FEDERAL COURT OF AUSTRALIA Boobera Lagoon Technology LLC v Zomojo Pty Ltd [2013] FCA 1107 Citation: Boobera Lagoon Technology LLC v Zomojo Pty Ltd [2013] FCA 1107 Parties: BOOBERA LAGOON TECHNOLOGY LLC v ZOMOJO PTY LTD (ACN 114 604 269) File number: VID 1066 of 2013 Judge: JESSUP J Date of judgment: 18 October 2013 Catchwords: PRACTICE AND PROCEDURE – application for interlocutory injunction restraining respondents from using or disclosing information contained in various documents where respondents entitled to access and use documents pursuant to orders of the court in another proceeding – whether applicant has established arguable case that information covered by equitable doctrine of confidence – whether balance of convenience favours granting of interlocutory restraint Cases cited: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Corrs Pavey Whiting and Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 Hearne v Street (2008) 235 CLR 125 Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621 Date of hearing: 11 and 18 October 2013 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the Applicant: R Cobden SC with A Maryniak and W Rothnie Solicitor for the Applicant: Baker & McKenzie Counsel for the Respondent: Dr M Collins SC Solicitor for the Respondent: Corrs Chambers Westgarth IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1066 of 2013 BETWEEN: BOOBERA LAGOON TECHNOLOGY LLC Applicant AND: ZOMOJO PTY LTD (ACN 114 604 269) Respondent JUDGE: JESSUP J DATE OF ORDER: 18 October 2013 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicant's claim for interlocutory relief be refused. 2. The applicant pay the respondent's costs of the applicant's Interlocutory Application. 3. The proceeding be listed for first directions on a date to be fixed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1066 of 2013 BETWEEN: BOOBERA LAGOON TECHNOLOGY LLC Applicant AND: ZOMOJO PTY LTD (ACN 114 604 269) Respondent JUDGE: JESSUP J DATE: 25 October 2013 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This proceeding was commenced on 7 October 2013. The applicant, Boobera Lagoon Technology LLC, is the assignee of certain assets from Zeptonics Pty Ltd, ZeptoIP Pty Ltd and Zepto Fabrics Pty Ltd ("the assignors") pursuant to an agreement made on 22 July 2013. The applicant claims to be the owner (by reason of that assignment) of copyright subsisting in certain documents, as to which nothing further presently needs to be said. The applicant also claims that documents identified in Annexure MRC-3 to the affidavit of Matthew Richard Critchley sworn on 3 October 2013 in proceeding No VID 1478 of 2011 ("the Hurd proceeding") contain confidential information to which it became entitled pursuant to the assignment, and that the respondent, Zomojo Pty Ltd ("Zomojo"), should be permanently restrained from using or disclosing that information. On the present occasion, those documents have been referred to as "the MRC-3 documents". 2 An unusual feature of the case is that, because it allegedly derived title to the information by assignment, and because of other factors to which I shall refer, officers of the applicant had not, as at the commencement of this proceeding, seen the documents which are said to contain the confidential information and, for the most part, still have not done so (although the applicant's solicitors have seen a number of those documents). 3 On 18 October 2013, the court heard the applicant's interlocutory application for an order restraining Zomojo from accessing, using or disclosing the MRC-3 documents other than in accordance with a protocol which was annexed to the application, and which would provide a means for the applicant's representatives to inspect those documents and to identify the ones with respect to which the applicant would go to trial, Zomojo's access to them in the meantime being subject to the interlocutory restraint. On that day, I dismissed the interlocutory application. These are my reasons for having done so. 4 The genesis of the present dispute is to be seen in a judgment of Gordon J in the Hurd proceeding on 19 December 2012: Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621. Orders which her Honour made on 5 February 2013 in consequence of that judgment included the following: 12. By 4:00pm on 26 February 2013, each Respondent take all necessary steps within his or its power to assign the ownership of all of his or its rights in each of the following to the Applicant: (a) the product or products (including any parts thereof) known as 'OptiCast'; (b) the product or products (including any parts thereof) known as 'ZeptoCast'; (c) the product or products (including any parts thereof) known as 'ZeptoLink'; (d) the product or products (including any parts thereof) known as 'ZeptoNIC'; (e) the product or products (including any parts thereof) known as 'ZeptoAccess KRX'; and (f) the product or products (including any parts thereof) known as the 'Crosswise ATS', (collectively, the 'Products', and, individually, a 'Product'). 13. By 4:00pm on 26 February 2013, each Respondent deliver up to the Applicant: (a) the Products; and (b) the prototypes and parts of prototypes relating to or based on each Product, in his or its possession, power or control. 