JUDGMENT No, DD 7.82. CATCHWORDS DESIGNS ~ application for interlocutory injunction - whether product based upon a registered design, but with a number of different features, constitutes an "obvious or fraudulent imitation" within s.30(1) Designs Act - similarity of some significant features of design -— whether a serious question to be tried - balance of convenience - justice between the parties. Designs Act 1906 s.30(1) TURBO TEK ENTERPRISES INC and AUTOPACE PTY LTD v TARGET AUSTRALIA PTY LTD No. VG 55 of 1988 Woodward J 17 February 1988 Melbourne he ty IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 55 of 1988 GENERAL DIVISION BETWEEN: TURBO TEK ENTERPRISES INC and AUTOPACE PTY LTD Applicants and TARGET AUSTRALIA PTY LTD Respondent MINUTES OF ORDER COURT: Woodward J. DATE: 17 February 1988 PLACE: Melbourne UPON THE APPLICANTS by their counsel undertaking to pay to any party adversely affected by the following interlocutory orders such compensation (if any) as the Court thinks just in such manner as the Court directs, THE COURT ORDERS THAT: 1. The respondent be restrained until the hearing and determination of the application herein or further NOTE: order, from (whether by itself, its servants or agents or by any other means) manufacturing or causing to be manufactured, 1tmporting or causing to be imported, advertising, offering for sale or selling or supplying any spray washer device the same as or substantially identical with Exhibit 'JNB 6' herein. The directions hearing herein be adjourned to Friday 19 February 1988 at 10.15 a.m. The costs of and incidental to this application for an interlocutory injunction be reserved. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 55 af 1988 GENERAL DIVISION BETWEEN: TURBO TEK ENTERPRISES INC and AUTOPACE PTY LTD Applicants and TARGET AUSTRALIA PTY LTD Respondent COURT: Woodward J. DATE: 17 February 1988 PLACE: Melbourne REASONS FOR JUDGMENT . This is an application for an interlocutory injunction which would restrain the respondent from selling a product alleged to infringe an Australian registered design. It is necessary to begin by setting out something of the history of this litigation. Turbo-Wash has been described by the _ first applicant, which manufactures it, as "an easy to use high pressure cleaner that simply clicks onto your garden hose. Turbo-Wash uses specially formulated suds to power away dirt on cars, bikes, patios and even second storey windows ... The ultimate power pressure washer". The first applicant is an American company and_ the second applicant is the Australian distributor. The product has been selling in Australia since late in 1986 and has been very successful in that time. The applicants are about to launch a nation-wide advertising campaign on 6 March 1988 designed to increase sales even further. In the middle of last year a company called Sperling Enterprises Pty Ltd ('Sperling') introduced to Australia a Taiwanese product which was obviously similar to that manufactured by the first applicant. The applicants took the view that it involved both an obvious and a fraudulent imitation of their registered design No. 96482 for Turbo-Wash, and they instituted proceedings in this Court on those and other grounds. As a result of those proceedings, Ryan J made interlocutory orders on 17 August 1987 restraining Sperling from further sales of the product. His Honour delivered a reserved judgment with the findings of which, so far as they relate to issues relevant to these proceedings, I respectfully agree. I have drawn upon those findings in the following statements of fact. Even before judgment had been delivered in that matter, the applicants discovered that a virtually identical product was being sold in the stores of the present respondent (*Target'). Fresh proceedings were commenced and the matter came before Ryan J on 25 August 1987. Target was aware of the judgment which had been entered against Sperling and took the attitude that it neither consented to nor opposed an interlocutory injunction being issued against it. In those circumstances Ryan J made similar arders against Target as he had made in the Sperling case. Target appeared to accept the situation and, on 16 December 1987, one of its officers enquired about' the advertising programme of the applicants in order, as he suggested, that Target could take full advantage of that programme by stocking significant numbers of the applicants' product, It has now become clear that, before these discussions took place, Target had arranged with the Taiwanese manufacturer for the supply of a fresh version of its product which Target hoped would be sufficiently different from the applicants' Turbo-Wash to enable it to escape any liability under the Designs Act 1906. The substantial question underlying the present action is whether Target has succeeded in that aim, or whether the new product is a "fraudulent or obvious imitation" of the first applacant's registered design, within the meaning of s.30(1) of the Designs Act. Ryan J has conveniently set out the background to the production of Turbo-Wash, and the detailed nature of the design for which monopoly is claimed, in his judgment in the Sperling case. I da nat reproduce the relevant passages in that judgment in full, but I do adopt his Honour's descriptions of those