Extreme Kayaks & Watersports Pty Ltd v Viking Kayak International Pty Ltd

DESIGNS ACT 2003

DECISION OF A DELEGATE OF THE REGISTRAR OF DESIGNS WITH REASONS
Re:Design Registration No. 318769 in the name of Viking Kayak International Pty Ltd
and

Request for revocation under section 51 by Extreme Kayaks & Watersports Pty Ltd

Delegate: Debrett Lyons

Representation: Decision on the written record

Decision:
2010 ADO 1
Section 52 request: registered owner is not an entitled person. Declaration under s.52.

Background

The parties make and sell kayaks. They are competitors in business in Australia.
Design application 318769 was filed on 7 December 2007 in the name of Viking Kayak International Pty Ltd (“Viking”). The product to which the design is to be applied is a kayak.
The design application carried a Statement of Newness and Distinctiveness which reads: “Distinctive Top View features”.
Michael Bennett is a director of Viking. The design application nominated Michael Bennett as the designer.
The design was registered on 8 April 2008. .
On 24 April 2008, Viking wrote to the Office indicating that the registration certificate carried an error in so much as it was a Philip Mergard who was the designer and not Michael Bennett. Viking asked for the registration certificate to be amended.
On 1 May 2008 the Office wrote to Viking indicating that amendment of the registration was only possible in consequence of an obvious error or clerical mistake, which error or mistake must be fully explained.
In response, Viking wrote to the Office in these terms:
This is to advise that during the completion of the Design Application form, the name of the designer was written down in error.
Michael Bennett is the Director of Viking Kayak International Pty Ltd, and the person who actually designed the kayak was: Philip Mergard of Brisbane.
Whether or not it could be said that Viking’s 1 May 2008 letter was adequate to justify amendment of the registration, it remains that on 15 May 2008 the Office issued a fresh certificate of registration.
Nonetheless, on 28 May 2008 Viking wrote to the Office indicating that, contrary to its intention, the re-issued certificate of registration now named Philip Mergard and Michael Bennett as the designers. On 11 June 2008, Viking once again wrote to the Office, presumably in reaction to some Office communication of which there appears to be no written record, stating:
May we please hereby request a correction of the Design Registration by correcting the Name of the Designer as being Philip Mergard.
Eventually, on 3 July 2008 the Office appears to have issued a corrected certificate with which Viking was content.
On 17 February 2009, Extreme Kayaks & Watersports Pty Ltd (“the Requestor”) made a request for revocation of the design registration under section 51 of the Designs Act 2003 (the Act).
The ground for revocation is stated to be:
That the design in question belongs to Extreme Kayaks The pattern maker was contracted by extreme kayaks Extreme Kayaks has been manufacturing this design since June 2007 6 mths prior to Viking Kayaks lodgement of registration.
On March 20 2009, I wrote to the parties setting a deadline of 20 June 2009 for the parties to file evidence in support of their cases. Evidence from the Requestor was filed in a timely manner. Viking did not file evidence.
On 13 July 2009, I wrote to the parties indicating that Viking would have until 13 October 2009 to file evidence in answer to Requestor’s evidence in support, a copy of which accompanied the letter to Viking.
On 27 July 2009, and after receipt of a copy of the Requestor’s evidence, Viking wrote to the Office offering to surrender the registration. The offer was carried in a longer “without prejudice” letter responding in large part to the Requestor’s evidence.
I advised Viking that if it wanted to surrender the design registration, it would need to do so formally by way of filing a Form D/00/306, which I sent to Viking for its use.
On 17 September 2009, Viking filed a formal Offer to Surrender registration 318769 in the approved form. On 23 September 2009, the Office wrote to Viking advising that the Offer to Surrender would be advertised in the Official Journal of Designs on 8 October 2009, subsequent to which the registration would be revoked under section 50(3) provided there were no objections to revocation within one month of advertisement.
No objections were received and the registration was removed from the register on 3 December 2009.
In a letter to the Requestor dated 2 October 2009, copied to Viking, I explained that surrender and removal of the registration would not terminate these proceedings and that a decision on the section 51 revocation request would still follow unless the Requestor withdrew its application for revocation.
The parties were invited to request a Hearing by 20 November 2009. Neither did so and accordingly, after notice of my intention to do so, I made my decision hereunder on the basis of the written record.
Legislative provisions
Section 51 of the Act states that “[A] person may apply to the Registrar for revocation under section 52 of the registration of a design”.
In turn, section 52 provides that:
