XCHRX PALM COMPUTING, INC. v. ECHOLINK DESIGN LTD. AND ANOTHER

HCA 11787/1999
HCA 13420/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 11787 & 13420 OF 1999

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REASONS FOR DECISION

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Nature of the Actions

1. These 2 actions were consolidated by an order dated 10 September 1999. The Plaintiff alleges herein that D1 and D2 infringed its copyright work. According to the Amended Statement of Claim, the Plaintiff's business is and was the design and marketing of the world famous "Palm Computing" handheld computer devices. The copyright work in question is set out in para. 3 and 4 of the Amended Statement of Claim. Para. 3 avers inter alia that,

"each and every version of the suite compilation of computer programs known as the Palm Operating System ("Palm OS") software and in each individual program in the Palm OS".

Particulars of the software programs are given under the said para. 3. Para. 4 of the Amended Statement of Claim pleads copyright in:-

"each and every version of the compilation of computer programs known as the Palm Operating System Software Developer's Kit ("Palm OS SDK") software and in each and every program in the Palm OS SDK".

Similarly, particulars of the software programs are given under the said para. 4.

2. The Defendants' software programs are called the "NEXUS/da Vinci" operating system software and "da Vinci OS Software Developer's Kit ("da Vinci SDK")". Para. 5 of the Amended Statement of Claim alleges that they infringed the Plaintiff's copyright work by copying individual programs in the Plaintiff's Palm OS and/or Palm OS SDK in their NEXUS/da Vinci operating system software and in the da Vinci OS SDK. Particulars of the said individual programs are given under para. 5. Alleged infringement acts also consist of the sale and supply by D1 to D2 of the said NEXUS/da Vinci software as well as in the manufacture and sale of computer hardware by D2 containing this software (and so on) but it is unnecessary for the purpose of this Reasons for Decision to set out each alleged infringement act.

Nature of the Applications

3. It is common ground that in order to determine whether there has been copying of the Plaintiff's copyright work by the Defendants, it is necessary for the source codes of the respective software programs to be compared by the parties' experts. It is also common ground that because source codes of software programs are in the nature of trade secrets, appropriate safeguards relating to confidentiality should be in place when the source codes of one party are disclosed to the other party.

4. The hearing on 28 and 29 September 2000 involved several summonses:-

(1) D2's summons dated 7 September 1999 for specific discovery and the supply of source codes;

(2) D2's summons dated 30 November 1999 for the supply of source codes under R.H.C. Ord 24 rr 10 and 11;

(3) D2's summons dated 29 February 2000 for further directions regarding the disclosure of source codes relating to the above-said 2 summonses;

(4) the Plaintiff's summons dated 8 March 2000 regarding the conditions for the inspection of the respective source codes and the release of articles and documents seized from D1 in the execution of the Anton Piller Order granted on 21 July 1999.

It is unclear whether para. 2 of the Plaintiff's summons (at (4) above) was also before me. I mention this because of correspondence sent to court regarding disputes as to whether the Plaintiff's source codes ought to be inspected by D1 as well. This will be dealt with below under the heading "Subsequent Events".

5. At the beginning of the hearing on 28 September 2000, the parties informed me that the only dispute was whether the Plaintiff is liable to disclose the whole of its source codes. The Plaintiff's expert has stated in his recent affirmation that some groups of the program files of the Plaintiff's software have not been copied. The source codes of these groups of program files are irrelevant to this action and need not be disclosed to the defence.

The Order Made

6. I concluded after hearing the parties that the whole of the Plaintiff's source codes ought to be disclosed, indicating that reasons would be given later. They are as follows.

7. As regards the precise form of the order (relating to matters like the time for production/inspection and the terms and conditions relating to confidentiality), the parties indicated this could be agreed among them.

Relevant Legal Principles

8. It is common ground that the applications are concerned with the production and/or inspection of documents, and not merely with their discovery. The relevant legal principles are undisputed and can be summarised as follows.

