Hoyle v Hoyle
[2016] NZHC 3120
•19 December 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-454-910 [2016] NZHC 3120
UNDER the Copyright Act 1994 IN THE MATTER OF
Copyright infringement
BETWEEN
DAVID STANLEY HOYLE First Plaintiff
AND
TRANSPREAD INTERNATIONAL LIMITED
Second Plaintiff
AND
PAUL DAVID HOYLE Defendant
Hearing: 23–30 November, 1–11 December 2015 and 28 January 2016 Counsel:
N J Scampion and P D M Johns for First and Second Plaintiffs
P Dengate Thrush and W Aldred for DefendantJudgment:
19 December 2016
JUDGMENT OF CLARK J
I direct that the delivery time of this judgment is
4:30pm on 19th of December 2016
HOYLE v TRANSPREAD INTERNATIONAL LIMITED [2016] NZHC 3120 [19 December 2016]
A Introduction [1] B Background [3] C Issues [18] D Plaintiffs’ case [21] D.1 Plaintiffs’ pleaded case [21] D.1 (i) The spreader drawings [24] D.1 (ii) The side tipper drawings [25] D.1 (iii) The drawbar drawings [26] D.1 (iv) Laser cutting shape files – .dxf files [27] D.1 (v) Infringement [28] D.2 Evidence [30] E The defendant’s case [34] E.1 Defendant’s pleaded case [34] E.2 Evidence [39] F The trial: observations and rulings [46] F.1 The documents and electronic bundle [47] F.2 Discovery [49] F.3 Unpleaded defences [51] F.3 (i) Objection to unpleaded defences [51] F.3 (ii) Analysis [59] F.3 (iii) Determination [62] G Subsistence [64] G.1 Originality: the principles [66] G.1 (i) Originality: Spreaders [69] G.1 (ii) Originality: Side tippers [100] G.1 (iii) Originality: Drawbars [121] G.1 (iv) Originality: .dxf files [125] G.2 Subsistence: conclusion [126] H Ownership [129] H.1 Applicable principles [129] H.2 Defendant’s position [130] H.3 Ownership: determination [133] I Infringement [134] I.1 The applicable principles [134] I.1 (i) Objective similarity [137] I.1 (ii) Causal connection [138] I.1 (iii) Substantial part [141] I.2 Preliminary observations concerning proof [148] I.3 Spreader drawings infringement [155] I.3 (i) Objective similarity [156] I.3 (ii) Causal connection [161] I.3 (iii) Substantial reproduction [182] I.4 Side tipper drawings infringement [200] I.4 (i) Objective similarity [201] I.4 (ii) Causal connection [203] I.4 (iii) Substantial reproduction [204] I.5 Drawbar drawings infringement [210] I.5 (i) Objective similarity [210] I.5 (ii) Casual connection [211] I.5 (iii) Substantial reproduction [212]
I.6 Summary: infringement claim [216] [220] J Standing of the second plaintiff J.1 Submissions [221] J.2 Analysis [224] K Industrial application [228] L First counterclaim: unjustified proceedings [236] M Second counterclaim: revocation [240] N Third counterclaim: unlawful interference with business relations [243] N.1 Analysis [250] O Fourth counterclaim: injurious falsehood [255] P Fifth counterclaim: breach of the Fair Trading Act [262] P.1 Analysis [265] Q Result [270]
A Introduction
[1] The first plaintiff, David Hoyle, designs and builds agricultural machines. The machines and componentry at the heart of this claim are fertiliser spreaders, side tippers and drawbars. The defendant, Paul Hoyle, is his eldest son. Paul worked with David in the late 1980s and at other times including in 2003 and 2004. David says that when Paul left the family business in 2004 to set up on his own Paul took David’s designs with him and since that time has been using David’s designs and related files to manufacture his own machines. David Hoyle and the second plaintiff, Transpread International Ltd (Transpread), claim damages for infringement of copyright owned by David and licensed to Transpread and seek injunctions to prevent future infringement.
[2] Paul Hoyle denies that copyright subsists and denies any infringement. He challenges Transpread’s standing to bring the claim and counterclaims for unjustified proceedings, unlawful interference with his business relations, injurious falsehood and breach of the Fair Trading Act 1986.
B Background
[3] The backdrop to the litigation is an unfortunately bitter and intractable family dispute.
[4] David Hoyle began designing and building agricultural machinery in the 1950s. He built his first fertiliser spreader around 1959 at the age of 18.
[5] In 1969 David set up DS Hoyle & Co Ltd to manufacture and market spreading and transportation machinery. By the mid to late 1970s he had some
20 to 30 people working for him. While the company traded David continued to design machinery. He informally licensed to DS Hoyle & Co Ltd the manufacture, marketing and sale of the machines he designed. He formally licensed by registration his eight tonne truck “an improved manure spreader” which he had patented in 1968. The company went into receivership following
the abolition of many agricultural subsidies in the 1980s and a down turn in work.
[6] Transpread Pty Limited (TPL) was incorporated in Australia in 1979. Keith Hoyle, one of David’s sons, managed TPL from the late 1990s. TPL marketed and manufactured machines from David Hoyle’s designs from 2000 to perhaps 2004 or 2005. The company ceased trading in 2006 and has since been deregistered.
[7] Between 1984 and 1992 David Hoyle traded in a partnership with his wife and Keith Hoyle. David Hoyle designed spreaders and the partnership manufactured and licensed the manufacture of spreaders. From 1982 to 1993 he developed a wide belt spreader.
[8] Transpread was incorporated in 1992 to licence the manufacture of David Hoyle’s designs. All manufacturing was undertaken by licensees. Transpread currently has four licensees in New Zealand and 15 active licensees in Australia, North America, Europe and South Africa.
[9] In 1995 David began designing the Transpread 730 chain spreader using AutoCAD, a software application for two and three-dimensional computer- aided design.
[10] David established Transpread Co Ltd (TCL) in 1995 to market his designs and supply parts to licensees. In 1997, when Paul Hoyle returned to New Zealand, TCL became involved in manufacturing. Paul had worked with his father and TPL in Australia in the mid-1980s for around two years. Paul said he left because he was exhausted and was not paid enough to live on. David lost track of his son for many years until late 1996 or early 1997 when Paul got in touch. He was married and had children. He wanted to bring his family home and manufacture spreaders. After a trial period of a month or so he and Paul decided it would work. David purchased a house and workshop in Maungaturoto where Paul would do the manufacturing. Paul worked for TCL from 1997 to the end of 1999 before leaving once more.
[11] Being very satisfied with the single chain mechanism he had invented for fertiliser spreaders David took advice from a patent attorney who prepared a specification and filed a patent application on 21 September 1998. NZ Patent No 331966 titled “conveyors for spreaders” was granted on 6 July 2000. I return to this patent later in the judgment.
[12] The first 730 single chain spreader, the Trotter spreader, so named after its purchaser Peter Trotter Ltd, was sold and delivered in 1998. Paul Hoyle says he designed the Trotter spreader with input from his brother Anthony. David Hoyle says he designed it.
[13] Paul Hoyle returned to New Zealand and to the business in July 2002. He agreed to provide “contract labour” manufacturing services to TCL through Palrik Engineering Ltd (Palrik), a company he formed with an associate. Between 2002 and 2004 Palrik provided manufacturing services to TCL.
[14] Palrik ended its contract in June 2004. Negotiations between David and Paul for Paul to take over the manufacturing side of TCL’s business came to nothing. Paul set up business on his own account around July 2004. The evidence is that the months leading up to Paul’s departure were not harmonious. One witness described the environment as “toxic”.
[15] David says it was during this period that Paul obtained the plaintiffs’ drawings, laser cutting shape files, and construction and operating manuals from TCL’s premises without consent. David contacted a number of his customers in December 2004 to say that Paul had “manufactured replica units of Transpread’s spreaders”. His solicitors notified Paul of David’s objections to his activities by writing ‘cease and desist’ letters on 14 December 2004 and
27 July 2005.
[16] Following receipt of the ‘cease and desist’ letters Paul has continued to manufacture and supply single chain spreaders, twin chain spreaders, side tippers and drawbars in which the plaintiffs claim copyright. With only a few exceptions he does not dispute manufacturing the machines which the plaintiffs
have identified in the statement of claim. Rather, he disputes that they were
manufactured using David’s designs.
[17] David says the similarities between Paul’s machines and David’s drawings are such that it is highly unlikely the machines could have been made without the use of David’s drawings.
C Issues
[18] To succeed in their action for breach of copyright the plaintiffs must establish:
(a) there are works in which copyright can subsist; (b) copyright does in fact subsist in the works;
(c) the plaintiffs own the copyright in the pleaded works; and
(d) the defendant has infringed the plaintiffs’ copyright.
[19] All allegations of any importance in the statement of claim are denied. In particular the defendant contests all elements of the claim to copyright in respect of all pleaded copyright works.
[20] The two “headline”1 topics of ownership and infringement raise subsidiary issues. For the moment it is sufficient to observe that the plaintiffs must establish that the drawings underlying their single chain fertiliser spreaders, twin chain fertiliser spreaders, side tippers and drawbars are works
in which copyright can subsist and that copyright does subsist.
1 To adopt the description of the Supreme Court in Henkel KGaA v Holdfast New Zealand
Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [34].
D Plaintiffs’ case
D.1 Plaintiffs’ pleaded case
[21] In an action for breach of copyright it is necessary to plead the copyright work said to have been wrongfully copied.2 The defendant is critical of the plaintiffs’ pleadings in this regard contending that the plaintiffs’ case has moved from almost comically bad to unclear, imprecise and in some areas inadequate. In order to address this criticism it is necessary to set out the claim in some detail.
[22] In their third amended statement, which from this point I refer to as the
“statement of claim”, the plaintiffs plead that:
(a) David Hoyle is the inventor and designer of various agricultural machines, including single chain fertiliser spreaders, twin chain fertiliser spreaders and side tippers.
(b)David Hoyle is the author and owner of original two- dimensional AutoCAD drawings and designs relating to—
(i)single chain fertiliser spreaders including individual parts and components;
(ii)twin chain fertiliser spreaders including individual parts and components;
(iii) side tippers, including individual parts and components;
and
(iv)other components and parts used in conjunction with the above agricultural machines, including drawbars.
