|Koger Inc. & anor -v- O'Donnell & ors|
| IESC 28|
Supreme Court Record Number:
High Court Record Number:
|2008 4333 P|
Date of Delivery:
Composition of Court:
|Murray J., Clarke J., MacMenamin J.|
Link to Judgment
Murray J., MacMenamin J.
THE SUPREME COURT
[Record No: 422/2010]
Koger Inc. and Koger (Dublin) Limited
James O’Donnell and Roger Woolman and David Gross and HWM Financial Solutions Limited
Judgment of Mr. Justice Clarke delivered the 18th June, 2013.
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.
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 8th October, 2010, (Koger Inc. & anor v.O'Donnell & ors,  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
2.1 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:
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 4th 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.
“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.”
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 30th 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 company and was responsible for the running of the Dublin office”.
2.4 The second named defendant/respondent, Roger Woolman (“Mr. Woolman”), worked with Mr. O’ Donnell for the same employer in the Cayman Islands. Mr. Woolman returned to Ireland in 1999 and was then offered a consultancy role in Koger Inc.’s Dublin office by Mr. O’Donnell, which he initially refused. However, in 2001, Mr. Woolman commenced providing accountancy services for Koger (Dublin) on a part-time basis. Mr. Woolman served as a director of Koger (Dublin) from its establishment in 2002 until the beginning of 2003, at which point he resigned and Mr. O’Donnell took up that position. Mr. Woolman continued to provide services to Koger (Dublin) on a consultancy basis until September 2006, albeit with a break in service for a period between 2003 and 2004.
2.5 The third named defendant/respondent David Gross (“Mr. Gross”), also worked in the Cayman Islands, at the same time as Mr. O’Donnell and Mr. Woolman, and all three knew one another. Mr. Gross returned to Ireland in 2000 and was approached by Mr. O’Donnell with an offer to work in the Dublin office. Mr. Gross accepted and began working for Koger Inc. as a senior analyst in April 2001. His employment transferred to Koger (Dublin) after its incorporation in 2002. In 2004, Mr. Gross ceased working for Koger.
2.6 A number of others who worked extensively with the NTAS program in Koger’s Slovakian office are also said to have been involved in the alleged wrongdoing, but are not parties to the proceedings. Marian Klco (“Mr. Klco”) worked for Koger from 1998 until March 2006. His evidence was that he was the driving force behind the redesign of the NTAS code over this period. Jana Potocnakova (“Ms. Potocnakova”) was another senior employee in the Slovakian office. By 2005, she was responsible for co-ordinating the NTAS programming work among the software developers. She handed in her resignation in February 2006 and was directed to depart immediately. Martin Madej and Ivan Mesarc were other former Koger employees who are also alleged to be involved.
2.7 The personal defendants together with Mr. Klco, Ms. Potocnakova and other former employees of Koger were involved in the creation and establishment of HWM. In December 2005, Mr. O’Donnell and Mr. Woolman registered the domain names www.hmwps.com and www.hwmsolutions.com. Feeney J. also noted that a meeting took place between the personal defendants in January 2006 where the possibility of setting up an independent company was discussed. In February and March 2006, more work was carried out by Mr. Woolman and Mr. Gross, including the preparation of a preliminary business plan and the obtaining of legal advice as to whether former employees of Koger would be restricted from establishing a rival firm or product.
2.8 At the beginning of June 2006, a meeting occurred in Slovakia, which has been described as a brainstorming session, at which the development of the NTAS competitor product, ManTra, was discussed. Present at this meeting were Mr. O’Donnell, Mr. Klco, Ms. Potocnakova, Martin Madej and Dylan O’Brien (another former employee of Koger (Dublin) who had resigned from Koger (Dublin) prior to the meeting but then recommenced working for Koger (Dublin) for a number of months after this meeting). This meeting lasted a number of days. Feeney J. described the next stages of the development process at paras. 67 and 68, where he stated:
2.9 Development of the ManTra product accelerated after this meeting and the “development team” met continuously over a two week period in November 2006. An embryonic source code had been completed by the 19th December, 2006 and this was repeatedly amended over the following months. By early April 2007, a first version was made available to an outside firm for evaluation purposes. Development of ManTra continued and a second version was released in October 2007. The involvement of some of the Slovakian associates in this development is succinctly outlined in para. 104 of the High Court judgment in the following terms:
“The evidence establishes that there was no further significant development of the ManTra product in the months following June 2006 meeting until the meeting in October of that year. In the intervening months there had been progress in relation to the business plan, the circulation of that plan and the raising of limited finance. By October 2006 HWM had progressed to the extent that there was certain finance in place and some persons were employed. It was then possible to arrange a trip to Kosice in Slovakia in October 2006 so that a discussion could take place to identify the main components of a new system that HWM proposed to build.
In the first week of October 2006 there was a meeting of approximately a week’s duration held in Kosice to discuss the development of the ManTra product. That meeting was attended by James O’Donnell, Roger Woolman, Marian Klco, Jana Potocnakova, Martin Madej and Ivan Mesarc.”
2.10 The plenary summons was issued on the 28th May, 2008.
“The evidence of Jana Potocnakova established that she acted as the “hub” in the development process directing requests and forwarding information from the analysts to the developers. ….significantly, the Court heard the evidence from Marian Klco who is the person who created the significant and technically difficult portions of ManTra.”
3. The Trial in the High Court
3.1 In order to fully understand the trial in the High Court it is important to say just a little about some fundamental differences which exist between the law relating to copyright, on the one hand, and the law relating to misuse of confidential information, on the other hand. It will be necessary to address some aspects of the law of copyright in more detail in due course. However, for present purposes, it is sufficient to note that a party either has copyright or has not copyright in any particular work including software. The criteria for determining whether copyright exists and, if so, precisely what aspect of any given software has the protection of copyright is relatively well established. However, the important point to emphasise is that once copyright subsists in any relevant material (an aspect of software for the purposes of this case), then it is unlawful to copy that material. The fact that the relevant material may have been created by individuals working for a company does not give those individuals any entitlement to breach copyright provided that, in all the circumstances of the case, their employer is the copyright owner.