14. By 4:00pm on 26 February 2013, each Respondent deliver up to the Applicant all documents (including electronic documents and files) in his or its possession, power or control that record or refer to each Product, or any prototypes for each Product, including: (a) all patents held or applications for patents lodged by any of the Respondents concerning the technology or techniques employed in each Product; (b) all purchase orders, agreements, invoices and receipts concerning the sale of each Product; (c) all purchase orders, agreements, invoices and receipts concerning the production of each Product; (d) all agreements and arrangements entered into by any of the Respondents concerning the use of or access to (directly or indirectly) each Product; and (e) all agreements and arrangements entered into by any of the Respondents with investors concerning the ownership of, or rights to the proceeds of sale of, each Product. 15. Each Respondent forthwith cease: (a) using or accessing (directly or indirectly) the Products; and (b) assisting, facilitating or enabling any other person to use or access (directly or indirectly) the Products. The respondents referred to in those orders included the assignors. They did not comply with the orders. 5 On 22 March 2013, Tracey J ordered, pursuant to r 41.09 of the Federal Court Rules 2011 (Cth), that Mr Rodney McKemmish be appointed to do all things as may be necessary to meet the requirements of Orders 12 – 21 made by Gordon J on 5 February 2013. However, his Honour also ordered that, until further order, Mr McKemmish not disclose to Zomojo any of the documents to which he had access pursuant to that order. 6 Mr McKemmish then began the process of taking an image of the databases and computing systems of the respondents in that proceeding. Once he had done so, in about early May 2013, Zomojo and the respondents in that proceeding, including the assignors, negotiated the terms of a protocol under which Mr McKemmish would disclose documents to Zomojo. The object of the protocol was to enable consideration to be given to the objections that those respondents might have to Zomojo seeing the documents, such as objections which might be based on claims of legal professional privilege. 7 On 9 May 2013, Tracey J made an order by consent which established such a protocol. It provided for Mr McKemmish to identify documents which he proposed to provide to Zomojo pursuant to the orders of 22 March 2013; for him to load them on to an electronic data platform; for him to make such documents available to the respondents in that proceeding, including the assignors; for those parties to object to the provision of any document to Zomojo; and for any such objection to be resolved by the court upon application. 8 According to Zomojo's solicitor in her affidavit sworn on 10 October 2013, there were "significant delays in the release of material to Zomojo" pursuant to the protocol the subject of Tracey J's orders of 9 May 2013. 9 Each of the corporate respondents to the Hurd proceeding, including the assignors, became the subject of a winding up proceeding commenced by Zomojo on 10 July 2013. As at the hearing of the applicant's application for interlocutory relief, this application had been heard but not yet determined. 10 So far as the record shows, the next event to occur was the assignment of 22 July 2013, as between the assignors and the applicant. The assets assigned under the agreement executed that day included a number of patent applications, of unfiled patent works in progress and of artefacts described as "generic infrastructure", a product described as "ZeptoMux" and all intellectual property related to products described as ZeptoChron, ZeptoGuard, ZeptoQIC, ZeptoNet and ZeptoTrade. At least as so identified, none of these products corresponded with any product covered by Order 12 made by Gordon J on 5 February 2013. But the agreement also stated that "encumbered assets" were not being assigned, those being the assets that were "included in the products referred to as ZeptoLink and ZeptoNIC" in that order. Also excluded from the assignment were various domain names, company names and logos, and one trade mark application. There was no suggestion that Zomojo was aware of these assignments at the time. 11 On 1 August 2013, Mr McKemmish informed Zomojo's solicitors (and the respondents in the Hurd proceeding) that the result of his examination of the electronic data would be the uploading of 8,409 emails and 1,175 files (before de-duplication) on to the data platform. On the same day, Mr Hurd emailed Mr McKemmish with a request that he specify "which order from the February 5th 2013 orders each document or group of documents is consistent with which is what the protocol refers to as your responsibility". In reply on 2 August 2013, Mr McKemmish said that the material had been produced "in accordance with Order 14 of Justice Gordon's 5 February Orders." Mr Hurd then requested that Mr McKemmish "explain clarify [sic] the search terms used or how you have otherwise limited the material to that which is relevant to the assigned products referred to in Order 14". In response to that inquiry, Mr McKemmish said: "The criteria used included terms such as invoice, quotation, statement of account, shipping record, sales, consignment etc … AND Zeptolink, ZLink, Zeptocast, Opticast, etc … These were based on a manual review by me of a range of documents located in the material copied." 12 According to Zomojo's solicitor, the respondents in the Hurd proceeding, including the assignors, failed to comply with the Tracey J protocol in relation to the documents loaded on to the data platform by Mr McKemmish on 1 August 2013. That circumstance led to an application by Zomojo which came before the court as presently constituted on 30 August 2013. On that application, I made the following orders (where "the applicant" is, of course, Zomojo): 1. Mr Rodney McKemmish release to the respondents and their solicitors forthwith all documents referred to in his email to the first respondent dated 1 August 2013. 