(1) This section applies if a person makes an application under section 51 for revocation of the registration of a design.
(2)       If the Registrar is satisfied that:
(a)       a person or persons were entitled persons at the time the design was first registered, and one or more of the original registered owners of the design was not an entitled person at that time; or
(b)       each original registered owner of the design was an entitled person at the time when the design was first registered, but another person or persons were also entitled persons at that time;
the Registrar may make a written declaration specifying that a person whom the Registrar is satisfied was an entitled person at the time the design was first registered is an entitled person under this subsection.
(3)       If the Registrar makes a declaration under subsection (2), the Registrar must:
(a)       give the relevant parties a notice stating that the registration of the design is revoked; and
(b)       make an entry in the Register under section 115.
(4)       The Registrar must also publish a notice, in the form prescribed by the regulations, stating that the registration of the design has been revoked and that the design is taken never to have been registered.
(5)       The Registrar must not revoke the registration of a design under this section unless the Registrar has given each original registered owner a reasonable opportunity to be heard.
(6)       The Registrar must not revoke the registration of a design under this section while relevant proceedings in relation to that design are pending.
(7)       An appeal lies to the Federal Court against a decision of the Registrar under this section.
Section 5 of the Act defines an “entitled person” as:
entitled person, in relation to a design, means a person entitled under section 13 to be entered in the Register as the registered owner of the design.
Section 13 states:
13 Who is entitled to be registered as the registered owner of a design
(1)       A person mentioned in any of the following paragraphs is entitled to be entered on the Register as the registered owner of a design that has not yet been registered:
(a)       the person who created the design (the designer);
(b)       if the designer created the design in the course of employment, or under a contract, with another person—the other person, unless the designer and the other person have agreed to the contrary;
(c)       a person who derives title to the design from a person mentioned in paragraph (a) or (b), or by devolution by will or by operation of law;
(d)       a person who would, on registration of the design, be entitled to have the exclusive rights in the design assigned to the person;
(e)       the legal personal representative of a deceased person mentioned in paragraph (a), (b), (c) or (d).
(2)       Despite subsection (1), a person is not entitled to be entered on the Register as the registered owner of a design that has not yet been registered if:
(a)       the person has assigned all of the person’s rights in the design to another person; or
(b)       the person’s rights in the design have devolved on another person by operation of law.
(3)       To avoid doubt:
(a)       more than one person may be entitled to be entered on the Register as the registered owner of a design; and
(b)       unless the contrary intention appears, a reference to the registered owner of a registered design in this Act is a reference to each of the registered owners of the design.
(4)       No person other than a person mentioned in paragraph (1)(a), (b), (c), (d) or (e) is entitled to be entered on the Register as the registered owner of a design that has not yet been registered.
Onus of proof
In reaching my decision, I must apply the civil standard of proof and decide disputed issues on the balance of probabilities[1]. It is the Requestor who bears the onus of proof in that regard[2].
[1] See, for example, Dunlop Holdings Ltd's Application, (1979) RPC 523 at 543-4
[2] See, for example, Stamp v W J Powell Pty Ltd, (1918) 24 CLR 339
Submissions
The Requestor relied upon written submissions dated 18 June 2009 from its representatives, Mathew Sulman & Associates, Intellectual Property Lawyers, Patent & Trade Mark Attorneys and upon evidence filed in accordance with written directions and a timetable which I set during the course of these proceedings. That evidence consists of the Statutory Declaration of Paul Henry Robert Endicott made 17 June 2009, with exhibits PE1 – PE30 and the Statutory Declaration of Ngaire Endicott, also made 17 June 2009.
As stated, Viking did not file any evidence. It did not file written submissions however it would be open to treat the content of its 27 July 2009 letter as part of the written record in these proceedings were it not for the fact that letter is marked “without prejudice”. I have nonetheless read and considered that letter and for the sake of completeness say here that I have paid regard to its contents to the extent necessary in reaching my decision.
The core of the Requestor’s submissions is that:
