England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HER HONOUR JUDGE KIRKHAM
HC04C03870

		Royal Courts of Justice Strand, London, WC2A 2LL
		23rd January 2007

Lord Justice Chadwick :

1. This is an appeal from an order made on 16 December 2005 by Her Honour Judge Kirkham, sitting as a Judge of the High Court in the Chancery Division, in proceedings brought by the appellant, Point Solutions Limited, against Focus Business Solutions Limited and Focus Solutions Group plc. In the context of these proceedings it is unnecessary to distinguish between the two Focus companies: the first is owned and controlled by the second.
2. The relief sought in those proceedings was unusual. As the judge put it in her judgment, [2005] EWHC 3096 (Ch): "I am being asked to make a declaration that software, which I have not seen, does not infringe any copyright in another software product which I have not seen and in respect of which copyright has not been demonstrated". She declined to grant that relief and dismissed the action with costs on an indemnity basis. Permission to appeal was granted by Lord Justice Lloyd on 16 February 2006.

The underlying facts

3. Point Solutions Limited ("Point") carries on business as a provider of computer software services – in particular, as a provider of software for the creation and use of electronic application forms for use in the financial service sector. At the material time the respondents (together "Focus") had for some years been the dominant supplier in that market.
4. In April 2001 Point and Focus had entered into an outsourcing agreement under which Point undertook work for Focus, including a review of a module in Focus' Goal software – Builder Tool. That work was carried out by Mr David Green, the managing director of Point. In connection with that work Point was provided with three modules of Goal software – Goal: Builder versions 2 and 2.1, Goal: Renderer version 1.43 and Goal: Utilities.
5. In the course of its business Point supplies a product known as Acuo Software. That product – which comprises three modules, Acuo Enable/Professional, Acuo Web and Acuo SDK - was developed over a period between 2 July 2001 and August 2002 in response to an approach from Clerical Medical International ("CMI"), a well known pension provider.
6. The outsourcing agreement between Point and Focus came to an end in or about October 2001. It seems that Focus learnt that Point had been awarded the CMI contract, for which Focus had made an unsuccessful bid, and that Point intended to bid for a contract with Halifax (the parent of CMI) in competition with Focus. Focus asked for the return of the Goal software: a request with which Point claims to have complied.
7. On 9 October 2002 Mr Frank Murray, the Chief Technology Officer at Focus wrote to Point "to seek confirmation of the provenance of the software you have developed in order to compete with Focus". After referring to the return of the Focus software and manuals in 2001, to a dispute between Focus and Synaptic Systems Limited (a company with which Focus had been in a "partner relationship") in which, it was said, Synaptic had been forced to admit copying of Focus software, and to the April 2001 outsourcing agreement, the letter went on:

"What has happened between Focus and Point Solutions is strikingly similar to what has happened between Focus and Synaptic. As a result of this and particularly the speed at which you have launched a competing product, I am sure you will understand that I need confirmation that you have not undertaken any copying of Focus' software and solutions. I strongly suggest that before you reply, that you give serious thought to what constitutes copying. Indeed, Synaptic failed to understand that copying covers more than just literal code copying, it also covers, for example, the use of the structure of the product as a 'springboard' in producing your own product. . . .

Copyright works

We wish to assert that Focus products are original copyright and to which the copyright vests in Focus.

Confirmation request

Without a court order for advance disclosure or the carrying out of further investigations (including the analysis of your product) we are not in a position to confirm that no copyright or infringement has taken place. Therefore we are requesting both a written confirmation from you in this respect and a voluntary disclosure by Point Solutions of such material that would confirm that no copyright infringement has taken place. We believe such material would be made available through a court order were we to seek any advance disclosure and, indeed case law supports the principle that an unreasonable refusal by you now to make advance disclosure may deny you the costs of doing so if a court is minded later so to order.

We are concerned to establish a voluntary agreement to determine that no copyright infringement has taken place and we look forward to hearing from you accordingly."

8. Mr Green replied, on behalf of Point, by a letter dated 15 October 2002:

"I understand your concern following your experience with Synaptic.

I am therefore happy to confirm that we have neither copied code nor based any of our product suite on Focus'software or solutions. I would also like to make it clear that we have not used the structure of any of your products as a 'springboard' in producing our Acuo product suite.

We have been developing our Acuo product suite for over 15 months, and during the height of development have had a team in excess of 20 people working on it. We estimate that more than 20 man-years of work have been carried out in the development of Acuo.

Because we believe that the architectural approach that we have taken provides us with a strong competitive advantage over other providers of PAC^[1] technology, including Focus, we would be unwilling to allow Focus representatives to have access to our source code.

We are, however, happy to make a voluntary disclosure of such material that would confirm that no copyright infringement has taken place, to a mutually agreeable third party. This is provided that Focus pay for all costs incurred and is on the understanding that no products, architectural diagrams, or source code will leave our premises.

I believe that it is in the interest of both companies to resolve this issue as soon as possible and clear any doubt over the provenance of our software.

. . . "

9. Despite that apparently promising start, the parties did not resolve the issue whether, in the course of developing its Acuo product, Point had made use of the knowledge of Focus software - which had, plainly, been available to it – by the 'agreed expert' route which Point had suggested and with which Focus were content. The attempts to reach an agreed procedure are set out in detail by the judge at paragraphs [22] to [37] of her judgment. It is not, I think, necessary to rehearse them in this judgment. It is enough to note that the parties agreed the identity of the experts who were to be instructed; and agreed terms of reference on the basis of which the experts should be asked to act. Those terms of reference were set out in a letter dated 25 August 2003. They provided (amongst other matters) for each party to produce a technical primer containing such information as the parties believed the experts might require "to understand and to efficiently carry out their examination of the software".
10. The judge accepted that Focus did put in hand the preparation of a technical primer; but she found that "matters did not otherwise proceed with any urgency". The Focus primer had been completed by 19 March 2004. Point had taken no steps to prepare a primer. On 18 April 2004 Mr Green wrote:

"Our offer to enter into a non-determinative review made on the 25 August 2003 was on the understanding that Focus Solutions would move quickly forward with the review and that the process would commence within 2 weeks of Focus Solutions receiving the quote from the experts.

