Midamarine Pty Limited v International Sports Clothing Pty Ltd and

The Reasons for Judgment of his Honour Justice Spender 5 Midamarine sought an interlocutory Order restraining DMC and a director of DMC, Mr David Maxwell Corrick ('Mr Corrick') from infringing the Applicant's Registered Design 151872 ('the Registered Design') for an article described as an 'inflatable surfcraft' and an Order restraining the Respondents from infringing the Applicant's copyright said to subsist in a work described as 'Warning Instructions' marked Attachment 'A' to the Application filed on 23 October 2006. 6 His Honour formed the view that the evidence did not support a conclusion that the Applicant is the owner of the copyright subsisting in the 'Warning Instructions' and declined to make any interlocutory Order in respect of the alleged breach of copyright. 7 His Honour then considered the Applicant's claim for an interlocutory Order arising out of the contended infringement of the Registered Design. His Honour identified that the matters in dispute were whether the Applicant had demonstrated an arguable case of infringement of the Registered Design, whether the Registered Design is valid, whether the balance of convenience favoured the grant of the injunction sought and whether damages would be an adequate remedy. 8 His Honour then analysed the evidence before him on each of those issues. 9 His Honour's Reasons reflect the following observations concerning his Honour's assessment of the evidence before him and the legal issues: (a) The Applicant applied for the Registered Design on 24 December 2001. The Registered Design was granted on 27 May 2003 and since September 2004 Midamarine has, through arrangements with a licensee, Britz Innovation Pty Ltd ('Britz Innovation') and a related company Kalinin Pty Ltd ('Kalinin'), a company trading as 'Britz Marketing', been selling an inflatable surfcraft described as the 'Wavestar'. The Applicant also sells another surfcraft article described as the 'Surfster'. (b) The Applicant contends that the Wavestar is an embodiment of the Registered Design. (c) In June 2005, Mr Russell Joel Binkin ('Mr Binkin'), 'an associate of the applicant, provided a sample of the Wavestar to Mr Corrick and endeavoured to persuade him that he should licence the design of the Wavestar from the applicant. Mr Corrick was provided with artwork, which came from the applicant. I am satisfied that the sample of the Wavestar and the artwork contained clear notification of a Registered Design, and the artwork and sample contained the Warning which presently appears on the physical exhibit of the Wavestar. It is to be expected, I would have thought, that there was copyright in somebody in that formulation of the Warning.' [6] (d) 'After the meeting and the supply of the sample and artwork, Mr Corrick indicated he was not interested in pursuing a licence for the product.' [7] (e) In January 2006, Midamarine and Britz Marketing entered into an exclusive distributorship in relation to the Wavestar surfcraft. In February 2006, Mr Corrick commenced negotiations with the National Rugby League ('NRL') and the Australian Football League ('AFL') to use the trade marks of NRL and AFL sporting teams on surfcraft or surf mats. (f) On 8 September 2006, a director of Midamarine, Mr Michael Arenson, learnt that DMC was supplying a surfcraft article to 'Amart All Sports' which was said by Mr Arenson to be strikingly similar to the Wavestar. (g) On 22 September 2006, Mr Arenson saw a reproduction of the DMC article. Mr Arenson spoke to Mr Corrick and wrote a letter to him on 24 September 2006 drawing his attention to the similarities in the design features between the Wavestar article and the DMC article. Mr Arenson drew Mr Corrick's attention to the fact that the warning label endorsed on the DMC article was a direct copy of the Warning Notice on the Wavestar article. In particular, Mr Arenson drew Mr Corrick's attention to the reproduction on the DMC article of the claim, 'The shape of this inflated product is a Registered Design'. (h) On 27 September 2006, the solicitors for DMC applied to register a design of a surfcraft in the name of DMC and, in that Application, Mr Corrick was described as the designer. His Honour observed that: 'No documents supporting his design exist, for the good reason that, in fact, the DMC product is a direct and complete copy of the Wavestar.' [11] (i) His Honour noted: 'It is now conceded that the DMC surf mat is indeed a copy - and a deliberate copy - of the Wavestar'. This, in my view, had to be so. The visual comparison leads to that conclusion. The fact that the Wavestar was left with Mr Corrick, the comparison of the two and the identity of the words used in the Warning on the back of the DMC surf mat and, in particular, "the shape of this inflatable product is a Registered Design", lead inevitably to the conclusion that the DMC product is a direct copy of the Wavestar'. [12] 'The words on the Wavestar reflect the contention by Mr Arenson that the Wavestar is an embodiment of the Registered Design. The presence of those words on the DMC product is, in my opinion, damning evidence of copying by DMC of the Wavestar.' [13] (j) Counsel for DMC contended that the Wavestar is not an embodiment of the Registered Design and in any event, the Registered Design is invalid. As to the latter question, his Honour concluded that for interlocutory purposes, the Applicant is to be treated as the owner of a valid Registered Design having regard to differences in the features of shape reflected in the examples of prior art. 