McCallum & Co Pty Ltd v Allen Manufacturing Co Pty Ltd

[2001] FCA 488

FEDERAL COURT OF AUSTRALIA

McCallum & Co Pty Ltd v Allen Manufacturing Co Pty Ltd
[2001] FCA 488

INTELLECTUAL PROPERTY – Designs Act 1906 (Cth) – whether infringement of registered design – test to be applied – effect of statement of monopoly in application – whether statement of monopoly in application limits scope of design monopoly – whether fraudulent imitation – whether obvious imitation – infringement of registered design – liability as joint tortfeasor – liability of director of company and indirect licensor for infringement by company of registered design – test to be applied – relevance of control of company by director – where day-to-day activities of small proprietary company controlled by one director – no concept of “authorisation” under Designs Act 1906

WORDS AND PHRASES – “infringement of” – “joint tortfeasor” - “fraudulent   imitation” – “obvious imitation”

Designs Act 1906 (Cth) Ss 17, 20(4), 28, 30

Malleys Ltd v JW Tomlin Pty Ltd (1961) 180 CLR 120 cited
Firmagroup Australia Pty Ltd v Byrne & Davidson Doors (Vic) Pty Ltd (1987) 180 CLR 483 cited
Dart Industries Inc v Decor Corporation Pty Ltd (1989) 15 IPR 403 cited
Turbo Tek Enterprises Inc v Sperling Enterprises Pty Ltd (1989) 23 FCR 331 cited
Phillips v Harbro Rubber Company (1920) 37 RPC 233 considered
W Lusty & Sons Ltd v Morris Wilkinson & Co (Nottingham) Ltd (1954) 71 RPC 174 considered
D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 considered
Jones & Atwood Ltd v National Radiator Company Ltd (1928) 45 RPC 71 cited
Sommer Allibert (UK) Ltd v Flair Plastics Ltd [1987] RPC 599 cited
Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 103 ALR 239 applied
Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 considered
Henley Arch v Clarendon Homes (1998) 41 IPR 443 cited
Microsoft Corporation v Goodview Electronics Pty Ltd (2000) 49 IPR 578 cited
Root Control Technologies Pty Ltd v Root Quality Pty Ltd (2001) 177 ALR 231 considered
Seven Network (Operations) Ltd v CEPU [2001] FCA 456 cited
Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 164 ALR 239 cited
Australian Tape Manufacturers’ Association Ltd v Commonwealth (1993) 176 CLR 480 applied

McCALLUM & CO PTY LIMITED ACN 000 054 491 v ALLEN MANUFACTURING COMPANY PTY LIMITED ACN 001 617 643 and ALAN GEORGE HARPER
N 1059 OF 1999

GYLES J
SYDNEY
3 MAY 2001

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1059 OF 1999

BETWEEN:

McCALLUM & CO PTY LIMITED
ACN 000 054 491
APPLICANT

AND:

ALLEN MANUFACTURING COMPANY PTY LIMITED
ACN 001 617 643
FIRST RESPONDENT

ALAN GEORGE HARPER
SECOND RESPONDENT

JUDGE:

GYLES J

DATE OF ORDER:

3 MAY 2001

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The proceeding be stood over to enable the applicant to bring in short minutes of order to give effect to these reasons.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1059 OF 1999

BETWEEN:

McCALLUM & CO PTY LIMITED
ACN 000 054 491
APPLICANT

AND:

ALLEN MANUFACTURING COMPANY PTY LIMITED
ACN 001 617 643
FIRST RESPONDENT

ALAN GEORGE HARPER
SECOND RESPONDENT

JUDGE:	GYLES J
DATE:	3 MAY 2001
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This is a proceeding for relief for infringement of Registered Design No 110500 (“the McCallum Registered Design”) and for an order for rectification of the Register maintained under the Designs Act 1906 (Cth) (“the Act”) expunging Registered Design No 131521 (“the Harper Registered Design”). A cross claim for expungement of the McCallum Registered Design was not pursued. The parties agreed that the issues of liability would be determined before relief in relation to infringement is considered.

