CATCHWORDS TRADE PRACTICES - COPYRIGHT - BREACH OF CONFIDENCE - Use by respondents of manuals and drawings prepared for purpose of applicant's business by its employees - Title blocks on respondent's drawings falsely claiming ownership - Title to copyright in documents - Whether copyright claim in drawings excluded by industrial application of articles produced from drawings - Transmission of confidential information by former employees of applicants - Jurisdiction of Ceowct to determine copyright claims - Whether breach of confidence action excluded by federal copyright legislation - Whether claims barred by provisions of Part IV of Trade Practices Act - Balance of convenience. PRACTICE - Anton Piller orders for seizure of documents - Whether seized documents should be returned to respondents pending final hearing - Subpoena to respondent to produce documents - Objection on ground that production may incriminate respondent - Procedure available to obtain production of documents without self-incrimination of producer. Trade Practices Act 1974 38.4M, 45, 45D, 46, 50, 52 Copyright Act 1968 ss.32, 35, 74, 77, 131A, 131B, 132, 133 Copyright Pequlations r.17 Designs Act 1906 s.30 Constitution s.5l(xxxi), 76(ii) Crimes Act 1914 s.86 Federal Court of Australia Act 1976 ss.32, 50 Judiciary Act 1903 ss.39, 79, 80 Sherman Anti-Trust Act (USA) ss.1, 2 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. G.161 of 1986 WARMAN INTERNATIONAL LID First Applicant WARMAN EQUIPMENT (INTERNATIONAL) LTD Second Applicant WARMAN SERVICES LTD Third Applicant PEKO-WALLSEND OPERATIONS LTD Fourth Applicant ENVIROTECH AUSTRALIA pry LIMITED First Respondent KENNETH WILFRED SYMONDS Second Respondent ROSS GRAHAM WALKER Third Respondent CARRUTHERS BROS PTY LIMITED Fourth Respondent CARRUTHERS BROS (HOLDINGS) PTY LIMITED Fifth Respondent \ ' or is likely to mislead or deceive, by representing in respect of drawings and information therein the copyright in which is vested in any of the applicants: (a) that the said drawings and information therein are the property of the first — respondent and are confidential to the first respondent; and (b) that the right to control the copying of the same is vested in the first respondent. _o The second and third respondent each be restrained from aiding, abetting, counselling or procuring the conduct of the first respondent referred to in order 1 herein. The first, second and third respondents and each of them, by themselves, their servants and agents and the servants and agents of each of them, be restrained from infringing the copyright of the applicants in: NOTE All parties have liberty to apply on forty-eight (48) hours' notice to all other affected parties in relation to any application to dissolve or vary any of the orders or directions hereby made. The matter be listed for directions relating to a final hearing at 9.30 a.m. Friday 4 July 1986. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Ruics. See also Order 37 rule-2(3). IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION wee ww No. G.161 of 1986 BETWEEN: WARMAN INTERNATIONAL LTD First Applicant WAKMAN EQUIPMENT {TNTERNATIONAL ) LTD Second Applicant WARMAN SERVICES LTD Third Applicant PEKO-WALLSEND OPERATIONS LTD Fourth Applicant ENVIROTECH AUSTRALIA PTY LIMITED First Respondent - KENNETH WILFRED SYMONDS Second Respondent ROSS_GRAHAM WALKER Third Respondent CARRUTHERS BROS PTY LIMITED Fourth Respondent CARRUTHERS BROS (HOLDINGS PTY LIMITED Fifth Respondent JOHN HEINE & SON LIMITED Sixth Respondent WILLIAM WALLBANK AND SONS PTY LIMITED Seventh Respondent RICHARD ALBERT PADLEY Eighth Respondent JACQUELINE ANN PADLEY Ninth Respondent PENINSULA FOUNDRY CRAFTSMEN PTY LIMITED Tenth Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 30 JUNE 1986 REASONS FOR JUDGMENT These proceedings concern claims by the applicants that the first, second and third respondents have engaged in what the applicants' counsel describes as "wholesale commercial theft". The "theft" referred to is the use by those respondents of certain information relating to the manufacture of pump parts and claimed by the applicants to be confidential to them. The information comprises three manuals -- the Warman Manufacturing Manual, the Warman Slurry Pumping Manual and the Warman Data Book -- and numerous drawings of pump parts. The Warman business The four applicant companies, Warman International Ltd, Warman Equipment (International) Ltd, Warman Services Ltd and Peko-Wallsend Operations Ltd, are all wholly owned subsidiaries of Peko-Wallsend Limited. They have each been associated with the design, manufacture and supply of slurry pumps; the pumps being marketed under the trade name — "Warman". It appears that Warman Equipment -- which was incorporated in 1936 —- carried on the business until 22 April 1974 when it sold to Warman Services. That company sold the business to Warman International in 1976. On 5 July 1978 the business was transferred to Peko-Wallsend Operations but Warman International was immediately appointed by the new owner _to manage the business on its behalf. This remains the position, so that Warman pumps and parts are currently manufactured by Warman International on behalf of Peko-Wallsend Operations. Except where it is necessary to do so, I shall ignore the various changes in the particular entity running the business and I shall use the name "Warman", standing alone, to signify the company conducting the business at the relevant time. According to the evidence of Mr R J Weekes, General Manager - Australian Marketing of Warman International, Warman enjoys approximately 90% of the Australian slurry pump Market. Mr Weekes said that a survey carried out in the period December 1984 to March 1985 showed that Warman then supplied 84% of the Australian market for spare parts for Warman slurry pumps. He thought that the company's market share might have since increased slightly. In addition Warman nas derived, and continues to derive, substantial fees from various organizations licensed to manufacture Warman pumps and parts in certain overseas countries. Over recent years Warman has spent about $1.3 - $1.5 million each year on research and product development. Kenneth Wilfred Symonds, the second respondent, was employed by Warman as a sales engineer from 8 April 1969 until 31 December 1982. His function was to prepare quotations and technical information for slurry pump customers. For that purpose he had possession, and made use, of copies of the Warman Data Book and the Warman Slurry Pumping Manual. The third respondent, Ross Graham Walker, joined Warman in 1963 as a draftsman. In 1969 he was assigned the task of establishing a rubber shop at Warman's premises in the Sydney suburb of Artarmon. Between 1971 and 1976 he was superintendent of the rubber shop, being responsible for the supervision of labour in the rubber shop, the sourcing of tooling and raw materials and the supply of manufacturing data to Warman's overseas branches and licensees. In 1976 Mr Walker became Shop Superintendent in charge of all manufacturing units in the organization. He remained in that position until he left Warman on 26 October 1984. For the purposes of his employment with Warman, Mr Walker had access to the three manuals previously mentioned. Mr G W Davies, General Manager - Manufacturing of Warman International and Mr Walker's immediate superior immediately prior to the latter's resignation, described these manuals in an affidavit. He said that the Manufacturing Manual "details most comprehensively the techniques and practices which nave been developed by Warman and its predecessors-in business from more than 50 years' experience in the manufacture of slurry pumps and slurry pump spare parts". He referred to various features of the book and explained their significance. Upon -the basis of that evidence, I am satisfied that the manual contains much information not generally known to engineers which would be of considerable value to persons desiring to reproduce Warman pumps and parts. According to Mr Davies, the Slurry Pumping manual is designed to allow Warman sales engineers to advise their customers on the correct choice of a Warman pumping system to suit their needs. He said that the manual "contains some Q information which is basic fluid flow theory, but also much Dp data that has been collected and collated by Warman over the years and used in the marketing of its product". The Data Book is described by Mr Davies as "a comprehensive guide to and description of the Warman pump range and the Warman techniques and practices in marketing that range". Mr Davies' affidavit refers to particular items of information contained in the book some of which, at least, would be of assistance to anybody wishing to copy Warman products. Warman spare parts are manufactured from both metal and rubber. It is not necessary to set out details of the respective manufacturing processes. It is enough to say that, in each case, the process commences with a drawing prepared by a Warman draftsman upon the instructions of a design engineer. From that drawing a pattern maker produces a three dimensional reproduction of the part. Patterns are usually made out of wood, but sometimes out of aluminium, fibreglass or polyurethane. Sample parts are made for testing and, depending upon the result, the pattern may be modified. The making of an adequate pattern, according to Mr Davies, is a lengthy procedure sometimes involving several weeks' work for an experienced pattern maker. Once the pattern is accepted as correct, it is used to produce moulds for the production of the parts themselves. The evidence of Mr Davies and other witnesses emphasises the importance to a manufacturer of Warman parts of information regarding casting techniques, acceptable tolerances and rubber formulae. I am satisfied that, over the years, Warman and its predecessors have accumulated -- largely by a process of "trial and error" -- a body of useful information which it would take any competitor a considerable time, and much expense, to duplicate. Mr Davies expressed the opinion that -- for technical reasons which he gave -- it would be extremely difficult to "reverse engineer" a Warman part; that is to produce an adequate and accurate drawing of that part by examination of the finished product. Moreover, there is evidence from Mr A R Jones, a rubber chemist now employed by Warman as its Elastomer Manager, that it would be highly unlikely that a competitor of Warman, producing replacement parts for Warman pumps, would arrive at exactly the same formulae for its. rubber parts. He said that, depending on the nature and location of their respective oe experience, two competent rubber chemists might be expected to come up with similar formulae. But he added that "nine times out of ten" a formula "does not work and has to be developed over a long time". These opinions are unchallenged. In practice, it seems, the only way in which immediately to produce parts identical to genuine Warman parts is to use original Warman drawings, or accurate copies thereof, and the information reproduced in the manuals. The Envirotech business In 1976 a company known as Earthmoving Accessories (Wollongong) Pty Limited was incorporated. In 1977 that company registered under the Business Names Act 1962 (NSW) a business name, "E M A Industries". In