Dodson Motorsport Ltd v Logiical Performance Ltd - [2019] NZHC 918

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-000110

[2019] NZHC 918

UNDER the Copyright Act 1994 Fair Trading Act 1986

IN THE MATTER OF

Copyright Infringement Breach of Confidence Conspiracy

Breaches of the Fair Trading Act 1986

BETWEEN

DODSON MOTORSPORT LIMITED

Plaintiff

AND

LOGIICAL PERFORMANCE LIMITED

First Defendant

Defendants continued over

Hearing: 29-31 October, and 1, 5-9, 12-16, 26 and 27 November 2018 Further submissions received on 1 and 11 February, and
18 April 2019

Appearances:

C L Elliott QC and B R Webster for the Plaintiff B P Cain and E Butler for the Defendants

Judgment:

30 April 2019

[REDACTED] JUDGMENT OF EDWARDS J

This judgment was delivered by me on Tuesday, 30 April 2019 at 11.30 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

DODSON MOTORSPORT LTD v LOGIICAL PERFORMANCE LTD [2019] NZHC 918 [30 April 2019]

CARL JOHN HANNAFORD
Second Defendant

GRD ENGINEERING SERVICES LIMITED
Third Defendant

KELVIN JAMES GRAY
Fourth Defendant

TABLE OF CONTENTS

The clutch and ancillary parts.................................................................................... [4]

The clutch parts..................................................................................................... [4]
Ancillary parts....................................................................................................... [7]
Logiical parts......................................................................................................... [8]

History of the dispute.............................................................................................. [11]

COPYRIGHT.......................................................................................................... [32]

Identification of the copyright works...................................................................... [34]

Legal principles................................................................................................... [44]
The Dodson design pathway............................................................................... [64]

Outer basket........................................................................................................ [74]
Gear plate............................................................................................................ [84]
A basket............................................................................................................... [93]
B basket............................................................................................................. [104]

Inner Basket Steel (IBS).................................................................................... [110]

A piston............................................................................................................. [116]
B piston............................................................................................................. [122]
Gear lock........................................................................................................... [127]
Selector fork...................................................................................................... [131]

Mechanical circlips............................................................................................ [138]

Clutch assembly................................................................................................ [143]

Summary of originality findings....................................................................... [148]

Who owns the copyright?...................................................................................... [151]

GRD drawings.................................................................................................. [155]

The Bicknell and GS Works drawings.............................................................. [167]

Has there been copyright infringement?................................................................ [177]

The defendants’ design pathway....................................................................... [179]

Outer basket...................................................................................................... [187]
Gear plate.......................................................................................................... [193]
A and B baskets................................................................................................. [199]

Inner Basket Steel (IBS)................................................................................... [202]

A and B pistons................................................................................................. [210]

Selector fork...................................................................................................... [213]

Gear lock and mechanical circlips..................................................................... [216]

Clutch assembly................................................................................................ [222]

Who is liable for the infringement and on what basis?.......................................... [225]

GRD and Mr Gray............................................................................................. [228]

Logiical and Mr Hannaford.............................................................................. [233]

What relief should be granted?.............................................................................. [248]

The user principle.............................................................................................. [250]

The expert evidence.......................................................................................... [254]

Terms of the hypothetical licence...................................................................... [259]
Parties to the negotiation................................................................................... [264]
Commercial context and the parties’ bargaining positions............................... [267]
Structure of the licence – a fixed fee?............................................................... [274]
Comparable licences.......................................................................................... [279]
Share of profits.................................................................................................. [283]
Reluctance and willingness............................................................................... [289]
Dodson’s competitors........................................................................................ [296]
Extent of the copying........................................................................................ [298]
Eight Mile Style premium................................................................................. [299]
Assessment of compensatory damages............................................................. [301]
Additional damages for flagrancy of breach..................................................... [305]

FAIR TRADING ACT.......................................................................................... [313]
Logiical and Mr Hannaford.............................................................................. [314]
GRD and Mr Gray............................................................................................ [330]
Additional claims.............................................................................................. [335]
Relief................................................................................................................. [337]

BREACH OF CONFIDENCE.............................................................................. [340]
Does the information have the necessary quality of confidence?..................... [343]
Was the information imparted in circumstances importing an obligation
of confidence?................................................................................................... [348]
Was there unauthorised use of the information to the detriment of the
party communicating it?................................................................................... [354]

CONSPIRACY BY UNLAWFUL MEANS......................................................... [360]

SUMMARY OF FINDINGS................................................................................ [373]

RESULT................................................................................................................ [380]

Appendix A – Clutch Parts ..........................................................................................

Appendix B – Cross-section view of Assembled Clutch............................................
Appendix C – Outer Basket ........................................................................................
Appendix D – Gear Plate .............................................................................................
Appendix E – The A Basket.........................................................................................
Appendix F – The B Basket .........................................................................................
Appendix G – IBS ........................................................................................................
Appendix H – A Piston.................................................................................................
Appendix I – B Piston ..................................................................................................
Appendix J – Selector Fork .........................................................................................

[1] Car enthusiasts around the world are likely to be familiar with the Nissan GT-R R35 (R35). A distinctive feature of that car is its dual clutch transmission. This case is about aftermarket clutch and ancillary parts for the R35 manufactured and sold by the plaintiff (Dodson) and first defendant (Logiical).

[2] Dodson contends that the defendants (including a former employee, Mr Hannaford, and a former manufacturer, “GRD”) have breached copyright in the Dodson parts by manufacturing and dealing in copies of those parts. Dodson also claims breach of the Fair Trading Act 1986, breach of confidence, and conspiracy by unlawful means.

[3] The defendants deny all these claims. They say that copyright does not subsist in the Dodson parts because they are not original. They allege that the Dodson parts are derived from the original Nissan (OEM) parts, and contain commonplace features, or features dictated by functional constraints. However, to the extent copyright does subsist, GRD says that it owns that copyright, and there has been no breach. The defendants also deny any misleading and deceptive conduct in breach of the Fair Trading Act; deny they obtained information subject to an obligation of confidence; and deny any conspiracy or intent to injure Dodson by unlawful means.

The clutch and ancillary parts

The clutch parts

[4] The Dodson parts at the heart of this claim concern Dodson’s Promax and Sportsman clutch assemblies, and the individual parts that comprise those clutches. Pictures of those parts and assemblies are set out in Appendix A to this judgment (the clutch stacks and clutch core do not form part of the claim). A cross-section view of the assembled clutch is shown in Appendix B.

[5] In very simple terms, the function of a clutch is to transmit power from the engine to the vehicle transmission system. In a dual clutch transmission, there are two clutches operating simultaneously, with the gears split between them. Clutch A has the odd gears – 1, 3, and 5. Clutch B has the even gears – 2, 4, and 6. When the car is in drive, clutch A will have one gear engaged, and clutch B will simultaneously have

pre-selected the next gear, allowing that gear to be immediately engaged. As Dodson’s lead engineer, Mr Cupit, explained, essentially the car is “flipping backwards and forwards between clutch A and clutch B as it selects the next appropriate gear”.1 The process of engaging and disengaging the clutch discs allows for the transmission of torque by means of mechanical friction.

[6] The Promax clutch is Dodson’s premier product and is totally self-contained. The Sportsman clutch uses some OEM parts in the overall assembly and is interchangeable with the OEM parts. Dodson claims copyright in both the individual parts which make up the clutch assembly and the assembly itself. The individual parts at issue are: the outer basket, gear plate, A basket, B basket, Inner Basket Steel (IBS), A piston, and B piston. These are referred to as the “clutch parts” throughout this judgment.

Ancillary parts

[7] There are several ancillary parts that also form part of Dodson’s claim, namely, two mechanical circlips (referred to as MC 1 and MC 2 respectively), a gear lock, and selector fork. The mechanical circlips and gear lock sit on the gear shaft. The selector fork in issue is for the reverse and first gears of the car.

Logiical parts

[8] The Logiical parts which Dodson says infringe its copyright are found in Logiical’s 9-plate and 22-plate clutch assemblies. The latter is known as the Ultimate clutch. The 9-plate assembly is interchangeable with the Nissan OEM parts; the 22- plate clutch is fully self-contained.

[9] The Logiical 9-plate and 22-plate clutch components were manufactured by GRD. GRD also manufactured a selector fork for Logiical which Dodson says is a copy of its selector fork.

[10] GRD did not manufacture a mechanical circlip or gear lock for Logiical. However, Logiical sold circlips and a gear lock that Dodson says infringe its copyright.

1 Brief of Evidence, Mr Cupit at [65].

Claims of secondary infringement are made against Logiical and Mr Hannaford in respect of these parts.

History of the dispute

[11] Dodson’s founding directors, Mr Dodson and Mr Cupit, met each other in the early 2000s. Mr Dodson’s involvement with the automotive industry continues a family tradition stretching back over a number of generations. Mr Cupit has an extensive background in car engineering.

[12] In 2004 they decided to set up business together, and Dodson was subsequently incorporated. Initially the business involved building race cars, specifically Nissan GTRs, for Dodson’s customers. That complemented Mr Dodson’s other business, Dodson Auto Spares Ltd, which was a Japanese car parts importer.

[13] Mr Hannaford, the second defendant, began work with Dodson Auto Spares Ltd in 2004 as a mechanic. Mr Hannaford left school when he was 16 and started an apprenticeship rebuilding automatic gearboxes. He got into motorsport soon after and developed a love for building and preparing race cars.

[14] The R35 was launched in Japan in 2007 and was subsequently rolled out around the world. It was the much-hyped successor to the Nissan Skyline series, although it does not form part of that car family. Some commentators have suggested that in terms of acceleration, top speed, and head to head race-track performance the GT-R model rivals premier sports car brands such as Porsche, Audi, Lotus and Lamborghini.

[15] Mr Clark Proctor, a well-known personality in the New Zealand racing scene, was one of the first to import a R35 into New Zealand. In 2009 he experienced transmission failures with his car and, instead of returning the car to Japan at large expense, he brought it to Dodson to see if it could be fixed.

[16] Mr Cupit and Mr Hannaford pulled the transmission apart and found a blown seal on one of the pistons. The seal was a “push in” seal moulded by Nissan and not easily replaced. Mr Cupit approached Mr Peter Wieser at Marua Engineering Co Ltd

(Marua) to manufacture a replacement part. Marua manufactured an A piston (then known, somewhat confusingly, as a B piston) with a push-in, rather than a push-on, seal.

[17] From these inauspicious beginnings, the Dodson business grew. By this time, the R35 was becoming a popular race car and owners were modifying the vehicle in an effort to extract more power. Dodson’s business expanded from fixing faults with the original parts to making bigger and stronger clutches which could withstand the greater power that car enthusiasts were demanding.

[18] As a result of its rapid growth, Dodson required a greater volume of parts than Marua had capacity to make. So, in March 2009, following an approach by Mr Cupit, Dodson engaged Edgeworth 2000 Ltd (Edgeworth) to manufacture the Dodson parts. Edgeworth is a specialised tool making and precision engineering company and its workshop was just around the corner from the Dodson premises.

