EC Medica Group UK Ltd & Ors v Dearnley-Davison & Ors [2018] EWHC 1952 (Ch)

[2018] EWHC 1952 (Ch)Case No HC-2016-001671
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London EC4A 1NLDate 27/07/2018
Before
Kelyn Bacon QC(sitting as a Deputy Judge of the High Court)
Between
(1) EC MEDICA GROUP UK LIMITEDClaimants(2) EC MEDICA MANUFACTURING LIMITEDClaimant(3) MEDICAL DEVICES LIMITEDClaimant(4) E C REP LIMITEDClaimant(1) CHRISTOPHER DEARNLEY-DAVISONDefendants(2) CHRISTOPHER GARRETTDefendant(3) SAUL BERMANDefendant(4) CS MEDICAL LIMITEDDefendantPAUL SHANE BENNETTSPart 20 Defendant
Michael Hicks (instructed by HGF Law LLP) for ClaimantsThomas Alkin and Tim Bamford (instructed by Collyer Bristow) for DefendantsHearing Hearing dates: 6–8 and 13 June 2018
Judgment ApprovedKelyn Bacon QC (sitting as a Deputy Judge of the High Court):Introduction
[1]The Claimants (who I will refer to collectively as “EC Medica”) are all members of a group of companies whose main business is the manufacture and sale of medical devices, in particular cushions and other items used to support patients during surgery. The first to third Defendants, Mr Dearnley-Davison, Mr Garrett and Mr Berman, worked for EC Medica for some years before leaving in 2016 to set up a competing business, CS Medical (the fourth Defendant). The Claimants contend that the establishment of this business was in breach of the Defendants’ duties of fidelity, and that the Defendants used the Claimants’ confidential information (including customer details and product designs). The Claimants also say that the Defendants infringed their unregistered design rights, and that the intellectual property rights in the design of various products by Mr Berman for CS Medical actually belong to EC Medica, because Mr Berman designed those products in the course of his employment at EC Medica.[2]Although the claim covers various different products developed by CS Medical, a central aspect of the claim is the development by CS Medical of its CSM2510 face cushion, which is used to support a patient’s head during prone surgery. The Claimants say that important parts of this cushion were copied from the design of EC Medica’s CL10.3 face cushion.[3]The Defendants deny all the claims, saying that their activities in setting up CS Medical before they had left EC Medica were legitimate preparatory activities, and did not in any way use EC Medica’s confidential information or infringe EC Medica’s design rights. Mr Berman also says that in any event he was not an employee of EC Medica, but was rather a casual worker. He did not, therefore, owe any duty of fidelity to EC Medica outside of his working hours, and the rights in his designs cannot be regarded as vesting in EC Medica. The Defendants have counterclaimed for unjustified threats of infringement of registered design rights, and have added Mr Bennetts as a Part 20 Defendant to that counterclaim. Witness evidence The Claimants’ witnesses

Witness evidence

[4]At the trial, the Claimants sought to rely on the evidence of four witnesses: Mr Bennetts, Mr Vieira, Mr Hancock and Ms Dooley-Anderson. The Claimants had served witness statements for two further witnesses, but in the event those witnesses did not attend trial and the Claimants did not rely on their evidence. I therefore need say no more about those. It is, however, necessary to make some comments about the other witnesses relied upon by the Claimants.[5]Mr Bennetts is the managing director of the first to third Claimants, and a director of the fourth Claimant. He provided five witness statements, and gave evidence at the trial. It was, however, apparent that Mr Bennetts did not have first-hand knowledge of the some of the key issues in dispute. He had not observed the Defendants carrying out activities for their new business while employed by EC Medica, nor did he have direct evidence that the Defendants had used EC Medica’s confidential information. His assertions in that regard were, therefore, limited to speculation and inference based on various indirect pieces of evidence, such as the timing of the creation and/or deletion of documents containing customer information, and the timing of offers made by the Defendants to the Claimants’ customers. In so far as his evidence was simply commentary or submissions, I agree with the Defendants that it should not be given any weight.[6]Mr Alkin, for the Defendants, also said that Mr Bennetts had made various serious allegations of dishonesty against the individual Defendants with no sensible basis, referring in particular to an allegation that Mr Dearnley-Davison had stolen sailing equipment, and allegations of dishonest conduct by Mr Garrett during his employment by EC Medica. Although in the event nothing turns on those particular allegations, I consider that they did demonstrate that Mr Bennetts was rather too ready to characterise conduct as being dishonest without having a proper basis for such claims. There were also other aspects of his evidence that I regarded as not being credible. I have therefore treated his evidence with some caution, where not supported by other material.[7]Mr Vieira has been an employee of EC Medica since April 2017. He describes his duties as including research and development of new products and work on existing products. His evidence addressed the specific issue of the design history of CS Medical’s face cushion, based on the CAD files disclosed by the Defendants. While that evidence was initially put forward as a witness statement, it was subsequently ordered at the pre-trial review that, in so far as Mr Vieira’s statements contained expert evidence, the Claimants could rely on that evidence.[8]Mr Vieira’s evidence at the hearing was clear and measured. It was supported by a meticulous analysis of the Defendants’ CAD design history. This proved, indeed, to be a far more careful analysis than the Defendants themselves had carried out in the preparation of their evidence. A key conclusion that Mr Vieira reached regarding the starting point for the CAD design of the CSM2510 face cushion was, as I will discuss further below, accepted by the Defendants as well-founded, and led Mr Berman to change his evidence during the course of the trial.[9]Mr Alkin nevertheless pointed out that Mr Vieira is not only a current employee of EC Medica, but is also a longstanding personal friend and former tenant of Mr Bennetts. He also noted that before giving his own evidence for the purposes of the trial, Mr Vieira had considered and opined on the question of copying for the purposes of Mr Bennetts’ third witness statement. Notwithstanding those potential concerns, I considered Mr Vieira to be an entirely candid witness. Where I have not accepted some of his opinions, that was not because of any suspicions of a lack of impartiality.[10]Mr Hancock and Ms Dooley-Anderson did not attend the trial. On 4 June 2018, the day before the trial was originally due to start, the Claimants served hearsay notices pursuant to section 2 of the Civil Evidence Act 1995 in relation to the evidence of both witnesses. It is common ground that the court has a discretion to refuse to admit hearsay evidence: White Book paragraph 33.2.3 and Intervet v Merial [2010] EWHC 294 (Pat), §§69–70. I therefore heard submissions at the outset of the trial as to whether the hearsay evidence of these two witnesses should be admitted.[11]In the case of Mr Hancock, it was said that he could not give oral evidence because he was required to be at his new place of work to provide IT support due to the absence of a colleague. The Claimants said, moreover, that they intended to place only very limited reliance on his evidence, confined to the location of certain files that had been deleted by Mr Dearnley-Davison, and the fact of various screen shots taken by the AktivTrak employee monitoring software used by the Claimants. Those matters were in any event not disputed by the Defendants. I therefore permitted reliance on Mr Hancock’s hearsay evidence in those limited respects, although in the event I have not found that anything turned on it.[12]The position of Ms Dooley-Anderson was rather different. The reason given for her non-attendance at the trial was that she had injured a finger on 11 April 2018, which had required plastic surgery on 13 April 2018. On 15 May 2018 her doctor had apparently signed her off work until 27 June 2018. That, in my judgment, was a wholly unsatisfactory reason for non-attendance at the trial: there was no explanation at all of why a finger injury should prevent Ms Dooley Anderson from giving oral evidence. Nor was there any reason why the hearsay notice should have been served so late, given that the doctor’s certification of non-fitness for work was given some weeks before the start of the trial. Her evidence did, moreover, concern an issue that is vigorously disputed between the parties, namely the employment status of Mr Berman. It was in those circumstances all the more important that if the Claimants proposed to rely on hearsay evidence in this regard, proper notice of this ought to have been given. In those circumstances I refused to admit the hearsay evidence of Ms Dooley-Anderson.

