed the copyright subsisting in the UTS Software.

3.    The second and third respondents, and each of them, have authorised the infringement by the first respondent of the copyright subsisting in the UTS Software.

4.    The third respondent, by:

(a)    providing the source code for the UTS Software as well as the communications protocol documents for the UTS Software which comprise Annexures “BJRF5” and “BJRF6” to the affidavit of Mr Bhathiya Jeewaka Raveendra Fernando affirmed 7 October 2015 to Mr Li without the applicant’s consent; and

(b)    thereby assisting Mr Li to develop the Pavetest TestLab Software,

breached a duty of confidence he owed to the applicant.

5.    The first to third respondents, in the creation of the controller known as the CDAS, misused the applicant’s confidential information in the firmware for the controller known as the IMACS.

THE COURT ORDERS THAT:

6.    The first respondent, whether by itself, its directors, servants, agents or otherwise howsoever, be permanently restrained, without the licence of the applicant, from infringing the copyright subsisting in the UTS Software by the reproduction, communication, importation, supply, sale or offer for sale or supply of version 1 of the Pavetest TestLab Software.

7.    The second and third respondents be permanently restrained from, without the licence of the applicant, authorising the infringement, by the reproduction, communication, importation, supply, sale or offer for sale or supply of version 1 of the Pavetest TestLab Software.

8.    Within 14 days of the date of these orders, the respondents file and serve an affidavit attesting to the fact that all copies of version 1 of the Pavetest TestLab Software have been destroyed or erased, and the steps undertaken to give effect to such destruction or erasing.

9.    Within 14 days of the date of these Orders, the respondents file and serve an affidavit attesting to the fact that the reference copy of the CDAS Firmware referred to in Order 5 of the Orders in these proceedings made on 8 November 2016 has been destroyed or erased. (The Court notes that the reference copy was delivered by the respondents to Stephens Lawyers on 15 November 2016 and is in the possession of Stephens Lawyers).

10.    An inquiry be held to quantify the damages (including any additional damages pursuant to s 115(4) of the Copyright Act 1968 (Cth)) or, subject to the applicant’s election, to take an account of profits.

11.    Within 28 days of the date of these orders, the first respondent serve an affidavit setting out details of all its sales and supplies of:

(a)    its controller known as the Control and Data Acquisition System (CDAS);

(b)    version 1 of the Pavetest TestLab Software; and

(c)    version 2 of the Pavetest TestLab Software,

including the date of the sale or supply, the person to whom the sale or supply was made and the price of the sale or supply.

12.    Within 42 days of the date of these orders, the first respondent give verified discovery of the accounts and records referred to in the undertaking noted at paragraph 19 of the orders made on 23 October 2015.

13.    Leave be granted to the applicant to make any application for further discovery within 21 days of compliance with orders 11 and 12 above.

14.    The first, second and third respondents pay the applicant’s costs of and incidental to this proceeding, up to and including the date of these orders, forthwith to be taxed in default of agreement.

15.    The application against the fourth respondent be dismissed.

16.    The matter be listed for a case management hearing on a date to be fixed, in relation to the making of an election by the applicant and the interlocutory steps preparatory to a further hearing on quantum.

17.    Liberty to apply in relation to order 14 above, any such application to be made before the day which is 28 days after the final disposition of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOSHINSKY J:

1    On 10 February 2017, I published reasons for judgment on issues of liability in this proceeding: IPC Global Pty Ltd v Pavetest Pty Ltd (No 3) [2017] FCA 82 (the Reasons). At that time, I made orders for each party to file and serve proposed minutes of orders to give effect to the Reasons and a short outline of submissions in support of those orders; and for each party to file and serve a short outline of submissions in response. The parties did so, and the respondents requested a hearing in relation to the disputed issues. Accordingly, the matter was listed for hearing on 14 March 2017 and the parties made some additional oral submissions relating to the form of orders.

2    These reasons, which deal with the form of orders to be made, should be read together with the Reasons. I will adopt the same abbreviations as used in the Reasons.

3    It is convenient to note at this point that, as recorded in [10] of the Reasons, on the third day of the trial of this proceeding (on issues of liability only), the respondents conceded liability in relation to the firmware part of the case, both as regards copyright and breach of confidence. The trial continued in relation to the software part of the case. However, IPC Global submitted that it was appropriate for final orders to be made in relation to the copyright aspect of the firmware part of the case in advance of publication of my reasons on the software issues. It was arranged that, in conjunction with the making of closing submissions on the software part of the case, the parties would address on whether final orders should be made, and if so what orders, in relation to the copyright aspect of the firmware case. Following those submissions, on 8 November 2016 I published reasons (IPC Global Pty Ltd v Pavetest Pty Ltd (No 2) (2016) 121 IPR 434) and made final orders in relation to the copyright aspect of the firmware part of the case. I will refer to these, respectively, as the Firmware Reasons and the 8 November 2016 Orders.

