Blackmagic Design Pty Ltd v Overliese

The facts in outline 3 Grant Petty is the Chief Executive Officer of the applicant. In his affidavit affirmed on 13 February 2009, he explained that the products which the applicant designs, manufactures, markets and wholesales are the following: (a) products that capture and/or play back video to and from a computer in either compressed or uncompressed video; (b) products that capture and/or play back audio to and from a computer in either compressed or uncompressed audio; (c) products that perform video conversion from one video format to another, including but not limited to SDI to HDMI conversion, HDMI to SDI conversion, SDI to analog video conversion and analog to SDI conversion audio imbedding, SDI audio de‑imbedding; (d) products that generate video synchronisation signals in either standard definition or high definition; (e) products that perform video routing and switching in standard definition or high definition; (f) products that have video or audio wave form monitoring or testing capabilities (which are currently being developed by BMD but are not yet commercialised) and (g) products that perform SDI to DVI conversion for video monitoring in either high definition or standard definition. In the above passage, "SDI" means "serial digital interface", a high‑quality video connection for interfacing between video products and the highest quality uncompressed format. "HDMI" means "high‑definition multimedia interface", a compact audio/video interface for transmitting very high quality digital video. 4 Mr Petty said that, in November 2002, the applicant launched a product called the "DeckLink" capture card, which was, at the time, one of the first 10‑bit uncompressed capture cards to work seamlessly with the Macintosh operating system. Later, the applicant launched its "DeckLink HD" (high definition) product. All subsequent DeckLink products with high definition video were based on the DeckLink HD design. In April 2004, the applicant launched its "DeckLink HD Pro" product, which Mr Petty said was the world's first true 10‑bit and 12‑bit dual link 4:4:4 and 4:2:2 high‑end video capture card suitable for both Macintosh and Windows systems. In the same month, the applicant also launched what Mr Petty described as its "HDLink HD Monitoring Solution", which allowed customers to use a 24‑inch computer monitor for the highest quality HD TV video monitoring. In April 2005, the applicant introduced a new type of video editing product called "Multibridge Extreme" which solved the problem of insufficient space on standard computer ports to add extra audio channels by moving the electronics to an external box. In April 2006, the applicant released its "DeckLink HD Extreme" product, which features both SDI and analogue input/output connections that switch between high definition and standard definition video. 5 Mr Overliese commenced working for the applicant, through an employment‑procuring intermediary of some kind, in June 2002. He took up direct employment with the applicant in August 2004. At that time his position was Director of Hardware (International Video Markets). At some stage, and at least for the period which is presently material, Mr Overliese assumed, and thereafter continued in, the position of Director of Hardware Engineering of the applicant. As the applicant's business grew, he recruited and managed a large hardware engineering team. Mr Overliese described the main part of his role as "to lead the hardware engineering team, and ensure the timely, effective, and efficient development of the hardware products" for the applicant. He said that his role was as "technical lead, mentor and chief engineer"; and to provide personnel and human resources management of the hardware engineering team. An idea of the responsibilities attaching to the position occupied by Mr Overliese may be gained by the following listing thereof in the job specification written by the applicant for Mr Overliese's replacement: Responsibilities • To lead hardware development for Blackmagic Design • Oversee new product development and design implementation in conjunction with the CEO and Product Managers • Define product specifications • Manage product time‑scales and time to market imperatives • Manage product testing specifications • Manage new part selection and pricing negotiations • Manage a bug system and assignment of tasks to engineers as part of a planned product release • Joint responsibility, along with the Director of Software, for ensuring interoperability between hardware and software development • Authority to Hire and Fire 6 Mr Young commenced his employment with the applicant in April 2006, as Business Development Manager. His job description, set out in a schedule to a written contract of employment executed in November 2006, was: "Developing the sales channel for Blackmagic Design, and finding new opportunities for relationships with other manufacturers and industry partners". He was, in effect, the head of sales for the applicant. His employment was covered by a written contract dated 23 November 2006, some of the terms of which are presently relevant. Under that contract, Mr Young acknowledged that he might, in the course of his employment, become aware of confidential information which was the property of the applicant. The relevant clause provided: (c) The Employee shall keep in strictest confidence all Confidential Information and shall not disclose to any person any confidential information without the consent of the Company. (d) The Employee will not use, or modify for his own use or benefit or the use or benefit of any third party any Confidential Information. The contract required Mr Young to disclose any conflict of interest to the applicant, and contained a cascading series of restraints upon competition. So far as presently relevant, Mr Young was thereby restrained from participating in, having an interest in, assisting with or otherwise being directly or indirectly involved, engaged, concerned or interested in a business, activity or operation that was the same as, substantially similar to, or competitive with, the business, or any material part of the business, of the applicant. 7 In 2006 (and possibly also early 2007) Mr Overliese built a pair of loud speakers at his own home, in his own time and using his own resources. Either in December 2006 (as recalled by Mr Young) or in early 2007 (as recalled by Mr Overliese) he showed these speakers to Mr Young, who thought "they represented a complete product close to being a product I could sell". Thereafter, Messrs Overliese and Young occasionally discussed the idea of going into business together, making electronic products in the audio industry. Evidence of a serious interest in such a venture is a spreadsheet named "industry.xls" created by Mr Overliese on 31 May 2007 which, as last modified on 27 November 2007, contains details of speakers, suppliers, organisations etc in the audio industry. 8 In June 2007 Mr Young was, it seems, about to undertake a business trip to Europe on behalf of the applicant. On 5 June 2007, Mr Overliese sent him an email with the subject line "planzz" and in which he suggested that they should plan a list of retailers that Mr Young could visit while he was in Europe. About 10 minutes later on the same day, Mr Overliese sent Mr Young a further email in which he set out a list of the information which they needed from dealers (inferentially in Europe), including "what the interest is in better‑bang‑but‑bigger‑bucks speakers" and "how many units of powered speakers do they sell". 9 In the same month, over (or possibly after) a few drinks, Messrs Overliese and Young came up with a name for their proposed business, "Atomos". On 12 August 2007, they registered a new company called "Atomos Audio Pty Ltd". On 13 August 2007, Ms Young registered the domain names "atomosaudio.com", "atomosaudio.com.au", "atomosaudio.net" and "atomosaudio.biz". On 11 August 2007, Mr Overliese created a document on his word processor headed "Patent", and in which four "primary claims" were set out. The claims were all to do with loud speakers. 10 In August 2007, Mr Overliese sent an email to Mr Young with an attachment headed "Atomos". The applicant described this, not inappropriately, as a "to‑do" list. There were four columns, headed respectively "What", "Who", "Comments" and "Due date". With one exception, where there was an entry in the column headed "Who", that entry was "Ian", "Jeromy" or "Both". The dates in the "Due date" column ranged from 12 August to 3 September and, although the year is not referred to, there is little doubt but that it was 2007. Some of the entries in the column headed "What" were "Form a limited company"; "US registration"; "Get a URL"; "Get web hosting/email/calendar"; "Write patent(s)"; "Cost of goods"; "Design first products"; "Investigate and report on competitors' sales channels"; "Investigate trade shows"; "Logo and website design/contact plans" and "Set up FTP server". 11 It appears that Mr Young engaged the services of a design or branding firm called "Mekanica" since, on 28 September 2007, someone from such a concern called Mark emailed him with the subject line "atomos concept". Mark apologised for it having taken a while to do what he had done, which was to prepare a preliminary design image for an audio speaker, a logo for Atomos, and an advertising brochure containing the line "Atomos have revolutionised studio speakers by enabling linking to your pro audio computer to produce high quality monitoring of sound styles and effects". That was attached to the email. 12 On 28 November 2007, Ms Young (at the request of Mr Young) opened an account for Atomos at a collaboration web site called "Grouphub". On the same day, Mr Young uploaded three files to Grouphub, namely "industry.xls" and two word processor files apparently related to prospective patent applications, including the one to which I have referred. 13 In mid‑January 2008, Mr Overliese mentioned to Callum Hunter, a hardware engineer working in his section, that he was in the process of setting up a new company with Mr Young that would create professional audio equipment. He asked whether Mr Hunter would be interested in joining the new company. Mr Hunter replied that he could possibly be interested. Nothing further came of that proposal. 14 On 10 January 2008, Mr Overliese created a spreadsheet on his private computer called "ycalc.xls". He made changes to it, and added to it, over the succeeding months. Various versions of the spreadsheet are in evidence, reflecting Mr Overliese's practice of saving it with different names from time to time. The spreadsheet was made up of different pages, or "worksheets" as they are called. The worksheets fall into two quite distinct categories. The first relates to Mr Overliese's ideas and calculations for the audio products which might have been made and marketed by Atomos. No issue arises with respect to those worksheets: counsel for the applicant made it clear that their client had no objection to Mr Overliese and Mr Young making plans, in their own time, to develop an audio business for Atomos. The second category consists of three worksheets on which were set out details about video products, including products of the applicant. Those details were alleged to contain the applicant's confidential information and to bespeak the making of serious preparations by Mr Overliese at least to take Atomos into the video industry in competition with the applicant. It was not until about 7 February 2008 that these three worksheets were created, or that the first of them was. Before describing those worksheets in detail, I should return to the second half of 2007, and to certain differences of opinion which then arose as between Mr Petty and Mr Overliese. 15 One of the matters of concern which arose in late 2007 related to an idea that Mr Petty had for the replacement of all the applicant's then existing models with a new one‑lane PCI express card, based on the product called "Intensity Pro". The replacement product was to encompass all of the features offered by the other cards in the applicant's range. As Mr Overliese recalled it, the impetus for this idea was the discontinuation by the manufacturer of one of the electronic parts used in a number of the applicant's products, called "SAA7129". As a result, the applicant's products which used that part would also need to be discontinued, including the highly successful DeckLink Extreme. However that may be, the fact is that, according to Mr Overliese, Mr Petty wanted to introduce this new card. In his witness statement, Mr Overliese said that Mr Petty laid down the following stipulations: (a) The card must offer the same or better selection of video inputs and outputs; (b) Must work in the same way as the cards it replaced; (c) All video connections had to offer High Definition video; (d) Certain features must be offered; (e) Newer parts must be used; and (f) The card must be 1 lane PCI express Mr Overliese was opposed to this idea. He told Mr Petty that this would leave a competitor with opportunities to introduce a much simpler and cheaper card, and thereby to undercut the applicant on price. According to Mr Overliese, Mr Petty dismissed this concern, saying that the feature set offered in the card which he proposed would be so attractive that people would not want a cheaper card. He added that, if a competitor did come in with a cheaper model, the applicant could make a cheaper version of the product quickly. Mr Overliese also opposed Mr Petty's decision to have no model which did not have the high definition feature. According to Mr Overliese, the inclusion of high definition added considerable cost to the product. 