The Defendants’ witnesses

[13]The first to third Defendants all served witness statements and gave evidence at the trial. The Defendants did not call any further witnesses.[14]Mr Dearnley-Davison had worked for EC Medica since 2006, during which time he had undertaken various different roles. During his last two years he had led the design team as well as managing the purchasing and logistics team and assisting with IT problems. He gave evidence of his activities in establishing CS Medical, together with Mr Berman and (later) Mr Garrett, and the reasons for his departure from EC Medica to set up a competing business. While some aspects of his evidence were clear and credible, on some important points I have found his evidence to be inconsistent and implausible. I do not, therefore, regard Mr Dearnley-Davison to be an entirely reliable witness.[15]Mr Berman started to work at EC Medica in 2013 on an internship as part of his engineering degree course, and continued to work there during a placement year and thereafter on various bases which I will discuss further below. During his degree course he specialised in surface modelling using CAD systems, and his work at EC Medica also focused on CAD modelling. His evidence focused on two main issues: his employment status at EC Medica, and the design of the CSM2510 face cushion. He also addressed some of the other aspects of the claims.[16]On the question of Mr Berman’s employment status, while much of his account was uncontroversial, some of his evidence was implausible. As for his account of the design process for the CSM2510 face cushion, this changed in almost every one of the witness statements he provided on this point, including a sixth witness statement that was served on the second day of the hearing, and which accepted a key point made by Mr Vieira about the design history that Mr Berman had previously denied. There are other important parts of Mr Berman’s evidence that, as set out below, I have not accepted. As with Mr Dearnley-Davison, therefore, I do not regard Mr Berman as an entirely reliable witness.[17]Mr Garrett had worked at EC Medica since 2014 in a sales role. He became involved with CS Medical some time after Mr Dearnley-Davison and Mr Berman had started working together to establish their new company, and it was not disputed that he played no part in the preparations for CS Medical beginning to trade in February 2016. His evidence on the issues in dispute was, therefore, far more limited than that of Mr Dearnley-Davison and Mr Berman, and most of it was unchallenged.

The establishment of CS Medical

[18]The central facts concerning the establishment of CS Medical are not disputed. By September 2015 Mr Dearnley-Davison had become unhappy at EC Medica, and Mr Berman had also decided not to continue to work for the company after his graduation from university. Mr Dearnley-Davison and Mr Berman had become friends, and in early September they discussed the possibility of setting up a competing business.[19]One of the products that they decided to try and produce, in competition with EC Medica, was a face cushion. Mr Berman had designed EC Medica’s CL10.3 face cushion in July 2015. Mr Dearnley-Davison and Mr Berman decided to design an alternative face cushion, which became known as the CSM2510 cushion. One of the central claims advanced by the Claimants is that Mr Berman used the CL10.3 design as part of his design of the CSM2510 cushion.[20]In December 2015 Mr Garrett told Mr Dearnley-Davison that he too was planning to leave EC Medica. Mr Dearnley-Davison invited him to join CS Medica as their sales person. Mr Garrett agreed and handed in his notice to EC Medica on 5 January 2016. He worked his notice period of four weeks, plus an additional week at EC Medica’s request, eventually leaving on 5 February 2016. Thereafter he worked for CS Medical.[21]Mr Dearnley-Davison likewise gave notice on 5 January 2016, and as with Mr Garrett his last day of employment with EC Medica was (formally) 5 February 2016. In the event, however, he was signed off sick for the last week during which he was supposed to work.[22]Mr Berman worked at EC Medica for the last time on 8 December 2015, after which he did not return to work there, although he did not formally resign. During November and December 2015 Mr Berman was in contact with a manufacturer (Interfoam) and a toolmaker (Central Patternmaking) with a view to using these for the production of the CSM2510 face cushions. He initially used a pseudonym for these contacts, but by the end of December had disclosed his real name and the fact that he was in business with Mr Dearnley-Davison.[23]CS Medical was incorporated on 18 December 2015, and commenced trading in February 2016. The first orders for the CSM2510 cushion were received in May 2016.

The injunction applications

[24]In May 2016 the Claimants brought the present proceedings, and made an application for an interim injunction to restrain the Defendants’ sales of their CSM2510 face cushion pending trial.[25]On 15 June EC Medica’s solicitors wrote to Interfoam claiming that their manufacture of the CSM2510 face cushion amounted to (among other things) an infringement of EC Medica’s registered designs, and threatening to bring proceedings if various undertakings were not given by Interfoam. The next week, on 21 June, Mr Bennetts sent emails to a number of hospitals informing them of the proceedings that had been commenced against the Defendants, explaining that the proceedings were based on allegations of registered design right infringement and misuse of confidential information. In respect of the position of the hospitals, the email said as follows:
“However, although EC Medica is diligent in protecting its intellectual property rights, EC Medica says it has no desire to pursue unnecessary litigation and wishes it to be known that it has no current intention to commence proceedings against other third party customers of CS Medical in relation to this matter.”
[26]The Defendants resisted the injunction sought by the Claimants, applied to strike out the claims for infringement of Community registered and unregistered design rights and UK unregistered design rights, and sought an interim injunction to restrain further threats by EC Medica.[27]Both parties’ applications were heard on 8 July 2016 by Mr John Baldwin QC (sitting as a Deputy Judge of the High Court). The judge dismissed the Claimants’ injunction application, struck out the Claimants’ Community design right claims (but not the UK unregistered design right claims), and granted an interim injunction restraining the Claimants from making any threats of proceedings for infringement of any registered or unregistered designs in relation to CS Medical’s face cushions to any hospital, NHS Trust or other provider of healthcare in the UK.

The present claims

[28]The Particulars of Claim were amended following the injunction hearing, and re-amended following the pre-trial review of 4 May 2018. The remaining claims against the Defendants are as follows: i) Various claims for misuse of EC Medica’s confidential information. By the time of closing submissions, these had reduced to allegations that Mr Dearnley-Davison and Mr Berman had used the design drawings for EC Medica’s CL10.3 cushion in order to design their competing CSM2510 cushion; that Mr Dearnley-Davison and Mr Berman had sent a design for a box-type face cushion to a manufacturer for a quote for the purposes of CS Medical’s business; and that Mr Dearnley-Davison had taken from EC Medica a report with the file name IP_SALBD containing records of EC Medica’s sales during the year 2015, and had used this for the purposes of CS Medical’s business. ii) A claim that the individual Defendants breached their duties of fidelity by working on products for CS Medical (including the CSM2510 cushion and the box-type cushion) and doing other work to set up the competing business while they were still employed by EC Medica. iii) A claim that EC Medica is entitled to the design rights in relation to the CSM2510 cushion, the box-type cushion, a drawing for a helmet made by Benchmark, and any other drawings for use by CS Medical that were made by Mr Berman while he was still employed by EC Medica. iv) A claim that the Defendants infringed EC Medica’s UK unregistered design rights by copying the CL10.3 design.[29]The aspects of the claims set out at ii) and iii) above require, as a preliminary matter, consideration of Mr Berman’s employment status. I will therefore address that first before turning to the specific claims advanced by the Claimants.[30]The final matter that calls for determination is the Defendants’ counterclaim for unjustified threats. Mr Berman’s employment status The disputed issue

Mr Berman’s employment status

[31]It is common ground that after an initial internship at EC Medica during the summer of 2013, Mr Berman went on to work for the company full time during his placement year, from September 2013 to September 2014. In September 2014 he returned to his engineering course, during which he continued to work for EC Medica for around two days every week (typically Tuesdays and Wednesdays). During the 2015 summer vacation Mr Berman worked at EC Medica on a full time basis, apart for some time off for holidays. Once he started the final year of his degree course in September 2015, he reverted to working part-time, and from then until 8 December 2015 he worked only one day a week (invariably Tuesdays).[32]It is undisputed that during Mr Berman’s placement year he worked at EC Medica as a full time employee under a contract of service, with full employment rights including (for example) sickness and holiday pay. The dispute between the parties is as to his employment status after that, and particularly for the period from September 2015 onwards. The Claimants contend that, after Mr Berman’s placement year, he continued to work under an overarching or “umbrella” contract of service. The Defendants contend that during that period Mr Berman was a casual worker who was employed only for the days that he worked, but was not obliged to attend work and was not subject to any overarching employment contract.[33]The reason that the issue is relevant is that the Claimants say that Mr Berman owed duties of fidelity to EC Medica that extended beyond the days when he actually worked for the company during the autumn of 2015, and that the design work that he carried out for CS Medical during September–December 2015 on his non-working days was work done during the course of his employment.