"... it is submitted ... that the effect of [Ord 24] r 13(1) is that the burden of satisfying the court that production and inspection is necessary is squarely upon the party applying, whereas under r 8 it is for the party who is objecting to any such order to satisfy the court that discovery by list or affidavit is not necessary. It appears to me that that approach and submission are correct, and it does not harm in most cases for the party against whom discovery is sought merely to list his documents. That discloses that he has them, or has power over them. But he can object to produce them on the grounds of privilege or, indeed, on any other ground ... When, however, one gets to the stage of production and the document is to be produced to the court or the other side, the position is different, and it should be (and the rules appear to me to state with complete clarity) that it is for the party seeking production to satisfy the court that such production is necessary for the purposes specified in r 13(1), namely for disposing fairly of the cause or matter or for saving costs" (emphasis supplied):

Dolling-Baker v. Merrett [1991] 2 All ER 890, 895f to j. The above principle was also stated in Ventouris v. Mountain [1991] 1 WLR 607.

9. The phrase "disposing fairly of the cause or matter" was further discussed in Wallace Smith Trust Co. v. Deloitte [1997] 1 WLR 257, 266D to F, where the English Court of Appeal quoted from Taylor v. Anderson [1995] 1 WLR 447, 462:-

"... Those words direct attention to the question whether inspection is necessary for the fair determination of the matter, whether by trial or otherwise. The purpose of the rule is to ensure that one party does not enjoy an unfair advantage or suffer from an unfair disadvantage in the litigation as the result of a document not being produced for inspection. It is ... of no importance that a party is curious about the contents of a document or would like to know the contents of it if he suffers no litigious disadvantage by not seeing it and would gain no litigious advantage by seeing it. That, in my judgment, is the test" (emphasis supplied).

10. The court is entitled to take into account whether the documents are confidential and, if so, whether the necessary information could be obtained by some other means: Science Research Council v. Nassé [1980] AC 1028, 1065-66 and the Wallace Smith case at p. 267C to F.

11. If a prima facie case is made out for disclosure, then the court will first inspect the documents: (1) to ensure that inspection is indeed necessary; (2) assuming it is, to see if the loss of confidentiality involved can be mitigated by: (a) blanking out parts of the documents, and/or (b) limiting disclosure to legal advisers only: the Wallace Smith case at p. 272E to F. There is no balancing exercise to be performed under Ord 24 r 13: see the Wallace Smith case at p. 273J.

12. The Plaintiff, however, disputes the validity of the argument that when the materiality of the documents is in issue, it is the case of the applying party that must be assumed to be true and not that of the respondent party. In fact, the Plaintiff contends that in such a case, it is incumbent upon the court to resolve the dispute.

13. With respect, I do not agree. First, it is usual that the evidence before the court at the time of the application is only contained in affidavit(s). In order to determine the issue of materiality when that is disputed in affidavit(s) would mean resolving a factual dispute and making a finding of fact. Normally this will not be viable unless the affidavit evidence is inherently implausible or contradicted by undisputed or indisputable evidence in a material way. Secondly, the Plaintiff's argument does not stand together with the observation in Format Communications Mfg. Ltd v. ITT Ltd [1983] FSR 473, 477:

"... I think Mr Prescott ... is right in his submission that, for the purpose of testing the materiality of discovery to the particular issue now referred to by the defendants, it is the case of the party seeking the discovery ... that must be assumed to be true and not that of the party against whom discovery is sought ... In this context he referred us to Bray on Discovery at p. 18".

The rationale behind this was set out in Bray on Discovery (1885), pp. 18-19:

"... otherwise a party might shut out his opponent from discovery essential to support his case by simply denying that case ... A party cannot avoid the discovery by saying that the matter of which discovery is sought does not relate to the question, when the very question in the action is whether or not it does so relate. Nor will the court for the purpose of determining the relevancy of the discovery to a particular case try that issue for the purpose of determining the relevancy of the discovery, for it is in order that that issue may be rightly determined that the discovery is required ... ".

I consider the same rationale is applicable to the production and inspection of documents.

Evidence Relevant to the Applications

14. Having dealt with the relevant legal principles, I turn to examine the evidence filed for the purpose of the hearing.

