Henley Arch Pty Ltd v Tamawood Pty Ltd

REASONS FOR JUDGMENT 1 These proceedings concern allegations of copyright infringement in house plans and houses built in accordance with those plans. I am presently concerned only with questions of liability. 2 The applicants are project home building companies. The second applicant ("Henley") is a subsidiary of the first applicant ("Henley Arch") and carries on business in Queensland. The first applicant claims to be the owner of copyright subsisting in Australia in the plans of a house known as the "Chirnside"(and the Chirnside house itself), and in plans and drawings of a house known as the "Baltimore" (and the Baltimore house itself). The second applicant is the exclusive licensee of the first applicant for the State of Queensland of the right to reproduce in a material form the works. Each of those works is claimed to be an original artistic work in which copyright subsists under the Copyright Act 1968 (Cth) ("the Act"). 3 Section 31(1)(b) of the Act relevantly provides: "For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right: … (b) in the case of an artistic work, to do all or any of the following acts: (i) to reproduce the work in a material form; (ii) to publish the work; (iii) to communicate the work to the public. …" Section 21(3) of the Act provides: "For the purposes of this Act, an artistic work shall be deemed to have been reproduced: (a) in the case of a work in a two-dimensional form - if a version of the work is produced in a three-dimensional form; or (b) in the case of a work in a three-dimensional form - if a version of the work is produced in a three-dimensional form; and the version of the work so produced shall be deemed to be a reproduction of the work." Section 14(1) of the Act provides: "(1) In this Act, unless the contrary intention appears: (a) a reference to the doing of an act in relation to a work or other subject-matter shall be read as including a reference to the doing of that act in relation to a substantial part of the work or other subject-matter; and (b) a reference to a reproduction, adaptation or copy of a work shall be read as including a reference to a reproduction, adaptation or copy of a substantial part of the work, as the case may be." Section 115 of the Act provides: "(1) Subject to this Act, the owner of a copyright may bring an action for an infringement of the copyright. (2) Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits. (3) Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not. (4) Where, in an action under this section: (a) an infringement of copyright is established; and (b) the court is satisfied that it is proper to do so, having regard to: (i) the flagrancy of the infringement; and (ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and (iii) any benefit shown to have accrued to the defendant by reason of the infringement; and (iv) all other relevant matters; the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances. It follows that copyright in an artistic work is infringed by the reproduction of the work in a material form, including by the reproduction of a substantial part of the work. 4 The first respondent Tamawood Pty Ltd ("Tamawood") is involved in the building of project homes, although it does not itself build them. It operates by promoting a range of homes to the public and facilitates the building of those homes by encouraging clients to contract directly with builders with whom Tamawood is associated. Tamawood carries on business in Queensland and the second respondent (Mr Mizikovsky) is its Managing Director. 5 The applicants allege that copyright in the Chirnside plans and the Chirnside house has been infringed by the production of plans of a house (which was formerly owned by the third respondent, Ms Gould) ("the Gould house"), and by the building of the Gould house. This Gould house was built according to plans drafted by Tamawood on lot 38, 23 Oakley Street, Carindale in Brisbane. Lot 38 is a north-facing, rectangular block in Oakley Street of 710 square metres, with a frontage of just over 21 metres and a depth of 33 ˝ metres. Ms Gould became the registered owner of lot 38 on 10 July 1997. 6 Ms Gould in June 1997 inspected one of Henley's Chirnside houses which was on display at Wishart, a suburb of Brisbane. She paid a $50 cash deposit on a Chirnside for the purpose of holding the price fixed, and a further $300 by cheque for the purpose of having work done to test the soil. She did not proceed with the construction of the Chirnside house but instead went to Tamawood. Tamawood and Ms Gould arranged for the construction of the Gould house. Tamawood said that the plan for this house was based on the "Adrian" house plan of Tamawood, but with changes to that plan directed by Ms Gould. The claim by Henley is that the Gould house quite systematically took a lot of the features of the Chirnside design, such as to amount to an infringement of the copyright of Henley in the Chirnside plans and house. 7 Some parts of the Gould house conform to the original Adrian plan, the bedroom configuration, the entrance configuration and the garage configuration by way of example. However, the original Adrian plan has had significant modifications including the omission of a number of internal walls so that one has an open plan to the dining and living room similar to that in the Chirnside design. There has been a conservatory-type meal area, a part- octagonal shape with full glass walls adjoining the kitchen area, and a number of the rectangular corners, both internal and external, have been truncated. 