Norm Engineering Pty Ltd v Digga Australia Pty Ltd

[2007] FCA 761

FEDERAL COURT OF AUSTRALIA

Norm Engineering v Digga Australia [2007] FCA 761

INTELLECTUAL PROPERTY – consideration of a claim of infringement of copyright in drawings for the components of an assembled industrial bucket used with ‘Bobcat’ equipment – consideration of originality and authorship, subsistence of copyright, use by a respondent of a three‑dimensional article to indirectly produce drawings relied upon in manufacturing three‑dimensional articles – consideration of conscious copying - consideration of Part III, Division 8 (ss 74-77) – designs copyright overlap – consideration of reproduction of the work by application of a corresponding design to articles (pre‑17 June 2004 position) – consideration of embodiment of a corresponding design in a product (post‑17 June 2004 position) – consideration of damages pursuant to s 115(2) of the Copyright Act 1968 (Cth) and s 115(4) of that Act

Copyright Act 1968 (Cth), ss 10(1), 13, 14(1), 21(3), 31(1)(b), 32, 35(6), 36(1), 74-77, 77A, 115(2), 115(4)
Designs (Consequential Amendments) Act 2003 (Cth), s 14
Designs Act 1906 (Cth)
Designs Act 2003 (Cth)

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Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 - cited
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Lamb v Cotongo (1987) 164 CLR 1 - cited
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NORM ENGINEERING PTY LTD (ACN 010 799 943) v DIGGA AUSTRALIA PTY LTD (ACN 010 443 875)
QUD285 OF 2005

GREENWOOD J
18 MAY 2007
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD285 OF 2005

BETWEEN:	NORM ENGINEERING PTY LTD (ACN 010 799 943) Applicant
AND:	DIGGA AUSTRALIA PTY LTD (ACN 010 443 875) Respondent

JUDGE:	GREENWOOD J
DATE OF ORDER:	18 MAY 2007
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.The proceeding stands adjourned to a date to be fixed.

2.The costs of the proceeding and any question in relation to the applicant’s claim for interest, are reserved. 

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD285 OF 2005

BETWEEN:	NORM ENGINEERING PTY LTD (ACN 010 799 943) Applicant
AND:	DIGGA AUSTRALIA PTY LTD (ACN 010 443 875) Respondent

JUDGE:	GREENWOOD J
DATE:	18 MAY 2007
PLACE:	BRISBANE

REASONS FOR JUDGMENT

Background

1. The applicant is a manufacturer of equipment and accessories used in earthmoving applications. 

2. One example of such equipment is a bucket designed to be attached to a primary apparatus commonly described as a ‘Bobcat’ (which is a machine made by a particular manufacturer and badged under that trade name) but which is more generally described as a species of ‘skid steer equipment’.  That term derives from the fact that motors attached to the wheels of the machine enable it to turn sharply or abruptly in a way that effects a skidding movement. 

3. The standard bucket attached to skid steer equipment is in the shape of a scoop and allows the operator of the machine to push, load or scoop material using the leading edge of the bucket manipulated by the hydraulic arms of the skid steer apparatus.  A standard bucket is a fixed shape in the sense that there is no capacity to open sections of the bucket or effect a separation between the front scoop section and the rear section of the bucket in something akin to a jaw‑like effect. 

4. The applicant however also manufactures a bucket that does have that effect. 

5. It is commonly called a ‘4 in 1 bucket’.  When attached to the primary skid steer apparatus, additional hydraulic rams attached to the bucket, operated in conjunction with the skid steer’s hydraulic system, enables the lower part of the bucket to open and close thus enabling the operator to undertake four additional versatile functions of cutting, pulling or scraping material, a loading function and a clasping, holding or ‘grab’ action. 

6. The applicant’s 4 in 1 bucket is a piece of equipment assembled by the applicant comprising components or parts manufactured by the applicant and some components supplied to the applicant by other component manufacturers.  The total number of parts comprising the applicant’s 4 in 1 bucket is more than 30 and less than 40. 

7. The applicant contends in these proceedings that it owns the copyright subsisting in drawings for five particular components of its 4 in 1 bucket and the copyright subsisting in two drawings depicting aspects of the assembly of sections of its 4 in 1 bucket.  Copyright is said to subsist in the drawings as original artistic works of authorship (s 31(1)(b) Copyright Act 1968 (Cth) ‘Copyright Act’) of Mr Norman Pesch who originated the plans in March 2002 in his capacity as an employee of the applicant (s 35(6) Copyright Act).  The applicant contends that the respondent in October or November 2003 elected to incorporate a 4 in 1 bucket within its product range as a manufacturer and supplier of earthmoving equipment. 

8. The applicant contends that in order to do so, the respondent had regard to both an early version of the applicant’s 4 in 1 bucket (the ‘old Norm 4 in 1 bucket’, 1988) and a later version available in the market in October 2003 (a ‘new Norm bucket’ available in that form from 2002) not only for the purpose of conscious use of the old and new Norm 4 in 1 buckets as a source of ideas for the manufacture, assembly and sale of a competing 4 in 1 bucket but for the purpose of conscious copying of five components of the applicant’s 4 in 1 bucket.  Those components are said by the applicant to comprise key elements of its 4 in 1 bucket because each component is significant and material to the function and operation of the 4 in 1 bucket as a whole and the components are central to the geometry of the opening and closing mechanism of its 4 in 1 bucket. 

9. The respondent is said to have examined those five components in three‑dimensional form and brought into existence two‑dimensional drawings for the manufacture of the five components for assembly in the respondent’s 4 in 1 bucket and each respective drawing constitutes a reproduction of the applicant’s plan for the corresponding Norm part.  Secondly, the respondent is said to have constructed a three‑dimensional bucket in accordance with those plans.  The applicant’s complaint is framed in terms of the respondent’s overall conduct of copying its bucket.  However, the foundation of its claim is seven specific drawings (‘plans’ (s 10(1) Copyright Act) for five components of its 4 in 1 bucket said to have been ‘reproduced’. Copyright, by s 32 of the Copyright Act, subsists in an original artistic work. Section 31(1)(b)(i) provides that one of the exclusive rights comprised in the copyright in an artistic work is a right to reproduce the work in a material form which by s 10(1) includes any form of storage (electronic or otherwise) of the work or a substantial part of the work. Section 14(1)(b) provides that a reference to reproduction of the work includes a reference to reproduction of a substantial part of the work and s 21(3) provides that an artistic work shall be deemed to have been reproduced:

   (a)       in the case of a work in a two-dimensional form – if a version of the work is produced in a three-dimensional form; or

   (b)       in the case of a work in a three-dimensional form – if a version of the work is produced in a two-dimensional form.

10. Section 36 provides that an artistic work is infringed by a person who does or authorises the doing in Australia of any act comprised in the copyright without the licence or authority of the copyright owner and s 13 makes it plain that ‘an act comprised in the copyright’ is a reference to the bundle of exclusive rights conferred by s 31 including the reproduction right. 

11. The applicant has made an election to claim damages (s 115(2), Copyright Act). The applicant seeks a declaration as to infringement of its copyright in the plans for the five components and assembly drawings; an injunction restraining the respondent from infringing the applicant’s copyright in the plans by ‘constructing or manufacturing any equipment by use of the plans or any substantial part thereof’; additional damages pursuant to s 115(4) of the Copyright Act; and an order for delivery up of all infringing copies of the plans and related relief. 

    Short synopsis of the respondent’s contentions

12. The respondent accepts that it had access to the old Norm 4 in 1 bucket and in October 2003 made conscious use of the bucket as a source of ideas for the design and manufacture of a 4 in 1 bucket but denies conscious copying of the five components.

13. The respondent makes these additional contentions. 

14. First, it denies use of the new Norm 4 in 1 bucket as a source of ideas.  Secondly, it contends that the applicant has adopted an unorthodox approach in adducing evidence of its claim of authorship and originality of the works and thus subsistence of copyright in the plans with the result that, at the threshold, the applicant’s case necessarily fails for lack of proof.  Thirdly, it contends that if the sequence of development of the plans by the applicant involved developing a three‑dimensional part and then a two‑dimensional drawing simply as a version of the three‑dimensional work, copyright can not subsist in the drawing:– the drawing must come first.  Fourthly, the diversity of buckets available in the market at the dates on which the drawings are said to have been originated for the applicant’s 4 in 1 bucket, is compelling evidence of a lack of originality in the plans.  Fifthly, it contends that the applicant did not originate the plans in suit at the date alleged and thus copyright did not subsist in the plans at the moment in time when the respondent is said to have engaged in infringing conduct.  Sixthly, it contends that an examination of the plans makes it plain that its drawings do not constitute a reproduction of the applicant’s drawings.  Seventhly, the diversity of manufactured buckets in the market at the moment in time when the respondent developed its 4 in 1 bucket is compelling evidence that the features reflected in the respondent’s plans are consistent with features well known in the market and thus any similarity of features has not derived from copying the applicant’s components for its 4 in 1 bucket.  Eighthly, the applicant has failed to properly establish a foundation for the calculation of damages.

15. Ninthly, the respondent contends that if copyright subsists in each artistic work, the applicant has nevertheless industrially applied a corresponding design in circumstances where the corresponding design was either not registrable or had not been registered at the material time and thus by reason of Part III, Division 8, ss 74 to 77 of the Copyright Act, it is not, for the period prior to 17 June 2004, an infringement of the copyright in each artistic work to reproduce the works by applying that corresponding design to an article, at any time after articles made to the corresponding design were first sold (or offered for sale). Further, the respondent contends that after 17 June 2004, it is not an infringement of the copyright in each artistic work, by force of s 77(2) of the Copyright Act (introduced into the legislation by the Designs (Consequential Amendments) Act 2003 effective from 17 June 2004) to reproduce each artistic work on or after the day on which products made to the corresponding design were first sold (or offered for sale), by embodying that corresponding design in a product. 

16. The applicant joins issue with the respondent on all of those contentions and says firstly that even though the respondent made changes to its drawings for the components in March 2005 and further changes in October 2005, the changes are simply cosmetic changes designed to obfuscate the continuing conscious reproduction of the applicant’s works and secondly, the pre‑conditions for the operation of s 77 of the Copyright Act whether under the form of the legislation in existence prior to 17 June 2004 or as amended by the Designs (Consequential Amendments) Act 2003, are not satisfied.

    The foundation of the applicant’s case

17. The applicant asserts subsistence and ownership of the copyright in the following plans said to have been made on the following dates for five components of the applicant’s 4 in 1 bucket, namely:

    1.        a ‘side cutter bar’ (drawing BC 41 D013) dated 12 March 2002.

    2.        an ‘outside mounting bracket’ (drawing BC 41 D018) dated 4 March 2002;

    3.        an ‘inside mounting bracket’ (drawing BC 41 D016) dated 4 March 2002;

    4.a part described as the ‘pivot arms’ (drawing BC 41 D015) dated 12 March 2002; and

    5.        a ‘floor side plate’ (drawing BC 41 D014F) dated 12 March 2002. 

18. The applicant also asserts subsistence and ownership of the copyright in two assembly drawings said to have been made on the following dates, namely:

    (a)       a ‘front bucket assembly’ drawing (BC 41 A004) dated 4 March 2002; and

    (b)       a ‘rear bucket assembly’ drawing (BC 41 A003) dated 4 March 2002.

19. On 22 December 2005, Mr Pesch swore two affidavits.  One was the applicant’s verified List of Documents and the other contained paragraphs identifying by reference to the list, the drawings Mr Pesch said he drew reflecting improvements made to earlier drawings generally called the ‘first plans’ made by Mr Pesch’s father‑in‑law, Mr Acimovic.  Mr Pesch says these improvements are the result of his skill, labour, effort and work and thus this second group of plans are said to be original and the source of the applicant’s copyright.  Mr Pesch identified this second group of plans as documents 5 to 24 of the list.  The List of Documents attaches a copy of drawings 5, 6, 7, 8, 9, 10 (a second composite drawing for document 10 also marked BC 41 D0002), documents 11 to 22 inclusive and another drawing (marked BC 41 D014) reflecting aspects of the drawing at document 22.  No copy of drawing 23 (BC 41 D015) or document 24 (BC 41 B016) was attached to the list.  Drawings 5 to 8 and 10 to 22 attached to the List of Documents are all dated 9 October 2003. 