January 1985 a further company, EM A Industries Pty Limited, was incorporated. That company commenced to carry on business in Wollongong, Newcastle and Brisbane. Its business included the supply of what it called "replacement parts to suit Warman pumps". In relation to slurry and gravel pumps it advertised "components "completely interchangeable with Warman equivalent", the components being said to be "made in Australia for Australian mining conditions". As at April 1985 the second respondent, Mr Symonds, was a director of both Earthmoving Accessories (Wollongong) and E M A Industries Pty Limited. The evidence does not disclose when he became a director of either company. Envirotech, the first respondent, is owned by Envirotech Corporation, a United States company. On 13 December 1984 the company registered a business name, "Baker Process Technology": the business of that firm being said to have commenced on 17 September 1984 and to be conducted at 14~16 Suakin Street, in the Sydney suburb of Pymble. On 21 August 1985 Envirotech issued a circular -- using a letterhead styled "EM A Industries" and showing the Pymble address -- in ~ which it announced that it had acquired "the operating interests" of EM A Industries Pty Limited. The announcement said that "the company will trade as E M A Industries and will continue to supply spare parts and accessories throughout Australia". It was said that "E M A will be managed from the Pymble premises". Particular personnel were mentioned, Mr Symonds being shown as "Manager, Contracts Engineering, Pymble". Mr J E M Madgwick worked for Warman as a purchasing officer for many years. In that capacity he supervised the letting to, and performance by, outside workshops of contracts for the manufacture, in accordance with Warman drawings, of pump parts. About the middle of 1985 he left the employment of Warman. Within a week or two he commenced employment at Pymble, first with E M A and then with Baker Process Technology, carrying out duties similar to those which he had undertaken for Warman. He found that Mr Walker and Mr Symonds -- both of whom he had known at Warman -- were working in the Pymble office. In a filing cabinet to which he_had access he saw drawings, some of which bore the title block and name of Warman International. He sent some of these drawings to contractors. Most of the titled drawings sent by him to contractors were handed to him by Mr Walker, who told him to make photostat copies with the title block blanked out. Mr Madgwick commented on this instruction to Mr Symonds, saying something to the effect that "it isa pretty doubtful thing to 10. do". Although the evidence is not clear, it appears that Mr Madgwick expressed the opinion that "we should have our own drawings" and Mr Symonds replied to the effect that "that is a no-no". Mr Madgwick saw drawings containing the Warman block in the possession, at various times, of both Mr Walker and Mr Symonds. On Saturday 8 March 1986 Mr Weekes drove to 14-16 Suakin Street, Pymble. He noticed a large trade waste garbage Din in the entrance road to the car park. He returned' the next morning and removed from the bin three bags of rubbish. Two of them contained rubbish from Baker Process Technology. That rubbish contained copies of certain pages of the Warman Manufacturing Manual. One page (p.1) identified the copied manual as being Registered Copy No.3 issued on 4 September 1981 to Mr RG Walker. Also in the rubbish were portions of a drawing, which Mr Weekes pasted onto a piece of cardboard. On three subsequent Sundays, 23 March, 30 March and 6 April 1986, Mr Weekes returned to the garbage bin. On each occasion he removed a number of garbage bags. On each occasion he found in the bags drawings of items which he believed to be Warman pump parts. On one occasion he found a bundle of pages headed "Warman International Limited Data Sheet", on another a copy of a page from the Warman Slurry Pumping Manual. He recognised the numbers on some of the documents as being Warman part numbers, formula numbers or drawing numbers, ll. The Anton Piller orders The Application in these proceedings is dated 28 April 1986. In addition to the first, second and third respondents, seven respondents have been named. Those respondents are all companies or individuals believed by the applicants to have acted as contractors to Envirotech in the manufacture of parts or the drafting of plans. As against Envirotech the Application seeks both an interlocutory and final order restraining that respondent: "from engaging in trade or commerce in conduct which is misleading or deceptive or is likely to mislead or deceive, by representing in respect of drawings and information thereon the copyright in which is vested in the Fourth Applicant:- (a) that the said drawings and information thereon are the property of the First Respondent and are confidential to the first respondent; and (b) that the right to control the copying of the same is vested in the First Respondent," The Application claims interlocutory and final orders restraining each of Mr Symonds and Mr Walker from aiding and abetting, counselling or procuring the said conduct of the first respondent. Interlocutory and final orders are sought restraining the first, second and third respondents from infringing the copyright of the applicants in the three manuals and in the 12. drawings identified in the Schedule to the Application. Additionally, the applicants seek a declaration that the first, second and third respondents have infringed their copyright and damages, or an account of profits. In relation to the remaining respondents, the various contractors, the claim is limited to one for injunctive relief -- both upon an interlocutory basis and a final basis -- in respect of infringenent by those respondents of the copyright claimed by the applicants in the drawings identified in the Schedule to the Application. On 28 April 1986, Evatt J made orders against each respondent named in the Application upon an ex parte application and upon certain terms, including an undertaking to pay compensation to any person adversely affected, requiring that respondent to permit not more than five persons, being members, employees or agents of the applicants' solicitors or employees of any of the applicants, to enter onto specified premises occupied by that respondent and therein to search for and to seize specified documents: see Anton Piller K G v Manufacturing Processes Ltd [1976] 1 Ch.55. The orders were executed and a considerable volume of material was seized; some from each of the respondents. 13. The interlocutory applications Notices of motion were subsequently filed on behalf of several of the respondents. There was some variation in the terms of the orders sought by the various respondents but all included an order setting aside the Anton Piller orders made against that respondent and/or an order for return of the seized material. However, agreement has now been reached between the applicants and each of the fourth, fifth, sixth, seventh, eighth, ninth and tenth respondents disposing, either finally or upon an interlocutory basis, of the matters in issue between the applicants and those respondents so that it is presently necessary for me to deal only with the dispute between the applicants and the first, second and third respondents. On 6 May 1986 the first respondent filed a notice of motion seeking an order that the orders made by Evatt J be dismissed or, alternatively, that they be varied in certain respects, and that the applicants deliver up all documents seized pursuant to the orders. On 8 May 1986 a further notice of motion was filed on behalf of the first, second and third respondents, seeking leave pursuant to s.24(1A) of the Federal Court of Australia Act 1976 to appeal from the judgment of Evatt J making Anton Piller orders against those respondents. 14. The matter came before me briefly on 8 May 1986 and, moreextensively, upon the following day. Counsel for the applicants indicated that their clients sought an early hearing of their applications for interlocutory injunctions; although it was recognized that the hearing could not proceed upon that day as the respondents had not yet had sufficient opportunity to consider their position and to file affidavits. I indicated that the hearing of the applicants' interlocutory application should co-incide with the hearing or the respondents' various notices of motion. However, at the request of counsel, I dealt immediately with the application for leave to appeal. It was intimated to me by their counsel that, inter alia, the first, second and third respondents wished to challenge the power of this Court to make Anton Piller orders and to contend that, if the Federal Court of Australia Act is to be construed as conferring such a power, it ig invalid, as being legislation authorizing an acquisition of property otherwise than upon just terms: see Constitution 5.5l(xxxi). Without expressing' any opinion about the merit of these contentions, I took the view that they raised matters of general importance appropriate to be considered by a Full Court of the Court. Accordingly, I granted leave to appeal; but upon the basis that the prosecution of the appeal should not be allowed to impede the resolution of the outstanding interlocutory matters between the parties. I made directions to enable a hearing of those matters on 28-30 May 1986. The directions were subsequently varied to provide for a limited : \ discovery of documents. 15. In the event the issues between the applicants and the first respondent narrowed a little. At the interlocutory hearing Envirotech did not press its application to set aside the order made by Evatt J. It was content to limit its application to a claim for a return of the documents seized from it, it offering an undertaking to the Court "that it will not part with possession of or destroy any drawings or material seized under the Anton Piller order or any moulds or patterns from which its products are made and will keep accounts of all transactions involving production and sale of all replacement parts of Warman pumps made by it until final determination of this matter". The applicants contend that such an undertaking would constitute an insufficient protection of their interests. They press for interlocutory orders against the first, second and third respondents as outlined above and submit that, pending the final hearing of the matter, the material seized pursuant to the Anton Piller orders should be retained by them or their solicitors or, alternatively, by the Court. The Envirotech subpoena The applicants served a subpoena, addressed to "The Proper Officer, Envirotech Australia Pty Limited", requiring the production to the Court at the interlocutory hearing of the documents specified in the Schedule to the Subpoena, namely: "TL, 16. All design layouts, design layout sketches and design layout drawings, preliminary layouts and preliminary drawings, 'And all associated calculations and parameters regarding mechanical and hydraulic performance of the pump or pump part illustrated, in respect of each and every drawing bearing any part number or any drawing number set out in the Schedule to the Application filed in these proceedings. All contracts and agreements between Envirotech Australia Pty Limited and the Second Respondent