Summit Building Services v Baxter
[2020] NZHC 143
•12 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-794
[2020] NZHC 143
BETWEEN SUMMIT BUILDING SERVICES
Appellant
AND
VICKI JILL BAXTER AND LANCE OWEN BAXTER
Respondents
Hearing: 6 November 2019 Appearances:
M G Keall for Appellant Respondents in person
Judgment:
12 February 2020
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 12 February 2020 at 12:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Fryers Joyce, Auckland
SUMMIT BUILDING SERVICES v BAXTER [2020] NZHC 143 [12 February 2020]
Introduction
[1] The appellant, Summit Building Services Ltd (Summit), designs and builds houses. In 2012, Mr and Mrs Baxter (the respondents), decided to build a home for their retirement at Kilbryde Crescent, Pokeno. They approached Summit with a view to possibly engaging it on their project. Between November 2012 and March 2013, Summit prepared and provided the respondents with six sets of building plans.
[2] On 22 March 2013, Mrs Baxter notified Summit that she and her husband had decided to proceed with another builder, Grigor Construction Ltd (Grigor). The final Grigor building plans1 were all but identical to the final Summit building plans.2
[3] In November 2018, the appellant’s claim was heard in the District Court at Hamilton.3 The appellant sought damages of not less than $74,043 on the grounds of breach of oral contract, equitable estoppel, and breach of copyright. Judge A A Sinclair dismissed each claim and found the respondents entitled to costs and disbursements.4 As regards the breach of copyright claim, the Judge found that Summit had not established ownership of copyright in the building plans it provided to the respondents.5
[4] Summit appeals the District Court’s determination as to its breach of copyright claim.
Background
[5] On 13 November 2012, Summit provided the respondents with a document entitled “Preconsent Agreement”. The Preconsent Agreement provided that the respondents engaged Summit to:
1 Dated 23 May 2013.
2 Dated 21 February, 28 February, and 5 March 2013.
3 Summit Building Services Ltd v Baxter [2019] NZDC 6162.
4 At [67] and [68].
5 At [59] – [61].
1.Prepare a scheme plan for the home to the design brief, comprising a site plan, floor plan and elevations only, for the provisional cost of
$1,500.
2.Prepare full working drawings ready for Council consent, for the provisional cost of $4,000.
3.Engage a surveyor to undertake a site topography plan/report, for the provisional cost of $2,000.
4.Engage a Geotech Engineer to undertake a site Geotech analysis/report, for the provisional cost of $1,800.
5.Secure Lot 48. This required the respondents to pay $5,000 as a deposit, comprising $2,500 for the home, and $2,500 for the land.
[6]The Preconsent Agreement further provided:
I/we acknowledge that:
[…]
[6] …the plans, specifications, and contract document are the intellectual property and as such are copyright to Summit Homes and at all times remain the property of Summit Homes. These plans and contracts cannot be used by any other builder or contractor or private developer. Failure to observe this IP and copyright will result in litigation.
[….]
[7] The respondents initialled and dated items (1) and (5), however they did not sign the agreement.
[8] Mr Anthony Clark is the director of Summit. He is also the director of Competitive Homes. Summit and Competitive Homes engage Capital Precut Solutions Design (CPS) to draft some of their house designs. The working relationship between Summit Homes and CPS was described at [6] of Judge A A Sinclair’s judgment:
Mr Clark stated that creating and updating an attractive range of predesigned houses was a core part of the company’s business. The designers are engaged on the basis that all plans drawn up for Summit Homes belong to the company including copyright. The designers ensure that Summit Homes is identified as owning the intellectual property of the work [the designers] produce by embossing the Summit Homes name and logo on the plans. It was Mr Clark’s evidence that once clients select a particular design, Summit Homes then engages its designer to fine tune the design according to the client’s requirements. Each house design comes with its own range of options and minor departures to the standard designs are permitted.
[9]CPS was engaged by Summit to draft the plans for the respondents’ house.
