Archive for the ‘Confidential Information’ Category

You can arbitrate disputes under an IP licence agreement

Tuesday, May 10th, 2011

Hamerschlag J, in the New South Wales Supreme Court, has ruled that disputes between a licensor and licensee under a technology licence agreement fall within the arbitration clause in the agreement and, consequently, the arbitrator’s determination that he has jurisdication is valid and binding on the parties.

The disputes between the parties related to (1) the application of the “improvements” clause and (2) whether licence fees would be payable if the licensee embarked on different strategies in the future. Hamerschlag J rejected the licensor’s, Lardken’s, argument that neither of the matters were disputes within the scope of the arbitration clause, cl. 19(b):

(b) All disputes arising in connection with this Licence, which are not adjusted by Licensing Agreement between the parties concerned, shall be finally settled by arbitration. The arbitration shall be held before a single arbitrator appointed by the parties or in the absence of agreement by the Chair of the Law Society of New South Wales, and conducted in accordance with and under the Commercial Arbitration Act 1984 of New South Wales. Judgment upon the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award, or an order of enforcement as the case may be.

The improvements clause

Lardken licensed Lloyd to use Lardken’s technology relating to methods of collecting energy, converting it to heat, transferring the heat energy to a storage medium based on graphite and extracting and releasing the heat energy into useable form.

The licence agreement had one of those “Improvements” clauses, cl. 5.4(a), by which Lloyd agreed to transfer ownership of any improvements in the technology it developed to Lardken and would receive a non-exclusive licence back.

A third party, Ausra, applied for patents in the USA and Australia. Lloyd had notified Lardken about these applications, but had settled a dispute with Ausra on terms that Ausra assigned its rights in the patent applications to Lloyd. Lardken claimed that “Ausra’s” patent applications had been developed from confidential information about Lardken’s technology which, it was alleged, Ausra accessed at Lloyd’s facility. Lardken also claimed it was entitled to ownership of patent applications filed by one of Lloyd’s subsidiaries, Solfast.

Lloyd denied that any of this technology were improvements within the meaning of the licence agreement and, when Lardken refused to agree, referred the matter to arbitration.

Lardken argued that these disputes were not capable of determination by the arbitrator as a matter of public policy as only the Commissioner of Patents had authority under the Patents Act to grant patents or, subject to appeal to the Court, determine who was an entitled person under s 15 and s 32 and s 36.

Hammerschlag J held that the issue between the parties was a dispute about whether the Ausra or the Solfast technology fell within the terms of cl. 5.4(a). That was a dispute falling within the scope of the arbitration clause. The arbitrator’s decision would not, and could not, affect the Commissioner’s determination whether to grant the patent applications or not. The Commissioner’s powers under ss 15, 32 and 36, to determine entitlement, were not exclusive: questions of assignment for example were regularly determined in other fora. All the arbitrator’s decision would do would be to decide rights and obligations as between Lardken and Lloyd.

The liability to pay licence fees

Lloyd also sought the arbitrator’s ruling that it would not have to pay additional licence fees if:

  1. it itself constructed something using Lardken’s technology; or
  2. it sub-licensed one of its subsidiaries to construct something using Lardken’s technology.

Lardken argued the dispute about Lloyd’s potential liability to pay royalties in the future was not a ‘dispute’ capable of arbitration. There was, as yet, no “live issue” between the parties, it was really an attempt to seek an advisory opinion about a hypothetical eventuality.

Hammerschlag J also found that this was a dispute covered by the arbitration clause.

When Lloyd had written to Lardken stating its interpretation of the licence agreement, Lardken had responded disagreeing. Thus, at [101]:

There is thus clear disagreement between the parties on matters arising in connection with the Licensing Agreement. Each has claimed that the Licensing Agreement operates in a way which the other disputes; see Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726 at 757. See also the incisive discussion as to what constitutes a dispute in Tjong Very Sumito v Antig Investments at 747 and following, and Sutton et al, Russell on Arbitration , 23rd ed (2007) at [5-003].