4    The issues to be considered in these reasons will be addressed under the following headings:

(a)    additional orders relating to the firmware part of the case;

(b)    declarations relating to the software part of the case;

(c)    injunctions relating to version 1 of the TestLab software;

(d)    whether a ‘springboard’ injunction should be ordered in relation to version 2 of the TestLab software;

(e)    whether an injunction should be ordered in relation to confidential information;

(f)    delivery up or destruction orders;

(g)    costs; and

(h)    other matters.

Additional orders relating to the firmware part of the case

5    The 8 November 2016 Orders were limited to the copyright aspect of the firmware part of the case. They did not include orders relating to breach of confidence in relation to firmware. In this regard, IPC Global now seeks a declaration to the following effect:

The first to third respondents, in the creation of the controller known as the CDAS, misused the applicant’s confidential information in the firmware for the controller known as the IMACS.

6    The respondents propose differently worded declarations, relating only to the first and third respondents. Given that the respondents’ concession as to liability was made by, and related to, all the respondents, I consider the declaration proposed by IPC Global to be appropriate and will make such a declaration.

7    Another issue dealt with in the parties’ submissions relates to the reference copy of the CDAS Firmware referred to in [28] of the Firmware Reasons. In that paragraph, I indicated that I would make an exception to the order for delivery up (or destruction or erasing) of copies of the CDAS Firmware to permit the retention of a reference copy of the CDAS Firmware. In relation to the reference copy, I stated as follows:

[The reference copy] can at least be used in the event Pavetest needs to deal with warranty claims, or similar claims or enquiries, from customers to whom it has already sold the relevant products. IPC Global accepted that it was appropriate for such an exception to be made, for this purpose. More contentiously, counsel for the respondents contended that reference should also be permitted so that the respondents could review their firmware with a view to reproducing in new firmware the parts which were created since Pavetest was established. The respondents point out that the development of the CDAS Firmware took some time (as the evidence establishes) and they have created parts of it since the establishment of Pavetest. It was contended that they should not be required to ‘start from scratch’ but should be permitted to have access to these parts of the firmware. I think this is a matter that requires further consideration and not something that can be conveniently dealt with at this stage of the proceeding. Accordingly, I propose to proceed on the basis that this aspect can be the subject of further submissions following publication of my reasons in relation to the software part of the case, and in conjunction with submissions on the appropriate orders to be made following publication of those reasons. In the meantime, the orders do not preclude the respondents referring to the reference copy in the way that they have indicated they seek to do.

8    Together with its written submissions on orders, Pavetest filed an affidavit of Mr Feeley sworn 23 February 2017 in which he deposed as follows:

(a)    On 23 November 2016, Mr Feeley made an affidavit which confirmed that he had destroyed all copies of the specified versions of the CDAS Firmware (the Infringing Firmware) except a single copy that he delivered to Pavetest’s solicitors (the Retained Copy). Mr Feeley stated that he had not accessed the Retained Copy since that time.

(b)    Since 8 November 2016, no copies of the Infringing Firmware or of the associated TestLab software have been supplied to Pavetest customers.

(c)    New Pavetest CDAS firmware is now being written and it is anticipated that a pre-release beta test version of the new firmware will be ready for release in about two months.

(d)    Mr Feeley is the architect of the new firmware, and its source code is being written by him with the assistance of three other programmers.

(e)    To the best of Mr Feeley’s knowledge, the source code for the new firmware is being independently developed, and has not been copied from or created by reference to IPC Global’s firmware source code.

(f)    Before Mr Feeley provided the Retained Copy to Pavetest’s solicitors, he “extracted some source code which was [his] original and independent work for Pavetest, and that code has been used in the ongoing development of the new firmware”.

(g)    The new firmware source code will communicate with version 2 of the TestLab software using a communication protocol compatible with version 2 of the TestLab software.

9    I think it is fair to say that the course adopted by Pavetest, as disclosed in Mr Feeley’s recent affidavit, is not what was contemplated by [28] of the Firmware Reasons, which anticipated that there would be “further consideration” following publication of the Reasons of the question whether the respondents could review their firmware with a view to reproducing in new firmware the parts which were created since Pavetest was established (while making clear that, in the meantime, the 8 November 2016 Orders did not preclude the respondents referring to the reference copy in the way that they sought). In any event, as submitted by IPC Global, in light of the matters deposed to in Mr Feeley’s affidavit, the question whether Pavetest should be permitted to review the reference copy of the CDAS Firmware with a view to reproducing in new firmware the parts which were created since Pavetest was established, is now otiose.

