For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

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Sunday, 4 November 2012

Sky falls on big individuals, but not on small ones

Sky: licensed to sue ...
You just can't keep Sky out of court, it seems.  Only last Friday the IPKat was reporting on the company's famous victory against Starbucks in the Speedy Case of the Figurative Figleaf (here), not long after the Court of Appeal's two-for-the-price-of-one ruling in a pair of applications for trade mark actions to be stayed pending the outcome of Community trade mark invalidity proceedings far away in sunny Alicante. Earlier this year Sky was battling it out with Dramatico and also had a hand in the multi-party litigation frenzy that was Football Association Premier League v QC Leisure (eight claimants versus eleven defendants, if the Kat's arithmetic is right)  And now we have British Sky Broadcasting Group plc and others v Digital Satellite Warranty Cover Ltd (in liquidation) [2012] EWHC 2642 (Ch), a fascinating decision of Sir William Blackburne, sitting in the Chancery Division, England and Wales, and a sequel to an earlier decision which this Kat somehow managed to miss . While this case was decided on 1 October, it has only just come to this Kat's attention, so he apologises for the delay in bringing it to his readers' attention.

The four corporate claimants in this action, collectively referred to as Sky, are a pay television satellite broadcaster and communications service provider.  Up till late 2006 two companies -- Nationwide, the second defendant, and then from early 2007 till 2010 Digital,  the first defendant -- traded in the provision of service plans for Sky satellite television equipment, in competition with Sky’s authorised provider. From August 2010 to November 2010 Messrs Freeman (who was a director of both companies and owned the sole issued share in Nationwide) and Sullivan (who handled their marketing complaints), the third and fourth defendants, carried on the same business as Digital had done, trading in partnership as Satellite Services.

This line of business was not, it seems, propitious, since in November 2010 Digital, Nationwide and Satellite services were all placed in provisional liquidation; in 2011 they were wound up. But this was not an end to their business woes since the Sky was about to fall in on them.  According to Sky, Nationwide, Digital and Satellite Services had all sequentially unlawfully come into possession of and then made use of confidential customer data taken from Sky’s customer databases for the purposes of marketing extended warranty service plans for Sky satellite equipment. What's more, said Sky, they had infringed Sky's trade marks and performed acts of passing off through the use of deceptive marketing activities.

Sky additionally alleged that Freeman, Sullivan and one Marrow (the fifth defendant and the two companies' marketing manager), were jointly and severally liable with on the basis that they had procured the two companies to carry out the acts complained of or that they had committed the acts complained of while in pursuit of a common design. Freeman, Sullivan and Marrow were at all material times the registered holders of issued shares in Digital and they provided the senior management backbone of both companies.

A further five minor individual defendants were implicated. These were one Steele, of whom it was alleged that he had acted as a courier for the delivery of data to Sullivan in exchange for cash payments, though there was evidence that Sullivan had confessed that he had lied to the court and had involved Steele; Waters, whom Sullivan named as a data supplier, and who died shortly before judgment was given; Sibbald, who was said to have been implicated in the use of Sky data; Reynolds, who operated satellite warranty businesses during which he had set up a company which had allegedly acquired data, including, among others, Sky customers (Reynolds had already been held liable for passing off in earlier proceedings and was now bankrupt) and finally Lee, a former employee of Sky In-Home Services (one of the claimant companies), who was said to have acted in breach of confidence and to have infringed Sky's sui generis database right by supplying Digital with confidential data relating to Sky customers.

In October 2011 in an application by Sky for summary judgment Mr Justice Arnold, at [2011] EWHC 2662 (Ch), held the two companies and Satellite Services liable for breach of confidence, infringement of Sky’s database rights, infringement of one of Sky’s trade marks and passing off. Arnold J however declined to give Sky summary judgment against the individual defendants on the claim that they were jointly liable for the wrongful acts of the two companies since, while there was some strong evidence in support of the claim, it was not suitable for summary disposition. It was this issue of liability of the individual defendants which was the subject of the instant ruling, together with a ruling on the meaning of 're-utilisation' in Article 7(2) of Council Directive 96/9 on the legal protection of databases: did "making available to the public" mean something wider than simply making contents of a database available to the two companies?

Sir William Blackburne first stated that, as a matter of settled law, a person who procures an infringement of copyright is jointly and severally liable with the infringer for the loss suffered by the claimant in result of the infringement. The fact that a person is a director or other officer of an infringing company does not exculpate him from liability unless he did no more than carry out a constitutional role rather than a commercial one.

In this case, it was unreal to suppose that the purchase of the Sky customer data by the two companies had occurred without the fact of that purchase, and the circumstances in which it had happened, being fully known to and approved by the three main individual defendants. Accordingly, those three had intended, procured and shared a common design that the various acts should occur which, as had already been held, amounted to breaches of the obligation of confidence which the two companies owed to Sky as the owner of the data in question. All three had agreed that the two companies should operate in such a way as to breach Sky’s right of confidence in the data, infringe Sky’s database rights in it, infringe its trade marks and to pass themselves off as being connected with, or authorised by Sky. They were accordingly liable for these acts.

As for the minor individuals, Sky’s claims against Steele would be dismissed, along with the claims against Sibbald, Reynolds and Waters, since there was no evidence upon which to establish their personality. Lee however could provide no explanation of how seeded data, provided uniquely to him, had ended up with Digital, with the result that he was liable for misuse of Sky’s confidential information, infringement of its database right and breach of his employment contract.

As to database right, 're-utilisation' under Article 7(2) of the Directive was intended to protect the maker of a database against acts which went beyond the legitimate rights and thereby harmed the investment of the maker. The test was whether the distribution to the public in issue was an act which would harm the maker’s investment in creating the database in question. An act of collecting data and delivering it to another without the consent or authority of its maker would amount to the making the contents available to the public.

The IPKat has spent much time recently perusing high-profile decisions and sensational facts. It's good to remember, though, that most pieces of IP litigation are highly unglamorous and involve patiently picking through a mass of detail, both in terms of evidence and in terms of applicable law, in order to bring a claim to its just conclusion, establishing the proper boundaries of liability for those who have acted unlawfully. He notes that, while Sky's involvement in this matter may be at an end, the case is far from over for Messrs Freeman, Sullivan, Marrow and Steele: all four admitted to laying evidence before the court which they knew to be false -- a matter which, Sir William Blackburne said, should be referred to the Director of Public Prosecutions.

When the sky falls in, here

1 comment:

Andy J said...

I noticed the case at the time but didn't mention to the IPKat because of its borderline IP content, being more about breach of confidence and passing-off. However the judgment is well worth the read for its analysis of the chicanery practised (or did they?) by some of the defendants and their associates, which while not worthy of a James Bond film, certainly comes into the fantasy league.

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