'Indeed, the attack on the validity of the Registered Design is seriously undermined by DMC's own application for registration of the design of the DMC product, which application is tainted with dishonesty and fraudulent claims. I accept that it has been acknowledged that the application will be withdrawn or otherwise expunged.' [16] (l) His Honour addressed Midamarine's contention that DMC had applied the Registered Design or a fraudulent or obvious imitation of the Registered Design to articles sold and offered for sale by DMC. At [23], the features of shape, configuration, pattern or ornamentation contained within the Registered Design, capable of being judged by the eye, are identified by his Honour. At [24], his Honour observes, 'I have inspected the inflated DMC product and compared it with the Registered Design. The inflated DMC product possesses each of the features identified in the Applicant's written submissions (those identified at [23]), with the exception that the handles do not protrude from the top of the surf mat as depicted in the Registered Design. The handles on the Wavestar also do not protrude from the top of the surf mat, as depicted in the Registered Design. His Honour concluded that, 'For present purposes, being the interlocutory purposes, I am satisfied that, to the eye, the shape of the DMC product is substantially the same as that of the Registered Design. It is, in my opinion, strongly arguable that the design, which has been applied to the DMC product, is an obvious imitation of the Registered Design. That is, in the words of the test in Malleys (Malleys Ltd v J W Tomlin Pty Limited [1961-62] 35 ALJR 352), to be found at p 354 of the report: "Not the same but a copy apparent to the eye notwithstanding slight differences".' [27] (m) His Honour observed that even if the design applied to the DMC article is not an obvious imitation of the Registered Design, the test for fraudulent imitation is even more strongly arguable [28]. His Honour identified the tests approved by the High Court in Polyaire Pty Ltd v K-Aire Pty Ltd & Ors (2005) 221 CLR 287 and the High Court's approval of the observations of Lehane J in Koninklijke Philips Electronics NV & Anor v Remington Products Australia Pty Ltd (1999) 91 FCR 167. His Honour concluded: 'I am satisfied that there is a strongly arguable case of fraudulent imitation. It seems inevitable that, if the Wavestar is an embodiment of the Registered Design, then the DMC product is a fraudulent imitation. The design of the Wavestar and the DMC product is almost identical. It could not have been independently created. It is now admitted that the DMC product is a copy of the Wavestar.' [31] 'So, also, is the embarrassing identity of the direct words of the warning label, including the imprinting of the words: "The shape of this inflatable product is a Registered Design".' (n) At [33], his Honour said this: 'It is not denied that Mr Corrick was supplied with a sample of the Wavestar surf mat and had discussed obtaining a licence of the design. It seems plain that there is a strongly arguable case of obvious imitation or fraudulent imitation of the Registered Design.' (o) On the question of the balance of convenience, his Honour considered the observations of the High Court in Beecham Group Limited v Bristol Laboratories Pty Limited (1967-68) 118 CLR 618 at 625 and the principles affirmed by the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46 and weighed in the balance the implications arising out of a consideration that DMC had 'in the face of warnings' from Midamarine and 'with eyes wide open' embarked upon a course of importing, selling and offering for sale articles to which a fraudulent or obvious imitation of the Registered Design had been applied. At [39], his Honour said this: 'In my judgment, the balance of convenience strongly favours the grant of the injunction sought. The chronology of events, and in particular the history of the design of the DMC product - that is to say no design, but a direct copy - indicates that the respondents have decided to import and distribute the DMC product with their eyes open to the likely consequences of so doing.' (p) At [40], his Honour further referred to submissions by counsel for Midamarine and quoted this submission, 'No reasonable trader, having received the sales pitch from Mr Binkin [in June 2005] for the Wavestar, could reasonably ignore the existence of the rights [claimed in the design]'. (The words in the square brackets are explanatory words inserted into counsel's submission by his Honour). (q) As to the question of damage accruing to Midamarine, his Honour said this: 'In this particular case, the applicant is shown to be an established manufacturer and supplier of the Wavestar surf mats. It is strongly arguable that that product has the benefit of the protection of the Registered Design. It has been creating a market for its product and supplying its product to distributors since 2004. [35]. 'Earlier this year, the applicant entered into an exclusive distributor arrangement with Britz Marketing. I accept that its fortunes are tied to its ability to distribute its products via Britz Marketing. The Wavestar is now exclusively sold by Britz Marketing under the name Wahu Wavetube. That surf mat is sold in an extensive range of shops, including Toyworld, Big W, Rebel Sports, Target and Toy'R'Us. Mr Britz says the Wahu Wavetube has been heavily promoted'. [36] 'Since the First Respondent [DMC] began, in October 2006, to sell the DMC product, Amart All Sports has ceased all sales of the Wahu Wavetube and has acquired, instead, the DMC product. I accept that the inability to sell surf mats to the applicant's design to Amart has a significant impact on the ability of the applicant to make sales.' (r) On the question of an assessment of potential wider injury, his Honour concluded that, 'There is a serious over‑statement of those risks in the evidence on behalf of the applicant'. [38] His Honour concluded that there was 'a deal of exaggeration in the injury inherent' in the