10    Although IPC Global’s initial form of orders contemplated retention of the reference copy for the purpose of dealing with warranty claims, Pavetest has indicated through its proposed orders that it does not seek to retain the reference copy for such purposes. It proposes an order that, within 14 days, it provide an affidavit to the effect that the reference copy has been destroyed or erased. IPC Global in its responding submissions indicated that it is content with this. Accordingly, it is common ground that there should be an order as follows:

Within 14 days of the date of these Orders, the respondents file and serve an affidavit attesting to the fact that the reference copy of the CDAS Firmware referred to in Order 5 of the Orders in these proceedings made on 8 November 2016 has been destroyed or erased. (The Court notes that the reference copy was delivered by the respondents to Stephens Lawyers on 15 November 2016 and is in the possession of Stephens Lawyers).

11    I will make such an order.

Declarations relating to the software part of the case

12    IPC Global seeks the following declarations in relation to the software part of the case. These relate both to infringement of copyright and breach of confidence.

1.     The first respondent, by the third respondent reproducing the source code for the system library and the test modules UTS001, UTS002, UTS003, UTS004, UTS006, UTS018 and UTS019 of the original computer program known as “Universal Testing Software” (UTS Software) onto the computer provided to Mr Bin Li (Mr Li) in or around November 2012, has infringed the copyright subsisting in the UTS Software.

2.     The first respondent, by the creation, development, reproduction and distribution of version 1 of the software known as the “Pavetest TestLab Software” (Pavetest TestLab Software), has infringed the copyright subsisting in the UTS Software.

3.     The second and third respondents, and each of them, have authorised the infringement by the first respondent of the copyright subsisting in the UTS Software.

4.     The third respondent, by:

(a)     providing the source code for the UTS Software as well as the communications protocol documents for the UTS Software which comprise Annexures “BJRF5” and “BJRF6” to the affidavit of Mr Bhathiya Jeewaka Raveendra Fernando affirmed 7 October 2015 (together, Confidential Information) to Mr Li without the applicant’s consent; and

(b)     thereby assisting Mr Li to develop the Pavetest TestLab Software,

breached a duty of confidence he owed to the applicant.

13    The respondents do not oppose the making of declarations, but would frame the declarations in slightly different terms. In relation to proposed declaration 1, they would insert the words “a Delphi 7 version of” before “the original computer program known as”. I do not think the addition of these words is appropriate. The factual findings (see the Reasons at [126], [176]) do not go this far.

14    In relation to the second proposed declaration, the respondents would delete the references to “creation”, “development” and “distribution” and insert “communication”. In other words, they would refer only to the reproduction and communication of version 1 of the TestLab software. In my view, the wording proposed by IPC Global appropriately reflects the facts as referred to in the evidence and Reasons.

15    The respondents do not oppose the third and fourth proposed declarations set out above. I will therefore make declarations substantially in those terms.

Injunctions relating to version 1 of the TestLab software

16    IPC Global seeks the following injunctions relating to version 1 of the TestLab software (based on the findings relating to copyright infringement):

6.    The first respondent, whether by itself, its directors, servants, agents or otherwise howsoever, be permanently restrained, without the licence of the applicant, from infringing the copyright subsisting in the UTS Software by the reproduction, communication, importation, supply, sale or offer for sale or supply of version 1 of the Pavetest TestLab Software.

7.    The second and third respondents be permanently restrained from, without the licence of the applicant, authorising the infringement, by the reproduction, communication, importation, supply, sale or offer for sale or supply of version 1 of the Pavetest TestLab Software.

17    The respondents would delete from each of these proposed orders the words “importation, supply, sale or offer for sale or supply” but do not otherwise oppose the injunctions. Although the findings as to infringement of copyright (see the Reasons at [13](a), [179]) did not refer to each of these matters, in my view those findings are sufficient to support injunctions in the terms proposed by IPC Global, and it is appropriate in all the circumstances to frame the injunctions in such terms.

Whether a ‘springboard’ injunction should be ordered in relation to version 2 of the TestLab software

18    In the Reasons, I concluded that the breach of confidence cause of action was established in relation to (a) the UTS source code, as a corpus, and (b) the UTS communications protocol documents (defined in [198] of the Reasons) (see the Reasons, [13](b), [204]-[212]). I also concluded that the evidence established that Pavetest gained a substantial ‘springboard’ benefit by the misuse of the confidential information (Reasons, [13](b), [213]-[216]). As indicated in [216] of the Reasons, I deferred making a finding, should this be necessary, as to the precise amount of time saved by Pavetest. I did note, however, that I considered that considerably more time was saved than the two months referred to by Mr Li in his evidence.

19    IPC Global seeks a ‘springboard’ injunction for a period of 18 months in relation to version 2 of the TestLab software. Its proposed order is as follows:

Up to and including [INSERT DATE 18 MONTHS FROM THE DATE OF THESE ORDERS], the first respondent, whether by itself, its directors, servants, agents or otherwise howsoever, be restrained from the reproduction, importation, supply, sale or offer for sale or supply of:

(a)    version 2 of the Pavetest TestLab Software; or

(b)    any software the development of which is enabled, assisted or in any way derived from the UTS Software.

