Invenpro (M) Sdn Bhd v JCS Automation Pte Ltd and another [2014] SGHC 38
Singapore High Court dismisses claims for breach of confidential information and copyright over machine that cleans discs used in the manufacture of hard disk drives
Introduction
The Plaintiff, Invenpro, and the Defendants, JCS Automation and JCS Echigo (“JCS”), are both manufacturers and suppliers of cleaning machines known as batch scrubbers. Batch scrubbers are high precision cleaning machines that clean discs (the hard disk substrate) used in the manufacture of hard disk drives. As the slightest contamination can render a disc unusable as a hard disk, this cleaning process is of paramount importance during the hard disk manufacturing process. Moreover, as the hard disk manufacturing industry is one that is niche, two of the main players, Western Digital Corporation (“WDC”) and Seagate, were common customers of both Invenpro and JCS.
In June 2009, Invenpro commenced an action in the High Court against JCS alleging that JCS had made unauthorised use of Invenpro’s confidential information and copyright documents in its production of batch scrubbers. JCS denied both claims and argued independent creation of the batch scrubber as, like Invenpro, they had gone through a similar consultative process with their common customer, WDC, to whom the batch scrubber was provided.
JCS counterclaimed that Invenpro had made a defamatory statement to another common customer, Seagate, to the effect that JCS had made an unauthorised use of Invenpro’s confidential information in manufacturing the batch scrubber for Seagate. The 9-day long trial was presided over by the Honourable Judicial Commissioner George Wei, a well-respected and renowned expert in intellectual property law with more than 30 years of experience in the field. Rodyk acted for JCS in the action.
Findings of the High Court
The Court dismissed the breach of confidence and copyright claims by Invenpro as well as the defamation counterclaim by JCS.
In coming to its decision, the Court affirmed the trite legal principles that for an action in breach of confidence to succeed, the information must possess the necessary quality of confidentiality, the information must have been imparted in circumstances such as to import an obligation of confidentiality and there must have been unauthorised use of the information and detriment.
Firstly, the Court in analyzing the evidence put forward by JCS concluded that the individual features Invenpro claimed confidentiality in were either public knowledge, a matter of common sense, or generally dictated by WDC (or Komag, WDC’s predecessor). Although the Court opined that Invenpro could assert a claim that the solutions it had come up with to improve the batch scrubber design (from WDC’s original design), in particular the combination of features, possess a quality of confidence, the Court reasoned that it did not have to come to a conclusive answer in this respect as there was neither a duty of confidence owed by JCS nor unauthorised use of Invenpro’s confidential information by JCS.
The claim was brought by Invenpro on the basis that JCS was an indirect recipient (i.e. the information was passed by WDC) of the confidential information. To import an obligation of confidentiality in equity, JCS, as the indirect recipient of the information, must have knowledge that a serious claim for breach of confidence has been made by Invenpro against WDC. On the evidence, the Court was not satisfied that, even if JCS was given confidential information belong to Invenpro, JCS knew at the material time that such access constituted unauthorized use of confidential information. JCS therefore did not owe Invenpro an obligation of confidence.
However, the principal basis for the Court’s dismissal of Invenpro’s claim was that Invenpro had not established an unauthorized use of its confidential information in the first place.
Although it was typical for plaintiffs in cases involving misuse of confidential information to have to rely on circumstantial evidence and “finger prints” to establish copying or unauthorised use, this did not change the standard of proof to be met. The mere fact that there exists a suspicion of access and copying is insufficient to establish a case of breach of confidence on the balance of probabilities. On the facts, there was no direct evidence that JCS had been given access to any document which contained details of the confidential information.
Although an inference of copying may be established by proving access coupled with sufficient objective similarity, the strength of the inference will depend on the nature of the access and the degree of similarity. In this regard, the Court was not satisfied that the overall mix of similarities in details and concepts were sufficient to establish copying given the evidence of the design process that JCS went through. The Court thus ruled that Invenpro had failed to establish copying and instead found the evidence to be suggestive of independent creation by JCS.
On the issue of Invenpro’s “thinly pleaded” copyright case, the Court found that JCS neither had any access to any copyright materials owned by Invenpro nor did Invenpro sustain a case for indirect copying. The evidence adduced by Invenpro was insufficient to establish that JCS was provided with access to the copyrighted works. Further, since WDC had requested for specific components to be used in the production of the respective batch scrubbers and many of the components were obtained “off the shelf”, the natural result was a degree of semblance between both parties’ batch scrubbers. Invenpro’s claim for indirect copying by JCS similarly failed as Invenpro had failed to demonstrate a causal connection between its copyright documents and JCS’ alleged infringing article. In any case, the Court reiterated its finding that JCS’ batch scrubber was of independent
creation and design.
JCS’ counterclaim for defamation was dismissed as the Court held that the contents of the letter in question were not defamatory. Although there was publication of the statement in question to Seagate, the Court opined that purpose of the letter was to put Seagate on formal notice that JCS’ batch scrubber incorporates Invenpro’s confidential information and to reserve Invenpro’s rights. Therefore, looking at the letter as a whole, the statement was merely a warning to Seagate informing that an action has been commenced against JCS (with whom Seagate also has a commercial relationship) and that Seagate may be implicated.
Future Implications
While this case has not fundamentally changed the law of unauthorised use of confidential information or copyright, it is a timely reminder that knowledge of a breach of confidence by the indirect recipient of the information is required for equity’s intervention. A party cannot expect the long arm of equity to intervene in cases where the party allegedly in breach has no reason to know or even suspect that the information he is in possession of is another party’s confidential information. As a pre-emptive measure and notwithstanding the practice of signing non-disclosure agreements, businesses should clearly put its customers to whom they are divulging sensitive information to on notice that the information provided is not to be disclosed to any third party.