and any document evidencing same. All contracts and agreements between Envirotech Australia Pty Limited and the Third Respondent and any document evidencing same. All file notes and notes of conversations relating to the employment or engagement of the Second Respondent by Envirotech Australia Pty Limited. All file notes and notes of conversations relating to the employment or engagement of the Third Respondent by Envirotech Australia Pty Limited. All wage records in respect of the Second Respondent. All wage records in respect of the Third Respondent. All agreements, and any document evidencing same, between Envirotech Australia Pty Limited and EMA Industries Pty Limited and between Envirotech Australia Pty Limited and Earthmoving Accessories (Wollongong) Pty Limited regarding the acquisition by Envirotech Australia Pty Limited of the business known or subsequently known as EMA Industries." Counsel for Envirotech answered the subpoena on behalf of the Proper Officer but they objected to production of the documents upon the ground that the production of those documents would tend to incriminate the company. In support of that objection counsel tendered the minute of a resolution ' 17. of the board of directors of the company in which the opinion was expressed that compliance with the subpoena "will tend to expose this Company to a criminal liability, assuming that the claims made by the Applicants in the present proceedings are sound, and thus the Company apprehends that it would, if compelled to produce the documents set out in the Schedule to the Subpoena, expose itself to a risk of conviction of an offence or offences of conspiracy or of an offence or offences under Section 86 of the Crimes Act (Commonwealth) or an offence under the provisions of the Copyright Act (Commonwealth)". Section 86(1) of the Crimes Act 1914 provides: "86. (1) A person who conspires with another person-- (a) to commit an offence against a law of the Commonwealth; (b) to prevent or defeat the execution or enforcement of a law of the Commonwealth; (c) to effect a purpose that is unlawful under a law of the Commonwealth; or (ad) to effect a lawful purpose by means that are unlawful under a law of the Commonwealth. shall be guilty of an indictable offence. Penalty: Imprisonment for 3 years." Section 132 of the Copyright Act 1968 creates a number of offences. The offences arguably relevant to the present case are as follows: o 18. "132. (1) A person shali not, at a time when copyright subsists in a work-- (a) make an article for sale or hire; (b) sell or let for hire, or by way of trade offer or expose for sale or hire, an article; (c) by way of trade exhibit an article in public; or if he knows the article to be an infringing copy of the work. (2) A person shall not, at a time when copyright subsists in a work, distribute-- (a) for the purpose of trade; or (b) for any other purpose to an extent that affects prejudicially the owner of the copyright, an article that he knows to be an infringing copy of the work." Penalties are provided by s.133 of the Act, the penalty for a first offence against either sub~-s.(1) or (2), in respect of a work other than a cinematographic film, being $150.00. _ There is no federal legislation dealing with self-incrimination. Both the Evidence Act 1905 and the Federal Court of Australia Act 1976 are silent upon that subject. The Federal Court rules (0.33 r.11) contemplate objections upon the ground of privilege, including privilege against self-incrimination, but they do not purport to prescribe the basis upon which such an objection will be 19. allowed. That matter is left to any applicable State law -- D see Judiciary Act 1903 s.79 -- or, if there is none, the common law: see Judiciary Act s.80. The interlocutory proceedings in the present case were heard in Sydney but there is no relevant New South Wales statutory provision. The objection must be determined according to the common law, the principle of which was stated by Goddard LJ in plunt v Park Lane Hotel Limited £19421] 2 KB 253 at p.257, adapting for that purpose the words of Stephen J in Lamb v Munster (1882) 10 QBD 110 at pp.112-113: "... the rule is that no one is bound to answer any question if the answer thereto would, in the opinion of the judge, have a tendency to expose the deponent to any criminal charge, penalty or forfeiture which the judge regards as reasonably likely to be preferred or sued for." This test has been adopted in Australia: see Sorby v The Commonwealth (1983)152 CLR 281 at pp.288-289. The privilege applies not only to oral evidence but to answers to interrogatories (Blunt; Triplex Safety Glass Company Limited v_ Lancegaye Safety Glass (1934) Limited) C1939] 2 KB 395) to the discovery of documents (Spokes v_ The Grosvenor and West End Railway Terminus Hotel Company Limited £1897] 2 QB 124 at pp.132, 133, 134) and to the production of documents upon subpoena (Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at p.574). 20. In Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] AC 547 the House of Lords, by majority, upheld a decision of the Court of Appeal allowing a claim of privilege in respect of the production pursuant to letters rogatory of documents which were said to expose Rio Tinto Zinc and associated companies to proceedings for the recovery of a penalty under the General Regulations of the European Economic Community. Rio Tinto Zinc was not a party to the principal litigation, in America. In the Court or Appeal Lord Denning MR drew a distinction between the position of a witness and that of a party to a suit. He said at p.573: "It happens sometimes that a defendant is sued for a matter which not only gives rise to a civil cause but also gives rise to a criminal offence such ag libel or fraudulent conversion. The plaintiff then seeks to administer interrogatories or get discovery from the defendant so as to support his charge. In such a case the defendant has on occasion taken objection on the ground that the answer or the discovery may tend to expose him to proceedings for a criminal offence: and the objection has been upheld. Such were the libel cases of Lamb v Munster ... and Triplex Safety Glass Co. Ltd. ... I must say that I doubt if those cases would be decided in the same way today. The privilege should not be allowed in a libel case where there is no real risk of the deferidant being prosecuted: and his objection is only put forward as a way of escaping his civil liability." Lord Denning went on to observe that the present case concerned a witness, not a party. In relation to a witness, his Lordship said at pp.573-574: "The common law does in some circumstances cast its protection over him. ... It says: al. 'If a witness claims the protection of the court, on the ground that the answer would tend to incriminate himself and there appears reasonable ground to believe that it would do so, hé is not compellable to answer Note that a witness is only given this protection if he can satisfy the court that there is reasonable ground for it... It is for the judge to say whether there is reasonable ground or not. Reasonable ground may appear from the circumstances of the case or from matters put forward by the witness himself. He should not be compelled to go into detail -- because that may invuive his - disclosing the very matter to which he takes objection. But if it appears to the judge that, by being compelled to answer, a witness may be furnishing evidence against himself -- which could be used against him in criminal proceedings or in proceedings for a penalty -- then his objection should be upheld." — __-Lora Denning went on to say that, once it appears that a — witness is at risk, great latitude should be allowed to him in judging for himself the effect of any particular question. Roskill LJ, at p.578, said that the first question for the court is "whether the facts proved in evidence disclose the commission of an offence". Having held that, in the instant case, they did so, his Lordship went on to consider the degree of risk of penalty proceedings following. At p.579 he said: : "It seems to me that once a party to legal proceedings who is resisting production of documents can show facts which establish the existence of a penalty offence (or in other cases the commission of a criminal offence) the courts should be slow to deprive that party of his privilege against self-incrimination, which the common law now for some three centuries, and section 14 of 22. the Civil Evidence Act 1968 today accords him. In the absence of bad faith, to say that there is no risk of proceedings may in all but the plainest cases involve a court claiming for itself a degree of prescient foresight to which it would not be wise to pretend for if its forecast were wrong and if proceedings and penalties were to follow, damage will or at least may be done by an erroneous decision of the court which it would not be easy thereafter to undo or redress." In the House of Lords the majority, upon this aspect of the case, were content v.o agree generally with the judgments in the Court of Appeal. No specific reference was made to the distinction drawn by Lord Denning between the position of a party and that of a witness, although Viscount Dilhorne did comment at p.627 that "it may be that it would now be held that answering interrogatories as to libel would not be a reasonable ground for apprehending a prosecution for criminal libel". Rank Film Distributors Ltd v Video Information Centre C1982] AC 380 was a copyright case. The defendants were held entitled to rely upon the privilege against self-incrimination in resisting discovery and the answering of interrogatories, there being in the circumstances a "real and appreciable risk" of criminal proceedings for conspiracy to defraud being taken against them. However all members of the House of Lords rejected the defendants' reliance upon the risk of prosecution under the Copyright Act. At p.441 Lord Wilberforce said: 23. "The essential question being whether the provision of the information or production of the documents may tend to incriminate the respondents, it is necessary to see what possible heads of criminal liability there may be. There are three: (1) Section 21 of the Copyright Act 1956 creates summary offences under a number of headings, some of which would have potential applicabilty to the respondents. For a first offence there is a maximum fine of 50 pounds however many infringing articles are involved. (2) Conspiracy to commit a breach of section 21 of the Act. By virtue of the Criminal Law Act 1977 no greater punishment can be imposed for such a conspiracy than for the substantive offence under section 41. (3) Conspiracy to defraud -- an offence at common law left unaffected by the Act of 1977. As to (1) and (2), I think that a substantial argument could be raised that these should not be taken account of in connection with a claim for privilege. The criminal offences created by section 21 cover almost precisely the same ground as the bases for civil liability under the Copyright Act 1956. I would be reluctant to hold that in civil proceedings for infringement based on specified acts the defendants could claim privilege against discovery on the ground that those same acts establish a possible liability for a petty offence. In practice, as one would suppose, section 21 