BURDEN V ESR GROUP (NZ) LTD

High Court, Duffy J, 7-11, 14-16, 18, 21-24, 28 September 2015, 7 July 2016

Copyright – secondary infringement – enforcement – application of the Copyright Act 1994 to other states – s 230, 232 of the Copyright Act 1994

Copyright –secondary infringement – enforcement – eligibility of exclusive licensee to enforce copyright – s 2 of the Copyright Act 1994

Copyright – secondary infringement – ownership of copyright – authorship and joint authorship – s 35 of the Copyright Act 1994

Copyright – secondary infringement – ownership of copyright – defendant’s allegation of copying by plaintiff as defence

Copyright – secondary infringement – knowledge of defendant – standard of knowledge required for defendant to “have reason to believe”

Fair Trading Act 1986 – false or misleading representation – requirement of representation – s 13 of the Fair Trading Act 1986

Fair Trading Act 1986 – misleading and deceptive conduct – requirement of reputation – s 9 of the Fair Trading Act 1986

Facts:

The first plaintiff, Mr Ian James Burden, was an Australian citizen who lived in Queensland. He was the managing director of the second and third plaintiffs, Plantation Grown Timbers (International) Ltd and Plantation Grown Timbers (Vietnam) Ltd. The second and third plaintiffs were registered in the British Virgin Islands and Vietnam respectively. Together, the plaintiffs carried on the business of designing, producing and exporting furniture products mainly to North America, Europe and Australasia. One such product was the “Irish Coast” line of furniture.

The first defendant, ESR Group NZ Ltd (ESR), was a New Zealand registered company. It imported furniture from a competitor of the plaintiffs for sale in New Zealand. In August 2014, furniture imported by ESR known as the “Roseberry Collection” was seized by Customs as pirated goods as a result of copyright notices filed by the plaintiffs. The plaintiffs subsequently initiated proceedings against ESR for copyright infringement as a secondary infringer, as well as for breach of the Fair Trading Act 1986 (the FTA).

The plaintiffs claimed a declaration that the Roseberry Collection reproduced its copyright works and that each piece of the collection was an infringing copy under s 12 of the Copyright Act 1994 (the Act) and a declaration that those works were pirated copies under s 141(3) of the Act. They also claimed an injunction to restrain the defendant from dealing with the Roseberry Collection or infringing the plaintiffs’ copyright, orders for delivery up of any infringing goods and disclosure of their location and suppliers, as well as interest and costs.

ESR first challenged the plaintiffs’ ability to enforce any copyright in the works from which the Irish Coast collection was produced. That challenge was premised, first, on an argument that none of the plaintiffs could establish that they or the copyright works had the requisite statutory connection with a foreign country that qualifies for recognition under New Zealand law; and secondly, on an argument that the second and third plaintiffs were not exclusive licence holders of the copyright works.

ESR challenged the substance of the plaintiff’s claim by arguing that the plaintiffs could not establish that they were the authors or owners of the copyright works. Those works were split into two categories: the “preliminary drawings”, which were created personally by Mr Burden, and the “technical drawings”, which were created by employees of Mr Burden and the second plaintiff under Mr Burden’s direction.

It was submitted by ESR that Mr Burden had not in fact authored the preliminary design drawings of the Irish Coast collection, which underpinned both categories. Instead, it was said that Mr Jim Hembree, an employee of a competitor of the plaintiffs known as Hillsdale, had authored the works. ESR also contended that the copyright works were not original, by making counter-allegations that any design drawings made by Mr Burden were copies of another collection known as the “Attic Heirlooms” collection, made by Broyhill.

ESR argued that even if Mr Burden was the author of the preliminary drawings, and they were original, the owner of those works was either the second or third plaintiffs. It also argued that the owner of the copyright in the technical drawings works was not Mr Burden but either the Vietnamese draughtsmen who drew them, or the third plaintiff.

Next, ESR submitted that the plaintiffs could not establish infringement on the basis that the Roseberry Collection was not a reproduction of a substantial part of the copyright works. It denied that it was a secondary infringer of the plaintiffs’ copyright, submitting that it did not have actual or constructive knowledge, nor reason to believe, that the Roseberry Collection infringed the plaintiffs’ copyright.

The plaintiffs also claimed that the case was one of “initial interest confusion”, arising out of the likelihood of confusion between the Irish Coast collection and the Roseberry Collection. This was argued to give rise to liability under ss 9, 10, 13(a) and 13(e) of the FTA. ESR submitted that there was no likelihood of consumers being misled or deceived given that the plaintiffs could not demonstrate reputation for the Irish Coast collection in New Zealand.

Finally, ESR counterclaimed that the copyright notices filed with Customs were invalid on the basis that they incorrectly described the second and third plaintiffs as exclusive licensees of the copyright works. It claimed that the notices and their filing amounted to misleading and deceptive conduct under s 9 of the FTA.

Held, granting the first plaintiff’s claim:

Enforcement by Australian, British Virgin Islands, and Vietnamese entities

  1. Mr Burden was and is an Australian citizen. That country is a prescribed country as referred to in s 18(2) of the Act. He was accordingly entitled to enforce copyright in New Zealand if he could establish authorship or ownership of the alleged copyright works [24].

  2. Plantation Grown Timbers (International) Ltd was also entitled to enforce copyright in New Zealand if it could demonstrate it owned or was an exclusive licence holder of the copyright works, because the British Virgin Islands, as a territory of the United Kingdom, fell within the listing of “United Kingdom” as a prescribed country under schedule 1 of the Copyright (Application to Other Countries) Order 1995 (the Order) [35]. This interpretation was consistent with the Act’s definition of “country” and the interpretive rule that statutes should be read consistent with New Zealand’s international obligations [32], [33].

