Copyright - Engineering drawings - Whether "artistic works" - Application of s.77 of Copyright Act - Infringement - Damages.

Copyright Act 1968, ss.31, 32, 36, 74, 77 and 115.

Counsel for the Second Mr Fica appeared in person

1. The Application be dismissed, with no order as to costs.

2. The Cross-claim of Warman International Limited be dismissed, with no order as to costs.

3. On the cross-claim of Peko-Wallsend Operations Limited:

(a) Adrian Octavio Fica by himself, his servants and

agents, be restrained from reproducing or authorising

the reproduction of the whole or any substantial part

of any of the drawings identified in the First or

Second Schedules to the Further Amended Cross-claim

filed herein on 31 July 1991 and from publishing or

assigning to any person the whole or any substantial

part of any of the said drawings;

(b) within seven days of this order, the said Adrian

Octavio Fica deliver up an oath to the solicitors for

the cross-claimants all drawings in his possession,

custody or control which are the originals or

reproductions of any of the drawings identified in the

First or Second Schedule to the said Further Amended

Cross-claim; and

(c) within seven days of this order, the said Adrian

Octavio Fica deliver to the District Registrar of this

Court all moulds and patterns in his possession,

custody or control which constitute a reproduction of

the whole or a substantial part of any of the drawings

identified in the First or Second Schedule to the said

Further Amended Cross-claim and notify the solicitors

for the cross-claimants of such delivery.

4. Judgment for damages be entered in favour of Peko-Wallsend Operations

Limited against Amalgamated Mining Services Pty Limited and Adrian Octavio Fica in the sum of three million dollars ($3,000,000); provided however that the said judgment shall not be enforced against Amalgamated Mining Services Pty Limited except with the prior leave of the Supreme Court of New South Wales or this Court.

5. Amalgamated Mining Services Pty Limited and Adrian Octavio Fica pay to Peko-Wallsend Operations Limited the costs incurred by it in connection with its cross-claim; provided however that this order shall not be enforced against Amalgamated Mining Services Pty Limited except with the prior leave of the Supreme Court of New South Wales or this Court.

6. All parties have liberty to apply on seven days notice in relation to:

(a) any order sought in the said Further Amended

Cross-claim but not dealt with in these orders; and

(b) any matter arising out of the interpretation or

implementation of these orders.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. (See also Order 37 rule 2(3)).

WILCOX J. This is a copyright case concerning engineering drawings. It arises under a cross-claim, the two respondents contending that the cross-respondents, the applicant Amalgamated Mining Services Pty Limited ("AMS") and one Adrian Octavio Fica, have infringed their copyright in the drawings.

2. The first respondent, Warman International Limited ("Warman"), is a manufacturer of mining equipment. It is the successor in title to a number of other companies, most of which were founded by Charles Harold Warman. Dr Warman was born in Kalgoorlie, Western Australia, in 1910. He was trained as a mechanical and electrical engineer. After five years as a design draftsman, Dr Warman practised in Kalgoorlie as a consulting engineer; at first as an individual, later through various companies. In 1958 he moved to Sydney and established a research company.

3. It is apparent that Dr Warman is a most inventive person. Throughout the whole of his career he was involved in the improvement of mining techniques and equipment, with particular emphasis on slurry handling equipment and pumps. For this purpose he personally prepared numerous engineering drawings from which patterns and moulds could be fabricated. In the result, Dr Warman built up a substantial collection of mining equipment drawings.

4. In 1969 Dr Warman sold his engineering interests (including control of most of his companies) to Peko-Wallsend Limited, a company involved in mine operation. The copyright in the drawings created by Dr Warman was assigned to an associated company: Peko-Wallsend Operations Limited ("Peko"), the second respondent.

5. Following the 1969 sale, companies within the Peko-Wallsend group continued the work previously undertaken by Dr Warman and his companies. New equipment was designed. Existing designs were improved. New drawings came into existence. Peko was successful in selling equipment to both Australian and overseas miners and in negotiating agreements with some overseas manufacturers whereby they were licensed to manufacture equipment according to the drawings. As the figure is commercially sensitive, I will not state the current annual value of the company's overseas sales; it is sufficient to say that it represents an important addition to Australia's export earnings.

6. No doubt because of the value of the drawings, the respondents have experienced problems in maintaining their confidentiality. In 1986 the present two respondents and two associated companies took legal action against a company called Envirotech Australia Pty Limited ("Envirotech") and two of its executives, both of whom were formerly senior Peko employees: see Warman International Ltd v Envirotech Australia Pty Ltd (1986) 67 ALR 253. The evidence in that case suggested that, shortly before the litigation, Envirotech had acquired the business of one or both of two associated companies, Earthmoving Accessories (Wollongong) Pty Ltd ("EMA") and EMA Industries Pty Ltd. One of the individual respondents, Kenneth Wilfred Symonds, was a director of both these companies. He became a senior employee of Envirotech.

7. Mr Symonds provides a link to the present case. Between November 1979 and November 1981, Mr Fica, the second cross-respondent, was employed by Warman as a contract draftsman. In early 1982 he entered the employment of a company called MFS Corporate Services Pty Ltd ("MFS"), working as a draftsman. Shortly after that time, he contacted Victor Starke, a Warman draftsman, and invited him to lunch. At lunch, Mr Fica told Mr Starke that he had a good job with another company. He said:

"I've a Warman pump magazine which shows an arrangement of a

pump but doesn't show details of parts in general. I need

some detail drawings to help me with the job that I'm doing.

I don't have time to start studying books to produce a

drawing in the level of detail that I need. Would it be

possible for you to supply to me some Warman drawings?

There will be some money in it for you."

8. Mr Starke told Mr Fica he would think about his offer. Subsequently he declined to provide any drawings. Mr Fica asked him not to tell anyone at Warman about the conversation. Until recently, Mr Starke did not do so.

