Sheldon v Metrokane

Case [2004] FCA 19

FEDERAL COURT OF AUSTRALIA

Sheldon v Metrokane [2004] FCA 19

COPYRIGHT – work of artistic craftsmanship copyright – claimed by United States company (respondent/cross-claimant) – work related to handle enclosing mechanism of corkscrew – mechanism subject of recently expired international patent – United States company exports corkscrew product to Australia – Australian company (applicant) imports corkscrew made by another overseas manufacturer having similar handle enclosing same mechanism – whether Australian importer committed secondary infringement of copyright claimed by United States company for work of artistic craftsmanship relating to handle enclosing the mechanism of corkscrew imported by Australian company from the other manufacturer – authorship of copyright claimed by United States company and its designer not established – artistic craftsmanship not demonstrated in respect of United States company’s corkscrew for qualification as artistic work copyright – if affirmative finding of joint authorship and of copyright had been established then finding of infringement of copyright would have been established – finding of no secondary infringement by Australian company as importer in any event – meaning and implications of work of artistic craftsmanship

PASSING OFF – DECEPTIVE CONDUCT – not established by United States company against Australian company

DECEPTIVE CONDUCT – not established by Australian company against United States company

Copyright Act1968 (Cth) ss 10(1) (various definitions), 14(1), 22(1), 31(1), 32(4), 33(2), 35(2), 36(1), 37(1), 38(1), 74, 75, 76, 77(1), 77(2), 115(1), 115(3), 115(4), 184, 202(1), 218(2) and 249
Copyright (International Protection) Regulations1969 (Cth)
Trade Practices Act1974 Cth ss 52, 53(a), 53(c) 53(d) and 53(g)
Designs Act1906 (Cth)
Patents Act1990 (Cth) s 67

Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450
Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273
SW Hart & Co.  Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466
Zeccola v Universal City Studios Inc (1982) 46 ALR 189
Milpurrurru & Ors v Indofurn Pty Ltd & Ors (1994) 54 FCR 240
Interlego AG & Anor v Croner Trading Pty Ltd (1992) 25 IPR 65
Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88
Performing Rights Society Ltd v London Theatre of Varieties [1924] AC 1
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Express Newspapers v News (UK) Ltd (1990) 18 IPR 201
George Hensher Ltd v Restawhile Upholstery (Lancs.) Ltd [1976] AC 64
Merlet v Mothercare plc (1984) 2 IPR 456
Cuisenaire v Reed [1963] VR 719
Walter v Lane [1900] AC 539
Commissioner of Taxation (Cth) v Murray (1990) 21 FCR 436
Coogi Australia Pty Ltd v Hysport International Pty Ltd & Ors (1998) 86 FCR 154
Bulun Bulun v R T Textiles Pty Ltd (1998) 41 IPR 513
Redwood Music Ltdv B Feldman & Co Ltd (1979) 48 RPC 385
Apple Computer Inc & Anor v Computer Edge Pty Ltd (1986) 161 CLR 171
Bonz Group (Pty)…

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AGLC
Sheldon v Metrokane [2004] FCA 19
Case
[2004] FCA 19
Decision Date

CaseChat Overview and Summary

In Sheldon and Hammond Pty Limited v Metrokane Inc, the plaintiff, Sheldon and Hammond, sought to establish that the defendant, Metrokane, had infringed its copyright in the design of the Rabbit corkscrew. Sheldon and Hammond further sought to establish that Metrokane had contravened the Trade Practices Act 1974 (Cth) by making groundless threats of copyright infringement. Metrokane, on the other hand, denied that Sheldon and Hammond held any copyright in the Rabbit corkscrew and sought to establish that Sheldon and Hammond had contravened the Trade Practices Act by making groundless threats of contravention of the Copyright Act. The primary legal issues before the court were whether Sheldon and Hammond had copyright in the Rabbit corkscrew and whether either party had contravened the Trade Practices Act.

The court found that Sheldon and Hammond did not have copyright in the Rabbit corkscrew, and therefore, Metrokane had not infringed its copyright. The court also found that Metrokane had made groundless threats of copyright infringement, but Sheldon and Hammond had not suffered any loss or damage as a result. The court further found that neither party had contravened the Trade Practices Act. The court dismissed all claims brought by both parties and ordered that the hearing of submissions on costs be stood over for determination on a date to be fixed. The parties were required to provide written submissions as to costs three clear days in advance of the adjourned hearing.

Orders

Orders of the court

1. Proceedings brought by Metrokane Inc and Edward Kilduff against Sheldon and Hammond Pty Limited by way of cross-claim for secondary infringement of copyright, passing off and contravention of the Trade Practices Act 1974 (Cth) be dismissed.

