Norm Engineering Pty Ltd v Digga Australia Pty Ltd

EX TEMPORE REASONS FOR JUDGMENT DELIVERED AT 11.12AM 1 I have an application before me under Order 17 Rule 1 of the Rules of the Federal Court of Australia for an order that an expert, Mr Mike Gould and/or one other employee of Qantec McWilliam Consulting Engineers and no more than two employed solicitors of the solicitors for the applicant be permitted (during business hours only) to enter upon the premises of the respondent at two locations, namely 25 Christensen Street, Staplyton and Octale Street, Yatala, Queensland for the purpose of conducting an inspection of each property to determine whether a Norm 4 in 1 Bucket is present on the premises and to inspect and observe the said bucket and undertake any experiment on it in order to determine whether the bucket appears to have been used as a template to reproduce in two or three dimensional form, a version of the bucket by the respondent. 2 The application is made in an action in which the applicant asserts that the respondent has infringed the copyright subsisting in a large number of plans which are pleaded at paragraph 9 of the statement of claim. All of these plans reflect the dimensions and essential elements for various components of manufacture which, when assembled, result in an attachment (a Norm 4 in 1 bucket) to a Bobcat machine which replaces the standard bucket for such a machine. 3 The plans are a work of authorship by Mr Norman Peach who, relevantly, was an employee of the applicant at all material times, and the applicant says that by force of that relationship, the copyright subsisting in the plans is vested in the applicant. The applicant says that the respondent has infringed the copyright subsisting in those plans by making a reproduction of the works in a material form for the purposes of sections 31 and 36 of the Copyright Act 1968 (Cth). 4 The particular acts of infringement are said to be that the respondent has acquired a copy of the applicant's 4 in 1 bucket and has reverse engineered the applicant's bucket by bringing into existence drawings for each component part of the bucket. Those drawings are said to constitute a reproduction of the applicant's drawings. The applicant says that the respondent has then used those drawings to make a three dimensional version of each component part and then assembled a Digga 4 in 1 bucket for sale. In submissions, the applicant says at paragraph 8 that the applicant's case is that the respondent's Digga reverse engineered the applicant's Norm bucket creating plans by which the respondent constructed its own bucket. 5 The applicant says that "a matter in question in the proceeding" therefore is whether the respondent has made a reproduction of the applicant's plans in a material form in the way pleaded and contended for in the applicant's submissions. 6 It seems to me therefore, having regard to the statement of claim, that a matter in question in the proceeding is whether or not the respondent has engaged in conduct which involves taking the applicant's bucket, disassembling the bucket, drawing plans for the component parts and making a reproduction in a material form in the way contended for. A question is whether there is a causal connection between the conduct of the respondent and the alleged acts of infringement. Recently, some affidavits have been prepared and put before the Court which have revealed information going to the question of the conduct of the respondent. In this particular case, the allegations are not only that there has been an infringement of copyright in the way contended for in the pleadings, but that the infringement was undertaken consciously and deliberately. 7 Leave was given to file and read an affidavit by Mr Robert John Robinson sworn 22 September 2005 in which he deposes to a sequence of events involving a number of matters. He says that he worked for the respondent on three separate occasions, since 1992, and most recently a period of employment ending in November 2004. During that period, he discharged the position of shift supervisor for the respondent's machine shop, and in doing so, supervised a number of men, approximately 12. He says that in late 2003, he saw a 4 in 1 bucket manufactured by the applicant on the workshop floor of the respondent in an area which he describes as the "research and development shed" of the respondent. The applicant's bucket was located at the back of the respondent's premises at 25 Christensen Street, Staplyton in Queensland. 8 Mr Robinson says that he believes that the bucket which I have just described was a 4 in 1 bucket manufactured by the applicant and at paragraph 10 of his affidavit he sets out the reason for that view. By paragraph 11 of his affidavit, Mr Robinson says that he saw a number of the respondent's employees in the research and development shed taking measurements of the bucket and making drawings of the applicant's bucket during late 2003. 9 He goes on in his affidavit to describe his role as the machine shop supervisor, and the requirement upon him to produce hydraulic ram components for the respondent's buckets. He says that he was given a copy of drawings or plans for that purpose, but was also provided with a physical ram itself which he says, in his view, was taken from the applicant's bucket. At paragraph 16 he sets out the reasons why he concludes that the ram was taken from the applicant's bucket. The ram was given to him to assist him in producing an equivalent article for the respondent's bucket. 