2. The McCallum Registered Design was entered in the Register on 12 March 1991, the application for it having been lodged on 10 August 1990. The article in respect of which the design was registered is a door hinge. There was no statement of novelty. The statement of monopoly pursuant to s 20(4) of the Act was:

   “Monopoly is claimed in the shape and/or configuration of a door hinge as illustrated in the accompanying representations.”

3. The representations depicted a front view, a side view, a front perspective view, a top view, a rear (closed) view and a rear (partly open) view of a door hinge.  A copy of these representations is appended to this judgment.

4. As might be expected in relation to an everyday article such as a door hinge, where form must follow function to a considerable extent, there is much that is common between the design depicted in these representations and both previous registered designs and door hinges which had been on the market. 

5. The prior designs relied upon by the respondents here were:

   1.Australian Registered Design No 48712 (Warlan Products Pty Limited).

   2.Australian Registered Design No 53234 (Meyers-Taylor Pty Limited).

   3.The McCallum Aluminium “Fast-Fix” Interfold Hinge (Catal No A74, A74B) sold by the applicant in early 1990.

   4.The Lane non-mortise butt hinge which was available in Australia before 1990.

   5.The Doric “Quik Fix Hinges” DH-3 and DH-9 which were available and used before the date of application.

6. The applicant has manufactured, sold and offered for sale a door hinge (“the McCallum Hinge”) which is similar to, but differs in some matters of detail from, the McCallum Registered Design since shortly after registration of that design.

7. On 17 March 1997 Alan George Harper (the second respondent) applied for registration of a design in respect of a door hinge, being the Harper Registered Design.  No statement of novelty was lodged.  The statement of monopoly was:

   “Monopoly is claimed in the shape and/or configuration of a door hinge as illustrated in the accompanying representations”.

   The design was registered on 1 October 1997 as No 131521.

8. The representations referred to in the Harper Registered Design depicted a door hinge in front view, top view, front perspective view, side view, rear (closed) and rear (partly open).  A copy of these representations is appended to this judgment.

9. There is no dispute that Allen Manufacturing Company Pty Limited (“the first respondent”) has, for some time, manufactured, sold and offered for sale door hinges known as “Model 7100 heavy duty aluminium fast fix hinges” (“the Allen Hinge”) which is the alleged infringing article.  There is no dispute that this accords with the Harper Registered Design.

10. The capital of the first respondent is $3, divided into three shares of $1, two held by the second respondent and one held by Marjorie Ann Harper of the same address as the second respondent.  The second respondent has been a director of the first respondent since about 1978 and has been the secretary of the first respondent since 1 June 1999.  Marjorie Ann Harper was a director between 1978 and 1 June 1999 and was the secretary of the first respondent from 1986 to 1 June 1999.  It is admitted that the second respondent controls the day-to-day activities of the first respondent.

11. On 28 July 1998 the first respondent appointed Nova Hardware Pty Ltd ACN 074 131 650 as distributor of the Allen Hinge.  On 7 September 1998 the second respondent licensed Reginald James Harper (of the same address as the second respondent and Marjorie Ann Harper) to use the Harper Registered Design for the purpose of manufacturing and distributing goods in accordance with it for a term of two years, liable to be terminated in various events and capable of renewal.  On 6 November 1998 Reginald James Harper sublicensed the first respondent to use the Harper Registered Design for a term of twenty-two months.  The sublicence was also capable of termination and renewal.  The applicant found out about the Allen Hinge by reason of the activities of Nova Hardware Pty Ltd in 1999. 

12. The applicant commenced business in about 1939 originally selling hinges, but later expanded its product range to other items relating to builders hardware.  The second respondent was employed by the applicant between 11 April 1983 and 20 May 1986.