20    This is opposed by the respondents.

Applicable principles

21    The ‘springboard’ doctrine was referred to in [194]-[196] of the Reasons by reference to the judgment of Gordon J in Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621 and the judgment of Ryan J in RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd (2011) 280 ALR 125 (appeal dismissed: Nexus Adhesives Pty Ltd v RLA Polymers Pty Ltd (2012) 97 IPR 160).

22    In Roger Bullivant Ltd v Ellis [1987] FSR 172, the primary judge had granted an interlocutory injunction to prevent the defendants from taking unfair advantage of the springboard which he considered they might obtain by their misuse of the business contacts and information contained in the plaintiff’s card index system. In the Court of Appeal, Nourse LJ referred to a number of cases and then said (at 184):

All these observations support the view that the injunction should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue. That is in my judgment the period for which an injunction should normally be granted in springboard cases.

23    Although this statement was made in the context of an interlocutory injunction, in my view these observations are equally applicable where a springboard injunction is sought by way of final relief.

24    In Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840, which was discussed by Arnold J in Vestergaard Frandsen A/S v Bestnet Europe Ltd [2010] FSR 2; [2009] EWHC 1456 (Ch) at [85]-[87], Sir Donald Nicholls V-C (as he then was) held (at 853-854) that an interlocutory injunction which had been granted against the defendants had gone beyond what was required for the proper protection of the plaintiff’s legitimate rights. Nicholls V-C said (at 854) that, in some cases, an injunction for a limited period could be justified “as affording the means for putting the parties back into the position they would have occupied had there been no misuse”. Nicholls V-C said (at 854-855) that, had the interlocutory injunction had the effect “simply of restoring the parties to the competitive position they each sought to occupy and that each would have occupied but for the defendants’ misconduct”, then “such a form of injunction would be fair and just”. Nicholls V-C said (at 855) that the interlocutory injunction which had been granted went too far because it “put the plaintiff in a better position than if there had been no breach of confidence”. Again, although this discussion took place in the context of an interlocutory injunction, the observations are, in my view, equally applicable in the context of final relief.

25    In Dal Pont GE, Law of Confidentiality (LexisNexis Butterworths, Australia, 2015), there is a helpful discussion of the relevant principles concerning the grant of a springboard injunction (albeit in the context of interlocutory injunctions) at [15.8]-[15.9]. The learned author states (at [15.8]) that “an injunction preventing the misuse of confidential information as a springboard should not normally extend beyond ‘the time necessary to protect the plaintiff from any harm attributable to the appropriation and to deprive the defendant of any economic advantage attributable to the appropriation’”. The footnote for this proposition cites the American Law Institute, Restatement (Third) of Unfair Competition, 1995, §44(3). Also referred to in the footnote is the passage from Roger Bullivant Ltd v Ellis set out above. Dal Pont (at [15.8]) quotes QBE Management Services (UK) Ltd v Dymoke [2012] IRLR 458; [2012] EWHC 80 (QB) at [285] per Haddon-Cave J for the proposition that “the appropriate measure for the length of a springboard injunction is the length of time that it would have taken the wrongdoer to achieve lawfully what he in fact achieved unlawfully, relative to the victim”. Dal Pont continues (at [15.9]):

Any remedial response must, accordingly, be proportionate to the advantage secured in breach of the duty of confidentiality. ‘Springboard’ relief merely aims to restore the parties to ‘the competitive position they each set out to occupy and would have occupied but for the defendant’s misconduct’. Any remedial response that goes further may not only unjustly enrich the plaintiff and punish the defendant, neither of which falls within equity’s mandate, but threaten the broader public interest by unduly restraining legitimate competition.

(Footnotes omitted.)

26    I respectfully adopt this statement of principles.

27    In RLA Polymers, Ryan J found that: the respondents were only able to develop the relevant product (Nexus 820) in a period of five months because they misused confidential information of the applicant (RLA); and the creation and development of the product for the commercial market, had it been uninfluenced by the confidential information, would have taken at least nine, and up to twelve, months (at [173]). In these circumstances, it was considered appropriate to order an account of profits in respect of the “springboard advantage” period, being the difference between each of the respective time periods. Ryan J did not consider the other remedies sought by the applicant (which included a springboard injunction) to be appropriate: see [174]-[175].

Submissions

28    IPC Global’s submissions in support of a ‘springboard’ injunction can be summarised as follows:

(a)    The Court has found that Mr Feeley was in breach of his equitable duty of confidence by disclosing and using his knowledge of the UTS Software, effectively as a “substantial springboard” to develop and bring to market, more quickly than Pavetest otherwise would have, the TestLab software: Reasons, [214]. The Court also held that it is open to IPC Global to seek relief as against Pavetest in relation to the springboard benefit it gained as a result of the misuse of the confidential information: Reasons, [215]. The Court invited submissions as to the precise amount of time saved by Pavetest: Reasons, [216].