the Requestor commissioned Phillip Mergard of Meccanism Pattern and Mould Making to make design modifications to a kayak of which the applicant was the owner in or about December 2006 and to make a plug and mould for the modified kayak such that the Requestor could mass produce the redesigned kayak;
Mergard made the design modifications, however, not to a standard to which the Requestor was comfortable;
….a dispute arose between the Requestor and Meccanism regarding final payment;
Mergard and Meccanism retained the mould and plug that the Requestor had commissioned them to make and sold the mould and plug for the kayak design to Michael Bennett, Director of Viking Kayak International Pty Ltd;
Bennett and Viking Kayak registered Design Registration No. 813769 in full knowledge that the Requester had commissioned the design and that they were not entitled to the design.
Discussion
Paul Henry Robert Endicott is the Managing Director of the Requestor. He declares than in or about 2006 he bought a kayak making machine and corresponding mould from a third party from which he then manufactured and sold kayaks under the brand name EXTREME (“the EXTREME kayak”). He found that the design of the EXTREME kayak could be improved upon and declares that:
I used the basic design and mould for the EXTREME kayak which I had purchased as the template upon which I added specific design features and produced a design which included the following improvements:-
(i)           streamlining the bow to modernize the shape;
(ii)          adding a keel line along the bottom to add extra hull strength;
(iii)to accentuate the gull-wing lines on the hull slightly to improve moulding deformation in production;
(iv)         changes to the top of the kayak including:
(a)        increasing the forward storage area;
(b)        increasing the rear storage area and adding a water drainage chute;
(c)        adding a drink bottle holder;
(d)        widening the seating area for more comfort;
(e)        adding an extra inspection port at the back;
(f)         improving the shape and configuration of storage areas in the top of the kayak;
(g)        including a flat area which could accommodate an electronic fish finder;
(h)        a wider stern for larger users of the kayak;
(i)          adding slight depressions (streamlining) to the gunwales.
Mr. Endicott goes on to declare that in December 2006 he and his wife met with a design engineer, Philip Mergard, who did business under the name Meccanism Pattern and Mould Making (“Meccanism”), with a view to (i) design of a kayak which incorporated the modifications to the EXTREME kayak described above, and (ii), supply of two cast aluminium moulds for the production of kayaks incorporating that improved design.
Mr. Endicott declares that:
Meccanism is not a boat building specialist however Mergard assured us that he was the man for the job and that he had many years of experience in pattern and mould making. As we were to provide Mergard with the original EXTREME kayak we were confident that he could make the design alterations/modifications directly from that without trouble. On 8 January 2007, Meccanism supplied us with a quote for the work which included design through to delivery of two cast aluminum kayak moulds for rotational moulding. The total cost for the two moulds was $42,845 inc GST with a completion time of approximately 7 to 8 weeks from payment of a deposit. We accepted these terms and paid a 50% deposit to Meccanism on 18 January 2007.
Exhibited to Mr. Endicott’s declaration is a copy of the 8 January 2007 quotation from Meccanism which supports the statements made above. I note that the quotation was addressed to the Requestor.
As seen, section 13(1)(a) of the Act provides that the creator (sometimes called the “author”) of a design is an entitled person. Last year I considered in some detail the nature of design authorship in Craige Jonathan Henrick v Richard Eaton Taplin and Craige Jonathan Henrick [2009] ADO 1 (1 October 2009) however an added, and as yet largely unresolved[3], layer of complexity arises in cases of digitally created designs. In this particular case, leaving to one side issues of employment law and contract law more generally, there is a question as to whether it was Philip Mergard who, as operator of the CAD software which helped produce the kayak design, was the creator of the design, or whether it was Paul Endicott, who conceived and conveyed to Mergard in detail the desired modifications to the EXTREME kayak, who was the creator of the design.
[3] There is no case which is clear authority for the creator of a digitally aided or digitally produced design. The Law Reform Commission Discussion Paper 58, Designs, (August 1994), paragraphs 17.5 – 17.38, considered the emerging problem but made no recommendations and nothing found its way into the Act. The nearest guidance comes from the discussion in copyright law of authorship of digitally created works. See, for example, Express Newspapers Plc v Liverpool Daily Post & Echo (1985) 5 IPR 193; see more generally, Copyright in the Digital Domain, Rhys Bollen, Murdoch University Electronic Journal of Law, Volume 8, Number 2 (June 2001). Compare United Kingdom copyright law, under which the author of a computer-generated work is taken to be the person by whom the arrangements necessary for the creation of the work are undertaken : Copyright, Designs and Patents Act 1988 (UK) section 9(3).
