Midamarine Pty Ltd v DMC International Pty Ltd
[2006] FCA 1458
•3 NOVEMBER 2006
FEDERAL COURT OF AUSTRALIA
Midamarine Pty Ltd v DMC International Pty Ltd [2006] FCA 1458
PRACTICE AND PROCEDURE – interlocutory injunction – whether arguable case raised by the applicant – whether balance of convenience favours the granting of an injunction – whether damages an adequate remedy in the circumstances – injunction granted
INTELLECTUAL PROPERTY – whether infringement of a registered design – test for fraudulent imitation – whether copy of product protected by a registered design
COPYRIGHT – whether applicant was owner of copyright in warning label
Designs Act 1906 (Cth) ss 4 and 30
Designs Act2003 (Cth) ss 146 and 153Australian Broadcasting Corporation v O'Neill [2006] HCA 46, cited
Beecham Group Limited v Bristol Laboratories Pty Limited (1967-68) 118 CLR 618, cited
Malleys Ltd v JW Tomlin Pty Ltd [1961-62] 35 ALJR 352, applied
Polyaire Pty Ltd v K-Aire Pty Ltd and Others (2005) 221 CLR 287, cited
Koninklijke Philips Electronics NV & Another v Remington Products Australia Pty Ltd (1999) 91 FCR 167, citedMIDAMARINE PTY LTD v DMC INTERNATIONAL PTY LTD AND DAVID MAXWELL CORRICK
QUD 409 OF 2006SPENDER J
3 NOVEMBER 2006
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 409 OF 2006
BETWEEN:
MIDAMARINE PTY LTD
ApplicantAND:
DMC INTERNATIONAL PTY LTD
First RespondentDAVID MAXWELL CORRICK
Second Respondent
JUDGE:
SPENDER J
DATE OF ORDER:
3 NOVEMBER 2006
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.On the usual undertaking as to damages, pending the trial of the issues of invalidity and infringement,or further or earlier order, the First Respondent by itself, directors, officers, servants or agents be restrained from manufacturing, importing, promoting, offering for sale or selling within Australia any article of the type exemplified in Exhibit 13.
2.Each party’s costs of and incidental to the applicant’s application heard on 1 & 2 November 2006 be reserved.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 409 OF 2006
BETWEEN:
MIDAMARINE PTY LTD
ApplicantAND:
DMC INTERNATIONAL PTY LTD
First RespondentDAVID MAXWELL CORRICK
Second Respondent
JUDGE:
SPENDER J
DATE:
3 NOVEMBER 2006
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an application by Midamarine Pty Ltd (‘the applicant’) seeking interlocutory orders restraining DMC International Pty Ltd (‘DMC’) and David Maxwell Corrick (‘Mr Corrick’) from infringing Registered Design 151872 (‘the Registered Design’) for an ‘inflatable surfcraft’, and from infringing copyright in a Warning Label that the directors of the applicant say they wrote. The Warning Label, the subject of that application appears on the physical exhibit of the ‘Wavestar’ and is replicated in the physical exhibit on the DMC product. The allegedly infringing products (‘the DMC products’), are described by DMC in its packaging as an ‘inflatable wave rider’.
These proceedings were commenced on 24 October 2006 by the filing and service of an Application, Statement of Claim, and affidavits in support of the claim, for interlocutory relief.
The evidence does not support a conclusion that the applicant is the owner of copyright in the warning, whatever that copyright is. Consequently, I decline to make any interlocutory order in respect of the alleged breach of copyright.
In respect of the claim for infringement, the matters in dispute seem to be whether there is an arguable case on infringement of the Registered Design, whether the Registered Design is valid, whether the balance of convenience favours the grant of the injunctions sought, and whether damages would be an adequate remedy.
By way of background, it is sufficient to note that the applicant applied for the Registered Design on 24 December 2001, which was granted on 27 May 2003. Since September 2004, the applicant has, via a licensee Britz Innovation Pty Ltd and a related company, Kalinin Pty Ltd (which trades as Britz Marketing), been selling a surfmat called the Wavestar. The applicant contends that the Wavestar is an embodiment of the Registered Design. This appears to be the central legal question on the application for interlocutory relief.