is very rarely invoked: only one case came to our knowledge, namely of a prosecution in 1913 under the Copyright Act 1911, and potential liability under it might well be disregarded as totally insubstantial. The same argument would apply as regards conspiracy to breach it." Lord Fraser of Tullybelton at p.445 described the offences created by s.21 as being "only ancillary remedies for breach of copyright ... and they are treated as comparatively trivial with a maximum penalty ... of 50 pounds. It would, in my opinion, be unreasonable to allow the possibility of incrimination of such offences to obstruct disclosure of 24. information which would be of much more vaiue to the owners of the infringed copyright than any protection they obtain from section 21". The application to the present case of these authorities is not an easy matter. On the one hand, the rule against self-incrimination is firmly fixed in our law and not properly to be circumvented by too restricted an application of the test of reasonable prospect of a prosecution bct.ig launched. And although, according to Lord Denning, the courts will look with greater scepticism at a claim for privilege made by a party than one made by a witness, it is clear that, once it appears that there is a real prospect of criminal ~ proceedings, the court will not compel self-incriitfiination even by a party. On the other han@, the upholding of a claim for privilege in a civil case may have a drastic effect upon the ability of a party to obtain a redress to which he or she is entitled at law. The dilemma becomes particularly acute ina case where the method primarily contemplated for protection of individual rights conferred by a statute is by a civil action, the effectiveness of which may be threatened by concern about self-incrimination for offences inserted in the Act merely as ancillary enforcement provisions. The Copyright Act is such a case. It would be curious if such a statute was rendered less effective to safeguard the rights of the individual by reason of the fact that Parliament had thought those rights to he sufficiently valuable as also to warrant vindication under the criminal law. 25. A possible partial solution of the dilemma is that adopted in Rank Film: to exclude from the principle about self-incrimination offences which may be categorised as "petty" or as merely ancillary to civil liability. However, in a legal system which, in the absence of special statutory provision to the contrary, maintains an absolute right to silence in respect of even the most trivial offences, there are conceptual difficulties in modifying the traditional ruie upon this basis. Moreover, there are practical difficulties in that exclusions will have to be established on a case to case basis. Not until a decision is made -- probably at an appellate level -- will it be known whether the rule is excluded in respect of a particular offence. If the right to maintain silence is to be over-ridden in particular cases because of the desirability of making available material evidence to an affected party, perhaps the courts should overtly adopt a balancing process; discarding an absolute privilege against self-incrimination and substituting a discretionary judgment wherein the nature and degree of the risk of self-incrimination and the seriousness of the possible offence are to be weighed against the importance of the evidentiary material in the instant case. However, the desirability of such an approach is for appellate courts to consider. Notwithstanding that a first offence under the Australian Copyright Act is no more serious : \ 26. than its equivalent in the United Kingdom, it is not for me to make, for the Australian Act, the policy decision made by the House of Lords in Rank Film in respect of United Kingdom copyright offences. I must apply the traditional rule in its full rigour. But, fully applying the rule against self-incrimination, it is important to bear in mind two principles which underlie that rule. The first principle is that the privilege may be claimed only at the point' at which the risk of actual incrimination arises. Thus it is nota proper answer to a summons to administer interrogatories that they may include a question, the answer to which may disclose criminality. The objection must be taken to the specific question, when its tendency may be considered: see Spokes at pp.132, 133. Secondly, as was pointed out by Cooke J in relation to the problem of self-incrimination under Anton Piller orders in Busby v Thorn EMI Video Programmes Limited (1984) 2 IPR 304 at p.318, the dilemma to which I have referred arises out of judge-made rules: "Its ingredients are judge-made processes of discovery and interrogation: a judge-made privilege: judge-made practice as to the evidence that will be received in a criminal trial. Experience, first overseas and now in New Zealand, has shown that it is reasonable to put the process to a new use to meet a demand occasioned by the abuse of new technology. The privilege, established in the nineteenth century, remains as valuable and important as ever. All that is needed is a 27. modification of the practice so as to enable information to be obtained while preserving the privilege. In other words, rather than undermining the privilege against self-incrimination, the steps about to be mentioned are aimed at achieving its objects." The New Zealand Court of Appeal went on to make its Anton Piller orders subject to undertakings precluding the use of information gained by the enforcement of the orders for the purpose of any criminal proceedings. I note that a similar course was taken by Evatt J in the present case. In the application of the first of the two principles to which I have referred, it can never be a ground to set aside a subpoena that compliance with the subpoena may require the recipient to produce documents whose production may tend to incriminate him or her. The objection must wait until the subpoena is called; as it did here. But, even at that stage, the risk may not in fact arise. No risk of self~-incrimination can arise from the mere production of documents in answer to a subpoena. -Production is to the court Unless and tintil the content of the documents is made known to a person who is reasonably likely to use those documents for the purpose of a criminal prosecution, no self-incrimination can occur. If the documents are produced in open court under circumstances in which the nature and content of the relevant documents may become known to a potential prosecutor, a danger of self-incrimination may arise. But there is no such danger in the production of documents to the court, without public identification of their nature and content, for consideration 28. by the court -- pursuant to the principle applied in Busby -- of the procedures possible and desirable to be taken in order to make the documents available in the instant case without thereby forcing self-incrimination upon the producing person. It is not unusual for a court, faced with a claim of privilege, to look at relevant documents itself for the purposes of determining the appropriate course of action: see, in relation to public interest privilege, Alister v R (1983) 154 CLR 404, Young v Quin (1985) 4 FCR 483 and, in relation to a claim of confidentiality, Allied Mills Industries Pty Limited v Trade Practices Commission (1981) 34 ALR 105 at p.144. One possibility may be to restrict access to the documents to persons who are prepared to give undertakings as to confidentiality, as in Busby, and to receive the documents -- and any evidence in relation thereto -- in closed court: see Federal Court of Australia Act s.50, Allied Mills Industries at pp.145-146 and Re Intercontinental Development Corporation Pty Limited (1975) 1 ACLR 253 at p.259. The documents referred to in the present subpoena fell into three catetories: documents -- principally drawings -- bearing any part number or drawing number referred to in the Schedule to the Application, employment records in respect of Mr Symonds and Mr Walker and documents relating to any agreement between Envirotech and EMA. It seemed to me highly unlikely that any documents in the second or third 29. category would tend to incriminate Envirotech. Counsel argued that proof that the second and third respondents were employed by the first respondent, or that Envirotech had acquired the pump part business of EM A, might tend to support a case of an agreement falling within s.86(1) of the Crimes Act. But this would have been most unlikely. Conspirators rarely record their illicit understanding in formal documents. And it does nothing to advance an allegation of conspiracy to show that one alleged conspirator has, at relevant times, employed another or has acquired the business of a third. Indeed the contrary is more likely. Agents of a company who carry out unlawful acts upon its behalf may thereby expose the company to criminal liability. If, acting on its behalf, they conspire with persons who are not agents of the company they may render the company liable to conviction upon a charge of conspiracy; although it would be more usual for a prosecutor to proceed against the various involved individuals rather than against a company only liable vicariously. But a company may not in law conspire with its own agents, whose acts are the acts of the company itself: see O'Brien v Dawson (1942) 66 CLR 18 at p.32. To the extent that the allegation of conspiracy feared in the present case was that of some agreement between Envirotech and one or both of Messrs Symonds and Walker -- and this is the only suggestion which has been made -- proof of the fact that these two individuals were employed by the company and therefore, prima facie, acted on its behalf tends to suggest the unlikelihood of a criminal conspiracy. 30. D The more real possibility is that documents, falling within the first category, might tend to establish an offence under s.132 of the Copyright Act. But that risk required consideration only if such documents were produced to the Court by Envirotech and if it was not then possible appropriately to protect the company. For the above reasons I required the rroduction to the Court for inspection of the documents held by Envirotech and referred to in the subpoena. The material proved to consist of records relating to the employment by Envirotech of Mr Symonds and Mr Walker and of certain plans which did not suggest the commission of any criminal offence. Accordingly, I permitted inspection by counsel for the applicants. Counsel for the first, second and third respondents, at the invitation of counsel for the applicants, then formally admitted that Mr Symonds and Mr Walker were each employees of Envirotech; and, in the result, none of the material the subject of the subpoena was further used in the hearing. The case for the applicants: section 52 As I have indicated, the applicants rely upon three causes of action: contravention of s.52 of the Trade Practices Act 1974, infringement of copyright and breach of confidence. 