England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		St. Dunstan's House 133-137 Fetter Lane London EC4A 1HD
		26/10/2010

His Honour Judge Birss QC:

1. This action concerns database rights. The parties are rival producers of healthcare information. The claimant publishes a database called "Binley's Database of GP Practices". It consists essentially of the names and addresses of individuals (such as nurses and doctors) associated with GP practices. It has been described as providing an accurate and reliable means to communicate sales and marketing messages to GP practices throughout the UK and the claimant has been publishing it since 1994. The Edition of the database referred to in the evidence of Mr Brinzer apparently names 159,576 individuals located at 11,480 GP practices within the UK. Mr Brinzer explains that the database is kept up to date and the claimant spends some £110,000 annually doing so.
2. The first defendant provides direct marketing information in the fields of list sourcing, print management, mailing and fulfilment, database management and campaign response handling. The second defendant carries on business providing database marketing services to manufacturing and services companies in the healthcare sector.
3. The action is a claim for database right infringement under regulations 12 and 16 of the Copyright and Rights in Databases Regulations 1997 SI 1997/3032 ("the Regulations"). Database right is sometimes called sui generis database right to distinguish it from the copyright which may also subsist under the Copyright Designs and Patents Act 1988.
4. In August 2007 the claimant found clear evidence that the first defendant was using information from the claimant's database. This was because the claimant puts a few seeds in its database. The seeds are dummy entries which do not correspond to real people. They are fictitious entries with addresses corresponding to the claimant's staff. Thus the claimant will find out if someone is using data from its database because a letter will be sent to one of the seed addresses. That is what happened in this case and this action ensued.
5. The underlying facts are not in dispute. The mailing to the seed entry took place in about August 2007. The letter was sent by the first defendant. The first defendant obtained the data it used from the second defendant and the second defendant in turn obtained the data in March 2006 from an organisation called Bespoke Database Organisation Ltd ("BDOL"). The data from BDOL included the seed entry. There is no doubt that the BDOL data includes at least one entry from the claimant's database, that is the seed. There is also no doubt that BDOL used the claimant's database as one of the sources for the BDOL data. There is however an issue as to the extent of that use and that is a matter I will return to below. If (see below) the claimant has a good claim to ownership and subsistence of database right and if (see below) the BDOL mailing list includes or consists of a substantial part of the claimant's database then it is not in dispute that the defendants infringed the claimant's database rights.
6. Correspondence between the parties began and included both open and without prejudice communication. After about a year of writing, on 1st October 2008 the claimant's solicitors wrote to the defendants' solicitors and on 8th October 2008 the defendants' solicitors replied by email. The question which arises is whether this exchange settled the case or not. The defendants contend that it did and the claimant disagrees. Since on the claimant's case the action had not settled, the claim form was issued on 20^th February 2009 and Particulars of Claim served. The defence pleads the (alleged) settlement, puts in issue subsistence and ownership of database right by means of non-admissions and denies infringement. The defendants also plead an estoppel arising from the same circumstances as the settlement.
7. An assessment of the magnitude of this case can be seen from the fact that the terms of settlement included a payment of damages of the order of £3,000 (although the claimant was at pains before me to say that that was a reduced sum for the purposes of negotiation) and the claimant's costs at that stage were of the order of £8,000. On any view this is a modest case in terms of its direct financial consequences to the parties although it has other important elements such as public recognition of the claimant's rights.
8. Neither side conducted these proceedings with any proper dispatch. There appears to have been an attempt to organise a case management conference in July 2009 but nothing came of it.
9. On 1^st July 2010 the claimant issued the application which came before me on 13^th October 2010. The claimant applied for summary judgment and/or to strike out. The application was put on the following bases:

i) There was no settlement and the allegation that there was is "legally unsustainable". Therefore those parts of the defences should be struck out or alternatively summarily dismissed.

ii) The estoppel should also be struck out or summarily dismissed.

iii) On the questions of subsistence and ownership of database right, there may not be a dispute at all but if there is then summary judgment on those issues can and should be given.

iv) On the question of infringement, the only realistic explanation for the situation is that substantial quantities of practice nurse data were taken and therefore summary judgment should be given on that issue too and with it the whole claim.

10. The defendants' position was:

i) The claim was settled. At the very least there is evidence the claim was settled and therefore the application for a strike out/summary judgment should be dismissed.

ii) In any event the estoppel is a good and (for present purposes) perfectly arguable defence.

iii) Sensibly in my view the defendants did not advance a case about subsistence or ownership of database right.

iv) On infringement however, they contend there is simply no evidence showing that a substantial part of the database was used. Therefore no summary judgment should be given.

