FEDERAL COURT OF AUSTRALIA Fasco Australia Pty Ltd v Tesonic Australia Pty Ltd [1999] FCA 1614 TRADE PRACTICES – copyright – passing off – injunction to restrain importation and selling – serious question to be tried – substantial reproduction – likelihood of continued importation – use of same model numbers. Trade Practices Act 1974 (Cth): s 52, s 53, s 76 Copyright Act 1968 (Cth): s 115, s 116 S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 applied FASCO AUSTRALIA PTY LTD v TESONIC AUSTRALIA PTY LTD & ANOR V 583 of 1999 GOLDBERG J 1 NOVEMBER 1999 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 583 of 1999 BETWEEN: FASCO AUSTRALIA PTY LTD Applicant AND: TESONIC AUSTRALIA PTY LTD & ANOR Respondents JUDGE: GOLDBERG J DATE OF ORDER: 1 NOVEMBER 1999 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: Upon the applicant by its counsel undertaking: (a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person whether or not a party, adversely affected by the operation of the interlocutory order hereafter made or any continuation (with or without variation thereof). (b) to pay the compensation referred to in (a) to the person there referred to. 1. The respondents and each of them, whether by themselves or employees or agents or howsoever otherwise, are restrained until the hearing and determination of this proceeding or until further order from: (a) importing into Australia the Tesonic motors as defined in paragraph 9 of the Statement of Claim, or any motor components which are substantial reproductions of one or more of the Fasco service motor drawings as defined in paragraph 4 in the Statement of Claim, for the purpose of selling, or by way of trade offering or exposing for sale, the Tesonic motors or any such motor components or distributing the Tesonic motors or any such motor components in public; (b) selling or by way of trade offering or exposing for sale the Tesonic motors or any motor components which are substantial reproductions of one or more of the Fasco service motor drawings, or by way of trade exhibiting the Tesonic motors or any such motor components in public. 2. The costs of the application are reserved. Note: 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 V 583 of 1999 BETWEEN: FASCO AUSTRALIA PTY LTD Applicant AND: TESONIC AUSTRALIA PTY LTD & ANOR Respondents JUDGE: GOLDBERG J DATE: 1 NOVEMBER 1999 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicant seeks interlocutory relief against the respondents, the second respondent being a director of the first respondent, restraining them from importing and selling within Australia certain electrical motors. The applicant contends that such importation and sale results in an infringement of copyright which is held by the applicant in certain drawings for parts of electrical motors, to which I shall refer, and also results in a breach of s 52 and s 53(a), (c) and (d) of the Trade Practices Act 1974 (Cth). 2 The applicant is a company which has existed under various names, having changed its name from time to time, but being incorporated around 1921. It has manufacturing operations in Sydney and in Melbourne. It changed its name to its current name, Fasco Australia Pty Ltd, in June 1997. It manufactures and sells a wide range of electronic motors in Australia which are used in a wide range of applications, including swimming pool pumps, domestic ovens, ventilation and airconditioning equipment and, of more relevance for the present application, refrigeration equipment. 3 Since August 1999, its Melbourne operation has included the production line which manufactures its "50D" series electronic motors which are used as condenser fan motors in the commercial refrigeration industry in Australia. The model is typically found used in supermarket refrigerators and refrigerator display cabinets in various stores. In particular, for present purposes, the 50D series includes models 50D 501‑80A which is a 10‑watt motor, 50D 502‑80A which is a 20‑watt motor, and 50D 503-80A which is a 40‑watt motor. The applicant is accustomed to referring to these three models as service motors. 4 Around May 1989 Fasco acquired the business of Betts Electrical Motors from the James Kirby company and it is said that amongst the assets it acquired, was an assignment of the intellectual property used by James Kirby in connection with its business carried on through the Betts division. The only evidence I have before me at the present time as to the assignment of that intellectual property is copies of minutes of the board of directors of the applicant, then known under a different name, which refer to the fact of the assignment. 5 The market which the applicant services consists of original equipment manufacturers, electrical wholesalers and commercial refrigeration wholesalers, which cater for the service and the repair industry. There are three main refrigeration wholesalers who account for approximately 90% of the sales of the applicant's service motors, namely Kirby Refrigeration, LGL Refrigeration (previously known as Lovelock Luke) and Actrol Parts. Each of these wholesalers sells through branches around Australia. The applicant contends that its service motors are the leading product in the service industry for replacement condenser fan motors for commercial refrigeration units, and that it has been in that market for of the order of 30 years. 6 The applicant has tendered in evidence a number of engineering drawings relating to three components of its 50D series service motors. These drawings relate to the stator stack, the end shields of the motor and the rotor shaft. The drawings in fact produced by the applicant, and verified by Mr Wood, include drawings which predate the acquisition of the intellectual property in 1989 to which I have referred. But the drawings referred to and relied upon by the applicant straddle 1989 in the sense that the applicant relied upon pre‑1989 drawings and a number of drawings from and including, 1991. 