16 Mr Petty's evidence as to the events to which I have just referred was that, in August or September 2007, he had a number of ideas for new products that might be developed, including the replacement of existing standard definition products with models based on the applicant's "Intensity 1‑lane PCIe" design. He discussed the idea with Mr Overliese on several occasions in late 2007. In his affidavit affirmed on 13 February 2009, Mr Petty said: By late 2007 Overliese and I had referred this idea to engineers to start developing. I asked Overliese to analyse the idea for the design, and part of this process is to calculate parts costs etc. The idea was to develop the Intensity product which would use lower costs architecture rather than the more expensive architecture of the existing cards. The Intensity cards were to be a 1 lane pcie card, meaning the bandwidth would be on 1 lane which allows high end HD video quality at significantly lower cost. Intensity had sold well, and was a reliable design, so I knew the new SDI based product would work well. My instructions to Overliese were that he was to try and find a means of building the same capabilities as a 4 lane pcie card in a 1 lane pcie card which would be the most cost effective capture card on the market. Under cross‑examination, Mr Petty asserted that these were not the instructions he had given Mr Overliese in about September 2007. Rather, he said that what he had instructed Mr Overliese to investigate was (as described in par 8(a) of his affidavit affirmed on 1 July 2009) - A product to be based on BMD's Intensity 1‑lane architecture. This product was to be BMD's Intensity Pro with the addition of balanced analog audio, SDI video in and out, RS‑422 deck control and gunlock inputs. However, when Mr Petty was asked to recall the specific details of his conversation or conversations with Mr Overliese, he said: Well, in some ways I told him both. It was like, the theme was to bring Intensity up to the old DeckLink HD Extreme features roughly and to bring our Multibridge product down to where the old one was, but specifically when we talked about the actual features it was like 8(1) [sic]. The theme was, you know, kind of like DeckLink HD Extreme down but it was a very sort of general spirited theme versus the - 8(a) was what I was actually was - we were talking about and when it got to the nitty gritty and we discussing features, that was what more specifically 8(a) was what I was saying. … It's vague because we had a lot of discussions. It was like a discussion trade‑off where what happens if we add, you know, high definition, you know, what happens if we take this out. You know, we sort of, you know, what would you call it, negotiate almost the feature sets versus the costs and, you know, we sort of had it pretty much locked down and then they were going off to do the product. Mr Petty could not recall the "actual conversations" of the first time he raised this matter with Mr Overliese. He said that what he set out in par 8(a) was "pretty much what I said". He accepted that he never asked Mr Overliese to achieve 10‑bit over 1‑lane. 17 In saying that there were many discussions about his proposal for a one‑lane PCI card, Mr Petty made common ground with Mr Overliese. The latter said that the discussions occurred over several occasions, and included many more details than those to which he referred in his evidence. An aspect to which he did refer, and about which he, apparently, felt strongly, related to a project called "Kip" which had been under way in late 2006. That project involved the development of a 1‑lane card incorporating the SDI features of DeckLink HD Extreme. The project was based upon "Intensity", and used a microchip called "CYP 15 G 0101". However, as of late 2007, the Kip project had been abandoned for about a year. Mr Overliese said that Mr Petty refused to re‑enliven this project, notwithstanding that it was, in Mr Overliese's view, an inexpensive means by which to produce the 1‑lane product which Mr Petty had in mind. He said that Mr Petty was keen to use only new parts and to make "a much more feature‑rich product". Mr Overliese said that he advised Mr Petty of every option for reducing the cost of the product by reducing the feature set, offering different models, or changing the way the product worked. He said that he advised Mr Petty "clearly and completely" in these respects. He said that, if the applicant made a card that offered almost identically the features of the DeckLink HD Extreme card (retailing at $US995), but at a cheaper price ($US695), it would make less money as customers opted for the cheaper card. 18 Mr Overliese set about costing the kind of 1‑lane card that, in his understanding of it, Mr Petty had specified. He enrolled the services of Mr Hunter to assist him in this task. The conclusion they reached was that the card would be only about $20 cheaper to build than a new version of the DeckLink HD Extreme 2 which was in development at the time, the "DeckLink HD Extreme 2". Mr Overliese reported this to Mr Petty, and the idea was not further pursued. This was at about the end of 2007 or the start of 2008. 19 The development of the "DeckLink HD Extreme 2" was of itself the cause of some difference of view as between Mr Overliese and Mr Petty. According to the former, at some time in late 2007 Mr Petty instructed the engineering teams to design a new DeckLink HD Extreme product. The proposal was that the existing HD Extreme product would be discontinued simultaneously with the commencement of production of the new product. Mr Overliese considered this to be a "highly risky strategy", as the engineers could not guarantee that any new product would be right the first time. His recommendation was not to withdraw the old model for a few months, until the new model was established. However, according to Mr Overliese, Mr Petty was adamant, and ordered that there be an immediate changeover. Mr Overliese said (in his evidence) that Mr Petty loudly stated in the open office environment, for all to hear, that the DeckLink HD Extreme product contributed about "25% of the company's profit", and put pressure on the engineers to be sure that the new product was right the first time. He said that he was stopping manufacture of the old model completely, and stopping ordering parts for it. Mr Overliese said that there was "a huge amount of stress in engineering" with respect to the new product, and that Mr Clarke, the head of software engineering, "looked at death's door with the massive workload he had". 20 The events to which I have referred in late 2007 and early 2008 provided a kind of context for the creation by Mr Overliese of the contentious worksheets in "ycalc". The circumstance which led directly to it related to Mr Overliese's interests in audio products, presumably in the context of Atomos. In January 2008, a friend gave Mr Overliese a "Traveller" audio box made by a company called Motu. As an engineer, Mr Overliese was interested in seeing the parts that made up the Motu product. So he dismantled it, then set about determining the cost of building the product, using a parts sourcing company called "Digikey" and the manufacturer's website prices. He recorded the results of his labours on a new worksheet, in the then current version of the "ycalc" spreadsheet, called "cp". The worksheet (not one of the three which I have described above as contentious) has columns which identify the parts within the Motu product, the source of those parts, the quantity used in each case, the price, and the total cost for each part. Mr Overliese said that the prices paid by the applicant for similar or corresponding parts were almost the same as those which he identified through Digikey and the manufacturer's websites. Although the applicant did not make an audio‑only product of this kind, Mr Overliese realised that, had it chosen to do so, it could not have been cost‑competitive with Motu. This made Mr Overliese concerned that Motu (which also made products in the video industry) could have effectively competed with the applicant on price in that industry. He said that he regarded this potential competition from Motu "as extremely concerning". 21 Having looked at the Motu "Traveller" audio product, Mr Overliese looked at Motu's V3HD video product. This was its first product in the professional video market, and Mr Overliese was most impressed. According to him, Motu had managed to design and implement "every single type of video technology" that the applicant had. There were also some "clever cost‑saving design aspects" of the Motu video product. Mr Overliese thought that Motu could quite easily launch a range of SDI video PCI cards which matched the applicant's range at every level where the applicant had a product. 22 According to Mr Overliese, it was because of these concerns of potential competition from Motu, and because of his concerns that Mr Petty was specifying a more expensive product than was necessary, that he developed another worksheet in the "ycalc" spreadsheet called "SDI". He said that he "wrote down a line of products which Motu, or indeed any other competitor, could do if they made a range of SDI video PCI cards which matched and competed with [the applicant's] range". He listed the corresponding existing products of the applicant, and calculated costs and profits which might be derived from those products, and from the products of the hypothetical competitor. 23 The "SDI" worksheet set out details of the components, and of the costs of those components, with respect to five video interface products. Mr Overliese called them the "simplest option", the "killer card", the "ultracheap SD card", the "4lane megamotha" and the "ultracheap HDMISDI interface". By this process, Mr Overliese "sketched up a bunch of 1‑lane cards that could do various features". He described the "SDI" worksheet as follows: [W]hat I did here is, I kind of put my head into the engineer of the one who is going to compete with [the applicant], and … do a set of products which fairly much go across the range of a cheap product which is very limited and only has a few connections and they're only standard definition, and then produce a couple of models in between where you add one high definition output, or you add two and so on. But the idea is, like I was saying, it's kind of a bit like Lego, this process. You can bolt on another piece, and you can come up with a sketch of a possible product which has one standard definition output, one high definition output, one analogue video input, one analogue video output set, and so on; two channels of audio. Each time you add a set of functions, you generally increase the cost. So if you start off with a very simple, small product, you've got a very cheap one. And as you add functions, you can build a range of products … And so what I have sketched here is the possibility of somebody making a set of products to compete with [the applicant]. In this way, Mr Overliese came up with a cost figure for each of the five products dealt with in the "SDI" worksheet. The result of Mr Overliese's calculations was a conclusion on his part that the hypothetical competitor could well produce corresponding products on a lower cost base than that of the applicant. 24 Mr Overliese sought to raise his concerns with Mr Petty in about early February 2008. He gave the following evidence about the ensuing conversation: I started the conversation with a [sic] words to the effect of "Grant, I am very concerned about what MOTU could do". Petty got immediately furiously angry at the mention of the competitor MOTU. He yelled at me that he did not want to ever discuss competitors, and such discussions were the rot that destroyed companies. Despite his reaction, I persisted. I recall I used an analogy and that I said something like "you can't play chess without looking at your opponents' moves". He yelled, swore and gesticulated while he instructed me that one should never consider a competitor's moves. He gave me a lengthy lecture about how employees can get obsessed with competitors, and that this was a destructive force within the business. Petty stated that the right way to achieve success was that Blackmagic needed to have its own completely independent creative vision. This is a vision that Petty himself determined. Petty ordered me never to bring up competitors again with him or anyone at Blackmagic and this terminated the conversation. I did not get to voice any of my concerns. Present at the time were Young, Lam, Simon Kidd and others I can't remember. They had no trouble hearing him, he was shouting at the top of his voice. The correctness of this evidence was not challenged in cross-examination. 25 Mr Overliese's concerns, together with Mr Petty's reaction to the Motu aspect thereof, prompted the former to undertake further development of the "ycalc" spreadsheet. It is not entirely clear when, or in what sequence, Mr Overliese developed the SDI worksheet and created two further worksheets called "costs" and "allcosts". For reasons to which I shall come presently, 7 February 2008 was a busy day (or night) for him (although he denied that any substantial time was occupied by these endeavours). I shall, however, first describe the contents of these two worksheets, and set out what Mr Overliese said about them. 26 Mr Overliese said that he commenced with the "allcosts" worksheet. There was a column with the names of products, the first four of which corresponded with the first four mentioned on the "SDI" worksheet (see para 23 above) and were, respectively, "Simple card", "Killer card", "SD card" and "4 lane". They represented products of the hypothetical competitor. The remainder were products of the applicant, or which the applicant was contemplating introducing. The production cost of each of the applicant's then products was set out. The major component of that cost, and one which was stated accurately to the cent in the worksheet, was the amount which the applicant would pay to obtain the components that, when assembled, made up the product. Mr Overliese said that these costs figures were "based only on information which I used daily for my work" with the applicant. Mr Overliese included in the worksheet the usage of the parts in question per month from August 2007, details which he also obtained from the applicant's records to which he had access. The manufacturer's margin, 65%, was, he said, a "guess" which he applied across the board. However, he said that he knew "roughly" what the applicant's margins were, because Mr Petty would discuss with him how much profit he would make whenever they talked about the total cost of his ideas for a product. 27 Mr Overliese then created a further worksheet, called "costs". Into that worksheet, Mr Overliese copied the contents of the "allcosts" worksheet. He added two columns, headed "Bang for buck" and "percent profit". At the time (ie in early February 2008) he entered data only with respect to the applicant's products. The cells in the new columns corresponding to the four hypothetical competitors' products were left empty. The figures in the "bang for buck" column presented the annual unit profit for each of the applicant's products, and the column headed "percent profit" represented the calculated percentage contribution to overall profits made by the profit on each product. 