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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Artifical Solutions Germany GmbH v Creative Virtual Ltd & Anor [2007] EWHC 3185 (Ch) (12 October 2007) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2007/3185.html Cite as: [2007] EWHC 3185 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th October 2007

MR JUSTICE BRIGGS:

1. I have before me two applications in a copyright infringement action. The first is by the claimant for an interim injunction restraining breach of copyright pending trial and the second is by the defendants for a stay pending the final determination of an allegedly related action in Hamburg under Article 28 of the Judgments Regulation, this court being the second seized.PRIVATE 
2. The claimant's application is made on the basis that I should conclude that there is no serious issue to be tried; alternatively that the balance of convenience favours the grant of an injunction. The defendant's application is made on the basis that there are two important issues which have been raised in this action which are also raised, albeit not between identical parties, in proceedings in the Regional Court in Hamburg. Since both applications involve the exercise by the court of discretion and since the outcome of each may affect the exercise of discretion in the other, I have heard them both together.
3. The case concerns alleged copyright in a package of computer programmes collectively known as Lingubot. Lingubot is a form of computer software which enables licenced users to build and run a virtual interactive customer service agent, capable of engaging in natural language digital conversations with the users' customers via the internet, SMS, WAP and other channels.
4. In the form with which this action is concerned Lingubot was developed into a marketable package by a German company, "Kiwi Logic". On 14th January 2004 Kiwi Logic and the second defendant, a Mr Ezekiel (a former employee of Kiwi Logic's UK subsidiary) made a written distribution agreement providing for the second defendant (or a company nominated by him) to have the exclusive distribution rights for Lingubot in the UK and Ireland. After an amendment on 19th December 2005 the agreement became one for a fixed term expiring on 30th September 2010 and thereafter until terminated on twelve months notice. Provision for early termination was made by clause 9 upon, among other things, failure by the distributor to pay monies due thereunder. After amendment, the distributor was liable to pay fixed monthly sums on the 15th of each month. During 2006 the monthly sum payable was 9,200 Euros. During this year the monthly sum payable is 10,000 Euros.
5. The Distribution Agreement necessarily involved for its duration a licence by Kiwi Logic to the distributor to copy the Lingubot programmes for sale and for servicing the requirements of existing customers, and the copyright was described as being "owned by Kiwi Logic and/or its suppliers" in an enclosure to the agreement. The Distribution Agreement was expressed to be governed by German law.
6. The second defendant nominated the first defendant, Creative Virtual Limited, a company owned and controlled by him, as the distributor. The first defendant has since then built up a substantial client base for Lingubot in the United Kingdom and Ireland, including among its customers British Telecom and the BBC.
7. With effect from 30th June 2006, the claimant, Artificial Solutions Germany GmbH, another German company, acquired the business and assets of Kiwi Logic, including any copyrights owned by Kiwi Logic and Lingubot pursuant to an Asset Purchase Agreement made in July 2006, also subject to German law. The Asset Purchase Agreement purported to transfer Kiwi Logic's rights and obligations under a series of listed agreements. The list in the Asset Purchase Agreement, as signed, did not include the Distribution Agreement between Kiwi Logic and the defendants.
8. The claimant maintains that the Distribution Agreement was deliberately excluded, such that the claimant obtained the intellectual property rights in Lingubot with no obligation to continue to licence their continued use by the first defendant, while Kiwi Logic remained saddled with an obligation to do just that under the Distribution Agreement, an obligation which Kiwi Logic could not perform because of its transfer of the relevant intellectual property rights to the claimant.
9. The claimant says that this is what it intended when making the Asset Purchase Agreement because it wished to be able both to market products based on Lingubot in the United Kingdom and Ireland without regard to the Distribution Agreement and to control all copying of the software programmes in the UK and Ireland and, indeed, elsewhere.