9. Notwithstanding Mr Starke's refusal to supply drawings, Mr Fica became involved in large-scale copying of Warman drawings. This finding is based on Mr Fica's own admissions. In an affidavit read in this proceeding, Robert John Weekes, Warman's executive director, set out the substance of a conversation he and a colleague, Paul White, had with Mr Fica on 2 May 1986. At that time Mr Fica told the two men that, when he commenced with MFS in 1982, one Craig Miller was chairman of both MFS and EMA. Mr Fica said that "EMA had established MFS to act as a co-ordinator of the manufacture of replica parts for Warman pumps by other sub-contractors using patterns and moulds made to the drawings provided to MFS by EMA". Although employed by MFS, Mr Fica worked in EMA's office. He told Mr Weekes and Dr White that, shortly after he started in that office, he saw Mr Symonds. He recognised him from the time he (Mr Fica) had spent at Warman. Soon after the time Mr Fica saw Mr Symonds, Mr Miller gave him prints of drawings of Warman pump parts with the title blocks removed. He instructed Mr Fica to convert the prints into reproducibles and to finish off the title blocks by showing them as MFS drawings. Mr Fica said that he did this by creating dummy title blocks on which he inserted randomly selected dates for the original drawings and revisions. He signed many of these as having been drawn by "AF". He then inserted some initials, or a squiggle, in the "checked box" to denote the signature of a checker. Mr Fica told Mr Weekes and Dr White that his responsibilities, while at MFS, also included arranging for the manufacture of patterns and moulds for replica Warman parts and the making of parts utilising these patterns and moulds. For this purpose, Mr Fica printed copies of the drawings, as they were needed, and provided them to pattern makers, toolmakers, foundries and machine shops.

10. During the period Mr Fica was employed by MFS one of its directors was Harold Holden. Mr Holden gave evidence in this case. It appears that, many years ago, Mr Holden served an apprenticeship as a printing engineer. But he has not been actively involved in engineering work, or the drawing of engineering plans, for some 30 years. His current occupation is superannuation consultant. However, Mr Holden was familiar with the activities of MFS, at least in broad terms. He gave evidence that the company entered into an arrangement with EMA to produce replica Warman parts for the mining industry. MFS was not concerned with the sale of the parts. It delivered all the parts it produced to EMA. Mr Holden said that EMA provided drawings to MFS, although they were mostly sketches, and Mr Fica transformed them into drawings able to be used in the manufacture of the parts themselves.

11. It seems from Mr Holden's evidence that, in about 1984, a new company became involved in these activities. This was AMS, the present applicant. Mr Holden and Mr Fica both became directors of AMS. According to Mr Holden, AMS, in effect, took over the business of MFS. As he put it, AMS "took up where MFS had left off". AMS made drawings and parts for EMA. Mr Fica was General Manager of AMS. Nonetheless, he continued personally to prepare drawings.

12. A stage was reached when EMA did not pay its account. There was litigation between AMS and EMA. According to Mr Holden, this was resolved on terms which included a requirement that AMS deliver all the drawings to EMA. Mr Holden was unable to say whether this was done. There is no evidence that it was.

13. For a period of about two years, apparently about 1986 to 1988, a technical draftsman now named Monty Montazami worked for AMS. He was supervised by Mr Fica. Mr Fica and Mr Montazami were the only AMS employees with technical expertise. The other employees were an accountant and a receptionist-typist. Mr Montazami's job was to redraw design drawings for slurry pump parts. In his affidavit he described his standard routine:

"5.1 Adrian Fica would give to me a photocopy of a drawing for the pump

part in question, or 2 or 3 photocopies of different parts of the

drawing in question. None of the copies bore any part of a title

block.

5.2 Some of those photocopies had been annotated to indicate that

dimensions were to be changed when the drawing was redrawn.

Others had certain dimensions, (often as many as half), or part

segments for some drawings omitted altogether. In place of the

missing dimensions or segments would often be the slight shadows

than can result when photocopies are made of 'whited out'

documents. In that instance I was generally told or sometimes

instructed in writing to insert specified dimensions.

5.3 Adrian Fica would often indicate to me to alter the location of

the views in the redrawing I was to prepare. That is, I was to

draw the exact same part in the same view, but relocate the view

on the redrawing.

5.4 Adrian Fica would also indicate to me generally orally but

sometimes by providing to me written notes, what notes were to

appear on the redrawing.

5.5 I would then begin to prepare the redrawing of the part in A2 or

A3 size, often either tracing the photocopy part or photocopying

or tracing the photocopies providing to me by Adrian Fica.

5.6 For some complicated parts such as pump impellers I would

generally trace the new design drawing from the photocopies given

to me by Adrian Fica.

5.7 Where dimensions had been changed on the photocopies provided to

me by Adrian Fica I would insert the new dimensions into the

redrawing.

5.8 Where dimensions had been omitted from the photocopies provided to

me by Adrian Fica, and where Adrian told me that I was to

determine those dimensions myself, I would often prepare a layout

from which I could calculate the missing dimensions. The missing

dimensions were generally either tolerances or radii. However

often the drawing from which I was to copy the part was

substantially smaller than the full scale. In that case I would

firstly prepare a photocopy enlargement or a full scale layout of

the photocopy provided to me by Adrian Fica and then use that

enlargement or payout to make the redrawing. I would calculate

the missing dimensions from the full scale layout either by

measuring directly or using a protractor and compass. For

example, where I was instructed to determine the radius of the

volute between various nominated points around the volute I would

gradually adjust a large compass until I had determined the radius

and centre point of a circle that corresponded to the radius of

the arc between those nominated points on the volute. I would

then insert the radius of that arc on the redrawing. These

measurements and computations were always based on the drawings

given to me and never from genuine Warman parts.

5.9 Where the drawing I was to prepare was for a very simple part such

as a seal or a throatbush, the foregoing routine could be varied

somewhat. For instance, Fica might give me a photocopy for only

one pump size, and instruct me to prepare a redrawing which was

then copied and different dimensions allocated to different size

pumps. I did not actually calculate these dimensions myself - the

dimensions were always specified by Adrian Fica.

