Quantum Glass Ltd & Ors v Spowart & Ors [2000] ScotCS 299 (30 November 2000)

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[1] In this opinion I shall refer to the pursuers respectively as "Quantum", "Triangle" and "Redwind", and the defenders respectively as "Dr Spowart", "Kelsill" and "Smart Power". According to his curriculum vitae, Dr Spowart has extensive experience in the custom development of high purity glasses whose properties can be tailored to many high technology applications. Quantum was incorporated in June 1996 for the purpose of developing and marketing certain technology relating to light emitting or light absorbing glass which has been worked on by Dr Spowart. From 21 June 1996 to 19 September 1997 Dr Spowart was a director of and consultant to Quantum. During this period he worked on the development of certain technology which became the property of Quantum. By international application No.PCT/GB99/03692 with the international filing date of 8 November 1999 Kelsill, as applicant for all designated States except the United States of America, and Dr Spowart as inventor and as inventor/applicant for the United States of America only, applied for a patent under the title "Security Printing". In terms of the abstract, the invention claimed by the applicants was:

The pursuers allege that Quantum and Triangle are the persons entitled to the whole of the property in, and the persons entitled to be granted a patent for, the invention claimed in this application. They conclude, firstly, for declarator to that effect and, secondly, for an order that the application shall proceed, in the United Kingdom, in the names of Quantum and Triangle jointly, instead of the names of Dr Spowart and Kelsill.

[2] The pursuers' third, fourth and fifth conclusions, as amended at the bar, are in the following terms:

[3] A motion on behalf of the pursuers for interim interdict in terms of the third, fourth and fifth conclusions of the summons came before me for a hearing which extended to some two and a half days. By that stage, defences had not yet been lodged, but both parties had lodged inventories of productions and the solicitor advocate for the defenders had sufficient instructions to enable him to advance full submissions on their behalf. What I have to decide is whether, having regard to the averments in the summons and the extensive submissions of counsel for the pursuers and the solicitor advocate for the defenders, the pursuers have established a prima facie case and, if so, whether the balance of convenience favours the granting of interim interdict at this stage. If the pursuers have succeeded in establishing a prima facie case, the relative strength of the cases put forward by each party at this stage is one of the many factors that may go to make up the balance of convenience: NWL Limited v Woods [1979] 1 W.L.R. 1294 per Lord Fraser at p.1310, Toynar Limited v Whitbread & Co plc 1988 S.L.T. 433 and, in the field of intellectual property, Malden Timber Limited v McLeish 1992 S.L.T. 727. In these circumstances I think it appropriate to set out at some length the submissions advanced to me during the course of the hearing.

[4] Counsel for the pursuers began his submissions by saying that at the heart of their action lies their contention that Dr Spowart has appropriated trade secrets belonging to the pursuers and used them as the fundamental basis of the patent application made in name of himself and Kelsill. Also lying at the heart of the action is the apprehension that Dr Spowart is in possession of further confidential information amounting to trade secrets belonging to the pursuers and not disclosed in the patent application and which the pursuers fear that he may use or disclose. The purpose of the action is to secure a finding that the pursuers are the persons entitled to be granted a patent for the invention claimed in the patent application and to prevent the defenders from using or disclosing any further confidential information of the pursuers amounting to trade secrets, so far as these have not already been disclosed in the application. The specific purpose in seeking interim interdict is to prevent the defenders from doing anything to prejudice the objective of the pursuers in having the patent application proceed in their name and the patent granted to them.

[5] Quantum was incorporated in June 1996 following discussions that had taken place between Dr Spowart, Ross Peters and Alan Fortune, all of whom became directors of Quantum. Their initial discussion related to the development of a new form of fluorescent light tube. It is possible to make special glasses in which the admixture of rare earths (i.e. certain inorganic substances in the periodic table of elements) as dopants gives the glasses the properties of emitting or absorbing light. Conventional fluorescent lights emit visible light by using phosphor coatings inside thin glass tubes to convert a gas ultraviolet discharge generated between electrodes. Much of the cost of manufacture of these lights is attributable to the phosphor coatings. The proposal was that Quantum would produce light emitting glass fluorescent lights in which the glass tubes themselves would convert the ultraviolet discharge directly and emit the light. This would eliminate the need for phosphor coatings and would not only reduce the cost of manufacture but would also reduce running costs by more efficient conversion of the input electrical energy into light. Mr Fortune and Mr Peters were to supply the commercial input and finance, while Dr Spowart was to supply the scientific input. Mr Peters had a background which was both scientific and financial and he understood enough of the science and technology to act as a bridge between the directors.

[6] Counsel went on to explain, under reference to a diagram, how absorption of light can be detected. An ordinary light bulb is used as a source of light output in the visible, ultraviolet and infrared ranges of the spectrum. When this light is directed onto material with light absorbing characteristics, non-absorbed light returns and can be examined by means of a spectrograph. The non-absorbed light passes through a grating within the spectrograph which breaks up the returned light into responses in various ranges within the spectrum. Ultraviolet light is treated as falling within the range 1nm (nanometre) to 360nm, visible light as falling within the range 360nm to 760nm, and infrared light, which includes near near infrared and near infrared light, within the range 760nm to 3000nm. Counsel stated that scientists are not unanimous about the dividing point between the visible and infrared ranges, some placing it at 780nm. The diagram goes on to show how a photo detector array within the spectrograph can be used to detect non-absorbed light within the ultraviolet, visible or infrared range. A display then shows the wavelengths of the absorbed and the non-absorbed light. The display takes the form of a continuous wavy line, with pronounced "peaks" at the wavelengths at which the light has been absorbed. Counsel stated that Quantum developed a spectrograph reader which functioned in the manner indicated in the diagram. For its light output it used an ordinary 4 watt light bulb.