This clearly has not happened, the quote was received in September . . .

We have suspected for a long time that Focus Solutions were trying to prolong the process and their inaction over the last six months has added further weight to this viewpoint. If Focus Solutions genuinely believed that we have infringed their copyright then they would have moved forward with the review without hesitation.

. . . As a result of the inaction over the past six months and a change in our own circumstances our approach to this issue has now changed. We are not prepared to allow Focus Solutions to use this issue as an open ended threat and will not expend any more time, effort, or expense in any process that is non-determinative.

Instead we are now embarking on our own process to seek resolution. . . ."

The judge rejected, as unfair, the suggestion, made by Mr Green in that letter of 18 April 2004, that Focus had been dragging their feet. It was her view that Point had decided, for its own reasons, that it would not proceed with the expert scrutiny process "but did not get around to telling Focus until their letter of 18 April 2004".

11. Be that as it may, on 28 May 2004, solicitors for Point wrote to Focus' solicitors to say that they were instructed to seek a declaration of non-infringement of copyright. That was followed, on 12 July 2004, by a letter of claim. These proceedings were commenced on 14 December 2004.

These proceedings

12. The amended particulars of claim, dated 28 January 2005, are commendably succinct. Paragraphs 1 and 2 describe, respectively, the claimant and the defendants. Paragraph 3 pleads that:

"Since before the issue of the Claim Form herein, the Defendants have asserted that the Claimant's Acuo software infringes the Defendant's copyright in their Focus software as follows . . ." [giving particulars]

Paragraph 4 pleads that:

"The Defendants assertions are untrue."

Paragraph 5 pleads that the defendants, unless restrained, threaten and intend to repeat the untrue assertions "which will cause the claimant to suffer further loss and damage". And paragraph 6 asserts that, in the premises, the claimant is entitled to declaratory and injunctive relief. The relief claimed is:

"A declaration that the Claimant's Acuo software modules, namely (i) Acuo Enable/Professional (ii) Acuo Web (iii) Acuo SDK do not infringe the literary copyright (if any) subsisting in the source code for the Defendant's Focus Goal software of any of its constituent modules, namely (i) Goal Offline viewer (ii) Goal Online Viewer (iii) Goal Builder, or any other copyright (if any) subsisting in any work making up the Defendant's Focus Goal software."

and an injunction to restrain each defendant from representing to any person that the claimant's Acuo software does infringe any copyright owned by the defendants or either of them.

13. The particulars given under paragraph 3 (assertions of infringement) are set out under four heads: (i) the correspondence between the parties and their respective solicitors from 9 October 2002 to the date of the claim form (including, in particular, the letter dated 9 October 2002 and two subsequent letters, dated 7 November 2002 and 16 December 2002); (ii) a statement made in or around December 2002 by Mr Mark Loosmore (of Focus) to Mr Richard Leadbeater of Swiss Life; (iii) an implied representation made in or around February of March 2003 by Mr Murray (of Focus) to Mr Paul Creamer of Marlborough Stirling; and (iv) the allegations made in paragraph 7 of the defence dated 10 January 2005 served on behalf of Focus in these proceedings.
14. Particulars are given of the fact pleaded in paragraph 4 of the particulars of claim (that the defendant's assertions are and at all times have been untrue):

"Pending full and proper particularisation of the Defendants' contentions as to why the Claimant's Acuo software is alleged to infringe the copyright (if any) in the Defendants' Focus Goal software, the Claimant will state as follows:

(1) Each module of the Claimant's Acuo software, namely (i) Acuo Enable/Professional (ii) Acuo Web and (iii) Acuo SDK, was developed and written without reference to the Defendants' source code for any of its equivalent modules, namely (i) Goal Offline viewer (ii) Goal Online Viewer and (iii) Goal Builder respectively. The Claimant is and was aware of the Defendants' Focus Goal software but has never at any stage had sight of the source code for any of the Defendants' software products.

(2) The functionality of the Acuo software is derived from the 77-page ORIGO standard entitled 'ISML Definition and Use Version 2.1', client requirements and ordinary and accepted methods of generating user interfaces. The Acuo software does not reproduce any of the source code of the Defendants' Focus software products.

(3) In the premises, the Claimant's Acuo software does not infringe any literary copyright (if and to the extent that any subsists) in the Defendant's Goal software source code.

(4) Further, the Claimants will aver that, notwithstanding the Defendants' allegations of infringement as particularised above, the Defendants have not at any stage advanced a positive case of infringement."

15. It is plain that Focus had been advised to avoid advancing any positive case on infringement. In an amended defence served on 12 April 2005, paragraph 3 of the particulars of claim is denied. The allegations in paragraph 4 (save as to sub-paragraph (4)) are not admitted. Paragraph 5 is denied. It is said (at paragraph 10 of the amended defence) that:

"The Defendants intend only and truly to repeat their assertions that:

(1) the Claimant's Point Module software or elements of it were produced in what on any objective view was a very 'short time frame'; and

(2) that the Claimant has declined to allow a comparison of its and the Defendants' software by an independent expert."

16. The judge, after analysing those pleadings, observed that Focus' position was "that they have insufficient evidence to know whether or not Point's software infringes some unspecified copyright of Focus". She rejected Point's assertion that Focus were running a positive and inconsistent case as to whether there has been substantial copying. She pointed out (at paragraph [10] of her judgment) that:

"Focus have adduced no evidence as to any copyright they might have or as to whether Point's software does copy their own software. Focus have simply challenged Point's evidence in support of its assertions that its Acuo software was independently designed. They are entitled to do so."

And she went on to direct herself that:

"I am not trying a case as to whether or not there has been copying. The relevant element in this case is whether Point have demonstrated, on balance of probabilities independent design. The burden is on Point, not on Focus."

She observed (as was the case) that she was not assisted by any expert evidence.

