The Technology Disputes Law Review: Singapore
Technology disputes in Singapore fall into the realm of either contract or tortious disputes. Generally, the technology disputes ultimately determined according to contractual principles typically revolve around disputes over system development or delivery, and licensing or payment and ownership of the subject technology. The courts typically treat such disputes as technology neutral. They are more concerned with the contractual elements of the dispute and are keen to determine what the parties intended contractually, with a view to generally upholding business concerns, rather than focusing on the underlying technology in question.
Technology disputes ultimately determined in accordance with tortious principles usually take the form of intellectual property disputes, specifically disputes relating to patents and copyright involving databases and software. Where these rights do not exist, trade secret protection in the form of an action for breach of confidential information is typically alleged as the basis for the commencement of the technology dispute before the courts.
Where applicable, the courts will refer to the specific legislation governing copyright and patents as these are now determined as statutory torts, and where there is no specific legislation applicable to the dispute, the courts will rely on the common law for guidance.
Although they have not explicitly relied on policy considerations in the determination of such disputes, the courts, as will be seen later, generally uphold the subsistence of an intellectual property right and have found it appropriate to depart from the common law if, on consideration of the facts, the existing protection for rights relating to technology is viewed as being inadequate.
Year in review
i Changes to the tort of breach of confidence
The most significant recent development in technology disputes law in Singapore has been the line of cases discussing the application of the test for the tort of breach of confidence.
Until recently, the prevailing position in Singapore had been the three-step test set out in Coco v. AN Clark (Engineers) Ltd,2 as follows:
- the information must possess the necessary quality of confidentiality;
- the information must have been imparted or received in circumstances giving rise to an obligation of confidentiality; and
- there must be unauthorised use of, and detriment to the party who had disclosed, the information.
The Singapore Court of Appeal recently modified the three-step test3 and two main changes were made. First, the second limb of the three-step test was expanded such that an obligation of confidentiality could arise if the plaintiff's information was accessed without the knowledge or consent of the plaintiff. Second, the third limb of the three-step test was modified such that the burden would no longer be on the plaintiff to prove that there was unauthorised use and detriment.
The modified three-step test was most recently applied in the 2020 Singapore High Court decision in BAFCO (Singapore) Pte Ltd v. Lee Tze Seng (BAFCO)4 and this case illustrates the extent to which the modified three-step test swings the balance in favour of a plaintiff. The High Court in BAFCO considered how, in the context of an application for an interlocutory injunction, the plaintiff would now establish a claim under the tort of breach of confidence. The plaintiff company alleged that its ex-employees had breached the confidence of the plaintiff by using the confidential information to divert business opportunities to rival companies.
When determining whether the plaintiff had a real prospect of succeeding in his case at trial for the purposes of an interlocutory injunction, the High Court applied the modified three-step test. After the High Court was satisfied that the information in question possessed the necessary quality of confidentiality and was imparted in circumstances giving rise to an obligation of confidentiality, the High Court held that the burden then shifted to the defendants to disprove the presumption that they had committed a breach of confidence by showing that their conscience was clear.
The impact of BAFCO is significant as it is the first case to consider and apply the modified three-step test. The High Court's application and interpretation of the modified three-step test notably places the entire burden of displacing the presumption of breach of confidence onto the defendant.
Technology disputes in Singapore often involve the leak of trade secrets and breach of confidential information, and this decision ostensibly confirms the enhanced protection for confidential information by lessening the burden of proof on would-be plaintiffs in Singapore. The impact of the three-step test as a deterrent cannot be overstated as would-be users of confidential information will now find themselves having to rebut a (more easily satisfied) presumption of breach by laying bare their conscience before the courts in a public process, whereby the subjectivity of their conscience or conduct will be subject to the objective scrutiny, criticism and judgment of the courts.
