Lumen Australia Pty Ltd v Frontline Australasia Pty Ltd
[2018] FCA 1807
•22 November 2018
FEDERAL COURT OF AUSTRALIA
Lumen Australia Pty Ltd v Frontline Australasia Pty Ltd [2018] FCA 1807
File number: VID 258 of 2016 Judge: MOSHINSKY J Date of judgment: 22 November 2018 Catchwords: COPYRIGHT – infringement – trailer wiring harnesses for inclusion in towbar kits – where the first respondent (Frontline) supplied towbar kits to automotive companies – where the first applicant (Lumen) supplied wiring harnesses to Frontline – where Frontline engaged the second and third respondents (Vision) to replicate Lumen’s wiring harnesses – where Frontline provided Vision with samples, engineering drawings and the installation instructions for Lumen’s products – whether Frontline and Vision infringed Lumen’s copyright in the circuit markings on the printed circuit board in the electronic control unit, the engineering drawings and the installation instructions – whether Vision could make out defences under ss 77 and 115(3) of the Copyright Act 1968 (Cth)
TRADE MARKS – infringement – installation instructions for towbar kits – where installation instructions included a depiction of a trailer socket with the applicants’ name in small font – where the installation instructions were supplied with towbar kits including wiring harnesses from another supplier – whether the first respondent had established, for the purposes of the proviso to s 120(2) of the Trade Marks Act 1995 (Cth), that using the name as it did was not likely to deceive or cause confusion
INTELLECTUAL PROPERTY – Circuit Layouts Act 1989 (Cth) – trailer wiring harnesses for inclusion in towbar kits – where the wiring harnesses included an electronic control unit that included a printed circuit board assembly – whether the printed circuit board assembly was an “integrated circuit” for the purposes of the Circuit Layouts Act
DAMAGES – additional or exemplary damages – passing off, copyright infringement and trade mark infringement – trailer wiring harnesses for inclusion in towbar kits – where the first respondent (Frontline) supplied towbar kits to automotive companies – where the first applicant supplied wiring harnesses to Frontline – where Frontline substituted wiring harnesses from the second and third respondents – where Frontline did not disclose this to the automotive companies it supplied – where Frontline did not comply with the automotive companies’ approval procedures for new parts – where Frontline failed to make discovery in the proceeding of a large number of relevant documents – applicable principles regarding additional or exemplary damages – whether additional or exemplary damages should be ordered and the quantum of any such damages
Legislation: Circuit Layouts Act 1989 (Cth), ss 5, 8, 9, 11, 13, 16, 17, 19, 20, 23, 27
Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 18, 29, 237
Copyright Act 1968 (Cth), ss 10, 13, 14, 25, 31, 32, 35, 36, 38, 74, 77, 77A, 115
Design (Consequential Amendments) Act 2003 (Cth)
Law and Justice Legislation Amendment Act 1990 (Cth)
Trade Marks Act 1995 (Cth), ss 8, 10, 17, 120, 126
Trade Practices Act 1974 (Cth), s 52
Wrongs Act 1958 (Vic), s 23B
Cases cited: ACP Machinery Australia Pty Ltd v Aerospace Technologies of Australia Ltd (No 3) (2013) 103 IPR 435
Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640
Autodesk v Yee (1996) 68 FCR 391
Avel Pty Ltd v Wells (1992) 36 FCR 340
Baiada Poultry Pty Ltd v The Queen (2012) 246 CLR 92
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Clarendon Homes (Aust) Pty Ltd v Henley Arch Pty Ltd (1999) 46 IPR 309
Data Access Corporation v Powerflex Services Pty Ltd (1999) 202 CLR 1
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Digga Australia Pty Ltd v Norm Engineering Pty Ltd (2008) 166 FCR 268
Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd (2016) 245 FCR 529
Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd (2011) 91 IPR 488
Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569
Fairfax Media Publications Pty Ltd v Reed International Books Australia Pty Ltd (2010) 189 FCR 109
Galaxy Electronics Pty Ltd v Sega Enterprises Ltd (1997) 75 FCR 8
Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 5) (2017) 122 IPR 279
Golden Editions Pty Ltd v Polygram Pty Ltd (1996) 61 FCR 479
Henley Arch Pty Ltd v Lucky Homes Pty Ltd (2016) 120 IPR 317
IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458
Jones v Dunkel (1959) 101 CLR 298
Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054
Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273
Lamb v Cotogno (1987) 164 CLR 1
Metricon Homes Pty Ltd v Barrett Property Group Pty Ltd (2008) 248 ALR 364
Microsoft Corporation v Glostar Pty Ltd (2003) 57 IPR 518
Microsoft Corporation v PC Club Australia Pty Ltd (2005) 148 FCR 310
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357
Nintendo Company Limited v Centronics Systems Pty Ltd (1994) 181 CLR 134
Ogden Industries Pty Ltd v Kis (Australia) Pty Ltd [1982] 2 NSWLR 283
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Pokémon Company International Inc v Redbubble Ltd (2017) 351 ALR 676
Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd (1993) 42 FCR 227
Polo/Lauren Company LP v Ziliani Holdings Pty Ltd (2008) 173 FCR 266
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88
Seafolly Pty Ltd v Fewstone Pty Ltd (2014) 313 ALR 41
SW Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466
Taleb v GM Holden Ltd (2011) 286 ALR 309
Tamawood Ltd v Habitare Developments Pty Ltd (2015) 112 IPR 439
Temple Instruments Ltd v Hollis Heels Ltd [1973] RPC 15
Tolmark Homes Pty Ltd v Paul (1999) 46 IPR 321
Truong Giang Corporation v Quach (2015) 114 IPR 498
University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601
William McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902
XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448
Date of hearing: 4, 5, 6, 7, 8, 12 and 13 June 2018 Registry: Victoria Division: General Division National Practice Area: Intellectual Property Sub-area: Trade Marks Category: Catchwords Number of paragraphs: 377 Counsel for the Applicants: Mr EJC Heerey QC with Mr PJT Creighton-Selvay Solicitor for the Applicants: DLA Piper Australia Counsel for the First Respondent: Mr BN Caine QC with Mr AD Barraclough Solicitor for the First Respondent: Mills Oakley Counsel for the Second and Third Respondents: Mr GR McCormick Solicitor for the Second and Third Respondents: Francisdaniel Lawyers ORDERS
VID 258 of 2016 BETWEEN: LUMEN AUSTRALIA PTY LTD (ACN 007 285 501)
First Applicant
LUMEN INTERNATIONAL HOLDINGS PTY LTD (ACN 153 135 267)
Second Applicant
AND: FRONTLINE AUSTRALASIA PTY LTD (ACN 073 668 649)
First Respondent
LOVE STRATEGIC INVESTMENTS PTY LTD (ACN 158 532 800)
Second Respondent
AZZOPARDI STRATEGIC INVESTMENTS PTY LTD (ACN 158 532 962)
Third Respondent
JUDGE:
MOSHINSKY J
DATE OF ORDER:
22 NOVEMBER 2018
THE COURT ORDERS THAT:
1.Within 14 days the parties provide any agreed proposed minute of orders to give effect to the Court’s reasons.
2.If the parties cannot agree, within 21 days each party provide its proposed minute of orders to give effect to these reasons, together with a short written submission in support of the proposed orders.
3.Any outstanding issues of relief, and the issue of costs, be listed for hearing on a date to be fixed.
4.There be liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Table of Corrections 4 April 2023 In paragraph 376(d), “Vision has succeeded in its cross-claim against Vision” has been replaced with “Vision has succeeded in its cross-claim against Frontline” REASONS FOR JUDGMENT
MOSHINSKY J:
INTRODUCTION
The first applicant (Lumen) is a manufacturer and supplier of electronic automotive components including trailer wiring harnesses (wiring harnesses) for inclusion in towbar kits. In general terms, wiring harnesses contain the wiring and electronics that allow the electrical components on a trailer (such as brake lights, indicators, reversing lights and tail lights) to be connected to a vehicle and operated when the trailer is being towed by the vehicle.
The second applicant (Lumen International) is the owner of Australian trade mark no. 958232 for the name LUMEN (the Lumen trade mark), which was registered with effect from 13 June 2003 in respect of goods for the automotive ‘after market’, including parts and accessories for vehicles and trailers.
For some years before December 2014, Lumen supplied wiring harnesses (Lumen wiring harnesses) to the first respondent (Frontline) for inclusion in towbar kits it supplied to automotive companies (relevantly, Mitsubishi Motors Australia Ltd (Mitsubishi) and Mazda). Suppliers that supply directly to automotive companies are referred to as “tier 1” suppliers. Suppliers that supply components to a tier 1 supplier are referred to as “tier 2” suppliers. In relation to the products that are the subject of this proceeding, Frontline was a tier 1 supplier and Lumen was a tier 2 supplier (although in other contexts Lumen supplies components directly to automotive companies and is thus a tier 1 supplier). The towbar kits were for installation by automotive dealers.
During 2013 and 2014, Frontline took steps to acquire wiring harnesses for its towbar kits from the second and third respondents (together, Vision) in substitution for the Lumen wiring harnesses. The second and third respondents trade together as “Vision Automotive Technology”. To facilitate the reproduction of the Lumen wiring harnesses, Frontline, without the knowledge or consent of Lumen, provided Vision with: samples of the Lumen wiring harnesses (including the electronic control unit (ECU)); engineering drawings for the Lumen wiring harnesses (the Engineering Drawings) (these drawings covered the parts of the wiring harness other than the internal aspects of the ECU); and the installation instructions for the towbar kits including the Lumen wiring harnesses (the Installation Instructions). Vision used the samples and the Engineering Drawings to produce products that were almost identical to the Lumen wiring harnesses. From December 2014 to February 2016, Vision supplied wiring harnesses (Vision wiring harnesses) to Frontline, and Frontline included the Vision wiring harnesses in the towbar kits it supplied to Mitsubishi and Mazda. Frontline did not disclose to Mitsubishi or Mazda that it had substituted the Vision wiring harnesses for the Lumen wiring harnesses. Moreover, Frontline did not seek the approval of Mitsubishi or Mazda to substitute the Vision wiring harnesses, despite there being a requirement that all components be approved pursuant to a Production Part Approval Process (PPAP).
Vision produced direct copies of the Installation Instructions and supplied these with the Vision wiring harnesses. The Installation Instructions for some of the models of towbar kits included a depiction of a socket bearing the Lumen trade mark. As Vision produced direct copies of the Installation Instructions, the depictions of the socket with the Lumen trade mark appeared in installation instructions it supplied.
In late 2015, Lumen’s business development manager noticed that Lumen’s sales to Frontline of wiring harnesses for Mitsubishi vehicles had experienced a drop-off from forecast sales. In January and February 2016, a staff member of Lumen visited three Mitsubishi dealers and identified wiring harnesses that had not been supplied by Lumen and brought this to the attention of those dealers. Following communication between Lumen and Mitsubishi, on 15 February 2016 Lumen’s solicitors sent a letter of demand to Frontline.
On 17 February 2016, Mitsubishi issued an alert to all Mitsubishi dealers throughout Australia, stating that it had been brought to Mitsubishi’s attention that non-approved wiring harnesses may have been used in certain towbar kits, and that stock of the affected towbar kits had been frozen while the issue was being investigated.