In June 2005, Mr Binkin, an associate of the applicant, provided a sample of the Wavestar to a director of the first respondent, Mr Corrick, and endeavoured to persuade him that he should licence the design of the Wavestar from the applicant. Mr Corrick was provided with artwork, which came from the applicant. I am satisfied that the sample of the Wavestar and the artwork contained clear notification of a Registered Design, and the artwork and sample contained the Warning which presently appears on the physical exhibit of the Wavestar. It is to be expected, I would have thought, that there was copyright in somebody in that formulation of the Warning.
After the meeting and the supply of the sample and artwork, Mr Corrick indicated he was not interested in pursuing a licence for the product. Until only recently, there was no further communication between the parties.
In January 2006, the applicant and Britz Marketing entered into an exclusive distributorship arrangement in relation to the Wavestar surfmat. In about February 2006, Mr Corrick commenced negotiations with the National Rugby League and the Australian Football League, who licenced the first respondent (DMC) to use their trademarks for sporting teams for application on surfmats. The applicant was unaware of the negotiations between Mr Corrick and the football entities.
On 8 September 2006, Mr Arenson, a director of the applicant, learnt that the first respondent was supplying a surfmat to Amart All Sports, and that the surfmat supplied to Amart All Sports by the first respondent was said to be strikingly similar to the Wavestar.
On 22 September 2006, he saw a reproduction of the DMC product and, then, spoke to Mr Corrick. He later wrote to him on 24 September. Both the letter and the conversations drew Mr Corrick's attention to the similarities in design between the Wavestar and the DMC surfmat, and also to the fact that the Warning Label on the DMC surfmat was a direct copy of the Warning on the Wavestar surfmat. In particular, both surf mats contained the assertion, ‘The shape of this inflated product is a Registered Design.’
On 27 September 2006, the solicitors for the respondents applied for a Design Registration to the Patents Office for a ‘surf craft’ in the name of the first respondent. In that application, Mr Corrick was said to be the designer. No documents supporting his design exist, for the good reason that, in fact, the DMC product is a direct and complete copy of the Wavestar.
It is now conceded that the DMC surfmat is indeed a copy - and a deliberate copy - of the Wavestar. This, in my view, had to be so. The visual comparison leads to that conclusion. The fact that the Wavestar was left with Mr Corrick, the comparison of the two and the identity of the words used in the Warning on the back of the DMC surfmat and, in particular, ‘the shape of this inflatable product is a Registered Design’, lead inevitably to the conclusion that the DMC product is a direct copy of the Wavestar.
The words on the Wavestar reflect the contention by Mr Arenson that the Wavestar is an embodiment of the Registered Design. The presence of those words on the DMC product is, in my opinion, damning evidence of copying by DMC of the Wavestar.
While now conceding that the DMC is a copy of the Wavestar, Miss Downes, counsel for the respondents, contends that the Wavestar is not an embodiment of the Registered Design, with a consequence that a copy of the Wavestar does not infringe the Registered Design. Next, she contended that the Registered Design was invalid, based on what was said to be the art prior to the priority date given to the Registered Design in suit.
However, the evidence in this respect suggests to me that the surfmats known prior to the priority date were basically rectangular in shape. I am satisfied, for interlocutory purposes, that the applicant is the owner of a valid Registered Design.
Indeed, the attack on the validity of the Registered Design is seriously undermined by DMC’s own application for registration of the design of the DMC product, which application is tainted with dishonesty and fraudulent claims. I accept that it has been acknowledged that that application will be withdrawn or otherwise expunged.
The principles governing the grant of interlocutory relief are well established, and have recently been reaffirmed by the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46 (‘O’Neill’) at pars 19 and 65 and following. In O’Neill, the High Court affirmed the approach adopted by the High Court in Beecham Group Limited v Bristol Laboratories Pty Limited (1967-68) 118 CLR 618. At par 19, Gleeson CJ and Crennan J said:
‘... in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed ...’
The Registered Design claims a monopoly as follows: ‘The monopoly claimed resides in the shape and configuration of the inflatable surfcraft as shown in the accompanying representations’. The term of the registration has been extended, so the evidence establishes, since its initial grant, and has current renewal until 24 December.