[10]The Summit plans (the plans) were as follows:
(a)Plans dated 19 November 2012: early plans of the “Baxter House” at Kilbryde Crescent, Pokeno; embossed with Summit Homes name and logo; and text stating: “This design and drawings are the copyright of Summit Homes and shall not be used or reproduced in whole or in part without written authority” (the copyright warning).
(b)Plans dated 1 February 2013: revision of the plans of the “Baxter House” at Kilbryde Crescent Pokeno, dated 19 November 2012; including the Summit name and logo and the copyright warning.
(c)Plans dated 12 February 2013: described as “proposed dwelling for Baxter” at Kilbryde Crescent Pokeno; embossed with the CPS and Competitive Homes names and logos, and the words “DRAFT ONLY”.
(d)Plans dated 21 February 2013:6 described as “proposed dwelling for Baxter” at Kilbryde Crescent Pokeno, to be lodged for building consent with the Waikato District Council; embossed with the Summit name and logo; and featuring a problematic storm water connection.
(e)Plans dated 28 February 2013: described as “proposed dwelling for Baxter” at Kilbryde Crescent Pokeno, to be lodged for building consent
6 The appellant has referred to this plan, which is dated on the document with 21 February 2013, as forming part of the 28 February 2013 plan.
with the Waikato District Council; embossed with the Summit name and logo.
(f)Plans dated 5 March 2013: plans for “client: Baxter” at Kilbryde Crescent Pokeno, approved by Waikato District Council, and embossed with Summit’s name and logo. Apart from some minor landscaping details, this set of plans is identical to the plans dated 21 and 28 February 2013.
[11] In early March 2013 the respondents’ daughter, Ms Shannon Baxter, took the Summit plans dated 12 February 2013 to Grigor. In mid-March 2013, Mrs Baxter met with Grigor’s sales consultant, Mr Grant Edwards. However, Mr Edwards said in evidence that he and Mrs Baxter discussed the Summit plans dated 21 February 2013 and that he recalls that they had discussed the problematic storm water connection. The plans dated 21 February 2013 were the only plans which included the storm water connection. It was also Mr Edwards’ evidence that he did not have any concerns about copyright infringement as Mrs Baxter informed him that as she had paid for the plans, she and her husband had the right to use them as she saw fit.
[12] Following Mr Edwards’ meeting with Mrs Baxter, Grigor prepared and provided the respondents with two sets of building plans, dated 12 March 2013 and 23 May 2013. Mr Edwards acknowledged in his evidence that he could not have produced the Grigor plan dated 23 May 2013 without the Summit plan dated 21 February 2013.
[13] On 22 March 2013, and on being advised by the respondents of their decision to proceed with an alternative builder, Summit wrote to them saying:
We have proceeded upon your verbal instruction to get full working drawings ready for Building Consent, deposited them into Council and the engineering required for the site, we also added your bay window upon your instruction.
[…]
Please return our contract and drawings as they are intellectual property of Summit Homes and are not to be copied or substituted.
[14] Mrs Baxter said in evidence that having received Summit’s letter, she bundled up all the various sets of plans and building contracts in the respondents’ possession and posted them to Summit as requested. Mr Clark however denied ever receiving them. Copies of the documents were nevertheless included in the respondents’ discovered documents, which Mrs Baxter said she believed were copies held or obtained by the respondents’ solicitors.
The District Court Judgment
[15] Addressing the breach of copyright claim, the District Court Judge undertook her analysis by reference to the factors set out in Golden Homes (1998) Limited v Blue Chip Construction Limited (“Golden Homes”).7 The Judge noted that:8
In order to succeed at trial on a claim of infringement of copyright, a plaintiff needs to establish:
(a)Their ownership of copyright in the relevant work;
(b)The reproduction of either the entire work or a substantial part of it;
(c)That there is sufficiently objective similarity between the infringing work and the copyright work or a substantial part of it;
(d)That there is a causal connection between the copyright work and the infringing work. The copyright work must be the source from which the infringing work is derived.
[16] The Judge made brief comments on factors (b) - (d) indicating that she found these factors to have been made out.9 She said:10
[…] the similarity between the Summit Homes and Grigor plans is marked. It is clear on the evidence that the floor plan provided to Grigor was largely copied in the production of the final plans by Grigor. Significantly, the room dimensions and other measurements are almost identical.
