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Sky staffer plundered database to benefit naughty false firms

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A former Sky employee who took Sky customers' information from its databases and passed it on for use by others was guilty of misusing the company's confidential information and infringing the firms' database rights, the High Court has ruled.

Steven Lee, who worked for Sky In-Home Service for more than five years, was also guilty of breaching the terms of his employment contract with the company as a result of his activities, the Court said.

Lee "transmitted" data that was "substantial in terms of both quantity and quality" when he copied customers' information from Sky's customer data onto disks that were later supplied to Digital Satellite Warranty Cover Limited (Digital), the judge Sir William Blackburne said in his ruling.

"Mr Lee can provide no explanation for how seeded data, provided uniquely to him, ended up with Digital which is consistent with his claim not to have distributed it to anyone outside Sky or otherwise than for the purposes of his employment with Sky," the judge said. "In my view Mr Lee had no explanation and, by the manner of his answers, conveyed unmistakably that he knew that he did not."

"The probabilities are, but I do not need to find, that he passed the data to Mr Tom Hicks, an ex-employee of Sky and former colleague of Mr Lee, who left Sky under something of a cloud and who then set up a television satellite dish repair business. I therefore find that Mr Lee is liable for misuse of Sky's confidential information, infringement of its database right and breach of his employment contract with [Sky In-Home Service]," he said.

Digital, and sister company Nationwide Digital Satellite Warranty Services Limited (Nationwide), offered extended warranty and repair services to Sky customers. They marketed those services to those customers whose details were contained on Sky's database.

The High Court found that three men who each held a 25 per cent share in Digital, Bernard Freeman; Michael Sullivan and Paul Marrow, were guilty of breach of confidence, infringement of Sky's trademark and database rights as well as of passing off. Freeman was sole owner of Nationwide. Acquiring the Sky customer information was "central" to the "success" of both companies, Sir William Blackburne said.

"The three of them each intended, procured and shared a common design that the various acts should occur which ... amounted to breaches of the obligation of confidence which the two companies owed to Sky as owner of the data in question," the judge ruled. "Infringement of database right, trade mark infringement and passing off ... go hand in hand."

Because the men knew of and participated in the "marketing activities where these wrongs occurred" they were all liable, along with the now liquidated companies, for the offences, the judge added.

"Mr Marrow's responsibility is clear beyond any doubt: it was he who had charge of the marketing side and approved the scripts and material that were used," Sir William Blackburne said. "He intended and procured that the two companies should operate in ways that [another judge] found to have infringed the Sky marks and constituted passing off. He also arranged for and had charge of the processes whereby the data was transferred from one medium to another to enable the data to be used in the companies' marketing activities."

The judge said that Freeman knew about the supply of Sky customer data and indeed "intended" for it to be "used for marketing purposes". Freeman had also dealt with complaints about the two firms' marketing which would have made him aware "how the companies targeted their customers," the judge added.

He said that Sullivan had also handled complaints and "knew that the only purpose of acquiring the data was so that it could be transferred to the companies' own databases and used for marketing."

"It is obvious that the companies carried on their business in the way they did – sourcing, processing and then using the customer data [for marketing purposes] – with the full knowledge and approval of these two and not just of Mr Marrow and others," Sir William Blackburne said.

"I find that all three agreed – it is sufficient that they did so tacitly - that the two companies should operate in such a way – receiving the customer data from sources ... anxious not to be revealed, knowing that the data was confidential to Sky, extracting it so that it could be used in their own marketing and then using the information so extracted in the course of marketing their service plans – as to breach Sky's right of confidence in the data, infringe Sky's database rights in it, infringe its marks and pass themselves off as connected with, or authorised, by Sky," the judge concluded.

Three distinct protections can apply to databases and their contents. The information in a database can be protected by copyright; the database structure itself can be so creative that it is protected by copyright, and the whole database can be protected by the 'sui generis' database right. The contents of a database can also be subject to laws which protect confidential information.

This was created by the European Union to encourage the development of database-dependent digital systems and it allows a creator to stop others using a database or the information in it if the investment of time, money and skill in that original database was large enough. Under copyright law alone such protection would not necessarily apply if the database contained merely facts, as only the expression of facts and not the facts themselves can be copyrighted.

The law of 'passing off' enables mark owners to gain protection for marks that have not been registered as trade marks if there are sufficient 'goodwill' rights associated with the mark.

If mark owners can prove that their use of a trademark has established 'goodwill' in the business associated with that trade mark protection to that mark may apply. Goodwill is essentially a reputation in the mark. If another trader 'passes off' their services as being those of mark owners and appear to claim that their services are theirs or that they are in some way connected or have been endorsed, then mark owners can take action. Mark owners can claim damages or seek an injunction to prevent that use, so long as they can show that they have or are likely to suffer damage as a result of the use.

Copyright © 2012, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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