The law

[34]It is well-established that an overarching or “umbrella” contract of employment will only arise where there is some level of mutual obligation between the employer and the employee during the period when no work is being performed: Carmichael v National Power [1999] 1 WLR 2042, at 2047A-B per Lord Irvine of Lairg. Whether that is the case or not does not turn solely on the contractual documentation, but also requires consideration of the objective circumstances of the employment relationship. In that case the House of Lords upheld the decision of the industrial tribunal, which had found that there was no mutuality of obligation in circumstances where the part-time workers in question were free to accept work or not as they chose, an arrangement that “turned on mutual convenience and goodwill” on both sides: p. 2047F.[35]In the more recent cases of Addison Lee v Gascoigne UKEAT/0289/17/LA and Uber v Aslam [2018] ICR 453, which concerned part-time cycle couriers (Addison Lee) and minicab drivers (Uber), it was likewise accepted that, during the periods in which the workers in question were not logged on to the systems of the companies in question, and were therefore not available for work, they were not subject to any overarching contract of employment.[36]By contrast in St Ives Plymouth v Haggerty UKEAT/0107/08/MAA the Employment Appeal Tribunal upheld the conclusion of the Employment Tribunal that the claimant, who was part of a bank of casual workers employed by a printing company, was indeed employed under an overarching contract. The Tribunal had found that the expectation that the claimant would be available for a reasonable amount of work, together with the claimant’s expectation that she would be offered a reasonable amount of work, was “just sufficient” to amount to the minimum of mutual obligation between the parties. The EAT pointed out that a course of dealing could give rise to mutual legal obligations even where the worker in question was entitled to refuse any particular shift (§26). The question was whether what had arisen was a legally binding obligation, as opposed to an arrangement driven by goodwill and mutual benefit, and the majority considered that there was a sufficient factual basis for the findings of the Tribunal (§§28–30).[37]The question of whether an overarching or umbrella contract had arisen was also considered in Pimlico Plumbers v Smith [2018] UKSC 29. Since the judgment of the Supreme Court was handed down on the day of closing submissions in this case, I gave both parties permission to submit supplemental written submissions on the case. In that case, the Employment Tribunal and the Court of Appeal had considered that Mr Smith was a worker pursuant to an umbrella contract. While questioning whether it had been necessary to determine that issue, Lord Wilson (giving the judgment of the Supreme Court) considered that this finding was legitimate, in circumstances where Pimlico was under an obligation to offer work to Mr Smith if it was available, and Mr Smith was in principle required to keep himself available to work for up to 40 hours on five days each week, without prejudice to his entitlement to decline any particular assignment, for example on grounds of its location.[38]It is clear from these cases that the ability of a worker to decline a particular shift or particular assignment, while relevant, is not decisive either way for the question of whether there is an overarching or umbrella contract. What is more important is whether the expectations, on each side, are sufficiently concrete to give rise to mutual legal obligations rather than simply an arrangement of mutual convenience.

Application in this case

[39]I have no hesitation in concluding that, in this case, the arrangement between EC Medica and Mr Berman for the period from September 2014 onwards was one of mutual convenience rather than mutual obligation. From that point on, Mr Berman had returned to his degree course and it is clear that he then worked at EC Medica only as and when he was able to, around his academic work. That is why, while he was able to work full-time during the 2015 summer vacation, once his final year course started in September 2015 he reduced his work to one day a week.[40]In cross-examination Mr Berman claimed that nobody in the company knew what day that he normally turned up. I consider that to be unlikely. His timesheets showed that he worked at EC Medica every Tuesday from 22 September until 8 December 2015. That is consistent with Mr Bennetts’ evidence that he had a discussion with Mr Berman in September, in which Mr Berman said that once his course started he would only be able to work at EC Medica on Tuesdays. It is therefore probable that Mr Bennetts did indeed expect – during the autumn of 2015 – that Mr Berman would generally show up to work on a Tuesday.[41]Equally, however, Mr Berman was entitled to tell EC Medica that he was not coming into work on any particular day, and did in fact do so on various occasions after September 2014. In an exchange on 13 November 2014, for example, Mr Berman told Mr Dearnley-Davison that he was “Not gona b able to make it in tomorrow far too much work”. When Mr Dearnley-Davison responded “But I need you [tomorrow]”, Mr Berman replied simply “Too bad” and said that the issue for which his help was required “Will have to wait till next week”. The tone of that exchange conveys no apology on Mr Berman’s part, nor any expectation on Mr Dearnley-Davison’s part of an obligation on Mr Berman to work on any particular days. I was shown other text messages of a similar nature.[42]This was therefore, unlike the St Ives case, not a case where there was any expectation that Mr Berman would be available for a reasonable amount of work. There was, in fact, not any expectation at all as to the amount of time that Mr Berman would be available for work; the arrangement was simply that he would work when he was available, and it is clear that his availability fluctuated considerably during the period after September 2014, depending on his academic commitments. EC Medica was, apparently, content with that arrangement because Mr Berman was a valuable addition to their design team, and it was therefore of benefit to the company that he assisted when he was able to do so. The informal nature of Mr Berman’s working arrangement was therefore of convenience to both parties.[43]What happened after 8 December 2015 is not entirely clear. Mr Bennetts said that he had agreed that Mr Berman would take study leave and would return to EC Medica after his course had finished in 2016, but his evidence as to when Mr Berman was supposed to return was neither clear nor consistent.[44]Mr Berman denied ever discussing the need to take study leave with Mr Bennett, and said that although he did attend the company Christmas party on 12 December, thereafter he made it clear to EC Medica that he had no plans to return to the company. He did not, however, ever formally resign or hand in his notice. That, Mr Alkin said, is a further factor pointing in the direction of a casual working arrangement.[45]I consider that Mr Berman’s account is, on this point, more credible than that of Mr Bennetts. There is no contemporaneous evidence of any discussion of study leave, nor anything (such as a text message or email exchange) to suggest that Mr Bennetts held out any expectation of Mr Berman returning to the company after December 2016. There is, moreover, evidence that by June 2016 Mr Bennetts believed that Mr Berman had left, because on 20 June 2016 Mr Bennetts gave a statement to the police (for the purposes of requesting that they search Mr Dearnley-Davison’s house) in which he described Mr Berman as a “former employee”. The next day Mr Bennetts sent the email to various hospitals that is the subject of the counterclaim in this case, in which he described Mr Berman as a person “who was previously employed in [EC Medica’s] design department”.[46]Mr Bennetts sought to dismiss those statements as being drafting prepared on the advice of his lawyers, and claimed that at the time he considered that Mr Berman was still an employee. I do not accept that. While EC Medica’s lawyers might well have suggested drafting (particularly for the text of the 21 June email), it is highly unlikely that Mr Bennetts would have put his name to two statements describing Mr Berman as a former employee if he believed the opposite. The 20/21 June statements should therefore, in my view, be taken to mean what they say: that by then, despite not having received any formal resignation notice from Mr Berman, Mr Bennetts understood that Mr Berman was not returning to the company. I agree with Mr Alkin that this is consistent with the Defendants’ case as to Mr Berman’s employment status.[47]Mr Alkin also noted that while Mr Berman received holiday pay from EC Medica during his full-time placement year, he did not receive any ongoing holiday pay thereafter. I agree that this tends to corroborate the casual nature of the arrangement between Mr Berman and EC Medica. The Claimants must also have realised this, because on 15 July 2016, after the Claimants had received Mr Berman’s first witness statement (filed for the purposes of the injunction proceedings), Mr Bennetts wrote to Mr Berman in the following terms:
“We note that in the High Court proceedings you have made it clear that you do not consider that you have any ongoing relationship with any of the companies in the EC Medica Group. we do not accept that that is correct but have taken your comments as a clear indication that you wish your employment with EC Medica Group Ltd to terminate. We are therefore treating your employment as having terminated with immediate effect on the date of submission of your witness statement in the High Court proceedings, the 23 June 2016. Jill will calculate any holiday pay due and issue your P45. Your B shares will automatically be returned to the company.”
[48]While Mr Berman was indeed subsequently paid a sum of £375 described as holiday pay, the Claimants have not been able to explain the basis on which this was calculated. In the circumstances, and given that it is common ground that Mr Berman had not received any holiday pay since his placement year, I consider that the reference to holiday pay in the 15 July letter was nothing more than an ex post facto attempt to validate EC Medica’s claims as to Mr Berman’s employment status. It is also notable that the letter suggests that EC Medica was treating Mr Berman’s employment as having terminated on 23 June, whereas Mr Bennetts’ own statements on 20/21 June had explicitly referred to Mr Berman as being (by then) a former employee. That reinforces the impression that the letter was not a genuine reflection of the arrangement with Mr Berman at the relevant time, but was drafted so as to support EC Medica’s position in the ongoing litigation.[49]There is one further matter that has been the subject of considerable evidence and debate between the parties, and that is the matter of Mr Berman’s employment contract. It is common ground that Mr Berman was given a document entitled “Written Statement of Employment” at some point during the summer of 2014, stating among other things that Mr Berman’s “period of continuous employment” began on 1 July 2013, that Mr Berman was entitled to four weeks holiday per year, in addition to public holidays, and that one month’s notice was required to terminate the employment (on either side).[50]In evidence, the Claimants have produced a version of that document that purports to have been signed by Mr Berman on 8 September 2015. Mr Berman’s evidence was that he did not sign the document because his father had advised him not to do so. He also says that the signature on the document is not his. A report on this point from a handwriting expert was inconclusive, and Mr Bennetts accepted that he had not personally witnessed Mr Berman signing the document.[51]In those circumstances, I would not be inclined to place any weight on the document. I do not, however, have to reach a firm conclusion on the matter because it is well-established that, even if a written contract of employment is available, the court is required to look at the reality of the employment relationship: see e.g. Autoclenz v Belcher [2011] ICR 1157, §29. In that regard the “Written Statement of Employment” manifestly does not reflect the reality of Mr Berman’s employment status after September 2014. He was not in “continuous employment”, he did not receive holiday pay, and he ceased attending work in December 2015 without having given any notice period.[52]For all of these reasons, and as indicated above, I find that Mr Berman was not engaged to work for EC Medica under an overarching or umbrella contract of employment, but was employed by the company only as and when he made himself available to work. Misuse of confidential information The law