7 The applicant says that in 1991 to 1992 there was a further revision of the drawings relating to its motors which created the 50D series and included the 10‑watt, 20‑watt and 40‑watt service motors. These drawings are referred to in par 31 through 45 of the affidavit of Mr Arthur William Wood sworn 15 October 1999. It is the motors (which are) manufactured from the further revisions of these drawings, that are the relevant motors and drawings for present consideration. 8 In August 1999 the applicant became aware of what was said to be copies of its D series service motors in the marketplace. As a result of certain inquiries which were made by officers and employees of the applicant, the applicant saw these motors which have been imported into Australia by the first respondent. For example, Mr Bradley John Gould, who is a sales executive employed by the applicant, says that on Tuesday 12 October he called at the office of Actrol Parts and was handed a sample of each of the 10‑watt, 20‑watt and 40‑watt motors which have been imported into Australia by the first respondent and sold by it. I will collectively refer to these motors hereafter as the Tesonic motors. 9 Mr Gould says that he observed that each Tesonic motor was packed individually in a box and that each box and the label on each motor used the same model number designation used by the applicant on the applicant's equivalent motor. Indeed there is in evidence the 20‑watt motor sold by the first respondent, which has on the outside of the box the model number 50D 502‑80A, and I observed the same number on the label on one of the end shields of the motor in that box. 10 Mr Wood, who is the Chief Mechanical and Systems Engineer Product Design employed by the applicant, has examined the drawings of the service motors of the applicant and says that he disassembled a 10‑watt Tesonic motor and formed the opinion that there are many similarities between the two end shields, which he identifies in his affidavit sworn 22 October 1999. He has formed the conclusion, based on his experience as an engineer, that the Tesonic end shield is a substantial reproduction of, and identical in three‑dimensional form to, the engineering drawings of the end shields of the applicant's 50D series motor. 11 Mr Wood made a similar examination of the rotor shaft assembly and the stator stack part of the Tesonic motor. He removed the rotor shaft assembly from the Tesonic motor and he visually inspected the rotor shaft assembly which he disassembled from the Tesonic motor, with one which he also disassembled which belonged to the applicant. He found similarities between the two and from his observations says that in his experience, although there are some minor differences between the two assemblies, the Tesonic rotor shaft assembly is a substantial reproduction of the critical design features of the applicant's rotor shaft assembly identified in the relevant drawings. 12 Mr Wood also removed the stator stack assembly from the 10‑watt Tesonic motor. He compared visually that assembly with a stator stack which he disassembled from the applicant's motor. He found many similarities between the shape and size of the two physical objects and says from his observations and experience as an engineer that with the exception of some minor detailing differences around the circumference of the Tesonic motor, the Tesonic stator lamination is an exact three-dimensional reproduction of the two‑dimensional profile depicted in the relevant drawing. 13 It is on the basis of Mr Wood's evidence that the applicant submits that there is evidence of an infringement of the copyright in the applicant's drawings by the three‑dimensional representation, namely the Tesonic motors. 14 I should turn for a moment to the activities of the respondent. The second respondent, Mr Lee, is the sole officer and employee of the first respondent which imports electrical equipment and in particular the Tesonic motors from China. Mr Lee said that he has dealt with the company in China which manufactures these motors since April 1999. The first respondent has imported 5000 Tesonic motors, which are mixed in that they comprise various quantities of the 10, 20 and 40‑watt models. 15 Each of the 5000 motors which the first respondent has imported has been sold and delivered to the purchaser of the motor. Mr Lee says that at the moment he has no other motors in stock. The lead time within which to order motors so that they can arrive in Australia he says is of the order of three to four months, and if he wanted to purchase them he could get them landed in Australia within that period. Mr Lee says that he wants to sell motors to every user he can in Australia. He identified two companies who are manufacturers or wholesalers hitherto supplied by the applicant, Actrol Parts and LGL Refrigeration. He said that so far they had bought quite a few motors from him. 16 When asked whether he proposed to import further models of the Tesonic motors into Australia, Mr Lee quite candidly pointed out that he was not prepared to import any more such motors until he found out whether he was allowed to do it or not. I took his reference to whether he was allowed to do it or not - and I should interpolate, I took the "h"" to be a reference to his company - as being a reference to the outcome of this application for an interlocutory injunction. He continued by saying words to the effect that if the Court said it was all right to do so, he would have to consider the matter. 17 The applicant's case in essence is that the relevant drawings upon which it relies are artistic works and therefore works for the purposes of s 10(1) of the Copyright Act 1968 (Cth), ("Copyright Act") and that the principal drawings which it says have been the subject of infringement are those which were created in or post‑1991. The applicant contends that three-dimensional objects have been made by the applicant and also by the respondent which are in essence a reproduction, or at the least a substantial reproduction, of these drawings. The applicant relies upon the right of a copyright owner, in respect of an artistic work, the exclusive right to reproduce the work in a material form, and it relies upon the importation provisions of the Copyright Act. The applicant contends that the making of the relevant Tesonic components, that is the stator stack, the end shields and the rotor shaft, had they been made in Australia would have constituted an infringement of the applicant's copyright in the relevant drawings. 