28 It is not possible to put a firm date on Mr Overliese reaching the stage in the development of the "ycalc" spreadsheet that I have just described. Neither is it possible to put a firm date on when he and Mr Young came to thinking that Atomos might produce video, as well as audio, products. It seems that the first time that Mr Overliese uploaded a version of "ycalc" on to Grouphub was on 22 January 2008. Mr Young said that that version of the spreadsheet "contained only audio information". That would have been consistent with other evidence in the case, and I have no reason not to accept what Mr Young said. I infer that the spreadsheet, at this stage, had not been populated with the kind of analysis that later found expression in the "allcosts", "SDI" and "costs" worksheets. That Messrs Overliese and Young had at least a provisional intention that Atomos should produce video products is apparent from an email sent by Mr Young to Mr Overliese on 3 February 2008, while he (Young) was travelling overseas on behalf of the applicant (which he was for the period 2‑22 February). On 2 February, he sent the email to Ms Young and to himself (ie to a personal email account). On 3 February 2008, he sent a copy of that email to Mr Overliese, describing it as "a simple overview of what is going through my mind for both Audio and Video products as guidelines from my side …". He told Mr Overliese that he thought the guidelines were "right", and that they would give him "the picture for this stage of development …". He added: "I hope you don't think I am not doing anything on this because it's all I think about …" 29 The email of 2/3 February 2008 consisted of a series of paragraphs of text headed "Shows for A", "Videographers Problems", "Markets", "Third Party Development", "Sales Channel", and "Direct Model". The most significant paragraph for present purposes was the one headed "Videographers Problems", which read as follows: Camera codecs and file transfers from cameras, review cycle is lost because of no ingest and edit becomes slower. Even if they want to review and capture higher, less compressed quality and review footage on the way in, they can't. Product idea ingest the compressed format through file transfer to HDD or solid state memory so they can store and reuse solid state memory in the camera. This stored footage would then be decoded using the TI chip or decode using a specific companies camera encode decode chip to enable realtime decoding of compressed sources and CPU/hardware encoding of editing formats. This can be done while the rest of the footage is being taken and the camera memory card is in use once again. The product would have card slots for all major camera products such as SD, P2 and SxS. This product should also have the Capability to do uncompressed capture from standard sources such as SDI, HDMI, All analog connections. It should be USB and Firewire compatible over PCIe, USB3 and PCIe 1 lane for laptop editing. If possible include RT effects processing and acceleration within certain packages or in GPU? 30 Mr Overliese said that he was not entirely sure as to the product concepts which Mr Young had in mind in this paragraph. He said that the products referred to were "loosely defined" and that Mr Young "wrote in a really rambling fashion". However, he agreed that, if Mr Young was proposing a video capture peripheral product, and Atomos were to make such a product, it would be going "head to head" with the applicant. The potential for that to happen was recognised by Mr Overliese in some notes he made upon a copy of Mr Young's email which he created in the form of a word processor file called "Shows for A Jeromy 2 Feb 08.doc". Beneath each paragraph in the text of the email, Mr Overliese added his own comments. In the paragraph set out above, after the words "laptop editing" in the second last sentence, Mr Overliese added, in parenthesis, "not sure what this means". After the paragraph as such, Mr Overliese made the following comments: · Development time for software - around 1 man yr · Development time to implement codecs for SD P2 SxS likely to be the substantial proportion of development for the product. · Discussions with Panasonic over P2 before, had them wanting a high price for the module ($2500 from memory) · Time for relationship management with Sony & Panasonic · Level of commitment in relationship from Sony & Panasonic (potential for uncontrollable delays) · Product lifecycle of P2 and SxS ? · Market size of P2 and SxS. Need these for a business case. · Development for P2 and SxS does not lead on to more opportunities - technological dead end. · 4 good h/w and 2 good s/w engineers for 9 months required · Starting at deep end - is this essential or unrealistic ?? · After this, we would be a video capture peripheral company. We would be going head‑to‑head with BMD, AJA, MOTU - is this a good idea? In the final bullet point, "BMD" was a reference to the applicant. Mr Young could not recall receiving a copy of these notes from Mr Overliese, and there is no evidence that they were ever made part of a communication. However, they are contemporaneous evidence that, until he received Mr Young's email of 3 February 2008, he did not envisage that Atomos would produce video capture cards. 31 Although the original email was sent also to Ms Young on 2 February 2008, her evidence was that, when she saw it, she realised immediately that it had nothing to do with her and had been sent to her email account because it was set up on their home desktop computer. She neither understood nor had any interest in the contents of the email, although she assumed that the "A" referred to in the heading of the first paragraph was Atomos, and that the email probably had something to do with Mr Young's ideas for trade shows at which Atomos could be present. Ms Young was challenged on this evidence (particularly since, in his email to Mr Overliese of 3 February 2008, Mr Young opened by saying that the email being forwarded was something which he had sent to Ms Young) but there is nothing in the context or facts existing at about the beginning of February 2008 from which I could infer that Ms Young had any greater interest in the email than she claims to have had. 32 It was submitted on behalf of the applicant that the paragraph headed "Videographers' Problems" made it clear that the respondents were, at about the beginning of February 2008, planning to set up in business in opposition to the applicant. Mr Young denied that this was what he intended by this paragraph. He said that the expression "camera codecs" was a reference to the compressed data that is recorded by the camera. He said that this was not what the applicant did. Mr Young said that the applicant's cards captured uncompressed information, and that the absence of "codecs in their hardware" was the reason that the applicant's cards were so cheap. However, in the paragraph headed "Videographers Problems", Mr Young had also said that the Atomos product "should also have the capability to do uncompressed capture …" When asked about that, he said: Correct, and the reference to both of those - this also goes to your other point earlier, that you moved away from, is that the compressed - the first part of the product that I'm talking about here, is expensive to put into a product. The products become more expensive when you try to do compression inside the product. Uncompressed, you're passing the data directly into the computer without processing it on your board. So by passing it directly into the computer you don't have to put so many components on your product and this is actually Blackmagic Design strategy. Mr Young accepted that, in offering the service of uncompressed capture, the Atomos card would "cross over" with the capacities of the applicant's cards. However, he said that it would not be competitive, because the products would be more expensive. He said that a compressed product, with capacity also to handle uncompressed data was the "very product" which had been suggested to Mr Petty, and rejected by him. 33 Within about this same time‑frame, Mr Petty raised again his idea of introducing a new 1‑lane card that might take the place of some of the applicant's existing products. On 4 February 2008, he sent the following email to Mr Overliese: What are your thoughts about reducing some of the features on the one lane version of Decklink Extreme PCIe 2. We could then enable them if we need to as we want to later. I was thinking about: · No 24 fps frame rates, just 1080p/50 and 1080p/5994 · No 3D lookup table? I am looking for a few things that we can disable, but then instantly enable if we need to in the future. Any ideas? Mr Overliese replied, seven minutes later, as follows: We can easily do both those, which would mean the differences would be: * Only 8 bit HD (forever) * No RGB HD in premiere (forever) * No 3G‑SDI (ever) - i.e. no 2K or RGB‑HD * no 24 frame rates (can be enabled at any time) * No 3D Luts (can be enabled at any time) * no HD desktop (could possibly add a RGB‑YUV s/w conversion?) * every 3rd frame of HD output is watermarked with a Blackmagic Design logo (could be disabled any time) In his affidavit affirmed on 13 February 2009, Mr Petty said that what he proposed here had been discussed with Mr Overliese previously, and that he, Petty, "had in mind that this product would have 10‑bit capability". In his oral evidence, Mr Petty suggested that the words "in SD" should be inserted after "capability". 34 The matter was taken further in an email sent by Mr Petty to others within the applicant's organisation, including Mr Overliese, on 5 February 2008. Mr Petty proposed doing a PCI express one‑lane version of the DeckLink HD Extreme 2 card, to replace the DeckLink SP PCIe and the DeckLink Extreme PCIe cards. The new card would have no desktop feature in HD, and would be only 8‑bit HD, but 10 and 8‑bit SD. It would have all the features of DeckLink Extreme, and "plug into the cheaper machines". Mr Petty proposed that the product would retail at $695, thereby sitting between the SP and the Extreme cards which it replaced. He said that the product would have a profit of $226 per unit, but that there would be a good chance of the build‑cost reducing over time, due to component volumes. On certain assumptions which Mr Petty had made, the applicant would be down about $30,000 in profit by introducing such a new card, but he pointed out that, if they did not follow that course, they would run out of components to build all the SD models just after mid‑2008. He said that the "upside" was that, if they increased volume with better features, hopefully they would get some increase in sales to reduce the loss somewhat, "and then the margin should also open up". In a response to this email, another of the applicant's employees, Mr Kristian Lam, expressed quite obvious reservations to Mr Petty's proposal. In a short contribution, Mr Overliese responded to those reservations, coming to Mr Petty's defence, albeit in a very limited way. Mr Young (who was then in Japan) also responded, expressing a preference for SD only at the start, and saying that it was very important to keep HD Extreme going. Mr Petty terminated this round of exchanges (on 12 February 2008) by saying that the card which he had in mind would "ship after NAB anyway", and that they could talk about the matter later. The "NAB" to which Mr Petty referred was the trade exhibition conducted in April each year by the National Association of Broadcasters in the United States, at which the applicant was a significant exhibitor. 35 Returning to the plans for Atomos being developed by Messrs Overliese and Young, according to the latter, while he was in Japan, he received a phone call from Mr Overliese to inform him that he had uploaded a new version of "ycalc" on to Grouphub. Mr Overliese said that he had added some products that Atomos might be able to do. They were products that he would like to make, but that he was not allowed to make in his employment with the applicant. He proposed that Atomos could make these products, since the applicant did not want to do so. Mr Young said that they (ie he and Mr Overliese) would then be competing with the applicant, something which he did not want to do. He said to Mr Overliese something to the effect of "You are crazy". Mr Overliese's response was: "Oh, yeah, all right". Mr Overliese also gave evidence about that phone call. He recalled that, when Mr Young received the news that Atomos might go into competition with the applicant, he laughed and said "That's silly". Mr Overliese himself (with the benefit of hindsight, I rather gathered) said that the idea involved "a mountain to climb" and that, "in terms of overall business strategy it was stupid". 36 The records of Grouphub show that a lot happened on 7 February 2008. First, Ms Young uploaded a document called "Objectives to Outcomes". This was a copy of a file originally emailed by Ms Young to Mr Young on 29 January 2008. Ms Young, whose professional expertise is in manufacturing and information technology, described this file as a template of a kind used to help clients develop a work breakdown structure based on their objectives, and producing a set of "deliverables". The file, in the form of a spreadsheet, took a high‑level objective, converted that to parcels and sub‑parcels of work or activity, and ended up with a great many detailed "deliverables". The first "objective" was "to achieve $100m turnover (within one year of launch) with 15% operating profit"; the second was "to create unique products for Audio professionals"; and the third was "to create the best company to work at". Ms Young said that she came to send the file to Mr Young on 29 January 2008 because they were talking on the telephone and she informed him that she was putting together "one of the generic templates" that she and Mr Overliese had discussed. She described the file as a "mapping tool". Mr Young said that he had asked his wife to undertake this kind of exercise so she would feel more involved in the business plans that he had with Mr Overliese. 37 The applicant described "Objectives to Outcomes" as "a sophisticated planning topology ... [which included] a comprehensive list of business activities with sub‑sets of actions and deliverables". That it was, but the content of the file was, as the respondents submitted, wholly generic. It was a template for organisation which might have been used in almost any industrial setting. My attention was drawn to nothing in it which implied a specific concern with SDI technology or products or with a business in competition with the applicant. In the context of the allegations made by the applicant in the present case, the file is quite benign. 38 The second document uploaded onto Grouphub on 7 February 2008 was a version of "ycalc", uploaded by Mr Overliese together with a message with the subject line "ycalc update". It read as follows: BOM sheet has 3 cost/price scenarios for a 12ch audio box. As it stands, it is about right. Whether we do this product or not is of course another matter. "Costs" sheet is interesting: it is BMD's last 6 months and cost/sale price comparison across the whole product range. Password is "atomos2924" and is not compatible with Numbers or any other mickey‑mouse apps :) (squeeek!) Let me know if this is a problem. I have some dramatically profitable ideas for SDI products, but have not detailed them yet. Thirdly, Mr Overliese uploaded a word processor document called "marketing plan", together with a message which related to that subject. I shall return to them later. Fourthly, Mr Overliese uploaded yet another version of the "ycalc" spreadsheet, together with a message with the subject line "SDI products added to ycalc - exciting news". It read as follows: I have put down 3 SDI cards we could do, that all start from Intensity and cost/features blow away everything BMD has. Check the "Killer" card specs: I think it would be a product that really hits the sweet spot. The cheap SD card is $65 cheaper to make than decklink extreme and would be hard to beat on price. Not that I think a price war is a good idea, but that is another story. "BMD" was, of course, the applicant. 39 By placing these Grouphub postings alongside Mr Young's evidence as to Mr Overliese's phone call while he (Young) was in Japan, certain inferences as to the order of things may, I consider, be drawn. In his first message, Mr Overliese drew attention to the fact that he had set out the applicant's cost/price comparison for the previous six months across the whole product range. That is consistent with his evidence that, in early February, he commenced by entering data for the applicant's products only. It was only as a kind of postscript that he said that he had "some dramatically profitable ideas for SDI products". However, by the time that Mr Overliese came to post his third message, and to upload the spreadsheet a second time, he had populated it with details of "3 SDI cards we could do". They involved at least the "killer" card and a "cheap SD card". There is little doubt but that Mr Overliese was then thinking, however theoretically and however unrealistically, that Atomos might provide SDI cards in competition with the applicant. 