2 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at
[29].
[23] Although printouts are appended as schedules to the statement of claim the plaintiffs rely on the electronic AutoCAD files as the original copyright works. The printouts are provided as convenient representations of the original works.
D.1 (i) The spreader drawings
[24] As artistic works the spreader drawings in which the first plaintiff pleads ownership of copyright include:
(a) a layout drawing file called “chainwid.dwg” created by David Hoyle around 29 May 1995 (statement of claim, schedule A).
(b)later versions, iterations and developments of that layout drawing so far as they are original, including a drawing created on or about 29 May 1998 and last modified on 10 December
1998 (statement of claim, schedule B). A printout of a layout drawing created around 29 May 1998 and last modified on
27 September 2007 (statement of claim, schedule C) is also pleaded.
(c) drawings of various components which make up the single and twin chain spreaders, a non-exhaustive list of which was annexed to the statement of claim (statement of claim, schedule D).
D.1 (ii) The side tipper drawings
[25] As artistic works the side tipper drawings in which the first plaintiff pleads ownership of copyright include:
(a) a layout drawing file called “side08.dwg” created by the first plaintiff on or about 1 January 1995. That drawing is for an eight-tonne side tipper (statement of claim, schedule E).
(b)a layout drawing file called “SIDE10.dwg” created by the plaintiff on or about 1 January 1995. That drawing is for a 10- tonne side tipper (statement of claim, schedule F).
(c) later versions, iterations and developments of those two drawings so far as they are original (eight tonne layout drawings, schedules G1 and G2 and 10 tonne layout drawings schedules H1 and H2 to statement of claim).
(d)drawings of various components which make up the side tippers (a non-exhaustive list of which was annexed as schedule I to the statement of claim).
D.1 (iii) The drawbar drawings
[26] As artistic works the drawbar drawings in which David Hoyle pleads ownership include:
(a) a layout drawing file called “drawbars.dwg” which he created on
or around 3 May 2000 (statement of claim, schedule J).
(b)drawings of various components which make up the drawbars (a non-exhaustive list of which is annexed as schedule K to the statement of claim).
D.1 (iv) Laser cutting shape files – .dxf files
[27] The statement of claim pleads David Hoyle is also the author and owner of various .dxf files3 created from the original copyright works identified in schedules A to K to the statement of claim. Copyright subsists in the .dxf files as literary works (being computer programmes) and artistic works (being
graphic works). David Hoyle owns copyright in the .dxf files.
3 The .dxf files in this case were created by David and Paul as instructions to the laser cutters who then cut components from sheet steel according to the exact design and dimensions of the .dxf files. The .dxf files can be created from .dwg files.
D.1 (v) Infringement
[28] Not all instances of copyright infringement have been particularised. The plaintiffs say they have not been able to do so. But they rely on and claim relief in respect of some 28 pleaded instances of infringement. Broadly, the acts of infringement are:
(a) creating, issuing or otherwise dealing in .dxf files being copies of the plaintiffs’ copyright works;
(b)manufacture and/or sale of 29 spreaders, variously single, twin and triple chain, between 2004 and 2012, 10 with drawbars;
(c) manufacture and/or sale of three side tippers, between 2004 and
2011.
[29] Additional damages are said to be warranted because the acts of infringement were for financial benefit, in full knowledge and in flagrant disregard of the plaintiffs’ rights.
D.2 Evidence
[30] The plaintiffs called five witnesses. David Hoyle gave evidence first. His evidence related to his experience in the field, the effort expended in authoring the pleaded works and the similarity between his machines and those of the defendant. He outlined the defendant’s involvement with the family business, the circumstances of his departure from the business in 2004 and what had happened since 2004.
[31] Shane Eddy, an employee of Transpread, gave evidence of David Hoyle’s role in the design of machinery, the defendant’s role and experience with the business, his return in 2002 and his actions and ultimate departure in 2004.
[32] Rodney Bird, a Project Director living in Perth and a former employee of TCL, covered his experience working with both David Hoyle and the defendant between 2002 and 2004, the roles and responsibilities of each, his knowledge of the relevant machines and his discussions with the defendant in
2004. His evidence was that the defendant told him he had programmes downloaded from Transpread and already had Transpread’s designs when he left the business in 2004.
[33] Neil Rogers, the consultant mechanical engineer and director of Neil Rogers & Associates Ltd, is a chartered professional engineer and a member of the Institution of Professional Engineers New Zealand. Mr Rogers was called as the plaintiffs’ expert witness to give his views on the apparent similarities between the parties’ designs and manufactured machines.
E The defendant’s case
E.1 Defendant’s pleaded case
[34] Paul Hoyle denies that the pleaded works are original artistic works in which copyright subsists. He denies that David Hoyle owns copyright in the pleaded works.
[35] Even if copyright subsists in the pleaded works and is owned by David Hoyle there was no infringement. He pleaded no knowledge as to whether Transpread was an exclusive licensee of David Hoyle.
[36] Except for three drawbars and one spreader the defendant admits manufacturing and selling the agricultural machinery to which the claim relates but says that the machinery was made according to his original designs.
[37] Two affirmative defences are pleaded:
(a) The proceeding is unjustified and the defendant counterclaims and seeks a declaration to that effect and an inquiry into damages pursuant to s 130 of the Copyright Act.
(b)The works have been “industrially applied”. Therefore s 75 of the Copyright Act applies so that even if copyright and infringement are established the plaintiffs are not entitled to relief for any infringing activities after 2011.
[38] Finally, and as set out in the introductory paragraphs, the defendant counterclaims for unlawful interference with his business relations, for injurious falsehood and for breach of the Fair Trading Act 1986.
E.2 Evidence
[39] Paul Hoyle was the first of seven witnesses for the defendant. His evidence placed him in his father’s workshop from a very young age. His evidence was that between 1997 and 1999 as an employee of TCL he, with his brother Anthony, invented the triple chain mechanism on the 730 chain spreader and the twin chain spreader. Paul’s evidence covered his period as a contractor to TCL through Palrik from 2002 to 2004, after which he set up on his own and began making spreaders and side tippers to his own designs.
[40] Nigel Randall was called as an independent engineering expert. He had been asked to review a limited range of documents and drawings and to comment on industry standard designs for spreaders. Mr Randall commented also on the shapes and features of side tippers and he explained the certification process for drawbars.
[41] Keith Hoyle, the defendant’s brother, was the former manager of TPL in Australia and familiar with family members’ input into the design process of the 830 spreader and its manufacture and sale particularly in Australia. His evidence responded to David Hoyle’s affidavit answering interrogatories relating to s 75 of the Copyright Act (whether any of the copyright works at issue have been “industrially applied”).
[42] Garry Trotter gave evidence about the sale and delivery to his father of David Hoyle’s first 730 chain spreader. The significance of this evidence is that the delivery date preceded the priority date of the patent. Prior to the
resolution of the patent dispute4 the delivery date of the first 730 spreader was in issue.
[43] Anthony Hoyle gave evidence of working in the family partnership and of what he regarded as David Hoyle’s misuse of the partnership’s intellectual property for his own benefit through Transpread. His evidence was of a shared understanding, encouraged by David Hoyle, that all of the design and labour was for the benefit of the family as a whole. He outlined his role in inventing the 730 spreader and its delivery to Peter Trotter and of the invention of the twin chain spreader. His evidence was that they are derived from the 830 belt spreader.
[44] Bruce Stephenson runs a large rural transport business and was a former customer of TCL. He gave evidence of the effect of David Hoyle’s threats of legal action on his decision to buy spreaders from Paul Hoyle when Paul set up on his own. While he took the threats with a grain of salt he said it was easier to go elsewhere.
[45] Dean Brooks, a fertiliser spreading contractor, gave evidence of his positive opinion of the defendant as an engineer and designer and of the way in which some in the industry regarded David Hoyle’s threats of legal action.
F The trial: observations and rulings
[46] From the first day of the hearing, most of which was consumed by a contentious discovery application, my impression was that the matter was barely ready for trial notwithstanding the claim was filed in 2011. Complaints and counter-complaints about the inadequacy of pleadings and discovery and the consequential prejudice to one or other of the parties persisted throughout and remained a grievance at the stage of closing submissions. The various points and objections are assessed in the judgment where they fall for
determination.
4 See judgment Hoyle v Hoyle [2015] NZHC 3282 discussed below in the section concerning revocation of the patent at [240] and following.
F.1 The documents and electronic bundle
[47] Mr Dengate Thrush at one stage described the number of drawings as being “literally thousands, and thousands”. Certainly the electronic common bundle comprised many hundreds of discovered documents. In their written closing submissions Mr Scampion and Mr Dengate Thrush collectively list some 200 documents, mainly technical drawings, relied on in support of their respective positions. It has proved impracticable to assess all of the documentary evidence. Nor have I regarded it as necessary to do so in order to determine the issues.
[48] Compounding the complexities relating to proof5 is that review of the documents post-trial has been time-consuming and laborious. Within the discovered documents are subsets of documents confidential to each of the parties. The AutoCAD drawings in the electronic bundle could only be viewed with specialised software. The process of loading the files on the software took time. The more complex the content the longer the drawing took to upload. That some of the documents were, at my request, provided to me in hard copy during the hearing did not obviate the need to engage in this time-consuming process.
F.2 Discovery
[49] The proceeding was filed on 19 December 2011. Four statements of claim and five statements of defence were filed. In March 2015 the matter was set down for trial. The pleadings were settled in April 2015 with the filing of a third amended statement of claim, an amended statement of defence and the plaintiffs’ reply to that statement of defence.
[50] Thereafter the parties continued to provide discovery. The trial commenced on 23 November 2015 as scheduled. An application for particular discovery and to set aside privilege claims was argued over most of the first
day of the hearing. Judgment was delivered on 30 November 2015.6 As at
5 Discussed at [148]–[153].
6 Hoyle v Hoyle [2015] NZHC 3001.
30 November 2015 11 affidavits of documents had been filed, the latest on the day the hearing commenced (23 November 2015). A further affidavit was filed on 2 December 2015 following my discovery judgment in which I required the defendant to particularise the steps he had taken in fulfilment of his obligation to make a reasonable search for correspondence relevant to the discovery of documents in the possession of the laser cutting firm he used.