However, as these developments in the tort of the breach of confidence are still emerging, we expect the proper application of the three-step test to be a source of contention until further clarified, explained or expanded by the Singapore Court of Appeal.
ii The further development of 'springboard' injunctions
A recent development in jurisprudence regarding injunctions in Singapore is the rise of the springboard injunction. Historically originating in cases of misuse of confidential information, springboard injunctions are intended to restrain a wrongdoer from using the fruits of its unlawful conduct as a springboard to holding an unfair competitive advantage over the aggrieved party. The springboard injunction, as opposed to its more general counterpart, the prohibitory injunction, is intended to impose more far-reaching restraints on the wrongdoer, beyond the usual ambit of a prohibitory injunction. For example, in the past, grants of springboard injunctions have restrained the wrongdoer from setting up a business in competition with the aggrieved party, or restrained the wrongdoer from contacting clients of the aggrieved party.
However, because of the springboard injunction's overlap with the traditional prohibitory injunction, the thresholds to be met to warrant the grant of a springboard injunction in Singapore (especially in the interim period prior before trial) have been unclear until recently.
In the 2020 BAFCO decision, the High Court clarified that, because of the peculiar nature of springboard injunctions, the court considering whether an interim springboard injunction ought to be granted must look beyond the traditional principles governing interim injunctions and assess the relative strength of the parties' rival arguments at the interlocutory stage. This is in contrast to the traditional position governing interim injunctions, where the court merely assesses whether there is a serious question to be tried.
The test for the grant of springboard injunctions in the context of a breach of confidence would require the plaintiff to show the following:
- confidential information has been misused or is at risk of being misused;
- this misuse of confidential information has given rise to an 'unfair competitive advantage' for the defendant;
- the unfair advantage is still being enjoyed by the defendant (at the time the injunction is sought); and
- damages would be an inadequate remedy for the plaintiff.
Further, the High Court held that the ambit of the springboard injunction must be no wider than reasonably necessary to eliminate the defendant's unfair competitive advantage. On the facts, the High Court ultimately did not grant the plaintiff's application for an interim springboard injunction, as the application went beyond merely eliminating the defendant's unfair advantage and the other injunctions applied for already eliminated that unfair advantage.
BAFCO is instructive in setting out the requirements to apply for an interim springboard injunction. The High Court's decision also illustrates the importance of clearly identifying the precise unfair advantage that the defendant would gain from the confidential information, and framing the injunction to go no further than eliminating that unfair advantage.
The development of springboard injunctions will be a significant addition to the remedies available in technology disputes involving a breach of confidential information. The fresh guidance from this decision has shown that springboard injunction applications must be carefully drafted to avoid the expansion of the injunction beyond the ambit of the restrictions called for by the offending conduct.
iii The growing importance of personal data protection
The entry into force of the Personal Data Protection Act 20125 heralded the beginning of a shift of emphasis in Singapore, with regulators paying increasing attention to the safeguarding of personal data by companies collecting this information.
The number of cases heard by the Personal Data Protection Commission has been growing annually in Singapore, as have the financial penalties for non-compliant companies.
In particular, the 2020 decision in Tripartite Alliance Limited6 highlights the importance of ensuring personal data protection standards are in place in Singapore companies.
By way of background, Section 24 of the Personal Data Protection Act 2012 provides that 'an organisation must protect personal data in its possession or under its control by making reasonable security arrangements to prevent unauthorised access, collection, use, disclosure, copying, modification or disposal, or similar risks; and the loss of any storage medium or device on which personal data is stored'.
On the facts of the Tipartite Alliance Limited case, the organisation in question had engaged a software service provider to provide a system that contained personal data. The system subsequently faced a ransomware attack.
The Commission found that the organisation had failed to exercise reasonable oversight over its vendors to ensure that its outsourced vendors met the required information security standards – in the absence of reasonable oversight, risk of failure and the subsequent liability would fall on the organisation. The organisation was ultimately found liable.