Misuse of confidential information

[53]The legal principles relating to the misuse of confidential information claims were not disputed. The essential elements of an action for breach of confidence were set out by Megarry J in Coco v A.N. Clark (Engineers) [1968] FSR 415 at 419:
“First, the information must itself … must ‘have the necessary quality of confidence about it’. Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it.”
[54]While there was an issue as to the confidentiality of the box-type cushion design, there was no dispute that both the CL10.3 design files and the IP_SALBD report were confidential to EC Medica, and that the relevant Defendants owed contractual and/or equitable obligations of confidence in respect of them. The issue was rather whether those documents had indeed been taken out of EC Medica and used by the Defendants for the purposes of CS Medical’s business.[55]In respect of the CL10.3 design files, the claim turns on an inference of copying based on similarities between the CSM2510 design and the CL10.3 design. It was common ground that the approach to be taken in that regard was as described by Lord Hoffmann in Designers Guild v Russell Williams [2000] 1 WLR 2416, at 2425:
“The first step in an action for infringement of artistic copyright is to identify those features of the defendant’s design which the plaintiff alleges have been copied from the copyright work. The court undertakes a visual comparison of the two designs, noting the similarities and the differences. The purpose of the examination is not to see whether the overall appearance of the two designs is similar, but to judge whether the particular similarities relied on are sufficiently close, numerous or extensive to be more likely to be the result of copying than of coincidence. It is at this stage that similarities may be disregarded because they are commonplace, unoriginal, or consist of general ideas. If the plaintiff demonstrates sufficient similarity, not in the works as a whole but in the features which he alleges have been copied, and establishes that the defendant had prior access to the copyright work, the burden passes to the defendant to satisfy the judge that, despite the similarities, they did not result from copying.”
[56]The exercise described in that passage is not, however, to be understood as a mechanical exercise. As Birss J put it in Wade v Sky [2014] EWHC 624 (Ch), at §§59–60, while a strong inference of copying may shift the evidential burden to the defendant to rebut that inference, the legal burden always rests with the claimant, and it is necessary to consider the evidence as a whole. That is likely in many cases to involve testing the cogency of the evidence of independent derivation against the strength of the inference of copying; and I consider that is the correct approach to adopt in this case.

Alleged use of the CL10.3 designs: EC Medica’s submissions

[57]Both EC Medica’s CL10.3 face cushion and CS Medica’s competing CSM2510 cushion were designed to fit into the Dupaco ProneView helmet, which is the standard helmet used by hospitals. The “A” surface of each cushion is the part of the cushion that is in contact with the patient’s face; the “B” surface is the part that fits into the helmet.[58]It is common ground that Mr Berman designed EC Medica’s CL10.3 face cushion in July 2015 using SolidWorks CAD software. That design took as its starting point a set of images of Mr Dearnley-Davison’s face which were taken on 15 June 2015. CS Medical’s CSM2510 cushion was likewise designed by Mr Berman, mainly on 17 October 2015, using the same software. The evidence of both Mr Berman and Mr Dearnley-Davison is that for the purposes of the new design Mr Berman generated a second scan of Mr Dearnley-Davison’s face at some point in the first half of October 2015. That evidence was not challenged. What is in issue is whether Mr Berman did in fact use the October scan of Mr Dearnley-Davison’s face to create an entirely new and independent design of the CSM2510 cushion, or whether he instead used the CL10.3 design files to do so.[59]Mr Hicks, for the Claimants, properly accepted that when Mr Berman designed the CSM2510 face cushion he was entitled to use his general skill and experience as well as the specific experience he had obtained from designing the CL10.3 cushion just a few months previously. What he was not entitled to do, however, was to use the CL10.3 design files themselves, either by importing them (or parts of them) in some way into the CSM2510 design files, or by referring to the specific measurements in the CL10.3 design files and using the same measurements in the CSM2510 designs. Mr Hicks argued that it can be inferred from the evidence that Mr Berman did both of those things.[60]In that regard Mr Hicks relied on three main factors. The first was that Mr Vieira had compared the design files for the CL10.3 with the design files that the Defendants had disclosed in respect of the CSM2510. On the basis of that comparison, Mr Vieira considered that the contours of the forehead and cheek portions of the “A” surface and various other measurements of the CSM2510 were so similar to those of the CL10.3 that he thought that those parts of the CSM2510 must have been copied directly from the CL10.3 designs.[61]The second factor was that Mr Berman had been unable to give a consistent account of the design history of the CSM2510. While he maintained from the outset that the basis of the design for the “A” surface of the CSM2510 was, as with the CL10.3, photographs of Mr Dearnley-Davison’s face, which he had imported into his CAD software, his account of how he got from that to the final CAD design drawings of the CSM2510 cushion was confused and unsatisfactory. There were also other inconsistencies in Mr Berman’s evidence, such as the fact that one witness statement claimed that the CSM2510 was designed at home on his personal computer, whereas in other witness statements (and in his evidence at trial) he said that he used the university computer for at least some parts of the design, on the grounds that the files were too big for his home computer.[62]The third factor relied on by Mr Hicks as supporting an inference of copying was that there were various ways in which the CL10.3 designs could in practice have been copied and removed by either Mr Dearnley-Davison or Mr Berman from EC Medica’s electronic file system, including by emailing them out of EC Medica or saving them on a removable drive such as a USB stick.