(b)    Overall, and taking a pragmatic approach as the courts have done in working out a springboard period (see recently, for example, Kerry Ingredients (UK) Ltd v Bakkavor Group Ltd [2016] EWHC 2448 (Ch) at [111]-[116]), IPC Global contends that it would have taken Pavetest approximately three to four years’ development time to independently develop the TestLab software, based on the following evidence and findings in the Reasons.

(c)    First, the evidence (as recorded in the Reasons) of the time taken to develop the UTS software was that the first version of the UTS software involved roughly three person-years of development work (Reasons, [48]) on top of the earlier experience of IPC Global over the decade before the UTS software’s development in developing and improving the UTM software. Mr King gave evidence that he created 19 of the test modules for the UTS software over a period of a decade: Reasons, [49].

(d)    Secondly, there was evidence from Mr Sizer (see section 2.13 of the Fourth Sizer Report) where he was asked to explain the process which would ordinarily be undertaken to develop a new product like the UTS or Pavetest system using a “clean room” development process. His total resources estimate was circa two to three person-years, plus a further person-year for system integration and testing. This evidence is largely consistent with the finding at Reasons [48] and was not challenged in the cross-examination of Mr Sizer.

(e)    The matters referred to above must be balanced against the time it took Pavetest to develop the TestLab software and the findings with respect to the advantage it received from the confidential information that was provided to Mr Li. See the findings at Reasons [104]-[105], [125].

(f)    It is apparent, therefore, that even with the frequent benefit of the UTS software, it took Pavetest approximately 2.5 person-years to develop version 1 of the TestLab software. Balancing that against the four years that Mr Sizer opines that it would take to develop independently a software program of the nature of the UTS or TestLab software, it seems to be a fair estimate that, had there not been a misuse of UTS’s confidential information, it would have taken Pavetest a minimum of four years of development time.

(g)    It follows that Pavetest should be restrained from the reproduction, supply or sale of its current version 2 of the TestLab software (not the subject of a permanent injunction) for a period of approximately 18 months.

29    In response to the respondents’ submission that, in the circumstances of this case, a springboard injunction is not warranted as an award of damages or an account of profits will provide IPC Global with an adequate remedy, IPC Global submits, in summary, as follows:

(a)    While certainly the respondents would not be required to pay compensation or submit to an account of profits for the springboard period in addition to any springboard injunction granted in respect of that same period, there is no principle to be gleaned from the authorities that an injunction should not be granted simply because damages or an account of profits might be an alternative remedy available: see Jardin v Metcash Ltd (2011) 285 ALR 677 at [113].

(b)    While not impossible, the task of assessing damages for the head start obtained by the respondents arising from their breach of confidence is not a straightforward task. The inquiry into damages requires the Court to quantify what damage has been and may be suffered by IPC Global by reason of the respondents’ breaches of confidence. While now is not the time to deal with this question comprehensively, there is a suggestion in the authorities that damages are to be assessed “on the basis of reasonable compensation for the use of the confidential information given by [IPC Global] to the [respondents]”, this requiring consideration of the “value of the information” which the respondents took: see Seager v Copydex Ltd [1969] RPC 250 at 251 and 256 and the discussion thereof in United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at 230. That inquiry, of its very nature, is attendant with nuances and difficulties, difficulties compounded by the task of placing a value on the confidential information that has been misused. In those circumstances, a cleaner remedy (and one which is supported by the Reasons and the evidence) is a temporary injunction restraining Pavetest from the supply of version 2 of the TestLab software up until the end of the period of time the Court determines was the head start gained by the respondents by reason of their breaches of confidence.

(c)    Further, the discretionary considerations identified by the respondents in their submissions ought not to dissuade the Court from granting the springboard injunction sought by IPC Global. The respondents have led no evidence in support of their submission that “incalculable or irreparable damage … may be caused to [Pavetest’s] reputation with existing and prospective customers”, or that a springboard injunction would “destroy Pavetest’s capacity to compete” with IPC Global in the future by way of the supply of non-infringing products. That Pavetest might have spent time independently developing certain aspects of the TestLab software is not so “material to the form of relief” that the Court in its discretion would refuse the grant of a springboard injunction. The relevant inquiry is not how much time Pavetest spent independently developing the TestLab software but what “unfair start” it obtained by reasons of Mr Feeley’s breach of confidence: Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375 at 391, cited in RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd (2011) 280 ALR 125 at [71]. In any event, the respondents’ submission as to the “independent development” of TestLab is overstated.

(d)    Finally, the Court ought not accede to the respondents’ submission that, because the practical effect of the 8 November 2016 Orders was that Pavetest has not supplied materials testing machines (for which the TestLab software is only useful), IPC Global “has effectively obtained a considerable measure of springboarding relief against Pavetest because of the injunctive relief already granted”. Pavetest has been unable to supply materials testing machines by reason of its own admitted infringement of copyright and breaches of confidence in its development and supply of the CDAS Firmware and the injunctive relief that flowed from that. It would be an odd, and inequitable, result indeed (not unlike ex turpi causa) if this was either reason to deny IPC Global injunctive relief, or to reduce the period for which any injunction operated, for an additional and separate breach of confidence found to give rise to a “substantial springboard benefit” to Pavetest: Reasons, [214].