2. By 4:00 pm on 13 September 2013, the respondents' solicitors notify the applicant's solicitors and Mr McKemmish in writing of the name and description of any of the said documents which the respondents object to Mr McKemmish providing to the applicant, specifying the basis upon which they so object and identifying the specific reasons they rely on in support of the objection. 3. Mr McKemmish provide to the applicant's solicitors all documents to which no objection is made by the respondents. 4. By 4:00 pm on 1 October 2013, the respondents' solicitors provide to the applicant's solicitors a list containing the name and description of all files and documents which the respondents have to date identified to Mr McKemmish as not to be released to the applicant and specifying the basis upon which the respondents object to these documents being provided to the applicant and identifying the specific reasons they rely on in support of the objection. 5. The applicant have liberty to apply to seek the release of any documents to which objection is made by the respondents. 13 On 13 September 2013, the solicitors for the respondents in the Hurd proceeding notified Zomojo's solicitors of their objections in purported compliance with Order 2 made on 30 August 2013. By a return letter of 24 September 2013, Zomojo's solicitors protested that that compliance had been, in point of form, "hopelessly deficient" because there had not been sufficient specification of the basis, or the reasons, upon which the objectors relied. Amongst other things, Zomojo's solicitors said in that letter: 1. A series of documents are objected to on the purported basis that they 'completely' or 'partially' contain confidential information. This is an improper and fundamentally misconceived basis to object to the production of documents our client is lawfully entitled to. This is not a discovery exercise. Your clients (who are already subject to contempt proceedings for non-compliance with the orders of 5 February 2013) must produce them. In any event, it is well established that 'confidentiality' is not a basis to resist production of documents. Zomojo's solicitors asserted that they were entitled to have all of the identified documents released to them, and threatened to approach the court if that were not done immediately. 14 In a letter to Zomojo's solicitors of 25 September 2013, the solicitors for the respondents in the Hurd proceeding made a number of points, one of which was that they were taking detailed instructions from their clients, and would reply in more detail by 4 pm on 27 September 2013. They asked Zomojo's solicitors not to have the matter relisted until then. 15 On 27 September 2013, the solicitors for the respondents in the Hurd proceeding advised Zomojo's solicitors that they had ceased to act for those respondents (including the assignors). No more detailed response to Zomojo's solicitors' complaints of 24 September 2013, such as was promised on 25 September 2013, was provided. 16 On 1 October 2013, Mr Matthew Hurd, himself a respondent in the Hurd proceeding, forwarded schedules by email to Zomojo's solicitors, in purported compliance with Order 4 made on 30 August 2013. The present application has proceeded on the silent assumption that the entities on behalf of which he did so included the assignors. 17 On 3 October 2013, a solicitor in the employ of Zomojo's solicitors, Mr Matthew Critchley, swore an affidavit in the Hurd proceeding. This was the affidavit referred to in para 1 above. Exhibit MRC-3 was a schedule of the documents which the respondents in the Hurd proceeding objected to producing to Zomojo or its solicitors on the sole ground that they were "Commercial in confidence – partial". 18 The Hurd proceeding was listed before me for directions on 4 October 2013. Mr Critchley's affidavit was then read to the court. The orders which I made at the conclusion of that hearing included one, Order 4, which directed Mr McKemmish, forthwith upon request by Zomojo's solicitors, to release the MRC-3 documents to those solicitors. I adjourned at 11.05 am. 19 A little less than three hours later, the applicant's solicitors wrote to the solicitors for Zomojo, informing them that their client was "the owner of assets purchased from" the assignors. They said that their client had "become aware" of the order which the court had made that day in the Hurd proceeding. They continued: Our clients believe that the Documents incorporate their trade secrets and confidential information relating to assets not the subject of the 5 February 2013 orders in the above proceedings and related matters, including regarding product design, manufacturing processes, components, pricing, technical matters and confidential discussions with customers and other third parties. The Documents are also likely to incorporate the subject matter of other intellectual property rights, including copyright. The applicant's solicitors sought confirmation by 4:00 pm that day that Zomojo's solicitors would not disclose (including to their client), use or deal with any of the information referred to. Not having received a response to that letter, the applicant's solicitors wrote to Zomojo's solicitors again, and to Zomojo itself, on 6 October 2013, noting that they had received instructions to commence court proceedings immediately. The present proceeding was commenced accordingly. 20 Relevantly to the present interlocutory application, the final relief which the applicant seeks in this proceeding is the following: … 3. A declaration that [the MRC-3 documents] … contain confidential information of the Applicant …. 4. An injunction permanently restraining [Zomojo] … from using or disclosing to anyone, without the prior consent of the Applicant, the Confidential Information. 