40 It was, I infer, at this stage that Mr Overliese telephoned Mr Young in Japan and described what he had just added to the spreadsheet, and which prompted Mr Young to suggest that he (Overliese) was wrong to be thinking of competing with the applicant. As it happens, it appears that Mr Young could not view the new spreadsheet on Grouphub, because it was password‑protected. On 9 February 2008, Mr Overliese uploaded a version of the spreadsheet which was called "ycalcNOPW.xls" - the "NOPW" part of the file name denoting that there was "no password" required. Mr Young said that he downloaded "ycalc.NOPW" from Grouphub. He looked at the "costs" worksheet, to which Mr Overliese had drawn his attention, and saw that it looked like the applicant's sales data. Mr Young did not really pay much attention to it, as it was information that was already in his possession; and it was not of interest to him. He claimed to be more interested in "the audio parts of the equation". 41 The version of the spreadsheet uploaded by Mr Overliese on to Grouphub on 9 February 2008 - "ycalcNOPW.xls" - is in evidence in its then form. It has formed the basis of my description of the various worksheets as set out above. In the "costs" worksheets, it is revealed that Mr Overliese summed the monthly and annual profits with respect to the applicant's products, and marked that "BMD", and he performed the like calculation with respect to the products of the hypothetical competitor, and marked that "Atomos". Mr Overliese sought to defend his actions by pointing out that the worksheet was organised from the applicant's perspective in the sense that Atomos was the hypothetical competitor whose activities had been the subject of his concerns raised with Mr Petty. I consider, however, that Mr Overliese's messages on Grouphub on 7 February 2008 give the lie to that self‑serving explanation. I accept that, initially, Mr Overliese had no intention of competing with the applicant. However, something happened in the first week of February 2008 (or thereabouts) to cause him (and Mr Young, it seems) at least to give consideration to the notion that Atomos might trade in video products. The most likely inference is that Mr Young's email of 3 February, together with Mr Petty's peremptory rejection of any consideration of the potential cost structures of a competitor, caused Mr Overliese to switch his analysis to one in which Atomos would now be in competition with the applicant, but for whatever reason, that is unambiguously what happened on 7 February 2008 or thereabouts. 42 There is an entry on the "SDI" worksheet in the "ycalcNOPW.xls" spreadsheet which should be mentioned at this stage. There is no reliable evidence as to when this entry was made by Mr Overliese, save that it must have been done on or before 9 February 2008. The entry is in the form of text in the "simplest option" section of the worksheet, associated with a side heading reading "software features". The entry reads: "10 bit HD should be doable - if the DMA style is changed". In his evidence, Mr Overliese explained that "DMA" was an acronym that stood for "direct memory access", a reference to the software by which the card got "the video out of the computer, if you like". He said that "DMA is comprised of VHDL source code and the source code which runs on the computer, which is probably NC … so if you changed both those pieces of software, you will change the way the DMA works." In re‑examination, Mr Overliese explained what he had in mind by this entry on the "SDI" worksheet: The thought came from the fact that computers were getting faster. Since PCI express was first [put in] computers … a few years before, the chipset in the computers was allowing the PCI express to run more and more efficiently as time went on, and I just had the thought that that's the main constraint. [W]hether 10 [bit] can be done is really up to the computer. … [T]he thought I had was that if someone's writing a fresh DMA, like they don't have PCI express, which … a couple of Blackmagic's competitors didn't …, in particular Motu didn't, … they would … have the option to optimise their DMA to work for PCI express by … cutting out unnecessary bits on the video, and perhaps with the computers coming up in performance and the DMA being made slightly more efficient, you might be in a position where it starts to look better on the newer computers … Mr Overliese denied that, at the time of inserting this entry into the "SDI" spreadsheet, he had actually worked out, even with a change in DMA, how to achieve 10‑bit HD over 1 lane. 43 The "marketing plan" document uploaded by Mr Overliese on to Grouphub on 7 February 2008 contained a series of bullet‑pointed observations, grouped under the headings "Objectives", "The Message", "Target Customer Demographics" and "USPs" (the latter of which represents "Unique Selling Points"). The next (and the largest) section of the document was headed "Competitors", and named three other companies, including Motu but not including the applicant. Under each company was a listing of the characteristics thereof, including its strengths and weaknesses. The document related only to audio products and the companies trading in them. 44 Mr Overliese gave evidence that the idea of competing with the applicant left him as rapidly as it had come to him, over the course of a few days in the first half of February 2008. He received no support from Mr Young for such an idea; indeed, Mr Young as good as derided him for having contemplated it. The applicant urged me not to accept this evidence, relying in this regard upon versions of the "ycalc" spreadsheet that had been modified on 28 February, 23 March and 7 May 2008. It was submitted on its behalf that those versions spoke loudly of a continuing intention on the part of Messrs Overliese and Young to compete with the applicant. Mr Overliese denied this, pointing out that the changes to the spreadsheet which occurred after 7 February 2008 occurred because the cells in question contained formulas, and were automatically altered when the date in a source cell was changed, as happened from time to time. Mr Overliese did not remove the reference to Atomos, but more by reason of inertia than anything else, as I understood him. 45 It is nigh impossible to arrive at an objective resolution of this point of evidentiary conflict between Mr Overliese and the applicant. Although it is possible to tell when a particular version of the spreadsheet was last saved, there is no way of knowing when, over a period of up to about three months, detailed changes were made. For example, there is no good reason to infer merely from a modification (or saving) of the file on 7 May 2008 that Mr Overliese then still entertained the notion of competing with the applicant. 46 The factual issues to which I have referred are complicated by the circumstance that Messrs Overliese and Young did, it seems, continue in their broad proposal to deal in video, as well as in audio, products whenever Atomos should commence business. 47 According to Mr Overliese, while Mr Young was overseas in February 2008, he (Overliese) asked Ms Young to prepare "a template for starting a business". As requested, she prepared three "generic planning documents". One of them was a spreadsheet which showed anticipated cash flows, based on various assumptions. For that purpose, Mr Overliese asked Ms Young to "insert some audio and video examples" from the "SDI" and "BOM" worksheets in the "ycalc" spreadsheet. This must have occurred on or after 7 February 2008, given that Ms Young obtained the details of proposal from a version of the "ycalc" spreadsheet that Mr Overliese had uploaded to Grouphub on that day (or possibly from "ycalc.NOPW" uploaded on 9 February). Ms Young created the cash flow spreadsheet on 13 February 2008. She incorporated the "SDI" worksheet in her own document, and in some respects used the SDI capture cards referred to there as a basis for her analysis. She insisted that she had no understanding of what these products represented - other than that they were video products of some kind. For Ms Young, the exercise was almost a theoretical one, in which she was using notional products merely for the purpose of setting up a cash flow template. In this evidence, she had the support of Messrs Overliese and Young. They denied that the use of the products set out on the "SDI" worksheet implied an intention on their part to make those products in competition with the applicant. Mr Young described the products as "placeholders" or "widgets". 48 Ms Young said that the only work she did with respect to the cash flow spreadsheet was to create it on 13 February 2008 (over a period of about an hour) and to forward it to Mr Overliese. For his part, Mr Overliese saved the spreadsheet with a new name - "cashflow_iano.xls" on 19 February 2008. A worksheet called "sales" set out the prices, ratios, costs and sales (on "high", "med" and "low" assumptions) for eight products. They were: "Killer external no SDI", "Killer external (with SDI)", "Ultra cheap SD only", "Basher", "Flasher", "Killer 1‑HD extreme killer 1 x lane PCIE", "Killer 2 - high end killer" and "Killer 3 - SD only". Mr Overliese acknowledged that none of these was an audio device, and that all of them (save "Basher" and "Flasher") were video devices. However, he said that none of them was a "real product" - they were all no more than "placeholders". He continued: This was, you know, conjecture. It was just if we did - you know, if you had a company that had these kind of product line up and, you know, I fiddle around with the cost of goods and the retail price and see what kind of cash flow you'd get for products. … You [ie counsel for the applicant, cross‑examining] keep saying we're making plans all the time, but there's a difference between making a plan to do something and just playing with an idea. 49 Messrs Overliese and Young met together on 4 March 2008. Mr Overliese subsequently made notes of their meeting, as follows: Agenda · Go over the cashflow_iano spreadsheet and insert realistic sales targets and analyse results Outcomes · Growth goals are realistic and achievable! · It is very important, for the strength of the company, to quickly produce as many products as possible in the early stages. This is for company growth and protection from competition. · Do video products as early as possible, related to the above point, and the fact that these are strong capabilities we have · Sales have three main mechanisms for growth: 1. Volume (maximization). Sales and marketing techniques to ensure maximum sales of the product by considering and targeting the end users/purchasers 2. Growth into new markets 3. Producing products which answer the needs and requirements of end users/purchasers Actions Ian · Get the windows DDK as quickly as possible for software engineer(s) to start work on drivers · Book appointment for lawyers to go over Jeromy's contract and advise on competitive actions in video market Jeromy · Put sales growth mechanisms into sales plan document As will be seen, the purpose of the meeting was to consider the "cashflow_iano" spreadsheet. An objective was for Atomos to produce as many products as possible in the early stages, commencing with video (rather than audio) products. Lawyers were to be engaged to advise on "competitive actions in video market". Mr Overliese accepted that his notes of the meeting on 4 March 2008, together with the contents of the spreadsheet, gave the impression that his focus then was on the sale of video capture cards. However, he reiterated that his only purpose "was to examine my cash flow spreadsheet and work out if we're going to be able to put together some kind of functioning business, particularly in relation to what kind of cash you need to put into the company to get a company going." Mr Overliese denied that the video products that he envisaged getting out more quickly were capture cards, but, given the nature of the products referred to on the spreadsheet, it is hard to take this denial seriously. 50 On 18 March 2008, Mr Overliese created a word processor document headed "business Plan Jeromy Ian Both". He agreed that it was an "outline for a business plan" rather than a business plan as such. It had bullet‑pointed notes under the headings "Sales Channel", "Competitive Analysis", "Product Plan" and "Marketing Plan one for Audio, one for Video". The notes under "Product Plan" make it clear that both audio and video products were contemplated. The document then lays out three "scenarios", namely: 1. All video: 5 video products first year, 5 second year more video 2. Video start, adding video: 3 video capture, then 2 other video + 2 audio, second year 2 & 2 3. Audio start, adding video: 3 audio products then 2 video, second year 3 video + 1 audio Details were provided by the first scenario only. As to that, the document stated: · Start with 3 video devices: 1. Killer external SDI 2. Killer external analog 3. Killer internal 1 lane And: · Next 2 devices: 1. Killer Pro x 4 + codec accel 2. Killer converter SDI‑DVI single? 3. Killer audio embedder? 4. CF - raid Although at first reluctant to do so, ultimately Mr Overliese accepted under cross‑examination that this document was concerned with video capture cards. Notwithstanding, he maintained his insistence that he and Mr Young never intended that Atomos would produce such products, and that the document was another example of purely conceptual work on his part. I regard this evidence as quite unconvincing. 51 On 19 March 2008, Messrs Overliese and Young met informally with a Ms Angelina Zubac, with whom they had been put in contact by Ms Young. The idea was, apparently, that Ms Zubac, who had some expertise in such matters, would provide some guidance to them on the preparation of a business plan. In an email to Mr Young on the same day, Ms Zubac did provide that guidance. However, save to confirm the impression that he and Mr Overliese were proposing to go into business on their own account, nothing of present importance turns on the meeting with Ms Zubac or the advice which she provided. 