30    The respondents made submissions in opposition to the grant of a temporary (or springboard) injunction. In summary, they contended that, in all the circumstances, an award of damages, or an account of profits, would provide IPC Global with an adequate remedy. The respondents also submitted that, as a consequence of the 8 November 2016 Orders, Pavetest has been effectively precluded from supplying materials testing equipment for some months: see the evidence of Mr Feeley set out in [8] above. As the TestLab software is only useful in connection with Pavetest’s materials testing machines, a further practical consequence of the 8 November 2016 Orders is that Pavetest has not supplied any TestLab software since 8 November 2016. The respondents also submit that the evidence and factual findings in the case would not support an inference that the head start obtained by Pavetest in developing the TestLab software was lengthy.

Consideration

31    I will first consider the period of time Pavetest saved by having access to the UTS software and the UTS communications protocol documents. Insofar as the UTS communications protocol documents are concerned, I have found that the amount of time saved was two to three weeks (see the Reasons at [125](k)). In relation to the UTS software, in [125](j) and (l) of the Reasons, I said:

(j)    Although Mr Li said that, other than code in the UTS system libraries, he did not copy any of the UTS code, there is evidence (discussed below) that version 2 of the TestLab software contains a number of unusual names that may suggest copying beyond the system library. Whether or not Mr Li copied parts of the UTS source code beyond the system library, I think it is likely that he consulted and derived assistance from the UTS test modules that were provided to him.

…

(l)    Mr Li gained considerable assistance in the development of the TestLab software from consulting the UTS source code. Mr Li said that, by reusing data structures used by the UTS code, and system library functions, instead of developing these from scratch, he estimated that he saved himself “about a couple of months of development time”. This does not take into account the benefit he gained generally from consulting the UTS software. I think it likely that the amount of time saved was considerably greater than two months.

32    At [214] of the Reasons, I said:

In my view, the evidence establishes that Pavetest gained a substantial springboard benefit by the misuse of the confidential information discussed above. Apart from the two to three weeks that were saved by Mr Feeley not having to develop a new communications protocol document, Pavetest saved a substantial amount of time by Mr Li having access to the UTS source code. The benefit gained is not limited to using the UTS source code to educate Mr Li about the problem domain, and the copying of source code as set out in Annex D. I would infer that Mr Li utilised ideas from, and otherwise gained a benefit from examining, other aspects of the UTS source code in writing the TestLab software. Given that he was writing software for the same type of equipment, it would be surprising if he did not draw on other aspects of the UTS source code, notwithstanding the new and more efficient approach to the architecture of the software. Thus, while I accept that he did not copy (in the sense of reproducing the text of) functions in the UTS test modules, I do not accept that he did not draw on other aspects of the UTS source code, including in the test modules, in the course of writing the TestLab software.

33    It is difficult to be precise about the period of the springboard benefit or head start, but based on the evidence as a whole I think it likely that Pavetest would have taken approximately three years to develop the TestLab software had it not had access to the UTS software, compared with the approximately two and half years (from September/October 2012 to April/May 2015 – Reasons, [104], [130]) that it actually took to develop the software. In forming this view, I have taken into account, in particular: the period of time IPC Global took to develop the initial UTS software (about three person-years – Reasons, [48]); the previous experience of the developers of that software (Reasons, [48]); the period of time during which Mr King created 19 test modules for UTS (a period of about a decade – Reasons, [49]); the period of time Pavetest took to develop the TestLab software (about two and a half years – Reasons, [104], [130]); the new and more efficient architecture of the TestLab software (Reasons, [125](b)); Mr Li’s lack of experience in the ‘problem domain’ (Reasons, [125](c)); the period of time during which Mr Li referred frequently to the UTS source code (November 2012 to April 2013 – Reasons, [125](f)); Mr Li’s invoices and evidence regarding subsequent reference to the UTS source code (Reasons, [125](g)); and Mr Feeley’s experience and expertise. I do not consider the ‘clean room’ development estimates in section 2.13 of the Fourth Sizer Report to be of much assistance in this regard. The estimates are expressed at a high level of generality. In any event, the estimates provided by Mr Sizer (ie, two to three person-years for PC software development and one person-year for system integration and testing) are consistent with the above estimate, if the lower end of the total of these estimates is adopted. On the basis that it would have taken Pavetest approximately three years to develop the TestLab software had it not had access to the UTS software, compared with the two and half years it actually took, Pavetest gained a springboard benefit or head start of approximately six months. I do not think it necessary to add the period of two to three weeks referred to earlier in this paragraph to the period of approximately six months; it is likely that the two periods would have overlapped.

