Marlbro Shelving Systems Pty Ltd v A.R.C. Engineering Pty Ltd
[1983] FCA 79
•28 APRIL 1983
And: A.R.C. ENGINEERING PTY. LIMITED (1983) 72 FLR 418
No. G111 of 1982
Trade Practices
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)
Trade Practices - Consumer protection - Misleading or deceptive conduct - Interchangeable coolroom shelving systems - Whether representation by respondent in photograph of applicant's product as respondent's product is misleading or deceptive conduct under s.52 - Confidential information - Whether confidential information imparted during negotiations for take-over was used by respondent.
Trade Practices Act, 1974 as amended s.52.
Trade Practices - Consumer protection - Misleading or deceptive conduct - Identical and interchangeable shelving systems - Whether respondent copied applicant's system - Sales brochure prepared using competitor's product - Whether brochure contained representations of applicant's product - Whether brochure misrepresented that product was respondent's product - Whether respondent used confidential information belonging to applicant - Whether respondent should be restrained from engaging in conduct - Trade Practices Act 1974 (Cth), ss 52, 80.
The applicant company, Marlbro Shelving Systems Pty Ltd (Marlbro), and the respondent company, A.R.C. Engineering Pty Ltd (A.R.C. Dynes), manufactured cool room shelving systems which were interchangeable as they were substantially identical in appearance, form, composition and function. Neither manufacturer had any relevant protection for its product by registered patent, trade mark or industrial design. A.R.C. Dynes obtained some samples of the Marlbro Shelving System which were used to produce prototypes of what became the A.R.C. Shelving System. Evidence showed that a brochure containing five photographs had been prepared and used by A.R.C. Dynes between December 1981 and February 1982 and that a diagram of the Marlbro product had been copied by a salesman of A.R.C. Dynes from a sales catalogue of a distributor of the Marlbro product.
Held: (1) (a) A.R.C. Dynes was free to copy the Marlbro Shelving System to take advantage of the available market for a shelving system of that kind.
Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1982) 56 ALJR 715, applied.
(b) The conduct of A.R.C. Dynes in respect of its shelving system impugned by Marlbro did not constitute a misrepresentation nor was it a breach of s. 52 of the Trade Practices Act 1974 (Cth).
Hornsby Building Information Centre Pty Ltd v. Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216; Taco Co. of Australia Inc. v. Taco Bell Pty Ltd (1982) 42 ALR 177; Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1982) 56 ALJR, applied.
(2) (a) Four of the five photographs which appeared in the brochure which advertised A.R.C. Dyne's product were representations of the Marlbro Shelving System.
(b) The brochure misrepresented that the article depicted in the photographs was A.R.C. Shelving System.
(c) A.R.C. Dynes had engaged in misleading or deceptive conduct and accordingly the future publication or circulation of the brochure should be restrained by way of injunction.
(3) A.R.C. Dynes made no copies of the documents containing confidential information, nor did A.R.C. Dynes embody any of the confidential information in any document prepared by that company.
Seager v. Copydex Ltd (1967) 1 WLR 923, referred to.
Coco v. A.N. Clark (Engineers) Ltd (1969) RPC 41, applied.
Printers and Finishers Ltd v. Holloway (No. 2) (1965) 1 WLR 1, referred to.
Terrapin Ltd v. Builders' Supply Co. (Hayes) Ltd (1967) RPC 375, distinguished.
Otherwise, the application would be dismissed.
Sydney, 1983, March 21-22, 24; April 28. #DATE 28:4:1983
APPLICATION FOR INTERLOCUTORY INJUNCTION.
The applicant company alleged that the respondent company had contravened the provisions of s. 52 of the Trade Practices Act 1974 (Cth) by engaging in conduct that was misleading or deceptive or was likely to mislead or deceive, namely, manufacturing and selling its shelving system without distinguishing it from the applicant's shelving system.
The applicant company further alleged that the respondent company had contravened the provisions of s. 52 of that Act by using photographic representations of the applicant's shelving system on a brochure produced and distributed to advertise the respondent's product.
The applicant company further alleged that the respondent company had used and was using confidential information of the applicant relating to its business without the consent of the applicant.
V. Bruce and J. L. B. Allsop, for the applicant company.
F. M. Douglas, for the respondent company.
Cur. adv. vult.
Solicitors for the applicant company: Benjafield & Associates.
Solicitors for the respondent company: Allen, Allen & Hemsley.
J. D. W.
1. The applicant bring in short minutes of orders to give effect to the Court's reasons for judgment.2. The matter be stood over to 3rd May 1983.
Orders accordingly.
