Zhang & Ors v Sealegs International Limited

Court of Appeal of New Zealand

French, Cooper and Brown JJ

19 – 20 February, 27 August 2019

[2019] NZCA 389

Copyright – industrially applied works – claim to copyright in arrangement or collocation of features – prototypes – models – objective similarity – functional similarity – dimensions and geometry – infringement – expert evidence – ideas and their expression – patent vs copyright – Copyright Act 1994 (NZ).

Facts:

The respondent Sealegs was a producer of amphibious boats for recreational purposes.  It claimed copyright in models in the form of prototypes of its arrangement of known mechanical components comprising the leg and wheel assemblies of its amphibious system externally located on the hull of its boats.  Copyright was claimed as the expression of the novel idea to place leg and wheel assemblies on the exterior of a boat hull which are then retractable [1].

Sealegs claimed that its colocation-based copyright was infringed by the amphibious system developed by the second appellant (Orion).  Sealegs also claimed that Orion had infringed its registered design.  It elected not to sue for patent infringement [2].

In the High Court ([2018] NZHC 1724), Sealegs copyright claim proceeded on an unpleaded allegation of copyright in the collocation of unoriginal features appearing in the prototypes.  It had abandoned reliance on copyright in the several detailed drawings annexed to the pleading [115].  The prototypes were no longer available, and the claim was advanced on the basis of photographs of the prototypes together with lists of the componentry in schedules (but no longer relied on as individual copyright works).  Davison J held that the arrangement of components comprising the central core of Sealegs amphibious boat system was highly original and had been appropriated by the design of the Orion amphibious system [3].  Sealegs registered design claim was dismissed.

On appeal the appellants challenged the High Court’s findings of originality and objective similarity and the rejection of their claimed independent design path.  They contended that the first instance judgment fundamentally misconceived copyright law so that Sealegs had been granted an unprecedented monopoly in a collocation of known functional components untethered to any visual expression [4].

Held, allowing the appeal:

The relevant copyright work: identification

A cause of action for breach of copyright necessarily involves clear and accurate identification of the copyright work in respect of which the defendant is said to have infringed [64]. 

Sealegs cause of action was confined at trial to the manifestation in three prototypes (referred to as “prototype boat 1”, “prototype boat 136” and “prototype SL100 system”, which was fitted to Sealegs boat IKA11) of an arrangement or collocation of features in the leg and wheel assemblies not original in themselves [69] – [71].

Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 referred to.

Ideas and their expression: patent vs copyright

Where the copyright work is an artistic work in the form of a detailed drawing of a key component in a machine, the significance of the role performed by that component may have the effect of providing a de facto monopoly [86].  However, focussing on the “integral part of the method” of expression would not be useful in practice for defining the conventional dichotomy between patents and copyright, at least in the context of works of a utilitarian nature [87].

Bonz Group (Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC); Bleiman v News Media (Auckland) Ltd [1994] 2 NZLR 673 (CA); Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 (CA) at 223; Billhöfer Maschinenfabrik GmbH v TH Dixon & Co Ltd [1990] FSR 105 (Ch) at 121 referred to.

The law of copyright rests on the very clear principle that anyone who by his or her own skill and effort creates an original work of whatever character has the exclusive right to copy it for a limited period.  The recognition of originality and its extent will be a reflection of the skill and labour expended in the creation of the particular work.  However, originality is a question of degree.  The greater the extent to which the creation of the copyright work is dictated by functional constraints, the less original the work is likely to be [93].

Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 (HL) at 2418 referred to. 

Were the prototypes “models”?

Section 14(1) of the Copyright Act provides that copyright exists in original works of various descriptions including artistic works [95].  It was common ground that the three prototypes could qualify as artistic works only if they were models.

The bow and stern wheel assemblies which were designed to be affixed to the standard RIBs adapted as prototype boats 1 and 136 were similar in concept to a prototype garment on a mannequin or tailor’s dummy.  The boats themselves, which were purchased by Sealegs, were not part of the prototype of the work in which copyright was claimed but rather, provided a medium for deploying and testing the componentry which enabled the boats to become amphibious [99].

Subsequent commercial dealing with or use of an item which has been genuinely produced as a prototype will not deprive it of the essential characteristics of a model under the Copyright Act 1994.  The critical enquiry will be the purpose for which the item was created [102]. 

Electroquip Ltd v Craigco Ltd HC Auckland CIV-2006-404-6719, 3 September 2008 referred to.

Prototype boats 1, 136 and IKA11 were each created for the purpose of ultimately being copied [103].  Therefore, despite both prototype 1 and prototype 136 being ultimately disposed of by sale, they did not lose their status as models [104].  Consequently, all three prototypes qualified as artistic works within s 14(1)(a) of the Copyright Act [105].

Was the arrangement of features original?