matters. His Honour's findings were not brought into question by any additional material before me. Ryan dg described the registration of the first applicant's design in the following terms: "The relevant certificate of registration recites that 'Monopoly is claimed in the shape and configuration of A PRESSURE SPRAY WASHER and the like as shown in the representations.' Registered design No. 96482 shows a single cylinder from the top front of which protrudes a telescopically extendible barrel of three sections, tapering towards a nozzle. At the rear of the cylinder, likewise mounted eccentrically is an inlet valve designed for connexion to a garden hose. The registered design also depicts, at the front of the cylinder mounted directly beneath the barrel, a triangular knob or tap apparently for regulating the flow of detergent, and, immediately below that, a circular cap covering an aperture through which' the cylinder is filled with detergent." Tt will be noted from this description that no attempt was made by the first applicant to limit in any way the monopoly which it claimed for its design. The effect of this is that all the features of the design must be taken into account in considering whether there has been an infringement of it. However this is not to say, as counsel for the respondent argued, that all those features should be given equal weight. In my view there are certain features of this design, as of most designs, which are considerably more important than other features. This is a matter to which it will be necessary to return at a later stage. Ryan J went on ta set out at length' the comparatively minor variations between the first applicant's design and the Sperling product and drew attention also to one major departure from the design as registered. He said "... The most significantly different feature of the allegedly infringing article 15 a 'pistol-grip' handle which depends from the cylinder at roughly a right angle to it. The attachment by which a domestic hose can be joined to the device is located at the bottom of the handle which is hollow to permit the passage of water to the cylinder and thence along the barrel and out through the nozzle." His Honour then set out details of the evidence of various experts which had been given by way of affidavit. His Honour then dealt with the question of prior art in the following terms: "There has also been placed before the Court by both sides a body of prior art which is substantially the same and consists of extracts, including drawings, from records in the United States Patent Office related to articles variously described as a 'hose mounted fluid mixing sprayer', a 'fluid Operated spraying device', a 'spray gun for viscous materials' a 'detergent dispensing device' and the like. Examination of that material reveals that each device incorporates what Mr. Redmond called the three major components, namely a hose connection, a container for soap or detergent and a barrel er nozzle from which the mixture of water and detergent is expelled. However, perusal of the prior art also discloses a considerable diversity in the design, comparative proportions and arrangement of those three components. In some, a compact hose inlet and nozzle are mounted on top of a large jar-like detergent container. In others, the outlet valve or nozzle is attached to a non-rigid conduit from the detergent reservoir. Some have a wand or barrel not unlike those on the present registered design and the allegedly infringing article, but wrth a quite different location and proportion in relation to the detergent reservoir. At least two examples of the prior art have "pistol grip' handles like that adopted for the accused device but mounted in a markedly different configuration and proportion to the nozzle and detergent container." Ryan J then expressed his conclusion on the question of obvious imitation in the following terms: "The result of a visual comparison of the first respondent's device with the registered design depends, as the expert evidence suggests, on whether one is struck principally by the similarity in the barrel and detergent cylinder, or principally by the presence of the 'pistol grip', and the absence of a rear mounted inlet valve in the allegedly infringing article. I am satisfied at least that there is a serious question as to whether the features of similarity are not so striking as to lead on balance to the conclusion that the first respondent's device 1S an apparent copy of the registered design." He then turned to consider the question of fraudulent imitation and, for reasons which he set out, he concluded: "The inference that the Taiwanese manufacturers of the allegedly infringing article had knowledge of the design of the Turbo-Wash device is almost inescapable ..." His Honour held that, as the evidence stood, it established that the makers of the Taiwanese product knew of the design embodied in the Turbo-Wash device. It is not necessary for me to canvass the evidence to which his Honour referred in his judgment, because there has been no attempt before me to suggest that the product which was the subject of the proceedings in the Sperling case, and in the first action against Target, was not a deliberate copy of significant parts of the first applicant's design. [In fact, further evidence