20. On 18 October 2005, the applicant filed a Statement of Claim and by paragraph 9 identified 19 plans in which copyright is said to subsist as the foundation of the applicant’s copyright.  Those plans were the plans identified in the applicant’s list (and nominated by Mr Pesch as the original works) pleaded in the order of the pleading, as documents 6, (another document being a version of document 6 designated with an additional letter ‘F’), 7, 8, 10, 11, 12, 13, 17, 16, (16 again), 15, 19, 14, 18, 20, 21 and 22 twice.  All of these plans were said by the pleading to have been made in March 2002. 

21. On 6 October 2005, the applicant filed an Amended Statement of Claim but made no change to plans said to be the foundation of the action. 

22. On 7 March 2006, the applicant filed a Further Amended Statement of Claim.  The applicant abandoned any reliance upon 17 of the 19 drawings previously pleaded; continued to rely upon two of the plans previously pleaded (BC 41 A003), an assembly drawing and (BC 41 D013) a drawing for a component described as a ‘side cutter bar’.  The pleading of 7 March 2006 introduced five additional plans into the action, namely:

    (a)       BC 41 A004 - a front assembly drawing;

    (b)       BC 41 D018 – an outside mounting bracket drawing;

    (c)       BC 41 D016 – an inside mounting bracket drawing (which is referred to in the applicant’s List of Documents as document 24 by that drawing number);

    (d)      BC 41 D014F – a front side plate drawing; and

    (e)       BC 41 D015 – a drawing depicting the ‘pivot arms’ for the bucket (which is referred to in the applicant’s List of Documents as document 23 by that drawing number).

23. Mr Pesch says by paragraph 2 of his further affidavit of 29 May 2006 that these seven plans the subject of the action, described as plans 185A to 185G, were drawn by him ‘at about the same time’ he drew plans numbered 5 to 24 in the applicant’s List of Documents.  All of these seven plans discovered as 185A to 185G are dated in March 2002.

24. The respondent says this fundamental reorganisation of the foundation of the action informs the answer to the question of when the works the subject of the suit were actually made and the consequential question of whether or not the conduct of the respondent could (absent any other considerations) involve a reproduction of any of the drawings in suit and thus an infringement of the applicant’s copyright, as no copyright subsisted in the plans in suit at the date of the respondent’s contended conduct. 

25. The reference to ‘BC’ in the applicant’s drawings is an abbreviation of bobcat.  The reference to 41 is an abbreviation of 4 in 1 and the ‘D’ reference signifies that the drawing is a drawing for a medium sized 4 in 1 bucket.  4 in 1 buckets are made in three sizes; a small bucket 300 millimetres (mm) to 1500mm in width; a medium bucket 1500mm to 1900mm; and a large bucket 1900mm to 2.5 metres.  This action concerns medium buckets.

26. These reasons attach a schedule that contains a drawing (marked 1.1) which depicts an elevated view of the Norm 4‑in‑1 bucket from both the side/front and the side/rear aspect of the 4 in 1 bucket showing the arrangements of the components.  The schedule also contains a number of photographs merely to illustrate the shape and configuration of the components in issue in the proceeding.  The photographs depict features present in a new Norm bucket being a bucket made after March 2002 reflecting in a three‑dimensional form features continuously present in new buckets made by the applicant and features present in a bucket made by the respondent on 12 October 2004.  The photographs in the schedule were taken by Mr Gould an expert called by the applicant and they are these:

    (a)       at Schedule 1.2, a photograph marked No. 9 of the applicant’s outside mounting bracket, floor side plate and side cutter bar;

    (b)at Schedule 1.3, a photograph marked No. 10 of the equivalent components of the respondent;

    (c)at Schedule 1.4, a photograph marked No. 11 of the applicant’s pivot mechanism (frontal view);

    (d)at Schedule 1.5, a photograph marked No. 12 of the respondent’s pivot mechanism (frontal view);

    (e)       at Schedule 1.6, a photograph marked No. 7 of the applicant’s pivot mechanism, floor side plate and side cutter bar taken from inside the bucket;

    (f)at Schedule 1.7, a photograph marked No. 8 of the respondent’s equivalent components.

    These photographs are simply illustrative of the description of the relevant features in the applicant’s 4 in 1 bucket and features depicted in the respondent’s three‑dimensional 4 in 1 bucket.  The issue to be determined in this action is whether the respondent’s three‑dimensional version involves a reproduction of any of the applicant’s drawings in suit and whether the respondent has made a reproduction of the applicant’s drawings by making a drawing either in the course of enabling a corresponding design to be applied for the manufacture of components or an assembled bucket, or otherwise. 

    A description of the components in issue

1. The shape of the applicant’s bucket might be broadly described as a scoop. 

2. The front section of the bucket comprises a floor which might be flat or slightly elevated.  The floor is essentially rectangular in shape.  The front section of the bucket has two sides attached to the base or floor, called ‘front side plates’.  They are triangular in shape with the base of the triangle welded to the floor plate with the cut off apex of the triangle providing, near the top, a point of welded attachment to a pivot apparatus which works in conjunction with the rear section of the bucket through manipulation of the pivot mechanism in conjunction with the inside and outside mounting brackets, to open and close the rear and front sections of the bucket. 

3. The back section of the bucket is a hollowed out rectangular section that joins the base plate when closed completing an integrated bucket of base, sides and rear section. 

4. Because the front triangular edge of each side plate is the immediate point of contact (together with the bevelled front edge of the floor plate) with earth, sand, rocks etc, the edge of each side plate suffers major wear and tear.  Accordingly, another component called a ‘side cutter bar’ is fixed to the triangular section of each side plate to effect the cutting action on presentation of the bucket under force to particular material and to absorb the wear and tear of that action.  The bucket has a particular functional geometry.  The side assembly of the rear section of the bucket is made up of a plate called an ‘outside mounting bracket’ that joins and partially closes over the front side plates of the bucket.  The outside mounting bracket, in the assembled position, has a pivot point in the top section for interaction with the pivot arms and, in a sense diagonally opposite that pivot point, a pivot point in the bottom section of the plate or bracket for attachment to an hydraulic ram. 

5. Attached to the top pivot point of the bracket by a pin is a component described as the ‘pivot arms’ or pivot mechanism.  The pivot mechanism is made up of two sections or ‘arms’.  The ‘outer arm’ is a straight section or flat plate welded to the front side plate of the bucket.  A second plate or ‘inner arm’ makes up a ‘double arm’ pivot around a pin.  The inner arm is separated from the outer arm by a circular tube between the two arms at the pivot point with the outside mounting bracket.  The inner arm is bent or folded some distance below the separating circular tube to abut the outer arm.  Between the two arms as the inner arm folds towards the outer arm, the notional triangular gap between the two is filled by a stiffening section or single plate.  At the top of each arm (viewed in the closed position for the bucket) is another pivot point for the attachment of an hydraulic ram.  A ram attached to the rear of the bucket located between the inside and outside mounting brackets when activated by the operator will pull down on the section between the top pivot points on the pivot arms which will cause the section of the pivot arms welded to the side plates of the bucket to lift the front section of the bucket open and cause rotation around the pin in turn connected to the top pivot point of the outside mounting bracket.  Pushing the hydraulic ram open closes the bucket.  The hydraulic ram is itself connected to the outside mounting bracket at the lower pivot point diagonally opposite the upper pivot point on the bracket.  The inside mounting bracket provides a corresponding connection point to the pin for the pivot arms and the outside mounting bracket provides some protection for the hydraulic ram and is shaped so as to facilitate appropriate access by the hydraulic hoses to the hydraulic ram. 

6. In functional terms, the interaction and operation of the inside and outside mounting brackets and the pivot arms is critical to the opening and closing of the front and rear sections of the 4 in 1 bucket.  One further preliminary matter should be mentioned.  The applicant suggested that it might be helpful to physically view the applicant’s new 4 in 1 bucket and compare it with the respondent’s 4 in 1 bucket.  During the course of the trial, a view was conducted.  In determining the issues in controversy I have not had regard to any matter or circumstance arising out of the view. 

   The evolution of the plans in suit

7. Mr Vlada Acimovic swore an affidavit dated 22 December 2005. 

8. Mr Acimovic is a European migrant; a boilermaker and general engineer by trade having studied at the Technical College at Belgrade, Serbia between 1948 and 1954; and the father‑in‑law of Mr Norman Pesch.  The applicant was founded by Mr Acimovic and was incorporated on 29 March 1988.  Before the applicant commenced business, Mr Acimovic operated a general engineering company which was sold in 1983.  In about 1984, Mr Acimovic purchased two skid steer loaders which formed part of an equipment hire business conducted by him.  Mr Acimovic was not satisfied with the bucket which was fitted to those machines. 

9. Mr Acimovic approached the new owners of his former business so as to use those facilities to build a new bucket which better suited identified needs and which was said to be an improvement on the buckets fitted to the two machines.  Mr Acimovic says that he worked in the workshop of his former business for some time and devised what he described as a ‘unique design’ for a 4 in 1 bucket.  Mr Acimovic says he used these buckets in a hire business which he operated after selling the former business.  Mr Acimovic says that a client expressed interest in the bucket and Mr Acimovic agreed to manufacture a bucket for that customer and sold him the finished product.  Requests grew for the supply of the buckets and this activity became the foundation of the applicant’s manufacturing activity.  Mr Acimovic says the request for buckets was so frequent that he elected to sell the hire business and began manufacturing 4 in 1 buckets full time according to his design. 

10. Mr Acimovic says that he established the new bucket manufacturing business; registered the name Norm Engineering; adopted the name ‘Norm’ because it was his son‑in‑law’s name; recognised that his son‑in‑law had an engineering background and intended that the new business would be Mr Pesch’s business. 

11. At paragraph 8 of his affidavit, Mr Acimovic says this:

    ‘8.Before the business was established, no plans of significance existed.  By this I mean that the only notes from which I manufactured the buckets were rough or rudimentary.  These were disposed of some time ago probably 1995.  These plans were prepared by me when I was principal of the business.  In the four year period in which the unincorporated business operated [1984-1988], I brought various rudimentary plans into existence and refined the design of the buckets.  It was not until after the applicant was incorporated that I began developing more sophisticated plans for the larger scale manufacture of 4‑in‑1 buckets with the assistance of draftsmen employed by the applicant.’

12. At paragraph 10, Mr Acimovic says this:

    ‘10.After the Applicant was incorporated, I, for the first time, instructed draftsmen to prepare plans to my specifications and direction.  The draftsman’s name was Joe.  I cannot recall his last name.  He was a full time employee of the applicant.  Those plans are document numbers 174 to 185 on the Applicant’s List of Documents.  This was the first time my design for buckets was systematically and comprehensively recorded (the First Plans).’

13. Mr Acimovic makes these further observations:

    ‘12.The Applicant produced 4‑in‑1 buckets utilising the First Plans for a period of about 14 years, until the design was changed.

    13.Between 1993 and 1997, the Applicant’s plans for the bucket were prepared in electronic form on the Applicant’s computer system by my son‑in‑law Norm Pesch.  These plans were transferred on to the computer system by him using Autocad software at a time when my son‑in‑law was employed full time by the Applicant.

    14.I retired from the business in or about July 1998.’

14. Mr Acimovic said that in designing his bucket he started with a standard bucket and thought it would be useful to ‘get something open and close and at that time there’s not many bucket’.  Mr Acimovic says that the bucket that he designed was the second such bucket in Australia.  The first was a Hughes bucket designed by Mr Tony Hughes from the Gold Coast which was sold to a business called Miller Brothers.  Mr Acimovic said that he did not know about the Hughes bucket when he designed his bucket.  Mr Acimovic said the 1988 drawings were made based on the bucket he designed in 1984.  Mr Acimovic said that he did not understand how to make drawings.  He understood how to make the product.  Mr Acimovic said that he helped Mr Pesch in 2001 in developing the later version of the bucket and again Mr Acimovic worked with the bucket not drawings.  Mr Acimovic said that he doesn’t ‘understand even to try drawing’.  I accept the evidence of Mr Acimovic.

