Chorus in High Court, accused of ripping off consultancy's ideas

Brendon Burns during his time as Christchurch Central MP for Labour. Photo / Simon Baker

A consultancy is accusing Chorus of breaching a non-disclosure agreement - then trying to use confidential information for its own gain.

In early 2018, Creative Development Solutions (CDS) held what it describes as a high-powered meeting with Chorus staff to discuss a broadband proposal for the Marlborough Sounds region.

CDS, whose three co-founders include ex-Labour MP Brendon Burns, had brought Marlborough District Council (MDC), Network Tasman and various wireless internet service providers (or "wisps" together) as part of its plan to make a bid for Rural Broadband Initiative 2+ funding (RBI2+).

The consultancy had hoped Chorus would get onboard with its Smart Services Initiative (SSI) concept, which it developed in partnership with the MDC (and which the council co-owns).

Instead, CDS alleges that Chorus took CDS' concepts and incorporated them into its own RBI2+ proposal for multiple areas including the consultancy's home turf.

An action brought by CDS is being heard in a case opening in the High Court at Wellington this week.

CDS is arguing that Chorus showed enthusiasm for its ideas during meetings.

At one point, Chorus said, according to CDS evidence: "Interesting model, really good idea. Can see how it might work for Chorus to do things it wouldn't normally consider, such as full RAN [Radio Area Network], Fixed Mobile Wireless or other areas."

However, in its opening statement this morning Chorus argued that it was aware the
Marlborough District Council (MDC) had funds for broadband, with or without CDS so "Chorus executives continued to be politely enthusiastic towards MDC and CDS."

Behind its polite front, Chorus argues its internal assessment was that CDS' plan for boosting broadband in Marlborough was "impractical and incomplete."

In early 2018, Creative Development Solutions held what it describes as a high-powered meeting with Chorus staff to discuss a broadband proposal for the Marlborough Sounds region. Photo / File

In its opening statement, Chorus claimed that internal emails released under discovery backed up its claim.

In one, dated March 13, Chorus network strategy manager Kurt Rodgers writes that CDS' plan is, "All a bit odd. 195 new wireless sites sounds like an absolute nightmare to plan, build and operate."

Chorus head of innovation Mike Lott emailed, "Okay so not exactly sure what to make of all this. And am not sure it's really decipherable."

On the same evening (still March 13), Rodgers emailed, "So how is this going to play out? We are basically going to say that we think his design sucks and would advise everyone to avoid it like the plague. AND we have done a high level design ourselves which is much better and can be contracted for immediately if MDC have the cash (maybe we should take a shoe box in case they do?)."

While the "shoebox" quip is embarrassing for Chorus, it also argues that the chain of emails helps prove it saw no worth in CDS's plan.

Chorus argues that the information was not confidential but in the public domain.

Justin Smith QC, representing Chorus, told the court that Marlborough council's involvement was the key attraction for the network operator to consider the proposals because spending money on its own wouldn't be economic.

Smith said Chorus had already prepared its plan to bid for the rural areas and that the council-backed proposal wasn't of any use or value to Chorus. The company preferred its own plan, he said.

Chorus also rejected the claim that it owed a fiduciary duty to CDS, saying there was no relationship and that the consultancy and council were dealing with a number of potential competitors, including Huawei, he said.

Marlborough council chief information officer Stacey Young was the first witness. She told the court that Chorus was considered as a potential supplier because of its strong expertise in fibre and copper networks.

She said Chorus didn't indicate at any point that it didn't want to proceed with the proposal and that her impression was that they were working towards a positive outcome.

For its part, CDS claims Chorus lifted key details from the "internet of things" element of its proposal, and its collaborative approach.

In its opening statement, CDS argues that characterising its concept as public domain information "is akin to reducing a smartphone to wires and chips and saying that there is no intellectual property in it worth protecting. Much like the latest smartphone, the plaintiff having done its job effectively, SSI is unique, elegant and relatively simple solution to a significant communications problem for all of rural New Zealand."

Details of the SSI were redacted from the written version of CDS' opening statement.

CDS also says it "obtained assurances from Chorus that it would not be bidding
for RBI2 funding so that it would not have any incentive to use MDC and Creative's confidential information."

Chorus claims "there is no basis to say that CDS has lost out on RBI2 funding (or any other funding) by dint of providing Chorus confidential information on the strength of a representation by Chorus."

In the final event, RBI2+ funding for the region went to neither the MDC nor Chorus as the Rural Connectivity Group (a joint venture between Spark, Vodafone and 2degrees) won almost all of the RBI2+ funding.

However, in its opening statement, CDS noted that telecommunications projects were eligible for the government's $1 billion-per-year Provincial Growth Fund.

And CDS adds, "MDC is seeking PGF funding for the Marlborough region. Chorus has
unsuccessfully sought PGF funding, at least up to date, based on using the same material as was used for its RBI2+ response - and therefore using the Confidential Information."

Chorus is being represented by Chapman Tripp, CDS by Clive Elliot QC and veteran telecommunications lawyer Michael Wigley.

The case, before Justice Robert Dobson, is scheduled to run for two weeks.