placed before me tends only to confirm that there was at first a knowing imitation which has led, in the case of the present product, to an equally deliberate attempt to make sufficient variation to the original design to achieve the result that the product now before me is not a copy of the first applicant's design. The evidence before me establishes that the product now complained of, known as AQEE, was first seen on the market on 29 January i988. The present proceedings were commenced on 5 February. I am prepared to accept for purposes of this decision that Target believed that it had departed sufficiently from the first applicant's design to be safe from liability in an action for infringement. Indeed it had received such advice from a firm of patent attorneys in no uncertain terms. Target had been told: ",.. the proposed new power spray gun which includes a hexagonal shaped body and pistol grip handle and quick connectors for the attachment of replaceable fixed nozzles and tips could not be held to be an infringement of the Turbo-Tek design registration No. 96482." In an affidavit filed on behalf of the respondent, Mc R.F. Simpson, an industrial designer, compared the respondent's AQEE spray gun with both the Turbo-Wash pressure washer and the registered design upon which that washer is based and reached the following conclusions, so far as the major design features of the respective products concerned: Mc Simpson *The Turbo Wash Pressure Washer is a fitting which attaches to the end of a hose and is operated in the manner of a conventional garden spray, that is with the primary hand holding the hose (and hose connector). This is in order to allow the flexibility of the hose to drop the spray (the Turbo Wash Pressure Washer) to a lower level in relation to the hand (below the main axis of the forearm) to allow a more comfortable and controllable Manipulation. This is demonstrated in the packaging of the Turbo Wash Pressure Washer. The Turbo Wash Pressure Washer is a pressure washer operated in the manner of a conventional garden hose spray. Conversely, The Aqee Spray Gun is a versatile pressure spray gun, designed to be hand held by the integral handle/pistol grip and/or its fluid reservoir body which, being hexagonal, is easier and more positive to grip. The intended mode of use is confirmed by the package photograph showing the product in use being held by the handle grip as a 'gun'. The absence of ribs and other detail from the body and the use of soft radii along all edges encourage its use as a hand held product. Unlike the Turbo Wash Pressure Washer, the Agee Spray Gun is uncontrollable when operated with the primary hand on the hose and hose connector. Therefore the Aqee Spray Gun is a unique product designed to be operated in a different manner from the Turbo Wash Pressure Washer with physical style, shape and configuration to visually support its operational intent." concluded: "Any similarities between the Aqee Spray Gun and the Turbo Wash Pressure Washer are of a Minor and coincidental nature and do not affect the clear fact of the Agee Spray Gun being a new and uniquely designed product. Indeed, it is apparent that the manufacturers of the Aqee Spray Gun have gone to considerable efforts to distinguish their product in the market place from the Turbo are Wash Pressure Washer. In my opinion in no way can the Agee Spray Gun be considered a copy of the Turbo Wash Pressure Washer." In contrast to this opinion, affidavits have been filed on behalf of the applicants by two experts, both of whom quote in addition, and with approval, opinions expressed by a third expert who gave evidence in proceedings in Holland which concerned the same registered design and the same allegedly infringing article. Mr P.K. Bayly, an industrial designer, stated as follows: "On the 3rd February 1988 I examined a power spray gun inscribed with the mark AQEE ... and a copy of the Australian Registered Design No. 96482. ... Upon comparing the AQEE with the design depicted in registered design drawing No. 96482 my overall impression was that the creator of the AQEE has attempted to imitate the machine gun-like appearance which in my opinion ... constitutes the essential feature from a design perspective of the Turbo-Wash device as depicted in the design drawings. In my view the AQEE device replicates the essential components of this machine gun-like appearance to an enormous degree by using the water storage barrel with its protruding wand and nozzle tip. I observed there to be several modifications to the registered design which include the addition of the handle, the use of a hexagonal rather than a cylindrical cross-section, the use of non-extendible detachable wand and nozzle accessories and the connection piece screwed to the chamber. However from a design perspective these differences are not significant features and do not detract from the essential machine gun-like appearance depicted in the registered design drawings. -10- Indeed if a shadow projection were to be taken of the product depicted in the registered design drawings and of the AQEE, in terms of proportion, size, shape and the overall machine gun-like configuration, the AQEE and the Turbo-Wash product would appear to be identical with the exception of the above-mentioned minor features. It is