2. Further claim brought by Sheldon and Hammond Pty Ltd against Metrokane Inc for contravention of the Trade Practices Act 1974 (Cth) be dismissed.

3. The hearing of submissions upon orders to be made as to costs of the proceedings, inclusive of any reserved costs, be stood over for determination on a date to be fixed.

4. The parties provide written submissions as to costs three clear days in advance of the adjourned hearing.

Background

Background to the litigation

The design of the Rabbit corkscrew received the following two awards in 2001:(i)The IDSA 2001 Award for design excellence in consumer products, which was judged by the Industrial Designers Society of America, and sponsored by Business Week Magazine; and(ii)The Good Design Award from the Chicago Athenaeum Museum for ‘The World’s Best and Most Innovative New Product Designs’.The IDSA press release described the Rabbit corkscrew as having ‘… an ergonomic design that sets a new standard for ease of use without sacrificing beauty’.Background to Sheldon and Hammond and the importation of the Pull It corkscrew into Australia Sheldon and Hammond Pty Limited (‘S & H’), being the applicant and cross-respondent, is an Australian incorporated company which has been engaged since 1975 in the distribution of a large range of products. S & H has been appointed since May 2001 as the exclusive distributor in Australia for Pacific China Industries Ltd (‘PCI’) of a lever style corkscrew known as Pull It. The name Pull It is a registered trade mark in Australia belonging to S & H. The first importation of the Pull It corkscrew into Australia occurred on 21 June 2001, and since about that time, S & H has sold in Australia about 50,000 units. S & H has about 100 employees, whereof 20 are sales and marketing personnel. The Pull It corkscrew was originally priced by S & H at $89.95 in June 2001 for retail sale in Australia, the wholesale price then being $47.45 (including GST). The recommended retail price was reduced to $59.95 as a 2001 Christmas promotion, and to $49.95 in early 2002, and yet again to $39.95 by June 2002. The recommended retail price of the Pull It for Christmas 2002 was further reduced to $35.95, based on a normal wholesale price to S & H by then of $19.97. The managing director of S & H, Mr Angus, who testified in the proceedings, said that the reason for those price reductions of the Pull It corkscrew was competition in the market from competing lever style corkscrews. During those times, S & H has been also selling two other lever style corkscrews, imported into Australia by PCI under the trade marks The Wasp and Avanti Cellar Wiz. Mr Angus recalled seeing the Metrokane corkscrew in late 2000, or early 2001, at a trade fair or a retail outlet. He said that he did not spend time considering its shape or other features, other than to observe that it had a lever style corkscrew similar to the Screwpull lever style corkscrew, which he then understood to be the subject of the patent belonging to Le Creuset (identified in [2] above), which was about to lapse. He did not then purchase a Metrokane corkscrew. In the course of his visit to the Hong Kong trade fair in April 2001, Mr Angus was shown the Pull It corkscrew at a stand operated by PCI. At the time he was shown, and was considering the distribution by S & H of the Pull It product, he claimed he had no recollection of the shape of the Metrokane corkscrew, or of any of S & H’s customers saying there was any similarity between the Metrokane and the Pull It corkscrews. He also said that between April and May 2001, when conducting negotiations with Mr Kushner of PCI for the distribution of the Pull It corkscrew in Australia, no mention was made by or to him of the Metrokane corkscrew. It is understandable, in the light of circumstances later to be examined, why Mr Angus would not have done so, but the fact that Mr Kushner did not do so is potentially damaging to his credibility, for reasons which will later become apparent in the course of my review of Mr Kushner’s evidence.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