11. On that basis the matter came before me on Wednesday 13th October. Mr Jonathan Hill instructed by Birketts LLP (formerly Wollastons) represented the claimant while Mr Lawrence Power instructed by Ashton Bond Gigg ("ABG") represented the defendants.
12. During the course of the argument I asked Mr Power how he proposed the case should be disposed of in the event that his submissions were well founded and no summary judgment or strike out was ordered. He replied proposing that the settlement issue would need to be tried, probably as a preliminary issue and then if the case remained there would be a trial of the database right issues. In my judgment Mr Power was correct that that would be the appropriate course and, if I may say so, it would be a pretty unedifying prospect given the nature of this case and the time it has all taken so far. I therefore invited both counsel to consider whether at least the settlement issue could be disposed of on its merits now, not on a summary basis but by treating this hearing as the trial of that issue. It seemed to me to be a potentially very useful approach given that the issue of the settlement appeared to depend entirely on construing written materials which were before the court and on undisputed evidence as to the surrounding circumstances. There would be no cross-examination or (further) disclosure but none appeared to be necessary.
13. Given that neither side had prepared on that basis hitherto I was only going to take that course with both parties' consent. Both the claimant and the defendants agreed to my disposing of the settlement issue in this way; there was no further evidence to be filed by either side. An important consequence is that the legal basis on which I will approach the settlement is quite different from the basis on which the other issues need to be considered and I must take care not to mix the two together.
14. Finally at this stage I should mention the estoppel point. It is pleaded in relation to the claim to damages, rightly so in my view in the sense that if it is a good point then it runs only to quantum. Accordingly it does not need to be finally disposed of at this stage in order to determine the issues of liability since, as is conventional in an intellectual property claim, damages would be assessed at a later inquiry if necessary and the estoppel can be dealt with there.

Judgment on the settlement point

15. On the settlement point I am now deciding the issue at a trial. The question I have to decide is whether or not the parties entered into a contract to compromise the claim of infringement of database right and if so on what terms. This clearly involves analysing and considering the documents and Mr Hill submitted that the task of construing the documents must be approached along the lines spelt out by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 and summarised and elaborated upon on in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 [2009] AC 1101. I accept that in the sense that the questions of construction I have to decide are to discern what the parties could reasonably be taken to have meant by the language used. That takes place against the relevant background and context, since it might throw light on what they meant by the language they used. Nevertheless ultimately, as Mr Power submitted, the issue of whether the parties entered into a contract or not is a question of fact to decide on the evidence after any necessary construction of documents.
16. The issue is to be decided on the balance of probabilities. To decide the issue I must examine correspondence marked "without prejudice". Although ordinarily the court will not look at such material, a recognised exception exists precisely in order to carry out the exercise I am conducting (see para 23 of the judgment of Robert Walker LJ (as he then was) in Unilever v Procter & Gamble [1999] EWCA Civ 3027), in other words to decide whether there was an agreement at all. Neither party cited to me the recent judgment of the Court of Appeal in Oceanbulk Shipping v TMT Asia [2010] EWCA Civ 79. However it is a significant case since it considered Unilever v Procter & Gamble and Chartbrook v Persimmon and decided that without prejudice materials, which could arguably be relevant to the construction of a settlement agreement along the lines of Chartbrook, may not be admitted in order to do so (see paragraphs 6 and 26 of the judgment of Longmore LJ, with which Burnton LJ agreed). The Court of Appeal there recognised and did not alter the exceptions in Unilever v Procter & Gamble but distinguished them. I will address the issue further if it arises. The Oceanbulk case has been heard by the Supreme Court and I gather that judgment is expected shortly.
17. The evidence before me from the claimant consists of a witness statement of Mr Brinzer, joint managing director of the claimant, which is concerned with the database itself and does not touch on the settlement issue; a witness statement of Mr Sleep, the claimant's solicitor, and exhibits to Mr Sleep's evidence which include the open and without prejudice correspondence at exhibits WB1 and WB2 respectively. This is the key material in the case. There is also a second witness statement of Mr Sleep in reply.
18. From the defendants I have a statement of Mr Kalaher, the defendants' solicitor. There was a point arising from Mr Sleep's statement in reply which I asked Mr Power to deal with by way of a short note after the hearing. He did so (letter dated 14^th October 2010) and I am grateful to him for that.
19. The open correspondence starts with a letter before action dated 22^nd October 2007 from the claimant's solicitors (than called Wollastons) to the first defendant. The letter puts to the first defendant that they have infringed the claimant's database rights, requests undertakings, reserves the position on costs and damages and ends by stating that if undertakings are not provided by 29^th October, proceedings will be started. This led to two letters from the first defendant's solicitors dated 26^th October, an open letter and a without prejudice letter. The open letter does not offer the undertakings sought, points out that the respective parties have apparently already been corresponding on the matter and ends by stating that if proceedings are commenced they will be defended vigorously. The without prejudice letter makes a proposal for settlement. The without prejudice letter states that the first defendant :

"would propose the following to draw a line under matters-

1) [a financial proposal the details of which are irrelevant]

2) Each party be responsible for its own costs incurred to date in this matter;

3) [an undertaking offered by the first defendant, the terms of which are irrelevant]

4) An appropriate full and final settlement agreement with confidentiality provisions be entered into, such settlement agreement covering both our client its holding company and any subsidiaries of such holding company."