5.10 I was told by Adrian Fica to adopt certain lettering systems when

labelling sections on the detailed design drawings I prepared (for

example A-A). I was also told by Adrian Fica to adopt certain

tolerance dimensions, regardless of what appeared on the original

photocopy.

5.11 Once I had finish a redrawing for a particular part I would give

the redrawing to Adrian Fica. Adrian Fica would leave with the

redrawing and bring it back a few hours or a few days later,

depending on how busy he was, and either approve the redrawing or

indicate changes to be made to dimensions or other aspects of the

redrawing.

5.12 Once a redrawing had Adrian Fica's final approval, I would insert

an AMS title block on it. I did not, however note in the title

block of the redrawing note that the drawings were redrawings,

despite standard professional practice of documenting on a

redrawing the number of the drawing from which it was redrawn.

The redrawing would then be filed in a vertiplan cabinet kept at

AMS's premises to which Adrian Fica, but not I had a key. ...

5.13 I would generally insert into the title block of the initials 'SM'

to signify that I was the draftsman who prepared the redrawing. I

used 'SM' because at that time I was known as Shahram Montazami.

5.14 Only when I finished a redrawing for one would Adrian Fica provide

to me photocopies of drawings for the next part for which a

redrawing was requested. Adrian Fica would generally collect the

photocopies of the drawings from which I was working when each

redrawing was approved and completed."

14. Mr Montazami stated that, on one occasion, Mr Fica said words to the effect that the drawings on which he was working were for parts to fit Warman slurry pumps. Mr Montazami originally estimated that, whilst at AMS, he prepared approximately 400 redrawings of slurry pump parts. This estimate was challenged in cross-examination and Mr Montazami revised it downwards to 300. Whatever the true figure, there is no reason to doubt that, during his time at AMS, Mr Montazami copied hundreds of drawings at Mr Fica's behest. Mr Montazami said that he never saw any genuine Warman parts at AMS. It follows that he did not see any "reverse engineering" being carried out; "reverse engineering" being the process whereby a drawing is prepared by deriving the necessary information from the inspection and measurement of the manufactured part.

15. Mr Montazami said that he had no regular contact with the foundries or machine shops which manufactured parts for AMS. But he was aware that Mr Fica had such contact. He was also aware that Mr Fica paid regular visits to Malaysia. On a couple of occasions, he received telephone calls from Mr Fica in Malaysia.

16. On 7 July 1988 thisproceeding was commenced. Initially the only parties were AMS and Warman. The proceeding arose out of a letter, dated 23 May 1988, sent by Warman to a company called Queensland Mining Supplies. According to the Statement of Claim, this letter suggested that AMS had infringed Warman's copyright in connection with parts for Warman pumps. AMS sought relief (declarations, injunctions and damages) pursuant to s.202 of the Copyright Act 1968 and ss.52 and 53 of the Trade Practices Act 1974.

17. On 25 July 1988 an Amended Statement of Claim was filed, adding Peko as a respondent. On 26 August a Defence and Cross-claim were filed. The cross-claimants were the two respondents, Warman and Peko. AMS was the only named cross-respondent. The cross-claim alleged breach of copyright in the cross-claimants' engineering drawings.

18. In September 1988 the respondents applied for an order that the applicant provide security for their costs. The application was refused: see [1988] FCA 309; 88 ALR 63. Thereupon the matter became dormant. It seems that the applicant lost interest in the letter to Queensland Mining Supplies. For their part, according to their subsequent explanation, the respondents had no evidence of widespread infraction of copyright by AMS. So they were content to let sleeping dogs lie. This attitude changed in July 1991, when the matter was revived by the respondents. As a result of information they gained about Mr Fica's recent activities, the respondents' solicitors obtained an "Anton Piller" order for execution at Mr Fica's residence in Turramurra and the AMS office at North Rocks. The order was executed on 14 July 1991. Some computer disks were seized at Mr Fica's home and 83 engineering drawings at the AMS office.

19. Shortly after 14 July a Further Amended Cross Claim was filed. Mr Fica was added as a cross-respondent. The new pleading alleged that Peko was the owner under the Copyright Act of the copyright in the artistic works specified in the First and Second Schedules to that document and all revisions and redrawings thereof. The First Schedule identified ten parts and the Second Schedule 420 parts. Each part was identified by reference to the Warman part number and drawing number.

20. AMS is now in liquidation. The liquidator has not pursued the company's original complaint. The principal proceeding should therefore be dismissed. I propose to so order. The cross-claim is pressed against both cross-respondents, the necessary leave having been given in connection with AMS. However, Warman's cross-claim cannot succeed. Counsel for the cross-claimants concede that Warman has no copyright interest in the drawings. The case comes down to Peko's cross-claim.

21. At the hearing AMS was not represented. Mr Fica appeared on his own behalf and conducted his case in person. He demonstrated a good understanding of the evidence and issues and put his points clearly.

22. Before turning to the issues for my determination, I should mention some further facts. On 19 February 1991, AMS entered into an agreement with Comlas Pty Limited ("Comlas") for the sale to that company of what the agreement described as "AMS Business Assets". Comlas is an Australian company but, according to the agreement, it is a wholly owned subsidiary of R M Holz Inc ("Holz"), a company incorporated in the United States. Holz is itself a subsidiary of a British company, BBA Group plc ("BBA").

23. The agreement of 19 February 1991 provided for the sale by AMS to Comlas of all the operating assets used by AMS in its business and located in Sydney or Malaysia, including "all equipment, machinery, tools and tooling, patterns, molds and dies, and all other assets and tangible personal property used or dedicated to the AMS Business". The sale included the items listed in an attachment marked "A". Attachment "A" identified some pieces of furniture and about 320 drawings. The drawings were described by reference to the depicted part, the drawing number and the part number. They appear all to relate to parts used in mining activities.

