Heinz Watties (New Zealand) Limited v Effem Foods Pty Limited HC Auckland CP421-sd99

[2001] NZHC 759

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP421-sd99

BETWEEN HEINZ WATTIES (NEW ZEALAND) LIMITED
Plaintiff

AND EFFEM FOODS PTY LIMITED & ANOR
Defendants

Date of hearing: 13 August 2001

Counsel: J Shackleton and P R Casey for the Defendants/Applicants
H C McQueen for the Plaintiff/Respondent

Date of judgment: 17 August 2001

(RESERVED) JUDGMENT OF MASTER KENNEDY-GRANT

Solicitors:
Chapman Tripp Sheffield Young, DX CP 24029, Auckland for Plaintiff
Simpson Grierson, DX CX 10092, Auckland for Defendants

Introduction

[1] The plaintiff and the defendants are the manufacturers and marketers of rival pet food products.

[2] In September 1999 the plaintiff instituted a proceeding against the defendants alleging, among other wrongs, infringment by the defendants of the plaintiff’s copyright in the label for its “Gourmet” cat pet-food product in respect of the labels of the defendants’ “Dine” cat pet-food and its “My Dog” dog pet-food.

[3] In October 1999 the defendants filed and served a Statement of Defence denying infringment of the plaintiff’s copyright and counter-claiming for relief under section 130 of the Copyright Act 1994.

[4] The parties went through the process of discovery.

[5] In November 2000 the plaintiff discontinued its proceeding against the defendants.

[6] In April 2001 the defendants applied for summary judgment on their counterclaim.

[7] This judgment considers and determines that application.

Need for application for leave to apply for summary judgment out of time

[8] The defendants apply orally for leave to file and serve their summary judgment application out of time. The granting of leave was not opposed; and I grant leave accordingly.

Section 130 of Copyright Act 1994

[9] Section 130 of the Copyright Act 1994 reads as follows:

“(1) Where a person brings proceedings alleging an infringement of copyright, a court may, on the application of any person against whom the proceedings are brought,-

(a) Make a declaration that the bringing of proceedings was unjustified:

(b) Make an order for the payment of damages for any loss suffered by the person against whom the proceedings are brought.

(2) A court shall not grant relief under this section if the person who brought the proceedings proves that the acts in respect of which proceedings were brought constituted, or would have constituted if they had been done, an infringement of the copyright concerned.

(3) Nothing in this section makes a barrister or solicitor of the High Court of New Zealand liable to any proceedings under this section in respect of any act done in his or her professional capacity on behalf of a client.”

The principles applicable to summary judgment.

[10] I approach my decision in this case on the basis of the following passage from the judgment of Somers J in Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3/49-4/17:

“At the end of the day R136 requires that the plaintiff “satisfies the Court that a defendant has no defence”. In this context the words “no defence” have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence. See eg Wallingford v Mutual Society (1880) 5 App Cas 685, 693; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99; Orme v De Boyette [1981] 1 NZLR 576. On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty.

Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident - that is to say, satisfied - that the defendant’s statements as to matters of fact are baseless. The need to scrutinise affidavits, to see that they pass the threshold of credibility, is referred to in Eng Mee Yong v Letchumanan [1980] AC 331, 341 and in the judgment of Greig J in Attorney-General v Rakiura Holdings Ltd (Wellington, CP 23/86, 8 April 1986).”

The issues

[11] Two issues have been raised by counsel in argument before me:

[a] Whether, on a proper interpretation of section 130, the person seeking relief under the section is entitled to that relief unless the party against whom relief is sought “proves that the acts in respect of which proceedings were brought constituted, or would have constituted if they had been done, an infringment of the copyright concerned”, so that the fact that the person who brought the proceedings (and against whom relief under the section is sought) brought those proceedings in good faith, held on reasonable grounds and after obtaining legal advice, is irrelevant;

[b] If, contrary to the first submission for the defendants, proof of infringment is not the only defence available to a party against whom relief under section 130 is sought, so that the fact that that party may have brought the proceedings in good faith, held on reasonable grounds and after taking legal advice, is relevant, whether, on the evidence before the Court, it is arguable that those facts have been proved.