Further, that fact that there was an element of futurity about the liability to pay did not render it purely abstract or hypothetical. Hammerschlag J accepted that purely hypothetical matters may not qualify as ‘disputes’, At [104]:

Although both of these disputes involve an element of futurity they are not purely abstract or hypothetical in the sense which makes them incapable of being the subject of determination. They concern whether certain prospective conduct will result in liability to pay fees under the Licensing Agreement (or put another way whether in the event of that conduct occurring the failure to pay would be a breach of contract). It was not suggested that the prospect that that conduct would occur was fanciful.

In reaching this conclusion, his Honour noted that declarations could be granted by the Court in similar situations:

98. In The Commonwealth v Sterling Nicholas Duty Free [1972] HCA 19; (1972) 126 CLR 297 at 305 Barwick CJ said:

The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction.

Hammerschlag J did note, however, it was a matter for the arbitrator’s discretion whether or not to make a determination on the issue.

The judgment doesn’t say how much it would cost to build one of these plant, but one might well think it makes sense for a party to be able to find out in advance what, if any, licence fee would be payable before it had committed to, or incurred, the expense of building the plant.

Larkden Pty Limited -v- Lloyd Energy Systems Pty Limited [2011] NSWSC 268

Lid dip: Steve White

The mobile (iPhone) confidentiality agreement

Friday, November 20th, 2009

iPhone J.D. reviews an intriguing development: a standard from Non-disclosure Agreement “app” for your iPhone – iNDA.

The developer told iPhone J.D.:

“People often have informal meeting where they would like to discuss ideas with colleagues, friends, or prospective employees. We want to promote these meetings by giving people legal protection available to them at all times.”

STOP LAUGHING, this is fascinating:

The discloser actually signs the document with his or her finger on the iPhone and the signed document is emailed to both parties. Read the review and watch the demo.

A couple of  points about this (1) enforceability and (2) ramifications.

First, although it is available in the Australian iTunes store ($5.99) and the developer’s website says the agreement has been drafted by “a leading contract law firm”, the developer’s conversation with the iPhone J.D. suggests the app was drafted in line with US laws. Whether or not it would be enforceable in Australia may well be another matter. One can’t tell from the screen shots what the wording is. Also, it doesn’t look like you can add details like what the information claimed to be confidential is. On the other hand, we have electronic signature laws too and a relationship of confidentiality can arise where the confidential nature of the circumstances is apparent from the circumstances. Signing up to such a document might, just might, lead to such an inference. You should form your own views.

Secondly and in many respects far more intriguingly, think about the ramifications.

We already go along to mediations toting our laptops and maybe a printer, type up the terms and print them out for signature.

With this product people can have in their pockets – well in their iPhones – and with them at (pretty much) all times a document which is intended to create binding legal relations with some other party and actually get them signed up on the spot.

OK, this particular document is pretty rudimentary and I personally don’t often find myself suddenly desperate to sign the person I’m talking to up to an NDA. How much longer will it be though before the number of fields in the document that can be customised is increased and you can actually start tailoring some form or other to the particular circumstances?

Confidentiality, unconscionability and contract

Wednesday, July 15th, 2009

Telstra and Optus have an interconnect agreement, in part to regulate how callers originating from one network get delivered to the other, charges and the like.

Optus successfully sued Telstra for misusing Optus’ confidential information under the agreement: information about call traffic between the two networks.

(You should look at that judgment as it illustrates the two-edged nature of many definitions of confidential information.)

In this part of the fight, Edmonds J declined to grant relief under the equitable obligation of confidence as the contractual obligations in question were comprehensive.

His Honour also explored the meaning of the prohibition on unconscionable conduct in s 51AA of the TPA, but declined to find a contravention in that context.

