Country: AU
Tribunal: Federal Court of Australia
Date: 18/12/2008
Case No.: --
Parties: LED Technologies Pty Ltd v Elecspess Pty Ltd
Design: AU 302359 and 302360
Citation(s): [2008] FCA 1941
Author: David Musker, R G C Jenkins & Co

This case concerned combinations of light emitting diodes (LEDs) for cars. The proprietor brought an infringement action under two Registered Designs with statements of novelty as follows: "Seperate (sic) clip in lenses. Base to take a variety of 2, 3 or 4 combination lenses for stop, tail, indicator, reverse LED lenses, no visible screws." They accused the individual directors of the first defendant of authorising, directing or procuring infringement. They also claimed breaches of the Trade Practices Act (a false trade description issue not discussed in this summary). The defendants counterclaimed for invalidity, on the bases that
(a) the designs were unclear;
(b) they lacked individual character, and
(c) the proprietor was not entitled, or not solely entitled, to the designs.
They also raised an "unjustified threats" claim, and a false trade description issue (not discussed in this summary).

Own Design Defence to Infringement
The defendants claimed that because their own designs were registered, they were distinctive over the designs in suit and therefore could not infringe. The court held that the Registrar's decision was not entitled to judicial deference and hence this was irrelevant.

Authorship and entitlement
The development process followed a not unusual path involving Western designers and Far Eastern manufacturers. A Mr Ottobre of the proprietor firm brought undimensioned hand-drawn sketches (which he did not retain subsequently) to a Taiwanese company "M". Evidence differed as to whether he drew two views or three views. He met and explained the drawings to a Mr Chao of "M". Following the meeting, Mr Chao "worked with M’s engineers to convert Mr Ottobre’s hand-drawn sketches into CAD (Computer Aided Design) format. “M”’s engineers used CAD technology to prepare detailed engineering drawings of a 3D model and 2D drawings of the combination lamp base. At a practical level, the use of CAD enables an operator of the computer software to lay out and develop work on a screen, print it out and save it for future editing. Having converted Mr Ottobre’s hand drawn sketches of the base into CAD format, Mr Chao printed the engineering drawings of the lamp base." M billed Ottobre for creating a mould from the CAD drawings, and sent Ottobre a three dimensional model from which he printed the drawings used to register the designs. M's invoices (which were paid) to Ottobre for production of the mould included, without any separate allocation, the cost of creating the CAD drawings. The defendant claimed that (a) Chao (or M generally) was the sole or joint designer, (b) the proprietor had not secured rights from them and therefore (c) the design was invalid for incorrect entitlement. Held, that
"Authorship of a design is in the “person whose mind conceives the relevant shape, configuration, pattern or ornamentation applicable to the article in question and reduces it to visible form”: Chris Ford Enterprises Pty Ltd v BH & JR Badenhop Pty Ltd (1985) 7 FCR 75, 80. On the facts just described, it is clear that Mr Ottobre is the person who conceived the relevant shape, configuration and pattern of the Designs and reduced it to a visible form; “M” simply converted that design to an electronic form in order to facilitate the production process. Put another way, it was Mr Ottobre, not “M”, who had the idea for dual and triple combination LED lamps in one base. It was Mr Ottobre who reduced that idea to visible form in the sketches. As the engineering drawings marked “1”, “2” and “3” on Annexure C record, it was Mr Ottobre’s sketches which contained the features different from those in any other previous design. Accordingly, Mr Ottobre was “the person who created the design” and his company as his employer was the sole person entitled to be registered as its owner: s 13(1)(b) of the 2003 Designs Act."
In any event, the designs were created pursuant to a contract between Ottobre and M. Held, that
"As noted above, the plain language of s 13(1)(b) states that if “the designer created the design in the course of employment, or under a contract, with another person - the other person” is the person entitled to be registered as the design’s owner. As the disjunctive word “or,” coupled with the commas on either side of the phrase “under a contract” indicate, there are two separate and distinct circumstances in which the creator of a design is not entitled to register it: (1) where the designer creates the design in the course of employment, whether or not there is a specific contract; and (2) where the designer creates the design under a specific contract, whether or not there is an employment relationship. This case would fall in the latter category.".
This challenge therefore failed.