The authorities on section 130

[12] Counsel have referred me to the following decisions on section 130 of the Copyright Act 1994: Larimda Holdings Ltd v Phillips New Zealand Ltd (High Court, Auckland, CP 588/93, 13/11/93 Master Anne Gambrill; Jetz International Ltd v McClintock (High Court, Wellington, CP 131/98, 30/9/98 Gendall J and Cooke v South Pacific Pictures Ltd (District Court, Waitakere, 1339/00, date of judgment unspecified but date of hearing 20 March 2001, Johnson DCJ).

[13] None of these decisions is of any assistance in the determination of the issues before the Court in this case.

The first issue : the arguments of counsel for the defendants

[14] Mr Shackleton, for the defendants, submits that:

[a] The unjustified summary proceedings provision of the Copyright Act 1994 should be seen as analogous to the unjustified threats provisions contained in the following United Kingdom and Australian statutes:

• Section 253 of the Copyright, Designs and Patents Act 1988 (UK)

• Section 202 of the Copyright Act 1968 (Australia)

• Sections 128-129 of the Patents Act 1990 (Australia);

[b] That it should be interpreted in the same way as those sections have been interpreted;

[c] That, if it is interpreted in the same way as those other sections, the defendants should be held entitled to the relief sought under section 130 of the Copyright Act 1994 unless the plaintiff proves that the defendants had in fact infringed its copyright;

[d] That the plaintiff has not proved that.

[15] In support of the third of these submissions (see paragraph [14][c] above) Mr Shackleton has referred me to the following passages in decisions on those sections:

[a] Skinner & Co. v Perry (1893) 10 RPC 1 (CA) at 8/32-47, per A L Smith LJ:

“I have only to add a few words to what in my view is the true reading of this section, because it is upon Section 32 that the whole of this case turns. Having heard the able arguments which have been addressed to us, I have arrived at this conclusion: that this is an absolute prohibition against a person threatening unless the threatener can get himself within either of the two saving clauses at the end of the section. I will say this, that my reading of the section is that you shall not threaten legal proceedings unless the manufacturer to which the threat applies infringes the legal right of the threatener, or unless the threatener is about to forthwith bring an action to show the validity of his threats. If he cannot bring himself within these two what I call saving clauses at the end of the section, then the section absolutely forbids a man threatening legal proceedings with regard to a patent at all, and in my opinion it is nihil ad rem to say that what he did was bona fide, or that what he did was on a privileged occasion, because the section says you shall not threaten unless you come within those two provisions at the end.”

[b] S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1980) 30 ALR 657 (WA, SC) at 661:

“It does not, in my opinion, avail the plaintiff to be able to say that its proposed action was being threatened with the intention of protecting its rights. If a threat is made it is no defence to an action under section 202(1) that the threats were made in good faith in the honest belief that the act was complained of was an infringment of a valid claim: see Skinner v Perry [1893] 10 RPC 1 , per Smith LJ at 8.”

[c] Coogi Australia Pty Ltd v Hysport International Pty Ltd (1998) 41 IPR 593 (FCA) at 629/50 - 630/20:

“The threats the subject of the cross-claim being proved, the persuasive onus is on Coogi to justify those threats: see Lewis Falk Ltd v Jacobwitz (1944) 61 RPC 116 at 118. By failing to prove infringment of its program copyright, Coogi has failed to discharge this onus of proof. It is no defence for Coogi to show, as it has, that it made the threats complained of in a bona fide belief that the respondents’ conduct constituted infringments of its rights: see SW Hart & Co Pty Ltd v Edwards Water Systems (1980) 30 ALR 657 at 661; Lahore, Patents, Trademarks and Related Rights, para 18,070. What Dawson J said in Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 18 IPR 443 at 454 does not constitute a departure from this long established rule, as reference to the English case cited by His Honour, Mechanical Services (Trailer Engineers) Ltd v Avon Rubber Co Ltd [1977] RPC 66 at 74-5 shows. It is there made clear that the only effective answer to an action in respect of unjustified threats of infringment is proof that the making of the threats was justified, that is, that the activities that attracted the threat constitute or, if done, would constitute, infringing conduct. Nothing was there said to suggest that a bona fide but unjustified belief can be a defence to such an action or that the mere bringing of an infringment action, irrespective of its outcome, is a good answer to a groundless threats action. (The latter was once a good defence to a threats action under earlier forms of legislation corresponding broadly to section 202, but it is not a defence under provisions that are in the form of the current s 202: see Pearson v Holden (1948) 65 RPC 424 at 427.”