[7] Counsel then turned to various documents which were executed on 21 June 1996. The first of these was a shareholders' agreement among Dr Spowart, Mr Peters, Mr Fortune and others, including Quantum (then called BLP 966 Limited) (therein called "the Company"). The preamble to the agreement provided that the parties thereto, other than the Company, had agreed to subscribe shares of the Company and intended that it should develop and exploit the Prototype and the Technology, as therein defined. By Clause 1.1 the expression "the Technology" was defined as meaning inter alia the Technology developed by Dr Spowart to fabricate high efficiency light emitting glass within all its applications, and the expression "the Prototype" was defined inter alia as meaning a working prototype of a light tube or tubes manufactured from the glass developed as part of the Technology. Clause 2 provided that the object of the Company should be the exploitation of the Technology in the lighting market and in all other markets which the Board might from time to time consider it to be appropriate. (I should mention at this point that the memorandum and articles of association of Quantum have not yet been lodged.) Other definitions in Clause 1.1 which are relevant for present purposes were of the expression "Intellectual Property Rights", which was defined as meaning all rights resulting from intellectual activity in the scientific, industrial, literary or artistic fields including, without limitation, patents for inventions, improvements, registered designs, unregistered designs, unregistered design rights, copyright, trade, service marks and all applications for the foregoing; and the expression "Know-How", which was defined as meaning all scientific or industrial or commercial information held by Dr Spowart relating to the Technology (howsoever recorded or stored) including, without limitation, information regarding techniques or methods or practices of the manufacture, supply and/or use of products incorporating the Technology, discoveries, secret processes, all information disclosed by or contained in existing drawings, plans, formulae, specifications, calculations, test data, instructional material, flow charts, process information, sourcing information, information regarding component and product pricing, information regarding test procedures and research and development and other similar information.

[8] The second document executed on 21 June 1996 was a consultancy agreement between Quantum and Dr Spowart. This provided, by Clause 1.1, that terms defined in the shareholders' agreement should have the same meaning when used in the consultancy agreement. It also contained additional definitions, including that of the word "Services" as meaning the provision to the Company of inter alia consulting services relating to the Company's development of the Prototype and to the commercial exploitation of the Prototype and the Technology in accordance with the shareholders' agreement. By Clause 2 Quantum appointed Dr Spowart to provide the Services and Dr Spowart agreed to provide such Services on the following terms and conditions. By Clause 3 it was provided that the consultancy agreement should commence on the date thereof and, subject to Clause 10 (which provided for earlier termination in certain events), should continue for a period of four years. Clause 8 of the consultancy agreement was in the following terms:

Counsel also referred to Clause 9.1, which provided that all intellectual property, created or discovered by Dr Spowart, whether alone or jointly with any other person, in the course of his provision of the Services should be fully disclosed forthwith to the Company and such intellectual property and all Intellectual Property Rights, and the right to apply for the same, relative thereto should belong to and vest absolutely and beneficially in the Company, and Clause 11.5, which contained the undertaking by Dr Spowart that he should not, following the termination date, divulge or make use of any information relating to the Group which was confidential or was treated as such by the Company or any relevant Group Company, unless ordered to do so by a court or tribunal of competent jurisdiction or a regulatory authority which Dr Spowart was obliged to obey.

[9] The third document executed on 21 June 1996 was an assignation between Dr Spowart and Quantum. By Clause 2 Dr Spowart inter alia assigned to Quantum his whole right, title and interest past, present and future in and to the Assigned Rights, which in terms of Clause 1.1 were defined as meaning all Intellectual Property Rights and Know-How connected with the Technology. The expression "Intellectual Property Rights" was defined as meaning all rights resulting from intellectual activity in the scientific, industrial, literary or artistic fields including, without limitation, patents for inventions, improvements, registered designs, unregistered designs, unregistered design rights, copyright, trade, service marks and all applications for the foregoing. The expression "Know-How" was defined as meaning all scientific or industrial or commercial information held by Dr Spowart relating to the Technology (howsoever recorded or stored) including, without limitation, information regarding techniques or methods or practices of the manufacture, supply and/or use of products incorporating the Technology, discoveries, secret processes, all information disclosed by or contained in existing drawings, plans, formulae, specifications, calculations, test data, instructional material, flow charts, process information, sourcing information, information regarding component and product pricing, information regarding test procedures and research and development and other similar information. The expression "the Technology" was defined as meaning the technology developed by Dr Spowart to fabricate high efficiency light emitting glasses within all its applications, including, without limitation, lighting, artefacts and lasers. It is averred that Quantum paid Dr Spowart £155,000 and allotted him shares in Quantum worth £154,000 in return for his agreeing to demonstrate a working prototype of a fluorescent tube to the agreed specification, on the understanding that he would be paid a further £100,000 upon the prototype itself being demonstrated.

[10] Counsel submitted that, although the parties were at that stage principally concerned with the development of a fluorescent tube, the definition of "Technology" in the documents executed on 21 June 1996 was wider than that. He also pointed out that in addition to entering into the consultancy agreement Dr Spowart became a director of Quantum and thereby undertook the obligations of that office.

[11] At about the same time as executing the above-mentioned documents Dr Spowart made a written technology disclosure relating to light emitting glasses. Counsel referred to passages in this which related to the admixture of rare earths as dopants in glasses of various formulations, with spectrograph readings of the light emitted in response to excitation at various wavelengths. Counsel drew attention in particular to a passage at p.58 in these terms:

[12] Counsel went on to explain that during the latter part of 1996 the initial application of Dr Spowart's technology to the development of a fluorescent light tube came to nothing, but the parties came to be aware that the application of the technology might be valuable in other ways. In August 1996 the manufacturers of a security ink with whom Quantum had been in contact enquired if Quantum could produce glass for incorporation into a security ink which could strongly absorb light at the infrared end of the spectrum. This was the trigger for the development of a project of real value to Quantum. This enquiry, and the work done pursuant to it, gave rise to the realisation for the first time on the part of anyone, including Dr Spowart, that his technology might have a security printing application. In the security industry there had been some use of dopants in ink which responded to ultraviolet radiation, but these dopants were easy to identify and to obtain and consequently were of very limited use because they could be used by forgers. The enquiry was directed to developing dopants which could be added to ink in such a way as to give a clear reading but could not be identified or replicated by forgers, or anyone else for that matter. In response to that enquiry, Dr Spowart identified certain rare earths which could strongly absorb light in the infrared range. These were initially added to ink without being admixed into glass.