On 23 March 2016, the applicants commenced this proceeding against Frontline (but not, at this stage, against Vision). It was alleged in the statement of claim that Frontline had engaged in passing off, contravened the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), infringed the copyright of Lumen in various copyright works, misused confidential information of Lumen, breached contractual arrangements between Lumen and Frontline, and infringed the Lumen trade mark.
On 14 April 2016, the Court ordered Frontline to provide discovery of two categories of documents (with capitalised terms having the meaning given in the statement of claim):
(a)correspondence between Frontline and the manufacturer of the Non-Lumen Wiring Harness relating to the design, development and manufacture of the Non-Lumen Wiring Harness; and
(b)correspondence between Frontline and the manufacturer of the Non-Lumen Wiring Harness attaching or containing Technical Information relating to the Lumen Wiring Harness, including but not limited to technical specifications, drawings and physical product samples.
Subsequently, on 23 June 2016, John Kaias, a director and co-owner of Frontline, swore an affidavit of documents listing only three documents. The three documents were inconsequential and did not reveal that Frontline had provided Vision with samples of Lumen’s wiring harnesses, the Engineering Drawings and the Installation Instructions. It is now apparent that Frontline failed to discover a large number of documents falling in the above categories that were in its possession.
Subsequently, the applicants joined Vision to the proceeding. Vision later made discovery of a large number of documents passing between Frontline and Vision that fell within the categories of documents set out in [9] above.
The applicants’ claims against the respondents were amended at various stages before trial. As at the trial of the proceeding, the applicants’ claims were, in summary, as follows:
(a)copyright infringement (against both Frontline and Vision) in relation to three different works or categories of works:
(i)the arrangement of reference designators (text and numerals) on the circuit board forming part of Lumen’s ECU (the Circuit Markings);
(ii)the Engineering Drawings; and
(iii)the Installation Instructions;
(b)passing off, and claims based on contravention of ss 18 and 29 of the Australian Consumer Law (against Frontline only);
(c)breach of confidence (against Frontline only);
(d)breach of contract (against Frontline only);
(e)trade mark infringement (against Frontline only); and
(f)infringement of rights under the Circuit Layouts Act 1989 (Cth) (against both Frontline and Vision).
Lumen seeks damages rather than an account of profits.
Vision has brought a cross-claim against Frontline, alleging that Frontline engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law.
Frontline has brought a cross-claim against Vision, seeking contribution towards any damages that Frontline is ordered to pay the applicants, pursuant to s 23B(1) of the Wrongs Act 1958 (Vic).
The issues in dispute were narrowed in the parties’ opening submissions and then further in the parties’ closing submissions. In particular, in its closing submissions, Frontline conceded many of the claims against it. Among other things:
(a)Frontline admits that it infringed Lumen’s copyright in respect of the Circuit Markings, the Engineering Drawings and the Installation Instructions;
(b)Frontline admits that it authorised the reproduction of the Circuit Markings, the Engineering Drawings and the Installation Instructions;
(c)Frontline admits that its conduct constituted passing off, misleading or deceptive conduct, breach of confidence and breach of contract; and
(d)Frontline admits that it should be ordered to pay damages to Lumen for the loss or damage that Lumen has suffered and that, in the circumstances, it is appropriate that it also be ordered to pay an amount by way of additional or exemplary damages.
The main issues that remain in dispute may be summarised as follows:
(a)in relation to Lumen’s copyright claims in respect of each of the Circuit Markings, the Engineering Drawings and the Installation Instructions:
(i)whether Lumen’s claim is made out (apart from defences);
(ii)whether Vision’s defence under s 115(3) of the Copyright Act 1968 (Cth) is made out; and
(iii)(in relation to the Circuit Markings and Engineering Drawings) whether Vision’s defence under s 77 of the Copyright Act is made out;
(b)in relation to the trade mark infringement claim, whether Frontline has established, for the purposes of the proviso to s 120(2) of the Trade Marks Act 1995 (Cth), that using the name LUMEN as it did was not likely to deceive or cause confusion;
(c)in relation to Lumen’s Circuit Layouts Act claim:
(i)whether the circuit upon which Lumen relies is an “integrated circuit” for the purposes of the Circuit Layouts Act;
(ii)whether Vision’s defence under s 20(1) of the Circuit Layouts Act is made out; and
(iii)whether Vision’s defence under s 23 of the Circuit Layouts Act is made out;
(d)in relation to relief:
(i)whether declaratory and injunctive relief, and delivery up, should be ordered;
(ii)whether compensatory damages should be ordered and the quantum of any such damages; and
(iii)whether additional or exemplary damages should be ordered and the quantum of any such damages;
(e)whether Vision’s cross-claim against Frontline (based on misleading or deceptive conduct) is established; and
(f)whether Frontline’s cross-claim against Vision (for contribution) is established.
In summary, for the reasons that follow, my conclusions in relation to the above issues are:
(a)in relation to Lumen’s copyright infringement claims, Lumen has made out its claims against both Frontline and Vision in respect of each of the Circuit Markings, the Engineering Drawings and the Installation Instructions;
(b)in relation to the trade mark infringement claim, Frontline has not established that using the name LUMEN as it did was not likely to deceive or cause confusion; accordingly, the trade mark infringement claim is made out;
(c)in relation to Lumen’s Circuit Layouts Act claims, the circuit upon which Lumen relies does not constitute an “integrated circuit” for the purposes of the Circuit Layouts Act; accordingly, Lumen’s claims based on this Act are not made out;
(d)in relation to relief:
(i)it is appropriate to grant declaratory and injunctive relief substantially as sought by Lumen;
(ii)compensatory damages should be ordered against Frontline and Vision (jointly and severally) in the sum of $140,750.30;
(iii)exemplary damages should be ordered against Frontline in the sum of $500,000; no additional or exemplary damages should be ordered against Vision;
(e)Vision has established that Frontline engaged in misleading or deceptive conduct or conduct likely to mislead or deceive;
(f)Frontline’s claim against Vision for contribution is to be dismissed.
These reasons will be structured under the following headings:
(a)Procedural matters.
(b)The witnesses.
(c)Factual findings.
(d)Lumen’s claims against Frontline and Vision.
(e)Vision’s cross-claim against Frontline.
(f)Frontline’s cross-claim against Vision.
PROCEDURAL MATTERS
On the first day of the trial, Lumen was granted leave to amend its originating application and statement of claim. The effect of the amendments was to abandon certain claims and to clarify aspects of other claims. Following these amendments, the latest versions of each document were: the third further amended originating application; and the third further amended statement of claim (the statement of claim).
During the course of the trial, both Frontline and Vision were given leave to amend their defences. The effect of the amendments was (in the case of Frontline) to enable Frontline to contend that, for the purposes of the proviso to s 120(2) of the Trade Marks Act, using the name LUMEN as it did was not likely to deceive or cause confusion, and (in the case of both Frontline and Vision) to enable the respondents to contend that the circuit upon which Lumen relies for its Circuit Layouts Act claim was not an “integrated circuit” for the purposes of that Act. The latter amendment was granted on the basis that the respondents would adduce no additional evidence in chief and would simply rely on the cross-examination of Mark Walter (a witness called by Lumen). It was also arranged that Mr Walter would be recalled to deal with this issue on the fifth day of the trial.
The trial was conducted by all parties on the basis that no relevant distinction needed to be drawn between the second and third respondents and they could be treated for present purposes as if they were a single entity. I will proceed on this basis.
The trial (dealing with both liability and relief) was conducted over seven days. The first day and part of the second day were occupied with opening submissions. The evidence was dealt with during the second, third, fourth and fifth days. After a one-day break for a public holiday, the parties made closing submissions during the sixth and seventh days.
As noted above, in its closing submissions, Frontline admitted many of the claims. Frontline’s admissions were set out in its outline of closing submissions, which was filed and served at about 4.30 pm on the day before the day when closing oral submissions were to commence.
THE WITNESSES
The following witnesses were called by the applicants and required to attend for cross-examination:
(a)Mark Walter, a continuous improvement manager employed by Lumen;
(b)Paul Fletcher, a senior electronics engineer who had been employed by Lumen from around 2010 to 2016 in the role of hardware engineer in the Research & Development Department;
(c)Robert Ritchie, a quality engineer employed by Lumen; and
(d)Ihab Sam Qubrosi, Lumen’s Chief Financial Officer.
Each of these witnesses was cross-examined by Vision. Apart from Mr Walter in relation to the “integrated circuit” issue, Frontline did not cross-examine the above witnesses. No issue was raised as to the credibility of these witnesses, and I accept their evidence.
In addition, the applicants relied on affidavits of the following deponents, who were not required for cross-examination:
(a)Chris Abrahams, a senior graphic illustrator employed by Lumen;
(b)Chris Fergusson, a business unit manager at Lumen;
(c)Bruce Hamilton, a business development manager at Lumen;
(d)David Waterson, a business development manager at Lumen;
(e)Paul Mason, an engineering consultant who had been employed by Lumen from around 2003 to 2014; at the time he left Lumen he held the role of Research & Development Manager;
(f)Pablo Mena, a graphic illustrator employed by Lumen; and
(g)Robynne Sanders, a solicitor.
Frontline called one witness, Dawie Aker, the Chief Executive Officer of Frontline. He was cross-examined. Mr Aker gave considered responses to the questions he was asked during cross-examination. He expressed himself in a way that gave confidence that he was endeavouring to assist the Court. He made significant concessions during cross-examination, which bolstered his credibility. I generally accept his evidence. In some instances, as discussed below, I prefer the evidence of Mr Love to that of Mr Aker.
Notably, Frontline did not call:
(a)John Martin, who had been employed by Frontline at the relevant times as Director – Operations & Strategic Planning and was closely involved in the relevant dealings with Vision; Mr Martin reported to Mr Aker;
(b)Pino Italiano, who had been employed by Frontline at the relevant times as Senior Quality Assurance Engineer and was closely involved in the relevant dealings with Vision; Mr Italiano reported to Mr Martin; and
(c)John Kaias, who swore the affidavit of documents referred to above.
Lumen submits that an adverse inference should be drawn from Frontline’s failure to call the above individuals: see Jones v Dunkel (1959) 101 CLR 298. I will discuss this issue later in these reasons.
The following witnesses were called by Vision and required to attend for cross-examination:
(a)Anson Cheng, the Research & Development Manager of Vision Automotive Electronics Industrial Co Ltd (Vision Taiwan), a company incorporated in Taiwan that is a supplier to Vision;
(b)Constantinos Giatas, who was employed by Vision for approximately one year as engineering account manager;
(c)Philip Love, the sole director, secretary and shareholder of the second respondent; and
(d)Daniel Regodeiro, a project engineer employed by Vision (Mr Regodeiro in effect took over from Mr Giatas at Vision).
In addition, Vision relied on an affidavit of Edward Azzopardi, the sole director, secretary and shareholder of the third respondent. As noted above, the second and third respondents trade together as Vision Automotive Technology. Mr Love has the title, Group Managing Director. Mr Azzopardi has the title, Managing Director. In practice, Mr Love and Mr Azzopardi are joint managing directors.
Mr Cheng gave evidence by video-link from Taiwan, with the assistance of an interpreter (located at the Court in Melbourne). The video-link evidence was clear, both visually and in terms of audio. While the interpreter was located in the courtroom in Melbourne rather than with the witness, the process worked smoothly and there did not appear to be any difficulty occasioned by this arrangement. I accept the evidence of Mr Cheng.
Mr Giatas was a good witness. He answered questions in a clear and straightforward way. He made sensible concessions. He presented as a frank, honest witness, and I accept his evidence.
