Legal Updates

Intellectual Property – Copyright - Computer Games - Copyright Infringement - Breach of Confidence

In Bunows v Smith & Crush Digital Media Ltd [2010], Mr Burrows accused Crush Digital Media Ltd (“Crush”) (and Mr Smith personally) of copyright infringement in a document containing a computer game concept and breach of confidential information. The claim was dismissed by the High Court.

.The Claimant ("Mr Burrows") is a freelance designer of computer games.  In 2005 to 2007 he was employed by Circle Studio Limited ("Circle").  Adrian Smith was a director of Circle as well as a minority shareholder.

Circle's business was the creation, development and supply of computer games. The company went into creditors' voluntary liquidation on 9 March 2007. In June 2007, Adrian Smith and Martin Can set up Crush. In August 2007, Crush purchased some of Circle's intellectual property from the liquidator.

In January 200x?, Mr Burrows became an employee of Circle. He was engaged as a senior games designer with a salary of £32,000.00 per annum. The contract of employment dealt with the ownership of the designs he would produce during his employment. Clause 14.1 .1 of his contract stated:-

'Every trade secret, invention,. . .. design, .know how. . . . . .process, method scheme, product or product design (each of which is hereinafter called “an invention") whether patentable or not, and every design note. . ..idea, algorithm.....source code, graphic, artwork, picture or like material, and any other matter which is the subject of copyright or is otherwise capable of protection through intellectual property rights........which is made, developed, perfected, devised, conceived or first reduced to practice by [you] either solely or in collaboration with others during your employment with the company whether or not during regular working hours, relating in any way to the business ...products or activities of the company or which is capable of use in relation thereto shall be the sole and exclusive property of the company"

Clause 14.1.2. stated that the terms of clause l4.l.l did not apply to "an invention" for which no company facilities were used and which was developed entirely in the employee's own time.

Clause 14.1.3 stated that any invention disclosed to the company during Mr Burrow's employment should be deemed to have arisen out of that employment unless Mr Burrows either disclosed it in the contract itself or established that it fell within clause 14.1.2.

Mr Burrows did disclose the idea he had for his game called "Traktis" to the company.

In May 2006, Mr Burrows put forward a proposal for a game that he now called "Traktrix". He did so using a two page document setting out some rough ideas. Mr Smith believed that the concept was worth developing. Although the game was developed by the team, it contained a number of enhancements (the work was done by Mr Burrows and other team members). But in preparing the Document (“2006 Document”) Mr Burrows had (unknown to Circle or any of its employees) drawn upon the Original Document *(“Original Document”).

The 2006 Document contained a much more detailed and complicated specification for the game it described than did the Original Document and some of the language used to describe some of the longstanding features of the game was identical to that used in the Original Document. No one other than Mr Burrows knew or could have known of the existence of the Original Document or the extent of any "copying". To the team, the 2006 Document would have appeared entirely original.

Circle was pleased with the outcome. He was offered a £5,000.00 bonus pool if Traktrix was sold commercially. They took the 2006 Document and a video presentation to Mr Ian Livingstone, founder of Eidos plc. His feedback was not good. What Circle had regarded as a strength (the similarity to existing established games) was seen by Eidos as a real weakness. Eidos also had concerns about the length of the game play and a lack of things to do (which Eidos thought was a fundamental flaw). Mr Livingstone advised them on what they needed to do in order to make the game attractive from a publisher's viewpoint. Circle when into liquidation whilst they were marketing Traintrax.

Mr Burrows' employment ended once Circle went into liquidation. Mr Smith was then approached by Mr Carr with a proposal to establish a new software development company. Crush was incorporated in June 2007 with a view to servicing the Nintendo DS and platform market. Mr Smith and Mr Carr decided to purchase some of the software under development by Circle from the liquidators. They reached an agreement in principle (which included a purchase of Circle's rights in to Traintrax. Mr Smith and Mr Cam regarded this agreement in principle as "a verbal "go-ahead" from the

liquidators". However, the formal Asset Sale Agreement itself was only entered on 2I August 2007; Crush did not acquire any right to the game concept "Traktrix".

Crush decided to develop the game without owning the rights and was speaking to developers including Mr Burrows. Mr Burrows sent an e-mail to Mr Smith on 8 July 2007, asking "When are you going to be able to pay me for the IP on Traktrix/Traintrax?". Mr Smith claimed he was completely taken aback by the request for payment.