F.3 Unpleaded defences
F.3 (i) Objection to unpleaded defences
[51] In his closing address Mr Scampion submitted that the plaintiffs had been “irretrievably prejudiced” by the defendant being permitted to argue a different case from its pleaded case. The pleadings issues arise in this way.
[52] The statement of claim pleads that David Hoyle is the author and owner of original drawings and designs for:
(a) single chain and twin chain fertiliser spreaders; (b) side tippers; and
(c) drawbars.
[53] In respect of the spreaders and side tippers the defendant denied the claims of originality and authorship in this form:
He has no knowledge of and therefore denies [the claims].
[54] In respect of the drawings for drawbars the defendant pleaded a bare denial.
[55] Mr Dengate Thrush opened on the afternoon of 30 November. At
4:50pm Paul Hoyle was sworn and commenced reading his brief of evidence. The following morning Mr Scampion raised an objection. Overnight he had reviewed Mr Dengate Thrush’s synopsis of opening. The basis of
Mr Scampion’s objection was that it was evident from Mr Dengate Thrush’s
opening that the defendant proposed to rely on two unpleaded defences:
(a) The plaintiffs’ pleaded works are not original because they are based on or developed from designs of components of earlier machines designed by David Hoyle (the ‘design continuum’ argument).
(b)Even if the pleaded works are original, and David Hoyle is the author, the copyright belonged to TCL or the family partnership as David’s employers at the times the pleaded works were produced (the ownership argument).
[56] Mr Scampion submitted that not only were these defences not pleaded they were not open to the defendant on his pleadings. The defendant had had some time and many opportunities7 to plead his defence and if he wished to run the arguments foreshadowed in counsel’s opening Mr Scampion submitted he should amend his pleadings. That would have implications for further discovery and evidence.
[57] Mr Dengate Thrush’s response to the objection was emphatic. The proper time for an attack on the defendant’s case and pleadings was in closing. Mr Dengate Thrush was clear that the plaintiff should not complain during his opening about the defendant’s pleadings and offer an opportunity to repair them: “If I fail on my pleadings we fail”.
[58] I ruled that Mr Scampion’s objection was properly raised, that I would remain alive to the relevance of evidence sought to be adduced in support of the unpleaded defences and that, therefore, objections did not need to be raised
throughout the defendant’s case.
7 Following the statement of defence filed on 24 April 2012, amended statements of defence were filed on 23 July 2012, 21 November 2012, 14 April 2014 and 20 April 2015.
F.3 (ii) Analysis
[59] In preparing my judgment I have formed the view that it would be contrary to established principle to permit the defendant to rely on his positive case against originality and ownership. As Lawton LJ stated when addressing a pleadings point in Rolled Steel Products (Holdings) Ltd v British Steel Corporation:8
Pleadings are formal documents which have to be prepared at the beginning of litigation. They are essential for the fair trial of an action
… A plaintiff is entitled to know what defences he has to meet and a
defendant what claims are being made against him. If the parties do not know, unnecessary evidence may be got together and led or, even worse, necessary evidence may not be led.
[60] Pleadings provide the framework and architecture for the litigation. They are the reference point for discovery and the briefing of evidence; for the preparation of each party’s case and for the conduct of the litigation from its inception to its conclusion. As the commentary to the High Court Rules states:9
The modern approach to pleading requires proper disclosure of the
defendant’s case and all the avenues it intends to pursue.
[61] The defendant’s arguments against originality and ownership amount to affirmative defences in that facts going beyond the pleadings are raised.10 It was necessary for the defences to be pleaded:11
The whole purpose of pleadings is fully and fairly to inform the opposite parties of the claims or defences they face. If an affirmative defence is not pleaded in the statement of defence, a plaintiff will have no notice of it and not be able to answer it. Further, if there is no pleading setting out the nature of the affirmative defence, there is nothing defining the issue so it can be properly understood and determined by the Court. … It is possible for an affirmative defence that has not been pleaded to arise and be considered in the course of a hearing, but only if leave is granted to amend and add that defence.
8 Rolled Steel Products (Holidngs) Ltd v British Steel Corporation [1986] Ch 246 (CA) at
309.
9 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR5.48.03], citing
Marley New Zealand Ltd v Skellerup Rubber Services Ltd [2013] NZHC 1653 at [19].
10 See Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZCA 154, (2012) 21 PRNZ 235 at [21].
11 At [22].
F.3 (iii) Determination
[62] The defendant did not seek leave to amend his statement of defence. Because these defences were not pleaded the plaintiff was unable to prepare evidence in rebuttal or even to anticipate the argument. Accordingly, I do not entertain the lines of argument advanced in support of the affirmative defences against originality and ownership summarised above at [55](a) and (b).
[63] Nevertheless, the plaintiffs are put to proof by the defendant’s denials and they must establish these elements of their claim. I therefore proceed to consider these preconditions for a copyright action by reference to the applicable principles and to David Hoyle’s tested evidence of originality and ownership and without reference to the unpleaded defences. In the event that I am wrong in excluding the affirmative defences, I consider them in alternative analyses at the end of Parts G.1(i) and G.1(ii) in which originality of the spreader and side tipper drawings is assessed.
G Subsistence
[64] Copyright may only be claimed for a work within one of the descriptions in s 14(1) of the Copyright Act. The plaintiffs say copyright subsists in the works which I have set out from the pleadings at [24]–[27] above.
[65] The defendant does not dispute that the relevant works are artistic works within the meaning of s 2(1)(a) of the Copyright Act and that copyright could subsist. The defendant says, however, that copyright does not subsist in the pleaded works as they are not original. The issue of originality is analysed in the remainder of Part G.
G.1 Originality: the principles
[66] In order for the plaintiffs’ pleaded works to be protected by copyright they must be original works in the sense that they originated from David Hoyle. A work is not original if it is a copy of another work. This
standard does not concern the merit or novelty of the work but rather whether it is the product of more than minimal skill and labour.12
[67] An expression of an idea or thought may attract protection even if the work draws on the ideas of others. As the Court of Appeal in Wham-O MFG Co v Lincoln Industries Ltd put it:13
The originality that is required by the Act relates to the manner in which the claimant to the copyright has expressed his thoughts or ideas. The Act does not require that the work be novel in form but that it should originate from the author and not be copied from another work.
[68] There is no need for particular inventiveness or novelty.14 A work must simply have been created independently, using skill, judgment, labour or effort.15 The threshold is low. Applying these principles the issue is whether the pleaded works have sufficient originality for copyright to subsist.
G.1 (i) Originality: Spreaders
[69] A spreader is an agricultural machine which consists of a bin mounted on a truck or trailer. The bin is filled with fertiliser and a mechanism distributes the fertiliser onto the surface over which the machine travels. The kind of spreader that is produced from the pleaded works was referred to as a
730 chain spreader. It is a chain spreader because a chain-based conveyor runs along the floor of the bin, driven by a hydraulic motor or ground-drive gearbox. The fertiliser falls from the conveyor onto spinners at the rear of the bin. The spinners distribute the fertiliser. Each spinner is driven by a hydraulic motor.
[70] Some 730 chain spreaders are single chain and others are twin chain. The twin chain mechanism consists of two separate conveyors, each
constructed of two chains connected by steel bars. Each conveyor can operate
12 Henkel KGaA v Holdfast New Zealand Ltd, above n 2, at [37].
13 Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 664 relying on
University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601 (Ch).
14 University of London Press Ltd v University Tutorial Press Ltd [1916], above n 13, at
608–9.
15 University of Waikato v Benchmarking Services Ltd (2004) 8 NZBLC 101,561 (CA).
independently of the other. Single chain (sometimes referred to as triple chain) mechanisms have a single conveyor comprising three chains linked by steel bars. The 730 chain spreader comes with a variety of bin heights and widths. Dimensions may vary according to the trailer or truck onto which a particular spreader is to be mounted.
[71] The principal copyright work relating to the 730 spreader, “chainwid.dwg”, was created around the beginning of 1995. The document has been through a number of iterations, snapshots of which have been preserved by David Hoyle’s backup system.
[72] I accept David Hoyle’s evidence of his authorship of the drawings. I found the evidence of his background in design and manufacture of machinery pertinent to my consideration of his claims of authorship of the pleaded works.
[73] David taught himself technical drawing. He gave evidence of designing and developing a machine during the 1960s and 1970s called a “Tructor”. He prepared drawings and patterns for these machines. The Tructors were used at airports, in the forestry industry, for fire-fighting and by the oil industry and also electric power boards. David produced evidence of these machines being used in these various contexts including for fertiliser spreading. He exported them to Australia and had them built under license there. Another machine, a “Spreadamatic”, a two-tonne single spinner model was sold to farmers.
[74] It was a source of pride to David that although he had no formal training the Ministry of Transport considered the workmanship on the Tructor to be sufficient to license it to be driven on the open road. He produced a photograph of the six-wheel drive Tructor carrying a drilling rig for coal exploration in the Waikato.
[75] By 1995 when David began designing the Transpread 730 chain spreaders using AutoCAD he had been designing and developing machinery for approximately 35 years.
[76] David travelled extensively, particularly to visit Transpread’s licensees. He worked with them to resolve manufacturing or software issues. While travelling he continued to work on designs for his various machines to adapt them to be suitable for the various different fertiliser products used in different countries.
[77] It was in 1995 when David was visiting GVM, a Transpread licensee in Pennsylvania, that the idea of a new type of chain spreader occurred to him. He stayed in a caravan on the premises of GVM for six months assisting GVM with its Tructor. He saw a certain type of chain being used on salt spreaders which was not available in New Zealand at the time and had not been used on fertiliser spreaders in New Zealand or Australia. All the spreader chains in New Zealand had been “c188” (88mm) combination chains with what was referred to as an “over the top” return.
[78] David’s evidence was that from the time he started work on the designs until the first 730 chain spreader was built in 1998 it took about two years and hundreds of hours, probably over 1000, of designing components, nesting components, making construction manuals and testing.
[79] I accept David Hoyle’s evidence. He impressed me as a very careful witness. In the face of evident hostility towards him from the defendant he was a co-operative and dispassionate witness throughout. He was fulsome in his responses under cross-examination and concessionary. He was also very clear about the questions that were asked of him in cross-examination in particular and in his responses. Where necessary he corrected terminology and sought clarification.