Optus Networks Ltd v Telstra Corporation Ltd (No. 3) [2009] FCA 728

ALAI and the Tercentenary of Copyright

Sunday, February 8th, 2009

ALAI’s 2009 (biennial) congress takes place in London in June this year, to commemorate the 300th anniversary of the Statute of Anne (that shouldn’t stop you also letting off fireworks on 10 April 2010).

Details here.

Unfortunately, we in Australia no longer have a national group; but it is still possible to be an individual member or just go to the conferences etc.

Sex, videotapes and damages II

Tuesday, December 16th, 2008

Following on from last week’s Giller v Procopets, I was asked if Max Mosley’s payment of the prostitutes precluded a claim for breach of confidence, leaving him just with his Conventional rights to privacy.

It is certainly true that the trial judge focused primarily on the invasion of Mr Mosley’s rights to privacy. However, his Lordship did also find that “Woman E” breached her obligation of confidence to Mr Mosley:

104 In the light of these two strands of authority, it becomes fairly obvious that the clandestine recording of sexual activity on private property must be taken to engage Article 8. What requires closer examination is the extent to which such intrusive behaviour could be justified by reference to a countervailing public interest; that is to say, at the stage of carrying out the ultimate balancing test. I will focus on those arguments shortly.

105 Before I do so, however, I need to address the separate question of whether Woman E owed a duty of confidence to the Claimant and the other participants in respect of the events at the flat on 28 March. In the ordinary way, those who participate in sexual or personal relationships may be expected not to reveal private conversations or activities. Evidence was given by the Claimant and the other women both generally about the recognised code of discretion on “the scene” and also, specifically, about their relationships with one another. Woman A was a close friend of Woman E and had introduced her to the Claimant. Her outrage is displayed in a text she sent on 11 April:

” … our scene is based on complete trust and complete discretion. However one of my so called close friends dominatrix [Woman E] has betrayed that confidence by doing what she has done. I am devastated by this act of pure total selfish greed, she has no morals, no integrity, no loyalty, complete disregard to others, cruel, and she is a liar!!! No one … deserves this invasion of privacy.”

106 It was often said that “there is no confidence in iniquity”, but it is highly questionable whether in modern society that is a concept that can be applied to sexual activity, fetishist or otherwise, conducted between consenting adults in private. All the other women, as well as the Claimant, felt utterly betrayed by Woman E’s behaviour in filming them without consent and selling the information to the News of the World. I was told that she was soon ostracised from “the scene”, where the need for discretion is widely accepted.

107 It is true that the Claimant on this occasion paid the women participants, although he has not always done so in the past, but this does not mean that it was a purely commercial transaction. Even if it was, that would naturally not preclude an obligation of confidence, but it is quite clear from the evidence that there was a large element of friendship involved, not only as between the women but also between them and the Claimant. For example, had it not been for the intervention of the News of the World there was a plan to offer him a (free) session for his birthday (which falls in April).

108 In any event, irrespective of payment, I would be prepared to hold that Woman E had committed an “old fashioned breach of confidence” as well as a violation of the Article 8 rights of all those involved. This may have been at the instigation of her husband, who saw the opportunity of making £25,000 out of the News of the World and who made the first approach. (emphasis supplied)

One might add that the equitable obligation of confidence long since escaped the confines of private relationships involved in (Prince) Albert v Strange and Argyll v Argyll to afford protection in many commercial situations such as employer-employee relationships where money changed hands.

So, while the obligation of confidence was recognised, it would seem the English court took the converse approach to the Victorian Court of Appeal – concentrating on the modern right to privacy.  So e.g. Eady J noted at [182]:

The cause of action now commonly described as infringement or breach of privacy, involving the balancing of competing Convention rights, usually those embodied in Articles 8 and 10, has recently evolved from the equitable doctrines that traditionally governed the protection of confidential information. Now (and especially since the formulation by Lord Nicholls in Campbell v MGN Ltd [2004] 2 AC 457) it is common to speak of the protection of personal information in this context, without importing the customary indicia of a duty of confidence. 

