mote 281° SS ky CATCHWORDS Trade Practices - Consumer protection - representation concerning place of origin of goods - goods containing components largely manufactured overseas described as being "Made in Australia" and "Built in Australia" - whether false statement or representation - whether misleading or deceptive conduct. Lanham Act 1946 (11 USC §1125 (a)) Trade Practices Act 1974 s.52, s.53 (d), s.53 (eb), s.80, s.163A Trade Practices Revision Bill 1986 The Constitution WEA International Inc. v Hanimex Corporation Ltd. (1987) 77 ALR 456 A-G (NSW) v The Perpetual Trustee Company (Limited) (1940) 63 CLR 209 Cole v Whitfield (1988) 62 ALJR 303 Korczynski v Wes Lofts (Aust.) Pty. Ltd. {1986] ATPR 47,206 NETCOMM (AUSTRALIA) PTY. LIMITED v DATAPLEX PTY. LIMITED G624 OF 1987 CORAM: GUMMOW J. PLACE: SYDNEY. DATE: 8 JUNE 1988. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G624 of 1987 ) ) GENERAL DIVISION BETWEEN: NETCOMM (AUSTRALIA) PTY. LIMITED Applicant AND: DATAPLEX PTY. LIMITED Respondent CORAM: GUMMOW J. PLACE: SYDNEY. DATE: 8 JUNE 1988. MINUTE OF ORDER Upon the undertaking by the respondent to the Court that the respondent by itself, its servants or agents will not, without further order, use the words "Made in Australia" in advertising or promotional material for the DPX-224 Modem, an example of which is Exhibit C in these proceedings, or any model variation thereof THE COURT ORDERS THAT: 1. The application be dismissed. 2. There be no order as to costs. Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G624 of 1987 ) ) GENERAL DIVISION BETWEEN: NETCOMM (AUSTRALIA) PTY. LIMITED Applicant AND: DATAPLEX PTY. LIMITED Respondent CORAM: GUMMOW J. PLACE: SYDNEY. DATE: 8 JUNE 1988. REASONS FOR JUDGMENT The dispute between the parties arises out of allegedly false or misleading representations made by the respondent in trade or commerce concerning the respondent's product known as the Dataplex "224-Modem", or the Dataplex "DPX-224". The applicant now claims no damages, but seeks injunctive relief pursuant to s.80 of the Trade Practices Act 1974 ("the TP Act") and declaratory relief pursuant to s.163A of the TP Act. This relief 1s sought on the footing that the conduct complained of contravened s.52 of the TP Act and also para. (eb) of s.53 of the TP Act. This forbids a corporation 2. in trade or commerce and in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services, to "make a false or misleading representation concerning the place of origin of goods". The applicant also pressed, though somewhat faintly, the submission that there was a contravention of para. (d) of s.53 of the TP Act, insofar as the respondent had represented in the prescribed circumstances that it had an "affiliation" it did not have. The applicant complained principally of advertisements for the respondent's product which appeared in the issues of the magazines "Computerworld Australia" for 12 June 1987, "Your Computer" for October 1987, "Computerworld Australia" for 22 January 1988 and "Computerworld Australia" for 8 April 1988. The masthead of "Computerworld Australia" describes the paper as "The news weekly for the computer community". The evidence indicates that the publication "Your Computer" 1s available from newsagents, whereas "Computerworld Australia" 1s a trade publication. The advertisement in "Computerworld Australia" for 12 June 1987 depicts the Dataplex DPX-224 together with descriptive material including in large heavy type the words "THE MODEM WITH THE LOT", and in heavy but smaller type "One DPX-224 replaces 4 ordinary modems". The advertisement also prominently displays the words "MADE IN AUSTRALIA" in large bold type and, less prominently, the following text: 3. With its impressive array of functional features and benefits you would expect the DPX-224 to be expensive - not so}! It competes head on with ordinary modems with fewer features. This full duplex, high performance, medium speed modem is built in Australia by Dataplex and complies with both CCITT and Bell standards from 75bps to 2400bps covering all popular synchronous and asynchronous applications. Minerva, Viatel, Telememo, Austpac, message services and other data base access is supported with terminal initiated or front panel one touch dialing. The DPX-224 - another professional data distribution product from Dataplex. In the advertisement in "Your Computer" for October 1987, the words "MADE IN AUSTRALIA" are replaced by "AUSTRALIAN BUILT" and in the text the statement appears "The modem that replaces 4 ordinary modems is an Australian production, Built by Dataplex, this full duplex, high performance, medium speed modem... .". In the advertisement in "Computerworld Australia" for 22 January 1988, the words "AUSTRALIAN BULLT" again appear in large bold type and are accompanied by text containing the following: The modem that replaces 4 ordinary modems 1s built in Australia by Dataplex. Finally, the advertisement in "Computerworld Australia" for 8 April 1988 does not have any reference in the block printing to the provenance of the equipment. The text contains the following: Now, for $995, you can buy Australia's most popular quad modem - the DPX-224. With its host of practical features, the DPX-224 gives you more error protection, more control, more capability, more