5. Delivery up to the Applicant of all documents (including electronic documents and files) in the possession, power or control of [Zomojo] that: … (b) record or refer to the Confidential Information. It will be noted that the applicant claims relief in relation to information and the delivery up of documents which record or refer to that information, whether or not such documents also contain any other matter. As will appear, that is a distinction of some present significance. 21 On the present application for an interlocutory injunction, counsel for the applicant made it clear that it was not part of their client's case that any of the MRC-3 documents was not covered by Order 14 made by Gordon J on 5 February 2013. The nub of the problem, therefore, is that documents which, because of what they recorded or referred to, were covered by the order also contain information which, to put it broadly, does not relate to any aspect of the relief granted to Zomojo by her Honour and which was, so it is alleged, confidential to the assignors. This was, apparently, what was meant by the notation on the schedules sent to Zomojo's solicitors, "Commercial in confidence – partial". 22 Turning to the relief which the applicant seeks, the first question which arose was whether the applicant had established a prima facie case, that is to say, "a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial": Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, 82 [65]. The applicant submitted that it had a sufficient likelihood of success in this sense under the equitable obligation of confidence. What is required in this regard was stated by Gummow J in Corrs Pavey Whiting and Byrne v Collector of Customs (Vic) (1987) 14 FCR 434, 443: It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information: Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; ; [1963] 3 All ER 413n, at 415; The Commonwealth v John Fairfax and Sons Ltd (1980) 147 CLR 39 at 50-51; ; O'Brien v Komesaroff (1982) 150 CLR 310 at 326-328 . In the present case, counsel for the applicant accepted that these were the criteria which their client would need to satisfy. It sought to do so – and I approached the interlocutory application on that basis – in relation to information contained in the MRC-3 documents which did not relate to any aspect of the relief granted to Zomojo by Gordon J. 23 Because of the urgency of the situation, and the applicant's limited opportunity to inspect and to review the documents to which the application relates, I was not prepared to mark down the applicant's prospects by reason of the present state of the evidence under the first criterion referred to by Gummow J. I was prepared to approach the application on the basis that the applicant's project was to protect the information which it claimed to be confidential from disclosure for the time being, so that it might have the opportunity to identify the information at trial with sufficient specificity to satisfy this criterion. 24 With respect to the second criterion, the evidence was very limited and, I would have to say, unsatisfactory from the applicant's point of view. The interlocutory application was first listed before me on 11 October 2013, at which time I made orders providing for the applicant's solicitors to be given access to the MRC-3 documents (by Zomojo which by then had obtained the documents from Mr McKemmish) at the offices of Zomojo's solicitors. This process encountered some technical road blocks, but, in the time available before the application next came before the court on 18 October 2013, 848, out of a total of 2217, MRC-3 documents had been inspected by the applicant's solicitors. 25 In support of a submission that the applicant would satisfy the second criterion of Gummow J, I was referred to three documents that were said to have the necessary quality of confidentiality about them. It was apparent that one of them had been in evidence at the hearing before Gordon J, and was referred to (and quoted from) in her Honour's reasons: 299 ALR at 668 [163]. Another referred to the product described as "ZeptoMux", the specifications of which had also been in evidence before her Honour, and to which she also referred: 299 ALR at 698-699 [288]-[289]. A third document was a minute of a meeting at which this product, amongst others (which were covered by Order 14), was the subject of discussion and resolution. At the prima facie case level, I was satisfied that there was information in this third document that had the necessary quality of confidentiality about it, but it must be said, as stressed by counsel for Zomojo, that it was the only one, out of 848 inspected, which was put before the court and which did meet that criterion. 26 With respect to the second criterion of Gummow J, therefore, and taking into account the difficulties of access which the applicant has apparently encountered, I was prepared to accept the probability that at least some of the MRC-3 documents contained information which qualified and which was unconnected with any basis upon which Zomojo succeeded before Gordon J. However, against that was the equally probable eventuality that others of those documents would not be found to contain any information which had the necessary quality of confidentiality; and, of course, the reality was that the evidentiary picture which the applicant had in fact painted, albeit that it faced the difficulties to which I referred, had been very limited. 