[19] Edgeworth manufactured an A and B basket, A and B piston, gear lock, and the mechanical circlips. Machine drawings of these parts were prepared in June 2009 and Dodson claims copyright in those drawings.

[20] But the Dodson business continued to grow, and the demand for larger runs of aftermarket parts rapidly outpaced Edgeworth’s capacity. Dodson began to look for a more efficient and cost-effective way to manufacture its aftermarket parts. Mr Proctor recommended GRD as a potential manufacturer, and he introduced Mr Gray, GRD’s director, to Mr Cupit.

[21] Mr Gray was brought up in a practical, mechanical household, and followed his father, grandfather, and great-grandfather into the field of mechanical engineering. In 2001 he incorporated GRD Engineering Services and began working on race cars.

[22] Dodson claims that there was a meeting between Mr Proctor, Mr Gray, and Mr Cupit at GRD’s premises in August or September 2009 in which confidentiality was discussed. That is disputed by Mr Gray and GRD. But whatever may have been discussed around confidentiality, it was agreed that GRD would manufacture the

Dodson parts. In October 2009, GRD made the first A baskets for Dodson. The other parts followed in late 2009 and early 2010.

[23] In early 2010, Dodson began work on its Promax clutch assembly. Detailed drawings were required for this self-contained assembly, and Bicknell Auto Sport Engineers Ltd (Bicknell) was engaged to prepare drawings of the necessary parts. Ownership of copyright in the Bicknell drawings is an issue in this proceeding.

[24] The Dodson selector fork was manufactured by GRD in November 2011. Mr Gray sub-contracted the manufacture of that selector fork and drawings were undertaken by Mr Glenn Simpson, trading as GS Works. Dodson claims copyright in the GS Works drawings of the selector fork.

[25] In August 2012, Dodson made the decision to create an in-house design team to work with Mr Cupit. By this time, tensions between Mr Hannaford and Mr Cupit were beginning to show, and Mr Hannaford resigned at the end of 2012. By all accounts, it was not a happy split.

[26] After leaving Dodson, Mr Hannaford went to work for a company owned by Mr Proctor, and then left to set up his own business. This business was to become Logiical, which was incorporated on 3 April 2013 under a different name. Logiical’s business involves the service, repair, and maintenance of vehicles, and the retail of aftermarket clutch transmission components. This includes the sale of aftermarket parts for the R35, including those which are at the heart of this proceeding.

[27] The acrimony characterising the end of the relationship between Mr Hannaford and Dodson reared its head again in 2014. Dodson commenced employment proceedings against Mr Hannaford, but the parties reached a settlement before the matter was heard.

[28] Meanwhile, GRD continued to manufacture the Dodson parts. But by mid- 2012, Dodson was experiencing further significant growth, and the directors began using overseas manufacturers to make their parts. As a consequence, GRD’s workflows began to dwindle. By 2014, most of Dodson’s manufacturing was

conducted overseas, and GRD was forced to sell one of its machines and lay off staff. Dodson’s last order with GRD was placed in July 2015.

[29] In around 2013 or 2014, Mr Hannaford approached Dodson requesting to purchase parts for a Logiical customer seeking to repair a R35. When that avenue hit a dead end, Mr Hannaford looked to purchase parts overseas, but was unable to source parts of a satisfactory quality. Eventually, he approached Mr Gray and GRD. Mr Gray initially refused to supply parts to Logiical, but Mr Hannaford’s approaches wore him down and he eventually said yes. It is not clear just when that was, but the first purchase order for the Logiical parts was sent through in March 2015.

[30] GRD initially manufactured the Logiical 9-plate clutch assembly. Design and manufacturing began on the 22-plate clutch but was still under development when these proceedings were commenced. Logiical sold the clutch and ancillary parts at issue in this proceeding throughout 2015.

[31] In 2016, Dodson became aware that Logiical was selling aftermarket clutch parts. It also became aware that Mr Hannaford had made certain statements regarding the Logiical parts, and his own skills and experience, which Dodson considered were misleading and deceptive. This proceeding soon followed and was filed in January 2017.

COPYRIGHT

[32] Dodson’s primary claim is breach of copyright. Dodson claims that the defendants have breached its copyright by either making copies of the Dodson clutch parts and selector fork, or by dealing or possessing in those parts. Dodson also claims that Logiical and Mr Hannaford have breached copyright in the gear lock and mechanical circlips by possessing or dealing with those particular parts.

[33] To prove its claim, Dodson must clearly identify the copyright work or works which it claims have been infringed. It must then show that copyright subsists in those works. In this case, the subsistence issue turns on whether the parts are original. If copyright does subsist, Dodson must then prove that it owns the copyright, either as the original author of the works, or as the commissioner of them. Finally, Dodson

must show that there has been an infringement of its copyright, either by copying the parts in issue, or by dealing in parts which are known to be copies. Each of these issues is considered below.

Identification of the copyright works

[34] The first step is to identify the copyright works which are alleged to be infringed. The obligation is on Dodson to clearly and accurately identify those works in its statement of claim.

[35] Schedule A to the fifth amended statement of claim dated 27 August 2018 lists the copyright works Dodson relies on. That schedule lists the computer-aided design (CAD) and manufacturing drawings for each of the Dodson parts in issue. The drawings listed include those produced by Dodson’s employees, and those created by manufacturers, including GRD.

[36] CAD drawings and manufacturing drawings are graphic works falling within the definition of artistic works in s 14(1) of the Copyright Act 1994. There is no dispute in this case that those drawings, which were produced in evidence, relate to the parts either individually or as part of a design series.2

[37] The issue in this case is one of pleading. The defendants say that the copyright works relied upon by Dodson are limited to those defined in Schedule A. That Schedule does not refer to Mr Cupit’s sketches or the Dodson prototypes. Nor does it refer to any of the drawings or test results produced by Bicknell in 2010 (Bicknell drawings). And the Schedule does not expressly refer to the GS Works drawings of the selector fork undertaken in November 2011 (GS Works drawings).

[38] In closing submissions, Mr Elliott confirmed that Dodson does not claim copyright in Mr Cupit’s sketches, or prototypes. Those sketches and prototypes are of evidential relevance only. However, Dodson does rely on the Bicknell and GS Works

2See Oraka Technologies Limited v Geostel Vision Limited [2013] NZCA 111 at [12] confirming that a court may consider a series of independent drawings or diagrams in determining infringement where it is apparent that those drawings relate to the same subject and are intended to form part of a series or a whole.

drawings. Mr Elliott submits that when the fifth amended statement of claim is read in its entirety, it is clear that both sets of drawings fall within the scope of the pleaded copyright works relied upon by Dodson.

[39] In Henkel KGaA v Holdfast New Zealand Ltd, the Supreme Court upheld the respondent’s contention that Henkel’s claim for copyright infringement in relation to a particular drawing was not available to it because of the way the claim was pleaded.3 That conclusion was reached after considering the pleadings, the opening and closing addresses, and the evidence called at trial. The Supreme Court concluded that the respondent had conducted its case on the basis of the appellant’s pleadings and it would be unfair to allow it to present a materially different case on appeal.4

[40] This case is distinguishable from Henkel. Although the Bicknell drawings are not specifically identified in a schedule to the claim, they are nevertheless referred to in the body of the pleading. Dodson specifically pleads that the copyright works were originally created by, or derived from “employees of Bicknell Autosport Engineering Ltd (Bicknell) as sub-commissioned by GRD to undertake part of the work that it had been commissioned to prepare for Dodson”.5 Similarly, the text message exchanges between Mr Cupit and Mr Bicknell are specifically referred to in the claim as particulars of the Dodson design process which underpins the claim to copyright.6

[41] In addition, the Bicknell drawings were referred to in Dodson’s opening submissions,7 and included in the evidence. Both Mr Cupit and Mr Gray were cross- examined about them,8 and they were referred to in closing submissions.9 There could be no real doubt that the Bicknell drawings were part of Dodson’s claim at trial.

[42] The GS Works drawings relate to the selector fork. The statement of claim includes a pleading that Dodson commissioned the design and manufacture of the selector fork through Mr Cupit.10 Particulars of that pleading include the dates on

3      Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577.
4 At [32].
5      Fifth Amended Statement of Claim, 27 August 2018 at [16.6].
6      At [17.7].
7      For example, see [14(e)], [24], [25], [41] of the plaintiff’s written opening submissions.
8      For example, see pages 351, 439, 741, and 783 of the Notes of Evidence.
9      For example, see [30] of the plaintiff’s written closing submissions.
10 Fifth Amended Statement of Claim, 27 August 2018 at [30].

which Dodson commissioned GRD to prepare the moulding. As with the Bicknell drawings, the GS Work drawings were produced in evidence, and it was clear that Dodson claimed copyright in those drawings. In those circumstances, I am satisfied that the pleaded copyright works relied upon by Dodson include the GS Works drawings.

[43] In summary, I find that the copyright works at issue in the proceeding are the drawings underpinning the Dodson parts which are listed in Schedule A to the fifth amended statement of claim, and include the Bicknell drawings, and the GS Works drawings.

Copyright subsistence: are the Dodson parts original?

Legal principles

[44] Before it can prove copyright infringement, Dodson must establish that copyright subsists in the copyright works. Under s 14 of the Copyright Act, copyright will only subsist if an artistic work is “original”.

[45] The threshold for originality is low. But the extent of the work’s originality will be relevant to the scope of copyright protection. An inference of copying will be more readily drawn where there is a high degree of originality, even where the degree of similarity is less.11

[46] The work need not be novel or unique in form; it must simply originate from its author and be the product of more than minimal skill and labour. Importantly, it is the execution or expression of the idea or concept that is protected by copyright law, rather than the idea or concept itself.12 In the same vein, copyright does not protect how things work, as that is the remit of patent law. But purpose and function may nevertheless provide important context in which to assess originality.

11Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [38]; Land Transport Safety Authority of New Zealand v Glogau [1999] 1 NZLR 261 (CA) at 271.

12 Holdfast NZ Ltd v Henkel KGaA [2007] 1 NZLR 336 (CA) at [55].

[47] As Davison J found in Sealegs, copyright may arise in a collection of individual features which are not in themselves original and which would not attract copyright if assessed on their own.13 In those circumstances, the work’s originality lies in the skill and labour required to arrange or collocate those features.14

[48] Section 14(2) of the Copyright Act clarifies that a work is not original if it is a copy of another work or itself infringes copyright. The defendants claim that the Dodson clutch parts, viewed either individually or collectively, are not original because they are copies of the Nissan OEM parts, with any differences between them explained by functional or manufacturing constraints rather than independent design.

[49] As the defendants’ challenge to the claim of originality in this case involves an allegation of copying, the principles relating to infringement of copyright apply to the question of subsistence also. The test for infringement by way of copying involves three elements:15

(a)Objective similarity between the infringing work and the copyright work.

(b)A causal connection between the copyright work and the infringing work in the sense that the copyright work is the source from which the infringing work is derived.

(c)Copying of either the entire work or of a substantial part of it.