This is a dispute between two manufacturers of shelving systems. Their products are substantially identical in appearance, form, composition, and function. They are interchangeable. Neither manufacturer has any relevant protection for its product by registered patent, trade mark or industrial design. The applicant, Marlbro Shelving Systems Pty. Limited (to which I shall refer as 'Marlbro'), is the proprietor of the registered trade mark 'Marlbro' in connection with class 6 goods covering shelving, but the name 'Marlbro' does not appear on the product itself and no complaint is made in these proceedings in relation to the mark.
Marlbro sells its shelving system under the name 'Marlbro Shelving System'. The respondent, A.R.C. Engineering Pty. Limited (to which I shall refer for convenience as 'A.R.C. Dynes'), sells its shelving system under the name 'A.R.C. Dynes Shelving System'.
The proceedings were brought pursuant to ss. 52 and 53 of the Trade Practices Act, 1974, but Marlbro abandoned its case in respect of s.53. Marlbro also asserts that A.R.C. Dynes has used and is using confidential information of Marlbro relating to its business without the consent of Marlbro, the information having been imparted by Marlbro to it during the course of discussions between them for the take-over of Marlbro by A.R.C. Dynes which did not eventuate.
Most of the facts are not in dispute, but there are some important areas of conflict.
The modular shelving system manufactured and sold by Marlbro is suitable for general storage and shelving but is used principally for storage in cool rooms. The system was designed in about 1969 by Mr R.W. Robinson, a director of Marlbro. Mr Robinson commenced to manufacture the shelving system in early 1970 in his father's garage at Peakhurst. The system was manufactured and distributed by Mr Robinson himself at first, then by his brother-in-law and himself in a partnership known as 'Centenary Productions'. After the partners moved into larger premises in July 1974 they manufactured other products in addition to the shelving system namely, handling containers. The partnership was dissolved in June 1976 and Mr Robinson's brother-in-law continued to manufacture handling containers whilst Mr Robinson continued to manufacture the shelving system. Marlbro was then incorporated to manufacture the shelving system. It was originally known as Centenary Productions Pty. Limited, but changed its name to Marlbro Shelving Systems Pty. Limited on 11 October 1979.
Since March 1973 Lawrence & Hanson Pty. Limited has distributed the Marlbro Shelving System throughout Australia. Marlbro also sells direct to end users and to cool room suppliers. Since March 1979 the Marlbro Shelving System has been manufactured and sold in Queensland by Storage Equipment Systems in consideration of the payment of royalties to Marlbro.
In 1979 the respondent, through its division A.R.C. Dynes, commenced to manufacture the six most commonly used shelf sizes of the Marlbro Shelving System and Marlbro manufactured the fourteen less commonly used sizes.
In April and May 1980 there were discussions between the parties. The participants on behalf of Marlbro were Mr Robinson and Marlbro's accountant, Mr Salter. The participants on behalf of A.R.C. Dynes were Mr Eldred its manager and Mr Reynolds, a technical sales manager of A.R.C. Dynes. The discussions related mainly to a proposal by A.R.C. Dynes to acquire the issued share capital of Marlbro, making Marlbro a division of the respondent and appointing Mr Robinson to run that division. In the course of those discussions Mr Eldred asked Mr Robinson to furnish a balance sheet of Marlbro, lists of its debtors and creditors, a cash flow statement and estimates of sales and 'future potential'.
During a conversation in May 1980 in the office of A.R.C. Dynes, at which Mr Robinson, Mr Salter, Mr Eldred and Mr Reynolds were present, Mr Robinson or Mr Salter handed to Mr Eldred:-
(a) a copy of the balance sheet of Marlbro as at 31 March 1980;
(b) notes to the accounts of Marlbro from 1977 to 31 March 1980;
(c) comparative trading figures of Marlbro from the year ended 30 June 1977 to the nine months ended 31 March 1980 with projections for the year ended 30 June 1981, giving details of sales, stock, purchases, gross profits, royalties received, expenses and net profit; and
(d) a list of creditors of Marlbro as at 30 April 1980, together with certain details of their accounts and a list of debtors of Marlbro as at 30 April 1980 which gave their names and some information as to their credit history.
It is these documents which Marlbro asserts contain confidential information allegedly misused by A.R.C. Dynes. The contents of the documents were discussed during the May 1980 meeting.
A.R.C. Dynes decided not to go ahead with the acquisition of the shares in Marlbro, asserting that it was not prepared to pay the amount of money requested by Mr Robinson for goodwill and 'potential' and that it required more 'asset backing'. The documents the subject of the claim for confidentiality were returned to Mr Salter on 3 June 1980. A.R.C. Dynes denies making any use of the documents or their contents.