The Designs Act2003 (Cth) (‘the 2003 Act’) came into effect on 17 June 2004. However, by virtue of ss 146(3) and 153(3) of the 2003 Act, the Designs Act 1906 (Cth) (‘the 1906 Act’) continues to apply for the purposes of determining the question of validity and infringement of designs registered pursuant to the terms of the 1906 Act.
Section 30 of the 1906 Act governs the question of infringement. It provides:
‘30Infringement of monopoly in designs
(1) A person shall be deemed to infringe the monopoly in a registered design if he, without the licence or authority of the owner of the design:
(a)applies the design or any fraudulent or obvious imitation of it to any article in respect of which the design is registered;
(b)imports into Australia for sale, or for use for the purposes of any trade or business, any article in respect of which the design is registered and to which the design or any fraudulent or obvious imitation of it has been applied outside Australia without the licence or authority of the person who was the owner of the registered design at the time when the design or imitation was so applied; or
(c)sells, or offers or keeps for sale, or hires, or offers or keeps for hire, any article:
(i)to which the design or any fraudulent or obvious imitation of it has been applied in infringement of the monopoly in the design; or
(ii)in respect of which the design is registered and to which the design or any fraudulent or obvious imitation of it has been applied outside Australia without the licence or authority of the person who was the owner of the registered design at the time when the design or imitation was so applied.
(2)If any person infringes the monopoly in a registered design, the owner of the design may bring an action or proceeding against him for infringement of the monopoly in the design.’
It is the contention of the applicant that the first respondent has applied the design, or a fraudulent or obvious imitation of the design, to the DMC product. The design, the subject of the monopoly, is defined in s 4 of the 1906 Act:
‘design means features of shape, configuration, pattern or ornamentation applicable to an article, being features that, in the finished article, can be judged by the eye, but does not include a method or principle of construction.
…
monopoly, in relation to a registered design, means the exclusive right to apply the design to an article in respect of which the design is so registered.’The High Court in Malleys Ltd v JW Tomlin Pty Limited [1961 – 62] 35 ALJR 352 (‘Malleys’) at p 352 said:
‘It is, of course, true that every shape is not a design; there must be “sufficient individuality of appearance” to distinguish it from what Russell-Clarke in Ch.2 of his book Copyright in Industrial Designs aptly describes as “the fundamental form” of an article. Furthermore, the existence of that sort of individuality is to be determined by the eye and not by measuring dimensions. It follows that a design need not have the precision of a working drawing; it concerns the shape or configuration of an article, as it appears to the eye. If a design applied by another has the features that are characteristic of the registered design and are so arranged that to the eye the resulting shape is substantially the same, there is infringement, whereas if the same features are arranged so that to the eye the resulting shape is different, there is, in the absence of fraudulent imitation, no infringement.’
(Emphasis added.)The applicant's written submissions set out the features of the Registered Design, correctly in my view. Those submissions recite:
‘15. The Registered Design depicts a surf mat which can be characterized as having the following individual design features or integers which, when combined, result in its distinctive appearance:
(1)[viewed in plan (as from above or below)] a crescent or swallow shaped tail or end;
(2)symmetrically curving towards a widest point approximately three quarters along its length;
(3)which then curves to a flattened top;
(4)from which two handles protrude;
(5)[viewed in profile from either end] an ovaloid shape with slightly flattened top and bottom which at each side comes to a point;
(6)[viewed in profile] an elliptical shape that is thicker at the front portion and which tapers to a narrower rear portion.’
I have inspected the inflated DMC product and compared it with the Registered Design. The inflated DMC product possesses each of the features identified in the applicant's written submissions, with the exception that the handles do not protrude from the top of the surfmat as depicted in the Registered Design. The handles on the Wavestar also do not protrude from the top of the surfmat, as depicted in the Registered Design.
The interior detail of the DMC product, particularly the interior ribbing, is not depicted in the Registered Design. The ribbing on the DMC product is identical to the ribbing on the Wavestar. No detail of ribbing is depicted in the Registered Design.