10 Mr Robinson goes on to say at paragraph 17 that he is aware that design drawings for the respondent's buckets were produced during 2003, and that he saw a book of plans specifically relating to the design and manufacturing processes for the respondent's buckets. He says that he is aware that these plans are stored in the archives department of the respondent. He also says that in his experience in discharging his duties and supervising men in the machine area, the production and use of design plans was necessary for the production process. 11 In his affidavit he goes on to describe the number of buckets made by the respondent in the production facility from the workshop, from time to time. In addition to that affidavit which has recently become available, a further affidavit is read by the applicant sworn by Mr Michael Wayne Gould who is a consulting engineer and an expert. Mr Gould has prepared a report which is an engineering and technical examination of the applicant's bucket and the respondent's bucket. This report and the examination process was undertaken to enable the applicant to determine whether there was a basis for asserting copying by reason of a substantial similarity evident in the two buckets in question. 12 Mr Gould comes to a conclusion at paragraph 8.1 at page 6 of his report that "there is a very high probability that the respondent's bucket is a copy of the applicant's bucket". On the basis of the engineering analysis, therefore, the extent of the similarities between the applicant's bucket and the respondent's bucket is said to be pronounced although there are some dissimilarities. The statement of claim based, presumably, upon Mr Gould's report, pleads the extensive range of similarities so as to give rise to the clear inference that there must have been access to the applicant's bucket and a use of the bucket to bring into existence plans for the component parts of the respondent's bucket. 13 The report leads one to the conclusion that there seems to be a reasonably strong case made out that there has been copying of the component parts of the applicant's bucket so as to enable the respondent to make and assemble and sell a competing bucket which is substantially similar to the applicant's bucket. At least, on an interlocutory basis, I am satisfied that, on the basis of the evidence of Mr Gould and Mr Robinson that the components of the applicant's bucket have been copied and that there is a strongly arguable case of reproduction in a material form of the applicant's drawings for the component parts by reverse engineering. 14 There was a further affidavit by Mr Sam Orr, sworn on 20 September 2005, in which Mr Orr deposes to searches undertaken of the respondent's website which showed that the respondent is in the process of moving industrial premises from the present location at Staplyton to a new location at Octale Street, Yatala in south-east Queensland. 15 This application is unusual because it comes as an ex parte application in a pending proceeding. 16 In the matter, there has been a directions hearing, and a statement of claim filed and served formulating the essential contentions and the respondents are no doubt in the process of formulating a defence to the statement of claim. In the ordinary course, one would be reluctant to consider an application for inspection under Order 17 Rule 1 in circumstances where the respondent in a pending proceeding was not present before the Court and did not have an opportunity to present arguments as to whether the discretion should be exercised in favour of enabling the applicant together with its advisers and its expert, to enter the respondent's two premises for the proposed purpose. 17 A further affidavit was read by the applicant being the affidavit of Mr Sam Hargreaves Orr sworn 23 September 2005 attaching a letter dated 21 September 2005 from the solicitors for the respondent to the applicant's solicitors together with a reply from the applicant's solicitors dated 22 September 2005. This affidavit was read in response to my observation that the respondents would probably contend that the applicant's cause of action for copyright infringement is stillborn because the copyright subsisting in the artistic works comprising the plans pleaded at paragraph 9 might not be susceptible of infringement proceedings by force of section 77 of the Copyright Act. In fact, that is precisely what the solicitors for the respondent do contend in their letter of 21 September 2005. 