3.2 The position in respect of breach of confidential information is different. Feeney J. sets out the position at para. 108 of his judgment:
3.3 However, importantly, Feeney J. continued:
“The right to prevent the misuse of confidential information and to grant relief for breach of confidence was set out by Costello J. in House of Spring Gardens Ltd. v. Point Blank Ltd.  I.R. 611. That case identified a number of steps which were necessary for a party to succeed in a claim for breach of confidence. Firstly, the Court must decide whether there existed from the relationship between the parties an obligation of confidence regarding the information which had been imparted and then to decide whether the information which was communicated could properly be regarded as confidential. Once the Court was satisfied that it had been established that an obligation of confidence existed and that the information was confidential, then the Court proceeded on the basis that the person to whom it was given had a duty to act in good faith which meant that that person must use the information for the purpose for which it was imparted to him and could not use it to the detriment of the informant. In arriving at that decision, Costello J. had relied in part on the judgment of Lord Greene, M.R. in Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd.  R.P.C. 203. In that case it had been held that if a defendant was proved to have used confidential information, directly or indirectly, obtained from a plaintiff, without the consent, express or implied, of the plaintiff, he would be guilty of an infringement of the plaintiff’s rights. Information communicated by the plaintiffs to their then employees during the course of their employment would have the clear intention, irrespective of any express provision in a contract of employment, to be categorised as confidential information placing on the party receiving that information, such as an employee, an obligation of confidence regarding that information. It would however have to be confidential information and the person receiving it must use that information.”
3.4 It follows that, even though an employee may have acquired knowledge in the course of their employment, such knowledge may, in accordance with the principles noted by Feeney J., form part of such employee’s general skill and knowledge as opposed to representing confidential information owned by an employer. In those circumstances, the employee is free to use that skill and knowledge in any future employment, whether on the employee’s own account or for a new employer.
“There is clear authority for the fact that protection cannot legitimately be claimed in respect of skill, expertise, know-how and general knowledge acquired by an employee as part of his job during the course of his employment, even though it might equip him as a competitor of his employer. As stated by Mummry L.J. in the judgment of the Court of Appeal in FSS Travel and Leisure Systems Ltd. v. Johnson  F.S.R. 505, dealing with the issue of confidential information and contracts of employment relating to a computer program, one of the well settled legal propositions affecting restrictive covenants in an employment contract include (p. 512):
“(4) Protection cannot be legitimately claimed in respect of the skill, experience, know-how and general knowledge acquired by an employee as part of his job during his employment, even though that will equip him as a competitor, or potential employee of a competitor, of the employer.”
That judgment identified that the critical question to consider was whether the employer had trade secrets which could be fairly regarded as his property, as distinct from the skill, experience, know-how and general knowledge which can fairly be regarded as the property of the employee to use without restraint for his own benefit or in the services of a competitor. In considering that distinction, a court must examine all the evidence relating to the nature of the employment, the character of the information, the restrictions imposed or its dissemination, the extent of use in the public domain and the damage likely to be caused by its use and disclosure in competition to the employer.”
3.5 It follows that there are likely to be cases in the software industry where an employee would, as a matter of contract and under the law relating to breach of confidence, be entitled to exploit information in the nature of skill and expertise which had been acquired in a previous employment but would not be able to exploit the same information in the event that a former employer owned the copyright in the relevant material. On the other hand, it is also obvious that there might be cases where a former employee could make unlawful use of confidential information belonging to an employer or former employer but where no copyright or, indeed, other intellectual property rights as such, might exist in the confidential information concerned. It follows that, while there may, in certain circumstances, be an overlap, breach of copyright and wrongful use of confidential information are separate concepts which are by no means co-extensive. It is, as has been pointed out, possible that there could be a breach of copyright in circumstances where there would be no wrongful use of confidential information and, likewise, there may be cases where there is a breach of confidence without there being a breach of copyright. It is against that background that the two separate strands of the case which Koger brought before the High Court need to be viewed.
3.6 In passing it should be noted that Koger initially alleged that there had also been copyright infringement of a related computer software program known as E*TAS. This claim is set out in an updated statement of particulars that had been served on the 8th June, 2009. However, this claim was later abandoned and this was acknowledged by counsel for Koger during the opening of the case. No explanation was given for this course of action.
3.7 The claims pursued at trial are summed up in para. 23 of the High Court judgment as follows:
3.8 However, following cross-examination of Koger’s expert witnesses, it became clear that Koger no longer sought to rely on the literal copying claim. In response to this, on day 25 of the hearing, Feeney J. directed Koger to deliver an “amended and definitive” statement of claim, “so that the Court could clearly understand the extent of the case which was then being made”. This amended statement of claim was dated the 5th February, 2010, and it was the claims as set out in that document that the trial judge proceeded to address in his judgment. This statement of claim does not make express reference to an allegation of literal copying but rather focuses on an allegation of access to, and use of, an unauthorised copy of NTAS in the development of ManTra. Paragraphs 2, 4 and 5 of the amended statement of claim state as follows:
“In the outline submissions made on behalf of the plaintiffs made at the start of the case and as set out in writing in a document dated the 30th September, 2009, the plaintiffs continued to contend that the defendants’ ManTra product contained source code that was copied from the plaintiffs’ NTAS product and that the copied elements were substantial. At paragraphs 26 and 27 of the written outline submissions the plaintiffs reiterated Harry Goddard’s expert view that the copied elements were substantial and that there was evidence of a systematic migration of the NTAS database structure to the ManTra database structure that was difficult to ignore and also relied on their other expert, Michael Turner, and his conclusion that the pattern of evidence in this case is consistent with wholesale copying, at least of the NTAS database structure, if not all of NTAS. Even though the claim in literal copying remained as of the opening of this case there was a different emphasis in the case as put forward in the plaintiffs’ submission. In paragraph 19 of the submissions, the plaintiffs contended:
“The facts of this case are a paradigm example of abuse of confidence/copyright infringement in relation to commercial secrets in a software business. It is the plaintiffs’ case, in short, that the defendants developed the ManTra software by ‘reverse engineering’ the plaintiffs’ NTAS software. It is the plaintiffs’ case that the defendants have sought to ‘springboard’ into a very specialised market, service by technically complex software solutions, through the unauthorised copying and reliance upon the plaintiffs’ software.”
