Do you need to see your competitor’s source code before you bring an infringement claim?

A recent UK court decision[1] has highlighted the difficulties in obtaining pre-action disclosure of allegedly infringing and confidential source code.

The case concerned the familiar allegation that a former employee had taken and misused proprietary code to develop software for his new employer.

Before formally issuing its claim, the previous employer wanted to see the extent of the alleged copying. It said it was necessary to focus its claim, aid settlement and save costs.

The UK Court declined the application. The decision reminds us that pre-action disclosure of source code may be an option, but only if a court is satisfied that it is “desirable” according to the tests provided for at 31.16 of the UK’s Civil Procedure Rules.

What are these tests?

First, the party asking for pre-action disclosure and the party potentially giving disclosure must both be likely to be parties to the subsequent proceedings and, if proceedings are started, the documents asked for would be disclosed anyway under what is known as “standard disclosure”.

Second, the court must decide if disclosure before proceedings is desirable. The court can only exercise its discretion if the disclosure is desirable on the basis of one of three limbs - to:

• dispose fairly of the anticipated proceedings; or
• assist the dispute to be resolved without proceedings; or
• save costs.

Why did the application fail?

The previous employer had already seen about 1% – 10% of the allegedly infringing code. It already had sufficient information to bring a claim. It said it had a strong case that 1% - 10% of the code was infringing and, in the judge’s view, the correspondence supported the assumption that such a claim would not be struck out.

Thus, the previous employer failed on limb I. It was already possible for it to bring a claim, and pre-action disclosure was not necessary to dispose fairly of the anticipated proceedings.

The previous employer further reasoned that pre-action disclosure was necessary to focus its particulars of claim and save them from being “over-broad and possibly more diffuse than they need otherwise be”. The Court confirmed that, of itself, the need to focus pleadings was not a good reason to order pre-action disclosure.

With regards to limb II, the new employer had already suggested that the code be disclosed to and reviewed by an expert (independently and confidentially) and for the expert to produce a “without prejudice” report to form the basis for mediation. In the Court’s view, there was therefore already a reasonable proposal on the table to aid settlement that also preserved the confidentiality of the code. Further, the judge was of the opinion that the expert would not need “prodding” by the previous employer in order to do its job properly.

With regards to limb III, the judge viewed the objective of saving costs as a variation of limb I. The cost-saving would arise from focusing the pleadings now and avoiding having to amend them later. 

In closing, the judge suggested that the parties ought to let the independent expert review the code as proposed by the new employer. He said that “seems to me a sensible suggestion”.

[1] Graffica Limited v The University of Birmingham & Ors [2018] EWHC 2683 (IPEC)