Mr Love presented his evidence in a quietly spoken manner. He was careful to ensure the accuracy of his answers. His recollection was (understandably) not always clear as to matters of detail, but I do not consider this to affect the veracity of the thrust of his evidence. I generally accept his evidence.
Mr Regodeiro was not always precise or careful in his answers to questions during cross-examination. Nevertheless, he presented as an honest witness, and I generally accept his evidence.
FACTUAL FINDINGS
The business of Lumen
Lumen is a manufacturer and supplier of electronic automotive components, including the Lumen wiring harnesses. In general terms, wiring harnesses contain the wiring and electronics that allow the electrical components on a trailer (such as brake lights, indicators, reversing lights and tail lights) to be connected to a vehicle and operated when the trailer is being towed by the vehicle.
Wiring harnesses are designed to be used in conjunction with conventional trailers, as well as other items which may be towed, such as boat trailers, horse floats, and caravans.
Accordingly, it is essential, from a road safety perspective, that wiring harnesses operate reliably. Mr Aker accepted during cross-examination that there is an “obvious safety concern” if wiring harnesses do not work, with potentially “very serious consequences”.
Lumen employs engineering, research and development, and graphic design teams to create its automotive components, including wiring harnesses, and associated technical documentation.
Lumen International is the owner of Australian trade mark no. 958232 for LUMEN, which was registered with effect from 13 June 2003 in respect of goods for the automotive ‘after market’, including parts and accessories for vehicles and trailers.
Lumen supplies automotive components, in its capacity as a tier 1 supplier, directly to many automotive companies. Lumen also supplies automotive components, as a tier 2 supplier, to other tier 1 suppliers, who then include those components in products they supply to automotive companies. For present purposes, Lumen was acting as a tier 2 supplier.
Lumen supplied its wiring harnesses to Frontline, for inclusion in towbar kits supplied by Frontline to automotive companies, including Mitsubishi and Mazda.
The importance of PPAPs in the automotive industry
Before Lumen could commence to supply any Lumen wiring harnesses to Frontline, it was required to submit PPAPs for approval by Frontline. Similarly, before Frontline could commence to supply towbar kits containing Lumen wiring harnesses (or any other components) to Mitsubishi or Mazda, it was required to submit PPAPs for approval by Mitsubishi and Mazda. Mr Aker accepted in cross-examination that this “is a serious obligation that Frontline must comply with”.
There are numerous documents in evidence that emphasise the importance of PPAPs in the automotive industry.
ISO/TS 16949 is a major quality management standard applicable to the automotive industry. That standard prescribes that a supplier, such as Frontline or Lumen, “shall conform to a product and process approval procedure recognized by the customer” (cl 7.3.6.3).
The fourth edition of an industry guide entitled “Production Part Approval Process” states that:
(a)an organisation, such as Frontline or Lumen, “shall notify the authorized customer representative of any planned changes to the design, process, or site” and identifies, as examples of changes requiring notification, “[p]roduction from new or modified tools … including additional or replacement tooling”, production from “tooling or equipment transferred to a different plant site or from an additional plant site”, any “[c]hange of supplier for parts”, any “[p]roduct and process changes related to components of the production product manufactured internally or manufactured by suppliers”, including “changes at the suppliers to the organization and their suppliers”; and
(b)an organisation, such as Frontline or Lumen, “shall submit for PPAP approval prior to the first production shipment” where there is a “new part or product (i.e. a specific part, material or colour not previously supplied to the customer)”, any “[e]ngineering change to design records, specifications, or materials for production product/part number(s)”, unless waived by the customer.
Mr Aker gave evidence during cross-examination that he was familiar with this industry guide and each of these requirements, which he understood triggered the need for a PPAP submission and approval.
Mitsubishi publishes its own document, entitled “MMAL – Customer Specific Requirements”, which prescribes that:
(a)the use of PPAP methodology “is required from all suppliers supplying production and [parts and accessories] materials to MMAL manufacturing facilities”;
(b)all parts must be “individually and clearly identified and tagged for PPAP submissions”;
(c)all PPAP laboratory data “shall be less than one year old”; and
(d)the result of a PPAP submission may be: (i) approval, where the part “has been accepted by MMAL [Quality Engineering]”, with the result that “scheduled production may commence”; (ii) interim approval, with the result that production may be permitted “on a limited time or piece quantity basis”; or (iii) rejection, if the parts are “non-conforming and/or unfit for use, or documentation is incomplete”.
Frontline publishes a document entitled “Supplier Requirements Manual”, which prescribes that a “full PPAP submission is required before shipment of the first production” where there is a “new part or product – something not previously supplied before”, a “[c]hange in Supplier of product”, a “[c]hange in production process of product” or an “[e]ngineering change on part or product”.
These documents demonstrate that the PPAP submission and approval process is of great importance in the automotive industry, to ensure that parts ultimately supplied to automotive manufacturers, such as wiring harnesses, are safe, of high quality, and reliable. Mr Aker gave the following evidence (which I accept) during cross-examination:
And what all this reflects is that the PPAP approval process is fundamental in the automotive industry in – so that all participants in that industry can do their best to ensure safety of products; correct?—That’s not the only purpose of PPAP.
No, but it’s a purpose, isn’t it?—Part of it, yes.
Yes. What other purposes are there?—The quality and performance of the product and reliability.
Yes, which are all important for the end users; correct?—Absolutely.
Mr Aker confirmed during cross-examination that he was well aware that under the PPAP scheme, Frontline was not permitted to supply parts to Mitsubishi or Mazda unless Frontline had submitted PPAPs and obtained approval from Mitsubishi and Mazda.
The contractual arrangements between Lumen and Frontline
On 1 September 2008, Lumen sent by post a copy of its updated Terms and Conditions of Trade (Lumen T&Cs) to Frontline. The Lumen T&Cs were sent under cover of a letter that provided that:
Upon sale of any further goods or services, these Terms will replace all other terms and conditions. We ask that you sign at the foot of this letter and mail or fax it to us, for our records.
However, if you do not return a signed copy of this letter, we advise that all subsequent dealings with Lumen Australia Pty Ltd (“Lumen”) will be deemed to be conducted upon the enclosed Terms.
The Lumen T&Cs contained terms to the following effect:
(a)Frontline must not at any time create, sell, manufacture or process any products using or taking advantage of the “Intellectual Property” (which was defined to include technical documentation, drawings, schematics and technical data of Lumen, as well as all copyright, rights in circuit layouts and confidential information of Lumen) (cl 10.3);
(b)any Intellectual Property provided to Frontline by Lumen shall not be copied or communicated to any third party without the prior written approval of Lumen (cl 10.4);
(c)Frontline must not reverse engineer any of the goods provided to it by Lumen (cl 11.1);
(d)Frontline must not publish or communicate any of the “Specifications” (which were defined to include technical documentation, drawings, schematics and technical data) to any person or publish or permit them to be copied or communicated to any other person without Lumen’s prior written approval (cl 11.2); and
(e)all “Specifications” supplied directly or indirectly by Lumen must be held in confidence by Frontline and must not be disclosed by Frontline to others without Lumen’s prior written approval (cl 11.3).
After 1 September 2008, Frontline purchased many Lumen wiring harnesses from Lumen and Lumen supplied the Engineering Drawings, the Installation Instructions, and PPAP submissions to Frontline. Frontline purchased the Lumen wiring harnesses pursuant to invoices issued by Lumen that expressly stated that “As per Lumen Terms and Conditions unless otherwise agreed in writing”. Mr Aker accepted in cross-examination that his affidavit did not refer to any other agreement in writing.
March – April 2013: initial interactions between Frontline and Vision
Some time prior to March 2013, Mr Aker met with Vision’s joint managing director Mr Azzopardi for dinner in Bangkok, during which Mr Azzopardi mentioned that Vision could supply wiring harnesses and lamps to Frontline. Mr Aker already knew Mr Azzopardi, although Vision had not previously supplied any products to Frontline.
On 6 March 2013, Mr Love of Vision went to Frontline’s office and spoke with Mr Martin of Frontline. Mr Martin asked whether Vision was interested in supplying various products to Frontline, including wiring harnesses. Mr Love indicated that Vision was interested and Mr Martin said that a package of samples would be put together for Vision to collect and then quote on. Mr Aker confirmed during cross-examination that Mr Martin reported this to him. Mr Martin was Frontline’s Director – Operations & Strategic Planning. He was responsible for purchasing and reported directly to Mr Aker.
By email dated 26 March 2013, Mr Loyson of Frontline informed Mr Love that he had put together a package of samples to be collected. Mr Love forwarded that email to Mr Giatas, requesting that he go and collect the samples. Mr Love stated in his email to Mr Giatas:
Please keep in mind that we may not be able to get drawings for most of these items as they will probably be proprietary to the existing supplier/s (Lumen etc…)
The samples were then collected by Mr Giatas of Vision. Mr Giatas gave evidence during cross-examination that this was “to enable Vision to quote on replicating them”. Similarly, the evidence of Mr Love during cross-examination was that “certainly from the start, there was a requirement for the product to be the same”.
It was clear to Mr Giatas, from the outset, that Lumen was the supplier of some elements of the towbar kit and that the objective of the quotation exercise was for Vision to replace Lumen in the supply of components used by Frontline in its towbar kits. Having collected the samples, Mr Giatas sent them to Thailand and Taiwan to be analysed and have costings prepared. The samples were of a number of different models of wiring harness (there being different models for different vehicles). Lumen’s wiring harnesses did not all use the same model of ECU. (The ECU forms part of the wiring harness and relates to the lighting system.) The samples of the Lumen wiring harnesses provided by Frontline to Vision included three different models of ECU. One of these was part no. SST-4000G.
May – August 2013
On 1 May 2013, Mr Martin wrote to Mr Love asking for an update on the status of the quotation. Mr Love responded to Mr Martin that day, with a copy to Mr Azzopardi: “Our target is to provide you the quotations on the 10th May (As discussed previously)”.
The evidence of Mr Love, consistent with the contemporaneous emails, was that in these dealings, Vision was being given “an opportunity to quote and supply these products”. To the extent that Mr Aker suggested that this was merely a “benchmarking study”, I do not accept that characterisation.
On 8 May 2013, Chris Pickard of Mitsubishi sent an email to Mr Aker of Frontline stating that Mitsubishi was seeking costs savings in relation to the Pajero Towbar part no. MR936588, and requesting Frontline’s assistance. Mr Aker discussed this email with Mr Martin.
On 14 May 2013, Mr Love emailed Mr Martin (copied to Mr Azzopardi and Mr Giatas), and provided “initial quotation estimates for the package of parts you provided”, albeit he stressed that “without detailed drawings & specifications for each item, we have had to make some assumptions”. Mr Love also advised that “ECU’s (our engineers believe that the ECU – 3 versions could be commonized (one version only)” and noted that “[n]o allowances have been made for testing & validation”.
During the period May to June 2013, Mr Martin and Mr Love exchanged numerous emails in which they negotiated the supply of the wiring harnesses. In an email dated 2 June 2013, Mr Love stated:
As no drawings or specifications can be provided by Frontline – we would need to get some additional samples from you to assist with the development of these items. (Ideally – 3 sets of each item if possible).
Mr Aker was aware throughout this time that Mr Martin was engaged in negotiations with Vision about the supply and pricing of the wiring harnesses. On 21 June 2013, Mr Love wrote to Mr Martin that “we have already informed our plant and suppliers that they have this business, and to start advanced preparation activities etc”.