[13] Counsel said that in September 1996 a major bank became aware of Quantum's work as a result of an approach to it by Mr Fortune. The bank were interested in the use of dopants in glass. Representatives of the bank attended a demonstration at Quantum's premises. They were shown how the use of dopants directly in ink led to high absorption of light within the infrared range, resulting in very accurate readings. The representatives of the bank regarded this as a very satisfactory test and the bank's interest continued. A mutual confidentiality agreement was entered into between the bank and Quantum with a view to further work being done. This was described as "Project Leap", which was entered into following a second presentation by Quantum to the bank at the bank's headquarters on 24 September 1996. The bank were interested in the use of glass containing rare earth dopants. The glass, when finely ground, would be used as one of the ingredients in security printing. The advantage of using rare earths as dopants in glass, rather than directly in the security printing, was that the glass had the effect of altering the wavelengths at which light was absorbed and consequently the signals obtained when making spectrograph readings were altered in such a way as to disguise which rare earths had been used as dopants. Because of this it was not possible by reverse engineering to discover the formulation of the glass and the dopant which had been admixed into it in any particular case, and accordingly this was a security feature which could not be replicated by forgers or others. A spectrograph reading was obtained by using an ordinary 4 watt light bulb as an excitation source. The light was transmitted by means of a fibre optic cable. The result was measured on a spectrograph developed by Quantum, and the analysis of the results was done by means of a computer, using certain mathematical software specifically developed for the purpose.

[14] On 23 September 1996 a second assignation was executed between Dr Spowart and Quantum. The expressions used in it were given the same definitions as in the previous assignation, except for the definition of the expression "the Technology", which was defined as meaning the technology developed by Dr Spowart to fabricate glasses which either emit or absorb infrared radiation within all their applications including, without limitation light, artefacts and lasers. By Clause 2 Dr Spowart inter alia assigned to Quantum and its successors and assignees whomsoever his whole right, title and interest past, present and future in and to the Assigned Rights, being "all Intellectual Property Rights and Know-How connected with the Technology". Clause 5 provided for payment of a consideration to Dr Spowart. Counsel stated that in fact £40,000 was paid to him by Quantum. At the same time as executing the second assignation Dr Spowart wrote a second technology disclosure which was dated 26 September 1996. In it he explained how two rare earths, one of which came to be of particular importance to Quantum, could be admixed into glass of a particular formulation as infrared absorbers.

[15] At this point counsel sought to emphasise that, although at this stage the work was directed to absorption of light in the infrared range of the spectrum, the technology involved the use of light across the whole spectrum. The spectrograph reading depended on which part of the spectrum had been selected for that purpose. During the period of Dr Spowart's consultancy with Quantum, signals and responses were used to produce readings which were within the visible range as well as within the infrared range. Counsel referred in particular to a memorandum dated 12 November 1996 relating to a project meeting held on 8 November 1996 between representatives of the bank and Mr Fortune and Dr Spowart for Quantum. There was a technical discussion about the use of absorbers in printing inks. Counsel particularly drew attention to this passage:

The word "peaks" refers to the display on the spectrograph indicating absorption of light at the wavelengths in question. Counsel submitted that this showed that work was being done, as part of Project Leap, on the use of dopants as light absorbers within both the visible and the infrared ranges.

[16] Project Leap continued throughout the period when Dr Spowart was consultant to Quantum, until his departure in September 1997. Matters of significance which were examined included: the question of which rare earths could be incorporated into ink, either directly or mixed into glass, to produce a sufficiently strong signal to be read; the question whether, when the rare earths were mixed into glass, the glass could be ground into a sufficiently fine powder to be incorporated into printing ink; the question of how much dopant could be put into ink to give an adequate signal without compromising the printability of the ink; the methodology of reading the signals which were produced; the application of technology for identifying fraudulent alterations to genuine documents; and the question of the commercial exploitation of the technology.

[17] A number of documents were executed on 17 July 1997. It appears that these were intended as a security measure, to prevent identification of Quantum as the company involved in the development of the technology. By a partnership agreement between BLP Nominees Limited and Lycidas Trustee Company Limited the firm of IPR Traders was formed for the purpose of trading intellectual property rights. By a sale agreement between Quantum and IPR Traders, Quantum sold to IPR Traders the Intellectual Property Rights and Know-How (which were given the same definitions as in previous documents) connected with the Technology, which was defined as meaning the technology developed for or by Quantum or its predecessors to fabricate materials which either emit or absorb infrared radiation within all their applications and system to identify infrared absorbing or emitting materials. The firm of IPR Traders changed its name to Kishorn Associates. By a sale agreement between Kishorn Associates and Triangle, Kishorn Associates sold the same assets to Triangle. Counsel explained that intellectual property rights and know-how connected with this technology are now operated by Redwind by virtue of an implied licence from Triangle. Such rights as are not owned by Triangle remain in the ownership of Quantum.

[18] Quantum and Dr Spowart ended their relationship with each other in September 1997. At that time a number of documents were executed. By an agreement among the same parties as entered into the shareholders' agreement, including Quantum and Dr Spowart, which provided for the disengagement of the parties' business interests, provision was made in Clause 7 in the following terms:

By a letter dated 19 September 1997 Dr Spowart also acknowledged to solicitors acting for the other parties, including Quantum, Triangle and Redwind, that notwithstanding the disengagement of his business interests he would continue to be bound by the terms of all confidentiality agreements entered into by him whether relating to Quantum, Triangle or Redwind or any of their business.

[19] Counsel went on to state that the pursuers continued to develop their business. On 18 August 2000 the bank brought to their attention that Dr Spowart and Kelsill had lodged the international patent application already referred to. Its international publication date was 18 May 2000. The application contains a lengthy specification of the claimed invention as well as a series of claims relating to it. Counsel drew attention in particular to a passage on pp.4-5, where it is stated:

Counsel also drew attention to Table 5, which contains a list of the preferred elements for dopant fabrication for visible wavelength absorption system, and to the claims, particularly claims 1, 12, 17 and 18, which are in these terms:

It is averred in the summons, and counsel submitted, that it is apparent from these claims, and from the application as a whole, that that which Dr Spowart and Kelsill wish to have patented is the technology developed by, and on behalf of, Quantum, the whole property in which is now owned by Quantum and Triangle. Counsel pointed to various passages in the patent application, including those I have quoted, and submitted that there is a substantial identity between the invention claimed in the patent and the work which was undertaken in the course of Project Leap. The rare earths, with one exception, referred to in Table 5 in the application are, he said, the same as those involved in the work being undertaken by Quantum.