31. The evidence establishes that amongst the documents recovered by Mr Weekes from the Envirotech rubbish bags were two documents in which Envirotech, under the name of Baker Process Technology, claimed ownership of material which had emanated from Warman. One document (ex.C) was a drawing of a frame plate, identified as no.C2032. This drawing contained the notation, as part of a Baker Process Technology title block: "This drawing and all information therein i> the property of Baker Process Technology and is confidential and must not be made public or copied. This drawing is made available subject to return upon demand and is not to be used directly or indirectly in any way detrimental to the interests of Baker Process Technology. Infringement of the above conditions will attract claims for compensation". Upon a request for quotation addressed to an outside contractor and printed upon a Baker Process Technology form (ex.AH) were the words: "You are invited to quote, free of charge, your best prices and terms for the items as detailed below, subject to the 'conditions for tendering' (overleaf), and to our drawings, specifications and other documents which form part of this enquiry (all of which remain the property of Envirotech, and must be returned on request)". The items set out in the completed form were identified by reference to drawing numbers, one at least of which is a Warman drawing number. Furthermore two documents (exs.BL and BM), which were seized at the premises of the eighth and ninth respondents, 32. are drawings -- each identified as being copies of Warman drawings -- containing the E&ker Proceds Technology title block with the claim of ownership to which I have referred. It is, therefore, evident that, at least to a limited extent, Envirotech has falsely represented to others, in the course of trade or commerce, that it is the owner of information originated by Warman, and to which Envirotech has no legal entitlement, and to which it is entitled to maintain a claim of confidentiality. Given those examples, and the other conduct of Envirotech, there is reason to apprehend that, unless restrained by this Court, Envirotech will in the future falsely claim rights over Warman drawings. I am satisfied that there is a serious question to be tried as to conduct contravening 3.52 of the Trade Practices Act. The case for the applicants: copyright The claims in regard to copyright and breach of confidence are more extensive. Each of the three manuals was compiled by one or more Warman employees. Both the Manufacturing Manual and the Slurry Pumping Manual were compiled in 1981 by Mr G R Moore, then Senior Sales Engineer of Warman. The Manufacturing Manual incorporated material written by various Warman employees, all of whom were then resident in Australia and who wrote the material pursuant to their employment. Also, all of the contributors to the Slurry Pumping Manual were Australian residents. All but one of them 33, were employees of Warman at the time of the compilation: the exception being an ex-employee of Warman, Mr R J Upjohn, who, on 18 April 1986, assigned to the fourth applicant his interest in the copyright of the work. The Data Book was compiled by Mr B W Bromley, Price Controller of Warman since 1979. Ali contributions to the book were written by Warman employees, acting in that capacity, they then being all Australian residents. The Schedule to the Application lists over four thousand drawings in relation to which copyright is claimed on behalf of the applicants. Some documents included within that Schedule were found in the Envirotech rubbish bag by Mr Weekes. 792 of the drawings listed in the Schedule were seized at the premises of Envirotech pursuant to the Anton Piller order. Additionally, documents included in the Schedule were seized at the homes of both Mr Symonds and Mr Walker and at the premises of each of the other respondents. There is evidence in relation to some, but not all, of those other respondents to indicate that, at the time of seizure they had current, or had had recent, contracts with Envirotech. Extensive evidence has been read on behalf of the applicants to prove the authorship of the drawings listed in the Schedule which have been found in the possession of the various respondents; the total number of which well exceeds 34. 1,000. With the exception of one category of drawings, drawings for moulds, there is direct evidence to estabDish that each of the seized drawings, or the original drawing of which it is a copy, was produced on behalf of Warman. The initials upon each drawing have enabled identification of the draftsmen of most of the documents, most of whom are proved to have been Warman employees at the time. There is no evidence that these draftsmen were at the time Australian residents but, given chat they carried out the work as full-time employees of Warman stationed in its drafting office at Artarmon, this should be inferred. —s In the case of the mould drawings ~- less than 10% of the whole -- the evidence is more scanty but it is established that mould drawings were produced by Warman draftsmen and kept in the office of Mr Jones, access being permitted only to selected employees including Mr Walker. I think that it is a proper inference, at least at this stage of the case, that the mould drawings also were produced by Warman draftsmen resident in Australia. The first, second and third respondents do not seriously contest that the applicants have made out a prima facie case of infringement of copyright in the manuals. in the case of the manuals there is no problem about title. The various authors were each a resident of Australia and thus a "qualified person" within the meaning of 3.32(2) of the 35. Copyright Act: see s.32(4). Each of the manuals was compiled after 5 July 1978, upon which date Peko-Wallsend Operations acquired the business from Warman International. Consequently, Warman employees who wrote material for the manuals did so on behalf of Peko-Wallsend Operations, in which company the copyright for the manuals is consequently vested: see Copyright Act s.35(6). No problem of interaction with the Designs Act arises and there is no doubt that portions of those manuals have been copied, by persons unknown, for the purposes of the business of Envirotech. There is a threat of future infringement of the fourth applicant's copyright in these manuals, amply sufficient to support the making of a guia timet injunction. In the case of the drawings the situation is more complex. The first issue relates to title. Some of the drawings were made prior to the transfer of the business to Peko-Wallsend Operations in 1978. The terms of that transfer do not appear from the evidence, so that it is not shown whether they included an assignment of any copyrights previously enjoyed by Warman International. The same may be said of the two previous transfers, from Warman Equipment to Warman Services and from Warman Services to Warman International. As all of these companies are applicants, any omission to assign copyright from one to the other does not matter. The only problem which would arise relates to such drawings as might have been made prior to the business being 36. taken over by Warman Equipment, on a date not disclosed by the evidence, and assuming that there was no proper assignment to that company of any copyrights then vested in its predecessors in the business. There may be drawings in this category. According to the Schedule, many of the drawings were made before 1974 -- some as early as the late 1950's. But it is also clear that copyright to many of the drawings seized from Envirotech does vest in one or other of the applicants. Envirotech appears to have made no distinction on this ground. Moreover, and contrary to a submission by its counsel, there is ample reason to assume that, unless restrained, Envirotech will in the future, for its own purposes, copy drawings in which the applicants have copyright as and when that may be expedient. Under cross-examination Mr Weekes agreed that it was highly likely that at least 50 articles corresponding to each of the drawings listed in the Schedule had been produced by the applicants. In reliance upon that concession, counsel for the first, second and third respondents submit that any claim to copyright in the drawings is excluded by s.77 of the Copyright Act. Section 77 relevantly provides: "(1) Where-- (a) copyright subsists in an artistic work; (b) a corresponding design is applied industrially by, or with the licence of, the owner of the copyright in the work; 37. (c) articles to which the corresponding design has been so applied (in this section referred to as 'articles made to the corresponding design') are sold, let for hire or offered or exposed for sale or hire in Australia; and (d) at the time when those articles are so sold, let for hire or offered or exposed for sale or hire, they are not articles in respect of which the corresponding design has been registered under the Designs Act 1906-1968, the succeeding sub-sections of this section have effect. (2) During the period of 16 years commencing on the date on which articles made to the corresponding design were first sold, let for hire or offered or exposed for sale or hire in the circumstances referred to in paragraph (1)(d), it is not an infringement of the copyright in the work to do anything that, at the time when it is done, would have been within the scope of the monopoly in the corresponding design if the corresponding design had, immediately before that time, been registered in _— respect of all articles made to the corresponding design that had, before that time, been sold, let for hire or offered or exposed for sale or hire in those circumstances. - (3) After the expiration of the period referred to in the last preceding sub-section, it is not an infringement of the copyright in the work to do anything that, at the time when it is done, would, if the corresponding design had been registered immediately before that time, have been within the scope of the monopoly in that design as extended to "all associated designs and articles. (4) For the purposes of this section, account shall not be taken of any articles in respect of which, at the time when they were sold, let for hire or offered or exposed for sale or hire, the corresponding design concerned was excluded from registration under the Designs Act 1906-1968 by regulations made under that Act for the purpose of excluding from registration designs for articles that are primarily literary or artistic in character and, for the purposes of any proceedings under this Act, a design shall be conclusively presumed to have been so excluded if-- 38. (a) before the commencement of those proceedings, an application for the registration of the design under that Act in respect of those articles had been refused; (b) the reason or one of the reasons given for the refusal was that the design was excluded from registration under that Act by regulations made under that Act for the purpose of excluding from registration designs for articles that are primarily literary or artistic in character; and (c) no appeal against the refusal had been allowed before the date of commencement of the proceedings or was pending on that date. (5) The regulations may make provision for determining the circumstances in which a design 1s, for the purposes of this section, to be deemed to be applied industrially." Counsel submit that the drawings each constitute an artistic work, within the definition of that term in s.10(1) of the Act, a corresponding design of which has been applied industrially -- that is 50 or more copies have been produced: see reg.17(1) of the Copyright Regulations. The articles were ~gsold or offered for sale in Australia at a time when they were not articles in respect of which the corresponding design had been registered under the Designs Act. There is a question whether the exclusion from copyright protection effected by 5.77 applies only to unregistered designs which are capable of registration under the Desiqns Act 1906 or whether it extends to all unregistered designs whether or not capable of registration, other than 39, designs excluded from registration by subs.