The judge's reasons

17. The judge was taken to a number of authorities, which she listed at paragraph [62] of her judgment. It is, I think, sufficient to mention the following: Russian Commercial & Industrial Bank v British Bank for Foreign Trade, Limited [1921] 2 AC 438, Metzger v Department of Social Security [1977] 3 All ER 444, Wyko Group Plc and others v Cooper Roller Bearings Co Ltd [1996] FSR 126, Messier-Dowty v Sabena [2000] 1 WLR 2004, L'Oreal(UK) Ltd and another v Johnson & Johnson and another [2000] FSR 686 and FSA v Rourke [2002] CP Rep 14. In the light of those authorities, she held that she should approach the issues as follows (paragraph [68] of her judgment):

"The absence of a statutory right to a negative declaration does not preclude the court from making such a declaration if satisfied, in all the circumstances, that it would be just to do so. It is open to the court, under its inherent jurisdiction, to consider whether there has been sufficient assertion of the right to trigger the exercise of the discretion to grant a declaration of nature sought by Point. Following FSA, the matters asserted must be established to the court's satisfaction. The court should consider whether in all the circumstances it is appropriate to make the order. In doing so, the court should take into account justice to both claimant and defendant and whether the order would serve any useful purpose, and should consider any other special reason why the court should or should not grant the declaration. The three principles set out by Lord Dunedin in Russian Commercial are of assistance here. Following Wyko the court should be slow to require a party who has made no allegation of copying to answer a negative case of non-copying. In this exceptional case (in the sense that I have limited information) I should proceed with caution."

In saying that she had only limited information, the judge had in mind, I think, that she was not in a position (without the assistance of expert evidence) to make the direct comparison of the Point software and the Focus software that would be usual in a copyright infringement case where the allegation was copying.

18. It is not suggested, on this appeal, that the judge was wrong to approach the matter on the basis of the approach which she had set out. The judge held that, approaching the matter in that way, she needed to address the following issues (identified at paragraph [70] of her judgment):

"Has there been a sufficient assertion of right to trigger the exercise of the discretion to grant declaratory judgment?

Has Point established on the balance of probabilities that it did not copy Focus' source code in creating its Acuo range of products?

Independent expert scrutiny

Utility

Whether the discretion should be exercised in favour of Point?"

19. In addressing the first of those issues, the judge considered, in turn, the matters relied on by Point under each of the four heads set out in the particulars given under paragraph 3 of the particulars of claim. She clearly had in mind the observation of Mr Justice Ferris in the Wyko case ([1996] FSR 126, 137) that:

". . . a party who claims that facts [already in existence] give him a cause of action should be allowed to commence his own proceedings at a time and in a manner of his own choosing and is not to be brought into court by the opposite party to resist a claim for a declaration of non-liability."

But she accepted that the letter of 9 October 2002 and the statement made to Swiss Life in December 2002 did contain a sufficient assertion of right to satisfy the requirements for what may be described as anticipatory declaratory relief summarised by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade, Limited [1921] 2 AC 438, 448:

"The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought."

20. In relation to the letter of 9 October 2002 the judge said this, at paragraph [74] of her judgment:

"[74] In their 9 October 2002 letter, Focus did not expressly allege infringement. Indeed, they specifically stated that they were not in a position to do so, hence their suggestion for a voluntary arrangement for independent expert scrutiny. They specifically did not allege that Point had copied. Having said that, in my judgment, the inference from the letter is that Focus believed that Point had copied Focus' software. In my initial reading and, indeed, in subsequent readings, of that letter, the impression I gained was that Focus were implicitly asserting that Point had copied the Focus Goal software. They asserted that their products were original copyright and that copyright vested in them ie subsistence and ownership. The reference to production of the Point product 'in an impossibly short timeframe' implicitly voices a suspicion that Point had copied or otherwise used Focus' software. The reference to the Synaptic experience supports the inference that Point had copied. The references in that letter to legal action against Synaptic, to a court order for advance disclosure and to the way in which a court might award costs all indicate that Focus considered that legal proceedings might ensue. And the letter indicated that Focus were considering their options including legal action. The letter went further than merely expressing Focus' concerns, as they allege. Of itself, in my judgment the letter does assert, by implication, that Point had copied and it was, at that time, sufficient assertion of right to trigger the exercise of discretion to grant declaratory relief. . . ."

And, at paragraph [76] of her judgment, she rejected the submission, made on behalf of Focus, that Focus should be allowed to choose its own time at which to commence proceedings for infringement (if that was what it decided to do). The judge observed:.

"[76] . . . It seems to me that an assertion can be made expressly or by implication whether or not a party is ready to come to court to pursue a claim. The natural reading of Focus' letter indicates that court proceedings are an option which Focus are contemplating."

21. At paragraphs [77] to [84] the judge set out her findings in relation to the allegation that Focus (through Mr Loosmore) had represented to Swiss Life (through Mr Leadbeater) that Point's Acuo software had infringed the copyright in Focus' Goal software; and had done so with the intention of persuading Swiss Life not to contract with Point for the supply of its software and services. A telling document (which was, I think, produced by Mr Leadbeater in the course of the trial) was an e-mail which he had sent to his manager in early January 2003:

"Just before Christmas I had a 'phone call from Mr Loosmore . . . who told me that Focus are looking to take legal action against Point about breaches of intellectual property rights with the implication that anything Point developed for us would not be legal. It came across as a rather crude attempt to dissuade us from using Point.. . . "

The judge observed that that e-mail was "the closest we have to a contemporaneous document". She went on, at paragraph [84] of her judgment:.

"[84] . . . That e-mail indicates, in summary, what Mr Leadbeater had understood from the conversation. However carefully Mr Loosmore had tried to phrase the points he was making, Mr Leadbeater had gained the impression that Focus were looking to take legal action against Point with respect to breaches of intellectual property rights. That was the message he understood from Mr Loosmore's subtle phrasing. Indeed, one can see that the nuances of Focus' position - not an outright allegation of copying but a strong hint that something was not right - might easily be lost in the circumstances of the rather difficult call which Mr Loosmore made to Mr Leadbeater. I can also understand that Mr Leadbeater could in his own mind easily have paraphrased Mr Loosmore's message as an assertion of copying by Point. On balance I conclude that, however carefully Mr Loosmore had tried to phrase what he said, Mr Leadbeater's understanding of what had been said was that Focus were contemplating legal proceedings against Point for breach of copyright. In my judgment, that amounted to at least an implicit assertion to a third party of Focus' right and was sufficient, at that time to have triggered the right to ask for a declaration."

