This was an appeal from a decision of the High Court which had found that the third respondent (an engineering company) owned copyright in drawings it had produced at the request of the appellant. The appellant had been developing an asparagus grading machine since the 1980s and had arranged for the third respondent to produce drawings (being “artistic works”) and to manufacture certain components of the grading machine that the appellant had created. The appellant contended that it had commissioned the third respondent to produce these drawings and asserted copyright in the artistic works in infringement proceedings against the third respondent  (amongst others).

The third respondent claimed that it had offered a “free design service” to its customers in order to attract in new customers with a view to securing later tooling and manufacturing work. The High Court had found that the third respondent had not in fact charged the appellant for the concept and design drawings and that the appellant had made no payment to the third respondent for those drawings. The High Court divided the dealings between the appellant and third respondent into two, the first transaction being the provision of the free service to prepare concept and design drawings.  The second transaction was for the later drawings of the tool and production of the tool and manufacture of components. The High Court found that the third respondent was paid $26,000 for the second transaction only. 

The Court of Appeal held, overturning the High Court:

(1)   Under the Copyright Act 1962 (and its successor the Copyright Act 1994) the starting point is that an author of a work holds copyright. However, s9(3) of the 1962 Act (and its successor s21 of the 1994 Act) allows a party commissioning a work to obtain ownership of the work that it commissioned. Whether there is in law a commissioning of a work (here the relevant cup assembly drawings), requires the following: (1) a request to make the drawings; (2) an antecedent payment or an agreement to pay for them in money or money’s worth; and (3) the making of the drawing. The critical issue is element (2), and such an obligation may be expressed or implied.  Inferences can probably be drawn from what actually happened.  [23] and [40]-[41]

(2)   As to whether a commissioning of a work has occurred, each case must depend on its own circumstances. Resort to implied terms and licences is relatively common with respect to the relief to be granted in copyright cases. Necessity may only require the grant of a licence. If so, the ambit of the licence should be the minimum which is required to secure to the client the entitlement which the parties to the contract must have intended to confer upon him. The right question to ask is: “given that Parliament vests the first ownership in the author, is it sensible that the parties intended to remain in that position?”. [39]

(3)   There may however be some cases in which, in addition to issues around the right to use the copyright works, the right to exclude the contractor from using the work and the ability to enforce copyright against a third party could arise. One of these is where a contractor creates the work which is derivative from a pre-existing work of the client, for instance when a draftsman is engaged to turn designs of an article or sketch drawn by the client into formal manufacturing drawings and the draftsman cannot then use the drawings himself without infringing the underlying rights of the client.  [38]

Pacific Software Technology Limited v Perry Group Limited [2004] 1 NZLR 164, (2003) 7 NZBLC 103,950 (CA); Griggs Group Limited v Evans [2004] FSR 31 (HC); Robin Rae v Classic FM Plc [1998] FSR 622 (CHD) considered.

(4)   The dividing of the events between the appellant and third respondent by the judge into two transactions was artificial, and did not accord with the commercial realities.  It had all the appearances of having been created as an afterthought defence to an infringement action. The commercial reality was that what transpired was one seamless transaction. [56]

(5)   The s9(3) criteria were satisfied on the facts. The issue was whether the appellant paid, or agreed to pay, for the drawings in money or money’s worth before these were undertaken. In commercial terms, the agreement was that if the third respondent could come up with satisfactory drawings, it would then get to do the manufacturing work and be paid for that manufacturing work if an appropriate price could be worked out.  This is what in fact happened. On the facts, it appeared that the third respondent had represented that any subsequent tooling would be owned by the appellant and that it would have the right to use that tooling. It made everyday commercial sense for this potential business opportunity (to the third respondent) to fall within the rubric of “money’s worth”.  [57]

(6)   Secondly, s9(3) was also (and separately) satisfied in that arising from the request to prepare the drawings, there was an implied obligation that the appellant would pay in money or money’s worth if satisfactory drawings led to the manufacturing work. That implied obligation arose before the work was undertaken and was a normal and necessary incident of the request by the appellant that drawings be prepared. There was no evidence that the third respondent’s usual representation that it did not usually charge for the drawings was in fact conveyed to the appellant. There was no reason why s9(3) of the 1962 Act (and s21(3) of the 1994 Act), may not apply to a conditional agreement of this type where that condition is subsequently satisfied (as it was in this case) by the appellant’s satisfaction with the drawing and its entering into a subsequent contract with the third respondent to prepare further working drawings and proceed with manufacture.  [58]

(7)   The next question was whether this was a case for vesting the entire copyright in the relevant drawings in favour of the appellant, or only some form of licence. This was a straightforward case under this head. It was really an ‘all-or-nothing’ case where the third respondents had wrongly proceeded as if the copyright was “theirs” and asserted it as a defence in an infringement action against them. The appellants were the owners of copyright in the drawings.  [62] and [67]

Observations - The Tooling Drawings - Subsistence

In the High Court it was suggested that there was insufficient originality in the tooling drawings (the drawings that the third respondents produced from the artistic works in contention in the appeal) to qualify for separate copyright protection. Although the Court was not asked to determine this point, and it is strictly not necessary for its decision, it had very real reservation about the judge’s conclusion in paragraph [62] of its decision. In order to be “original” a work must not be copied.  Labour alone is enough to create an original work.