(4). Policy reasons in favour of the interpretation in the former sense of the United Kingdom equivalent of 3.77 were identified by the English Court of Appeal in Dorling v Honnor Marine Ltd £1965] 1 Ch. 1 and in Ogden Industries Pty Limited v Kis (Australia) Pty Limited £19823 2 NSWLR 283 at pp.297-298 Kearney J thought that, had it been necessary so to decide the matter, he would have been bound to follow this decision. However, there are substantial arguments in the opposite direction: the fact that the test adopted by s.77(1)(d) is registration, without any qualification as to registrability, and the perceived need to make special provision in subs.(4) for articles denied registration on particular grounds. And, perhaps, the dilemma recently faced by the House of Lords in British Leyland Motor Corporation Ltd v_Armstrong Patents Co Ltd £19861 2 WLR 400, to be discussed below, shows that the policy considerations are not as one sided as they seemed in Dorling. Whatever may be the position in relation to designs which are not registrable, it is at least clear that 8.77 applies to unregistered designs which are registrable. It follows that, articles produced from the designs being registrable, if the drawings, the subject of the applicants' copyright claim, did no more than graphically describe those articles produced therefrom, s.77(2) of the Copyright Act" "a 40. would apply to preclude infringement of copyright occurring by reason of the manufacture of the articles. It 1s another matter whether s.77(2) has any application to "plan to plan" copying. The scope of the monopoly in the corresponding design, referred to in s.77(2), is by s.74(2) given its meaning under 3.30 of the Designs Act, namely the application of the design to an article in respect of which the design is registered, the importation into Australia of such an article fo. sale or for use in business and the selling, hiring, etc of such an article. However, the relevant drawings do more than graphically describe the articles which have been produced by Warman. They contain information in relation to datums and tolerances which is necessary ~-- or at least highly desirable -- for the manufacture of the parts. This information is properly to be described as "a method or principle of construction" and, as such, is excluded from the definition of "design" in the Designs Act; cf Weir Pumps Ltd vy CML Pumps Ltd (1983) 2 IPR 129 at p.132, Edwards Hot Water Systems v_ S W Hart & Co Pty Ltd (1983) 49 ALR 605 -at pp.634, 635. Consequently, upon the present evidence, I am not yet persuaded that s.77 would operate to defeat the applicants' claim to restrain infringement of their copyright in the drawings. 41. The case for the applicants: breach of confidential information Finally, the applicants contend that the use by the first, second and third respondents of their manuals and drawings represents a breach of their entitlement to safeguard the integrity of confidential information: see Saltman Engineering Co Ltd v Campbell] (1948) 65 RPC 203, Seager v Copydex ttd £19671 1 WLR 923, Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd £19671 VR 37, Weir Pumps at p.139 and the recent decision of the English Court of Appeal in Faccenda Chicken Ltd v Fowler noted in 60 Australian Law Journal 300. In my opinion a prima facie case of breach of confidential information has been made out; in respect of both the manuals and the drawings. Each of the manuals has been treated by Warman as a confidential document; copies being made available only to selected personnel and then pursuant to a system whereby copies of the manuals were numbered and the name of the particular person to whom the copy was issued was recorded in the company's Register of Book Holders. The various drawings, already referred to, in respect of which the applicants claim infringement of copyright have also been treated as confidential documents. In recent years they have borne an inscription to that effect. Mr A Grzina, Manager of the Products Engineering Division of oO 42. Warman, referred in his evidence to the importance of maintaining the confidentiality of both the datum locations and the tolerances shown on the drawings. The evidence of Mr Victor Blake, Superintendent of the Warman machine shop, is that, at least since 1974, drawings have usually been returned to the company by contractors along with the goods. Mr Madgwick says that, during his time at Warman, drawings sent to contractors for the purpose of manufacturing a part were usually returned by the contractor with the finished part. The drawings were not always returned but Mr Madgwick made requests, from time to time, for return of outstanding drawings. No doubt there were occasions upon which a drawing escaped return but I am satisfied that, for many years, Warman drawings have been treated by the company and its contractors as being confidential to the company. And, finally, it is established on the evidence that the nature of the relevant material was such as reasonably to justify Warman, in its own commercial interests, in insisting upon confidentiality. The evidence does not establish how it came about that Envirotech obtained copies of the manuals and of those drawings which have been found in its possession. The affidavit of Mr G 8S Boatto reveals that E MA Industries had possession of some Warman drawings. Presumably any Warman documents which were in the possession of E M A Industries -- and which may have been supplied to that firm by Mr Symonds -- were delivered to Envirotech when it acquired the EMA 43. "operations". It is probable that the Warman documents then acquired were supplemented by contributions from Mr Walker. In the absence of any explanation to the contrary -- and no explanation of Envirotech's possession of the documents was offered in evidence -- it is reasonable to conclude that, in breach of their duty of confidence to their former employer, Mr Symonds and Mr Walker made available to Envirotech originals or copies of confidential Warman documents and that Envirotech, knowing the nature of tne documents, has been prepared to use those documents as and when expedient for its own commercial purposes. The term "commercial theft" is not too harsh a description of the actions of these respondents. The defences raised: copyright In addition to traversing the case of the plaintiffs, the first, second and third respondents raise a number of matters by way of defence. They submit that one or more of these matters is such as to render it impossible for the Court to determine that there is a serious question to be tried as to the respondents' liability and, alternatively, that the existence of these defences is properly to be taken into account in considering the balance of convenience and the possession of the seized documents pending a final hearing. Firstly, in relation to the copyright claims, the respondents submit that this Court has no jurisdiction to grant relief. Counsel concede that, because of the Trade 44, Practices Act claim, the case is properly before the Court. They further concede that the copyright claims arise out of the same controversy and facts as that claim -- see Fencott v Muller (1983) 152 CLR 570 at pp.607-608 -- so that, in the absence of a relevant statutory exclusion, the Court would have jurisdiction to deal with the copyright claims under s.32 of the Federal Court of Australia Act. But they say that there is here a relevant statutory exclusion. The only provisions in the Copyright Act dealing with the jurisdiction of the courts are ss.131A and 131B. Section 131A provides: "131A. The jurisdiction of the Supreme Court of a State or Territory in an action under this Part shall be exercised by a single Judge of the Court." Section 131B provides that an appeal lies from a decision of the Supreme Court of a State or Territory to this Court or, by special leave, to the High Court. In contrast to the position under the Patents Act 1952, for example, the Copyright Act does not itself invest any court with jurisdiction. This function is undertaken by s.39(2) of the Judiciary Act 1903 which invests "the several Courts of the States ... within the limits of their several jurisdictions --- With federal jurisdiction, in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it", subject to an exception and condition not presently material. The High 45. Court does not have original jurisdiction in copyright matters but under 3.7644) of the Constitution the Parldament is empowered to confer jurisdiction on that Court. Hence s.39(2) applies. However, it should be noted that 5.39(2) merely invests State courts with a jurisdiction which they would not otherwise have. Neither expressly nor by implication does it exclude any jurisdiction which is conferred or invested upon any other court by any other provision. In particular, s.39(2) does not exclude the application, in an appropriate case, of s.32 of the Federal Court of Australia Act. Reference was made to the fact that ss.131A and 1318 were added to the Copyright Act in 1979, since the enactment of the Federal Court of Australia Act. But nothing turns on this; there is no inconsistency between the two provisions. Section 131A merely prescribes the manner of exercise by the Supreme Courts of the jurisdiction with which they are already invested and 3.131B prescribes the right of appeal from such courts. In relation to the merits of the copyright claim, counsel for the first, second and third respondents refer to British Leyland. That was an action by a manufacturer of motor cars to restrain the production by the defendant of replacement exhaust pipes designed to fit the plaintiff's cars. It was not suggested that the defendant had copied the original drawings -- apparently it had followed a process of 46. reverse engineering ~- but it was said that the reproduction of the shape and dimensions of the original exhaust pipes indirectly infringed the plaintiff's copyright in the drawings from which they were produced. The exhaust pipes were not registered under the United Kingdom Registered Designs Act 1949 -- the members of the House of Lords apparently regarded the pipes as non-registrable because of lack of originality. The House proceeded upon the basis that the exclusion from copyright protection effected by the equivalent of our s.77 applied only to registrable designs. Nonetheless, the defendant's appeal succeeded. By majority, the House upheld a submission that there was what Lord Edmund-Davies called a "spare parts exception" to the general rule protecting the copyright of a manufacturer. The exception was described by Lord Bridge of Harwich at p.414 in these words: "The owner of a car must be entitled to do . Whatever is necessary to keep it in running order and to