22. The judge was not persuaded that anything said by Mr Murray to Mr Creamer of Marlborough Stirling amounted to a representation (expressed or to be implied) that Point's Acuo software infringed the copyright in the Focus Goal software. And she dismissed the suggestion (in paragraph (4) of the particulars under paragraph 3 of the amended particulars of claim) that Focus' defence to the claim in these proceedings could "somehow be relevant to the question raised prior to proceedings whether Point were entitled to the declaratory relief it sought" as "fanciful".
23. There is no challenge to the judge's findings in relation to the first of the issues which she had identified: "Has there been a sufficient assertion of right to trigger the exercise of the discretion to grant declaratory judgment?". It has been common ground on this appeal that the judge was entitled to answer that question in the affirmative.
24. The judge then turned to consider the second issue: "Has Point established on the balance of probabilities that it did not copy Focus' source code in creating its Acuo range of products?". She pointed out, as she had done earlier in her judgment, that she did not have Point's software, she did not have Focus' software and she had had no assistance from an expert. She observed that she had heard evidence from some (but not all) of those involved in the development of the Acuo software (naming them) and that each of those witnesses had given evidence to the effect that he or she did not copy the Focus' Goal software. And she noted that (save for one minor exception) Focus had not put to any of those witnesses that Point had copied the Focus software. As she said, that was consistent with the position taken by Focus in the proceedings: Focus was not running a copying case. But she went on, at paragraph [99] of her judgment:

"[99] . . . Focus have, however, raised a number of matters both in cross examination of witnesses and in closing submissions to cast doubt on the evidence of independent design. These fall into two broad categories, namely (1) concerns as to the credibility of Mr Green and Mr Blatchford who were most intimately involved with the development of Acuo software and (2) incomplete evidence."

25. The judge accepted that she should treat the evidence of Mr Green and Mr Blatchford with caution. She said, at paragraph [101] of her judgment, that "I have concerns about the evidence given by both Mr Green and Mr Blatchford"; she referred, at paragraph [106], to "my not having full confidence in the evidence which either Mr Green or Mr Blatchford gave"; and she observed, at paragraph [113], that "I am not confident that Mr Green and Mr Blatchford have presented a full and accurate picture". Her reasons for taking that view are set out, in detail, between paragraphs [101] and [106]. They may be summarised as follows:

(1) The judge thought that Mr Green "was casual in his approach to the evidence": paragraph [101]. As she put it (ibid):

"He was not concerned as to the obvious inaccuracies in the letter of claim. He did not engage carefully with the questions put to him, finding it difficult to distinguish between matters he knew and matters which he said he believed, whether or not there were grounds for such belief."

(2) She found that there was no basis on which it could have been said – in the schedule to the letter of claim dated 12 July 2004 – that Mr Blatchford had no knowledge of the Focus Goal Technology. As she put it, at paragraph [102]:

"[102] . . . That was simply incorrect. Mr Blatchford had (prior even to his joining Point in 2001) been sent a disk containing Focus' software. In his statement he says he was given 'a CD containing the Focus Renderer and Builder ie PAC developer list as an introduction to the software we would be working with and so I could hit the ground running. I took the opportunity to have a look at the Focus software and to familiarise myself with it although of course I had no access to any source code.' He says he looked at this CD for half a day. In giving his evidence, Mr Blatchford sought to make a distinction between an exercise to familiarise himself with software and being familiar with it. Even if there is a valid distinction (which I doubt) it is not one which helps me here. Mr Blatchford had access to Focus software for half a day. Mr Blatchford's role was important. He was the technical architect of the Acuo software. There was no basis on which the letter of claim could say that his knowledge was 'none'."

(3) The letter of claim purported to disclose Mr Green's knowledge of the Focus software, but made no mention of a document dated 11 June 2001 which he had written while working for Focus under the April 2001 outsourcing agreement, in which he reviewed the Focus Goal: Builder Version 2.1. The judge commented (at paragraph [104]) that:

"[104] It is clear that Mr Green's knowledge of Focus' software was sufficiently detailed for him to have written that document recording his appraisal of their software. His explanation as to why the letter of claim made no reference to that part of his knowledge of Focus' software namely that Focus already knew of it so there was no need to mention it, was unconvincing."

(4) Mr Blatchford had given evidence to the effect that he opened, and thus gained access to, a public demonstration of Focus' web site. He had said that he entered sample data to observe the overall user experience; that he was surprised to see how much Javascript was clearly viewable within the browser; that he could read individual lines of code; but that he would not have been able to translate from Javascript and would have needed weeks to piece it together. Focus' evidence – which was not challenged - was that normal access to their web site would not reveal any of the information which Mr Blatchford said he saw: he could have seen that information only if he had unauthorised access to what is a secure site. When asked how he had been able to open the site to the extent of seeing this information, Mr Blatchford "backtracked quickly" (in the judge's words) and suggested that it may have been Mr Green who accessed the site and that Mr Green and Mr Blatchford had looked at it together. The judge commented (at paragraph [106]) that:

"[106] I am not persuaded by Mr Blatchford's account. It is not clear to me how he or Mr Green could properly have had such access to Focus' software. That episode is one of the factors which results in my not having full confidence in the evidence which either Mr Green or Mr Blatchford gave. "

It was suggested on this appeal that the judge was not entitled to take the view that she should treat the evidence of both Mr Green and Mr Blatchford with caution. But, plainly, as it seems to me, that was a view which the judge – who had heard those witnesses give their evidence – could properly take, for the reasons which she gave.

26. The judge accepted, also, that the evidence adduced by Point to establish that copying had not taken place was insufficient to discharge the burden of proving its case. She said this, at paragraph [113] of her judgment:

"[113] I am not confident that Mr Green and Mr Blatchford have presented a full and accurate picture. I cannot be confident that Point's approach has been sufficiently transparent and accurate to enable me to conclude, on the basis of largely untested evidence, that Point are entitled to the declaration they seek. Focus have succeeded in casting doubt on Point's claim to have created their Acuo software by independent design to the extent that Point have not discharged the burden of persuading me, on balance of probabilities, that they did achieve the design independently. Point have not proved, on balance of probabilities, that all of the individual literary works comprising the Acuo software, whether written by Point, Vyosoft or Elansoft, were created without copying or adaptation from any corresponding part of Focus' code."