15. The Plaintiff's expert, Mr Belgard, said in his 4th affidavit:-

"I have never asserted ... that the 1st Defendant ... copied the whole of the Palm OS. In so far as the Palm device contains functionality that is different from, or is not included in, the da Vinci device, it was and is my belief that the Palm OS source code relating to that functionality was not copied by the 1st Defendant and thus did not need to be analyzed. In this situation, the portions of the Palm OS source code that relate to those functions are irrelevant to this action ... " (para. 4 thereof);

"I was previously asked to attempt to identify the portions of the Palm OS source code that might be relevant to this action by conducting an analysis of the lists of names of files in the NEXUS OS that were provided to me by the Plaintiff's solicitors after execution of the Order of Deputy Judge To of 21 July 1999 ... " (para. 6 thereof);

"Despite my inability to identify with certainty relevant Palm OS files from the NEXUS OS lists of file names, I am able to identify a number of Palm OS files that clearly and undoubtedly have no correspondence in the NEXUS OS ... [The files were then listed]" (para. 7 thereof).

16. Insofar as it is relevant to the dispute before me, the evidence filed by D1's expert is as follows. In the [2nd] affidavit of Bernard Galler dated 27 September 2000, he said:-

"... I am not prepared to accept Mr Belgard's advice as to the importance of the code that I am not allowed to inspect and compare. All of the source code in the computer (both operating system and application code) is relevant when an assessment is being made of the importance of any part of the code ... " (para. 5 thereof);

"It is obviously not enough to count lines of code, as the Plaintiff suggests, in assessing the importance of any code which was copied" (para. 6 thereof).

17. The evidence filed by D2's experts is in essence as follows. In the 3rd affirmation of Leung Ho Fung, Dr Fung said:-

"... I cannot say whether the Palm OS implementation files were copied and used/adopted in the da Vinci OS at all because I do not have access to either the Palm OS or da Vinci implementation files" (para. 5 thereof);

"I note that the hardware architecture of the Palm Pilot and da Vinci PDA are different. I believe in all cases this inevitably leads to different OSs being used" (para. 13 thereof);

"... in terms of number of lines/files, only a few percents of the Palm OK [sic] [OS] SDK are copied. This is far from Substantial" (para. 15(a) thereof);

"I am handicapped in my examination of the evidence put forward by the Plaintiff's expert and the 1st Defendant's experts because I do not have any assistance or information on the source code of the Palm OS and NEXUS OS" (para. 18 thereof);

"In order to assess whether the alleged copying is substantial, the whole source code ... must be analyzed. To assess the significance of the copying, it is inconclusive to examine only parts of the source codes because all the files are interrelated" (para. 19(I) thereof).

In an affidavit of Prof. Anderson, he said:-

"... I will be unable to provide such an expert opinion or advice unless I am provided complete access to the source code for all versions of the Palm OS for which the Plaintiff has claimed copyright infringement ... In addition, I will require the source code for all versions of the NEXUS OS ... " (para. 2 thereof);

"A large amount of context is required for a proper evaluation of code similarity where there are no verbatim similarities. The context needed cannot be easily characterized, but would include for example, related code that is dissimilar. Allowing the Plaintiff to disclose only selected portions of the code would prevent such an exercise" (para. 4 thereof).

18. The Plaintiff argues that the evidence of its expert should be preferred to that of the defence experts. This is because (so the Plaintiff argues) the evidence of the Plaintiff's expert is specific whereas that of the defence experts is only general. Further, the relevant part of the evidence of the Plaintiff's expert was given in response to that given by the defence experts. The defence experts have not disputed the correctness of the evidence of the Plaintiff's expert by way of reply.

19. There was no evidence in reply from D2's experts because D2's counsel decided not to seek any adjournment to file such evidence. Having so decided, D2 had to take the risk that the court may decide the application against it. Such absence of evidence was the result of a tactical move and may not be because D2's experts were unable to reply. Further, in relation to D1's expert, his affirmation was clearly made by way of reply to the evidence given by the Plaintiff's expert: see para. 2 of the [2nd] affidavit of Mr Galler dated 27 September 2000.

20. Before dealing with the details of the issue, I should observe that, as D1's counsel rightly pointed out, the source codes in question are the subject matter of the copyright work based on which this action is brought.