27 With respect to the third criterion of Gummow J, with some hesitation I came to the view that, to the extent that the MRC-3 documents contained information which satisfied the second criterion and which was unconnected with any basis upon which Zomojo succeeded before Gordon J, it was fairly arguable that the applicant would succeed on its submission that that information was received by Zomojo in circumstances which would impart an obligation of confidence. Zomojo's submission to the contrary was based on the premise, which I accepted, that the rights of the applicant, as assignee with notice, could not rise any higher than those of the assignors. It was put that, if the assignors had complied with Order 14 in a timely way, the applicant would have had the documents delivered to it, and that too must be accepted. However, that the applicant would then have been entitled to use, to its own advantage and to the detriment of the assignors, information which happened to be in the documents and which was unrelated to any basis upon which it succeeded before Gordon J, or to any purpose for which Order 14 was made, was a much more doubtful proposition, at least as a generalisation. I considered it to be arguable that equity would step in at this point. 28 With respect to the balance of convenience and other discretionary considerations, on behalf of the applicant it was put that, without an injunctive regime of some kind to protect its information in the interlocutory period, the efficacy of its claim to confidence in the information would effectively have been lost forever. Especially in the hands of a competitor, it was said that confidential information is a very fragile commodity which, once shattered, could not realistically be restored to its original state. So much may be granted, but the voice with which such considerations speak in the present case is muted to a degree by the applicant's inability to place before the court anything more than a single concrete example of the information about which it is concerned. On the evidence, the real (as distinct from the theoretical or presumed) danger which the applicant faces if Zomojo should use its confidential information was not readily apparent. 29 As against that, there were two, intensely pragmatic, considerations which tipped the scales strongly in favour of Zomojo. The first related to the consequences of granting the applicant the interlocutory relief which it sought. That relief would not be confined to the information which the applicant claims to be confidential. Rather, if granted, the injunction sought by the applicant would preclude Zomojo from accessing, using or disclosing anything in the MRC-3 documents. Those were, of course, documents to which Zomojo was uncontroversially entitled under the orders made by Gordon J. The injunction would hold Zomojo out of the use of those documents even in relation to information in which the applicant claimed no relevant interest. It is true that the applicant proposed a protocol by which its claims for the protection of the information in the MRC-3 might be assessed, but that looked to me to involve a potentially complicated process, one which includes provisions for the resolution of disputes. While the processes of that protocol were being worked through, Zomojo would not have access to the documents in question. In the Hurd proceeding, Zomojo's claim for monetary relief was yet to be heard by the court: it was listed for 3 March 2014. Zomojo was due to file its evidence on 15 November 2013. One purpose of Zomojo having access to the MRC-3 documents was to assist it in the quantification of its claim in that proceeding. The protocol proposed by the applicant would hold Zomojo out of that access, and would likewise leave no scope for its advisors to use the documents for the purposes of the Hurd proceeding, pending the resolution of such objections as the applicant may advance. 30 The other consideration related to the position which would obtain if the relief sought were refused. It was here that the forensic setting of the case was significant. This is not a case in which, in commerce or ordinary life, a party has come into possession of a document which happens to contain the confidential information of another. The very basis of Zomojo's possession of the MRC-3 documents was, or would be, an order of the court. Furthermore, the order was made in, and the documents related to, a proceeding which was ongoing. In those circumstances, counsel for Zomojo made it clear that his client accepted that it was subject to the usual restriction that the documents could not be used other than for the purposes of the litigation: Hearne v Street (2008) 235 CLR 125, 154-155 [96]. Given the experienced level of representation which Zomojo enjoys in the Hurd proceeding, I could see no reason to determine the present application by reference to an assumption that this restriction would not be respected. 31 As explained above, it was a combination of two factors which led me to refuse the applicant's interlocutory application on 18 October 2013. The first was the absence from the evidence of anything beyond a single instance of actual information which would have the potential to qualify as confidential within the criteria enunciated by Gummow J in the Corrs case. At that point, while I accepted that the applicant had a case that could seriously be argued, I was in no position to go further and get an impression of the dimension or prospects of the case generally. Thus discretionary considerations became quite significant, and it was here that the second factor came strongly into play. For the reasons given in the two previous paragraphs, I took the view that there was a clear balance of convenience in favour of refusing the application. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 25 October 2013