15. Mr Norman Pesch swore an affidavit on 22 December 2005. 

16. Mr Pesch said that he started work for the applicant in 1989/1990 employed initially as a workshop supervisor although over time he became the general manager or principal of the business.  He presently holds that position.  Mr Pesch and his wife are the only directors of the applicant.  Mr Pesch also says that the applicant produced 4‑in‑1 buckets utilising the ‘First Plans’ as described by Mr Acimovic, for a period of about 14 years until the design was changed in 2001/2002.  Mr Pesch describes the development of the plans for the applicant’s 4‑in‑1 buckets in this way:

    ‘8.Between 1993 and 1997 the Applicant’s plans for the bucket were prepared in electronic form on the Applicant’s computer system while I was employed full time by the Applicant.  These plans were transferred on to the computer system by me using Autocad software.  My name appears on the plans as drawer.  Those plans are document numbers 25 to 153 on the Applicant’s List of Documents.  Most of these plans were drawn in 1994.  Some are marked with the copyright endorsement dated 1997.  That is because the Applicant had buckets constructed in Thailand for a short period around that time and wanted to be certain of copyright protection given that the plans were to be released to the overseas manufacturer for that purpose.  Nevertheless, those plans were brought into existence in 1994. 

    9.There are no significant changes between the First Plans and the plans I transferred on to the Applicant’s computer system.  At the time I transferred the plans on to the computer system, I was employed full time by the Applicant.  My aim was not to change the design; just to update and improve the applicant’s records.’

17. It is clear therefore that the act of Mr Pesch of transferring the ‘First Plans’ developed by Mr Acimovic on to the applicant’s Autocad computer system did not involve any act of original authorship. 

18. Mr Pesch continues:

    ‘10.The Applicant used the plans I had transferred on to the computer system until about 2001/2002.  At this time, the design for the buckets was changed.  This was because demands of customers had changed and the machines being produced by companies such as Toyota were of greater horsepower.  The changes evolved initially by working with the buckets in the workshop.  That process was managed by me working with employees of the Applicant to improve and make changes to the previous design.’

19. At paragraphs 11 and 12 of his affidavit, Mr Pesch describes the process of making changes to the First Plans and some of the changes which brought into existence additional plans, in these terms:

    ‘11.Once those changes had been made, the plans were changed to reflect the improvements me, my father‑in‑law and employees of the Applicant had decided should be made.  Those plans are document numbers 5 to 24 on the Applicant’s List of Documents (the Second Plans).  There are 19 plans comprising that bundle.  Each of those plans show only component parts of the bucket.  I also drew those plans using Autocad.  The main changes made to the buckets were to the pivot system to incorporate a stronger and better structure.  We had found that with machines of greater horsepower, buckets were susceptible to break at this point.  The other major change was to the geometry of the way the bucket functioned.  This meant that two sides of the buckets were altered so that wear was reduced. 

    12.The buckets manufactured by the Applicant replace a standard bucket used on machines commonly known as bobcats.  Those buckets have hydraulic rams attached to them which operate to open and close the lower part of the buckets.  The bucket is connected to the bobcat or similar machine using a lip connection at the top rear of the bucket and two pin connectors at the bottom of the bucket.’

20. On 29 May 2006, Mr Pesch swore a further affidavit referring to paragraph 11 of the affidavit sworn on 22 December 2005 deposing to the plans.  By paragraph 2 of the subsequent affidavit, Mr Pesch described matters relevant to the development and authorship of documents numbered 185A to 185G in these terms:

    ‘2.Documents numbered 185A to 185G were also drawn by me using autocad on or about the dates appearing on those plans.  I drew these plans at or about the same time I drew the plans which are documents 5 to 24 of the applicant’s list and while I was employed full time by the applicant.  The plans which are documents 185A to 185G were also drawn to reflect improvements which me, my father-in-law and employees of the applicant had decided to make.’

21. Documents 185A to 185G are the documents referred to in [17] and [18].  A number of things emerge from paragraphs 10 and 11 of Mr Pesch’s affidavit of 22 December 2005 and paragraph 2 of his affidavit of 29 May 2006. 

22. First, the moment in time when Mr Pesch made design changes to the ‘First Plans’ for the bucket is said to be 2001/2002.  Secondly, the changes are described as ‘design changes’.  Thirdly, the changes were made necessary so as to respond to demands from some customers due to the greater horsepower of some machines using the buckets.  Fourthly, initial changes occurred by making changes to the bucket itself in the workshop and as a result Mr Pesch says he managed the process to ‘improve and make changes to the previous design’.  Fifthly, once the changes had been made to the bucket, the plans were changed to ‘reflect’ the changes.  Sixthly, the plans which show the content of the changes emanating from Mr Pesch’s improvements to the First Plans comprise 19 new plans called the ‘Second Plans’.  Those 19 plans are identified by reference to the applicant’s List of Documents and all 19 plans are attached to the list verified by Mr Pesch in December 2005.  Seventhly, each of the 19 plans relates to component parts of the bucket and Mr Pesch says he drew those plans using Autocad software.  Eighthly, Mr Pesch describes two features of the componentry for the bucket and the orientation of those components as an explanation of the changes to the bucket and thus the changes resulting in the second plans.  Mr Pesch says that it was necessary to incorporate a stronger and better structure for the buckets because under additional horsepower, the buckets tended to break using the existing design for the pivot system which under hydraulic pressure would cause the bucket to open and close.  Mr Pesch says the other major change to the design resulting in changes to the plans concerned the geometry of the bucket which meant that ‘two sides of the buckets were altered so that wear was reduced’.

23. Paragraphs 10 and 11 of Mr Pesch’s affidavit of 22 December 2005 and paragraph 2 of his affidavit of 29 May 2006 represent the total evidence‑in‑chief of the applicant as to the scope and content of the skill, work, effort and labour deployed by Mr Pesch as author of the Second Plans to bring into existence original works in which copyright subsists. 

24. Ordinarily, the author of each artistic work would identify the plan, explain each of the circumstances which caused the plan to be brought into existence, the precise steps taken to address the inadequacies in the existing plans and those features of each drawing which are the emanation of the work, skill, effort and labour of the author.  The applicant in this case has elected to identify the plans by reference to the List of Documents, assert authorship of the 19 plans and plans 185A to 185G and identify the scope and content of the changes to the First Plans by means of inviting a comparison between the pre‑existing First Plans and the Second Plans aided by the explanation at paragraph 11 of the affidavit of 22 December 2005 and paragraph 2 of the affidavit of 29 May 2006. 

25. However, Mr Pesch gave oral evidence of the development of the plans in suit and the date of creation of changes to the 4 in 1 bucket and the consequential changes to the drawings.  It is necessary to closely examine this evidence in assessing the originality of the Second Plans and in determining the date of authorship of those plans. 

26. Mr Pesch says this.

27. In 1988, the applicant continued to manufacture 4 in 1 buckets based on the design developed by Mr Acimovic although the plans were changed in 1988.  The First Plans are properly to be understood as those plans altered by the applicant in 1988 and used until the changes in 2001/2002. 

28. Mr Pesch has computer design skills and until 2006 Mr Pesch was the person who did most of the design work using computer aided design software called ‘Autocad’.

29. Using those skills, Mr Pesch transferred the handwritten First Plans on to the computer system. 

30. In order to do so or otherwise design a drawing for a component using Autocad, the author starts with a standard size title block (setting out the name of the company, part description, drawing number, date drawing made, date of revision etc) and a standard A3 or A4 ‘outline’ to contain the drawing to be developed.  The author will when setting up the A3 or A4 title block and outline insert manually the name of the author and the date of that action. 

31. After transferring the First Plans on to the computer system and into the title block and outline format, the applicant no longer had any real need for the retention of hard copy drawings and ‘pretty much’, says Mr Pesch, ‘no longer relied on manual drawings’. 

32. The applicant operates an administration or drafting office where the computer operating the Autocad software is located.  Downstairs from that office is the workshop.  Some drawings are stored in the administration office.  Components made occasionally by the applicant would require a drawing to be printed from the Autocad system and taken to the workshop.  Drawings for other components made more often are kept in the workshop.

33. When plans are amended using Autocad, the Autocad system stores or represents the latest version of the drawing.  Changes or revisions to a drawing ought to be noted manually by the author in the title block in the ‘revision’ lines.  Revision details (and dates) were not always entered as a matter of good discipline.  Mr Pesch says that if he remembers to enter the revision date when a change is made, the title block will reflect those revision details; if not, it will not. 

34. When creating a drawing on the Autocad system, sometimes the author will copy the title block and the drawing into the new A3 or A4 outline and make changes to the drawing.  The date of the transfer and consequential changes giving rise to the new drawing should be manually entered in the title block.  As a result of transferring or copying across a title block, the date depicted in the title block in the new drawing might not reflect the date the drawing was drawn.  The date the drawing is done is contained in a box at the foot of the title block and the date of revision is a separate set of boxes above the title of the applicant in the title block. 

1. Notwithstanding the lack of discipline concerning the insertion of a revision date, Mr Pesch acknowledged that he appreciated the importance of inserting a date in a drawing. 

2. In 2001 and 2002, Mr Pesch, together with the assistance of his father‑in‑law and some employees of the applicant made changes to the 4 in 1 buckets; began making the changed buckets in November 2001; first brought into existence the new drawings [17] and the assembly drawings [18] in March 2002 thus ‘formalising’ the physical changes made to the 4 in 1 buckets; and thereafter, from time to time, amended the drawings. 

3. The respondent put to Mr Pesch that the Second Plans were actually created in September 2003.  Mr Pesch said ‘no’ and said he ‘would have said 2002’.  Mr Pesch said he would not rule out the possibility that it was that late and agreed that he was not sure of the date but ‘I thought it was done much earlier than that’. 

   The floor side plate drawing (BC 41 D014F) – document 185D

4. Document BC 41 D014F for the ‘floor side plate’ bears the date 12 March 2002.  Mr Pesch said he could not recall the exact date of creation of the drawing but that it was early 2002.  Mr Pesch accepted that it was possible that the document was created as late as September 2003.  The respondent drew Mr Pesch’s attention to the noted addition of ‘flat floor dimensions’ to the drawing on 3 February 2006.  That version of the drawing was produced by the applicant in discovery in March 2006.  Thus the respondent put to Mr Pesch that the drawing incorporates any revisions made to the document up to the date of printing out the drawing.  If so, the drawing reflecting the original work leading to the changes in November 2001 and March 2002 could not be seen in document 185D.  Mr Pesch said that the drawing reflects the features of the floor side plate ‘right at the start’ of the changes he made. 

5. As to the floor plate itself, Mr Pesch agreed that the ‘borders’ of the old plan (1994) for the floor side plate depict a general triangular form; the triangular form is ‘pretty much the same’ in the new drawing (BC 41 D014F); and that as to the shape at least, the two drawings are just the same.  Mr Pesch says the dimensions however are not the same. 

6. As to the date of creation of the new drawing, the respondent took Mr Pesch to a printout of a ‘statistics’ box produced automatically by the Autocad system for plan BC 41 D014F which records ‘Created:  Thursday, 18 September 2003 3:12:50PM’ and ‘Modified:  Sunday, 5 February 2006 1:18:57AM’ and ‘Total editing time:  56 hours, 16 minutes’. 

7. Mr Pesch says that the statistics box does not accurately state the date and time of creation of the drawings; the statistics box records a date and time but it is ‘not what happened’; and the drawing was drawn ‘well before then … in early 2002’.  Mr Pesch attributes the information contained in the statistics box to a legacy of upgrades of the Autocad system of which there were either two or three.  Mr Pesch suggests that such upgrades are a possible explanation for the entry.  Mr Pesch says the ‘Modified’ information reflecting a time of 18 minutes past 1 in the morning on Sunday, 5 February 2006 is not accurate and highly unlikely because Mr Pesch would have no reason to be in the administration office where the computer is located at that early hour of Sunday morning. 

