Tracklok Limited v T & R Interior Systems Limited
[2019] NZHC 1331
•13 June 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2019-404-0484
[2019] NZHC 1331
UNDER the Copyright Act 1994, Fair Trading Act 1986 IN THE MATTER
of Copyright Infringement Breaches of the Fair Trading Act 1986
BETWEEN
TRACKLOK LIMITED
Plaintiff
AND
T & R INTERIOR SYSTEMS LIMITED
First defendant
STEPHEN ANTHONY THWAITE
Second defendant
Hearing: 31 May 2019 Appearances:
C L Elliott QC and A F Klepacki for the Plaintiff G F Arthur and L Carter for the Defendants
Judgment:
13 June 2019
JUDGMENT OF JAGOSE J
This judgment is delivered by me on 13 June 2019 at 11.00 am pursuant to r 11.5 of the High Court Rules.
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Registrar / Deputy Registrar
Counsel/Solicitors:
Clive Elliott QC, Auckland (Plaintiff) Woodroffe Lawyers, Auckland (Plaintiff) A J Parks, Auckland (Plaintiff)
Greg Arthur, Barrister, Wellington (Defendants)
Catalyst Intellectual Property Limited, Wellington (Defendants) Hudson Gavin Martin, Auckland (Defendants)
TRACKLOK LTD v T & R INTERIOR SYSTEMS LTD [2019] NZHC 1331 [13 June 2019]
[1] The plaintiff (“Tracklok”) seeks an interim injunction to prevent the defendants from dealing with a product identified as Vertibrace. Tracklok alleges Vertibrace infringes Tracklok’s copyright in its Tracklok bracket, contravenes the Fair Trading Act 1986, and breaches Tracklok’s confidence in information about modification of the Tracklok bracket to accommodate vertical deflection. The last cause is a late amendment in the week of hearing, to capitalise on a dispute arising in the evidence.
Background
[2] The first defendant (“T&R”) is a longstanding Tracklok customer, reselling its Tracklok bracket since May 2014. (The second defendant (“Mr Thwaite”) is T&R’s sole director.) Tracklok and T&R also are party to a confidentiality agreement, broadly constraining use of information shared between them.
[3] The Tracklok bracket is a Y-shaped metal bracket to connect partial-height partition walls (ie, those not connecting directly) to a building’s structure above, providing resistance to horizontal deflection as may occur in earthquakes, without transferring load to the intermediate suspended ceiling. In very simple terms, the bracket comprises steel arms projecting at 45 degrees from either side of a plate through which runs a central bolt. (The bracket also is available in a configuration in which one arm projects vertically, at 90 degrees, from the plate.)
[4] The central bolt screws into a cylinder connected to the top of the partition wall; the top of the arms are connected to the building’s structure. The bracket design (and drawings) appears to belong to Tracklok, has a provisional New Zealand patent, and is sufficiently well-regarded to be illustrated in the industry’s Code of Practice for Partition Walls as a “proprietary partition bracing system” for partial-height partition walls. Sales of the bracket comprise over 70 per cent of Tracklok’s turnover.
[5] The Christchurch and Kaikōura earthquake sequences illustrated partition walls needed to resist vertical deflection, as also may occur in earthquakes. Since mid- July 2018, T&R has developed Vertibrace, also to provide a connection between partial-height partition walls and the building’s structure. The Vertibrace predominantly comprises a cylinder containing a piston-like bolt. The cylinder fixes to the top of the partition wall, and the bolt to connections with the building structure.
The bolt can move vertically within the cylinder while maintaining the integrity of that connection. T&R launched Vertibrace to the industry in February 2019 and since has commenced its manufacture for supply.
[6] Tracklok has had a spring-loaded bolt, also providing for vertical displacement, in development for its bracket since 2016. There is dispute whether Tracklok’s development was disclosed to T&R in discussions earlier in July 2018 about accommodating partial-height partition walls’ vertical displacement, in the context of a T&R client project requiring such and T&R seeking Tracklok’s advice. T&R says Tracklok made no mention of the development. Tracklok says it precisely explained its thinking on accommodating vertical displacement, leading to the development.