[50] As to the first step, the Court undertakes a visual comparison between the two designs, noting similarities and differences. The purpose of that examination is “not to see whether the overall appearance of the two designs is similar, but to judge

13 Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1729 at [203], citing Bonz Group (Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC) at 220, and Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [40].

14 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 (HL) at 277.
15The test was established in Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA). In Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111, the Court of Appeal set out the preferred order in which these factors should be considered. See also Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1724 at [248].

whether the particular similarities may be disregarded because they are commonplace, unoriginal, or consist of general ideas”.16

[51] The extent of similarity between the copyright work and the allegedly infringing work has evidentiary significance in terms of proving copying. The assessment of objective similarity is a matter of impression for the court. Expert evidence may be of assistance, but the court must reach its own view.17

[52] The second step involves establishing a causal connection linking the plaintiff’s copyright work with the defendant’s alleged infringement. As the Supreme Court noted in Henkel, it is this second step which important in copyright infringement cases:18
The ultimate issue in a breach of copyright case concerns derivation, not similarity, albeit the degree of similarity between the copyright work and the allegedly infringing work has evidentiary significance. Proof of copying will seldom be direct; in most cases the court will rely on inference. The closer the similarity between the two works the stronger the inference is likely to be that the one was copied from the other. If the alleged infringer has had access to, and therefore an opportunity to copy, the copyright work, and the similarity between the works supports an inference of copying, it may well be appropriate for the court to conclude, on the balance of probabilities, that there was indeed copying. This, of course, is subject always to the evaluation of any evidence there may be that no copying actually took place.

[citations omitted]

[53] In Steelbro NZ Ltd v Tidd Ross Todd Ltd, the Court of Appeal observed that the factors to which courts commonly have regard to in assessing causal connection are as follows: 19
… the “starting point” of the defendant’s work; the extent of the defendant’s alteration (i.e. whether a substantial part of the plaintiff’s work survived in the defendant’s so as to appear to be a copy of the original work); and generally the way in which the defendant has taken advantage of the plaintiff’s work.

[54] The final step concerns substantiality. The copying must be either of the entire work or a substantial part of it. In Oraka, the Court of Appeal said that the

16Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR 2416 (HL) at 2425.

17     Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1724 at [251].
18     Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43]
19     Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [109].

substantiality test can be regarded as a practical threshold designed to limit claims of infringement to those that are real and substantial. The issue of substantiality is to be decided on the basis of what is actually found to have been copied, rather than on what might be wider allegations of copying.20

[55] What constitutes a “substantial” part is a question of fact to be determined in each case, but in general it constitutes such a degree of similarity that it may be said that the infringement has adopted the essential features or substance of the original.21 A substantial part in an artistic work depends more on the qualitative visual impression rather than on a quantitative analysis.22 In percentage terms, “substantiality” can form a very small part of the infringing work.

[56] Evidence that there are functional constraints on design can support an inference of an independent design path. In Oraka, the issue of functional constraints, and the notion of “commonplace” features, was explained by the Court of Appeal as follows:

[131] The issue of functional constraints may become important at this point. If similarities between two works are dictated by the function of the item, then the similarities are an inevitable consequence of the object and its function rather than the labour and skill of the claimant, against whose misappropriation the law of copyright seeks to protect.

[132] Functional constraints have been considered in the United Kingdom under the notion of “commonplace”. If the claimant’s design is very ordinary (commonplace) given the constraints imposed by the function of the object and there is nothing new added, then the originality of the claimant’s work might be non-existent or so low that the defendant can easily avoid breach by adding something of his or her own to the design. The situation has been described as follows:

If a number of designers working independently of one another in the same field produce very similar designs by coincidence the most likely explanation of the similarities is that there is only one way of designing that article. In those circumstances the design in question can fairly and reasonably be described as “commonplace”. It would be a good reason for withholding the exclusive right to prevent the copying in the case of a design

20 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [87].
21Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 669, citing King Features Syndicate Inc v O & M Kleeman Ltd [1941] AC 417, [1941] RPC 207, 210.
22Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [129]; Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [44].

that, whether it has been copied or not, is bound to be substantially similar to other designs in the same field.

[133] Although the existence or otherwise of functional constraints is primarily relevant to earlier questions regarding the originality of the work and whether copying has in fact occurred, functional constraints may also assist in determining the originality of the respective works and whether a substantial part of the claimant’s labour and skill has been taken by the defendant.

[citations omitted]

[57] Access to a copyright work, and the opportunity to copy from that work, can support an inference of copying. However, the drawing of that inference is always subject to evidence showing that copying did not actually take place, and evidence of an independent design pathway can rebut an inference of copying.23

[58] This raises the issue of how to assess originality where modifications have been made to existing material. Two cases are particularly relevant to the facts of this case. The first is the Court of Appeal’s decision in Wham-O.24 One of the issues in that case was whether the addition of rings to a plain surface frisbee was sufficient to impart originality to the whole of the toy.

[59] The Court of Appeal cited from the judgment of Lord Atkinson in Macmillan & Co Ltd v Cooper confirming that it is not the appropriation of the raw material that is at issue in copyright claims but the appropriation of another’s labour, skill and capital.25 Accordingly, to secure copyright for the product it is necessary that labour, skill and capital should be expended “sufficiently to impart to the product some quality or character which the raw material did not possess and which differentiates the product from the raw material”.26

[60] As to the particular facts in Wham-O, the Court of Appeal held that copyright subsisted because:27

23 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43]; Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 (HC) at [168]; Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [109].

24     Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA).
25     Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 57–58.
26     Macmillan & Co Ltd v Cooper (1923) 40 TLR 186 at 188.
27     Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 665.

… the independent skill and labour in that case was directed not simply to the idea of a flying disc but to the form in which that idea was expressed by the distinctive image created upon the upper surface of the disc. Further, in so far as copyright exists in any drawings, there is no suggestion that they were copied from any previous drawings of another author.

Having considered the evidence in the case we are satisfied that Wham-O is entitled to copyright protection for the whole of the materials and not simply for the ribs or rings upon them as Mr Hillyer contended for.

[61] The second case is Steelbro.28 Subsistence and ownership of copyright were not contested in that case. The only issue was whether the copyright in the plaintiff’s sideloading trailer had been breached. Steelbro did not dispute that it had inspected and measured the plaintiff’s sideloader. Nevertheless, it maintained that its sideloader represented the logical evolution of the Steelbro range of sideloading trailers, and it was designed independently without resort to copying.

[62] The Court of Appeal summarised the competing policy arguments underpinning copyright infringement. It held that there was no valid policy reason for upholding substantial copying. Conversely, if Steelbro’s design represented an “innovative development drawing upon but further developing existing technology it should be welcomed and encouraged”.29

[63] The Court of Appeal upheld the trial Judge’s findings that the Steelbro design was derivative, that Steelbro had endeavoured to replicate the TRT model, and had “checked back” against what the plaintiff had done. An inference of copying was available on the evidence, and it was open to the Judge to find copying in that case. Although Steelbro did a great deal of work itself, the Court of Appeal said that all it had done was build “a better mousetrap”.30

The Dodson design pathway

[64] The principles in Wham-O and Steelbro are directly engaged in this case. That is because there is no dispute that Dodson had access to, and the opportunity to copy, the OEM parts. Dodson freely admits that the OEM parts were the starting point for

28 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486.
29 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [101].
30 At [113].

the Dodson designs. But, just because they were the starting point does not mean they were also the end-point. The originality inquiry involves more than just considering the starting point for the design.

[65] Although it started off designing replacement parts, Dodson’s business quickly progressed to designing parts for a different, higher performance use of the R35. Mr Cupit explained this development in his evidence as follows:31
As time went on people started putting more power into their cars. There was a need to make bigger and stronger clutches. This was a separate desire to fixing faults. This in turn meant that more efficient and stronger parts needed to be designed and made. Parts were breaking because of the growing power in the car together with what I believe were inherent design flaws.

[66] Dodson points to this changed use, and the different target market, to explain some of the key differences between their parts and the OEM parts. For example, the need to make bigger and stronger clutches led to the decision to machine the Dodson parts from single pieces of alloy billet, which provides for a more robust and rigid part than the OEM equivalents which are manufactured from pressed steel.

[67] Similarly, the pursuit of increased power also led to the creation of more room inside the clutch assembly to house additional frictions. The creation of additional space within the overall clutch assembly, whilst operating within the dimensional constraints posed by the R35, is a key driver of some of the features which Dodson says are not only original, but novel.

[68] Despite these different design objectives, the defendants say that Dodson’s design pathway falls short of the threshold for formal design that one would expect if the design had been truly independent rather than derived from the OEM parts. Dr Gooch was engaged to give expert evidence on the expected design pathway in the field of mechanical engineering. I agree with Mr Cain that Dodson’s design pathway did not follow Dr Gooch’s approach. But that does not automatically lead to a conclusion that Dodson copied the OEM parts. The question is not whether the design process followed, or fell short of, a textbook approach, but whether it was truly independent. That is a question of fact to be determined on the evidence in each case.

31 Brief of Evidence, Mr Cupit at [30].

[69] The evidence in this case shows that Dodson’s design pathway was generally one of trial and error. Mr Cupit explained that in the early days he would prepare sketches of what he wanted and give those to the manufacturer (initially Marua, then Edgeworth and subsequently GRD). Prototypes would be prepared and trialled, and modifications would be made to rectify any problems found with the parts, or to improve performance. Later, in 2012, CAD drawings were prepared for each of the Dodson parts. Once a detailed CAD drawing was made, design features of those parts were able to be changed using the CAD software programme.

[70] Mr Cain challenges Mr Cupit’s evidence regarding the use of prototypes in the testing process. He suggests that the parts were not prototypes but instead were designed to fill orders, and referred to Mr Proctor’s evidence as to the trialling of parts in his car. But I prefer Mr Cupit’s evidence to that of Mr Proctor. It was evident at trial that Mr Proctor blamed Dodson for various mishaps that occurred during racing. His deep sense of grievance coloured his evidence and tainted his recollections.

[71] Further, other evidence called at trial corroborates Mr Cupit’s evidence that early prototypes were trialled and tested in Mr Proctor’s car in a racing car environment. For example:

(a)Emails exchanged between Mr Hannaford and Mr Cupit in 2009 refer to trialling the seal before manufacturing the pistons, trying an “O” ring before ordering, and making a pan to try first before manufacturing a set of 10.

(b)An invoice from GRD to Dodson for 11 pans, includes a handwritten note stating “Clarke Proctor as prototype”.

(c)In 2010, Dodson engaged Bicknell to undertake stress testing of the Promax assembly. Mr Cupit explained that stress testing was done because the assembly was new, and Dodson needed to know how the metal was going to physically react to the higher duty. As a result of this stress testing, modifications were made to the overall clutch assembly.