It is admitted that during the May 1980 meeting, before the documents were handed to Mr Eldred, Mr Salter said words to Mr Eldred to the effect that the documents were confidential and that he should preserve their confidentiality. It was also admitted that Mr Eldred acknowledged that he would keep them confidential.
The parties are in dispute as to whether certain things were said during the course of the April/May 1980 discussions and as to the circumstances in which the discussions came about. Mr Eldred gave evidence that the indebtedness of Marlbro to A.R.C. Dynes arising from the manufacture of shelving by A.R.C. Dynes for Marlbro fell outside its normal trading terms of 30 days credit. Mr Eldred gave evidence that he said in effect that one way of overcoming the unsatisfactory state of Marlbro's account would be if A.R.C. Dynes acquired the issued share capital of Marlbro or acquired Marlbro's business from it or formed some association with Marlbro. Marlbro strongly denied this version of events given by A.R.C. Dynes and that its account was substantially overdue. I see no useful purpose in restating the relevant evidence touching these questions. I have considered it carefully and have come to the conclusion that the conversations deposed to by Mr Eldred in which he related the possible acquisition of the share capital or business of Marlbro or the formation of some business association with Marlbro to the state of Marlbro's account with A.R.C. Dynes is inherently improbable. Where the evidence of Mr Robinson conflicts with the evidence of Mr Eldred I prefer the evidence of Mr Robinson. I refer later to certain evidence of Mr Reynolds, but it is convenient at this stage to say that where his evidence conflicts with the evidence of Mr Robinson I prefer the evidence of Mr Robinson.
However, it does not follow that I did not find Mr Eldred or Mr Reynolds reliable witnesses in some respects. I accept their evidence on certain matters. Mr Eldred gave evidence that he took no details of the customers of Marlbro as revealed by the list of debtors and that he made no copies of the documents shown to him by Mr Robinson during the May 1980 meeting. I accept his evidence on these matters.
Development of A.R.C. Dynes Shelving System
A.R.C. Dynes carries on various businesses including the manufacture and sale of shelving systems. It has been engaged in this business for about 40 years but, until recently, only by fulfilling special orders from customers and generally to their own design. A.R.C. Dynes has sold its shelving system, the subject of these proceedings, since about February 1982.
Soon after Mr Eldred told Mr Robinson (about the middle of 1980) that A.R.C. Dynes was not going ahead with proposals to purchase the business or shares of Marlbro, Mr Robinson made arrangements with a Queensland firm, Dyne & Company, to produce all the shelf sizes for Marlbro and to hold them in stock at prices lower than those previously charged by A.R.C. Dynes. This arrangement was implemented.
In about May or June 1981 Mr Reynolds spoke to Mr Robinson and said that A.R.C. Dynes wished to manufacture Marlbro shelves again and would match the price paid to the Queensland firm. Mr Reynolds said:-
'If we don't get the business back we will set up in opposition against you. A.R.C. Dynes can afford to run at a loss on a product for a couple of years to gain the market. You can't afford to do that. We will get the whole market and put you out of business.'
Mr Robinson said that Marlbro would remain with the Queensland supplier. Not long after that conversation Mr Eldred and Mr Reynolds decided to manufacture the A.R.C. Dynes Shelving System. A.R.C. Dynes decided that it would enter the market of manufacturing shelf systems primarily for cool room storage as a proprietary line for a number of reasons, including the fact that it would be a profitable operation in due course and would enable full use to be made of an expensive machine known as a Schlatta machine which A.R.C. Dynes had purchased in about 1978, some 12 months before it commenced to produce some of the shelf units for Marlbro. The machine was used by A.R.C. Dynes primarily for other purposes but it was thought by it that production of its own shelf units would enable it to reach full capacity. The machine is a somewhat sophisticated and specialised machine for making pig mesh and other products.
The components of the A.R.C. Dynes Shelving System are made by a sub-contractor, Taren Manufacturing, except the wire shelving which is made by A.R.C. Dynes itself. Mr Reynolds was in charge of the design of the new system. He was also responsible for the pricing of the product. He and others in the organisation of A.R.C. Dynes worked out their own costings for labour, materials, etc. Working papers were produced _ some of which are in evidence _ and suitable prices arrived at after allowing for the desired profit margin. A.R.C. Dynes obtained more than one sample of the Marlbro Shelving System and samples of other manufacturers' shelving systems. They were used for the purpose of producing prototypes of what became the A.R.C. Dynes Shelving System. I am satisfied that A.R.C. Dynes set out to substantially copy the Marlbro Shelving System, and that it did copy it.
