Leica Geosystems Pty Ltd v Koudstaal

Link copied
Case Copied 21 min read

FEDERAL COURT OF AUSTRALIA

Leica Geosystems Pty Ltd v Koudstaal [2012] FCA 1337

Citation: Leica Geosystems Pty Ltd v Koudstaal [2012] FCA 1337
Parties: LEICA GEOSYSTEMS PTY LTD (ACN 000 112 765), LEICA GEOSYSTEMS AG and LEICA GEOSYSTEMS MINING INC v ANDREW KOUDSTAAL and AUTOMATED POSITIONING SYSTEMS PTY LTD (ACN 098 359 301)
File number: QUD 139 of 2012
Judge: COLLIER J
Date of judgment: 28 November 2012
Catchwords: PRACTICE AND PROCEDURE – interlocutory application for summary judgment – substantive application alleges breach of confidence and copyright infringement by former employee – r 26.01(1)(a) Federal Court Rules 2011 (Cth) – whether “no reasonable prospect of successfully prosecuting the proceeding” – relevance of principles discussed in Spencer v Commonwealth (2010) 241 CLR 118 – substantive proceedings at relatively early stage – evidence before Court – inferences open to Court – vicarious liability for copyright infringement – interlocutory application dismissed
Legislation: Corporations Act 2001 (Cth) s 183(1)
Federal Court of Australia Act 1976 (Cth) s 31A
Federal Court Rules 2011 (Cth) r 26.01(a)
Cases cited: Coco v A N Clark (Engineers) Ltd [1969] RPC 41 cited
Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 cited
Lord Ashburton v Pape [1913] 2 Ch 469 cited
Spencer v Commonwealth (2010) 241 CLR 118 cited
Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145 cited
WEA International Inc v Hanimex Corporation Ltd (1987) 17 FCR 274 cited
Date of hearing: 13 August 2012
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 36
Counsel for the First, Second and Third Applicants: Mr R Cobden SC with Mr D Logan
Solicitor for the First, Second and Third Applicants: Bennett & Philp Lawyers
Counsel for the First Respondent: The First Respondent appeared in person
Counsel for the Second Respondent: Mr P Travis
Solicitor for the Second Respondent: McKays Solicitors

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 139 of 2012
BETWEEN:

LEICA GEOSYSTEMS PTY LTD (ACN 000 112 765)
First Applicant

LEICA GEOSYSTEMS AG
Second Applicant

LEICA GEOSYSTEMS MINING INC
Third Applicant
AND:

ANDREW KOUDSTAAL
First Respondent

AUTOMATED POSITIONING SYSTEMS PTY LTD (ACN 098 359 301)
Second Respondent

JUDGE:

COLLIER J

DATE OF ORDER:

28 NOVEMBER 2012

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.The interlocutory application filed 4 July 2012 be dismissed.

2.The second respondent pay the applicants’ costs of and incidental to the interlocutory application filed 4 July 2012, to be taxed if not otherwise agreed.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 139 of 2012
BETWEEN:

LEICA GEOSYSTEMS PTY LTD (ACN 000 112 765)
First Applicant

LEICA GEOSYSTEMS AG
Second Applicant

LEICA GEOSYSTEMS MINING INC
Third Applicant
AND:

ANDREW KOUDSTAAL
First Respondent

AUTOMATED POSITIONING SYSTEMS PTY LTD (ACN 098 359 301)
Second Respondent

JUDGE:

COLLIER J

DATE:

28 NOVEMBER 2012

PLACE:

BRISBANE

REASONS FOR JUDGMENT

  1. Before me is an…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Leica Geosystems Pty Ltd v Koudstaal and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2012] FCA 1337
Decision Date

CaseChat Overview and Summary

The case of Leica Geosystems Pty Ltd v Koudstaal involved an interlocutory application for summary judgment against the second respondent, APS, in proceedings for alleged breach of confidence and copyright infringement by a former employee. The Federal Court was tasked with determining whether the applicants had no reasonable prospect of successfully prosecuting their claims, pursuant to r 26.01(1)(a) of the Federal Court Rules 2011 (Cth). APS argued that there was insufficient evidence to support the applicants' claims, while the applicants contended that there were reasonable prospects of success based on evidence of unauthorised copying and potential vicarious liability.

The Court considered the principles established in Spencer v Commonwealth, which emphasised that the power to dismiss an action summarily should not be exercised lightly and that summary judgment is inappropriate where factual issues are in dispute. The Court found that while there was no direct evidence that APS received the applicants' source code or had knowledge of its use by the former employee, there were significant inferences that could be drawn. The Court concluded that the applicants had reasonable prospects of establishing vicarious liability for copyright infringement by APS, as well as potential direct liability for breach of confidence. Therefore, the Court dismissed the interlocutory application and ordered APS to pay the applicants' costs.