24. The agreement also provided for the purchase by Comlas of all "confidential technical information, process manuals, formulae, trademarks, tradenames, trademark licenses and applications, know-how, innovations, invention disclosures and technology, including without limitation all specifications, drawings and designs in use or historically used at the AMS Business Sites". Other intangible property, such as outstanding orders, assignable contracts, franchises, licences, permits, catalogues etc. and inventories of raw materials were included. The specified purchase was $750,000, of which $250,000 was to be paid immediately and the balance by instalments over twelve months. The agreement was executed under the common seal of AMS, the seal being counter-signed by Messrs Fica and Holden as directors and one Rodney Bell as secretary.

25. Amongst the documents attached to the agreement is a schedule described as "AMS Rubber Part List from Malaysia". This reference ties in with a series of facsimile transmissions, which are in evidence. They passed between Mr Fica and one Denis Crumb of Holz and concerned the despatch of items from Malaysia to Holz in America. The evidence also includes a freight invoice dated 1 April 1991 concerning the delivery to America of four crates of "moulds for compression moulding".

26. The evidence does not establish when, or how, Warman learned of AMS's Malaysian connection. However, it does show that on 17 May 1991, Allan Wightley, Warman's General Manager - Group Development, caused a private inquiry agent to purchase a plate liner from Tan Kor Seng and Sons Rubber Wares in Ipoh, Malaysia. Mr Wightley examined the plate liner and, for reasons which he gave in evidence, concluded that it came from the same mould as the corresponding Warman plate liner. Armed with this evidence, Mr Wightley procured an "Anton Piller" order from the High Court of Malaysia against Tan Kor Seng. He attended when it was executed. Mr Wightley said in evidence that the executing party obtained from Tan Kor Seng many drawings of Warman pump parts which bore title blocks with the name "Amalgamated Mining Services Pty Limited" and many replica Warman pump parts which bore the initials "AMS".

27. The evidence suggests that the initial instalment ($250,000) due by Comlas to AMS under the agreement of 19 February 1991 was paid. But it seems that subsequent instalments have not been paid, the reason being Holz's opinion that AMS breached its title warranty.

28. After learning of the AMS-Comlas agreement, senior Warman officers contacted Holz, claiming that the drawings sold by AMS to Comlas were reproduced in breach of copyright. Holz responded by offering to return the drawings to Warman in return for a cash payment of $10 million and an order for $5 million worth of rubber work. Not surprisingly, this proposition was rejected. Warman embarked on litigation against Holz in the United States. According to Mr Weekes, in late 1991 Warman obtained a preliminary injunction. He understands that a final hearing is scheduled for February 1993. Mr Weekes deposed that, to the date of his evidence (8 September 1992), Warman had spent more than US$1 million on the litigation against Holz, its reason being that "Warman wishes the return of its drawings and the patterns and moulds made off those drawings".

29. The cross-claimants filed extensive evidence concerning the provenance of the various drawings listed in the Schedules to the Further Amended Cross Claim. This was done in a very thorough way. By a series of affidavits containing schedules, the draftsman of each drawing was identified. There was evidence as to the employer of each draftsman at the date when the drawing was made. Each employer was an entity whose copyright interests have been assigned to Peko, or was Peko itself. Each drawing was made in Australia by a person then resident in this country.

30. When the affidavits were read, they seemed to me to establish Peko's claim to hold copyright in each of the scheduled drawings. But this was before cross-examination of any of the deponents. Wishing to establish whether there was any issue about any aspect of this evidence, I asked Mr Fica his position. During the ensuing discussion, he indicated that he raised no issue about Peko's copyright in the drawings. With Mr Fica's agreement, I made the following formal note:

"Note that the second cross-respondent concedes for the purpose of this

case that the various drawings referred to in the Further Amended Cross

Claim filed on 31 July 1991 were brought into existence by employees of

Dr Warman or one of the companies in the Warman group and are drawings

in relation to which the relevant employer has assigned its copyright

(if any) to the second cross-claimant".

31. This concession does not, of course, bind the first cross-respondent, which was not represented at the hearing. But the evidence adduced by the cross-claimants affirmatively satisfies me of the truth of the matters conceded; and also, as noted above, that the drawings were all made in Australia by Australian residents.

32. Mr Fica made clear that his concession was without prejudice to the defences to the cross-claim which he wished to raise. They are three in number and constitute the issues concerning liability I have to determine. The three defences are: first, a denial that the drawings are "artistic works" within the meaning of the Copyright Act; second, a claim that the drawings are taken out of the protective provisions of the Act because of the operation of s.77; and, third, a denial by Mr Fica that he infringed Peko's copyright. I will deal separately with each of these defences.

33. Section 32 of the Copyright Act provides that, subject to the Act, "copyright subsists in an original literary, dramatic, musical or artistic work that is unpublished" and of which the author was a "qualified person" at the time when the work was made. The term "qualified person" is defined by s.32(4) so as to include a person resident in Australia. Each of the persons who authored drawings listed in the Schedules to the Further Amended Cross-claim was at the time resident in Australia.

34. The nature of the copyright referred to in s.32 of the Act is spelled out in s.31. In the case of an artistic work, it includes the exclusive right to reproduce the work in a material form and to publish the work. Section 36 provides that, subject to the Act, "the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia, of any act comprised in the copyright". In other words, it is an infringement for a person, without the consent of the owner, to reproduce the work in a material form or to publish the work.