Applicable legal principle
—interim injunctions
[7] Interim injunction applications are determined on the basis of whether the plaintiff has a serious question for trial, and whether the balance of convenience and overall interests of justice favour granting the injunction.1
[8] By ‘serious question’ is meant one not vexatious or frivolous, on which the plaintiff has a real prospect of succeeding at trial. On the remaining consideration(s), the question is whether refusing the injunction would be harder on a plaintiff who was successful at trial, than would granting it be on the successful defendant.2 This assessment is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.3
1 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); and Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
2 Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV-2007-485-1756, 30 July 2008 at [4] citing [Cayne] v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.
3 Wellington International Airport Ltd v Air New Zealand, above n 2, at [6]-[14].
[9] But more than inconvenience is required:4 interlocutory injunctions lie to protect a plaintiff against “irreparable damage” for which they cannot adequately be compensated.5
—copyright infringement
[10] It is an infringement of copyright to do “any restricted act” in relation to the copyright work “as a whole or any substantial part of it”.6 The ‘restricted acts’ include copying the work, including by making three-dimensional copies of two-dimensional works.7 A ‘copyright work’ includes “original … artistic works”,8 an ‘artistic work’ being “a graphic work … irrespective of artistic quality”.9 A secondary infringement is knowingly, in the course of a business, to possess or deal with an infringing copy of a copyright work.10
[11] In Wham-O MFG Co v Lincoln Industries Ltd, the Court of Appeal established three key aspects to infringement by copying a copyright work: the substantiality of the copying; the works’ “sufficient objective similarity”; and “some causal connection between the copyright work and the infringing work”. The Court added:
It is important to bear in mind … that it is not necessary for a plaintiff to establish a sufficient degree of similarity between the copyright work and the alleged infringing work, each taken as an entirety. It is sufficient to establish that such similarity exists between a substantial part of the copyright work and the alleged infringing work.
and “[w]hether a part of a copyright work is a substantial part must be decided by its quality rather than by its quantity”.11
—Fair Trading Act 1986
[12] Under s 43 of the Fair Trading Act 1986, the Court may injunct breaches of the Act’s prohibitions on misleading and deceptive conduct or representations in trade,
4 Pollen-Plus Ltd v Znel Ltd HC Tauranga CIV 2010-470-0848, 20 October 2010 at [40].
5 Finnigan v New Zealand Rugby Football Union Inc (No 2) [1985] 2 NZLR 181 (HC) at 183; and
American Cyanamid Co v Ethicon Ltd, above n 1, at 406.
6 Copyright Act 1994, s 29.
7 Section 30.
8 Section 14.
9 Section 2, definition of “artistic work”.
10 Section 36.
11 Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 666.
generally or in relation to goods (Tracklok here relies on breaches of ss 9, 10, and/or 13): “directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances”.12 No misleading or deceptive intention or actuality is required; it is enough the conduct had that potential.13
—breach of confidence
[13] The tort of breach of confidence exists to protect genuinely confidential information from misuse. Such authenticity can spring from being the closely-held product of the plaintiff’s thought and work.14
Discussion
—serious questions for trial?
[14] In Henkel KGaA v Holdfast New Zealand Ltd, the Supreme Court held “[s]ubstantial reproduction of those aspects of the work in which originality lies must be shown to establish infringement”.15 This, it acknowledged, is “a difficult matter of evaluation and is usually the most difficult question which arises in copyright cases”.16
[15] Tracklok’s evidence focused on similarity of depictions of the Vertibrace in situ with the Tracklok bracket itself. T&R offers to supply the Vertibrace with two 45- degree arms (although mobile in their individual rotation about the Vertibrace, unlike the Tracklok bracket arms’ fixed position opposite each other). But Vertibrace also is designed for a range of attachments, both supplied by T&R or separately sourced. Many are not comparable to the Tracklok bracket in form (although Tracklok complains of their similarity to other of its products), including for example wire cables, albeit providing comparable function.
[16] In response to questions from me, Tracklok’s counsel, Clive Elliott QC, accepted the bolt component of the Tracklok bracket was not in itself proprietary, and
12 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
13 At [28]. See also AMP Finance NZ Ltd v Heaven (1997) 8 TCLR 144 (CA) at 152.
14 Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR 1 at [80].