20. The correspondence both open and without prejudice continued to and fro after that. Many (but not all) of the without prejudice letters are marked "without prejudice save as to costs" rather than just "without prejudice" but nothing turns on that.
21. An example from the correspondence is a letter of 27^th February 2008 whereby the claimant's solicitors replied to a without prejudice letter dated 31^st January 2008 from the first defendant's solicitors on various points. Notably one of the points made in the letter relates to the confidentiality of the settlement. The claimant's solicitors state: "There is considerable value to our client in reaching settlement on an open basis without obligations of confidentiality, in terms of its potential publication and use as part of our client's enforcement policy and regime to protect its intellectual property rights. It is for that reason that our client will not usually agree to settle claims such as this on terms that include confidentiality provisions." This approach by holders of IP rights is a common one and is in my judgment entirely fair. Even though a given instance of infringement may be modest in its direct financial consequences, the owner of the right has a legitimate interest in the public enforcement of its rights. Thus it can be seen given sub-paragraph 4) set out above that the issue of confidentiality was an important one between the parties.
22. The letter of 27^th February 2008 then concludes with a section making an offer under Part 36. Under the heading "terms of revised offer" the letter sets out 4 sub-paragraphs:

"Our client is willing to settles (sic) its claim on the following terms:

1) [This refers to payment of a sum to settle the damages and gives account details for its payment. The details are irrelevant]

2) Your client to enter into a settlement agreement in the form enclosed at Appendix 1 of this letter ("the Settlement Agreement"), within 7 days of accepting this Revised Offer, and for the parties to comply with the terms of the Settlement Agreement accordingly.

3) The Settlement Sum does not include costs and, as mentioned above, your client will be liable to pay our clients costs on the standard basis, to be assessed if not agreed, up to the date of service of notice of acceptance if this Revised Offer is accepted with the Relevant Period.

4) [an irrelevant point on interest]"

23. Annexed to the letter is then a draft settlement agreement running to 5 pages with 11 sections. Section 4 (Settlement Provisions) runs to 10 clauses and section 6 deals with confidentiality. In conventional form there is a final signature page for the directors of the claimant and first defendant to sign.
24. On 18^th March 2009 the first defendant's solicitors reply on a without prejudice basis making various proposals. This includes sending a copy of the draft agreement with numerous manuscript changes proposed. I have made no attempt to consider whether the changes are significant or not since that is irrelevant. It may be noted however that there are changes (long and short) proposed to all 10 of the clauses in Section 4 (Settlement Provisions).
25. The without prejudice correspondence continues with letters passing back and forward on 29^th April, 9^th May, 22^nd May, 27^th May, 4^th June, 6^th June, 11^th June, 30^th June, 16^th July and 8^th August 2008. Two matters from this chain of correspondence are worth picking up. The 4^th June letter from the first defendant's solicitors makes a point that the claim would be allocated to the small claims track having regard to the sums at stake. This is a matter I will return to below. The 16^th July letter from the claimant's solicitors encloses an amended version of the settlement agreement. That document was not in the bundles. The letter also reiterates that the claimant is not prepared to agree to settle its claim on a confidential basis, making the point that a judgment would not be confidential.
26. Then on 1^st October 2008 the claimant's solicitors write the letter which the first defendant contends makes the offer which was accepted and thereby formed the binding contract. I will set the letter out in full:

"We refer to our open correspondence of today's date, to earlier correspondence, and to without prejudice telephone conversations between our Chris Sleep and your Paul Kalaher on 21 August 2008 and 10 September 2008.

There has been an extensive period of pre-action correspondence between the parties in relation to this matter, the majority of which has been marked as "without prejudice". It is our view , however, that this correspondence to date has been of little value to the parties because of the inappropriateness of a non-contentious solicitor having conduct of the matter on behalf of your clients for almost a year.

This matter has never been anything other than contentious (given that our first letter to your client dated 22^nd October 2008 was a cease and desist letter). Much of the correspondence to date has shown a lack of understanding of intellectual property disputes, and in particular database right infringement disputes.

In the recent telephone discussions between our Chris Sleep and your Paul Kalaher, we attempted to explain in detail why your clients will have difficulty in defending a claim brought by our client. This was intended to steer the parties towards a more sensible way of resolving the matter.

In that regard, our client has made it clear that it is prepared to settle this matter on the following basis:

1 The draft settlement agreement (the terms of which have largely been agreed) be entered into by the parties

2 Payment by your client of the sum of £3095.11

3 The parties will agree the wording of a joint statement

4 Your clients will pay our clients costs, to be assessed if not agreed.

You have acknowledged that the only remaining issue to be resolved is our clients costs, and have indicated on a number of occasions that you would take instructions from your client and would make a suitable proposal in this regard.

Given that you have put forward no basis on which our client's costs should not be recovered, we struggle to understand how it can be in your client's interests to jeopardise its chances of achieving settlement without the need to involve the courts by failing to reach agreement in relation to our clients costs. This is particularly so given the concerns that your client has raised over potential damage to its reputation, given that an agreement to prepare a joint statement is your clients last chance of resolving the matter in a way in which it has any control over the damage to its reputation.

Our costs will inevitably be increased as a result of such actions, and our client will seek to recover these increased costs from your client also.

Our clients costs are currently £8,817 (exclusive of VAT).