[80] Paul Hoyle contrasted significantly at times in terms of his answers and presentation. He was defensive and less co-operative. For example:
Q. And if one of those people for whom you had a made a machine wanted you to make a spare part that had a relationship with other components you would need to know the shape of that part, wouldn’t you? Yes or no?
A. Oh, you want me to answer? No, only bits that you would need –
[81] The plaintiffs pleaded that because of the defendant’s failure to discover the drawings from which the defendant’s infringing machines were made comparisons could not be made of drawings with drawings. This was an area of contention and the judgment which I issued on 30 November required Paul Hoyle to re-swear an affidavit as to the inquiries that had been made to
locate the relevant documents.16 He maintained they did not exist and that he
kept his designs in his head. His demeanour and answers during cross- examination tended towards defensiveness and lack of cooperation. By way of further example:
Q. Okay. It won’t be fruitful for us to argue out what ‘some time’ means but you did — you also said you do not currently have the laser shape files for the single chain on your system. We can agree that that’s a lie can’t we?
A. That would be incorrect, yes.
Q. And you can understand why they were wanting these can’t
you?
A No. I still cannot. I can understand why David wants them.
[82] The notes of evidence show that it took four pages of cross-examination for Paul Hoyle to agree a fact which was not able to be credibly disputed namely the issue of whether he had design files for spreaders on a particular date, contrary to representations made in correspondence that he did not have such files. Paul Hoyle’s defensiveness was such that it was necessary for me to remind him that counsel have an obligation to put propositions to witnesses and that it was not personal. Nevertheless Paul Hoyle’s bitterness and resentment continued to manifest itself with such answers as:
My father has never been concerned about anybody except himself his whole life so I do not believe that [his father was concerned about his welfare] for a second.
[83] When cross-examined about the time it would take to design and manufacture the Trotter spreader and elements of drawings were put to
16 Hoyle v Hoyle [2015] NZHC 3001.
Paul Hoyle, he answered defensively with replies such as “you can suggest whatever you like” and “if you say so” on at least seven occasions during a
20 minute period.
[84] On the basis of David Hoyle’s evidence, which I accept, the plaintiffs have demonstrated that there was sufficient skill, labour and effort involved in David Hoyle’s creation and development of the spreader drawings and that there is sufficient originality for copyright to subsist.
Alternative analysis
[85] My conclusion as to originality is reached without regard to the unpleaded design continuum defence which I have determined17 cannot be pursued. In the event I am wrong in that conclusion I now address the issue of originality having regard to the unpleaded defence.
[86] The defence contained both a factual and a pleadings component:
(a) The defendant contested originality on the basis that the components for the 730 spreaders were essentially components from David Hoyle’s earlier designs of his 830 and
500 spreaders.
(b)The defendant also argued the pleaded works are not original works because the evidence reveals the existence of underlying artistic works, namely, drawings which were earlier stages in a design continuum and which have not been pleaded or even put in evidence by the plaintiffs. In the defendant’s submission this means that the plaintiffs’ assertion of originality must fail.
[87] Speaking specifically of engineering drawings which copy in some way previous drawings, Lord Oliver said in Interlego AG v Tyco Industries Inc:18
17 At paras [62]–[63].
18 Interlego AG v Tyco Industries Inc [1989] AC 217 (PC) at 263.
There must in addition be some element of material alteration or embellishment which suffices to make the totality of the work an original work. Of course, even a relatively small alteration or addition quantitatively may, if material, suffice to convert that which is substantially copied from an earlier work into an original work.
[88] In LA Gear Inc v Hi-Tec Sports Plc Nourse LJ rejected as “novel and disturbing” an argument that originality could not be established in a drawing because earlier versions had not been produced:19
That argument must be firmly rejected. … If, in the course of producing a finished drawing, the author produces one or more preliminary versions, the finished product does not cease to be his original work simply because he adapts it with minor variations, or even if he simply copies it, from an earlier version. Each drawing having been made by him, each is his original work. It would be an extraordinary state of affairs if the law were otherwise.
[89] David Hoyle began designing the 730 spreader in 1995. His evidence traced the development of the 730 spreader from the 500 and how component parts were modified, adapted, improved and changed over time. The 500 was the first spreader sold using a 667 chain which David had resolved to use on all the spreaders as it presented benefits including that it was less prone to rusting. With its chain return mechanism it is quite different from the belt mechanism used in the Transpread 830 spreader.
[90] Paul accepted that the parts for a 500 are “completely different” to a
730. He agreed also that an important difference between the 730 and 830 was in the lack of a floor in the 830 which has a conveyer system replacing the floor.
[91] David acknowledged that door actuating components are common to the 730 and 830 and deflectors would fit all of his spreaders. Spinner mounts would fit both the 730 and 830 and all bins have the same top profile, a similarity that relates to road and truck widths. The rear of the bin is fitted with panels which are key for fitting bearing mounts, spinner mounts and fitting the feed system onto spinners. Those components and the panels are designed for
the 730 and the panels are unique to that spreader. While the width of the
19 LA Gear Inc v Hi-Tec Sports Plc [1992] FSR 121 (CA) at 136.
doors on the 830 and 730 spreaders was kept purposefully similar the height was different.
[92] While several features of the 730 were similar to the 830 and other earlier spreaders the evidence demonstrates significant differences between the machines such that I am able to conclude there has been sufficient material alteration or embellishment to make the totality of the work an original work. I find that “chainwid.dwg” and the later versions, iterations and developments of that drawing as well as the drawings of various components for the
730 spreader, are original drawings authored by David Hoyle.
[93] The defendant submits that the plaintiffs’ assertion of originality must fail because of a failure to plead earlier drawings in the evolution of the copyright works. I take a different view.
[94] It has been said that “a defendant can expect to receive short shift from the court” if arguing that the earliest works have not been disclosed and the latest works are unoriginal because they are copies of the earlier drawings with only insignificant alterations.20
[95] Relying on the Supreme Court’s decision in Henkel Mr Dengate Thrush submitted:
[Henkel is] a case where the plaintiff had earlier, original drawings but did not plead infringement of those, but of infringement of later drawings based on the earlier ones. That is exactly what appears to have happened here.
[96] But the issue in Henkel was importantly different. As Tipping J
summarised the position:21
[31] In the present case, Henkel’s failure to plead the copyright work on which it is ultimately seeking to rely must result in its inability to rely on that work. Henkel’s pleading fell well short of being sufficient to inform the Court and Holdfast that its cause of
20 K Garnett, G Davies and G Harbottle (eds) Copinger and Skone James on Copyright (16th ed, Sweet & Maxwell, London, 2011) at [3–136]. See also Hugh Laddie and others The Modern Law of Copyright and Designs (4th ed, LexisNexis, London, 2011) at [4.43].
21 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577.
action relied on the graphic work underlying the SuperAttak packaging.
[97] Where Henkel failed to plead the copyright work on which it ultimately relied the plaintiffs in this case have pleaded, and with particularity, the copyright works on which they rely. At best, the plaintiff in Henkel pleaded only “by inference” the drawings in which it sought copyright protection.
[98] In its explicit detail22 the plaintiffs’ pleadings in this case contrast starkly with the inadequate pleading in Henkel. I am satisfied by the body of authority on this point that it is not necessary to produce the earlier works in order to establish authorship and originality.
[99] I am further satisfied, following my alternative analysis, that my finding at [84] would be the same had this line of argument been permissible on the pleadings.
G.1 (ii) Originality: Side tippers
[100] A side tipper is a bin on a trailer or truck which can be raised and tipped with hydraulic arms. It is used to refill a spreader. The side tipper is drawn alongside the spreader and the hydraulic arms lift and tip the side tipper bin to fill the spreader bin. It is usually mounted on a trailer but can also be mounted on a truck. David Hoyle’s evidence was that he designed side tippers in four sizes: 6, 8, 10 and 14 tonnes.
[101] The principal copyright works relating to the side tippers, “side08.dwg” and “SIDE10.dwg”, were created at some point in 1994, though the metadata dates the files to 1 January 1995. These documents have been through a number of iterations, snapshots of which have been preserved by
David Hoyle’s backup system.
22 The pleadings are set out in paragraphs [24]–[27] of this judgment.
[102] I accept David Hoyle’s evidence of his authorship of the drawings for reasons similar to those that lead me to accept his authorship of the spreader drawings.23
[103] The inspiration for developing the side tippers arose when David Hoyle saw similar machines in Australia when working with industries that had purchased his Tructors. He decided to develop a machine for use with fertiliser. Development began in 1994 and took around 12 months. The first side tipper was sold in 1995.
[104] I am satisfied that the plaintiffs have demonstrated that there was sufficient skill, labour and effort involved in David Hoyle’s creation and development of the side tipper drawings and that there is sufficient originality for copyright to subsist.
[105] That conclusion is reached without regard to the unpleaded defence which I have ruled cannot be pursued.24 As with my approach to the spreader drawings, in the event that I am wrong in the conclusion that the unpleaded defence is impermissible, I now address the issue of originality having regard to that unpleaded defence.25
Alternative analysis
[106] The defendant contended that David Hoyle’s side tippers were copies of machines made by third parties, particularly the Hatfull tipper named after its owner, or of earlier side tippers designed by David Hoyle which were not pleaded or in evidence. The pleaded side tipper drawings were accordingly not original works. During cross-examination David Hoyle said that his earlier
designs were in old files which can no longer be opened.
23 Above from [72].
24 At [62]–[63].
25 Above at [55]–[56].
[107] Keith Hoyle gave evidence that he and David had seen and inspected the Hatfull tipper on the side of the road one day. That was the source of the inspiration for the Transpread side tippers.
[108] David Hoyle’s evidence was that the visual similarity arose because the Hatfull tipper was constructed from a repurposed Transpread spreader bin. More generally, the plaintiffs’ position is that while the side tipper drawings have a design history they are not so closely copied from previous designs as to lack originality sufficient to attract copyright.