Vyosoft and Elansoft – to which the judge made reference in that paragraph – were software houses, based in India. The judge had explained their role in the development of the Acuo software earlier in her judgment, at paragraph [107]:

"[107] In their letter of claim of 12 July 2004, Point summarise the projects they undertook, the key dates in the history of the development of the Acuo and a list of members of the project team. The names of nine members of Point staff are given. The letter states that a team of seven developers in India, employed by Elansoft, supported those nine. The letter also stated that Acuo SDK had initially been developed by Vyosoft, a software house based in India and co-owned by Messrs Green, Hillicks and Sidhu."

27. The judge's concern as to lack of transparency – to which she referred at paragraph [113] of her judgment – can be seen in the following passages in earlier paragraphs:

"[107] Focus criticise Point for not having referred in their letter of claim to all those who had worked on the Acuo software and for not having called to give evidence all those who had worked on that software, even those who are based in India. . . . . It is the case that Point's letter of claim did not identify all those who had worked on the Acuo products. This is illustrated by the time sheets which Point have disclosed for those working on Acuo software. A time sheet for Mr Sharp for the week beginning 9 July 2001 shows that he was working on CMIE-Applications namely PAC Build. Mr Sharp was not listed in either the letter of claim or the Part 18 response. A time sheet for Mr Corp indicates that, in mid November and early December 2001, he did some work in relation to analysis and design of the Acuo software. As Point acknowledge, Mr Sidhu did some work on the Acuo software. The time sheets show that he worked on Point's full blown renderer. He is not mentioned in the letter of claim as a member of the project team. Point's evidence was that Mr Sidhu's work had been of little use and for that reason had not been referred to. That, however, is not the point. He had worked on the project and should have been included in a list which was presumably intended to be comprehensive.

[108] In his second witness statement, Mr Murray conducted an analysis of the timesheets which Point disclosed. He calculated that the total time recorded between July 2001 and end October 2002 as spent on the Acuo software, in broad terms, is 9,910 hours. (He has probably included some work not strictly associated with the development of Acuo components). This equates to about 5.46 man years. Of the 9,910 hours, 3,126 are attributable to Vyosoft and 331 to Elansoft. Point acknowledge that personnel at Elansoft and Vyosoft worked on the Acuo project. Mr Green had considered the Vyosoft personnel CVs and had noted that they had no knowledge or previous experience of Focus software. Point say that they did not provide any Focus software to Elansoft or Vyosoft. They sent only Point's code. They sent that code so that the Indian developers could create utilities for Point. Mr Townsend spent a week in India supervising the work of the Indian project team. He and Mr Blatchford scrutinised the work which the Indian team had undertaken. Point used very little of the Indian code; Mr Townsend estimated that only 2% remained in the Acuo suite of products.

[109] . . . Mr Murray's analysis (to which I have referred) suggests that the Indian developers were responsible for a substantial part – possibly as much as one third - of the total time spent on developing the Acuo products.

[110] Focus criticise Point for not having called to give evidence all those who had worked on the Acuo software. . . . It seems to me that Focus' approach to witnesses is ambivalent. They complain that Point have not called all witnesses, even those based in India, yet it is unlikely that they would have cross examined them as to whether or not they had copied Focus' software if those witnesses had come to court. There must, however, be some concern that relevant Indian developers, whose work appears to have been material, were not called. I am troubled by the omissions from the letter of claim . . . of those who had worked on the Acuo software. It may well be that the contributions . . . were minor, but their omission raises doubts as to the claimants' approach. Point ask for a declaration in circumstances where the court has no opportunity to consider whether or not in fact there has been copying. I am therefore in effect in a position where I must take much of Point's evidence on trust. Any real doubts create difficulties. The lack of transparency in Point's evidence is a matter of concern."

28. The judge's finding, at paragraph [113] of her judgment, that Point had not discharged the burden of persuading her, on balance of probabilities, that it did achieve the design independently – or, to put the point in another way, that "Point have not proved, on balance of probabilities, that all of the individual literary works comprising the Acuo software, whether written by Point, Vyosoft or Elansoft, were created without copying or adaptation from any corresponding part of Focus' code" – was, as she recognised, sufficient to lead to the dismissal of Point's claim in the proceedings.
29. Nevertheless, the judge went on to address two of the other issues which she had identified – utility and discretion. It is, I think, sufficient to summarise the conclusions which she reached:

(1) She was not persuaded that the declaration – even if Point had established non-infringement – would serve any useful purpose. She recognised that, in general, the target market for Point's software product (financial services institutions) was risk adverse; and that the existence of a known dispute might well reduce the chances of customers in that market purchasing the product whose provenance was in doubt. She referred to the observations of Mr Justice Lightman in L'Oreal (UK) Ltd and another v Johnson & Johnson and another [2000] FSR 686, 696, which, as she said, indicated that "the policy is to lift clouds to dispel uncertainty". But she was struck by the facts (i) that there was no pleaded case of general "bad mouthing all over the trade to third parties", (ii) that there was no evidence that sales had been lost (in particular, Swiss Life had proceeded with the transaction with Point despite what it had been told), and (iii) that Point had, itself, told both Swiss Life and Marlborough Stirling of the dispute. And she thought that what she saw as Point's dilatory approach was a factor which suggested that Point did not need the declaration which it sought. She said this, at paragraph [120] of her judgment:

"[120] The dilatory nature of Point's approach to resolution of this dispute is a relevant factor in considering whether there is utility to the declaration sought. A period of 18 months (ie from mid October 2002 until 15 April 2004) elapsed before Mr Green informed Focus that he was no longer willing to proceed down the route of independent expert scrutiny. It is understandable, as Mr Green explained, that he was obliged to continue with his work for customers. I understand the pressures experienced in a small, start-up company. Nevertheless, it is, in my judgement, telling that Mr Green did not press on diligently. It suggests that he had no real need to seek this declaration. Even after the letter of claim was sent, Mr Green did not proceed diligently with commencing proceedings or, once proceedings were commenced, in progressing these. "

(2) She held that, in any event, a declaration should be withheld as a matter of discretion. In that context, also, what she saw as Point's dilatory approach was a factor. She thought that the suggestion, made by Focus in October 2002, for independent expert scrutiny of the codes on a confidential basis "was clearly a sensible one". But "Point dragged its feet at least as much as Focus, indeed probably more: at least Focus took the trouble to prepare its technical primer whereas Point did not even bother to do that." She went on, at paragraph [128] of her judgment:

"[128] The evidence shows that it was Point who pulled out of the process. They have given no good reason for having done so but instead sought to lay the blame at Focus' door. In my judgment the refusal by Point to continue with the independent expert scrutiny process is a factor which weighs against them."