35. Two observations about this legislative scheme are appropriate. I make them because of comments made by Mr Fica during the course of the hearing which reflected misunderstandings by him of the legislation. Although, in the end, Mr Fica put no argument which reflected these misunderstandings, they may have affected his conduct over the years and his initial approach to this case. It is therefore appropriate that I record the two points and explain why I suggested to Mr Fica that his understanding of the position was wrong. First, contrary to his apparent belief, there is no requirement in Australian law for registration of copyright. Provided that the relevant work is a literary, dramatic, musical or artistic work, as each of these terms is defined, the definition contained in s.31 applies; as also does s.36. Secondly, although the point is academic in this case since there is no evidence of "reverse engineering" having been carried out, Mr Fica apparently believed that no infringement of copyright occurs in a case where engineering drawings are created by this process. Where "reverse engineering" is used, there is no direct copying. The draftsman of the new drawing may not have seen the original drawing. Nonetheless, if the work has been accurately done, the new drawing will reproduce the artistic work (if that is what it is); that is the original drawing. Despite the use of the word "copyright", the right which the Act creates is not limited to protection against copying. It extends to unauthorised reproduction.

36. I turn to the question whether the drawings itemised in the two Schedules are artistic works. That term is defined by s.10 of the Act in this way:

"'artistic work' means -

(a) a painting, sculpture, drawing, engraving or photograph, whether

the work is of artistic quality or not;

(b) a building or a model of a building, whether the building or model

is of artistic quality or not; or

(c) a work of artistic craftsmanship to which neither of the last two

preceding paragraphs applies;

but does not include a circuit layout within the meaning of the Circuit

Layouts Act 1989."

37. The subject documents are all drawings. Accordingly, they fall within para.(a) of the definition. I can accept that few people would regard them as being of artistic quality; but the paragraph makes clear that this does not matter. Mr Fica did not put any submission in support of his suggestion that the relevant drawings are not artistic works. I see no basis for that suggestion and reject this defence.

38. Section 77 appears in Division 8 of Part III of the Copyright Act. That Part is concerned with the relationship between rights arising under copyright law and the operation of the Designs Act 1906. The latter Act provides for the registration of designs capable of industrial application, subject to certain exclusions. Division 8 was amended - by the Copyright Amendment Act 1989 - with effect from 1 October 1990. And the situation which existed in relation to registrable designs before the commencement of the 1968 Act - that is, under the Copyright Act 1912 - was quite different to that under the 1968 Act. As the subject drawings came into existence over a lengthy period, extending from the era of the 1912 Act until (possibly) after 1 October 1990, it is necessary to consider the position as it was under each legislative regime.

39. Although it made some local adaptations, mainly in connection with procedural matters, the underlying purpose of the 1912 Act was to apply in Australia the terms of the United Kingdom Copyright Act 1911. Section 22(1) of the latter Act provided that it should "not apply to designs capable of being registered under the Patents and Designs Act 1907, except designs which, though capable of being so registered, are not used or intended to be used as models or patterns to be multiplied by any industrial process". The evident intent was to avoid the dual protection of such works; that is, under both design law and copyright law. The adopted solution was the granting of protection under design law, copyright protection being totally excluded. The Australian Parliament accepted this solution. In applying the United Kingdom Act, it modified s.22 so as to substitute for its reference to the United Kingdom design legislation a reference to the Australian Designs Act 1906: see s.9(c). It follows that copyright could not be acquired in a design created in Australia during the operation of the Copyright Act 1912 which was capable of registration under the Designs Act. This situation was not affected by the repeal of the 1912 Act. On the contrary, one of the transitional provisions of that Act, s.218, provided, first, that Division 8 of Part III had no application to artistic works made before the commencement of the Act and, secondly, that:

"(c)opyright does not subsist by virtue of this Act in an artistic work

made before the commencement of this Act which, at the time when the

work was made, constituted a design capable of being registered under

the Designs Act 1906, or under that Act as amended and in force at that

time, and was used or intended to be used, as a model or pattern to be

multiplied by any industrial process."

40. It follows from the above that, in relation to the drawings made during the operation of the 1912 Act (that is prior to 1 May 1969), the critical question is whether they constituted designs capable of being registered under the Designs Act. I referred to this matter briefly in Warman v Envirotech at 269-272. Although it was not appropriate to reach any final conclusion on the matter, for the purposes of that interlocutory application, I expressed the view that the subject drawings were not capable of registration under the Designs Act. My reason was that the drawings did more than graphically describe the articles to be produced. They contained information, such as that concerning data and tolerances, which was necessary, or at least highly desirable, for the manufacture of the articles.

41. The same statement is true of the drawings in issue in this case. I adhere to the view I expressed in Warman v Envirotech and apply it to the subject drawings. But there is an additional reason for holding that those of the subject drawings which came into existence prior to 1 May 1969 were not registrable under the Designs Act. To be registrable under the Designs Act, a drawing or article must constitute a "design" within the meaning of that Act: see s.17. Until it was replaced in 1982, the definition of the term "design", contained in s.4 of the Designs Act, read:

"'Design' means an industrial design applicable, in any way or by any

means, to the purpose of the ornamentation, or pattern, or shape, or

configuration, of an article, or to any two or more of those purposes;"

42. This definition made no express reference to function. However, in Hosokawa Micron International Inc v Fortune (1990) 26 FCR 393, a Full Court held that, whilst it was in place, a design whose features were dictated solely by the function of the article was not registrable. In the present case there is unchallenged evidence from an expert engineer, Douglas Graham Jones, that the shape and configuration of each of the parts depicted on the drawings reflect the draftsman's attempts "to maximise the efficiency of the pump while still taking into account practical considerations such as the manufacturing methods to be employed in producing the parts. Aesthetic considerations have no part to play in the design or configuration of each part". This evidence brings the present case directly within the authority of Hosokawa Micron, insofar as it relates to drawings produced during the operation of the 1912 Copyright Act. If for no other reason, in relation to those drawings, the s.77 defence must fail.