8. The respondent took Mr Pesch to page 30 of Mr Pesch’s sworn List of Documents on behalf of the applicant.  At page 30 of the list is a version of the applicant’s plan BC 41 D014.  This plan depicts a floor side plate for a Norm 4 in 1 bucket with an elevated floor plate whereas BC 41 D014F represents a floor side plate for a ‘flat’ floor 4 in 1 bucket.  Mr Pesch says that there are no real differences between the two plans and they are essentially the same plan but for the elevation.  The ‘F’ simply identifies that drawing BC 41 D014F is the drawing for the flat floor 4 in 1 bucket.  The version of the plan at page 30 reveals a date of creation of 9 October 2003 drawn by ‘CMK’.  The document also notes a revision entry of ‘original issue’, CMK, 10 October 2003.  Document 22 in the applicant’s discovery is also a version of drawing BC 41 D014 which bears a creation date of 12 March 2002.  The respondent put to Mr Pesch that the date of 12 March 2002 was not the date of creation of the document having regard to the inconsistent later date of October 2003 noted in the document at page 30 to the List of Documents.  The respondent also put to Mr Pesch that his evidence as to the date of creation of the document was simply not correct; that the Autocad statistics correctly reflect the date of first creation in September 2003; and that the author of the document was not Mr Pesch but the individual whose initials are CMK. 

9. Mr Pesch denied these contentions and offered an explanation for the reference to CMK.  Mr Pesch says that the initials CMK are the initials for Mr Colin McKay.  Mr Colin McKay is a consulting engineer from a company retained by the applicant to undertake a stress and load‑bearing analysis called a ‘finite element analysis’ on the applicant’s 4 in 1 buckets.  The drawings for the applicant’s ‘4 in 1 buckets were electronically transferred to Mr McKay who undertook the engineering analysis and electronically transferred the drawings back to the applicant.  Mr Pesch says that Mr McKay did not create the drawings but merely undertook the finite element analysis in order to deal with the stress and load‑bearing failures reported to the applicant. 

10. Mr Pesch says that notwithstanding the apparent inconsistency between dates, he was the author of drawing BC 41 D014F; that the drawing was created in early 2002 and that Mr McKay’s engagement to undertake the finite element analysis explains the entry of the initials CMK into the document. 

    Outside mounting bracket (BC 41-D018) – document 185G

11. Drawing 3000 OS for a Norm outer mounting plate dated 30 August 1993 is the drawing Mr Pesch transcribed from the old plans to the Autocad system.  The date 30 August 1993 was manually entered into that system.  Drawing BC 41 D002 dated 4 March 2002 represents the equivalent part designed by Mr Pesch.  Mr Pesch says that the two drawings are similar.  They are not the same.  One difference is that the pivot points are not the same distance apart.  Another difference is that the lower front edge of the bracket which meets the floor side plate has three teeth used for gripping articles.  A further difference is that the back section of the bracket contains a straight edge leading down to the base of the bracket which reflects a protrusion leading down to and around the lower pivot point for the bracket, commonly described as a kink. 

12. A further difference is an acute angle from the top pivot point to a point approximately 40% along the line of the front edge of the bracket and a less acute angle of line continuing to the lower pivot point, in the 1993 bracket on the one hand, and a slight angle from the top pivot point to a point approximately 15% along the line of the front edge and then a continuous gradual slope until the commencement of the three teeth in the new bracket, in the new drawing, on the other hand.  Mr Pesch says that these were design choices he made which could have been any one of a number of permutations of design choices available to him.  The respondent put to Mr Pesch that he decided to adopt these changes because he thought it would look and work better and Mr Pesch agreed. 

13. Drawing BC 41 D018 is the same part reflected in BC 41 D002 but standing in an upright position.  Both drawings reflect a date of creation of 4 March 2002.  The respondent put to Mr Pesch that having regard to the numbering sequence D002 to D018, drawing D018 was necessarily created later than D002.  Mr Pesch agreed that because the drawings have a different drawing number, each drawing was created at a different time.  One of the differences between the drawings apart from the upright presentation of the bracket is that drawing D018 contains dimensions such as the distance between the centre points of the two pivot points and other dimensional information. 

14. The respondent put to Mr Pesch that the two documents could not possibly have the same actual date of creation of 4 March 2002 being separated by 16 other numbered drawings.  Mr Pesch gave evidence that the date of creation could be the same for each document if the title block for the earlier document was copied into the title block and outline for the drawing for D018.  Mr Pesch agreed that the date appearing in the title block might be the date copied across but the date of actual creation may be ‘somewhat different’.  The respondent suggested to Mr Pesch that the date of creation of drawing BC 41 D018 is likely to be about September or October 2003.  Mr Pesch disagreed.  The respondent then took Mr Pesch to a similar print out of the statistics box for drawing BC 41 D018 contained within the Autocad system which reveals a date of creation of Thursday, 18 September 2003 at 3:12:50pm and a date of modification of Saturday, 4 February 2006 at 10:00:24am and a total editing time of 62 hours and 58 minutes. 

15. The respondent put to Mr Pesch that 18 September 2003 at 3:12pm was the date and time that the layout and title block was created for the purpose of creating drawing BC 41 D018.  Mr Pesch disagreed and gave evidence that he was not exactly sure how the Autocad system generated electronic information of that statistical kind but that changes to the Autocad system previously described as ‘upgrades’ might explain the generation of those dates.  The respondent put to Mr Pesch that his evidence seemed to be that the electronic system was wrong but that his manually entered date was correct.  Mr Pesch gave evidence that, ‘What I am suggesting is, I’m not sure.  I’m telling you the drawings were created before that date, well and truly before that date’. 

    The inside mounting bracket (BC 41 D016) – document 185F

16. Drawing 3001 OS dated 22 September 1994 is a drawing of an inside mounting bracket forming part of the First Plan which Mr Pesch electronically transferred on to the Autocad system.  The drawing for that part amended by Mr Pesch and forming part of the Second Plan is drawing BC 41 D001 which bears a date of 4 March 2002.  A drawing for the same part depicting the part in an upright version is drawing BC 41 D016 (document 185F). 

17. Mr Pesch agreed that the general relationship between the pivot points of the inside mounting bracket depicted in the 1994 drawing and BC 41 D001 is approximately the same.  Mr Pesch agreed that on the right hand side of the mounting bracket in the old version (ie. the First Plan version), there is a cut away section of the bracket at the lower point (in an upright position) whereas in the new version or Second Plan there are two pivot points.  Mr Pesch agreed that the general shape of the old and new versions is approximately the same.  Mr Pesch also agreed that the differences between the two drawings are design choices made by the designer of the new part to make the part work better and make it look better.  Mr Pesch agreed that there could have been any number of other permutations that might have been selected. 

18. Other differences selected in relation to the new Second Plan include the angulation of the front section of the bracket, the angulation of the back section from the point of the back hydraulic hose fitting to the top pivot point and the shape of the bottom section of the bracket with the introduction of a pivot point within the bottom section of the bracket.  Mr Pesch agreed that BC 41 D001 is a drawing created before BC 41 D016 and that both drawings reflect the same part reflecting the same defined shape.  Mr Pesch agreed that the difference between the two drawings BC 41 D001 and BC 41 D016 is that there are dimensions noted on BC 41 D016 and the orientation of the part in that drawing is in an upright position whereas in BC 41 D001 the part is displayed horizontally. 

19. The respondent put to Mr Pesch that drawing BC 41 D016 was not incorporated into the applicant’s Autocad system until 18 September 2003 and that having regard to the statistical properties box for drawing BC 41 D016 in the Autocad system, the drawing was created on Thursday, 18 September 2003 at 3:12:50pm and modified on Sunday, 5 February 2006 at 1:18:18am with total editing time in all of 60 hours and 7 minutes.  Mr Pesch accepted that the statistics box reflected that information but attributed the information to an upgrade in the Autocad software and possibly upgrades in the applicant’s computers as well. 

20. Mr Pesch explained that the applicant holds a licence for the use of Autocad software; the licence is operated on one computer; that computer has been upgraded; it is located in the administration office; and that an upgrade has occurred in the last 18 months.  Mr Pesch acknowledged that he did not know how the statistical information in the properties box is logged by the Autocad system or how that system selects the date and precise times identified in the box.  Mr Pesch suggested that the drawings may have been copied and then transferred on to a new computer.  The respondent took Mr Pesch to a version of BC 41 D001 contained at page 15 of the applicant’s list of documents which Mr Pesch agreed was the same drawing as document number 8 in the applicant’s discovery bearing the date 4 March 2002.  Mr Pesch agreed that the only difference in the two drawings is that document 8 is endorsed in the title block with a date of creation of 9 October 2003 and in the revision block the notation ‘Original Issue, CMK, 15.10.2003’. 

21. The respondent put to Mr Pesch that drawing BC 41 D001 which is the same drawing reflected in BC 41 D016 although in a different orientation was drawn by the person whose initials are CMK.  Mr Pesch again explained that the role of Mr McKay was to undertake a stress testing analysis; that a copy of the drawing was communicated to Mr McKay on a CD; that Mr McKay entered the revision details of 15 October 2003 in the revision boxes and that Mr McKay inserted his initials of CMK, manually.  Mr Pesch was again pressed about these issues and his contention that Mr McKay made those changes.  Mr Pesch said he had no other explanation for the insertion of the reference to CMK or the date and that it could only have arisen in that way.  Mr Pesch said that he sent the documents to Mr McKay for the purpose of the analysis and it may be that Mr McKay inserted his details as he was dealing with the drawings for the 4 in 1 bucket for the purposes of the finite element analysis.  The respondent put to Mr Pesch that Mr McKay had no reason to include his own name in the document.  Mr Pesch accepted that proposition.  The respondent put to Mr Pesch that it is more probable than not that Mr Pesch changed the title block in the document which was later produced (BC 41 D016) to reflect a date of 4 March 2002.  The respondent also suggested that the true date of creation of BC 41 D001 and BC 41 D016 was September 2003. 

22. Mr Pesch disagreed with both those propositions. 

    The side cutter bar (BC 41 D013) – document 185C

23. Drawing 5071 NS dated 20 September 1994 is a drawing of a ‘side cutting edge’ for a 4 in 1 bucket being a plan Mr Pesch translated on to the Autocad system from the manual drawings in 1994.  That drawing depicts a shape for the side cutter bar which Mr Pesch agrees is the same shape as the drawing for a side cutter bar marked with the number 1 on drawing BC 41 D013.  Both drawings contain a shape for the side cutter edge or bar which reflects a shape described as a ‘lopsided arrow feature’.  Mr Pesch gave evidence that the particular detail described as the lopsided arrow feature was necessary in order to fit around the floor side plate.  The drawing BC 41 D013 also reflects an edge profile for the cutter bar with bevelled edges.  Mr Pesch says that selection was a design choice selection.  Drawing BC 41 D013 depicts a typical flame cut bevel section with steel thickness of 16mm.  Mr Pesch accepted that the applicant’s 4 in 1 buckets are not made to a thickness of 16mm and that drawing BC 41 D013 is not an accurate drawing for manufacturing purposes. 

24. The respondent took Mr Pesch to the information contained in the statistics box within the Autocad system which suggests that the drawing was created on Thursday, 18 September 2003 at 3:12:50pm and modified on Saturday, 4 February 2006 at 5:19:36am with a total editing time recorded for the document as 39 hours and 32 minutes.  Mr Pesch denied that the information in the statistics box accurately reflects the date on which the Autocad file was first opened for the purpose of creating drawing BC 41 D013 for the reasons previously articulated.  Mr Pesch gave evidence that in February 2006 he was the only person who worked on the drawings the subject of this action.  Mr Pesch acknowledged that another draftsman employed by the applicant had access to the computer; that the draftsman did not have access to the applicant’s premises at 5:19am on a Saturday as the applicant’s workplace was not open; that Mr Pesch did not have a computer at home where he could be making amendments to drawings; and as far as Mr Pesch knows, no other person has such access. 

25. The respondent took Mr Pesch to a document at page 29 of the applicant’s discovery bundle which is a version of BC 41 D013.  Mr Pesch agreed that both drawings depicted the same part and that they are identical except that the document at page 29 is dated 9 October 2003, bears the endorsement of CMK as the drawer of the document and notes a revision date by CMK of 15 October 2003.  Mr Pesch acknowledged that he had no explanation for the change other than the explanations given previously for like changes.  The respondent suggested to Mr Pesch that he had manually changed the title block in drawing BC 41 D013 to suggest a date of 12 March 2002 which inaccurately reflected the proper time of creation of the drawing.  Mr Pesch disagreed with the respondent and observed that in using the computer and Autocad design software ‘Quite a few things are copied, backed up, shifted around on the computer.  Perhaps we have two different sets here.  I’m not sure’. 