CONTI J
The S & H case for breaches on the part of Metrokane of the TP Act, being referrable to ss 52 and 53(g) thereof, is said to follow from the circumstance of Metrokane’s groundless threats of contravention of s 202 of the Copyright Act, which I have found to have occurred by reason of Metrokane’s absence of any entitlement to copyright in relation to the Rabbit corkscrew. The case for the existence of such statutory breaches seems to me however to be misconceived. S & H has not established that it was misled or deceived by reason of any such representations on the part of Metrokane. On the contrary, it rejected from the outset Metrokane’s allegations of breach of copyright, and also of such breaches of the TP Act as Metrokane later claimed. There is moreover no evidence of loss or damage sustained by S & H caused by any such supposed breaches on Metrokane’s part of the TP Act. As in the case of Metrokane, S & H’s pursuit of causes of action for breach of the TP Act must fail.Conclusions and Costs S & H has achieved substantial success in the proceedings. My tentative view is that in the exercise of my discretion, S & H should not be entitled to an order for the whole of its costs of the proceedings. I have found in favour of Metrokane on one of the major issues in the proceedings, namely whether Metrokane established infringement of copyright (referrable of course to the conduct of Mr Kushner and his company PCI) upon the assumed basis of course that the issue as to existence of copyright in the first place had been established in its favour. Coupled with the circumstance that PCI had contributed $50,000 to S & H’s cost of the proceedings (see [140] above), it may well be unjust that such sum should be in effect made available for recoupment to Mr Kushner and PCI, directly or indirectly, by virtue of an award of the costs of the entire proceedings in favour of S & H. I have made certain adverse findings concerning the conduct of Mr Kushner and PCI in relation to that substantial issue of infringement. What I tentatively have in mind would be to make orders that the costs of the proceedings be paid by Metrokane on the usual party and party basis, less the sum of $50,000. I would add that whilst Metrokane has been also wholly successful in relation to the counter-claim of S & H based upon the TP Act, what was involved in relation to that counter-claim was relatively insignificant, in terms of cost and expense. I should add that even if there be in fact no arrangement for the return of that sum of $50,000 by S & H to PCI, I tentatively am of the view that in principle, my proposal would be equitable in all the circumstances of the case. However I wish to have the benefit of submissions of the parties upon any costs proposals.

Ratio Decidendi

Legal Principle Established

Established by: CONTI J

After the close of the hearing of the proceedings, the parties engaged in the provision of comprehensive and extensive written submissions, in the following sequence:(i) S & H submissions in chief filed on 9 May 2003, comprising 7 pages;(ii)Metrokane submissions on defence and cross claim filed on 2 June 2003, comprising 91 pages;(iii)S & H submissions on defences to cross claim filed 3 July 2003, comprising 51 pages; and(iv)Metrokane submissions by way of reply to defences to cross claim, filed on 18 July 2003 comprising 25 pages.The submissions of both parties reflect considerable credit upon the industry and competence of the legal representatives for the parties to the proceedings. In order to keep these reasons for judgment within such parameters as can be reasonably managed, I have not found it necessary or appropriate to refer to every single submission which has been made, much less every piece of evidence referred to in those 174 pages of written submissions.The Australian copyright legislative scheme and the respective submissions of the parties as to the operation thereof It is common ground that Australia and the United States are parties to the Berne Convention for the Protection of Literary and Artistic Works, originally made at Berne on 9 September 1886, and signed by Australia on 14 April 1928, and subsequently signed by the United States on 1 March 1989, and further that the effect of Regulation 4 of the Copyright (International Protection) Regulations 1969 (Cth), made pursuant to ss 184 and 249 of the Copyright Act, is that the Copyright Act potentially applies in relation to the Rabbit corkscrew in like manner as the provisions thereof apply in relation to artistic works first published in Australia, and to citizens or residents of Australia (Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450 at 456-458). It follows that the Court is required to determine the issues here arising as to whether or not copyright subsists in the Rabbit corkscrew, and if so, as to any infringement thereof on the part of S & H in accordance with the provisions of the Australian legislation. A convenient starting point to a discussion of the controversial issues of statutory interpretation arising is the definition of ‘artistic work’ contained in s 10(1) of the Copyright Act, which reads as follows:‘artistic work means:(a)a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not;(b)a building or a model of a building, whether the building or model is of artistic quality or not; or(c)a work of artistic craftsmanship to which neither of the last two preceding paragraphs applies;…’.As I have foreshadowed, Metrokane propounded its case for breach of copyright upon the footing of the par (c) expression a work of artistic craftsmanship. No definition of artistic craftsmanship appears in the Copyright Act. By s 22(1) of the Copyright Act, a reference in the Copyright Act to the time when, or the period during which, an artistic work was made, shall be read as a reference to the time when, or the period during which, the work was first reduced to writing or to some other material form. By s 31(1)(b) of the Copyright Act, copyright in any artistic work is the exclusive right to reproduce that work in a material form, to publish that work, and to communicate that work to the public. By s 35(2) of the Copyright Act, it is the author who or which is the owner of any copyright subsisting in an artistic work. By s 36(1) of the Copyright Act, copyright in any artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright. However by s 14(1) of the Copyright Act, that exclusive right is qualified as follows:‘In this Act, unless the contrary intention appears:(a)a reference to the doing of an act in relation to a work or other subject-matter shall be read as including a reference to the doing of that act in relation to a substantial part of the work or other subject-matter; and (b)a reference to a reproduction, adaptation or copy of a work, shall be read as including a reference to a reproduction, adaptation or copy of a substantial part of the work, as the case may be.’