[20] At this point in his submissions, counsel referred to passages in Chapter 8 of Professor W R Cornish's Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 4th ed. (1999). Since, in due course, the solicitor advocate for the defenders did not take issue with counsel's submissions about the legal position, I need not set them out at length. In para.8-03 there is discussion of the options available to the inventor of a process of manufacture: he may secure a patent that gives him monopoly protection even against independent devisers of the same invention, but it is for a limited period and on condition that the invention is sufficiently described in the specification; alternatively, he may keep the invention a secret through obligations of confidence, which are not tied to specific time periods but which are good only against those who receive the information directly or (in some cases) indirectly from him. Counsel said that Quantum had specifically considered making a patent application but had drawn back from this, regarding themselves as sufficiently protected by the obligations of confidence undertaken by Dr Spowart. But for the application now made by Kelsill and Dr Spowart, the pursuers would not have sought to make a patent application at all. Now that their hand had been forced they had to consider the best course of action and had decided to bring the present proceedings with a view to taking over the application. This would enable them also to ensure that no more of their confidential information would be revealed than had been disclosed in the application. Counsel referred to a passage in para.8-13 of Professor Cornish's book, where there is discussion of the scope for protection of the undisclosed remainder of confidential information, some of which has been disclosed. Under reference to para.8-20 counsel also submitted that Dr Spowart had been commissioned to work as a consultant to Quantum. This gave rise to an implied duty to treat as confidential information supplied to him in that capacity. This coexisted with any express undertaking. Accordingly there might be information which Dr Spowart was obliged to treat as confidential even if it was not covered by the express terms of any undertaking signed by him. As a director of Quantum, he was bound by the terms of the confidentiality agreement between Quantum and the bank (the terms of which were not before me).

[21] Returning to the factual background, counsel submitted that there is a question whether the patent application relates only to the response to visible wavelength photon radiation. Even if it can be said that it does, or even if there is an indication that it would be restricted in this way, the application still impinges on the technology on which Dr Spowart worked as a consultant. The bank presentation covered the use of Quantum's technology in the visible as well as the infrared range. It was a matter of selection from which part of the spectrum readings were taken. The pursuers had taken advice from patent agents about the patent application and had been advised that if it was granted, the pursuers' activities would infringe it. This neatly encapsulated their dilemma. Dr Spowart gained his entire knowledge about the security applications of dopants and inks from his consultancy with Quantum and his involvement in Project Leap. While the use of rare earths as dopants was in general terms well known, the critical information which the pursuers were concerned to protect was their application in a security context in such a way as to conceal their identity. Under reference to para.8-26 of Professor Cornish's book and Faccenda Chicken Ltd v Fowler and Others [1987] Ch. 117, counsel submitted that the pursuers are entitled to protect confidential information amounting to trade secrets.

[22] Counsel said that the pursuers know very little about Kelsill. They were not aware of the existence of Kelsill until the patent application. They inferred that Kelsill were controlled or operated by, or at least operated under the influence of, Dr Spowart. Dr Spowart was director of, and majority shareholder in, Smart Power. Between 14 and 17 March 1999 Dr Spowart in his capacity as technical director of Smart Power attended a conference in Washington D.C. organised by the International Counter Measures Association, on the application of advanced security, authentication and tracking technologies and their implications. At this conference, he claimed that he was the designer and supplier of covert security material to the bank. The bank brought this matter to the attention of the pursuers. In these circumstances, he submitted that Smart Power are likely to seek to exploit the technology.

[23] Counsel referred to various provisions of the Patents Act 1977. Section 7(2) thereof provides that a patent for an invention may be granted - (a) primarily to the inventor or joint inventors; (b) in preference to the foregoing, to any person or persons who, by virtue of any enactment or rule of law, or any foreign law or treaty or international convention, or by virtue of an enforceable term of any agreement entered into with the inventor before the making of the invention, was or were at the time of the making of the invention entitled to the whole of the property in it (other than equitable interests) in the United Kingdom; (c) in any event, to the successor or successors in title of any person or persons mentioned in paragraph (a) or (b) above or any person so mentioned and the successor or successors in title of another person so mentioned; and to no other person. Counsel sought to rely on the second part of paragraph (b). He submitted that the pursuers have a preference by virtue of enforceable agreements relating to the whole of the property in the invention. He also relied on paragraph (c) in respect of the position of Triangle. Under reference to sections 8(7) and 12(2), counsel submitted that this court has jurisdiction to determine the question whether the invention which is the subject of the present patent application properly belongs to the pursuers and they are the persons who are entitled to be granted a patent for it. Counsel also referred to section 98, which makes provision for proceedings in Scotland, and section 99, which makes provision for the general powers of the court.

[24] Counsel explained that the terms of conclusion 3 reflect the pursuers' interest in progressing the patent application, now that it has been made. It is designed to ensure that they retain control or a measure of control over the progress of the application, which is still at a relatively early stage. The ultimate commercial worth of the subject-matter of the application will depend on whether the application is granted, and if so in what terms. Counsel submitted that justification for the fourth conclusion could be found in the fact that Dr Spowart and Kelsill had, by making the patent application, demonstrated an intention commercially to exploit the property in the invention. The actings of Dr Spowart as technical director of Smart Power demonstrated an intention on their part likewise to exploit the property in the invention. So far as the fifth conclusion is concerned, counsel submitted that in filing the application, and in thereby bringing about its publication, Dr Spowart has breached each and all of the provisions against the disclosure of trade secrets and information confidential to the pursuers in that much of the detail of the technology has been disclosed. There is more in the way of detail of the technology which the defenders may disclose if not prohibited from doing so, in particular the matters set forth in the fifth conclusion. The pursuers, he submitted, are reasonably apprehensive that the defenders will disclose some or all of this additional information unless interdicted from doing so.