No matter what might be the correct answer to that question, the Requestor’s ground for revocation includes the statement that “[T]he pattern maker was contracted by extreme kayaks” from which I must draw the finding that the Requestor concedes that Philip Mergard was the creator of the design. I therefore go to section 13(1)(b) of the Act which states that if the designer created the design whilst under a contract with another person then that other person will be an entitled person.
There is no doubt in my mind that there was an agreement for valuable consideration between the Requestor and Mergard/Meccanism for production of a design and corresponding mould for a kayak. The remaining question is whether the design features of registration 318769, specifically, the “top view” features said in the Statement of Newness and Distinctiveness to be “distinctive”, are design features created by Mergard/Meccanism pursuant to that agreement with the Requestor.
The declaration of Mr. Endicott shows that there was a falling out between Mergard/Meccanism and the Requestor. It is clear that by July 2007 the Requestor had identified problems with the Mergard/Meccanism design. Mr. Endicott declares that:
When we tested the new boat we discovered that it was incapable of properly carrying an 86kg man, that it sunk at the stern and that the rear hatch was submerged therefore rendering the boat commercially useless. This was a result of Meccanism decreasing the size of the keel.
Earlier in his declaration, Mr. Endicott explains that:
My son Jeremy and I visited Meccanism’s premises … during the course of the plug design and discussed the cosmetic changes to the kayak with Mergard. During the course of these visits we were happy with the cosmetic changes that were made, however, we were completely unaware that Meccanism had not kept the hull and keel of the redesigned kayak to the same specifications as the original kayak which was supplied to them to make the working drawings. We had no reason to check on this as no changes had been requested to the depth or draft of the main hull design…
Mr. Endicott later declares that:
We did not trust Mergard’s or Meccanism’s ability to rectify the problems with the kayak design and we were very concerned about the time it would take them to rectify the problems if they, in fact, had the ability to do the job properly. We requested the plug from Meccanism in order that we could engage another engineer to rectify the Meccanism produced design. Time was of the essence as the new Kayak design had been marketed and customers are waiting for it.
When we contacted Mergard in order to attempt to work out a solution he disowned any responsibility and stated that any alterations would attract an additional charge. Mergard and Meccanism held the plug and the second mould, as well as the foundry models that were taken from the plug, and our original EXTREME kayak. Mergard informed us that he would not release any of those items and forwarded a letter of demand for the balance of the invoices. Mergard also stated that he would sell the items held by him to recover costs.
…
My company has spent approximately $33,209.45 to fix the defects in the work produced by Meccanism. A modified kayak incorporating further operational design features has since been produced and successfully sold by my company.
…
The dispute with Meccanism is still unresolved and may well become the basis of court proceedings in the future.
…
On or about 27 January 2009 I became aware that Bennett and Viking were offering for sale kayaks which were produced using a mould purchased from Mergard and Meccanism.
Attached to Viking’s letter dated 27 July 2009 is a copy of an invoice from Mergard/Meccanism to Viking for the sale of a cast aluminium rotational mould, including plug and pattern. The invoice is dated 8 August 2007. In the 27 July 2009 letter Michael Bennett writes:
Viking kayak International Ltd (sic) purchased moulds and patterns for the registered design from Philip Mergard of Meccanism whose name appears in Endicott’s declaration. Mr Mergard claimed to us to be the designer. On that basis we proceeded to register the design.
It is clear from those statements that Viking had no further input to the design previously produced by Mergard/Meccanism. It is also more likely than not that Mergard/Mechanism made no further alterations to the design with which the Requestor expressed dissatisfaction in July 2007. Indeed, Mergard/Meccanism openly stated that they would be making additional charges for any more time spent on the project aimed at re-design of the kayak. Moreover, were it to make any difference to my decision, I find that the areas where Mergard/Meccanism departed from the contractual brief given to them by the Requestor were in the partial redesign of the hull and keel, both areas which can be ignored for the purposes of the design registration in light of the Statement of Newness and Distinctiveness which it carries.