26. Mr Pesch acknowledged that in fact he had no idea of the source of or explanation for the inconsistencies.  The respondent put to Mr Pesch that the correct answer is that the Autocad software accurately records information.  Mr Pesch disagreed that the information in the statistics box accurately reflects the date of creation of the document. 

    The pivot arms (BC 41 D015) – document 185E

27. Drawing 3003OS depicts the pivot arm of the applicant’s 4 in 1 bucket in accordance with the First Plans during the period of manufacture between 1993 and 1997.  It shows a single pivot arm connected to the side plate of the bucket.  Drawing 3003 OS also depicts the main pivot arm, the shape, fold line and profile drawing.  Drawing BC 41 D015 depicts a pivot arm that comprises two sections described as the inner and outer pivot arms.  The outer section (ie the section furtherest away from the centre point of the bucket looking towards the front assembly for the bucket) is a straight section welded to the floor side plate.  The inner section is a partially straight section with an identified fold line that ‘cranks’ or ‘folds’ the inner section to join the outer pivot arm.  The two sections are stiffened by a single plate between them.  Immediately above the stiffening plate at the lower of the two pivot points is a circular section.  The top pivot point is the top end of the pivot mechanism to which the hydraulic ram is attached which manipulates the pivot causing the bucket to open and close. 

28. The pivot assembly necessarily contains two pivot points.  The top point is the place of attachment of the ram and the lower point is the point of rotation effecting the separation of the two sections of the bucket.  The pivot assembly depicted in the Second Plans is a different design conception to that of the First Plans.  The respondent put to Mr Pesch that in drawing 3003 OS and drawing BC 41 D015 the distance between the centre point of each pivot point is essentially the same.  Mr Pesch disagreed and gave evidence that the difference between those points is a distance of approximately 22mm. 

1. The top section of drawing BC 41 D015 depicts the outer pivot arm; the outer pivot arm in profile (top right) and a dimensional drawing for the outer pivot arm in the top left section. 

2. The bottom section of drawing BC 41 D015 depicts the inner pivot arm, the inner pivot arm in profile (bottom right) and an inner pivot arm dimensional drawing at the bottom left section of the drawing.  The respondent in order to save time did not put to Mr Pesch the same sequence of questions concerning inconsistencies in dates between the date nominated on the block for drawing BC 41 D015 of 12 March 2002 and later dates emerging from a consideration of the statistics box derived from the Autocad software.  That statistics box suggests for the purposes of BC 41 D015 that the document was created on Thursday, 18 September 2003 at 3:12:50pm, modified on Friday, 3 March 2006 at 9:10:48am and total editing time for the document is recorded at 64 hours and 41 minutes.

   Front assembly bucket (BC 41 A004) – document 185B

3. Drawing BC 41 A004 depicts the front assembly of the bucket and shows the pivot mechanism, looking towards the bucket from directly in front of the bucket (the centre drawing); the pivot arm looking towards the pivot mechanism from outside the bucket (the left drawing); and the pivot mechanism viewed from inside the bucket (the right hand drawing).  The drawing also shows the relationship between the pivot arms, the floor side plate and the side cutter bar.  The components primarily depicted in the assembly drawing are the orientation of the pivot arms.  Mr Pesch agrees that there is no difference between the pivot arms depicted in this assembly drawing and those depicted in BC 41 D015.  The date endorsed on drawing BC 41 A004 is 4 March 2002.  Similarly, the statistics box for the Autocad system contains information which suggests that this drawing was created on Thursday, 18 September 2003 at 3:12:50pm, modified on Saturday, 4 February 2006 at 5:13:38am with total editing time for the drawing being 58 hours and 20 minutes.  The respondent adopted the same position in relation to the apparent anomalies in the creation and modification dates for this drawing as put to Mr Pesch in respect of the earlier drawings. 

   Rear bucket assembly (BC 41 A003) – document 185A

4. Drawing 4400 NS depicts the applicant’s drawing for the assembly of the rear section of the bucket at 20 May 1997.  This drawing is one of the ‘First Plans’ translated by Mr Pesch on to the Autocad system.  Drawing BC 41 A003 bears the date 4 March 2002 and is a drawing from the Second Plans of the rear bucket assembly.  The drawing in the top right hand section depicts the relationship between the inside and outside mounting brackets viewed from the rear of the bucket.  The drawing from the First Plans also shows the relationship between the inner and outer mounting brackets.  Mr Pesch notes that there is a difference between the drawings from the perspective of the rear section of the bucket in that the bushes in the Second Plans are wider apart because the distance of the pivot arm has been extended.  Mr Pesch is able to distinguish that difference because of his knowledge of manufacture of the 4 in 1 bucket.  However, Mr Pesch acknowledges that the difference he has identified can not be discerned by simply looking at the drawings. 

5. Mr Pesch identifies a second difference which he puts this way.  An examination of the earlier drawing (item 4 on the 1997 drawing) shows that the inner gusset is a different shape due to the change in the shape of the pivot arms.  A further difference is that because the mount for the cylinder for the hydraulic arm has been redesigned the features noted at items 5 and 8 of the 1997 drawing are not present in the later drawing.  Drawing BC 41 A003 is document 185A.  In this drawing the detail containing references to the Autocad system depicted as particular numbers within a circle, have been deleted and in their place dimensional information has been inserted in the drawing.  The drawing containing these deletions and additions also bears the date 4 March 2002. 

6. Mr Pesch accepted that he inserted the measurements into the drawing; could not recall when the measurements were inserted; accepted that they were not inserted on 4 March 2002; accepted that at 9 September 2005 drawing BC 41 A003 contained the Autocad references; accepted that the deletions and additions to the drawing were done by Mr Pesch well after the proceedings commenced; and that the drawing with the deletions and dimensional additions were supplied to Mr Gould, the applicant’s expert, on the footing that the drawing bore the date of 4 March 2002. 

7. The following exchange then took place between the respondent and Mr Pesch. 

   ‘Q:And yet the details included in that drawing weren’t put in then [4 March 2002] were they?

   A:       No.

   Q:And in fact you inserted those dimensions into the drawing to improve your prospects in these proceedings against Digga, didn’t you?

   A:       Only to make it more clear.

   Q:       To make it more clear for your case?

   A:       No, illustrating the dimensions of the parts are the same.

   Q:So you did that so that the court would look at that and think that there were more similarities between the two drawings, didn’t you?

   A:Yes.

   Q:And so you have been tailoring this material so that it becomes better for you in your case against Digga, haven’t you? 

   A:No.

   Q:Did you draw those dimensions to Mr Gould’s attention when you provided the drawings to him?

   A:I don’t believe so, no.

   Q:You have had a conversation with Mr Gould though, haven’t you?

   A:Yes, I have.

   Q:And you’ve talked about the drawings, haven’t you?

   A:I don’t think these specific drawings, no.

   Q:Now, whereabouts in the revision block does it indicate that you made those amendments?

   A:It doesn’t.

   Q:You deliberately didn’t include that in the revision block because you knew it wouldn’t assist your case, didn’t you?

   A:No, I did not.

   Q:You knew that dates were important in the context of this case, didn’t you, the drawings?

   A:I did not.’

8. Like the other drawings, the statistics box for drawing BC 41 A003 suggests that the document was created on Thursday, 18 September 2003 at 3:12:50pm and modified on Sunday, 5 February 2006 at 3:42:12am. 

9. In re‑examination on these issues, Mr Pesch gave evidence that he added the dimensions to the drawing and removed the references previously discussed but did not alter or change in any way the structure or design of the drawing.  In terms of adding dimensions, Mr Pesch gave evidence that the image reflected in the drawing is drawn in full size on the computer and the Autocad system has a function that enables dimensions between two nominated points to be automatically imposed on the drawing.  Mr Pesch says the addition of the dimensions does not change the depiction itself. 

   The anomaly of the dates

10. Mr Pesch has given evidence that each of the drawings in suit were created in March 2002 apart from drawing BC 41 A003 which Mr Pesch acknowledges was not created on 4 March 2002 and that the deletions and additions to bring into existence document 185A occurred well after the proceedings commenced.  As to the remaining documents, Mr Pesch maintains the position that they were brought into existence in March 2002. 

11. The first anomaly in relation to the dates of creation for the drawings is that each of the drawings from pages 13 to 30 of the List of Documents sworn December 2005 are endorsed with a date of 9 October 2003.  The second anomaly is that the statistics box for each of the drawings in suit suggest a date of creation of Thursday, 18 September 2003 at 3:12:50pm which is precisely the same time to the second for every drawing.  Moreover, some of the drawings suggest times of modification which seem inherently unlikely such as Sunday, 5 February 2006 at 1:18:57am for drawing BC 41 D014F.  It is unlikely that modifications were occurring to a drawing at that time, at least according to an ordinary course of business assessment.  Plainly, each of the drawings could not have been created at the precise same second. 

12. One explanation for the common creation date in each drawing is that offered by Mr Michael Bruce Jarvis in an affidavit sworn 20 June 2006 which seems consistent with an explanation offered by Robert Lewis Stanford in an affidavit sworn 21 June 2006. 

13. Mr Jarvis is the manager of ADA CAD Partners Pty Ltd which is described by Mr Jarvis as the ‘authorised Autodesk Systems Centre’ for Queensland.  Autodesk creates and supplies Autocad computer system drafting programs to the market.  Mr Jarvis says that he is very familiar with the operation of the Autocad software program and how it works.  Mr Jarvis says this.  The date ‘Created’ field is automatically entered into the statistics part of the properties file by the program itself by interaction between the software with the particular computer’s internal clock which is built into the operating system for each computer.  The ‘Created’ field displays the date and time when a particular file was first created.  The date which appears on a printed copy of a drawing stored electronically can be changed by the user at a later time but the program will continue to record the original date of creation both as to date and time. 

14. That information will remain constant. 

15. If data stored electronically in the Autocad system is transferred from one computer to another (such as in the case of a user’s purchase of new equipment), the date created information would not change simply as a function of transposition of the data from one computer to another.  Similarly, if a user upgrades to an updated version of Autocad then subsequent use of the updated version of the software would not change the date created information.  That data is retained electronically. 

16. Mr Jarvis was asked to comment on the circumstance that a number of engineering drawings might display the precise same date and time of creation in a series of Autocad files.  Consistent with Mr Jarvis’s explanation of a creation date being generated automatically when a particular file is first created, one would expect each separate file to bear a creation date unique to that file with its CAD file drawing reference.  Mr Jarvis suggests that the explanation is likely to be that the user has elected to bring into existence a template as a master template for the creation of drawings.  The template is likely to contain a title block reflecting the creation of the template.  The template is likely to have been saved as a master file.  When the user has then made or created each drawing, the user, in all probability, has opened the master file and brought the template into the new drawing (ie saved the template to the new drawing to be created).  The saving of the template to the new drawing would carry into the new drawing a creation date of the template as the creation date for the new drawing itself.  The user might complete that drawing and then elect to create further drawings and repeat the process.  This process, if implemented, would have the effect that each of those drawings even though they were created after the date of creation of the master template, will all have the same ‘Created’ date, dictated by the template. 

17. Mr Jarvis says that there may be another date to be considered as well.  Mr Jarvis says the ‘Created’ date in the electronic file is the date the drawing was actually created by the user (and that date might derive from a template date as discussed) but another date might appear on the hard copy printout of an electronically stored drawing (which Mr Jarvis calls the ‘face date’) and that date is usually the date when the actual drawing was completed or released (that is, after the date of creation).  The term ‘completed or released’ presumably means the moment in time when the drawing, using the Autocad software, is in a final form.  The term ‘usually’ presumably means that in the ordinary course of events the hard copy document would exhibit a face date consistent with the date the drawing was finalised or released by the author to the client, to the workshop etc. 

18. Mr Stanford is an engineering consultant and computer analyst who is an independent contractor to the respondent.  In that sense, Mr Stanford is not independent.  Mr Stanford also says that having regard to his experience recited in the affidavit the presence of precisely the same date (to the second) for each of the drawings indicates to him that each file was created using a template as a basic layout for a plan and that the template was first established at the nominated time and date and then utilised as a foundation template for each subsequent drawing.  As to the ‘Modified’ field, in respect of each drawing, that field reflects the date when the file was ‘last saved after being opened’. 