10. Until the end of 2006 the first defendant paid the monthly fees due under the Distribution Agreement to the claimant once notified of its banking details. Thereafter it ceased to do so in circumstances which I shall have to describe in more detail in due course. The claimant has always maintained that from July 2006 the Distribution Agreement ceased to confer any rights on the defendants to copy or distribute the software since it claims it never became a party to the Distribution Agreement. Nonetheless, subject to that denial, the claimant served notice terminating the Distribution Agreement on 17th May 2007 for non-payment of monthly fees and on other grounds not material today.
11. On 13th July the claimant started this action and applied on the same day for interim relief. On 20th July Mann J made an order pending the effective hearing of the interim relief application providing for payments into a joint account of the monthly amounts due and for certain reporting obligations to be discharged by the defendants. Meanwhile, having been appraised of the claimant's claim that the Asset Purchase Agreement left it with the burden of the Distribution Agreement but without the necessary intellectual property rights to discharge that burden, Kiwi Logic issued proceedings in the Hamburg Regional Court against, among others, the claimant on 2nd March 2007 seeking (and I summarise it in English Language recognising that this may not be a precise description of the relevant causes of action under German law) firstly, a declaration that the Asset Purchase Agreement did indeed transfer the Distribution Agreement to the claimant; alternatively (secondly) for an order for it now to be transferred; thirdly, damages; and, fourthly, in the alternative, rescission ab initio of the Asset Purchase Agreement under section 123.1 of the German Civil Code, relying essentially on an alleged deceit by the claimant during the process of the formulation and execution of the Asset Purchase Agreement. That claim is, if not settled, likely to come to trial in Hamburg in late 2008 at the earliest. Appeals might extend the final determination of that claim in Germany until 2010. The defendants in this action are not parties in the Hamburg action.
12. I turn to the claimant's application for an interim injunction. The claimant seeks to restrain the defendants from (and I quote from the draft minute of order appended to the Application Notice) "copying the software or any part of it, or procuring or authorising any other person, company or firm to do so; or putting into circulation anywhere in the world any copy of the software or any part of it, or procuring or authorising any other person, company or firm to do so."
13. Mr Edwards, who appears for the claimant, submits, although not seeking summary judgment, that the defendants have no arguable defence so that there is no serious issue to be tried and so that, therefore, the balance of convenience does not arise. In that context he relies upon Shepherd & Cooper v TSB Bank plc [1997] 2 BCLC 222, a decision of the Court of Appeal. He puts his case in this way. 1. He says, plainly the relevant copyrights were originally owned by Kiwi Logic. 2. Equally plainly, they were transferred by the Asset Purchase Agreement to the claimant and will remain vested in the claimant until, if ever, the Hamburg Court were to order rescission. 3. He accepts that there is an arguable case that the Distribution Agreement, or, rather, the burden of it was transferred to the claimant under the Asset Purchase Agreement, or an arguable case that it may be ordered to be transferred by the Hamburg Court; but 4, he submits, that non-payment of the monthly instalments from January 2007 onwards is admitted, such that termination is therefore unchallengeable. (I interject that no point is taken on the form or service of the termination notice.)
14. For the defendants, Mr Malynicz submits that there are four seriously triable issues. 1. A group of issues not yet resolved by adequate evidence as to whether Kiwi Logic ever was the copyright owner in relation to Lingubot. 2. The question whether the claimant is subject to the Distribution Agreement at all. It is, as I have recorded, common ground that this is a triable issue, albeit in Hamburg rather than here. 3. For long as Kiwi Logic seeks rescission of the Asset Purchase Agreement in Hamburg the claimant's title to any copyright is in issue; and 4, he submits that the claimant is arguably prohibited from terminating the Distribution Agreement pursuant to two German law doctrines, firstly the doctrine of Creditors Delay, in particular under Article 295 of the German Civil Code, and, secondly, the doctrine of Tu Quoque, which is an aspect of the good faith obligations recognised by German law between contracting parties.