    Ye v Minister of Immigration [2009] NZSC 76, [2010] 1 NZLR 104 applied.

  3. Plantation Grown Timbers (Vietnam) Ltd was not entitled to enforce copyright, because Vietnam was not a prescribed country under the Order [38]. To hold otherwise would extend operation of the Act in circumstances where the failure to provide for Vietnam as a prescribed country under the Order was unexplained [40].

    Enforcement by the third plaintiff as exclusive licensee

  4. Plantation Grown Timbers (International) Ltd could not demonstrate it was an exclusive licence holder of the copyright works, because it did not hold rights in the copyright works to the exclusion of all persons, including the copyright owner, as required by the definition of exclusive licence under s 2 of the Act [48], [54].

    Ownership of the copyright works

  5. Ownership was to be shown by proving that the subject-matter in which the plaintiffs claimed copyright was a work in which copyright could subsist, and that copyright did in fact subsist in that subject-matter [57]. The work must be original, in the sense that it must have originated from the author [65]. It is open to a plaintiff to rely on secondary evidence of the original designs that gave rise to subsequent prototypes or the finished product [71], [72].

    Fisher and Paykel Financial Services Ltd v Karum Group LLC (No 4) [2012] NZHC 3314; Henkel KGAA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577; Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) referred to.

  6. Mr Burden was the author of the preliminary design drawings of the Irish Coast furniture, given his development of the design of the furniture and his creation of the original preliminary design drawings [80], [81]. The evidence called by ESR claiming Mr Hembree was the true author was unreliable and did not fit within the timeline of events [103], [108]. The failure of ESR to call Mr Hembree went unexplained [107].

  7. The approach to considering the defendant’s claim that the plaintiff did not have authorship because the plaintiff had copied the works from a third party was the same as the approach commonly taken when considering a plaintiff’s claim that a defendant had infringed its copyright through copying [115]. That test requires it to be shown that the alleged copying work reproduces the whole or a substantial part of the equivalent original work; that there is objective similarity between the relevant part or parts of the copying work and the corresponding part or parts in the original work; and that the party alleged to have copied had the opportunity to do so [115].

    Henkel KGAA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577; Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) referred to.

  8. There was nothing in the copyright works which suggested a substantial similarity between the Irish Coast and Attic Heirlooms collections, other than the functional aspects of the relevant items of furniture [146], [156], [159].

  9. As author of the preliminary drawings, Mr Burden was first owner of the copyright in the work [174]. While Mr Burden was controlling director and shareholder of Plantation Grown Timbers (International) Ltd, it did not follow that he was an employee [181].

    Harmony Consulting v GA Foss Transport Ltd [2011] FC 340 not applied.

  10. Mr Burden was joint author and owner of the technical drawings with Plantation Grown Timbers (International) Ltd, given his significant creative input into the production of those works in conjunction with Vietnamese draughtsmen [193], [197].

    Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd [1995] FSR 818 (Ch); Hansen v Humes-MacLon Plastics Ltd (1984) 1 NZIPR 557 (HC); Robin Ray v Classic FM plc [1998] FSR 622 (Ch) referred to.

    Secondary infringement of the copyright works

  11. The Roseberry Collection reproduced a substantial part of the copyright works and, when viewed objectively, the items were clearly similar to the alleged copyright works [205]. The overall appearance of each item of the Roseberry Collection was nothing more than a three dimensional copy of the artistic works underlying the corresponding Irish Coast item of furniture [205].

    Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd (No 2) [1989] 1 NZLR 239 (HC) referred to.

  12. The plaintiff established that ESR had opportunity to copy the copyright works [234]. Mr Morrow, a former employee of the plaintiffs, had knowledge of and involvement with the Irish Coast collection before leaving his employment [231]. He subsequently created the second and fourth defendants and began producing the Roseberry Collection [232]. No evidence explaining the similarities was produced, nor was Mr Morrow called as a witness [238], [239].

    Henkel KGAA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577; Jones v Dunkel (1959) 101 CLR 298; Perry Corp v Ithaca (Custodians) Ltd (2003) 16 PRNZ 1055 (CA) referred to.

  13. ESR was liable as secondary infringer because it had reason to believe the items of Roseberry furniture were infringing copies of the plaintiffs’ alleged copyright works [258]. This conclusion followed from the plaintiffs’ action in filing copyright notices with Customs on 20 May 2013 to inform New Zealand entities of the copyright infringement taking place [258]. The first importation of seized Roseberry furniture was imported into New Zealand at a time when ESR had reason to believe that furniture infringed the copyright works [260].

    Husqvarna Forest & Garden Ltd v Bridon NZ Ltd [1997] 3 NZLR 215 (HC) referred to.

    The Fair Trading Act 1986 claim

  14. The plaintiffs could not establish a misrepresentation made by ESR that the Roseberry Collection was anything other than a separate collection of furniture from the Irish Coast collection [294]. Their claim under s 13 of the FTA accordingly failed [294].

  15. The plaintiffs could not establish a reputation for the Irish Coast collection in New Zealand [297]. Given the lack of evidence of reputation, the evidence did not support an inference that persons might initially confuse Roseberry furniture with Irish Coast furniture [297].

    ESR’s counterclaim

  16. While the copyright notice filed with Customs was incorrect insofar as it described the second and third plaintiffs as being exclusive licensees of the copyright works, those errors were insufficiently fundamental to the notice to invalidate it [301].

 

 

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