Furthermore we remind you that your client rejected our client's Part 36 Offers dated 22 November 2007 and 27 February 2008. We trust your clients have been fully advised of the potential consequences of rejecting those offers.

We confirm that we have been instructed to prepare and issue claim documents in the event that your clients fail to provide a satisfactory proposal in respect of settlement (primarily in relation to our clients costs) by close of business on 8 October 2008. We reserve our client's right to serve those documents upon your clients without further notice, and to bring this correspondence to the attention of the4 court when determining the issue of costs.

We trust such actions will not prove necessary, and look forward to receiving a satisfactory response by 8 October 2008."

27. It is fairly clear from the letter and totally clear from the background and context that the sum of £3095.11 at point 2 relates to damages. The claimant is at pains to point out before me that it represents a reduced sum for the purposes of settling and for now I do not need to resolve that question.
28. As a matter of construction it seems to me that there are two important points arising from the 1^st October letter.
29. First the letter refers to the draft settlement agreement to be entered into by the parties. This seems to me to be a vital point. Viewed objectively the reader of this letter would understand that the binding settlement contract was intended to come into effect when the full agreement was signed, not before. The letter refers to the document expressly and the context and background shows that there was a document passing between the parties. It seems to me to be plain that what was on offer was to agree the substance in correspondence – subject to contract - but that the actual contract would be the full document signed, properly executed.
30. It is notable that the letter does not recite the words "subject to contract" but Mr Hill cited Whitehead Mann Ltd v Cheverny Consulting Ltd [2006] EWCA Civ 1303 and Investec Bank (UK) Ltd v Zulman [2010] EWCA Civ 536 for the proposition that the label "subject to contract" is not a mandatory requirement. The matter is always one of construction.
31. The letter refers to the terms of the document as "largely agreed". That may be a lawyer's caution in that actually the draft was settled (subject to being signed) or it may be entirely accurate in that there were specific drafting details to be sorted out over and above the issues arising from the 1^st October letter. I have not been shown the draft in the form it had reached by that stage but it does not matter. Either way it seems to me to be clear as a matter of construction that the offer did not contemplate the contract becoming binding until the document was fully agreed and signed.
32. The second point concerns costs. Point 4 of the letter refers to paying the claimant's costs to be assessed if not agreed. There is no mention of a basis of assessment. The claimant contends that this meant assessed on an indemnity basis, having regard to the background and context and in particular the argument about the allocation of the case to a small claims track, the part 36 offers and the use of a non-contentious solicitor on the defendants' side. I do not agree. It seems to me that an objective reader of the letter would understand it to refer to assessment on the standard basis. There is nothing in the letter to suggest otherwise and I reject the claimant's submission on that point.
33. The letter goes on after the four points to invite the defendants to make a "suitable proposal" on costs and the claimant has laid stress on this matter before me as showing that the letter was not making an offer capable of being accepted but was an invitation seeking an offer from the defendants. I do not read this part of the letter in quite that way. It seems to me that looked at in isolation an offer in terms of point 4 is something capable of being accepted. The text afterwards would be understood to be intended to encourage the defendants to make a proposal as to a concrete sum to be agreed but the terms on offer included the machinery to resolve the issue of assessment if it could not be agreed (a usual costs assessment process). While it would obviously be sensible if the parties could agree a sum, an agreed sum was not being demanded as a necessary condition to settlement. Otherwise there would be no point including the language at point 4 "to be assessed if not agreed". The court makes orders in that form in almost every case. They are sufficiently certain to be enforceable.
34. On 8^th October the first defendant's solicitor sent an email at 16.31 to the claimant's solicitor as follows:

"We refer to your privileged letter of 1^st inst & write this letter without prejudice save as to costs & we reserve the right to produce it to the court should the need ever arise in detailed assessment proceedings (if any) along with all of the other of our previous letters sent on the same basis.

Our client will accept points 1-4 of your letter as follows

1- Agreed but of course the final draft will need to be engrossed after there is a meeting of minds between our respective clients on the final content.

2- Our client will send yours the sum of £3095.11 (approx £3K) by bank to bank. Please let us have the recipient's (sic) details.

3- Agreed

4- Our client will pay your client's reasonably incurred costs arising from the contested issues in this matter on the standard basis to be assessed in the absence of agreement. Our client reserves it's position on the argument relating to allocation & the real issues which the court would have been asked to determine in the event that your client had actually issued proceedings; which are now superfluous in the light of the agreement reached arising from the exchange of our correspondence

Finally we would mention that we disagree with some of the contents made in your letter & its contents represent your own views."