19. Mr Gould also swore an affidavit in relation to a test he undertook on the computer operating the Autocad software at the applicant’s premises.  Although that test revealed some distortions in the date of creation of a test document by reason of a manual adjustment to the setting for the computer’s clock, Mr Gould’s affidavit does not provide an explanation for the precise identicality of time of creation for a multiplicity of documents. 

20. Although the notion of the creation of a master template providing the foundation for the creation of subsequent drawings is an explanation for each subsequent drawing having the same creation date and time, it remains odd that the properties box suggests that modifications were made to drawings at times such as Sunday, 5 February 2006 at 1:18:57am; the same date at 1:18:18am; Saturday, 4 February 2006 at 5:19:36am; Sunday, 5 February 2006 at 3:41:12am. 

21. The explanation for odd times might in part be the evidence that each computer contains a clock which functions to allocate a time and date for an activity by reference to an industry standard within the computer that adopts a Julian calendar and Greenwich meantime.  In such a case, an activity might take place at midday in the Eastern States of Australia on a Monday but the computer might recognise that activity as having occurred at 2:00am, Sunday morning Greenwich time.  Normally, this would never occur because the computer by drop‑down box in the software or by otherwise setting the operating system’s software adopts a time and date at the place of use (ie time is adjusted according to a longitudinal variation from Greenwich to reflect the time at the place of use).  Mr Pesch gave evidence that no modifications were being made to the drawings at the times suggested by the ‘Modified’ field; that the computer operating the Autocad software is located in the administration office; and at the times suggested the computer was not accessible. 

22. The applicant says that these anomalies in the dates are not explained by the respondent in any way which is inconsistent with the proper acceptance of the evidence of Mr Pesch that the drawings were brought into existence during the course of March 2002.  The applicant says that it is plain on all the evidence that the applicant commenced manufacturing and selling a modified 4 in 1 bucket changed in accordance with the work done by Mr Pesch in November 2001 and that the applicant continued to sell buckets from the early part of 2002 so altered.  To do so, it was necessary for the applicant to bring drawings into existence stored on its Autocad system and printed from the administration office and taken to the workshop area.  As the workshop became familiar with the changes it retained some drawings in the workshop area.  However, the drawings were stored electronically, accessed and used electronically and when necessary, copies were printed in hard copy form for use.  The applicant says that its core commercial activity of manufacturing and selling buckets could not have taken place in respect of the new 4 in 1 bucket without the new or second plans having been brought into existence at the time or very close to the time that the changes were thought about, conceived and adopted in the manufacturing process. 

    The issue of originality and the date of making the drawings in suit

23. In weighing the evidence as to the date the drawings were created I am satisfied that it is more likely than not that the new drawings were brought into existence on or about 18 September 2003.  In reaching that conclusion, I am conscious of the evidence Mr Pesch initially gave in cross examination that the date may have been later than March 2002 and that he would not rule out the possibility that authorship occurred as late as September 2003 notwithstanding his belief that early March 2002 was the correct date. 

24. I am also conscious of the concession Mr Pesch made that drawing BC 41 A003 (that is, drawing 185A, the subject of the deletions and additions, being a version of BC 41 A003) although it bears the date 4 March 2002 was in fact brought into existence well after the proceedings commenced.  It seems to me likely that Mr Pesch created a master template which was to form the framework document or template for the subsequent development of the drawings.  This approach is consistent with the practice noted by Mr Pesch [56], [57], [60], [64] and [74].  The explanation by Mr Jarvis and Mr Stanford as to the precise date of creation for each drawing seems, on balance, to be the most likely explanation for the anomalies in the dates. 

25. I accept the evidence of Mr Pesch that he is the author of the seven plans in suit.  I accept that Mr Pesch applying his own labour, skill, effort and judgment, brought the seven plans into existence using electronic computer aided software.  Although other manufacturers had produced and sold a version of a 4 in 1 bucket at the time of Mr Pesch’s origination of the drawings in suit, I find that the seven plans are the emanation of the work, effort, skill, labour and judgment of Mr Pesch and the plans, subject to [123] and [124] are original works of authorship of Mr Pesch.  Suggestions were put to Mr Pesch by the respondent that the author of the plans in suit was Mr McKay.  I find that Mr McKay was retained by the applicant to undertake a load bearing analysis in relation to the applicant’s 4 in 1 buckets but that that task did not involve Mr McKay in the authorship of the plans in suit. 

26. I find that the date of creation of the drawings the subject of the proceedings is on or about 18 September 2003.  There are two versions of drawing BC 41 A003 (rear bucket assembly).  Both drawings are dated 4 March 2002.  The first, contains no dimensional measurements and I find that that drawing was brought into existence on or about 18 September 2003.  The second is the version of the drawing produced by Mr Pesch which deletes certain information and adds dimensional measurements (185A).  I am not able to make any finding as to the date upon which that drawing was made except that it was after the commencement of the proceedings. 

27. In reaching the conclusion that the plans in suit were made on or about 18 September 2003, it seems to me that Mr Pesch, in a frank way, recognised the very real possibility that the drawings were created as late as September 2003 and that drawing BC 41 A003 was brought into existence much later than 4 March 2002.  In reaching these conclusions, it seems to me that Mr Pesch has a recollection of the date of creation of the plans which is in error and thus I do not accept his evidence as to the date of authorship.  With the benefit of all the evidence, the better view is that the documents were brought into existence on or about 18 September 2003. 

28. Since the master template was created on that date and consistent with the respondent’s propositions put to Mr Pesch in cross examination that each drawing was made on that date, I infer that the work on each subsequent drawing was done by Mr Pesch very shortly after that date and thus on or about that date. 

1. Measuring the diminished capital value of the asset is not the only way of forming a view as to the proper amount of ‘reasonable compensation’ attributable to the loss suffered by a copyright owner.  The purpose of an award of damages for breach of copyright is to compensate the applicant for the loss suffered as a result of the respondent’s infringing conduct (Interfirm Comparison (Aust) Pty Limited v Law Society of New South Wales (1975) 6 ALR 445 at 446 (Bowen CJ); Bailey v Namol Pty Limited (1994) 53 FCR 102 at 111 (Burchett, Gummow and O’Loughlin JJ).

2. Mr Preece seemed to recognise the market significance of the applicant’s bucket.  The agitation for the respondent to make and sell a 4 in 1 bucket came from the sales area as the respondent required this product to broaden its product range available to customers and in order to use it as a device to sell other Digga products within the range.  It was in that sense an essential tool to use in securing a relationship with customers. 

3. In the circumstances, an approach to determining an assessment of reasonable compensation, might be to adopt a stepped method which provides a reasoned foundation for an assessment of compensatory loss.  The steps might be these. 

4. First, examine the number of sales made by the respondent of the relevant 4 in 1 buckets. 

5. Secondly, assume that since Digga was trying to meet the market leader by introducing its 4 in 1 bucket, it was at least trying to capture sales from the supply side market leader (and no doubt from other suppliers). 

6. Thirdly, assume that the number of sales actually made by the respondent represents sales, on balance, the applicant would have made, as a starting point. 

7. Fourthly, in recognition that it does not follow that a sale by Digga would necessarily have been a sale by the applicant, a discount factor must be applied either to the number of sales or to the amount of compensation determined according to proper principles, so as to reflect a proportionate sense of the impact upon the applicant of the respondent’s conduct of selling a competing supply side substitute incorporating the infringing component. 

8. Fifthly, a further discount factor needs to be taken into account to reflect the particular circumstances of the conduct.  In this case, the applicant’s 4 in 1 bucket is made up of between 30 to 40 components in all and a much smaller number of essential components.  All of the components no doubt are required for the functionality of the bucket but both Dr Gilmore and Mr Gould recognised some components are more important than others.  In that sense, the pivot mechanism is a major component.  However, the 4 in 1 bucket is a product made up of assembled parts or components and even though the pivot mechanism is essential to functionality, the extent of its contribution to the loss suffered by the applicant needs to bear a proportionate relationship to the materiality of its contribution as component to the 4 in 1 bucket.  By applying such a method, it ought to be possible to determine a reasonable analogue for the purposes of compensatory damages of the loss suffered by the applicant by reason of the respondent’s conduct. 

   The applicant’s approach to assessment of loss

9. The applicant called evidence from Mr Van Homrigh, an expert accountant.  Mr Van Homrigh prepared a report which seeks to identify the loss suffered by the applicant by reason of the respondent’s infringement.  In undertaking that exercise, Mr Van Homrigh had regard to the financial statements of the applicant for the years ending 30 June 2001 to 30 June 2004; four spreadsheets provided by the applicant setting out sales of the 4 in 1 bucket by the applicant for the years ending 30 June 2002 to 30 June 2005; a spreadsheet from the applicant setting out sales of the applicant’s 4 in 1 bucket for the period 1 July 2005 to 31 October 2005 and documents relating to credit adjustments for the financial year ending 30 June 2005. 

10. At ss 4.1 and 4.2 of Mr Van Homrigh’s report (the first report – exhibit ‘DVH1’ to Mr Van Homrigh’s affidavit sworn 1 June 2006 (exhibit 31)), Mr Van Homrigh identifies the methodology adopted in calculating damages and the assumptions upon which that methodology rests.  At 4.1.1, Mr Van Homrigh says that the general purpose in making an assessment of damages for loss of profits is to put the claimant in the same financial position it would have been had the incident not taken place and leave the claimant no better or worse off as a result of the incident or as if the contract had been performed. 

11. Mr Van Homrigh explained that this methodology did not adopt a contract measure of damage for the assessment of loss but rather was intended to reflect the assumption that the applicant ‘would have gained the sales that Digga enjoyed in the relevant periods’ and that the words ‘as if the contract had been performed’ did not have any direct bearing on the task he performed.  At 4.1.2, Mr Van Homrigh notes that economic loss can generally be constructed in terms of a loss of gross profits where the impact on the business is limited to the short term and that a loss of gross profits is generally calculated by applying a rate of gross profit to a volume of lost sales in a period of loss following the incident in question.  In determining the gross profit, Mr Van Homrigh says that gross profit is generally regarded as the sales value less variable or direct costs of production, distribution and sales and that a rate of gross profit can be applied to a volume of lost sales to provide an estimate of the loss flowing from the infringement.  Mr Van Homrigh says the rationale for the deduction of variable or direct costs is that the claimant would have had to incur certain costs to derive the incremental volume of sales.  At 4.1.4, Mr Van Homrigh notes that an allowance should be made for additional or saved fixed or non‑direct costs incurred as a result of the infringement, in calculating the loss. 

12. As to the assumptions, Mr Van Homrigh has assumed that damages have in fact been suffered by the applicant as a result of the infringement; that the loss in quantity of bucket sales as a result of the alleged infringement of copyright is equal to the sales of buckets made by the respondent; that the loss of sales commenced from 2 December 2003; that the average sales price per bucket to be assumed for the calculation is equal to the ‘average price of buckets (identical to the relevant buckets of Digga)’ achieved by the applicant in each financial year; that accessories are estimated to represent 10% of bucket sales; and that the average sales per bucket do not include any freight charged on sales. 

13. Applying the methodology in conjunction with the assumptions, Mr Van Homrigh has calculated the loss of profits for the period 2 December 2003 to 31 October 2005 suffered by the applicant as $323,618.00. 

14. That calculation is derived on this basis. 

15. Lost sales for the period amount to $1,016,800.00 made up of lost sales in the years ending 30 June 2004, 30 June 2005 and the period to 30 October 2005 of $223,896.00, $590,472.00 and $202,432.00 respectively.  That calculation is based upon the number of 4 in 1 buckets sold by the respondent in each of the three periods namely, 89, 225 and 75 respectively.  The sale price in each year adopted for the calculation of gross sales in that year is a ‘derived average sale price’ calculated by Mr Van Homrigh by examining spreadsheets provided by the applicant which set out the sales achieved for buckets and dividing sales by the number of buckets sold.  The spreadsheet provided by Mr Pesch sets out a detailed line by line list of sales.  In determining the derived average sale price, Mr Van Homrigh confined himself to a consideration of 4 in 1 buckets and excluded the number of units of accessories and ‘sorted out’ from the number of buckets sold, any bucket not being a 4 in 1 bucket.  The aim of the calculation using actual sales was to strike an average price per bucket for each year and then multiply the price by the number of 4 in 1 buckets sold by the respondent.  The derived average sale price for each bucket for the financial year ending 30 June 2004, financial year ending 30 June 2005 and the period 1 July 2005 to 31 October 2005 is $2,266.00, $2,364.00 and $2,432.00 respectively. 