difficult to resist the conclusion that the AQEE product is neither new nor original but is modelled on the appearance of the product depicted in the registered design drawings." Referring to the evidence which had been given in Holland, Mr Bayly said, "... I agree in all respects with the opinion of Professor Marinissen including his observations that the similarity in proportions of the two products is astounding and that this similarity is hardly, if at all, affected by the fact that a hexagonal cross-section has been chosen for the container of the AQEE. ... I also agree with Professor Marinissen's view ~.. that the nozzle of the AQEE, which admittedly does not work telescopically, looks exactly the same as that of ... the Workmaster {the first Taiwanese high pressure spray gun]. Similarly the AQEE is equipped with three interchangeable nozzles, each of which is exactly the same in terms of dimensions and details as ... the Workmaster nozzle in its three comparable, telescopically adjustable positions. eee I agree with the conclusion expressed by Professor Marinissen ... that it can be said that 'there 1S a great similarity between the outward appearance of the high pressure cleaner of the make 'AQEE' and ... the Workmaster which leads to the conclusion that here again it is justified to speak of an imitation of the high-pressure cleaner of the make 'Turbo-Wash'. -.. I also agree with the opinion expressed by Professor Marinissen on page 2 of his report that 'other solutions are conceivable, which show a different styling from the elongated shape that is so characteristic of the Turbo-Wash' without affecting the technical -1l1- soundness and usability of the product. Purthermore in my opinion, Professor Marinissen's opinion wee that it is justifiable to characterise the AQEE as an imitation of the Turbo-Wash device is sound." The other affidavit filed on behalf of applicants was sworn by Mr Michael Parker, a consultant. said, "In comparing the AQEE and the registered design drawings my initial impression was that both were remarkaly similar in their overall visual impact. I consider that the AQEE has moved only marginally along the spectrum away from the registered design than the High Pressure Spray Gun the subject of my affidavit {an the first action against Target]. However the observable modifications made to the design as depicted in the registered design drawings were not of a number or type that rendered the appearance of the AQEE power Spray gun significantly different from the design depicted in the registered design drawings. In my view the overall visual impact of the Turbo-Wash registered design resides in the positioning of the main water chamber with its wand-like extrusion protruding eccentrically from the top front portion of the chamber. The AQEE's visual impact similarly inheres in the positioning of each interchangeable wand from a point off centre at the top front portion of the chamber. In my view the fact that the wands on the AQEE are non-extendible does not detract from this overall visual similarity. Indeed if one compares the graded appearance of all three of the AQEE wands with the registered design drawing of the telescoped wand the visual similarity is remarkably close. The fact that the interchangeable wands on the AQEE clip on to the connection piece screwed to the chamber does not detract from the similarity in the overall visual impact af the AQEE and registered design drawings. In my view the fact that the registered design depicts a wand which is fixed to the chamber and which is extendible and the AQEE has three detachable, non-extendible wands is a trivial difference of merely secondary importance from an overall visual perspective. the He -~12- Furthermore I consider that the hexagonal cross-section of the AQEE chamber and the absence of alternative nozzles attached to the chamber to be further trivial differences of secondary importance which does not detract from the overall similarity between the registered design drawings and the AQEE product. The hexagonal shape of the chamber is not a feature which figures prominently upon an initial viewing of the gun but rather it is the extrusion of the wand from the barrel which is the essence of the registered design. Indeed the particular dimension or shape of the chamber and the positioning and shape of the various wands or nozzles attached to it are merely variations of a secondary nature which do not add to or subtract from the essential gun-like appearance of both the design and the AQEE product. Furthermore in my opinion the handle device featured in the AQEE, and the water valve and inlet connection located at the base of the handle do not undermine the similarity in overall visual impression shared by the registered design and the AQEE product. This accords with my views expressed in my earlier affidavit that the addition of the handle does not detract from the inherent design similarity. As stated above the overall visual impact clearly inheres in the positioning of the two essential design features, namely the water chamber and wand-Llike extrusion. The likeness between the design drawings and the Turbo-Wash device on the one hand and the AQEE power spray gun on the other is unmistakable and readily apparent even on an initial examination. In my opinion the minor differences referred to above and the positioning of a circular inlet cap on the underface of the AQEE are differences which in my view would necessitate an indepth examination of each article to be readily appreciated. I consider that the impressive features common to both articles, namely the water chamber and its off-centre extruding wand share remarkable similarity. The handle device and other features described which are peculiar to the AQEBE do not in my view form part of the overall visual impact of the device." Mr Parker also referred with approval to the report of Professor Ing. A.H. Marinissen. He concludes by saying -13- meee In my opinion, as in Professor Marinissen''s opinion ... it 18 justifiable to characterise the AQEE as an imitation of the Turbo-Wash device." In the light of this clearly conflicting evidence from experts, it is difficult to say that there is not a serious question to be tried even on the issue as to whether the respondent's AQEE product constitutes an obvious imitation of the first applicant's design. Indeed counsel for the respondent conceded as much. For myself, while not accepting the uncompromising views of the experts who have advised or provided affidavits for the respondent, I am equally doubtful about the confident views expressed by the experts who have sworn affidavits at the request of the applicants. In my view the respondent has gone a considerable way along the spectrum referred to by Mr Parker, and there are now a number of significant differences between the respondent's product and the first applicant's design. In particular the pistol grip, which also provides the point of entry for the water supply, creates a major design difference because it requires a different method of handling for the respective products. This, in the previous Target design, left untouched the remaining striking similarities between the two products. However in the case of the present AQEE there are now the additional differences of the changed shape of the water chamber and the fact that the nozzles are detachable and come in three different shapes. It seems to me that the major similarities remaining are the sizes and the two-dimensional profiles of the respective chambers and ~ 14 - the nozzles. The configuration of these two major elements of the AQEE product does still bear a marked similarity to the registered design. Whether this is sufficient to constitute an obvious copying of the first applicant's design is @& matter which I do not have to determine. However I have, with some doubt, reached the conclusion that there is here a serious question to be tried. On the issue of fraudulent copying, in the sense explained by Farwell J in the case of Dunlop Rubber Co Ltd v Golfball Development Ltd 1931 48 RPC 268, of deliberately making use of the design even though changes made are honestly believed sufficient to preclude an infringement of the registered design, I believe the applicants to be on stronger ground - though the issue is still by no means as clear cut as the respective experts suggest. As the evidence stands I am satisfied that the Taiwanese manufacturer of the AQEE product began with a design which was derived, at least in large part, from the first applicant's registered design, and then proceeded to make a number of changes to that design. The remaining similarities which have led me to conclude that there is a serious question to be tried, even on the issue of obvious imitation, also lead inevitably to the conclusion that there is a serious question to be tried in relation to fraudulent imitation. It can be argued that this 1s "a copy with differences which are both apparent and not so slight as to - 15 - be insubstantial but which have been made merely to disguise the copying" (Malleys Ltd v Jg.W. Tomlin Pty Ltd (1961) 35 ALJR 352 at 354). Turning to the question cf balance of convenience, I am impressed by the fact that the first applicant has spent millions of dollars in developing this product in the United States and both applicants are in the process of spending approximately $1m in an advertising campaign to promote further the sales of the product in Australia. The evidence shows that profits made and expected to be made by the applicants from the Australian sales of this product run into millions of dollars. Turbo-Wash sells for about $45.00 and AQEE for about $30.00. I note that, in at least one instance, Target has placed these products on the same sales stand in its store and has given prominence to the AQEE product. [It seems clear that any purchasers responding to the Turbo-Wash advertising campaign and entering such a Target store would be confronted, immediately they had found the Turbo-Wash product, with an AQEE product side by side, perhaps given greater prominence, and selling for only two-thirds of the price of the article which they were considering purchasing. The applicants are understandably concerned that in these circumstances substantial sales would be lost to AQEE. However it would be difficult to determine (1f damages rather than an account of profits were claimed after the event) just how many sales had been lost, because some people might buy ~ 16 —- the cheaper AQEE product who would not otherwise have bought the more expensive Turbo-Wash. The respondent is also