Clarity
The defendants claimed that the representations were unclear and lacked certainty. This was based on the pictures shown on the official IP Australia website, which were "pink and faint". Apparently, the original representations when inspected at IP Australia included one set of fair greyscale pictures which had been originally filed. The Rules required five sets of representations, and in response to an objection Mr Ottobre lodged the pink drawings objected to, from which the website pictures were subsequently made.
Held, that the standard was whether the design was "reasonably clear and succinct”, following LJ Fisher & Company Ltd v Fabtile Industries Pty Ltd.
"In LJ Fisher & Company Ltd v Fabtile Industries Pty Ltd (1978) 1A IPR 565, 571-72, Fullagar J said:
I am clearly of opinion that a registered design in order to be valid,
must be reasonably “clear and succinct”; that is to say the design sought to be monopolised by copyright must appear with reasonable clarity, and without necessity for unreasonably prolonged or complicated series of deductions, from the registered representation of an article to which the design has been applied. In argument in Phillips v Harbro Rubber Co (1920) 37 RPC 233, Sir Duncan Kerly KC said:
A design may be valid for any form that is new, subject to this, that it must be distinct and present an appearance that strikes the eye as being different from any previously existing shape. [Emphasis added.]
... But in design law I think that the design is addressed to a person of some skill who might be called a person skilled in the art, but that a person skilled in the art is not necessarily familiar with particular methods of manufacture per se; I think he knows the prior art articles and the prior art registered designs and knows as much about manufacture as he would reasonably be expected to deduce from a study of those designs and articles, but not necessarily any more. ... I do think that if a design, depicted by reference to an article to which it has been applied, appears difficult to construe, evidence is admissible from persons familiar with those articles and with methods of applying designs to them, at all events where the design is as here confined to configuration. In what follows I use the expression “person skilled in the art” as a shorthand for a person with the elementary knowledge that I have above indicated; that is to say a person in the circumstances of this case, who is familiar at least with the shape and appearance and (so far as obvious) constituents of prior art roof tiles composed wholly or chiefly of metal, as known at the priority date of the registration."
In fact, the IP Australia pictures could be seen at higher magnification by clicking on them so that they were of themselves satisfactory. Held, that a member of the public would know how to click on views to enlarge them (contrary to the defendants' assertion). It was unneccessary to examine whether the electronic website drawings or the originals held at the Registry, or some combination thereof, were governing. (NOTE: compare, on this point, the rather similar situation in Hadley v Sloggett.)

Combinations of prior art citations
Held, that "... contrary to the Respondents’ submissions, distinctiveness is to be assessed not by comparing the design in question to the prior art base as a whole but by comparing it individually to each relevant piece of prior art: s 15(1) read with ss 16(1) and (2). Part 4 of Chapter 2 of the 2003 Designs Act must be read as a whole. The Respondents cannot, as they do, simply selectively choose ss 15(1) and 19(2) to support their contention that a comparison is made of the design with the totality of the entire relevant prior art base for that design whilst ignoring the express words of the rest of Pt 4 including ss 16 and 19(1). It is those sections which expressly provide that a design is distinctive unless it is substantially similar in overall impression to a design that forms part of the prior art base for the design. As a result, a design that combines various features, each of which can be found in the prior art base when considered as a whole but not in any one particular piece of prior art, is capable of being distinctive: Review 2 Pty Ltd v Redberry Enterprise Pty Ltd [2008] FCA 1588 at [60]; Karen Millen Ltd v Dunnes Stores Ltd [2008] ECDR 11 at [82]-[84] (stating that the registered design must be assessed with regard to particular prior designs rather than a hypothetical amalgam of a number of prior designs). See also Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2007] HCA 21; (2007) 235 ALR 202 (upholding the validity in the patent context of a combination of features known collectively in the prior art)."