There were some delays in preparing for the manufacture of the A.R.C. Dynes Shelving System but, when these were overcome, production commenced in about February 1982. Production has expanded since then. The prices of the A.R.C. Dynes Shelving System are generally substantially cheaper than those of the Marlbro Shelving System but, although the evidence on the point is somewhat sparce it seems that A.R.C. Dynes business relating to the shelving system is not yet profitable.
In December 1981 Mr N.R. Douglas was engaged by A.R.C. Dynes as a salesman and it was his responsibility to promote the sale of the proposed shelving system. He sought to establish customers initially by telephoning people and companies listed under various headings in the 'Yellow Pages' of the Sydney Telephone Directory for 1982. He got in touch with large numbers of people and on many occasions followed his telephone calls with personal visits. It was not suggested by Marlbro that Mr Douglas used any of the confidential documents handed to Mr Eldred in May 1980 or information contained therein.
Comparison of the two products
There are many shelving systems produced in Australia for various purposes. Most of them are for heavy duty storage pallet racking or general storage. The shelving systems of Marlbro and A.R.C. Dynes are essentially suitable for coolroom shelving. I said earlier that the two systems are substantially identical in appearance, form, composition and function and that they are interchangeable. No other system is interchangeable with these two systems. The only other shelving system that is relevantly similar to them is the Mantova system, but it is different from them in certain respects and is not interchangeable with either of them.
The differences between the two shelving systems may be summarised as follows:-
(a) The Marlbro Shelving System has two shelves on each level of a unit. The A.R.C. Dynes Shelving System has one shelf on each level of a unit.
(b) A.R.C. Dynes manufactures a double-end frame which enables continuous runs to be made of shelving at the same height. Marlbro does not produce a double-end frame as a standard component.
(c) The Marlbro end frame has two support bars, whereas the A.R.C. Dynes' end frame has three support bars.
(d) The slots in the end posts of the Marlbro frame are slightly higher than those on the A.R.C. Dynes' end frame.
(e) The slots on the end posts of each product are the same size, except for one important difference namely, that on the Marlbro slot there is a small radius or curve at its top and bottom, whereas on the A.R.C. Dynes' slot the four corners at the top and bottom are roughly at right angles.
There are other differences between the two products, but I have stated the major ones.
A.R.C. Dynes Brochure.
Between December 1981, when Mr Douglas was employed by A.R.C. Dynes, and February 1982 A.R.C. Dynes did not have any printed brochures available advertising its shelving system. Mr Douglas made a copy of a diagram appearing in the sales catalogue of Lawrence & Hanson Pty. Limited, the distributors of the Marlbro product. That diagram advertised the Marlbro product. Mr Douglas deleted all reference in the advertisement to Marlbro and substituted the name and address 'A.R.C. Dynes Pty. Limited, Box 45 P.O. Kingsgrove, New South Wales.' A.R.C. Dynes used this document from December 1981 to mid-February 1982.
Since it commenced production of its shelving system in about February 1982 A.R.C. Dynes has produced and circulated a brochure comprising one sheet with photographs and writing on its front and back. On its front it bears in bold black type the words _
'A.R.C. DYNES.
SHELVING SYSTEMS'and underneath there is a black and white photograph of a complete shelving system. The photograph is reproduced for convenience below:-
(photograph omitted)
On the back page there are four photographs: the first which appears to be a smaller scale version of the main photograph on the front, the second being of an end frame, the third showing a shelf support and the fourth showing a post with a foot inserted in it. The writing on the back of the brochure describes the general characteristics and advantages of the shelving system and its specifications. On both sides the name of the manufacturer, A.R.C. Dynes, appears. No other brochures are used by A.R.C. Dynes in the sale of its products for use in coolrooms.
Mr Robinson gave evidence that the photograph appearing on the front page of the brochure and three of the four photographs on the back depict a Marlbro shelving unit. As to the large photograph on the front page he said that it depicts two shelves on each of three levels, that Marlbro produces two shelves per level, whereas A.R.C. Dynes produces one shelf per level. He said that the top slot or keyhole in the end frame depicted in the brochure is about half an inch down from the top of the frame, again a characteristic of the Marlbro unit, not the A.R.C. Dynes unit, and that the brochure depicts an adjustable foot on the unit which Marlbro has been using for some years consisting of a disc about 25 millimetres in diameter with a 3 inch long thread 'and on that we have a nut turned on adjustable foot pressure units within a sleeve on the vertical post.' He said that he could quite clearly see on at least two of the four legs in the photograph, the appearance of the disc and that it was a lot clearer under magnification. He referred to what he described as some 'minor points' which supported his conclusion that the shelf unit depicted on the front page of the brochure was a product of Marlbro, not A.R.C. Dynes, including the appearance of some welding and the size of the shelves.