[72] A high-level assessment of this evidence suggests that while the OEM parts may have been the starting point for the Dodson designs, what then developed followed an independent pathway. That evidence provides a solid basis to rebut allegations of copying and support the claim for originality. However, Dodson claims copyright in respect of each of the clutch parts, ancillary parts, and assemblies at issue in the claim. Originality must be assessed on a part by part basis. The focus of the enquiry is on the independent skill and labour evident in any modifications, and whether any additional elements are sufficient to make the total work original.32

[73] Witnesses called by both parties in this case (in particular, Dr Gooch, Mr Cupit, and Mr Gray) undertook that assessment by comparing the physical features and dimensions of the parts themselves. I follow that approach as set out below. The independent expert engaged by the defendants limited his evidence to a comparison of the respective measurements and dimensions of the parts. There were numerous errors and inaccuracies throughout his evidence which rendered it unreliable and unhelpful. The defendants did not rely on or refer to this evidence in closing, and I also set it to one side.

Outer basket

[74] As the name would suggest, the outer basket sits on the outer side of the clutch assembly and encases the rest of the clutch parts. The gear plate connects through the fingers at one end of the outer basket, and the A piston slots in at the other.

[75] Visually, the Dodson and OEM outer baskets appear very similar. The overall shape, profile and configuration of the two parts are more or less the same, although the Dodson part is larger. Both parts have the same number of fingers, a circlip groove on the outer teeth, and cut-outs which are used to connect to the A piston. The square oil flow holes around the circumference are also the same shape and configuration. These features of the outer basket are shown in fig.1 of Appendix C.

32 Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) at 665; Martin v Polyplas MF Ltd [1969] NZLR 1046 (SC) at 1050; Interlego AG v Tyco Industries Inc [1989] AC 217, (1989) 12 IPR 97 (PC) at 263.

[76] However, there are three key differences between the parts. The first is the size and shape of the Dodson part fingers, as shown in fig. 2 of Appendix C. Those fingers slot into the 10 matching slots in the gear plate as shown in fig. 3 of Appendix C. There is minimum clearance between the fingers and the gear plate slots, providing a precision fit. This fit is different to the OEM equivalents which, when fitted together, have significant clearance between the two parts – leading to movement and “rattle” in the clutch.

[77] Mr Gray says that the larger finger size was a consequence of a manufacturing decision and does not reflect original design. Unlike the OEM part, which is made out of pressed steel, the Dodson outer basket is made out of aluminium billet. As the aluminium billet is softer than steel, Mr Gray says that the whole part, and not just the fingers, had to be made thicker to be strong enough. He expanded on this in his evidence, suggesting that the design of the fingers to fit together with the gear plate arose out of a decision to remove the interior dimple on the OEM part. That decision in turn, he said, was driven by manufacturing constraints. Mr Gray explained it this way:33
The problem we faced with leaving this dimple in here was that if you were to put the cutting tool in here, as I’ve just described, this dimple would get in the way so it would make it virtually impossible to cut that groove with that dimple being there because the tool would interfere with it. So the solution was just to remove that because we knew that if we made this a closer fit with the gear plate, that would create the same driver or do the same function as that and replace that. So that’s pretty much how the bigger fingers in their width with a closer fit on the gear plate came about, it was because we needed to replace what the function of that was, because obviously we couldn’t manufacture the part.

[78] Manufacturing constraints, such as the “softer” qualities of the aluminium material, may have played a part in the size and shape of the fingers, but I am satisfied that the key driver of the changes was design. Mr Cupit explains that the thicker fingers on the OEM basket provide a much larger area to push on the clutch and clamp the frictions and steels together. That allows more area within the clutch, and also allows a more even distribution in the clamp load on the clutch. Creating greater area within the clutch was a design objective which finds expression in several Dodson parts.

33 Notes of Evidence at 710.

[79][REDACTED]

[80] [REDACTED]. This was not a decision prompted by manufacturing convenience, but a deliberate design choice consistent with the Dodson philosophy. There is a high degree of originality in this particular feature of the Dodson outer basket.

[81] The second key difference to the OEM part can be found at the other end of the outer basket. Different shaped cut-outs, a deeper circlip groove, and the absence of the pressed dimples on either side of the tooth found in the OEM part, provides for a better connection to the A piston. The simplicity of these design features does not make them commonplace. Rather, these features reflect independent skill and labour in the design of the fit between the outer basket and A piston in the overall clutch assembly.

[82] The third key difference is in the thicker wall of the outer basket. The thicker wall reduces the risk of distortion as a result of the higher load the Dodson clutch parts are designed to absorb. Mr Cupit said that finding the optimum wall thickness was not straightforward, and that initial stress tests on a prototype outer basket saw the shape deformed. The thicker wall was designed to counteract that tendency. I accept that evidence. It suggests that the thicker wall was a design solution to a problem posed, rather than a consequence of the use of the softer aluminium material. The testing of the part leading to modifications in the design negates any allegation that there was copying of the OEM part.

[83] Although the quantity of the differences between the two parts may not be significant, the quality of them is. They reflect independent skill and judgment in design of the part which is at odds with the claim of copying. Although manufacturing ease may explain some of the design differences, I am satisfied that the key driver for these changes was design, with the objective of creating a stronger clutch assembly which could withstand greater power. Whether considered individually or cumulatively, I consider the quality of the differences reflects an originality in the Dodson outer basket which distinguishes it from the OEM part. Copyright subsists in the Dodson outer basket.

Gear plate

[84] The OEM gear plate is made of pressed steel. It has 15 holes around its circumference, and three hole and slot formations. On the outer rim, it has 10 apertures through which the fingers from the outer basket protrude. The outer edge contains small teeth which slot into the IBS. The OEM oil pump gear drive is a machined part which is permanently welded onto the gear plate.

[85] The Dodson part is machined from alloy. The gear plate also has the holes around the circumference, although it has more than the OEM part, and they are all the same dimension. It also has apertures around the outer circumference, but they are a different shape and dimension to those on the OEM part as they are designed to fit the larger, thicker, fingers on the Dodson outer basket. As mentioned previously, the [REDACTED] which is original to the Dodson design. The features of the gear plate are shown in fig. 1 and fig. 2 of Appendix D.

[86] Although the Dodson gear plate connects to the IBS with the teeth on the outer edge, there are fewer teeth, and they are of a different shape, to the OEM part. This design was arrived at after a trial of a threaded version which allowed for a different connection to the IBS, but which became problematic as more and more power was put into the car. As explained further below, although both the OEM and Dodson parts have outer teeth, the fit to the IBS is different between the two parts. Dodson uses a circlip to lock the gear plate in position, and when the outer basket is placed over the gear plate and the IBS, it encases the circlip completely, preventing it from popping out.

[87] Objectively analysed, there is a basic similarity between the OEM and Dodson parts. They are of a similar dimension and shape and perform the same function in the operation of the clutch. They each have holes on the inner rim, apertures for the fingers of the outer basket on the outer rim, and teeth on the outer edge to connect to the IBS. But I consider the differences between the two parts reflect original design and are not driven by functional requirements or manufacturing processes, for the reasons that now follow.

[88] First, the decision to bolt the gear drive to the gear plate rather than weld it was to achieve greater flexibility in altering gear ratios. That is, by designing a part that could be bolted and unbolted, Dodson could alter the oil pump gear ratio to meet the requirements of a particular vehicle.

[89] Second, the apertures around the edge, which accommodate the outer basket fingers, allow for a precision fit between the [REDACTED] not found in the OEM equivalents. That fit also means that additional internal space is created within the clutch assembly, which allows for a greater number of frictions and seals to be inserted, which in turn allows for additional power to be transmitted. That is an original design change.

[90] Third, although the gear plate fits to the IBS through the use of “teeth”, the fit is quite different as between the OEM and the Dodson parts. The OEM gear plate teeth push in to the OEM IBS part. Without the circlip, there is nothing to hold the gear plate in place, and it would simply fall through. However, the Dodson gear plate fits on to the IBS, with the teeth resting in the corresponding cut-outs in the IBS allowing it to sit, unsupported, on the IBS. The fit between the gear plate and the IBS is shown in fig. 3 of Appendix D. The circlip ensures that the fit remains snug, and the entire connection is encased by the outer basket which also prevents the circlip from popping out, and the gear plate coming loose.

[91] That change was achieved as a result of an iterative design process, whereby the original threaded version, itself different to the OEM part, was initially developed and trialled. When the threaded connection was failing, Dodson went back to the design drawing board, and came up with a solution which met the particular problem posed.

[92] In summary, despite the apparent similarity between the two parts, there is sufficient evidence to show that the different features of the Dodson part are the result of independent skill and labour. The rationale for those changes is the creation of a more robust and reliable transmission which can withstand the greater duty from a high-performance use of the car. Overall, I consider the quality of the Dodson features, considered cumulatively, and in the context of the clutch assembly as a whole, are

sufficient to impart originality to the gear part. Consequently, copyright subsists in this part also.

A basket

[93] The function of the A and B baskets is to transmit power to the gear box. The “snout” of the A basket (shown in fig. 1 of Appendix E) connects to the gearbox. The A basket houses the clutch plates for clutch A.

[94] The OEM A basket is made out of pressed steel and is comprised of two pieces welded together. The outer circumference has a number of “teeth” which have slotted holes in a 2:1 pattern. These slots distribute oil to the frictions. The inner surface is corrugated.

[95]At first glance, the Dodson A basket looks quite similar to the OEM equivalent

– particularly in its shape and profile. They both have outer teeth with holes for the delivery of oil, and the function performed by both parts is the same. However, on closer inspection, it is apparent that there are a number of differences between the two parts.

[96] First, the Dodson A basket is machined from one piece of high tensile steel. That means there is no weld joint in the Dodson part. That method of manufacture also leads to a smooth inner profile on the inside of the basket, rather than the corrugated surface on the inside of the OEM part. Those different profiles are shown in fig. 2 of Appendix E.

[97] Mr Gray contends that the decision to machine the part from high tensile steel was a manufacturing decision. But I accept Mr Cupit’s evidence that the choice of manufacturing material was a design decision driven by the need to have a more robust part capable of absorbing the higher duty that the Dodson clutches are designed to take. [REDACTED]

[98] Another subtle difference concerns the height and profile of the teeth (as shown in fig. 3 of Appendix E). The teeth on the Dodson part are marginally longer than the corresponding teeth on the OEM part. Mr Gray contends that the tooth-shape profile

is dictated by the requirement of the clutch plate which is the same in both the Dodson and Nissan assemblies. Further, Mr Gray says that the height of the teeth is determined by the number of clutch plates to be fitted, which is a functional, rather than design- driven feature. As to the profile of the teeth, Mr Gray says that this also arises out of manufacturing processes rather than any conscious design decision.

[99] Mr Cupit gave evidence that Dodson had trialled a different tooth profile for both the A and B baskets and had engaged Auckland Gear Cutters to make the broaching tool used to manufacture those teeth. He explained that the decision to lengthen and alter the profile of the teeth was necessary to fit further frictions and steels into the clutch assembly. I accept that evidence. It is consistent with the Dodson design objective of creating clutch assemblies for a higher performance use of the car, and it counters the allegations of functional or commonplace design.

