Singapore: An interesting decision on copyright, breach of confidence and non- competition issues

August 14th, 2012

 

In the case of PH Hydraulics & Engineering Pte. Ltd. v. Intrepid Offshore Construction Pte Ltd. and another, the Singapore High Court held Interpid Offshore Construction responsible for copyright infringement and breach of confidentially obligations.

PH Hydraulics & Engineering Pte. Ltd. (hereinafter referred to as 'the Plaintiff') is a Singapore incorporated company which designs and provides hydraulic and electrical installations, like winch systems, for the marine industry.

Interpid Offshore Construction Pte. Ltd. (hereinafter referred to as 'the First Defendant') is a Singapore incorporated company which provides and manufactures hydraulic and electrical installations, such as winch systems. Mr. Rinov Herawan (hereinafter referred to as 'the Second Defendant') is an employee of the First Defendant and a former employee of the Plaintiff.

The Plaintiff commenced the present action against both the Defendants alleging copyright infringement and breach of confidence in respect of five of its General Arrangement drawings (the 'Five GA drawings'). Further, only against the Second Defendant, the Plaintiff alleged breach of the non-competition clause in his employment agreement with the Plaintiff.

The Second Defendant, during his employment with the Plaintiff, worked on the creation of the Five GA drawings. The Plaintiff complained that the winch drawings published in the First Defendant's catalog and website were very similar to the Five GA drawings, thereby alleging that the Second Defendant provided the Plaintiff's Five GA drawings to the First Defendant.

As per the employment agreement signed by the Second Defendant with the Plaintiff in 2006, the Second Defendant was restricted from divulging any confidential information to any person during his term of employment and for a period of two years following the resignation/termination of employment. Further, the non-competition clause in the employment agreement prohibited the Second Defendant from engaging in any activity, for a period of two years following the resignation/termination of his employment, which is in competition with the business of the Plaintiff.

The Plaintiff argued that the Five GA drawings were customized according to their client's needs and were safeguarded through various security measures and policies, thereby emphasizing their confidential nature.

However, the First Defendant, while not directly denying the infringement claim, pointed out that the Five GA drawings did not constitute confidential information because they were preliminary drawings and appropriate security measures to preserve their confidentiality were not implemented by the Plaintiff. The Defendants argued that hard and soft copies of the Five GA drawings were freely circulated within the Plaintiff's premises and not kept under physical or virtual lock and key, which amounts to giving up their confidential status. Also, the Defendants argued that the Five GA drawings were given to the First Defendant in 2008 without any qualifications of confidentiality made by the Plaintiff.

The High Court sided with the Plaintiff and adjudged that the Five GA drawings did amount to confidential information. The High Court realized that even though the Five GA drawings had been published by the Plaintiff in its operating manuals and sent out as soft copies, they were issued only for the limited and specific purpose of its customer's use and consideration. The High Court, therefore, concluded that the Five GA drawings were confidential information but were not of such a high degree of confidentiality as to amount to trade secrets.

On the issue of copyright infringement, the High Court noted that the Five GA drawings, despite being simple preliminary drawings of winches, were original artistic works of the Plaintiff and must enjoy copyright protection. The Plaintiff pointed out that various 'fingerprints' on the Five GA drawings, such as erroneous features, leader lines and dimensional lines, were also present on the infringing drawings in the First Defendant's catalog. The High Court also noted that a prima facie inference of 'causal connection' may be drawn where the Second Defendant had access to the Plaintiff's work and where there was close similarity between the First Defendant's
and the Plaintiff's work. Hence the High Court adjudged that the Defendants had infringed the Plaintiff's copyright in the Five GA drawings.

The Plaintiff, relying on the springboard principle, argued that since the First Defendant was a newcomer to the winch business, not stopping their acts would confer an unfair head start on the First Defendant and cause detriment to the Plaintiff. However, the High Court rebuffed the application of springboard doctrine considering that the confidentiality status of the Five GA drawings expired after two years, as stated in the employment agreement signed by the Second Defendant.

The Plaintiff had also alleged breach of the non-competition clause in the employment agreement against the Second Defendant. The Defendants argued that non-competition clause was void and contrary to public policy, being a restraint of trade. The High Court dismissed the Defendants argument stating that the Plaintiff had imparted training to the Second Defendant in the marine winch industry, which is a relatively small and specialized area of work. The High Court acknowledged the time and resources that the Plaintiff would have invested in such training and admitted that the non-competition clause was required to maintain employees well-versed and skilled in the Plaintiff's work. The High Court, although admitting that the Plaintiff reserved the right to enforce the non-competition clause, rejected the Plaintiff's claim on the grounds that the breach was acquiesced by the Plaintiff for about 16 months from the time the Second Defendant started work with the Plaintiff's competitor, EMS Engineering and Marine Services Pte. Ltd.

As a relief to the Plaintiff, the High Court granted an injunction against the continued use of the Plaintiff's Five GA drawings, in addition to the damages. The High Court clarified that the injunction was due to the Defendant's copyright infringement and not because of the breach of their obligation of confidentiality, for which no additional damages were granted. Further, the High Court cleared the Second Defendant from any injunction claim to be granted to enforce the non-competition clause.