Turning to the back page of the brochure, Mr Robinson said that the photograph depicted in the top right hand corner was also of a Marlbro unit. He said:-
'I have closely looked at that photo compared to the other and it appears to be exactly the same unit, and in fact taken from probably the same negative. The line of the unit and the way it is sitting and everything is exactly the same. Therefore everything follows on as it is with the first one excepting that some of the items are a little bit harder to distinguish in the size of the photograph.'
As to the right hand photograph of the three photographs grouped together a little below the centre of the back page of the brochure, Mr Robinson said that it too was a photograph of a Marlbro unit because the radius in the top and bottom of the keyhole corresponds with the radius on the Marlbro unit and does not have the 'corners nearly run square at the end of the slot' which is characteristic of A.R.C. Dynes' unit. Mr Robinson said that the left hand photograph of those three photographs was not manufactured by Marlbro. As to the remaining photograph in the bottom left hand corner of the back page of the brochure, Mr Robinson said that it depicted a post made by Marlbro with a footing that is not Marlbro, because Marlbro makes a disc and the photograph depicts a bolt. He said that the foot in fact used by A.R.C. Dynes appears to him to be 'just a standard set screw, half inch width set screw' which is freely available from hardware stores, bolt suppliers and manufacturers.
Mr Eldred and Mr Reynolds gave evidence that the brochure depicted the A.R.C. shelf unit. It was Mr Reynolds who was primarily responsible for the preparation of the brochure. It was prepared after photographs were taken by a professional photographer of shelf units and their components. One set of photographs was taken in September 1981 of a shelf unit and 'oyster tray'. The other set of photographs was taken in December 1981 of what the photographer's invoice described as '2 way end piece for shelf unit. Also new shot of adjustable foot.'
Mr Reynolds said that the components of the shelving system depicted in the brochure were manufactured by Taren Manufacturing, A.R.C. Dynes' sub-contractor, except for the wire shelving itself which was manufactured by A.R.C. Dynes. He said that having given Taren Manufacturing the order to make the end frames and cross rails, A.R.C. Dynes obtained samples of them from it which were taken to the professional photographer's studio on the two occasions in September and December 1981. Different end frames were taken on each occasion. He said that the footings depicted in the brochure were footings provided by Cold Forge Products, which manufactures footings for A.R.C. Dynes. He said that in one sequence of photographs the footings were those produced by Cold Forge Products (he must have meant the footings depicted on the main photograph on the front page of the brochure) and, in the other sequence of photographs, A.R.C. Dynes changed the system and used ordinary bolts. He could not think of any reason for the change
'but we did have it in mind to use either system which in our offering of this product we had chosen to do from time to time. We sell it with the rounded heads or with the bolts, and the availability is really the key to changing over'.
He said that the foot depicted in the photograph at the bottom of the back page of the brochure is not of a Marlbro unit but was obtained from Cold Forge Products who had them available as a proprietary line, and that as this was the December series of photographs
'I just grabbed a single unit which was not a complete product and put that nut underneath our own leg...just propped up in the photographer's studio...to typify the adjusting mechanism.'
Later in cross-examination, Mr Reynolds said that after he gave the oral evidence to which I have just referred he spoke to Mr George, a partner of Cold Forge Products, and ascertained that Cold Forge Products only supplied footings of the type depicted in the photograph at the bottom of the back page of the brochure to A.R.C. Dynes following the placement of its first order with them in August 1982. He conceded that these footings were 'not a proprietary line as such; but you can purchase them readily if you have got a suitable production quantity.' He agreed that A.R.C. Dynes did not have a 'suitable production quantity' in 1981 and that A.R.C. Dynes did not have Cold Forge Products manufactured for them in August or September 1981. He then said that he thought it was a reasonable assumption that the footings in the relevant photograph were those produced by A.R.C. Dynes.
Mr George was called by counsel for Marlbro and he confirmed that Cold Forge Products had not supplied A.R.C. Dynes with any order for footings before August 1982. He said that he could not identify anything appearing on either page of the brochure as being manufactured by Cold Forge Products, although the footings could be from their stock items.
