Koger Inc. and Another v James O'Donnell and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 18 June 2013
• Neutral Citation: [2013] IESC 28
• Court: Supreme Court
• Date: 18 June 2013

Koger Inc & Koger (Dublin) Ltd v O'Donnell & Ors

Between/

Koger Inc. and Koger (Dublin) Limited

Plaintiffs/Appellants

and

James O'Donnell and Koger Woolman and David Gross and HWM Financial Solutions Limited

Defendants/Respondents

[2013] IESC 28

Murray J.

Clarke J.

MacMenamin J.

[Record No: 422/2010]

THE SUPREME COURT

High Court - Intellectual property - Copyright - Appeal - Abuse of process - Manifest injustice - New point raised – New evidence

Facts: The first named plaintiff was a company incorporated in Slovakia that had developed a successful software programme to be used in the financial services industry. The copyright for the programme was collectively owned by the plaintiffs. The first defendants were former employees of the plaintiffs who formed the fourth defendant as a new company. The defendants created a rival software programme and the plaintiffs brought proceedings claiming the defendants had breached their duty as former employees by making improper use of confidential information, as well as breaching the copyright in relation to their software programme. The plaintiff”s claim was rejected before the High Court on the 8 ^th October 2010.

The plaintiffs sought to appeal the decision of the High Court on the issue of copyright infringement only. They argued that the trial judge had failed to consider the shift of the burden of proof onto the defendants in the breach of copyright action; inappropriately dismissed the plaintiff”s evidence in relation to the similarities between the two software programmes; incorrectly ruled that similarities between the programme could be discounted on the basis of that there were certain necessities required to function and that they derived from the ‘same conceptual language; and, that he had wrongly concluded that a breach of copyright could not have occurred by copying from memory having found that the defendants did not have a physical copy of the plaintiff”s software programme.

The defendants argued that the appeal should be disallowed on the basis that the plaintiffs were effectively attempting to argue a new case than that heard before the High Court. During the trial, the plaintiffs had argued the defendants had literally copied aspects of their software programme using a physical copy of their programme, but this had been rejected when expert evidence showed that such elements of the programme could be copied from publically accessible materials. The defendants therefore argued that the points raised by the plaintiffs had not been raised during the trial, therefore to allow the appeal would be unfair and inconsistent with the role of this court as a court of appeal.

Held by Clarke J. (with Murray J. and MacMenamin J. concurring) that the Court of Appeal had the discretion to allow a new point to be argued on appeal. However, in a case where the new point was completely opposed to the points raised during the trial, it would not be appropriate to allow the point to be argued pursuant to Lough Swilly Shellfish Growers Co-operative Society Limited & anor v. Bradley & anor [2013] IESC 16. In the present case, the plaintiffs had argued right to the end of the hearing in the High Court that the defendants had used a physical copy of their software programme in creating their own product. The plaintiff”s did not try to reformulate the position at the close of evidence to incorporate the possibility that the defendants had copied aspects of the programme from their own memories. As the case before the High Court was diametrically opposed to that which the plaintiffs was seeking to argue before the Court of Appeal, it was held that to allow the appeal to proceed would be a manifest injustice to the defendants.

Appeal allowed. Order striking out proceedings set aside.

KOGER INC & KOGER (DUBLIN) LTD v O'DONNELL & ORS UNREP FEENEY 8.10.2010 2010/26/6403 2010 IEHC 350

LOUGH SWILLY SHELLFISH GROWERS CO-OPERATIVE SOCIETY LTD & ATLANFISH LTD v BRADLEY & IVERS UNREP SUPREME 13.3.2013 2013 IESC 16

1. Introduction

2 1.1 Intellectual property rights provide a significant part of the legal framework within which the knowledge economy operates. In the context of the software business, copyright in newly developed programs can be a vital business asset. At the same time, senior employees often generate or have access to highly confidential information held by their employer. Such employees frequently must have access to highly confidential information as part of their job. Separate from intellectual property rights as such, the law gives a certain degree of protection to employers to ensure that improper use is not made by present or former employees of such confidential information. At the same time, the law seeks to protect employees by ensuring that, when leaving employment, they retain the freedom to take up alternative employment and exercise their skill and knowledge in such new employment, even though much of that skill and knowledge may have been obtained while working for their former employee. When these proceedings were originally brought, issues of both alleged copyright breach and alleged breach of obligations in respect of confidential information formed the basis of the allegations made.