35. The defendants submit that this response was a binding acceptance of the offer made on 1^st October. I do not accept that submission for two reasons.
36. First, point 1 is addressed in clear terms to the point that there is going to be a later settlement agreement the final content of which still needs to be sorted out. The words "after a meeting of minds between the respective clients" seem to me to make that even clearer. This letter recognises in its express language that more needs to be done to create a settlement and expressly contemplates that there still needs to be a meeting of minds. No doubt in substance the major debates between the parties are over but the objective reader of this letter would understand that the writer was agreeing with the author of the 1^st October letter that the whole thing was "subject to contract".
37. Second, the terms of point 4 on costs need to be examined. One might ask rhetorically why, if the first defendant was simply agreeing to the offer on costs, point 4 did not simply read "agreed" just as point 3 above it. However Mr Power cited Pars Technology v City Link (1999) LTL July 7 (CA) for the proposition that a valid acceptance need not be in precisely the same terms as the offer. I accept that submission as a matter of principle albeit that it seems to me one needs to be careful in such a case and I note that the facts of Pars Technology itself are a long way from this case (was an offer of £13,500 together with a full refund of a charge in the sum of £7.55 plus VAT accepted by a statement "accepting your offer of £13,507.55 plus VAT"?).
38. There are three ways in which point 4 might be taken as introducing qualifications as compared to the term on offer. First the basis of assessment is stated to be the standard basis. On my holding on construction of the offer letter that is no qualification at all (despite the fact that, as can be seen subsequently, the claimant's position was that indemnity costs were what should have been accepted). The second qualification arises from the words "arising from the contested issues" in the first sentence. Mr Power submitted and I agree that these words refer to the next sentence in point 4 and so I will deal with it on that basis. The third qualification arises from the second sentence in point 4. Here the first defendant is saying that it reserves its position on two matters: allocation (clearly a reference back to the earlier dispute about small claim track or multi track) and "the real issues which the court would have been asked to determine" if proceedings had been issued. It is not clear which issues are the "real issues" (and that in itself undermines the defendants' case) but it seems to me likely to be a harking back to the open correspondence between November 2007 and January 2008 in which the parties debated the merits, argued about what was admitted and what was not (letter of 6^th December 2007 from ABG), argued about whether proper information was being provided to the other (e.g. letter of 22^nd November 2007 from Wollastons ) and so on.
39. Mr Power submitted that this was in effect no more than an agreement to pay costs assessed on the standard basis but with some sabre rattling (my expression not his) in relation to how the assessment process would be carried out. However in my judgment, taken as a whole, point 4 of the 8^th October email represents and would be understood to represent a substantial qualification to the terms on offer from the claimant. The first defendant was not accepting it would pay all the costs, however they were assessed. It was taking the trouble to make clear it only accepted liability for part of the claimant's costs. It only accepted liability for the costs arising from the "contested issues". It did not accept that costs associated with the allocation issue would be paid nor costs on other issues apart from what it called "the real issues". It is clear in my view that the first defendant is holding back. The first defendant may well have been perfectly entitled to do so in the circumstances but it is not, in my judgment, an acceptance of the terms on offer.
40. Having got this far I will state my conclusions on construction of the documents. I do not construe the 1^st October letter as an offer capable of being accepted in its terms. It was an offer "subject to contract". The offer on costs was to pay all the costs, albeit assessed on a standard basis. I construe the 8^th October email not as an acceptance creating a binding contract but rather as an acceptance "subject to contract" as well. Moreover the terms in relation to costs were materially different from those on offer and no agreement on costs was reached.
41. There are two other matters which I believe support my conclusion but which I have not relied on in reaching it since they are more marginal in nature. The first is that the correspondence shows that by 1^st October 2008 the costs were a major issue in dispute and both sides understood that. That would tend to reinforce my view that the language of the 8^th October reply on costs was not a simple acceptance. The second point is the text of the public statement. This was of course never settled. It is clear that publicity (or not) was a significant issue between the parties as well. The 8^th October reply simply says "agreed" since all the 1^st October letter sought was agreement that a joint statement would be agreed. I prefer not to base my conclusion on deciding whether this was no more than an agreement to agree. It does however seem to me to support the "subject to contract" point. The parties were going to agree details afterwards and one such detail would be the statement. Such statements can of course be very contentious matters and not easy to agree.
42. I will complete the chronology since the defendants also rely on subsequent events in support of their case that agreement had been reached.
43. The next step was a phone call on 21^st October. The claimant's solicitor called the defendants' solicitor. Mr Kalaher's file note records that the essence of the conversation was that Mr Sleep said the case had not settled and in the absence of the first defendant agreeing to pay indemnity costs there would be proceedings. Mr Kalaher replied that he thought the offer made had been accepted. Mr Power relied on the period of time between receipt of the 8^th October email (presumably on the 8^th, Mr Sleep did not suggest he had not seen it on that day) and the 21^st when it was clear that the claimant did not accept settlement had been reached. I do not regard this point as significant. For what it is worth the period included a week in which Mr Sleep was on holiday but even without that explanation it seems to me that this argument does not amount to much bearing in mind the other matters I have considered.
44. The final document in the without prejudice correspondence exhibit is an email dated 18^th November 2008 from Mr Kalaher to Mr Sleep. It refers to the 8^th October email and states "we … write to enquire of the appropriate bank details we thought would have been transmitted to us before now to enable our client to make payment pursuant to the agreement". This is addressed below.
45. The final letter in the open exhibit before February 2009 when the proceedings began is a letter on 19^th November 2008 from the claimant making it clear that the claimant did not think the proceedings had settled by enclosing a draft Particulars of Claim.