Max Mosley v News Group Newspapers Ltd [2008] EWQB 1777

Sex, videotapes and damages

Thursday, December 11th, 2008

The “IP issue” arose amid a number of claims arising from the breakdown of a defacto relationship.

Ms Giller came from Russia in 1990 and shortly after commenced living with Mr Procopets. Together, they had twins, but the relationship was very rocky to say the least.  Neave JA explained the circumstances giving rise to this part of Ms Giller’s claim:

358 … Ms Giller obtained an interim intervention order against Mr Procopets on 12 November 1996. As is often the case where a relationship involves violence,[336] Ms Giller continued to see Mr Procopets after the interim intervention order was granted. Ms Giller’s claim for damages for breach of confidence, breach of privacy and intentionally causing mental harm arose out of the events which followed the granting of this intervention order. The relevant factual findings made by his Honour are summarised below.[337]

359 The couple had intercourse on 19 November 1996 and on a number of other occasions between then and 1 December 1996. Mr Procopets filmed their sexual activities on a hidden video camera. Until 25 November, Ms Giller was unaware of the filming. Thereafter she became aware of the filming and acquiesced in it.

360 Shortly after 1 December 1996, relations between Ms Giller and Mr Procopets deteriorated, to the point where Mr Procopets began threatening to show videos of their sexual activities to Ms Giller’s friends and family.

Mr Procopets also rang Ms Giller’s employer and said that he had a video showing her abusing her position to obtain sexual favours. Mr Procopets also showed the videotape to his subsequent girlfriend for the purposes of degrading Ms Giller.

The trial judge found that:

I am satisfied that the plaintiff has established that the relationship was a confidential one, that she did not authorise him to distribute the video or show it, that his unauthorised distribution was a breach of that confidence and she would be entitled to relief for that breach of confidence.

I also find in respect of the threats to show, the distribution and the showing of the tape in December 1996, that the defendant intended to cause the plaintiff mental harm and that in distributing the video the plaintiff was distressed, annoyed and embarrassed.

His Honour explained why the videotapes were subject to an equitable obligation of confidence:

In my view persons indulging in a sexual activity in the privacy of their own home create a confidential relationship during such activity. In my view it is difficult to think of anything more intimate than consensual sexual activities between two parties in the privacy of their home. It involves a relationship of mutual trust and confidence which is to be shared between the persons but is not to be divulged to others without the consent of both parties.

(Salacious) shades of (Prince) Albert v Strange.

His Honour however refused damages in the equitable jurisdiction because Ms Giller did not seek an injunction and, further, equitable damages (my terminology used impermissibly loosely for the monetary remedy available under Lord Cairn’s Act) were not available for mental harm falling short of psychological or psychiatric injury.

The Victorian Court of Appeal unanimously held that damages (or perhaps equitable compensation for the purists amongst you), including aggravated damages, were available. If damages had been available, the trial judge would have awarded $5,000 + $3,000 by way of aggravated compensatory damages.  Neave JA, with whom Maxwell P agreed, awarded $50,000 included $10,000 by way of aggravated damages.  Ashley JA would have awarded $27,500 (including $7,500 by way of aggravated damages).

One might think that the availability of such damages for defamation and copyright infringement (e.g. Milpurrurru v Indofurn) admittedly, respectively, legal and statutory wrongs should mean the Court’s conclusion should not ultimately be controversial.

Nonetheless, while it is clearly very, very carefully considered – running to over 500 paragraphs (dealing with several other claims as well) – Mr Procopets represented himself.  

In addition, as the Court acknowledged, no Australian court has gone this far before.  

The Court also took into account House of Lords and Court of Appeal decisions, recognising that the most directly relevant also involved the application of the European Convention on Human Rights and appear to have assumed the availability of the remedy in these circumstances.  Also, the decision bears on territory in which the learned authors of Meagher, Gummow and Lehane have expressed vigorous views, although perhaps more about whether it is ‘damages’ under Lord Cairn’s Act or equitable compensation in the inherent jurisdiction that is being invoked.