8 Henley also claims that the plans by Tamawood for a home which it advertised as the "Bern" reproduce the whole or a substantial part of the Baltimore plans, and the Baltimore buildings, and infringe Henley Arch's copyright in the Baltimore plans and buildings. 9 Tamawood and Mr Mizikovsky cross-claim that the applicants have threatened them with an action or proceedings in respect of infringement of the rights of copyright in the Chirnside plans and house, relying particularly on a letter dated 24 December 1998 from the applicant's solicitors to Tamawood and Mr Mizikovsky, and from 23 February 1999 threatened Tamawood and Mr Mizikovsky with an action or proceedings in respect of copyright claimed by Henley Arch in the Chirnside plans and house and the Baltimore plans and house. The application and statement of claim in these proceedings were filed in the Victorian Registry of the Federal Court on 22 February 1999. The cross claim asserts that these threats are unjustifiable. Section 202 of the Act permits a person who is threatened with an action or proceeding in respect of an infringement of copyright to bring an action against the person making the threat, and may obtain a declaration to the effect that the threats are unjustifiable. Relief based on groundless threats of legal proceedings will not be granted if the person making the threat of an action or proceeding in respect of the infringement of a copyright satisfies the Court that the acts in respect of which the action or proceeding was threatened constituted or, if done, would constitute an infringement of copyright. 10 Further, the cross claim alleges that the cross respondents made representations to customers of Tamawood and to members of the public that: "(i) The first respondent has copied the first and/or second applicant's plans, designs and/or houses; (ii) The first respondent has advertised a plan and/or design that is a copy of the first and/or second applicant's plans and/or designs; (iii) The first respondent is a marketing company; (iv) The first respondent has produced plans and/or designs that are a mirror image of the plans and/or designs of the first and/or second applicant; (v) Customers of the first respondent have no choice about the nature or quality of the finish within homes constructed by the first respondent, its servants or agents." 11 It is pleaded that the making of these representations constituted conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act). The majority of the case was concerned with the allegation of infringement of the Chirnside plans and house by the Gould plans and house. 12 As to the subsistence of copyright in house plans, where original plans have been published copyright subsists in them if, amongst other things, first publication took place in Australia or the author was an Australian resident at the time of publication: s 32(2) of the Act. Where an original artistic work is a building which is situated in Australia, then copyright subsists in that building: s 32(3) of the Act. 13 There is no argument that the Chirnside and Baltimore houses are situated in Australia and that the authors of the plans of those houses, Mr Shane Rogers and Mr Leon Edwards, were at all material times resident in Australia, and the plans of those houses were first published in Australia by the distribution of brochures containing copies of the plans. 14 For artistic works, as for literary works, the amount of originality required for copyright to subsist is not high. In Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479, Dixon J (as he then was) said at 511: "…some original result must be produced. This does not mean that new or inventive ideas must be contributed. The work need show no literary or other skill or judgment. But it must originate with the author and be more than a copy of other material." 15 Builders or architects plans are works in which copyright may subsist and be infringed. See the judgment of Sheppard J in LED Builders Pty Ltd v Masterton Homes (NSW) Pty Ltd (1994) 30 IPR 447 for a summary of the development of the law in this area. Where a plan is a simple one, however, an applicant's case may be difficult to prove. In Dixon Investments Pty Ltd v Hall (1990) 18 IPR 481 at 483 ("Dixon Investments 1"), Pincus J said that "[t]he simpler and more commonplace the copyright drawing, the more closely must the alleged infringer adhere to it, in order for liability to exist: Kinrick & Co v Lawrence & Co (1890) 25 QBD 99 at 102; Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd (1988) AIPC 90-488 at 38,243". 16 Lord Reid pointed out in Ladbroke (Football) Ltd v Hill (William) (Football) Ltd [1964] 1 WLR 273 at 276 that whether a person has reproduced a substantial part of a work "depends much more on the quality than on the quantity of what he has taken". See also Lord Evershed at 283. These dicta were followed by Pincus J in Dixon Investments 1 at 483 and by the Full Court, Lockhart, Spender and Ryan JJ, on appeal in Dixon Investments Pty Ltd v Hall (1990) 18 IPR 490 at 495 ("Dixon Investments 2"); and also by Gummow J in Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 19 IPR 44 at 49 and by the Full Court, Lockhart, French and Hill JJ, on appeal, in Collier Constructions Pty Ltd v Foskett Pty Ltd (1991) 20 IPR 666 at 669 ("Collier Constructions"). The Full Court in both Dixon Investments 2 and in Collier Constructions emphasised that one must examine the importance of the alleged substantial part in relation to the work as a whole: see the Full Court decisions of Dixon Investments at 494; Collier Constructions at 669. 