IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-001236 [2015] NZHC 1321

UNDER	the Designs Act 1953 and Copyright Act
1994	

IN THE MATTER OF	
Copyright infringement and design infringement	

BETWEEN	
GALLAGHER GROUP LIMITED Plaintiff	

AND	
ROBERTSON ENGINEERING
LIMITED (TRADING AS STRAINRITE) Defendant	

Hearing:	8 June 2015	

Appearances:	
J A Hazel and S P Rosanowski for Plaintiff
G F Arthur for Defendant	

Judgment:	
11 June 2015	

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 11 June 2015 at 3.00 pm
pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date……………………….

GALLAGHER GROUP LTD v ROBERTSON ENGINEERING LTD [2015] NZHC 1321 [11 June 2015]

Introduction

[1]       In my decision dated 9 June 2015 I granted an interim injunction on limited terms that prevented the marketing of a product in a particular form of packaging.  I declined to make the more extensive order sought that would have prevented all marketing of the product in question pending determination of the substantive proceedings.  I now give my reasons for that decision.

[2]      The plaintiff, Gallagher Group Limited, is a designer, manufacturer and distributor  of  a  variety  of  products,  including  a  post  used  for  portable  electric fencing.  The “Ring Top Post” was first marketed in February 2014 and has proven very successful.  The defendant, Robertson Engineering Limited, has recently begun marketing a very similar product under the name “Tangle Free Standard”.   In this proceeding   Gallagher   alleges   that   the   “Tangle   Free   Standard”   infringes   its intellectual property rights and that its appearance breaches the Fair Trading Act
1986.

[3]       On 8 June 2015 Gallagher applied for interim relief to prevent Robertson marketing the Tangle Free Standard pending the outcome of the substantive proceedings.   The timing of the application was triggered  by the  New  Zealand National Agricultural Fieldays scheduled for 10–13 June 2015, which is a major marketing opportunity for both parties.

[4]       The application fell to be determined on the usual principles relating to the granting of interim injunctions set out in American Cyanamid Co v Ethicon1  and Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd,2 whether there is a serious question to be tried, where the balance of convenience lies and what the overall justice of the case requires.

[5]       There was a preliminary point taken by Mr Arthur, for Robertson, that the application  should  not  have  been  brought  without  notice.     Self-evidently,  I considered that the application was appropriately brought.  Although Mr Arthur was
right  in  one  sense  that  Gallagher  could  have  moved  more  swiftly  to  make  its

1	American Cyanamid Co v Ethicon [1975] AC 396, [1975] 1 All ER 504(HL).
2	Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 at 139.

application (it knew that the Fieldays event was approaching and must have known that  Robertson  intended  to  promote  the  Tangle  Free  Standard  at  that  event)  I accepted Gallagher’s assertion that it did not know until 29 May 2015 that the product was actually available in stores and did not have a sample of the product until  2  June  2015.     Robertson  had  known  of  Gallagher’s  intention  to  issue proceedings  since  13  May  2015.    So,  while  Gallagher  could  have  been  more assertive, the application could hardly have been a surprise to Robertson.   I also accept that the imminent Fieldays was justifiably regarded by Gallagher as a significant event that required urgent action.

The competing products

The Ring Top Post

[6]       The Ring Top Post is designed to be used as a part of a portable electric fence system.   It is a variation on the so-called “pigtail” posts that have been used by farmers for many years.   They generally consist of a steel shaft with an insulated head in the form of a loop.  Electric wire, poly-wire or poly-tape, is slotted into the loo, the insulated top preventing the whole shaft from electrifying.

[7]       Gallagher’s lead engineer, Robert Wade, provided an affidavit describing the background to the development of the Ring Top Post; in an effort to improve the traditional pigtail posts Gallagher undertook an extensive survey of farmers in New Zealand and South Australia and identified a number of problems with the existing products.   These included the breaking down or wearing through of the plastic coatings, resulting in electric shocks and difficulty separating the pigtail posts when being carried or handled as they tended to tangle.  It appeared that farmers also found the traditional pigtail posts heavy and would have preferred a lighter product.

[8]       During 2010 and 2011 Gallagher worked on a number of prototypes and continued to consult with farmers to approve the design.   Its final design had two particular features, the head and a triangular wedge-shaped foot used to force the post into the ground.   It is the head of the post that was the focus of Gallagher’s application.  The head on the Ring Top Post is circular and central, sitting directly

above the shaft.  In traditional pigtail posts the loop is off-set, rather like the letter

“p” but with the tail extending beyond the circle of the loop itself.

[9]       Mr Wade described the head of the Ring Top Post in the following way:

Centralising the head gave the Ring Top an aesthetically pleasing and highly distinctive look and also reduced the number of catch points.  It provided a smoother transition from the shaft to the wider section of the head in both planes.  Making the head circular and making the pigtail portion match the profile also reduced catch points …

We wanted to minimise  the  amount of steel in the ring (or “eyelet”  or “head”) so decided to use a strong glass reinforced engineering plastic for its construction.   That material will be able to stand up to significant abuse without breaking or cracking.

Removing metal in the Ring or head addressed one of the key issues the farmers initially raised – getting electric shocks.   It meant that even if the wire wore into the material in the Ring head the wire carrying the current would not come into contact with metal which would conduct and shock the farmer.

We also wanted to have less pronounced ramp features on the side of the head (to reduce catch points) while still maintaining a symmetrical look. The ramps and shape were also considered when putting the fence up or taking it down as we did not want any catch points to slow the farmer or create frustrations when using the product.

[10]     Gallagher also designed new packaging which was different from the way pigtail posts had previously been packaged.  Mr Wade explained that pigtails were traditionally  packaged  in  bunches  of  ten  interlocked  “head  to  toe”  and  shrink wrapped or cable tied together.  In the new Ring Top packaging the posts were fitted into brackets for a neater appearance and easier stacking.

The Tangle Free Standard

[11]     The background to the Tangle Free Standard is described by Robertson’s business development manager, Mark Richardson.  He claimed that he has limited or no contact with customers, does not attend national field days, and does not know what is going on in the market.  Mr Richardson described the design process for the Tangle  Free  Standard  as  having  been  influenced  by  consumer  frustration  with existing pigtail standards on the market, including the breakdown of plastic heads that allowed the electric wire to come into contact with the metal shaft, and tangling

with one another.  Mr Richardson also described having designed and manufactured other pigtail standards between 2009 and 2012 and this process eventually led to the design of the Tangle Free Standard:

I was also looking at other ways to prevent tangling, including redesigning the loop of the pigtail standard to remove protrusions that can snag on other loops.   I assessed that reducing the gap between the loop and the shaft compared to our existing standards would also reduce the chance of tangling. Centring the loop over the shaft axis would halve the overhang of the loop also reducing the chance of tangling.

In February 2015 I was asked by REL director Maurice Wooster and general manager Brian Collins to focus on the design for a new pigtail standard.  My brief was to design a pigtail standard that overcame the problems with existing products while still being based on the existing Strainrite pigtail standard, which is a very popular product and well known by farmers.

[12]     Mr Richardson says he was given a sample of a standard manufactured by a

UK company, Hotline Electric Fencing Limited, to use in advancing his design.

[13]     Mr Richardson created a prototype on about 25 February 2015.  He described the Tangle Free Standard in the following way:

The loop is shaped to reduce the risk of tangling, including from either side of the radial plane of the loop.  The spaces between the curves of the loop are too small to admit the shaft of another standard. There are no protrusions outside the circumference of the loop which might lead to snagging or tangling.  The offset of the loop from the vertical axis of the shaft also helps to reduce tangling.

… Part of my brief was to develop a new pigtail standard that was in keeping with our existing Strainrite products.  Accordingly, the internal diameter of the  Tangle  Free  standard  is  37  millimetres,  which  is  close  to  the  38 millimetre internal diameter of our other pigtail standards.  As the loop on the  Tangle  Free  standard  consists  of  a  helical  spiral  that  decreases  in diameter, the smallest internal diameter is 35 millimetres.