43. As I have mentioned, the situation which applied after the commencement of the Copyright Act 1968 was different to that under the earlier Act: see Ametex Fabrics Inc v C and F Fabrics Pty Limited (Wilcox J, 6 November 1992, not reported). Under the new Act the industrial application of the corresponding design of an artistic work did not mean that the copyright was annihilated; it was merely "not an infringement of the copyright in the work" to do certain things. This immunity was provided by s.77. Section 77(1) set out a series of factual conditions for the application of subss.(2) and (3), which conferred the relevant immunities. They included (para.(d)) that the relevant articles were not "articles in respect of which the corresponding design has been registered under the Designs Act". Nothing was said in s.77(1) about registrability. But that notion was fundamental to the operation of the section because the immunities conferred by subss.(2) and (3) were in relation to acts "within the scope of the copyright in the corresponding design". Section 74(2)(b) defined "the scope of the copyright in a registered design" as being "the aggregate of the things that, by virtue of that Act, the person registered as the owner of the design would have had the exclusive right to do". Of course, there could be no such right unless the design was registrable. It was apparently because of considerations such as these that Franki J, with the agreement of Woodward J, held in Edwards Hot Water Systems v S W Hart and Co Pty Ltd [1983] FCA 251; (1983) 49 ALR 605 at 632 that "before a design can be a corresponding design within Division 8 of Part III of the Copyright Act, it must satisfy the definition of 'design' within the Designs Act".

44. It follows from the above that the initial enactment of the 1968 Copyright Act did not change the situation. The drawings not being registrable under the Designs Act, s.77 conferred no immunity on those who might infringe the copyright in the drawings.

45. In 1981 Parliament enacted the Designs Amendment Act 1981. It came into operation on 1 April 1982. The amending Act made significant amendments to the Designs Act 1906, as previously amended. One of the amendments was the substitution of a new definition of the term "design":

"'design' means features of shape, configuration, pattern or

ornamentation applicable to an article, being features that, in the

finished article, can be judged by the eye, but does not include a

method or principle of construction;"

46. The amendments also included a new s.18, in this form:

"18. An application for registration of a design shall not be refused,

and a registered design is not invalid, by reason only that the

design consists of, or includes, features of shape or

configuration that serve, or serve only, a functional purpose."

47. It is obvious, in the light of the new s.18, that after 1 April 1982 it was no longer a sufficient objection to registrability that the design was dictated by purely functional considerations. Accordingly, that particular argument is not available to Peko in respect of any drawings created after that day. There may be merit in Peko's argument that there were other objections to registrability; namely, that the designs of the drawings did not have "sufficient individuality of appearance" to distinguish them from "the fundamental form" of the articles they described - see Malleys Ltd v J W Tomlin Pty Ltd [1961] HCA 77; (1961) 35 ALJR 352 - and that their features did not convey the idea of "one particular individual and specific appearance": see Firmagroup Australia Pty Ltd v Byrne and Davidson Doors (Vic) Pty Ltd (1987) 61 ALJR 495 at 497. In order to evaluate that argument, it would be necessary to consider separately each drawing. But this is unnecessary. Even assuming that the designs contained in the various articles were registrable in relation to the articles the drawings depicted, the reproduction of the drawings by the respondents is not deprived of copyright protection by s.77, either in its original or present form.

48. For the purpose of this point, I assume satisfaction of each of the conditions specified in s.77(1) of the Copyright Act. That assumption includes the assumption that the corresponding designs for each of the pumps were registrable, though not in fact registered. The consequences of those assumptions, in the Act's original form, were twofold. First, during the period of 15 years from the date on which articles made to the corresponding design were first sold, let for hire or offered or exposed for sale or hire, "it is not an infringement of copyright in the work to do anything that, at the time when it is done, would have been within the scope of the copyright in the corresponding design" if the corresponding design had then been registered in relation to the relevant articles: see s.77(2). Secondly, after the expiration of the 15 year period, "it is not an infringement of the copyright in the work to do anything that, at the time when it is done, would, if the corresponding design had been registered immediately before that time, have been within the scope of the copyright in that design as extended to all associated designs and articles": see s.77(3).

49. (The Designs Amendment Act 1981 amended s.77(2) and (3) slightly, so as to substitute a reference to 16 years, in place of 15 years, in subs.(2) and to substitute in each subsection the words "monopoly in the corresponding design" for "copyright in the corresponding design". These amendments are presently immaterial.)

50. Common to both subss.(2) and (3) of the old s.77 is the concept of an immunity in respect of infringement in relation to an act which, when it was done, was "within the scope of the copyright in the corresponding design". That means the copyright under the Designs Act, obtainable on registration under that Act. Under the Designs Act registration is available in relation to articles, not in relation to a design per se: see s.20. So the assumption I make assumes that each design was registered in relation to an appropriate article; that is, a pump or other piece of mining equipment. Making that assumption, s.30(1) stipulates what actions are within the scope of the copyright thereby conferred. Since the commencement of the Design Amendment Act 1981, the period of present concern, that section has read:

"30(1) A person shall be deemed to infringe the monopoly in a

registered design if he, without the licence or authority of the owner

of the design -

(a) applies the design or any fraudulent or obvious limitation

of it to any article in respect of which the design is

registered;

(b) imports into Australia for sale, or for use for the purposes

of any trade or business, any article in respect of which

the design is registered and to which the design or any

fraudulent or obvious imitation of it has been applied

outside Australia without the licence or authority of the

person who was the owner of the registered design at the

time when the design or imitation was so applied; or

(c) sells, or offers or keeps for sale or hires, or offers or

keeps for hire, any article -

(i) to which the design or any fraudulent or

obvious imitation of it has been applied

in infringement of the monopoly in the

design; or

(ii) in respect of which the design is

registered and to which the design or any

fraudulent or obvious imitation of it has

been applied outside Australia without the

licence or authority of the person who was

the owner of the registered design at the

time when the design or imitation was so

applied."

51. It will be noted that each of the actions referred to in s.30(1) are actions in relation to an "article". The word "article" is not defined for the purposes of the Copyright Act but, in the context, it must bear its Designs Act meaning. The definition in that Act refers to an "article of manufacture". It does not include a sheet of paper whose only function is to carry the design. It follows that the subsection has no application to plan-to-plan copying. The doing of such a thing is not an infringement of the monopoly in the registered design; it is not "within the scope of the copyright" - or "monopoly" - in the corresponding design". Accordingly, it is an action not included within either of the immunities conferred by s.77 in its original form.