contentions of Mr Britz that Britz Marketing would have to give serious consideration to sourcing surf mats from a different and cheaper source than Midamarine if DMC products continued to be sold. (s) At [41], his Honour reached this conclusionary observation, 'The strength of the applicant's case of deliberate copying by the first respondent favours the grant of the interlocutory injunction. The impugned DMC products are clearly and objectively a deliberate copy of the Wavestar. The person responsible for the design and manufacturer of the DMC product knew that the product was a copy of the Wavestar, and knew of the claim that the design of the Wavestar product was protected by a Registered Design. In those circumstances, it seems to me that DMC has embarked on a task of ordering and importing the impugned products with its eyes wide open as to the potential consequences of so doing, namely, that it will be exposed to the present application.' 10 The questions to be determined on this Application are whether, in all the circumstances, the decision of his Honour is attended with sufficient doubt so as to warrant the decision being reconsidered by the Full Court and whether substantial injustice would result if leave is refused, supposing the decision to be wrong (Décor Corporation Pty Ltd & Anor v Dart Industries Inc. (1991) 33 FCR 397 at 398 and 399 per Sheppard, Burchett and Heerey JJ). At pp 399 and 400, their Honours said this: 'In our opinion, the principles discussed in Niemann and in other cases to which we have referred provide general guidance which a court should normally accept. However, there will continue to be cases raising special considerations, and the court should not regard its hands as tied in any case beyond this; that by s 24(1A) the legislature has evinced a policy against the bringing of interlocutory appeals except where the court, acting judicially, finds reason to grant leave. When the court comes to exercise its discretion on a particular application, an important distinction to be observed is that between the common interlocutory decision on a point of practice … and an interlocutory decision determining a substantive right - where leave will more readily be granted. … In the present case, the interlocutory decisions in respect of which leave is sought are certainly attended with difficulty, and their correctness is open to dispute. If they are wrong, significant consequences will be suffered by the applicants. We regard this as a clear case for the grant of leave.' In Yap Cheng See v Granich & Associates [2001] FCA 1735 per North, Merkel and Gyles JJ, the Court noted the distinction to be drawn between an interlocutory decision on a point of practice or procedure and an interlocutory injunction 'on a point of substance' [6]. 11 Counsel for DMC contends that his Honour's decision is attended with sufficient doubt and the interlocutory Order affects the substantive rights of DMC. Further, DMC contends that there is a strong likelihood that DMC will not be compensated for the loss it suffers by reason of the Order, having regard to the financial strength of Midamarine should DMC bring proceedings upon the undertaking as to damages. 12 DMC describes its 'primary submission' in this way. In written submissions although not in oral argument, counsel for Midamarine made statements about the evidence before the Court which was relied upon by his Honour in circumstances where the particular statements were not supported by the evidence. Thus, his Honour was led into error. DMC contends that it is clear his Honour relied upon the written submissions because he has plainly adopted, in similar language, the relevant propositions. At paragraph 7(c) of counsel's submissions on behalf of Midamarine, counsel recited the relevant background facts as including this statement, '(c) in June (Binkin paragraph 6 - [with a footnote reference to the statement "Mr Corrick contends in about February 2005"]) Mr Binkin, an associate of the applicant, provided a sample of the Wavestar to a director of the first respondent (Mr Corrick) and endeavoured to persuade him that he should licence the design of the Wavestar from the applicant (see also Corrick paragraph 18)'. 13 In support of the proposition that the facts before his Honour provided a strongly arguable case of fraudulent imitation, counsel for Midamarine contended in written submissions, among other things, that the following circumstance would aid in leading to that conclusion, namely '(c) the undenied fact that the First Respondent was supplied with a sample of the Wavestar surf mat and had discussed obtaining a licence of the design' (paragraph 22(c) of the submissions). 14 DMC criticises those observations in the written submissions on the footing that the evidence does not support the proposition that Mr Binkin endeavoured to persuade Mr Corrick to take up a licence of the design of the Wavestar article from Midamarine. Rather, Mr Corrick gave evidence that Mr Binkin did not indicate to him that 'rights were required from any person' and that as at February 2006, Mr Corrick was 'not aware of the Registered Design'. DMC contends that in reliance upon the written submissions as to the state of the evidence, his Honour determined that there had been a fraudulent imitation of the Registered Design and that this finding infected the assessment of the balance of convenience and the grant of the interlocutory Order. Accordingly, DMC contends there is an error which gives rise to sufficient doubt, in all the circumstances, as to the correctness of the decision. 15 The evidence before his Honour on the matter is to this effect. 