Nanofilm Technologies International Pte Ltd v Semivac International Pte Ltd and others

• Jurisdiction: Singapore
• Judge: George Wei J
• Judgment Date: 26 July 2018
• Neutral Citation: [2018] SGHC 167
• Plaintiff Counsel: Jevon Louis and Paul Teo (Ravindran Associates)
• Date: 26 July 2018
• Docket Number: Suit No 747 of 2016
• Hearing Date: 23 October 2017,26 October 2017,24 October 2017,11 December 2017,25 October 2017
• Subject Matter: Employment Law,Remedies,Infringement,Copyright,Tort,Confidence,Breach,Inducement of breach of contract,Contract of service
• Year: 2018
• Defendant Counsel: Rajendran Kanthosamy, Subash Rengasamy and Sri Balan s/o Krishnan (Relianze Law Corporation)
• Court: High Court (Singapore)
• Citation: [2018] SGHC 167
• Published date: 03 August 2018

George Wei J: Introduction

This is an action brought by the plaintiff against two former employees and the company set up by the former employees. The dispute concerns specialised coating technology. The plaintiff makes four claims.¹ First, that the 1st defendant infringed copyrights belonging to the plaintiff. Second, that the 2nd defendant breached his employment contract with the plaintiff. Third, that the 1st and 2nd defendants breached their duty of confidence owed to the plaintiff. Last, that the 3rd defendant induced the 2nd defendant to breach his contract with the plaintiff.

For convenience, the judgment that follows is structured as such: The background The parties An overview of the technology The genesis of the dispute The witnesses and procedural issues The claim against the 1st defendant for copyright infringement The Semivac Slides The Semivac Drawings Infringement and the plaintiff’s pre-existing technical drawings Do the Semivac Drawings reproduce a substantial part of the plaintiff’s pre-existing technical drawings? The useful article defence and the plaintiff’s pre-existing technical drawings Infringement and the Semivac Drawings Were the copyrights in the Semivac Drawings infringed? The useful article defence and the Semivac Drawings The claim against the 2nd defendant for breach of contract The claim against the 1st and 2nd defendants for breach of confidence The claim against the 3rd defendant for inducing breach of contract Conclusion on liability Remedies and relief Against the 1st defendant for copyright infringement The Semivac Slides The Semivac Drawings Against the 1st and 2nd defendants for breach of confidence Against the 2nd defendant for breach of contract Against the 3rd defendant for inducing breach of contract.

The background The parties

The plaintiff, Nanofilm Technologies International Pte Ltd, is a Singapore company incorporated in May 1999.² It is in the business of manufacturing and providing Filtered Cathodic Vacuum Arc (“FCVA”) technology products and services.³ The plaintiff’s chief executive officer and founder is Dr Shi Xu,⁴ and its senior vice-president is Dr Wei Hao.⁵

The 1st defendant, Semivac International Pte Ltd, is also a Singapore company, and is in the business of providing products and services in the vacuum industry.⁶ The 1st defendant specialises in providing pumps, spare parts, and installation and maintenance services.⁷

The 2nd defendant, Xu Yibo, was employed by the plaintiff on 6 April 2000 as an applications engineer.⁸ He was then promoted to manager – production mechanical on 1 January 2007.⁹ The 2nd defendant’s duties in this role included designing components using software.¹⁰ On 1 August 2014, the 2nd defendant was re-designated as – or in harsher terms, demoted to – senior engineer – mechanical design.¹¹ His employment with the plaintiff was eventually terminated on 13 January 2016.¹² Whilst in the employ of the plaintiff, the 2nd defendant became a director of the 1st defendant on 6 October 2008, and continued as such until 11 January 2016.¹³

The 3rd defendant, Hu Lang, was employed by the plaintiff from November 1999 to 4 January 2008 as a senior process engineer.¹⁴ He was subsequently promoted to senior manager of after-sales technical support.¹⁵ The 3rd defendant then left the plaintiff to set up the 1st defendant¹⁶ and has been its managing director since 6 October 2008.¹⁷

An overview of the technology

Whilst this is not a case of patent infringement, an overview of the technology will be helpful to shed light on the issues that have arisen. The following overview is based on the evidence and submissions put before the court.