[17] However, the Judge found that the appellant had not in fact established that Summit owned the copyright subsisting in the plans that they had provided to the respondents between November 2012 and March 2013.11 The Judge noted that the
7 Golden Homes (1998) Limited v Blue Chip Construction Limited HC Auckland CIV-2003-404- 7090, 21 June 2005.
8 Summit Building Services Ltd v Baxter, above n 3, at [55].
9 At [61].
10 At [61].
11 At [61].
burden of proving its ownership of the copyright rested with Summit, and she found that it had presented insufficient evidence on this point.12 Specifically, the Judge highlighted a lack of evidence regarding the basis upon which Summit owned the copyright in the plans dated 12 February 2013, given that this set of plans was not embossed with the Summit name and logo.13 Mr Clark’s evidence was that those plans were prepared by CPS for Competitive Homes, and that he owned Competitive Homes.14 Mr Clark also described the design process and asserted ownership of the copyright in the plans provided to the respondents was as stated in the Preconsent Agreement and contract documents.15 However, the Judge noted that Summit did not produce:16
(a)supporting evidence to establish the original authorship of the plans chosen by and/or prepared for the respondents and/or the commissioning of these plans from its designer; nor
(b)any evidence to establish the shareholding of Competitive Homes and that company’s relationship to Summit.
[18] As regards the appropriate damages for a successful claim, Summit had sought compensatory damages. Counsel for Summit submitted that the appropriate measure of loss was Summit’s loss of the profit it would have achieved upon completion of a house built in accordance with the plans.17 In closing submissions, Summit submitted that an alternative calculation of loss could be a notional royalty of 10 per cent of the cost of the construction of the house.18
[19] The Judge rejected both submissions. She held that “[at] best … if liability had been established, any award of damages would be nominal to reflect the
12 At [57]-[60].
13 At [57].
14 At [57].
15 At [59].
16 At [59]
17 At [62].
18 At [64].
unauthorised use of the plans.”19 With respect to the argument for loss of profit, she considered that:20
… it is difficult to see the basis on which Summit Homes can contend to have suffered the damages claimed. This loss of profit figure is based in effect on a notional loss of the contract. On the facts of the case, Mr and Mrs Baxter had already decided that they did not wish to employ Summit Homes to build their house when they engaged Grigor. There is no evidence that the company otherwise suffered any loss of a sale or the opportunity for a sale as a consequence of the alleged breach.
As regards Summit’s alternative argument for damages quantified by reference to a notional royalty, the Judge noted that “this alternative calculation of loss was not pleaded,”21 and observed:22
… there was no evidence before the Court as to the basis on which such a royalty could be calculated taking into account that Mr and Mrs Baxter did not use the plans to generate a profit and again, no sale was lost by Summit Homes.
[20] The Judge found for the respondents and held that they were entitled to an award of costs on a 2B basis, together with any disbursements reasonably incurred by them in the proceeding.23
Legal Principles – the approach to a general appeal
[21] This is a general appeal under part 9 of the District Court Act 2016 against part of the District Court decision. The Supreme Court explained in Austin, Nichols & Co Inc v Stichting Lodestar that:24
[16] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgement. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.
19 At [65].
20 At [63].
21 At [64].
22 At [64].
23 At [68].
24 Austin, Nichols & Co Inc V Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16]. See also: Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
The appellant’s submissions
[22] Summit submits that the District Court Judge correctly determined that: copyright subsisted in the building plans it supplied to the respondents; and that the plans were copied by the respondents and Grigor. However, it submits that the Judge erred in finding that: Summit had not established the ownership of the copyright in those plans; and that damages for a successful breach of copyright claim would be nominal in any event. Summit does not appeal against the dismissal of the causes of action based on contract and estoppel.
Subsistence of Copyright in the Plans
[23] In its submissions the appellant notes that the District Court Judge proceeded from the assumption that copyright had subsisted in the plans.