3 1.2 The first named plaintiff ("Koger Inc.") is incorporated in Slovakia and developed a highly successful software program designed for use in the financial services industry. The program in question was called NTAS. The plaintiffs (collectively "Koger") own copyright in that program. The first three defendants/respondents ("the personal defendants") were former employees of Koger while the fourth defendant/respondent ("HWM") is a company established by the personal defendants. Having left the employment of Koger and established HWM, a rival software called ManTra was developed. In essence, when these proceedings were commenced, Koger alleged that the personal defendants had acted in breach of their duties as former employees by allegedly making improper use of confidential information and, in addition, that ManTra breached the copyright which Koger held in NTAS. The case was at hearing before the High Court (Feeney J.) for 34 days with judgment being delivered on the 8 ^th October, 2010, ( Koger Inc. & anor v. O'Donnell & ors, [2010] IEHC 350). Each of Koger's claims was rejected. On this appeal, Koger did not seek to go behind the decision of Feeney J. on the question of breach of confidential obligation or allied matters. Koger confined itself to an appeal against the findings in relation to copyright. However, a major issue arose between the parties stemming from what was said by the defendants to be an attempt on the part of Koger to run the appeal on a basis wholly inconsistent with the case made in the High Court. That question, together with any consequences which might flow from this court being satisfied that the defendants' contentions in that regard were correct, was, therefore, logically the first issue which this court had to consider. In order to better understand that issue, it is appropriate to start by making some reference to the background facts.

2. Background Facts

2 2.1 The NTAS programme at the centre of the dispute was jointly developed by George Sipko and Paul Piringer, the founders of Koger Inc. Initial development occurred in the late part of 1995, 1996 and the early part of 1997, with the product being launched in 1997. Thereafter, the product was continuously updated and revised. At paragraph 4 of his judgment, Feeney J. outlined the functionality of the programme and its market prominence in the following terms:

"The NTAS software product provided back office software for fund administrators, fund managers and fund advisers and in particular the NTAS program provided an information technology system and software program to facilitate the processing, storing and categorisation of business data. The NTAS product was successful and Koger became the industry leader in the provision of back office software for fund administrators, fund managers and fund advisers. NTAS is used in the fund administration industry in a number of countries and had established itself as market leader to the extent that by 2006 it had over 50% market share in the relevant market."

3 2.2 Koger Inc. opened an office in Dublin in 1998 in an attempt to develop and service the European market for the NTAS product. The second named plaintiff/appellant, ("Koger (Dublin)") was incorporated on the 4 ^th January, 2002, to take over the business of the Dublin office. Koger Inc. holds 99% of the shares in Koger (Dublin) with the remaining 1% owned by George Sipko. Koger Inc. also established a Slovakian office in 2001, which worked closely with the Dublin office in meeting their client's requirements and resolving technical glitches in the NTAS program. As will become clear, a significant proportion of the later development of NTAS occurred at the Slovakian office.

4 2.3 The first named defendant/respondent, James O'Donnell ("Mr. O'Donnell") first came into contact with NTAS and Koger Inc. when working in the Cayman Islands between 1995 and 1998. He was directly involved in the procurement and the testing of the then new NTAS system for his then employer, who became Koger Inc.'s then largest client. When Mr. O'Donnell left that employment, he agreed to act as a consultant for Koger Inc. and operate from their recently opened Dublin office. Mr. O'Donnell became an employee of Koger (Dublin) in 2002, following its incorporation, and a director of that company in January 2003. This employment and directorship continued until the 30 ^th April, 2006, when he resigned. Feeney J. described Mr. O'Donnell as being "in effect, during the years of his employment, the senior person employed by the...