[25] Turning finally to the balance of convenience, counsel referred to a production which showed that Quantum has a substantial business in the United Kingdom in the field of currency and cheque printing. The pursuers, he submitted, are apprehensive that without the interim orders sought a large part or all of this may be jeopardised because the whole essence of the technology lies in secrecy. Their customers' confidence in them depends on the knowledge that the information is secure. If those aspects of the technology set out in heads (a) - (d) of the fifth conclusion were revealed a forger would be able to "crack the code". If the technology is in the public domain it is not secure. The risk that the pursuers' business would disappear, or at least be substantially damaged, is enough in itself for the balance of convenience to favour the granting of interim orders.

[26] In inviting me to refuse the pursuers' motion, the solicitor advocate for the defenders began by highlighting two matters in particular in respect of which, he said, the position of the defenders was diametrically opposed to that of the pursuers. Firstly, counsel for the pursuers had said that the use of visible wavelength photon radiation was merely a matter of selecting the part of the spectrum from which readings were taken. This was correct in a sense, but, in the context of technology concerned with light, it made every difference from which part of the spectrum readings were taken, and what those readings were. Otherwise the pursuers could claim entitlement in respect of any part of the spectrum from ultraviolet to infrared, which went well beyond anything they were entitled to. Secondly, under reference to the patent application and in particular the specification and claim 1, the solicitor advocate said that it is wholly contested by the defenders that visible wavelength photon radiation formed part of the work that was being done on Project Leap. Spectrograph readings, using an ordinary light bulb as a light source, produce a curve peaking at yellow. The scientific community divides the total spectrum into ultraviolet, visible, near infrared and infrared wavelengths. The human eye is unable to discern some of the wavelengths, but not everything which scientists call "visible" can be seen. So far as the defenders are concerned, the dividing line between the visible and near infrared wavelengths is at 750nm, but not all light at less than 750nm can be seen. A light bulb produces very little output in the infrared and near infrared wavelengths. If an ordinary light source is used with the purpose of detecting a response to the infrared part of the spectrum, only a small amount of the output is of significance. It was this that Dr Spowart worked on for Quantum.

[27] The solicitor advocate submitted that the pursuers' case is a mirage: when one gets up to it, it disappears. Accordingly the pursuers have no prima facie case. Dr Spowart's position is that he worked on, assigned to the pursuers and recognised an obligation of confidentiality in two things: firstly, high efficiency light emitting glasses primarily intended to replace fluorescent tubes; and, secondly, a special glass containing a particular rare earth with the property of absorbing infrared or near infrared light. There is one particular oxide of a rare earth which the pursuers are anxious to protect. Dr Spowart fully accepts this and this is the technology which he assigned to Quantum. It was absorption in the infrared part of the spectrum which was the subject of his work with the bank for security purposes. He assigned two specific technologies, no more and no less. It is an incorrect notion that he is working on something else. This underlies everything that follows.

[28] As a general comment, the solicitor advocate submitted that it is well recognised that breach of confidence claims can be employed in an endeavour to harass and impede those who are perceived to be competitors. He referred to the judgment of Laddie J. in Ocular Sciences Ltd and Another v Aspect Vision Care Ltd and Others [1997] 9 R.P.C. 289. He said that there has been a quite large time gap since the termination of a short consultancy, and one might be entitled to infer that the pursuers are attempting to stifle competition. He went on to say that Dr Spowart is one of the world's leading glass scientists who has spent more than 35 years working on the use of rare earths in glass and has extensive knowledge of this. Dr Spowart's possession is that he has been punctilious in not disclosing anything properly amounting to a trade secret of the pursuers and has no intention of doing so in future. He quite accepts that certain technologies have been left with the pursuers.

[29] Turning to the science, the solicitor advocate said that much turns on whether one accepts the proposition that work in the infrared, including the near infrared, part of the spectrum is a discrete area of scientific endeavour. It is generally recognised that it is. There is much information available in the public domain about the use of rare earths in glass and other materials and the use to which the products can be put. This can be seen from the number of patent applications which have been made. Dr Spowart is familiar with any reference to rare earths in the public domain. The use of rare earths in glass and the spectrograph readings which can be obtained have been discussed in public documents. Dr Spowart hotly contests that he only learnt about the possible application of this technology for security purposes while acting as a consultant to Quantum. It is necessary to define precisely what is to be protected. There is no basis for the pursuers to claim exclusive rights in the use of rare earths.

[30] The solicitor advocate continued by submitting that the documents do not support the pleadings. For example, the fifth conclusion goes well beyond the limited areas in respect of which the pursuers could claim confidentiality, i.e. the assigned technologies in light emitting glass and infrared absorbing glass. There is nothing, apart from one memorandum (i.e. that dated 12 November 1996), the authenticity of which is in dispute, which supports an endeavour to keep Dr Spowart out of the broad field of identifying something in the visible part of the spectrum which produces a reaction to light. Under reference to the shareholder's agreement, he submitted that Quantum had not been set up in connection with light absorbing glass. It was light emitting glass, primarily a replacement for a fluorescent tube , which led to its formation. The solicitor advocate explained how the use of dopants in glass can cause the glass to emit light in response to a stimulus. He contrasted this with the technique of light absorption, which produces no response visible to the naked eye. He said that much of the capital expenditure of Quantum arose from the original investment in the field of light emitting glass. The assignation dated 21 June 1996, and the related technology disclosure, were concerned with light emitting glasses. It could not be suggested that these form any part of the dispute between the parties. The mention of rare earths in the technology disclosure is therefore of no significance. The second assignation dated 23 September 1996 and the related technology disclosure dated 26 September 1996 were nearer to the subject-matter of the present dispute. Contrary to the pursuers' argument, however, it was recognised by both parties that the technology thereby assigned was a separate and discrete area in which intellectual property rights could arise which had to be purchased from Dr Spowart. Only absorption in the infrared part of the spectrum was covered by this assignation. The technology involves not just the use of rare earths, the characteristics of which are well-known, but the fabrication of glasses which produce a particular effect. The graphs in the technology disclosure show very high absorption of infrared light at particular wavelengths attributable to particular rare earths. This absorption produces a pronounced "spike" on the graph as an aid to detection. The rare earth oxide in which the pursuers are particularly interested provides prominent absorption features. The effect of incorporating this rare earth oxide into glass of a particular composition is to shift the wavelength at which peak absorption takes place and thus prevent the dopant from being detected. Reverse engineering would not be possible on the basis of the quantities of the glass that would be used in, for example, the printing of bank notes. What was being disclosed in the technology disclosure was the use of one particular oxide in a special glass producing absorption features in the near infrared part of the spectrum. This was the technology in which the other pursuers acquired interests. Accordingly the pursuers' rights are restricted to technology involving infrared absorption. If some other technology was being developed at that time, one would have expected the pursuers to acquire it.