And, at paragraphs [129] and [130] the judge said this:

"[129] A consequence of granting the declaration which Point seek would be that Focus would be prevented from bringing a claim for infringement if Focus subsequently had reason to believe that there were grounds to make such a claim. That is a serious concern. In balancing fairness to Point and fairness to Focus, it seems to me that a factor which weighs heavily in Focus' favour is that to grant the declaratory relief would shut Focus out of any future claim. It would be unjust to do so in circumstances where the court had not examined the evidence which a court would normally expect to see to be able to determine, on all available evidence, whether or not there had been infringement.

[130] I am conscious that a refusal to grant the declaration may leave Point in a worse position than that before proceedings began. That, however, is a consequence of the way in which they have pursued their claim. It is a factor which does not weigh heavily in favour of Point."

This appeal

30. The grounds of appeal, as annexed to the appellant's notice, are advanced under three main heads: (1) that the judge was wrong to find that Point had failed to establish on the balance of probabilities that it did not copy Focus' source code in creating the Acuo range of products; (2) that the judge erred in finding that there was no utility in making a declaration even if there had been no copying; (3) that the judge's finding that she would have exercised her discretion against granting a declaration even if she had found in Point's favour on the issue of non-infringement was perverse.
31. In granting permission to appeal (on the papers) Lord Justice Lloyd suggested what may, perhaps, be seen as a further ground of appeal: that (it having been found that Focus had asserted that Point had infringed their copyright) it was proper for Point to raise the issue and, if Focus wished to maintain that assertion, they had to allege that in the proceedings and (not having done so) they could not reserve their position for future proceedings. I mention that because, as it seems to me, that suggestion was not taken up by the appellant and advanced as an additional ground of appeal at the hearing of the appeal. There may be good reasons for that.
32. The parties – quite deliberately, as the correspondence between their respective solicitors in the period immediately before trial reveals – each decided to proceed to trial without the benefit of expert evidence, notwithstanding the order for the instruction of a joint independent expert which had been made by Master Bragge on 22 June 2005. No doubt each thought that there was some forensic advantage in bringing the matter before the judge in circumstances in which there would be no objective appraisal of the similarities (or otherwise) between Point's Acuo software and Focus' Goal software.
33. The judge was very much alive to the problem: she referred to the relevant correspondence at paragraph [60] of her judgment. She was well aware that she was being asked to make a declaration that: "software which I have not seen does not infringe any copyright there may be in software that I have not seen and where I have no expert evidence to assist me": paragraph [12] of her judgment. She had analysed the pleadings and concluded: "I am not trying a case as to whether or not there has been copying": paragraph [10] of her judgment. If she had thought that she had to decide between copying and no copying, she might well have refused to proceed without the assistance of the expert evidence which Master Bragge had thought necessary. But, as she said, she was approaching the case on the basis that the question which she had to decide was "whether Point have demonstrated, on balance of probabilities, independent design". There is no suggestion, on this appeal, that the judge was wrong to approach the matter in that way.
34. It might (or might not) have been open to the judge to put Focus to an election: to require Focus either to make a positive case as to copying or to accept that the court would try only the single issue whether Focus had made an assertion of infringement, with the consequence that (if Point were successful on that issue) Focus would be required to withdraw (and not repeat) that assertion. Without deciding whether that course would have been open to the judge in this case, I can see some attraction in a "put up or shut up" order in circumstances where one party seeks to spread it around the market by innuendo that another party (a competitor) is infringing its copyright, with the obvious purpose of putting that other party at a commercial disadvantage. And, in that context, I would respectfully endorse Mr Justice Lightman's observation, in L'Oreal (UK) v Johnson & Johnson ([2000] FSR 686, 696), that: "where a person in the position of the defendants sets out to write a clever letter designed to be close to the line between what is and what is not a threat or adverse claim, he should not be surprised if the Court holds that it is at least arguable that there is a threat or adverse claim". Although L'Oreal was a trademark case – so that there was a statutory power to grant a declaration under section 21 of the Trade Marks Act 1994 – the principle seems to me equally apposite in a copyright case where the court's inherent jurisdiction is invoked.
35. Be that as it may, Focus was not put to an election. Point does not argue, on this appeal, that it should have been. There has been no application to amend the grounds of appeal. The skeleton argument put before this court is in the same form as that which was before the court on the application for permission. In those circumstances we must address the appeal on the basis of the grounds on which the appellant has chosen to rely.
36. On that basis the first issue, in this Court, is whether the judge was wrong to find that Point had failed to establish on the balance of probabilities that it did not copy Focus' source code in creating the Acuo range of products. If the appellant fails on that issue, the other two issues do not arise.
37. The appellant's case, on that first issue, is summarised in paragraph 4 of its skeleton argument:

"The Judge's approach to the question of non-infringement was confused and riddled with errors. Despite the fact that Focus had chosen not to allege copying and had not put copying to any witness, she permitted Focus to attack the credibility of such witnesses for the purpose of suggesting that their evidence of non-copying should not be believed. She decided the case on the 'burden of proof' even though there was no shortage of evidence which would have permitted a proper finding of fact. She treated the failure by Focus to cross-examine Point's witnesses or to call evidence of their own (such as expert evidence) as somehow undermining the strength of Point's evidence and making it more difficult for Point to establish its case. She never engaged in a proper exercise of weighing the evidence against copying against the evidence of copying – had she done so she would inevitably have found that Point had proved its case on the balance of probabilities."