At about the same time, Mr Aker exchanged various emails with Mr Pickard of Mitsubishi regarding the Pajero Towbar part no. MR936588.
On 24 June 2013, Mr Aker advised Mr Pickard that “this tow bar is a VERY important part of our business” and informed Mr Pickard that Frontline was “proceeding with re-sourcing of components to meet your cost reduction requests”.
On 25 June 2013, Mr Aker informed Mr Pickard that: “Re-sourcing now progressing. Tooling committed. Awaiting [Mitsubishi] validation requirements” and requested that Mr Pickard “confirm the details of [Mitsubishi/Mitsubishi Motor Company] testing / engineering requirements for tow bar harnesses to ensure the PPAP submission can be prepared ASAP and the approval completed smoothly”. (Mitsubishi Motor Company, based in Japan, is the parent company of Mitsubishi.) Mr Aker confirmed, when cross-examined, that he made this request because he understood that Frontline had to obtain PPAP approval before it could supply any re-sourced product to Mitsubishi.
On 1 July 2013, Mr Aker again wrote by email to Mr Pickard, and queried whether there was “any progress on the harness testing specifications” and expressed confidence that “all testing will be met however we would appreciate the opportunity to confirm the specific tests ASAP”.
On 3 July 2013, Mr Pickard responded by email to Mr Aker. Mr Pickard expressed the view that Mr Aker was “jumping the gun on this”, advised that until potential changes to the 15 MY Pajero (ie, 2015 manufacturing year Pajero) were clarified he was “reluctant to proceed”, and explained that “[o]nce the detail is known” Mitsubishi might approve a “cost down on the current bar” or “may go the RFQ [Request for Quote] route to maximise the savings required”. Mr Pickard stated: “Once I know the direction on the above I have to submit your proposed cost saving submission / RFQ decision formally to [Mitsubishi] departments and then get approval from [Mitsubishi Motor Company] before we move on this”. Finally, Mr Pickard confirmed that, “[regarding] the testing requirements, [Mitsubishi] will be requiring the same testing Lumen did originally on this”.
Mr Aker accepted during cross-examination that this email made plain that it was only after all of the contingencies identified by Mr Pickard had been satisfied that Frontline would be able to supply a re-sourced product to Mitsubishi. Mr Aker gave the following further evidence:
Between this email and February 2016, Frontline never submitted any PPAP application to Mitsubishi relating to this Pajero tow bar product, did it?—No.
No. And it follows from that that you knew – you personally knew that Frontline, therefore, had no approval from Mitsubishi to supply Pajero tow bar kits containing wiring harnesses made by anyone but the approved supplier, Lumen; correct?—Correct.
Throughout the remainder of July 2013, Mr Aker and Mr Pickard exchanged a number of emails. On 3 July 2013, Mr Aker informed Mr Pickard that Frontline had “decided to re-source these parts anyway” and would “share these savings with [Mitsubishi] regardless (once the tooling is amortised).” On 29 July 2013, Mr Aker again requested “the detail of the [Mitsubishi] wiring harness testing”. The email exchange culminated in an email from Mr Pickard on 30 July 2013, in which he provided Mr Aker with “the latest specifications and what will be required if this proceeds”.
Despite this exchange, at no point in time prior to February 2016 did Frontline inform Mitsubishi (or Mazda) that it had, in fact, replaced the Lumen wiring harness with the Vision wiring harness. At no point in time prior to February 2016 did Frontline make any PPAP submission, to either Mitsubishi or Mazda, seeking approval of the Vision wiring harness.
September 2013 – November 2014
In early September 2013, Mr Giatas of Vision had a discussion with Pino Italiano, Frontline’s Senior Quality Assurance Engineer, about obtaining access to engineering drawings of the Lumen wiring harnesses. Mr Giatas gave the following evidence (which I accept) during cross-examination:
And why did you need the engineering drawings?—Well, there’s two ways we can work on this, whether we’re – we can either be given a vehicle, and we go and access the vehicle and do everything from scratch, or if we’re provided – you know – the base-line information - and the path to having a replacement product is quicker. So –
So it provides a short cut?—It does. Yes.
(Emphasis added.)
On 9 September 2013, Mr Italiano sent an email to Mr Giatas attaching copies of drawings for the Lumen wiring harnesses. The drawings related to a number of different models. The drawings covered parts other than the internal aspects of the ECU. In many cases, the drawing comprised a Lumen drawing enclosed within a Frontline frame or border. For example, the first drawing, which was for a wiring harness for the PB Challenger Towbar 3000 kg, comprised Lumen drawing no 5161 enclosed within a Frontline frame. In some cases, the drawing was simply the Lumen drawing without a Frontline frame. For example, the seventh drawing, which was for a wiring harness for the 10 MY GS45X Outlander, simply comprised Lumen drawing number 4086. The following Lumen drawings were provided by Frontline to Vision by way of attachments to the 9 September 2013 email (either as Lumen drawings enclosed within a Frontline frame or simply as the Lumen drawing): drawing numbers 5161, 1947, 4038, 4041, 4045, 4049, 4086, 6397, 6399, 6461, 607, 7837, 7669 and 5735. Copies of these drawings appear at Court Book (CB) 1301-1318 and (in large size) Exhibit L2, tab 1. In these reasons, the expression “Engineering Drawings” is used to refer to the Lumen drawings, ie, the drawings in respect of which Lumen claims copyright.
Mr Italiano’s email included the following:
Please note; information contained in drawings is the Intellectual Property of Frontline Australasia Pty. Ltd and under no circumstances is to be distributed without prior approval.
Each of the Lumen drawings (whether enclosed within a Frontline frame or a stand-alone Lumen drawing) contained the following statement under the name LUMEN:
COPYRIGHT SHALL NOT BE USED WITHOUT PERMISSION OR LICENSE.
In nearly every case where the Lumen drawing was enclosed within a Frontline frame, the following statement appeared near the edge of the frame:
THE INFORMATION CONTAINED WITHIN THIS DRAWING IS CONFIDENTIAL AND CANNOT BE DISTRIBUTED TO ANY THIRD PARTY WITHOUT THE EXPRESS PERMISSION OF FRONTLINE AUSTRALASIA PTY. LTD. ALL INFORMATION CONTAINED IN THIS DRAWING REMAINS THE INTELLECTUAL PROPERTY OF FRONTLINE AUSTRALASIA PTY. LTD.
The explanation for the Lumen drawings appearing within a Frontline frame is as follows. As part of the PPAP process as between Lumen and Frontline for the Lumen wiring harnesses, Lumen had submitted its drawings to Frontline. Then, as part of the PPAP process as between Frontline and Mitsubishi (and possibly Mazda) for the towbar kits, Frontline had enclosed Lumen drawings within a Frontline frame and provided these to Mitsubishi. Thus the drawings that comprised a Lumen drawing enclosed within a Frontline frame had been prepared at an earlier point in time, well before the email of 9 September 2013.
Mr Aker accepted during cross-examination that there was no basis for Frontline to claim copyright in the Lumen drawings.
Mr Aker said during cross-examination, and I accept, that he was unaware at the time that Mr Martin and Mr Italiano were providing drawings to Vision.
Mr Giatas accepted during cross-examination that many of the drawings made it “crystal-clear” that they were “created by Lumen” and that he specifically noticed the copyright statement made by Lumen on those documents (in addition to the Frontline information on many of the drawings).
On the same day (9 September 2013), Mr Martin provided Mr Giatas with a computer disc with PPAP information.
On 10 September 2013, Mr Giatas responded to Mr Italiano. Mr Giatas thanked Mr Italiano for the drawings and confirmed that: “I think we have most of what we need.” However, a few days later, and after having a “closer look”, Mr Giatas realised that, when he zoomed in, he could not “read the details for most of the drawings”. He explained to Mr Italiano that “[t]he important details are the dimensions and list of component p/nos” and requested that Mr Italiano resend the drawings in “higher resolution”. When cross-examined, Mr Giatas explained that obtaining high resolution versions of the drawings “would help us to get to the end point quicker. That’s – that’s definite.”
On 17 September 2013, Mr Giatas sent an email to Mr Italiano and Mr Martin at Frontline, with a copy to Mr Love and Mr Azzopardi at Vision, regarding the Installation Instructions, which Vision had received with the sample Lumen wiring harnesses. Mr Giatas wrote:
Fitting Instructions: Where the originals are completed using black & white sketches, we should be able to scan and reproduce. However, where black & white photos are used, we would need the original pdf files to reproduce clearly. Can you provide pdf’s for at least the fitting instructions with photos?
On 21 September 2013, Mr Italiano sent a further email to Mr Giatas, which attached higher resolution copies of a number of drawings. The drawings attached to the email were in a similar format to those attached to the 9 September 2013 email, as described above. The following Lumen drawings (whether enclosed within a Frontline frame or stand-alone drawings) were attached to the email: Lumen drawing numbers 5161, 7837, 7669, 5735, 4040, 4038, 4041, 4045, 4049, 4086, 6397, 6398 and 6461. Copies of these drawings are located at CB 1359-1371 and Exhibit L2, tab 2. The comments set out at [78]-[79] above regarding the Lumen copyright statement and the Frontline intellectual property statement apply equally to these documents.
The email also attached a PPAP submission previously made by Lumen to Frontline (CB 1382-1471). Mr Giatas accepted during cross-examination that this was clearly identifiable as a Lumen document.
By email dated 9 October 2013, and in response to a request from Mr Giatas, Mr Italiano provided a copy of Lumen drawing number 430 (CB 2255-2258, Exhibit L2, tab 3). This was a stand-alone Lumen drawing. It included the copyright statement set out at [78] above.
By email dated 6 November 2013, Mr Martin provided Mr Giatas with “Copies of drawings as discussed”, which included Lumen drawings (either enclosed within a Frontline frame or stand-alone drawings). The following were provided: Lumen drawing numbers 6461, 8665, 8444 and 8445. Copies are at CB 1347-1350 and Exhibit L2, tab 4. Each of these Lumen drawings was enclosed within a Frontline frame. The drawings contained the statements set out at [78]-[79] above.
On 7 November 2013, Mr Giatas requested “higher resolution versions for all the MZ p/no’s”. The purpose of this request was, again, so that Mr Giatas could confirm the precise parts used and the dimensions of those parts, being the important details that he had previously identified.
By email dated 11 November 2013, Mr Martin then provided copies of drawings. The drawings provided included Lumen drawing numbers 8445, 5394, 8665 and 8444. Copies are at CB 1476-1479 and Exhibit L2, tab 5. Each of these Lumen drawings was enclosed within a Frontline frame. The drawings contained the statements described at [78]-[79] above.
On 30 January 2014, Frontline and Vision concluded an agreement for the supply by Vision to Frontline of the Vision wiring harnesses, which was summarised in an email from Mr Love to Mr Martin on 31 January 2014.
On 12 February 2014, Mr Giatas requested that Frontline supply “better resolution drawings”, so as to “assist Vision in delivering all p/no’s in a timely manner”. In the same email, Mr Giatas requested: “Fitting instructions – editable files of all the Trailer Wiring Harness kits, so we can adjust if required”.
Commencing on 21 February 2014, an “Open Items” list was periodically circulated amongst various Frontline and Vision employees, in relation to the wiring harness project. The first version of that document recorded, in item 2.1, in relation to drawings: “Higher resolution pdf required for clarity of information” in respect of five different wiring harnesses.