planning some modest promotional activity on its own account for AQEE and again it would be difficult to determine the number of AQEE sales which might have been created by such advertising and would not have gone in any event to Turbo-Wash. Evidence was given by the respondent that it would already be too late to prevent an advertising brochure which included the AQBE product from being printed and, if an injunction were to issue, it would be necessary to overprint that particular advertisement at the cost of some $3000.00. The evidence also established that Target had imported 2000 units and sold 180 of them up to the time that the affidavits in this matter were prepared. There would undoubtedly be a good deal of inconvenience in putting into effect the system of recall which has been established for Target stores in the event of products having to be recalled for health or legal reasons. However in my view these are comparatively minor problems in the overall scale of Target's operations and of the respective profits which are at stake in this matter. One of the major problems which would arise if no injunction were now granted but the applicants ultimately made out their case, would be that a number of other major distributors, which normally compete with Target in products such as these, would have had to make decisions whether to take the risk of entering the market with the same product -17- that Target is selling and which is, I understand, readily available from Taiwan. If they did so, then no doubt the applicants would have to commence proceedings against them, and those proceedings would await the outcome of the present proceedings. In each case the damages which would have to be assessed would create the same problems as in the present case. If, on the other hand, the applicants are, by the issue of injunctions, allowed to retain their present monopoly in this particular field, then it will not be easy to determine (if it becomes necessary) what sales Target might have expected to achieve in the period during which they are restrained. However this would not be an insuperable problem and, after some period of experience in which its product had sold in competition with Turbo-Wash, I believe it would not be too difficult to arrive at a reasonable assessment as to the loss of profits arising from the injunction. In the meantime, Target will of course be able to share in the development of the market by the applicants. The evidence shows that up to the present time some 19,000 units of Turbo-Wash have been sold to Target, and there is no reason why it should not continue to make appropriate profits from the sale of this product. : I now consider together the questions of a serious question to be tried and of balance of canvenience; see —- 18 - Bullock & Ors v The Federated Furnishing Trades Society of Australasia & Ors 1985 S FCR 464 and Aboriginal Development Commission v Ralkon Agricultural Co Pty Ltd (Full Court, 12 June 1987 unreported). Bearing in mind also the ultimate requirement to do justice between the parties, I believe that the respondent should be restrained until the hearing of this action from selling the AQEE product. The first applicant has spent very large sums in developing Turbo-Wash and creating a world-wide market for 1t. The second applicant is about to undertake its major sales campaign in Australia. There was some evidence before Ryan J, not contradicted before me, that products such as these do not enjoy a very long sales life, and 1t may be that the major sales of the applicants' product will prove to have been in the last six months and the coming year. The respondent began its separate entry into the market for such pressure washers with a product which, as has been held, may well have constituted an infringement of the first applicant's design. It has now made a further attempt to avoid liability for such infringement, while at the same time selling an article which is clearly derived from the previously challenged article. It hopes to benefit from the applicants' advertising campaign by selling not only the applicants' product but, side by side with it, a competing product selling at a lower price which is likely to attract a significant share of the applicants' market. It has introduced this AQEBE product at the end of January, having discovered in the middle of the previous month that a major - 19 - promotional drive would be made by the applicants in early March. It is of course not illegal to use the first applicant's idea which underlies the registered design; and I bear in mind that there is public benefit from the existence of competition between products such as these. However, in my view, a company which sets out to use an idea developed by a competitor should be at pains to ensure that in doing so it does not also infringe statutory rights in intellectual property. For the reasons which I have given an injunction in appropriate terms will be granted. I certify that this and the eighteen (18) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward Associate Dated: 17 February 1988 Counsel for the Applicants: Mr P. Mandie QC & Mr G. Nettle Solicitors for the Applicants: Minter Ellison Counsel for the Respondent: Mr R. Gillard Q¢ & Mr P. Rose Solicitors for the Respondent: Corrs Pavey Whiting & Byrne