[31] Turning to the topic of the bank and Project Leap, the solicitor advocate said that the initial endeavour had been to interest the bank in light emitting glasses. This came to nothing. There were then discussions with the bank in a second phase, over a lengthy period, but the work Dr Spowart was engaged on was connected with the sale of infrared absorbers to the bank. So far as he was aware, this was what Quantum were working on. Reference was made to a written presentation by Quantum to the bank dated 10 September 1996. In it there was a list of "product families" of glasses, of which the only one of relevance in the present context is No.4: "A family of glasses which will strongly (99.95%) absorb in the I.R. only and have no visible emission wave band." There were further references to infrared absorption on other pages of the document. On 22 May 1997 a paper was circulated to the Board of Quantum discussing the possibility of patenting the intellectual property rights in the infrared absorber which featured in discussions with the bank. This was the background to the documents executed in July 1997. On 18 April 1997 Dr Spowart wrote a memorandum about the results of tests employing the infrared absorber. In another paper written by him (one of the pursuers' productions, which appears to lack at least one page), there was discussion of the design of an optimised detection system for the application of "the N.I.R. [near infrared] security compounds detailed above". Although a common light bulb was used as the source, the solicitor advocate said that this was just for convenience, and the work being done by Dr Spowart was directed to infrared absorbers, in which the bank were particularly interested. There were disadvantages in this because infrared output is a small element of the total output from a light bulb. On 24 June 1997 Dr Spowart wrote a memorandum listing "N.I.R. dopants", being oxides of various rare earths, including the oxide in which the bank were particularly interested. The note of the meeting with the bank on 8 November 1996, which the solicitor advocate had not seen prior to its being lodged as a production for the pursuers, was, he said, difficult to fit within the sequence of discussions which he understood to have taken place with the bank. Dr Spowart did not recognise this particular document as an accurate account of a meeting at which he participated, so this was a contentious document. All other documents demonstrated consistently that the technology under discussion related to infrared absorbers. Once it had become clear during the course of the hearing that the pursuers were arguing that the work on which Dr Spowart had been engaged had gone beyond infrared absorbers, Dr Spowart had made available documents which demonstrated that only infrared absorbers were being worked on. The solicitor advocate said that he had seen nothing that showed that Dr Spowart was working on anything other than infrared absorbers, but he was reluctant to lodge these documents as productions because of the confidential information which they contained.

[32] After discussion between the parties' representatives, the solicitor advocate stated that it was accepted by the pursuers that there are documents, already lodged as productions, which show that work was being done on infrared absorbers, and that there are further documents, not lodged as productions, which show the same thing. The only document to the contrary was the note of the meeting on 8 November 1996. Counsel for the pursuers confirmed that this was an accurate statement, subject to some reservations. The solicitor advocate said that he was content to proceed on the basis of this statement. Further discussion, however, led to my allowing an adjournment, at the conclusion of which the solicitor advocate stated that the information he had been given was as follows. As at 23 September 1996, when the written presentation was prepared, discussions were taking place with the bank in which infrared absorbers and other matters, including light emitters, were under consideration. On 23 October 1996 the management of Quantum met to review their business. In so doing they dealt with a number of matters. On the agenda was the infrared absorber in which the bank were particularly interested. There was discussion about going back to the bank to give them exclusivity in the infrared absorber. There was no discussion about any other work being undertaken either by Dr Spowart or by Quantum. The rest of the meeting was taken up with other matters. So far as the note of the meeting on 8 November 1996 was concerned, Dr Spowart's position was that he had not seen this document prior to its being lodged as a production. He accepted that there was a project meeting on that date, but so far as he was concerned other matters were discussed. In particular there was no discussion at that time of the use of light absorbing glasses to produce peaks in the visible part of the spectrum. Neither he nor Quantum had done any work on such absorbers, nor was any such work done by the time Dr Spowart left Quantum. Difficulties started to emerge over the functioning of the infrared absorber. On 28 November 1996 a scientist at the bank reported on further progress on the performance of the substance code-named "QGIR", i.e. Quantum Glass InfraRed, and how the product could function in ink. Towards the end of December 1996 there were further discussions with the bank about a proposed trial which would involve the building of a spectrograph reader and the incorporation of "QGIR" in ink, with the objective of signing a licence agreement for it. A technical acceptance trial document was produced, dealing with this particular product. This document confirmed that the production was an infrared absorber. The solicitor advocate said that it was accepted that in the latter stages of the project the bank raised the question of the reliance by Quantum on a single product and asked whether further infrared absorbers could be developed. So far as Dr Spowart was concerned the question was to do with infrared absorption, producing peaks in the infrared wavelength range, even though the dopants would produce several peaks, some in the visible range. There was no discussion of products or materials detectable by their absorption spectra in the visible range. It was recognised by the parties, as it is by the scientific community, that infrared technology is a discrete area of scientific endeavour. By March 1997 the bank were writing to Quantum discussing the possibility of the use, by other printers of bank notes, of Quantum's infrared absorber, subject to exclusivity conditions. In April 1997 Quantum were considering their future, with particular reference to the infrared absorbing product. On 31 July 1997 there was a Board meeting at which the matters discussed included the possible purchase of a quantity of a second rare earth in order to produce a second infrared absorber and the possibility of