15. The defendants' stay application is based upon the proposition that points 2 and 3 in that list, namely a question whether the claimant is subject to the Distribution Agreement and the rescission question, are already pending in Hamburg. Points 3 and 4 in that list are subject to a wealth of expert evidence from eminent German lawyers who, despite my encouragement to narrow the issues at a directions hearing in September, remain of almost completely diametrically opposed opinions.
16. Taking each of the defendants' points in turn: As to the first, I am not persuaded that there are sufficient issues about whether Kiwi Logic became the copyright owner of the relevant computer programmes to affect the claimant's title to seek an injunction. Copyright in a computer software package (like Lingubot) may and here probably does reside separately in each programme in the package - see sections 1(1)(a) and 3(1)(b) of the 1981 Act. Each programme is likely to be designed by a different individual or team. They may be employees or freelancers, some programmes may be inherited or bought in from a supplier with or without a copyright assignment. Here, notwithstanding present inadequacies in the statement of case as currently pleaded, I am satisfied on the evidence that sufficient of the programmes within Lingubot were created either by Kiwi Logic's employees or by freelancers on terms conferring copyright ownership on Kiwi Logic for the remaining uncertainties to be wholly unlikely to affect the claimant's claim that sale of the Lingubot package by the defendants will, if not authorised by the Distribution Agreement, infringe copyright originally vested in Kiwi Logic.
17. It is conceded that the defendants have an arguable case that the claimant is subject to the Distribution Agreement, either on the true construction of the Asset Purchase Agreement or because Kiwi Logic may obtain an order for the transfer of the Distribution Agreement to the claimant in Hamburg.
18. I do not regard the alternative claim for rescission by Kiwi Logic in Hamburg as giving rise to a serious triable issue as to the claimant's present title to sue as copyright owner. My reasons are as follows. The expert evidence deployed on this point does not make clear whether rescission ab initio for deceit under Article 123.1 of the German Civil Code has the retrospective effect, if ordered, that the Asset Purchase Agreement was void ab initio, or merely that as between the parties they are to make mutual restitutio in intergrum. But Kiwi Logic does not presently claim to have avoided the Asset Purchase Agreement, it merely seek rescission as a possible alternative remedy at trial. There is, therefore, merely a risk that it will be avoided in the future. Until then the Asset Purchase Agreement clearly has transferred Kiwi Logic's intellectual property rights in Lingubot to the claimant.
19. Furthermore, the parties' experts, Professor Grundman for the claimant and Professor Mansell for the defendants, differ as to the likelihood of rescission. Neither describes it as probable and there may be formidable procedural objections, but in any event as a matter of commercial common sense it seems to me that recision is unlikely to be ordered at trial. If Kiwi Logic succeeds it seems to me overwhelmingly likely that it would be satisfied with a declaration or order for transfer of the benefit and burden of the Distribution Agreement to the claimant. If it fails it will not obtain that relief or rescission.
20. The issue whether the claimant has, if subject to it, terminated the Distribution Agreement requires a more detailed review of the facts. They are largely, but not completely, uncontentious. On 18th October 2006 the claimant told the defendants by email that, in the claimant's view, it was not party to the Distribution Agreement and that the defendants had no right to copy or therefore to sell Lingubot in the United Kingdom. The claimant proposed a temporary month by month arrangement pending negotiations for the purchase of the first defendant by the claimant. On 3rd December the claimant told the defendants by email that it intended to treat any further monthly payments by the first defendant as signifying the defendant's consent to the proposed monthly arrangement. On 5th December the 2nd defendant responded that payments were being made pursuant to the Distribution Agreement. On 7th December the claimant warned that if no temporary arrangement had been put in place by 8th January 2007 the defendants would have no right to sell Lingubot and that the claimant would take legal proceedings to prevent the defendants from doing so. On 13th December the defendants reiterated their intent to go on paying the claimant pursuant to the Distribution Agreement. All those communications took place in writing.
21. In a witness statement made for the purposes of this application by the 2nd defendant, he said this:

"I have also made it clear on numerous occasions that I would be willing to pay the sums due to Artificial Solutions upon its confirmation that these payments would be accepted under the existing terms of the Distribution Agreement. Artificial Solutions made it clear to me that if I was to pay the sums to them they would be accepted on the basis of the revised terms as proposed by Mr Ireland (that is the temporary monthly arrangement). This position was reiterated in the meetings which I have detailed below which took place in January and in May (the reference to a meeting in January appears later on in the witness statement to have been a meeting in Frankfurt on 18th January). Eventually I decided to suspend making the monthly payments until the position in relation to the Distribution Agreement became clear, but I have always offered to comply with all aspects of the Distribution Agreement and make the payments due to it, but Mr Ireland always disputed the fact that Artificial Solutions was a party to the Distribution Agreement. He was only willing to accept the payments on the basis that they were in accordance with his new proposal. His actions were the sole basis for Creative Virtual suspending making payment in according with the Distribution Agreement."

22. On 11th January Kiwi Logic's lawyers suggested to the claimant that by accepting payment of monthly installments from the first defendant the claimant had already adopted the Distribution Agreement. In reply on 16th January the claimant's lawyers said:

"AS [the claimant] did never accept any payments from CV [the first defendant] on the basis of the Partner Agreement concluded between CV and Kiwi Logic, rather Mr Ireland made it always very clear to CV that AS would accept the payments only on a new temporary agreement and preserved AS's right to terminate the preliminary agreement without any notice period."

Though negotiations continued there the matter rested. No further payments were made by either of the defendants after the December payment.

23. I turn to the expert evidence. Both experts acknowledged the existence of the German law doctrines of Creditor Delay and Tu Quoque as potential bars to the termination of a contract by a creditor for non-payment by the debtor of money due. They differ as to the ambit of the Tu Quoque doctrine and as to the application of the Creditor Delay and the Tu Quoque doctrines to the facts.
24. I deal first with Creditor Delay. This doctrine is based upon Articles 293 to 295 of the German Civil Code, which in the English translation included in a comparative treatise on the German Law of Contract by Sir Basil (inaudible) and others read as follows:

"Delay by Creditor.

293. Delay in Acceptance.

The creditor falls into delay when he does not accept the performance offered to him.

294. Actual Offer.

The performance must be actually offered to the creditor as it is to be effected.

295. Verbal Offer.

A verbal offer by the debtor suffices if the creditor has declared to him that he will not accept the performance or if action by the creditor is necessary for the effecting of performance, in particular if the creditor has to collect the thing owed. An invitation to the creditor to undertake the necessary action is equivalent to an offer of performance."

25. The present case concerns the first part of Article 295, it being common ground that no action by the creditor was necessary for the effecting of payment of the monthly instalments. The experts agree, first, that it is not a breach of contract for a party to assert a belief that he is not bound by that contract providing he continues to perform his obligations under it; and (b) that payment is not validly offered verbally under Article 295 if the debtor attaches a new condition altering the parties' contractual obligations. I should add that the account of what took place orally in Mr Ezekiel's witness statement is disputed by the claimant.
26. Professor Mansell maintains that, on the evidence which I have described the claimant refused to accept payment by the defendants, save on terms that it was to be payment for a proposed temporary arrangement and that the defendants verbally offered to pay without imposing an extra contractual condition. Professor Grundman maintains, by contrast, first that the claimant imposed no improper condition of its own and, secondly, that on the second defendant's evidence his offer of payment on condition that the claimant accepted that it was bound by the Distribution Agreement was an extra contractual condition.
27. In my view, that difference of opinion cannot be resolved now. It depends first on resolution as to what precisely was said orally, for example, at the 18th January meeting in Frankfurt as to which there is a pure factual dispute, and, secondly, on the experts' conflicting opinions being tested by cross-examination. In reaching that conclusion I acknowledge that the experts stated in a very short joint statement that the question of interpretation of the meaning of what the parties said to each other is a matter for the court rather than for experts or for German law, but nonetheless as it seems to me the question what effect those statements had as a matter of German law and whether they attracted the doctrine of Creditor Delay is nonetheless sufficiently a matter of interpretation, in relation to which an English court both requires and is likely to be assisted by the opinions of German lawyers.
28. I turn to the Tu Quoque doctrine. Under this doctrine a failure by a debtor to pay a creditor may not be relied upon by the creditor as justifying termination if the debtor's failure has been brought about by or is sufficiently connected with some earlier breach of contract by the creditor. It is described by Professor Mansell as a particular application of the German law version of the 'clean hands' doctrine familiar to equity lawyers. Professor Mansell maintains that the facts proved by the emails and alleged by the second defendant in his witness statement attract that doctrine. Professor Grundman vigorously disagrees. His opinion is that the doctrine has no application at all to long-term contracts like the Distribution Agreement, and in any event that the facts do not show the necessary predominance of fault by the claimant sufficient to justify, in the relevant sense, the defendants' failure to pay. All the claimant did, says Professor Grundman, was lawfully to dispute that it was bound by the Distribution Agreement.
29. This difference of expert opinion is again, in my judgment, a classic triable issue. Although the court may decide questions of English law on agreed facts, for example the construction of documents at the interim stage, questions of foreign law are not susceptible to this robust treatment unless the court can see without the need for cross-examination that one of the two experts is clearly right. Here both opinions are argued logically, persuasively and with copious reference to German authority. I could not begin to determine whether the Tu Quoque doctrine applies or even express a view, as an aspect of the balance of convenience, which opinion would be likely to prevail at trial.
30. Issues of this kind, whether a threatened refusal to perform a contract justifies termination or prevents the creditor terminating for non-payment by the debtor, are in my view likely to give rise to difficult questions in any mature system of law. I have in mind in particular the conflict, if that it be, between the decision of the House in Lords in Woodar and Wimpey Construction [1981] WLR 277 and the Privy Council in Federal Commerce v Molina Alpha [1979] AC 757, a conflict on relatively similar facts which the editors of the current edition of Chitty on Contracts years later regard as difficult to reconcile.
31. I must therefore address the balance of convenience. Here a primary question is for how long will the interim regime have to endure before relevant triable issues can be resolved? That depends on the stay application to which I must now turn. It is based upon Article 28 of the Judgments Regulation, which reads as follows:

"1. Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings.

2. Where these actions are pending at first instance any court other than the court first seised may also on the application of one of the parties decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.

3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

32. Both Mr Edwards and Mr Malynicz agree that I should have regard to the following jurisprudence on Article 28. Firstly the statement by the Advocate General in The Tatry reported at [1999] QB 515 in a note, that:

"Two or more actions do not have to have the same parties or involve the same subject matter or cause of action in order to be related within the meaning of Article 28.3".

33. There the Court of Justice held that the concept of irreconcilable judgments is not confined to cases where the decision would have mutually exclusive legal consequences. Again in the words of the Advocate General:

"The rationale of the provision is to encourage harmonious judicial decisions and thereby obviate the danger of judgments which conflict with each other, albeit only as regards their reasoning. The court second seised should be able to have recourse to the machinery envisaged by that provision whenever it considers that the reasoning adopted by the court hearing the earlier proceedings may concern issues likely to be relevant to its own decision."

34. Secondly, the dictum in the speeches of the House of Lords in Sarrio SA v Kuwait Investment Authority [1999] 1AC 32 to the effect that the question whether actions are related should be determined in a broad common sense manner. Thirdly, the opinion of the Advocate General in Owens Bank v Bracco [1994] QB 509, to the effect that when considering whether or not to grant a stay under the equivalent of Article 28 (as it appears in the Brussels Convention) the court must have regard first to the extent and relatedness and to the risk of mutually irreconcilable decisions, second to the stage reached in each set of proceedings, and, thirdly, to the proximity of the courts to the subject matter of the case.
35. Finally, I bear in mind the dictum of Rix J in Centro Internationale Bank AG v Morgan Grenfell Trade Finance Limited [1997] CLC 870 at 891, where he said "there is no presumption in favour of a stay" and that "the burden of proof or persuasion is on the applicant".
36. I would add in addition to those principles that in the United Kingdom there is, in my judgment, no good reason why the objective identified by the Advocate General in The Tatry should be addressed purely and solely by the application or non-application of a total stay. The English court has the power to case manage litigation to achieve the overriding objective and there is no reason why the obvious inconvenience or potential injustice of irreconcilable judgments and multiplicity of proceedings cannot be eliminated or reduced to acceptably low levels of risk by case management solutions falling short of a wholesale stay.
37. Here, the two actions are, in my judgment, plainly related and the question whether the claimant has a right permanently to prevent the defendants from copying or distributing Lingubot depends in part on two issues already pending in Hamburg, namely whether the Distribution Agreement is binding on the claimant at all and whether the Asset Purchase Agreement and, therefore, the transfer of the copyrights in Lingubot to the claimant, is vulnerable to rescission. But that second issue does not affect the claimant's present right.
38. By contrast, the remaining issues in this action, namely the termination issue and, if triable at all, the question whether Kiwi Logic was ever the copyright owner of a sufficient number of copyrights in the relevant computer programmes, do not arise in Hamburg as between the claimant and Kiwi Logic.
39. The problem facing the court is not merely one of irreconcilable judgments. The common issues and especially the question whether the Distribution Agreement should now be transferred to the claimant necessitate the participation of Kiwi Logic as a party and no-one proposes to join Kiwi Logic in this action. Even if the Hamburg case was pending in England there would therefore need to be cooperative case management as between the two actions, whether by consolidation or by a decision that particular issues be taken first as preliminary issues.
40. Here, in my judgment, the obvious solution is not a wholesale stay, but the identification as preliminary issues of all triable issues in this action which do not also arise in Hamburg. By that I mean the termination issue, but I cannot prevent the defendants persisting with the supposed issue as to the question as to whether copyright sufficiently resided in Kiwi Logic in the first place.