versatility, more security. It's even easier to operate. Built in Australia by Dataplex, this professional unit is a full duplex, high performance, medium speed modem that complies with both CCITT and Bell standards from 75bps to 2400bps covering all popular synchronous and asynchronous applications By its application, the applicant seeks, inter alia, a prohibitory injunction restraining representations that the Dataplex-224 modem is "Made in Australia", "Australian Built", "Produced in Australia" or "an Australian product", although these phrases do not comprehensively reflect the contents of the advertisements in question Counsel for the respondent informed the Court that, as the evidence suggests, the respondent no longer used the phrase "Made in Australia" in relation to the DPX-224 modem. The respondent offered an undertaking not to use the phrase "Made in Australia" in relation to this product. The offer was limited to that phrase and so did not embrace the expressions "Australian Built" or "Australian production" or variants thereof. DPX-224 modems, or variants of that model, have been 5. supplied by the respondent to Telecom Australia (a major customer) and presently account for something approaching 60% of the activity at the respondent's plant at Lilydale in Victoria. In Sydney, there 18 a chain of retail stores selling software to owners of personal computers and the Dataplex 224 modem has been sold by that retail chain. Nevertheless, since the product was first readied for the market early in 1985, it has been aimed at what was described in evidence as "the top end of the market", that is to say the corporate sector conducting sophisticated business operations. The current recommended retail price is $1,338.40. The word "modem" is a contraction of "MOdulator" and "DEModulator". Modulation, in this sense, describes the process whereby a digital signal generated by a computer is transformed into an analogue which can be handled by the telephone line system. Demodulation describes the reverse Process whereby the telephone line signal is received and transformed into the digital signal received by the attached computer. The essential function of modems is to pass digital signals over analogue channels by the modulation and demodulation process. The expression "duplex" which appears, for example, in the advertisement for 12 June 1987 which I have described, refers to this function. Within Australia, products sold under the description "Modem" range in technical capability from what were described in evidence as "dumb" silicon chip modems to sophisticated software driven information machines which are humanized by the expression "user-friendly". The Dataplex DPX-224 was described as "user-friendly". "Dumb" modems are capable simply of allowing transmission of data to a remote user over telephone lines; they are presently sold by retail for as little as $200. More advanced modems may contain digital signal processor chips as user programmable, or mask programmable, devices, with or without one or more Eprom chips; by means of control through software, the digital signal processor chip may perform a number of sophisticated functions, such as voice synthesis and recognition and tone generation. - The respondent does not deal in "dumb" modems. As I have indicated, the DPx-224 18 more sophisticated equipment and sells for a considerably greater recommended retail price. The respondent urged that the expressions of which complaint was made by the applicant contained words with a generally understood primary meaning and that the provenance of the DPX-224 was such that there was nothing in the use of those expressions which involved any contravention of the provisions of ss.52 and 53 upon which the applicant relied. I have mentioned the category or categories of persons to which the respondent sells and desires to sell its product and the nature of the publications in which the advertisements in question appeared. 7. Para. (eb) was added to s.53 by an amendment to the TP Act which came into operation on 1 June 1986. In para. 88 of the Explanatory Memorandum for the Trade Practices Revision Bill 1986, it was said: The new para. (eb) is directed at traders falsely advertising that their goods have been made in a particular country, as often a consumer may be induced to buy or not buy a particular good [sic] depending on where it was made. This is a case in which evidence as to the habits and attitudes, with respect to the sense and use of the phrases in question, of the category or categories of persons to whom the advertisements were addressed would have been of assistance to the Court as providing part of the surrounding circumstances against which the conduct complained of was to be assessed: see WEA International Inc. v Hanimex Corporation Ltd. (1987) 77 ALR 456 at 462. Such evidence was not tendered by the applicant; rather there was speculation as to what might or might not be the attitudes or responses to the material in question of such persons as officers of Telecom Australia concerned with tenders for equipment of this type. Evidence for the respondent was given by Mr. Bolto, that company's Product Manager. In his affidavit, Mr. Bolto described the circumstances surrounding the design and manufacture of the DPX-224 modem. He said that the writing of the code to implement the critical function or requirements in the DPX-224 was undertaken by an American corporation Octocom Systems Inc. ("Octocom") in the United States of America. Mr. Bolto said that Octocom performed its tasks to specifications provided by the respondent and prepared by him. However, in cross-examination, it became clear that the nature of those specifications was such that very considerable responsibility had rested on Octocom. Mr. Bolto agreed that with the exception of some circuitry devised by the respondent, Octocom "devised the circuitry, wrote the code, the software and the firmware and eventually manufactured the fully stuffed PCB". The objective was to manufacture equipment entirely suitable for use with the Australian domestic telephone system. The respondent imports from Octocom printed circuit boards ("PCB's") onto which the componentry has been mounted and which have been solder bathed to the design specification. The process of mounting componentry on printed circuit boards has been described as "stuffing". When the printed circuit boards arrive in Australia in this condition, there 1s no power supply, nor any means by which in that form the boards could be rendered operational. Within the respondent's premises at Lilydale, the printed circuit boards are mounted into a case along with a power supply unit, power switches, fuse circuits and other mechanical and electrical assembly components. An examination of a DPX-224 modem in evidence, as Exhibit C, showed that the stuffed printed circuit board (or "PCB") contained components apparently variously manufactured in Western Germany, the Philippines, Japan and Malaysia. 9. As I have said, s.53 (eb) of the TP Act proscribes the making by a corporation, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services, of a false or misleading representation concerning the place of origin of goods. Para. (eb) has some affinity with s.43 (a) of the Lanham Act 1946, 11 USC §1125 (a). This prohibits inter alia persons using in connexion with any goods or services "a false designation of origin". The latter expression has been judicially interpreted as including designation not only of place of manufacture, but also of the identity of the manufacturer, supplier or franchisor of goods or services. This expansive interpretation has attracted criticism (e.g. by Professor Germain in the ebulliently titled article "Unfair Trade Practices Under Section 43 (a) of the Lanham Act: You've Come a Long Way, Baby - Too Far, Maybe", (1974) 64 Trade Mark Reporter 193 at 206, 218-221). The terms of the Australian para. (eb) perhaps reflect the United States experience by making it plain that "origin" has a purely geographic denotation. Counsel for the applicant urged that the fully stuffed PCB was, on the evidence, not made or produced in Australia, that it was the essential integer in and "pertained to the essence" of the DPX-224 modem, and that the activities conducted in Australia by the applicant were merely ancillary or accidental in character. The result was, it was submitted, 10. that the DPX-224 modem itself was inaccurately described as made or produced in Australia. The respondent countered by emphasizing that the DPX-224 modem first came into existence as such in Australia and so was made or produced here. Legal arguments, such as that of the applicant, which draw upon notions of Platonic essences are by no means as unusual as the respondent suggested. For example, such ideas are reflected in what was said by Dixon J. and Evatt J. in their joint judgment concerning general charitable intention in A-G (NSW) v The Perpetual Trustee Company (Limited) ("The Milly Milly Case") (1940) 63 CLR 209 at 226-227, and by Dixon C.J. as regards the (now outmoded) distinction drawn between s.51 (1) and s.92 of the Constitution (see Cole v Whitfield (1988) 62 ALJR 303 at 314-315). Such notions also plainly influenced, in the field of patent infringement, the formulation of distinctions between the inessential integers of the claimed invention and the essential integers constituting the "pith and marrow" of that invention. However, in my view, no great assistance is derived by approaching the present case in that way. It 1s necessary first to construe the statutory provisions in question and then, in the factual setting disclosed by the evidence, consider the phrases the use of which the applicant complains. What then is meant by a false or misleading representation concerning the place of origin of goods? "Origin" directs attention, consistently with the Oxford 11. English Dictionary meaning, to the beginnings of existence of the goods with reference to a source or cause of that existence; the concept is that of beginning regarded in connexion with its cause. In sub-s. 4 (1) of the TP Act, "goods" is defined as including such sophisticated items as ships and aircraft as well as primary produce such as minerals and crops. With minerals or crops, it may be quite easy to state what is their place of origin and so to characterize representations concerning that place of origin as being or not being false or misleading. The concept of "place of origin" will present difficulties where sophisticated articles derive their value and character as articles of commerce by various circumstances involving design and manufacture. There is then more likely to be a complex of integers constituting the origin of those articles. The present 1s such a case. To say of goods that they were made in Australia plainly is to make a statement concerning their place of origin. The making of goods involves the steps and procedures which preceded and resulted in the formation or composition of the goods: cf. Korczynski v Wes Lofts (Aust.) Pty. Ltd. [1986] ATPR 47,206 at 47,212. When used in relation to equipment, such as the DPX-224 modem, and without a qualifying context to limit it, the expression "made in Australia" suggests that the steps in the composition or construction of the item, including the design work which makes it the technically proficient equipment it is promoted to be, were taken in Australia. The expression will, depending on the context, amount to a representation, and depending on the facts the representation 12. may be false or misleading. In my judgment, in the circumstances I have described as to the provenance of the DPX-224 modem, to state that 1t was "Made in Australia" and to seek to promote sales thereby would ordinarily be to make a false or at least misleading statement concerning the place of origin of those goods. There would also, in my view, ordinarily thereby be an engagement in trade Or commerce that was at least likely to mislead or deceive. Accordingly, the undertaking proffered by the applicant not to use this expression in relation to the DPx-224 modem was soundly based. On the other hand, statements that the product is "Australian Built" or "Built in Australia by Dataplex" stand in a rather different position. These were the expressions used in one or other of the advertisements of 22 January 1988 and 8 April 1988. Clearly, the building of an object 18S an integer or element in the "origin" of the goods in the sense I have described. As counsel for the applicant put it, "build" is a sub-set of "make" with a narrower and more precise range of application. Cakes, he said, are made, cars built. One of the primary meanings of the word "build" 1s "to construct by the fitting together of separate parts". One might add that, as the respondent suggests, the "fitting together" would usually be taken as a process of some skill and judgment, whereas mere "assembly" more readily might be thought of as a 13. routine procedure with the application of less skill and judgment. The evidence satisfies me that the procedures employed at the Lilydale plant of the respondent in relation to the DPX-224 modem are more than assembly. To say of the DPX-224 that it 18 Australian built or built in Australia by Dataplex is, in the circumstances of this case, not to make a false or misleading representation concerning the place of origin of the goods; thus to locate the place where these goods are built does not, in my view, carry with it the implication or suggestion that the materials or components used in that process themselves were constructed in Australia, or that the technology employed in design of the goods emanated from Australia. Para. (eb) of s.53 of the TP Act is directed to false or misleading representations concerning "the place of origin of goods"; the concept of "origin" is not narrow or cramped, but to say of goods that they were built in a particular place is to make a fairly specific and precise statement concerning origin which does not extend to the provenance of the design or manufacture of some of or the major part of the components which went into construction. It follows from what I have said that I accept the submission of the respondent on this issue. Nor, in my view, is there in the statements complained of, "Built in Australia by Dataplex" and "Australian built" (when used in the circumstances disclosed in this case) any half truth which might involve contravention of s.52 of the TP Act, as conduct that was misleading or deceptive, or likely to 14. mislead or deceive. Further, in my view, there 1s no ground for complaint that there was in the advertisements in question a false representation as to "affiliation", a term generally understood as linking in some way persons, institutions or businesses, as is suggested in the setting of s.53 (d) which speaks of "sponsorship, approval or affiliation". That means there was no contravention by the material contained in the advertisements for 22 January 1988 and 8 April 1988. In the advertisement for 12 June 1987, the expression "Built in Australia by Dataplex" was used in the body of the advertisement but the words "Made in Australia" appeared in block letters and heavy print. This tends to associate the expression "Built in Australia by Dataplex" with the more heavily emphasized message "Made in Australia". As I have said, I regard the expression "Made in Australia", per se, asa misleading, if not false, representation concerning the place of origin of the goods. fThe issue, however, is not a live one because of the respondent's preparedness to undertake not to use the expression "Made in Australia" in relation to the DPX-224 modem. Certainly I do not regard the case as appropriate for a mandatory order requiring "corrective advertising", as sought by the applicant. There remains the advertisement for October 1987. This