Payment of the £3,095.11 in February 2009

46. An important matter the defendants rely on is the payment by the first defendant of the sum of £3,095.11 to the claimant's solicitors client account on 2^nd February 2009. Mr Power put the following submission in his skeleton argument (para 22(a)) "That the claimant accepted payment of the Settlement Sum in these circumstances is very strong evidence that an accord and satisfaction has taken place, (see Stour Valley Builders v Mr & Mrs TP Stuart [2003] TCLR 8 per Lloyd LJ at paragraph 28)". It seemed to me when I pre-read the papers that this submission had force. It was no doubt based on Mr Kalaher's evidence in paragraph 16 of his statement that "The evidence shows that I had bound my client to pay the damages agreed at £3,095.11 and this was to be paid to wherever the claimant nominated as recipient bank. My clients were provided the claimant's solicitor's bank details and they transmitted the money to them. There is no dispute that the claimant has received the money." I understood this to mean that the bank details and the funds had been provided pursuant to the compromise (see the without prejudice email of 18^th November 2008 referred to above).
47. However following the exchange of skeleton arguments Mr Sleep filed a second witness statement addressing specifically the receipt of the £3,095.11. He explains that the sum was transferred to Wollastons' client account on 4^th February (whether it was on the 2^nd or the 4^th does not matter). The bank details had been set out in the Part 36 letters of 22 November 2007 and 27 February 2008. He says "I had not communicated the details to ABG in response to Mr Kalaher's emails of 8 October and 18 November 2008, nor requested that the transfer be made." Mr Sleep wrote to ABG on 5 February 2009 acknowledging receipt of the sum of £3,095.11 and in his words "making it clear that the money would be retained in the Wollastons client account on account of sums due to the claimant in respect of its claim". The letter makes clear that for the claimant's part the sum had not been accepted in full and final settlement of any claims.
48. It seemed to me that Mr Sleep's second witness statement puts the payment of the sum of £3,095.11 in a very different context. Since the defendants had not had the opportunity to reply to Mr Sleep's second witness statement I asked Mr Power if his client disputed Mr Sleep's version of events as to how the payment occurred and how the bank details were transmitted. I gave Mr Power the opportunity to send me a note on the matter after the hearing and he did so. I am very grateful for it. The note refers to other letters but does not undermine the basic points being made by Mr Sleep.
49. Accordingly I find that the banking details were not provided pursuant to any contract and the fact that the first defendant had details of an account to pay into is not evidence that the claimant acted pursuant to an agreement by providing them. I also find that the payment made by the first defendant was not accepted by the claimant as part of the (alleged) settlement and does not amount to evidence of a concluded agreement.

Conclusion on the settlement

50. Mr Power made two submissions. He submitted first that having regard to the documents on their true construction and the evidence after the event, there was, as a matter of fact a full concluded settlement. His second submission was that if, which he did not accept, the basis of assessment of costs had not been agreed but the matter was otherwise settled then that would have been a valid and enforceable settlement. I reject the first submission. In my judgement there was no agreement to compromise the claim. On my findings above the second submission does not arise. The issue did not turn on the basis of assessment of costs.
51. I note that my conclusion that there was no contract arising from the without prejudice exchanges means that I do not have to concern myself with Oceanbulk Shipping v TMT Asia (see paragraph 16 above). This case is squarely within Unilever v Procter & Gamble.

The estoppel

52. The estoppel will be dealt with (if necessary) at an inquiry as to damages. I should add that on any view the sums at stake on such an inquiry would be very small indeed relative to the cost of such an exercise.

Summary judgment on database right

53. Given my decision that the action has not been compromised, I now turn to deal with the application for summary judgment in relation to the claim for database right infringement.
54. The first step is to remind myself that the legal approach to this application is entirely distinct from what has gone before. The approach now is under CPR Pt 24. The grounds for summary judgment are provided by CPR r. 24.2, which provides:

The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –

(a) it considers that –

(i) the claimant has no real prospect of succeeding on the claim or issue; or

(ii) the defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial.

55. Mr Power submitted that the applicant, the claimant, has the burden of proving that this is a case eligible for summary judgment, but a summary judgment application must not become a mini-trial and he cited ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at paragraphs 9, 10, 11, 52 and 53 per Potter LJ) in support. Mr Power also cited the observation of Lord Hobhouse in Three Rivers DC v Bank of England (No 3) [2001] 2 All ER 513 at paragraph 158 that "The criterion which the judge has to apply under CPR Pt 24 is not one of probability; it is absence of reality". I accept those submissions.
56. The first matter to address is the question of subsistence of database right and its ownership by the claimant. This is covered in paragraphs 1 – 5 of the Particulars of Claim. The key pleading is paragraph 5 which pleads "The claimant is and at all material times was the owner of database right in the Database" ("Database" being a defined term) and gives full particulars of subsistence (sub-paragraphs (a) to (d)) and ownership ((e) and (f)).
57. In the first defendant's Defence paragraphs 1 to 4 of the Particulars of Claim are admitted (save for a detail about available editions which is pleaded in paragraph 5 of the first defendant's defence starting with the words "is admitted save that …"). As far as I can tell the detailed editions point is of no significance to the issues I have to decide and neither side addressed their submissions to it. I will not formally decide that point in this judgment but I will hear the parties on whether anything turns on it.
58. Paragraph 7 of the first defendant's Defence is important. The paragraph states:

Paragraph 5 of the particulars of claim is admitted. Sub-paragraphs (a) through to (f) are not pleaded to as they are matters of law and fact for the claimant to prove.

59. The relevant paragraphs of the second defendant's Defence are in the same form as the first defendant's Defence (except that they do not raise the detailed editions point referred to above).
60. It seems to me that, with respect, the second sentence of the paragraph 7 of the first defendant's Defence is not correct in that if, as the first sentence states, paragraph 5 of the Particulars of Claim is admitted then the matters of fact are not for the claimant to prove at all. They stand admitted. The defence is confusing in this regard, nevertheless sensibly in my view the claimant's approach to this hearing has been that subsistence and ownership appear not to be admitted and have pressed for summary judgment on the matter. I asked Mr Power whether his clients had any matters they wished to put before me on this application, as it relates to subsistence and ownership, and, while he made clear he took a point on infringement (see below), he had nothing to add on subsistence and ownership.

Subsistence and Ownership of database right – the law

61. Database right arises as a result of the UK implementation of Council Directive 96/9/EC of 14 March 1996 on the legal protection of databases. As a result the Regulations were passed which amended the Copyright Designs and Patents Act 1988 in part and themselves contain most of the important substantive provisions. A "database" is defined in s3A of the 1988 Act (as amended) as "a collection of independent works, data or other materials which (a) are arranged in a systematic or methodical way, and (b) are individually accessible by electronic or other means." Database right is a property right which subsists in a database pursuant to Part III of the Regulations. Database right subsists if there has been a substantial investment in obtaining, verifying or presenting the contents of the database (reg. 13 of the Regulations).
62. The first owner of database right is the maker of the database (reg. 15 of the Regulations). The maker of the database is defined in reg. 14. The first material element to the definition is reg. 14(1) that the "person who takes the initiative in obtaining, verifying or presenting the contents of a database and assumes the risk of investing in that obtaining, verification or presentation shall be regarded as the maker of, and as having made, the database." Reg. 14(2) then provides that, subject to an agreement to the contrary, if a database is made by an employee in the course of his employment, the maker is regarded as the employer.
63. Mr Brinzer's evidence explains that the claimant has been publishing the database since 1994 and is now at the stage of maintaining it rather than building it up from nothing. This involves substantial resources to update the database to take account of changes and adding and removing details as practices open, close or change. The claimant has 9 people employed permanently maintaining the full primary care database (of which the database in this case forms the major part) with a further 10 staff working on an ad hoc basis supporting the research. Mr Brinzer sets out in some detail how the process of maintaining the database works and what it costs. His conclusion is that it currently costs £110,000 per year to maintain the database and has cost comparable sums for at least the last 6 years. There is no challenge made to Mr Brinzer's evidence and no realistic prospect, of which I am aware, of it being successfully challenged at trial.
64. The kind of updating process carried on by the claimant was addressed by Advocate-General Stix-Hackl in British Horseracing Board v William Hill Case C-203/02 (section D of her opinion, paragraphs 139-156). The issue under consideration was the term of protection. In considering the matter the AG recognised that "dynamic" databases existed which were constantly updated by a process which includes addition, deletion and verification (see paragraphs 147-148). Her opinion was that viewed in this light the Directive provides for "a rolling sui generis right". It seems to me that this opinion supports the view (if support were needed) that the kind of work carried out by the claimant in keeping its database up to date is quite sufficient to mean that sui generis database right subsists under the Regulations. Clearly the owner of the database right is the claimant.
65. Accordingly in my judgment the defendants in this case have no real prospect of defending the issues of subsistence and ownership. There is no doubt on the evidence presented to me that database right subsists and that the claimant owns it. There is no realistic prospect of which I am aware that any contrary evidence might be adduced later. Accordingly I decide, pursuant to CPR Pt 24, that defendant has no real prospect of successfully defending those issues.
66. I should add that I can think of no other compelling reason why the issues should await trial. The defendants did not suggest that there was.

Infringement

67. The provisions relating to infringement of database right are set out in regs. 12 and 16 of the Regulations. The relevant parts of these regulations are:

12.—(1) In this Part—

"extraction", in relation to any contents of a database, means the permanent or temporary transfer of those contents to another medium by any means or in any form;

"insubstantial", in relation to part of the contents of a database, shall be construed subject to Regulation 16(2);

"re-utilisation", in relation to any contents of a database, means making those contents available to the public by any means;

"substantial", in relation to any investment, extraction or re-utilisation, means substantial in terms of quantity or quality or a combination of both.

16.—(1) Subject to the provisions of this Part, a person infringes database right in a database if, without the consent of the owner of the right, he extracts or re-utilises all or a substantial part of the contents of the database.

(2) For the purposes of this Part, the repeated and systematic extraction or re-utilisation of insubstantial parts of the contents of a database may amount to the extraction or re-utilisation of a substantial part of those contents.