52. This conclusion is consistent with the view I expressed in Hutchence v South Seas Bubble Co Pty Ltd (1986) 64 ALR 330 at 342: that s.77(2), as it then stood, was "consistent with the concept of specificity of registration". I said that a "copyright owner only loses his or her rights under that section in respect of infringements made by another person in regard to articles of the same type as those previously sold, hired, or offered for sale or hire by or with the licence of, the copyright owner". This approach was endorsed by a Full Court in Lorenzo and Sons Pty Ltd v Roland Corporation [1992] FCA 318; (1992) 23 IPR 376 at 383-384.

53. The Copyright Amendment Act 1989 substituted, from 1 October 1990, a new form of s.77(2). The subsection now provides:

"(2) It is not an infringement of the copyright in the artistic work to

reproduce the work, on or after the day on which articles made to

the corresponding design are first so sold, let for hire or

offered or exposed for sale or hire, by applying that, or any

other, corresponding design to an article."

54. It will be seen, once again, that the immunity conferred by the section relates to the application of a corresponding design to an article. The current provision, like the earlier subsections, says nothing about plan-to-plan copying.

55. There may be other reasons for rejecting the application of s.77 to this case. The above discussion is not necessarily exhaustive. But I think it does indicate that, whatever period is selected, s.77 provides no defence to Peko's action for infringement by plan copying.

56. I turn to the matter of infringement. On this issue Peko's case is overwhelming. The historical account earlier set out shows that, over a period of some ten years, Mr Fica has been engaged in the systematic reproduction of Warman plans and the exploitation of their value by the manufacture of parts. Mr Fica described his activities to that date at his meeting with Mr Weekes and Dr White on 2 May 1986. He referred to his more recent activities in an affidavit dated 19 July 1991 which was sworn and filed in this proceeding and tendered against the cross-respondents by counsel for the cross-claimants. Mr Fica was then a director of AMS and able to make admissions on its behalf as well as admissions against himself. The affidavit was apparently prepared by solicitors. It bears the name and address of McCabe Brown, the firm of solicitors which acted for AMS in connection with the Comlas transaction. In this affidavit Mr Fica deposed that he supplied on behalf of AMS "drawings of the parts indicated by the reference numbers set out in the schedules to this affidavit": to Comlas Pty Ltd, 86 drawings; to Eastaway Foundry of Taren Point, Sydney, 16 drawings; to Alexandria Foundry of Rozelle, Sydney, 7 drawings; to Willy Gody Engineering of Revesby, Sydney, 30 drawings; to Carruthers Foundry of Revesby, 20 drawings; to Shaw Process of Mortdale, Sydney, 12 drawings; and to Tan Kor Seng and Son of Ipoh, Malaysia, 32 drawings. It seems that all these parts are parts shown in the drawings the subject of the cross-claim, in respect of which Peko holds copyright. As indicated, Mr Fica was a signatory to the Comlas agreement pursuant to which about 320 drawings were assigned to Comlas; all of them drawings over which Peko holds copyright.

57. There was a good deal of other evidence indicating copying on behalf of AMS. Numerous examples were given of drawings which were altered so as to change one or more dimensions, but only slightly and within an acceptable tolerance. Sometimes the location on the sheet of paper of individual drawings was transposed. In other cases, section identification letters were changed. This was all as described by Mr Montazami. It is apparent that, over a long period of time, there was systematic copying of Warman plans, but with attempts to disguise what was being done.

58. When counsel for the cross-claimants tendered Mr Fica's affidavit, I pointed out to Mr Fica the effect of this step. I told him that the cross-claimants sought to obtain the benefit of the admissions contained in the affidavit but that the tender did not mean that he himself was in evidence or vulnerable to cross-examination. I informed Mr Fica that, if he wished to give evidence in rebuttal of the cross-claimants' case, he was free to do so; but, in that event, he would render himself liable to cross-examination by counsel for the cross-claimants. Subsequently, other references were made to the matter of Mr Fica giving evidence; mostly in the context of my explaining to him that I could not treat as evidence prefatory statements which he made in the course of questioning Mr Holden. There is no doubt that Mr Fica was well aware of his entitlement to give evidence and that he deliberately chose not to do so. Under these circumstances, and notwithstanding the fact that Mr Fica was not legally represented, it is appropriate to draw the usual inference that Mr Fica concluded that his evidence would be unlikely to assist the cross-respondents' cases.

59. In the event, there was no evidence whatever in rebuttal of any of the material on infringement to which I have referred. Indeed, almost none of it was challenged, even by questions. In that situation it is unnecessary to detail all of the evidence regarding infringement. It is sufficient to say that I am satisfied that Mr Fica infringed Peko's copyright in the subject drawings on numerous occasions over the period 1982 to 1991 and that he did so, over most but not all of that time, on behalf of AMS. As against both cross-respondents, infringement is proved.

60. The evidence does not establish what Peko drawings Mr Fica still holds. Perhaps he has none. But I cannot be sure of this. Having regard to his past blatant disregard of Peko's rights, it is appropriate to make orders restraining him from using any of the drawings scheduled in the Further Amended Cross-claim. I will also order the delivering up of any such drawings. I do not think there is any need to make equivalent orders against AMS. The company is apparently not now trading. Its documents are apparently now in the hands of a liquidator. But I will reserve liberty to apply. Peko may apply for such orders if necessary.

61. The Further Amended Cross-claim also seeks orders in respect of any moulds or patterns reproducing any of the drawings. I doubt whether there are any such moulds or patterns. They seem to have all been delivered to Comlas. If there are, something may depend on when they were created. I have dealt with the s.77 argument, in respect of the period since 1 May 1982, primarily on the basis of plan-to-plan copying. Although other considerations would probably exclude the application of s.77 to moulds and patterns, that reasoning does not apply to the making of moulds or patterns. Under the circumstances, the preferable course is to order that Mr Fica deliver to the Registrar any moulds or patterns held by him which reproduce any of the drawings. If any moulds or patterns are delivered up, application may be made by either party as necessary.