[100] The shape and pattern of the holes on the outer teeth is also different between the two parts. The OEM part has slots in a 2:1 pattern. The Dodson part has rounded holes which are configured in a 3:2 pattern. A later iteration of the Dodson design has the holes in a 3:3 pattern slightly offset against each other.

[101] This is another feature which the defendants argue is functional in nature. I accept that the round shape of the holes is determined by manufacturing convenience. Round holes are easier to drill into steel billet. However, the positioning of those holes reflects purposive design. [REDACTED]. The fact that the placement evolved from a 3:2 pattern to a 3:3 pattern reflects an independent design pathway in relation to this feature of the Dodson A basket.

[102] Finally, Mr Cupit pointed to [REDACTED]. The defendants did not proffer an alternative explanation [REDACTED], and I accept Mr Cupit’s evidence on that basis.

[103] Overall, the two parts are objectively similar. But that similarity is explained by the common function of the two parts, and the constraints posed by the operational requirements of a clutch. The differences between the two parts are not quantitatively numerous, but they are nevertheless of qualitative significance. They evidence Dodson’s independent skill and labour in finding design solutions to the particular

issues posed by high performance use of the R35. The trial and error process evident in the evolution of the oil hole patterns is inconsistent with Dodson “slavishly copying” the OEM part. The cumulative effect of those differences reflects originality in the Dodson A basket and copyright subsists accordingly.

B basket

[104] The OEM B basket is made out of two pressed steel parts which are welded together. The internal spline connects to the solid shaft that fits into the gearbox. The tooth profile around the outer edge is slightly rounded on the top. There is an inner tooth profile, or corrugated pattern, that is a by-product of the pressing process. The slotted apertures on the teeth are arranged in a 2:1:2 formation around the circumference of the B basket. On the upper circumference, the oil slots are arranged in a 2:1:1 pattern.

[105] The Dodson B basket has the same overall profile. There are apertures for oil relief and teeth around the outer circumference. The spline at the top of the B basket is also of the same shape and profile. The features of the OEM and Dodson B baskets are shown in fig. 1 of Appendix F.

[106] However, as with the other Dodson parts, there are some key differences. The oil apertures are round holes, rather than slots. The holes on the outer teeth are arranged in a 3:2:3 formation which differs to the 2:1:2 formation on the OEM part. The holes on the upper circumference of the Dodson part are arranged in a regular 2:1:2 pattern, rather than the 2:1:1 pattern on the OEM part. Although not obvious to the naked eye, the overall profile of the Dodson basket is thicker, and it has a constant wall thickness. The tooth profile is also slightly different, with a squarer and sharper edge compared to the rounded edge of the tooth on the OEM basket.

[107] These design features play the same function and purpose as those on the A basket. That is, [REDACTED] the tooth profile allows more room within the overall clutch assembly, and the smooth inner profile of the basket allows a more equal distribution of force.

[108] Similarly, as with the A basket, Mr Cupit gave evidence about the design pathway for this part which involved trialling different tooth profiles, oil hole patterns, and producing different versions of the B basket as part of the design evolution of the part. That evidence is at odds with this part being a mere copy of the OEM equivalent.

[109] I find the Dodson B basket to be original for the same reasons I found the A basket to be original. Copyright subsists in this part.

Inner Basket Steel (IBS)

[110] The IBS is the core part of the clutch assembly as it takes the torque from the engine.

[111] The OEM part is made from two pressed steel parts, welded together at the internal centre disk. Three circlip grooves and a series of slots in a 2:2 pattern are located on the circumference of the OEM basket. The outer and inner profile of the OEM and Dodson IBS are shown in fig. 1 and fig. 2 of Appendix G.

[112] As with the other parts, the Dodson IBS has the same shape and profile as the OEM part, and it performs the same general function in the overall clutch assembly. But there are some obvious differences between the two parts. Some of those differences may be attributed to manufacturing technique. For example, I accept Mr Gray’s evidence that the teeth on the internal surface of the Dodson part and the smooth outer radius are by-products of the manufacturing method used. They are not expressions of originality in and of themselves.

[113] However, other features of the Dodson IBS are evidence of original expression. First, the middle plate in the Dodson IBS is flat, and is thinner than the OEM equivalent. This allows frictions to be placed directly on top of the integrated wear plate which affords greater space than in the OEM part. Similarly, the inside diameters and internal heights are different which also aids in the creation of additional space to fit additional frictions to generate greater power. Those features are all signatures of Dodson’s design philosophy and are reflective of the independent skill and judgment brought to bear in designing the Dodson part.

[114] As discussed in relation to the outer basket, a distinguishing feature of the Dodson IBS is the means by which it connects to the outer basket, and to the gear plate (as shown in fig. 3 of Appendix G). That different form of connection means there are different shaped cut-outs on the top edge of the IBS. [REDACTED].

[115] When the similarities and differences between the two parts are considered in total, I am satisfied that the differences between the two parts are expressions of independent design and are sufficient to impart originality to the Dodson IBS as a whole. Copyright subsists in the IBS.

A piston

[116] The A piston connects to the outer basket. It performs part of the clamping function which generates and transmits power. As Mr Cupit explained, when the A piston is applied it reduces the area inside the clutch assembly, and basically clamps the clutch. The B piston does that on the other side of the clutch assembly. It is the clamping function which transmits power.

[117] The OEM A piston is made from pressed steel. It is located on the outer basket by means of three contact points located between 10 external teeth on the outer radius of the piston. Those 10 external teeth fit within 10 slots in the outer basket and ensure that the A piston turns with the outer basket. A rubber cup seal pushes on to the A piston to hold it in place. The OEM part has four raised dimples which are piston stops and a bent lug to prevent rotation of the outer basket circlip. These features can be seen in fig. 1 and fig. 2 of Appendix H.

[118] Mr Cupit covered the design evolution of the Dodson A piston at some length in his evidence. The starting point for the entire Dodson business was the blown seal on the A piston in Mr Proctor’s car. As earlier noted, Mr Cupit changed the design of the piston seal so that it was a push-in, rather than a push-on, seal. From there, Mr Cupit, in collaboration with Mr Wieser, began designing the A piston. Mr Cupit says the design started with a solid piece of steel. A prototype piston was then manufactured and put into Mr Proctor’s car to trial. The design of the piston evolved over time as new design solutions were trialled, and faults with the existing parts were

uncovered. Mr Cupit referred to five different versions of the A piston in his evidence, with minor modifications and adjustments made to each of those versions over time.

[119] One of the most significant refinements made to the A piston was the development of the piston seal. The design of the seal involved a deliberate decision to move away from what Mr Cupit considered was a “rather complicated approach” adopted in the OEM part, because he “felt that a flexible seal might be more reliable/serviceable”, and easier to manufacture.34 Mr Cupit explained the design process of the piston seal in the first three versions of the A piston as follows:35
In basic terms, the first three versions of the modified piston had an external piston seal – a protruding part of the piston which the seal went around. With the later versions the seal went in. It was exactly the opposite to the OEM part in terms of design and functionality.

[120] Further refinements followed. Mr Cupit designed both a multi-piece steel ring, and a flexible seal, to fit inside the piston groove. Many attempts to design a flexible seal were made and a company in Pukekohe was commissioned to make some piston rings to suit the particular seal groove. Those piston rings did not provide a perfect solution, and Dodson approached a company in the United States to manufacture a piston seal that fit the piston seal groove in the Dodson A piston. Further refinements to that particular seal resulted in a metallic seal that Dodson calls the “seal for life” (shown in fig. 2 of Appendix H). Mr Cupit reflected on the evolution of this seal as follows:36
Once this lengthy R&D process was over, I realised that the fundamental design breakthrough with our modified seal was that it is internal. This means that it is both captured and protected by steel on top and bottom and also on both sides. This was a completely novel design solution which took a huge amount of time and effort to reach. While it may look simple, it was the bain of our life for some time – particularly because of leakages. As I have said, the Promax® Clutch is a significant improvement on the original OEM clutch. In fact, we promoted the new seal as a :“lifetime seal”. The OEM clutch would max out at 650 HP. The Promax® goes all the way to 3,000+ HP.

[121] The evolution of the A piston design exemplifies the Dodson design pathway. The trial and error process led to refinements to the A piston which were entirely of

34 Brief of Evidence, Mr Cupit at [189].
35 Brief of Evidence, Mr Cupit at [222].
36 Brief of Evidence, Mr Cupit at [241].

Dodson’s own making. Some of those refinements, such as the piston seal, were not only original, but innovative too. The quality of those refinements imparts originality to the overall part. This was not just a better mousetrap, but a different trap designed for a different species of mouse. Copyright subsists in the A piston.

B piston

[122] The B piston performs the same function as the A piston but for the clutch on the other side. The OEM and Dodson parts are depicted in Appendix I to this judgment.

[123] The OEM B piston is made from pressed steel and comprises two parts welded together. It has an internal rubber lip seal. Four raised dimples operate as piston stops. Around the lower circumference is a series of square apertures, with smaller rounded apertures above.

[124] At one level, the two parts have a similar overall profile, shape and configuration. They both have a smooth outer radius, a smooth outer surface, and they also have holes on the outer circumference which serve the same purpose, namely oil relief. But the differences between the two parts are more visually apparent than they are with some of the other parts at issue. The Dodson part is noticeably taller. It also has a different lower profile with three slots in the outer circumference. The shape and dimension of the apertures around the outer edge are different, as are the piston stops on the inner part. The connection between the two parts is also different to the OEM version. An earlier iteration of the Dodson part included a threaded connection; the later version has an interference fit.

[125]These features reflect independent skill and labour. For example:

(a)The larger flat surface area of the B piston is designed to accommodate greater push on the steels and frictions.

(b)The greater height from the piston stop to the clamp face increases the internal capacity of the B piston by three or four millimetres. That also allows for more area inside the clutch assembly.

(c)The “interference” fit between the two parts of the Dodson part (referred to as the outer and inner) was the result of several design iterations. The first version was screwed in, and it had a tag to “rock” it in even further. Subsequently, Dodson moved to an internal thread design where the inner screwed in from the inside and was again held in place by a locking tab. The final design involved shrinking the inner part together with the outer part, removing the need to weld the parts together.

(d)The change in the shape of the piston stops (four dimples in the OEM version and a wavy design in the Dodson model) made the manufacturing process easier, but that does not detract from the fact that it was the product of independent skill and labour.

(e)The seal groove is also different on the Dodson part. This allowed for the push-in seal, rather than the push-on seal for the OEM part. The position of the seal is accordingly different.

[126] The Dodson B piston does not reveal the same level of innovation in design as, for example, the A piston. Nevertheless, the various iterations in some of these design features prove that they were the result of independent skill and labour. And, the conscious design decisions made in accordance with the clear design objective to increase space in the clutch imparts originality to the Dodson B piston. Copyright subsists in this part.

Gear lock

[127] As the name would suggest, the gear lock “locks” the gear onto the gearbox shaft. The OEM R35 clutch does not have a gear lock. The originality issue is not derivation, but functionality, in relation to this part.