The applicant submits that the ribbing feature is purely functional. The significance of that feature, and of the difference in the location of the handles on the two physical surfmats in evidence, compared with the Registered Design, is ultimately a matter for final trial.
For present purposes, being the interlocutory purposes, I am satisfied that, to the eye, the shape of the DMC product is substantially the same as that of the Registered Design. It is, in my opinion, strongly arguable that the design, which has been applied to the DMC product, is an obvious imitation of the Registered Design. That is, in the words of the test in Malleys, to be found at p 354 of the report: ‘‘...not the same but a copy apparent to the eye notwithstanding slight differences...’
Even if I am wrong in that view, it seems that the test for fraudulent imitation is also - and even more strongly arguable. The test for fraudulent imitation requires less objective similarity between the Registered Design and the impugned product. The High Court, in Polyaire and K-Aire Pty Ltd (2005) 221 CLR 287 (‘Polyaire’) was concerned with, amongst other things, the question of fraudulent imitation. At p 301 par 32 the High Court approved the passage in Edmunds and Bentwich, ‘The Law of Copyright in Designs’:
‘A "fraudulent imitation" is imitation with knowledge that the patent is a registered design, and without any sufficient invention on the part of the imitator.’
The High Court approved the observations by Lehane J in Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (1999) 91 FCR 167 at p 200, where Lehane J said:
‘…the essential questions are, first, whether the allegedly infringing design is based on or derived from the registered design and, then, whether the differences are so substantial that the result is not to be described as an imitation. Frequently, of course, probably usually, changes will have been introduced for the purpose of disguising copying or, perhaps, because of a conscious desire to come as close as possible to the registered design while avoiding infringement. But, as this case illustrates, particular changes may be introduced for other compelling reasons; and there is no obvious reason why that should defeat a claim of fraudulent infringement.’
The High Court, in Polyaire, said, at p 295 par 17:
‘…the application of a “fraudulent imitation” requires that the application of the design be with knowledge of the existence of the registration and of the absence of consent to its use, or with reason to suspect those matters, and that the use of the design produces what is an “imitation” within the meaning of para (a) [of s 30(1) of the 1906 Act]. This, to apply the general principle recently exemplified in Macleod v The Queen [(2004) 214 CLR 242], is the knowledge, belief or intent which renders the conduct fraudulent…’
I am satisfied that there is a strongly arguable case of fraudulent imitation. It seems inevitable that, if the Wavestar is an embodiment of the Registered Design, then the DMC product is a fraudulent imitation. The design of the Wavestar and the DMC product is almost identical. It could not have been independently created. It is now admitted that the DMC product is a copy of the Wavestar. That conclusion is the explanation, it seems to me, of the identical ribbing structure and the same construction materials.
So, also, is the embarrassing identity of the direct words of the warning label, including the imprinting of the words: ‘The shape of this inflatable product is a Registered Design’.
It is not denied that Mr Corrick was supplied with a sample of the Wavestar surfmat and had discussed obtaining a licence of the design. It seems plain that there is a strongly arguable case of obvious imitation or fraudulent imitation of the Registered Design.
The next major question is where the balance of convenience lies and whether the plaintiff is likely to suffer injury for which damages will not be an adequate remedy. It seems to me that my approach, in this case, should mirror that of the High Court in Beecham Group Limited v Bristol Laboratories Pty Limited (1967 - 68) 118 CLR 618 at 625, where the Court said:
‘The facts which appear to us to be decisive on this question may be stated quite briefly. In April 1967, after the plaintiff had been building up in Australia a substantial business in ampicillin over a period of several years, the defendant announced its intention of marketing hetacillin in Australia. The plaintiff on 10 May 1967 warned the defendant that if it began to do so proceedings for infringement of the patents would be taken. It was in the face of this warning that the defendant commenced the acts now complained of, and the action was thereafter instituted without delay. Any goodwill the defendant may since have built up for hetacillin would of course be destroyed or damaged by granting an injunction, but that was a risk the defendant took with its eyes open. If it be not restrained, it will presumably take advantage of the time before the hearing to subject the goodwill of the plaintiff’s established trade in ampicillin to the prejudice of competition from a product which the defendant maintains has some points of superiority. In no meaningful sense could matters be said to be kept in status quo if in these circumstances the defendant were left free to pursue its course, merely keeping an account of the profits it makes.’
