Re Obsa Pty Limited (Trading As Harvest Pools) v TF Thomas and Sons Pty Limited (Trading As Thomas Pools) and Another [1990] FCA 540; 20 IPR 155 27 FCR 421 (28 December 1990)

FEDERAL COURT OF AUSTRALIA

Re: OBSA PTY LIMITED (trading as Harvest Pools)
And: T.F. THOMAS AND SONS PTY LIMITED (Trading as Thomas Pools) AND ANOTHER
No. N G726 of 1990
FED No. 774
[1990] FCA 540; 20 IPR 155
27 FCR 421

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

HEARING

SYDNEY
28:12:1990

DECISION

This is an action for damages and other relief for a breach of a registered design. The second applicants are the directors of the first applicant and the proprietors of a registered design number 10961 of an inground fibreglass swimming pool shell. The registration became effective on 4 December 1990. For some years, at least somewhat more than two years, the first applicant has been in the business of constructing fibreglass swimming pools known by the generic name of "Harvest". The first applicant's business is primarily in New South Wales. The second respondent is a director of the first respondent, which for about five years has been manufacturing and selling swimming pools in Queensland.

2. It appears that in August 1989 the first applicant constructed a mould, allegedly in general conformity with the registered design, of some 9.4 metres in length. The applicants allege that from that time to the present, some 65 pools have been manufactured from that mould, each with a wholesale price of the order of $5200. In December 1989 the first applicant constructed a mould, alleged to conform with the registered design, of some 7.4 metres in length. From that date to the present, some 24 pools are said to have been manufactured from that mould, each with a wholesale price of just under $4300.

3. The applicants allege that in about August 1990, the second respondent lodged an order for one each of the 7.4 and 9.4 metre pools manufactured by the applicants. These pools were delivered to the respondent's premises in Queensland on about 6 September 1990. On 5 September the second respondent ordered another two 9.4 metre pools. All the orders placed by the respondent were described by the applicants as special orders because the pools normally have what is described as blue pin-striping to show the edges of the steps and the respondent's orders were for pools without the pin-striping. As it happens, the additional two 9.4 metre pools have apparently not yet been delivered to the respondents as they are not yet available.

4. That much of this case appears to be in general terms common ground, at any rate for present purposes, but thereafter there arises a major factual dispute.

5. The applicants allege that the conversations between themselves or their staff and the respondents were merely on the basis that the respondent was ordering the pools apparently for himself, although it is not completely explained why one person would want three 9.4 metre pools and one 7.4 metre pool if it were not for the desire to sell or copy them. In fact, the applicants agree that the second respondent, when he placed his first order, told them that he was from Queensland, that he wanted to get these pools in the respective sizes for sale in Queensland and that if there was any movement, in the sense of any sales, he would order some more. However, the applicants say that it was only when the delivery of the first order was witnessed that they learned that the respondents traded as "Thomas Pools". From all these circumstances, it is reasonable to infer that the applicants would at an early stage have known that the respondents were in some form of business associated with the sale of household or generally domestic swimming pools.

6. In November 1990 the second applicants, apparently entertaining some suspicion about the respondents' activities, went to Queensland. They say in the affidavit material that this was for the purpose of speaking with the second respondent, but in fact it appears to have been more for the purpose of reconnoitring what the respondents were doing in relation to the pools. At the premises of the respondents' business, they saw the pools which had earlier been delivered. They then entered the premises and sought from a person who was apparently employed there, the promotional literature which the first respondent was putting about in respect of its own products.

7. The applicants say that the promotional material produced to them by the first respondent showed pools which were very similar to those marketed by the first applicant. When they examined their two pools in the premises of the first respondent, they saw that their trading name "Harvest" had been ground off the surface of the pools and the surface repaired so that the name no longer appeared. There has been exhibited to me in the course of these proceedings a photograph of one 7.4 and one 9.4 metre pool of the first applicant showing the removal of the name.

8. The applicants allege that the first respondent made a mould from the applicant's 7.4 metre pool. It has perhaps not yet done so from the 9.4 metre pool, but the applicants suggest that the behaviour of the respondents is such as to lead to an apprehension that if it has not already been done, it will not be long before the 9.4 metre pool is copied as well.

9. The applicants say that they gave no permission to the second respondent to make moulds from their pools and that he had no permission to use their registered design. Although they are not absolutely unequivocal about it, the general allegation made by the applicants is that the mould already made by the respondents is in breach of their property in the registered design. They point to the fact that one of the applicants is said to have been the actual inventor of this design - perhaps 'designer' would be a better word. The applicants say that they have spent considerable time and money in developing the design and obtaining its registration, and in building pools on the basis of the design which has now been registered. They say that they had anticipated distributing the pools in Queensland in due course by appointing distributors there, and that the respondents' activities amount to an infringement of their intellectual property in the design which will result in substantial damages not entirely compensable in monetary terms.

10. As a consequence the applicants have approached the court for an interlocutory injunction pending the action to restrain the respondents from further infringing the design by making moulds of their two pools and by promoting and selling the pools to their own profit. They seek the destruction of moulds already made and an accounting for moneys already received for sales.

11. In stark contrast to the facts alleged by the applicants, the second respondent has filed an affidavit in these interlocutory proceedings giving a completely different account. The second respondent says that when he first indicated an interest to buy the two pools, he specifically said that he wished to do so to take moulds for manufacture, that he wished to manufacture these pools in Queensland, and that the applicants agreed to sell him the pools for this purpose provided he gave an undertaking that he would not sell any pools in New South Wales. The second respondent says that his response was that he did not have any intention of selling any pools in New South Wales.

12. There are a number of smaller factual disputes including questions as to how the two pools were paid for and some other matters, but the fundamental dispute between the parties is as thus summarised. In other words, the applicants say that the second respondent was sold the pools merely for the purpose of using them personally or perhaps on-selling them in Queensland; the respondents respectively say that they received a licence, paid for by the cost of the pools purchased, to mould, manufacture and market the applicants' design in Queensland. As no parties were cross-examined in the interlocutory proceeding, it is not possible for me to resolve this substantial factual dispute at this time. It will suffice to say for present purposes that it gives rise to a major issue of fact which will have to be determined at the trial and I cannot at this time even hazard a guess as to how that issue might be resolved.

13. No argument was raised concerning the availability of the action in respect of those pools moulded, manufactured and sold prior to the design registration coming into effect in December 1990. However, the respondents raise a number of other issues including one that seems to go to the appropriateness of the registered design at all. The respondents allege, for example, that in effect there is nothing very special about the applicants' pools and that other people market pools, even in the small market in and around Brisbane, which are very similar to the applicants' design. In other words, they say that these designs and their dimensions are very common and there is nothing particularly distinguishable about the applicants' pools. The respondents also say that for a number of years, they have in fact manufactured and sold a pool which is almost identical to the 9.4 metre Harvest pool except for the placement of the steps. In general terms, this part of the respondents' case is that the registration of the design really does not do anything to protect the applicants' intellectual property because there is nothing particularly special about their design.

14. The first matter that arises here is whether an alleged infringement of a registered design can be restrained on an interlocutory basis at all. In Tefex Proprietary Limited v Boller and Another (1981) 40 ALR 326, Mr Justice Rath in the Equity Division of the New South Wales Supreme Court entertained a case which was very similar to the facts of this particular case in that it also dealt with moulds for fibreglass swimming pools. As in this case, some attack was there made upon the validity of the design and the consequences of its breach or infringement. At 331-2, Rath J referred to distinguished authority in Australia and in England which provided a general rule that if a person charged with infringement of a patent proposes to contest the validity of the patent, his infringement will not be restrained in proceedings for interlocutory relief: see Beecham Group v Bristol Laboratories Proprietary Limited [1968] HCA 1; (1968) 118 CLR 618 at 624; Smith v Grigg Limited (1924) 1 KB 655.

15. Rath J concluded that the principle was as applicable in design infringement cases as it is in patent infringement cases. With respect I agree with this conclusion. Rath J went on that the general principle was
... applicable only where validity is challenged on some

ground that can be reasonably pressed as having some
probability of success (p 332 line 7).

16. As presently advised in the current case, there seems little basis for the claim of invalidity of the design registration. In those circumstances, following the principle which Rath J thus delimited, it seems to me that the alleged infringement here is available to be considered as restrainable on an interlocutory basis. As it is not possible, for the reasons to which I have referred, to resolve the central issue of fact now, I must hold that there is a distinct and very significant issue to be tried on whether there has been an infringement. In the sense that it is appropriate to refer to the concept in interlocutory matters of this kind, that means that the applicants have made out a prima facie or arguable case for relief. That of course makes no observation at all about the likelihood that the applicants' case will be accepted when tested in comparison to or contradistinction with the case made by the respondents.