Neave JA explained that, if it ever were the case that the Victorian enactment of Lord Cairn’s Act required an injunction to be sought, that had been conclusively changed by the wording adopted in s 38 of the Supreme Court Act 1986.

As to damages for mental distress and embarrasment, her Honour considered:

422 In Smith Kline & French v Secretary, Department of Community Services and Health, Gummow J said the conferring of equitable jurisdiction on a court:

… brings with it, in a case such as the present, the inherent jurisdiction to grant relief by way of monetary compensation for breach of an equitable obligation, whether of trust or confidence.[407]

423 Equitable remedies such as injunctions are available to prevent publication of confidential material because of its private nature.[408] It is unnecessary in such applications to show that, if unrestrained, the breach of confidence will cause financial loss or psychiatric injury. By parity of reasoning there should be no barrier to the making of an order for equitable compensation to compensate a claimant for the embarrassment or distress she has suffered as the result of a breach of an equitable duty of confidence which has already occurred. As Morland J said in Cornelius v De Taranto:

…[I]t would be a hollow protection of [the right to protection of confidential information] if in a particular case in breach of confidence without consent details of the confider’s private and family life were disclosed by the confidant to others and the only remedy that the law of England allowed was nominal damages. In this case an injunction or order for delivery up of all copies of the medico-legal report against the defendant will be of little use to the claimant. The damage has been done. … In cases of commercial or business breach of confidence the powers of the court are not barren. Such remedies as injunction, delivery-up, account of profits and damages may be available… similarly in the case of personal confidences exploited for profit or peddled to the media. … In the present case in my judgment recovery of damages for mental distress caused by breach of confidence, when no other substantial remedy is available, would not be inimical to considerations of policy but indeed to refuse such recovery would illustrate that something was wrong with the law.[409]

424 I respectfully agree with that view.[410] An inability to order equitable compensation to a claimant who has suffered distress would mean that a claimant whose confidence was breached before an injunction could be obtained would have no effective remedy.

and, if damages were to be assessed under Lord Cairn’s Act:

428 Damages under Lord Cairns’ Act are sui generis, and can be awarded in some circumstances where common law damages are not recoverable.[416] In my view, such damages should be available where the essence of the plaintiff’s case is that he or she has been embarrassed by the exposure of private information, rather than that the defendant has profited from the wrongful use of that information. In Talbot v General Television Corporation Pty Ltd,[417] Young CJ treated damages under Lord Cairns’ Act as compensating the plaintiff for what he or she had lost.[418] It is consistent with that approach to compensate Ms Giller for the mental distress suffered as a result of the defendant’s actions.

Her Honour considered that awarding damages was also consistent with the injunctions by Gleeson CJ, Hayne and Gummow JJ in ABC v Lenah Meats on the need for breach of confidence to develop appropriately to protect privacy interests.

Ashley JA considered that it was unnecessary to consider Ms Giller’s claim to a generalised tort of invasion of privacy because breach of confidence was available and adequate to address the situation.

Giller v Procopets [2008] VSCA 236.

Monopolies and IP round up

Tuesday, September 2nd, 2008

IPKat reviews 2 new texts on the “interface” between aspects of IP and anti-trust or competition and an economics “reader”:

(1) Nuno Pires de Carvalho, TRIPS Regime of Antitrust and Undisclosed Information; and

(2) Irina Haracoglou, Competition Law And Patents: a Follow-on Innovation Perspective in the Biopharmaceutical Industry; and

(3) Robert P. Merges (ed), Economics Of Intellectual Property Law.

IPKat’s review here,

and the IP Dragon entices us with news of a new (1 August) anti-monopoly law in China. which, apparently, reserves well-known trade marks and traditional Chinese brands on grounds of national security.