The first issue : the arguments of counsel for the plaintiff

[16] Ms McQueen, for the plaintiff, submits that, on its proper interpretation, section 130 of the Copyright Act 1994 does not have the effect that a party seeking relief under it is entitled to that relief unless the party against whom the relief is sought is able to show that its copyright has been infringed by the party seeking the relief. Section 130(2 provides that, if infringment is proved, the Court cannot find justification. It does not say, nor does the section as a whole say, that the Court cannot take other factors into account in determining whether the bringing of an infringment proceeding was justified.

[17] In support of her submissions, Ms McQueen advances the following arguments:

[a] Section 130 of the Copyright Act 1994 was introduced to implement New Zealand’s international obligations under the General Agreement on Tariffs and Trade, which included the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement): see the Report of the Commerce Committee to the House of representatives on 29 November 1994 recorded on p 5105 of the New Zealand Parliamentary Debates.

[b] The purpose of the TRIPS Agreement, and therefore of the section, is “to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade”: see p 340 of New Zealand Treaty Series 1995, No. 17, the Marrakesh Agreement establishing the World Trade Organisation).

[c] The authors of Intellectual Property in New Zealand: Copyright and Design (1996) express the view (in paragraph 130.3) that:

“Given that the Court has a discretion as to whether to make a declaration and order payment of damages it is likely that the surrounding circumstances of the proceedings will be looked at. It is, accordingly, unlikely that strict liability will attach to an unsuccessful plaintiff, particularly if the plaintiff genuinely believed that it had a justified claim for infringment. It would, however, need to be a reasonable belief based on sound legal advice. It would also seem reasonable that, in the absence of an opinion from a competent adviser, the proceedings may well be regarded as unjustified.”

(It should be noted that this passage immediately follows a reference to S W Hart & Co Pty Ltd - see paragraph [15][b] above and shortly after a reference to Coogi Australia Pty Ltd - see paragraph [15][c] above).

[d] Section 202 of the Copyright Act 1968 (Australia), on which two of the three cases relied on by Mr Shackleton were decided, is worded

“(1) Where a person, by means of circulars, advertisments or otherwise, threatens a person with an action or proceeding in respect of an infringment of copyright then, whether the person making the threats is or is not the owner of the copyright or an exclusive licensee, the person aggrieved may bring an action against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he or she has sustained, unless the first-mentioned person satisfies the Court that the acts in respect of which the action or proceeding was threatened constituted or, if done, would constitute, an infringment of copyright.”

The first issue : my findings

[18] I accept Ms McQueen’s submissions on the interpretation of section 130 of the Copyright Act 1994 set out in paragraph [17] of this judgment.

[19] I do so for the following reasons.

[a] Such an interpretation is more appropriate than that contended for by Mr Shackleton, for the defendants, given the plain wording of the section. Subsection(1) gives the Court a discretion to grant the relief specified in the section. Subsection(2) precludes the Court from exercising that discretion in favour of the applicant where the respondent to the application proves that copyright has been infringed. The reason for this is, in my view, obvious: the bringing of the proceedings cannot, logically, be said to be unjustified if it has been successful or, if pressed to a conclusion, would be successful. It does not follow that the bringing of the proceeding could never be justified on other grounds.

[b] The difference in wording between section 202 of the Copyright Act 1968 (Australia) and section 130 of the Copyright Act 1994 is clear. In the case of the former provision, the word “may” is used in respect of the person bringing the application for relief and clearly means, “is entitled to”. In the case of section 130 of the Copyright Act 1994, the word “may” is used in respect of the Court and clearly identifies a discretionary power.

word “may” is used in respect of the Court and clearly identifies a discretionary power.

[c] The decisions relied on by Mr Shackleton, for the defendants, have been decisions on the Australian section and on similar, earlier, UK sections.

[d] The passage from Intellectual Property in New Zealand: Copyright and Design relied on by Ms McQueen (see paragraph [17][c] of this judgment) is consistent with this approach and appears to have been written in full awareness of the Australian authorities relied on by Mr Shackleton.

The second issue

[20] I note at this stage that, although the allegation in the counterclaim that the acts in respect of which proceedings were brought by the plaintiff did not, and do not, constitute an infringment of copyright for the first or second defendants is denied in the statement of defence to counterclaim, no evidence was adduced or argument advanced in support of the proposition that there had in fact been infringment of the plaintiff’s copyright by the defendants.)

[21] Having held that the scope of justification under section 130 of the Copyright Act 1994 is wider than proof of infringment of copyright under subsection(2) of that section, it is necessary to consider the second issue identified in paragraph [11] of this judgment.

