Warring parties wave their weapons when IP licences come unstuck

This decision from the High Court for England and Wales from nearly two weeks ago, Societa Esplosivi Industriali SpA v Ordnance Technologies (UK) Limited (formerly SEI (UK) Ltd), Impact Science Ltd and Stephen Cardy [2007] EWHC 2875 (Ch) is a bit of a whopper, standing at 110 paragraphs and without many jokes or easy bits. You can read it here in full on BAILII.

Right: warlike and multiple-headed, an ideal deterrent ...

Societa Esplosivi (an Italian company) made a number of allegations against Ordnance Technologies (a British company) in connection with the design and manufacture of shaped warheads for use in multiple warhead systems, following their agreement to work together on the development of new generation warhead systems. The contract provided for any bids and contracts to be in the name of Societa Esplosivi, which was also to be the design authority and lead contractor in their ongoing relationship. In turn, Ordnance Technologies was to be the exclusive sub-contractor for making and testing the design concept. Under this contract Ordnance Technologies was not allowed to offer its specialist skills to anyone else and needed permission from Societa Esplosivi before it could participate in any UK classified programme or contract in which Societa Esplosivi could not itself participate.

Ordnance Technologies subsequently contracted with Raytheon, a US weapons manufacturer, to work on a trade study project for a multi-mission missile and to undertake work on a dense metal penetrator. Societa Esplosivi, which objected to Ordnance Technologies working in those areas, issued proceedings. At the first trial the court held that Ordnance Technologies had breached the agreement by failing to supply documentation to Societa Esplosivi over which it had IP rights and by disclosing confidential information to a third party; an inquiry into damages was ordered ((2004) EWHC 48 (Ch)). Meanwhile, the allegations breach of contract, breach of contractual and equitable obligations of confidence, infringement of copyright and infringement of design right remained to be determined. Since Ordnance Technologies subsequently went into liquidation, and no part in these proceedings was taken by Impact Science (the second defendant, being a company previously purchased by it), the active dispute continued against Cardy, Ordnance Technologies' sole director.

Mr Justice Lindsay gave judgment in part for Societa Esplosivi. In his view,

* both in its multi-mission missile work and its dense metal penetrator work for Raytheon, Ordnance Technologies had breached its contract with Societa Esplosivi in relation to the use of the intellectual property for multiple warhead systems. It could only properly have used that information with the consent of Societa Esplosivi, which it did not obtain. Ordnance Technologies was also in breach by its insinuation of itself as the main contractor with Raytheon, to the exclusion of Societa Esplosivi . Judgment was thus entered for Societa Esplosivi on that point.

* as to the breach of contractual obligations of confidence, the information had been given to Raytheon was of insufficient significance to be regarded as confidential within the provisions of the contract, so there was no real breach of confidence.

* the algorithms, software and data in respect in which Societa Esplosivi claimed copyright had not been further identified in the pleadings, nor was the occasion on which it was said that some of it had been supplied to Raytheon. Even an absent party such as Ordnance Technologies, and a present litigant in person such as Cardy, were entitled to something more specifically and clearly alleged.

* the protection usually afforded to trade secrets under the equitable doctrine of confidence was to be taken as qualified where the parties were in a contractual relationship, where the contract made express provision on the subject of confidentiality. In such a case, arguably, the express provisions of the contract should be taken to have replaced those of the equitable doctrine. Here, accordingly, it was only by reference to the contractual provisions related to confidence that Societa Esplosivi could bring its claim.

* proof of infringement of design right through the authorisation another to infringe required proof that the alleged infringer intended that an actual infringement would take place. Such proof was not necessarily negatived by a defendant's denial. Whether the weapon made by others was immaterial, particularly if an article protected by design right had actually been made. The court was not however satisfied that, in relation to the multi-mission missile, Ordnance Technologies had for a commercial purpose made any design documents for the purpose of enabling articles infringing the protected design to be made.

* a director would be treated as personally liable with the company as a joint tortfeasor, where the wrongful acts complained of arose from his participation or involvement in ways which went beyond the exercise of his power of control through the constitutional organs of the company. In this case Cardy had acted in a manner which was to be taken to facilitate an infringement of design right. Since he shared with Ordnance Technologies a common design that the acts complained of should take place, he had been personally involved in the commission of the tort to an extent that was sufficient to render him personally liable.

The IPKat hates these complex multi-headed IP infringement disputes getting to court, where everyone gets to pore over militarily sensitive technology. Surely, he wonders, a good case could have been made for (i) sticking a decent arbitration clause into the original agreement and (ii) ensuring that the key employees and directors of the respective parties entered collateral contracts on their own account. Merpel notes that neither the first nor the second defendant companies appeared, and that Cardy appeared in person. Did this, she wonders, keep the costs down?