Informed User
Woodhouse v Architectural Lighting applied. Held, that "Although it would be dangerous to attempt some comprehensive statement of principles that might be applied to the concept, it is apparent that an informed user:
  1. is reasonably informed; not an expert but more informed than an average consumer;
  2. is an objective standard. However, expert evidence may still be adduced in court to assist the Court in applying the informed user concept;
  3. focuses on visual features and is not concerned with internal features or features that are not visible to the naked eye."

Scope
The infringement and validity tests should be the same, resulting in a broader scope of protection. Held, that "The 2003 Designs Act was drafted so that the test of whether an allegedly infringing product is substantially similar in overall impression to the registered design is the same test applied to determine whether a design was distinctive for registration purposes: ALRC Report pars 5.22-5.23. As the ALRC said, “[T]he infringement and distinctiveness tests should be the same so that an infringing design is not a distinctive design and vice versa”: para 5.22. Adopting the same test for distinctiveness and infringement broadens the scope of protection. The extent of difference required to make a design distinctive will depend on the state of development of the relevant prior art base. A more developed prior art base will mean that smaller differences will be sufficient to result in a finding that there is no substantial similarity: para 5.23."
It was relevant that the infringements were much closer to the registered designs than to the prior art. (NOTE: differences from the approach of the UK Court of Appeal in Procter & Gamble v Reckitt Benckiser (CA)). Infringement found.

Use of models or samples in judging infringement
The UK Courts (e.g. J Choo v Towerstone, citing Procter & Gamble v Reckitt Benckiser (CA)) were wrong to use a sample in judging infringement. Review 2 v Redberry followed.

Marking and innocence
As the infringement was very similar, it was reasonable to infer that the secondary infringers had seen the commercial embodiments of the design (NOTE: I do not follow this inference!), and that product and its packaging contained references to the registrations, so the secondary infringers could not make out an "innocence" defence and avoid damages.

Quantum of Damages
It was incorrect to assume that every infringement was a lost sale because the prices and trade channels were different. The court was therefore entitled to resort to a degree of "guesswork and speculation". Damages awarded on the basis of the defendant/respondant's figures, rounded up a little (about 40% of what was claimed by the proprietor).

Directors' liability
There were two lines of authority: the "direct or procure" test (PRS v Ciryl Theatrical Syndicate, [1924] 1 KB 1, 14-15) and the test that a director is only personally liable if it is reasonable to conclude that the purpose of the director was not the direction of the manufacturing and selling activity of the company in the course of his relationship to it but the “deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it”: Mentmore Manufacturing v National Merchandising Manufacturing (1978) 89 DLR (3d) 195 at 204-205. King v Milpurrurru (1996) 66 FCR 474 at 494-500 was followed: on either test there was infringement, as "This is not a case in which Messrs Keller and Armstrong acted only as directors of the infringing companies. Each had personal knowledge of the Designs and of the other facts and matters set out above ... To adopt the language of the Full Court, it was clear that each of Messrs Keller and Armstrong “was personally an actor invading [LED Tech’s] rights: by creating the [Condor Products]” and taking the other steps outlined above. These sequences of actions were “the deliberate, wilful and knowing pursuit of a course of conduct” that was likely to constitute infringement or, at least, reflected a conscious indifference to the risk of infringement. As a result, each of the Directors also engaged in the design infringement. Each is a joint tortfeasor to the design infringement as each had “a common design” with Ren and Olsen to infringe the Designs and is jointly and severally liable to LED Tech for the damages assessed."

Unjustified Threats
The letter before action did not actually contain a threat; it said that "we are currently consulting our legal advisers regarding litigation". The letters after commencement of litigation could not be threats: see Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2008) 76 IPR 83 at [41] and authorities there cited. In any event, since the designs were valid and infringed, any threats could not be "unjustified".