Mr Reynolds did not impress me as a reliable witness on matters relating to the brochure including the photographs depicted therein. It is, of course, possible that Mr Reynolds did not intend to deliberately portray the Marlbro product in the brochure and that he simply took from Taren Manufacturing what he assumed were components for the A.R.C. Dynes product. No evidence was called from any representative of Taren Manufacturing, notwithstanding that the assertion that the brochure depicted photographs of the Marlbro product was always part of Marlbro's case, and A.R.C. Dynes had been on notice of this assertion well before the trial. This was alleged in the points of claim and in Mr Robinson's affidavit of 11 June 1982. No cogent evidence was adduced to rebut the evidence of Mr Robinson as to his reasons for the conclusion that the brochure depicted the Marlbro product in all but one photograph of the five. My own observation of the brochure and the points of similarity mentioned by Mr Robinson confirm the accuracy of his evidence. It must also be remembered that at all relevant times at least one sample of the Marlbro product was in the possession of A.R.C. Dynes or Taren Manufacturing.
Mr Eldred gave some general evidence that the photographs reproduced in the brochure were of A.R.C. Dynes' product. In my view the evidence of Mr Eldred concerning the brochure was unsatisfactory. However, in fairness to him he did not impress me as having any first hand knowledge of how the brochure came to be prepared.
I am satisfied that the brochure produced by A.R.C. Dynes and circulated and used by it since February 1982 depicts on the front page a photograph of a Marlbro unit and on the back page photographs of a Marlbro unit or of its components except in the case of the photograph on the left hand side of the middle of the back page and the bolt depicted in the bottom photograph.
Section 52
Marlbro asserts that A.R.C. Dynes has engaged and is engaging in conduct that is misleading or deceptive or is likely to mislead or deceive in contravention of s.52 of the Act. The conduct relied on by Marlbro is the manufacture and sale by A.R.C. Dynes of its shelving system without distinguishing it from Marlbro's Shelving System. Marlbro does not complain of the fact that the A.R.C. Dynes Shelving System is substantially identical with the Marlbro system, but points to the substantial identity as facilitating the likelihood of confusion in the minds of the public unless the two products are distinguished. Marlbro says that it is for A.R.C. Dynes to distinguish its product from the Marlbro shelving system because Marlbro was established in the field of manufacturing and selling shelving systems essentially for use in coolroom storage for years before the A.R.C. Dynes product came on the market in circumstances where it was deliberately copied from the Marlbro system and for the purpose of making the two systems interchangeable.
Marlbro asserts a separate contravention of s.52 namely, the use by A.R.C. Dynes of the photographic representations of the Marlbro Shelving System on the brochure, produced and distributed to advertise A.R.C. Dynes' product.
The design of the Marlbro Shelving System was not registered under the Designs Act 1906 (Cth). Marlbro acquired no statutory monopoly in the manufacture and sale of shelving systems of the Marlbro design. It acquired no right to exclude others from manufacturing shelving systems of the Marlbro design. A.R.C. Dynes was free to apply the design of the Marlbro Shelving System to shelving systems of its own manufacture. A manufacturer is free to copy the product of another even if that product has been successful and for the purpose of taking advantage of an expanding market for products of that kind, without infringing s.52. These principles were established by the High Court in Parkdale Custom Built Furniture Pty. Limited v. Puxu Pty. Limited (1982) 42 A.L.R. 1.
In my opinion A.R.C. Dynes was free to copy the Marlbro Shelving System to take advantage of the available market for a shelving system of that kind. Of course, A.R.C. Dynes would not be free to pass off its shelving system as the Marlbro Shelving System and there is no evidence that it did so. Indeed, Marlbro does not assert that A.R.C. Dynes is passing off its product as the Marlbro product.
The real question is whether any of the conduct of A.R.C. Dynes constitutes a misrepresentation to consumers. That is the only basis upon which Marlbro could successfully assert a breach of s.52 by reason of A.R.C. Dynes' manufacture and sale of its shelving system.
Evidence that some one has in fact been misled is admissible and may be persuasive but it is not determinative of the question. It is for the court to determine the question of misleading or deceptive conduct for itself: Hornsby Building Information Centre Pty. Limited v. Sydney Building Information Centre Limited (1978) 140 C.L.R. 216; Taco Company of Australia Inc. v. Taco Bell Pty. Limited (1982) 42 A.L.R. 177; Parkdale v. Puxu (supra).
Counsel for A.R.C. Dynes read an affidavit of a Mr M.W. Wainwright who had an interest in the Pier One Tavern in the Pier One complex at Walsh Bay, Sydney. Marlbro shelving was installed for him in the Pier One Tavern kitchen coolroom early in March 1982. In April 1982 he decided that the tavern needed more shelving for the beer coolroom. He telephoned several manufacturers of coolroom shelving and asked them to send him information about their products. The only company from which he received a reply was A.R.C. Dynes which sent a salesman to see him about two days later. The salesman showed him a brochure illustrating the A.R.C. Dynes shelving and quoted him prices to supply it. The brochure is the same brochure mentioned earlier. Mr Wainwright chose to purchase A.R.C. Dynes' shelving because the price was lower than the price he had previously paid for the Marlbro shelving. He swore that he did not believe at any time that the shelving which he purchased from A.R.C. Dynes was the shelving manufactured by Marlbro, although he knew and was fully aware that the shelving manufactured by A.R.C. Dynes and by Marlbro are similar. He swore that the A.R.C. Dynes salesman did not represent to him that his product was that of Marlbro or that it was in any way related to it.