18 I should refer generally to a particularly relevant principle in this area, found in the decision of the High Court in S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466, where at 474 the Gibbs CJ said: "The question is not whether there are dissimilarities but whether the respondent's products closely resembled the appellant's drawings or a substantial part of them." Again Wilson J said at 482: "In my opinion, the question whether there has been a reproduction is a question of fact and degree depending on the circumstances of each case. The emphasis upon quality rather than quantity directs attention to the significance of what is taken." 19 The respondents raise a number of matters in respect of which they submit that there is not a serious question to be tried as to the issue whether there has been an infringement of copyright, any passing off or any breach of the relevant provisions of the Trade Practices Act. In particular it is submitted that I should have sufficient doubt about the ownership of the copyright in the pre‑1989 plans, that I should be satisfied that the applicant cannot make title to those plans. 20 On the material before me I am satisfied there is a serious question to be tried as to whether the plans which were produced in and post‑1991 are plans in respect of which there has been an infringement of copyright. The ownership of those plans is not really in issue and it is those plans upon which the applicant relies and it is those plans which have been the subject of consideration by Mr Wood in the manner to which I have referred. 21 It is then submitted by the respondents that I have no information or evidence before me as to how the company in China designed or developed or produced the motors, or created the drawings from which they were made. It was said that if I did not know whether those motors were reverse engineered, or what plans were copied, I cannot be satisfied of the plans in respect of which ownership is claimed which might have been used in some way by the Chinese company. 22 However, I am satisfied that on the material presently before me, having looked at the drawings upon which the applicant relies and having looked at the relevant motors and also taking into account the evidence of Mr Wood, that there is a serious question to be tried as to whether the Tesonic motors, or the parts of them to which I have referred, in a three‑dimensional way reproduce the drawings relied upon by the applicant or a substantial part of them. It was also put that I have no evidence of the assignment of the pre‑1989 plans, which may be true, but I do not consider that that dilutes the seriousness of the question to be tried as to the infringement of the particular drawings upon which the applicant relies. 23 The respondents then submitted that the service motors which are the subject of this application have three intrinsic parts which are inherent in all shaded pole, four‑pole motors. The parts relied upon are the stator stack, the rotor and the windings. It was submitted that if a person is going to make a shaded pole, four‑pole motor of the type which the applicants are manufacturing and the first respondent is importing, there is a limited way in which they could be made. Accordingly it was said there is no infringement of copyright because there is only one way to make the motors, which is well‑known. Reliance was placed upon a Brinsmead motor which was tendered in evidence to support that proposition. 24 It was also submitted that the most important part of these motors, in terms of their ability to function properly, are the windings, that is the windings of the wiring. However, no case is made by the applicant for any infringement of copyright or passing off or breach of the Trade Practices Act in relation to the windings. The respondents rely upon the evidence of Trevor Robert Blackburn, who is an associate professor of electrical engineering at the University of New South Wales and eminently qualified to give expert evidence as to the nature of the motors which are the subject of this proceeding. 25 Professor Blackburn has given evidence as to the nature of the shaded pole, four‑pole motors which are the subject of this proceedings. Professor Blackburn identified a number of differences in the motors. For example, he found that the thickness of the laminations in the stator of the Tesonic motor is 0.51 millimetres, whereas the thickness of the laminations in the applicant's motor is 0.65 millimetres. Professor Blackburn says that the thickness in the laminations is a very important factor in relation to the efficiency of the motor, for reasons which he demonstrates. I should point out that the issue before me is not so much whether one motor is better or more efficient than the other motor, but rather the issue is whether there has been an infringement of copyright in drawings and whether there is a passing off of a motor or whether there has been a breach of ss 52 and 53 of the Trade Practices Act. 26 Professor Blackburn also examined in some detail the nature of the rotor of a shaded pole motor, which he says is typically known as a squirrel cage rotor. He found differences in the thickness of the laminations of the rotors of each motor of the same dimension to which I have already referred. Professor Blackburn says that the windings on each of the motors are obviously quite different and he says that those differences impact directly on the performance of these motors. He sets out the differences in those windings but, for the reasons to which I have referred, those differences in my opinion are not relevant to the issues before me. He also identifies a difference in the electrical resistance in Ohms of each motor and the differing resistance is explained in some detail. 