16 Mr Arenson in his affidavit sworn 25 October 2006 deposes to these matters: (a) In 2005, Midamarine utilised the services of J R Lifestyle Dynamics as its sales representative in New South Wales. The individual who operated that firm was Russell Joel Binkin. (b) In June 2005, Mr Binkin had a conversation with Mr Arenson during which Mr Binkin asked him whether Midamarine could add a graphic design to the surface of an inflatable surf mat. The particular logo to be applied to the surface of the surf mat was that of the NRL 'Roosters Football Club'. Mr Binkin told Mr Arenson that the reason for the request was that Mr Binkin had spoken with a company who might wish to market Midamarine's surf mats with NRL Football Club logos endorsed on the surf mat. Mr Arenson told Mr Binkin that he would be happy to speak with the company directly and asked Mr Binkin to arrange for the necessary logos to be sent to him to be applied to the inflatable surf mats. (c) Mr Binkin then emailed a logo for the Roosters Football Club to Mr Arenson on 19 June 2005. Mr Binkin also gave Mr Arenson a copy of the logo for a company called ISC Sports which is an abbreviation of Illustrated Sports Clothing Company Pty Limited ('ISC Sports'). Mr Arenson says that this was the first occasion that he knew of the identity of the other party. (d) Mr Arenson then used a graphic computer program at Midamarine's office to project the logo of the Roosters Football Club on to an outline of the Wavestar surf mat. Mr Arenson then emailed that image to Mr Binkin on 20 June 2005 to enable Mr Binkin to provide it to ISC Sports. Mr Arenson exhibits a copy of the attachment emailed to Mr Binkin displaying the surface of the Wavestar surf mat exhibiting the Sydney Roosters Football Club logo on one side and the word 'Roosters' on the other. That document was endorsed with some important language. Firstly, the attachment identified in reasonably large type face the word 'midamarine'. Secondly, the attachment described the article as 'wavestar'. Thirdly, the attachment was endorsed with the statement 'US Patent and foreign patents pending'. The text of that statement is in a smaller typeface but is readily discernible. Fourthly, the attachment was marked with four boxes in these terms: 'Available: Sample Only Model: WaveStar Rooster Accessory: Nil Item Code: ' Fifthly, the attachment was marked in capitalised letters with these words at the base of the document: 'BODYBOARD SHAPE IS A REGISTERED DESIGN TO MIDAMARINE PTY LTD © 2003 Midamarine Pty Ltd'. (e) Shortly after Mr Arenson sent the emailed attachment to Mr Binkin, Mr Binkin rang him and informed him that ISC Sports did not like the red colouring Mr Arenson had used on the attachment. ISC Sports requested the attachment to be reworked using a blue colour. As a result of that request, Mr Arenson produced another graphic illustration of the application of the logos to the Wavestar device but using a blue colour. Mr Arenson then emailed the redrawn graphic depiction of the applied logos to Mr Binkin. Mr Arenson believes that this redrawn application of the logos was emailed to Mr Binkin either at the end of June or possibly during the first week of July 2005. The redrawn graphic depiction is marked as a further exhibit to Mr Arenson's affidavit and the attachment exhibits all of the same language described at [16(d) of these Reasons]. (f) Mr Arenson says that after he sent Mr Binkin the second email of the redrawn graphic application, Mr Binkin told him that he had taken the second email to a meeting at the office of ISC Sports; that at the meeting he discussed the second email with Mr Corrick; that Mr Corrick and Mr Binkin discussed production of the Wavestar incorporating NRL logos on the Wavestar; that Mr Binkin had given a sample of the Wavestar to Mr Corrick for his consideration; and that Mr Corrick subsequently contacted Mr Binkin and told him that ISC Sports was not interested in taking the discussions any further as they considered Midamarine's design was too expensive. (g) Mr Arenson says that at no time did Midamarine give any licence, permission consent or authority to Mr Corrick or DMC to use the Registered Design. 17 Mr Binkin swore an affidavit dated 24 October 2006 in which he describes his engagement with Mr Corrick. Mr Binkin deposes to these matters. (a) Prior to June 2005, Mr Binkin had had a number of dealings with ISC Sports and as a result of those matters, Mr Binkin had dealt with Mr Corrick. Mr Binkin says that he was aware from those dealings that ISC Sports held a licence from the NRL to apply NRL graphic designs to products for commercialisation. (b) In June 2005, Mr Binkin began a consultancy business, knew of Midamarine's inflatable surf mats and conceived the notion that it could be a successful marketing strategy for the NRL to apply NRL football team logos to Midamarine's surf mats. (c) As a result, Mr Binkin approached Mr Corrick in June 2005 and had a discussion with him at his office. Mr Binkin showed Mr Corrick a sample of Midamarine's Wavestar inflatable surf mats in an inflated form and left it with Mr Corrick. Mr Binkin told Mr Corrick that it would be possible to put NRL and other company logos and graphics on the surface of the surf mat. Mr Binkin explained to Mr Corrick his 'good idea' for advertising NRL Football Club logos and graphics during the summer off‑season for football. (d) Mr Binkin says that Mr Corrick seemed to be 'quite excited by the idea'. Mr Binkin says he recalls that during the conversation Mr Corrick commented to him to the effect that he (Mr Corrick) 'had never seen one of these inflatable surf mats before'. Mr Binkin suggested to Mr Corrick that the logo for the Roosters NRL Football Club might be supplied to Midamarine and Mr Binkin could speak to Midamarine and determine whether the logo could be applied to the surface of Midamarine's surf mats. Mr Binkin suggested that he might then show Mr Corrick some sample artwork and things might be taken forward from