3.9 What is clear, therefore, is that there was, to put it at its mildest, a significant evolution in the case made by Koger before the High Court. Much of the initial complaint was based on an allegation of literal copying. However, in the light of cross-examination of Koger’s expert witnesses, that case was no longer persisted with. The case, as it was carefully formulated on behalf of Koger at the end of Koger’s case and just as the defendants were about to go into evidence, was very clear. No distinction was made as and between the claim for breach of copyright, on the one hand, and the claim for breach of confidence, on the other hand, insofar as the method used was concerned. Koger alleged that the personal defendants had taken unlawfully an actual copy of the NTAS software and had used it. Indeed, the case made by Koger went so far as to say that it would not have been possible for the personal defendants to develop their own ManTra software, in the timescale in which it was actually was developed, without having had a copy of NTAS.
“2. In breach of copyright and/or in breach of confidence, the Defendants took a copy of the NTAS product, (the “unauthorised copy of NTAS”) and used the unauthorised copy of NTAS as a functional and/or design specification for developing ManTra. But for their access to and use of the unauthorised copy of NTAS, the Defendants could not have developed ManTra and released it onto the market as quickly as they did and to such a high quality.
4. The making of the unauthorised copy of NTAS constitutes an infringement of the Plaintiffs’ copyright under the 2000 Act. Further, the use of the unauthorised copy of NTAS as described in the development of ManTra constitutes the adaptation of the NTAS product within the meaning of Section 37 of the 2000 Act thereby infringing the Plaintiffs’ copyright in the NTAS product.
5. Further and in the alternative, the said use of the NTAS product constitutes a misuse of confidential information and ManTra consists of the fruits of such misuse.”
3.10 No case was, therefore, put to the High Court which suggested that there might, separately, be a claim available to Koger in breach of copyright, in the alternative, even if the court were not satisfied that an actual copy of NTAS had been taken but rather that those working on the development of ManTra were able, because of their intimate involvement in the development of NTAS, to remember important aspects of the NTAS software and, thus, reproduce much, if not almost all, of Koger’s software from memory. That breach of copyright can be established where copying is done from memory, rather than by having a physical copy of the work to which copyright attaches, cannot be doubted and was not contested, as a matter of principle, by counsel on behalf of the defendants on this appeal. The problem, however, is that a case of copying by memory was not made by Koger in the High Court. Indeed, the opposite is the case.
3.11 It must be recalled that the text of the revised statement of claim was drafted in circumstances where significant controversy had already arisen concerning the parameters of Koger's case. Paragraph 2 of the revised claim defines the term "unauthorised copy of NTAS" as meaning a copy of the NTAS product which was actually taken by the personal defendants and used for the purposes of developing ManTra. Likewise, the claim of using an adaption of the NTAS product in breach of s. 37 of the Copyright and Related Rights Act 2000, is made by specific reference to the use of an unauthorised copy as so defined. Not only, therefore, is there no reference to an allegation of any form of breach of copyright by virtue of copying from memory, but rather the claim as reformulated expressly confines itself, so far as the breach of copyright claims are concerned, to the use of an unauthorised copy in the way in which that term was defined. In substance, Koger expressly excluded from its reformulated claim any reliance, in furtherance of its breach of copyright claim, on copying other than in the context of an actual copy of the NTAS produce having been taken. Furthermore, it is clear that the claim as so reformulated expressly placed reliance on an assertion that ManTra could not have been developed as quickly as it was without access to and use of such an unauthorised copy.
3.12 One of the key questions which now arises is as to whether it is open to Koger to seek to persuade this court to remit the matter back to the High Court to allow it to make what would, it was conceded, be a significantly different case to the one which it earlier ran and lost. Before going on to consider that issue, it is next necessary to turn to the findings of the trial judge.
4. The Findings of the Trial Judge
4.1 A fundamental aspect of the judgment of Feeney J. is his analysis of the credibility of the witnesses who testified. At para. 18, he set out in outline his unequivocal findings on this matter:
These findings are reiterated throughout his judgment and are a relevant factor in a large majority of his later findings in relation to the claim made against the defendants and their associates.
“The Court has had the benefit of seeing and hearing each of the three personal defendants and also the evidence of the witnesses who assisted those three persons in the establishment of HWM and in developing the ManTra product and the source code contained within ManTra. Having had that opportunity and having considered the technical evidence adduced by parties, the Court is satisfied that each of the three named personal defendants and their associates, in particular Marian Klco and Jana Potocnakova, are truthful and reliable witnesses. The Court is satisfied that the accounts that each of those witnesses gave in relation to their actions concerning the development of ManTra was coherent, accurate and credible. Each account given by those witnesses as to the manner and mode of the development of ManTra and the establishment of HWM was not only credible but also was cogent and consistent. The evidence of those witnesses stands in sharp contrast with the evidence of George Sipko and Ras Sipko. Both those witnesses demonstrated a willingness to provide misleading and unreliable evidence. They were evasive and unreliable in their evidence. Where there is a conflict in evidence between the first three named defendants, Marian Klco and Jana Potocnakova’s evidence on the one part and the evidence of George Sipko and Ras Sipko on the other part, the Court favours the accounts given by and on behalf of the defendants.”