While not strictly a technology dispute in the traditional sense, this decision is instructive as to the importance of exercising sufficient oversight over software service providers to ensure compliance with regulatory standards. As data protection and information security become critical in an increasingly web-connected world, it is incumbent on organisations to ensure they take reasonable care over information security, to avoid running afoul of regulatory standards.
It will also become necessary for parties to recognise that the failure of technology service delivery can lead to regulatory sanctions for the relevant party, and there is an increased likelihood of contractual disputes with technology service providers over the apportionment of fault in these scenarios. Requiring organisations to exercise oversight over their technology service provider can also lead to tortious disputes involving non-disclosure agreements (NDAs), the leaking of trade secrets and breaches of confidential information.
Claims and remedies
Technology disputes can give rise to many causes of action in Singapore, depending on the factual circumstance of the dispute. As such, the claims and remedies that may arise vary greatly. The following are some of the more common causes of actions that arise, along with their corresponding remedies.
i Patent infringement
Patent infringement typically arises in technology disputes where the technology in question is a patentable invention and a competitor deals in technology that falls within the scope of the patent's claims in Singapore.
Singapore law provides that an action for patent infringement can be brought by a patent proprietor against a person who, without the consent of the patent proprietor, makes, disposes of, offers to dispose of, imports or keeps a patented product or an end product derived from a patented process. A patented process used or offered for use without the proprietor's consent will also infringe the patent.
There are, however, a number of defences available to the infringing party and these include acts done privately for non-commercial purposes and acts done for experimental purposes.
The forms of monetary remedies that can be awarded for a claim of patent infringement are either compensatory damages in respect of the infringement or an account of profits from the patent infringer derived from the infringer, but not both in respect of the same infringement. In addition, the patent proprietor can also seek an injunction restraining the defendant from any future act of infringement, an order to deliver up or destroy any patented product and a declaration that the patent is valid and has been infringed.
ii Breach of confidence
A common cause of action for employers to protect their technological secrets is through the tort of breach of confidence. This claim typically arises when there is suspicion that ex-employees had appropriated confidential information for use in subsequent employment.
A key advantage to this cause of action is that the protection afforded to confidential information is unlimited in duration for as long as the information continues to possess the quality of confidentiality, namely it remains secret and inaccessible to the public at large compared to information already in the public domain.
Where a breach of confidence has been established, the court has the discretion to award a wide array of remedies, such as injunctions and orders for the delivery up of the confidential information, as well as monetary remedies, including damages or an account of profits. Where these remedies are inappropriate, or would not satisfactorily address the wrong inflicted by the party in breach, the court has the option of awarding equitable damages, which gives the court the flexibility to determine the manner in which damages should be assessed.
iii Copyright infringement
Technology disputes taking the form of copyright infringement usually arise where the technology in question is a computer program. Section 7A of the Copyright Act7 provides that computer programs are considered literary works, which avails them copyright protection.
The main acts of infringement under the Copyright Act include:
- the doing, or authorising the doing, in Singapore of any act covered by the copyright, such as reproducing the work in a material form or communicating the work to the public;
- importing the copyrighted technology into Singapore for the purpose of selling or hiring it or exposing it for sale; and
- exhibiting the copyrighted technology in public by way of trade.
Often, the factual circumstances that give rise to a claim of copyright infringement involve the infringer allegedly copying some portion of a computer program. As such, a common issue that arises in copyright litigation of this kind is whether substantial copying has taken place. The determination of this point depends on the facts of the particular case.
If copyright infringement is made out, the infringing party can avail themselves of defences under the Copyright Act, such as fair dealing, which currently includes research or private study purposes. There are also provisions in the Copyright Act that allow for reproductions by libraries, educational institutions and institutions assisting handicapped readers under certain conditions.