there. Mr Binkin says that Mr Corrick 'seemed to me to be very enthusiastic about the whole concept and as a result he told me to go ahead with preparing artwork'. (e) Mr Binkin then contacted Mr Arenson and told him of the discussions with Mr Corrick. Mr Arenson seemed equally enthusiastic about the idea and requested Mr Binkin to send the artwork for the Roosters logo and colours to him. Mr Binkin had previously obtained all of the NRL logos in their particular colours from Mr Hilton Flood of ISC Sports as a result of earlier business proposals. Mr Binkin then emailed the Roosters NRL logo to Mr Arenson. (f) Mr Binkin recalls that a little time later in June 2005, Mr Arenson emailed him some artwork. That artwork was a graphic image of Midamarine's Wavestar surf mat on which had been applied the Roosters NRL Football Club logo that Mr Binkin had sent to Mr Arenson. The background colour was red with a flame‑like design. (g) Mr Binkin then had a discussion with Mr Corrick. Shortly after Mr Binkin received the artwork from Mr Arenson, Mr Binkin showed Mr Corrick that artwork. Mr Binkin says that Mr Corrick told him that he was 'very interested in the concept but that he wanted the artwork changed so as to delete the flame‑like design and change the background colour from red to blue'. (h) Mr Binkin says that on the same day as the conversation with Mr Corrick or the day after that conversation, Mr Binkin spoke to Mr Arenson by telephone and told him that a new graphic depiction would need to be prepared consistent with Mr Corrick's request. Mr Binkin asked Mr Arenson to email to him the amended artwork. On either that day or very shortly thereafter, Mr Arenson sent Mr Binkin a further email containing an attachment on which was depicted a single drawing of the Wavestar surf mat with the Roosters logo on it with a blue background. (i) Mr Binkin says, 'I then went to see Mr Corrick at his office and gave to him a colour printout of that last email from Mr Arenson to me showing the redesign of the artwork on the Wavestar surf mat. I was quite excited about the project and Mr Corrick seemed again to be very much interested in it'. (j) Mr Binkin says that, 'At the end of that meeting Mr Corrick said he would get back to me. He gave me to understand that he would have to check with the NRL whether or not he could get a licence to apply the NRL logos to the Wavestar surf mats' I followed him up on some few occasions after that second meeting to enquire what was going on and whether or not this project was going to go ahead. He was non‑committal until at last I had a conversation with him when he told me the project would not go ahead. I cannot recall precisely when this final conversation took place but it would have been perhaps two or perhaps three months after that last meeting. Although I cannot recall the precise reason he gave as to why his company was not going to go ahead with the project, I do recall it was to the effect that the NRL logo was not available to be licensed to be applied to an inflatable surf mat'. 18 Apart from the contention concerning the discussion of licensing arrangements, counsel for DMC says that there is no evidence to support the contention that a copy of the artwork prepared by Mr Arenson was left with Mr Corrick by Mr Binkin. Counsel says that there was evidence that the artwork was shown to Mr Corrick but no evidence that it was left with him. That submission seems inconsistent with the apparent evidence of Mr Binkin that he gave Mr Corrick a colour printout of the last email from Mr Arenson depicting the re‑design of the artwork for the Roosters NRL Football Club. Although Mr Binkin does not say that he left the artwork with Mr Corrick, the plain language of paragraph 11 of Mr Binkin's affidavit is that he went to see Mr Corrick at Mr Corrick's office and 'gave to him a colour printout of that last email' [17(i)]. 19 Mr Corrick filed an affidavit which is responsive to these contentions of Mr Arenson and Mr Binkin. Mr Corrick says this: (a) Approximately 18 months ago, Mr Binkin approached him in relation to a proposal to use DMC's relationship with the NRL to obtain licences to apply the logos of the NRL football teams to an inflatable surf mat. (b) Mr Corrick says, 'I was already aware of inflatable surf craft prior to that approach'. (c) At no time did Mr Binkin disclose to him that Mr Binkin had any relationship or possible relationship with Midamarine. Nor did Mr Binkin ever identify Midamarine. Mr Binkin did not indicate to Mr Corrick that he was an agent for Midamarine or for any other person, or that rights were required from any person. (d) Mr Binkin approached him with a number of products including a proposal for a 'team' branded rug or floor covering, wall hangings and the surf mat. (e) Mr Binkin said to him that he came to Mr Corrick because Mr Binkin knew that Mr Corrick had an existing relationship with the NRL as a result of the activity of DMC and that Mr Corrick could approach the relevant NRL individuals to propose a licensing arrangement of NRL team names and logos. (f) Mr Corrick did not proceed with any of the proposals. Mr Corrick says there was an existing licensee for floor mats and he was unable to establish to the satisfaction of the NRL that the proposal for floor coverings and wall hangings was sufficiently different. Mr Corrick says, 'I also mentioned the surf mat at that stage, but the NRL was not interested'. (g) Mr Corrick says that, 'In any event, I was not interested as the pricing proposed by Mr Binkin was prohibitive, it included the cost of the surf mat, a 15% royalty payment to the licensor and the store's margin. The proposal did not make commercial sense'. (h) Mr Corrick says that he, 'discussed the proposal with Mr Binkin in general terms, but at no point did we ever reach an agreement on a proposal'. (i) Mr Corrick says that, 'Mr Binkin left me with a surf mat. I cannot recall whether it was a Wavestar or another model. I do not have that surf mat any longer and do not know where it is. Mr Binkin did not leave with me any drawings or graphic representations of his proposal for the use of team logos on a surf mat'. 