4.2 Feeney J. made a number of findings in respect of George Sipko’s treatment of his employees. Particularly, in relation to Koger’s employees in the Slovakian office, the court found that they were “subject to personal abuse, arbitrary action and a feeling of insecurity in relation to their continued employment”, and accepted this was the reason for the departure of many of those alleged to have been involved in this conspiracy, and not any inducement by Mr. O’Donnell to participate in any conspiracy.
4.3 The Court describes the steps taken by the defendants between December 2005 and March 2006, as set out in para. 2.7 above, as being “of a preliminary nature taken in circumstances where a future decision might be taken to set up such a business or to create such a product” and, as such, they were found not to be indicative of a conspiracy on the part of the personal defendants. The contention that Mr. O’Donnell’s visit to Slovakia in January and February 2006 was in furtherance of the alleged conspiracy was also rejected. The Court was also satisfied that Mr. O’Donnell did not prolong his employment with Koger (Dublin) in an attempt to aid the conspiracy. The development of ManTra was held to have commenced at the June 2006 brainstorming session and no earlier.
4.4 Koger relied on the speed in which ManTra was developed as evidence of the fact that the defendants had an unauthorised copy of NTAS available to them. In essence, Koger contended that it would be impossible to develop ManTra in the time available without the benefit of an actual copy of NTAS. This was referred to as a “deductive inference”. This submission was rejected at para. 63:
At para. 64, Feeney J. elaborated on this finding in the following terms:
“In particular, the deductive inference which the plaintiffs ask the Court to make makes no real or proper allowance for the knowledge, experience and expertise of the individual defendants and the persons working with them in the development of ManTra. The evidence establishes that those persons had the exact and precise expertise, training, information and knowledge necessary to enable them to develop the ManTra product. An examination of the ManTra product does not, on the face of it, indicate or manifest how or in what manner that product would have benefited in its development from access to NTAS. The products are fundamentally different in design.”
4.5 The Court was also satisfied that this informed and collaborative environment was an explanation for the absence of documentation, which would normally be expected when developing a program of this nature, and the court, therefore, accepted the explanation offered by the defendant’s witnesses for failing to keep backups of the early stages of ManTra’s development.
“In considering the nature and speed of the development of ManTra, neither the plaintiffs nor their experts gave any real or sufficient allowance for the knowledge, experience and expertise of the persons developing ManTra. Between them these persons had a detailed and comprehensive knowledge of transfer agency systems and the requirements of clients and potential clients using such systems and the mastery and know how of computer programming and the development of software using PowerBuilder and SQL based database management systems. To a large extent this arose from their work experience with Koger where they had acquired a detailed knowledge of NTAS including its strengths and weaknesses. This knowledge would have been available without the need for any copy of NTAS due to their thorough involvement with the NTAS product. There was also a failure on the part of the plaintiffs’ witnesses and their experts to make any sufficient allowance for the manner in which the persons developing ManTra were able to carry out their work. The people involved in the development were free to work in a constructive, co-operative and dynamic environment in contrast to the environment within Koger. The persons developing ManTra were in open, direct and constant contact with one and other.”
4.6 Koger had suggested that there were two main areas where copying had occurred, being the World-Check interface and the fee calculations function. Both of these contentions were also rejected by the trial judge. In relation to World-Check, Feeney J. again referred to the fact that the knowledge and expertise of the programmers was such that access to a copy of NTAS was not necessary. Any similarities in column names “emanated from a common source rather than from the use of NTAS.” The court held that ManTra’s fee calculations method was sufficiently different to disregard the argument that it had emanated from an NTAS copy. In any event, the trial judge found that the fee calculation methods used were not protected by copyright.
4.7 It had also been submitted by Koger that there had been a replication of some of the errors in NTAS within the ManTra product and that this was further evidence of the use of an unauthorised copy of NTAS in the design of Mantra. Feeney J. dismissed this argument at para. 86 of his judgment:
The court also rejected arguments to the effect that the similarities in functionality of the two products was indicative in any way of copying or design by reference. The court found that similarities of this nature are to be expected in two products aimed at the same industry.
“The evidence failed to demonstrate that there were functionality errors replicated within ManTra of the nature claimed by George Sipko and the Court accepts the evidence that the features in issue were properly implemented. In any event, even if there were replication of errors in the NTAS product within ManTra, that would not demonstrate access to or use of an unauthorised copy. The persons who developed ManTra had a deep comprehensive knowledge of how matters were implemented within NTAS and a replication of those features within ManTra is not unexpected and is not evidence of copying.”
4.8 As noted in section 3 above, Feeney J. dealt with the claim in accordance with the updated statement of claim. The sole emphasis of that updated claim was that the ManTra developers had access to, and use of, an unauthorised copy of the NTAS program. No separate contention was made therein that there could have been copying from memory or without the assistance of the actual NTAS program. In those circumstances and taking into account the evolution of the appellant’s claim over the course of the hearing, Feeney J. focused solely on the argument as set out in the statement of claim. His ultimate findings on these and related matters can be seen in para. 106, where he stated:
Feeney J. was not, by virtue of the claim being as specifically formulated by Koger, required to make any findings on whether there might have been any copying of NTAS by any other means, whether lawful or unlawful.