34    It is appropriate for there to be an inquiry as to monetary relief, whether this be damages (or equitable compensation) or an account of profits, in connection with the misuse of IPC Global’s confidential information. However, I do not think it necessary or appropriate to grant a temporary (or springboard) injunction restraining Pavetest from reproduction, importation, supply, sale or offer for supply or sale of version 2 of the TestLab software for a period of time from the date of the orders. My reasons are as follows.

35    The period of the springboard benefit or head start has now passed. If Pavetest had developed the TestLab software without access to the confidential information, it would have completed development of the software in about September/October 2015 (being three years after development commenced). Thus the period of the springboard benefit ended some time ago. In oral submissions, senior counsel for IPC Global sought to address this issue by submitting that version 1 and version 2 of the TestLab software should be viewed as distinct products, and the springboard period commenced when Pavetest started to develop version 2 of the TestLab software (in December 2015 – Reasons, [135]). It was submitted that: Pavetest should have adopted a ‘clean room’ method for the development of version 2; had it done so, it would have taken four years from that date to develop a new version of the software; hence, Pavetest is still now enjoying a springboard benefit or head start. I do not think this analysis is convincing. In particular, it is artificial, in my view, to view version 1 and version 2 of the TestLab software as two distinct products for present purposes. The labels “version 1” and “version 2” were adopted for convenience to differentiate the software as it existed before and after Pavetest sought to address the issues raised by this proceeding. For the purposes of calculating the springboard benefit that Pavetest obtained, it is appropriate to consider the TestLab software as the relevant product, and assess how long it would have taken Pavetest to develop the software without access to the confidential information and compare this with the time actually taken. On this basis, as indicated above, the period of the springboard benefit has now passed.

36    In these circumstances, granting a temporary injunction is likely to put the applicant, IPC Global, in a better position than if there had been no breach of confidence (and, in any case, would not serve to restore the parties to the competitive position that each would have occupied absent Pavetest’s misconduct). On the findings that I have made above, absent the breach of confidence, Pavetest would have entered the market for materials testing equipment in September/October 2015 and would now be competing with IPC Global. The grant of a temporary injunction would likely have the effect of taking Pavetest out of the market, and thus removing Pavetest as a competitor of IPC Global, for the period of the injunction.

37    Further, in considering whether or not it is appropriate to grant a springboard injunction, it is relevant to have regard to the other parts of IPC Global’s case (in respect of which it was largely successful) and the relief likely to flow from those other parts. IPC Global succeeded in its copyright infringement case in relation to the firmware and version 1 of the TestLab software. This is likely to lead to monetary relief, either in the form of damages or an account of profits. IPC Global also claims monetary relief in respect of the misuse of its confidential information. This claim arises out of the same events, or course of conduct, as the copyright infringement claims. It is likely, therefore, that any damages or account of profits awarded in respect of copyright infringement will substantially, if not wholly, subsume the monetary relief for breach of confidence. In these circumstances, the grant of a temporary injunction, in addition to the likely monetary relief, may well go further than is necessary to address the misuse of the confidential information.

38    Accordingly, I will not grant a temporary (or springboard) injunction.

Whether an injunction should be ordered in relation to confidential information

39    IPC Global seeks a permanent injunction in relation to the “Confidential Information” as defined in its proposed orders, namely the source code from the UTS software and the UTS communications protocol documents. The form of order sought is as follows:

The first and third respondents, and each of them, be permanently restrained from directly or indirectly using or disclosing the Confidential Information to any person, other than for the purpose of complying with these orders.

40    IPC Global submits that such an injunction follows from the findings of the Court in respect of Mr Feeley’s breach of confidence. The respondents oppose such an order.

41    I do not think it necessary or appropriate to grant a permanent injunction in relation to the UTS software and the UTS communications protocol documents. Pavetest has already delivered up the source code for the UTS software which, as a corpus, is the primary part of the confidential information. Thus there is no threat of further misuse of the UTS software as a corpus. In relation to the UTS communications protocol documents, the misuse of this confidential information has already occurred. There is no threat of further misuse. Further, the evidence shows that parts of the confidential information have become mixed with Pavetest’s own confidential information. A permanent injunction would thus cause considerable uncertainty as to Pavetest’s entitlement to continue using or building upon version 2 of the TestLab software.

Delivery up or destruction orders

42    IPC Global seeks an order for delivery up or destruction (or erasing) of version 1 of the TestLab software. The respondents do not oppose such an order, but would frame the order in terms only of destruction (or erasing). The respondents’ proposed order is as follows:

Within 14 days of the date of these orders, the respondents will file and serve an affidavit attesting to the fact that all copies of version 1 of the TestLab Software have been destroyed or erased, and the steps undertaken to give effect to such destruction or erasing.