20 In those responsive paragraphs of Mr Corrick's affidavit, Mr Corrick makes reference to drawings or graphic representations only for the purpose of denying that he was left with any such material. There is no reference to Mr Binkin showing Mr Corrick the first email logo; no reference to a request by Mr Corrick to change the red flame graphic and red colouration for the Roosters logo and replace it with a blue colour; and no reference to Mr Binkin showing Mr Corrick the second email of the graphic depiction. 21 Mr Corrick also describes the business of ISC Sports and DMC. In relation to DMC, Mr Corrick says this: 'DMC's current business began in 2001. DMC is a kit sponsor of all of the Australian "Super 14" teams of the Australian Rugby Union (ARU) competition, 6 teams in the NRL competition and 3 teams in the National Basketball League. It manufactures and sells the team playing and training kits for the teams, and their coaching staff, and replica jerseys and accessories or merchandise for fans for the teams playing in each of those competitions. DMC also has similar arrangements with the Rugby League (including the English Super League), rugby union and soccer teams in the United Kingdom, France (rugby league), South Africa and New Zealand (rugby union). DMC, having arrangements with 6 NRL teams, is the largest supplier of team kits and supporter merchandise to the NRL, in terms of number and value of kit and replica merchandise, and in terms of the number of teams to which or for which kit and merchandise is supplied. Rebok has the licence for 3 NRL clubs. Nike and Puma each has the licence for 2 clubs and Adidas has the licence for 1 club. DMC is the only supplier of kit and team replica merchandise to the whole of the Australia Super 14 teams. DMC is also the largest supplier of team kits to the Super League in the United Kingdom.' 22 Mr Corrick deposes, through confidential exhibits, to the revenues derived by DMC from this activity. 23 It is clear that the commercialisation and merchandising of articles endorsed with works of intellectual property by others is a core business activity of DMC. Mr Corrick and DMC are sophisticated distributors of articles endorsed with copyright works and logos of the NRL, the ARU, National Basketball League and other organisations both in Australia and overseas. It is correct to say 'in terms' that the evidence of Mr Binkin does not expressly contend for a negotiation of a 'licence' arrangement between Midamarine and DMC. Further, the references in Mr Corrick's affidavit to a 15% royalty payment to the licensor is, it seems to me, properly understood as a reference to an anticipated licence fee payable to the NRL for the right to apply and commercialise articles endorsed with the intellectual property assets of that organisation. 24 However, it seems to me to be equally clear that when Mr Binkin approached Mr Corrick with the proposition that Midamarine might be able to supply surfcraft or surf mats endorsed with logos of the NRL (appropriate licences from the NRL for those works having been put in place), Mr Binkin was engaged in the commercial discussion with Mr Corrick which necessarily involved the possible supply to DMC of Wavestar surfcraft (with the NRL logos applied) and the re‑supply of those articles to the market. Securing a commercial right of access to the Wavestar article, from the perspective of an entity sophisticated in the commercialisation of articles the subject of claims to intellectual property (and from the perspective of a director of such a company) would necessarily raise the question of whether and on what terms, DMC might secure the consent, authority, approval or licence of the owner of rights in the Wavestar article. 25 The endorsements contained on the two email graphic attachments sent by Mr Arenson to Mr Binkin and shown by Mr Binkin to Mr Corrick and on the evidence of Mr Binkin as to the second email, given to Mr Corrick, must have alerted Mr Corrick to Midamarine's claims, taking, for interlocutory purposes, the Applicant's evidence as it stands. The attachments are marked with the name Midamarine and, in addition, the full name of the Applicant company, a claim of Registered Design protection in respect of the article depicted in the attachments and an assertion of copyright. 26 In all the circumstances, it was open to his Honour to conclude that having regard to the level of sophistication of DMC and Mr Corrick on such commercialisation matters, the substance of the engagement between Mr Binkin and Mr Corrick expressly in relation to the Wavestar article, the provision of the two email attachments developed by Mr Arenson to Mr Corrick by Mr Binkin (and the giving of the second email attachment to Mr Corrick), that Mr Corrick was squarely put on notice of the assertion of rights which, one way or another, had to be acquired by DMC from the owner of those rights either by consent, licence or authority if DMC proposed to deal, according to law, with the features of shape, pattern or ornamentation contained in the Registered Design, subject to any question of the validity of the design. 27 Accordingly, to the extent that his Honour's conclusion as to a strongly arguable case of fraudulent imitation of the Registered Design relies upon those matters, the evidence supports those conclusions. 28 The following further matters should be noted. 