[22] This second issue itself raises two sub-issues:

[a] Would the fact that a plaintiff had brought a proceeding for the infringment of copyright in the genuine belief, held on reasonable grounds and after taking legal advice, that there had been or might have been an infringment of its copyright, come within the meaning of “justified” in the section?

[b] If so, has the plaintiff established an arguable basis for a finding that it acted in such a belief?

[23] To the first of these sub issues, my answer is, yes.

[24] I am of this view for the following reasons:

[a] Such an interpretation is consistent with the meaning of the word “justify” as defined by the Shorter Oxford English Dictionary and by Chambers 21st Century Dictionary (Revised Edition, 1999).

[b] The word “justification” and its cognates, is often used in ordinary language with the meaning of something which, though it does not excuse one’s actions, does provide an explanation for them that shows them to be less reprehensible than they might otherwise appear.

[c] To admit of such an excuse for bringing a copyright proceeding as a defence to a claim under section 130(1) of the Copyright Act 1994 is consistent with the general approach to the appropriateness of proceedings and the consequences of bringing inappropriate proceedings, and does not unduly favour the plaintiff in infringment proceedings over the defendant.

[25] In support of the point made in paragraph [23][a] of this judgment:

[a] The Shorter Oxford English Dictionary includes, among its definitions of the word “justify” ,the following definitions:

“6. v.i. & t. Law. Show adequate grounds for (doing the thing with which one is charged).

7. v.t. Show . . . the justice or reasonableness of (an action, claim etc.)”

[b] The Chambers 21st Century Dictionary gives as its first meaning of “justify”:

“To prove or show something to be right, just or reasonable.”

[26] I turn now to consider whether, on the evidence before me, there is an arguable case that the plaintiff brought its infringment proceeding against the defendants, in the genuine belief, held on reasonable grounds and after taking legal advice, that there had or might have been an infringment of its copyright in the label of its “Gourmet” cat pet-food.

[27] The defendants do not, in my understanding of their case, challenge the genuineness of the plaintiff’s belief (unless it be on the basis that it was so unreasonable that it could not have been genuine) nor that it obtained legal advice before instituting proceedings. Battle is joined on the reasonableness of the belief.

[28] Before considering whether the plaintiff had reasonable grounds for its belief, I note that the legal advice on which it relied in bringing the proceeding has not been disclosed to the Court. I do not draw any interference adverse to the plaintiff from that omission on this occasion. I simply note that, certainly where the advice is given by a recognised expert in the field of copyright and clearly advises that there has been or may have been an infringment of the plaintiff’s copyright, the disclosure of the opinion would probably strengthen the case for the existence of reasonable grounds for acting.

[29] The key point for the plaintiff on the issue of the reasonableness of its belief that its copyright in the design of the “Gourmet” cat pet-food label had or might have been infringed, was and is, the similarity (as it contends) of the cat incorporated in the design of the defendants’ “Dine” cat pet-food, and the cat forming part of the design of the plaintiff’s “Gourmet” cat pet-food labels and, so far as the second claim of infringment of copyright is concerned, the use in the defendants’ “My Dog” dog pet-food label of a photograph of a dog of similar colour and size to the cat in the plaintiff’s “Gourmet” cat pet-food label. It places reliance, in this context, on the fact that a change in the design of the defendants’ “Dine” cat pet-food label in 1999 (from a painting of a marmalade cat lying on a sofa to a photograph of a white cat sitting upright and facing the camera) imparted to the defendants’ “Dine” cat pet-food label a far greater degree of similarity to the plaintiff’s “Gourmet” cat pet-food label than had previously existed. The plaintiff contends that, in the pre-proceedings exchange of correspondence between the parties’ solicitors and in the evidence before the Court on this application, this central point was simply not met by the defendants or their solicitors.

[30] The defendants, for their part, rely on the following factors to show that the plaintiff had no reasonable grounds for bringing its copyright infringment proceedings:

[a] That the colouring of its “Dine” cat pet-food label was totally different from the colouring of the plaintiff’s “Gourmet” cat pet-food label.

[b] That, in the case of each of the products, the product name was displayed prominently, above the cat and so differently, that there was no possibility of confusion.

[c] That, in the case of the defendants’ “My Dog” dog pet-food label, a photograph of a white west highland terrier has been used since 1989.