Some  features  of the Tangle  Free  standard  were developed further after creating the “quick print” prototype.  For example, I enlarged and refined the lug feature.  I added the lug feature solely to prevent tangling between posts. The lug is designed to close the space between the base of the loop and the bottom curve  of  the  loop  so  that  the  shaft  of  another  post  cannot  pass through and cause tangling …

I added a pommel at the base of the elongate portion to prevent the user’s hand sliding off the end of the insulated top onto the metal shaft and to alert the user that their hand was close to the metal shaft.  This pommel feature comes from the top of the Strainrite multi-wire steel post tread-in.

[14]     Mr Richardson claims not to have become aware of the Ring Top Post until after he had begun machining the final production hard tool to mould the Tangle Free Standard in April 2015.

A serious question to be tried?

The packaging: misleading and deceptive conduct

[15]     Gallagher produced comparative photographs of packaged Ring Top Posts and Tangle Free Standards.   Both were packaged in a similar “bracket” system. Gallagher asserted, without challenge, that this form of packaging was entirely new and  different  from  the  manner  in  which  pigtail  posts  have  traditionally  been presented.

[16]     There is no doubt that the appearance of the Robertson bracket packaging is remarkably close to that used by Gallagher for over a year.   The only noticeable difference between the two sets of packaged products was the colours of the heads (Tangle Free was white and Ring Top orange) and the fact that the Tangle Free Standards also had a small wrap-around label that appeared in the photograph as predominantly yellow and white with some green on the reverse side.  I considered that there would be a real risk of prospective buyers being misled into thinking that both are Gallagher’s product, which is now quite well known in the market.

[17]     Mr Arthur explained that Gallagher had discontinued this form of packaging approximately a month ago.  He did not explain why that decision had been taken. A picture of Robertson’s current packaging shows several Tangle Free Standards bundled held together and held with a red and green sleeve.  There ought not be an issue except for the fact that as late as 29 May 2015 Gallagher purchased a sample of the Tangle Free Standard in the bracketed packaging.   On the evidence there was certainly a risk that this packaging was still in circulation; if it was then there existed a serious question as to whether prospective buyers would be misled into thinking that the Tangle Free packages were the Gallagher product.

Breaches of design registration and copyright

[18]     Gallagher holds a design registration in relation to the head of the Ring Top Post  and  the  post  itself.    It  alleges  that  the Tangle  Free  Standard  infringes  its copyright in the design drawings for the Ring Top Post and infringes the design registration in respect of the Ring Top Post.

[19]     The similarities in the two products are obvious from the photographs.  Both have a centralised head  sitting immediately above the shaft, of almost identical diameter, no sharp edges and a protruding feature beneath the main eyelet.   In addition, the embossed branding is located in the same place on each product.

[20]     For all of that similarity it is also evident that the head on the Tangle Free Standard differs slightly from the Ring Top Post.   Mr Richardson points to the constant width of the Ring Top Post shaft compared with the tapering width of the Tangle Free Standard, the varied width of the Ring Top Post head compared with the constant width of the Tangle Free Standard loop and the tapered tail of the loop on the Tangle Free Standard compared to the rounded end of the loop on the Ring Top Post.  He also asserts that the loop of the Tangle Free Standard is significantly offset relative to the axis of the shaft compared to the Ring Top Post and has a more sculpted appearance than the Ring Top Post.

[21]     Mr Wade asserts that there are also significant qualitative differences which will only become evident upon use.  He claims that the Ring Top Post has better anti- tangle properties, wears better because of the material used and is lighter.

[22]     Gallagher holds a design registration No. 417365 “head for use in a post” and No. 414942 “electric fence standard” registered on 7 March 2013 and 26 May 2011 respectively.   Registration under the Designs Act 1953 confers on the registered proprietor the exclusive right in New Zealand to make or sell any article in respect of which the design is registered, being an article to which the registered design or design  not  substantially  different  from  the  registered  design  has  been  applied.3
Whether there has been an infringement of copyright in a registered design is “a