52 On 21 March 2008, Mr Overliese created a word processor document which was, he said, a series of biographical notes about himself which might form the basis of a later document that could be used to impress investors in Atomos. In part, the document was a rudimentary curriculum vitae, but it also set out Mr Overliese's reasons for leaving the applicant as follows: · Company direction for first 4.5 years was determined largely in cooperation with CEO. After this period, CEO changed my role to only management of hardware team, removing me from most strategic decision making. · Products development under sole direction of CEO has slowed from 6‑8 new products per year to 2‑3 new products. · Hardware engineering productivity gone from 100% to 60%, due to continually abandoned projects. · Company management highly dysfunctional under CEO. My desire to fix other divisions: software and manufacturing in particular vetoed. · Can see clear easy product openings in the audio & video markets not exploited. · · Want to go because I know Atomos will be a great business. We are sitting on a goldmine! · NB: I am not starting a business because I am unhappy with my job! As this extract makes clear, Mr Overliese was still, on 21 March 2008, intending that Atomos should operate in the video (as well as in the audio) market. Under cross‑examination, he explained that the expression "sitting on a goldmine" was something he observed being used to advantage by a manager with whom he had previously worked, when seeking venture capital. He denied that the relevant section of the document was informed by his profit calculations in the "SDI" page of the "ycalc" worksheet. Again, I regard that as an improbable denial. Whether or not by reason of that worksheet as such, the court would be naďve not to recognise that Mr Overliese's assessment of the potential profitability of video products, derived from his knowledge of the applicant's cost and profit figures, was very much in his thoughts as he created this document. 53 I refer next to the "marketing plan" document which I have mentioned briefly at para 43 above. It related to the video industry, and was headed "Atomos Video Marketing Plans". It included details relating to two "competitors", the first of which was the applicant. The way Mr Overliese (who created this document) set out the details which related to the applicant and those which related to the other potential competitor is instructive. For example: · Size The applicant: "$25m turnover" The other: Revenue estimate TBD. Guess around $50M? Would say around 15 hardware & 10 software engineers, sales offices? · Weaknesses The applicant: - Profitability too low, a 20% slump in sales will result in cutbacks. - Quality of manufacturing poor, few capabilities and high return rate - Marketing & advertising strategy nonexistent - Reputation for "cheap, so you get what you pay for" - Poor customer support - Software very weak and not much chance of improving The other: - Slow and conservative engineering, easy to beat features - Actual signal quality does not live up to the reputation - though mostly in spec. - Marketing extremely techie, relies almost 100% on sales channel for explanation. The evidence is that this document was last saved by Mr Overliese on 30 March 2008. To an extent at least, Mr Overliese was using his knowledge of facts about the applicant that would have come to him only in the course of his employment, to develop a video marketing plan for Atomos. 54 On 1 April 2008, Mr Overliese created another word processor document, saved as "Plan Overview". In part, the document consisted only of a series of headings beneath which no text appeared. In other respects, the document contained seemingly well thought‑out notes of what Atomos might do. It was clear that participation in the market for video products was a significant element of Mr Overliese's intentions. Under cross‑examination, he insisted that the document was consistent only with an intention to use compressed video technology, whereas the applicant's main focus was on uncompressed technology. I do not accept that. The document contains a number of references to uncompressed products. 55 In mid‑April 2008, the trade show of the National Association of Broadcasters was held in Las Vegas. Most of the senior personnel of the applicant, including Messrs Petty, Overliese and Young, attended. At the show, a Canadian competitor of the applicant called "Matrox" announced that it would introduce a new 1‑lane card with 10‑bit HD capacity for use in conjunction with Macintosh computers. This was, it seems, an announcement of some importance, and the matter was discussed as between Mr Petty and Mr Overliese. Mr Overliese said (to Mr Petty) that it was not possible for the applicant to do 10‑bit with its DMA, "but that since Matrox claimed it, we could investigate it by changing the DMA". Mr Petty did not deny Mr Overliese's account of this conversation, but said that the environment at the show was not conducive to holding confidential discussions about future product ideas, so the issue was not progressed at that stage. 56 Shortly after his return from the United States, Mr Overliese gave four weeks' notice to the applicant. He did so by letter addressed to Mr Petty dated 28 April 2008. He stated no reason for his resignation. He handed the letter to Mr Petty on 29 April 2009. When Mr Petty asked him why he was leaving, Mr Overliese said that it was due to personal issues, that he was feeling stressed with his job, and that he wanted to do something different. He said that he was going to be working from Melbourne until the end of the year freelancing for a UK‑based French company that developed chips for application‑specific integrated circuits. Mr Petty offered to have Mr Overliese remain with the applicant, albeit in a different role, but Mr Overliese's response was that he was restless, and wanted to do something different. He said that he was interested in moving overseas and getting out of Melbourne, and that he might move to northern California to work. Mr Petty said that the applicant had an office there, and, if he wanted to remain with the applicant, he could be there the following week and do something from that office. However, Mr Overliese declined that offer. 57 In his evidence, Mr Overliese said that his real reasons for leaving the employ of the applicant were not as he had told Mr Petty on 29 April 2008. He said that he was then "evasive", as he wanted to avoid confrontation and bad feelings. His real reasons for leaving had much to do with his disenchantment with his job at the applicant, and with the applicant generally. He perceived a number of problems both in the software and in the hardware engineering activities of the applicant, but had been constantly rebuffed by Mr Petty when he sought to suggest solutions. He found this very demoralizing. He was frustrated that he lacked the authority to make decisions about the products which the applicant would produce, and he was unhappy that his ideas were dismissed by Mr Petty in terms which were "ardent and dictatorial". 58 Mr Overliese referred also to the failure of Mr Petty to implement a share options plan, which had been discussed positively as long ago as two years previously. After some negotiation, in early 2007 Mr Petty had offered Mr Overliese options the equivalent of 5% of the applicant's equity. However, a scheme to implement these options was never produced. By early 2008, Mr Overliese felt that his career with the applicant had reached a dead‑end, that Mr Petty's intention was that his role should be limited to the management of hardware engineering and the ordering of parts, and that the limit of his career progression would be as a salaried employee engaged in such activities. 59 Mr Overliese said that, for these reasons, he decided to "use my substantial accumulated skills to come up with my own products". What he had in mind, of course, was going in to business with Mr Young, with Atomos as their corporate vehicle, in the production and marketing of audio and video products. 60 Mr Petty required Mr Overliese to work out his period of notice. He conducted an "exit interview" with him on 30 April 2008. Mr Petty was most concerned to obtain a complete picture of Mr Overliese's role, initially for the purpose of recruiting a replacement. At the exit interview, Mr Overliese reiterated the generally uninformative (and, as it happens, incorrect) reasons he had for leaving the applicant's employ. 61 After the exit interview, Mr Overliese said that he was not feeling well, and went home. He did not attend at work on 1, 2 or 5 May 2008 (Thursday, Friday and Monday), as he remained unwell. He returned to work on Tuesday 6 May 2008. 62 On 28 April 2008, Mr Young had no intention of resigning. However, events occurred over the next few days which caused him to change his mind. On a day that Mr Young identified as the day of Mr Overliese's resignation (but it may, from context, have been 30 April 2008), there was a discussion involving Messrs Petty, Young and some other members of staff, during the course of which Mr Petty (according to the evidence of Mr Young, which was not denied by Mr Petty) said that Mr Overliese was "a shit engineer anyway" and something to the effect of the applicant not needing him. Mr Young responded: "How can you say that? I am astounded that the person who made the first ten products for you by himself would be spoken about in this way by you". According to Mr Young, "the office went silent and Petty did not reply". 63 There was a further clashing of swords as between Messrs Petty and Young on 2 May 2008. It related to some arrangements that Mr Young had made with representatives of a business called Adobe Video Systems whilst he was in Las Vegas. Mr Young recalls that the undertaking of a cooperative sales promotion between Adobe and the applicant was then discussed with, and approved by, Mr Petty. Mr Young said that he and the Adobe representatives commenced work on the promotional activities proposed. Less than two weeks later, Mr Young asked Mr Petty to approve a particular aspect of the arrangement with Adobe. According to Mr Young, Mr Petty said that he "recalled no such deal and ordered me to stop all activities relating to it". This left Mr Young in an embarrassing situation, in that he would have to explain to Adobe that his boss had cancelled the project, despite previously agreeing to it. Mr Young said that Mr Petty told him that he recalled no such agreement, that the conversation became heated, and that he (Young) asked Mr Petty to write things down, "because you can't remember what you decide from day to day". 64 Mr Petty's recollection of his conversation with Mr Young on 2 May 2008 was rather different. He made no reference (either in his original affidavit or in his affidavit in reply to Mr Young) to the suggestion that there had been an agreement on his part to the cooperative activities whilst they were in Las Vegas. He said that it was on 2 May 2008 that Mr Young first indicated that he wanted to do "advertising for a bundle software deal" between the applicant and Adobe. Mr Petty expressed the concern that the applicant did not have the budget at that time for such a proposal. According to Mr Petty, Mr Young then said that he had purchased 22 units of an Adobe product, then situated in the applicant's USA office, that now needed to be sold. Mr Petty said that he was shocked to hear that, as he had never approved the purchase of such stock. He told Mr Young so. Mr Young responded that there were emails about it, that he (Petty) had agreed to it, and said that he should write things down because he had no memory of anything. At the time, Mr Petty assumed that the stock in the USA was worth about $US20,000. After making inquiries, he discovered that the stock was worth $US109,600. He claimed that this had been done without his authority or knowledge. He said, in one of his affidavits, that he then knew that he needed to have a serious discussion with Mr Young to determine how these commitments had come to be made, and to make sure that the experience was not repeated. 65 Mr Petty did have a discussion with Mr Young on Monday 5 May 2008. According to Mr Young, Mr Petty chastised him, saying in effect that he was undermining his authority. According to Mr Petty (which was not denied by Mr Young), he told Mr Young that there had been no authority for the purchase of $US110,000 worth of stock. He told him that it was necessary to have some protocols laid down, and that he wanted to be provided with profit and loss statements from each overseas office by the fifth of every month, an itinerary of every overseas business trip undertaken by Mr Young before he left for each trip, a report following each trip (so he knew exactly what Mr Young had been doing) and expense reports provided after every trip. He also told Mr Young that he did not want him to undermine his authority in the office. 66 Mr Young then indicated that he would resign. Mr Young's recollection of what he then said to Mr Petty was (in effect); As you know, I have always wanted to go and start my own business. I think I will do that. And don't worry, this business won't compete with you. I want to make new and exciting products and open up new markets. Mr Petty did not deny this, but his own recollection was that Mr Young had said: "That's it, you block my sales initiatives, I'm tired, I think we should go our separate ways". Whatever was said, it is common ground that Mr Young thereupon produced a letter of resignation. To the extent that it gave any reason for Mr Young leaving the employ of the applicant, it was that he had completed the task of building "a very formidable worldwide team of excellent employees and functioning sales channels", and that his effectiveness at the applicant "has come to an end". It is evident from this letter that Mr Young's decision to resign on 5 May 2008 was no spur of the moment thing. Indeed, on Friday 2 May 2008, he had told Mr Simon Hollingworth, the marketing manager of the applicant, that he had already signed his resignation letter, as he was fed up with Mr Petty's "inadequate management and strategic direction and Ian Overliese's resignation had left him lacking in confidence about the future success of the company" (Mr Hollingworth's words). 67 Mr Young's resignation letter gave four weeks' notice. It stated that 30 May 2008 would be the last day upon which he would work for the applicant. However, when Mr Petty received the letter on 5 May 2008, he told Mr Young to leave immediately. He instructed Mr Young to change the password on his computer to something generic so that other staff of the applicant could access it and to collect his personal effects from his desk. Mr Young told Mr Petty that he had "some personal expense" spreadsheets on his computer that he wanted to copy, but did not then have a USB memory stick with him. Mr Petty said that he could do that later. 68 Mr Young said (in his evidence) that he had an extensive amount of the applicant's information in his possession (ie, I infer, on his private computer), and was not sure whether he should delete it, or return it to the applicant, and if the latter, how he should do so. On the evening of 5 May 2008, he telephoned Mr Petty to discuss what should be done about the applicant's information which he had at home. Mr Petty said "I'm not sure what to do with the information, I will let you know". However, Mr Petty did not return to Mr Young with any such instructions and, notwithstanding several attempts made over the ensuing days by Mr Young to contact Mr Petty and other management at the applicant, Mr Young was not informed about how he should deal with the applicant's information which remained in his possession. 