[109] The evidence of the defendant’s expert, Mr Randall, was that due to functional constraints most side tipping trailers are likely to have very similar looking bins. But the view expressed in his written brief was based solely on documents he had been given and from which he had been asked to form a conclusion. His had been a desk exercise. He was shown images of side tippers by other manufacturers which were different from the examples he had examined to prepare his evidence. Under cross-examination, and in light of the new examples put to him by Mr Scampion, Mr Randall conceded that side tipper shapes may differ.
[110] The machines which Mr Randall considered indicated an industry standard were referred to as the McMaster and Ace Engineering machines. It transpired that the McMaster machine was not a side tipper at all. The other, made by Ace Engineering, was, David Hoyle explained, similar because Ace Engineering was a former Transpread licensee. The similarity had given rise to a court action and eventual settlement.
[111] As stated previously, where there is a design continuum the existence of the earlier designs on which later designs are based does not preclude the later designs from being original works. Later designs must be sufficiently different to be original in themselves. It is not essential that the earlier works be pleaded or are put in evidence.
[112] The best evidence of the design history of the side tipper, exhibit DX-3, was produced by Paul Hoyle. The exhibit was a drawing of five side tipper bin profiles. (Though David Hoyle rightly pointed out that it lacked measurements, it remains useful for the present analysis.) The first drawing is of the Hatfull tipper. The remaining four are Transpread’s.
[113] Mr Dengate Thrush submitted in closing that this “evolution” document establishes a series of designs. He submitted that only the last drawing represented a design that had been pleaded and put in evidence. In my assessment, the last two drawings are representative of the profiles seen in the pleaded work side08.dwg (schedule E to the statement of claim) and a later iteration of SIDE10.dwg the 10 tonne drawing (schedule F), which later iteration is included in schedule H1 of the statement of claim.
[114] I consider that each of the profiles represented in the “evolution” document is sufficiently different to be an original work. Each is different in dimension, general geometries and features. Originality does not require novelty so much as the application of labour, judgement and skill which are evidenced in these differences. Paul Hoyle’s evidence relating to the different shapes in the later bin profiles was that although the differences appear minor the improvement in function is major and that entails a measure of real difference. Of course the merit of the difference is not significant when assessing originality, though the evidence of difference in merit supports the view that more than minimal skill and judgement were necessary to create the design differences that increased the design’s merit.
[115] Although the earlier drawings are not before the Court the “evolution” document provides evidence from which the features of those earlier drawings can be inferred and a conclusion as to their differences reached. Accordingly, were the defence available I would nonetheless find that the side tipper drawings are original works.
[116] I record for completeness that the defendant contended that he was responsible for some of the ideas represented in the pleaded side tipper
drawings. Paul said that the curved side of the side tipper bin was developed by Palrik between 2002 and 2004. On this point David’s evidence was that the side shape had been developed years previously. David pointed out further that Paul had misdescribed the bin sides in his evidence — the change involved one bend, not two. Paul also gave evidence that he and David together drew the later side tipper drawings.
[117] I prefer David’s evidence that he was responsible for the side tipper drawings. First, on his own evidence, Paul did not draw. Secondly, it seems improbable that as the conflict over copyright infringements began, and wore on, Paul would not assert as he does now that the drawings were his.
[118] The fact is, David had been designing and selling side tippers since the
1990s. Even accepting Keith Hoyle’s evidence that he was involved in the design and build of David’s first side tipper in the 1990s that does not detract from David’s authorship and ownership of the side tipper drawings which constitute the pleaded works; similarly, with regard to Paul’s evidence that he designed three side tippers.
[119] My strong impression is that where once there was a functioning family enterprise, of which David Hoyle’s sons were an integral part, for the varied reasons that emerged during the trial and that were apparent from some of the documentary evidence, the working relationships gave way to bitterness, factions and rifts. It is understandable that the sons who devoted themselves to a successful family enterprise would feel a sense of entitlement towards the business and proprietorial in respect of the agricultural machinery which they built and the designs to which they contributed modifications over the years. But this is a copyright infringement action focussing the Court on a narrow set of issues in respect of which such considerations play no legitimate part.
[120] I am satisfied on this alternative analysis that my finding at [104] above would be the same had this line of argument been permissible on the pleadings.
G.1 (iii) Originality: Drawbars
[121] The drawbars at issue are essentially tow bars for trailer spreaders. They were referred to throughout the trial as drawbeams but I shall describe them as David Hoyle did in his evidence. He considered his drawbars to be unusual as they came a long way back from the chassis of the truck and dropped down to avoid the spinners. David Hoyle said the design of his drawbars meant that “the drawbar does not bottom out when the truck and trailer go over rough terrain”. He had to carefully design the parts on AutoCAD. The first drawings are from mid-2000. Having prepared drawings he then provided them to the certifying engineer who sent proof drawings back to David Hoyle who would then construct the drawbar according to the specification. The certifying engineer certified the drawbar. The drawbars were not designed by the certifying engineer. Rather, he certified David Hoyle’s design.
[122] The defendant’s case was that the drawbars were likely to have been drawn by the engineer at MechTech. Mr Randall, the defendant’s witness explained aspects of the certification process for drawbeams and why it was highly improbable the substantial design of drawbars was by David Hoyle.
[123] Mr Rogers, the engineer called by the plaintiffs, considered the process which David Hoyle employed was within the range of usual practices if not the most common practice. It was possible for a drawbar to be designed or even built by a lay person and then to be certified by a qualified engineer. I accept that the drawbar drawings were certified by the engineer but drawn by David Hoyle.
[124] I consider the evidence establishes that there has been sufficient skill, labour and effort involved in David Hoyle’s creation and development of the drawbar drawings and that there is sufficient originality for copyright to subsist. I am strengthened in my view when I consider the creditworthy nature of David Hoyle’s evidence.
G.1 (iv) Originality: .dxf files
[125] To the extent that the .dxf files are copies of the .dwg files, or different compositions of the shapes reflected in the .dwg files — it was not contended otherwise — the foregoing analyses and conclusions are applicable and I find that copyright subsists in the .dxf files as artistic works.
G.2 Subsistence: conclusion
[126] David Hoyle has established to my satisfaction that his drawings were his own. They were not copied from someone else’s work. When I consider his explanation as to why his earlier drawings could not be produced and the evidence as to the nature of the works represented by the drawings that are in evidence I am satisfied that the pleaded works reflect the skill and effort which David Hoyle has applied over time. The evidence that does exist satisfies me that David Hoyle was the author of the pleaded works and the predecessor drawings which were not in evidence.
[127] To summarise I find that the pleaded works set out at paragraphs [24], [25] and [26] above are original artistic works in which copyright subsists and that David Hoyle is their author.
[128] I find also that the laser cutting shape files created from the original copyright works (set out at para [27] above) are original literary and artistic works in which copyright subsists and that David Hoyle is their author.
H Ownership
H.1 Applicable principles
[129] Generally the person who is the author of a work is the first owner of copyright in the work.26 The main exception is where a work is authored by an employee in the course of employment. In that situation, absent a contrary
agreement, the work is owned by the employer.27
26 Copyright Act 1994, s 21(1).
27 Copyright Act 1994, ss 21(2) and (4).
H.2 Defendant’s position
[130] Although the defendant denied in his statement of defence that the plaintiffs owned copyright in any of the pleaded works, it was apparent from Mr Dengate Thrush’s opening that the defendant intended more than to simply put the plaintiffs to proof. The defendant attempted to run a case that David Hoyle was an employee of TCL or the partnership which was involved in similar business at the time the pleaded works were authored. Consequently, any copyright belonged to TCL or the partnership or the partnership’s successors in title and David Hoyle could not make a claim for infringement. Mr Dengate Thrush included with his opening submissions a diagrammatic account of David Hoyle’s corporate entities in New Zealand and Australia since 1960 and the various licences granted to some of those entities.
[131] As previously recorded I have accepted the plaintiffs’ claim of prejudice. The attempt to pursue the new line of defence was inconsistent with the pleading of no knowledge and a failure of the obligation to plead one’s case.28 More specifically, the failure to plead that David Hoyle was not the owner because he was an employee denied the plaintiffs the opportunity to adduce evidence to refute the point.
[132] As Mr Dengate Thrush observed in closing there is no evidence on the point. The proposition that David Hoyle was an employee of TCL or the partnership was not put to him in cross-examination. No witness gave evidence or was cross-examined on the point. There is accordingly no basis for concluding that David Hoyle was an employee of the partnership or TCL and that ownership vested in either as his employer even if the line of argument
were permitted.
28 See discussion above at [51]–[63].
H.3 Ownership: determination
[133] I accept David Hoyle’s evidence that he was the author of the pleaded works set out at [24]–[27] above. The effect of s 21 of the Copyright Act29 is that David Hoyle is the owner of the copyright that subsists in those works.
I Infringement
I.1 The applicable principles
[134] Infringement of copyright arises when there is unauthorised copying of the copyright work.30 Only the owner31 of the copyright may copy the work.
[135] The primary means of infringement that are relevant to the present case are copying the work,32 issuing infringing copies to the public,33 and making an adaptation of the work or doing any restricted act in relation to the adaptation.34
[136] The test for infringement by copying established by the Court of Appeal in Wham-O MFG Co v Lincoln Industries Ltd35 remains the authoritative statement as to the elements which a plaintiff must prove. In determining infringement I will consider the elements in the order which appeared to the Court of Appeal in Oraka Technologies Ltd v Geostel Vision Ltd to be the most logical ordering:36
(a) Objective similarity: There must be sufficient objective similarity between the infringing work and the copyright work or a substantial part of it.
(b)Causal connection: There must be some causal connection between the copyright work and the infringing work in that the
copyright work is the source from which the infringing work is
29 Or s 9 of the Copyright Act 1962 in respect of the works authored before 1 January 1995.
30 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at
[42].
31 Or someone acting with the owner’s authority.
32 Copyright Act 1994, ss 2(1) and 30.
33 Copyright Act 1994, s 31.
34 Copyright Act 1994, s 34.
35 Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 666.
36 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [85]–[86].
derived.
(c) Substantiality: The reproduction must be either of the entire or a substantial part of the copyright work.