Orders

Orders of the court

1. The interlocutory application filed 4 July 2012 be dismissed.

2. The second respondent pay the applicants’ costs of and incidental to the interlocutory application filed 4 July 2012, to be taxed if not otherwise agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Before considering the interlocutory application before me it is useful to consider the background facts to the proceedings.Background The first applicant is a company incorporated according to Australian law. The second applicant is a company incorporated according to the law of Switzerland. The third applicant is a company incorporated according to the law of the United States of America. The first and third applicants conduct business together under the name Leica Geosystems Mining (LGM). The second and third applicants separately own source code and related software. The second applicant owns source code and related software for an original fleet management system and machine guidance system known as PitOps (also known as Leica Classic). The third applicant owns source code and related software for an enhanced fleet management system known as Jigsaw (also known as mineOPS). It is convenient to refer to this source code and software cumulatively as “LGM’s source code”. It does not appear to be in dispute that copyright subsists, and has subsisted at all material times, in LGM’s source code. The first applicant has a licence in respect of both copyright and use of the third applicant’s software and LGM’s source code. In March 2004 the first and second applicants entered into commercial agreements whereby, inter alia, copyright in LGM’s source code was assigned to and vested in the second applicant, and the first applicant retained a non-exclusive licence in respect of both copyright and use of LGM’s source code. The first respondent, Mr Koudstaal, was employed by the first applicant as a software engineer on or about 10 May 2010. The first applicant’s employment of Mr Koudstaal was pursuant to the terms of a written employment agreement dated 29 April 2010 (“the employment agreement”). The employment agreement included competition and confidentiality clauses, materially as follows:6. No Competition and Confidentiality during employment6.1 ObligationYou shall not without the Employer’s prior written consent, do any of the following while employed by the Employer:…(b) disclose or use any Confidential Information, except:(i) disclosure or use in the proper course of your duties;(ii) for information which is freely available to the public; or(iii)to the extent you are required to disclose information by law or requirement of any regulatory body.Confidential Information includes, without limiting its ordinary meaning, information whether oral, written or recorded electronically and including all copies or extracts, known to you or in your possession or control, relating to Group’s affairs, transactions, customers or business in your possession or control, including information which may come into your possession or control in the course of and by reason of employment with the Employer, whether or not the same was originally supplied by the Employer.Group means the Employer and any Related Body Corporate (within the meaning given to that term by the Corporations Act 2001 (Cth) from time to time, and includes:(a)Leica Geosystems AG of Heinrich-Wild-Strasse CH9435, Heerbrugg, Switzerland, and its subsidiaries;(b)Hexagon AB of Cylindervagen 12, Box 112, SE-131 26 Nacka Strand Sweden, and its subsidiaries.7. Your Obligations After Employment Ceases7.1 Separate ProvisionsClauses 7.2 and 7.3, each Time Period and each Area in the Schedule have effect as if they consisted of separate provisions, each being severable from the other. If any one or more of the restraints resulting from a combination of those variables is unenforceable or illegal:(a) the fact shall not affect the other mentioned restraints; and(b)the unenforceable or illegal restraint or restrains will be deemed severed from and will form no part of this agreement.7.2 Confidentiality(a)Within each of the Time Periods and each of the Areas in the Schedule, you covenant in favour of the Employer that you will not, without the prior written consent of the Employer, use or disclose to any person any Confidential Information. Without prejudice to any other available remedy, the Employer may recover any loss sustained by the Employer or profit obtained by you as a result of any use of Confidential Information contrary to this agreement.(b) Clause 7.2 (a) does not apply to:(i)the disclosure of information that is freely available to the public;(ii)disclosures required of you by any applicable law or requirement of any regulatory body.…8.7 Return of the Employer’s propertyOn termination of this agreement and whenever requested by the Employer, you shall immediately deliver to the Employer all books, documents, papers, materials, credit cards, software, computer files, access keys, motor vehicles and other property of the Employer which may then be in your possession or under your power or control.…Schedule 1(1)The Time Periods mentioned in each of the following periods in clause 7 of the agreement are:(i)for a period of 1 month after the date of termination of your employment;(ii)for a period of three months after the date of termination of your employment;(iii)for a period of six months after the date of termination of your employment;(iv)for a period of one year after the date of termination of your employment; and(v)for such other time as Confidential Information held by you retains its quality of confidentiality.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Rule 26.01, so far as material, provides:26.01 Summary judgment(1)A party may apply to the Court for an order that judgment be given against another party because:(a)the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or In this proceeding, it appeared common ground that the key issue for consideration by the Court was whether the applicants had “no reasonable prospect of success” in prosecuting its claims, which is a principle common to r 26.01(1)(a) and s 31A of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”), such that authorities on s 31A are useful in considering r 26.01. In my view it is appropriate to consider the submissions of the parties on that basis. APS claims that the applicants lack the evidentiary basis necessary to pursue their claims against APS with any reasonable prospect of success because, in summary:·In relation to the breach of confidence claim against APS:othe three elements essential to a cause of action for breach of the equitable duty of confidence are:(i)that the information must be of a confidential nature;(ii)that the information must be communicated in circumstances importing an obligation of confidence; and(iii)that there must be an unauthorised use of the information to the detriment of the party who communicated it.othere is no evidence that APS received LGM’s source code, or had actual or constructive knowledge of use of that code by Mr Koudstaal in the course of his employment. In particular:▪pursuant to an order of this Court of 24 February 2012, an independent computer expert, Mr Paul Bouwer of Dialog Information Technology, entered APS’ premises on 27 and 28 February 2012 in order to search for listed things on “any data storage device… apparently the property of one or other of the respondents”. Mr Bouwer reported the results of his search on 28 February 2012 (in a report annexed to the affidavit of Mr Joshua Henderson affirmed 28 February 2012) and concluded that nothing of consequence was found on any of APS’ data stores in the execution of his search;▪Mr Dushyantha Wimalsuriya, the Chief Executive Officer of APS, has deposed in his affidavit sworn 4 July 2012 that APS was not aware that Mr Koudstaal had a copy of any code from the applicants until the substantive proceedings were served on APS. Further, Mr Wimalsuriya has deposed that APS is able to track precisely which lines of software code were written by Mr Koudstaal, and Mr Wimalsuriya’s review of that code did not suggest that Mr Koudstaal was using the applicants’ code;▪Mr Ajoy Ghosh, a computer expert who has provided a report on instructions from the applicants’ solicitors annexed to his affidavit sworn 9 August 2012, did not find any evidence of LGM’s source code migrating from Mr Koudstaal’s computer and storage devices to APS’ computer systems;▪even apart from the lack of evidence of breach by APS, the factual basis on which the applicants allege an equitable obligation of confidence was imposed on APS is not borne out by the evidence. There is no evidence that Mr Koudstaal used a copy of LGM’s source code to work on APS software, or, even if he did, that APS knew or ought to have known that Mr Koudstaal was doing so; and▪the complete absence of evidence to support the case of the applicants supports a finding that the applicants cannot be said to have any reasonable prospects of successfully prosecuting its breach of confidence claim against APS.·In relation to the breach of copyright claim against APS:othere is no allegation that, if Mr Koudstaal downloaded a copy of LGM’s source code before leaving the employment of the first applicant, APS was in any way involved in the alleged reproductions of the source code, or that Mr Koudstaal was even employed by APS at the time of those alleged reproductions; andothere is no evidence that Mr Koudstaal provided a copy of LGM’s source code to APS. Instead, the evidence of the independent computer expert Mr Bouwer reveals that there was nothing of interest on APS’ computer system.