43    IPC Global indicated at the hearing that it was content with an order in these terms. I will make such an order.

Costs

44    IPC Global seeks an order that the first, second and third respondents pay IPC Global’s costs of and incidental to this proceeding, up to and including the date of these orders, forthwith to be taxed in default of agreement.

45    The respondents proposed order is to the effect that the first, second and third respondents pay 75% of IPC Global’s costs of the proceeding, up to and including the date of these orders, forthwith to be taxed in default of agreement. The respondents also seek an order for liberty to apply so that the costs order can be revisited later, if appropriate, on the basis of a Calderbank offer. IPC Global does not oppose liberty to apply being included in the orders for this purpose. It suggested at the hearing that there be a temporal limit on the liberty to apply order, eg 28 days after the final disposition of the proceeding.

46    The principles relating to the discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) are well established: see, eg, Latoudis v Casey (1990) 170 CLR 534 at 567 per McHugh J; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]-[12] per Black CJ and French J; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[5] per Finkelstein and Gordon JJ; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 at [11], [16]-[18] per Dowsett, Middleton and Gilmour JJ. Although usually, in the exercise of the discretion, it is ordered that costs follow the event, there may be situations where the event of success is contestable, by reference to how separate issues have been determined: see Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241] per Kiefel and Keane JJ, cited by French CJ, Kiefel, Nettle and Gordon JJ in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6]. See also Les Laboratoires Servier v Apotex Pty Ltd (2016) 117 IPR 415 at [297]-[306] per Bennett, Besanko and Beach JJ.

47    The respondents submit that: while costs must follow the event, IPC Global’s costs should be reduced to reflect the fact that IPC Global has not been wholly successful on liability issues; the trial was primarily concerned with copyright infringement and the relief IPC Global sought extended to version 2 of the TestLab software; in its closing written submissions, IPC Global indicated that it no longer pressed its copyright claim in relation to version 2 of the TestLab software; and in these circumstances, IPC Global will not be successful in obtaining orders permanently enjoining the exploitation by Pavetest of version 2 of the TestLab software, or requiring delivery up of all copies of that version in the respondents’ possession.

48    In my view, subject to consideration of the Calderbank offer, it is appropriate to order the first, second and third respondents to pay IPC Global’s costs of and incidental to the proceeding. IPC Global was overwhelmingly successful in the proceeding. Although it is true that, in final submissions, it did not press its copyright infringement claim in relation to version 2 of the TestLab software, it was nevertheless successful in its breach of confidence claim in relation to that version of the software. I do not think the circumstances are such that it would be appropriate to treat the copyright claim regarding version 2 as a discrete issue, given the factual overlap between the copyright claim and the breach of confidence claim. I note for completeness that IPC Global was also unsuccessful in relation to its contract claim and the allegation that Mr Sinadinos breached his duty of confidence with respect to the UTS software. These parts of the case occupied relatively little time and do not provide a basis to depart from an order that the first, second and third respondents pay IPC Global’s costs of the proceeding.

49    IPC Global’s proposed costs order provides that the costs are payable forthwith. It would appear that IPC Global is concerned that r 40.13 of the Federal Court Rules 2011 (which provides that, if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding is finished) might otherwise apply. The respondents do not oppose the order being framed in these terms. I will therefore provide for the costs to be payable forthwith. I will also make an order that there be liberty to apply (any such application to be made before the day which is 28 days after the final disposition of the proceeding) for the reasons indicated in [45] above.

Other matters

50    IPC Global proposes the following additional orders:

12.     An inquiry be held to quantify the damages (including additional damages pursuant to section 115(4) of the Copyright Act 1968), or, subject to the applicant’s election, to take an account of profits.

13.     Within 14 days of the date of these orders, the first respondent serve an affidavit setting out details of all sales and supplies of:

a.    its controller known as the Control and Data Acquisition System (CDAS);

b.    version 1 of the Pavetest TestLab Software;

c.    version 2 of the Pavetest TestLab Software,

including the date of the sale or supply, the person to whom the sale or supply was made and the price of the sale or supply.

14.     Within 14 days of the date of these orders, the first respondent give verified discovery of the accounts and records referred to in the undertaking noted at paragraph 19 of the orders made on 23 October 2015.

15.     Leave be granted to the applicant to make any application for further discovery within 21 days of compliance with orders 13 and 14 above.

51    The respondents would make some minor changes to these orders (adding the word “any” before “additional damages” in proposed order 12; adding the word “its” before the words “sales and supplies” in proposed order 13; and changing the times for compliance to 28 days in proposed order 13 and to 42 days in proposed order 14). I will make orders as set out above, but with the adjustments proposed by the respondents.

52    It is common ground that there should be an order dismissing the application against the fourth respondent. I will make such an order.

53    I will also make an order that the matter be listed for a case management hearing on a date to be fixed, in relation to the making of an election by IPC Global and the interlocutory steps preparatory to a further hearing on quantum.

Associate:

Dated:    16 March 2017

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