18 In essence, what is said is that the applicant has developed and is the owner of the copyright subsisting in a series of artistic works, that those works reflect a corresponding design, that the corresponding design has been applied industrially and that the elements of section 77(1) are satisfied with the result that section 77(2) operates such that it is not an infringement of the copyright in the artistic work to reproduce the work on or after the day on which products made to the corresponding design were first sold. 19 It seems to me that what is necessarily implicit in the correspondence from the respondent's solicitors is that the answer to the copyright infringement is not whether the conduct of reproduction has occurred (although that might be denied), but whether, as a matter of law, it is not open to the applicant to bring proceedings against the respondent in reliance upon the copyright in the artistic works being the plans pleaded at paragraph 9 by reason of the alleged industrial application of the corresponding design. I mention that because the underlying conduct in question here which is pressed upon the court as a matter of urgent concern is that there has been a conscious and deliberate copying (by reverse engineering) of the copyright in the applicant's plans. The question of whether there is relevantly "a corresponding design" in relation to the artistic works in the form of visual features of shape or configuration which, when embodied in a product, results in a reproduction of the artistic work so as to provide the respondent with a defence to what would otherwise be an infringement of the copyright subsisting in the plans, is a matter that needs to be tested in the course of the proceedings. For present purposes, on an interlocutory basis, I am not satisfied that there is a complete and total answer to the applicant's claims of copyright infringement although the question of an industrial application of a corresponding design is a real and substantial question. 20 It may be that in some respects features of design or visual features of shape or configuration are apparent in the assembly of component parts making up the applicant's bucket and that the respondent has chosen to make a competing bucket which incorporates those visual features of shape or configuration, but it seems to me that that is a different question from whether or not there has been an application of a corresponding design in relation to each and every one of the artistic works/plans for the component parts of the applicant's bucket which, when assembled, reflects particular visual features of shape and configuration. An examination would have to be made of each artistic work, plan by plan to test the extent to which Division 8 of the Copyright Act provides the respondent with a defence to what would otherwise be an infringement of copyright assuming the elements of such an infringement are ultimately made out. 21 Accordingly, I then come to the question of how the discretion should be exercised under Order 17, Rule 1, particularly in the context of an ex parte application where there is recently available clear evidence of conscious copying by the respondent, albeit perhaps in circumstances where the respondent may have always thought and continues to contend that the acts complained of do not amount to an infringement of copyright. However, it is clear that there is a basis upon which, in the right set of circumstances, an order can be made on an ex parte basis, although, of course, the discretion is constrained by recognising that an ex parte order should only be made in unusual circumstances where there is a clear apprehension of risk that the applicant may not be able to obtain the evidence of conscious copying should the application be made, in the ordinary way, on notice. The applicant relies fundamentally on the affidavit of Mr Robinson which has recently become available and seeks to draw an inference that the applicant would be at risk if the application was made on notice. Any question of whether an order should be made is to be assessed against the balancing factors designed to protect the interests of the respondent, the extent of inspection to be allowed, the strength of the applicant's case and the utility and contribution the order might make, in a balanced way to the resolution of the issues in the matter. 22 I have had regard to the ex parte order made in EMI Limited and Others v Pandit (1975) 1 All England Reports at 418, and the principles discussed in that case and the judgment of Chesterman J in Evans Deakin Pty Ltd v Orekinetics Pty Ltd (2002) 2 Qd.R. 345 in which his Honour considered an application under Rule 250(1) of the Uniform Civil Procedure Rules. In that particular case, his Honour was considering proceedings which involved an allegation that the defendants had used confidential information of the plaintiff to produce machines manufactured by the defendants incorporating elements of the plaintiff's confidential information. 23 Although the application was made on notice to the defendants, a number of principles were identified which, in some respects, are illustrative of the approach. The defendants contended that the evidence of the plaintiff did not go far enough to show a substantial and genuine issue to be tried, or that there were formidable grounds for saying that infringement had taken place. In addition, it was said that the application was not supported by any expert opinion going to substantial grounds of infringement. His Honour found that there were some pertinent facts deposed to in affidavits on the application which established some basis for complaint. This seemed a fairly limited assessment of the strength of the plaintiff's established case. 24 His Honour then went on to examine and test the evidence against a number of factors. His Honour said at paragraph 18 that there is no clear evidence that the defendant's machines are the product of any particular information confidential to the plaintiff. His Honour observed that it is no doubt true that an order for inspection of property will not be made unless there is some evidence that the plaintiff's rights are being infringed and that an inspection will facilitate proof of the claim. 