“Having considered the entirety of the evidence in relation to the claim under paragraph 2 of the plaintiffs’ statement of case and each of the individual particulars relied on as set forth in paragraph 3, the Court is satisfied that the defendants in developing ManTra did not use any copy of NTAS either as a functional and/or design specification for developing ManTra. The Court is satisfied that there is no evidence that the defendants had access to or used an unauthorised copy or any copy of NTAS. For completeness sake it is also the case that the evidence satisfies the Court that the defendants were able to develop ManTra and release it onto the market as a result of the defendants’ own independent work and that such development and date of release was in no way dependent, as alleged, on access to and use of an unauthorised copy of NTAS. The plaintiffs have recognised that their case is ultimately fact dependent and on the facts of this case the Court is satisfied that the plaintiffs have failed to establish a case against the defendants to support their claim.”
4.9 Similarly, the claim that Mantra constituted an unlawful adaptation of the NTAS program was also premised on the contention that there was access to, and use of, an unauthorised copy of NTAS. Therefore, once the argument in relation to direct copying was dismissed, the court held that it followed that this aspect of the claim also had to fail. However, the court did proceed to examine whether it could be said that there had been an adaptation but rejected this contention on the basis of the evidence.
4.10 The separate but related claim in relation to misuse of confidential information was also dependent on a finding that there had been access to an actual copy of NTAS. This is clear from para. 108 of the High Court judgment where the following is stated:
4.11 Feeney J. concluded his judgment by dismissing claims against Mr. O’Donnell and Mr. Woolman to the effect that they had acted in breach of their contracts and contrary to their fiduciary duties to the appellants.
“In this case the plaintiffs allege that former employees used confidential information by making a copy of NTAS and by having access to such copy and using such unauthorised copy as they were developing ManTra. The plaintiffs have failed to establish such use in evidence and have failed to identify any confidential information which was used by the defendants in and about the development of ManTra. What has been established in evidence is that former employees of the plaintiffs had accumulated a body of knowledge during their employment which was used in and about the independent development of ManTra. The plaintiffs have failed to identify the use or misuse of any identifiable trade secrets. No claim is made that the defendants used or applied skill, expertise know-how and general knowledge gained during the course of their employment. Indeed, such a claim could not succeed.”
4.12 Against that background, it is necessary to turn to the case which Koger sought to make on this appeal.
5. The Basis of Koger’s Appeal
5.1 In addressing the appeal put forward on behalf of Koger, it is of importance to note that this appeal was one of those in which a process of micro-management was engaged in by direction of the Chief Justice. The purpose of that procedure, which is at present best described as experimental, is to ensure, as a result of a series of case management hearings before a single judge of this Court, that the appeal is focused and that the materials which the court will need to consider in detail in order to resolve the appeal are presented in a way most conducive to permitting a time effective oral hearing and to facilitate a concentration by the court on those materials central to the issues raised on the appeal. I think it would be fair to characterise the experiment in this case as a qualified success.
5.2 Notwithstanding that, it is important to record that much of the materials which were included in the books of documents for the hearing of the appeal were not, ultimately, referred to. In addition, significant additional documentation, not included in the books of appeal, were handed in at the beginning of ,or in the course of, oral argument, not least a significant set of documentation on the Koger side made available at the beginning of the hearing. It does need to be said that it is becoming increasingly essential (given the limited court time available in the context of the large number of appeals requiring hearing) that everything possible is done to ensure the most efficient conduct of oral hearings. There is an obligation on all parties to engage with each other in an attempt to put before the court all but only those materials (whether pleadings, transcript extracts, documentary evidence or legal materials) which the court will really have to consider for the purposes of conducting the oral hearing and coming to a fair decision. While it must be acknowledged that it will be rarely possible to get things exactly right (given that cases can take their own turns at hearing), nonetheless, it is to be hoped that a situation will be arrived at where, for cases such as this, the court will be presented with only those materials which one or other side believes are necessary to the courts real consideration and either referred to directly or indirectly in the written submission or likely to be referred to in oral argument. The time may well come where the court may be required to impose penalties in respect of costs in cases where there is a significant failure to provide the court with the appropriate materials in an appropriate form. These comments should not be taken as a criticism of the parties to this case who were, after all, participating in an experimental procedure and, it must be recorded, engaged actively and appropriately with the court in attempting to put suitable measures in place.
5.3 Against the background of the micro-management of this case, it is fair to say that the written submissions filed went through, at the courts suggestion, a number of editions not least because, from the beginning, the position adopted on behalf of the defendants was that Koger was seeking to make, on the appeal, a case which it was not entitled to do. Indeed, in that context it should be recorded that Koger brought an application before the courts seeking leave to admit additional evidence, which application was refused.
5.4 By the time the appeal came to trial, counsel for Koger conveniently grouped his arguments under five headings:-
5.5 While counsel for the defendants addressed each of the specific points made, I think it would be fair to characterise counsel as having first placed reliance on a contention that the case sought to be made by Koger on this appeal was so totally different from the case addressed in the High Court that it ought not be allowed as being fundamentally both unfair and inconsistent with the role of this court as a court of appeal. In that context counsel for Koger accepted that the high point of what he could realistically hope to achieve would be an order of this court setting aside the judgment and remitting the matter to the High Court for a retrial.
1. It was suggested that the trial judge had not, or at least had not properly, considered the shifting of the burden of proof which might be said to arise at a certain stage in a breach of copyright action;
2. It was argued that the trial court inappropriately dismissed Koger’s evidence concerning certain similarities between the respective software systems. In that context it should be noted that it was argued by the defendants in the High Court that an inference of copying should not be drawn from certain similarities alleged between the respective software programs on the basis that relevant materials were either in the public domain or derived from third parties. It was said that the trial judge ignored Koger's evidence of other similarities not attributable to publicly available information or third parties;
3. It was said that the court incorrectly considered that similarities between the two software programs could be discounted on the basis of the programs having the same functional necessity;
4. As a corollary to point 3, it was said that the trial judge wrongly discounted similarities as deriving from “the same common conceptual language”; and
5. It was said that the court wrongly failed to consider whether there could be a breach of copyright by copying from memory such that the court, having found as a fact that the defendants did not have a physical copy of the NTAS software, wrongly, it was argued, concluded that copying had not taken place.