Ratio Decidendi

Legal Principle Established

The applicants oppose the interlocutory application, in summary on the following grounds:·The power to dismiss an action summarily is not to be exercised lightly: Spencer v Commonwealth (2010) 241 CLR 118 at [24] and [60] and Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Ltd [2011] FCAFC 145 at [31].·Summary judgment is inappropriate where there are factual issues capable of being disputed and in dispute: Spencer at [25].·There is evidence that Mr Koudstaal downloaded LGM’s source code on to his external hard drive on 2 and 3 November 2011, before ceasing employment with the first applicant. This evidence is apparent from the report of Mr Ghosh.·On 28 January 2012 Mr Koudstaal told Ms Vella that he was using LGM’s source code to assist him in his work at APS (affidavit of Ms Vella affirmed 24 February 2012 paragraph 29).·These facts must be considered in light of the evidence that:o APS is an aggressive competitor of the first applicant;o source code is a critical part of developing new software;oAPS needed to have a fleet management system to be competitive with the first applicant and it is apparent from its website that APS now has a fleet management system which involves machine guidance; andoAPS has been approaching employees and clients of the first applicant, and a number of staff of the first applicant, including Mr Koudstaal, have left to work for APS.·The evidence establishes to at least the requisite interlocutory level that there has been unauthorised copying of LGM’s source code by Mr Koudstaal, and supports the likelihood of further reproductions of parts of LGM’s source code by Mr Koudstaal while an employee of APS.·APS is at least vicariously liable for Mr Koudstaal’s tortious conduct in infringing the applicants’ copyright and commercially exploiting those infringing copies, such conduct being committed in the course of Mr Koudstaal’s employment with APS.·The inference may and should be drawn that Mr Koudstaal was reproducing and accessing the relevant material in the course of his employment with APS because the relevant reproductions were done for the intended pursuit of APS’ interests, or the intended pursuit of Mr Koudstaal’s contract of employment with APS. This is likely to be clarified by discovery by each of the respondents.·In these circumstances the applicants have good, or at least reasonable, prospects of successfully establishing vicarious liability of APS for copyright infringements by Mr Koudstaal.·In relation to the essential requirements for an action for breach of the equitable obligation of confidence:oall requirements are established to the requisite interlocutory level in respect of LGM’s source code;oeven if APS innocently received confidential information, the Court has jurisdiction to enjoin APS if it is established that the initial wrongdoing which brought about the misuse of confidential information would be carried into effect by APS’ conduct (Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 406);othe evidence clearly supports, to at least the requisite interlocutory level, the conclusion that APS had actual or constructive notice of the confidentiality of this information being used by Mr Koudstaal, such that it is liable to be restrained by injunction from further use or disclosure of it. APS is also liable, if the applicants substantiate their case, to accounting and tracing remedies; andoin these circumstances, the applicants have reasonable prospects of establishing direct liability of APS for breach of confidence.Consideration