The CL10.3 designs: discussion and conclusions

[63]Mr Vieira’s evidence does indeed identify various strong similarities between the design of the CSM2510 cushion and the CL10.3 cushion. The Defendants have, however, put forward explanations for these similarities. Regarding the similarities between the forehead and cheek areas, Mr Alkin said that the simple explanation was that the designs were created using precisely the same starting point, namely images of Mr Dearnley-Davison’s face, which were subsequently imported into Mr Berman’s CAD software. The two face scans were generated only four months apart. It was therefore not surprising, Mr Alkin said, that the CAD models of the forehead and cheek areas of the face cushions produced from those two sets of scans were very similar.[64]The other allegedly similar measurements were, according to the Defendants, due to the same factor, or were purely functional (to allow the body to sit at the appropriate height and to fit the helmet into which the cushion would be placed), or were in fact not so similar as to suggest copying.[65]I consider that these are logical and plausible explanations of how Mr Berman could have arrived at a design for the CSM2510 that was very similar to that of the CL10.3, without copying the CL10.3 design files. I do not, therefore, consider that Mr Vieira’s evidence of similarity is in itself sufficient to demonstrate that the CL10.3 design files were copied by Mr Berman.[66]I turn therefore to Mr Berman’s explanations of the CSM2510 design history. In that regard I agree with Mr Hicks that the account given by Mr Berman, in the course of his six witness statements, was confused and contradictory. The initial story given in Mr Berman’s first two witness statements was that he started with his October scan of Mr Dearnley-Davison’s face, created the “B” surface of the cushion from images found on the internet, and then merged the two to create a composite design. That description was, however, contradicted by the CSM2510 design files disclosed by the Defendants, which showed the design being built up around the “A” surface.[67]Mr Berman therefore changed his story in his fourth witness statement, acknowledging that the design had been built around the October scan of Mr Dearnley-Davison’s face, and identifying as the starting point a file called “Chris Initial Scan.STL”. Mr Vieira questioned that in his evidence, suggesting that “Chris Initial Scan.STL” was too dissimilar to the subsequent design files that had been disclosed to have been the starting point. Mr Berman’s response in his fifth witness statement was to assert “categorically” that Mr Vieira was wrong and that he did indeed start the design for the CSM2510 with the “Chris Initial Scan.STL” file.[68]On the evening of the second day of the trial, however, after hearing Mr Vieira’s evidence, Mr Berman filed a sixth witness statement in which he conceded that Mr Vieira was right and that “Chris Initial Scan.STL” was not the starting point of his design. Instead, he said, he thought that the starting point had been a file called “Chris October Scan” which he had referred to in his first witness statement. “Chris October Scan” had not been disclosed to the Claimants. Indeed, it been deleted from Mr Berman’s system and he could no longer retrieve it. There was therefore no way of verifying whether “Chris October Scan” was indeed the genesis of the design for the “A” surface of the CSM2510.[69]It is highly unsatisfactory that Mr Berman, who was the very person who had designed both face cushions, was not able to give a coherent and consistent account of his design process. Given the contradictions in his evidence, Mr Berman cannot be regarded as a reliable witness on this point. Mr Berman’s evidence was not, however, the only evidence before the Court regarding the CSM2510 design process, and it is necessary for me to consider the other available evidence, including in particular the design files that were disclosed by the Defendants, and Mr Vieira’s careful analysis of those files.[70]The first point to note is that while “Chris October Scan”, which was said to be the initial scan file used by Mr Berman to create the CSM2510, was no longer available, the exhibit to Mr Berman’s first witness statement did include a screenshot of the properties for that file, indicating that it was created on 17 October 2015 at 13:42. That timing is consistent with the disclosure of a set of scan files containing various trimmed and smoothed versions of a 3D face shape, which according to their file properties were completed between 14:29 and 15:35 on the same day. It is therefore plausible that the “Chris October Scan” file was indeed used as the basis for the subsequent set of scan files.[71]What appears to have happened then was that Mr Berman imported one of those subsequent scan files into his CAD design package and used that to build up the design of the whole of the CSM2510 face cushion. This was accepted by Mr Vieira in cross-examination. The subsequent design steps can be seen from a SolidWorks file disclosed by the Defendants, entitled “Face Cushion.SLDPRT”. The timings of the various steps in that file indicate that the design process started at 16:34 on 17 October and was completed at 20:53. Mr Vieira said that this part of the design history did appear to show the designer of the CSM2510 creating the design step by step from the initial file that had been imported. On its face, therefore, the file timings and the design steps that are set out in the Face Cushion.SLDPRT file suggest a coherent design history.[72]When cross-examined on the question of how the CL10.3 design might have been introduced into that design process, Mr Vieira suggested that at some point along the sequence of files, prior to the creation of the “Face Cushion.SLDPRT” design file, the relevant sections of the CL10.3 design had been spliced into one of the 3D face scan files. He accepted that this would not have made sense as a design process, and would only have made sense if Mr Berman had been seeking to falsify the design history of the CSM2510 in order to cover his tracks. Given the times set out in the properties of the sequence of files, Mr Berman would either have had to have created the false design history as he went along, or he would have had to have retrospectively falsified the relevant files so as to give the appearance of a coherent design sequence.[73]The problem with that proposition, however, is that there is no apparent motivation for an elaborate falsification of this nature. The product in question is a foam cushion. While it was designed with care, it is not a complex product. Mr Bennetts’ evidence was that, after some preliminary modelling work during June 2015, the final version of the CL10.3 was designed over the course of a week, from 27–31 July 2015. That included the modelling of a prototype at the start of the week, before the final version was designed by Mr Berman later in the week. Once Mr Berman had done that, he was obviously able to carry out a similar design process using his October scan of Mr Dearnley-Davison’s face. His consistent evidence was that he did that during the course of a single day on 17 October 2017, and it was not at any point suggested by the Claimants that it would have been impossible for him to complete the design during that timescale. That being the case, I have not been able to discern any motivation for Mr Berman to have not only copied parts of the CL10.3 design, but then embarked on a process of elaborate falsification of his design history, a process that would have (as Mr Vieira accepted) taken longer than creating a new design from scratch.[74]Considering all the evidence before me, and notwithstanding the unreliability of Mr Berman’s account, I do not consider that an inference of copying may be drawn from the design history of the CSM2510. That should not be taken to imply any criticism of Mr Vieira’s evidence. As will be apparent from what I have already said, I found his evidence to be entirely candid, and more helpful in elucidating the CSM2510 design process than Mr Berman’s own evidence. But it did not explain why Mr Berman would have laid a falsified design trail that would have been a more time-consuming and complex process than simply using his existing knowledge and experience to create a legitimate new design for his new company.[75]Finally, there is the problem of how Mr Berman would in any event have extracted the CL10.3 design files from EC Medica. His evidence was that the CL10.3 design files were stored on the EC Medica server, to which he only had access while he was working at EC Medica. He did not have any remote access to the files, did not work on them at home, and said that he had no reason to remove them from EC Medica either by emailing them to himself or storing them on removable media such as a USB stick. That evidence was not challenged, and there was certainly no evidence suggesting that Mr Berman had ever emailed the CL10.3 design files to anyone or saved them onto any other file storage media.[76]In closing submissions Mr Hicks suggested, as an alternative, that Mr Dearnley-Davison might have been able to access the CL10.3 design files, since he could access EC Medica emails remotely on his phone. It was common ground that Mr Dearnley-Davison could indeed access his EC Medica emails remotely. But there was no evidence that Mr Dearnley-Davison had ever emailed the CL10.3 design files to anyone, and Mr Hicks accepted that there was not any evidence suggesting that Mr Dearnley-Davison was party to a plan to copy the CL10.3 design.[77]Taking all of the evidence in the round, I do not consider that the matters relied upon by the Claimants are sufficient to support an inference of copying the CL10.3 design. On the evidence before me, it seems more likely that Mr Berman did indeed create a de novo design for the CSM2510, based on his October scan of Mr Dearnley-Davison’s face. There is no doubt that he was able to do so relatively quickly precisely because he had spent some time perfecting the modelling process for the CL10.3 a few months previously. But merely using his prior experience in that way is not sufficient to establish misuse of confidential information; rather, the Claimants would have to show that Mr Berman directly used the CL10.3 design files. I find that it has not been established on the evidence that he did so.