5.6 In order to fully appreciate the case sought to be made on behalf of Koger on this appeal, it is necessary to say just a little about the normal process which a court is likely to follow while considering a breach of copyright case. While it will be necessary to refer, to some extent, to the relevant legal principles in due course, it is fair to say that, at a very general level, the process is that a plaintiff will seek to place before the court evidence of sufficient similarity between the allegedly offending material and the material in which copyright is said to lie, together with evidence of the defendant having had an opportunity to actually copy. If sufficient evidence of such matters is placed before the court then the evidential burden may shift to the defendant to provide some innocent explanation which may, of course, take the form of drawing attention to publicly available or third party materials, which can provide an explanation for any relevant similarities or may seek to explain similarities as being derived not from copying but rather from some functional necessity.
5.7 In essence, the case which Koger sought to urge on this Court was that the High Court should have considered whether an opportunity to copy arose from the ability of the personal defendants to copy from memory and whether, when coupled with such similarities as had been established between NTAS and ManTra, the combined effect of that opportunity and those similarities was sufficient to shift the burden of proof. Furthermore, it was suggested that if the trial judge had conducted his analysis on that basis, his approach to determining whether any inference of copying had been displaced by the existence of publicly available or third party materials or functional necessity would have been different. On that basis, it was said that the overall approach of the High Court judge was wrong with each of the five points made being aspects of that general complaint. However, it must be recalled that the only case for copying which was pursued on behalf of Koger, subsequent to the filing of the revised statement of claim to which reference has been made, was a case of copying from an unlawfully taken version of NTAS.
5.8 In that regard it seems to me that counsel’s concession was necessary. There is no basis on which this Court could have concluded, on the basis on the way in which the case was run before the High Court, that Koger should have won. The only conceivable conclusion, favourable to Koger, could be that Koger should be given an opportunity to run the case again on a different basis. In order to understand why that was so, it is necessary to return to the way in which the case evolved while at hearing before the High Court.
6. The Reformulation of the Case before the High Court
6.1 It must be recalled that the case made by Koger was significantly refined and, indeed, altered at the close of Koger's evidence. Up to that point a significant part of Koger's case was that there was literal copying in the sense that specific elements of the NTAS software was said to have been directly copied into ManTra. However, that case collapsed when the expert witnesses called on behalf of Koger accepted that the elements of the program in respect of which the assertion of literal copying had been made could be found either in publicly available materials or in materials which were obtained from third parties. It was on the basis of the collapse of the literal copying case that the reformulation, to which reference has already been made, of Koger's case occurred. The case, as reformulated, needs to be seen in the light of developments up to that time.
6.2 It also needs to be noted that the independent witnesses called on behalf of Koger did not assert any competence to deal with questions concerning other forms of similarity between the respective programs. This can be seen from the following exchange between Feeney J. and Mr. Harry Goddard (the relevant expert) on day 24 of the High Court hearing.
“Q. …Fine if you cannot answer the next series of questions feel free to say that you cannot, but they potentially could be of assistance to me. Can you tell me, from your examination of NTAS and ManTra, anything in ManTra which you say you can identify as having been copied from NTAS?
6.3 It is true to say that some evidence concerning such other similarities was given by Mr. Sipko although it does need to be said that, viewed from the perspective of the end of the presentation of Koger's case, Mr. Sipko's evidence had been subject to significant challenge as to its credibility.
A. I don’t think I can identify anything as being literally copied from NTAS.
Q. Can you identify similarities?
A. I don’t think I can answer that. I understand that there are functional similarities in both products, but that is not my area of expertise.
Q. You cannot. In relation to whether any such similarities might exist, whether they are a functional necessity, your answer to the previous question will also answer this one for me?
A. It will, yes.”
6.4 It must also be recalled that the basic building blocks of a claim for breach of copyright normally involve a plaintiff in persuading the court that the combination of whatever opportunity the defendant might have had to access to the allegedly copied material, coupled with whatever similarities could be identified between the material in which the copyright subsists and the allegedly infringing material, gives rise to an inference of copying. It is in that sense that most of the points sought to be raised on behalf of Koger on this appeal arise. It is undoubtedly true that there is authority for the proposition that the burden of proof may shift. Feeney J. refers to such authority at para. 107 of his judgment where he said the following:-
6.5 However, it is clear that the burden of proof which shifts in those circumstances is simply an evidential burden of proof. In many cases, and a case such as this is one, to say that the evidential burden shifts is no more than to express the common sense proposition that the party on whom the initial legal burden of proof rests has produced sufficient evidence so that, in the absence of any, or any further, evidence on the part of its opponent, it will succeed. The opponent then has, in practice, a burden, for if no further evidence is adduced that party will lose. The position in copyright reflects that common sense proposition. If there is sufficient evidence of both similarities and opportunity to copy then that, of itself, can be enough to allow the plaintiff to win. If the plaintiff puts enough evidence before the court in those regards then it will, as a matter of practicality, call for some explanation from the defendant to show that any similarities relied on can be otherwise explained by, for example, being derived from information in the public domain in which copyright did not subsist at all, or from materials in which, whether subject to copyright or otherwise, a third party held any intellectual property rights. However, one matter which any plaintiff, at the close of the presentation of its evidence in a copyright case, must assess is whether it is felt that it has placed sufficient credible evidence before the Court to meet the requirement of establishing sufficient similarities and opportunity to copy. Unless there is an application for a non-suit, a plaintiff will not know the definitive answer to that question and will have to make a judgment as to where its case stands. The position adopted by Koger in the reformulation of its claim also needs to be seen against the backdrop of where its case would have stood, on the evidence, at the close of its case. In particular, the reformulation needs to be seen against the background of the fact that its independent evidence concerning copying had largely been found wanting and that the only remaining evidence of copying was that of one of its principals who was obviously not independent and whose credibility had been called into question.