27 Professor Blackburn reaches the conclusion that having examined the applicant's motor and the Tesonic motor, there are significant differences between the two of them in relation to the magnetic field of the stator windings, the insulation of the stator windings and the overall efficiency of the motors. He explained those differences by reference to the thinner laminations to which I have already referred. He also concluded that there is a difference in the winding structure of the two motors. 28 His final conclusion is that although the motors look similar in appearance, they have significantly different operational aspects in their respective electrical and magnetic designs. However, for the reasons to which I have already referred, by reference to the judgment in S W Hart & Co Pty Ltd v Edwards Hot Water Systems (supra), the question that I have to address is whether there is a serious question to be tried as to whether there is a reproduction of a substantial part of the work which is the subject of copyright. As Gibbs CJ pointed out, the question is not whether there are dissimilarities but whether the first respondent's motor closely resembles the drawings upon which the applicant relies, or a substantial part of them. 29 For the reasons to which I have already referred, I am satisfied that there is a serious question to be tried whether the parts of the Tesonic motor which are relied upon by the applicant - that is the stator stack, the rotor shaft assembly and the end shields - closely resemble the relevant drawings relied upon by the applicant. 30 The respondents also relied upon the provisions of s 77 of the Copyright Act, but there is insufficient material before me on which I can form a view about that matter and all I could say about the defence which may arise under s 77 is that I am unable to say whether it can be made. But even if there be a serious question to be tried as to whether it can be made out, there is still a serious question to be tried as to the infringement of copyright in the applicant's drawings. 31 It was also submitted by the respondents that I cannot be satisfied that there has not been an independent creation of the Tesonic motor, that is independent of any copying of the applicant's drawings. However, the question of independent creation ultimately is a matter of evidence and on the material presently before me there is a serious question to be tried as to infringement of copyright, having regard to the evidence of Mr Wood and my own tentative observations. 32 As far as the passing off and contravention of the Trade Practices Act causes of action are concerned, I am satisfied there is a serious question to be tried on those issues as well. Not only do I draw in aid the visual comparison of the two motors, in particular the end shields, but I also draw in aid the fact that the same model number is used on the Tesonic motors as is used on the applicant's motors. No explanation has been forthcoming from the respondents as to why that is so, but I am satisfied that the identical model numbers are such as to consolidate the case that there is a serious question to be tried as to passing off and also contraventions of ss 52 and 53(a), (c) and (d). 33 The use of the same model numbers not only creates a serious question as to whether the conduct in selling these motors is either misleading and deceptive or likely to mislead or deceive, but it also raises a serious question as to whether there is a contravention of s 53(a), that is that the motors are falsely represented as being of a particular model or have a particular history. A similar question is raised regarding a contravention of s 53(c), that the motors have a sponsorship or approval, which they do not have. There is also a serious question to be tried that by using the same model number on all Tesonic motors there is a representation that the first respondent has a sponsorship of the applicant, which it does not have. It must be remembered that the customers of the applicant and the first respondent, with whom they both deal, are people who use and on-sell motors by reference to model numbers. 34 So far as the balance of convenience is concerned, I am satisfied that the balance of convenience is in favour of the grant of injunctive relief. The applicant has been in business for a substantial period of time and has built up substantial goodwill. The first respondent has only been in business selling these particular motors since April 1999. I also refer to the fact that the current stock imported by the first respondent has been sold and delivered and that the first respondent has no stock either presently in its warehouse or on the water which it is either proposing to sell or has forward sold. As I noted earlier Mr Lee quite candidly said he is not prepared to import any more motors until he finds out whether he is allowed to do so by the Court. 35 In those circumstances, if I were not to grant an injunction I am satisfied that there is a probability that Mr Lee, through his company, would import more motors. If I grant the injunction at the present time there is protection for the applicant but no necessary corresponding serious harm to the first respondent, other than its present ability to sell the motors, which can be protected by the usual undertaking as to damages which has been proffered on behalf of the applicant. 36 I am also satisfied that an injunction should go against the second respondent, the officer of the first respondent who has been involved in the importation of the motors. Liability is sought to be established against Mr Lee pursuant to s 76 of the Trade Practices Act, whereby relief can be granted in relation to someone who has aided and abetted, counselled or procured a person to contravene a provision. I have already found there is a serious question to be tried as to whether there has been a contravention by the first respondent so there should be an injunction granted against the second respondent as well. I certify that the preceding thirty‑six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg J. Associate: Dated: 1 November 1999 Counsel for the Applicant: Ms E Strong Solicitor for the Applicant: Clayton Utz Counsel for the Respondent: Mr A R Martin Solicitor for the Respondent: Potts Latimer Date of Hearing: 1 November 1999 Date of Judgment: 1 November 1999