41. Mr Malynicz asks why spend money on those issues when it may turn out (a) that the claimant was never subject to the Distribution Agreement at all; or (b) that the Asset Purchase Agreement is to be rescinded. In my judgment, the answer to that question is as follows. First, frequently trials do involve expenditure on issues which in the end are trumped by other issues. Secondly, the termination issue is, subject perhaps to minimal disclosure, almost ready for trial For example, full experts' reports have been exchanged, the experts have met and produced an agreed agreement statement and factual witness statements have been served, though I do not rule out the possibility that further factual evidence may be sought to be brought to bear on the relatively narrow issue of what was said at the meetings in January and May 2007. Thirdly, a speedy trial of the termination issue may show, if the claimant succeeds, that the Distribution Agreement is an irrelevance and that may make it much easier for the claimant and Kiwi Logic to settle the Hamburg case. Furthermore, if the claimant succeeds on determination then the only impediment to a permanent injunction will be Kiwi Logic's rescission claim and the effect of that can be provided for by an injunction coupled with liberty to apply if rescission is ordered in Hamburg.
42. Having consulted the Clerk of the Lists, it appears that by directing a speedy trial of the preliminary issues, as I have just identified them, this will shorten the time during which the present interim regime must be considered from, say, a year to three or four months, without creating any risk of irreconcilable judgments. That is what I propose to do and I will hear submissions on the necessary directions for a speedy trial which I have been informed should be available on a three to five day estimate in January 2007.
43. I can return therefore to the balance of convenience on the basis of considering what interim regime creates the least risk of injustice during that shorter period. If an interim regime is needed thereafter, that is pending judgment in Hamburg but after determination of the preliminary issues, for example if the defendants succeed on termination, it can be considered on its then merits once the preliminary issues have been determined.
44. As to balance of convenience, the first question is whether the claimant would be adequately compensated in damages if successful at trial, but obtaining no injunction in the meantime. Mr Edwards submits that the answer is in the negative, first, because it will be hard for the defendant to quantify its loss occasioned from the defendant's unlawful competition during the period when the claimant wishes to and is ready to establish its own business in the marketing and sale of an updated version of Lingubot in the United Kingdom and Ireland, and, secondly, because a damages remedy will incur a credit risk for the claimant, because the defendants may not be worth the money at the end of the trial.
45. By contrast, the defendants submit that the damages will be easily quantified and probably limited to a royalty assessment and that the first defendant is well able to pay any damages ordered.
46. In evidence and submissions the claimant identified a number of respects in which continual marketing and sale of Lingubot by the defendants in the form which they have available might cause economic harm to the claimants, whether or not recoverable in damages for breach of copyright. They included lost opportunity to establish a market for a broader product incorporating an updated version of Lingubot; confusion in the market place between that new product and the defendant's existing version of Lingubot; and possible damage to the reputation of Lingubot as a branded product attributable to the defendant's continued sale of an out of date version.
47. Mr Malynicz submitted that economic loss of this type was outside the scope of damages for breach of copyright, but the point was not supported by citation of authority, other than an unnamed Court of Appeal case which was described by Mr Malynicz as possibly relevant.
48. The claimant relied in a supplemental skeleton on the following passage from the judgment of Carnwarth LJ in SmithKline Beecham v Apotex (Europe) Limited [2003] FSR 31, at paragraph 43:

"The purpose of an interlocutory injunction therefore is protection, not just against "loss which would sound in damages", but against violation of any right where damages would not be adequate compensation. An obvious example of the need for that wider formulation is the case of trespass to land…. With great respect to Robert Walker J therefore I think that the passage in Peaudouce may be too narrowly stated."