62. Damages are sought. Section 115(2) of the Copyright Act permits the Court, in an action for infringement of copyright, to grant damages. Damages are not available in a case where it is 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 copyright (s.115(3)). But that is not this case. While Mr Fica may have misunderstood some aspects of copyright law - he has, of course, not given evidence to that effect - he certainly had reasonable grounds for suspecting that his activities were an infringement of copyright. This is evident not only from the objective facts. Mr Fica's state of mind is indicated both by the surreptitious nature of his dealings with Mr Starke, back in 1982, and the care he took to disguise the provenance of the drawings he put out as AMS drawings and used in the preparation of moulds and patterns. Especially after his discussion with Mr Weekes and Dr White in 1986, Mr Fica must have been well aware of the nature of his actions.

63. Section 115(4) provides that, in an action where an infringement of copyright is established and -

"the court is satisfied that it is proper to do so having regard to:

(i) the flagrancy of the infringement;

(ii) any benefit shown to have accrued to the defendant by reason

of the infringement; and

(iii) all other relevant matters";

in assessing damages the Court may "award such additional damages as it considers appropriate in the circumstances".

64. In Autodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 at 73-78 I discussed the principles governing the assessment of damages in copyright cases. I see no need to repeat in these reasons what I there set out. It is sufficient to note that, on occasions, guidance may be afforded by considering what licence fee would have been charged by the copyright holder had the copyright holder been disposed to authorise the infringing actions or what dealings have been undertaken in exploitation of the copyright. In relation to the first matter, it is unlikely that Peko would have agreed to sell the drawings at any price. If it did sell, having regard to its earnings from the parts depicted in the drawings, a proper price would have been many times $750,000. The price would probably run to hundreds of millions of dollars. In relation to the second, AMS was able to negotiate the sale of its business assets for $750,000. Those assets included items other than copies of the subject drawings. But the other items were mainly secondhand furniture and equipment. They cannot have been of much value. The whole purpose of the agreement, from Comlas' point of view, seems to have been the acquisition of the drawings. It is reasonable to ascribe the bulk (at least) of the purchase price to the drawings.

65. It does not follow that the drawings were worth only $750,000. At the time when the agreement was made, AMS was in financial difficulties. The sale to Comlas represented an opportunity for it to realise something of the value of the drawings. Mr Fica knew that the drawings were "stolen". He must have known there would be only a limited market for them. He would have known that, if they had any inkling of the position, reputable companies would decline to have anything to do with the drawings.

66. There is no doubt that Peko has suffered considerable damage by reason of the activities of AMS and Mr Fica. The damage is impossible to quantify precisely. It is probable that, over the period of the infringements, Peko lost substantial sales of parts, and perhaps licence fees, because of the fact that AMS and Mr Fica put replica products onto the market, or enabled others to do so. There is no material to provide even a rough guide to the extent of this loss. But the fact that AMS earned enough revenue from its activities to survive for some seven years indicates that its operations were on a significant scale. There is no evidence to suggest that it derived income otherwise from the making of pirate Warman drawings and Warman replica parts. Mr Montazami's evidence suggests that, in his time at least, it did not do so. Under the circumstances, I would be acting conservatively in assessing Peko's loss during this period at $1 million.

67. More importantly, as a direct result of the infringement of its rights by AMS and Mr Fica, Peko has the problem of restraining the use of its drawings by Comlas and Holz, and any others who might be authorised by one or both of those companies. Peko has already spent over $1 million in seeking restraining orders. It is currently facing a final hearing which will require the expenditure of further money. How much damage Peko will eventually suffer because of the sale of the drawings to Comlas is impossible to say. If its United States litigation fails, and Holz proves intransigent, Peko's total damage could run to hundreds of millions of dollars. On the other hand, it is reasonable to believe that Peko will be able to satisfy the American court that Holz' use of the drawings infringes its copyright and that it will obtain final orders which will substantially limit its damage. Furthermore, I understand that BBA, the parent of Holz, is a respected United Kingdom company. Despite Holz's unpromising reaction to Warman's first approach, it is difficult to believe that BBA will allow Holz to continue in this vein. BBA will surely appreciate the damage to its own reputation of Holz' conduct and intervene to resolve the matter. For these reasons, I think that it would be excessive to assess damages against the present cross-respondents on the basis of the worst possible outcome for Peko. It seems more appropriate to assess the likely damage to Peko flowing from the sale to Comlas at a figure at the bottom of the range of possible damage. Bearing in mind that $1 million has already been spent on legal costs and that, on any view, substantial further costs will be incurred, I think that such a figure is $2 million. If I add that figure to the figure of $1 million for the damage sustained by Peko prior to the date of the Comlas sale, total compensatory damages come to $3 million.

68. This is a case in which the conditions specified in s.115(4) are satisfied. The actions of the cross-respondents are of breath-taking flagrancy, especially the sale of the drawings to Comlas. The circumstances amply justify an award of additional damages under s.115(4). But, having regard to the burden which even compensatory damages visit upon the cross-respondents, I do not propose to take that course. I simply say that, had compensatory damages not justified an award as high as $3 million, I would have imposed additional damages to take the award to that figure. If copyright protection is to mean anything, the courts must take a severe view in cases as blatant as this. There will be judgment in favour of Peko against both cross-respondents in the sum of $3 million. Having regard to the terms of the leave granted by the Supreme Court of New South Wales to proceed against AMS, the judgment for damages may not be enforced against AMS except with the leave of the Supreme Court or this court.

69. The two cross-respondents must pay Peko's costs of the cross-claim. Once again that order is not to be enforced against AMS except with the leave of the Supreme Court or this Court.