uses the words "Australian Built" in heavy bold type and in the text of the advertisement the words ". . . an Australian 15. production. Built by Dataplex .. ." In this setting, the expression "an Australian production" in my view takes its force and colour from the more heavily emphasized "Australian Built". Were the expression "an Australian production" to appear per se and without the emphasis given by the other expression, there would have been much to have been said for the view that the advertisement involved both engagement in misleading or deceptive conduct (or in conduct that was likely to mislead or deceive) within the meaning of s.52, and also contravention of s.53 (eb). The concept of production, in my view, when used in relation to equipment of the complexity of the DPX-224 modem, involves the process giving rise or bringing about the existence of the equipment in question. All of this will relevantly comprise the origin of the equipment. Included are not merely the building of the equipment in the sense described, but the effort that has gone into the technical specification pursuant to which the equipment has been designed and brought into existence. The technical effort that went into the DPX-224 modem was in large measure, as the evidence discloses, the result of work performed by Octocom in the United States, albeit at the order and under the instruction of Dataplex. In those circumstances, 1n my view, to say of the DPX-224, by way of promoting sales, that it was an Australian production, without qualifying the expression to indicate that what was identified as production was the post-planning activity of building or constructing the equipment, would ordinarily be to contravene s.52 and s.53 (eb) of the TP Act. However, the result is that there was no contravention 16. of s.52 or of s.53 (d) or s.53 (eb) by the advertisement of October 1987, given the emphasis therein to the phrase "Australian built". I turn to consider the appropriate remedies. In doing so, I should emphasize the undesirability of enjoining conduct or declaring obligations or contraventions other than in specific terms. The anodyne, or false, or misleading nature of the expressions debated in this case depends very much on the particular context in which they are used, hence the concentration upon the four advertisements I have discussed. The context also includes the factual matters concerning the provenance and the marketing of the equipment at any given time. This 18 not the type of case where ordinary words have acquired a sufficient degree of secondary meaning, akin to that founding a common law goodwill, which provides a footing for interlocutory or declaratory relief in fairly wide terms. The Court should accept the undertaking offered to the Court for the respondent, by its counsel, that the respondent by itself, its servants and agents will not, without further order, use the words "Made in Australia" in advertising or promotional material for the DPX-224 Modem, an example of which is Exhibit C in these proceedings, or any model variation thereof. In accordance with the findings I have made, there was no contravention by the material contained in_ the advertisements for October 1987, 22 January 1988 and 8 April 1988. 17. In view of the undertaking given, there 1s no call for relief in respect of the statement "Made in Australia" in the advertisement inserted almost a year ago in "Computerworld Australia", that is to say the advertisement of 12 June 1987. I appreciate that injunctive relief may be available under s.80 of the TP Act in a particular case, even though there 1s no apprehended threat of the commencement or repetition of the offending conduct. Nevertheless, in the circumstances of this case, I do not believe 1t appropriate to order injunctive relief in respect of any statement "an Australian product", "an Australian production", "Produced in Australia", or any variant thereof. The evidence is that these phrases have been used with the qualifying expression "Australian Built". What I have said, however, should make it clear to the respondent that it may use these phrases at its peril of further proceedings if the context does not plainly qualify what I have held to be their primary meaning and clearly indicate a secondary meaning to the effect that whilst the technology is not of Australian origin, the equipment was nevertheless built or constructed in Australia. The respondent's proffered undertaking did not involve any restraint at all upon the expression ""an Australian production". Whilst in the circumstances of the case, I have not held it appropriate to grant in these proceedings injunctive or declaratory relief in relation' thereto, nevertheless there should be no order as to costs. Accordingly, upon the giving of the undertaking in the terms indicated above, no order as to costs. 18. the proceedings will be dismissed with The exhibits should be returned. I certify that this and the seventeen (17) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr. Justice Gummow. Associate: Date: Counsel for the Applicant: Counsel for the Respondent: Date of Hearing: Date of Judgment: 4) / VQhAICRKER 8 June 1988. Mr. B. Walker instructed by c.G. Gillis & Co. Mr. N. Cotman instructed by Madgwicks. 16, 17 May 1988. 8 June 1988.