13. The McCallum Hinge was first sold in April 1991 and quickly became the best selling hinge in the range of hinges sold by the applicant and it has been widely promoted. It has special application to commercial builders. The evidence is that this is a fairly close-knit sector of business, where communication concerning new products is fast and easy. Reference is made in some of the packaging material to the McCallum Registered Design.

14. The applicant called evidence from the designer (who was not cross examined), an independent shop fitter (Mr Smith) and an independent industrial designer (Mr Wood).  The shop fitter’s evidence was designed to establish in a general way that the McCallum Registered Design  was an advance on what had gone before, and cross examination was limited to establishing his knowledge of some prior designs relied upon by the respondent.  The industrial designer made a close comparison between various combinations of the McCallum Registered Design, the McCallum Hinge, the Harper Registered Design and the Allen Hinge.  This analysis (clarified to some extent by cross examination) was helpful in drawing attention to physical features, but ultimately of limited value as to the questions of judgment involved.  No oral or affidavit evidence was tendered for the respondents. 

15. The principles as to how I should approach the issue of infringement according to s 30 of the Act have been well worked over in a series of cases in the High Court and the Full Court of this Court, and it is not necessary to summarise or paraphrase those principles once again. It is sufficient to refer to Malleys Ltd v JW Tomlin Pty Ltd (1961) 180 CLR 120 at 127; Firmagroup Australia Pty Ltd v Byrne & Davidson Doors (Vic) Pty Ltd (1987) 180 CLR 483 at 487-488; Dart Industries Inc v Decor Corporation Pty Ltd (1989) 15 IPR 403, particularly at 409-410; Turbo Tek Enterprises Inc v Sperling Enterprises Pty Ltd (1989) 23 FCR 331 at 335-7.

16. It is necessary, however, to deal with the submission on behalf of the respondent that the width of the statement of monopoly in this case has the result that there must be absolute identity between the alleged infringing article and the registered design, citing Phillips v Harbro Rubber Company (1920) 37 RPC 233 at 241-242 (“Phillips”).  Whilst that decision related to the effect of the absence of a statement of novelty under the then United Kingdom provisions, it may be granted that it could equally relate to the effect of a statement of monopoly in blanket form, as here.  Phillips and cases expressing a similar view such as     W Lusty & Sons Ltd v Morris Wilkinson & Co (Nottingham) Ltd (1954) 71 RPC 174 at 179-180 and D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 at 228 are so regarded by the learned author J Lahore (see Lahore, Copyright and Designs, Butterworths, 1996 at par 70-075).  There is no suggestion that this line of authority has been disapproved.

17. However, I doubt that, upon analysis, these decisions add anything of substance to the test in a case where, as here, the registered design is the shape or configuration of the whole of an article.  As remarked by the Designs Law Review Committee in its Report on the Law Relating to Designs (1973, AGS, Canberra):

    “99.    … as a registered proprietor of a design gets a monopoly for one thing only, namely one ‘particular and individual specific appearance’, it is difficult to see how it is appropriate to vary the scope of the monopoly by way of a ‘statement of monopoly’, except insofar as it is by way of disclaimer in a particular case.”

    See also Jones & Atwood Ltd v National Radiator Company Ltd (1928) 45 RPC 71 at 83, 84 and Sommer Allibert (UK) Ltd v Flair Plastics Ltd [1987] RPC 599 at 626 (“Somer Allibert”).  It would be different if certain features of the design were disclaimed, or if features of design other than shape and configuration are also claimed, such as colour or pattern.

18. The following passage from Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 103 ALR 239 at 246-247 sums up the position (relating, of course, to the facts of that case):

    “In its statement of monopoly, Avion choose not to designate any particular features of the representations in respect of which it claimed a monopoly and also chose not to specify any features of the representations which were to be disregarded in considering the extent of the monopoly protection.  It is essential therefore that one compares the depiction of the chairs in the two photographs as a whole with the alleged offending chair, Ex B.  … We find two chairs which convey overall a rather different impression of shape and configuration to the eye. …”

19. When I compare the Allen Hinge with the McCallum Registered Design the impression judged by my eye is of very close correspondence between the two.  There are differences, namely:

    1.the countersunk nature of certain of the holes;

    2.the precise shape of the cylinder or barrel and the end caps;

    3.the angle of disposition of the holes on the fixed outer leaf;

    4.the position of the holes on the wings;

    5.perhaps a difference in the width of the wings.