16. Having determined the gross sales, Mr Van Homrigh then determined the gross profit margin in respect of those sales.  Mr Van Homrigh approached that exercise this way.  Mr Van Homrigh assumed as a reliable basis for the calculation that the profit margin on 4 in 1 buckets equates to the total profit margin generated by the applicant for all of the sales in its business.  Mr Van Homrigh says that such a margin is based upon the achieved margin for the applicant in its business and recognises that sale of 4 in 1 buckets is a significant part of the total sales of the applicant’s business.  Appendix 1 to his report contains a schedule of sales for the financial years ending 2001, 2002, 2003 and 2004 and reflects a gross profit calculation which demonstrates a gross profit margin in each year of 32%, 30%, 38% and 32%.  These calculations derive from the financial records of the applicant for the financial years 30 June 2001 to 30 June 2004.  The gross profit calculation takes revenues in each financial year and deducts what Mr Van Homrigh describes as the direct costs of manufacture including opening stock values, purchases, closing stock values, freight and cartage, expenses paid to subcontractors, factory wages costs and employee hire to derive the gross profit and thus the gross profit margin.  Schedule 1 then sets out a further series of ‘Expenses’ including such things as accountancy fees, bank charges, electricity and gas, entertainment, insurance, licence fees, motor vehicle expenses, rates, superannuation and many others.  In determining the gross profit margin for the damages calculation, Mr Van Homrigh has brought to account as a further deduction from revenue the costs and charges associated with ‘electricity and gas, repairs and maintenance and warranty expenses’ but not the remaining items of expenses in Schedule 1.  The gross profit margin for the years ending 30 June 2004, 30 June 2005 and the period 1 July 2005 to 30 October 2005 have been calculated by Mr Van Homrigh by reference to s 3.1.1 of his report as 32%, 34% and 37% respectively. 

17. Having determined the gross profit margin less ‘below the line’ expenses of electricity and gas, repairs and maintenance and warranty expenses, the gross profit represents $347,946.00.  The distribution of some additional overheads ($24,327.00) results in a gross profit of $323,618.00 the applicant would have derived had the applicant manufactured each of the buckets made by the respondent. 

18. Mr Van Homrigh was challenged by the respondent in relation to both the methodology and the assumptions in deriving an estimate of the gross loss of profit.  The respondent put to Mr Van Homrigh that in a manufacturing business some items will have a greater profit margin than others (Mr Van Homrigh agreed); and that a more precise way of calculating actual profits made by a company in respect of the sale of one item or one line of items would be to conduct a cost accounting exercise in respect of that item.  Mr Van Homrigh accepted that it might be more precise but that any of the methodologies for determining gross lost profit have ‘inherent uncertainties in any of these calculations’.  Mr Van Homrigh said that he undertook a check calculation of the derived average margin by using the applicant’s ‘time and materials’ data and that calculation revealed a higher margin than an average whole of business margin.  The respondent put to Mr Van Homrigh that in properly calculating actual profit made on the sale of a particular product it would be necessary to have regard to all of the expenses or all of the costs.  Mr Van Homrigh said that he had not done that exercise.  Rather, the exercise was not to determine the amount of profit derived by the applicant for the purpose of an annual report but rather to ‘work out the amount of damages’ by attempting to ‘estimate the effect on profit of the loss of these particular buckets [sales by Digga] under the assumptions we’ve discussed, which means clearly estimating a sales figure margin … and then looking at any other costs that might have changed as a result of the loss of these sales’. 

19. Mr Van Homrigh did not accept that items in the expenses column in Schedule 1 had been ignored as those expenses that ought to be taken into account namely electricity and gas, repairs and maintenance and warranty expenses were brought into the calculation.  Mr Van Homrigh says that the lost sales (389 units in all) represent only a relatively small change in sales in terms of the production activity and the task is to identify the ‘consequential variable costs’ affecting profitability.  Mr Van Homrigh says that additional overhead costs have been taken into account in the below the line calculation.  Mr Van Homrigh notes the distinction between selecting an analogue for profitability based on a derived average as compared with a product line, in this way.  One task is to try and assess the profitability of the company as a whole on its complete production of its products of which the 4 in 1 bucket is a substantial activity.  In that case, the determination of the gross profit does not involve taking into account particular overheads that might normally be allocated to an annual profit and loss statement where all expenses are brought to account.  This task is a different one to allocating overheads that might be distributed (such as all the fixed overheads) to try and measure the impact of those costs on the profit and loss of each product in a product mix.  Mr Van Homrigh says the exercise here involved an attempt to determine the average gross profit for what is a relatively small operation as a good and accurate indication of the likely profit margin which would have been derived on the 4 in 1 buckets sold by Digga had they been made and sold by the applicant, adjusted by particular changes to the costs by reason of the additional production numbers and most directly the movement in the variable costs.  Mr Van Homrigh does not agree that in such a case as the present, it is appropriate to include production overheads in the calculation of gross profit, on the footing that those particular overheads have not altered.  Since the number of buckets involved is 389 buckets over the relevant financial years in all, it ‘… doesn’t necessarily have a major impact on the costs of his operation.  So costs – given it’s a relatively small change to his production volume, you’d expect less costs to change than if he’d, for example, lost all the production of the buckets’.  Mr Van Homrigh emphasises that the real task is to assess the effect upon profit and loss from the loss of the Digga sales not to assess the profitability of a particular product line. 

20. As to the accessories, Mr Van Homrigh assumed that accessories are estimated to be 10% of bucket sales.  In the gross sales of $1,016,800.00, accessories represent $100,764.00 at an average profit margin of 34.3% resulting in a profit margin on accessories of $34,562.00. 

21. Mr Van Homrigh was tested in relation to the apparent impact upon sales of 4 in 1 buckets by the applicant due to the presence of the respondent in the market.  Mr Van Homrigh acknowledged that over the years 2003, 2004 and 2005 there had been a trend of increasing sales by the applicant which according to the expert called by the respondent, Mr Parker, is inconsistent with a loss suffered by the applicant as a result of sales by Digga.  Mr Van Homrigh has noted that the trend of increasing sales had slowed and particularly so in 2005.  Mr Van Homrigh inferred that the slowing of the growth in sales in 2005 may on balance be attributable to Digga’s entry into the market with its 4 in 1 bucket.  Mr Van Homrigh notes that in 2004 sales by the applicant of its 4 in 1 bucket increased by 33% and in 2005 sales increased by 10%.  The average bucket sales value increased from $2,266.00 in 2004 to $2,364.00 in 2005.  Mr Van Homrigh notes that sales of buckets and accessories by the applicant represented approximately 58% of total sales in 2003.  The percentage declined to 48% in 2005 and 46% in 2006. 

22. The respondent called evidence from Mr Warwick Parker, a chartered accountant.  Mr Parker prepared a report which critiques the report of Mr Van Homrigh.  The critique addresses both the approach to determining the profits made by the respondent for the purposes of an account of profits claim and the methodology and assumptions adopted in calculating damages suffered by the applicant.  The applicant, of course, has elected to claim damages.  However, some aspects of the approach to the proper basis for determining the calculation of the profit derived by the respondent has informed the respondent’s approach to the determination of the profit derived by the applicant, for the purpose of calculating compensatory damages.  In particular, the respondent contends and put to Mr Pesch and Mr Van Homrigh that in determining the profit the applicant would have made had it manufactured and sold the 4 in 1 buckets made by the respondent, gross profit ought to be determined by not only taking account of the direct costs of manufacture but also by distributing particular overhead costs to the ‘production cost’ of the buckets.  Mr Parker says that such an approach to determining the profit on the production of a 4 in 1 bucket is consistent with Accounting Standard AASB102 for determining the cost of inventories and Australian Taxation Office Ruling TR2005/11 for the use of absorption costing in valuing trading stock for tax purposes.  Although Mr Parker does not say that these notions directly apply in the calculation of damages, the contention is that in determining the cost of manufacture of the buckets, regard should be had to not only materials and labour costs but consequential direct labour costs such as superannuation and workers’ compensation costs and other direct factory costs.  These categorised ‘direct factory costs’ are said to be ‘production overheads’ which ought to be brought to account.  One way of doing so is to determine the percentage of total sales represented by sales of the bucket and then using that percentage to allocate factory overhead costs.  Such a process would give a true and accurate indication of the likely real profit the applicant would have derived had it made and sold the buckets, made and sold by Digga. 

23. In dealing specifically with the damages calculation based upon an assessment of the loss of profits by the applicant, Mr Parker criticises the assumption made by Mr Van Homrigh that a sale made by Digga would have been a sale made by the applicant and analytically contends that in a competitive market the true approach is to distribute those sales amongst the supply side participants according to market shares.  As to the determination of the profit lost by reason of infringement for the purposes of a damages calculation, Mr Parker says that any loss suffered by the applicant will depend upon ‘a comparison between the costs of production of a Norm bucket as against the sale price of a Norm bucket’.  As a result, Mr Parker says that the assumption that the margin earned by the applicant on its buckets is the same margin earned on the sale of all of its products is flawed. 

24. In cross‑examination, Mr Parker accepted that he had not attempted to calculate a comparative assessment of lost profit but had simply conducted a critique of Mr Van Homrigh’s report.  Mr Parker agreed that in calculating damages, the determination of the profit derived by the applicant needs to take account of variable expenses and savings made and only those costs that have changed (or would be likely to change as a result of the applicant manufacturing the lost units) ought to be taken into account.  Mr Parker nevertheless contended that Mr Van Homrigh’s approach to determining the gross profit margin remained incorrect for the reasons previously identified. 

1. It seems to me that the question to be answered is what profit would the applicant have made had it manufactured and sold the buckets made and sold by the respondent.  That calculation involves determining the likely sale price of each bucket in the relevant financial period and I accept the approach adopted by Mr Van Homrigh to that matter.  Secondly, the costs that would have been incurred in deriving those sales revenues need to be identified.  Those costs are the direct costs of manufacture identified by Mr Van Homrigh together with the below the line costs identified by him.  As to the overhead costs, the facts of this case are that the applicant had a certain manufacturing infrastructure deployed in the making of its buckets.  In the 2003 year being the calendar year in which the respondent commenced manufacture of its buckets, 58% of total sales of the applicant represented the manufacture and sale of buckets.  Had the applicant made and sold the buckets of the respondent, its production process would have been deployed to that task.  It is not suggested that in order to make the additional buckets, the applicant would have incurred additional costs of either debt or equity to expand its production facilities, add a new line or acquire additional equipment.  The question is, what identified variances of cost would the applicant have incurred in order to derive the additional revenue?  Those variances must be taken into account because they represent an additional cost of producing the revenue lost by reason of the infringement.  Distributing production overheads which would have been incurred in any event as part of the establishment cost of conducting the business is not a proper way of determining the gross profit lost as a result of infringing conduct. 

2. Mr Parker accepts that the applicant is a small business and not a particularly sophisticated business operation.  Ultimately, these calculations of derived profit from infringing conduct are imprecise.  Nevertheless, it seems to me that Mr Van Homrigh’s approach is a fair and reasonable one in trying to reach a reliable estimate of the loss actually suffered by reason of the respondent’s conduct. 

3. Accordingly, I accept Mr Van Homrigh’s approach to the matter, subject to the assumption made that each sale by the respondent is a sale the applicant would have made. 

4. I find that the applicant has suffered damage by reason of the infringement.  Mr Parker notes that in the financial year to 30 June 2003 the applicant increased its sales of buckets by 37% over the previous year and in the financial year ending 30 June 2004 the increase over the previous year was 40%.  In the year ending 30 June 2005 the increase had declined to 21%.  Mr Parker notes that sales of buckets represented 57% of the applicant’s sales in 2003/2004 as compared with 58% in the 2002/2003 year. 

