Sinclair Research Ltd v. Lambra Electronics Ltd

HCA011141/1983

BETWEEN

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Coram: The Honourable Mr. Justice Jones in Chambers.

Date: Monday, 10th October 1983.

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J U D G M E N T

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1. This is an application by the plaintiff for an interlecutory injunction.

FACTS

2. The plaintiff company which is registered in England is engaged in the research, manufacture and development of computers and televisions. The defendant company is registered in Hong Kong and manufactures watches, medical instruments and computers.

3. In 1980 the plaintiff manufactured the first personal home computer model ZX 80 which was highly successful. This model was discontinued in March 1981 when it was succeeded by model ZX 81. Sales of this model have also been very successful worldwide. 900,000 have been sold since the model was introduced onto the market. In August 1983 sales totalled £763,000 in value.

4. In June 1983 Timex Corporation which is licensed by the plaintiff to sell model ZX 81 as T/S1000 in the United States informed the plaintiff of the existence of the defendant's computer model No. 8300 which they regarded to be very similar to ZX 81.

5. Following investigations carried out on behalf of the plaintiff the writ in this action was issued on the 31st August 1983 claiming an injunction and damages on the grounds that the defendant's model No. 8300 has infringed the copyright in the source code contained in the R.O.M. (Read Only Memory) of ZX 81, and in the plaintiff's instruction manual.

6. The parties have agreed that there are serious issues to be tried. In fact it is clear that apart from matters of technical complexity involved there are complicated issues of law to be determined. Accordingly it will be necessary to decide this application upon the balance of convenience on the principles enunciated in American Cyanamid v. Ethicon Ltd. (1975) A.C. 396.

PLAINTIFF'S CASE

7. The plaintiff contends that having regard to the rapid advance of computer technology the ZX 81 has only a short life span with the result that it will become obsolete if an injunction is not granted to prohibit the continued marketing by the defendant of model No. 8300. The plaintiff claims that they hold a dominant position worldwide for computers, but in particular micro-computers which they say would be impossible to retain or regain if relief is not granted. A further consequence envisaged is that the manufactuers of the software for the computers would turn elsewhere if the plaintiff's dominant position is lost.

8. The plaintiff therefore submits that they will suffer serious and irreparable damage if an injunction is not granted now, and that damage will alse be caused to their manufacturing contractors and exclusive distributors.

DEFENDANT'S CASP

9. The defendant has a fully paid up capital of $15,000,000, and is a fully owned subsidiary of Lambda Technology Limited, a public company. The defendant's turnover for the year 1982 was about $80,000,000 and for 1983 about $65,000,000. About 20% of the turnover is attributable to the manufacture of computers. However, the defendant is scaling down the manufacture of watches and increasing the output for computers and medical instrumepts.

10. The defendant first considered manufacturing model No. 8300 in July or August 1982. Marketing commenced in January 1983. $600,000 was spent on production and advertising Manufacturing began in April 1983 and the first sales were made in May or June 1983. Of a total work force of 280, between 40 and 50 are engaged on the manufacture of computers. Sales have so far totalled in excess of $3,000,000. Orders have been received for the next three months. The defendant has stock worth $2,000,000 for parts and components which cannot be used for other products.

CONCLUSIONS

11. Although the plaintiff maintained that they hold a dominant position in the market that was not borne out by some newspaper articles adduced in evidence by the defendant. There are many other companies engaged in this field which is highly competitive. It is particularly significant that the life span of the Model ZX 81 is almost coming to an end for the plaintiff is now selling the Spectrum computer which is the successor to the ZX 81. There is indeed evidence, although it is strongly contested that the plaintiff has been dumping supplies of the ZX 81 in the United States.

12. In considering where the balance of convenience lies Lord Diplock in American Cyanamid v. Ethicon Ltd. said at page 408:-

"As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage."

The factors that I take into consideration in this case are as follows:-

1. There is a serious dispute as to whether the plaintiff holds a dominant position in the market.

2. In contrast to the submission made on behalf of the plaintiff the increased sales of computers can only benefit the software manufacturers. In any event the model ZX 81 does not appear to use much software.

3. Although the defendant may not have an established market by comparison with some other companies, nevertheless, they are in the process of manufacturing computers and have a business in existence. The business was operating for three months prior to these proceedings being instituted. To cease production imediately would cause the defendant irreparable damage. In all probability it would take at least ten months to regain their position in the market.

4. A major consequence of granting an injunction would be to lay off between 40 and 50 workers.

5. Whilst the ZX 81 may soon become obsolete, this equally applies to the 8300. The effect of an injunction would for all practical purpcses result in the death knell for the 8300.

6. I am not persuaded, on the evidence before me, that the marketing of the 8300 has affected the plaintiff's sales of the ZX 81 nor do I believe that the plaintiff's future growth will be seriously affected when the model is phased out.

7. It is abundantly clear that if the plaintiff succeeds at the hearing the defendant will be in a financial position to meet any award by way of damages for the period up to the date of the trial. In all the circumstances, I am satisfied that the balance of convenience lies in favour of the defendant by preserving the status quo. The application for interlocutory relief is therefore refused.

13. Costs will be in the cause.

Representation:

Mr. A. Liao (Johnson, Stokes & Master) for the plaintiff.

Mr. A Rogers (Gallant Y.T. Ho. & Co.) for the defendant.