69 After Mr Young had left the applicant's premises on 5 May 2008, Mr Petty arranged for another employee of the applicant to check Mr Young's computer to obtain contact data in relation to the sales channels for which Mr Young had been responsible. The employee drew Mr Petty's attention to an email sent by Mr Young to Mr Overliese on 10 April 2008 which gave him (Mr Petty) cause to suspect that Messrs Young and Overliese might have been involving themselves in some kind of video business other than that of the applicant. Mr Petty then also found a copy of the email of 2/3 February 2008 to which I have referred in paras 28‑32 above. He noted that one of Mr Overliese's email domain names was "atomosaudio.com", he had the applicant's solicitors undertake a company search of "Atomos", he searched Mr Young's computer for the word "Atomos" and he located amongst other things, the file "ycalc.NOPW". 70 Mr Overliese was not at work on 5 May 2008. When he arrived at work on 6 May 2008, Mr Petty refused him admission to the premises. He did not work again for the applicant. 71 On 8 May 2008, Mr Overliese went to Mr Young's residence, and they discussed their future plans. One of the things they discussed was how they needed to remove or to return to the applicant work‑related information that was on their own computers. Mr Overliese kept all of the password‑protected documents on his computer in a 35GB "Truecrypt" volume. They included both his own personal documents and material which related to his employment with the applicant. They included, of course, all of the files and documents to which I have referred above, including those presently contentious. Amongst the documents which related to Mr Overliese's employment was a number which contained copyright works of the applicant (a circumstance admitted by Mr Overliese). While at Mr Young's house on 8 May 2008, Mr Overliese anticipated that he would be deleting the files on his computer that related to the applicant. For that purpose − principally, I infer, to guard against the risk that some files might be unintentionally lost − Mr Overliese backed up the entire Truecrypt volume onto a DVD, which he labelled "d". He said he did this backup "momentarily" and did not consider "particularly what to do afterwards". He did not think that there was any information that the applicant would want returned. He left the back‑up DVD on a desk at Mr Young's residence. 72 On 12 May 2008, Mr Overliese purchased a "USB Key" and copied to it all of the encrypted files on his computer. The object was then to use the USB key as the working medium from which would delete the files that he no longer wanted (principally files containing the applicant's information), to format his computer and to copy back to it the remaining contents of the USB key. He completed these tasks only partly on 12 May 2008. He thought that he had removed all of the applicant's material from the USB key, but there were some older files (ie files that had been placed on to his computer more than a year previously) which he missed, and which remained on his USB key. He commenced to format the relevant partition on his hard drive but, after about 15 minutes the formatting was incomplete, and Mr Overliese wished to use his computer for other things, so he aborted the formatting operation. Notwithstanding that, he checked to see whether there were any files remaining on the Truecrypt volume. As a result of receiving an error message that informed him that the drive was not formatted, he inferred that there were not. 73 The investigations put in train by Mr Petty to which I have referred in para 69 above led to the commencement of the present proceeding on 12 May 2008, and to the making of a search order by the court on the same day. The execution of that order on 13 May 2008 yielded a number of electronic files and media (including the DVD which Mr Overliese left at Mr Young's residence and the USB key to which Mr Overliese copied files on 12 May 2008) in the custody of Messrs Overliese and Young. To the extent that they are presently important, I have referred to them above.

The applicant's case 74 Not surprisingly perhaps, when Mr Petty saw the nature of the material that was contained on the electronic media seized under the search order, he feared the worst. He feared that Messrs Overliese and Young, with the active cooperation and assistance of Ms Young, were at an advanced stage of establishing a business to compete directly with the applicant, and that they had reached that point by the utilisation of information to which they were privy as senior employees of the applicant holding responsible positions, being information that the applicant would wish to keep confidential, particularly from the eyes of actual or potential competitors. By the time that final submissions were made on behalf of the applicant, however, its case had come down to the following points. First, it alleged that Messrs Overliese and Young, while still employed by the applicant, had used the applicant's confidential information, to which they were privy by reason of their senior positions in the employ of the applicant, for the purposes of establishing a potentially competing business. In so doing, they disclosed the applicant's confidential information to Ms Young and to Atomos. Secondly, it alleged that Messrs Overliese and Young had contravened ss 182 and 183 of the Corporations Act. Thirdly, it alleged that Messrs Overliese and Young, while still employed by the applicant, diverted certain business opportunities away from the applicant in order to exploit them for themselves. Fourthly, it alleged that Mr Overliese did not advise the applicant of business opportunities available to it of which he was aware, being the opportunities alleged to be diverted as previously referred to. As the applicant's fiduciary, Mr Overliese should have so advised it, and his failure to have done so makes him now liable to compensate the applicant for the lost opportunities. Fifthly, it alleged that Mr Overliese engaged in misleading and deceptive conduct when he informed Mr Petty that to produce a 1 lane card with 10‑bit capacity would cost only $20 less than the then cost of producing the DeckLink HD Extreme 2 card and when he informed him later that a 1 lane version of that card would be "8 bit forever". Sixthly, it alleged that, when he made a copy of the contents of the Truecrypt volume on his personal computer − first to the DVD labelled "d", and secondly to the USB key − Mr Overliese infringed the applicant's copyright in a number of the works which were so copied. Seventhly, it alleged that Mr Young breached the terms of his employment agreement to which I referred in para 6 above. Against Mr Overliese, Ms Young and Atomos, it is said that they induced Mr Young's breach of that agreement.

Confidential information 75 As pleaded, the applicant's case involved allegations that Messrs Overliese and Young had in their possession, without proper authority, a great deal of information that was confidential to the applicant. As the evidence emerged, it was only Mr Overliese that had the information referred to (apart, that is, from the sharing of information as between the respondents necessarily involved in the forwarding by Mr Overliese of the "ycalc" spreadsheet). He admitted that much of the information was confidential to the applicant. There is some dispute as to the confidentiality of some of the information, but the essence of Mr Overliese's defence is that he had this information on his personal computer as a necessary concomitant of being required to work away from the office from time to time and of his very senior position with the applicant. There were, for example, layouts of hundreds of printed circuit boards (an item which Mr Overliese did not, as it happened, admit to be confidential to the applicant) on Mr Overliese's computer. This is only to be expected in the case of someone who was the head of hardware engineering. For the most part, there is nothing in the evidence that would sustain the proposition that Mr Overliese misused, or intended to misuse, any of the information that was conventionally in his possession as a result of his position with the applicant. 76 The exceptions are the categories of information which Mr Overliese used to develop the various versions of the "ycalc" spreadsheet. He himself accepted that the parts usage figures incorporated in to the "allcosts" worksheet (see para 26 above) were confidential to the applicant. He resisted the suggestion that the prices paid by the applicant for the parts which went into the various cards were confidential, saying that those prices were very close to those which could be derived by the application of a conventional wholesale mark‑up to the manufacturers' published prices. That may be, but the prices in fact used by Mr Overliese were those paid by the applicant pursuant to contracts which it had struck with its suppliers. However close those prices may have been to the hypothetical educated guess, they were the applicant's own commercial information which should be regarded as confidential in Mr Overliese's hands consistently with the tests adumbrated by Gummow J in Smith Kline & French Laboratories (Aust) Ltd v Department of Community Services and Health (1990) 22 FCR 73, 87. The applicant's profit margins were also, quite obviously, confidential to itself in accordance with normal commercial assumptions. The fact that Mr Petty shared information about those margins with Mr Overliese in no sense gave the latter a right to treat the information effectively as public property or to use the information for purposes unconnected with the applicant. 77 The next question is whether Mr Overliese used the applicant's confidential information for his own, or for Atomos's, purposes. He clearly incorporated such information into the versions of the "ycalc" spreadsheet developed in early February 2008, which he placed on to Grouphub on 7 February and which he sent to Mr Young in the form of "ycalc.NOPW" on 9 February. For reasons which I have given above, I am satisfied that, by 7 February at the latest, Mr Overliese's use of that information was for the purposes of Atomos. I allow for the possibility that he may originally have developed − or commenced to develop − the offending worksheets in "ycalc" for benign purposes, but this was confidential information to which he was privy as a senior employee. It does not, I consider, come well from a person in his then position to ask the court to perceive the existence of nice distinctions between his own separate purposes, particularly when he chose to incorporate the information into pages of a spreadsheet which he had created, and on which he was regularly working, to facilitate the establishment of his own company. 78 For those reasons, I consider that the applicant has, prima facie at least, made good its claim for a permanent injunction to restrain Mr Overliese from using the information in the "ycalc" spreadsheets otherwise than with the authority of the applicant. However, Mr Overliese resists such a course, even on the assumption that I might find against him on the substance of the matter. He submits that he was dispossessed of all the media on which the relevant information was stored when the search order was executed on 13 May 2008. He has been subject to interlocutory restraints which have given the applicant everything, in point of content, for which it might reasonably have asked by way of permanent injunction. He also points out that the information in question is not such as he might carry around in his head, since it was essentially a mass of statistics that one either has − electronically or otherwise − or has not; and if the latter, it would be artificial to consider that the information could be "used". 79 The applicant does not accept this approach to its presumptive entitlement to permanent injunctive relief. It points out that its claim has been contested on the merits to the end, and that Mr Overliese, therefore, implicitly asserts the right to continue to use the information which I have held to be confidential. Were I not to restrain him, he would, as a matter of law, have that right, whether or not he had the means to restore to his conscious thinking the details of that information. In point of principle, these submissions on behalf of the applicant must be accepted. The pragmatic arguments advanced by Mr Overliese in the capacity of someone who has used his position as a senior employee to acquire his employer's confidential information and then to make use of it − however transiently − for his own purposes are not such as a court of equitable jurisdiction should find attractive. I shall grant the applicant permanent injunctive relief in relation to such information. 80 As proposed by counsel for the applicant, I shall list the proceeding for the purpose of hearing the parties on the terms of such an injunction. What I have in mind is that Mr Overliese should be restrained from using, or disclosing to any person, the information which I have found to be confidential to the applicant, without the applicant's prior written consent. However, I shall confine the terms of the injunction to information which can be specifically identified by reference to the evidence in this case. It is not my intention, for example, that everything in "ycalc" would, ipso facto as it were, be covered. 81 What of the position of Mr Young? He was the recipient, rather than the originator, of the confidential material to which I have referred, most obviously when a version of it was posted for his attention on Grouphub on 9 February 2008. I accept that he quickly resisted the idea that Atomos should compete with the applicant. But the present issue is concerned not with potential competition but with possession of, or access to, confidential information. It is likely that Mr Young already had access to, and was familiar with, a deal of the information which he was sent by Mr Overliese. I note that one comment he made about the "ycalc" spreadsheet was that it concerned sales data with which he was already familiar and which, therefore, was of no interest to him. 82 On balance I am persuaded that Mr Young should be bound by an injunction in the same terms as will apply to Mr Overliese. He was a co‑principal in the embryonic Atomos project, and was the author of an email (sent to Mr Overliese on 3 February 2008) which first proposed that their business should include the production and sale of video capture cards. He too was a senior manager in the employ of the applicant, his familiarity with the sales data on the "ycalc" spreadsheet deriving from that circumstance. No less than that of Mr Overliese, Mr Young's conscience is, in my view, affected by the confidential nature of the information to which he became privy, by the circumstances by which he became privy thereto, and by his former position with the applicant. 83 Self‑evidently, in the circumstances, Atomos should be similarly restrained. 84 I take a different view about Ms Young. She was never a part of the Atomos project. She helped out where she could, but more in the role of a useful volunteer than in that of a participant. She was, it is true, exposed to confidential information in "ycalc", but it was meaningless to her, save in the sense of a series of figures by reference to which she could develop a template for the others. She never worked for the applicant, and I accept her denial of any appreciation that the figures to which she was being exposed were confidential. Further, I think it quite unlikely that she would now have either the recollection or the inclination to make any use of those figures. The applicant has not made good its case for an injunction binding on Ms Young.