The trial judge had not approached the issue of originality by making an assessment of the extent of skill and labour which had been expended in the creation of the identified copyright works, namely the sequence of the collocation of known components.  He described the Sealegs design as “unique” [106].  There was a conflation of idea and expression [108].  In the judgment, the trial judge expressed the view that there was a high degree of originality in the Sealegs assembly pattern [112].  He also accorded considerable significance to the “solution” that Sealegs arrived at in the course of designing its system [113]. 

The evidence did not demonstrate that the selection of the sequence of known generic components required substantial skill and labour [121].  The degree of originality of the sequence of the various generic components in the leg assemblies was negligible [122]. 

The trial judge had erroneously approached the issue of originality in the collocation of common features by reference to the criteria for patentability, coupled with his assessment of the commercial success of Sealegs invention [124]. 

Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 (HL) at 2423 referred to.

Sealegs clearly expended some skill and labour in the choice of the shape and dimension of certain of the components in the arrangement which, to that extent, conferred a degree of originality on the arrangement itself.  However, any originality was modest and certainly very much less than the high degree found by the trial judge [127]. 

Infringement – principles

The trial judge commenced the consideration of infringement by noting the three well-established elements of substantiality, objective similarity and causal connection, but concluded that the impact of functional constraints should not be put aside for the purpose of assessing similarity [128] – [131].  However, in carrying out a visual comparison without taking into account the extent to which the claimed copyright work was commonplace or dictated by functional constraints, the trial judge adopted an erroneous approach [136].

Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416 (HL) at 2425; Beckmann v Mayceys Confectionary Ltd (1995) 33 IPR 543 (CA) at 546 followed.

Objective similarity?

The trial judge’s consideration of objective similarity was deficient in four aspects [138]:

(a)  The first was the failure to take into account the extent to which the claimed copyright work was commonplace or dictated by functional constraints [138].

(b)  The second was the failure to apportion sufficient significance to the differences identified between the Sealegs and Orion systems as a result of his consideration that there was a high degree of originality in what he described as the Sealegs assembly pattern [138]. 

(c)   The third error was the significance the trial judge accorded to the “functional resemblance” of the Sealegs and Orion assemblies [141].  He relied on “fundamental functionality” as a justification for discounting the significance of the identified differences between the two systems and as a result, in effect recognised an exclusive right to a method of operability which is in the realm of patents and not copyright [144] – [145]. 

(d)  The fourth error was the reliance on similarities between the Sealegs and Orion systems in terms of their dimensions and geometry in the finding of objective similarity.  Sealegs case at trial did not rely on similarity in dimensions and no mention of this was made in Sealegs closing (or written submissions on appeal) [146].  “Geometry” was not a feature comprised in the collocation as claimed.  Neither geometry nor dimensions were valid considerations in the objective similarity assessment [152]. 

Assessment of objective similarity involves a visual analysis of the copyright work and those features of a defendant’s work which are alleged to have been copied from the copyright work.  Given the nature of the claim in this case, assessment of objective similarity involved a comparison of the respective leg assemblies of the Sealegs and Orion systems and the manner of their attachment to the boat hulls [154].

Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [47] referred to.

There was some degree of originality in the bespoke form of arrangement visible in the leg assemblies on the prototypes.  However, certain types of similarities were to be disregarded, namely the similarity arising from the commonplace leg structure and the similarity arising as a consequence of the deployment of an amphibious kit to vessels of similar size and dimension [155].  Approached in this way, the bespoke leg assembly arrangement of the Sealegs system was not visually similar to the Orion leg assembly arrangement [156].  Various differences were identified by the appellant’s expert witnesses and recognised by the trial judge but were ultimately excluded from any role in the assessment of objective similarity because of his view that they made no change to the fundamental functionality of the leg assemblies [156] – [159].  This omission would have been significant if the copyright work relied on was the bespoke arrangement whose originality derived from the particular features of certain of the components in the combination [159].  However, Sealegs had confined its claim to the sequence of the generic components in which there was no originality.

The relevance of an engineer’s perspective

In the assessment of objective similarity “visually significant” means visually significant to a person to whom the work would normally be addressed [164]. 

As a consequence of treating both geometry and dimension as relevant to the assessment of objective similarity, expert evidence was relevant as serving to explain why in the circumstances similarities in dimension and geometry were not informative [169].  The trial judge therefore erred in failing to have regard to the expert evidence as to the commonplace nature of the components, their functional nature and the factors which explained perceived similarities in dimension and geometry [170]. 

A failure to take account of the appellant’s expert evidence?

The trial judge’s failure to distinguish between the idea behind Sealegs system and such copyright as subsisted in its expression in the leg assemblies had the consequence that the expert evidence as to an independent design affording an explanation which might rebut the inference of copying was erroneously excluded from consideration [177].

Undue reliance on credibility issues?

The exclusion of the expert evidence resulted in there being undue reliance on the credibility findings of the appellant’s expert evidence.  However, it did not follow that the trial judge’s conclusion would necessarily have been different if the expert evidence had been taken into account because it was opinion evidence as to whether a conclusion of independent design was available in the circumstances [179] – [180].