The box-type face cushion

[78]The claim regarding the box-type face cushion turns on a design that Mr Berman produced at EC Medica on 3 September 2015, and sent to Mr Dearnley-Davison the following day. The design was entitled “CAS Moulding – Box Shape Prone Cushion”. On 9 September 2015 Mr Dearnley-Davison sent the design from his EC Medica email address to a manufacturer, Breasley, asking for a quote for producing the cushion. He then forwarded that email to Mr Dearnley-Davison on 29 September. At some point in October it appears that Mr Dearnley-Davison sent the same design to a different manufacturer, Rocon, to discuss the possibility of them manufacturing the product for CS Medical. There was further correspondence with Breasley on 2 December, suggesting that the quote previously given by Breasley was too high. (I will comment further on that correspondence below.) It appears that CS Medical ultimately engaged Rocon to make a batch of the box-type face cushions for the company in January 2016.[79]Mr Hicks submitted that the 3 September drawing was actually done for CS Medical, and was for that reason an example of a breach of the Defendants’ duties of fidelity to EC Medica. His alternative submission was that if the drawing was in fact done for EC Medica’s business, then it was a misuse of confidential information for that design to be sent to Rocon in October 2015.[80]Mr Alkin’s response was that the 3 September drawing was produced solely for EC Medica’s business. Mr Dearnley-Davison accepted that he sent the design to Rocon, but said that this was inadvertent and that he intended to send a different design, which Mr Berman had created independently in August 2015. On that basis, Mr Alkin characterised the matter as a “simple mistake” and said that the Claimants were making a mountain out of a molehill. He also said that the claim that the 3 September drawing was confidential was in any event not pleaded, and that the Defendants had therefore been deprived of the opportunity to investigate whether there was any confidential information in the drawing at all, or whether it was in fact information that was already in the public domain.[81]The pleading point is not, in my judgment, well-founded. The Re-Amended Particulars of Claim identified EC Medica’s confidential materials as including, among other things, new product designs and information. These were said to be of a commercially confidential nature, and (as one might expect) not accessible to the public. The Particulars went on to claim that the Defendants had unlawfully misused, copied and/or disseminated the Claimants’ confidential material. While the Particulars did not identify the 3 September drawing as a specific instance of that, Mr Bennetts’ third witness statement did refer to this as a breach of the Defendants’ duties of fidelity, and Mr Hicks’ skeleton argument for the trial explicitly argued that if the Defendants contended that the drawing was indeed for EC Medica, then it was a misuse of confidential information for it to be used for the purposes of the competing business. Mr Alkin therefore had notice that if (as he was contending) the drawing had indeed been produced for EC Medica, then Mr Hicks’ alternative submission would be that this fell into the category of EC Medica’s new product designs that, as pleaded, the Claimants considered to be commercially confidential material.[82]I do not consider that the Defendants were thereby deprived of the opportunity to investigate whether the design was in fact in the public domain. Mr Dearnley-Davison gave evidence in cross-examination as to the nature of the design and the existence of competing products. It is clear from that evidence that, if the design had been one that was in the public domain, he would have been well aware of it and could have said so. His evidence was, however, not that the 3 September drawing contained nothing more than material that was publicly available. Rather, he said that the product was made by numerous different companies to essentially the same design, but with slight variations in the measurements.[83]This is therefore the type of case where, in the words of Lord Greene MR in Saltman Engineering v Campbell Engineering (1949) 65 RPC 203, at p. 215, “what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process”. In other words, while the product may well have been made by other companies, each company’s version of the product required skill and effort to specify the precise measurements that should be used to produce a cushion suitable for use in the medical procedures for which it was intended. The 3 September drawing set out a particular design using a particular set of measurements, as specified by Mr Berman, and there was no suggestion in any of the Defendants’ evidence that those measurements were at any time publicly available.[84]That leaves the question of whether the 3 September drawing was indeed genuinely created for EC Medica, but sent to Rocon inadvertently. I do not accept that explanation. It is common ground that the 3 September design was created by Mr Berman at EC Medica and stored on EC Medica’s file system. However Mr Berman’s timesheet conspicuously did not record his work on the box-type face cushion, and Mr Dearnley-Davison’s fourth witness statement stated clearly that when in early September he started to explore the idea of going into business with Mr Berman, they discussed producing a box-type cushion precisely because that was not a product within EC Medica’s range. Those facts indicate that Mr Berman was in fact designing the product for the purposes of the new business.[85]In cross-examination, Mr Dearnley-Davison and Mr Berman disputed this, claiming that the box-type product was a continuation of a plan that they had proposed to Mr Bennetts, for EC Medica to start to manufacture its own products. It is, however, common ground that when that manufacturing plan had been proposed earlier in the year, it had been rejected by Mr Bennetts. That is, indeed, one of the reasons given by Mr Dearnley-Davison in his fourth witness statement for his dissatisfaction with EC Medica. Given those circumstances, it is inconceivable that this plan would have been revived by Mr Dearnley-Davison and Mr Berman just at the point when they had both decided to leave EC Medica and set up their own business. It is also clear that Mr Berman’s design was not part of a project to manufacture in-house, given that Mr Dearnley-Davison proceeded to speak to both Breasley and Rocon about the manufacture of the product.[86]The timing of the contact with Breasley is also telling: the initial email was sent on 9 September, the same day that Mr Dearnley-Davison carried out initial searches for insurance brokers for the new business. It is also notable that Mr Dearnley-Davison forwarded that email onto Mr Berman at the end of September, shortly before the design was sent to Rocon. Mr Dearnley-Davison was not able to offer any explanation as to why he would have sent Mr Berman that email. Nor was he able to explain why the title of the design was “CAS Moulding” (i.e. “Chris and Saul Moulding”) rather than “EC Medica”, save for saying that Mr Berman was careless with file names. All of these points lend further weight to the conclusion that the box-type product was designed with the intention that it should be used for the new business.[87]Since the 3 September design was, nevertheless, produced during Mr Berman’s working hours at EC Medica, on EC Medica’s premises and using EC Medica’s software, it was an EC Medica work product which – for the reasons given above – was confidential to EC Medica. It should not, therefore, have been sent to Rocon as a CS Medical design. I do not accept the Defendants’ submission that this was a simple mistake. The facts suggest strongly that the design was, all along, intended to be used by CS Medical, at least for the purposes of getting quotes from potential manufacturers such as Rocon.[88]I therefore find that Mr Dearnley-Davison did indeed misuse EC Medica’s confidential information in the form of Mr Berman’s design drawings for the box-type cushion.

The IP_SALBD file

[89]The IP_SALBD file is the final piece of EC Medica’s confidential information which the Claimants say was copied from EC Medica and used for the purposes of CS Medical’s business. This document was a report generated from EC Medica’s accounting system, listing all the products sold and to whom during 2015. Mr Dearnley-Davison emailed the document to another employee of EC Medica, Ryan Hiley, on 21 December 2015. The Claimants say that there was no reason for him to send the document to Mr Hiley, and that it should therefore be inferred that he did so in order that he could then use the document for the purposes of CS Medical’s business.[90]In cross-examination, Mr Dearnley-Davison said that the reason he sent the document to Mr Hiley was that by that point he knew that he would be leaving EC Medica, and he was therefore training Mr Hiley to take over his role as the purchasing and logistics manager of the business. He sent the report to Mr Hiley as part of that training process. This was, he said, a document that he produced routinely at the end of every year.[91]I consider that this explanation is at the very least a plausible one. There is, moreover, no obvious motivation for Mr Dearnley-Davison to have used an email to Mr Hiley to extract the document from EC Medica even if he had wished to do so – it would have been much easier for him simply to have printed the document for himself. Most importantly, there is no evidence that the Defendants did actually use the document for the purposes of CS Medical’s business. Mr Dearnley-Davison says that he built a list of NHS hospitals from Google searches. That claim is corroborated by extracts from his Google activity record on the relevant dates, as well as Mr Garrett’s evidence.[92]Taking all of these points together, I do not consider that the evidence is sufficient to support an inference that Mr Dearnley-Davison used the IP_SALBD document for the purposes of CS Medical’s business. Breaches of the duty of fidelity The law

Breaches of the duty of fidelity

[93]I can set out the relevant law fairly shortly. Mr Hicks has referred me to the helpful summary given by Haddon-Cave J in QBE Management Services v Dymoke [2012] EWHC 80 (QB), [2012] IRLR 458, at §169, as follows:
“The general principles relating to employees’ duties of good faith and fidelity are settled and can be summarised in the following propositions: (1) It is indisputable that an employee owes his employer a contractual duty of ‘fidelity’, but how far it extends will depend on the facts of each case (per Lord Green MR in Hivac v Park Royal [1946] Ch 169 at 174). (2) The more senior the staff the greater the degree of loyalty, fidelity and diligence required (perOpenshaw J in UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] IRLR 965 at paragraph [10]). (3) The first task of the court is to identify the nature of the employee’s obligations of fidelity and then to decide whether the employee’s activities are in breach (per Moses LJ in Helmet Integrated Systems v Tunnard [2007] IRLR 126 at paragraph [32]). (4) The mere fact that activities are described by an employee as ‘preparatory’ to competition does not mean that they are legitimate (per Moses LJ in Helmet Integrated Systems v Tunnard [2007] IRLR 126 at paragraph [28]). (5) It is a breach of the duty of fidelity for an employee to recruit or solicit another employee to act in competition (see British Midland Tool v Midland International Tooling Ltd [2003] 2 BCLC 523). (6) Attempts by senior employees to solicit more junior staff constitutes particularly serious misconduct (Sybron Corp v Rochem Ltd [1984] Ch 112). (7) It is a breach of the duty of fidelity for an employee to misuse confidential information belonging to his employee (see Faccenda Chicken Ltd v Fowler [1987] Ch 117). (8) The court should ask whether the activities in which the employee is engaged affect his ability to serve his employer faithfully and honestly and to the best of his abilities (see Shepherds Investments Ltd v Walters [2007] IRLR 110 at paragraph [131]).”
[94]I gratefully adopt this as a summary of the principles relevant to this case. Mr Alkin did not dispute any of these propositions; on the contrary, he agreed that it was crucial to look at the nature of the employee’s obligations to the employer, and to ask whether the activities in question prevented or impaired the employee’s loyal performance of their duties to the employer during the period of their employment.

