THJ Systems Limited & Anor v Daniel Sheridan & Anor

The Court of Appeal reviewed two appeals arising from a High Court decision ([2023] EWHC 927 (Ch)) concerning an LLP dispute and related intellectual property claims arising from a software product called OptionNET Explorer. The principal legal issue on the appeals was whether the risk and price charts (R & P Charts) produced by the software are "artistic works" protected by copyright under section 4(1)(a) of the Copyright, Designs and Patents Act 1988 and, if so, whether the defendants infringed the claimant’s copyright.

The court held that the applicable originality test is the Court of Justice of the European Union formulation of "the author’s own intellectual creation" (Infopaq and subsequent CJEU authorities), not the earlier English "skill and labour" approach. Applying that test afresh to the evidence, the Court found that the R & P Charts involved a low but sufficient degree of visual creativity in layout, choice of components, fonts and colours so as to be the author’s own intellectual creation. Protection is therefore available but narrow in scope.

On infringement the Court allowed the claimant’s cross-appeal: it concluded that the defendants had, by prior admissions made in the litigation, accepted liability for specified post-termination uses if subsistence and authorship were established. Because the claimant established subsistence and authorship in respect of the pleaded instances, the Court declared that two identified displays on 27 January 2016 infringed THJ’s copyright and directed an inquiry as to damages or an account of profits at the claimant’s election.

Background and parties: The claimants (THJ Systems Ltd and OptionNet LLP) were the developer/owner and exclusive licensee respectively of OptionNET Explorer, a software program producing risk and price charts and other graphical displays. The defendants (Daniel Sheridan and Sheridan Options Mentoring Corporation) used the software in a mentoring/training business. The parties had fallen out and the claimants expelled Mr Sheridan from the LLP and terminated the defendants’ licence. The claimants sued for passing off and copyright infringement in relation to images produced by the software.

Nature of the proceedings and relief sought: The litigation combined an LLP expulsion dispute and intellectual property claims. In the copyright limb the claimants sought declarations of subsistence, authorship and ownership of copyright in the graphical user interface and images produced by the software, and damages/account or other relief for alleged unauthorised post-termination use (in particular two specified events on 27 January 2016).

Pleaded issues and procedural posture: The High Court trial determined liability issues, including whether (i) the R & P Charts were capable of protection as artistic works under the 1988 Act, (ii) who was the author under section 9(3), and (iii) whether two specific uses on 27 January 2016 infringed. The defendants accepted on the pleadings that their denial of infringement rested on denial of subsistence and authorship/ownership, and in pre-trial correspondence and a solicitors’ witness statement admitted that if the claimants proved subsistence and authorship then post-termination uses would amount to infringement (leaving extent of use to quantum). There were contested disclosure issues and disputes about the relevance of post-termination videos; the High Court judge found subsistence and authorship but dismissed the infringement claim on an evidential basis, concluding there was no proof of communication to the UK public.

Issues before the Court of Appeal: (i) whether the judge had applied the correct legal test for originality and, if not, whether the R & P Charts were original when assessed under the CJEU "author’s own intellectual creation" test; and (ii) whether the judge was wrong to dismiss the infringement claim where the defendants had admitted that, if subsistence and authorship were proved, the pleaded uses were infringing.

Court’s reasoning:

• The Court held that the governing test is that of the CJEU (Infopaq and subsequent authorities) requiring the work to reflect the author’s own intellectual creation and free, creative choices; the prior English "skill and labour" test is not the correct standard.
• Applying the correct test objectively to the R & P Charts and the evidence (including the works themselves and the uncontradicted evidence of Mr Mitchell about design choices), the Court concluded that a low degree of visual creativity existed sufficient for originality; protection is therefore available but its scope is narrow.
• On infringement the Court concluded that the defendants had, by clear admissions in litigation (including a witness statement by the defendants’ solicitors and earlier counsel submissions), accepted that post-termination uses would infringe if subsistence and authorship were established. The High Court had erred in addressing targeting/communication to the UK public as an issue when that matter had not been pleaded and the defendants had effectively admitted infringement of the pleaded instances. The Court therefore allowed the claimant’s cross-appeal in part, declared that the two pleaded displays of R & P Charts on 27 January 2016 infringed THJ’s copyright, and ordered an inquiry as to damages or an account of profits.

Subsidiary findings and practical notes: The Court restricted the earlier High Court declaration to the R & P Charts; it observed that the degree of originality was low, so protection is narrow. The appeal record showed significant procedural disputes about disclosure and the parties’ conduct, and the Court noted the litigation costs probably exceeded what was at stake and recommended mediation.

Appeal allowed in part. The Court of Appeal held that the correct legal test for originality is the CJEU "author’s own intellectual creation" standard; applying that test the risk and price charts produced by the software were original (albeit with a low degree of visual creativity) and therefore copyright subsisted in them with Mr Mitchell as author and THJ as owner. The defendants’ appeal against that declaration was dismissed save that the declaration was limited to the R & P Charts. The claimant’s cross-appeal on infringement succeeded: the Court found that, by admissions in the litigation, the defendants had accepted that the pleaded post-termination uses would infringe if subsistence and authorship were proved, and accordingly declared that the two pleaded displays on 27 January 2016 infringed THJ’s copyright and directed an inquiry as to damages or an account of profits.

This is an appeal from the High Court of Justice, Business and Property Courts (Chancery Division), Deputy High Court Judge John Kimbell KC, judgment [2023] EWHC 927 (Ch). The Court of Appeal (Civil Division) delivered judgment on 20 November 2023 ([2023] EWCA Civ 1354), dismissing the defendants' challenge to originality except to limit the earlier declaration to the risk and price charts and allowing the claimants' cross-appeal on infringement for the two pleaded instances, with directions for an inquiry as to damages or account of profits.