I.1 (i) Objective similarity
[137] Objective similarity, in the main, is a matter of impression for the Court: “A copy is a copy if it looks like a copy”.37 The impression on the Court, however, is to be calibrated to the context. Accordingly, the High Court observed in Hammar Maskin AB v Steelbro New Zealand Ltd:38
[I]n comparing engineering drawings it is the impact upon an engineering eye which is important. Matters of detail, which may not attract the eye of a layman, may nonetheless be important. Equally, the originality, or distinctiveness, of the copyright work will be relevant to the assessment of substantiality. Conversely, manufacturing and engineering constraints may dictate that product design is necessarily similar. In such cases, even lesser differences of design may be of significance.
I.1 (ii) Causal connection
[138] Where objective similarity between a plaintiff ’s and defendant’s works is established there are four possible explanations for the similarity: the defendant copied the plaintiff; the plaintiff copied the defendant; both copied from a common source; or the similarities are a coincidence.39 In the absence of direct evidence copying can only be deduced by inference from the surrounding circumstances.40 The degree of similarity between the copyright work and the allegedly infringing work has evidentiary significance.
Frequently, the Court will rely on inference because seldom will proof of
37 Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd (No 2) [1989] 1 NZLR 239 (HC) at 246.
38 Hammar Maskin AB v Steelbro New Zealand Ltd HC Christchurch CIV-2006-409-977,
8 October 2008 at [182].
39 K Garnett, G Davies and G Harbottle (eds) Copinger and Skone James on Copyright (16th ed, Sweet & Maxwell, London, 2011) at [7–14], cited in Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [113].
40 At [114].
copying be direct. The closer the similarity between the works the stronger the inference is likely to be that one was copied from the other.41
[139] Evidence of access to the copyright works by the alleged infringer will support an inference of copying.42 Conversely, evidence of independent design will assist in rebutting an inference of copying.43 It follows that a lack of evidence of independent design will also be significant.
[140] Further, evidence of functional constraints on a design (for example teapots require a spout) can support an inference of an independent design path and accordingly a lack of causation.44
I.1 (iii) Substantial part
[141] Once copying has been established the question of substantiality is to be decided on the basis of what has been found to be copied rather than what a plaintiff alleges has been copied.45
[142] Whether a substantial part has been taken is usually the most difficult issue in copyright cases.46 The substantiality requirement is a practical threshold to limit claims of infringement to those which are real and substantial.47 The essential test is:48
whether a claimant can show substantial use by the defendant of those features of the claimant’s work that, by reason of the knowledge, skill and labour employed in their production, constituted it as an original copyright work. It is wrong to jump to the conclusion that a substantial part was taken simply on the basis that copying occurred. What constitutes a “substantial part” is necessarily a question of fact and degree. The quality or importance of what has been taken is much more significant than the quantity.
41 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43].
42 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [114].
43 At [115].
44 At [88].
45 At [87].
46 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at
[44].
47 Oraka Technologies Ltd v Geostel Vision Ltd, above n 35 at [87].
48 At [129]. Footnotes omitted.
[143] Thus, substantiality is closely associated with originality (of expression, rather than of an idea). The greater the originality in the expression of the copyright work, the greater the protection that copyright law will afford it.49
The reproduction of a part which by itself has no originality will not normally be a substantial part of the copyright and will accordingly not be protected.50
[144] Assessing substantiality:51
depends more on qualitative visual impression rather than on quantitative analysis. As it has helpfully been put, what must have been copied is the essence of the copyright work.
[145] In considering substantiality, the focus is on similarities rather than differences.52 The pirated part is isolated and its importance to the copyright work as a whole is assessed:53
… copyright infringement focuses on what has been taken, the similarities. Differences are of less moment. The fact that separate original work has been added to an infringement does not make it any the less an infringement.
[146] This proposition, that the Court concentrate on the similarities rather than the differences when assessing whether a substantial part has been taken, is based on the rationale that originality added to piracy can be substantial piracy nonetheless.54
[147] Finally, evidence of functional constraints on a design can assist in the assessment of substantiality of reproduction, in that functional constraints may minimise the originality involved in the copyright work and the scope of
protection afforded to it.55
49 At [136].
50 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 (HL) at 293.
51 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [44]
citing Lord Reid in Ladbroke at 279.
52 Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 (HL) at 2425.
53 Bleiman v News Media (Auckland) Ltd [1994] 2 NZLR 673 (CA) at 679.
54 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at
[51], n 41.
55 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [88] and [131]–[133].
I.2 Preliminary observations concerning proof
[148] The issue is whether the plaintiffs’ two-dimensional copyright works have been substantially reproduced by either the creation of other two- dimensional drawings or by the creation of three-dimensional manufactured items which are copies of the copyright works.
[149] The parties are polarised over proof. Mr Scampion submitted in closing that the defendant’s failure to produce documents that he should have produced placed the plaintiffs in real difficulty in terms of direct evidence establishing copying. Therefore in many cases the Court is invited to draw an inference of copying. Mr Dengate Thrush’s position is that where there are “yawning gaps” in the crucial links which the plaintiffs must prove then the Court is unable to draw inferences.
[150] The best evidence, the plaintiffs say, would have been comparison of each parties’ .dwg files as at 2004 given that since that time both parties have continued to develop their products. But only one of the defendant’s pre-2008
.dwg files was discovered, and no .dxf files from prior to December 2005 were discovered. Where .dwg or .dxf files depicting equivalent components have been available it has been possible to prepare some overlaid comparisons. But the opportunities to do so have been limited because of the restricted access to each others’ confidential documents. The analysis of infringement pre- December 2005, Mr Scampion submitted, has therefore to be conducted indirectly by comparing the plaintiffs’ drawings with machines constructed by the defendant from drawings which drawings and machines, the plaintiffs say, must have been infringements. Comparison can also be done, the plaintiffs submitted, by comparing the plaintiffs’ machines “which embody the copyright works” with the defendant’s machines.
[151] Copyright has been claimed in some components for which there has been no comparison evidence. The plaintiffs submit that the Court is entitled to draw inferences of further copying based on the comparison evidence that exists alongside the defendant’s failure to disclose more documents in what the
plaintiffs say are suspicious circumstances. Further, if some components are established as copied the plaintiffs invite the Court to infer that others were likely also to have been copied. That is because the components must relate to each other to effect a working whole.
[152] I accept that this approach is available to me.
[153] I have thought it proper to proceed on the basis of the comparison documents relied on by the parties: the plaintiffs to establish their case and the defendant to challenge it. Each comparison document comprised two discovered documents: one overlaying the other. Mr Dengate Thrush was given an opportunity to satisfy himself that certain comparison documents were indeed composites of documents that had been discovered and the hearing proceeded on that basis. At no stage during the trial was it suggested that the comparison documents relied on by the plaintiffs did not reflect the pleaded works or Paul’s .dwg or .dxf files.
[154] The plaintiffs contend that Paul’s .dxf files infringe David’s copyright works and also that Paul’s manufactured spreaders infringe David’s copyright works. Paul’s evidence was that his spreaders were manufactured from his .dxf files. Insofar as Paul’s .dxf files are infringing, so too will be any spreaders manufactured from them.
I.3 Spreader drawings infringement
[155] The Court was invited to determine infringement of the spreader drawings by reference to the design of 21 component parts.
I.3 (i) Objective similarity
[156] Much evidence was directed to the question of whether Paul Hoyle’s machines had been manufactured from David Hoyle’s designs and drawings. In order to deal with the number of constituent parts which David Hoyle says have been copied I will focus primarily on the comparison documents. I am conscious of the plaintiffs’ concern that only limited opportunities have been
available to prepare precise comparisons of the copyright works with those drawings that the defendant has disclosed but the course I propose to take is necessary in light of the vast numbers of documents and the practical limitations I have alluded to in dealing with them.
[157] A survey of key features of the spreader drawings shown in the comparison documents demonstrates objective similarity. On the bin rear the five vertical slots used to align parts in assembly are perfectly aligned when overlaid. The outlines of the side plates diverge slightly but the critical bearing mounts are again perfectly aligned. The front floor outlines are virtually identical and the three slots match.
[158] The further comparison documents depicting the front chain cover/stiffener, the “smiley”, the “teardrops”, the bin front and sprockets reveal a striking identity between the spreader drawings and the defendant’s .dxf files.
[159] I conclude there is objective similarity between the plaintiffs’ spreader drawings and the defendant’s .dxf files.
[160] Mr Rogers’ evidence bears on the point. The photographs exhibited in the second brief of Mr Rogers comparing a 2004 Transpread spreader to a spreader manufactured by Paul Hoyle in 2004 continue that theme. The two machines are substantially indistinguishable. I acknowledge that greater differences are observable between the “Sole” and “Gwynn” spreaders photographed by Mr Rogers and exhibited to his first brief of evidence. They nonetheless appear identical in a great many respects.
I.3 (ii) Causal connection
[161] Having satisfied myself of the objective similarity between the copyright works and the defendant’s .dxf files and spreaders I turn to the question of whether the similarity arises as a result of the defendant copying, either directly or indirectly, the plaintiffs’ copyright works.
[162] David Hoyle viewed the defendant’s confidential electronic files on a computer at his solicitor’s offices (Baldwins Law Ltd). His evidence was that in the limited time he had to review the files it was apparent to him from his initial review that many of Paul’s files contain components which are direct copies of his spreader and side tipper designs or, at the very least, had been created and adapted from his designs.
[163] One such example which I viewed is a confidential document named “ST 2 back”. This is a drawing file (.dwg) showing two duplicate copies of the back of a 730 spreader bin. One of the bins in the drawing is labelled “Transpread 730 Low ST 2”. David Hoyle’s evidence was that “ST 2” is Transpread’s customer abbreviation code for Stephenson Transport which was provided a 730 chain spreader in 2000.
[164] Paul Hoyle’s evidence about this document was completely unsatisfactory.
[165] First, he gave inconsistent testimony about his approach to drawing and whether or not he kept drawings in order to recreate spare parts. Paul insisted he designed from memory. It was put to him in cross-examination that it was important for a designer to keep drawings for spare parts. Paul rejected that proposition.
AFor spare parts if anyone came into me with a damaged back end, as you saw with the truck I’d done for Dennis Dougherty’s, I wouldn’t even dream of putting one of the old ones back onto it. I would be cutting it off and replacing it with my new design. Why would you replace it with an old one? It just wouldn’t make sense.