Application in this case

[95]It is common ground that although Mr Dearnley-Davison and Mr Garrett were under no express contractual duties of fidelity, they owed EC Medica implied duties of fidelity until their last working day on 5 February 2016. It is also not disputed that Mr Berman owed EC Medica an implied duty of fidelity during the time that he spent actually working for and being paid by EC Medica.[96]Mr Hicks said that Mr Dearnley-Davison and Mr Berman had breached their duties of fidelity by working on the design and production of the CSM2510 face cushion and the box-type cushion, working on the design of an Allen face mask, the investigation of particular type of helmet, obtaining a copy of the IP_SALBD file, other work on the competing business such as the purchase of domain names, organising insurance and registering with the MHRA, work done for CS Medical while signed off sick from EC Medica, and recruiting Mr Garrett as the salesman for the new business. While breach of the duty of fidelity was also formally alleged against Mr Garrett, this was not ultimately pursued in closing submissions.[97]Mr Alkin has pointed out that none of the individual Defendants were under any express contractual restrictions on their ability to compete post-termination, or indeed to prepare for such competition while they were still working for EC Medica. Mr Hicks argued that Mr Dearnley-Davison and Mr Berman were nevertheless in breach of their duties of fidelity by carrying out any work to prepare for their new business while they were still employed by EC Medica, on the basis that it was impossible for them to perform both roles at the same time. In closing submissions, his submission boiled down to the following proposition:
“Inevitably, you cannot serve EC Medica when what you are doing is setting up a business which you know is going to take away business from EC Medica. You are going to design the same range of products and use the same sub-contractors in many instances. It is impossible to wear both hats and do the same design job in the case of Mr Berman and do the same management role in the case of Mr Dearnley-Davison.”
[98]The problem with that submission is that it assumes that preparing to set up a competing business would necessarily and inevitably have affected the abilities of Mr Dearnley-Davison and Mr Berman to carry out their normal jobs at EC Medica. I do not consider that such an assumption can be made. There is no reason why, in principle, those two Defendants could not have made preparations to set up their new business while continuing to carry out their jobs at EC Medica to the best of their abilities. It is therefore necessary to consider the specific circumstances of the particular activities said to have constituted breaches of the duties of fidelity.[99]Starting with the general administrative activities for the new company, I do not consider that these were breaches of the Defendants’ duties of fidelity. There is no reason why organising matters such as insurance, domain names and MHRA registration for CS Medical, in the Defendants’ spare time and not using EC Medica’s resources, would have affected their ability to carry on working as normal for EC Medica.[100]The same is true in principle for the development of new products, where that was done outside of EC Medica with no illegitimate use of EC Medica’s designs. It follows from my conclusions above regarding Mr Berman’s employment status that he did not owe EC Medica any duty of fidelity outside his working hours. His design of the CSM2510 cushion, in his spare time and not using the EC Medica designs, was therefore not a breach of his duty of fidelity. There is no evidence that Mr Berman’s independent work on a potentially competing product impeded his ability to continue working at EC Medica developing other designs. Nor do I consider that Mr Dearnley-Davison breached his duty of fidelity by encouraging Mr Berman to design the CSM2510 cushion, again absent any evidence that this had a detrimental effect on Mr Dearnley-Davison’s continuing work at EC Medica.[101]It is, however, apparent that Mr Dearnley-Davison and Mr Berman did not confine their activities for CS Medical to their spare time, but on several occasions carried out work for the new business during their working time at EC Medica, and using EC Medica’s equipment and resources. These were clear breaches of their duties of fidelity.[102]One example is their work on the box-type face cushion, which I have already discussed. This was not a product in EC Medica’s range, and I have found that Mr Berman and Mr Dearnley-Davison’s work on this, carried out in part during their working hours at EC Medica, was in fact intended for the purposes of developing the product for CS Medical.[103]A further example is Mr Dearnley-Davison’s work on the “Allen” face cushion. I have referred above to correspondence with Breasley on 2 December 2015, sent from Mr Dearnley-Davison’s EC Medica email address during working hours. In the same email chain Mr Dearnley-Davison added:
“Also, I forgot [to] mention, there is an Allen Cushion in there it needs to be die cut, can you let me know if you can do that foam and also die cut that shape?”
[104]The email attached a design drawing of an “Allen Cushion Mask” that had been produced by a member of EC Medica’s design team (not Mr Berman) on 27 November 2015 at the request of Mr Dearnley-Davison. Breasley subsequently sent a prototype of the face cushion to EC Medica, which was signed for by Mr Dearnley-Davison on 10 December 2015. While CS Medical went on to sell a face cushion of this type, Mr Bennetts said that he had checked EC Medica’s design list, and this was not a product that EC Medica was working on at the time.[105]Mr Dearnley-Davison claimed that this was all work done for EC Medica and not connected to CS Medical in any way. In his fifth witness statement he did not dispute Mr Bennetts’ evidence but rather said that it missed the point: the purpose of contacting Breasley, according to Mr Dearnley-Davison, was to see whether they could replicate the foam used in the Allen cushion (which he said was something that EC Medica was interested in for various products) and “not necessarily to manufacture the product itself”. He said that he had asked Breasley to produce an Allen cushion made of the relevant foam purely because it was a simple product to make.[106]I do not accept Mr Dearnley-Davison’s explanation. It is contradicted by the explicit wording of the 2 December email, which asked not only whether Breasley could manufacture the relevant foam but also whether they could die cut the shape required for the cushion, with the design drawing attached to the email. There would have been no reason to ask that specific question, or to attach the design drawing, if Mr Dearnley-Davison was simply interested in the foam. It is also notable that in early 2016 Mr Berman produced his own version of the design for this type of face mask, which was the design subsequently used by CS Medical.[107]The inescapable conclusion from these facts is that Mr Dearnley-Davison was making enquiries purportedly on behalf of EC Medica that were, in fact, designed to elicit information for the use of the new business. He had also asked another EC Medica employee to do an initial design of the product for the purposes of those enquiries. Those activities were a clear breach of Mr Dearnley-Davison’s duty of fidelity.[108]The Claimants have also suggested that visits to Benchmark Plastics and Metal Services on 20 November 2015 by Mr Dearnley-Davison and Mr Berman, and subsequently on 25 November 2015 by Mr Berman alone, are further examples of preparatory work done for CS Medical in breach of the Defendants’ duties of fidelity.[109]Mr Bennetts said that he was told by the Production Manager at Benchmark that on the 20 November visit one of the subjects discussed was a particular type of “4 post” support helmet that was not in EC Medica’s range, and that this was discussed again when Mr Berman returned on 25 November. Both Mr Dearnley-Davison and Mr Berman have denied that, saying that the 4 post helmet was only discussed on 25 November, when Mr Berman went on his own, in his free time and not purporting to be a representative of EC Medica. Given the findings that I have already made, I am inclined to treat Mr Dearnley-Davison and Mr Berman’s evidence on this point with some scepticism. Nevertheless, Mr Bennetts’ account is simply a report of what he was told by the Benchmark manager, who was not called to give evidence on the point, and I have also found that Mr Bennetts was not always a reliable witness. In those circumstances I do not think that the evidence is sufficiently clear to establish that this was a breach of the Defendants’ duties of fidelity.[110]Regarding Mr Dearnley-Davison’s activities during the week of 1–5 February 2016, Mr Dearnley-Davison explained in his evidence that after handing in his notice he had fully intended to work at EC Medica until 5 February, as originally agreed with Mr Bennetts. On 29 January, however, he had a particularly unpleasant handover meeting at EC Medica, at which he had been threatened with legal proceedings if he set up in competition with the company after his departure. That meeting, he said, caused him to feel too stressed and unwell to return to work, and on 3 February he visited his GP who signed him off sick from 1–6 February, due to “stress at work”. Mr Bennetts does not appear to have disputed this at the time, nor was it was claimed by the Claimants that Mr Dearnley-Davison’s stress at the time was not genuine. In those circumstances I do not think Mr Dearnley-Davison’s absence from work, or his preparatory work for CS Medical during that week, can be regarded as a breach of his duty of fidelity to EC Medica.[111]As for the fact that Mr Dearnley-Davison generated the IP_SALBD file and sent it to Mr Hiley, I have already found that his explanation for doing so is plausible and that the evidence does not establish that the file was generated for or used for the purposes of CS Medical’s business. It follows that it is, likewise, not established that this was a breach of Mr Dearnley-Davison’s duty of fidelity.[112]Finally, regarding the recruitment of Mr Garrett, I do not consider that this was a breach of Mr Dearnley-Davison’s duty of fidelity for the short reason that Mr Garrett’s unchallenged evidence was that he had independently decided to leave EC Medica during November 2015. He had told various other people that he planned to do so before speaking to Mr Dearnley-Davison about his intentions. It was only then that Mr Dearnley-Davison suggested that Mr Garrett might consider joining CS Medical.[113]In conclusion, I find that Mr Dearnley-Davison and Mr Berman did indeed breach their duties of fidelity by working on two products for CS Medical (the box-type face cushion and the “Allen” face cushion) at EC Medica and during their working hours. The evidence does not, however, establish breaches of duties in respect of the other activities referred to by the Claimants.

