Several cases during this period

INTELLECTUAL AND INDUSTRIAL PROPERTY
ANDREW BROWN QC
BCL (Oxon), LLB (Hons), Auckland

This is a review of intellectual property developments in New Zealand – both legislative and
case law – over the last two years. There have been a number of significant events and cases.
LEGISLATIVE DEVELOPMENTS

A New Patents Bill
Over the last 2-3 years a detailed and far reaching review of the patents legislation has been
undertaken by the Ministry of Economic Development. An exposure draft of the new Bill is
expected to be released by early November 2004 and it is anticipated that the new legislation
will be introduced into Parliament in early-mid 2005. Because of the need for Select Committee
study and the drafting of new Regulations, it is not anticipated that the new legislation will come
into force until some time in 2006.
The changes to the legislation which have been widely signalled by the Ministry will involve the
following elements:
(a)
Adoption of the Australian definition of “invention” i.e. that for an invention to be patentable, it must be a “manner of manufacture”, within the meaning of s6 of the Statute of Monopolies, be novel, involve an inventive step and be useful; The Act is to be amended to specifically exclude from patentability inventions for “diagnostic, therapeutic and surgical methods for the treatment of humans”. This wording reflects Article 27.3(a) of the TRIPs Agreement. The scope of what is excluded will no doubt be the subject of further vigorous debate (see the discussion at the Pfizer case later in this review); Business methods and software will continue to be patentable; Patents will be granted only if, on the balance of probabilities, the requirements for patentability are met. This will align New Zealand with Australia which adopted this test in 2001; There will be a long overdue shift to international novelty; The provisions governing patent attorneys would be substantially updated and modernised. In a further policy announcement made in June 2004, the Ministry indicated that it would not be recommending the exclusion of genetic material from patentability. This was because of the difficulties of definition, the large amount of genetic material already patented and because to rule out such material might be inconsistent with New Zealand’s TRIPs obligations. The same report notes that there is “emerging evidence” that genetic material patents may actually impede and restrict further innovation and research. The Ministry, in conjunction with the Ministry of Research, Science and Technology is therefore to look at the possibility of adding a research exemption to the Patents Act and to report this back to Cabinet by December 2004. The amendment of New Zealand’s patent legislation has had an enormously long gestation period but will finally align the New Zealand Act with comparable legislation in other developed countries – most particularly Australia. The move to international novelty will place considerable pressure on New Zealand’s patent examiners and may yet lead to some contracting out to IP Australia or some rationalization between the Intellectual Property Offices of these two countries. Patent Reform: Exemptions from Infringement With effect from 19 December 2002, the New Zealand Parliament passed a small but significant amendment to the Patents Act. The new provision (section 68B) provides that: “It is not an infringement of a patent for a person to make, use, exercise or vend the invention concerned solely for uses reasonably related to the development and submission of information required under New Zealand law or the law of any other country that regulates the manufacture, construction, use, or sale of any product”. The effect of the provision that it is no longer an infringement for a party to apply for regulatory approval for, say, a generic equivalent pharmaceutical or animal remedy prior to the expiry in New Zealand of patents governing the original product. Similarly it will not be an infringement to manufacture samples and conduct testing if required to meet regulatory requirements for registration either in New Zealand or under the law of any other country. The New Zealand provision was taken from section 55.2(1) of the Canadian Patents Act. The Canadian provision was itself the subject of challenge before the WTO by the EU. In a lengthy decision issued on 17 March 2000, a WTO Panel upheld the Canadian provision, ruling that it was not inconsistent with Articles 27.1, 28.1, and 30 of the TRIPs Agreement. The WTO Panel accepted arguments that the Canadian provision did nothing to impair the patentee’s rights to exploit its patent for the full term of protection. Nothing in the TRIPs Agreement was intended to give a patent owner an extension to the prescribed period of a patent. In view of the time required for registration of pharmaceuticals, failure to allow pre-expiry testing would lead to a delay in competition after the expiry of the patent, and a de facto extension of a patent - thus allowing the patent owner to gain a “windfall monopoly”. The WTO Panel held that this was not a consequence intended by the TRIPs Agreement. Fair Trading Act The Fair Trading Act Amendment 2002 enacted a series of modest amendments to strengthen the effectiveness of the Act. The maximum penalties for offences were doubled to $60,000 for an individual and $200,000 for a body corporate. A three year time limit on criminal prosecutions was clarified. It now runs for three years from the date of discovery of the breach or the date the breach ought reasonably to have been discovered. In addition, the Commerce Commission’s search warrant powers were augmented by additional provisions enabling it to require persons to supply information on documents. Copyright: Digital Amendments In December 2002, the Ministry of Economic Development released a further Position Paper on digital copyright. This was followed in June 2003 with a Cabinet paper which outlined recommendations on amending the Copyright Act to clarify existing rights and exceptions in the digital environment. The amending legislation is presently being drafted and it is expected that the amendments will be introduced into Parliament late in 2004 and then sent to Select Committee consideration. The recommendations involve the following: (a) Clarifying the application of the reproduction right to digital material. At the same time, it is proposed that an exception be provided for transient copying as a result of an automatic or inevitable technical process; To include a technology-neutral communication right and a corresponding category of communications works that would receive copyright protection. This is designed to replace provision relating to broadcast and cable programme services; To limit the liability of internet service providers for both primary and secondary infringement in certain circumstances so as to ensure continued access for consumers to internet services at reasonable cost. ISPs would also be permitted to cache; It is proposed that technological protection measures be expanded to cover all rights provided to copyright owners, not just copying, but the provision would maintain its focus on devices, means or information that are intended to facilitate infringement of copyright. It is also recommended than an offence provision be introduced for large-scale commercial dealing with such devices, means or information. There is also to be protection for electronic rights management information that identifies content protected by copyright and the terms and conditions of use (but not tracking functions); There is to be clarification of the Part III permitted uses as to fair dealing, the rights of libraries and educational institutions in relation to digital works. The readjustment of the boundaries between owners and users in this part of the Act is likely to be contentious (as always) and there will undoubtedly be robust debate on these provisions.