That approach was recently reaffirmed by the High Court in O'Neill, to which I have earlier referred.
In this particular case, the applicant is shown to be an established manufacturer and supplier of the Wavestar surfmats. It is strongly arguable that that product has the benefit of the protection of the Registered Design. It has been creating a market for its product and supplying its product to distributors since 2004.
Earlier this year, the applicant entered into an exclusive distributor arrangement with Britz Marketing. I accept that its fortunes are tied to its ability to distribute its products via Britz Marketing. The Wavestar is now exclusively sold by Britz Marketing under the name Wahu Wavetube. That surfmat is sold in an extensive range of shops, including Toyworld, Big W, Rebel Sports, Target, and Toys R Us. Mr Britz says the Wahu Wavetube has been heavily promoted.
Since the first respondent began, in October 2006, to sell the DMC product, Amart All Sports has ceased all sales of the Wahu Wavetube and has acquired, instead, the DMC product. I accept that the inability to sell surfmats to the applicant's design to Amart has a significant impact on the ability of the applicant to make sales.
In respect of the question of what injury other than damages the applicant might suffer, I think that there is a serious over-statement of those risks in the evidence on behalf of the applicant. Mr Britz says that the continued sale by DMC of its product, pending a final hearing, would result in Britz Marketing ‘seriously considering’ sourcing surfmats from a different and cheaper source. He also says that, if the DMC products continue to be sold, he will have no alternative than to go to another design, so that he can pitch a new product for shops for next season's sales. I think there is a deal of exaggeration in the injury inherent in each of those aspects of the relationship between Britz Marketing and the applicant.
Nonetheless, in my judgment, the balance of convenience strongly favours the grant of the injunctions sought. The chronology of events, and in particular the history of the design of the DMC product - that is to say no design, but a direct copy - indicates that the respondents have decided to import and distribute the DMC product with their eyes open to the likely consequences of so doing.
It was submitted by Mr Burley of counsel on behalf of the applicant that, ‘No reasonable trader, having received the sales pitch from Mr Binkin [in June 2005] for the Wavestar, could reasonably ignore the existence of the rights [claimed in the design]’. Mr Burley put to the Court that a reasonable trader could not expect that it would not be exposed to the danger of legal proceedings of the type currently brought. I accept these submissions.
The strength of the applicant's case of deliberate copying by the first respondent favours the grant of the interlocutory injunction. The impugned DMC products are clearly and objectively a deliberate copy of the Wavestar. The person responsible for the design and manufacture of the DMC product knew that the product was a copy of the Wavestar, and knew of the claim that the design of the Wavestar product was protected by a Registered Design. In those circumstances, it seems to me that DMC has embarked on a task of ordering and importing the impugned products with its eyes wide open as to the potential consequences of do doing, namely, that it will be exposed to the present application.
It is an important consideration that the injunction in respect of restraining sales by DMC would not serve to prevent retailers from selling stock, title in which has already passed to them. I note, also, that the products are not perishable, and I have given directions so that there can be a final trial on the questions of infringement and validity heard in early December of this year.
I acknowledge that the issue of an injunction will cause loss or injury to DMC, but I am satisfied that any loss or damage suffered by the respondents, as a consequence of the grant of the interlocutory injunctions until the trial of those issues, will be covered by the proffered undertaking as to damages offered on behalf of the applicant.
On that undertaking, I order that, pending the trial of the questions of invalidity and infringement of the Registered Design in suit, or further earlier order, the first respondent be restrained by itself, its directors, officers, servants or agents, from manufacturing, importing, distributing, promoting, offering for sale, or selling, anywhere within Australia, any article of the design exemplified in exhibit 13 in these proceedings.
I order that the costs of the interlocutory application be reserved.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate:
Dated: 8 November 2006
Counsel for the Applicant: Mr Stephen Burley Solicitor for the Applicant: Mr Ken Philp Counsel for the Respondent: Miss Kylie Downes Solicitor for the Respondent: Mr Matthew Hall Date of Hearing: 1 and 2 November 2006 Date of Judgment: 3 November 2006
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