The design right entitlement claims

[114]In light of the findings that I have already made, the Claimants’ design right claims can be addressed relatively shortly. Section 215 of the Copyright, Designs and Patents Act 1988 provides, so far as material:
“Ownership of design right (1) The designer is the first owner of any design right in a design which is not created in the course of employment. (2) [deleted] (3) Where a design is created by an employee in the course of his employment, his employer is the first owner of any design right in the design.”
[115]The Claimants say that all of Mr Berman’s drawings and design work that he did for CS Medical while still employed by EC Medica was work done in the course of his employment by EC Medica, such that the rights in those designs vest in EC Medica.[116]That claim turns on the prior submission that Mr Berman was subject to an overarching contract of employment at EC Medica. Since I have found that this was not the case, his employment at EC Medica was limited to the days when he actually worked for the company. EC Medica is therefore only entitled to design rights in the drawings and designs created by Mr Berman on his working days.[117]It follows that the Claimants are entitled to the design rights in Mr Berman’s 3 September 2015 design of a box-type cushion. That is, indeed, not disputed, since it is the Defendants’ case that this was a design that had been produced specifically for the purposes of EC Medica. I have found that the intention was in fact to use this design to obtain a quote that would be useful to CS Medical; but it remains the case that the design was done during Mr Berman’s working hours at EC Medica, on EC Medica’s premises and using EC Medica’s software. Notwithstanding the ulterior motive, therefore, this was a product created in the course of Mr Berman’s employment at EC Medica.[118]The Claimants are not, however, entitled to the design rights in the other products designed by Mr Berman for CS Medical (including the CSM2510 cushion), since there is no evidence to suggest that any of those other designs were produced during Mr Berman’s working time at EC Medica.

The design right infringement claim

[119]The Claimants’ design right infringement claim rests on the allegation that the Defendants copied the design of the CL10.3 face cushion to produce the design of CS Medical’s CSM2510 cushion. Since I have found that the evidence is insufficient to support an inference of copying the CL10.3, it follows that this claim must fail.[120]Accordingly, I do not need to enter into the debate as to whether, even if some parts of the CL10.3 were copied, the parts ultimately identified by the Claimants for the purposes of their infringement claim are sufficiently concrete to qualify as “part of an article” for the purposes of section 213(2) of the CDPA 1988.

The counterclaim for unjustified threats

[121]Regulation 2 of the Community Design Regulations 2005 As that Regulation stood prior to 1 October 2017 and as continues to be applicable to threats made before that date, pursuant to Regulation 3 of SI 2017/771. provides as follows:
“Remedy for groundless threats of infringement proceedings (1) Where any person (whether entitled to or interested in a Community design or not) by circulars, advertisements or otherwise threatens any other person with proceedings for infringement of a Community design, any person aggrieved thereby may bring an action against him for any such relief as is mentioned in paragraph (2). (2) Subject to paragraphs (3) and (4), the claimant shall be entitled to the following relief— (a) a declaration to the effect that the threats are unjustifiable; (b) an injunction against the continuance of the threats; and (c) such damages, if any, as he has sustained by reason of the threats. (3) If the defendant proves that the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of a registered Community design the claimant shall be entitled to the relief claimed only if he shows that the registration is invalid. (4) If the defendant proves that the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of an unregistered Community design the claimant shall not be entitled to the relief claimed. (5) Proceedings may not be brought under this regulation in respect of a threat to bring proceedings for an infringement alleged to consist of the making or importing of anything. (6) Mere notification that a design is— (a) a registered Community design; or (b) protected as an unregistered Community design, does not constitute a threat of proceedings for the purpose of this regulation.” (a) a declaration to the effect that the threats are unjustifiable; (b) an injunction against the continuance of the threats; and (c) such damages, if any, as he has sustained by reason of the threats. (a) a registered Community design; or (b) protected as an unregistered Community design, does not constitute a threat of proceedings for the purpose of this regulation.”
[122]The Defendants say that the Claimants and Mr Bennetts made unjustified threats in the two respects that I have referred to in paragraph 25 above: first, by sending a letter to Interfoam on 15 June 2016, threatening to bring proceedings against them, and secondly by sending an email to various hospitals on 21 June 2016.[123]The Claimants admit that the Interfoam letter on 15 June did indeed constitute an unjustified threat within the meaning of Regulation 2. It was a threat of proceedings for infringement of registered Community designs, and the Community design right claims were struck out in the injunction hearing on 8 July 2016.[124]Regarding the email of 21 June, the Claimants contend that this was not a threat, because the email specifically stated that third party customers would not be sued. I do not accept that submission. It is well-established that a threat may be “veiled or covert, conditional or future”: Lightman J in L’Oréal v Johnson & Johnson [2000] FSR 686, §12. Although the 21 June email stated that EC Medica had no “current” intention to commence proceedings against customers, it emphasised that the company was “diligent in protecting its intellectual property rights”. I consider that the ordinary reader of that email, in the position of the hospitals in question, would have understood that as a veiled threat that EC Medica intended to bring proceedings if the hospitals continued to use CS Medical’s face cushion.[125]As Mr Alkin has pointed out, the language of the 21 June email is very similar to the language of the solicitors’ letter that was the subject of the complaint in Grimme v Scott [2009] EWHC 2691 (Pat), which had said (after referring to the existing infringement proceedings brought against the defendant):
“Please note that our client does not intend to commence proceedings against you as its action is against Mr Scott, but of course our client reserves all its rights in this matter.”
[126]In that case Floyd J held at §175 that the letter constituted a veiled threat of infringement proceedings, since “the ordinary recipient would read the last few sentences as indicating that Grimme did not at present intend to commence proceedings against the recipient, but it would be likely to do so in the future if it was successful in its action against Mr Scott.”[127]I consider that the same is true in the present case. Indeed a recipient of the email at Preston Hospital said expressly, in a telephone call with the Defendants, that the hospital was “getting [its] legal team involved”, and did not want to be associated with the CS Medical product until the dispute had been resolved. Mr Bennetts accepted, in his oral evidence, that the intention of the email had been to deter hospitals from buying CS Medical’s face cushion, and that he knew that this would be damaging to CS Medical’s business.[128]I therefore find that the 21 June 2016 email was indeed a threat within the meaning of Regulation 2. There is no dispute that if there was a threat it was an unjustified one, since it referred to claims regarding EC Medica’s registered design rights that were struck out on 8 July 2016.[129]It is accepted that CS Medical was a “person aggrieved” by the two threats. The Claimants are therefore liable on the counterclaim.[130]As to the liability of Mr Bennetts as the Part 20 Defendant under the counterclaim, the Claimants initially denied that Mr Bennetts was individually liable on the basis that in respect of the two communications Mr Bennetts was simply acting in his capacity as a director of the Claimants. Mr Hicks subsequently accepted, however, that this did not prevent Mr Bennetts from being found to be a joint tortfeasor together with the Claimants. It is common ground that liability of an individual as a joint tortfeasor may arise where it is established that the individual acted in a way that furthered the commission of the tort by the principal tortfeasor, and did so in pursuance of a common design to do the acts which constituted the tort: see e.g. Sea Shepherd UK v Fish & Fish [2015] UKSC 10, §21 per Lord Toulson. The question is whether this was the case for the letter of 15 June 2016 and the email of 21 June 2016.[131]On the basis of Mr Bennetts’ evidence regarding the 21 June email, the Claimants ultimately accepted that Mr Bennetts was jointly liable for any threat contained in that email. The 15 June letter was, however, sent by EC Medica’s solicitors, and there is no evidence regarding Mr Bennetts’ involvement in that letter. Accordingly, in respect of that letter I find for the Defendants as against the Claimants only.

Conclusion

[132]It follows from the discussion and conclusions set out above that the Claimants succeed in their claim for misuse of confidential information by Mr Dearnley-Davison in relation to the 3 September 2015 design of the box-type product sent to Rocon for the purposes of CS Medical’s business. They also succeed in their claims for breaches of duties of fidelity by Mr Dearnley-Davison and Mr Berman in respect of their activities in relation to the box-type product and the “Allen” face cushion, carried out at EC Medica during working hours. The other aspects of the claims fail.[133]I will hear further submissions on the appropriate remedies in respect of the successful claims, noting that the Claimants have (among other things) sought damages in relation to both of these aspects of their claims. Although the claim for damages in respect of breaches of duties of fidelity was not included in the prayer for relief in the Re-Amended Particulars of Claim, the Claimants’ request for damages was expressly pleaded in the body of the Particulars. There can, therefore, have been no doubt that this was part of the relief sought.[134]As set out above, I also find for the Defendants in respect of their counterclaim as against the Claimants in respect of the 15 June 2016 letter, and as against both the Claimants and Mr Bennetts in respect of the 21 June 2016 email. I do not need to determine the issue of damages caused by the threats, since all that is sought in that respect at this stage is that there should be an inquiry as to damages.[135]One final point should be noted. Following the handing down of a draft of this judgment, I received – in the usual way – corrections from both parties of a typographical nature. I also received written submissions from both Mr Hicks and Mr Alkin concerning various specific points of substance which they requested should be addressed or clarified in the judgment. I have taken account of those submissions in this final version of the judgment.

Cited in 1 later judgment