BURDEN & ORS v ESR GROUP LTD

High Court of New Zealand 

Downs J 

27-28 June, 29 July 2022 

[2022] NZHC 1818

Copyright – issuing to the public – primary infringement – infringing furniture made in Vietnam and sold to defendant – infringing copies imported into and sold in New Zealand by defendant – scope of what constitutes ‘issuing to the public’ –- fact that infringing copies were first sold overseas held irrelevant to interpretation – consistency with UK Copyright, Designs and Patents Act 1988 – Article 6 WIPO Copyright Treaty -  ss 9, 12, 16, 29 and 31 Copyright Act 1994 (NZ)

Facts:

In the period March 2013 to November 2014 the defendant (ESR) imported and sold articles of furniture (made in Vietnam) that were infringing copies of detailed technical drawings of furniture items created by the plaintiffs.  The infringing copies (known as the Roseberry and Westbury collections) were sold by ESR to New Zealand customers through its retail stores.

In this proceeding the High Court and, subsequently, the Court of Appeal held that[1]:

(a)  the second and third plaintiffs owned copyright in a number of technical drawings of their Irish Coast collection of furniture;

(b)  the Roseberry articles of furniture imported and sold by ESR were infringing copies of the second and third plaintiff’s copyright works; and

(c)   ESR imported the infringing copies into New Zealand knowing that they infringed the plaintiffs’ copyright as of 28 August 2014. This was a secondary infringement cause of action.

Following further discovery, the plaintiffs obtained leave from the Court of Appeal[2] to amend their pleadings for the remedies hearing to expressly include a primary infringement cause of action, ie that ESR had issued copies to the public (sections 16 and 31 Copyright Act), namely the infringing Roseberry and Westbury furniture. If established, this cause of action avoided the knowledge requirement and would enable the plaintiffs to recover for the whole of the period of importation and sale of the infringing copies in New Zealand.

The Court of Appeal found that the plaintiffs had pleaded a claim of issuing to the public in the proceedings as issued and, further, that it was in the interests of justice for the plaintiffs to be able to argue the primary infringement cause of action at the remedies hearing.[3]

For the remedies hearing, the plaintiffs elected an account of profits.  The parties reached agreement as to the quantum of profits:

(a)  for secondary infringement from 28 August 2014 until cessation of sales (22 November 2014) being NZ$9316.50; and

(b)  for the primary infringement cause of action, if established, covering the period April 2013 to 22 November 2014, being NZ$221,134.50.

In the present case, the infringing copies of furniture had been manufactured and finished in Vietnam.  The infringing copies were shipped from Vietnam and imported into New Zealand by ESR.  Delivery of the goods occurred when the goods were placed on board the ship in Vietnam.  Title to the goods passed upon payment by ESR which occurred when the goods were in transit to New Zealand.

At trial ESR argued that primary infringement was not established.  It contended that, once the infringing copies were placed on the market anywhere in the world (even without the copyright owner’s consent), then there could be no liability for ‘issuing to the public’ in New Zealand.

The plaintiffs argued that section 9(1) (containing a definition of ‘issue to the public’) meant “the act of putting into circulation copies [in New Zealand] not previously put into circulation [in New Zealand by or with the consent of the copyright owner].”  Further, that this interpretation followed as a matter of necessary implication by reading sections 9, 16. 29 and 31 together, was consistent with the United Kingdom Copyright Act on which the New Zealand statute was largely based, and accorded with New Zealand’s international obligations under the World Intellectual Property Organization (‘WIPO’) Copyright Treaty.

Held, giving judgment for the plaintiffs:

1              Once the Copyright Act’s text and purpose were considered, alongside related developments, ‘issue to the public’ in section 9(1) meant ‘the act of putting into circulation copies [in New Zealand] not previously put into circulation [in New Zealand by or with the consent of the owner]’ This was not adding words to the Act nor recrafting it.  Rather it was just drawing out what was already implied in it by virtue of ss 9, 12, 16, 29 and 31. [55]-[56]

2              This conclusion was revealed by nine points:

(a)  Section 16 identified an elementary feature of copyright, namely that it is territorial.  Section 16 afforded the owner of copyright in a work ‘the exclusive right’ to do various things ‘in New Zealand’.  [46]

Atkinson Footwear Ltd v Hodgskin International Services Ltd (1994) 31 IPR 186 and Gao v Zespri Group Ltd [2021] NZCA 442; (2021) 165 IPR 161 referred to.

(b)  Section 16 created a code of rights of a copyright owner. The right of first circulation (‘issuing to the public’) was one such right. As with the others, it was exercisable in New Zealand only.  [47].

(c)   By sections 29 and 31, contravention of the right of first circulation was a primary infringement. It was no answer for an infringer of this right to say that a plaintiff may have recourse to secondary copyright infringement; that was to invert statutory purpose. [48]

(d)  If antecedent foreign circulation of infringing copies were to constitute first circulation, then, in any such instance, the copyright owner would not have an actionable primary infringement. This would, in turn, compromise the efficacy of the right of first circulation and the Act more generally. [49]

(e)  The plaintiffs’ construction was consistent with section 9(1)(d), whereas the defendant’s interpretation presupposed it was a mistake. Sections 9(1)(d), 12(3) and 12(5A) would not have been necessary if earlier foreign circulation qualified as ‘issuing to the public’ under s9(1). [50]

(f)    ESR’s construction cut across the Copyright Act’s distinction between genuine and infringing copies and was inconsistent with the statutory regime in relation to parallel imports.  When copyright works were genuine and had been placed in foreign circulation by the copyright owner or licensee, the legislature had chosen, as a matter of policy (reflected in section 12(5A)) to treat those copies as not infringing the owner’s rights. [51]

(g)  The plaintiffs’ construction was consistent with the concept of exhaustion, the approach of the United Kingdom and importantly, Article 6 of the WIPO Copyright Treaty which imposed an international law obligation on New Zealand. [52]

(h)  The plaintiffs’ construction was also consistent with the concept of exhaustion in relation to other forms of intellectual property, such as trade marks under section 97A of the Trade Marks Act 2002.  Further section 97A in the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 made only modest changes to the Copyright Act, in turn suggesting that the right of first circulation operated as the plaintiffs were contending rather that meaning that copyright owners lost their rights by unauthorised foreign circulation of infringing copies. [53]

(i)    The above eight points were consistent with the Ministry’s observations in relation to the Copyright Act. [54]

3              The defendant’s contention that delivery of the furniture to the shipping company in Vietnam meant that someone earlier in the chain, and not it, engaged in issuing to the public was rejected. The defendant had admitted to importing the furniture in its statement of defence and had been found liable for importation in the 2016 liability judgment. It was not open to the defendant to advance such a submission. [62]

4              The defendant’s claim that others in Vietnam were selling copies of the furniture was rejected.  The focus of s9(1) is on the copies in question not other copies.  This conclusion was affirmed in text authority. [63] – [65].

 

 

[1]           [2016] NZHC 1542; [2017] NZCA 217 at [53]-[56] and [63].

[2]          Burden v ESR Group (NZ) Ltd [2020] NZCA 560

[3]          Burden v ESR Group (NZ) Ltd [2020] NZCA 560