6.6 Furthermore, the reformulation of Koger's case needs to be seen against the background of the fact that there were potentially conflicting difficulties with the two strands of its case, being the copyright strand and the breach of confidence strand. If it could have been established that any of the personal defendants or, indeed, others working on the production of ManTra, had available to them a copy of the NTAS, then Koger's case for breach of confidence would have been significantly strengthened. This would have been so irrespective of whether copyright could be shown to subsist in any specific elements of NTAS which had similarities in ManTra. As pointed out earlier, copyright and breach of confidence can apply in quite different circumstances, even though there may be a significant overlap. On the other hand, Koger's case on breach of confidence would be significantly weakened in the event that the court found that there was no actual copy of NTAS available, at the relevant time, to HWM personnel. While it would not, necessarily, provide a full defence in all circumstances, it would, having regard to the entitlement of employees to use their skill and knowledge even if acquired while working for a former employer, have placed Koger's case under that heading in a much weaker light. Koger was thus faced with a situation where there was a real risk that its claim for breach of confidence would be significantly weakened in the absence of a finding that HWM personnel had access to an illicit copy of NTAS while developing ManTra. The case as reformulated at the close of Koger's evidence needs also to be seen against that background.
6.7 While, therefore, a finding that an unauthorised copy of NTAS had not been taken might not, necessarily, have damaged the claim for breach of copyright, it could have had a significantly damaging effect on the claim for breach of confidence. Whether concentrating (possibly to the exclusion of all else) on a claim based on there being an unauthorised copy made tactical sense would, therefore, have depended in significant part on the extent to which the case for breach of copyright, independent of the method of copying, might have been seen, at the close of Koger's case, to have remained strong. If the case for breach of copyright (in the light of the concessions made by Koger's expert witnesses) had become weak, then there was an obvious tactical advantage in concentrating on the allegation of having taken an unauthorised copy for a finding of such unauthorised taking would have strengthened the breach of confidence claim which might, on that hypothesis, have looked the best bet for success.
6.8 There will, of course, be cases where a court will be able, without expert evidence, to assess similarity. However, to a greater or lesser extent, some breach of copyright cases may require the court to have the assistance of expert testimony to form an assessment of similarity and, in particular, whether any similarities identified could reasonably give rise to an inference of copying. Software programs are undoubtedly one such area. In a breach of copyright case where the copyright is said to subsist in a software program, it follows that expert evidence as to similarity will be important. It, likewise, follows that an assessment of the plaintiff's case made at the close of the plaintiff's evidence will, necessarily, focus, at least in material part, on the extent to which any independent expert evidence withstood cross-examination and whether the evidence, independent or otherwise, as it existed at the close of the plaintiff's case, might be sufficient to shift the burden of proof.
6.9 Thus the position which confronted Koger, in the events that happened at the trial, at the time when its evidence closed, was that there were potential difficulties with both strands of its claim. Its evidence of copying had been weakened to the extent that there was no independent expert evidence in favour of copying and it was forced to rely on the evidence of a witness whose credibility had been challenged. If copying could not be established then Koger's best chance of success would, undoubtedly, have lain in the direction of breach of confidence under which heading, of course, as has been pointed out, evidence of HWM personnel having an actual illicit copy of NTAS would have been extremely advantageous. The position adopted by Koger needs to be seen against that background. In that context, it is appropriate to turn to whether Koger should be allowed to argue its case on this appeal in a way which, on any view, differs significantly from the case made in the High Court.
7. A Different Case on Appeal?
7.1 This Court has had recent occasion to consider the circumstances in which it may be appropriate for the Court to exercise its undoubted discretion to allow a new point to be argued on appeal. It may be that it is not possible to encompass all of the considerations which the Court should properly take into account in deciding whether to allow a new point to be argued on appeal in one ready formulation. In the context of the proper approach, O'Donnell J., writing for this Court in Lough Swilly Shellfish Growers Co-operative Society Limited & anor v. Bradley & anor  IESC 16, said the following:-
7.2 On any view, this case lies at the end of the spectrum identified by O'Donnell J. in Lough Swilly where leave should not be granted. There can be little doubt but that, had Koger reformulated its case at the close of its evidence in a way which did not expressly exclude any allegation of copying other than by making use of an unauthorised copy taken, then the run of the case thereafter and the evidence which would have been addressed during the presentation of the defendant's case could have been significantly different.
"There is a spectrum of cases in which a new issue is sought to be argued on appeal. At one extreme lie cases such as those where argument of the point would necessarily involve new evidence, and with a consequent effect on the evidence already given (as in K.D. for example); or where a party seeks to make an argument which was actually abandoned in the High Court (as in Movie News); or, for example where a party sought to make an argument which was diametrically opposed to that which had been advanced in the High Court and on the basis of which the High Court case had been argued, and perhaps evidence adduced. In such cases leave would not be grated to argue a new point of appeal"
7.3 As noted earlier, there is the potential for a shifting of the burden of proof in a copyright case. That much was acknowledged by Feeney J. by his citation of authority to that effect. However, it is no more than a shifting of an evidential burden. In such circumstances, and assuming that the defence goes into evidence, the role of the trial judge is ultimately to assess whether, in the light of all of the evidence, the plaintiff's case has been made out. Whether, had the plaintiff's evidence stood alone, same would have been sufficient to discharge the burden of proof will never formally be decided in the absence of an application for a non-suit. Likewise, there will be no formal determination of precisely how far the defendant has to go to displace the finding that might be made if the plaintiff's evidence stood alone. In such a case it is not, in my view, necessary for the trial judge to go through an exercise in deciding (and specifying in the judgment) what the position would have been had only the plaintiff's evidence been available.
