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Copyright in arrangements gaining (Sea)legs

November 06, 2018

Contacts

Partners Earl Gray, Richard Watts
Special Advisors Sarah Chapman

Intellectual property

In July this year, Paul Davison J issued his judgment in Sealegs International Ltd v Zhang [2018] NZHC 1724. He found the defendants liable for copyright infringement for the development and sale of amphibious boats like the ones Sealegs had developed. The much-anticipated decision has raised questions about some essential elements of copyright law in New Zealand. The full decision can be found here.

Facts

An abbreviated version of the facts of the case is that an ex-employee of Sealegs, which manufactures amphibious vehicles, set up shop manufacturing craft with the same functionality intended for sale in China. When the ex-employee, Mr Leybourne, and his company, Orion Limited, starting building and offering their amphibious boats for sale in New Zealand, Sealegs raised concerns, and obtained an interim injunction against the defendants in 2017.

Sealegs’ relevant registered design had expired so the case was brought for infringement of copyright that was said to subsist in an original arrangement of unoriginal features in the leg designs for the Sealegs craft.

Sealegs had separately engaged Orion Limited to develop new technology for the wheels of Sealegs’ craft so the contractual position between the parties also needed to be considered. As that wheel technology was developed by Orion for Sealegs, any intellectual property in the wheel technology was owned by Sealegs and use of that technology by Orion for the defendants’ craft was also considered in the assessment of copyright infringement.

The judgment relies heavily on factual elements:

  1. Mr Leybourne and the other defendant ex-employees of Sealegs had extensive knowledge through working on the Sealegs boats and had access to detailed information about the design process for those boats;

  2. There was no evidence provided of any alternative design pathway taken by the defendants in order to develop the allegedly infringing product; and

  3. Much of the evidence provided by the defendants was considered unreliable, with a number of perceived gaps in relevant information.

Key issue: knowledge carried by past employees

A key focus of the case was on the knowledge carried by past employees of Sealegs, and the lack of evidence of any alternative design pathways taken by the defendants. At paragraph 388, Paul Davison J says that the defendants’ “real starting point was their detailed knowledge of the Sealegs system and the proven arrangement of the Sealegs pattern of features.” Those factual elements, in particular, were influential in the determination that copying took place.

The judgment did not expressly include a counterfactual assessment of whether there could be an alternative conclusion, such as examination by the defendants of Sealegs craft in the public domain. If there had not been adverse findings against the defendants about the source of design information, we can only speculate whether the judge would have reached the same conclusion in a case like this where the alleged copyright arrangement is of functional and unoriginal features.

Key issue: objective similarity

In an assessment of copyright infringement, the court needs to consider objective similarity, causal connection and substantiality. Objective similarity is assessed in relation to the originality already identified in the work protected by copyright, rather than all elements of the work, whether original or not.

The judgment appears to be heavily influenced by the facts that the defendants were clearly intending to compete with Sealegs and that the products bore many similarities. However, the question is whether in his assessment, the judge jumped too quickly to assume the objective similarity was in relation to the original elements of the Sealegs work rather than the boat as a whole. With respect, this judgment appears to have the practical effect of lowering the threshold and placing undue onus on the defendants to defend against copyright infringement in circumstances where some or all of the similarities could be explained by commonality of ideas rather than expression.

Put simply, while it is clear that the defendants deliberately sought to create a directly competing product and may have inappropriately misused employees’ access to confidential information and designs, we must be cautious before assuming this necessarily makes a prima facie case for copyright infringement.

Key issue: concept vs. expression

An essential element of copyright law in New Zealand is that copyright protects the expression of an idea, but not the idea itself. While that principle is often pronounced, it can be difficult to identify the line between ideas and copyright-protected expression.

The finding that the copyright in this case subsisted in arrangements of unoriginal features of prototype craft provides an illustration of that difficulty.

During a design process, parameters are often set out at a conceptual level. Are these concepts, which may be dictated by functionality and high level goals for the products in question, a proper subject for copyright protection?

As the result of this decision will be injunctions restraining the manufacture, display and sale of the allegedly infringing craft, the next step is for the court to decide the appropriate term of these injunctions. To do so, the court will need to analyse what is original in each prototype, when that original design element was produced and commercialised, and how and to what extent each prototype has been infringed. We therefore expect the exercise of setting the periods for which injunctions will operate to shed some light on precisely what is original from a copyright perspective in each of the prototypes.

Key learnings from the Sealegs case

We are left uncertain about what the originality is in the Sealegs prototypes and, consequently, how dissimilar an arrangement of an alternative amphibious craft would need to be in order to not infringe Sealegs’ rights.

For now, the decision highlights a number of considerations for manufacturers, designers and artists to keep in mind:

  • Copyright can subsist in an arrangement of features that are not themselves original.

  • Previous access (such as from previous employment) will be taken into account in an assessment of whether there has been copyright infringement.

  • Evidence of the steps taken to design or develop a work may be critical to overcoming an inference of copying.

An appeal against the decision has been lodged, and we look forward to further examination of the difficult copyright issues by the Court of Appeal.

Contributors rebekah.etherington@simpsongrierson.com