For a further discussion of these reforms see Smillie Digital Copyright Reform in New Zealand
[2004] EIPR 302.
Copyright (Parallel Importation of Films and Onus of Proof) Amendment Bill 2002

In May 1998 the then New Zealand Government removed the ban on parallel importation of
copyright works contained in the Copyright Act 1994. This was done without any prior
consultation or Select Committee hearings. Following this abrupt move, certain copyright owner groups were vocal in their concern that (to prove infringement) they were obliged to show that the imported product was an infringing copy in the country in which it was made (section 12(3)(a)) and that proof of this might be difficult. In particular, the music industry was keen to have in New Zealand a provision similar to section 130A of the Australian Copyright Act which, in respect of sound recordings, reversed the onus of proof as to whether or not an article was an infringing copy. In December 2001 in a media release, the Minister of Commerce and the Associate Minister of Arts, Culture and Heritage, foreshadowed changes to the onus of proof to make it easier for right holders to take action against persons “blatantly importing pirated material”. In the same press release, the Government announced its intention to ban the parallel imports of films, videos and DVDs for nine months from a title’s first introduction. This was designed “to give the film distribution industry a period of protection to allow for the orderly release of films, videos and DVDs … This will ensure that distributors can supply provincial and smaller cinemas with copies of film prints so that as many New Zealanders as possible have access to new release titles”. The Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003 implementing these policy objectives came into force in October 2003. The changes affected by the Bill are: (a) To introduce a ban on parallel importation of films made primarily for public showing in cinemas (including copies of those films and other formats) for nine months after a title’s first international release. The ban is to remain in effect for a period of five years; To clarify the scope of rental rights granted to owners of copyright in films, sound recordings and computer programs – in particular that the rental of parallel imported DVD copies and films infringes the rental right; In respect of sound recordings, films and software products (including electronic books and computer games) to shift the evidentiary onus as to whether the goods in question are infringing copies on to the defendant in civil proceedings concerning the act of importation; To lower the knowledge requirement in the case of importation of sound recordings, films (including DVDs, VHS videos and video CDs) and software products from “knows or has reason to believe” to the lower requirement of “knows or ought reasonably to know”; Finally, the Act includes a provision designed to ensure that registered trade marks cannot be used to frustrate legitimate parallel importing. The Bill introduces an amendment to the Trade Marks Act 2002 – a new s97A: “A registered trade mark is not infringed by the use of the trade mark (including use for the purpose of advertising) in relation to goods that have been put on the market anywhere in the world under that trade mark by the owner or with his or her express or implied consent” Trade Marks Act 2002 The Trade Marks Act 2002 came into force on 20 August 2003 after new Trade Mark Regulations were promulgated. Many of the policy changes effected in the new Act were first officially mooted as long ago as 1992. Interestingly, the new Act drew a number of its provisions from the Singapore Trade Marks Act 1998 which has the virtue of plain drafting and clarity of expression. In turn, the Singapore Act is heavily based on the UK Trade Marks Act 1994 and the EU Trade Marks Directive. The net result is that the new legislation blends much of the current familiar trade mark law with new concepts and terminology from the UK and Europe. Some of the features to note in this new Act are: h The former Parts A and B of the Register are now coalesced and the standard of registrability is the former Part B standard i.e. that the sign is capable of distinguishing the goods and services of one person from those of another. A number of provisions have been inserted to protect the inappropriate registration of Maori words and symbols as trade marks. These changes are an innovative approach to the issue of protection of indigenous rights and are the culmination of a lengthy period of consultation between the Government and Maori. It is an absolute ground of refusal if the Commissioner considers on reasonable grounds that the use or registration of the mark would be likely to offend a significant portion of the community, including Maori. The Act also allows persons who are culturally aggrieved to seek a declaration that a registered trade mark is invalid because it is likely to offend a significant number of the community, including Maori. The periods of registration are now standardized at ten years. A new absolute ground for refusing registration (as well as opposition and rectification) is that the application for registration of the trade mark was made in bad faith. This will introduce wide scope for challenges – in particular to overly broad specifications. Previously trade marks could be removed from the register on the grounds of no bona fide use for a period of five years from the date the mark was actually placed on the register. This has now been reduced to three years (after a phase-in period). The onus is also placed on the registered proprietor to show use. Registered trade marks may no longer be amended after registration. One significant change which puts New Zealand out of step with Australia and other
jurisdictions is the test for genericism. In brief, the current test is based on whether the
trade mark has a well-known and established use amongst the trade as the name of an
article. The new test involves showing that as a consequence of acts or inactivity of the
owner, the trade mark has become a common name in general public use for a
product or service in respect of which it is registered.
The remedies for trade mark infringement were not fully codified in the existing 1953 Act. These are now properly recorded and include orders for erasure or obliteration, delivery up and an order for the disposal of such infringing items.
A further amendment is expected to be introduced in the next few months to clarify that
application for trade marks may be made by a person “claiming to be the proprietor”. This is to
ensure that the case law under the former Act relating to the right to apply for a mark are
retained. The omission of these words from the new section 32 of the 2002 Act had raised
questions as to how the Courts might deal with prior rights to proprietorship.
Traditional knowledge
The issue of traditional knowledge has been actively canvassed both within New Zealand and
internationally for some years. Within New Zealand a Treaty of Waitangi claim (the WAI 262
claim) by six Maori iwi has raised issues about both cultural and intellectual property, including
the inadequacy of conventional intellectual property rights to cater for Maori cultural property
and traditional knowledge. At an international level the issue of traditional knowledge and
cultural rights is being considered by a variety of bodies namely UNESCO, WIPO, WTO, the
Convention on Biological Diversity, the FAO and WHO. At a regional level, the Asia-Pacific Co-
operation (“APEC”) has held a symposium on traditional medicine. Further, the Pacific Islands
Forum in conjunction with the South Pacific Regional Environmental Programme has been
working on a draft Regional Model Law for the protection of traditional ecological knowledge
since 1999.
In July 2004 the Ministry of Economic Development announced a three stage work programme
on intellectual property and traditional knowledge. This programme will evolve from information
and awareness-raising to identifying problems where intellectual property rights do not match
traditional knowledge requirements. The final stage will develop a series of options to address
these. Traditional knowledge in the New Zealand context will cover such items as weaving,
carving, songs, tribal stories, traditional medicine and environmental knowledge. The paper
acknowledges that the development of options is very likely to straddle a range of policy areas
including intellectual property, cultural heritage policy, conservation and environmental
concerns, access to genetic resources and benefit sharing.
CASE LAW DEVELOPMENTS
Patents

The most significant patent decision in the period under review is the Court of Appeal’s ruling in
Pfizer, Inc v Commissioner of Patents ((2004) 60 IPR 624). In this case the Court of Appeal
was asked to overrule its earlier 1983 seminal decision in Wellcome [1983] NZLR 385 that
methods of treating illness or disease in human beings were not patentable. At the time of
hearing, some hundreds of patent applications were awaiting the outcome of this decision.
Pfizer argued that a series of changes to the Patents Act as well as dicta in a Court of Appeal
decision allowing patents in the Swiss form (Pharmac v Commissioner of Patents (1999) 46 IPR
655) removed the reasons for the ban given in the Wellcome case. These factors were:
The repeal in 1992 of the compulsory licence provision in s51; The observations of the Court of Appeal in Pharmac that it was doubtful that the Commissioner could refuse an application under the “generally inconvenient” proviso in s6 Statute of Monopolies; The recognition in Pharmac that methods of medical treatment were an “invention” under the Act, specifically overruling the Wellcome decision on that point; The amendment to s17 Patents Act 1953 in 1994 and the fact that this did not provide a statutory basis for the medical treatment exclusion; The recognition by the Court of Appeal in Pharmac and by the Ministry of Economic Development in reform proposals that the Patents Act contained no specific exclusion for methods of medical treatment; The fact that appellate courts in Australia had found under comparable legislation that methods of medical treatment claims were within the definition of “invention” and were patentable; The fact that the 1994 amendments to the Patents Act, which were designed to ensure that New Zealand complied with the TRIPs Agreement, did not include amendments to prevent the patenting of methods of medical treatment as was specifically permitted under Article 27:3 TRIPs Agreement.
In the alternative, Pfizer offered to include in each of its patent applications a disclaimer of suit
again medical practitioner.
The Court of Appeal upheld the ratio of the earlier Wellcome case and held that it remains the
law in New Zealand that methods of medical treatment of humans are not patentable. Plainly,
the Court was uncomfortable in reversing Wellcome and felt this was properly for the
Legislature. The reasons for its conclusion were:
(a)
The whole of s6 of the Statute of Monopolies forms part of the definition of “invention”. Section 17 of the Act cannot be said to replace the “generally inconvenient” ground in s6 Statute of Monopolies [7, 51 and 58]; There is no breach of Article 27 TRIPs in interpreting the definition of “invention” as preventing patentability of methods of medical treatment [7 and 57]; Other than methods of medical treatment of humans, there is little scope for exclusion on the “generally inconvenient” ground [7 and 57-8]; The Court in Pharmac was careful not to overrule the exclusion in Wellcome. To the extent that obiter observations in Pharmac may have cast doubt on the exclusion of methods of medical treatment from the definition of “invention”, the Court differed from those observations [60-64]; Section 17 could not have been a basis for the medical treatment exclusion [66]; The scope of the 1994 amendments to the Patents Act dealt only with amendments that were strictly required by the TRIPs Agreement [77-8]; Reform of this area of the law has been undertaken through the Parliamentary process. The circumstances had not changed so significantly that the Court should overrule the Wellcome decision. The complexity of this area of the law and the policy choices required were matters best left to legislative reform [83-4, 128].
As to the issue of a disclaimer, the Court of Appeal recognised that the earlier Court in Pharmac
had made observations about disclaimers from patentees. This was held, however, to be
directed to the Legislature and to officials considering reform proposals and was not an
indication of any intention by the Court to impose such an outcome in a future decision.
Litigation between AB Hassle and Novartis concerning an omeprazole patent spawned a series
of interlocutory disputes, one aspect of which merits attention. The defendant sought the
discovery of documents from the plaintiff patentee relating to the amendment to the patent
including the plaintiff’s own documents outlining the reasons and basis for the amendment.
Disclosure was resisted on the basis that interpretation of a patent is a question of law (relying
on Glaverbel SA v British Coal [1995] RPC 255) and that the interpretation was not to be
qualified by what was in the mind of the applicant as at that time. O’Regan J held that
construction of a patent is by reference to the notional skilled addressee. Knowing how the
patentee interpreted the document was not reflected in the notional nature of that exercise.
Accordingly, the documents being sought were not relevant and therefore not discoverable (AB
Hassle v Novartis (HC Auckland, CP 51-SW-03, 17 November 2003, paras 36-42)).
In Pfizer Ireland Pharmaceuticals v Eli Lilly & Co (HC Auckland, CIV 2003-404-452, 21
November 2003, Potter J) the Court dealt with the extent to which a patentee must plead to
Particulars of Objection to Validity filed as part of a patent revocation action. In Australia and in
the UK the practice has not been to require the patentee to so plead except in special
circumstances - for example Polaroid’s Patent No. 2 [1977] FSR 243 CA) on the basis that the
onus of proof is on the party seeking to invalidate the patent. Potter J followed an earlier New
Zealand Court of Appeal decision in Ancare New Zealand Limited v Ciba Geigy ((1997) 11
PRNZ 398) requiring the patentee to respond by properly pleading to the Particulars of
Objection. Potter J held that the requirement for the patentee to properly so plead was not to be
confused with the burden of proof. The patentee was still entitled to stand on its patent and to
say to the party claiming invalidity “you prove your objections and show that it is invalid”. At the
time of writing a second interlocutory decision was awaited from Potter J to further clarify the
extent of the patentee’s obligation to plead to the Particulars of Objection.
The principles governing amendments of patents are among the more difficult areas facing
patent attorneys and counsel. This is exemplified in Coory v Amcor Packaging (New Zealand)
Limited (HC Auckland, M1125-SW/02, 14 July 2004, Venning J), where the applicant, Coory,
had alleged infringement of its patent for a foil-piercing cap for drinking containers. One of the
defendants, Amcor, counterclaimed to revoke the patent. At trial of the infringement action,
Coory elected a non-suit and gave intention to apply to amend the patent. At the hearing of the
amendment application, Amcor conceded that the Court had jurisdiction to consider the
amendments but claimed that these should be refused in the exercise of the Court’s discretion –
principally the applicant’s conduct in not fully, frankly and credibly explaining his actions. In
addition there was criticism of the patentee for maintaining a claim to privilege to
correspondence between him and his patent attorney at a critical time. It was further alleged
that the patentee had deliberately chosen not to put information before the Court relating to the
breadths of claims and had failed to disclose certain prior art.
The first difficult issue faced by Venning J concerned privilege. In the UK in Oxford Gene [2001] RPC 310, the Court of Appeal had held that there was no obligation to waive privilege in patent amendment applications. But at the same time there is an obligation to tell the Court the facts material to the reasons for amendment. Venning J held [40] that there could be no requirement for the patentee to waive privilege: “However, the onus is on the patentee to satisfy the Court the amendment sought ought to be granted. In order to satisfy the onus it may, in certain circumstances, be in the applicant’s interest to waive privilege and produce otherwise privileged documentation to the Court. That will only be necessary if the documents are of particular relevance to the issue before the Court. Each case must turn on its facts.” The second issue related to the patentee’s explanation for the breadth of the claims and a failure to disclose certain prior art. Venning J held that the appropriate test was whether this failure was “blameworthy” (ICI [1978] RPC 11; Kimberly-Clark [2001] FSR 339). He found that the reasons given by the patentee and its patent attorney for non-disclosure were contradictory, not satisfactory and unconvincing and that this conduct was indeed ‘blameworthy’. A conscious decision had been taken not to refer to certain prior art but to proceed with the application at least because of a commercial need to secure patent protection to assist the patentee in his discussions with Amcor and another. The Court therefore exercised its discretion against allowing the amendment. The approach of New Zealand Courts to interlocutory injunctions Several cases during this period have highlighted a clear difference of approach between New Zealand and Australian Courts in granting interlocutory injunctions to protect intellectual property rights – particularly where there are strong challenges to the validity of those rights. The New Zealand Courts seem far readier to rely on the prima facie validity of intellectual property rights (and to grant interlocutory relief) than their Australian counterparts. In recent years in registered design cases, the New Zealand High Court has taken the approach that in order to prevent an interlocutory injunction, the defendant needs to show a clear defence (Eveready New Zealand Limited v Gillette New Zealand Limited, Elias J, HC Auckland, M1130/98, 28 August 1998, pages 10, 15). A particularly difficult example of this approach was in Permanent Promotions Pty Limited v Independent Liquor (NZ) Limited (HC Auckland, CIV 2004-404-2419, 10 June 2004, Heath J). Here Heath J granted an interlocutory injunction to restrain the defendant from selling or promoting twisted shot glasses which allegedly infringed the plaintiff’s registered design. This was despite evidence: (a) Showing that the registered design was extremely narrow; Strongly suggesting that the claimed features of the design were functional and therefore invalid; and Indicating (via an Official Information Act search of the IPONZ file) a complete absence of any examination of the registered design for functionality. Heath J held (para 43) that registration of the design conferred a prima facie right sufficient to overcome the hurdle of establishing that a serious question existed. He held that the onus on a defendant who counterclaims to remove the design is heavy and must go so far as to persuade the Court that the prima facie rights attaching to registration must be overlooked because of the strength of the counterclaim. When it came to the counterclaim for invalidity, Heath J stated that the defendant’s case that the design was functional was “strongly arguable”. Yet (despite this) he was not persuaded that the defendant’s arguments went far enough to enable him to find no serious question to be tried. By contrast, contemporaneous litigation between the same parties in the Australian Federal Court led to the opposite result. Heerey J refused an interlocutory injunction to the same registered design proprietor on the basis that where a party has a genuine belief on reasonable grounds that the plaintiff’s intellectual property is invalid, or that the plaintiff’s product may be contested with a non-infringing product, there is no reason why that party should not enter the market (Permanent Promotions v Independent Distillers (Aust) Pty Limited [2004] FCA 794, para 28). He further stated [21]: “Other things being equal, the shorter the period to trial, the less willing a Court should be to grant an interlocutory injunction, which is always a significant interference with what a party might otherwise be entitled to do.” In the patent case, A B Hassle v Novartis New Zealand Limited (Potter J, HC Auckland, CP 51-SW/03, 1 May 2003); [2004] 2 NZLR 721), both Potter J and the Court of Appeal again exemplified the difficulties facing New Zealand defendants in combating an interlocutory injunction even where there are substantial grounds for attacking the intellectual property right or even doubting infringement. Novartis had contracted with New Zealand pharmaceutical-buying agency, Pharmac, to supply its omeprazole product. Hassle/Astra sought to injunct further supply, relying on one of its omeprazole patents. Novartis contended its product did not infringe because it did not contain a particular sub-coating layer. Further, Novartis alleged that in any event the patent was invalid for lack of novelty and obviousness (relying on the fact that in the UK the equivalent patent had been found to be obvious). Potter J granted the injunction. Conflicts of evidence as to whether the coating was present meant that there was a serious question. Further, Potter J held that the challenge to validity was not “clear”. There were important issues of principle and issues of fact that would require determination by the Court and the interim injunction should not “pre-empt the ultimate outcome”. In circumstances where the defendant had mounted a strong case of invalidity for obviousness (marginally favouring it) and yet the balance of convenience favoured the plaintiff, Potter J was forced to use the “tie-breaker” of the status quo to make her decision in favour of an injunction. This result was upheld by the Court of Appeal. The Court noted that the result of an obviousness attack on the equivalent patent in an English Court (successful) could not be relied on in New Zealand to establish that there was no serious question to be tried. It could not be assumed that the patentee’s evidence in New Zealand would be the same as in the UK. Further, the Court was not prepared to disturb the first instance discretion to maintain the status quo unless there was evidence that the Court had acted on a wrong principle or had failed to take into account relevant matters, had considered irrelevant matters or was plainly wrong. This had not been shown. Copyright
In Benchmark Building Supplies Limited v Mitre 10 (2003) 58 IPR 407; [2004] 1 NZLR 26, the
Court of Appeal was required to rule on three interesting aspects of copyright law concerning
copying, adaptations and moral rights. The Mitre 10 franchised hardware chain produced at
regular intervals colour promotional brochures that were delivered to household letterboxes
throughout New Zealand. These depicted photographic illustrations of various products
accompanied by brief descriptions and the price. Benchmark displayed outside its Bunnings
stores original copies of Mitre 10’s brochures which had been collected by its employees.
These had superimposed on them bright orange stickers placed against some of the
advertisements stating the price offered by Bunnings hardware supermarkets with handwritten
dollar amounts lower than those offered by Mitre 10. Mitre 10 commenced injunction
proceedings for breach of copyright by adaptation.
At first instance, the Court granted an injunction based on a finding of breach of copyright by
copying which had been neither pleaded nor argued. On appeal, Mitre 10 sought to uphold the
judgment on grounds of breach of copyright by adaptation and by copying as well as a breach of
moral rights (a point also not argued below). It was alleged that the addition of stickers
constituted derogatory treatment of the copyright work. Mitre 10 alleged that it was “author” of
the works and therefore entitled to assert moral rights.
As to copying, the Court of Appeal acknowledged (by reference to both Canadian and US
authorities relating to the lifting of lithographic prints) that reproduction of a copyright work might
occur without multiplication of the original work in particular circumstances. But the
conventional approach to copyright in fact required the making of something that did not exist
before in order to find infringement. By displaying Mitre 10’s own brochures, Benchmark had
done nothing to reproduce the copyright works. Nothing had been copied. Even if a new work
was created incorporating the brochures (and it was very doubtful that applying the stickers had
that effect) the Court held that the representation of the copyright works remained unchanged
and no new representations of them were made.
As to adaptations, the Court provided an important ruling on an aspect of adaptation which had
been covered by some academic writings but which is now made clear. Making an adaptation
of a work involves producing a different version of the work by taking the intellectual content of
the original, or incorporating the same product of originality of the author, and expressing it in a
manner which cannot be categorised as copying or reproduction but still presents substantially
the same work. An adaptation requires more than merely taking and using the original work
without change. In this case the use by Benchmark of Mitre 10’s brochure involved no
conversion of or change to any literary work. The works remained the same throughout and no
adaptation of them had been made.