[d] Quite apart from the matters listed in (a) to (c) of this paragraph, the plaintiff was unable, even after discovery by the defendants, to establish any basis for arguing that there had in fact been copying by the defendants of the plaintiff’s “Gourmet” cat pet-food label design. (It must be noted, although it does not weaken the point made by the defendants, that their discovered documents do show that they were aware of the potential for confusion and of the need to avoid it).

[31] I have no hesitation in finding that reasonable grounds did not exist for the plaintiff’s belief that its copyright in the “Gourmet” cat pet-food label design had been or might have been infringed by the defendants’ “My Dog” label. The labels are totally different, the animals are totally different, and the position of the animals is totally different. Moreover, as noted in paragraph [29][c] above, a white west highland terrier had been used on the labels of the defendants’ “My Dog” dog pet-food label since 1989.

[32] I am, however, not persuaded that the plaintiff’s institution of proceedings alleging infringing by the defendants of the plaintiff’s copyright in the design of its “Gourmet” cat pet-food label was clearly unreasonable. The undoubted fact is that, having previously used labels which showed a painting of a marmalade cat on a sofa, the defendants started using a label which incorporated a photograph of a white cat similar to that of the cat which appeared on the plaintiff’s “Gourmet” cat pet-food label. (In making this finding, I am talking about general similarity. The pose of the cat, the precise colour of the cat, and the colour of the cat’s eyes were different). Given that the plaintiff’s “Gourmet” cat pet-food and the defendants’ “Dine” cat pet-food were in direct competition for the quality end of the cat pet-food market, the sudden change of design of the defendants’ label and the absence in the pre-proceeding correspondence of any acknowledgement by the defendants or their solicitors of the centrality of the photograph of the white cat in the plaintiff’s design, I think that it is arguable that the plaintiff had reasonable grounds for instituting its infringement proceeding in respect of the defendants’ new “Dine” cat pet-food label.

The results of my findings

[33] In the light of my finding that the plaintiff was unjustified in bringing its claim for infringment of its copyright in relation to the defendants’ “My Dog” label, it follows that, unless there are other factors which would make it inappropriate to do so, the defendants are entitled to summary judgment for a declaration under section 130(1)(a) of the Copyright Act 1994 in respect of that proceeding. There are no other factors which would make such an order inappropriate.

[34] In view of my finding that there is an arguable case that the plaintiff was justified in bringing its proceedings for infringment of copyright in respect of the defendants’ “Dine” cat pet-food label, the defendants’ application for summary judgment for a declaration under s 130(1)(a) of the Copyright Act 1994 must be dismissed.

[35] In the absence of evidence of loss, I am not prepared to order an enquiry as to damages at this stage. Instead, I have followed the course adopted by Neuberger J in the Chancery Division of the High Court of Justice in England and Wales in Prince plc v Prince Sports Group Inc [1998] FSR 21 at 37 and 42.

Orders

[36] I accordingly make the following orders:

[a] There will be a declaration that the plaintiff’s bringing of proceedings alleging infringment of its copyright in its “Gourmet” cat pet-food label in respect of the defendants’ “My Dog” dog pet-food label was unjustified.

[b] The defendants’ application for an order for an enquiry as to damages suffered as a result of the plaintiff bringing an unjustified proceeding alleging infringment of its copyright in its “Gourmet” cat pet-food label in respect of the defendants’ “My Dog” dog pet-food label is adjourned to the summary judgment list on 25 October 2001 at 2.15pm, on the following terms:

[i] The defendants are to file and serve by 4 October 2001 either a memorandum summarising the claim for damages and any affidavits in support of the claim for damages or a memorandum stating that it withdraws its application for an order for payment of damages.

[ii] In the event that the Court holds, after reading any memorandum and affidavits put in in support of a claim for damages, that there is not a sustainable claim for loss, the defendants will thereupon abandon their claim for damages.

[c] The defendants’ application for summary judgment for an equivalent declaration and an enquiry as to damages in respect of the plaintiff’s bringing of proceedings alleging infringement of its copyright in its “Gourmet” cat pet-food label in respect of the defendants’ “Dine” cat pet-food label is dismissed and that part of the defendants’ counterclaim is transferred to the standard track and adjourned to the summary judgment list on 25 October 2001 at 2.15pm (the placing of it in that list being a matter of convenience given order [b]).

[d] Costs are reserved for the present.

[37] This judgment is signed at 5.25 pm on 17 August, 2001.