38. In my view that criticism is misconceived. On a proper analysis the judge's conclusion that she could not be satisfied, on the balance of probabilities, that "all of the individual literary works comprising the Acuo software, whether written by Point, Vyosoft or Elansoft, were created without copying or adaptation from any corresponding part of Focus' code" rests on the following findings: (i) that personnel at Vyosoft and Elansoft (the Indian developers) "were responsible for a substantial part – possibly as much as one third – of the total time spent on developing the Acuo products" (paragraph [109]); (ii) that those who had worked on the products in India were not called as witnesses - "There must, however, be some concern that relevant Indian developers, whose work appears to have been material, were not called" – (paragraph [110]); (iii) that "in circumstances where the court has no opportunity to consider whether or not in fact there has been copying" the evidence as to what did or did not take place in India had to be taken "on trust" – in the sense that the judge was asked to accept what those witnesses who did give evidence (in particular, Mr Green and Mr Blatchford) said that they thought had or had not happened – paragraph [110]; and (iv) that, given what she saw as the unreliability of their evidence in other areas, the judge could not have "full confidence" in what Mr Green and Mr Blatchford might tell her – she could not be "confident that Mr Green and Mr Blatchford have presented a full and accurate picture" - (paragraphs [106] and [113]). If those four findings withstand challenge, then (as it seems to me) the judge was entitled to reach the conclusion that she did.
39. In this context, it is, I think pertinent to set out the submission made by Point at paragraphs 19 and 20 of its skeleton argument in this Court:

"19 . . . the judge was not confronted by conflicting evidence as to whether or not Acuo was copied from Goal. She had no evidence at all to suggest that it was copied. In the circumstances, the question before her was simply whether Point's unchallenged evidence that the software had not been copied did in fact establish that it was more likely than not that the software had not been copied.

20. In those circumstances Point could only lose if the evidence presented to the Court was simply inadequate to support a conclusion even on the balance of probabilities that Acuo had not been copied from Goal. It is possible to conceive how this could happen: eg if the evidence was given by people who had no actual knowledge of all the circumstances in which Acuo had been written, or simply did not deal with the creation of the software or some substantial parts of it. But no such criticisms can be made of the evidence here. It was careful and thorough. It consisted of (i) an account of the process of development of the software by Mr Green, the MD of Point; (ii) two statements from Mr Blatchford, Chief Technical Architect of Point, explaining in some detail the development process of the various Acuo products, including at PDB 2 a lengthy development summary; (iii) a statement from Mr Townsend, a technical consultant who (with Mr Blatchford) was the primary designer of Acuo; (iv) a statement from Mr Gale, a trainee who had developed some of the PACs used in Acuo; (v) a statement from Mr Helm, another trainee who had developed PACs; (vi) a statement from Ms Horn, another trainee who had developed PACs and written some code for the Acuo Web renderer. The only other people with any involvement at all in the creation of code were a couple of temporary trainees and some coders sub-contracted in India. The evidence explained that the involvement of those others was minimal and there was no reason to suspect that they had ever accessed the Focus software. Each of the witnesses confirmed in his own words that they had not copied anything from Focus' software. The evidence also pointed out that the Acuo software was written in a completely different language (Visual Basic and C++) from the Goal software (Java), so it would be hard to imagine how copying could have occurred anyway, let alone what motive there would be for copying in such circumstances. The evidence confirmed that there was no question of the software having even a 'look and feel' similar to the Goal software." [emphasis added]

40. I have set out that submission in full because it illuminates the problem with which the judge was confronted. She knew that the evidence was incomplete: there was no evidence from some of those who had been involved in the development of the Acuo product. In particular, there was no evidence from "some coders sub-contracted in India". She was told that their involvement was minimal and that "there was no reason to suspect that they had ever accessed the Focus software". But there was evidence, to which the judge referred at paragraph [108] of her judgment and which (at paragraph [109]) she seems to have accepted, which suggested that (on the basis of time spent) the contribution of the Indian sub-contractors was substantial. And there was no direct evidence to confirm whether or not the Indian sub-contractors had had access to the Focus software: the judge was asked, in effect, to take "on trust" Point's view that "there was no reason to suspect" that they had.
41. Further, the judge had no expert evidence to assist her to decide whether, in fact, "the Acuo software was written in a completely different language (Visual Basic and C++) from the Goal software (Java)". That was a matter which Focus could not challenge (because it had not had access to the Point software). She had to take that assertion "on trust" from Point. She had no expert evidence to assist her to decide whether (if the Acuo software was written in a different language from the Goal software, as alleged) that would make it difficult, or pointless, to attempt copying. Again, she had to take that assertion "on trust" from Point. And, even if literal copying was difficult or pointless, the judge had no evidence to assist her to decide whether knowledge of the structure of the Focus software could or would be of use as a "springboard" in the development of the Point software – as suggested in the letter of 9 October 2002.
42. The judge's reluctance to take "on trust" Point's view that there was no reason to suspect that the Indian sub-contractors had had access to the Focus software was based on her view that she could not regard Mr Green and Mr Blatchford as reliable witnesses – for the reasons which she gave. It is said, on behalf of the appellant, that she should not have allowed an attack on credibility, in circumstances where Focus was not advancing a positive case on copying. But that, as it seems to me, is to miss the point. The judge did not have to find – and did not find – that Mr Green and Mr Blatchford were not telling the truth when they told her that there had been no copying by them or by anyone else to their knowledge. But she did have to ask herself whether she could reach the conclusion, on the balance of probabilities, that there had been no copying by the Indian sub-contractors in the absence of any direct evidence on that point and in reliance only on the opinion of Mr Green and Mr Blatchford that there was no reason to suspect that those sub-contractors had had access to the Focus software. In effect, she had to ask herself whether the opinion of Mr Green and Mr Blatchford was a sufficiently firm basis from which to reach that conclusion. In that context, the judge's view of their reliability as witnesses was relevant. And, in that context, her assessment of Mr Green as a witness, in paragraph [101] of her judgment (which I have set out above), was of critical importance. She had found Mr Green to be casual in his approach to evidence; unable or unwilling to engage carefully with the questions put to him; and "finding it difficult to distinguish between matters he knew and matters which he said he believed, whether or not there were grounds for such belief".
43. As I have said, the judge was entitled to reach the conclusion that she did – that is to say, that she could not be satisfied, on the balance of probabilities, that all of the individual literary works comprising the Acuo software were created without copying or adaptation from any corresponding part of Focus' code – unless the findings upon which that conclusion rests can be shown to be wrong. Two of those findings are unchallengeable: that those who had worked on the products in India were not called as witnesses and that the only evidence on the question whether or not those in India had access to the Focus software was the opinion evidence offered by Mr Green and Mr Blatchford. The scope for challenge is confined to the judge's finding (a) that persons at Vyosoft and Elansoft were responsible for a substantial part of the time spent on developing the Acuo product and (b) that she could not rely on the opinion evidence of Mr Green and Mr Blatchford on the question whether those persons had access to the Focus' software.
44. In my view the appellant's challenge on those points fails. There was evidence on which the judge could take the view that persons at Vyosoft and Elansoft did substantial work on the development of the Acuo product; and there were grounds upon which she could take the view that Mr Green and Mr Blatchford were unreliable witnesses. It follows that I would hold that the appellant has not shown that the judge was wrong in finding that Point failed to establish on the balance of probabilities that it did not copy Focus' source code in creating the Acuo range of products.
45. If the appellant fails on that issue, the other two issues do not arise. But for completeness I would add that I am not persuaded that the judge was wrong to hold, for the reasons that she gave, that Point did not need the declaration which it sought. In particular, it seems to me that there is much force in the judge's observation, at paragraph [116] of her judgment, that Point had available to it a sensible means of resolving the dispute without recourse to litigation: namely independent and confidential expert scrutiny which would have assisted the parties to know whether there had been copying, coupled with the comfort given by Focus' solicitors (in a letter of 4 June 2004 – to which the judge had referred at paragraph [46] of her judgment) to the effect that, if expert scrutiny found that copying had not taken place, Focus would accept that there had been no infringement.
46. I am less confident that the judge would have been right – had she found that copying had not taken place and that a declaration would serve some useful purpose – to refuse a declaration on discretionary grounds. In particular, I find difficulty in following her reasoning that she should refuse a declaration because that "would shut Focus out of any future claim" (paragraph [129] of her judgment). It seems to me that, once Focus had decided that its interests would be better served by allowing the matter to go to trial without the expert report which Master Bragge had thought necessary, it was in no position to complain if, as a result of a finding at the trial that copying had not taken place, it was unable to bring a claim alleging copying in the future.