On 25 February 2014, Mr Giatas circulated an “updated ‘Open Items’” list. That document recorded a number of relevant matters as set out below.
First, item 2.1 continued to record, in relation to drawings: “Higher resolution pdf required for clarity of information”. Mr Giatas accepted, when cross-examined, that he was “very eager to get high-resolution drawings”.
Secondly, item 2.4 recorded a direction from Frontline to Vision in respect of the drawings: “Frontline direction is to leave drawings unchanged. Any variations to be shown in PPAP documents only”.
Thirdly, item 8.1, relating to fitting instructions, stated: “Provide editable files for all P/No’s”. Further, item 8.2 recorded a direction from Frontline to Vision: “Frontline direction is to leave ‘Fitting Instructions’ unchanged. Any variations to be shown in PPAP documents only”.
Fourthly, item 11.2 recorded the instruction of Frontline to Vision: “Frontline confirmed they prefer design to remain as identical as possible to current ECU ‘SST-4000G’. Item Closed”. This was so even though Mr Giatas had suggested deleting unused mounting tabs on, and making product improvements to, the ECU. Mr Giatas gave the following evidence (which I accept) during cross-examination:
They were redundant?—In my opinion at the time, yes.
And you also suggested a product improvement, which was to use a waterproof design?—Yes.
And both of these suggestions were rejected by Frontline?—Yes.
And they were rejected because you were instructed that Frontline wanted the design to remain as identical as possible to the [present] ECU?—Correct
By email dated 28 February 2014, Mr Italiano provided Mr Giatas with high resolution versions of certain drawings. Each of these was a stand-alone Lumen drawing (that is, without a Frontline frame). The following drawings were provided: Lumen drawing numbers 1947, 8718, 8717, 5735 and 8665. Each of these contained the copyright statement set out at [78] above. Copies are located at CB 1483-1487 and Exhibit L2, tab 6.
On the same day, Mr Italiano informed Mr Giatas by email that: “Regarding item 8.1, in the short term you will need to scan fitting instruction that was provided with samples”. On 3 March 2014, Mr Giatas responded and confirmed that “We will scan in the interim”, despite the difficulties he had previously identified in scanning instructions featuring photographs.
On 4 April 2014, Mr Italiano informed Mr Giatas by email that “I now have PDF electronic copies of all fitting instructions, as the folder is quite large, I will burn to a disk [and] mail out to you” and also supplied a copy of the Installation Instructions for GJ11-TB-PLUG which he had missed “in the package”.
On 17 April 2014, Mr Giatas received a copy of that disc, which contained copies of each of the Installation Instructions. The name LUMEN appeared on the trailer sockets depicted on page 2 of several of the Installation Instructions. Vision never received an editable version of the Installation Instructions. Thus, when Vision ultimately came to supply the wiring harnesses, the non-editable PDF copies of the fitting instructions contained on the disc supplied to Mr Giatas were printed out and used for the Vision wiring harnesses. Some of these fitting instructions included the Lumen trade mark.
By email dated 16 May 2014, Mr Italiano provided a further “hi res drawing” to Daniel Regodeiro, a project engineer now employed by Vision in place of Mr Giatas. This was a copy of Lumen drawing number 5394 enclosed within a Frontline frame (CB 1874 and Exhibit L2, tab 7). The drawing included the statements described in [78]-[79] above.
Vision provided the ECUs from the Lumen samples to Vision Taiwan. (Despite the similarity in name, Vision and Vision Taiwan are not related companies.) Vision Taiwan considered that one model of ECU (rather than three models) would suffice. It developed an ECU based on the Lumen ECU with part no. SST-4000G. Mr Cheng of Vision Taiwan gave evidence about the process of developing the new ECU.
Vision provided the drawings it had received to Chanon Assy Co Ltd (Chanon), a company incorporated in Thailand. Chanon used the drawings to make its own production drawings, and then manufactured the Vision wiring harnesses (apart from the ECU) for Vision in accordance with those drawings.
In June 2014, an issue arose regarding the labelling of the wiring harnesses to be manufactured in Thailand. On 27 June 2014, Mr Regodeiro advised Mr Martin that “our plant” cannot print “Made in Taiwan” or “Made in Australia on the labels” in Thailand as “[t]his will cause a concern with customs”. Nevertheless, on 2 July 2014, Mr Martin instructed Mr Regodeiro that: “we need to duplicate the labels and therefore they should be printed as is and placed on the product here in Australia”. When cross-examined, Mr Regodeiro gave the following evidence (which I accept) regarding this episode:
[T]he initial instruction from Mr Martin was that the labels should be duplicated, even though that would involve falsely indicating the country of origin?—Correct.
And so your instructions at this time were not only to replicate the product 100 per cent, but also to replicate labelling which would involve false country [of] origin claims?—Correct.
As this evidence indicates, Frontline instructed Vision to make false country of origin claims. This prompted Mr Love to intervene, on 4 July 2014, and raise his concerns that “penalties for falsely claiming country of origin can … be very high”. Later that day, Mr Martin relented, and instead instructed that “we should delete the country of origin from these three (3) labels”.
Mr Regodeiro then proceeded to prepare and submit PPAP submissions to Frontline, so that Vision could obtain approval to proceed with the manufacture and supply of the wiring harnesses (including ECUs). The PPAP submissions of Vision included the Engineering Drawings.
In October 2014, Mr Italiano sent Mr Regodeiro the necessary PPAP approvals.
December 2014 – February 2016: the period of substitution
In about December 2014, Frontline began supplying to Mitsubishi towbar kits containing the Vision wiring harnesses in place of the Lumen wiring harnesses.
On 17 February 2015, Mr Italiano provided Mr Regodeiro with a further drawing. This was Lumen drawing number 10059, enclosed within a Frontline frame (CB 1802 and Exhibit L2, tab 8). The drawing contained the statements set out at [78]-[79] above.
The provision of Lumen drawings by Frontline to Vision took place from September 2013 to February 2015, a period of approximately 17 months. Mr Aker maintained during cross-examination that he was unaware throughout this period that Frontline was providing Lumen drawings to Vision. I accept this evidence.
Frontline and Vision agreed that Frontline would undertake dual sourcing for the initial three months, with a minimum 50% from Vision. On 27 March 2015, Mr Love sent an email to Mr Martin querying the status of the change to 100% supply to Vision and stating “I know that this is a bit of a sensitive subject for you”. Mr Love requested updates on this issue from Mr Martin on 6 May 2015, 12 May 2015, and 20 May 2015. On 20 May 2015, Mr Martin provided a response stating:
We are starting to transition 100% sourcing with Vision for all products except Mazda parts which are subject to further consideration within Frontline as to the best approach to ensure this business is not lost to both of us and sourced direct with Lumen by Mazda.
On 3 June 2015, Mr Love requested a further update from Mr Martin on Frontline’s plan to change sourcing to 100% Vision, noting that Mazda would be excluded “as per your previous comments”. Mr Martin responded on 4 June 2015, stating that “[c]hangeover will occur this week and will be subject to stock run out at both Lumen and Frontline”.
In December 2015, Mr Martin ceased employment at Frontline.
On 23 February 2016, in an email from Mr Love to Mr Loyson and Mr Aker, Mr Love queried the volume sharing of Mazda parts. Mr Love noted that the arrangement to transition to 100% Vision sourcing had been temporarily revised due to “sensitive/political” issues with Mazda.
Between December 2014 and February 2016, Frontline supplied a substantial quantity of towbar kits containing Vision wiring harnesses in substitution for Lumen wiring harnesses to Mitsubishi and Mazda (the latter over a shorter period). I discuss the number of towbar kits sold by Frontline later in these reasons. The substitution continued for 14 months, without detection.
Mr Aker was aware that Frontline was supplying towbar kits to Mitsubishi and Mazda that included Vision wiring harnesses in place of Lumen wiring harnesses and that Frontline had not sought or obtained approval from Mitsubishi or Mazda for this substitution. The following exchange took place during his cross-examination:
Now, the fact is that you proceeded to source wiring harnesses for this Pajero towbar from Vision, didn’t you?—Yes.
And Frontline proceeded to supply those products to Mitsubishi and continued to supply those products to Mitsubishi up until early 2016; that’s correct, isn’t it?—Yes.
So – and Frontline proceeded to do that despite your knowledge that it did not have Mitsubishi’s approval to do so because you had not submitted a PPAP application to Mitsubishi and Mitsubishi had not approved any such application; that’s correct, isn’t it?—Yes.
…
HIS HONOUR: Mr Aker, were you personally aware that Frontline was supplying the towbar kits to Mitsubishi that included the Vision product?—Yes.
Frontline continued to sell towbar kits to Mitsubishi and Mazda at the same price, despite re-sourcing a cheaper wiring harness. Frontline had made no profit on the wiring harnesses sourced from Lumen, whereas it made profits on each of the wiring harnesses sourced from Vision. The following evidence was given during Mr Aker’s cross-examination:
So the advantage for your company was that by selling the non-Lumen wiring harnesses, you started making profits on the wiring harness as well as the tow bar, didn’t you?—Yes.
Late 2015 to February 2016: discovery of the substitution
In late 2015, David Waterson, Lumen’s Business Development Manager, noticed that Lumen’s sales to Frontline of wiring harnesses for Mitsubishi vehicles had experienced a drop-off from forecast sales. This triggered some discussion between Mr Waterson and Chris Fergusson, Lumen’s Business Unit Manager, in around December 2015.
In January and February 2016, Mr Fergusson visited three Mitsubishi dealers in Mornington, Dandenong and Frankston, and identified wiring harnesses that were not supplied by Lumen, and brought this to the attention of those dealers.
On 12 February 2016, Mr Waterson communicated the issue to Rajitha Jayasinghe, Mitsubishi’s Supply Chain Co-ordinator. Later that day, after receiving further details by email from Mr Waterson, Mr Jayasinghe responded by email:
Obviously we are going to have a lot [of] questions for Lumen and Frontline (once you have officially advised Frontline) regarding parts/vehicles affected, rectification for existing stock and vehicles fitted with one of these harnesses and of course Mitsubishi’s decisions regarding [the] future of Frontline as a supplier.
Emails between Mr Waterson and Mr Jayasinghe between 15 and 17 February 2016 record the investigation they undertook, comparing stock held by Mitsubishi against supplies made by Lumen.
February 2016: Lumen’s letter of demand and the conduct of Frontline and Vision following receipt of the letter of demand
On 15 February 2016, the solicitors for Lumen sent a letter of demand to Mr Aker of Frontline. The letter included the following:
1. BACKGROUND
We have been instructed that your company was requested by Mitsubishi to supply a towbar kit including a wiring harness & electronic control module kit. Your company engaged our client to design, develop and supply the wiring harness, which it did at no charge to you.
As part of that process, our client provided to your company detailed technical information, drawings and samples relating to the parts.
Our client has been supplying your company with those parts since April 2009. However, since June 2015 there have been no sales of the trailer harness from our client to your company, despite Mitsubishi continuing to require the trailer harness.
Our client has recently obtained a sample of the trailer harness your company is supplying to Mitsubishi, and inspected the wiring harness.
Attached and marked “Attachment A” is a document comparing the instructions that accompanied the product incorporating our client’s wiring harness and the document that accompanied the product that our client inspected. Attached and marked “Attachment B” are images of our client’s wiring harness and the wiring harness inspected. Attached as “Attachment C” is a document comparing the circuit boards for our client’s product and the counterfeit product. Attached as “Attachment D” and “Attachment E” are visual guides to our client’s complete kits.