17 There is no dispute in relation to the originality of the Baltimore plans and house. The Baltimore plans were the work of Mr Shane Rogers and Mr Leon Edwards. 18 Tamawood, by its cross-claim, asserts that the Chirnside plans and house are not original, and copyright does not subsist in them because they were copied from the Tamawood's "Renee" design. Mr Shane Rogers gave evidence that he was the author of the Chirnside plans and his evidence supports the conclusion that there was substantial independent effort by him in the creation of the Chirnside plans. Mr Rogers' evidence establishes that the ancestor of the Chirnside was Henley Arch's "Camden" plans, which were created in 1991. Some time before September 1994, the Camden Mark 2 plans were drawn. This possessed a feature of a fully-glassed meal/conservatory area as an option, off the family room. Mr Rogers produced two possible options for future development, option A being a plan suited for a relatively wide but not relatively deep block of land, and option B for a narrower and deeper block of land. The option A developed into the Chirnside. No allegation of copying the Renee was put to Mr Rogers in cross-examination, and MrRogers in his affidavit evidence emphatically denied any copying of the Renee. There is no basis for the claim that the Chirnside plans were copied from the Renee design. I find that copyright resides in Henley Arch in the Chirnside plans and house, both Mr Rogers and Mr Edwards being employed by Henley Arch at all relevant times: see s 35(6) of the Act. The second applicant, as the exclusive licensee for the State of Queensland of the right to reproduce the Chirnside plans, amongst others, is entitled to sue for infringement of the copyright subsisting in those plans: s 119 of the Act. 19 The term "reproduce" or "reproduction" is not defined in the Act. 20 On what is a "reproduction" for the purposes of the Act, Gibbs CJ (with whom Mason J, and Brennan J on this point agreed), said in S.W. Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 472; 5 IPR 13 at 15: "The notion of reproduction, for the purposes of copyright law, involves two elements - resemblance to, and actual use of, the copyright work, or, to adopt the words which appear in the judgment of Willmer LJ in Francis Day & Hunter Ltd v Bron [1963] Ch 587, at 614, 'a sufficient degree of objective similarity between the two works' and 'some causal connection between the plaintiffs' and defendants' work'. Lord Reid said in Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] WLR 273 at 276; [1964] 1 All ER 465 at 469: 'Broadly, reproduction means copying, and does not include cases where an author or compiler produces a substantially similar result by independent work without copying. And, if he does copy, the question whether he has copied a substantial part depends much more on the quality than on the quantity of what he has taken.' … In the same case, Lord Evershed said [1964] 1 WLR at p 283; [1964] 1 All ER at p 473, 'that what amounts in any case to substantial reproduction … cannot be defined in precise terms but must be a matter of fact and degree'." 21 Where an author produces a substantially similar result by independent work, that result is not a "reproduction". The reason is that there is "no actual use" of the copyright work, one of the two essential elements of a "reproduction". The requirement for some "causal connection" between the works allows for what has been termed direct and indirect copying. 22 The Full Court (Heerey, Sundberg and Finkelstein JJ) in Clarendon Homes (Aust) Pty Ltd & Anor v Henley Arch Pty Ltd and Ors 46 IPR 309 said at par 28: "…in a case where there has been deliberate copying, the court will not look kindly on a defendant when the plaintiff seeks to establish that what has been copied is sufficiently objectively similar to the plaintiff's work. In Blackie & Sons Ltd v Lothian Book Publishing Co Pty Ltd (1921) 29 CLR 396 Starke J said at 404: 'It is not for the court to make the way of the taker of copyright matter easy. It is a sound principle of copyright law that the court should not allow one man to take away the result "of another man's labour, or, in other words, his property", unless it is satisfied that the part taken is "so slight, and the effect upon the total composition was so small", "as to render the taking perfectly immaterial", or what is much the same thing, that the part taken is an unsubstantial part [citations omitted]'. See also S.W. Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 484; 5 IPR 13 at 25 where Wilson J referred with approval to the judgment of Street J in Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 where his Honour acknowledged that his finding of infringement had been coloured by the unmeritorious use made by the defendant of the plaintiff's work." 23 Street J (as he then was), in Ancher, Mortlock, Murray &. Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278, underlined the importance in a copyright suit involving architects' plans of the question of how the alleged infringing work came into existence. His Honour said, at 284: "An architect may legitimately inspect an original plan or house and then, having absorbed the architectural concept and appreciated the architectural style represented therein, return to his own drawing board and apply that concept and style to an original plan prepared by him and in due course to a house built to such plan. There is a dividing line separating such a legitimate process from an inspection followed by a later copying of a substantial part of the physical object inspected, even though the copying be from memory; the latter exercise does infringe. In many instances it will be difficult to state categorically whether the dividing line has been crossed. Cases will not always be black or white where the alleged copying is from memory. The borderline area is clouded by a band of grey within which opinions and conclusions may differ. Within this grey band conflicting answers could without error be given to the questions - is that plan or house only a copy of the concept or style of the original and hence legitimate ?, or is it a copy of the author's manifestation of that concept or style and hence an infringement? In this grey band, in answering such questions as these, it can be of critical importance to know how the architect who is said to have infringed went about the preparation and drawing of his plan. It is only after making a finding, either on direct evidence or by inference, of copying, that is to say, of unfair or unconscientious use of the author's plan or building, that significance will attach to the degree of similarity. In a practical sense, of course, the degree of similarity is frequently a most telling element on the question of copying. To some extent the two aspects overlap, but they are distinct in point of principle and they must be considered with this distinction in mind." 24 The Gould plans and house came about, I find, in the following way. Christine Gould and her partner, Mark Crompton, in June 1997 visited a number of display villages, in particular a display village at Wishart, at which were displayed homes built by Henley Arch, amongst others. They inspected a number of Henley homes in the display village, including a home called the Chirnside. She obtained a copy of the Chirnside plan when she was there. 25 She said in her affidavit that she purchased Lot 38 at 23 Oakley Street, Carindale, and had an independent site survey and soil test conducted on 30 June 1997 on that site. She made enquiries of Henley whether they would offer a house/land package on that block, but Henley indicated that it would have to do a soil test and site survey first, which would cost $300. Ms Gould indicated that she already had a site survey/soil test done at the time of purchase, but the sales representative of Henley indicated that they needed to do their own. Ms Gould says at a subsequent meeting at the Wishart Display Village, she paid $300 by cheque to have the soil test and site survey conducted, and also paid $50 in cash to "secure the current advertised price for house construction". She was told by the sales representative that this in no way locked her in contractually, but it simply locked in the base price and was fully refundable. 26 Ms Gould was impressed by the Chirnside design, but there were a number of changes which she wished to make to it before it suited her needs, such as internal access from the garage to the house, linen storage, and storage in the laundry. At the time of the payment of the $300 by cheque and the $50 in cash, Ms Gould said that she discussed with the sales representative about variations to the basic house plan, such as internal access from the garage, additional power points and lights, additional external taps, security grilles and flyscreens, additional costs for tiling (the basic price only included wet tiling). "I asked for a quote to be given to establish a fixed construction price." She says that in subsequent weeks she made numerous attempts to telephone to obtain a fixed price from the Henley Group, without success. She says at no time did she ever have any plan or representation of the Chirnside other than the brochure she had obtained. As the consequence of a recommendation by a work colleague, Ms Gould contacted a Tamawood sales representative, Richard Middleditch, in Tamawood's Buranda office. 27 Ms Gould says that the Gould house arose from modifications to the standard Tamawood "Adrian" and "Samuel" designs, which modifications were made having regard to Ms Gould's instructions to Mr Middleditch. She claims that there was no reference made to the Chirnside in arriving at the final design for the Gould house. She said that over the next few weeks she made various requests to alter the Adrian floor plan, either by phone to Mr Middleditch or in meetings with him. She denied any suggestion that she requested amendments to the standard Adrian design by reference to the Chirnside. 28 Exhibit 39 is a very important piece of evidence in these proceedings. Ms Gould agreed that it identifies the changes from the standard Adrian plan which were incorporated in the Gould house plan. A budget costing addendum to technical specifications bearing date 19 September 1997 lists a number of change requests, as follows: