ESR GROUP (NZ) LIMITED v BURDEN [2017] NZCA 217 [26 May 2017]

IN THE COURT OF APPEAL OF NEW ZEALAND

CA387/2016

[2017] NZCA 217

BETWEEN

ESR GROUP (NZ) LIMITED

Appellant

AND

IAN JAMES BURDEN

First Respondent

PLANTATION GROWN TIMBERS

(INTERNATIONAL) LIMITED

Second Respondent

PLANTATION GROWN TIMBERS

(VIETNAM) LIMITED

Third Respondent

Hearing:

2 May 2017

Court:

Randerson, Harrison and Brown JJ

Counsel:

J G Miles QC and A J Pietras for Appellant

A H Brown QC, A I K Franks and J R E Wach for Respondents

Judgment:

26 May 2017 at 10 am

JUDGMENT OF THE COURT

A The application by the respondents to adduce the letter of 7 August 2014 on

appeal is granted.

B The appeal is allowed in part.

C The cross-appeal is allowed.

D The judgment in the High Court is partially set aside and amended in the

following respects:

(i) In respect of the technical drawings made up to 28 October 2003,

judgment is entered for the second respondent in substitution for the

first respondent.

(ii) In respect of the technical drawings made after 28 October 2003,

judgment is entered for the second and third respondents in

substitution for the first respondent.

E Costs in this Court are to lie where they fall.

F Any remaining question of costs in the High Court is to be determined in

that Court.

____________________________________________________________________

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

Para No

Introduction

The background facts and the findings in the High Court

The parties

Authorship and ownership of the copyright works

Copyright qualification

Copying

Secondary infringement

The importations and the Customs notice

Other conclusions in the High Court

Application to adduce further evidence on appeal

The issues on appeal

Was the Judge right to find Mr Burden was a joint author of

the technical drawings?

Did the Judge correctly find that the technical drawings were

original works for copyright purposes?

Do the technical drawings qualify for copyright under s 18(2)

of the Act?

Was the Judge correct to conclude that neither Plantation

International nor Plantation Vietnam owned or co-owned the

copyright works?

When ESR imported its goods into New Zealand did it know

or have reason to believe that the goods were infringing

copyright and, if so, what was the earliest date on which the

company had such knowledge or belief?

Did the Judge err in finding that the Customs notice and the

subsequent determinations by Customs were valid?

Summary

Result

[1]

[4]

[4]

[6]

[14]

[17]

[20]

[22]

[27]

[29]

[34]

[35]

[47]

[51]

[53]

[57]

[66]

[78]

[79]

Introduction

[1] The appellant (ESR) appeals against a judgment of Duffy J in which she

found it had infringed the copyright of the first respondent (Mr Burden) by importing

furniture into New Zealand in 2014.1 ESR was found to be liable for secondary

infringement under s 35 of the Copyright Act 1994 (the Act). This was on the basis

that the imported furniture constituted an infringing copy of Mr Burden’s copyright

work and that ESR knew or had reason to believe that the furniture was an infringing

copy at the time of importation.

[2] The second and third respondents (Plantation International and Plantation

Vietnam respectively) were joint plaintiffs with Mr Burden in the High Court but

their claims to copyright infringement were not upheld. Duffy J granted declaratory

and other relief to Mr Burden in terms we detail below.

[3] The appeal and a cross-appeal by the respondents raise issues about the

authorship and ownership of the alleged copyright works, whether there was

qualifying copyright in the work, the ability of the respondents to sue for

infringement in New Zealand and other issues relating to the seizure of ESR’s goods

after their importation into New Zealand. For reasons we detail below, the issues on

appeal are considerably narrower than those before the High Court.

The background facts and the findings in the High Court

The parties

[4] Mr Burden is an Australian citizen and the managing director of both

Plantation International and Plantation Vietnam. From the early 1990s he has been

involved in the design and manufacture of furniture. In 1998 he incorporated

Plantation International and formed Plantation Vietnam in October 2003.2 Plantation

International was incorporated in the British Virgin Islands and Plantation Vietnam

in Vietnam. At material times they undertook the design and manufacture of

1 Burden v ESR Group (NZ) Ltd [2016] NZHC 1542 [High Court judgment].

2 The evidence was that the company’s charter was signed on 12 October 2003 but an investment

licence was granted on 28 October 2003. The parties were content to adopt 28 October 2003 as

the relevant date.

furniture in Vietnam. The companies produce and sell a range of furniture including

the “Irish Coast Collection”.

[5] Copyright was claimed in the drawings underlying the furniture. At trial,

copyright was claimed in preliminary drawings made by Mr Burden and in later

more formal technical drawings. It is now accepted that the claim of copyright in the

preliminary drawings was insufficiently proved, and this judgment relates only to the

later technical drawings. The technical drawings are divided into two categories

based on whether they were created before or after 28 October 2003. This is the

assumed date on which draughtspersons employed by Plantation International

transferred to Plantation Vietnam.

Authorship and ownership of the copyright works

[6] Issues arose in the High Court as to both authorship and ownership of the

copyright works. Mr Burden described the design process as starting with his

preliminary sketch drawings followed by working drawings made by others under

his supervision. Samples were then made to test the design. Once satisfied with the

samples, more detailed technical drawings were made in an iterative process

involving a series of modifications to successive plans. Three other witnesses called

by the respondents gave evidence confirming the process. They also confirmed

Mr Burden’s evidence of his lengthy involvement in the design and manufacture of

household furniture as well as his experience, skill and ability in drawing the

designs.

[7] The Judge accepted Mr Burden’s account of the process of designing the

furniture and the preparation of the drawings. She was satisfied Mr Burden was the

author of the preliminary drawings and that the more detailed technical drawings

relied upon by the respondents had been derived from them. Duffy J expressed her

findings in these terms:

[172] Mr Burden was also adamant that he created the Irish Coast designs.

I accept his evidence. I am satisfied that the preliminary copyright works

represent Mr Burden’s expression of the heritage styles that are reflected in

those works. Once the constraints imposed by the function of each item are

put aside there would still be the design details which went to form the

essence of the Irish Coast design imagery. In this regard Mr Burden has

referenced a particular heritage look in those designs, which he has arrived at

through his own skill and labour by creating designs that allowed for the

manufacture of furniture by the flotsam method of construction to recycled

or caste-off timber, and gave a heritage style appearance to furniture

intended for modern every day household use.

[173] I find, therefore, that the artistic design work underlying the Irish

Coast Collection of furniture is Mr Burden’s original work, and that he did

not copy the Broyhill Attic Heirlooms range of furniture [as had been alleged

by ESR].3

[8] On appeal, Mr Brown QC on behalf of the respondents conceded there was

insufficient evidence to support the Judge’s finding that copyright existed in the

preliminary drawings. That was so because these drawings were no longer available

and had not therefore been produced in evidence. Counsel also accepted there was

insufficient evidence as to the content and scope of the preliminary drawings.

Nevertheless, Mr Brown submitted that the Judge’s acceptance that the technical

drawings derived from the preliminary drawings by the process Mr Burden described

supports her finding that the later technical drawings were original works in which

copyright subsisted.

[9] The relationship between Mr Burden and the two companies was significant

for both authorship and ownership of copyright. In particular, if those responsible

for preparing the drawings were employees of the respondent companies, then first

ownership of copyright would belong to the company by whom the authors were

employed at the time by virtue of s 21(2) of the Act. The evidence established that

after the incorporation of Plantation International, it employed the staff who made

the technical drawings of the designs produced by Mr Burden. Upon the

incorporation of Plantation Vietnam in 2003, staff employed by Plantation

International were transferred to Plantation Vietnam. The design and production of

furniture was then undertaken by that company in the same or similar manner to the

processes undertaken by Plantation International.

[10] As the Judge noted, none of the technical drawings relied upon by the

respondents identified Mr Burden as the author.4 Rather, the drawings identified

individuals with Vietnamese names as the authors while ownership of the drawings

3 There is no challenge on appeal to Duffy J’s finding that the drawings were not copied from the

goods of another manufacturer. 4 High Court judgment, above n 1, at [84].

was ascribed to Plantation International.5 Nevertheless, the Judge found that

Mr Burden’s evidence established that he had significant creative input into the

production of the technical drawings.6 Further, his contribution to those works was

not distinct from that of the Vietnamese draughtspersons with whom he collaborated.

She was satisfied Mr Burden’s input was sufficient for the purposes of s 6 of the Act

to qualify him as a joint author of the technical drawings with the named Vietnamese

draughtspersons. These findings are challenged on appeal.

[11] Addressing the ownership of the copyright works, the Judge found there was

no evidence Mr Burden was an employee of Plantation International as distinct from

his role as managing director. She viewed Mr Burden as no more than an officer of

Plantation International who was entitled to claim first ownership of copyright in the

drawings.7 On appeal, Mr Brown accepted that, contrary to the Judge’s

understanding, there was evidence Mr Burden was employed by Plantation

International. It followed, in terms of s 21(2) of the Act, that copyright ownership

resided in the respondent companies and not Mr Burden personally.

[12] After many changes of position the respondents’ final contention on appeal is

that in respect of the technical drawings created up to 28 October 2003 ownership

belongs to Plantation International as the employer of both Mr Burden and the

draughtspersons. In respect of copyright works created after that date, counsel

submitted that joint ownership lay with both Plantation International and Plantation

Vietnam. We revert to the ownership issues below.

[13] We record that on 10 September 2012 an exclusive licence agreement was

entered into between Mr Burden, Plantation International and Plantation Vietnam in

which Mr Burden is acknowledged to be the owner of the copyright works and the

companies are said to be licensees. The respondents acknowledge in the light of the

concession we have already mentioned that the description of Mr Burden as the

owner of the copyright cannot be sustained.

5 Or to a name by which that company was previously known.

6 High Court judgment, above n 1, at [193].

7 At [181].

Copyright qualification

[14] In terms of s 18(2) of the Act, a foreign work does not qualify for copyright

unless the author is, at the material time:

(a) a citizen or subject of a prescribed foreign country; or

(b) an individual domiciled or resident in a prescribed foreign country;

or

(c) a body incorporated under the law of a prescribed foreign country.

[15] A “prescribed foreign country” is defined by s 2 as a convention country or a

foreign country declared to be such by Order in Council under s 232 of the Act.8

ESR argued in the High Court that the respondents’ works did not qualify for

copyright purposes because Mr Burden was not an author and because the second

and third respondents were incorporated in the British Virgin Islands and Vietnam

respectively, neither of which had been included in any Order in Council under

s 232.9

[16] With reference to the second respondent Duffy J rejected this submission,

finding that s 232 is expressed in permissive terms and that the listing of the United

Kingdom in the relevant Order in Council should be read to include the British

Virgin Islands.10

Copying

[17] The Judge noted that 10 items of ESR’s “Roseberry Collection” were alleged

to have infringed the respondents’ copyright. She found that:11

The overall appearance of each item of the Roseberry Collection looks to me

to be nothing more than a three dimensional copy of the artistic works

underlying the corresponding Irish Coast item of furniture.

8 For present purposes we are concerned only with a foreign country declared to be such under

s 232. 9 See the Copyright (Application to Other Countries) Order 1995.

10 Relying on the definition of “country” in s 2 of the Act as including every territory for whose

international relations the government of that country is responsible. 11

High Court judgment, above n 1, at [205] (footnote omitted).

[18] The Judge was satisfied that ESR had reproduced a substantial part of the

copyright works and had therefore infringed copyright. That finding is not

challenged on appeal.

Secondary infringement

[19] In terms of s 35 of the Act, secondary infringement of copyright requires

proof of four elements:

(a) The importation into New Zealand of goods that are an infringing

copy of the copyright work;

(b) At the time of importation the importer knew or had reason to believe

that the imported goods were an infringing copy;

(c) The absence of a copyright licence to import the goods; and

(d) The importation is not for the importer’s private and domestic use.

[20] Elements (a), (c) and (d) were satisfied or are no longer challenged. The only

issue is item (b): whether ESR knew or had reason to believe that the goods it was

importing were infringing copies. This turned on two issues: first, the date on which

ESR first became aware that infringement was alleged, and second, how long

thereafter it was reasonable to allow for ESR to investigate before it could be said on

the evidence that ESR knew or had reason to believe that the imported items

infringed the respondents’ copyright.

The importations and the Customs notice

[21] The first material event was a notice issued by Mr Burden on 20 May 2013

under s 136(1) of the Act giving notice of his claim to copyright and requesting the

chief executive of the New Zealand Customs Service (Customs) to detain any pirated

copies of works including the Irish Coast Collection. It was not until 2014 that

containers of the infringing goods began to arrive in New Zealand. There is no

dispute that ESR was the importer. The goods were part of ESR’s Roseberry

Collection. There were four importations between 30 July and 12 September 2014.

Customs issued a series of notices under s 137(3) of the Act between 4 September

and 22 October 2014 determining that the imported goods appeared to be pirated

copies of the goods identified in the Customs notice of 20 May 2013. The

notifications — given by Customs to ESR under s 139 of the Act — stated that the

goods covered by the notices would be detained by the chief executive on terms set

out in the notices.

[22] On 7 August 2014 the respondents’ solicitors sent a letter to ESR and its

solicitors advising Customs had detained the first shipment of furniture imported on

30 July 2014 and claiming that Plantation International’s copyright had been

infringed by the imported goods. The letter was not produced in the High Court nor

referred to in submissions in that Court. We deal below with the respondents’

application to adduce this letter on appeal.

[23] The Judge accepted evidence given by a director of ESR, Ms McLennan, that

she had no actual knowledge of the respondents’ claim of copyright infringement

until about the time Customs seized the items of furniture ESR had imported into

New Zealand on or about 30 July 2014.12

The Judge considered that ESR would

have had sufficient information and time before that date to lead it to make the type

of enquiries a reasonable person would have made. She was satisfied that, by June

2014, before the first importation of Roseberry furniture, ESR had reason to believe

it had infringed the respondents’ copyright works.13

In part, the Judge relied on a

letter having been sent to ESR’s associated company, ESR Group Holdings Pty Ltd,

on 13 May 2013. The existence of this letter was referred to in the solicitors’ letter

of 7 August 2014 but was not itself in evidence. Mr Brown accepted before us that

the 13 May letter could not have been relied upon without direct evidence of its

contents.

[24] Duffy J found in the alternative that, after ESR received the solicitors’ letter

of 7 August 2014, no reasonable person could be left with any doubt that the goods

ESR had imported into New Zealand infringed the respondents’ copyright. She

therefore found that ESR was liable as a secondary infringer from June 2014 at the

earliest and, at the latest, by the time of receipt of the letter of 7 August 2014.14

12

High Court judgment, above n 1, at [254]–[257]. 13

At [260]. 14

At [263].

[25] Since there was no contest at trial that ESR had imported the Roseberry

furniture for the purpose of sale in New Zealand, the Judge found under s 141(3) of

the Act that the infringing items were pirated copies of the respondents’ copyright

works as defined by s 135 of the Act.

Other conclusions in the High Court

[26] The Judge went on to dismiss claims brought by the respondents under the

Fair Trading Act 1986. Those claims are no longer at issue. She also dismissed a

counterclaim by ESR challenging the validity of the Customs determinations in

respect of the detained furniture. The Judge determined that only Mr Burden was

entitled to relief. We summarise the relief granted in broad terms:

(a) A declaration that ESR had infringed copyright by reproducing

Mr Burden’s copyright works.

(b) A declaration that ESR’s infringing products reproduced Mr Burden’s

copyright works and therefore each was a pirated copy imported other

than for private and domestic use.

(c) An injunction restraining ESR from further importing, selling or

dealing with its infringing products or otherwise infringing the

respondents’ copyright.

(d) An order for delivery up of goods and related documents and for the

filing of affidavit evidence as to the extent of the importation.

[27] Issues relating to damages or an account of profits were reserved.

Application to adduce further evidence on appeal

[28] The respondents seek leave to adduce on appeal the letter written by its

solicitors to ESR dated 7 August 2014. The letter notified ESR that Plantation

International claimed copyright in the Irish Coast Collection of furniture; alleged

infringement by ESR through the importation of goods comprising part of ESR’s

Roseberry range of furniture; attached copies of relevant design drawings as well as

images of a large number of items in the Irish Coast collection; and invited ESR to

forfeit the furniture it had imported and to give undertakings not to infringe

Plantation International’s copyright.

[29] The letter of 7 August 2014 was also sent to ESR’s solicitors. It was

disclosed on discovery and included in the common bundle of documents produced

at trial (although apparently without all of the exhibits). It was not referred to or

produced in evidence nor mentioned in submissions. Accordingly, in terms of

r 9.5(4) of the High Court Rules 2016, the letter was not formally received into

evidence. The Judge clearly assumed the letter was in evidence because she referred

to it in her judgment.

[30] Counsel who appeared for the respondents at trial (not Mr Brown) has sworn

an affidavit in which he frankly accepts that, by oversight, the letter was not

produced or referred to at trial. He says he was distracted by other events during the

trial.

[31] The application to adduce further evidence was filed on 19 April 2017. On

26 April 2017 a direction was given that the application would be dealt with at the

hearing of the substantive appeal. ESR was advised that it could file any further

affidavits in opposition without prejudice to its opposition to the application. No

such affidavit was filed but ESR nevertheless opposed the application. It did so on

the grounds that the letter was not fresh; there was no adequate explanation for the

failure to produce the letter or refer to it at trial; the application was late; and ESR

would be prejudiced because it had no opportunity to explain what it understood

from the letter, when Ms McLennan became aware of the letter, and how long would

have been needed to investigate the matters recorded in it.

[32] We heard argument on the application during the hearing of the appeal and

allowed the letter to be produced on a provisional basis. We are satisfied it is in the

interests of justice that the application should now be formally granted. First, the

letter is plainly relevant to the issue of ESR’s knowledge of the alleged infringement.

Second, there can be no doubt ESR was aware of the letter at the time. Third, the

content of the letter cannot be challenged. Fourth, the letter was in the common

bundle but was not produced or referred to at trial through oversight. Although we

accept the explanation for this is insubstantial, there is no evidence it was

deliberately overlooked. Fifth, it was reasonable for the Judge to assume the letter

was in evidence. Sixth, we are not persuaded that ESR will be materially prejudiced

if the application is granted. The issue relating to ESR’s knowledge of the

infringement was adequately explored at trial and ESR has not taken advantage of

the invitation to file any further affidavit on this issue explaining how it would have

responded if the letter had been raised. Realistically, there was little that could have

been said in response since the letter spoke for itself and was clear in its terms.

[33] We grant the application accordingly.

The issues on appeal

[34] Against that background, the issues on appeal have narrowed to these:

(a) Was the Judge right to find Mr Burden was a joint author of the

technical drawings?

(b) Did the Judge correctly find that the technical drawings were original

works for copyright purposes?

(c) Do the technical drawings qualify for copyright under s 18(2) of the

Act?

(d) Was the Judge correct to conclude that neither Plantation International

nor Plantation Vietnam owned or co-owned the copyright works?

(e) When ESR imported its goods into New Zealand, did it know or have

reason to believe that the goods were infringing copyright and, if so,

what was the earliest date on which the company had such knowledge

or reason to believe?

(f) Did the Judge err in finding that the Customs notice and the

subsequent determinations by Customs were valid?

Was the Judge right to find Mr Burden was a joint author of the technical

drawings?

[35] The essence of the submission made by Mr Miles QC on this topic was that

Mr Burden was neither a co-author nor a co-owner of the copyright in the technical

drawings. It was submitted Mr Burden’s evidence of authorship was unreliable

because he was not named as an author on any of the relevant drawings; rather, these

identified Vietnamese draughtspersons as the authors; and ESR was entitled to rely

on the presumption under s 126(2) of the Act that the persons so named were the

authors. Finally, counsel submitted that Mr Burden’s evidence that he directed the

Vietnamese authors was insufficiently detailed to justify a finding of co-authorship.

[36] In respect of ownership, Mr Miles pointed out that Mr Burden had claimed to

be the owner of the copyright throughout the trial but that claim had now been

abandoned. Further, the licence agreement dated 10 September 2012 recorded

Mr Burden as owner and the two companies as exclusive licensees. Given the

respondents’ acceptance that this agreement was not correct, counsel submitted it

should now be recognised as a sham, designed to overcome difficulties with the two

companies suing in New Zealand or elsewhere. Finally, it was said that the Customs

notice lodged on 20 May 2013 recorded Mr Burden as the copyright owner and only

in respect of the logos for the Irish Coast Collection.

[37] ESR is entitled to be critical of the changes of stance on the respondents’ part.

However, there is no suggestion the position now taken by them was not open on the

pleadings as amended during trial. In the end, despite the presumption as to

authorship under s 126 of the Act, we are satisfied it was open for the Judge to

conclude Mr Burden played a substantial creative role in the preparation of the

technical drawings.

[38] Duffy J had the advantage of assessing Mr Burden’s evidence at trial as well

as that of the supporting witnesses. We accept the submission made by Mr Brown

that it was open to the Judge to conclude that the technical drawings were part of an

iterative process involving, in various sequences, the creation of preliminary

drawings or sketches and the making of samples followed by the preparation of

technical drawings. We have already referred at [6] and [7] above to the Judge’s

acceptance of Mr Burden’s description of the design process. The Judge also

found:15

[189] In the present case the plaintiffs contend that Mr Burden was the

creative force behind the technical copy works, which is what generates

copyright entitlement, whereas the draughtspersons did no more than place

lines on a page. Here the plaintiffs rely on Mr Burden’s evidence that he

drew concepts or scratch ups that he might leave on his desk or a drafting

board until satisfied with them, when he would then give what were

preliminary sketches to a draughtsperson to draft to scale. Mr Burden would

direct the draughtsperson as to the measurements of the height, width and

breadth of a particular item of furniture. Then the draughtsperson would

draw a dimensional drawing and return it to Mr Burden who would then pin

it on the wall, look at it and then perhaps alter some feature of the drawing to

change the appearance, giving it back to the draughtsperson to redraw as a

dimensional drawing. Once Mr Burden was finally happy with the

dimensional drawing a sample would be built, then the overall design would

be finalised and very specific technical drawings were prepared from which

the end product was produced.

[39] Duffy J accepted Mr Burden’s evidence and rejected ESR’s submissions as to

authorship:

[190] On the other hand, ESR contends that the technical copyright works

were authored by the Vietnamese artists whose names are recorded on the

relevant technical drawings. First, ESR disputes that Mr Burden “creatively

directed the artists”. I reject that submission. I accept Mr Burden’s account

of the involvement he had in the creation of the technical copyright works.

ESR has identified no reason for me to reject this account, nor do I consider

there to be any good reason for doing so. I have accepted Mr Burden’s

evidence in other respects, and I see no reason to depart from that approach

here.

[40] Dealing with a submission by ESR that any creative input by Mr Burden was

insufficient to show Mr Burden was the author of the technical drawings, the Judge

concluded:

[193] Here the processes underlying the development of the technical

copyright works resemble the processes that were followed in Cala Homes

(South) Ltd v Alfred McAlpine Homes Ltd. Mr Burden’s evidence establishes

that he, like the architect in Cala Homes (South), had significant creative

input into the production of the technical copyright works. Further his

contribution to those works is not distinct from that of the Vietnamese

15

High Court judgment, above n 1.

draughtspersons with whom he collaborated. I am satisfied, therefore, that

Mr Burden’s input is sufficient to qualify him as a joint author of the

technical copyright works with the named Vietnamese draughtspersons also

being joint authors.

(Footnotes omitted.)

[41] The view that authorship should be determined by the “pusher of the pen”

was rejected by Laddie J in the Cala Homes case referred to by the Judge:16

… to have regard merely to who pushed the pen is too narrow a view of

authorship. … It is both the words or lines and the skill and effort involved

in creating, selecting or gathering together the detailed concepts, data or

emotions which those words or lines have fixed in some tangible form which

is protected. It is wrong to think that only the person who carries out the

mechanical act of fixation is an author. There may well be skill and

expertise in drawing clearly and well but that does not mean that it is only

that skill and expertise which is relevant.

[42] Laddie J found that although the actual drafting had been undertaken by

junior employees of a drawing office, the architect claiming to be the author had

provided them with a detailed brief. Although the architect had done none of the

drawing, he was nonetheless found to be a joint author.

[43] We also accept Mr Brown’s submission that Duffy J correctly distinguished

the decision of Hillyer J in Hansen v Humes-Maclon Plastics Ltd where the prospect

of joint authorship was not addressed.17

As Duffy J found, the facts in Hansen

differed from the case before her. In the present case Mr Burden gave specific

evidence, accepted by the Judge, that he signed off on each final technical drawing

and that, although employees assisted him in producing technical drawings, the

decisions were his. He directed, and was intimately involved in, the design process

at every stage. His employees acted in accordance with his detailed directions.

[44] Mr Burden also gave evidence that it was common in producing the technical

drawings to work with copies or photocopies as the design was developed. Typically

this would proceed by printing or photocopying a drawing and then making

additions to it. It was common to go through several cycles of photocopying and

additions. We add that, although Mr Burden was unable to produce the preliminary

16

Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd [1995] FSR 818 (Ch) at 835. 17

Hansen v Humes-Maclon Plastics Ltd (1984) 1 NZIPR 557 (HC); High Court judgment, above

n 1, at [192].

drawings or sketches from which the technical drawings had later been derived, he

produced similar sketches for other products. The Judge was satisfied the

preliminary sketches for the Irish Coast Collection had been in existence.18

[45] ESR also submitted that the technical drawings were merely two-dimensional

copies of a three-dimensional prototype sample and did not qualify for copyright

purposes.19

However, we accept Mr Brown’s submission that this contention cannot

be sustained on the evidence the Judge accepted. Importantly, it is clear that the

evidence showed the technical drawings were not just two-dimensional copies of

three-dimensional samples. Rather, the dimensioning and joinery information was

added to the technical drawings after the sampling as part of the iterative process

already discussed.

[46] We are satisfied the Judge was correct to find that Mr Burden was a joint

author of the technical drawings along with the Vietnamese draughtspersons

employed by Plantation International and later by Plantation Vietnam. On the

evidence, the technical drawings constituted a work of joint authorship for the

purposes of s 6(1) of the Act on the basis that the contribution of each of the authors

was not distinct from that of the others. As we discuss shortly, this has an important

consequence for the issue of whether the technical drawings qualified for copyright

in terms of s 18(2) of the Act.

Did the Judge correctly find that the technical drawings were original works for

copyright purposes?

[47] ESR’s written submissions included an argument that the technical drawings

were not original works for copyright purposes in terms of s 14 of the Act. However,

this submission was not advanced in oral argument. We are satisfied the Judge was

correct to find that the technical drawings were original works on the evidence of

Mr Burden which she accepted. ESR accepted that the technical drawings were, in

principle, capable of attracting copyright and does not challenge the Judge’s finding

that the drawings were not works copied from others, as ESR had alleged at trial.

18

High Court judgment, above n 1, at [112]. 19

Citing the decision of Davison CJ in Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641

(CA) at 655.

[48] Mr Brown correctly submitted that the test for originality in relation to

artistic works is a relatively low one.20

As Duffy J said:21

[75] Provided the work “was not slavishly copied from some other work”

and the author has “expended more than negligible or trivial labour skill and

judgment” in its creation, it will be considered original work. This statement

appears to me to accurately reflect New Zealand copyright law on originality

as well.

[49] We also refer to the decision of LA Gear Inc v Hi-Tec Sports plc for the

proposition that where an author produces one or more preliminary versions, the

finished product does not cease to be that person’s original work simply because the

author adapts it with minor variations or even simply copies it from an earlier

version.22

[50] In the light of the Judge’s findings on the evidence, we are satisfied that the

technical drawings reflect the original creative work of Mr Burden and the

Vietnamese draughtspersons so that copyright subsists in them.

Do the technical drawings qualify for copyright under s 18(2) of the Act?

[51] Given our finding that the technical drawings were the product of the joint

authorship of Mr Burden and the Vietnamese draughtspersons, we accept the

respondents’ submission that they qualify for copyright on the basis that Mr Burden

was, at the material time, a citizen or subject of a prescribed foreign country, namely

Australia, for the purposes of s 18(2)(a) of the Act. It does not matter that the other

co-authors do not qualify under that provision since s 18(3) provides that a work of

joint authorship qualifies for copyright if, at the material time, any of the authors

satisfies the requirements of subs (1) or (2).

[52] It was submitted for the respondents that, if we were satisfied the technical

drawings qualified for copyright purposes on the basis of Mr Burden’s citizenship of

Australia it was unnecessary for us to determine whether the British Virgin Islands

were a prescribed foreign country for the purposes of s 18(2) of the Act. Detailed

submissions on this point were presented on behalf of the respondents at the hearing

20

Citing Wham-O MFG Co v Lincoln Industries, above n 19, at 664. 21

High Court judgment, above n 1. 22

LA Gear Inc v Hi-Tec Sports plc [1992] FSR 121 (CA) at 136.

and we have since received, by leave, further submissions on this point from ESR.

The determination of this issue is not free from doubt and we have decided the better

course is to refrain from making any finding on the point. We do so because it is

unnecessary for our decision. The technical drawings qualify for copyright on the

basis we have found.

Was the Judge correct to conclude that neither Plantation International nor

Plantation Vietnam owned or co-owned the copyright works?

[53] We can deal with this issue briefly. In short, we accept the submissions made

on behalf of the respondents in support of the cross-appeal that the Judge erred in

finding that Mr Burden was the owner of the copyright in the technical drawings and

that neither of the companies were owners or co-owners thereof. Our conclusion is

that Plantation International was the owner of the copyright in the technical drawings

created in the period up to the formation of the new company on 28 October 2003.

During that period, although Mr Burden was a co-author of the drawings, he was

admittedly employed by Plantation International. It follows in terms of s 21(2) that

the first owner of the copyright in the technical drawings during this period is

Plantation International.

[54] In the period post-28 October 2003, our finding that the Vietnamese

draughtspersons were co-authors employed by Plantation Vietnam means that via the

latter group of persons ownership of the technical drawings is held by Plantation

Vietnam as their employer. It is not entirely clear on the evidence whether

Mr Burden was employed by Plantation Vietnam. The fact that he was the managing

director of Plantation Vietnam and Plantation International suggests he may have

been. On the other hand, it is clear that both companies remained in existence after

28 October 2003. In his brief of evidence Mr Burden said Plantation Vietnam was

incorporated to deal with the design, production and exportation of goods for

Plantation International, which was responsible for marketing the goods

internationally. Mr Burden personally continued to be involved in the design of the

furniture along with the Vietnamese draughtspersons who had transferred their

employment to Plantation Vietnam. On the balance of probabilities, we find that

Mr Burden was employed solely by Plantation International.

[55] In the end, whether Mr Burden was employed by both companies or solely by

Plantation International is immaterial. Either way, both companies would be

co-owners and entitled to sue in New Zealand for infringement of copyright.

[56] In terms of s 120 of the Act, an infringement of copyright is actionable by the

copyright owner. So long as the works qualify for copyright in terms of s 18 of the

Act (which we accept) it follows that both Plantation International and Plantation

Vietnam were entitled to bring proceedings in New Zealand. They are entitled to do

so whether or not the British Virgin Islands or Vietnam are prescribed foreign

countries for the purposes of s 18(2). That provision is concerned with authorship,

not ownership.

When ESR imported its goods into New Zealand did it know or have reason to

believe that the goods were infringing copyright and, if so, what was the earliest

date on which the company had such knowledge or belief?

[57] As noted at [20] above, for the purposes of secondary infringement under

s 35 of the Act, the only disputed issue is whether and when ESR knew or had reason

to believe the goods it was importing infringed copyright. This Court discussed the

issue of secondary infringement in Jeanswest Corporation (New Zealand) Ltd v

G-Star Raw C.V.23

Dealing with the question of knowledge for the purposes of

secondary infringement the Court said:

[110] The word “knows” in s 35(1)(a)(ii) and in s 36 connotes actual

knowledge, as Smellie J – in our view correctly – held in Husqvarna Forest

& Garden Ltd v Bridon New Zealand Ltd.24

On the other hand, the words

“has reason to believe” in those two provisions involve constructive

knowledge. Constructive knowledge is appropriately imputed if a party

wilfully closes its eyes to the obvious or wilfully fails to make those

inquiries an honest and reasonable person in the circumstances will make.25

(Footnotes in original.)

23

Jeanswest Corporation (New Zealand) Ltd v G-Star Raw C.V. [2015] NZCA 14, (2015) 13

TCLR 787. 24

Husqvarna Forest & Garden Ltd v Bridon New Zealand Ltd [1997] 3 NZLR 215 (HC) at 226.

This is also the view expressed in Kevin Garnett, Gillian Davies and Gwilym Harbottle (eds)

Copinger and Skone James on Copyright (16th ed, Sweet & Maxwell, London, 2011) Vol 1 at

[8-08]–[8-09]. 25

Husqvarna, above n 24, at 226; Inverness Medical Innovations, Inc v MDS Diagnostics Ltd

(2010) 93 IPR 14 (HC) at [265] citing Kevin Garnett, Gillian Davies and Gwilym Harbottle

(eds) Copinger and Skone James on Copyright (15th ed, Sweet & Maxwell, London, 2005) Vol 1

at [8-10].

[58] It is not in dispute that the material time at which knowledge is to be assessed

is at the point of importation of the goods into New Zealand.

[59] In submitting there was no proof of actual or constructive knowledge at the

time the goods were imported, ESR referred to the Customs notice dated 20 May

2013 and the subsequent notices of determination by Customs. Mr Miles rightly

pointed to some initial uncertainty in the terms of the 20 May 2013 notice. He

pointed out that Mr Burden claimed to own the copyright and submitted that, on its

face, the copyright was said to reside only in the logo of the identified works. On the

first page of the notice, it is stated:

The title of the works is as stated in the list of works attached as Schedule 1,

namely “logo”.

[60] The Customs notice produced to the Court by ESR attached images of the

products in which copyright was claimed but not the technical drawings. However,

the same images along with technical drawings were attached to the letter of

7 August 2014. The schedule also referred to copyright beyond the logos. It stated:

Copyright is claimed in the literary and artistic works and the logo shown,

including but not limited to as embodied in the Annexures to this Notice.

[61] ESR submitted confusion could have arisen from the content of the notice.

We do not accept this could have occurred at that time because, although the notice

was posted on the Customs website, the Judge accepted Ms McLennan’s evidence

she did not see it there.26

Ms McLennan could not recall when she first became

aware of it or whether this was before or after the importations. Significantly, any

lack of clarity was cured soon after the first importation of goods the following year,

as we discuss in the next section of this judgment.

[62] The first importation of goods by ESR arrived in New Zealand on 30 July

2014. Although it was not until 4 September 2014 that Customs determined under

s 137 of the Act that the goods imported on 30 July appeared to be pirated copies of

the goods to which the respondents’ Customs notice related, ESR’s solicitors had in

the meantime sent the 7 August 2014 letter both to ESR and its solicitors. At the

26

High Court judgment, above n 1, at [254].

hearing of the appeal, we floated the proposition that perhaps a period of one month

after notice of an alleged infringement was a sufficient period to enable ESR to

investigate the alleged claim and to take legal advice.

[63] However, we consider on reflection that this was rather too generous. Given

the obvious and close similarities between the ESR goods and the copyright works,

we are satisfied that a period of two to three weeks would have been more than

sufficient after receipt of the 7 August letter.

[64] Mr Brown accepted that the respondents had not established the requisite

knowledge of infringement at the time of the first importation on 30 July 2014 but

we accept his submission that, by the time of the subsequent importations on

28 August and 5 and 12 September 2014, ESR knew or had reason to believe that the

imported goods were infringing copies of the respondents’ copyright works.

[65] For completeness we note Mr Brown’s observation that there is no appeal

from the declaration made in the High Court that the infringing Roseberry products

reproduced the respondents’ copyright works. Counsel submitted that ESR’s goods

were pirated copies within the meaning of s 141(3) of the Act in any event since

knowledge of infringement was not a requirement under that section or in the

definition of pirated copy.

Did the Judge err in finding that the Customs notice and the subsequent

determinations by Customs were valid?

[66] Mr Miles submitted that the Customs notice of 20 May 2013 was

fundamentally flawed because it recorded Mr Burden as the copyright owner and

Plantation International as the exclusive licensee. It was also submitted that the

notice claimed copyright only in the logo, but we have already rejected that

criticism.

[67] While Mr Miles acknowledged the letter of 7 August 2014 claimed the

copyright was owned by Plantation International, it was submitted that ESR would

have been confused as to who owned the copyright. It was also said that ESR would

have been confused as to who had authored the technical drawings since the

Customs notice said Mr Burden was the author yet the technical drawings provided

with the 7 August letter cited only the Vietnamese draughtspersons as authors. There

could certainly have been no doubt what was alleged after the letter of 7 August.

[68] As we have already noted, the images attached to the Customs notice of

20 May 2013 identified Plantation International as the copyright owner. By the time

of the letter of 7 August 2014, the respondents’ solicitors informed ESR and its

solicitors that Plantation International owned the copyright. The attachments to the

7 August letter stated the same thing.

[69] We do not accept ESR’s submission that the Customs notice of 20 May 2013

was invalid on any of the grounds advanced. While s 136(1) of the Act provides that

a notice given under that section is to be given by the owner of the copyright, it does

not follow that an error as to ownership means the notice is invalid. The Act makes

elaborate provision for what is to happen on receipt of a notice under the section. In

particular, there are extensive provisions enabling the chief executive of Customs to

seek further information, to suspend the giving of any acceptance of the notice, and

ultimately, for application to be made to the Court for resolution of disputes. These

provisions show a clear statutory intention that any errors in the notice do not lead to

its invalidity.

[70] Under reg 4(1) of the Copyright (Border Protection) Regulations 1994 every

person giving a notice under s 136 is obliged to provide evidence in support of the

claim that the items referred to in the notice are works in which the person owns

copyright. Regulation 4(2) allows the chief executive to direct that such evidence be

given at the time the notice is given or at any subsequent time. This allows the

chief executive to clarify matters or request further evidence.

[71] In terms of s 136(3) of the Act, the chief executive is obliged either to accept

or decline the notice within a reasonable period of its receipt. Section 136A permits

the chief executive to suspend an accepted notice if satisfied that the information

held in respect of the notice is not correct or is no longer current. Before giving any

notice of suspension, the chief executive is obliged to inform the person who gave

the notice and to give an opportunity for them to respond.

[72] An accepted notice remains in force for the period specified in the notice (in

this case five years) unless it is revoked by the claimant or discharged by order of the

court under s 141 of the Act. This section provides that any person may apply to the

court for an order that a notice accepted under s 136 be discharged.

[73] Under s 137, where a notice has been accepted under s 136 and the

chief executive forms the opinion that any imported item in the control of Customs

may be a pirated copy to which the notice relates, the chief executive may conduct

an investigation. For the purposes of the investigation, the chief executive may

require the claimant or any person appearing to have an interest in the item to supply

information.

[74] Whether or not the chief executive conducts any investigation, a

determination must be made within a reasonable period as to whether the imported

goods appear to be a pirated copy. Notice of any such determination must then be

given to the claimant and any person appearing to have an interest in the item.27

Any

dispute may be determined by the court under s 141.

[75] In the present case, the chief executive issued a notice on 13 June 2013, less

than a month after the Customs notice. The 13 June 2013 notice is headed

“Copyright Notice” and lists the copyright holder as Plantation International.

Although the title of the work is listed as “logos”, the notice itself states that:

Copyright is claimed in the literary and artistic works in the literary, artistic

works, or stylised logos shown

[76] After the importations began the following year, the chief executive advised

the respondents’ solicitors on 4 September 2014 that the notices under s 136 of the

Act stating that Plantation International was the copyright owner had been accepted.

This determination is consistent with the images attached to the Customs notice of

20 May 2013 and with the attachments to the letter of 7 August 2014 from the

respondents’ solicitors. The chief executive’s advice included a determination made

under s 137(3) that the goods imported on 30 July 2014 appeared to be pirated

copies. Similar determinations followed on 17 and 22 October 2014.

27

Copyright Act 1994, s 139.

[77] For the reasons given, we are satisfied the Judge was correct to find that the

Customs notice and the subsequent determinations made by the chief executive of

Customs were valid.

Summary

[78] In summary, we have determined:

(a) The letter of 7 August 2014 may be admitted on appeal.

(b) The High Court correctly found:

(i) Mr Burden was a joint author of the technical drawings.

(ii) The technical drawings were original works for copyright

purposes.

(iii) The technical drawings qualify for copyright under s 18(2) of

the Act.

(c) The High Court was wrong to find that Mr Burden was the owner of

copyright in the drawings and that neither Plantation International nor

Plantation Vietnam were the owners of copyright.

(d) The correct position is that Plantation International was the copyright

owner in respect of the technical drawings made up to 28 October

2003 and both Plantation International and Plantation Vietnam are

co-owners in the copyright of the technical drawings made after

28 October 2003.

(e) Plantation International and Plantation Vietnam are both entitled to

sue in New Zealand for infringement of copyright.

(f) The High Court was correct to find that ESR was liable for secondary

infringement in respect of the importation of its goods into

New Zealand on 28 August and 5 and 12 September 2014 but not in

respect of the importation of goods on 30 July 2014.

(g) The High Court was correct to find that the Customs notice of 20 May

2013 and the subsequent determinations made by the chief executive

of Customs were valid.

Result

[79] The application by the respondents to adduce the letter of 7 August 2014 on

appeal is granted.

[80] The appeal is allowed in part.

[81] The cross-appeal is allowed.

[82] The judgment in the High Court is partially set aside and amended in the

following respects:

(i) In respect of the technical drawings made up to 28 October 2003,

judgment is entered for the second respondent in substitution for the

first respondent.

(ii) In respect of the technical drawings made after 28 October 2003,

judgment is entered for the second and third respondents in

substitution for the first respondent.

[83] We consider that costs should lie where they fall. We take into account that

the appellant has been partially successful and that the respondents have been

granted an indulgence by the admission of the letter of 7 August. As well, the

changes of stance by the respondents (including their persistence until shortly before

the appeal was heard that Mr Burden was the copyright owner) have added to the

costs of resolving the issues.

[84] Any remaining question of costs in the High Court is to be determined in that

Court.

Solicitors: AJ Pietras & Co, Lower Hutt for Appellant

James & Wells, Auckland for Respondents