[128] The origins and subsequent development of this part point towards originality. Mr Cupit said that over the years Dodson found that the OEM circlip (a spring steel type clip) which holds the gear on was the probable cause of gearbox failure. To avoid that problem, Dodson designed the gear lock to hold the circlip more securely in place.

The design of the part went through a number of iterations as Dodson’s own design deficiencies were exposed in the market, and Dodson’s dealers sought a part which could be removed to allow easy access to service the gearboxes.

[129] Furthermore, there are innovative features of the gear lock which put the originality enquiry beyond dispute. The gear lock incorporates both a wedge and a taper. [REDACTED].37 Accordingly, the gear lock plays two functions: it holds the circlip in place, [REDACTED] providing for a more secure fit on the gearbox shaft.

[130] I am satisfied that these features of the gear lock are original to Dodson and copyright in the gear lock accordingly subsists.

Selector fork

[131] The function of the selector fork is to engage the gear. The selector fork in issue is for the first and reverse gears. Photographs of each of the OEM, Dodson and Logiical parts inspected by Dr Gooch were included in his brief of evidence, and are reproduced in Appendix J.

[132] There are noticeable differences between the OEM and Dodson models. The OEM selector gear is a two-piece cast aluminium part. It has a short detend arm, a large shaft housing, and a selector ring area with a small chamfer. The casting is thicker than the Dodson equivalent, and there is a large brace on the fork.

[133] The Dodson selector fork is made from one piece of solid billet steel. It is integrated into a one-piece design which is overall smaller than the equivalent OEM part. The Dodson part has a longer detend arm and the area behind that arm is narrower. The smaller shaft housing means there is less material in the part which leads to a streamlined design. A larger chamfer in the selector ring contact area allows for better oil lubrication. The Dodson selector fork has less material on the selector lever and a smaller brace.

37 Brief of Evidence, Mr Cupit at [371].

[134] Mr Gray claims that the changes to the selector fork arose out of manufacturing changes that either he, or Mr Glenn Simpson of Trimac made to overcome manufacturing hurdles. Accordingly, he says these are not design changes instigated by Dodson but features which are dictated by manufacturing constraints.

[135] I prefer Mr Cupit’s evidence as to the development of this part. Mr Cupit explained that several Dodson customers were returning with selector forks that were breaking in the same place. Accordingly, Dodson decided to manufacture a stronger part using a single piece of solid billet. That decision is consistent with Dodson’s overall design objectives in designing parts capable of withstanding greater force generated in the car.

[136] The other features of the Dodson selector fork are also a result of purposive design, rather than manufacturing convenience. The smaller size provides greater clearance around the gears designed by Dodson, and the streamlined shaft housing and detend arm contribute to the overall strength and durability of the part.

[137] Overall, the OEM and the Dodson selector forks are not objectively similar; there is no evidence that one was derived from the other; and the differences between them cannot be explained by manufacturing constraint. Copyright subsists in the selector fork.

Mechanical circlips

[138] The mechanical circlips designed by Dodson also hold the gears in place on the gear shaft. The original version of the circlip is referred to as MC 1. A later version is called MC 2. The OEM circlip is a standard spring steel circlip, and there is no equivalent to the Dodson-designed part.

[139] Dr Gooch described the Dodson mechanical circlip as a “locking collar” – a mechanical stop which he said is reasonably common in transmission systems.38 Despite that commonplace use in other areas, I am satisfied that the Dodson design is original for the following reasons.

38 Brief of Evidence, Dr Gooch at [287].

[140] First, the design of the circlips responded to a specific problem identified as a cause of gear box failure in the high-performance use of the car. Mr Cupit explained that Dodson had to find a way to hold the gears on the shafts more effectively given the increased power being generated in the car.39 The gear lock sits on the front of the shaft, but there was no room for another gear lock on the back of the shaft. Accordingly, Dodson designed a mechanical circlip which was bolted in place to secure the gears in place.

[141] Second, the various design iterations of the part are also consistent with the part being original. The first version had a straight cut through the middle with no oil drainage flow holes. This design was then developed to ensure the delivery of oil to the bearing sitting behind the circlip. Oil flow holes were drilled into the top and bottom of the circlip and a washer was built in to the circlip. That design process suggests that this was not just a case of taking a commonplace item and using it in a different context.

[142] Third, and most significantly, is the angled cut in the centre of the circlip. That simple, yet innovative, design solution [REDACTED]. Dr Gooch described this feature as an “unusual design” and represented a point of difference to similar circlips (or locking collars) used by other aftermarket parts suppliers.40 That design improvement reflects independent skill, judgment, labour and effort and is the hallmark of originality in this part. Copyright subsists in the mechanical circlips.

Clutch assembly

[143] In addition to the individual parts, Dodson claims copyright in the clutch assemblies, being both the Promax and Sportsman clutch systems.

[144] This claim does not relate to the order of the assembled parts. Dodson does not claim copyright in the basic arrangement of the clutch parts. The order is dictated by the functioning requirements of the dual clutch system. To that extent the

[326] Dodson makes two claims of breach of the FTA against Mr Hannaford personally. The first is a statement in a NZ Performance Car magazine article from September 2016 that Mr Hannaford was the “head mechanic at Dodson performance for eight years”.

[327] Mr Hannaford says that he never meant to convey that he held the position of ‘Head Mechanic’ at Dodson. Instead, he was providing a descriptive and general

96 Holdfast New Zealand Ltd v Mechanical Plastics Corp [2013] NZCA 335.
97As per the test set out in Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

explanation of the role he performed for the company. That explanation is implausible. As Mr Hannaford later admitted, he was “talking himself up”. He was trading off Dodson’s pre-eminent reputation in the market by associating himself with the development of their products. His statements suggest to the magazine readership that he has a particular trade, qualification or skill that he does not have, and that he is affiliated to Dodson in a way that he is not.98 It is a false and misleading statement under s 13(b) of the FTA.

[328] The second statement relied upon by Dodson was made during a conversation with a private investigator who was posing as a potential customer. The conversation took place on 16 August 2016 and was recorded by the private investigator who gave evidence at trial. When referring to clutch parts, Mr Hannaford said that he “developed all this stuff when I was at Dodson’s”.

[329] There are two potential meanings conveyed by Mr Hannaford’s statements. It could be interpreted as Mr Hannaford claiming responsibility for the development of the Dodson parts. It could also be interpreted as meaning that Mr Hannaford was involved with the development. That latter interpretation is not false, nor misleading. Considered in the context of the discussion as a whole, I am not persuaded that this statement was false or misleading within the meaning of ss 9, 10 or 13.

GRD and Mr Gray

[330] Dodson claims that GRD and Mr Gray made two separate representations which breach the FTA.

[331] First, Dodson claims that both GRD and Mr Gray held themselves out as being lawfully entitled to manufacture and deal in the Dodson parts, and as being the rightful owners of the copyright in the copyright works.

[332] Dodson’s statement of claim does not identify when, where, and to whom the representation was made. In closing, Mr Elliott submitted that Mr Gray held himself out as the rightful owner of the Dodson designs in his statement of defence.

98 Fair Trading Act 1986, ss 13(b) and (f).

Representations made in a statement of defence are not representations made “in trade” and so fall outside the ambit of the FTA. In the absence of any evidence regarding the particulars of the representations relied upon, Dodson is unable to prove, on the balance of probabilities, a breach of the FTA.

[333] Second, Dodson claims that both GRD and Mr Gray made various assurances regarding the destruction of unfinished components and tooling, the deletion of files and machine codes, the sale of machines used to manufacture the Dodson parts, and the deletion of all hard drives and back-ups of Dodson’s information. These assurances were made in a letter to Dodson once the relationship with GRD had come to an end. Dodson says that these statements were false and misleading as GRD and Mr Gray had not in fact destroyed and deleted the tooling, machine codes and Dodson information as represented.

[334] Despite the broad definition of “trade” under the FTA, I am not persuaded that GRD’s assurances fall within that definition. The assurances were made in response to Dodson’s requirements at the end of a business relationship between the two parties. As discussed further in this judgment (at [350]–[352]), the terms of that relationship included the protection of confidential and commercial information. Seen in that light, Dodson’s requests were akin to the enforcement of contractual obligations, and GRD’s responses was in the nature of a private undertaking.99 This is not the type of conduct the FTA was intended to capture.100 I decline Dodson’s claim of breach of the FTA against GRD and Mr Gray.

Additional claims

[335] Dodson submits that during the course of the trial it became clear that the defendants had engaged in other misleading and deceptive conduct. It referred to statements made by Logiical and Mr Hannaford regarding a “finite element analysis” and the sale of second-hand parts.

99See Desmone Ltd v University of Auckland Senior Common Rooms Inc (2002) 7 NZBLC 103, 580 (HC); Malayan Breweries Ltd v Lion Corp (1988) 4 NZCLC 64, 344 (HC).

100 Fair Trading Act 1986, s 1A.

[336] These claims were not pleaded and no application to amend the statement of claim was made either prior to, during, or at the close of trial. It is true that Dodson claimed relief for all breaches of the FTA because the precise number, extent, and dates of each of the breaches were then unknown. But that pleading was ineffective in reserving Dodson’s rights to advance additional claims. The purpose of a statement of claim is to inform the opposing party and the Court of the basis of a claim and its necessary ingredients.101 Notice of the claim is the backbone of natural justice. Mr Hannaford and Mr Gray did not have notice of these additional claims against them, and, in these circumstances, I decline to entertain these un-pleaded claims.

Relief

[337] Dodson seeks declaratory and injunctive relief against the defendants. Logiical has not given an undertaking that it will remove the offending website statements or desist from supplying Dodson’s gear lock as if it was its own. There are also no other means of ensuring that Mr Hannaford does not continue to “talk himself up” by referring to himself as Dodson’s head mechanic when promoting Logiical’s business. Declarations marking that conduct as misleading and deceptive are in the public interest. Injunctive relief to enforce those findings is also “desirable” (as per s 41 of the FTA). Orders in those terms are set out at the end of this Judgment

[338] Dodson also sought orders under s 43 awarding damages. However, there was no evidence to support the claim for damages. Mr Hussey considered that any loss arising out of the breach of the FTA was already reflected in the damages assessed in relation to the copyright infringement. Mr Beylefeld did not address the damages sought under any other cause of action other than the copyright infringement claims. Accordingly, I decline to make an award of damages.

[339] Finally, Dodson seeks orders directing the defendants “to return, deliver up, or destroy on oath all product, printed matter, digital references or other materials in the possession or power or under control of the Defendants the use of which would offend against any injunction granted”. I am satisfied that Dodson, or indeed a future customer, is likely to suffer loss if an order requiring Logiical to deliver up the

101 Reay v Attorney-General [2016] NZCA 519, [2016] NZAR 1672 at [16].

offending gear locks is not made. An order under s 43(3)(e) is appropriate in those circumstances. However, there is no basis to go beyond that and I decline to grant the order in the terms as sought.

BREACH OF CONFIDENCE

[340] Dodson’s third cause of action against all defendants is for breach of confidence. Dodson alleges that the defendants have used its confidential and commercially sensitive information to design and manufacture the Logiical parts.