17. Thus the question of interlocutory relief turns on the balance of convenience. The respondents say that they have entered into contracts for the sale of four of the 7.4 metre pools. They say that they have incurred substantial costs in respect of these contracts including costs for the preparation of the mould of the 7.4 metre pool, the printing and designing of brochures, newspaper advertising, the material and labour costs of the construction of the four pools, and application fees for building approval from the local councils in each case. They say that they will not receive payment for any of the four pools until they are fully installed and no doubt operating satisfactorily.

18. The respondents have offered an undertaking that they will maintain all their records in relation to the acquisition of the first applicant's pools including those concerning the taking of the moulds and relating to the manufacture, construction and sale of all of the pools, both of 7.4 metre and 9.4 metre varieties, which they have or will be constructing and selling between now and the time of the trial of the action. This includes all their financial records.

19. The respondents say that they are a company or business people of substance, that they have substantial stock and leased premises, and that they made a profit of some $45,000 for the year to June 1990. They have, however, declined to offer an undertaking asked for by the applicants through their solicitor that they cease further duplication of the first applicant's pools, that they destroy any moulds they have manufactured, and that they return to the applicants the swimming pools which they have purchased.

20. I accept the evidence of the respondents that if an injunction goes to restrain manufacturing or continuing to manufacture, or selling or continuing to sell if and when the manufacture is complete, the four pools which they have contracted to sell of the 7.4 metre variety, they will suffer considerable financial harm. I invited them in the course of argument to consider whether they would be prepared to put aside the sale prices in respect of these pools and hold them in a separate account or pay them into court. They declined to make that offer on the grounds of the expenditure which they have incurred, to which I have already referred, in order to enable those four contracts to be performed. In fact, on the figures given to me, it would seem at least questionable, perhaps even unlikely, that the respondents will recover from the four sales the amount of money they claim to have expended in enabling them to effect the sales. That of course depends upon accepting all the figures given by the respondents.

21. On the other hand, the respondents have declined to produce to the court the original contracts themselves, so I am not in a position to know what prices they are requesting for the pools and what proceeds they expect to obtain. This was not even tendered in the form of secondary let alone primary evidence.

22. Some allowance must certainly be made for the fact that this litigation has been brought on at short notice in the vacation (although I am not at all sure that it was properly qualified in this respect), and the ordinary expectations of proof, even in an interlocutory matter, must be allowed some leeway for those reasons. However, I do not think that it should have been difficult for the respondents to produce copies at least of the contracts for the four 7.4 metre pools which they have allegedly undertaken to instal.

23. Because of the substantial dispute in this matter on the issues of fact, I do not think it is reasonable to require the respondents to return the pools or to destroy the moulds which they have made, but I do think that it is appropriate that an injunction should go to restrain further sales and promotion. It is also appropriate that the respondents should be required to produce to their solicitor for safe keeping all original, secondary and later records concerning the dealings which they have had in respect of these four pools, both as to the preliminary or pre-sale expenditure to which I have adverted, as well as the four contracts which they have actually undertaken to complete up to date. If necessary, to facilitate the continuing conduct of the business, copies of all these materials may be supplied to the solicitor provided the originals are maintained by the respondents. It is not appropriate that the respondents should go on manufacturing and selling these pools pending the resolution of this action, despite the likelihood that the summer or high season for sales of pools will more than likely be over by that time.

24. Therefore I will order an injunction to restrain the respondents from making any further moulds and from any further manufacture, promotion or sale of the pools made from moulds of the first applicant's product or any other action which might infringe the applicant's registered design. The injunction will be granted on the basis of the usual undertakings for damages by the applicants and the respondents' undertaking to produce and maintain all the records to which I have adverted. Without drawing any conclusions in the matter, I am satisfied that the quarantining of the proceeds of the sales of the four pools is not warranted at present.

25. The parties should bring in short minutes of appropriate formal orders to make to embody the conclusions which I have reached. I will hear the parties on costs at that time.

26. Pending the formal orders I shall reserve liberty to apply to either party on 48 hours notice.