29 Firstly, counsel for DMC concedes that the Wavestar article was copied by DMC. DMC contends that the copying of the Wavestar product is irrelevant because the Respondents did not have the relevant knowledge as to an assertion of Registered Design protection and the copying of the Wavestar article was, in effect, a choice open to DMC because the Wavestar article did not at the relevant time and does not now embody the features of shape, pattern or ornamentation reflected in the Registered Design. His Honour concluded that the features of shape, pattern and ornamentation reflected in the Registered Design are to be found in the inflated DMC product. Since DMC copied the Wavestar article which resulted in features of the Registered Design visible to the eye in the DMC article, DMC's contention that the Wavestar article does not embody the design seems, for interlocutory purposes, to have been rejected. The question to be determined is whether the features of shape, pattern or ornamentation contained within the Registered Design have been applied by DMC to the relevant article or whether a fraudulent or obvious imitation of those features have been applied by DMC. His Honour concluded, based upon his assessment of the Registered Design and the DMC article that the relevant features, visible to the eye, were discernable in the DMC article and thus an arguable case of obvious imitation was made out. In reliance upon the evidence previously mentioned, his Honour concluded that a strongly arguable case of fraudulent imitation was made out. 30 Secondly, the DMC article reproduces the 'Warning Instructions' marked Attachment A to the Application. Although DMC contends that there is no evidence that the inflated Wavestar surfcraft left by Mr Binkin with Mr Corrick in June 2005 had endorsed upon it the text of the Warning Instructions and, in particular, the last sentence of the Warning Instructions containing the statement, 'The shape of this inflatable product is a Registered Design', the evidence is that Mr Arenson and his fellow director developed the text of the Warning Instructions, incorporated it on Wavestar devices, that an inflated Wavestar device was left with Mr Corrick and the DMC article reproduces the Warning Instructions. For interlocutory purposes, a clear inference is open that Midamarine's Warning Instruction was endorsed on the Wavestar article when copied by DMC. Apart from any question of copyright infringement, his Honour found, for interlocutory purposes only, that DMC copied the Wavestar article in circumstances where the Wavestar device had endorsed upon it a claim of Registered Design protection. 31 Thirdly, in order to deal with the apparent anomaly of the DMC article bearing a warning instruction which asserted that the shape of the DMC inflatable product is a Registered Design, DMC applied for a Registered Design and asserted that Mr Corrick is the author of the design. Mr Corrick is not the author of the design because the article is copied from the Wavestar article. DMC proposes to discontinue its application for Registered Design protection for the copied article. 32 Fourthly, Mr Corrick says that he first conceived of the possibility of marketing and selling inflatable surfcraft featuring the designs and logos of the NRL and AFL teams during the course of his holidays during December 2005 and January 2006 at Noosa in Queensland. Mr Corrick says that on his return to Sydney he proposed the notion to the NRL and AFL in February 2006 and then developed a concept and design but did so in circumstances where he was not aware of Midamarine's Registered Design. Mr Corrick says that he spent $30,000 developing the concept of the surfcraft endorsed with the designs, for approval of the NRL and AFL. In May 2006, licence agreements with the NRL and AFL were negotiated. Mr Corrick says that he does not have any documents in his possession, power or control in relation to the 'design process undertaken in developing the DMC surf mat'. DMC concedes that it copied the Wavestar article although DMC and Mr Corrick contend that that conduct occurred without any knowledge of or reference to the Registered Design or an assertion of such rights by Midamarine. That matter is the subject of controversy for the purposes of the action. 33 Fifthly, Mr Corrick in his affidavit says that Mr Binkin came to him with three product proposals for endorsement with NRL team graphics, 'a team branded rug or floor covering, wall hangings and the surf mat'. The surf mat was just one of a number. Mr Corrick says he did not proceed with any of the proposals. There was an existing licensee for floor mats and the NRL was not satisfied that the proposal concerning floor coverings and wall hangings was sufficiently differentiated. Although Mr Corrick mentioned the surf mat proposal to the NRL, 'the NRL was not interested'. However, by May 2006, Mr Corrick and DMC had established confidential licensing arrangements with each of the NRL, ARU and AFL to manufacture and supply inflatable surf mats displaying the names and logos of the various teams in the National football competitions administered by those bodies. 34 I am not satisfied that his Honour's decision is attended with doubt as to the conclusions he reached concerning these matters going to the strength of the arguable question to be determined at the trial of the action. 