Conclusion

47. It is difficult to avoid the conclusion that the outcome of these proceedings is unsatisfactory; and that the outcome would have been equally unsatisfactory had the decision gone the other way. But that is the effect of the way in which both parties chose to conduct the proceedings. They chose to deny the judge the assistance of the expert's report which Master Bragge had directed. They chose to put the judge in the position where the only question which she could decide was whether Point had established on the balance of probabilities, by the evidence which it adduced, that it had developed the Acuo software without copying. Point accepted that burden. It might be said that it failed to discharge that burden because it failed to appreciate that there was a lacuna in that evidence. But to say that would be to speculate. There may have been sound reasons for not adducing evidence from those who had worked on the development in India. For whatever reason – whether through incompetence or design - Point did not fill the lacuna. Had it done so, Focus might well have been shut out from bringing future infringement proceedings. But, again, that would have been the effect of the way in which it was content for the proceedings to be conducted. For my part, I think that a judge should be slow to allow proceedings of this nature to be brought to trial in circumstances where the parties have chosen – for tactical and forensic reasons – to disregard directions already given for the provision of the expert assistance which is needed if the court is to decide the real question in dispute.
48. I would dismiss this appeal.

Lady Justice Hallett:

49. I agree.

Mr Justice Lindsay:

50. I agree with the conclusions reached by Chadwick LJ and his reasons for them. At para [47] he comments on the appellant's failure to adduce adequate evidence that the material work (see Her Honour Judge Kirkham's judgment at her paragraph 110) done for the appellant by the developers in India was independent, involving no derivation from Focus' software. He comments that through incompetence or design that lacuna was not filled.
51. Mr Colley drew our attention to Stoddard International plc v William Lomas Carpets Limited [2001] FSR 848. In Stoddard, a copyright case in which copying of the claimant's carpet design was denied, Pumfrey J., at his paragraph 21 spoke of the evidential mountain that had to be climbed by a designer who denied copying in a case where there were inferences that could be drawn which suggested that copying had taken place. At his paragraph 70 he dealt with a submission that, because the defendant company, the alleged copier, had failed to discharge the burden upon it of giving a clear and comprehensible account of the events leading to its independent design of its alleged infringing copy, the action should have been determined in the claimant's favour on that very basis. Pumfrey J. continued:

"I accept that such a finding is a theoretical possibility but where all the relevant persons are before the court, and where it appears that all the relevant documents are before the court, I should be extremely slow to reach a decision purely on onus". [my emphasis added]

52. The possibility of an adverse decision where not all relevant persons are before the court is obvious. Of course, the context there was different in a number of respects to that before HHJ Kirkham, who was concerned with whether the claimant had demonstrated, on a balance of probabilities, independent design, the very converse of what was sought to be proved by the claimant in Stoddard. Moreover, in Stoddard the evidence sufficed to disprove copying. Nonetheless, I see no reason in principle why Pumfrey J's observation should not equally apply to the converse case which HHJ Kirkham had before her. On that basis the passage illuminates, were illumination required, that a claimant, seeking to prove the negative, who does not adduce reliable evidence from or as to all the persons who could have copied rather than having done independent work can find itself at risk of an adverse decision even on the basis of onus.
53. We are not concerned with whether it was incompetence or design that was the cause of the lacuna but it is notable that Stoddard provides practitioners in the area with good reason to be well aware that a party who fails to plug any material evidential gap may find itself at risk.
54. I, too, would dismiss this appeal.

Note 1   Electronic application forms as they appear on a computer screen are generated by running the XML (extensible mark-up language) string (known as a product application component (PAC)) through a programme known as a renderer.     [Back]