[24] However, the appellant also relies on the Copyright Act 1994 (the Act), and principles of copyright law relevant to the subsistence of copyright in the plans. In particular, the appellant says that copyright is a property right that exists, in accordance with the Act, in “original works”.25 “Original works” include “artistic works”.26 “Graphic works”, “any painting, drawing, diagram, map, chart, or plan”, come within the meaning of “artistic works”.27 Further, that:28
copyright commonly subsists in industrial design drawings…where the artistic work concerned was capable of supporting a claim to copyright. A relatively low level of skill, judgment or labour is sufficient to found a claim.
Ownership of the Copyright in the Plans
[25] Summit notes that pursuant to s 5 of the Act, “the author of a work is the person who creates it and may be a natural person or body corporate.” And that pursuant to s 21(3) that:
[w]here – (a) a person commissions or pays or agrees to pay for…the making of a … drawing, diagram, map, chart, plan …; and (b) the work is made in
25 Copyright Act 1994, s 14(1).
26 Copyright Act 1994, s 14(1).
27 Copyright Act 1994, s 2.
28 Golden Homes (1998) Limited v Blue Chip Construction Limited, above n 7, at [18].
pursuance of that commission, - that person is the first owner of any copyright in that work.
[26] The appellant accordingly submits that Summit was thus deemed to be the owner of any copyright subsisting in the work commissioned from the draughtsmen and designers it engaged. The appellant says that Summit’s ownership of the plans in accordance with those provisions of the Act was reinforced by its express agreement with the designer concerned.
[27]The appellant in its submissions recognises that:29
[i]t is incumbent upon a plaintiff to lead evidence of the original authorship of the work or works in which copyright is claimed and of the chain of title thereafter. A failure to do that gives rise to a deficiency which cannot easily be overlooked.
[28] The appellant nevertheless seeks to downplay the significance of “CPS” and the endorsement of its name “Competitive Homes” on the plans dated 12 February 2013. The appellant submits that focussing on the presence of the names and logos on the plan dated 12 February 2013 fails to accord due and sufficient weight to the evidence of copyright ownership by Summit. In particular, the appellant highlights the following:
(a)Relying on ESR Group Ltd v Burden, that the identity of the author of a work and owner of the copyright is ultimately a matter of evidence to be assessed in the round.30 The appearance of a name on a technical drawing provides a useful indication as to the identity of the author and copyright owner, however it is not determinative.31
(b)Mr Clark’s evidence that Summit exercised full control over the design and detail of its pre-designed house plans, and that draftsmen, such as CPS, were only engaged for the limited purpose of converting those designs and details into house plans.
29 Golden Homes (1998) Limited v Blue Chip Construction Limited, above n 7, at [19].
30 ESR Group Ltd v Burden [2017] NZCA 217, (2017) 14 TCLR 590.
31 ESR Group Ltd v Burden, above n 31, at [10] and [78].
(c)Mr Clark’s evidence that CPS embossed finished plans with the Summit Homes name and logo to reflect its ownership of those finished plans. All finished plans provided to the respondents were embossed with the Summit Homes name and logo.
(d)The plan dated 12 February 2013 was the only plan of the plans provided to the respondents stamped “DRAFT ONLY”. This was to indicate that it was a preliminary, unfinished plan. All other plans provided to the respondents were embossed with the Summit name and logo.
(e)The respondents acknowledge that they received the plan dated 12 February 2013 from Summit.
(f)The respondents acknowledge that the plan dated 12 February 2013 was identical to the plans dated 21 February 2013 and 5 March 2013, apart from the presence of the CPS and Competitive Homes names and logos (and the absence of the Summit’s name and logo) on the plan dated 12 February 2013.
(g)Mr Clark’s evidence that he owned both Competitive Homes and Summit.
Damages
[29] Summit submits that the District Court Judge erred in finding that if liability had been established, the damages would be nominal to reflect the unauthorised use of the plans. Summit seeks compensatory damages of not less than $73,043, and exemplary damages of not less than $20,000.