    However, to list the differences in this way tends to exaggerate them compared with the overall visual impression.  As has often been said, there is a limit as to the ability or necessity to explain in words the impression of the eye.

20. I see no such correspondence between the McCallum Registered Design and any one of the previous designs relied upon by the respondents, although there is some correspondence between parts of them.  In particular, I see no earlier design which is what was described in the evidence as an “interfold hinge combined with wings”.  This is the feature which distinguishes this design.  This feature is found in the Allen Hinge, together with other features which may be common to both the McCallum Registered Design and the prior designs.

21. The differences may be enough to avoid a conclusion that “the design” has been applied to the Allen Hinge, but I am satisfied that it is an obvious imitation of the McCallum Registered Design even if the test is as high as “something reasonably approaching to identity” (cf Sommer Allibert at 626).

22. If this be wrong, then I am satisfied that the Allen Hinge is a fraudulent imitation of the McCallum Registered Design.  Among the factual matters relied upon by the applicants to reach this conclusion were the following:

    (1)the second respondent is a director and shareholder of the first respondent and controls the day to day operations of the first respondent;

    (2)the second respondent is a former employee of the applicant and, it can be inferred, was aware of the applicant’s commercial activities;

    (3)the applicant has sold its hinge since April 1991.  It was very popular and became the best selling hinge in the applicant’s range.  The packaging in which the hinge has been sold since 1991 makes reference to the McCallum Registered Design;

    (4)the applicant promoted its new hinge and the registered design from mid 1991;

    (5)none of the second respondent nor any officer of the first respondent has sought to give evidence in these proceedings to explain the coincidence of representations of the two registered designs, the coincidence of the overall similarities between the McCallum Registered Design and the Allen Hinge, and to establish any good design reason for the differences between the McCallum Registered Design and the Allen Hinge.

23. It is submitted for the respondents that it is necessary for the applicant to establish that changes have been made merely to disguise copying. The respondents deny that can be found here as, for example, there are functional reasons for some of the changes.

24. The points made by the applicant lead to a fair inference that the second respondent knew of the McCallum Registered Design and, for this purpose at least, the second respondent is the directing mind of the first respondent.  It is also a fair inference that the first respondent intended to, and did, copy the McCallum Registered Design, including its unique combination of interfold hinge and wings.  Whilst there may be functional explanations for some variations, the change in shape of the barrel and end stops seem to me to be to be designed to disguise the copying.  These inferences may be more readily drawn because of the failure of the first or second respondent to call evidence.

25. These findings on infringement inevitably lead to the conclusion that the Harper Registered Design was not new or original as required by s 17 of the Act, and that the design had been published in the Commonwealth prior to the priority date within the meaning of s 28 of the Act. It follows that the Register should be rectified by expunging of the entry of registration of the Harper Registered Design.

26. The liability of the second respondent needs to be considered. The applicant pleaded that the second respondent authorised the infringement of the McCallum Registered Design. This is not sufficient. There is no concept of authorisation in the Act, in contrast with the Copyright Act 1968 (Cth) (see ss 13 and 36) and the Patents Act 1990 (Cth) (see s 13(1)). The applicant has also pleaded that the second respondent procured the infringement by the first respondent or was otherwise a party to the conduct and so a joint tortfeasor.

27. The applicant relies upon the evidence (and admissions) as to the control by the second respondent of the day-to-day operation of the first respondent, and the inferred knowledge of the second respondent of the registration of the McCallum Registered Design, which must have involved knowledge that manufacturing and selling the Allen Hinge would infringe the rights of the applicant.  In addition, the applicant relies upon the chain of licences which brought the goods to the market, commencing with a licence from the second respondent.