15 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [41].
16 At [44].
could be substituted. On reflection, it is unclear if he meant the vertical component of the Tracklok bracket as I intended, or only its threaded steel bolt (which has a number of accompanying components to make the connection from bracket to partition wall). I also understood him to acknowledge Tracklok could not contest Vertibrace alone on copyright grounds, although that was late in the day, and may not have been the concession it then appeared.17
[17] I have difficulty seeing how Vertibrace’s dynamic innovation alone can be said qualitatively to be copying even a substantial part of Tracklok’s essentially static bracket, especially if originality is only to be seen in the latter’s Y-shaped form. Vertibrace itself may only be analogous with the vertical aspect of the Tracklok bracket, and even then not qualitatively.
[18] On the other hand, Vertibrace appears intended to be used in circumstances bearing close comparability to the Tracklok bracket. Vertibrace’s publicity material describes itself as a “partition wall bracket”, providing connection between “the upper surface of a wall structure” and “the building structure above”. That is to imply further componentry, in addition to the Vertibrace itself. The affidavit evidence includes photographs and illustrations of the Vertibrace holding together two 45-degree brackets at 180 degrees to each other. That combination, including depiction of Vertibrace’s multiple applications comparably with Tracklok’s various products, overall may provide a sufficient basis on which to argue for the requisite copying. I cannot on this preliminary basis exclude the possibility there is a serious question for trial on copyright grounds.
[19] T&R’s duality as seller of its own Vertibrace (including brackets) and as reseller of Tracklok brackets also may provide context to argue its misleading and deceptive conduct in trade, in breach of s 9 (and others) of the Fair Trading Act 1986, particularly to the extent there is evidence of comparison of or confusion between the two solutions, or T&R’s diminution of the Tracklok bracket. The evidence presently is more of such prospect than its realisation, but that does not diminish the seriousness of a Fair Trading Act question for trial.
17 In the wake of that ‘concession’, I invited the parties to reconsider if some accommodation could be reached between them. By memorandum of 5 June 2019, they requested I deliver judgment.
[20] Last, resolving the dispute between the parties as to the content of discussions on accommodating vertical displacement will turn on determinations of witness credibility. I cannot make those findings on this interim application, especially as arising out of affidavit evidence filed without any claim to breach of confidence. Again, there is a serious question for trial, although its weight here for interim relief must suffer from the claim’s very late inclusion of breach of confidence.
[21] For all these reasons, I find Tracklok has crossed the threshold to establish a serious question for trial.
—balance of convenience
[22]I therefore turn to the balance of convenience.
[23] Mr Elliott says damages are not an adequate remedy for Tracklok because the Tracklok bracket is the essence of its market presence. Given the long specification period for building componentry, and the close relationship built up between Tracklok and such specifiers, Tracklok fears its effective exclusion from the market, especially if the market confuses Vertibrace for, or conflates it with, the Tracklok bracket. He observes Vertibrace is only one of T&R’s many market offerings. Mr Elliott pressed loss of Tracklok’s goodwill (although more usually arising under passing off, which is not presently expressly in issue here),18 especially if Vertibrace is inferior to Tracklok’s solution.19
[24] I accept loss attributable to market confusion may be difficult to quantify (although that alone does not render damages, as essentially compensatory, inadequate), but that is not the case on breach of copyright or confidence. Under those latter causes, more strongly asserted by Tracklok, something close to an accounting will be possible, T&R having undertaken to maintain its relevant financial records for trial. Damages (and other substantive relief) will be an adequate remedy for Tracklok.
18 Tot Toys Ltd v Mitchell [1993] 1 NZLR 325 (HC) at 334. And, if the passing off standard is justified on damages’ adequacy, arguably so too should it be met on the higher ‘prima facie case’ threshold: Meat Services Ltd v Moses (1983) 1 TCLR 94 (HC); and Tui Foods Ltd v NZ Milk Corp Ltd [1997] 2 NZLR 214 (HC). I do not think such a case presently is established.
19 But comparability of product is not directly relevant to a claim for diminution of goodwill: Plix Products Ltd v Frank M Winstone (Merchants) Ltd (1984) 1 TCLR 176 (HC) at 208.