The Benchmark decision also provided the first Court ruling on moral rights under the Copyright
Act 1994. The Court noted that moral rights are enforceable only by the authors of works, not
the owner of copyright in the works. The context of the Act required that the word “person” in
the definition of “author” should not extend to bodies corporate except where the contrary is
stated in sections 5(2) and (3). Here the authors of each of the brochures were individuals who
were not parties to the proceedings. Mitre 10 was certainly not the author for this purpose and
therefore could not assert any moral rights. In any event, the Court was not persuaded that
displaying brochures (in which copyright works are reproduced) for comparative advertising
amounted to derogatory treatment of those works. The brochures were being used for the very
purpose that they were created. That the appellant was taking advantage from it could not be ‘prejudicial to the honour or reputation’ of the authors whose identity was not disclosed. The use of summary judgment proceedings in copyright cases has been very sparing over the years. This is often because, on individual facts, there is room for argument over whether there has been substantial reproduction or a causal connection – thus providing an arguable defence. In University of Waikato v Benchmarking Services (Court of Appeal, 11 June 2004), the Court of Appeal allowed an appeal and granted summary judgment in a case of copyright infringement. The allegation was that Benchmarking Service had infringed copyright in various works relating to the New Zealand Business Benchmarking Survey which the University of Waikato had compiled and published annually for 18 years. The Benchmark data included various ratios, percentages and percentiles to enable companies to measure their financial performance against others in the industry. Although the University did not hold copyright in the raw data or commonplace features of its reports, a number of unusual or unique features were held to be protected including various headings and their order, the selection and calculation of various ratios, the presentation and calculation of figures and percentages and the overall format and presentation. The Court found a “striking similarity” between three of the plaintiff’s works and the alleged copy including similarities in the headings and column titles. Causal connection was established both on the facts and as an inescapable inference. In granting summary judgment, the Court had some cautionary words for plaintiffs who might contemplate summary judgment [64]: “We accept that care is necessary before taking the step of granting summary judgment in a case such as this. But the present case is one of alleged infringement of copyright in literary works where it is simply a matter of comparing the form and contents of the appellant’s report with the corresponding material in the respondent’s brochure and website. The determination of the issue of infringement is a matter for the Court. However, we are satisfied that no further evidence or discovery of documents would produce further material bearing on the issue of infringement.”
In its decision, Pacific Software Technology Limited v Perry Group Limited ((2003) 57 IPR 145)
the Court of Appeal clarified an aspect of copyright in commissioned software. Under New
Zealand’s Copyright Act the commissioning party owns copyright in certain commissioned
works. In 1994, this rule was extended to software programs. Often, however, a commissioned
software program will consist partly of material developed for the commission as well as
material developed independently by the author prior to the commissioning.
In this case Perry Group made a decision to move to a Microsoft-based or Microsoft compatible
program for a database for one of its subsidiaries, UGL, for use in connection with its gaming
machine business. Perry Group commissioned Pacific to develop a VB/Access database which
Pacific did.
In August 2001, Perry Group asked for delivery up of the source code. Pacific refused,
contending that it had been independently working on the development of a gaming machine
database prior to the commissioning. Pacific contended that as much as 85% of the software in
the database program had been developed independently prior to the commissioning and
sought to protect ownership in this pre-existing software (the library codes). Perry Group, on
the other hand, contended that as the software had been commissioned, it was owner of the
copyright in the entire program and therefore entitled to the source code.
The Court of Appeal found that there was ample evidence to support the lower Court’s finding
that there was a commissioning of a computer program. There could be no question therefore
that Perry Group was the first owner of copyright in the source code. But the Court of Appeal
went on to find that the exercise by Perry Group of its statutory rights as owner did not displace
the underlying ownership of Pacific in the library code (to the extent that this might ultimately be
established at a final trial). It would be wrong to say that there was a transfer of the library code
copyright to Perry Group. The parties did not turn their mind to the question of rights each
would have in the library code copyright if it existed. To give full weight to the position of the
commissioning party and to give the commissioning business efficacy, it was both necessary
and appropriate to imply a non-revocable licence for the Perry Group to utilise the library code
(if any) which was embedded in the source code, and further imply a term that such licence also
enured for the benefit of any successor or assignor of the Perry Group. That licence would then
be enforceable by that third party under s4 of the Contracts Privity Act 1982. The existence of
such a licence was also a form of “authorisation” which would be a defence to any claim of
infringement under the Act.
This judgment has been criticised by Eagles & Longdin, Copyright in Bespoke Software:
Commissioner’s Rights in Incorporated and Connected Works (2004) EIPR 162. The authors
note that New Zealand’s commissioning provisions cover software programs but do not extend
to all literary works including compilations and therefore databases. In a carefully and well-
reasoned argument, Eagles & Longdin criticise the eliding in the decision of software programs
and databases and in particular the Court of Appeal’s oversimplified exposition of how a
database works. The authors note with some frustration that the Court was not asked to
address whether the VB/Access database amounted to a “compilation” as a separate category
of work outside the default commissioning rules. For readers wanting a more in-depth analysis
of the judgment, this article is worth careful consideration.
Trade Marks

During the period of review, there have been a number of important trade mark decisions.
Benchmark Building Supplies Limited v Mitre 10 (referred to earlier) became the first case to
consider the 2002 Trade Marks Act. One of the allegations in that case was that Benchmark’s
use of the Mitre 10 brochure for comparative advertising and price comparison constituted trade
mark infringement. The appeal was heard in August 2003, the same month the new Trade
Marks Act 2002 came into force. Section 94 of the new Act excludes comparative advertising
from infringement “but any such use otherwise than in accordance with honest practices in
industrial or commercial matters must be treated as infringing the registered trade mark if the
use, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character
or the repute of the trade mark”.
The Court of Appeal was satisfied that this was truly comparative advertising and fell within the
section 94 exception to infringement. The Court held that the Benchmark’s display of the
brochures was with the intention that Mitre 10’s trade marks performed exactly the same
function as they performed upon Mitre 10’s own original distribution of the brochures. The
distinctiveness of the marks was not in any way damaged, nor was it possible to say that
Benchmark had taken unfair advantage of the distinctiveness or repute of the trade marks to
any greater extent than more conventional forms of comparative advertising.
One aspect of the trade mark law and procedure which has attracted its share of attention in this
period is the extent to which the rules of evidence apply in opposition and other proceedings
before the Commissioner of Trade Marks. In Rainbow Technologies Limited v Logical Networks
Limited ([2003] 3 NZLR 553), Hammond J doubted an earlier High Court decision and held that
the same rules of evidence should apply to cases coming before the Commissioner of Trade
Marks as applied to the High Court on appeal. The Court expressed the view that the subject
matter of intellectual property disputes involved important proprietary rights and there were
distinct concerns about admitting any hearsay evidence.