[33] The solicitor advocate accepted that there are confidentiality obligations in the disengagement agreement and the letter signed by Dr Spowart. Dr Spowart has not, however, he submitted, breached his obligations of confidentiality. The patent application relates to the incorporation of dopants, particularly in glasses specially designed and engineered to shift their absorption spectra, which absorption spectra are detectable in the visible part of the spectrum. The "clever" bit is the creation of special glasses which shift the wavelengths and produce a covert feature. The patent application does not relate to light emitting glasses or infrared absorbing glasses, and relates to a different technology. The claims in the application all relate to the response to visible wavelength radiation. Dr Spowart is now working on the development of products identifiable by their response to visible wavelength radiation, which are not the same as the infrared absorbing products on which he had been working with Quantum. The oxide in which the bank are particularly interested is not a feature of this patent application. The next stage in the application procedure will be a preliminary report. The defenders have been advised by patent agents that the pursuers' intellectual property rights would not be infringed by the application. Dr Spowart takes the view that he is not in the possession of any trade secrets relating to visible wavelength absorbing glasses. His glasses are the product of his own scientific investigation and experiment. His reader does not use any complicated algorithms: it uses standard Microsoft software. If the pursuers wished to take over the patent application, they would have to demonstrate that it relates to an invention made during Dr Spowart's time with Quantum.

[34] The solicitor advocate said that he did not need to go into the law to any great extent, because there was no material difference between him and counsel for the pursuers in this respect. Counsel for the pursuers had confirmed that it was only confidential information in the nature of trade secrets in respect of which the pursuers were entitled to protection.

[35] On the question of the balance of convenience, the solicitor advocate referred in the first place to a letter on behalf of the pursuers to Dr Spowart dated 26 April 1999 alleging breach of his obligations of confidentiality and asking him to sign a further undertaking. Dr Spowart's response was that he had done nothing wrong, and the matter was taken no further. The solicitor advocate accepted that Kelsill were almost inevitably drawn in, because they were applicants for the patent, but he declined to offer any further information about the relationship between Dr Spowart and Kelsill. He accepted that any order against Dr Spowart would also have to be against Kelsill. He submitted, however, that there was inadequate material to support an order against Smart Power, who are not involved in the patent application. In the course of the procedure following the lodging of the application, a preliminary report has been requested but not yet received. The applicants will have an opportunity to respond to it. During the international phase of the application, the provisions of the Patent Co-operation Treaty will apply (see section 89A of the 1977 Act), but the prescribed period will expire in May 2001 and thereafter the national phase of the application will begin. The effect of an order preventing prosecution of the application will be that it will lapse and the subject-matter will be generally available. The terms of the third conclusion are an inadequate protection because further progress would depend on the whim of the pursuers. The balance of convenience is in favour of allowing the application to proceed. So far as the other conclusions are concerned, Dr Spowart has punctiliously observed his obligations. He depends on his work for his current livelihood, and this is the only part of it which is reasonably well advanced. Although Dr Spowart is not, the solicitor advocate said, the controlling shareholder of Smart Power, in practical terms Smart Power are developing and exploiting the invention. If interim interdict is granted it is likely that Smart Power, in which various parties have invested, will collapse. The balance of convenience in respect of the fourth conclusion favours the defenders. The solicitor advocate directed various criticisms to the terms of the fifth conclusion, but they were principally to make the point that Dr Spowart had been engaged only on infrared absorbers. He repeated that the software used in the reader was obtained from Microsoft and was not specifically developed for Quantum.

[36] The solicitor advocate concluded by submitting that the pursuers have no prima facie case, or at best have a very weak one. This is a factor in the balance of convenience.

[37] In his reply to the submissions on behalf of the defenders, counsel for the pursuer said that whatever expertise Dr Spowart had in respect of glass, it did not relate to the technology that was developed during Project Leap and is now set out in the patent application. The pursuers' position is that very little of the prior art had to do with the security applications of powdered glasses containing rare earth dopants, and in particular their use in security inks, coloured or invisible, and that Dr Spowart only came to know of such applications during Project Leap. Quantum's original business plan, which Dr Spowart prepared, related to technology which was wholly different from that involved in Project Leap. The whole essence of what is now set out in the patent application reflects knowledge gained by Dr Spowart through his consultancy with Quantum and in particular his work on Project Leap. The pursuers' case is that what is found in the patent application is very largely the technology which evolved from Dr Spowart's initial ideas, which formed the subject-matter of the second assignation, as applied in a somewhat different way from what was originally intended. It involved the use of essentially the same technique, the only difference being that it purported to be restricted to the visible part of the spectrum. This is a distinction without any real difference. The work done on Project Leap included the taking of readings between 700nm and 1600nm, i.e. partly in the visible part of the spectrum.

[38] In reply to this the solicitor advocate for the defenders, under reference to passages in the patent application, said that known methods of covert security include near infrared and infrared absorbing inks. The inventive step is the use of special glasses to shift the wavelengths at which light is absorbed. The bank wanted absorption in the infrared part of the spectrum because this would be invisible, while the patent application relates to absorption in the visible part of the spectrum. During the course of his submissions the solicitor advocate referred to various figures in the patent application taking the form of graphs showing the wavelengths at which light is absorbed by various substances in accordance with the invention claimed in the patent application, and explained that each graph shows a distinctive "signature" characteristic of the light absorbing property of the substance in question.