35 His Honour then considered where the balance of convenience lay and whether Midamarine had demonstrated that it had and would continue to suffer injury or damage not compensable by an award of damages. As to the question of irreparable harm, his Honour noted that Midamarine had embarked upon a process of developing the Wavestar and Surfster devices, had established a position as a manufacturer and supplier particularly of the Wavestar surf mats and had embarked upon a course of creating a market for the product and supplying the product to distributors since 2004. A part of that incremental process involved establishing an exclusive distribution arrangement with Mr Britz and his companies. His Honour also noted that the intervention of DMC had resulted in the loss of all future sales for the Wavestar article to an important buyer, Amart All Sports. His Honour accepted evidence that the loss of sales to Amart All Sports had a significant impact on the ability of Midamarine to make sales of its Wavestar product. His Honour formed the view that the impact of the conduct of DMC upon Midamarine's incremental development of the market for its product [35] was significant. The question seemed to be not one of just assessing lost sales but an assessment of the injury to the incremental development of the market by Midamarine and emblematic of that affect was the impact upon the purchasing behaviour of Amart All Sports and inferentially others. 36 It is correct that his Honour was critical of the evidence of Midamarine as to a wider injury or impact of the conduct of DMC. However, the assessment of the impact upon Midamarine in its development of the market was found, by his Honour, upon all the evidence to be a significant impact and thus injurious of Midamarine in a way difficult of assessment. 37 On the question of the balance of convenience, his Honour had regard to the strength of the arguable case established by Midamarine and the features of the conduct discussed in these Reasons which led to his Honour's conclusion that Mr Corrick had embarked upon a course of conduct astute to the assertions by Midamarine of rights derivative of its Registered Design. His Honour noted the exchanges between Mr Binkin and Mr Corrick, the submission of the two email graphic depictions, the copying of the Warning Instructions containing the reference to the shape of the inflated Wavestar product being a Registered Design, the lack of any evidence of independent design, the contention that DMC was at one point entitled to a Registered Design for its article although now to be discontinued. For interlocutory purposes, his Honour accepted Midamarine's evidence directed to the conscious quality of the conduct particularly the contentions, on all the evidence, that DMC adopted the features of shape, pattern and ornamentation in circumstances amounting to obvious imitation and, having regard to the evidence of knowledge, in a way amounting to fraudulent imitation. 38 I am not satisfied that his Honour's decision in support of the Orders in relation to irreparable damage and the assessment of the balance of convenience is attended by doubt. 39 DMC relies upon three further matters namely, the adequacy of Midamarine's undertaking as to damages, the imminent trial of the matter to commence during the early part of December (possibly 6 December 2006) and DMC's offer to keep proper records relating to importation and sale. 40 As to Midamarine's undertaking, DMC contends that any loss it suffers by reason of the Order will not realistically be recoverable having regard to the financial strength of Midamarine. Midamarine has provided the usual undertaking as to damages and there is a differentiation in the financial standing of Midamarine and DMC. However, in circumstances where Midamarine has satisfied the elements required to be discharged, according to principle, in the exercise of the discretion in the making of an interlocutory injunction Order pending trial, it seems to me that Midamarine ought not to be deprived of the benefit of the interlocutory Order on the ground that it is a corporation incrementally establishing in a market for its products and its financial standing is disproportionate to that of DMC. There is no evidence that Midamarine is in financial difficulty. 41 As to the imminence of the trial, DMC contends that because the trial of the action is to take place in the early part of December, the discretion ought to be exercised against making an interlocutory Order. However, because the trial is imminent, there is a real prospect that the period of the interlocutory restraint confronting DMC is likely to be short and the effect of the Order less burdensome. 42 As to the offer to keep proper records, two things should be said. Firstly, an undertaking to keep proper records is designed to preserve the evidence which would be relied upon by a successful applicant at trial in identifying the basis for an accurate calculation of its compensable loss in money terms. In circumstances where injury or harm not susceptible of compensation in money terms accrues to an applicant by reason of the respondent's conduct, an undertaking to keep proper records is less relevant. Secondly, as indicated in these Reasons, Spender J reached conclusions concerning the strength of the arguable case based upon evidence which suggests a strongly arguable case of fraudulent imitation of the Registered Design. In those circumstances, a question arises as to whether an applicant ought to be deprived of an interlocutory Order and put in a position of reliance upon an interlocutory undertaking of such a respondent. It seems to me that in the circumstances of this case, the Applicant ought not to be put in such a position. 43 Accordingly, I am not satisfied that by reason of the three further matters, his Honour's decision leading to the making of the interlocutory Order is attended by doubt. 44 Accordingly, I propose to dismiss the Application for leave to appeal and order DMC to pay Midamarine's costs of and incidental to the Notice of Motion. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Associate: Dated: 22 November 2006 Counsel for the Applicant: Ms Downes

Solicitor for the Applicant: Mr Hall, Swaab Attorneys

Counsel for the Respondent: Respondent appeared by its Solicitor

Solicitor for the Respondent: Mr Philp, Bennett & Philp, Solicitors