Lloyds TSB Insurance Services Ltd & Anor v Shanley

Copyright infringement requires the claimant to prove use of copyright materials without consent. Where defendants positively assert a licence, the evidential burden of establishing that licence may rest on them after the claimant’s case has been rejected. An implied licence is confined by the objective purpose and circumstances in which it arose. Permission given to one company for a collaborative commercial project does not, without supporting evidence, extend to a related or competing company or authorise sub-licensing. A claimant’s dishonesty may undermine oral evidence on one issue without requiring rejection of the entire claim. Findings may be based on contemporary documents, objective facts, probabilities and subsequent conduct.

Mr Shanley claimed copyright infringement and breach of confidence concerning a software scoping tool supplied to Halifax. The High Court, in its judgment reported at [2013] EWHC 411 (Ch), rejected Mr Shanley’s alleged oral agreement but found that his conduct had granted Halifax a licence. It nevertheless held that the licence did not extend to Lloyds, and that Lloyds’s use infringed his rights. The defendants appealed, alleging errors concerning the burden of proof, the effect of Mr Shanley’s dishonesty, and the evidence of his knowledge of Lloyds’s use. The central issue was whether Lloyds had been licensed, expressly or impliedly, to use the scoping tool.

The Court of Appeal unanimously dismissed the appeal.

1. Burden of proof. The claimant bore the legal burden of establishing copyright use without consent. The judge’s statement that, if the claimant’s case failed, the evidential burden rested on the defendants was not a misdirection. The defendants had advanced a positive case that Mr Shanley had consented to use by Lloyds, either through a sub-licence or through a licence extending to companies under common corporate governance. The judge was entitled to require that case to be established by the defendants.
2. Scope of the licence. The judge was entitled to infer from the contemporary documents, objective facts and overall probabilities that the scoping tool was supplied to Halifax to promote a commercial relationship and assist CSL to obtain business. That purpose did not support a licence to Lloyds. There was no evidence that Halifax could sub-license the technology to a trade competitor or that the licence extended to companies connected with Halifax. The licence was properly treated as personal to Halifax.
3. Dishonesty and evidence. Mr Shanley’s persistent lies made his oral evidence unreliable, but did not require the rejection of every aspect of his claim. The judge was entitled to rely on undisputed facts, contemporary documents, objective evidence, probabilities and subsequent events. His conclusion that Mr Shanley did not know of Lloyds’s use until after the 2011 audit meeting had a proper evidential basis, including the reaction recorded at the later meeting.
4. The trial judge applied the correct legal principles and reached conclusions open to him on the evidence. Lloyds therefore had no licence to use the tool, and the findings of infringement and breach of confidence were upheld.

1. Court of Appeal (Civil Division) — The appeal by Lloyds and Halifax was dismissed.
2. High Court of Justice, Chancery Division, Intellectual Property — HHJ Pelling QC, in [2013] EWHC 411 (Ch), rejected the alleged oral agreement, found a licence in favour of Halifax, but held that it did not extend to Lloyds.