Further, there are provisions permitting users of lawfully obtained copies of computer programs to do acts that may otherwise be considered copyright infringement, including:
- making a copy of the computer program for use in the event the original copy is lost, destroyed or rendered unusable;
- making a copy of or adapting the computer program if this is necessary for the user's lawful use;
- decompiling the computer program for the purpose of creating an independent computer program that can be operated with the computer program decompiled, provided that the decompiling is not used to create a computer program substantially similar to the computer program decompiled; and
- performing any of the lawful acts of loading, displaying, running, transmitting or storing the computer program for the purpose of observing, studying or testing the functioning of the program to determine the ideas and principles that underlie any element of the computer program.
Remedies for copyright infringement include obtaining an injunction and an order for delivery up or disposal of infringing copies. Damages, an account of profits and statutory damages are also available remedies, although all three are mutually exclusive.
There is also a right to take civil action for any acts relating to the alteration or removal of rights management information and circumvention of technological measures intended to limit access to copyrighted information.
Finally, a copyright owner may apply for an injunction against an internet or network service provider to disable access to a website that is flagrantly infringing the copyright owner's copyright, although the trend has been for such websites not to provide infringing copies of computer programs for download.
iv Contractual disputes
Technology disputes that involve software development and maintenance contracts are often litigated on contractual grounds. These claims are often argued on the basis that one of the parties to the agreement breached the contractual terms.
In cases where contractual breach is the basis for the dispute, the remedies awarded are often damages or restitution or disgorgement of a party's unjust enrichment. It is only in exceptional cases where damages would be inadequate that the court will consider awarding other non-monetary remedies, such as specific performance of the contractual terms.
Courts and procedures
Technology disputes are not heard by specialist courts in Singapore and are treated like other civil disputes.
Following the entry into force of the Supreme Court of Judicature (Amendment) Act 2019,8 there are multiple appeal processes for civil disputes commencing on or after 2 January 2021:
- Disputes where the value of the claim is less than or equal to S$250,000 will generally be heard in the district court at first instance, with appeals being heard in the High Court and subsequent appeals generally heard in the Appellate Division of the High Court.
- Disputes where the value of the claim is above S$250,000 will generally be heard by the High Court at first instance. Appeals are generally heard in the Appellate Division of the High Court.
Regardless of the value of the claim, litigants can seek leave from the court to lodge a final appeal in the Court of Appeal in certain prescribed instances. One such instance is where the decision of the Court of Appeal is required to resolve a point of law. The above procedural rules will apply to the vast majority of technology disputes, with the exception of patent disputes.
Patent disputes are an exception to the general rule outlined above as they are heard in the High Court of Singapore at first instance, regardless of the value of the claim. Appeals relating to patents that were heard in the High Court at first instance are not heard in the Appellate Division of the High Court but instead are heard in the Court of Appeal.
ii Interim and provisional remedies
Litigants can apply to the court for interim remedies prior to trial. Common interim remedies are the mandatory injunction (an order mandating the fulfilment of a positive act) and the prohibitory injunction (an order prohibiting the commission or continuance of an act). Disobeying either court-ordered injunction will render the non-compliant party liable for contempt of court, an offence that attracts criminal penalties.
Interim prohibitory injunctions are typically sought as a means to protect the aggrieved party from further injury in the interim period pending the trial of an action. To obtain an order of this kind from the court, the applicant must show that the case discloses a serious issue to be tried and that the losses suffered by the applicant in the interim period are of a nature that cannot be compensated by monetary damages and are greater than the losses that would be suffered by the respondent should the injunction be granted.
In claims involving a misuse of confidential information, the aggrieved party can apply for a special form of interim injunction known as a springboard injunction (see Section II.ii). The purpose of this injunction is to restrain the wrongdoer from gaining an unfair competitive advantage from the misuse of the confidential information when in competition against the aggrieved party. The restraints that can be imposed with springboard injunctions extend further than is typically allowed with prohibitory injunctions. For example, they can come in the form of prohibiting the wrongdoer from dealing with clients of the wronged party for a set period. The aggrieved party can apply for an interim springboard injunction if it can show that:
- the confidential information has been misused or is at risk of being misused;
- this misuse of confidential information has given rise to an unfair competitive advantage for the wrongdoer;
- the unfair advantage is still being enjoyed by the wrongdoer; and
- damages would be an inadequate remedy for the aggrieved party.
