HAPPY KAT; LITIGATION AS THERAPY?

Happy Kat

The IPKat is a happy kat. Yesterday his email circular list notched up its 500th member. Thank you for joining us, Simone, you're very welcome! Merpel says, this is one occasion when I'm not going to argue ... but the other 499 are welcome too.

On a somewhat less happy note, several of our email circular readers have complained of the list being hijacked from time to time by spammers. In theory this should not be able to happen. Google operates a moderated system for its Groups, under which every email circular has to be approved by the IPKat before it's distributed to his circular list. Some 10 to 12 such spam circulars are notified to him daily. It is the IPKat's policy never to allow the distribution of third party circulars, though from time to time the IPKat will post information as a blog in its own right if it has been sent to him by a friend and appears to have some genuine connection to intellectual property.

Unfortunately some spam still gets through and it's doubly annoying to the IPKat. Apart from the fact that he has to take the time and effort to verify that it is spam and then delete it - just as everyone else does - he also has to answer several emails a week from irate members of the circulation list. Some of you have wondered if the IPKat gets paid for circulating this stuff. The answer is emphatically no.

So please be patient if you get spam via the IPKat's list: we're doing our best to combat it and very much hope that one day it will be entirely eliminated.


Litigation as therapy?

This floated into the IPKat's consciousness via the LexisNexis Butterworths service: Vitof Ltd v Altoft [2006] EWHC 1678 (Ch), a decision of Richard Arnold QC, sitting as a deputy judge of the High Court, last Tuesday, 11 July.

A person referred to in the note as C, together with the defendant Altoft, entered into a partnership for the purpose of making a new labelling machine. For this purpose they incorporated a company, Vitof. On the company's incorporation, C and Altoft became its directors; Altoft was also the company secretary. C, Vitof and Altoft entered into a shareholders' agreement by which they agreed that C and Altoft would finance the company through loans repayable once Vitof became profitable.

Vitof later developed a labelling machine, the PDFM. Circuit boards for the PDFM were made in the UK by another company, UKE. C and Altoft gradually fell out and Altoft eventually resigned his directorship. Vitof then sued Altoft, alleging that (i) the components of the PDFM and all the IP rights in them belonged to it since they had been created by C and Altoft in their capacities as the company's directors and employees; (ii) the PDFM's source code was confidential and (iii) Vitof owned copyright and design rights in the designs depicted in design documents that it had sent to UKE in March 2003. Altoft served a defence and a counterclaim in respect of the valuation of his shareholding, seeking repayment of his loans. Vitof pressed for summary judgment on its claims and sought to strike out chunks of the counterclaim. Altoft also applied for reverse summary judgment on Vitof's claims and on his counterclaims.

Richard Arnold QC ruled that, on the evidence, Vitof was entitled to summary judgment on its claim that Altoft held the copyright in the latest version of the PDFM's source code on trust for Vitof; he also gave summary judgment on the claim in relation to the confidentiality of that source code. Since Altoft had a real chance of establishing that legal or equitable ownership of the design right in the designs belonged to UKE rather than to Vitof, a declaration would be made to the effect not that Vitof did own the design right, but that Altoft did not. Altoft's counterclaim in respect of the alleged undervaluing of his shareholding would be struck out, but he was entitled to summary judgment on his claim for repayment of the money he lent Vitof.

The IPKat finds it sad that these disputes get to court. What is so often at stake is not the legal issues but the personal hurt felt by former business associates who have fallen out, who nurse grievances against one another and for whom litigation is often an expensive form of anger therapy. The more such cases are settled by good case management or by summary judgment, rather than being allowed to grind on to trial, the better. Merpel adds, there's much to be said for building some sort of comfortable dispute resolution clause into the partnership arrangement when it's drawn up, since so many partnerships end in tears.