68. In Directmedia GmbH v Albert-Ludwig Universitat Freiburg, Case C-304/07) the Court of Justice considered the scope of the concept of "extraction" in the context of database right. Article 7 (2) of the Directive defines "extraction" and the relevant parts of segs. 12 and 16 together are clearly intended to put that into effect.
69. Paragraph 34 of Judgment in Directmedia states that "the concept of extraction, within the meaning of Article 7 of Directive 96/9, must be understood as referring to any unauthorised act of appropriation of the whole or a part of the contents of a database (see The British Horseracing Board and Others, paragraphs 51 and 67)". Moreover paragraph 37 decides that, for the purpose of assessing whether there has been an extraction, it is immaterial whether the transfer was based on a technical process or was a simple manual process. The Court therefore held that the right is not limited to preventing mechanical reproduction without adaptation of the database or a part of it (Directmedia paragraph 40). In addition the question of whether an extraction is in respect of a substantial part is evaluated qualitatively or quantitatively and the extraction may be in one go or by repeated and systematic extractions of insubstantial parts which in overall amount to a substantial part (Directmedia paragraph 59).
70. On the basis of the wide approach to extraction in Directmedia it seems to me to be highly likely that the defendants both have carried out acts of "extraction" and the major issue therefore is whether the data in the form used by the first defendant represents a "substantial part" of the contents of the claimant's database. If it is not a "substantial part" then the acts of the defendants cannot amount to infringement of database right within the meaning of reg. 16. The defendants did not seek to argue any other issue on infringement, they placed their case firmly on the issue of substantiality.
71. That the first defendant used the seed entry is not in doubt but they argue that that on its own is no infringement of the claimant's database right because a single piece of data, the offending seed, cannot be a substantial part. I certainly cannot decide that question on an application for summary judgment and Mr Hill did not put his client's case on that basis.
72. The claimant's case is that it is entirely far fetched to say that the only entry used by the first defendant which derives from the claimant's database is the single seed entry. They make the point that the reason the seed came to light is precisely due to its fictitious nature and in the nature of things the claimant was not going to hear about letters sent to other (genuine) addresses. Of course genuine addresses make up the vast majority of the database.
73. The claimant's submissions are as follows:

i) The fact that the claimant only received a single letter sent to one of its seeds does not mean that that address was the only address that made its way from the database into the address data used by the first defendant, via BDO and the second defendant. Such a scenario is wholly fanciful, given the parties position as suppliers of bulk data.

ii) There is a letter in evidence dated 20 April 2008 from Philip Bothwell exhibited as CS3 and that makes this clear beyond question. Mr Bothwell acknowledges that BDO supplied a substantial quantity of nurse data to the second defendant (over 8,000 records) and failed to remove the claimant's data from that data.

iii) The only realistic explanation for the situation is that substantial quantities of practice nurse data were taken from the database by BDO and provided ultimately to the first defendant.

74. I must say I am very sympathetic to these submissions by the claimant and I have not found this aspect of the case straightforward. It seems to me to be highly probable that the claimant is correct but of course this part of my judgment relates to an application for summary judgment and "highly probable" is not the test. Equally well given the way this dispute has been conducted over time and the cost involved one is left with an impression that a decision on the point now might well be in the best interests of the parties. However when I examine the evidence as it stands I am struck by the fact that truly there is no evidence as to how many entries used by the first defendant actually derived from the claimant's database. Probably many were derived in that way but on the state of the evidence as it stands I simply do not know. It could be that only the seed was derived but that seems pretty unlikely in my view. However to go and say that the court can decide today that enough were derived so as to pass the hurdle of a substantial part (on whatever basis that would be assessed in this case) and do so in a manner satisfying CPR Pt 24 is impossible.
75. I am also struck by the claimant's statement that there are "a few" seeds in the database. The claimant has not stated how many "a few" means and has so far refused to tell the defendants how many there are. No doubt that is for the claimant's own good commercial reasons. However it seems to me that one way of gauging the number of entries derived from the claimant's database might be to ask what proportion of the seed entries ended up with the defendants? Such an exercise would no doubt have to be treated with caution but it at least might shed some light on the matter. For example just because only one seed came to light does not mean others were not present. However if only one seed from hundred was present that might suggest a lesser fraction derive from the claimant whereas if "a few" means only 3 or 4 seed entries then that might suggest a rather higher fraction. Although substantiality is not necessarily a purely quantitative matter, some idea of numbers would be a start.
76. Accordingly I will not give summary judgment on the issue of infringement.

Conclusion

77. As a result of my judgment the case must continue and I will hear the parties as to how to take this case forward. Before hearing the parties I will say only that this seems to me to be a case which ought to be capable of being dealt with very quickly from now on and in an economical fashion. I gave judgment on Wednesday in Technical Fibre v Bell [2010] EWPCC 011, deciding that the new Patents County Court procedures do not apply to existing Patents County Court cases, of which this case is one such. Nevertheless the parties ought to consider what sort of case management of the action from now on is appropriate, having regard in particular to CPR Pt 1.1(2)(c) (dealing with the case in ways which are proportionate).