The decision in AMI Insurance v New Zealand Automobile Association (HC Wellington, CIV-
2003-485-836, 15 July 2004, Miller J) is interesting as illustrating the proposition that the
likelihood of confusion or deception (for opposition purposes) can be proven not just by the
opponent’s similar mark but also by reference to surrounding circumstances including existing
confusion between the parties. The New Zealand AA’s application to register LIFE ASSIST
was refused on appeal partly because of the opponent’s AMI ASSIST mark but also because
the parties had previously had a commercial relationship whereby they had promoted each
other’s services, operated from the same premises and had similar trade dress. Although that
relationship had ended in 1992, both companies continued to use the same colours and there
was evidence of an existing level of confusion amongst the public between the two companies.

Registered designs

Re Rainsford (2003) 57 IPR 138 starkly indicates the problems under the New Zealand Designs
Act where a registration is allowed to lapse through failure to pay the renewal fee. Here errors
by the registered proprietor’s agent had led to the registered design expiring as there had been
no payment of renewal fees. As soon as the error was discovered, attempts were made to
restore the registration by making a formal request for correction of error (the claimed error
being failure to pay the renewal fee). Hammond J held that the Designs Act does not provide
for the restoration of a lapsed registration. The circumstances that had led to the lapsing of the
registration were not a “mistake” under either a literal or a purposive interpretation of s29(3) of
the Designs Act, which authorises the correction of mistakes in the register. That sub-section is
limited to the correction of documentary or clerical errors. Hammond J held that a lapsed
registration was of no effect and could not be corrected. An alternative approach attempted by
the registered proprietor was to file an application for rectification of the register by restoring the
lapsed registration. This too failed for want of jurisdiction. Hammond J held that this was not a
rectification application within the meaning of the provisions but rather sought resurrection of a
lapsed registration had that been lost for good.

Passing off/Fair Trading Act 1986

The reach of the New Zealand Courts in respect of passing off and Fair Trading Act actions was
considered by Salmon J in an interesting case, Containerlift Services & Ors v Maxwell Rotors
Limited (No. 1) and (No. 2) ((2003) 10 TCLR 810 and 817). There the plaintiff had been
operating a fleet of trucks in the UK which used a side lifter manufactured by the second
plaintiff. This enabled containers to be lifted off the ground or off another vehicle to be placed
on (and taken off) the flatbed of the truck. The first plaintiff had been trading under the name
Containerlift in the UK for 13 years and claimed a considerable reputation both there and in
Europe. The first defendant was a New Zealand company manufacturing container handling
equipment. Its self loading trucks were said to dominate the market in many parts of Europe,
including the UK. It was alleged that the second defendant, being the principal of the first
defendant had obtained a copy of the first plaintiff’s promotional video. Shortly afterwards, the
first defendant registered the domain name “containerlift.com”. The first defendant advertised in
the UK trade magazine for its website “swinglift.com” but there was one advertisement referring
to the website “containerlift.com”. The plaintiffs obtained an ex parte injunction restraining the defendants from transferring or dealing with the domain name “containerlift.com” until further order. Then, on an inter parties basis, the plaintiff sought an interim injunction to restrain the defendants from using the trade mark CONTAINERLIFT or any confusingly similar name. Salmon J held that the procedural character of actions in personam meant that anyone could invoke or become answerable to the jurisdiction provided only that the defendant had been served. With respect to a passing off action committed overseas, the Court was prepared to adopt the “double actionability” rule i.e. the action done abroad would be actionable as a tort in New Zealand only if: (a) It would have been actionable as a tort if it had been done in New Zealand; and It was actionable, though not necessarily as a tort, under the law of the foreign country. Salmon J held that the elements of the passing off action had been established. The first and third plaintiffs had shown that they had a reputation in the name Containerlift in the UK and Europe. Further, the use of the mark CONTAINERLIFT (as the website domain name and in advertising) was likely to mislead people into thinking that the first defendant was associated with the first and third plaintiffs’ business. An interim injunction was therefore granted to restrain the defendants from using the name Containerlift or any confusingly similar name in any way including use as a domain name or in promotional material. (The injunction was subsequently varied on re-hearing to confine it to the UK and Europe.) As to the jurisdiction of the Fair Trading Act, Salmon J held that this controlled the activities of persons within New Zealand. Any proceedings to enforce the law would have to be brought in New Zealand. But there was no reason why the proceeding should not be brought by someone resident out of New Zealand who was affected by the actions of someone within New Zealand which breached the Act. Section 3 extended the Act to cover conduct outside New Zealand by persons in New Zealand to the extent that that conduct related to the supply of goods or services within New Zealand. Here the defendant’s business was in New Zealand. The first defendant’s website operated from New Zealand and was designed to promote his business. Insofar as this was so, the defendant’s actions were subject to the Fair Trading Act. (See also Douglas Pharmaceuticals Limited v Nutripharm (1997) 42 IPR 407.) Cadbury Limited v Effem Foods Limited (2003) 58 IPR 386 is an interesting procedural decision on the extent of particulars available for passing off and Fair Trading Act actions. There Cadbury had sued Effem Foods Limited in respect of a range of Harry Potter chocolates in packaging using purple as the dominant colour. The defendant sought extensive particulars including that Cadbury should be required to define with precision the shades of colour it sought to protect by reference to an accepted colour standard such as the Pantone standard. The defendant also requested Cadbury to provide historical information over a ten year period showing the name and nature of each product, the periods of sale in New Zealand, sales by value annually, the shades of purple used by reference to a colour matching system and the periods during which each shade was used in New Zealand. Rodney Hansen J refused to grant such particulars. Cadbury’s use of a colour swatch attached to its statement of claim clearly stated the case which the defendant was being required to meet. For the purposes of pleadings there was no reason why in principle, Cadbury could not expand the colour range covered by its pleadings by an allegation relating to a “substantially similar colour”. There was no legal requirement that the claimed monopoly be defined by reference to an accepted colour standard. It was sufficient that terminology was adopted that
permitted a finding to be made at trial and gave the defendant clear notice of what that plaintiff
claimed. As to the historical particulars, those sought went far beyond what the defendant was
entitled by way of particulars and amounted to evidence. Much of it would be disclosed before
trial in discovery or in briefs of evidence. The particulars sought did not serve any of the
recognised objectives of further particulars and would be oppressive.
The period saw the usual type of interlocutory injunction for similar packaging and similar
trading names. In a case between tertiary educational institutes (Universal College of Learning
v ACB Computer Solutions Limited (Napier High Court, 22 October 2003, CP 9/01)) Hammond J
was scathing in his assessment of the plaintiff’s case, refusing to find that FUTURECOL logo
was confusing, deceptive or misleadingly similar to UCOL logo for the purposes of passing off or
a breach of the Fair Trading Act. The case did not rise above a “cause to wonder” threshold and
did not establish any misrepresentation. In Wilson Classics Limited v Stenhan Nominees Pty
Limited (Auckland High Court, CIV 2003-404-004571, Venning J, 10 October 2003), an
Australian clothing manufacturer of mens and womens fashion clothing using the brand
POLITIX sought to open a retail store in Auckland under that trade mark in circumstances where
there was an existing men’s retail outlet using the POLITIKS mark. Venning J granted an
interim injunction. The defendants claim to have sold POLITIX branded garments in New
Zealand since 1995 was regarded as quite different from the scale of operations and nature of a
retail outlet and there was doubt as to the extent of the claimed concurrent use rights anyway.

Confidential Information

The case Norbrook Laboratories Limited v Bomac Laboratories Limited (Court of Appeal, 5 May
2004) dealt with the onus of proof on a party alleging breach of confidence to show misuse.
The Court noted that in the absence of direct evidence, if there are two reasonably possible
explanations for the behaviour of the confidee, it will be a rare case in which the plaintiff can
discharge the burden of showing misuse.
Bomac was previously the New Zealand distributor of a veterinary remedy produced by
Norbrook. Bomac had a contractual obligation to Norbrook to keep confidential certain
information supplied to Bomac for the purpose of obtaining of regulatory approval in New
Zealand for the remedy.
In June 2001, the commercial arrangement between the parties had ended. In anticipation of
this, Bomac had previously developed a contingency plan to obtain a chemically equivalent
product from a third party supplier known as Rosenbusch. The advantage of this plan was that
a chemical equivalent could be sold under the regulatory licence already granted in respect of
the Norbrook product. Without being certain that the products were actually equivalent, Bomac
made a “speculative” application to the regulatory body involved which determined that the
replacement product was in fact chemically equivalent and Bomac commenced selling it in
competition with the Norbrook product.
As a result, Norbrook brought an action based on a number of claims. This appeal dealt only
with the claim that Bomac could not have sourced an equivalent product without misusing the
confidential information supplied by Norbrook. In particular, it was alleged that Bomac had
disclosed to Rosenbusch the exact amount, as a percentage, of lecithin to be used to coat the
active ingredient cloxacillin. Bomac claimed that although the same amount of lecithin was
used in the Rosenbusch product, this had arisen independently.
The Court first considered the issue of onus of proof. The plaintiff argued that in cases where a party was in possession of confidential information, disclosure of which would serve its interests, then there is a presumption of disclosure against that party. This argument relied on cases in which the confidential information misused had been obtained in a fiduciary relationship. The High Court had ruled below that, as there was no such relationship in this case, the normal onus of proof on a plaintiff remained. The Court of Appeal upheld this and warned that to find a fiduciary relationship in a commercial agreement would excessively restrict competitive behaviour. The evidence showed that in correspondence between Bomac and Rosenbusch, the first mention of the particular percentage of lecithin used was made by Rosenbusch. Rosenbusch had informed Bomac that only that particular percentage was likely to be available from its usual supplier. The chief executive of Bomac, Mr Leech, in subsequent correspondence indicated that this percentage ought to be used. Leech had given evidence that this figure had “gelled” with him when it was mentioned by Rosenbusch even though the had misunderstood what the figure actually referred to. The Court of Appeal concluded that the only possible source for this gelling was a “subconscious memory” of the confidential information supplied by Norbrook. Although Leech undoubtedly took comfort from the fact that the figure first suggested by Rosenbusch “gelled”, the Court of Appeal found that confidential information had not been misused. Rosenbusch’s technical director had thought that the particular figure was probable even before the unwitting disclosure. Mr Leech did not expressly convey that this provisional figure must be used. Given that the regulatory application was speculative, and would have been made in any case, the evidence showed that Bomac simply accepted the lecithin percentage available to Rosenbusch from its usual sources. No consideration of alternative percentages was made. In the circumstances, Leech’s unconscious memory of the confidential information did not affect or alter the course of action taken by Bomac or Rosenbusch and therefore the information had not been misused.

Source: http://www.andrewbrown.co.nz/doclibrary/nzlawreview.pdf