For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Sunday, 11 November 2012

Emails are not property...it's not practical

Technological advancements have substantially impacted humanity, particularly in the field of communications. Email is just one facet of this development, enabling a body of text or an attached document to be sent by a sender to a recipient via the internet. Its nature is inherently incorporeal due to its existence on the virtual plane that is slowly dominating our lives. And as with any adoption of new technology [yes - emails are relatively new in the great scheme of things], new legal issues can arise, as evidenced in the recent case of Fairstar v Adkins [2012] EWHC 2952 (TCC), where the court was asked to decide whether a proprietary interest exists in the content of emails.

The Facts and the Issue: Property or information?

Fairstar, a provider of marine heavy transport, had successfully obtained an order from the court against Adkins, restraining him from knowingly deleting or otherwise interfering with emails sent or received while he acted as Chief Executive Office (CEO) of Fairstar prior to the company being taken over. It was alleged that during the period leading up to the takeover Adkins had not revealed that Fairstar had incurred a very substantial liability to a shipyard relating to the construction of a vessel. Further, Fairstar had no access to electronic correspondence, material for determining the scope of its liability, between the shipyard and Atkins: incoming emails addressed to Adkins at his Fairstar email address were automatically forwarded to his private email address and then deleted by Fairstar's server; outgoing emails were sent directly from Atkin's own computer and would not have reached Fairstar's server unless someone at Fairstar was copied in.

Give me back my emailllsss....
Fairstar therefore sought access to both the incoming and outgoing emails to gauge its liabilities, not however on the basis of copyright or a breach of an obligation of confidentiality, but on the ground that it had a proprietary claim to the content of the emails on the basis that materials created by, or that come into the possession of, an agent whilst acting for his principal are the property of the principal. Atkins submitted that the content of an email is information, and that information is not property, notwithstanding copyright claims.

The court found that the preponderance of authority pointed strongly against there being any proprietary right in the content of information, and therefore emails. As such Fairstar's application could not succeed on the ground on which it was based. Importantly, however, the court noted this area of law was still not settled.

The Authorities

Largely, the authorities were against Fairstar. The court found that the use of the term 'sufficient special property' in relation to whether a principal was entitled to restrain the use of documents or materials obtained by an agent in the course of their employment by Bowen LJ at p. 229, in Lamb v Evans [1893] 1 Ch 280 (a case concerning the use of wood blocks and other materials used for printing [a process for reproducing text and images on paper]), should not be taken to mean a property right, but referenced the existence of a form of interest in the relevant material sufficient to found a claim against the use of the materials. Further, the decision did not assist on the question of whether or not the contents of emails held on a server in the possession of a defendant could be regarded as property or materials. Other cases concerning physical property were also distinguished. The court found that some support could be found for Fairstar's submissions in Pennwell Publishing v Ornstien [2007] EWHC 1570, which concerned contact information being copied from an employer's email account into a spreadsheet, were it not for the fact that it was undisputed that an address list stored on a computer was property. 

A medium may be a psychic but a
psychic isn't always a medium
Huddleston v Control Risks [1987] 1 WLR 702 was also cited by Fairstar. The court found that it went against them, although it found assistance in the distinction made between the medium, the actual physical object which carries information, and the message, the information which the object conveys.The court in that case found that only a question concerning the medium could be construed as property for the purposes of an order under s. 33(1), Senior Court Act 1981. As the plaintiffs were concerned with the message of a report that was potentially defamatory, the court had no power to make the order.