Mr Burrows went straight to solicitors (Messrs Nelsons, who in fact had acted for Circle). On 10 July 2007 they wrote asserting that Mr Burrows had been employed by Circle after he had pitched a number of games "including a game he had designed a number of years previously known at the time as "Trak Trix". That game subsequently became known as "TrainTrax" after various changes to the graphic style. The basis of the game however was exactly as the design prior to his employment. They asserted that the game was a literary work in which copyright subsisted, and that Mr Burrows was its author. They alleged that Mr Smith was infringing that copyright by "[taking] the game to various publishers": and they threatened proceedings unless they received a written acknowledgement "that all intellectual property rights in the game known at various times as "Traktrix" or "Traintrax" (the Game) belong to our client", delivery up of all copies of the Game, and payment of damages (or an account of profits) together with costs on an indemnity basis. This aggressive and ill-advised letter contained a number of factual and legal errors: but most crucially it proceeded on the footing that there was a single identifiable "Game".

Crush instructed solicitors. They responded to Nelsons, adopting Nelsons' analysis. They said that Crush had purchased "all subsisting rights of [Circle] in Traktrix/Traintrax": they challenged the assertion that the basis of the game was exactly as had been designed before Mr Burrows' employment, and themselves asserted that "the lion's share of all and any IPR in this game belonged to [Circle]". They expressed particular surprise that a complaint should be made about the current attempt to resurrect the Traintrax project when it was Mr Burrows himself who had drafted the document to enable that to be done.

There was a dispute over ownership of the rights. Mr Burrows disclosed that he had produced an original game and they were in breach of confidential information. Crush offered to assign the IPRs to Mr Burrows. It transpired that anything to do with "Traintrax" that had belonged to Circle was acquired by Crush under the August 2007 Assignment. Crush entered administration on 23 March 2009 and no permission had been sought to pursue the action against the company in administration: so at trial this complaint was now directed at Mr Smith.

There were two limbs to the complaint: breach of confidence and infringement of Copyright. To make out a case in breach of confidence it must first be established that the relevant material was of such a nature as to be capable of being treated confidentially. In De Maudsley v Palumbo [1996] FSR 447 it was stated that (in the context of the entertainment industry) in order to attract confidence an idea must (a) contain some significant element of originality; (b) be clearly identifiable (as an idea of the confider); (c) be of potential commercial attractiveness; and (d) be sufficiently well developed to be capable of actual realisation. The court hrld that the idea for the game "Traktrix" (what is called "the Concept" in paragraph 6 of the Particulars of Claim and what is described in paragraph 9 of the Particulars of Claim) was an idea capable of being protected by the equitable rules of confidence. Even if no single element in it was novel the combination of elements was original.

Mr Burrows was employed as a senior games designer by Circle. It was his job to come up with ideas. If he came up with an idea and shared it with his employer he was doing what he was paid to do: the disclosure would not be in circumstances importing any duty of confidence owed by the employer to the employee. After he had been employed for over a year Mr Burrows disclosed the idea for "Traktrix" (in the form in which was in the Original Document). There is no evidence that in so doing he told Mr Smith or the creative team at Circle that this was an idea he had thought up before he joined Circle and one he had been working on since 1998. He had not claimed it as an original personal idea in the Schedule to his contract of employment. The whole purpose of disclosing the idea was to enable Circle and its team to further develop the idea and market it). The breach of confidence claim failed.

Assuming Mr Burrows owned the copyright in the Original Document, he must establish that Crush has created or copied an infringing work or issued an infringing work to the public. Since only Mr Smith survived as a defendant, Mr Burrows must establish either that Mr Smith personally carried out those infringing acts or was personally responsible for Crush having done so.

Mr Burrow's argument was that Circle had created an infringing document by producing the 2006 Document which (he asserted) copied significant parts of the Original Document. But nobody at Circle, other than Mr Burrows, knew of the Original Document. If the 2006 Document "copied" parts of the Original Documents then it did so because Mr Burrows himself incorporated them without telling anyone. Crush pleaded that there must (at the least) be an implied licence. It was accepted that that must be so: but Mr Burrows argued that the licence was personal to Circle (and could not be assigned to Crush) and that it contained an implied term (required to give it business efficacy) that it was automatically terminable on the liquidation of Circle (or the termination of Mr Burrows' employment by Circle). The courts rejected this argument.

The court held that:-

•  The incorporation of parts of the Original Document in the 2006 Document was not consensual (in that Circle and its team did not know that it was occurring). 

•   Mr Burrows voluntarily and without the imposition of any express conditions used work that he had previously completed for the purpose of performing the tasks required for the fulfilment of his current duties as an employee. He has therefore assigned his rights.

•  But even if copyright in some sentences in the 2006 Document remained vested in Mr Burrows, there was no evidence that Crush ever used such an infringing copy. 

• Finally, if Crush itself had used or made available to the public any infringing copy no case has been     made out that Mr Smith was personally responsible.

• There was no basis for a finding that Mr Smith personally carried out any infringing acts or was personally responsible for Crush having done so 

• The claim in copyright against Mr Smith therefore failed.

• The claim was dismissed.

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© RT COOPERS, 2010. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.