Intellectual Property - Appellate Law Update - Directed Electronics OE Pty Ltd v Gridtraq Australia Pty Ltd [2023] FCAFC 149

Intellectual Property
Tom Cordiner Headshot
M Marcus
C Cunliffe 2
Surkis Amy Headshot

Appeal from decision to dismiss case against Respondents for breach of copyright and misuse of confidential information – whether case advanced in appeal was run at trial

In October 2017, Directed Electronics (DE) brought proceedings against multiple parties for allegations of breach of fiduciary duty, breach of confidence and copyright infringement. DE’s case was founded on the allegation that two of its former employees had colluded with one of its suppliers to misappropriate its business. This appeal only concerns findings made in respect of three of those parties, the Gridtraq Parties.

After a trial of more than 9 weeks, in a 4,003 paragraph Judgment published in November 2022, Justice Beach dismissed the proceeding against the Gridtraq Parties. Justice Beach found that the Gridtraq Parties had possession of two relevant documents (the CAN Bus data and vehicle parameters document and the Directed Specification) but had not used those documents as part of the larger scheme of misappropriation. The Gridtraq Parties gave undertakings to destroy the documents and Justice Beach dismissed the proceeding against the Gridtraq Parties and ordered that DE pay 90% of the Gridtraq Parties’ costs. DE appealed those orders.

In the appeal, DE argued that the trial Judge’s findings showed that the Gridtraq Parties had infringed copyright by being in possession of the CAN Bus Data and Directed Specification and that, by dismissing that case, DE was denied the opportunity to seek remedies against the Gridtraq Parties (in the form of a foregone licence and additional damages). DE also argued that the Gridtraq Parties had used confidential information in the CAN Bus data in relation to their own products (in a manner that was unrelated to the larger scheme) and so was entitled to remedies for that use.

The Full Court examined the pleadings at trial and found that DE’s case against the Gridtraq Parties was only ever ran as an allegation of involvement in the larger scheme and that it was not open to DE to assert, on appeal, that it should be provided with an opportunity to seek remedies for independent acts of copyright infringement or misuse of confidential information.

For example, in relation to the copyright case, the Full Court referred to an omnibus allegation in the statement of claim that the other parties “and/or” the Gridtraq Parties reproduced the works and communicated them to others. After considering that paragraph with its particulars, the Full Court said: “[w]hatever the grammatical implications of ‘and/or’ are, it is clear that Directed Electronics did not advance a free standing copyright infringement case in which only the Gridtraq Parties were involved”.

In relation to the confidential information case, the Full Court found that each of the allegations in the pleading were linked to the involvement in the overall misappropriation case and so “the confidential information case sought to be advanced in this Court was never pleaded”.

The Full Court also looked at the closing submissions on relief at trial and the process leading to the final orders in arriving at its view that DE had not ran an independent case against the Gridtraq Parties at trial.

As to the closing submissions at trial, the Full Court said “[n]o mention was made that Directed Electronics was also pursuing a separate case against the Gridtraq Parties which was not part of that alleged joint enterprise and which would have required its own separate remedies hearing. If the proposed foregone licence case had actually existed, the omission to refer to it in this part of the submissions is a striking omission.”

As to the final orders, the Full Court said “[t]he failure of counsel for Directed Electronics to indicate at this hearing that the proceeding should not be dismissed because there was still a case which existed which needed a remedies hearing is entirely inconsistent with the argument which has taken up a day of this Court’s time.

The Full Court concluded that the appeal was “bereft of merit” and dismissed it with costs. This decision stands as a stark reminder to practitioners that the Full Court will hold parties to the case they advanced at trial. The Full Court’s examination of DE’s statement of claim also brings into the focus the need to ensure that a party’s written case properly reflects the case as run.

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