21. Bearing the above matters in mind, I conclude that the evidence of the defence experts is sufficient to establish the materiality of the whole of the Plaintiff's source codes to the issues for the fair disposal of this action and/or for saving costs.

22. The Plaintiff further submits that even if I should decide to order production/inspection of the whole of the Plaintiff's source codes, it is proper in the exercise of my discretion to defer making such an order regarding the disputed part of the Plaintiff's source codes to a later stage. This is because the defence experts, after examining the Plaintiff's undisputed source codes, may agree with the conclusion of the Plaintiff's expert that it is unnecessary to further examine the disputed source codes. An order should only be made as regards the disputed source codes if and when the defence experts conclude that further production/inspection is necessary.

23. I do not agree. The evidence filed by the defence experts has in effect stated inter alia that the source codes are interrelated. They also claimed that they cannot properly advise whether the Plaintiff's allegation of substantial copying is valid. As stated above, for the purpose of these applications, these claims are to be regarded as correct.

Subsequent Events

24. Subsequent to the hearing on 29 September 2000, parts of the parties' correspondence were sent/copied to the court. They show that there was a dispute between the Plaintiff and D1 as to whether the decision made at the end of the hearing on 29 September 2000 also covers D1's inspection of the Plaintiff's source codes; see:-

(1) the letter dated 18 October 2000 from D1's solicitors to the court;

(2) the letter of 18 October 2000 from the court to D1's solicitors (copied to the other parties);

(3) the letter dated 18 October 2000 from the Plaintiff's solicitors to D1's solicitors (copied to the court and D2);

(4) the letter dated 19 October 2000 from D1's solicitors to the Plaintiff's solicitors (copied to the court and D2); and finally

(5) the letter dated 23 October 2000 from the Plaintiff's solicitors to D1's solicitors (copied to the court and D2).

25. It appears that this dispute has finally been resolved. If it had not, I must say I fail to understand why it should arise at all when the parties were represented by experienced and reputable practitioners. Although no express order(s) were made (in view of counsels' indication that the precise order(s) could be agreed), the matter should have been beyond doubt because:-

(a) D1's counsel has put forth submissions in support of the application for the production/inspection of the Plaintiff's source codes;

(b) D1's counsel has asked for, and D1 was awarded, the costs of para. 2 of the Plaintiff's summons dated 8 March 2000 (which relates to the production/inspection of the Plaintiff's source codes).

If in fact the matters are still disputed, the parties may need to restore the hearing to address me further regarding this matter.

Costs

26. I made the following costs orders on 29 September 2000:-

(a) para. 1 of the Plaintiff's summons dated 8 March 2000 be paid by D1 to the Plaintiff in any event;

(b) para. 2 of the Plaintiff's summons dated 8 March 2000 be paid by the Plaintiff to D1 in any event;

(c) costs of para. 3 of D2's summons dated 7 September 2000 (in HCA 13420 of 1999) from 7 September 2000 to 4 January 2000 be in the cause of the action;

(d) costs of para. 3 of D2's summons dated 7 September 2000 (in HCA 13420 of 1999) from 5 January 2000 to date of decision be paid by the Plaintiff to D2 in any event;

(e) costs of para. 1(a) of D2's summons dated 30 November 1999 be paid by the Plaintiff to D2 in any event;

(f) there be no order as to costs for D2's summons dated 29 February 2000.

I certified the attendance by 2 counsel to be proper and indicated reasons for the costs order will be included in the Reasons for Decision.

27. Save as regards (c) and (f) above, I consider there is no valid reason to depart from the usual rule that costs should follow the event. The defence has in essence been successful (regarding (b) and (d) to (e) above) and should be entitled to the costs thereof. Likewise, the Plaintiff has in essence been successful regarding (a) and should be entitled to those costs.

28. As regards (c) above, the Plaintiff asked for the costs to be in the cause and D2's counsel fairly accepted that the costs up to 4 January 2000 be in the cause of the action. As regards (f) above, as it turned out, there was no need to deal with the summons at the hearing. The costs involved must have been minimal. It is appropriate to make no order as to costs regarding this.

29. I certified the attendance of 2 counsel to be proper because (1) the issues raised at the hearing are important to the defence and (2) the complexity justified such attendance.