effect whatever repairs may he necessary in the most economical way possible. To derive this entitlement from an implied licence granted by the original manufacturer seems to me quite artificial. It is a right inherent in the ownership of the car itself. To curtail or restrict the owner's right to repair in any way may diminish the value of the car." Lord Templeman, with whom Lord Scarman expressly agreed, at p.421 accepted a submission "that Parliament did not intend the protection afforded by copyright to a drawing should be capable of exploitation 30 as to prevent the reproduction of a 47. functional object depicted on a drawing". "But", he commented, "there is a good deal of legistative and judicial history to be considered". As Lord Templeman made clear, the problem confronting the House in British Leyland arose because of judicial decisions to the effect that it was an infringement of the copyright in a plan indirectly to copy that plan by the making of an article, combined with the failure of the United Kingdom Parliament to carry into effect a view expressed in 1952 by an expert committee -- the Gregory Committee ~-- that "it should not be possible to protect under the Copyright Act more in the _— constructional or functional field than is protectable under — the Registered DeSigqns Act". His Lordship regarded it as anomalous that the owner of copyright in a drawing of a non-registrable article -- perhaps non-registrable because of the absence of novelty -- should be protected against the marketing by a competitor of a copy of that article, whilst the law denied copyright protection in a drawing of a registrable article. One method of eliminating this anomaly would have been to hold that the United Kingdom equivalent of s.77 of the Australian Copyright Act applies to all unregistered articles, whether registrable or not. But the majority of the House took a different path, eliminating the anomaly within a limited area by creating an exception in respect of spare parts for durable goods. 48. The result achieved in British Leyland may fairly be described as remarkable; representing as it does a major qualification upon the scheme laid out -- wisely or unwisely -~- under the United Kingdom copyright and designs legislation. If the relevant United Kingdom decisions -- commencing with King Features Syndicate Inc v 0 and M Kleeman Ltd (£19413 AC 417, running through to LB (Plastics) Ltd v Swish Products Ltd £19793 RPC 551 and including Dorling -- were followed in Australia, the anomaly perceived by Lord Templeman would arise in this country. But it may be another matter whether there would be fudicial intervention along the lines of British Leyland; especially having regard to the fact that Parliament has dealt with the inter-relationship between the Copyright Act and the Designs Act as recently as 1981. Whatever one may think of the adequacy of the solutions then adopted -- as to which see my comments in Hutchence v South Seas Bubble Company Pty Limited (1986) 64 ALR 330 at p.432-343 -- it cannot be denied that this inter-relationship is a matter to which Parliament has given its attention in recent times. For present purposes it is not necessary to pursue this speculation. There is a major factual difference between British Leyland and the present case. In the former case the plaintiff sought to restrain the manufacture by the defendant of articles. In the present case the applicants seek to restrain the creation of copy documents. Nothing that was said in British Leyland suggests that the House of Lords 49, would, in the name of the provision of spare parts to vehicle owners, have sanctioned the copying by a competitor of the plans of a copyright owner. The whole context of the decision is that the result operates as a qualification upon the principle, authoratively established by King Features Syndicate, that a person may infringe the copyright in two-dimensional drawings by making a three-dimensional object. The defences raised: breacn of confideiuce In answer to the claims of the applicants of breach of confidence, counsel for the first, second and third respondents submit that the protection given to them in that area of the law is excluded by the enactment of federal copyright legisiation, that the Commonwealth Parliament, having enacted the Copyright Act and the Designs Act without a specific saving of the law relating to breaches of confidence -- cf 3.4M(b) of the Trade Practices Act -- must be taken to have excluded the operation of that law in a case covered by the provisions of that legislation. It is said that there is an inconsistency between the grant of perpetual protection under State law and the intention of the Commonwealth Parliament to give a protection limited in point of time. In support of the submission reference is made to three decisions of the United States Supreme Court: Sears, Roebuck & Co v Stiffel Company 376 US 225 (1976), Compco Corporation v Day Brite Lighting Inc 376 US 234 (1976) and Kewanee Oil Co v Bicron Corporation 416 US 470 (1974). 50. As counsel acknowledge, it is not appropriate to determine, at this interlocutory stage, such a far reaching submission. It is sufficient for me to say that I am not yet persuaded that the enactment by the Commonwealth Parliament of either the Copyright Act or the Desiqns Act affects, in any way, the continued operation of the equitable principles which we know as the law relating to breaches of confidence. Sears, Roebuck and Compco were both cases involving consiteration of Illinois legislation devised to prevent unfair competition and which conferred, in effect, a statutory monopoly upon the designers of non-patentable objects. The Supreme Court held —— that this legislation was inconsistent with the federal Patents law. As was said by Black J, delivering the opinion of the Court in Sears, Roebuck at pp. 231-232: "To allow a State by use of its law of unfair competition to prevent the copying of an article which 'represents too slight an advance to be patented would be to permit the State to block off from the public something which federal law has said belongs to the public." In Paimer, "Law of Restitution" vol.1 p.101 the comment is made that "there was some uncertainty as to the effect of those decisions on state law relating to protection of trade secrets". There was some inconsistency concerning that matter in decisions of State Courts of Appeal but the uncertainty was resolved by the decision of the Supreme Court in Kewanee upholding the grant of an injunction restraining the use or disclosure of trade secrets until such time as 51. those secrets had been released to the public, had otherwise become generally available to the public or had been legitimately obtained by the defendants. To the extent that the United States experience is relevant to the position in Australia, it seems to me to tell against the submission made by the respondents. -The defences raised: provisions of Part IV of the Tra7+ , Practices Act , Finally, and in response to the whole of the applicants' claims, the first, second and third respondents rely upon some of the provisions of Part IV of the Trade Practices Act. I will examine those submissions in the light of the amendments made to Part IV by the Trade Practices Revision Act 1986, which commenced on 1 June 1986. Firstly, counsel submit that the prosecution of this action is precluded by 3.46 of the Trade Practices Act. That section deals with monopolization. Subsection (1) provides: "(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of-- (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; (b) preventing the entry of a person into that or any cther market; or 52. (c) deterring or preventing a person from engaging in competitive conduct in that or any other market." Subsection (2) deals with the composite market power of related corporations and subs.(3) requires the Court, in determining for the purposes of the section the degree of market power, to take into account the extent to which the conduct of the relevant body corporate or bodies corporate is constrained by the conduct of competitors, potential competitors, customers or suppliers. Subsection (4) spells out the nature of the power referred to: "(4) In this section-- {a) a reference to power is a reference to market power; _—- (b) a reference to a market is a reference to a market -for goods or services; and {c) a reference to power in relation to, or to conduct in, a market is a reference to power, or to conduct, in that market either as a supplier or as an acquirer of goods or services in that market." During the course of their cross-examination of Mr Weekes, the most senior officer of Warman to give evidence, counsel for the first, second and third respondents suggested to him "that the purpose of these proceedings is to achieve an increase in business for your applicant company or companies in the market for spare parts for Warman pumps". Mr Weekes responded: "I would prefer to say that the purpose of the proceedings was to get back information which was rightfully ours and which was being misused". Asked about his "ultimate & 53. purpose", Mr Weekes conceded that he was interested aiso in getting back business "which we lost to EMA initially over the last few years". Mr Weekes conceded that success by the applicants in these proceedings would adversely affect Envirotech, although he thought that it could continue in business by buying in parts from other competitors of Warman. Upon the basis of this evidence it is submitted that, having a substantial degree of power in the pump parts market, Warman is attempting by these proceedings to eliminate or to substantially damage a competitor, Envirotech, in breach of 8.46(1)(a). This submission overlooks an important limitation to the operation of 5.46 imposed by the words "shail take advantage of that power", that is to say that market power: see subs.(4)(a). There is no doubt that Warman enjoys a dominant role in the Australian slurry pump market and in the market for replacement parts for its pumps; the figures have already been mentioned. This dominance may properly be described as "a substantial degree of power" in the markets for pumps and for replacement parts. But in these proceedings it does not seek to take advantage of that power. Rather it seeks to take advantage of rights which it claims in respect of particular documents. Those rights depend upon the nature and source of the information in the documents. The rights, and Warman's position in this Court, would be exactly the same if it held only 10% of the market; indeed, even if it ceased altogether to manufacture pump parts. 54. In support of their submissions counsel referred to several United States decisions relating to ss.1 and 2 of the Sherman Anti-Trust Act and which provide: "1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal ... 