Interim mandatory injunctions are an exceptional remedy awarded only in rare cases. An example of their use would be to compel a contractual party to specifically perform a clause in the contract, such as the supply of software. The courts will only grant an interim mandatory injunction in clear cases where special circumstances exist; if the applicant would not suffer irremediable prejudice were the injunction not granted, it is unlikely that the courts would grant one.
iii Protection of trade secrets during litigation
A party to litigation that has obtained discovery of information owes an implied undertaking to the court not to use the information for any collateral or ulterior purpose. This is known as the Riddick principle, which has been recognised by our courts under Singapore law.
The courts have recognised the prejudicial effect that disclosure of such information can have on a party locked in a dispute with a commercial competitor. The courts therefore instituted additional safeguards in the Intellectual Property Court Guide, which was first issued in September 2013 and acts as a supplement to the Rules of Court and practice directions governing cases involving intellectual property.
The Intellectual Property Court Guide provides that confidentiality undertakings over and above the Riddick principle may take the following forms:
- reinforcement of the Riddick principle as an explicit term of an order of court. Suitable terms may be extracted as part of an order for discovery or summons for directions, or of a pretrial conference (PTC);
- disclosure subject to execution of an NDA. Terms of the NDA as worked out between the parties may be executed before the exchange of lists of documents for general discovery; terms of the NDA may be included as part of an order for discovery or summons for directions, or of the PTC; and
- confidentiality clubs, namely the disclosure of confidential information to named individuals (usually the solicitors, third-party experts and representatives of the litigants) who have executed NDAs. Where litigants are commercial competitors, selection of a representative ought to balance the ability to give instructions against the risk that commercially sensitive information, particularly information of a technical nature, is disclosed to the research and development department of the competitor.
iv Limitation periods
The limitation period for contractual and tortious claims in Singapore is six years from the last date on which the cause of action accrued.
v Schedules and timelines
Technology disputes, like most civil disputes, would typically complete a first instance trial after between 12 and 18 months, although more complex proceedings would typically take longer. Appeals from a first instance decision are likely to be resolved within a year of the issuance of the first instance decision. In particular, patent and copyright infringement disputes typically have a more protracted timeline, as Singapore courts generally bifurcate patent infringement proceedings into separate hearings for liability and for damage quantification.
Evidence and witnesses
The means of obtaining documentary evidence from the opposing party during litigation before the courts is through the discovery process. During discovery, parties serve a list of documents in their possession, custody or power that they will rely on in the course of the proceedings, as well as documents that could adversely affect or support any party's case. After the lists of documents have been exchanged, the parties will then inspect each other's documents, whether electronic or physical.
After the lists of documents have been exchanged, either party can make an application for specific discovery requiring another party to disclose a specific document or class of documents that the applicant believes is in the party's possession, custody or power, and is a document on which the party will rely or that will adversely affect or support any party's case, or will lead the party seeking discovery of it to a train of inquiry resulting in obtaining information that may adversely affect or support any party's case. If the party resists specific discovery, there will be an interlocutory hearing at which the court will decide whether to grant the request for specific discovery.
It is commonplace for documents sought in technology disputes to be met with a protestation of confidentiality from the disclosing party. While confidentiality in itself is not a bar to disclosure, the courts have instituted mechanisms in the Intellectual Property Court Guide in Singapore to govern the disclosure of such documents with safeguards determined appropriate by the courts (see Section IV.iii).