[30] Summit says that the plans in which their copyright subsists are only available to their clients and are never sold to other parties and that it follows this policy in order to secure construction clients, and that it is the most profitable way for them to exploit their intellectual property rights. If Summit were to sell its copyright plans to clients who did not engage it to build houses, the revenue generated could only relate to the
cost of drafting plans, and plan sales would undermine the value of its copyright by the risk of copies circulating in the public domain. As such, Summit says that the value of its intellectual property rights is appropriately valued in terms of the profit they could expect to achieve from the construction of a dwelling in accordance with their plans under a notional construction contract. The appellant says that in relation to the respondents’ proposed dwelling, this amount is $74,043.
[31] In the alternative, Summit submits that compensatory damages should be calculated as a notional royalty. They submit that recent New Zealand cases have moved away from assessing damages for copyright infringement purely in terms of actual loss, focussing also on the use of the plaintiff’s property. They note that in Golden Homes, Allan J considered that a plaintiff was entitled to determine for itself how its individual property should be deployed.32 And in Electroquip Ltd v Craigco, Hansen J considered that the court need not be confined “to the straightjacket of compensatory damages”, commenting that:33
[a]n award which includes royalties on the additional infringing articles sold will ensure that the plaintiffs are fairly compensated for the use of their property as well as the losses they have incurred.
[32] Summit further submits that the deliberate nature of the copying in this case justifies an award of exemplary damages of not less than $20,000.
[33] Summit says that if the District Court erred in dismissing its breach of copyright claim, then it also erred in failing to award costs and disbursements to the appellant.
The respondents’ submissions
Subsistence of Copyright in the Plans
[34] The respondents submit that Summit Homes did not establish that the plans were “original works”.34 They note that under the Act, a work is not “original” if it is
32 Golden Homes (1998) Limited v Blue Chip Construction Limited, above n 7, at [70].
33 Electroquip Ltd v Craigco Ltd (No 2) HC Auckland CIV-2006-404-006719, 29 April 2010.
34 Copyright Act 1994, s 14.
a copy of another work.35 They highlight that the plan from which their home was built was “generic”; the shape and layout of the house primarily determined by cost, the size and contours of the section, and the orientation of the house on the site.
Ownership of the Copyright in the Plans
[35] The respondents submit that the appellant did not establish ownership of any copyright subsisting in the plans. In particular, they submit that Summit Homes did not establish authorship of the plans36. Further, they dispute the relevance of the “DRAFT ONLY” stamp on the plans dated 12 February 2013.
Infringement of the Copyright in the Plans
[36] The respondents submit that they did not copy the plans, intentionally or unintentionally. They further submit that they did not request anyone else do so. In particular:
(a)they dispute Mr Edwards’ evidence that Mrs Baxter discussed the Summit Homes plan dated 21 February 2013 (featuring the problematic storm water connection) with Mr Edwards; and
(b)they assert that Ms Shannon Baxter took the Summit Homes plan dated 12 February 2013 to Grigor for the sole purpose of obtaining a quote for a comparable dwelling.
Damages
[37] The respondents submit that the District Court Judge was correct to find that damages should only be nominal in event of breach of copyright. They reiterate her comment that they did not use Summit Homes’ plans to generate a profit.
35 Copyright Act 1994, s 14(2)(a).
36 Copyright Act 1994, s 5.
Analysis
[38] To establish a breach of copyright, the appellant needed to prove on the balance of probabilities:37
(a) That there is a work in which copyright can subsist.
(b) That copyright does subsist in the work.
(c) That the plaintiff owns such copyright; and
(d) That such copyright has been infringed.
The “Work” in which Copyright Could Subsist
[39] The plans produced and provided to the respondents by Summit are clearly “graphic works” within the meaning of s 2 of the Act. They are therefore the sort of “artistic works” in which copyright could subsist per s 14 (1)(a) of the Act. Summit has identified these plans with “sufficient particularity and put sufficient evidence before the Court to establish [their] nature”.38
Subsistence of Copyright in the Plans
[40] I am satisfied that the plans are “original works” for the purposes of s 14(1) of the Act and, as such, are those in which copyright subsists. The threshold for originality under s 14(1) is low.39 Provided that industrial designs are not copies of another work, nor otherwise infringing the copyright of another work,40 “[c]opyright commonly subsists in industrial design drawings”.41 While the plans may appear somewhat generic, I am satisfied by Mr Clark’s evidence that Summit produced its house designs from scratch. In terms of the threshold described in University of Waikato v Benchmarking Services Ltd,42 Summit expended sufficient time, skill, labour and judgment in producing the plans.43