25 His Honour goes on to observe that the discretion conferred by the Rule should be addressed by considering whether, in all the circumstances of a particular case, the plaintiff has shown sufficient grounds for intruding on to the defendant's property. His Honour also goes on to make observations about the countervailing factors that need to be taken into account to balance and protect the interests of a respondent to the application. 26 In this particular case, it seems to me, that there is an expert report before me which shows a high degree of conformity between the two buckets in question which suggests that there is a high probability, on the facts, that there has been a copying of the applicant's bucket and that, for the purposes of the Copyright Act, there is at the very least an arguable case of copyright infringement which ultimately will be tested against the legal question of whether a defence to infringement of copyright (if otherwise established) is open to the respondent by operation of sections 74 to 77 of the Copyright Act. 27 It also seems to me that, on the basis of the recent evidence of Mr Robinson, that there is strong evidence that copying has been conscious and deliberate so as to reverse engineer the applicant's bucket. I am conscious that the respondents, if they were here, would seek to say that the cause of action upon which the plaintiff relies is answered by the elements of section 77, but for present purposes, I am satisfied that there is a proper basis for the exercise of the discretion provided that the order sufficiently balances the interests of the respondents. 28 The proposed order involves enabling Mr Gould, the expert engineer, and one other employee of Qantec McWilliam, Consulting Engineers, and no more than two employed solicitors of the solicitors for the applicant to enter and remain on the respondent's premises located at 25 Christensen Street, Staplyton in the State of Queensland for the purpose of ascertaining whether a Norm 4 in 1 bucket, that is, the applicant's bucket, is physically present on those premises, and secondly, an order allowing those gentlemen to enter other premises at Octale Street, Yatala in the State of Queensland for the same purpose. 29 The third limb of the order is one which is intended to allow those gentlemen to inspect and observe the said bucket and undertake any experiment on it in order to determine whether the bucket appears to have been used as a template to reproduce in two or three dimensional form a version of it. Having regard to all of the things I have said, I am prepared to make an order in terms of what is paragraph 5(a) and (b) of the draft order, and I propose to discuss with counsel shortly, aspects in relation to paragraph 5(c). I am not persuaded that the proposed order reflected in paragraph 5(c) should be made in the way formulated. 30 The balancing factors which are designed to protect the interests of the respondent in the face of the recent affidavit material are reflected in the draft paragraph 6 and what is proposed is that at least one hour prior to the execution of this order, the applicants are to serve on the solicitors for the respondent, copies of certain documents to enable the respondent to have the benefit of independent legal advice should they wish to do so and those documents include this order, the notice of motion filed in the application, all material filed in support of the application, and, additionally, a copy of any written submissions relied upon by the applicant on the hearing of this application. 31 I would also require a copy of these ex tempore reasons to be provided to the solicitors for the respondent, although they can be provided once they have become available rather than delay the service of the other documents and the performance and execution of the order. 32 It seems to me that the interests of the proceeding are served by enabling a step to take place which will be productive of the preservation of evidence and the inspection of any bucket of the applicant upon the respondent's premises so as to enable a proper determination of one of the matters in question in the proceeding, namely, reproduction in a material form. 33 I propose then to make an order, essentially in terms of the draft, and I now propose to discuss with counsel, aspects of the draft to be satisfied that the proper balancing factors are incorporated in the order to protect the interests of the respondent and not prejudice the respondent in any way in the conduct of what appears to be a potential defence to the action, namely, the question of whether the applicant has made industrial application of a corresponding design to each of the artistic works pleaded in paragraph 9 of the statement of claim.