The installation instructions for both products are identical. It is clear that the product inspected is not our client’s wiring harness or electronic control module, but has such stark similarities that it could only have been developed and manufactured by reference to our client’s confidential information.
2. BREACH OF CONFIDENTIALITY
As stated above, during the development and design process for the wiring harness, our client provided to your company detailed technical information, drawings and physical samples relating to the wiring harness. These documents were clearly marked as documents of our client and contained valuable proprietary information. A sample of such documents are attached.
This information was provided to your company solely for the purpose of complying with Mitsubishi’s specifications and the approval of the products for sale.
Given the stark similarities between our client’s product and the counterfeit product inspected, it appears highly likely that the counterfeit product was made by reference to our client’s product and the technical documents provided by our client to your company. Our client only provided the technical documents to your company and therefore the only way the supplier of the counterfeit product could have had access to those documents is if they were supplied by your company.
It therefore appears that your company has provided our client’s proprietary confidential information in its product and the technical documents and drawings, to the supplier of the counterfeit product shown in Attachment B.
This is a clear breach of our client’s rights in that confidential information, and has caused significant damage to our client.
Our client is in the process of undertaking more detailed testing of the counterfeit product, but they are very concerned that the product may not be of sufficient quality to meet Mitsubishi’s standards, which has the potential to cause significant further financial and reputational damage to our client and Mitsubishi.
3. BREACH OF COPYRIGHT
Our client is the owner of copyright in the documents embodying the technical information and drawings referred to above. Self-evidently, given the similarities between our clients product and the counterfeit product inspected, your company must have supplied those copyright works to the manufacturer of the counterfeit product. Such supply constitutes an infringement of our client’s valuable copyright in those technical documents, drawings and samples.
Our client is also the owner of copyright in the installation instructions shown in Attachment A. The installation instructions found in the product you supplied to Mitsubishi are an almost identical copy of those installation instructions.
By supplying those instructions, your company has engaged in an infringement of our client’s valuable copyright rights in those installation instructions.
4. TRADE MARK INFRINGEMENT
Lumen International Holdings Pty Ltd is the registered proprietor of Australian Trade Mark No. 958232 for LUMEN in respect of automotive parts and accessories. Our client is an authorised user of that mark. Full details of trade mark no. 958232 are attached as “Attachment F”.
The installation instructions enclosed with the product you supplied to Mitsubishi include, in the image of the trailer socket, the trade mark LUMEN. Such use of our client’s registered trade mark in respect of products not supplied by our client is an infringement of those registered trade mark rights.
5.MISLEADING OR DECEPTIVE CONDUCT AND FALSE REPRESENTATIONS
Given the almost identical appearance of the counterfeit product to our client’s product, the use of our client’s installation instructions including our client’s trade mark and the fact that, unlike our client’s product, the counterfeit product is completely unbranded, such conduct also constitutes conduct that is likely to mislead or deceive consumers that the counterfeit product is our client’s product and of the quality of our client’s product constituting:-
Ÿmisleading or deceptive conduct in breach of section 18 of Schedule 1 of the Competition and Consumer Act; and
Ÿa false representation as to standard or quality in breach of section 29(1)(e), and sponsorship or approval in breach of section 29(1)(g) and (h) of Schedule 1 of the Competition and Consumer Act.
The letter then set out a proposal for resolution of the dispute.
On 18 February 2016 (1.08 pm), Mr Italiano sent an email to Mr Regodeiro attaching copies of fitting instructions, and stating:
There [has] been a minor change to fitting instructions. Find attached updated booklets. Please ensure old instructions are discarded from your system and replace with attached.
All future orders and your current stock must use the attached.
(Emphasis added.)
After receiving this email, Mr Regodeiro telephoned Mr Italiano and, in the course of that conversation, queried what was the “minor change”. Mr Italiano said the Lumen name had been left on the trailer socket on page 2 of the instructions and Frontline was now removing the name. It is to be inferred that Mr Italiano had been made aware of the issue that had arisen between Lumen and Frontline.
On 18 February 2016 (7.41 pm), Mr Italiano emailed Mr Regodeiro, stating that “I need your help urgently”. Mr Italiano requested “testing data for harnesses as per attached matrix”.
On 19 February 2016, Mr Regodeiro sent Mr Italiano drawings from Vision for part numbers MR935181, MR936591, MR936596, MZ350485, MZ350174, MZ350126, MZ350127, MZ350485, and MZ350576 (which included Lumen drawing numbers 5161, 5175, 5394, 1947, 1865, 4040, 4086, 6398, 6174, 6397, 6175, 6460, 6973, 6461, 8665, 8663 and 10059). Copies of these drawings are located at CB 1812-1862 and Exhibit L2, tab 9. These emails show that Frontline had provided Vision with copies of Lumen drawing numbers 1865, 5175, 6174, 6175, 8663, 6460 and 6973 (in addition to the Lumen drawings referred to earlier in these reasons).
By email dated 19 February 2016, Mr Italiano requested that Mr Regodeiro “confirm via return email, that harness testing was not conducted due to …”. Mr Regodeiro accepted in cross-examination that this email confirmed that the Vision wiring harnesses had not been tested to the Mitsubishi standard:
The wiring harness had not been tested by Vision Australia, Chanon Assy or Vision Taiwan to the Mitsubishi standard, had it?—We never got a Mitsubishi standard to start with.
No. And, as a consequence, the wiring harness had not been tested to that standard, had it?—Well, not to that standard, but to our own internal standard. Correct.
So is the answer to my question that it wasn’t tested to the Mitsubishi standard?—Correct.
Thank you?—Because we didn’t have that standard. I want you to be clear with that.
Because it wasn’t supplied to you by Frontline?—Correct.
In a further email dated 19 February 2016, Mr Regodeiro confirmed that Mr Martin had “agreed that testing was not required for the harness itself as all components used were identical to the current parts you were supplying apart from the agreed deviations by Frontline”. The email stated that the only testing that had been required was for new items, namely the ECU and trailer plug.
In further emails circulated on 22 and 23 February 2016, Mr Regodeiro sought to identify what testing had been undertaken, and what testing was required.
On 24 February 2016, Mr Love and Mr Regodeiro attended a meeting at Frontline with Mr Aker, Mr Italiano and Mr Delacorn of Frontline about test results that were needed for submission of PPAPs to Mitsubishi. The presence of Mr Italiano at the meeting indicates that he was involved in Frontline’s response to the issue that had arisen between Lumen and Frontline.
At the end of that meeting, Mr Aker took Mr Love aside for a private conversation. In Mr Love’s affidavit, he gave evidence that Mr Aker said words to the following effect:
(a)there was an issue with Lumen;
(b)Lumen was making a legal claim regarding the copying of their products;
(c)Frontline wanted support from Vision and technical support;
(d)Mr Aker requested that Vision not divulge any information to anyone other than Frontline; and
(e)Mr Aker asked that Vision not disclose that Vision had received the drawings.
Mr Love also gave evidence in his affidavit that: he responded to these requests by saying “OK, but we would not lie in Court”; Mr Aker accepted this; Mr Aker went on to say that he was “disappointed (embarrassed)” in the way Mr Martin had handled “this business” and that it reflected poorly on him and Frontline; and Mr Aker also said that it was a change without following customer process for approval.
There is no dispute that Mr Aker and Mr Love had a private conversation, but there is a dispute about some aspects of what was said. Mr Aker in his affidavit stated that he agreed that he said words to the effect set out in paragraphs (a) to (c) above. Mr Aker disagreed that he said words to the effect of paragraph (d); rather, he said words to the effect that Vision should liaise with Frontline before responding to any communication of a legal nature from Lumen. Mr Aker stated in his affidavit that he strongly disagreed that he said words to the effect of paragraph (e) above.
Mr Love made a file note of the conversation. The file note, which Mr Love wrote by hand during the conversation, included:
Dawie Aker (Private discussion)
– Issue with Lumen
– legal claim regarding copy of
their products.
– Need support from Vision
→ Tech info etc.
– Requested not to divulge
any info to anyone other
than FL– Not to mention we rec’d
Dwgs
→ Advised OK → But
would not lie in Court
(DA accepted this)–Dawie very disappointed (embarrassed)
in way JM handled this business –
reflected poorly on him + FLA.
– Change without followingcustomer process for
approval etc.
Both Mr Aker and Mr Love were cross-examined on the conversation. Mr Aker maintained that he did not request Vision not to disclose that it had received drawings from Frontline. Mr Aker accepted that he said words to the effect recorded in other parts of the file note. For example, he accepted that he said that he was disappointed with the whole situation and that it was a change without following customer process for approval (because the PPAPs for Mitsubishi had not been submitted). Mr Aker said that he requested that Frontline and Vision co-ordinate, and it was agreed by both Frontline and Vision that they would make a co-ordinated response (in the context of the letter of demand to Frontline).
Mr Love stated during cross-examination that he was “100 per cent” confident that his file note truly reflected the conversation.
I consider that Mr Love’s version of the conversation (as set out in his file note) is more likely to be correct. His version is supported by a contemporaneous file note of the conversation. No other interpretation of the file note was suggested that would explain the statement, “Not to mention we rec’d Dwgs”. In the context of the letter of demand having been received some days earlier, the meeting at Frontline, and the other matters discussed in the private conversation, it is plausible that Mr Aker asked Mr Love not to mention that Vision had received drawings from Frontline. The fact is that Frontline had, on eight occasions, emailed drawings to Vision. It is plausible that Mr Aker became aware, in the days following receipt of the letter of demand, of the fact that drawings had been provided to Vision, even though he had not previously been aware of this. In the days after receipt of the letter of demand, the dealings between Frontline and Vision are likely to have been the subject of intense scrutiny by Mr Aker, and this is likely to have revealed that the drawings had been provided. To the extent that there is a (minor) difference between Mr Love’s affidavit evidence and his file note – in his affidavit Mr Love stated that Mr Aker asked that Vision not “disclose” that it had received the drawings; in the file note Mr Love recorded Mr Aker requesting Vision not to “mention” that it had received drawings – I prefer the file note. To the extent that Mr Aker gave evidence that he was not aware at this stage that drawings had been provided by Frontline to Vision, and that he did not request Mr Love not to mention that Vision had received drawings, I consider Mr Aker’s recollection to be faulty.
February 2016: Mitsubishi’s investigation
In or about February 2016, Mitsubishi sought to identify, quarantine, and block the sale of, the substitute wiring harnesses.
On 17 February 2016, Mitsubishi issued a ‘P&A Inventory Bulletin’ to all Mitsubishi dealers throughout Australia, in which it stated:
It has been brought to [Mitsubishi’s] attention that non approved towbar harnesses may have been used in the Towbar Kit part numbers listed above. Stock of the affected towbar kits has been frozen by [Mitsubishi] whilst this issue is being investigated with the supplier.
If you have stocks on hand at your dealership, please quarantine these parts until further notice.
The investigation undertaken by Mitsubishi is well illustrated by documents produced by Mitsubishi in answer to a subpoena issued by Lumen.
By email dated 17 February 2016, Mr Princi, the Head of Corporate Financial Planning and Company Secretary of Mitsubishi, queried whether there had been “any failures of the allegedly counterfeit wiring harness” and whether it had “any technical shortcomings”. In response, Mr Shibuya, the Deputy Director, Parts and Accessories, advised that “[t]his is [a] serious issue and I think that earlier action is required”.