28. It is submitted for the second respondent that there is no evidence of any participation or other joint conduct between the first and second respondents, and that the second respondent’s office as director of and control of the business operations of the first respondent is insufficient to establish either procuring the infringement by the first respondent or otherwise participating in it.

29. It is also submitted on behalf of the second respondent that mere licensing is not equivalent to participating in an act of infringement done pursuant to the licence.  It is put that there is, in any event, no direct licence from the second respondent to the first respondent and no evidence of his ability to control the first respondent in his capacity as licensor, which must be kept separate from his role as shareholder or director.  In short, it is submitted that procurement of infringement requires more than authorisation:  it requires at least some evidence of inducement, incitement or persuasion.  Proof of some positive steps by the second respondent is necessary.  The alleged participant must make the tort his or her own.

30. The correct test or approach to be applied to this issue has been much discussed over recent years and there is a divergence of opinion which has not been authoritatively settled.  On the one hand, there is the test as to whether the director “procured or directed” the tortious conduct, as explained by Lindgren J in Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 at 241-246 (“Auschina Polaris”), followed by Merkel J in Henley Arch v Clarendon Homes (1998) 41 IPR 443 at 463-464 and Branson J in Microsoft Corporation v Goodview Electronics Pty Ltd (2000) 49 IPR 578. On the other hand, Finkelstein J, after a comprehensive review of the authorities, concluded that a higher (although somewhat indefinite) standard was required (see Root Control Technologies Pty Ltd v Root Quality Pty Ltd (2001) 177 ALR 231 at 257-269 referred to by Merkel J in Seven Network (Operations) Ltd v CEPU [2001] FCA 456 at par 46). The decision of the Full Court in Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 164 ALR 239 is directed to a somewhat different, although related, issue.

1. If the procurement test, as explained by Lindgren J, is to be applied, there is no doubt that it is satisfied.  It can safely be inferred that the second respondent actually authorised, procured and directed the acts of infringement, as submitted for the applicant, because of his control of the company.

2. If Finkelstein J is correct, the issue as to whether the second respondent made the infringement his own is not so clear.  The submission for the second respondent that mere licensing is not enough is plainly correct (see Australian Tape Manufacturers’ Association Ltd v Commonwealth (1993) 176 CLR 480 at 498). So far as association with the company is concerned, it is difficult to distinguish this from any other “one person company” case. I should say that this latter point did not trouble Lindgren J in Auschina Polaris (at 246G).

3. However, in my opinion, the combination of licensing, control of the company and the knowledge that I have found that the second respondent had of the McCallum Registered Design is sufficient to meet whichever test is correct.  I do not regard the fact that the licensing is not direct as of assistance to the second respondent.  In the absence of evidence from he and Mr Reginald James Harper, I would infer that at least one reason that back-to-back licences were entered into was in order that a direct connection could be denied between the respondents in the event of litigation.  Whether that be so or not, I would infer that the successive licences were planned in advance.  The fact that the licence to Nova Hardware Pty Ltd predates the other licences would bear that out.  It is also to be noted that the second respondent signed that licence, and the sub-licence from Reginald James Harper, on behalf of the first respondent.  The applicant has proved its case against the second respondent.

4. The proceeding will stand over to enable the applicant to bring in short minutes of order to give effect to these reasons, including directions as to the future conduct of the matter.  If the respondents (or either of them) are proposing to seek leave to appeal (which I neither encourage nor discourage) it may be prudent to consider whether separate questions for early determination should not be ordered retrospectively.

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated:             3 May 2001

Counsel for the Applicant:	JR Baird
Solicitor for the Applicant:	Pricewaterhouse Coopers Legal
Counsel for the Respondents:	SJ Goddard
Solicitor for the Respondents:	Murphy & Moloney
Date of Hearing:	9, 10 April 2001
Date of Judgment:	3 May 2001