3	Designs Act 1953, s 11(1).

question of fact of which the eye is the judge”.4   The question, therefore, is whether the  article  said  to  infringe  the  registered  design  has  substantially  the  same appearance as that design.  The nature of the prior art may influence this assessment however.  If the registered design is substantially novel or original, small variations in the alleged infringing article may be sufficient to support the allegation of infringement.  On the other hand if the article the subject of the registered design has minimum   novelty   or   originality,   small   differences   may   not   constitute   an
infringement.5

[23]     It is evident from my previous description that there is significant visual similarity between the products, but also some differences, albeit small.  There were competing assertions regarding prior art, with Gallagher asserting that the Ring Top Post constituted a significant original departure from the traditional pigtail post and Robertson pointing to at least one example of an older pigtail post design apparently displaying a similar centralised head to both the Ring Top Post and the Tangle Free Standard.  In these circumstances I was satisfied that there was a serious issue to be tried in relation to whether there was an infringement of the registered design.  There is, in addition, an argument being advanced by Robertson as to the validity of the registered designs.

[24]     In   relation   to   the   alleged   breach   of   copyright,   whilst   Robertson acknowledged, for the purposes of the injunction application, that the Ring Top Post design was sufficiently original for copyright to subsist, it asserted that the level of originality was low and therefore the scope of the copyright protection similarly low. Robertson’s   defence   on   this   allegation   focused   on   the   lack   of   copying. Mr Richardson’s affidavit was directed towards establishing that the Tangle Free standard  was  the  product  of  genuinely  independent  design  conducted  entirely without knowledge of the Ring Top Post already on the market.   Given the coincidence in timing and design features, this issue is likely to raise questions of
credibility and there is undoubtedly a serious issue to be tried.

4	UPL Group Ltd v Dux Engineers Ltd [1989] 3 NZLR 135 at 139.
5	UPL at139; Brand Developers Ltd v Ezibuy Ltd HC Auckland CIV-2010-404-7593, 4 February
2011 at [49].

Balance of convenience

[25]     The balance of convenience turned largely on the perceived benefits to the parties of being able to promote their respective products at the Fieldays.  In essence, Gallagher’s position was that it had put a very substantial amount of time and money into developing the Ring Top Post, that the product had been recognised through a design excellence award conferred by the Designers Institute of New Zealand in
2014 and National Fieldays Innovation Award in 2014.  Gallagher regards the Ring Top Post product as superior to the Tangle Free Standard and considers that the latter’s entry into the market has the potential to ruin the market for the Ring Top Post.  It claims that the damage would be impossible to quantify.

[26]     As against that, Robertson asserts that it has committed itself to expensive promotion of the Tangle Free Standard in the lead-up to the National Fieldays and that if it were forced to withdraw the product at this point it would not only sustain lost sales, the extent of which would be very difficult to assess, but also damage to its reputation.

[27]     Mr Arthur, for Robertson, argued that the balance of convenience favoured Robertson  because,  in  the  event  of  the  substantive  allegations  being  upheld, assessing the lost sales to Gallagher would be relatively straightforward because they would be represented by the actual sales made by Robertson.  It seems likely, too, that if Robertson were forced to publicly withdraw its product as a result of the substantive allegations being sustained that would have the effect of substantially or entirely offsetting any reputational damage done to the Ring Top Post.  I considered that the balance of convenience did lie with Robertson.

Overall justice

[28]     The urgency of this matter arose because of the impending and significant marketing  opportunity that  is  the  National  Fieldays.    It  seems  common  ground between the parties that this event is the major marketing opportunity of the year for companies such as Robertson and Gallagher.  If the substantive allegations are not upheld then Robertson will have unnecessarily lost the single biggest marketing opportunity of the year to promote its new product.  It will be difficult to calculate its

loss, given the Ring Top Post’s successful presence in the market already.  The loss of that opportunity to Robertson is greater than the potential for loss to Gallagher of having an infringing product competing at the Fieldays.  The substantive allegations will be able to be tested within a relatively short period and if sustained the product will be removed promptly from the market.   The loss of sales will be easily determined and the damage to reputation can reasonably be expected to be restored with appropriate publicity of the outcome of the claim.

[29]     In these circumstances I considered that, save for the packaging, the overall justice of the case lay with Robertson at this stage.

P Courtney J