5. I am satisfied that the evidence demonstrates that during the course of the 2004/2005 financial year the applicant was experiencing a significant and measurable impact upon its sales of 4 in 1 buckets.  That may have been attributable to a number of factors but I am satisfied that one of those factors was sales by the respondent of an immediate market substitute for the 4 in 1 bucket of the applicant incorporating the infringing three‑dimensional component.  The evidence of Mr Preece and the urgency (in October and particularly November 2003 leading to the first sale on 2 December 2003) with which the respondent elected to enter the market with such a bucket to contest sales of buckets by the applicant as the market leader, gives rise to the proper inference that the conduct of the respondent caused damage to the applicant.  The applicant introduced its bucket to the market on 2 December 2003 in the financial year ending 30 June 2004.  By the next financial year after that (30 June 2005), the substantial increase evident in the financial year ending 30 June 2004 (from the previous financial year) had been significantly arrested.  In addition, it is clear from the evidence that the respondent focused very directly upon the market position of the applicant’s bucket and the attractive force to the market of that bucket.  The respondent discovered an email from Mr Alan Wade to Mr Alister Rayner which indicates the particular emphasis given by the respondent to the applicant’s bucket.  Mr Wade said this:

   ‘New product (4 in 1)

   Is there a call in England or Europe for a 4 in 1 Skid Steer Bucket.  We have produced our first prototype here and are putting it to the field for testing.

   The call in Australia came to us from dealers, searching for another supplier other than the current (Norm, Hughes etc).  I will send you some photo’s for you to look at.  I viewed the first couple on Friday and in comparison they are every bit as good as the Norm and Hughes if not better.  They should be as we have taken all the good points from both of these, added pieces at the request of dealers and contractors and produced our own.  You mentioned to me before about staying out of certain markets.  I did not know if this fell into that category.  I needed to inform you regardless.’

6. The respondent criticised the inclusion within the calculation of lost profit of approximately $35,000.00 in respect of the ‘accessories’ and whether the margin on accessories was consistent with the whole of business margin.  I propose to discount the profit component in respect of the accessories by 50% to $17,500.00. 

7. Accordingly, I find that the loss of profit suffered by the applicant had it made and sold all of the buckets made and sold by the respondent amounts to $306,118.00. 

8. However, that sum does not represent a reasonable or fair estimate of the compensatory loss actually suffered by the applicant because it represents a construct based on the particular assumption.  The court must do its best to quantify the actual loss even if some degree of speculation or even possible guess work is involved in this exercise (Aristocrat Technologies Australia Pty Limited v DAP Services [2007] FCAFC 40 per Black CJ and Jacobson). The court is not relieved from the duty of assessing the loss merely because circumstances do not admit of damages being assessed with certainty (McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 412 per Dixon and Fullagar JJ; Enzed Holdings Limited v Wynthea Pty Limited (1984) 57 ALR 167 at p 183 per Sheppard, Morling and Wilcox JJ where their Honours said, ‘The principle is clear.  If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved.  Furthermore, if actual damage is suffered, the award must be for more than nominal damages’.  See also The Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 at 83 per Mason CJ and Dawson J, where their Honours said, ‘The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can’). 

9. Applying those principles, it seems to me that a reasonable estimate of the profit the applicant would have derived subject to [298] had it made and sold the buckets made and sold by the respondent, is an amount determined by discounting the figure at [294] by 50% which results in an assessment of $153,059.00. 

10. However, that sum reflects the lost profit upon sales of the bucket rather than the loss suffered by the applicant by reason of infringement of the copyright in the drawing for the pivot mechanism itself.  It seems to me that a further discount should apply to take account of that proportion of the profit which is attributable to a component forming part of an assembled article.  In this case, it seems to me that the copyright owner is only entitled to damages that represent the loss attributable to the copyright material taken.  Although speaking in terms of conversion damages, the principle in relation to severance was expressed this way by Lockhart J in Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 at 571:

    ‘If the court is presented with goods that comprise infringing and non‑infringing matter, it will be necessary to decide whether the goods can be severed into infringing and non‑infringing components. 

    If the goods can be severed then the court can find that it was the making of the infringing component that constituted an infringement of the work, and therefore that the infringing copy is only comprised by that component.  In such a case, the copyright owner is only entitled to damages that represent the value of the copyright material taken.’

11. I have accepted that the pivot mechanism is a major component and is, on the expert evidence, central to the functioning and operation of the bucket.  It is the mechanism within the bucket that under hydraulic load causes it to function and articulate.  Many of the other parts (although plainly not all), play a dependent role in the configuration of the bucket.  It seems to me that the supplementary discount is not simply a question of whether the part or component is one of five or seven or 12 or 30 components within the bucket resulting in a proportionate allocation of the lost profit but whether the component is a material component of real importance.  It seems to me that the pivot mechanism is clearly such a component.  Its relative importance is a matter of judgment and in determining a reasonable view of compensatory loss it seems to me that the amount at [296] ought to be further discounted by 60% resulting in an amount of $61,223.00. 

12. Accordingly, the measure of damage is $61,223.00. 

13. I propose to award damages pursuant to s 115(2) in respect of the infringement of the copyright subsisting in the applicant’s drawings for the outside and inside mounting brackets and the front assembly drawing in the period 2 December 2003 to 17 June 2004 of $300.00 and damages in respect of the respondent’s infringement of the applicant’s drawing for the pivot mechanism by two‑dimensional copying and three‑dimensional reproduction of the drawing, of $61,223.00.

    Damages pursuant to s 115(4)

14. Section 115(4) is in these terms:

    ‘Where, in an action under this section: 

    (a)      an infringement of copyright is established; and

    (b)      the court is satisfied that it is proper to do so, having regard to:

    (i)        the flagrancy of the infringement; and

    (ia)      the need to deter similar infringements of copyright;

    (ib)the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and

    (ii)whether the infringement involved the conversion of a work or other subject‑matter from hard copy or analogue form into a digital or other electronic machine‑readable form; and

    (iii)any benefit shown to have accrued to the defendant by reason of the infringement;

    (iv)      all other relevant matters;

    the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.’

15. The principles influencing an assessment of damages under the section are these (Aristocrat Technologies Australia Pty Limited v DAP Services (supra) [40]‑[45]). Flagrancy is not an essential pre‑requisite for an award of additional damages; it is sufficient if the court is satisfied that any one or more of the circumstances set out in s 115(4)(b) is established (Raben Footwear v Polygram Records Inc. (1997) 75 FCR 88 at 93 per Burchett J; per Tamberlin J at 103 and per Lehane J at 104; Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 per Lockhart J at 575; Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 per Jacobson J [158]); additional damages under s 115(4) may be assessed having regard to principles derived from awards of aggravated and exemplary damages at common law (Autodesk Inc. v Yee (1996) 68 FCR 391 per Burchett J at 394; Lamb v Cotongo (1987) 164 CLR 1 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ at pp 9, 10); one objective of an award is deterrence; an element of penalty is an accepted factor (Autodesk v Yee (supra) at p 384); the accrual of benefit by reason of the infringement to the respondent is a further factor and the notion of ‘benefit’ suggests a pecuniary benefit to the respondent in excess of the damages otherwise payable (Ravenscroft v Herbert and New English Library Limited [1980] RPC 193 per Brightman J at 208); the benefit need not be pecuniary (Polygram v Golden Editions Pty Ltd (supra) per Lockhart J, p 576); and there need not be any proportionality between the amount of compensatory damages awarded pursuant to s 115(2) and the amount of additional damages awarded pursuant to s 115(4) (Raben Footwear v Polygram Records (supra), pp 93, 103 and 104; Microsoft Corporation v PC Club of Aust Pty Limited (2005) 148 FCR 310 at pp 409, 410 per Conti J); and the assessment of the amount to be awarded is necessarily an imprecise exercise (Bailey v Namol Pty Limited (supra) per Burchett, Gummow and O’Loughlin JJ at p 114). 

16. In this case, I have found conscious copying on the part of the respondent.  The respondent has, in the period 2 December 2003 to 31 October 2005, sold 389 buckets.  The applicant has suffered loss by reason of the infringement which has resulted in a compensatory assessment of the above amount having regard to the principles identified.  Notwithstanding that it is unsound to proceed on the footing that a sale made by the respondent would have been a sale achieved by the applicant, it nevertheless remains the position that the respondent has derived the benefit of 389 sales incorporating the infringing three‑dimensional component.  Mr Parker says based upon the financial information supplied by the respondent that Digga has suffered a loss of $1,164.00 on every bucket it sells on the footing that it sells a bucket on average for $2,487.00; incurs direct costs of $1,839.00; and ‘additional costs’ of $56.00 amounting in all to $1,895.00 resulting in a profit of $592.00 subject to two other factors.  The first is the distribution of overheads of $713.00 and the second is the taking account of a ‘mark‑up’ on the article of $1,043.00 constituting $1,756.00.  Having regard to those two additional items, the gross profit becomes a loss of $1,164.00.  Nevertheless, it is artificial to strike the profit or loss position in relation to sales of buckets by the respondent by making a full distribution of the overheads and introducing into the calculation a failure to achieve a notional mark‑up. 

17. I propose to make an award of statutory damages pursuant to s 115(4) to take account of the conscious copying by the respondent; in recognition of an element of deterrence and having regard to the benefit derived by the respondent, on the following basis. The respondent sold 389 buckets. 50% of those buckets is 194 buckets. I have assumed a profit on each bucket of $250.00 which amounts to $48,625.00. That amount should be discounted by 60% having regard to the matters discussed earlier. The amount to be awarded is $19,450.00.

18. Accordingly, I propose to make the following orders.  First, a declaration that the respondent has infringed the copyright subsisting in the applicant’s drawings for an outside mounting bracket, an inside mounting bracket and a front assembly drawing by making a two‑dimensional reproduction of the drawing in the period 2 December 2003 to 17 June 2004. 

19. Secondly, I propose to make a declaration that the respondent has infringed the copyright subsisting in the applicant’s drawing for a pivot mechanism by making a two‑dimensional and three‑dimensional reproduction of the work from 2 December 2003 to trial. 

20. Thirdly, I propose to grant an injunction restraining the respondent from reproducing the applicant’s pivot mechanism drawing either in two‑dimensional or three‑dimensional form whether by reference to the respondent’s first drawing of pivot arms for its pivot mechanism or by reference to the respondent’s October 2005 drawings or in any other means constituting a substantial reproduction of the applicant’s work. 

21. Fourthly, I propose to make an order for delivery up by the respondent to the applicant of copies of the respondent’s drawings for its pivot mechanism whether in the form of the respondent’s first or second version (October 2005) of those drawings. 

22. Fifthly, I propose to make an order that the respondent pay damages pursuant to s 115(2) of the Copyright Act as follows:  an amount of $300.00 in respect of the infringement of the copyright in the drawings for the inside and outside mounting brackets and the front assembly drawing between 2 December 2003 and 17 June 2004; an amount of $61,223.00 in respect of the infringement of the copyright in the drawings for the pivot mechanism from 2 December 2003 both in two‑dimensional and three‑dimensional form, to date. 

23. Sixthly, I propose to make an order that the respondent pay damages pursuant to s 115(4) of the Copyright Act in respect of the two‑dimensional and three‑dimensional infringement of the drawing of the applicant’s pivot mechanism in an amount of $19,450.00.

24. I propose to adjourn the matter for further argument in relation to the question of costs and interest once the parties have had an opportunity to consider these reasons.  I direct that the applicant prepare and provide to my Associate within seven days, draft orders reflecting the proposed orders and provide a copy of the draft to the respondent.  I propose to re‑list the matter for argument in relation to the question of costs as soon as possible.  If any controversy emerges in relation to the form of orders, I will list the matter for further argument to determine the content of the orders. 

I certify that the preceding three hundred and eleven (311) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Associate:

Dated:       18 May 2007

Counsel for the Applicant:	Mr D J Campbell SC and Mr J M Horton
Solicitor for the Applicant:	LeMass Solicitors
Counsel for the Respondent:	Mr S Burley
Solicitor for the Respondent:	Bennett & Philp Solicitors
Date of Hearing:	19, 20, 21, 22 and 23 June 2006
Date of Supplementary Submissions:	4 May 2007
Date of Judgment:	18 May 2007

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