Technology disputes sometime involve expert witnesses and, in the case of patent disputes, it is de rigueur for each party to call its own expert (or two). Although the selection and appointment of expert witnesses are decided by the parties intending to rely on the experts' evidence, the scheduling of these lies within the court's discretion and they generally occur after general discovery has taken place. Once they have confirmed the appointment of their experts, parties may also be directed to exchange lists of areas in which they intend to adduce expert evidence.
Patent disputes are unique as the Rules of Court provide that a party may apply for leave to perform experiments by way of serving a notice of experiment on the other party. A party may also apply for site visits or even caucuses between the parties' experts to identify the areas of agreement and disagreement.
At the conclusion of the proceedings, the court will make an order stipulating the remedies. Failure to meet the order can result in criminal penalties. As such, for the enforcement of non-monetary remedies such as injunctions or the delivery up of infringing products, if the party refuses to comply with the order, the aggrieved party may apply to the court for an order of committal, which can result in fines or imprisonment for the disobedient party.
Where monetary remedies such as damages or an account of profits are concerned, the aggrieved party can also apply to the court for an order of committal if the opposing party refuses to pay the amount stipulated in the order. Typically, the aggrieved party's first recourse when it comes to monetary remedies is to avail itself of the various avenues under Singapore law to recover the judgment debt; for example:
- applying for an examination of the judgment debtor where the judgment debtor has to answer questions regarding its assets;
- applying for a writ of seizure and sale where the court seizes the property of the judgment debtor for sale to meet the judgment debt; and
- taking out garnishee proceedings against parties who are in debt to the judgment debtor.
Alternative dispute resolution
There are five main forms of alternative dispute resolution (ADR) available in Singapore: neutral evaluation, expert determination, conciliation, mediation and arbitration. In technology disputes, the two mechanisms that attract the most use are mediation and arbitration.
Mediation is a frequently utilised ADR mechanism because of its confidentiality, cost-efficiency and flexibility. Mediation is typically utilised early in the proceedings as an effort to resolve disputes before they reach trial, to avoid the high costs of patent litigation. Even cross-border patent disputes are capable of resolution through mediation: the Singapore Convention on Mediation, which came into force on 12 September 2020, allows parties from different nation states that have agreed to a settlement agreement to enforce their international settlement agreement in court, subject to exceptions.
Arbitration is slowly growing in popularity as an alternative to court proceedings in technology disputes. Both Singapore's Arbitration Act and its International Arbitration Act recognise intellectual property disputes as capable of settlement by arbitration between the parties to the dispute. Like mediation, arbitration has the benefits of confidentiality, cost-efficiency and flexibility of procedures.
It must be noted that the outcome of disputes resolved through arbitration is binding only for the parties to the arbitral proceedings. This means that third parties with an interest in the matter – for example, licensees of a patent in dispute – cannot enforce the outcome of the arbitration for their own benefit as they were not a party to the arbitration. Further, if public injunctive relief is the primary relief sought, it may be more appropriate to pursue litigation in the courts rather than through arbitration.
The Singapore International Commercial Court (SICC), which was officially launched in 2015, is a division of the General Division of the High Court designed to deal with transnational commercial disputes. Parties that intend to utilise arbitration as their dispute resolution mechanism of choice may instead opt for the SICC, which has the jurisdiction to hear the dispute if the claim is of an international and commercial nature, provided that both parties have submitted to the SICC's jurisdiction under a written jurisdiction agreement. The SICC's benefits over arbitration include access to an appellate process and the power to order a joinder of third parties. The SICC may also preside over matters traditionally considered non-arbitrable; for example, patent revocation and the rectification of the patent register.
Outlook and conclusions
Moving forward, we expect more technology law disputes to be determined by the Singapore courts and, where the parties already have a contractual relationship, through arbitration. Furthermore, as technology disputes take on an increasingly multi-jurisdictional and cross-border perspective, the SICC is well placed to be the venue for the determination of such disputes.
We expect the Singapore courts to continue to protect intellectual property rights where necessary and to scrutinise closely the conduct of would-be infringers seeking to use intellectual property without authorisation.