[25] Notably, Tracklok is not seeking to enforce its patent, which would include its intermediate monopoly and may justify interim relief on that basis alone.20 Tracklok’s present causes do not attract such weight. If Tracklok is successful at trial, it should be entitled to recover T&R’s impermissible profits, and to supplant T&R’s impermissible product in the market (assuming Tracklok’s spring-loaded development has matured into production). Conversely, if injuncted, T&R’s losses would largely be speculative, as to the loss of sales and opportunity in the period pending the Court’s dismissal of Tracklok’s claims. Damages may not be an adequate remedy for T&R.
[26] There appears pent-up and unmet market demand to accommodate vertical displacement of partition walls. The extent of commercial rebuilding work in the wake of the earthquakes – particularly in Christchurch and Wellington, and nationally in any event – is notorious. T&R’s Vertibrace presently is available to meet that demand; Tracklok’s development is not yet in manufacture. T&R’s counsel, Greg Arthur, claimed ‘first mover’ advantage for T&R; Mr Elliott said that was advantage to which Tracklok was entitled from its confidential development disclosed to T&R, and which T&R was not allowed to trump.
[27] There is significant interest in the public not being held out of such innovations as may achieve contemporary building standards, to enhance safety and protect investment. Componentry specification today is for construction supply months, if not years, later. If Vertibrace then is not available, Tracklok should have open running for its replacement (while recovering T&R’s commercial gains in the interim). Such public interest is a significant factor against interim relief.21
[28] In those circumstances I do not need to have regard for the status quo, maintenance of which the foundation authority only commends “[w]here other factors appear to be evenly balanced”.22 But the factors thus far weigh against interim relief.
20 Link Technology International Ltd v Port (1999) 6 NZBLC 102,691 (HC) at 102,696.
21 Bond & Bond Ltd v Fisher & Paykel Ltd (1986) 2 TCLR 79 (HC) at 89; and Aventis Pharma SA v Pharmaco (NZ) Ltd HC Auckland CIV 2010-404-1670, 4 June 2010 at [44].
22 American Cyanamid Co v Ethicon Ltd, above n 1, at 408.
[29] Had I to assess the status quo’s “last settled position between the parties”,23 it may have favoured the grant of such relief, to the extent only T&R’s market supply was injuncted, as T&R would only be “enjoined temporarily from doing something that he has not done before”.24 But Tracklok seeks wider interim relief, essentially in the nature of substantive injunctive relief, which “[interruption] in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial”.25
—overall justice
[30] Standing back, then, I consider Tracklok would be less detrimentally affected, if limited to its success at trial, than T&R, if held out of deploying Vertibrace until its successful defence. The risk of injustice bears more heavily on T&R.26 Of especial materiality is Tracklok’s present inability to accommodate vertical deflection of partition walls, the market demand for such facility, and T&R’s readiness to supply. Overall justice in the present circumstances does not support interim injunctive relief.
[31] T&R was particularly critical of the weight of Tracklok’s mandatory undertaking as to damages, and the meaning to be given to its directors’ assertions of abilities to pay. Given the undertaking is immaterial if no interlocutory injunction is ordered, I do not need to address those issues.
Result
[32] Tracklok’s amended interlocutory application for interim injunctions dated 28 May 2019 is dismissed.
Costs
[33] In my preliminary view, as the successful party, T&R is entitled to category 2B costs for all steps taken in the proceeding, except category 2C for step 23, and disbursements. That is because, from what I presently know of it, nothing in the steps
23 Levi Strauss and Co v Dino Clothing Co Ltd (1986) 1 TCLR 393 (HC) at 399.
24 American Cyanamid Co v Ethicon Ltd, above n 1, at 408.
25 At 408.
26 Cayne v Global Natural Resources Plc, above n 2, at 236.
T&R took in this averagely complex proceeding required other than a normal amount of time (except filing its opposition, for which a comparatively large amount of time was reasonable).
[34] If that is not accepted by either party, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:
(a)T&R within ten working days of the date of this judgment;
(b)Tracklok within five working days of service of T&R’s memorandum; and
(c)T&R strictly in reply within five working days of service of Tracklok’s memorandum.
—Jagose J
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