The Corporations Act 85 The applicant seeks injunctions under s 1324 of the CorporationsActfor alleged contraventions of ss 182(1) and 183(1) of that Act. It says that Mr Overliese used his position as its employee, and used information which he had obtained as its employee, to gain an advantage for himself and for Atomos and to cause detriment to itself (the applicant). The submissions made on behalf of the applicant under ss 182 and 183 proceeded, however, at a very high level: almost no attention was paid to the detailed requirements of these provisions, nor to how Mr Overliese's conduct was said to come within them. 86 The applicant and the respondents were in agreement on one legal point arising under ss 182 and 183. They all submitted that the content of the norms of conduct conveyed by the expression "improperly use" was no different from the kind of impropriety which equity would require to restrain a breach of confidence or of fiduciary duty. The parties relied upon the recent Full Court judgment in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2009) 81 IPR 1, 9‑10, [44]‑[46]. I accept the parties' agreement in this respect: indeed, I am bound to apply the law as contained in Futuretronics. I note, however, that the Full Court does not appear to have been referred to Grove v Flavel (1986) 43 SASR 410, 416‑417 or to R v Byrnes (1995) 183 CLR 501, 514 (which I had cause to discuss in Dais Studio Pty Ltd v Bullet Creative Pty Ltd (2007) 165 FCR 92, 128‑130, [100]‑[105]). 87 I have held that a court of equity would restrain Mr Overliese from making use of the information of the applicant's which should be regarded as confidential. Albeit perhaps fleetingly over a few weeks in early 2008, Mr Overliese did make use of that information (which was in his possession because of his position as employee of the applicant) to gain an advantage for Atomos. This conclusion is unaffected by the circumstance that, as things turned out, no advantage was in fact gained by Atomos: Chew v R (1992) 173 CLR 626, 633. It follows that, for the reasons given above in connection with the applicant's claim that Mr Overliese had misused its confidential information, I am of the view that he has likewise contravened s 183(1) of the Corporations Act. I do not, however, propose to restrain him more than once in respect of what is essentially a single pattern of conduct. I shall hear the applicant as to the terms of a single permanent injunction that would reflect Mr Overliese's breach of confidence and of s 183(1). 88 Although the applicant sought declarations in a number of respects, none was sought under s 1317E of the Corporations Act. Notwithstanding that omission, I note that that section is expressed in a way that appears to leave the court no choice but to make a declaration. This was not a matter addressed by the parties in their submissions, and I shall hear from them on the subject in the course of settling the orders that should be made in consequence of these reasons. 89 The applicant sought compensation under s 1317H of the Corporations Act, but it was not suggested that it had suffered any damage as a result of Mr Overliese's use of information which I have held to be in breach of s 183(1). 90 I am not satisfied that Mr Young improperly used any information, being information obtained by him because he was an employee of the applicant, to gain an advantage for himself or for Atomos. The applicant's submissions dealt with Mr Young at a high level of generality, focussing on the circumstance that he was a co‑venturer in the project that was to become Atomos. It is true that, one way or the other, Mr Young became privy to the information (passed to him by Mr Overliese) which I have held to be confidential to the applicant, and that I have concluded that a permanent injunction should go in his case. However, the information in question was not obtained by Mr Young because he was an employee of the applicant: it was obtained by him because it was provided to him by Mr Overliese. Further, I am not satisfied that Mr Young used the information within the terms of s 183(1): indeed, he seems to have discouraged Mr Overliese from steering Atomos down a track where this confidential information would have been to greatest advantage. I shall dismiss the applicant's s 183 case as against Mr Young. 91 That leaves s 182(1) of the Corporations Act. In a sense it was Mr Overliese's position as an employee of the applicant that enabled him to obtain the information which I have held to be confidential and which he then used to the advantage of Atomos. However, this is the province of s 183. Although I was not addressed on the subject, I am disposed to think that s 182 is concerned with the direct use of an employee's position to gain an advantage of the kind referred to, rather than with the circumstance that the position is the means by which the employee comes to have in his or her possession information which is then used to gain such an advantage. What Mr Overliese did that was (as a matter of purpose if not reality) to the advantage of Atomos was done wholly outside the context of his position with Atomos. It was done in his own time, on his own computer and at his own premises. It had neither an intended nor an apparent reference to his role or capacity as employee of the applicant. For these reasons, I propose to dismiss the applicant's case under s 182 against Mr Overliese. The like case against Mr Young will also be dismissed.

Diversion of business opportunities 92 The "business opportunities" which Messrs Overliese and Young were alleged to have diverted from the applicant were "a card‑incorporating DeckLink HD Extreme features using [the applicant's] Intensity 1‑lane architecture", "the incorporation of 10‑bit video signal capability into a modified 1‑lane version of the DeckLink HD Extreme card" and "the incorporation of 10‑bit video signal capability into products utilising [the applicant's] Intensity 1‑lane architecture". As became apparent during the running of the trial, these formulations were essentially three different ways of referring to the one thing, namely, the "Simple card" included on the "ycalc" spreadsheet. As a point separate from the one to which I refer next, however, it is hard to see what this allegation adds to that relating to confidential information. The truth of the matter is that the Simple card did not represent a "business opportunity" at all, but, at the most, a product concept of some potential. The applicant's point was that it should be regarded as the owner in equity of that concept. The value of the concept, however, was that 10‑bit capability could possibly be achieved over 1 lane, if the DMA Style were changed. That was a technical matter within Mr Overliese's expertise. Had he, while still employed by the applicant, devised a practical way of producing a card that would perform in that way and then used that technology for the benefit of himself or of Atomos, the applicant might well have had an argument that he should be restrained. But Mr Overliese's workings, such as they were, never reached that stage. Neither, in my view, was there ever a business opportunity that was diverted. Further, Mr Overliese now having been out of the employ of the applicant for a period approaching two years, the circumstances referred to provide no basis for a permanent injunction. And if there is no case to restrain Mr Overliese in these respects, Mr Young's situation is a fortiori.

Equitable damages 93 I turn next to the applicant's case for equitable damages against Mr Overliese. This related to what the applicant claimed was a lost opportunity to exploit one of the hypothetical capture cards that Mr Overliese included in his workings of the product possibilities for Atomos and recorded in the "ycalc" spreadsheet. The applicant contended that the "Simple card" proposed by Mr Overliese was a product that would have been of great commercial value to it, substantially because it would have had 10‑bit capability over 1 lane. It contended that this ought to have been obvious to Mr Overliese and, as a fiduciary who had devised the card, even if only conceptually and subject to a modification to the DMA, he was obliged to disclose his ideas to the applicant. It further contended that although sourced in Mr Overliese's fiduciary obligation, equity would award the applicant compensation for the loss it suffered by being unable to produce and market such a card until at least 6 months after it would have done if it had had the benefit of Mr Overliese's ideas immediately they were formulated in early February 2008. In this respect, the applicant relied upon the judgment of Tadgell J in Hill v Rose [1990] VR 129, 143‑144. 94 I was referred to no reported instance of a senior employee having been held to be in breach of his or her fiduciary obligation merely by failing to disclose to his or her employer the details of a clever or potentially useful idea. For my own part, I am unaware of any such instance. Here several things must be remembered. The argument put on behalf of the applicant was not based on contract. In one of the alternative formulations of the applicant's allegation in its Further Amended Statement of Claim, it was said that it was an implied term of Mr Overliese's contract of employment that he owed the applicant a duty "to exploit for [the applicant] alone, and to the exclusion of any interest [he] may have after the end of [his] employment by [the applicant], each and every opportunity to expand [the applicant's] business". This allegation (which was not as a matter of contract pursued in the applicant's final submissions) is at best tangential to the point now under consideration. That point is based wholly upon what was said to be a breach of Mr Overliese's duty as a fiduciary. 95 Further, the applicant seeks equitable compensation quite apart from its claim for an injunction to restrain the use of confidential information or the use, in a potentially competitive capacity, of any information which came to Mr Overliese while he was employed by the applicant. The point is unrelated to the question of Mr Overliese's actual or intended activities in competition with the applicant. The point does not depend on Mr Overliese having taken anything of the applicant's for his own benefit, or having made, or having put himself in a position to make, any profit from information acquired in the employ of the applicant. Neither does the point depend on the applicant having suffered any actual loss; nor upon the applicant being the worse off for Mr Overliese having denied it the benefit of a commercial opportunity that would, absent Mr Overliese's actions, have come to the applicant in the normal course. The point is simply that, where Mr Overliese (in his own time but admittedly by reference to the applicant's information) came upon an idea, equity would impose on him a positive obligation to inform the applicant of it, and, failing him doing that, would require him to pay compensation to the extent necessary to place the applicant in the same commercial position as it would have occupied had the idea been disclosed promptly. 96 The applicant's point is met directly by long‑established authority to the effect that the obligations imposed by equity upon a fiduciary are proscriptive, not prescriptive. In P & V Industries Pty Ltd v Porto (2006) 14 VR 1, Hollingworth J canvassed the authorities on this point, and concluded (14 VR 1 at 9, [43]): The law in Australia, as outlined in [Breen v Williams (1996) 186 CLR 71]is that fiduciary duties are limited to imposing constraints on conduct which the fiduciary has in fact embarked upon and not by imposing a positive obligation of disclosure of the kind assumed by a duty to disclose. Her Honour's judgment has since been followed by the Supreme Court of New South Wales in Levy v Bablis [2007]NSWSC 565, [18] and cited with approval by the Court of Appeal of Western Australia in Wilden Pty Ltd v Green [2009] WASCA 38, [106], [212]. Although I was not referred to this line of authority by either side in the present case, it is fatal to the applicant's claim that Mr Overliese came under a positive fiduciary obligation to disclose the details of the Simple card to Mr Petty. 97 I mention, for the sake of completeness only, that it was fleetingly suggested in final submissions made on behalf of the applicant that Mr Overliese's failure to disclose the concept, and the details, of the Simple card to the applicant would sound in compensation under s 1317H of the Corporations Act. The applicant provided no explanation, however, of how that failure would amount to a contravention of s 182 or s 183 of that Act. It is not at all self‑evident that it would. In the circumstances, there is no need to develop such a possibility further.