The court found most assistance from Force India Formula One Team v 1 Malaysian Racing Team [2012] EWHC 616 (Ch), and the cases cited therein, where Arnold J said at [376]:
'Confidential information is not property, however, even though businessmen often deal with confidential information as if it were property and judges often use the language of property when discussing breach of confidence...It follows that the user principle is not directly applicable to claims for breach of confidence. Although proprietary remedies have sometimes been granted in breach of confidence cases, these have been based not purely upon breach of confidence, but upon breach of a fiduciary duty, as for example in Boardman v Phipps' [more on Boardman to come...].
 Australian and Canadian authorities, cited in Force India, were considered by way of an aside. In Moorgate Tobacco Ltd v Philip Morris Ltd [1985] RPC 219, the high Court of Australia held at 234 that:
'the equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information does not lie in proprietary right, but in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained.' 
In Cadbury Schweppes Inc v FBI Foods Ltd [2000] FSR 491, the Supreme Court of Canada found that a proprietary remedy would not automatically follow from a breach of confidentiality, broadly for the same reasons, at [39] - [48]:
 'It would be contrary to the authorities...to allow the choice of remedy to be driven by a label ("property") rather than a case-by-case balancing of the equities...Application of the label "property" in this context would add nothing except confusion to the task of weighing the policy objectives furthered by a particular remedy and particular facts of each case.'
The Contrary View and Practical Considerations

Despite the authorities above, that this is not an area of settled law was said to be evident in the views of Lords Hodson and Guest in Boardman v Phipps [1966] UKHL 2, who did not agree with the majority that in a strict sense information is not property. Lord Hodson said at 107:
'Each case must depend on its own facts and I dissent from the view that information is of its nature something which is not properly to be described as property. We are aware that what is called "know-how" in the commercial sense is property which may be very valuable as an asset...the confidential information acquired in this case which was capable of being and was turned to account can be properly regarded as the property of the trust.'
Lord Guest also could not see any reason why information and knowledge could not be property. However, although entitled to significant weight, those views were found not binding on the court: they did not form part of the ratio of the decision because the question of whether information was to be regarded as property was not decided. 

However, the court noted that Fairstar had put forward forceful logic that the content of an email was a form of property in the circumstances of the modern world. As such, it was necessary to test the 'beguiling' submission that the law needed to be instep with the state of technology in the 21st century by recognising that the content of an email is capable in law of being property. The court looked at the issue from the perspective of ownership and found five possible options:
  • First, title to the content would remain with the creator (or their principal); 
  • Secondly, by analogy with the transfer of property in a letter, title would pass to the recipient (or their principal) when the email is sent; 
  • Thirdly, if title remains with the creator, then the recipient of the email has a licence to use the content for any legitimate purposes consistent with the circumstances; 
  • Fourthly, if title is transferred to the recipient, the sender has a licence to retain the content and use it for any legitimate purposes, and; 
  • Fifthly, title to the content, once sent, is shared between the sender and the recipient(s).

Impractical futuristic cat get-up
As regards the first two options (ownership vesting in either the creator or recipient), the court found them to be impractical and unrealistic. Although it appeared that creators of emails are asserting some proprietary right to its contents by attaching statements at the foot of many emails to the effect that an email is intended only for the addressee(s) and that an unintended recipient destroy the email, the realities of enforcing those conditions by requiring any recipient, however far down the chain, to delete it 'would be very strange - and far reaching'. Further, if a creator ceased to have any right in its contents from the moment it was sent, the recipient would be entitled to ask the sender of the email to delete it [potentially very useful against spam], which would result in hopeless confusion as to title if the initial email was sent to several recipients, some of whom forwarded it to others.

The second two options (either the creator or recipient obtaining a licence to use or retain the content), although workable, would in reality deprive the value of a proprietary interest in the content of an email. The right would be dependent on the extent of legitimate use, which would essentially amount to the same test applicable to the misuse of confidential information. The only difference being that it would not be necessary to show that the information was confidential in order to exercise a property right of control. But if the information was not confidential, then the need to restrain use would be few and far between. As such, there was no compelling need or logic for adopting either of those options.

Even the fifth option (shared ownership) was found unrealistic:
'suppose that a supplier of components loses his database of e-mails when his server unexpectedly crashes. If he had a proprietary right in the content of all e-mails sent to and received by him from each of his customers, would he have the right to demand access to the copies of those e-mails on those customers' servers in order to enable him to reconstitute his database? In a different situation would parties who had formerly communicated with each other on a regular basis by e-mail but had since fallen out have the right to demand access to each other's servers in order to see to whom e-mails that they had sent had been forwarded?' (at [68])
Again, if the questions were answered in the negative, the right would have no value, and if it were answered in the positive, the ramifications would be considerable and not necessarily beneficial.

Conclusion: No proprietary right in confidential information

As such, there was no practical basis for holding that there should be property in the content of an email. If anything, such considerations militated against it. To the extent that misuse of information contained in emails needs to be protected, equitable jurisdiction in relation to confidential information or, where applicable, the law of copyright, provides satisfactory protection. As such, Fairstar's application failed on the grounds on which it was based:
'I have to say that this is not a result that I view with any enthusiasm in the circumstances of this particular case. Although Fairstar has put forward compelling reasons in support of its application to inspect the e-mails, its inability to deploy other grounds for relief that would usually be available under English law has had the consequence that the application had to fail.' (at [71])
Two of the reasons this Kat is so fond of intellectual property is its applicability to the intangible and its predisposition to flexibility, but only where certain considerations warrant it. The flexibility of the court necessarily operates within the law, and in this case there were no practical considerations for the court to deviate from the authorities. However, she queries the strength given to the contrary opinions as to the nature of information as a property right in Boardman v Phipps, and considers that Arnold J's finding that the case was decided on, among other things, a breach of fiduciary duty satisfactory. The attempt to bring emails within the property of a principal was valiant, but ultimately unsound, and it is most likely that if the claim had been brought on the grounds of either copyright or confidentiality, Fairstar may have been successful. What do the IPKat readers think?

6 comments:

ipdraughts said...

An alternative perspective on the case appears on the IP Draughts website at http://ipdraughts.wordpress.com/2012/11/11/one-more-time-with-feeling-information-is-not-property/

Anonymous said...

Thanks ip draughts but i still like Kate's better because it explains the arguments in so much more depth. It also saves me having to read Air force India which is about a thousand miles long.

Anonymous said...

Were it otherwise, someone could be prosecuted/sued for criminal damage/conversion of property, just for pressing the delete button in order to free up some disk space!

Anonymous said...

In response to the Kat's question about whether the claim should have been brought under copyright or confidentiality, I know very little about copyright, but presumably the reason for pursuing the information as 'property' was for it to be given back to the 'owner', which is not what copyright and confidential information protection seek to do.

Ken Moon said...

It may not be that the claimant selected the wrong cause of action. The judgment leads us to believe that a contract was in place which gave Dutch courts jurisdiction and Edwards-Stuart J states at [21] "It is principally for this reason that Fairstar has confined itself to a proprietary claim".

Apart from the US where the Supreme Court has held trade secrets to be property (albeit using unsatisfactory reasoning), the balance of common law authority and academic writings is heavily weighted against property in information. There is a long line of authority in Australia (not just the cited Moorgate case) that denies confidential information is property.

Furthermore, and not cited by the court or Kate, in the criminal theft case of Oxford v Moss the UK Court of Appeal held information was not property (and therefore could not be stolen).

Incidentally, the discussion and conclusion on the information property argument in Gurry on Breach of Confidence 2nd ed was cited in support by the judge and comprehensively identifies most of the authorities in the common law world.

If I have an idea and could claim it was property to which I held title under property law I should be able to sue for trespass if another person subsequently and independently conceives the same idea. Patent law can handle this, but personal property law cannot and should not.

Anonymous said...

Not sure I agree with your last point. It is conceivable for two persons to own similar or even identical pieces of intangible property, such as in the highly unlikely hypothetical scenario that two persons independently write the same poem, book or source code, score the same music, etc. Thus you would not necessarily have an action against someone merely for possession of the same information if they had derived or developed that information independently. One can't necessarily directly transfer a cause of action or remedy from one kind of property to another. That said, all intangible personal property rights that I am aware of are the creation of statute (in the UK) and therefore the causes of action and remedies are set out in the statute.

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