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Friday, 26 December 2014

Endoscope and remedial scope: inside view of an application for summary judgment

"They don't like it up'em!" was the famous line delivered by Corporal Jones (right) in the popular BBC television comedy Dad's Army (here and here).  Jonesy's refrain was referring to bayonets but nowadays, when most folk rarely encounter a bayonet outside a war museum, those words might be more applicable to endoscopes, the subject of Medical Innovations Ltd v Eakins and others.  This is a Chancery Division, England and Wales, decision of Richard Meade QC on 17 December, and the following blogpost is based on a Lawtel note that is a bit thin and somewhat confusing in terms of the facts.   Be that as it may, the overall reasoning is clear and this Kat -- a great enthusiast for summary judgment where it is available -- thought it was interesting enough to merit a blog post.

Medical Innovations (MI), a company, employed Eakins for four years in the design and manufacture of endoscopy devices. When his employment was ended, Eakins signed a compensation agreement under which he agreed to keep MI's information confidential, to disclose any wrongful acts and to repay the compensation payment on demand if he breached the agreement. Eakins subsequently collaborated with the other defendants in business ventures that competed with MI's.

Not everyone needs
an endoscope ...
MI commenced legal proceedings in which it asserted ownership of various intellectual property rights and alleged breach of database rights, misuse of confidential information and breach of contract and sought a variety of declarations, injunctions to stop the sale of competing products and an inquiry into damages. Eakins helpfully admitted that he had indeed taken documents from MI and that he had continued to access its electronic databases after leaving its employment. Of importance in this case were (i) the distributor database, containing the names and details of MI's actual and potential distributors together with comments about their likely attitude to MI's products (MI had culled these distributors from a longer list, then corresponded with them to establish their attitude) and (ii) the customer database, containing information about customers, such as contact and account details.

MI sought summary judgment on its claims for infringement of database right, breach of confidence and repayment of the money paid to Eakins under the compensation agreement, at which point Eakins began to resist: no, he said, MI had no database rights in the distributor database because the effort that had gone into it was insufficiently substantial and because it contained data created by MI, rather than data obtained by MI; in any event, MI had no database rights in the customer database because third party material had been incorporated into it.

Richard Meade QC granted summary judgment in relation to infringement of database right but not for the claim of breach of confidence. In his view

* while it was clear that a trial would be needed to determine the issues of intellectual property ownership as well as other causes of action that were not subject to the application for summary judgment, if MI could establish a proper claim for summary judgment to the requisite standard, it would not be right to withhold summary judgment merely because there would still have to be a trial on the other matters.

* as to the distributor database, Eakins's argument that no substantial work had gone into it was hopeless. MI had clearly entered into correspondence with potential distributors to find out their likely level of interest in the products and, while work done internally within MI might amount to creation, the database clearly went beyond that: it reflected research in the commercial world.

* equally, while Eakins was working for MI, substantial work had gone into adding to the customer database and maintaining it -- and Eakins could not escape liability by saying that the database contained copyright material belonging to someone other than the database owner. The fact that the customer database contained material from another source did not mean that there was no database right in relation to it.

* though Eakins had clearly perpetrated a number of acts of taking and misusing confidential information, there was a significant dispute about both the extent of these acts and their consequences and an important dispute remained to  be resolved as to whether MI's claim was too broad. This being so, the burden was on MI to identify the scope and nature of its confidential information in order to support its claims for an injunction to prevent the production of competing products, On the facts before it, the court was unable to frame any useful relief to reflect Eakins's extensive breach of confidence: a declaration would be neither clear nor useful, and an order relating to financial relief would be pointless as that would be considered on an inquiry into damages. Summary judgment was therefore refused in relation to breach of confidence.

* Eakins had clearly breached the terms of the compromise agreement and there was no reason to delay the repayment of his severance pay-off, so MI could recover that straight away.

This Kat continues to find it strange that the parties to a legal action should have to focus on issues such as whether a database is created from within or acquired from outside, and how much effort has gone into creating the data itself rather than creating the database, since these issues seem so irrelevant to the world of business and commerce in which investment in databases is made. There, the questions asked are along the lines of "is it a valuable business asset?", "what would happen if our competitors could also use it?" and "how can we stop them getting their hands on it?"

Endoscopy and other-endoscopy here

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