Misleading conduct 98 The applicant's claims under the Trade Practices Act and the Fair Trading Act relate to the events which I have described in outline at paras 15‑18 and 33 above. It was submitted that, in informing Mr Petty that a 1‑lane card with the characteristics which he had specified in late 2007 would be only about $20 cheaper to build than the then proposed DeckLink HD Extreme 2, and in responding to Mr Petty's email of 4 February 2008 with the words "only 8 bit HD (forever)", Mr Overliese engaged in misleading conduct in trade or commerce within the meaning of s 9 of the Fair Trading Act and, because he engaged in that conduct on behalf of Atomos, it too engaged in such conduct under s 9 and also in like conduct in contravention of s 52 of the Trade Practices Act. In each case the basis of the allegation was that Mr Overliese, in the preparations which he was making for the start-up of Atomos, well knew that 10‑bit capability was feasible over 1 lane, and that his representations to the contrary to Mr Petty were crafted to serve the interests of Atomos and to ensure that the applicant did not derive the benefit of that knowledge. 99 The applicant's submissions in support of this aspect of its case were off‑hand and cursory in the extreme. They amounted to little more than a reference to its case as pleaded. I am not satisfied that Mr Overliese's statements to Mr Petty were misleading. They were made in the context of the then conventional wisdom that 10‑bit was not feasible over 1 lane. At the time when he made the "$20 cheaper" representation to Mr Petty, even Mr Overliese had not surmised that 10‑bit might be feasible over 1 lane. He may have (but I could not find that he had) reached that point by the time he responded to Mr Petty's email of 4 February 2008, but he made clear in his evidence that all of the advice which he gave to Mr Petty proceeded from the assumption that the DMA used by the applicant would remain as it was. His supposition that 10‑bit might be feasible in a 1‑lane card such as the "Simple card" proceeded from an assumption that a new form of DMA would be used. Mr Overliese responded to Mr Petty's inquiries in the context in which they were made, and he engaged in no misleading conduct when he did so. 100 It was submitted on behalf of Mr Overliese that such representations as he made to Mr Petty were not made in trade or commerce as required by s 52 and s 9. In this respect, counsel relied on Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. The point was that Mr Overliese's responses to Mr Petty were wholly internal to the applicant, and did not of their nature bear a trading or commercial character. The applicant sought to deflect this point by asserting that, when he gave those responses, Mr Overliese was (albeit unknown to Mr Petty at the time) speaking with intended reference to his role with Atomos, and on behalf of Atomos. That assertion amounts to a serious charge of duplicity on the part of Mr Overliese, and I have no hesitation in rejecting it. There is nothing in the evidence that would sustain it. I find that, in relevant respects, Mr Overliese was acting with intended reference to his position with the applicant, and was giving Mr Petty, bona fide, the benefit of his considered reaction to the proposals that had been put forward. These transactions concerned the applicant and the applicant alone, and did not bear a trading or commercial character. In the circumstances, I would hold that Mr Overliese's conduct was not in trade or commerce.

Copyright 101 The applicant's copyright case relates to certain of the files that were on Mr Overliese's personal computer and which he copied on to the DVD marked "d" on 8 May 2008, and on to the USB key on 12 May 2008 (see paras 71‑72 above). The applicant made no complaint about these files being on that computer in the first place. It was accepted that that was an unobjectionable incident of Mr Overliese's employment. However, those files included many documents which were, or which contained, original literary or artistic works in which the applicant claimed copyright, and it contended that the acts of copying them onto the DVD and the USB key were unauthorised reproductions of the works, and thus infringements of copyright within the meaning of s 36 of the Copyright Act 1968 (Cth). 102 This aspect of the applicant's case was to a large extent resolved on the pleadings. With minor exceptions which the applicant accepted, Mr Overliese admitted the existence of copyright in the works specified by the applicant, and admitted that he had reproduced the works on 8 and 12 May 2008. However, he alleged in his Defence that his copying of the relevant files on that day was implicitly licensed by the applicant. He alleged: (i) it was an implied term of Overliese's unwritten contract of employment with the Applicant that after the cessation of his employment he was to return to the Applicant or destroy (as the Applicant may direct) all Copyright Works in his possession …; (ii) there was an implied licence or authority from the Applicant, as the copyright owner, to Overliese to reproduce Copyright Works in material form for the purpose of complying with the Implied Return or Destroy Term …; and (iii) Overliese acted in accordance with the Implied Return or Destroy Term pursuant to the Implied Post Employment Licence in reproducing the Copyright Works as pleaded in this paragraph and particularised below; (iv) there was an implied licence or authority from the Applicant to each of Overliese and J Young to reproduce copyright works of the Applicant, including the Copyright Works, during the course of each of his employment and for the purposes of complying with the duties and terms of each of their employment contracts with the Applicant …; (v) to the extent that either Overliese or J Young reproduced any of the Copyright Works as otherwise alleged by the Applicant and not admitted by them, such reproduction was authorised by the Applicant pursuant to the Implied During Employment Licence. Mr Overliese relied also on s 115(3) of the Copyright Act. 103 In final submissions made on behalf of the applicant, counsel did not take issue with the jurisprudential basis of Mr Overliese's defence. Rather, they submitted that the facts did not line up with it. They drew attention to Mr Overliese's evidence in chief that, having made the DVD, he left it at Mr Young's residence, as he "did not particularly want it for anything"; that he "did not consider particularly what to do with it afterwards"; and that he did not think he had any of the applicant's information that it would want returned and "could not remember having anything important". They drew attention to his evidence under cross‑examination that the USB key was not a backup at all, but was the final destination for the files that he wanted to keep. They pointed out that Mr Overliese had said in chief that he had no instructions from Mr Petty as to what to do with any "work information" that he had, and that he "did not think about it much, or have time to go through every single device and computer … and search for whatever might be hanging around after almost 6 years of work". 104 I am satisfied that the sole purpose of Mr Overliese copying files onto the DVD and later onto the USB key was to separate out, and then delete or destroy, the applicant's files. For many years, to the applicant's advantage, Mr Overliese had been carrying out work at home and on his own computer. Unsurprisingly, the drive on his computer contained a deal of the applicant's files together with, presumably, much of his own personal material. He had assumed that he would be in the employ of the applicant for a number of weeks beyond 6 May 2008, but was peremptorily excluded from the applicant's premises by Mr Petty on that day. He had no opportunity for a conventional or orderly removal of the applicant's files from his computer - nor for one that might be undertaken under such supervision as Mr Petty might have required. He commenced by placing the entire contents of the Truecrypt volume onto the DVD as a security backup, lest any wanted files became lost or destroyed in the process that was to follow. It is true that he casually and, I infer, inadvertently, left this at Mr Young's residence, but this is neither here nor there apropos his purpose in copying. He then placed the contents of the volume onto the USB key, and commenced to format the drive on his computer. His purpose, as he stated in his evidence and as I accept, was to delete from the USB key everything which related to the applicant, and ultimately to return the remainder to his newly‑formatted computer drive. As I have explained, the formatting process was aborted at Mr Overliese's discretion because he needed his computer for other things, and the operation overall was cut short by the execution of the search order the following day. 105 I regard the facts as so outlined as consistent with Mr Overliese's Defence. Since it was implicit in the submissions made on behalf of the applicant that, if the facts did accord with the Defence, the Defence would be a good one, I must dismiss the applicant's claim in copyright.

Mr Young's contract 106 The submissions made on behalf of the applicant in support of its claim under Mr Young's contract of employment were also very spare. They went little beyond directing my attention to the clauses in the contract upon which reliance was placed, much as though the relationship between the facts of the case and those clauses ought to have been self‑evident. It was not. Consistently with my reasons under s 183 of the Corporations Act in relation to Mr Young, I am not satisfied that he used, either for his own benefit or for that of a third party, confidential information of the applicant. Neither does it appear to me that he disclosed such information to another person: indeed, he was the recipient (from Mr Overliese) of the information which I have held to be confidential. The applicant made no attempt to relate Mr Young's circumstances to the "conflict of interest" clause in his contract, in which circumstances I need say nothing further about it. 107 That leaves the non‑competition restraints. I have summarised them at para 6 above, but I should here set out the actual provisions of Mr Young's contract. They were: (a) The Employee must not, in any capacity including on his own account or as a member, shareholder, unitholder, director, partner, joint venturer, employee, trustee, beneficiary, principal, agent, adviser, contractor, consultant, manager, associate, representative or financier or in any other way or by any other means: (i) during the period specified below (Restraint Period) and in the area specified below (Restraint Area) perform the duties of a software developer - broadcast video products, participate in, be interested in, assist with or otherwise be directly or indirectly involved, engaged, concerned or interested in a business, activity or operation that is the same as, substantially similar to, or competitive with, the Company's business or any material part of it (Restrained Business). (The reference here to a "software developer" was a curiosity which the applicant could not explain. Mr Young was never a software developer. Perhaps his contract was based on one previously used for another employee.) The "restraint period" was defined as each of a series of stated periods, consisting of the terms of Mr Young's employment plus 1, 2, 3, 6 and 12 months respectively. If I were of the view that Mr Young had contravened this provision of the contract, and that in other respects an injunction should go, I could not so proceed because the most extensive of these periods has long expired. I should add that the applicant did not suggest that it had suffered any loss or damage as a result of what it claimed was a breach of this provision. As it happens, however, as a matter of construction I do not think that the provision caught anything done by Mr Young at any time that might be relevant to it. I consider that the expression "business, activity or operation" is not apt to include the very embryonic structure that Atomos was down to the point when the search order was executed. Although I would accept that the term "activity or operation" is one of extension, I also consider that it should be read ejusdem generis with "business", and therefore as a reference to an existing businesslike entity or undertaking of some kind. Although Atomos had been incorporated at the relevant times, in no sense had it carried on business, undertaken any "activity" or "operated" such as to enliven the terms of this provision. 108 In the circumstances, I propose to dismiss the applicant's claim in contract against Mr Young.

Disposition of the proceeding 109 For the reasons given above, I shall uphold the applicant's claim for permanent injunctions binding on Messrs Overliese and Young, and Atomos, in relation to the applicant's confidential information which was incorporated into the "ycalc" spreadsheet. Otherwise, the Application will be dismissed. I shall hear the parties on the orders necessary to give effect to these conclusions, and with respect to costs. I certify that the preceding one hundred and nine (109) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.