[341] Breach of confidence is an equitable cause of action. There are three elements which must be proved for the cause of action to succeed:102

(a)The information must have the necessary quality of confidence;

(b)The information must have been imparted in circumstances importing an obligation of confidence; and

(c)There must be unauthorised use of the information to the detriment of the party communicating it.

[342]Each of these requirements is considered below.

Does the information have the necessary quality of confidence?

[343] Dodson’s statement of claim defines the confidential information which it says has been misused in some detail. It includes prototypes, information about the sourcing of parts and materials, fabrication, drawings, intelligence received from the market, Dodson’s employees and dealers, insights and information regarding the workings of the clutch assemblies, knowledge of faults, knowledge of the significance of the dimensions and material used, and knowledge of the improvements and modifications made in the Dodson design process.

102 Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41 (Ch) at 47.

[344] Whether information has a quality of confidence is a fact-based inquiry. But there are certain facts which will indicate confidentiality. These include: the extent of thought and work expended to produce the material, whether the information is unique or a trade secret, and the extent to which the owner has considered the information confidential and taken steps to preserve and guard its secrecy.103 Information cannot be confidential where it is “public property or public knowledge”.104

[345] The defendants argue that the information was not confidential. They say this is because the information was in the public domain in three ways:

(a)Any person could acquire knowledge of Dodson’s clutch parts by simply pulling the parts apart.

(b)The procedures for making aftermarket parts are common knowledge among mechanical engineers.

(c)Dodson had posted about faults of the OEM clutch on public internet forums, along with other competitors and publicly available sources of information about the clutch parts and assemblies.

[346] Once a manufacturer releases its product for public sale, it cannot maintain confidentiality over features that are either visible or readily ascertainable, absent relevant intellectual property laws. But it can maintain confidentiality over information that is not visible or readily ascertainable. This includes, for example, drawing plans, market information, or improvements made in the design and manufacturing process.

[347] Much of the information being claimed as confidential in this case is not about visible aspects of the clutch design. Nor is it limited to procedures for installing aftermarket parts, or information exchanged on group chats. The confidential information at the heart of the claim is something different to those limited categories.

103 Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR1 at [80].
104 Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, [1963] 3 All ER 413 at 415, cited in A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA) at 521.

It is information and knowledge gained through the design, testing and manufacturing processes for the R35 clutch. This knowledge finds its end expression in the clutch parts and ancillary parts themselves, but clearly goes beyond that which is visible in the part itself. I consider the pleaded information has the necessary quality of confidence, and the first element of the confidence cause is met.

Was the information imparted in circumstances importing an obligation of confidence?

[348] The second requirement is that the circumstances must impose an obligation of confidence on the person in receipt of the information.

[349] There can be no real doubt that Mr Hannaford received information subject to an obligation of confidence. Confidentiality obligations were set out in his employment agreements signed in 2006 and 2009. These agreements made it crystal clear that any information obtained by Mr Hannaford in the course of his employment with Dodson was confidential.

[350] The position with Mr Gray and GRD is less clear cut. Mr Cupit says that he met with Mr Gray and discussed confidentiality at the outset of their relationship. That is denied by Mr Gray. I prefer Mr Cupit’s evidence on this point for the following reasons:

(a)First, Dodson’s business was growing exponentially by the time of the meeting in 2009. Indeed, greater manufacturing capacity was one of the reasons Mr Cupit and Mr Gray were meeting. Confidentiality around the features of the Dodson parts that set them apart from the competition was essential to maintaining this demand.

(b)Second, the value of confidentiality was already reflected in the agreements which Dodson required its employees to sign. The fact that Dodson was alive to the importance of confidentiality makes it much more likely that it was raised in any conversation with a potential new contractor.

(c)Third, Mr Cupit and Mr Gray had not met before, and did not know each other. Based on my observations at trial, it would be consistent with Mr Cupit’s style and approach to raise issues such as confidentiality directly, and at the outset.

[351] In any case, regardless of whether the parties discussed confidentiality, an obligation of confidentiality generally arises out of a relationship where one party has imparted information to the other on the basis that it is only to be used for the limited purpose for which it was given. In the absence of any confidentiality agreements, it is enough that a person knows or ought to know that information has been divulged to it in confidence. This obligation has been extended to cover pre-contractual bargaining, and more generally applies to business relationships.105

[352] Even if confidentiality was not specifically discussed, GRD should have understood that the information given to it by Dodson was confidential, and that it could not use the information for its own purposes. Innovation in the development of Dodson’s clutch parts was the point of difference between it and its competitors and was the backbone of its business. GRD would have understood this. Indeed, GRD’s website contains the following statement: “with strict access controls to our workshop, you can be assured of confidentiality and the protection of your intellectual property”. That is a clear recognition of the importance of confidentiality to customers, and the circumstances in which information would be imparted.

[353] I find that the information was imparted in circumstances of confidentiality. This second element of the cause of action is also met.

Was there unauthorised use of the information to the detriment of the party communicating it?

[354] The third element of the cause of action concerns unauthorised use of the information. Dodson alleges that the defendants have used the confidential information to “unlawfully create, source, develop and sell the Logiical parts,” and

105 A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA).

that they threaten to utilise the confidential information in wilful disregard of Dodson’s rights and entitlements.

[355] In Norbrook Laboratories Ltd v Bomac Laboratories Ltd, the Court of Appeal set out some guiding principles for ascertaining whether confidential information had been misused.106 The Court emphasised that the purpose of protecting confidence was to prevent misuse, not to stifle competition. Thus, mere possession of confidential information, or deriving comfort from the fact that it conforms with other information from an independent source, is not enough to constitute misuse. Conduct will only amount to a misuse if the knowledge or comfort causes the person to do, or to omit to do, something. For example, it is a misuse for a person to use confidential information to avoid having to undertake some part of the process required to develop a product themselves.107

[356] In this case, there is no real doubt that GRD and Mr Gray misused Dodson’s confidential information to manufacture the Logiical parts. That flows from my findings that GRD did not follow an independent pathway and that the Logiical parts were copies of the Dodson equivalents. Mr Gray’s use of the SolidWorks drawings, which probably incorporated Dodson’s commercially sensitive information, is good evidence of misuse. By using that commercially sensitive information, GRD was able to skip the design, testing, and market feedback processes which formed part of the evolution of the Dodson parts. GRD and Mr Gray wrongfully appropriated that information to their own economic advantage, and to manufacture parts in direct competition with Dodson. The breach of confidence cause of action is made out against GRD and Mr Gray.

[357] Establishing a breach against Mr Hannaford is not as straightforward. Dodson does not particularise the way in which Mr Hannaford and Logiical have misused the confidential information. It is not alleged that Mr Hannaford disclosed commercially sensitive information to GRD to facilitate the making of those parts. Nor is it alleged that Mr Hannaford misused confidential information to source particular parts, identify sales channels, or to install the relevant parts in customer’s cars. I was not

106 Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2004] 3 NZLR 39 (CA) at [35].
107 At [35].

taken to any evidence from which it may be inferred that Mr Hannaford had misused confidential information.

[358] That particularisation is all the more important in Mr Hannaford’s case because in November 2014 he reached a settlement of his employment dispute with Dodson [REDACTED]:

[REDACTED]

[359] Whether a particular act or omission amounts to misuse of confidential information, or whether it falls within this permitted use, can only be determined in light of the particular misuse alleged. In the absence of such particularisation I cannot be satisfied, on the balance of probabilities, that there has been a misuse. The breach of confidence cause of action against the first and second defendants must be dismissed.

CONSPIRACY BY UNLAWFUL MEANS

[360] In the final cause of action, Dodson alleges that all the defendants acted in concert with a constructive intent to injure Dodson’s business. The cause of action adds flavour to Dodson’s other claims, but, like the Fair Trading Act and breach of confidence causes of action, received comparatively little attention at trial.

[361] There are two forms of the conspiracy tort. This case concerns the second form, that of conspiracy by unlawful means. That tort is committed where two or more persons agree to perform an unlawful act that causes damage to the plaintiff. There is no dispute as to the elements of the cause of action, which are:108

(a)The existence of a combination;

(b)Unlawful action (unlawful means);

(c)Intention to injure the claimant; and

108The principles relevant to the tort were most recently reviewed and restated by the Court of Appeal in Wagner v Gill [2014] NZCA 336, [2015] 3 NZLR 157 at [47]–[52].

(d)Actual damage caused to the claimant.

[362] As to the first element, Mr Cain submits that there is no evidence of a combination – only a customer and supplier relationship. That submission is targeted at the lack of evidence concerning an agreed intent to act to injure Dodson. I address that submission in relation to the third element of the cause, that of an intention to injure the claimant. For present purposes, it is sufficient that all four defendants were working in combination to produce and sell the Logiical parts.109

[363] As to the second element, Dodson pleads misuse of its confidential information, and infringement of the copyright as the unlawful means. The former is problematic given the dismissal of that claim against Mr Hannaford and Logiical. However, the latter has been established against all four defendants, and I proceed on the basis that breach of copyright is the alleged “unlawful means”.

[364] There has been some uncertainty regarding the scope of what constitutes “unlawful means” for the purposes of the conspiracy tort. Following a review of the various decisions in Wagner v Gill, the Court of Appeal observed that an overriding theme was “that the encroachment of the common law into the regulation of economic competition must for obvious reasons be subject to some limits”.110 Those limits depend on policy considerations, having regard to the underlying purpose of the tort.

[365] The policy considerations in this case weigh against finding that the statutory breaches constitute “unlawful means”. There is no “gap in the law” that needs to be filled by the conspiracy by unlawful means tort. The Copyright Act sets out a comprehensive regime for the regulation of the unlawful conduct at issue in this proceeding. However, the parties did not specifically address me on these points, or indeed whether breach of either of these statutes constitutes “unlawful means”. And, as outlined further below, the cause of action fails regardless. It is not necessary to finally decide the point for that reason. Nevertheless, for the purposes of argument, I proceed on the basis that breach of the Copyright Act is sufficient to establish this element of the cause.

109 A company is a separate legal entity and can conspire with its directors: Wagner v Gill at [27].
110 At [79].

[366] The real contest in this case concerns the third element – an intention to injure the claimant. It is not necessary for Dodson to prove that the defendants had the sole or predominant purpose of injuring it, but something more than reasonable foreseeability that the unlawful conduct was likely to cause harm is required.111 Just where the line between those two ends should be drawn in any particular case is more difficult to discern. In Wagner v Gill, the Court of Appeal preferred, on balance, to retain the requirement that the conduct be directed at a claimant, although it was not necessary to reach a concluded view on that issue in the case.112

[367] The primary evidence of intention relied upon by Dodson in this case is the sense of grievance that each defendant took away from their relationship with Dodson. There is no doubt that both Mr Hannaford and Mr Gray felt a deep sense of bitterness towards Dodson at the way their respective employment and manufacturing relationships came to an end. Neither of those relationships ended on good terms and the resulting acrimony was evident at trial.