The only area of potential difficulty arises from certain letters put into evidence by Mr Endicott which might be construed as repudiation by the Requestor of the contract with Mergard/Meccanism. A letter dated 14 August 2007 from the Requestor’s solicitors to Mergard/Meccanism’s solicitors threatens action by the Requestor for breach of contract. A later letter dated 29 October 2007 goes into the detail of a claim of lack of specific performance of the contract. Neither letter repudiates the contract. Both allege breach of contract and threaten action for such.
Accordingly, I find that the Requestor was the person entitled to be entered on the Register as the registered owner of the design.
Decision
Under section 52(2) of the Act, I am satisfied that at the time the design 318769 was first registered, Viking was not an entitled person. Further, I hereby make a written declaration specifying that at the time the design 318769 was first registered the Requestor was an entitled person.
Section 52(3)(a) directs me to give notice to the parties that design 318769 is revoked under s 52. Section 52(3)(b) mandates that, if I make a declaration under s 52(2), as I have done in paragraph 44, I act in accordance with section 115. Section 52(4) goes on to provide that if the Registrar revokes a registration under section 52 then the Registrar must also publish a prescribed notice stating that the registration of the design has been revoked.
As indicated above, design 318769 was revoked under section 50 on 3 December in consequence of Viking’s offer to surrender the registration. Section 50(3) provides that:
The Registrar may accept the offer, revoke the registration of the design and make an entry in the Register under section 115 after doing the things mentioned in subsection (2).
Section 115 provides:
Amendments of Register made to give effect to certain decisions
If:
(a)the Registrar decides to revoke the registration of a design under section 50, 52 or 68; or
(b) a court makes an order revoking the registration of a design;
the Registrar must make an entry in the Register stating that the registration of the design has been revoked and that the design is taken never to have been registered.
Both sections 52(4) and s 115 have the effect that the design is taken never to have been registered. I direct that the entry in the register (referred to in section 115) and the publication of the notice (referred to in section 52(4)) proceed after one month from the date of this decision.
To the extent that those actions appear redundant in light of earlier events, let this decision stand as a written record of the fact that design registration 318769 was properly revoked, not because it was surrendered by Viking, but because a declaration was made that, at the time of filing of the design application, Viking was not a person entitled to the design.
Costs
Costs before the Registrar normally follow the event. In this case the Requestor has made its case and I therefore direct that Viking pays the Requestor’s costs.
Debrett Lyons
Hearing Officer
Trade Marks & Design Hearings
25 June 2010

Delegate:	Debrett Lyons
Representation:	Decision on the written record
Decision:	2010 ADO 1 Section 52 request: registered owner is not an entitled person. Declaration under s.52.

[2010] ADO 1

25 June 2010