By email dated 18 February 2016, Mr Jayasinghe reported to Mr Shibuya that Mitsubishi had “[b]locked all our existing and incoming stock of these suspect towbar part numbers”. Later that day, Mr Botha, the Head of Parts and Accessories, also confirmed by email that “[a]ll [Mitsubishi] stock quarantined at SPDC [a parts distribution centre] for checking and rectification if required” and that enquiries would be made into “warranty claims for Tow Bar harness over the last 6 months”.
Also on 18 February 2016, Mitsubishi wrote to Frontline in the following terms:
Mitsubishi Motors Australia Limited (‘MMAL’) has been made aware by Lumen Australia Pty Ltd (‘Lumen’) that Frontline Australasia Pty Ltd (‘Frontline’) may have allegedly breached the contractual agreement between MMAL and Frontline for the supply of towbars and wiring harness (‘parts’) to MMAL by sourcing the parts from an unknown supplier rather than Lumen. MMAL is very concerned that the changes to the parts may have been made without prior MMAL’s approval.
MMAL requests Frontline’s formal explanation of this matter and look forward to receiving your response by 5 pm Wednesday 24 February 2016.
(Emphasis added.)
Further, it was known at the highest levels within Frontline (namely, by Mr Aker as CEO), that the company was supplying the towbar kits with Vision wiring harnesses, and that Frontline had not obtained the approval of Mitsubishi or Mazda for the supply of the towbar kits including Vision wiring harnesses: see [120] above.
The substitution of the Vision wiring harnesses for the Lumen wiring harnesses was deliberate and involved planning by Frontline over a significant period of time. Frontline actively sought to achieve this result, including by providing samples of the Lumen wiring harnesses, and Lumen’s drawings of its wiring harnesses, to Vision.
Taking these matters into consideration, I consider it appropriate to order Frontline to pay exemplary damages for passing off in the amount of $500,000. This is a substantial figure, intended to punish Frontline for conduct showing a conscious and contumelious disregard of Lumen’s rights, and to deter Frontline from committing like conduct again. The evidence does not provide much detail as to the size of Frontline, but it would appear to be a substantial company. I have taken this into account in arriving at what I consider to be an appropriate figure. Although there need not be any proportionality between the amount of compensatory damages and the exemplary or additional damages, I note that the figure I propose is several times the amount of compensatory damages.
In arriving at any appropriate figure for exemplary or additional damages in the circumstances of this case, I do not propose to have regard to Frontline’s failure to make proper discovery in accordance with the 14 April 2016 orders. As set out above, I have concluded that, while the discovery failure was serious and without adequate explanation, I am not satisfied that it involved a conscious decision to conceal relevant documents. In the circumstances, I do not consider Frontline’s failure to make discovery in compliance with the Court’s orders to be sufficiently tied to the passing off such as to constitute a matter to which I should have regard for the purposes of exemplary damages. This is not to suggest that, in an appropriate case, conduct in the course of a proceeding cannot be a relevant factor for the purposes of exemplary damages. Frontline’s failure to comply with the Court’s discovery order is, however, a relevant matter on the question of costs.
In light of the sum that I propose to order in respect of passing off, I do not consider it necessary or appropriate to order any additional damages for copyright infringement: cf Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569 at [9]-[10]. The factual substratum of each of the claims is essentially the same, although the elements of each claim are different. Had I not ordered exemplary damages in the sum of $500,000 for passing off, I would have ordered the same amount as additional damages for copyright infringement, for substantially the same reasons as set out above in relation to passing off. In expressing this view, I have had regard to the matters referred to in s 115(4) of the Copyright Act.
I do not consider it necessary or appropriate to order any additional damages for trade mark infringement. There is an overlap between the facts relevant to this claim and the other two claims referred to above. Further, the trade mark infringement was less serious than the passing off and copyright infringement. Had I not ordered exemplary damages for passing off, I would have ordered an amount of additional damages for trade mark infringement, but less than $500,000.
Accordingly, I propose to order that Frontline pay exemplary damages in the amount of $500,000.
In relation to Vision, I do not consider it appropriate to order it to pay additional damages for copyright infringement (this being the only claim made out against Vision). I do not consider Vision’s conduct in the circumstances to have the character that would make it appropriate to order it to pay additional damages. In reaching this view, I have had regard to the matters referred to in s 115(4) of the Copyright Act. Unlike Frontline’s conduct, Vision’s conduct did not involve a deliberate and calculated infringement or a calculated disregard for Lumen’s rights.
VISION’S CROSS-CLAIM AGAINST FRONTLINE
Vision has filed a notice of cross-claim and a statement of cross-claim against Frontline. In summary, Vision makes allegations to the following effect:
(a)At all material times, Frontline represented that the intellectual property, copyright, trade marks and rights under the Circuit Layouts Act in the sample, the drawings provided by Frontline to Vision (the Relevant Drawings), the Installation Instructions and certain technical information was Frontline’s.
(b)Frontline was silent as to any intellectual property, copyright, trade mark rights and Circuit Layouts Act rights of Lumen in the sample, the Relevant Drawings, the Installation Instructions and certain technical information.
(c)Frontline was silent as to there being no approval or consent of Lumen to the use, disclosure or reproduction of the sample, the Relevant Drawings, the Installation Instructions and certain technical information. (The acts or omissions in (a)-(c) are then defined as the “representations”.)
(d)The representations were in trade or commerce.
(e)In reliance on the representations, Vision: quoted to provide wiring harnesses (as detailed in Vision’s defence); caused production of the parts to commence; and supplied the parts to Frontline as and when required by Frontline.
(f)The representations were misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law in that:
(i)Frontline did not hold any intellectual property, copyright, trade mark rights or rights under the Circuit Layouts Act in the sample, the Relevant Drawings, the Installation Instructions and the technical information;
(ii)Lumen held the intellectual property, copyright, trade mark rights and rights under the Circuit Layouts Act in the sample, the Relevant Drawings, the Installation Instructions and the technical information; and
(iii)there was no approval or consent of Lumen to the use, disclosure or reproduction of the sample, the Relevant Drawings, the Installation Instructions and the technical information.
(g)By reason of the above matters, Vision has suffered or is likely to suffer loss and damage. The loss and damage claimed by Vision comprises: stock of the parts in Melbourne; stock used to make the parts in Thailand; stock used to make the ECU in Taiwan; tooling costs; and development costs.
(h)Further, by reason of the above matters, if Lumen succeeds in the principal proceeding as against Vision, Vision seeks an order pursuant to s 237 of the Australian Consumer Law indemnifying Vision in respect of any relief that is ordered against it.
On this basis, Vision seeks an indemnity, damages, interest and costs.
Vision’s closing submissions in respect of its cross-claim can be summarised as follows:
(a)At all material times, Frontline represented to Vision that the intellectual property in the drawings was Frontline’s and Frontline’s alone. This was first done with the email from Mr Italiano to Mr Giatas of 9 September 2013. It continued with the ‘frame’ that appeared on the drawings that Frontline supplied to Vision.
(b)Throughout its dealings with Frontline, Vision was faced with positive and repeated representations that the intellectual property was Frontline’s. There was nothing to alert Vision that this was not the case.
(c)Frontline has not put on evidence from the two employees who were primarily dealing with Vision in 2013-2016, namely Mr Italiano and Mr Martin. It may be inferred that neither would assist Frontline’s defence to Vision’s cross-claim.
(d)Frontline’s defence pleads that Vision knew, or ought to have been aware, that: Frontline did not design or manufacture wiring harnesses; it engaged third parties to do that; previously Lumen was the supplier; and the sample and drawings had been supplied to Frontline by Lumen. These matters do not go to, or overcome, the clear and unequivocal representations that Frontline possessed the intellectual property or that Frontline as a tier 1 supplier would reasonably be expected to hold the intellectual property.
(e)In a surprising piece of cross-examination on behalf of Frontline, it was put to Mr Love that he refrained from making inquiries of Frontline about ownership of intellectual property in the Relevant Drawings and the Installation Instructions because it did not suit him to get an adverse answer. Mr Love’s response was to say that that was not correct and to say that he refrained from inquiry because he “put his trust” in what Frontline said. This line of cross-examination of itself reinforces the misrepresentation that Frontline engaged in.
(f)Frontline seeks to distinguish between the samples and the drawings that Frontline supplied to Vision. But the samples derived from the drawings. Moreover, by the time Vision reached agreement with Frontline to supply the wiring harness kits (30 January 2014), the drawings had already been provided to Vision.
(g)Mr Giatas’s evidence was that the drawings made the path to a replacement product quicker. Thus, there is clear evidence of reliance in terms of the drawings expediting the process.
(h)The Installation Instructions came with the samples. Moreover, the Installation Instructions clearly relate to the wiring harness kits.
(i)In the circumstances of this case, there was a reasonable expectation of disclosure. In particular, Frontline did not design or manufacture wiring harnesses; it engaged third parties to do so. That carries with it a reasonable expectation that Frontline will make complete disclosure in respect of intellectual property when it provides Vision, not just the drawings, but also the samples and the Installation Instructions.
In response, Frontline submits, in summary, that: no express representation regarding intellectual property rights was made in relation to the samples and the Installation Instructions; in relation to the Relevant Drawings, a substantial number of the drawings contained copyright claims only by Lumen (ie, the stand-alone Lumen drawings did not contain a claim by Frontline); in the circumstances, and regardless of the 9 September 2013 email, the position as regards intellectual property rights must have been unclear to Vision; while the 9 September 2013 email made a representation regarding drawings, no subsequent email amplified or repeated the representation; in the circumstances, Vision had a profound suspicion that Frontline did not own the intellectual property; and Vision did not ask questions about this because it did not want to receive an unhelpful answer. Frontline submits that, in the circumstances, there was no misleading or deceptive conduct and no reliance on any such conduct.
Section 18(1) of the Australian Consumer Law provides that “[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. I refer to my summary of the applicable principles in Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd (2016) 245 FCR 529 at [149]-[152]. For ease of reference, I set out the substance of those paragraphs below.
The principles relating to misleading or deceptive conduct have been discussed in many cases. For present purposes, it is relevant to emphasise that the conduct of a defendant must be viewed as a whole. As Gibbs CJ said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199:
It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading.
In Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 (Campbell), French CJ said at [25], “[c]haracterisation is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error”. In the same case, Gummow, Hayne, Heydon and Kiefel JJ at [102] quoted with approval the following passage from the judgment of McHugh J in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. In that case, in reference to s 52 of the Trade Practices Act 1974 (Cth), McHugh J said at [109]:
The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.
(Footnotes omitted; emphasis added by Gummow, Hayne, Heydon and Kiefel JJ in Campbell at [102].)
Where the conduct complained of is constituted by or includes a failure to disclose something, the question is whether in light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41 per Gummow J, Black CJ and Cooper J agreeing; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [14] per French CJ and Kiefel J. In Demagogue at 41, Gummow J agreed with the remarks of French J (as his Honour then was) in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054 at 53,195 that “unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist”. See also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd at [19]-[23] per French CJ and Kiefel J.
The task of characterisation of conduct (as misleading or deceptive) is to be distinguished from the question of causation, which may need to be determined, for example, where a private plaintiff claims damages or an injunction. In Campbell, French CJ noted at [24] that the question of characterisation as to whether conduct is misleading is logically anterior to the question whether a person has suffered loss or damage. See also Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [49] per French CJ, Crennan, Bell and Keane JJ.