[368] But that evidence needs to be considered in light of all the evidence called at trial, some of which contains contraindications of an intention to injure. For example, when Mr Hannaford left Dodson’s employment, he started working on R35 cars. Dodson knew about that and took no issue with it. Mr Hannaford says that he only started to look for replacement parts because customers started asking for them. He then approached Dodson but was unsuccessful in securing supply. Other attempts to source parts were unsuccessful and it was only then that he approached Mr Gray. This evidence suggests that the decision to manufacture the Logiical parts was motivated by a desire to feed customer demand, and to build a competing business (albeit by way of copying), rather than injure Dodson in any way.

[369] Similarly, Mr Gray declined the request to manufacture the Logiical parts on several occasions, before finally succumbing to Mr Hannaford’s requests. At the time that he did finally succumb, GRD’s work from Dodson had dwindled, and Mr Gray decided to make the parts as a favour to his friend, Mr Hannaford. That is at odds with a concerted effort to damage Dodson’s business in any way.

111 At [89] and [90].
112 At [106].

[370] Finally, both Mr Hannaford and Mr Gray scoffed at the idea that they could even contemplate making a dent in Dodson’s market share. There are reasonable grounds for that view. Dodson is the leader in the field with an extensive network of dealers across the world. Neither Mr Hannaford nor Mr Gray had the nous or the means to take Dodson down a peg or two, and, I consider it unlikely that they even tried.

[371] Overall, I am not persuaded that the evidence of a grievance, when weighed together with all the other evidence called at trial, is sufficient to draw an inference that the defendants’ conduct was targeted at Dodson. Rather, taken at its highest, the evidence suggests that Mr Hannaford wanted to set up a business in competition with Dodson, and he engaged GRD to manufacture the parts. That, in and of itself, is not sufficient to constitute an intention to injure. The cause of action fails on proof of this third element.

[372] Even if intention could be proved, the cause of action would nevertheless fail on the fourth element – proof of damage to the claimant. There was no evidence that the conspiracy had in fact caused damage to Dodson. The only evidence called at trial relating to loss was for the copyright cause of action. In the absence of any evidence regarding loss, the elements of the cause of action cannot be established, and the cause of action against all defendants must be dismissed.

SUMMARY OF FINDINGS

[373] In summary, I have found that the copyright works at issue in the proceeding are the drawings underpinning the Dodson parts which are listed in Schedule A to the fifth amended statement of claim, and include the Bicknell drawings, and the GS Works drawings. Copyright subsists in those copyright works as they are original works. Dodson is the owner of the copyright works either as the author of those works or as commissioner.

[374] The Logiical clutch parts, Logiical selector fork, and the Logiical 22-plate clutch assembly infringe Dodson’s copyright in the copyright works. There is insufficient evidence to support a claim of infringement in relation to the Logiical gear lock and mechanical circlips, and those claims are dismissed.

[375] GRD is liable as a primary infringer. Mr Gray and Logiical are liable for authorising GRD to undertake that copying. Logiical is liable as a secondary infringer in relation to the Logiical clutch parts, Logiical selector fork and Logiical 22-plate clutch assembly. Mr Hannaford is liable for authorising copyright infringement and as a joint tortfeasor in relation to secondary infringement.

[376]Damages against all the defendants jointly and severally are assessed at

$129,494. This sum comprises the sum of $69,494 calculated according to the user principle, and additional damages in the sum of $60,000 pursuant to s 121 of the Copyright Act. Injunctive and declaratory relief is granted in addition.

[377] In terms of the FTA cause of action, I have found that Logiical’s statement on its website, and the supply of Dodson’s gear locks with the logo sheared off breach ss 13 and 9 respectively of the FTA. Mr Hannaford’s statement about being the head mechanic at Dodson similarly breaches the FTA. The conduct alleged against GRD and Mr Gray is not conduct falling within the meaning of “trade” and is accordingly outside the scope of the FTA. Those claims are dismissed. Declaratory and injunctive relief is appropriate, as is limited “deliver up” orders in relation to the gear lock. There is no evidence to support the claim for damages, and the scope of the other relief sought under s 43 is too broad.

[378] The breach of confidence cause of action is established against GRD and Mr Gray. Orders to deliver up the confidential information are made below. There is insufficient evidence and particularisation of the misuse of confidential information by Logiical and Mr Hannaford, and accordingly the breach of confidence cause of action against them is dismissed.

[379] The conspiracy by unlawful means cause of action against all defendants is dismissed as there is insufficient evidence of an intent to injure Dodson, and no evidence of damage caused to Dodson as a result.

RESULT

[380]As to the copyright causes of action, I make the following orders.

(a)Dodson’s claim for primary infringement of copyright is allowed. The claim for secondary infringement of copyright is allowed in respect of the Logiical clutch parts and selector fork but is dismissed in relation to the gear lock and mechanical circlips.

(b)The Logiical clutch parts and the Logiical selector fork are declared to infringe Dodson’s copyright in the Dodson Parts (comprising the Dodson clutch and ancillary parts).

(c)Logiical and Mr Hannaford, whether by their servants, agents, or otherwise, are restrained from copying, issuing to the public, possessing in the course of business, manufacturing, distributing, offering for sale, selling or making available the Logiical clutch parts (whether by way of individual parts or in an assembled clutch), and the Logiical selector fork.

(d)The defendants shall deliver up or destroy all remaining Logiical clutch parts and the Logiical selector fork.

(e)Damages are awarded against all the defendant jointly and severally in the sum of $129,494 comprising $69,494 in compensatory damages, and additional damages in the sum of $60,000.

(f)Interest is awarded in accordance with the Interest on Money Act 2016.

As to the Fair Trading Act 1986 cause of action, I make the following orders:

(a)Dodson’s claim against Logiical is allowed in relation to statements made on the Logiical website, the supply of the Dodson gear lock, and as against Mr Hannaford in relation to the statements in the NZ Performance Car magazine. All other claims are dismissed.

(b)It is declared that:

(i)Logiical breached the Fair Trading Act 1986 by making the statement at [315] on its website and by supplying a Dodson gear lock as if it was its own

(ii)Mr Hannaford breached the Fair Trading Act 1986 by making the statements at [326] to the NZ Performance Car magazine.

(c)Logiical shall remove the statement at [315] from its website and deliver up all Dodson gear locks (whether the logo has been removed or not) in its possession.

(d)Logiical is prohibited from posting the statement at [315] on its website again, and from supplying Dodson gear locks in the future.

(e)Mr Hannaford is prohibited from making the same or substantially the same representations as set out in [326] again.

[382]As to the breach of confidence cause of action, I make the following orders:

(a)Dodson’s claim is allowed as against Mr Gray and GRD but dismissed as against Logiical and Mr Hannaford.

(b)It is declared that Mr Gray and GRD breached their duty of confidence owed to Dodson.

(c)Mr Gray and GRD shall destroy or deliver up any of the confidential information pleaded at paragraph 57 of the Fifth Amended Statement of Claim.

[383]The conspiracy by unlawful means cause of action is dismissed.

[384] As to costs, Dodson is the overall winner and is entitled to an award of costs. If counsel cannot agree on the quantum of costs and disbursements, or there are any factors affecting the award costs of which I am not aware, then memoranda as to those

issues may be filed and served within 20 working days of the date of this judgment. Costs shall be determined on the papers unless otherwise ordered.

[385] Finally, I direct this judgment be initially released to the parties and their counsel only so that commercially sensitive information may be identified and redacted in the public copy of the judgment. Counsel shall confer and file memoranda (preferably joint) within 15 working days from the release of this judgment as to those commercially sensitive parts of the judgement to be redacted.

Edwards J

Counsel: C L Elliott QC, Auckland

Solicitors: Morgan Coakle, Auckland

James and Wells, Tauranga

APPENDIX A – CLUTCH PARTS

APPENDIX B – CROSS-SECTION VIEW OF ASSEMBLED CLUTCH

APPENDIX C – OUTER BASKET

Fig. 1 – Outer basket features

OEM Dodson
Cut outs
Oil relief
Interior
Fingers

Teeth and circlip groove dimples

Fig. 2 – Outer basket fingers

OEM Dodson

Thicker fingers

Fig. 3 – Dodson outer basket and gear plate fit

Gear plate
Outer basket fingers

Fig. 4 – Dodson outer basket

Fig. 5 – Logiical outer basket

APPENDIX D – GEAR PLATE

Fig. 1 – Gear plate features

Teeth connection to IBS

Apertures for outer basket

Hole and slots
formation

OEM

Dodson

Fig. 2 – Gear plate and oil pump gear drive

Welded oil pump gear

drive

Gear

Fig. 3 – Fit between Dodson gear plate and IBS

Fig. 4 – Dodson gear plate (v.2)

Fig. 5 – Logiical gear plate

APPENDIX E – THE A BASKET

Fig. 1 – A basket

OEM Dodson

Snout

Weld

Fig. 2 – A basket inner profile

OEM

Welded joint

Dodson

Fig. 3 – Teeth and oil holes

Height and profile of Shape and pattern of oil

OEM Dodson

Fig. 4 – Dodson A basket versions

Fig. 5 – Logiical A basket versions

APPENDIX F – THE B BASKET

Fig. 1 – B basket features

OEM

Dodson

Slotted apertures

Corrugated profile

Rounded oil holes in regular pattern on the tooth profile

Fig. 2 – Dodson B basket versions

Fig. 3 – Logiical B basket versions

APPENDIX G – IBS

Fig. 1 – IBS outer profile

OEM Dodson

Fig. 2 – IBS inner profile and middle plate

OEM Dodson

Fig. 3 – Fit between Dodson IBS and gear plate
Gear Plate Circlip

Slots for Gear

Fig. 4 – Dodson IBS version 1 (upper) and version 2 (below)

Fig. 5 – Logiical IBS 9 plate (upper) and 22 plate (below)

APPENDIX H – A PISTON

Fig. 1 – A piston

OEM Dodson (v 4)

anti rotational
lug

Fig. 2 – Piston stops and seal

seal

dimples

OEM Dodson (v 4)

waved stops (v 4)

piston seal (v 5)

Fig. 3 – Dodson versions 3, 4, and 5

Fig. 4 – Logiical versions

APPENDIX I – B PISTON

Fig. 1 – B Piston

OEM Dodson (v 3)

Fig. 2 – Dodson B Piston (versions 3 and 4)

Fig. 3 – Logiical B Piston

APPENDIX J – SELECTOR FORK

UNDER	the Copyright Act 1994 Fair Trading Act 1986
IN THE MATTER OF	Copyright Infringement Breach of Confidence Conspiracy Breaches of the Fair Trading Act 1986
BETWEEN	DODSON MOTORSPORT LIMITED Plaintiff
AND	LOGIICAL PERFORMANCE LIMITED First Defendant Defendants continued over

Hearing:	29-31 October, and 1, 5-9, 12-16, 26 and 27 November 2018 Further submissions received on 1 and 11 February, and 18 April 2019
Appearances:	C L Elliott QC and B R Webster for the Plaintiff B P Cain and E Butler for the Defendants
Judgment:	30 April 2019