Mr Wainwright was not cross-examined. I find Mr Wainwright's evidence helpful in resolving the question whether any misrepresentation was made by A.R.C. Dynes because the evidence of Mr Wainwright accords with what I would expect to find from any reasonable member of the public.
Counsel for Marlbro elicited some evidence from Mr Robinson in chief to the effect that Marlbro received an order from Mr Wainwright towards the end of 1982 for two additional levels to 'suit' a Marlbro shelving unit. Mr Robinson went to the Pier One Tavern, taking two levels with him, and was directed to the low temperature coolroom off the kitchen, where he saw some Marlbro shelving and some A.R.C Dynes' shelving. He said that the additional Marlbro shelves were ordered from him to supplement the A.R.C. Dynes shelving. He said that he installed the Marlbro shelving and it fitted precisely with the A.R.C. Dynes shelving. He spoke to Mr Wainwright on the telephone from the tavern before installing the shelves because 'I did not intend to put the shelves in that unit until he was quite aware that he in fact had made an error in thinking that the unit he ordered for was Marlbro shelving and not A.R.C. Dynes'unit.' He told Mr Wainwright that the unit was in fact an A.R.C. Dynes unit and not a Marlbro unit. Counsel for Marlbro sought to use this evidence to found an argument that Mr Wainwright was misled or confused between the two systems of shelving. In my view this evidence does not support the submission and cannot found an argument that Mr Wainwright was misled in any way.
There are many boltless shelving systems manufactured and sold in Australia for a variety of purposes. Many of the features and some of the specifications of these systems are similar. Modular shelving system have been in use for many years for a variety of storage purposes, though not generally in coolrooms, but their use in coolrooms is essentially an extension of the general principle of modular shelving.
Marlbro has no monopoly in its shelving systems. A.R.C. Dynes has simply reproduced that system. The interchangeability of the two products is beneficial to the public. Indeed, the evidence of Mr Robinson as to Marlbro's sale to Mr Wainwright of the Marlbro shelving system late last year shows that the sale would not have been made unless Marlbro was interchangeable with A.R.C. Dynes.
Counsel for Marlbro conceded that if A.R.C. Dynes had distinguished its product from Marlbro by ensuring that it bore the name 'A.R.C. Dynes' no complaint could be made. There are cases, of course, where by distinguishing one product from another, any possibility of misleading or deceptive conduct may be eliminated or reduced, but that is not this case. There is no room for the suggestion that a member of the public, on seeing the Marlbro Shelving System, would assume that it was any particular system. A member of the public upon seeing either of the subject shelving systems would, I think, simply regard them as shelving systems without associating them with any particular manufacturer or source of origin. The conduct of A.R.C. Dynes in respect of its shelving system impugned by Marlbro does not constitute any misrepresentation and is not a breach of s.52.
I turn to the brochure. I have already held that the photograph on the front page of the brochure and three of the photographs on the back page are representations of the Marlbro Shelving System, except for the adjustable bolt in the bottom photograph on the back page. The brochure represents that the articles depicted in the photographs are A.R.C. Dynes Shelving Systems. This is untrue and in my view is a misrepresentation of the true facts. It matters not that only a discerning or expert eye could readily see that the photographs depict the Marlbro Shelving rather than the A.R.C. Dynes Shelving. Nor does it matter that, because the two systems are interchangeable, no false representation is conveyed as to the use or function of the shelving system depicted in the brochure. What is misleading or deceptive is that a member of the public, upon seeing the brochure, would necessarily assume that what he is observing is what the printed matter in the brochure says it is namely, an A.R.C. Dynes Shelving System, whereas in truth it is a Marlbro Shelving System. That is misleading or deceptive conduct and, in my view, its future publication or circulation should be restrained.
Use of Confidential Information.
The law on the use of confidential information
'...depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent'
per Lord Denning M.R. in Seager v. Copydex Limited (1967) R.P.C. 349 at (p.368).
In Coco v. A.N. Clark (Engineers) Limited (1969) R.P.C. 41, Megarry J. said at (p.47):-
'In my judgment, three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First, the information itself, in the words of Lord Greene, M.R. in the Saltman case on p.215, must 'have the necessary quality of confidence about it.' Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it...'