[39] While I have thought it necessary to set out the competing submissions at some length, for that very reason I can state the reasons for my decision more briefly. It was not, as I understood it, in dispute that Dr Spowart has been and remains bound by obligations in respect of confidential information of the pursuers amounting to trade secrets, both by virtue of the express undertakings, the terms of which I have quoted above, and by virtue of the implied duties arising from his directorship of Quantum. Nor was it in dispute that confidential information relating to the technology on which work was being undertaken for the bank by Quantum, and by Dr Spowart on their behalf, in the course of Project Leap constituted confidential information amounting to trade secrets. The principal dispute between the parties appears to me to be one of fact, that is to say whether the work being undertaken in the course of Project Leap was confined in its scope to technology using infrared absorbers only, and whether the invention claimed in the patent is a different technology which is confined to the use of light in the visible part of the spectrum only. In due course the parties will no doubt lead evidence about the prior art in the use of rare earth dopants as absorbers of light in different ranges of the spectrum, and as to whether a valid scientific distinction can be made between absorption in the infrared and absorption in the visible ranges. It would be premature for me to express any concluded view about this. At this stage, however, I have difficulty in accepting that there is a material distinction to be made between absorption in the infrared and absorption in the visible ranges. It appeared to be common ground that the spectrum is a continuum of wavelengths from ultraviolet through visible to infrared in its various sub-divisions. To the human eye, no doubt, the visible part is the most obvious; but to a spectrograph all that appears to matter is the part of the spectrum which it is adjusted to detect. It may thus be no more than arbirtrary whether the spectrograph is detecting photon radiation in the visible or in the infrared (particularly near infrared) ranges of the spectrum, or indeed partly the one and partly the other. Some of the figures referred to in the course of the hearing show spectrograph readings of light reflected from various substances which can apparently be recognised as characteristic "signatures" of light absorption by those substances at particular wavelengths. Even allowing for some disagreement about the position of the borderline between the visible and the near near infrared ranges of the spectrum, some of these figures appear to me to show "signatures" which extend on either side of the borderline.

[40] It was not in dispute that the technology for the detection of light absorption which was being developed in the course of Project Leap is essentially the same as that used for the detection of light absorption in the visible part of the spectrum, which is the subject-matter of the patent application. Light from a common 4 watt light bulb is directed onto material into which the light absorbing substance has been incorporated or onto which it has been applied, and a spectrograph produces a reading of the reflected light. It was not, as I understood it, suggested that the human eye would be able to detect the absorption of light at particular wavelengths. This being so, it is not obvious to me that in the context of a security application there is any material distinction to be made between light absorption in the visible and in the infrared ranges of the spectrum. Obviously, at this stage I must treat the invention which is claimed in the patent application as being truly patentable. In light of the parties' submissions, it appears to me that the particular feature which makes it a new invention is the use of special glasses which shift the wavelengths at which rare earth dopants absorb light, which yields the possibility of using finely-ground glass of the relevant composition and with the admixture of the relevant dopant as a covert security feature which can be identified by means of a spectrograph without being capable of imitation. It was for this very reason that work was being undertaken for the bank in the course of Project Leap on a specific application of this new technology. Although this work was initially confined to the use of infrared absorbers, it was not explained to me why this should have been dictated by either scientific principles or practical considerations. The note of the meeting held on 8 November 1996, which was relied on by the pursuers and disputed by the defenders, would suggest that by that time those involved in the project, particularly Dr Spowart, had started considering the use of absorbers in the visible range of the spectrum as well as in the infrared range. Although the solicitor advocate for the defenders described this as a contentious document, there is nothing at this stage which leads me to doubt its authenticity; and, if authentic, it shows that the project was moving onto subject matter indistinguishable from the invention claimed in the patent application. It was not explained to me how, apart from his involvement in Project Leap, Dr Spowart could have undertaken the work which has led to what he now claims as his invention.

[41] For these reasons, I am satisfied that the pursuers have a prima facie case for arguing that the property in the invention which is claimed in the patent application properly belongs to them and that information relating to it forms part of their trade secrets. Equally, Dr Spowart in particular asserts, and may well be able to prove, that the two technologies are not the same and to claim an invention which involves examination of the response of a dopant to visible wavelength photon radiation is sufficiently different from technology involving examination of the response of a dopant to infrared wavelength photon radiation for there to be no breach of any duty owed by him (or his associated companies) to the pursuers and Quantum in particular. I do not find it possible at this stage to assess the relative strengths of the parties' cases, beyond the comments I have already made, so the balance of convenience will turn on other factors as well.

[42] Given that there is thus a material prospect that the pursuers will succeed in establishing that the patent application has been made in breach of their rights, it does not seem to me to be appropriate that the defenders, and in particular Dr Spowart, should be left in charge of its progress in the meantime. This would leave Dr Spowart as arbiter of what should be done in the course of procedure following the application, and in particular whether, and if so what, further disclosures should be made, and such disclosures, whatever view he took of them, might be of information properly amounting to trade secrets of the pursuers. To pronounce interim interdict in terms of the third conclusion would give to the pursuers a measure of control which they do not have at present. This would have the advantage of preserving the status quo in respect of information amounting to trade secrets which remains confidential and so far undisclosed. The highly confidential nature of some of the information was borne in on me by the attempts made by both parties to conceal even from me the identity of the bank and the particular oxide in which the bank are primarily interested. Moreover, while Quantum is operating a business as a going concern and Project Leap is at a comparatively advanced stage, there was no indication that any of the defenders is currently engaged in business to any significant extent or that the invention claimed in the patent application is of immediate commercial value to them. For this very reason it is unlikely that the defenders or any of them would be able to meet any substantial award of damages. The involvement of Kelsill along with Dr Spowart is evident from the terms of the patent application. In the circumstances relied on by the pursuers, and in the absence of any candid disclosure by the defenders of their relationships inter se, it appears to me that I must at this stage treat Smart Power as being sufficiently involved to be the subject of interim orders. The balance of convenience accordingly appears to me to favour the granting of interim interdict against all the defenders in terms of the third conclusion, and also in terms of the fourth conclusion, which in the circumstances appears to me to flow from it. So far as the fifth conclusion is concerned, there appears to me to be sufficient justification at this stage for the pursuers' reservations about Dr Spowart's willingness to respect his obligations, on a proper view of these, in relation to the pursuers' trade secrets, and accordingly the balance of convenience likewise appears to me to favour the granting of interim interdict in terms of the this conclusion. Otherwise, Dr Spowart would be free to determine for himself, perhaps erroneously, what is comprised in the pursuers' trade secrets. I except from this head (d), because there appears to be a serious doubt whether the software was developed specially for the pursuers, rather than acquired as a standard product, and counsel for the pursuers did not ultimately press for an interim interdict to extend to this head.

[43] I shall accordingly pronounce interim interdict in terms of the third, fourth and fifth conclusions, with the exception of head (d) of the fifth conclusion.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Quantum Glass Ltd & Ors v Spowart & Ors [2000] ScotCS 299 (30 November 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/299.html Cite as: [2000] ScotCS 299

Scottish Court of Session Decisions