7.4 I am not, therefore, satisfied, in any event, that there is any legitimate criticism of the approach adopted by Feeney J. under that heading. But even if there were some merit in this aspect of Koger's appeal, the evidence which any defendant would be likely to present to the court will inevitably depend on the state of the plaintiff's case when the plaintiff has completed its evidence. That will particularly be so where, as here, the plaintiff is required to specify with some precision the case then sought to be relied on at the close of the plaintiff's case. It would be a manifest breach of fair procedures to allow a plaintiff, having specified the case at that stage with some precision and at the request of the Court, and having, thus, coloured the defendant's approach to its presentation of the evidence, to then argue on appeal for an entirely different approach. If such were ever to be allowed it could only be on the basis, as was fairly conceded by counsel on behalf of Koger, that the case would have to go back for a retrial for any other course of action would be manifestly unfair. However, as pointed out by O'Donnell J. in Lough Swilly, a case where there would necessarily be new evidence which, in the light of the way in which the appeal was run, would necessarily be new evidence which could and should have been presented at the first trial, lies at the end of the spectrum where the Court leans heavily against allowing a new point to be argued.
7.5 In addition, it seems to me to be correct to characterise the points now sought to be relied on by Koger as being, at least in the main, points abandoned at the trial. The reformulation at the close of Koger's case cannot be seen as anything more than such an abandonment. In addition there were, objectively speaking, potential tactical reasons which might lead such an abandonment, as seen from the perspective of the close of Koger's case, as having been advantageous to Koger. As pointed out earlier, the assertion that there could not have been a timely development of ManTra without access to an unauthorised copy had the potential to strengthen, if the argument was accepted, Koger's case for breach of confidence. The effective abandonment of a claim for breach of copyright based on copying from memory must be seen in the light of the fact that its abandonment carried with it a potential strengthening of the case, asserted strenuously, that there must have been a taking of an unlawful copy. It is not for this Court to assess what actual tactical considerations were in the minds of Koger when it reformulated its claim. However, this is not the sort of case where one might be able to say that a claim was abandoned, necessarily and objectively speaking, in error. Rather there are, objectively speaking, tactical considerations which might explain such a course of action being adopted. Those considerations press this case even closer to the end of the spectrum identified by O'Donnell J. in Lough Swilly at which a court should refuse any attempt to reformulate the claim on appeal.
7.6 It also seems to me that counsel for the defendants was correct when he characterised the claim advanced in the High Court by Koger as one in which the breach of copyright claim and the breach of confidence claim ran in tandem, with no distinction made between them other than the obvious distinction that they are separate causes of action. As already analysed there can be real differences between the circumstances in which both types of claims might succeed. However, Koger chose not to make any case based on such differences but rather sought to make the case under both headings on the same substantive basis. To allow, at this late stage, Koger to have the opportunity to go back to the High Court to argue a case which could only emphasise the differences between a breach of copyright claim and a breach of confidence claim would, in my view, also meet the category of a "diametrically opposed" ground of appeal (i.e. diametrically opposed to the case made in the High Court) also identified in Lough Swilly.
7.7 There are very real reasons both of principle and of practice why, not least in complex cases, parties should be required to carefully consider whatever case they wish to put forward to their best advantage and stick to it. Trials are not a dry run. Tactical decisions are made by all parties on a regular basis in the context of complex trials. Doubtless, with the benefit of hindsight, many parties might wish to be allowed revisit some of the tactical decisions which they took. However, allowing parties do so on appeal is a recipe both for procedural chaos and serious injustice.
7.8 For whatever reason, Koger made the case it did before the High Court. It must now be kept to that case. None of the grounds of appeal sought to be relied on were, in my view, argued before the High Court in any meaningful way such as would justify this Court, even if those grounds were considered to be meritorious, in setting aside the judgment of the trial judge. Each of those grounds could only succeed if this Court were to permit what is essentially a new case to be made on appeal. For the reasons already analysed, I am satisfied that permitting Koger so to do would be to run the risk of grave injustice. I would not, therefore, permit a new case to be made on appeal in the circumstances of these proceedings. That being so, it does not seem to me that any of the grounds of appeal can properly be advanced.
7.9 Without allowing Koger to run what I am satisfied would be a significantly different case on appeal, none of the grounds advanced really get to first base. In order that an evidential burden of proof can be said to have shifted and in order, therefore, that there be any burden on a defendant to explain similarities by reference to such matters as publicly available or third party materials or functional necessity, the plaintiff must put sufficient evidence before the Court of similarity and opportunity. Having, for whatever reason, confined its case on opportunity to the availability of an actual copy and that case having failed on the facts (and not being the subject of an appeal), it follows that all of the grounds can only be relevant to the appeal if Koger were to be permitted to now rely on copying from memory. For the reasons already analysed, I am not satisfied that Koger should be permitted to adopt that course of action. It follows, therefore, that Koger's appeal must fail.
8.1 I am, therefore, satisfied that the case sought to be made by Koger on this appeal would amount to a new case radically different from that advanced before the High Court and involving a requirement, if it were successful, that the case be remitted to the High Court for a hearing on different evidence and on a different basis. It would also involve permitting Koger to argue what is, in substance, a case diametrically opposed to that on which it ultimately fixed before the High Court. In substance, much of the case now sought to be advanced was, in reality, abandoned in the High Court. Allowing Koger to advance an appeal in that way would, in my judgment, be a manifest injustice.
8.2 For those reasons, I would dismiss the appeal and affirm the order of the trial judge.