49. The passage in Peaudouce SA v Kimberley-Clark Ltd to which Carnworth LJ referred (Peaudouce being reported at [1996] FSR 680) is a citation of observations of the Court of Appeal in Polaroid Corporation v Eastman Kodak [1997] PC 379 as follows:

"In general, and I am putting on one side actions based on the apprehension of non-economic loss such as some breaches of confidence and other special cases such as anti-suit injunctions, injunctions are granted in order to protect a plaintiff from loss which would sound in damages, not from loss which would not sound in damages."

50. In my judgment, it is well arguable that damages in the present case may prove to be a less than ideal remedy, not because of any risk that the defendants will not be good for the money, nor because of any supposed inadequacy in damages as a remedy for copyright infringement, but first because copyright is a property right, which the claimant is prima facie entitled to have protected by injunction, and, secondly, because the extent of the claimant's loss will in some respects be difficult to quantify. There is therefore at least a risk of injustice if an injunction is refused now, but the claimant establishes its claim at trial.
51. The second question is whether there is a corresponding potential for injustice if the defendants are restrained now, but succeed at trial. Mr Malynicz relied on the following. First, the injunction as sought would simply put the first defendant out of business, at the heart of which lies the copying of Lingubot, both in obtaining new clients and in servicing the requirements of existing clients. Secondly, the defendant has an established market reputation and customer base which would clearly be lost, whereas the claimant complains only of the loss of an uncertain opportunity to establish a new market of its own. Thirdly, he submits that the claimant suffers no threat to its continued existence as a business by the refusal of an injunction. Fourthly, he submits that part of the defendants' loss would be as hard to quantify as the claimant's loss because it would includes its hoped for but uncertain future marketing between now and trial. No point is taken on the defendants' behalf as to the adequacy of the proffered cross-undertaking in damages.
52. In my judgment, the grant of an injunction now would plainly work an injustice on the defendants if they succeeded at trial because again damages would not for the above reasons be an adequate remedy. In assessing which of these two potential injustices carries the greater weight, I bear in mind the relatively short period of interim restraint necessary before the trial of preliminary issues, but I nonetheless consider that the potential for injustice to the defendants significantly outweighs the risk of injustice to the claimants. This is primarily because, in relation to the defendants, injustice is a certainty rather than a risk if they succeed at trial because the first defendant has a business which would be entirely shut down, whereas the claimant faces merely the brief postponement of a potentially lucrative marketing opportunity. That, in my judgment, outweighs whatever modest risk there may be that the defendants may not be good for a damages award at trial having regard to the evidence before the court.
53. Mr Edwards offered to attenuate his proposed injunction by excluding from its scope the continued servicing of the defendant's existing clients. That goes a long way to even up the potential injustices, but not in my judgment quite the whole way. Conversely, the defendants suggest that a continuation of the present interim regime where the first defendant pays the monthly amounts due into a joint account pending trial and complies with certain reporting obligations would also reduce potential injustice to the claimant. Again, in my judgment it will, but it will not nearly eliminate it.
54. Other relevant considerations include preservation of the status quo ante bellum. Plainly, that favours the defendants since any injunction will alter a status quo which existed long before this dispute arose.
55. Finally, although the relative strength of the parties' cases may be relevant in particular circumstances, I have been unable to conclude that either party's case on the triable issues is obviously stronger than the other's. Furthermore, this is not a case where the interim regime will effectively be decisive of the parties' rights, save in the sense that an injunction now, even if only for three months, might so disrupt the defendant's business that it could no longer viably be restarted.
56. Overall, therefore, I consider that the balance of convenience comes downs against the ground of any three month interim injunction, even one which excluded the defendants' continued servicing of its existing clients, and in favour of continuing the regime of payment into court and a regime for periodic reporting by the defendants to the claimant in accordance with the Distribution Agreement about the detail of which I will hear submissions.