Applying these principles in the present case, I am satisfied that the conduct of Frontline in relation to the Relevant Drawings was misleading or deceptive or likely to mislead or deceive. As set out in the “factual findings” section of these reasons, on 9 September 2013 Mr Italiano of Frontline provided a set of drawings to Vision under cover of an email that stated that “information contained in drawings is the Intellectual Property of Frontline”. Further, many of the attached drawings comprised a Lumen drawing within a Frontline frame. In such cases, the Frontline frame contained a claim to intellectual property as set out in [79] above. However, as was accepted by Mr Aker during cross-examination, there was no basis for Frontline to claim copyright in the drawings. Likewise, there was no basis for Frontline to claim “intellectual property” in the drawings. In these circumstances, I consider Frontline’s conduct in relation to the drawings attached to the 9 September 2013 email to have been misleading or deceptive or likely to mislead or deceive.
Frontline provided drawings to Vision on many subsequent occasions, as detailed in the “factual findings” section. In these cases, the covering email did not contain a statement in the same terms as the 9 September 2013 email. Nevertheless, I consider the statement in that email to have continuing application in relation to the drawings that were provided on the subsequent occasions, in circumstances where there was no retraction or correction. Further, many of the subsequent drawings included a Frontline frame with the intellectual property claim referred to above. In these circumstances, and taking Frontline’s conduct as a whole, I consider its conduct in relation to the drawings provided on the subsequent occasions to have been misleading or deceptive or likely to mislead or deceive.
In reaching these conclusions, I have not overlooked the fact that the drawings included a claim to copyright on behalf of Lumen. I do not regard this as sufficient to overcome the impression created by the statement in the 9 September 2013 email and the Frontline intellectual property claim in the drawings with a Frontline frame. Of course, for the purposes of s 18 of the Australian Consumer Law it is sufficient if the conduct is likely to mislead or deceive. Accordingly, I conclude that Frontline engaged in conduct that was misleading or deceptive or likely to mislead or deceive in relation to the Relevant Drawings.
I turn now to consider whether there was misleading or deceptive conduct (or conduct likely to mislead or deceive) in relation to the Circuit Markings. Frontline did not make any express statement that it owned the copyright or intellectual property rights in the samples it provided to Vision or in the Circuit Markings. The samples were provided in March 2013, well before the first set of drawings was provided (in September 2013). I do not consider it to be established that Frontline engaged in misleading or deceptive conduct (or conduct likely to mislead or deceive) at the time that the samples were provided. However, subsequently, in February 2014, Frontline in effect directed Vision to replicate the SST-4000G. As set out in [100] above, the updated Open Items checklist circulated on 25 February 2014 recorded an instruction of Frontline to Vision: “Frontline confirmed they prefer design to remain as identical as possible to current ECU ‘SST-4000G’. Item Closed”. This was so even though Mr Giatas had suggested deleting unused mounting tabs on, and making product improvements to, the ECU. At the time of these discussions, a contract between Frontline and Vision had already been entered into (this occurred in January 2014), but the design of the Vision ECU had not been finalised; the evidence of Mr Cheng indicates that work on the design continued during 2014 (for example, the diagrammatic depiction of the Vision PCBA is dated April 2014). In the circumstances, I consider that a reasonable expectation arose in or about February 2014 that Frontline would disclose to Vision if Frontline did not own the copyright in the Circuit Markings. Frontline did not disclose this, notwithstanding that it did not own the copyright. In my view, Frontline’s conduct in the circumstances was misleading or deceptive, or likely to mislead or deceive.
I now consider the Installation Instructions. These were provided by Frontline to Vision on various dates. Copies were provided with the samples. Subsequently, copies of the Installation Instructions were provided on a computer disk (in April 2014). No express statement was made by Frontline that it had copyright in the Installation Instructions. However, in the updated Open Items list circulated on 25 February 2014, it is recorded that Frontline’s direction was to leave the instructions unchanged (see [99] above). This was so even though there had been a discussion regarding the accuracy of those instructions. Further, by email dated 28 February 2014, Mr Italiano informed Mr Giatas that “in the short term you will need to scan fitting instruction that was provided with samples” (see [102] above). Subsequently, a disk was provided with PDF electronic copies. In the circumstances, I consider that a reasonable expectation arose that Frontline would disclose to Vision if Frontline did not own the copyright in the Installation Instructions. I note that some of the Installation Instructions included the LUMEN name on the depiction of the trailer socket. However, the circumstances need to be considered as a whole. When regard is had to the conduct of Frontline as a whole, I consider that a reasonable expectation as outlined above arose.
The evidence establishes, in my view, that Vision relied on the conduct of Frontline that has been found to have been misleading or deceptive or likely to mislead or deceive. Mr Love adopted a careful and considered approach towards intellectual property and regulatory issues. For example, in his email to Mr Giatas dated 26 March 2013 he stated: “Please keep in mind that we may not be able to get drawings for most of these items as they will probably be proprietary to the existing supplier/s (Lumen etc…)”. Further, on 12 September 2013 Mr Giatas forwarded to Mr Love the 9 September 2013 email from Mr Italiano. Mr Giatas stated in his email to Mr Love: “Given the comments about IP below, I’m not sure it’s appropriate yet to pass onto Chanon (or other 3rd parties). What are your thoughts?” Mr Love responded by email on the same day: “I do not believe it would be an issue to provide these drawings to our suppliers (As they are Frontline drawings and not Lumen)”. In expressing the view that it was acceptable to provide the drawings, Mr Love had read and placed weight on the statement about intellectual property in Mr Italiano’s email dated 9 September 2013 and the intellectual property claims in the Relevant Drawings with the Frontline frame.
In relation to the Circuit Markings, I consider it likely that Vision relied on the conduct of Frontline that has been found to have been misleading or deceptive or likely to mislead or deceive. The development of the ECU continued during 2014. But for the conduct, it is likely that Vision would not have reproduced redundant parts from the Lumen PCBA. It is also likely that the design of the Vision PCBA would have departed more generally from the Lumen PCBA.
In relation to the Installation Instructions, but for the conduct that has been found to have been misleading or deceptive or likely to mislead or deceive it is likely that Vision would have prepared its own instructions.
I note that there may appear to be a tension between my conclusions, earlier in these reasons, that Vision has not made out defences under s 115(3) of the Copyright Act (on the basis that it has not established that it had no reasonable grounds for suspecting that the act constituting the infringement was an infringement of the copyright) and the conclusions in this section of the reasons that Frontline engaged in conduct that was misleading or deceptive or likely to mislead or deceive and that Vision relied on that conduct. However, there is no necessary inconsistency between such conclusions (see Tamawood at [180]-[181]) and, in the present case, any apparent tension is explained by the differences between the tests to be applied in respect of the different issues.
It follows that Frontline’s misleading or deceptive conduct (or conduct likely to mislead or deceive) has been or will be causative of loss for Vision. The losses claimed by Vision are as follows:
(a)an amount for stock held in Melbourne – this claim was originally $275,265.70, but it is agreed between Frontline and Vision that it should be reduced to $260,000;
(b)THB 1,011,034 for stock held in Thailand;
(c)US$5,665.74 for stock held in Taiwan;
(d)$13,870 for tooling costs in Taiwan;
(e)$134,307 for development costs; and
(f)$952 per month plus GST for warehousing costs in Australia.
There was no dispute about the quantum of these amounts and I accept them. Frontline submits that it is necessary to then deduct an amount of $29,776.07, being profit earned by Vision on its past sales of wiring harnesses to Frontline. I accept that this amount should be deducted. Frontline should be ordered to pay damages to Vision reflecting the above amounts and the deduction. Subject to submissions, it would seem appropriate for interest to be ordered. I will leave it to the parties to calculate the total sum and to formulate an appropriate order.
Further, and for the same reasons, Frontline should be ordered to indemnify Vision for the compensatory damages that it is to be ordered to pay Lumen. It would seem to follow that Frontline should also indemnify Vision for any costs that Vision is ordered to pay Frontline. This can be addressed when I deal with costs. In addition, it would seem to follow that Frontline should pay damages to Vision representing Vision’s actual costs of the proceeding (save for any costs unreasonably incurred). This too can be addressed by the parties if there is any issue about this.
FRONTLINE’S CROSS-CLAIM AGAINST VISION
Frontline has filed a notice of cross-claim and statement of cross-claim against Vision. By the statement of cross-claim Frontline notes that in the principal proceeding, Lumen and Lumen International have sued Frontline and Vision alleging an entitlement to recover damages:
(a)against Frontline in respect of conduct that is said to constitute copyright infringement, passing off, misleading or deceptive conduct and false representations, breach of confidence, breach of contract, trade mark infringement and infringement of rights under the Circuit Layouts Act; and
(b)against Vision in respect of conduct that is said to constitute copyright infringement and infringement of rights under the Circuit Layouts Act.
Frontline contends that if (which is denied) Frontline is liable to Lumen and Lumen International in respect of damage suffered by them, then Frontline, for the purposes of the cross-claim only:
(a)says that Vision is also liable to Lumen and Lumen International for the same damage; and
(b)claims contribution from Vision pursuant to s 23B(1) of the Wrongs Act for any amount Frontline is ordered to pay Lumen and Lumen International.
Frontline submits that if the Court finds that both Frontline and Vision are liable to Lumen in respect of Lumen’s lost sales and that Vision’s cross-claim fails (in whole or in part), then it would be just and equitable for the Court to order that Frontline recover an amount by way of contribution in respect of Lumen’s loss or damage. Frontline submits that: the appropriate amount of the contribution will ultimately depend on the findings that the Court makes in respect of each of Lumen’s causes of action against Frontline and Vision, and Vision’s claims against Frontline; and if the Court were to find that Frontline and Vision are liable in respect of the same damage suffered by Lumen and that Vision fails in all of its misleading or deceptive conduct claims against Frontline, then it would be just and equitable for the Court to find that Vision should contribute up to half of Lumen’s loss and damage.
It follows from my conclusion that Frontline engaged in misleading or deceptive conduct (or conduct likely to mislead or deceive) vis-à-vis Vision that Frontline’s cross-claim seeking contribution from Vision is to be dismissed. There was no issue that if Vision succeeded in its cross-claim against Frontline, the corollary would be that Frontline’s cross-claim would be dismissed.
CONCLUSION
For the reasons set out above:
(a)Lumen has succeeded in its copyright infringement claims against both Frontline and Vision;
(b)Lumen has (or Lumen and Lumen International have) succeeded in the following additional claims against Frontline: passing off; misleading or deceptive conduct; breach of confidence; breach of contract; and trade mark infringement;
(c)Lumen has not made out its claims based on the Circuit Layouts Act;
(d)Vision has succeeded in its cross-claim against Frontline based on misleading or deceptive conduct.
(e)Frontline has not made out its cross-claim against Vision seeking contribution.
I will order that within 14 days the parties provide any agreed proposed minute of orders to give effect to these reasons and that, if the parties cannot agree, within 21 days each party provide its proposed minute of orders to give effect to these reasons, together with a short written submission in support of the proposed orders. I will deal with any outstanding issues of relief, and the issue of costs, on a date to be fixed.
I certify that the preceding three hundred and seventy-seven (377) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky. Associate:
Dated: 22 November 2018
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