37 PS Johnson & Assocs Ltd v Bucko Enterprises Ltd [1975] 1 NZLR 311 (SC) at 315.
38 Ian Finch (ed) James and Wells Intellectual Property Law in New Zealand (3rd ed, Thomson Reuters, Wellington, 2017) at 433.
39 Finch, above n 39, at 383.
40 Copyright Act 1994, s 14(2).
41 Golden Homes (1998) Limited v Blue Chip Construction Limited, above n 7, at [18].
42 University of Waikato v Benchmarking Services Ltd (2004) 8 NZBLC 101, 561 (CA).
43 At [27].
[41] I am also satisfied that the plans qualify for copyright by reference to the author; 44 Summit Building Services Ltd is a body incorporated under the law of New Zealand.
Ownership of the Copyright in the Plans
[42] The person or entity that created these plans will be construed as their “author”.45 The creator will thus be found to be the first owner of copyright subsisting in the plans, 46 unless this finding is displaced by the exception for commissioned works.47
[43] I am satisfied that Summit presented sufficient evidence of the original authorship of the plans, and of the chain of title thereafter.
[44] I do not find the presence of Competitive Homes’ and CPS’ names and logos on the plans dated 12 February 2013 to negate Summit’s authorship of the plans for the following reasons:
(a)While the appearance of a name on a work provides an indication as to the author’s identity, it will not be determinative.48
(b)To the extent that the presence of the Competitive Homes’ and CPS’ names and logos on the plans dated 12 February 2013 is relevant, I consider it to be a consequence of Summit and Competitive Homes sharing the same director, and of the close working relationship between Summit and CPS. In the circumstances of this case, I do not consider that it means that Summit did not create the plans.
(c)In the District Court, the Judge noted that the appellant had not brought sufficient evidence to establish the shareholding of Competitive Homes and that company’s relationship to Summit. Under s 128 of the
44 Copyright Act 1994, ss 17 and 18(1)(c).
45 Copyright Act 1994, s 5(1).
46 Copyright Act 1994, s 21(1).
47 Copyright Act 1994, s 21(3)-(4).
48 ESR Group Ltd v Burden, above n 31, at [10] and [78].
Evidence Act 2006, I take notice of the shareholdings of Anthony (Clifford) Clark in “Summit Building Services Limited (1764885)” and “Competitive Homes NZ Limited (4364921)” on the Companies Register of the New Zealand Companies Office.
(d)Finally, although not pleaded, the appellants could quite easily have construed the work done by CPS on these plans as a commission by Summit Homes. To “commission” simply means to “order” or “request”.49 I am prepared to infer,50 from Mr Clark’s description of the working relationship between Summit and CPS, that CPS was commissioned to do the work they did on these plans. In terms of s 21(3) of the Act, where a person commissions, and agrees to pay for the making of a plan, and the work is made in pursuance of that commission, that person is the first owner of any copyright in the work. Commissioning antecedent to the work will usually imply that there is an obligation to pay.51 As such, I find that Summit owns the copyright in the plans on both the first authorship principle, and the commissioning rule.
[45] I note that this finding cannot be displaced by the argument that the respondents commissioned the plans from Summit. The rule that the commissioner is the first owner of any copyright in a work is subject to any agreement to the contrary.52 To the extent that the respondents did commission the plans from Summit, this is negated by their express agreement with Summit that Summit would retain all copyright in the plans. I infer the existence of this agreement from:
(a)The acknowledgement at [6] of the Preconsent Agreement that “…the plans, specifications, and contract document are the intellectual property and as such are copyright to Summit Homes”; and
49 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 at [55].