FCVA technology, put simply, is a method of coating materials or products with a thin film of metallic, ceramic or composite substances.¹⁸ For example, the technology can be used to coat articles with a thin film of diamond-like carbon particles, known as tetrahedral amorphous carbon, to reduce friction and prolong the life of the article.¹⁹ The general technology has been known for quite a long time and appears to date back to technology developed in the Soviet Union before the 1980s.²⁰ Cathodic vacuum arc technology, when first developed, apparently did not incorporate a filter.²¹ Thereafter, filters of various shapes were used.²² Eventually the plaintiff developed its version of FCVA technology which uses a “double bend filter”, together with some other improvements, the details of which are unnecessary for present purposes.²³

FCVA technology comprises hardware and software. For the purposes of this case, the hardware is essentially a “machine” made from various components such as a power supply, circuit boards, various types of valves, vacuum pumps, filters amongst other things.²⁴ The software used in the control panel is concerned with the carrying out of the various processes involved in FCVA coating.²⁵

Whilst the plaintiff asserts that it has obtained numerous patents over its FCVA technology,²⁶ I note that the plaintiff does not in this case rely on any patents or registered design rights.²⁷ Indeed, it is not clear whether there are any relevant patents which are still in force over FCVA technology.²⁸

What is clear is that some, possibly many, hardware components of the FCVA machine are available from various original equipment manufacturers (“OEM”).²⁹ In a sense, some of the components are generic components that could be used in a variety of different types of machines serving the same, similar or even different purposes. On the other hand, some components might be developed “in-house” by the plaintiff, such as a valve with a particular shape and set of dimensions: the point being that advantages may arise from the particular shape.³⁰

Whilst the evidence could have been clearer, it appears that although some parts or components of the plaintiff’s FCVA machine are designed in-house for use in a generic FCVA machine, some components may be designed in accordance with the needs of particular customers.³¹ FCVA machines can be made in different sizes and might be adjusted or tailored, so to speak, for particular types of coating applications.³²

In any event, it appears that some component parts would wear out or require servicing from time to time.³³ If the component had to be replaced, it stands to reason that the plaintiff would have to either (i) use a component from stock; (ii) order the relevant component from a third party manufacturer; or (iii) fabricate the component part itself.

For completeness, I note Dr Wei Hao’s evidence that the plaintiff’s business comprises manufacturing and servicing their own machines.³⁴ Further, whilst the plaintiff’s main business is in FCVA machines/technology, Dr Wei Hao explains that they also make and supply more traditional and cheaper coating machines.³⁵ Indeed, the 2nd defendant in cross-examination agreed that the plaintiff sold different types of vacuum coating machines, including machines using something called a “sputter source”, which appears to involve a different process from FCVA machines.³⁶

The genesis of the dispute

The 3rd defendant had been working for the plaintiff for almost ten years at the time of his departure in early January 2008.³⁷ It is not disputed that, at the time of his departure, the 3rd defendant and the 2nd defendant had been colleagues for about eight years.³⁸

After the 3rd defendant left in January 2008, the 2nd defendant remained a full-time employee of the plaintiff.³⁹ The 2nd defendant, together with the 3rd defendant, then “set up” the 1st defendant in 2008.⁴⁰ That said, I note that there is a dispute as to whether the 2nd and 3rd defendant jointly decided to set up the 1st defendant or whether the 3rd defendant persuaded the 2nd defendant to join him shortly after the 1st defendant was incorporated. This will be examined later. In any case, it is not disputed that the 2nd defendant became a director of the 1st defendant at or about the same time the 3rd defendant became the managing director of the 1st defendant.⁴¹

The plaintiff’s basic case is that the 2nd defendant did not obtain the plaintiff’s consent to become a director of the 1st defendant or to perform any work for the 1st defendant.⁴²

The plaintiff alleges that, whilst in the employment of the plaintiff, the 2nd defendant created numerous technical drawings for the 1st defendant.⁴³ The technical drawings were created using the laptop and software (computer-aided design program (“CAD”)) provided by the plaintiff.⁴⁴ The laptop had been provided to the 2nd defendant because there was a period when he was required to travel overseas.⁴⁵ The plaintiff avers that some of the drawings were created during the plaintiff’s official working hours.⁴⁶ Other drawings may have been created outside of office hours, using the plaintiff’s laptop.⁴⁷

I note that these technical drawings (the “Semivac Drawings”), which bore the 1st defendant’s name, were recovered from the 2nd defendant’s laptop with the assistance of Nexia TS Risk Advisory Pte Ltd (“Nexia”), a computer forensics company.⁴⁸ Some 48 Semivac Drawings were recovered by Nexia.⁴⁹

Nexia’s report concluded that the 2nd defendant had in his possession technical drawings of the plaintiff (not drawn by the 2nd defendant), which were then changed/modified for the first defendant’s use.⁵⁰ The plaintiff’s case is that, aside from these 48 Semivac Drawings, there were many more technical drawings which it was unable to recover from the laptop.⁵¹ This is indeed likely, as the 3rd defendant under cross-examination agreed that the 1st defendant made more than just 48 Semivac Drawings.⁵²

The plaintiff’s case is that most of the Semivac Drawings were either unauthorised copies or adaptations of technical drawings belonging to the plaintiff.⁵³ The defendants’ case essentially is that the majority of the Semivac...