[166] Paul Hoyle’s evidence under cross-examination was that if parts were damaged they would either be repaired by hand or if the damage was bad enough he would cut out the damaged area and “replace the whole lot”. Yet in his written brief of evidence Paul gave the following explanation for having in his possession a file showing a Transpread 730 bin end:
I drew it so that if I had a similar repair job I would be able to easily recreate the part.
[167] Secondly, in his written brief Paul Hoyle described “ST No 2” as a laser cutting file drawn by him. The document is not a laser cutting (.dxf) file. Even within the defendant’s lists of discovered confidential documents it is described as “1009.117.ST 2 back.dwg”. Thus, it is a drawing file and in his written brief Paul Hoyle accepts he produced it. That testimony is at odds with his evidence that he does not do drawings but designs (from memory) directly in .dxf files.
[168] Finally, Paul Hoyle did not explain why he adopted his father’s business nomenclature. “ST 2” was Transpread’s customer code for Stephenson Transport. In the absence of any explanation as to why that code continued to be used it seems to me that Paul Hoyle, who was at pains to distance himself from his father’s business and establish his own independent reputation, would be unlikely to use an identical customer number.
[169] It is open to me to infer copying from the fact that Paul Hoyle has in his possession a drawing file (when he does not draw) of the back of a spreader bin (which he conceded was a Transpread 730 bin end) bearing a Transpread customer code. But there is additional evidence that strengthens the basis for an inference of copying.
[170] There were ample opportunities in 2004, and earlier, to copy the drawings. Paul agreed he had access to the drawings.
[171] Rodney Bird was employed by TCL from mid-2002 for approximately
24 months. One of his roles was to assist David Hoyle with technical issues that customers, for example, may have been experiencing with spreaders. Mr Bird said he was contacted by Mrs Hoyle to assist in negotiations between Paul and David. Both Paul and Mr Bird spoke of a meeting in June 2004 at which Paul’s business partner, Ricky Dowson, was also present. The objective was to achieve a licence agreement between Transpread and Paul and Mr Dowson. Mr Bird understood Paul’s main driver in the process was legal access to the Transpread 730 designs and intellectual property but he did not want the licensee performance guarantees imposed by the proposed agreement. Mr Bird’s evidence was that Paul told him he already had Transpread’s designs.
[218] Those findings relate to:
(a) the defendant’s .dxf files for the manufacture of 730 spreaders, side tippers and drawbars; and
(b)the machinery pleaded at 25.2 to 25.28 of the statement of claim, barring the three drawbars pleaded at 25.8 and 25.14 and the spreader pleaded at 25.19, manufacture of which was denied by the defendant and not proved by the plaintiffs.
[219] Accordingly I propose to make a declaration in the terms sought in paragraph A of the statement of claim (but for paragraph A(f) which contains an error) namely, that the following acts by the defendant constitute infringement of the plaintiffs’ copyright in the copyright works:61
(a) electronically copying the plaintiffs’ copyright works;
(b)reproducing the copyright works in a material form in both two and three dimensions;
(c) making an adaptation of the copyright works;
(d)reproducing the copyright works in relation to an adaptation thereof;
60 See above at [145].
61 Set out at [24]–[27] above.
(e) issuing copies of the copyright works or adaptations thereof to the public;
(f) authorising third parties to the plaintiffs’ copyright works or
substantial parts thereof; [sic]
(g)possessing or dealing in the course of business with objects that the defendant knew, or had reason to believe, were infringing copies of the plaintiffs’ copyright works;
(h)manufacture, sale or offer for sale by the defendant of his spreaders, tippers and drawbars.
J Standing of the second plaintiff
[220] The issue arises because it transpires that the second plaintiff only became an exclusive licensee of the pleaded works on 22 November 2013.
J.1 Submissions
[221] The plaintiffs’ position is that the second plaintiff is entitled to:
(a) an injunction; and
(b)damages and an account of profits for infringements that occurred after 22 November 2013.
[222] The relief claimed is perfectly orthodox. The Copyright Act provides:
123 Rights and remedies of exclusive licensee
(1)An exclusive licensee has, except against the copyright owner, the same rights and remedies under any of sections 120 to
122P in respect of matters occurring after the grant of the licence as if the licence were an assignment.
(2)The rights and remedies of the exclusive licensee under any of sections 120 to 122P are concurrent with those of the copyright owner.
(3)In proceedings brought by an exclusive licensee pursuant to this section, a defendant may avail himself or herself or itself of any defence that would have been available if the proceedings had been brought by the copyright owner.
[223] But the defendant points out, correctly, that there are no pleaded infringements after 2012. Thus, there could be no account of profits or damages to be awarded to the second plaintiff. The second plaintiff should therefore be struck out and have costs awarded against it.
J.2 Analysis
[224] The question is whether the second plaintiff is potentially entitled to relief upon determination of the infringement claim. If it is so entitled it will have standing.
[225] The defendant concedes that the 2013 licence is an exclusive licence. The licence agreement was produced in evidence. One of the rights available to an owner in an infringement action is an injunction. The Act provides:
120 Infringement actionable by copyright owner
(1)An infringement of copyright is actionable by the copyright owner.
(2)In proceedings for infringement of copyright, all such relief by way of damages, injunctions, accounts, or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right.
(3)This section has effect subject to the following provisions of this Part.
[226] An exclusive licensee can exercise rights that would otherwise be exercisable only by the owner, such as the assertion of the right referred to in s 120(2), namely — that copyright is effectively a property right and may be vindicated by proprietary forms of relief. And s 2 of the Copyright Act defines an exclusive licence as:
a licence in writing, signed by or on behalf of a copyright owner, authorising the licensee, to the exclusion of all other persons (including the copyright owner), to exercise a right that would otherwise be exercisable exclusively by the copyright owner.
[227] It follows that an exclusive licensee can seek an injunction. The second plaintiff may be entitled to relief in the form of an injunction if it is established that the defendant has infringed any copyright in the pleaded works. The second plaintiff accordingly has standing. Besides, to the extent the plaintiffs have concurrent rights of action, it is obligatory that they both be parties.62
K Industrial application
[228] Section 75 of the Copyright Act creates a special exception from protection of artistic works that have been “applied industrially”. In introducing the Copyright Amendment Bill 198463 the Minister for Justice advised that the industrial application rules were to establish a period of protection for industrially applied copyright works in line with that accorded to patents and registered designs.
[229] The provision provides a defence to an infringement action where the works have attained the status of “industrially applied” more than 16 years prior to the alleged infringement. A work is applied industrially when more than 50 copies in three dimensions are made for sale.
[230] Section 75 of the Copyright Act provides:
75Special exception from protection of artistic work that has been applied industrially
(1) The making of—
(a) any object in 3 dimensions; or
(b) subject to subsection (3), a copy in 2 dimensions reasonably required for the making of the object—
does not infringe copyright in an artistic work if, when the object or copy is made, the artistic work has been applied industrially, in New Zealand or in any other country, by or with the licence of the copyright owner,—
…
62 Copyright Act 1994, s 124.
63 Copyright Amendment Bill 1984 (31–1).
(e) subject to subsection (2), in the case of any other artistic work, more than 16 years before the object or copy is made.
…
(4) For the purposes of subsection (1), an artistic work is applied industrially if—
(a) more than 50 copies in 3 dimensions are made of the work, for the purposes of sale or hire; or
…
(5) For the purposes of subsection (4), 2 or more copies in
3 dimensions that are of the same general character and intended for use together are a single copy.
[231] The defendant invokes s 75. He says that some of the pleaded
730 spreader drawings have been industrially applied within the meaning of s 75 of the Act. The works are therefore subject to a shortened copyright term.
[232] Mr Dengate Thrush submitted that to some extent the defence has been superseded by the “overwhelming evidence” showing the plaintiff had failed to meet the threshold requirement of originality in relation to his pleaded works. At the time it was pleaded the s 75 defence was based on the plaintiffs’ claim that the copyright works were created in 1995 thus the defendant’s application for a declaration that the plaintiffs are not entitled to any relief for infringing activities after 2011 (being 16 years after 1995). Mr Dengate Thrush accepted that “the defendant is not in possession of the relevant financial and other information” that would enable him to establish the point at which the components had been produced 50 times. That information, he said, lay entirely within the control of the plaintiffs.
[233] David Hoyle swore answers to interrogatories but that affidavit did not assist the defendant. His answers related to his pleaded copyright works whereas the defendant’s focus is on the underlying earlier works. In his reply to David Hoyle’s affidavit Keith Hoyle was critical of the fact that David Hoyle addressed only the 730 spreaders and ignored other spreaders with similar parts.
[234] The defendant bears the onus of establishing the affirmative defence. He has not done so. He adduced no relevant evidence in support of his defence nor has he discredited such evidence as David Hoyle relies on. There is no evidence before me to show that more than 50 copies of any of the pleaded artistic works have been made for the purpose of sale except in relation to the spreader.
[235] I cannot say on what date a 50th copy of any part was manufactured, except to the extent of David Hoyle’s evidence which is that the 50th copy of the spreader was made around 22 December 2001. It follows, as the defendant submitted and the plaintiff accepted, that any injunctive relief cannot reach beyond 22 December 2017 being 16 years after manufacture of the 50th spreader.
L First counterclaim: unjustified proceedings
[236] The defendant says the plaintiffs’ proceeding against him alleging infringement of copyright is unjustified. An inquiry into damages for unjustified proceedings is sought under s 130 of the Copyright Act. Under s 130(1)(a) a Court may, on the application of any person against whom an infringement proceeding is brought, make a declaration that the bringing of the proceeding was unjustified. An order for damages for loss suffered by a defendant may be made.
[237] Relief is not available if the plaintiff proves the acts in respect of which the proceedings were brought constituted an infringement of their copyright.64
[238] My findings that the defendant has infringed the plaintiffs’ copyright is
determinative of this counterclaim.
[239] Accordingly, the first counterclaim is dismissed.
64 Copyright Act 1994, s 130(2).
M Second counterclaim: revocation
[240] The original statement of claim alleged infringement of copyright and of NZ Patent No 331966 entitled “Conveyer for Spreaders”. The defendant’s second amended statement of defence pleaded prior use and obviousness as positive defences to the patent infringement claim. In the second amended statement of defence and counterclaim the defendant sought revocation of the patent.