50 Pacific Software Technology Ltd v Perry Group Ltd, above n 50, at [60].
51 Pacific Software Technology Ltd v Perry Group Ltd, above n 50, at [60].
52 Copyright Act 1994, s 21(4).
(b)The copyright warnings on the plans dated 19 November 2012 and 1 February 2013.
[46] I accept that the respondents did not sign the Preconsent Agreement, and the copyright warnings did not appear on the later Summit Homes plans. However, looking at the documentation and the conduct of the parties in the round, I cannot accept that the respondents did not agree that Summit was to retain the copyright ownership.
Infringement of the Copyright in the Plans
[47] Copyright in a work is infringed by a person who, other than pursuant to a copyright licence, does any restricted act, directly or indirectly.53 It is a restricted act to authorise another person to copy the whole, or a substantial part, of a work.54
[48] “Copying” includes “reproducing … the work in any material form … in any medium and by any means”.55 The Court of Appeal has said that to infringe by reproduction, there must be:56
(a)… reproduction…of the entire work or of a substantial part.
(b)… sufficient objective similarity between the infringing work and the copyright work, or a substantial part thereof.
(c)… some causal connection between the copyright work and the infringing work. The copyright must be the source from which the infringing work is derived.
[49] I accept that the final Grigor plans57 were all but identical to the final Summit plans.58 Consequently, I find that they amounted to a reproduction of the final Summit plans, despite the relatively low level of originality of the plans.59 Moreover, in view of the similarity between the plans and the evidence that Grigor had access to the Summit plans dated 12 and 21 February 2013, I find that there was a causal connection
53 Copyright Act 1994, s 29.
54 Copyright Act 1994, ss 16(1)(a) and (i), and 29(a).
55 Copyright Act 1994, s 2.
56 Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 666.
57 Dated 23 May 2013.
58 Dated 21 February, 28 February, and 5 March 2013.
59 Land Transport Safety Authority of New Zealand v Glogau [1999] 1 NZLR 261 (CA) at 271.
between the copyright work (the Summit plans) and the infringing work (the Grigor plans).60
[50] “Authorising” a copyright infringement means requesting or approving an act “which the authorising party understands is or could be unlawful.”61 As expressed by Lord Templeman in CBS Songs Ltd v Amstrad Consumer Electronics Plc:62
[A]n authorisation means a grant or a purported grant, which may be express or implied, of the right to do the act complained of.
[51] Mrs Baxter purported to grant the right to copy the Summit Plans to Grigor by asserting that having paid for the plans, she could use them as she saw fit. As such, I find the respondents to have infringed the copyright in the Summit Homes plans by authorising Grigor to do the restricted act of copying.
Damages
[52]Section 120(2) of the Act says:
In proceedings for infringement of copyright, all such relief by way of damages … is available to the plaintiff as is available in respect of the infringement of any other property right.
[53] As regards the appropriate measure of any damages, New Zealand National Party v Eight Mile Style, LLC (Eight Mile Style) sets out that:63
[w]here intellectual property rights relating to a product are infringed, the measure of damages will vary depending upon the manner in which the holder of the right chooses to exploit the right.
[54] In this case Summit’s business model monetised its copyright in the plans it produced by selling the plans to its construction clients. However, as the Judge noted, the respondents “had already decided that they did not wish to employ Summit Homes to build their house when they engaged Grigor.”64 It follows that in these circumstances the respondents’ infringement of Summit’s copyright in the plans did
60 Wham-O MFG Co v Lincoln Industries Ltd, above n 57, at 668.
61 Finch, above n 39, at 447.
62 CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013 at 1054, as cited in Heinz Wattie’s Ltd v Spantech Pty Ltd (2006) 8 NZBLC 101, 679 (CA) at [26].
63 New Zealand National Party v Eight Mile Style, LLC [2018] NZCA 596 [Eight Mile Style] at [26].
64 At [63].
not result in Summit losing a concluded building contract. I therefore consider that it would not be appropriate to assess damages in terms of the profit that would have been realised by Summit Homes had the respondents chosen to employ Summit to build their house.