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty ... " These cases, they say, show that the exercise of what would otherwise be a legitimate power may breach s.2, whether or not there is any intention-to monopolize. Thus in Kobe Ine v Dempsey Pump Co 198 F. 2d. 416 (1962) relief was denied to a — — patent holder who sought to restrain infringement by a competitor of its patents upon the basis that the action was brought in pursuit of an intention to monopolize. See also United States v Timken Roller Bearing Co 83 F. Supp. 284 (1949) at pp.315-316 (trade marks), Sargent-Welch Scientific Company v Ventron Corporation 567 F. Supp. 701 (1977) (rationalization of dealer arrangements). However, there is not in the Australian Act -- as there is in the Sherman Act -- a general prohibition upon monopolization. Section 46 strikes only at the conduct it defines and that conduct is limited to the taking advantage of the market power of the relevant corporation. To exercise in good faith an extraneous legal right, though the effect may be 55. to lessen, or even eliminate, competition, is to take advantage of that right, not of market power: cf Top Performance Motors Pty Limited v Ira Berk (Queensland) Pty Limited (1975) 1 ATPR 40-004 especially at p.17115. Section 45(2) of the Trade Practices Act prohibits a corporation making, or giving effect to, a contract which -- amongst other things -- would be likely to have the effect of substantially lessening competition. Counsel for the first, second and third respondents argue that the effect of this section would be to prohibit a consensual agreement between the parties to the effect of the orders sought by the applicants; and, therefore, that, as a matter of public policy, the Court should decline to make orders to achieve that which the parties could not themselves achieve. I am not impressed by this argument. The terms of s.45 have been carefully formulated. There is no warrant for extending the section so as to exclude the Court from vindicating rights, simply because the effect of that vindication may be the reduction of competition. If that result had been desired, it would have been easy to so provide. In the face of comprehensive legislation containing no invitation so to do, it will rarely be justifiable to resort to unspecified considerations of public policy; especially when, as in this case, the relevant policy considerations are likely to bear in opposite directions. 56. Counsel also refer to s.45D of the Trade Practices Act, putting a similar argument. It is said that the applicants should be regarded as being engaged in a course of conduct for the purpose of hindering or preventing Envirotech supplying goods to others. It is not suggested that the case falls within the terms of s.45D but rather that it should be treated as being analogous and that public policy should be applied. For tie reasons expressed in relation to s.45, I reject this submission. Finally, reference is made to 3.50, a section dealing with mergers and other acquisitions. It is not necessary to set out the section at length. Subsection (1) provides: "(1) A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate if-- (a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to dominate a market for goods or services; or ~ (b) in a case where the corporation is ina position to dominate a market for goods or services-- (i) the body corporate or another body corporate that is related to that body corporate is, or is likely to be, a competitor of the corporation or of a body corporate that is related to the corporation; and (ii) the acquisition would, or would be likely to, substantially strengthen the power of the corporation to dominate that market." Subsection (3) gives an expanded interpretation to the phrase "market for goods and services" and to the concept of dominating a market. The argument is that, as a result of its acquisition of the Warman business -- including the copyright in the various documents -- Peko-Wallsend Operations became able to dominate the market, within the meaning of s.50(1)(a), so that the acquisition was in breach of the Act. It follows, it is said, that Peko-Wallsend Operations comes to this Court without clean hands oad that relief should be denied to it. No doubt the same submission may be made about Warman International, whose 1976 acquisition occurred after the commencement of the Trade Practices Act. I am not aware of any case in which there has been discussion as to the possible application to claims under the Trade Practices Act of the equitable doctrine of "clean hands"; more properly that "he who seeks equity must do equity". There are problems about such an application in relation to claims of contraventions of Parts IV or V of the Act. Section 80 permits "any person" to bring proceedings, thus indicating that Parliament regarded the personality of the applicant as being immaterial to the existence of a complete cause of action. There is not the same problem in relation to claims under the Copyright Act or for breach of confidence. 58. In Interstate Parcel Express Co Pty Limited v Time-Life International (Nederlands) B V (1977) 138 CLR 5b4 at pp.560-561 Murphy J alluded to the possible application of the principle to an action for infringement of copyright; but the matter had not been argued and his Honour concurred in the dismissal of the defendant's appeal. However, it is important to note that the conduct of the plaintiff which provoked that allusion was conduct in respect of the very matter which gave rise to the particular litigation; and th*~ is a fundamental limitation upon the application of the principle. Not even the equity courts insist upon general virtue in their plaintiffs. Questions of degree are often involved in determining whether there is a sufficient connection between any improper conduct of a plaintiff and the relief sought. It is possible that the present respondents may make out a case that the applicants, or some of them, are disqualified from obtaining the relief they seek, or some of it, because of a contravention of s.50 of the Trade Practices Act; but that is far from clear. I am not satisfied that the defence under s.50, any more than any of the other defences raised by the first, second and third respondents, is such as to deny to the applicants' case the description of being one which has substantial prospects of success, in whole or in part. 59. Balance of convenience The applicants argue that the balance of convenience lies in favour of granting interlocutory injunctions. They acknowledge that such injunctions are likely to have a serious effect upon the operations of Envirotech; and rightly so. Mr S C Aquilina, the accountant of Envirotech and its only witness at the interlocutory hearing, expressed the opinion in an affidavit that the likely effect of the compu.iy being prohibited from using the drawings seized under the Anton Piller orders would be to occasion losses exceeding §1 Miliion. This estimate is based upon the supposition that loss of the drawings would necessitate Envirotech closing down its pump parts operations. In cross-examination Mr Aquilina said that Envirotech could not continue to make slurry pump parts without these drawings. In support of their submission that, notwithstanding the effect upon Envirotech, injunctions should be made -- including an order for the retention of the seized material -- counsel for the applicant refer to three matters. First, they point to the strehgth of their prima facie case. Not only is the evidence' substantially uncontested, they say; it is tacitly admitted by Mr Aquilina's evidence that Envirotech cannot continue this part of its business without access to documents which, on the unchallenged evidence, are Warman documents illicitly obtained. 60. Secondly, they point out that no suggestion has been made that the applicants would not be able to meet any liability imposed upon them pursuant to their undertaking as to damages; if the proceedings should fail. On the other hand -- according to Mr Aquilina -- the net worth of Envirotech is only $300,000.00. It is true that, in their written submissions, counsel for the first, second and third respondents have indicated that Envirotech Corporation, the American parent, is prepared to guarantee any additional liability of the Australian Company. No doubt this offer could be appropriately formalised. But, say counsel for the - applicants, nothing is known of the financial position of the American company and, in_any event, there are practical difficulties in enforcing any guarantee. The American company is not shown to have an Australian presence. Thirdly, counsel submit that, if the documents are returned, they may sustain damage impossible to detect or to rectify. The documents might easily be copied and passed to the United States parent or to some other company which is in active competition with overseas licensees of Warman. If that happened, Warman would be unlikely to learn, still less to be able to prove, what had happened. Any undertaking as to future behaviour by those responsible for the management of Envirotech in Australia should, it is submitted, be regarded, in the light of what has occurred, as worthless. Even with él. - goodwill, counsel add, damage to Warman might occur. If it is to stay in business, En@irotech must give copies of the documents to its sub-contractors. Further dissemination is bound to occur. The argument on the other side rests entirely upon the hardship which would be suffered by Envirotech if it were denied access to the documents pending a hearing at which it was successful. I give this consideration great weight but it must yield to the matters put on behalf of the applicants; with whose submissions I agree. In relation to hardship, it must be remembered that Envirotech has carried on the relevant business for almost a year, so that it will have records as to its turnover and profitability. If the proceedings ultimately fail, it should be possible, even if not easy, to fix a sum of money which will fairly compensate Envirotech for its inability to carry on the business in the meantime. As counsel point out, there is no suggestion that the applicants cannot meet any order for compensation which might be made. Accordingly, I am of the opinion that, subject to their counsel giving to the Court the usual undertaking as to damages, interlocutory orders should be madé in favour of the applicants, including an order for retention by the Court of all seized documents. It is desirable that steps be taken to bring the matter on for final hearing at the earliest possible date. There will be an early directions hearing for that purpose. 62. I certify that the sixty-one (61) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Wilcox. Associate: Date: 30 June 1986 Counsel for the First, Second and Third Applicants: Solicitors for the First, Second and Third Applicant: Counsel for the First, Second and Third Respondents: Solicitors for the First, Second and Third Respondents: Counsel for the Fourth and Fifth Respondents: Solicitors for the Fourth and Fifth Respondents: Counsel for the Sixth Respondent: Solicitors for the Sixth Respondent: Counsel for the Seventh Respondent: Solicitors for the Seventh Respondent: Counsel for the Eigth and Ninth Respondents: Solicitors for the Eighth and Ninth Respondents: Counsel for the Tenth Respondent: Solicitors for the Tenth Respondent: Date(s) of hearing: Nmome A Het tae Mr P G Hely QC with Mr MR Ellicott Messrs Phillips Fox Mr DE Horton QC with Mr D Ryan Messrs Moore & Bevins Mr RD Giles QC with Mr T Jukovic and Mr R Harper Messrs Thurlow Fisher Mr P Hallen Messrs Hones & Ledingham Mr W Hodgekiss and Mr K Morrisey Messrs Schrader Coyle Mr P W Neill Messrs G A Neil & Co Mr DI Browne Messrs Axtens & Co 9, 28, 29 and 30 May 1986