[241] On 17 December 2015 I issued a judgment revoking the first plaintiff’s
patent for certain conveyers for spreaders.65 Costs were reserved.
[242] This counterclaim, having been resolved by my patent revocation judgment, no longer requires resolution.
N Third counterclaim: unlawful interference with business relations
[243] The third counterclaim is based on David Hoyle’s communications with the defendant’s suppliers, customers and potential customers regarding David’s allegation of copyright infringement by the defendant. I will set the facts out in some detail because the third to fifth counterclaims plead the same facts and rely on the same evidence.
[244] On 6 December 2004 David Hoyle wrote an open letter headed “Dear
Valued Customer”. The letter continued:
Paul Hoyle was previously involved in the manufacture of Transpread spreaders. He terminated his engagement with Transpread on 30 June
2004. Since that time, he has not been involved in the manufacture of
Transpread’s equipment.
Paul Hoyle does not have any authority to take orders for, or provide, Transpread spreaders.
All intellectual property rights in Transpread’s spreaders, including copyright, are owned by David Hoyle. The only licensed distributors of Transpread’s spreaders are Transpread International Ltd and Transpread New Zealand Limited.
65 Hoyle v Hoyle [2015] NZHC 3282.
In apparent disregard to Transpread’s intellectual property rights including and not limited to copyright, Paul Hoyle has manufactured replica units.
To protect our existing licensees, and intellectual property rights, both the manufacturer and the purchaser of these infringement items will have action taken against them.
[245] David also distributed newsletters to Transpread customers and potential customers to similar effect in May and September 2006 and in July 2011. The May 2006 and July 2011 newsletters, however, did not identify the defendant by name.
[246] Invoices claiming royalties were sent to other customers.
[247] At trial two witnesses gave evidence of their reaction to the receipt of these communications. Mr Stephenson of Stephenson Transport said that although he took the threats with a grain of salt David’s behaviour made it too difficult to deal with Paul and it was easier to go elsewhere. Mr Stephenson did say that ultimately he bought two spreaders from the defendant in 2008 but I am invited to conclude that, at least for a period, David Hoyle’s conduct deterred Mr Stephenson from dealing with Paul Hoyle.
[248] Dean Brooks, who is the Vice President of the New Zealand Groundspread Fertilisers Association and owner of Brooks Spreading Ltd, gave evidence of the knowledge within the small spreader industry of the dispute between David and Paul. In his opinion there would have been people in the industry who did not give their business to the defendant when they might otherwise have done so because of David Hoyle’s conduct. That said, in cross examination Mr Brooks agreed he did not take the invoice seriously when he received it but “threw it in the bin”.
[249] Mr Dengate Thrush acknowledged that the defendant faced a difficult hurdle in establishing whether David Hoyle’s conduct constituted an interference by unlawful means given the unsettled nature of the law in New Zealand in relation to the scope of the tort. He submitted that David Hoyle’s conduct in writing to customers and alleging the manufacture of
replica units by the defendant would be actionable by the defendant: the statement in the “Dear Valued Customer” letter would constitute a defamatory statement in that it was a false statement about the defendant to his discredit.
N.1 Analysis
[250] David Hoyle admits sending letters to the defendant’s customers and an
invoice to two of them but contends it was not unlawful to do so.
[251] The tort of causing loss by unlawful means is controversial and has proved difficult to apply in practice. Since the Court of Appeal decision in Diver v Loktronic Industries Ltd,66 the elements of the tort in New Zealand are settled. There must be first, wrongful interference with the actions of a third party in which the claimant has an economic interest and, second, an intention thereby to cause loss to the claimant. Those elements were stated by Lord Hoffmann in OBG Ltd v Allan67 and accepted by the Court of Appeal in Diver v Loktronic Industries Ltd.
[252] Lord Hoffmann who was in the majority in OBG Ltd v Allan has observed extra-judicially that the common law should be modest in regulating competition and should confine itself to the most crude and obvious cases which, he added, seldom occur in practice.68 The narrow approach views conduct as ‘unlawful means’ only if there is an intention to cause loss to the plaintiff by interfering with the freedom of a third party in a way that is unlawful against that third party. In its acceptance of Lord Hoffman’s analysis in OBG Ltd v Allan the Court of Appeal has adopted this narrow view of
wrongful interference.
[253] The actions must be a wrongful interference with the actions of a third party which interference must be actionable by that third party. The defendant suggests the “Dear Valued Customer” letter constitutes unlawful means
because it was defamatory of the defendant. Sensibly, in my view, Mr Dengate
66 Diver v Loktronic Industries Ltd [2012] NZCA 131, [2012] 2 NZLR 388 at [100].
67 OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1 at [47] cited in Stephen Todd (ed) The
Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) at [13.1].
68 Stephen Todd (ed) The Law of Torts in New Zealand, above n 67, at [13.2.01], n 13.
Thrush took that argument no further. To succeed, the defamatory claim would have to be made out. As it is statute-barred and not pleaded that argument is not available. No unlawful means have been identified in my view. In my view, the submission that defamation would have sufficed is misconceived as it would not be actionable by the third party.
[254] I agree with Mr Scampion’s submission that David Hoyle’s intention was to further assert his intellectual property rights. His means may have been clumsy but there is no evidence that he intended harm to the defendant in asserting what he believed were his legitimate property rights. The required element of intention to cause loss is not satisfied by loss being a foreseeable consequence of the unlawful conduct. Specifically, in this case, Paul Hoyle’s loss must be either the desired end itself or the intended means of obtaining
that end.69
O Fourth counterclaim: injurious falsehood
[255] Paul Hoyle pleads that the plaintiffs’ statements in the communications referred to above also amount to injurious falsehoods because David Hoyle knew them to be false and was reckless as to their truth or falsity. He could not have reasonably believed himself to be entitled to royalties, it is said.
[256] He further pleads the publication of the statements were likely to cause him pecuniary loss and have in fact caused loss in the form of damage to reputation and loss of business.
[257] To establish a claim of injurious falsehood a plaintiff must prove:
(a) false statements have been made about the plaintiff or his or her business or property;
(b) the statement was published to a third person;
(c) the statement was published maliciously; and
69 Stephen Todd (ed) The Law of Torts in New Zealand, above n 67, at [13.2.04].
(d) damage has resulted from publication of the statement.
[258] The defendant says the falsity of the statements made by David Hoyle is established whatever the outcome of the copyright infringement action. Even if the Court were to find that some component manufactured by the defendant infringed copyright, Mr Dengate Thrush submitted it was nevertheless demonstrably false for David Hoyle to have accused Paul Hoyle of manufacturing “replica units” which he clearly had not. Likewise, he submitted, the amount claimed as royalties was false in the sense that the invoices demanded payment of a full royalty in relation to a “spreader” rather than representing a royalty in relation to infringing components.
[259] The burden of proof is on the counterclaim plaintiff, that is Paul Hoyle, to establish malice. Particulars of malice are required to be pleaded but Paul Hoyle has not pleaded particulars of the facts on which he relies in alleging malice.
[260] Where Paul Hoyle has alleged malice on the basis that David Hoyle knew the claims being made were false or that he was reckless as to their truth or falsity the evidence in fact persuades me that David Hoyle acted honestly and from a genuine belief that his rights were being infringed.
[261] The counterclaim fails.
P Fifth counterclaim: breach of the Fair Trading Act
[262] Section 9 of the Fair Trading Act 1986 overlaps with the claim of injurious falsehood.70 Section 9 provides:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[263] Paul Hoyle says David Hoyle’s statements were misleading and
deceptive and were likely to mislead or deceive the recipients of those
70 Stephen Todd (ed) The Law of Torts in New Zealand, above n 67, at [15.1].
communications on the same basis falsity was submitted in respect of the injurious falsehood counterclaim.
[264] Statements were published to customers and potential customers of the defendant, they were made “in trade” and were made by a manufacturer of agricultural machinery to purchasers or potential purchasers of such machinery.
P.1 Analysis
[265] Again, it is necessary to prove that conduct in trade was misleading or deceptive or likely to be so. There is no mental element. Proof of damage or the likelihood of damage is necessary to obtain the remedy of damages.71
[266] As the plaintiffs have succeeded in their copyright infringement action in respect of the spreaders, David Hoyle’s assertion of intellectual property has been vindicated. Even prior to resolution, the assertion of intellectual property rights where there is some basis for the assertion is not in my view false, misleading or deceptive.
[267] Claims that David Hoyle’s communications were false and misleading
or deceptive have not been made out.
[268] Further, there is no evidence that the recipients of these communications were, or were likely to have been, misled or deceived. The evidence shows one of the recipients did not take David Hoyle’s invoices seriously and none of the invoices was paid. At best, the evidence was of a general reluctance to be involved in a family dispute and do business with Paul Hoyle but that is not evidence of being misled or deceived.
[269] For these reasons the fifth counterclaim fails.
71 Fair Trading Act 1986, s 43.
Q Result
[270] The plaintiffs have established that the defendant has infringed the copyright works set out in [24]–[27] above.
[271] The infringing acts of the defendant were committed with full knowledge of the plaintiffs’ rights, at least from the defendant’s receipt of the letter from the plaintiffs’ solicitor dated 14 December 2004, and the infringing acts were for the purpose of obtaining a financial benefit for the defendant.
[272] A declaration is made in the terms set out in [219].
[273] An injunction is granted in the terms sought at paragraph B of the statement of claim except that in respect of the plaintiffs’ spreaders the injunction does not extend beyond 22 December 2017 (being 16 years from the manufacture of the 50th spreader).
[274] The defendant’s claim for a declaration under s 130 of the Copyright
Act, that the proceeding is unjustified, is dismissed. [275] The defendant’s counterclaims are dismissed.
[276] The plaintiffs are entitled to costs which may, if necessary, be addressed in memoranda to be filed by the plaintiffs by 20 February 2017 and by the defendant 10 days following.
[277] Any further directions sought should be the subject of separate memoranda.
Karen Clark J
Solicitors:
Baldwins Law Ltd, Auckland for the Plaintiffs
McCabe and Company, Wellington for Defendant
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