[55] Nevertheless the appellant has suffered a loss for which it should be compensated, even though it is not loss of a conventional kind.65 The respondents say that as they have not at all profited financially from the construction of their home they should not be liable to pay damages in any event. However, while they may not have profited from the construction of their house, they did derive benefit from their use of Summit’s plans. By giving the Summit plans to Grigor, the respondents were able to provide Grigor with an already developed design for their house without incurring any charge or costs associated with starting the design process entirely from scratch.66 By doing so the respondents derived a financial benefit from their use and copying of the Summit plans.67
[56] The respondents also say that Grigor would have been the appropriate entity against whom the appellant could direct its claim. However it is Summit’s prerogative to select the party against which it claims. If the appellant’s claim was frivolous or vexatious, or otherwise an abuse of the process of the court, it would have risked being struck out by the court.68
[57] In the circumstances here, damages for Summit’s unconventional type of loss can be appropriately assessed by determining a notional licence fee or royalty, being the sum that the intellectual property right holder would reasonably have charged for permission to carry out the infringing act.69 While the Court must have regard to evidence adduced by Summit as to quantum, it can make its own estimation based on the available indications.70 The fact that Summit says that it would never have sold
65 Eight Mile Style, above n 72, at [38] and [39].
66 See Oraka Technologies Ltd v Geostel Vision Ltd [2018] NZHC 769 [Oraka] at [22]; and
Gallagher Electronics Ltd v Donaghys Electronics Ltd (1991) 4 TCLR 344 (HC) at 12.
67 Copyright Act 1994, s 16(1).
68 High Court Rules 2016, r 15.1(1).
69 Eight Mile Style, above n 72, at [28].
70 Eight Mile Style, above n 72, at [13] and [40].
its plans to a client other than in the context of entering into a construction contract with that client, is irrelevant to this hypothetical approach.71
[58] The subject matter of the hypothetical licence is to be “what the [infringer] actually used including the extent of copying and its relationship with the copyrighted work”.72 The evidence was that Ms Shannon Baxter and the respondents provided Grigor only with the Summit plans dated 12 and 21 February 2013. However, given that all six plans prepared by Summit for the respondents were part of the sequence from initial drafts through to final plans for the proposed house to be built for the respondents, I consider the appropriate subject matter of the hypothetical licence to be all six of them.
[59] To fix the loss, I must multiply the number of infringements by the notional licence fee.73 There has however been a single infringement – the replication of the Summit plans in the Grigor plans for the respondents’ house.
[60] I consider that the notional licence fee to be applied should be the provisional cost of the plans as set out in the Preconsent Agreement, namely $1,500 for the preparation of a scheme for the home to the design brief, and $4,000 for the preparation of full working drawings ready for Council consent. Had Summit been a willing licensor, and the respondents willing licensees, I consider that these are amounts the parties would reasonably have agreed on as the fees for Summit’s approval for the use of its plans.
[61] In my view the justice of the case does not require the award of the additional damages sought by the appellant.74 The flagrancy of the infringement and the benefit accruing to the respondents by reason of the infringement does not rise to a level warranting further damages.75
71 Eight Mile Style, above n 72, at [13]; Oraka, above n 76, at [33].
72 Eight Mile Style, above n 72, at [13].
73 Oraka, above n 76, at [34].
74 Copyright Act 1994, s 121(2).
75 Copyright Act 1994, s 121(2).
Result
[62] Summit owned the copyright subsisting in the plans. The respondents infringed this copyright when they authorised Grigor to use and copy the plans. As such, Summit is entitled to recover from the respondents an amount equivalent to what I have determined would be a notional royalty of $5,500 for the use of the plans.
[63] Accordingly I allow the appeal, and enter judgment for Summit against the respondents in the sum of $5,500.00.
[64] Summit is also entitled to costs and disbursements. Costs are to be determined on a 2B basis. Summit are also entitled to recover the disbursements reasonably incurred by them in the proceeding.
[65] If the parties are unable to agree on costs, I direct that Summit file and serve a costs memorandum within ten working days of the date of the delivery of this judgment, and the respondents file and serve their costs memorandum within seven working days following their receipt of Summit’s costs memorandum. The costs memoranda are not to exceed three pages in length apart from any annexures.
Paul Davison J
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