2014 (1) TMI 1115 - HC - Companies Law

Copyright infringement - Copyright in e-tendering solution - Unauthorizedly obtaining the access to the plaintiff product - Permanent injunction - Held that - plaintiff is a copyright holder in the software programme. Even though no original document has been filed despite admission/ denial of documents, nothing dissuades the plaintiff from still proving the same during trial. Further, there is already a decree in favour of the plaintiff against the Tendercity and defendant No.2 whereby they have been injuncted from infringing the copyright of the plaintiff company in the software E-solutions. Moreover defendant No. 2 as director of Tendercity has already acknowledged the proprietary rights of the plaintiff in the software. Hence, merely because the plaintiff has not filed any documents in support of its copyright, the plaint cannot be dismissed for want of cause of action. Defendant No.2 undertook not to even develop a software comparable to that of the plaintiff. The defendant No.2 already suffers a decree against him in this regard. Indubitably, a company is a separate legal entity from its shareholders and thus can be sued in its own name. However, in order to avoid a mala-fide exercise and if an act of the company is prima facie meant to circumvent the orders passed by the Courts, this Court will certainly pierce the Corporate veil and find out the true position. Despite an apology being tendered before this Court on 26th November, 2007 in Contempt Petition 35/2005, an independent company i.e. defendant No.1 had already been incorporated on 28th March, 2006 with the wife of defendant No.2 being its majority shareholder. On piercing the Corporate veil, I am of the considered opinion that the defendant No.1 company has been floated by defendant No.2 to circumvent the orders passed by this Court. Hence, the interim injunction granted vide order dated 28th July, 2010 is made absolute till the disposal of the suit - Decided in favour of Appellant.

Summary

Issues Involved:
1. Infringement of copyright in e-tendering software.
2. Allegations of illegal acts and breach of agreement by the defendants.
3. Application under Order VII Rule 11 CPC for rejection of plaint.
4. Application under Order XXXIX Rule 1 & 2 CPC for interim injunction.
5. Application under Section 151 CPC by defendant No.1 for restraining the plaintiff from communicating with its clients.

Detailed Analysis:

1. Infringement of Copyright in E-Tendering Software:
The plaintiff, a private limited company, filed a suit against the defendants for infringing its copyright in an e-tendering solution. The plaintiff claimed ownership of the intellectual property rights in its software, known as the Electronic Tender Management System, and sought to restrain the defendants from marketing, distributing, or using the said software. The plaintiff argued that the defendant No.2, who was previously associated with the plaintiff through an agreement, breached the confidentiality and non-compete clauses by developing and offering similar software through a new company where his wife is the majority shareholder.

2. Allegations of Illegal Acts and Breach of Agreement by the Defendants:
The plaintiff alleged that defendant No.2, while working with the plaintiff, had access to the plaintiff's software and technical know-how under a confidentiality agreement. Despite a prior court order restraining the use of the plaintiff's software, defendant No.2 continued to offer similar software through a new company, allegedly to circumvent the court's orders. The plaintiff sought an injunction to prevent the defendants from using or representing the plaintiff's software.

3. Application under Order VII Rule 11 CPC for Rejection of Plaint:
The defendant No.1 contended that the plaint did not disclose a cause of action and that the plaintiff failed to demonstrate how the copyright was infringed. The court, however, held that the averments in the plaint and the documents filed were sufficient to establish a cause of action. The court noted that there was already a decree in favor of the plaintiff against defendant No.2 and Tendercity, acknowledging the plaintiff's proprietary rights in the software. Thus, the application for rejection of the plaint was dismissed.

4. Application under Order XXXIX Rule 1 & 2 CPC for Interim Injunction:
The plaintiff sought an interim injunction to restrain the defendants from using its e-tendering software. The court observed that the defendant No.2 had previously acknowledged the plaintiff's proprietary rights and was already under a decree preventing him from using the software. The court pierced the corporate veil to determine that the new company, where the wife of defendant No.2 was the majority shareholder, was created to circumvent the court's orders. Consequently, the interim injunction granted earlier was made absolute until the disposal of the suit.

5. Application under Section 151 CPC by Defendant No.1 for Restraining the Plaintiff from Communicating with its Clients:
Defendant No.1 sought to restrain the plaintiff from communicating with its clients and demanded a public apology for alleged threats and intimidation. The plaintiff admitted to informing the Government of Andhra Pradesh about the court's injunction to prevent further contravention. The court directed the plaintiff to only communicate the order of injunction and refrain from making any adverse communications against the defendants.

In conclusion, the court addressed each issue comprehensively, upholding the plaintiff's claims of copyright infringement and granting necessary injunctions while dismissing the defendants' applications for rejection of the plaint and restraining orders against the plaintiff.