Taking those three requisites, it is not disputed by A.R.C. Dynes that the information imparted to it by Marlbro in May 1980 had the requisite quality of confidence. It is agreed that the second requisite is established. It was imparted in circumstances importing an obligation of confidence. That is shown by the admitted statement by Mr Salter at the May 1980 meeting to the effect that the documents were confidential and that Mr Eldred should preserve their confidentiality, together with Mr Eldred's agreement that he would keep them confidential. Even without these express statements, this second requisite may have been satisfied, but I do not need to consider this.
This case turns on whether the third requisite is satisfied namely, whether A.R.C. Dynes used the information contained in the documents handed over in May 1980. It is open to some question whether detriment to the party communicating the information is essential, but this case turns essentially on whether the information was in fact used by A.R.C. Dynes.
Shortly after Mr Eldred told Mr Robinson that A.R.C. Dynes did not propose to acquire the issued share capital of Marlbro or acquire its business from it, the documents containing the confidential information were returned to Mr Salter who received them on behalf of Marlbro. No decision was made by Mr Eldred and Mr Reynolds to produce the A.R.C. Dynes Shelving System until the expiration of about a year after the return of the documents. Mr Eldred swore that no one else saw the documents except himself, although this statement must be qualified by the fact that the contents of the documents were discussed at the May 1980 meeting by those present who included Mr Reynolds.
Mr Reynolds was principally concerned with the design of the A.R.C. Dynes product and for that purpose he obtained a sample of the Marlbro product and products of other manufacturers. The actual manufacturer of the A.R.C. Dynes product was Taren Manufacturing except the wire shelving which was manufactured by A.R.C. Dynes itself. Although little enquiry appears to have been made by A.R.C. Dynes as to the potential of the relevant market some enquiry was made by its product manager. Mr Reynolds was responsible for pricing the product and he and the costings department of A.R.C. Dynes did the necessary work on pricing and costing. Working papers were produced and they or some of them are in evidence. Mr Reynolds denied that he paid any regard to Marlbro's profitability in fixing prices and I accept his denial.
It is probable that, when the decision was made in about May 1981 by Mr Eldred and Mr Reynolds to produce an A.R.C. Dynes shelving unit, each of them carried a general impression in his mind gathered from a year earlier that the market for coolroom shelving had good potential and that Marlbro's profitability was increasing and its business expanding. They also probably remembered that although Marlbro had not been in a particularly healthy liquid position about a year before, this would probably improve in the future with expanding markets. It was not suggested in argument before me that the list of debtors of Marlbro, which forms part of the confidential information, was used by A.R.C. Dynes when marketing its own shelving system. Nor could this be suggested because it is plain from the evidence, especially of Mr Douglas, that this was not so and that communication with potential customers was in no way assisted by any of the confidential information imparted in May 1980.
I am satisfied that A.R.C. Dynes made no copies of any of the documents containing the confidential information and that it did not embody any of the confidential information in any document prepared by it. One must, however, remember the words of Cross J. in Printers and Finishers Limited v. Holloway (1965) R.P.C. 239 (at p.255):-
'The mere fact that the confidential information is not embodied in a document but is carried away by the employee in his head is not, of course, of itself a reason against the granting of an injunction to prevent its use or disclosure by him.'
In some cases a man may use confidential information imparted to him previously even though he does not remember the detail of it, but carries away in his mind a sufficiently precise and firm impression that '...he could not have avoided starting his dive into the future from the springboard of the confidential information acquired...' by him: Terrapin Limited v. Builders' Supply Co. (Hayes) Limited (1967) R.P.C. 375 per Roxburgh J. (at p.390).
This is not such a case. It is unreal to say that any general recollection from a year before that the relevant market was expanding and presented good prospects and that this was reflected in some general way in the finances of Marlbro, could enable A.R.C. Dynes to obtain some unfair advantage over its competitor. What A.R.C. Dynes in fact did was what anybody else would have done who set out to copy the Marlbro product namely, design its own product, prepare its own costings, and have prototypes prepared after purchasing copies of rival products.
The only relief to which Marlbro is entitled is an injunction to restrain the publication and circulation of the brochure. Otherwise I would dismiss the application.
As to costs, as Marlbro has succeeded in part in my view there should be some order for costs in its favour. As much of the time in the case was spent on matters on which Marlbro failed I think the fair order is that A.R.C. Dynes pay one-third of Marlbro's costs.
I will make no orders at this stage other than to direct Marlbro to bring in short minutes to give effect to my reasons for judgment and will stand the matter over to a date to be fixed when final orders can be made.
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