Vawdrey Australia Pty Ltd v Krueger Transport Equipment Pty Ltd [2009] FCAFC 156 (5 November 2009)

COPYRIGHT – infringement – whether causal connection established between form of copyright drawings and form of putative infringing work – indirect copying – indirect access – absence of explanation by author of putative infringing work of similarities – onus to explain – three-dimensional reproduction – evidence of reproduction – whether manufacture of three-dimensional object constituted infringement of two-dimensional work – whether reproduction of substantial part

DAMAGES – innocent infringement defence – whether there were reasonable grounds for suspecting copyright infringement

COSTS – entitlement to indemnity costs following refusal of offer of compromise – "Calderbank offer"

Held – appeal dismissed

Copyright Act 1968 (Cth) ss 14(1), 21(3), 21 (4), 31(1), 115
Federal Court of Australia Act 1976 (Cth) ss 24(1)(a), 27
Federal Court Rules O 23 r 2, r 11

Ancher, Mortlock, Murray & Woolley Pty Limited v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 cited
Carla Homes (South) Ltd v Alfred McAlpine East Ltd [1995] FSR 818 cited
Chabot v Davies [1936] 3 All ER 221 referred to
Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138; (1999) 87 FCR 415 cited
Fire Nymph Products Ltd v Jalco Products (WA) Pty Ltd [1983] FCA 82; (1983) 47 ALR 355 cited
Frank M Winstone (Merchants) Ltd v Plix Products Ltd [1985] 1 NZLR 376 discussed
Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746 cited
House of Spring Gardens Ltd v Point Blank Ltd [1983] FSR 213 cited
IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14; (2009) 254 ALR 386 referred to
King Features Syndicate Inc v O & M Kleeman [1941] AC 417 referred to
Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd [2008] FCA 803 cited
Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (No 2) [2009] FCA 1493 cited
Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (No 3) [2008] FCA 1592 cited
LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 35 IPR 215 cited
Lend Lease Homes Pty Ltd v Warrigal Homes Pty Ltd [1970] 3 NSWR 265 referred to
Metricon Homes Pty Ltd v Barrett Property Group Pty Ltd [2008] FCAFC 46; (2008) 248 ALR 364 followed
Pacific Gaming Pty Ltd v Aristocrat Leisure Industries Pty Ltd [2001] FCA 1636; (2001) 116 FCR 448 followed
Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 cited
Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537 cited
S W Hart & Co Pty Ltd v Edwards Hot Water Systems [1985] HCA 59; (1985) 159 CLR 466 referred to
Ultra Marketing (UK) Ltd v Universal Components Ltd [2004] EWHC 468 cited

VAWDREY AUSTRALIA PTY LTD v KRUEGER TRANSPORT EQUIPMENT PTY LTD

VID 956 of 2008

MOORE, LINDGREN AND BENNETT JJ
5 NOVEMBER 2009
SYDNEY (HEARD IN MELBOURNE)

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 956 of 2008

BETWEEN:	VAWDREY AUSTRALIA PTY LTD Appellant
AND:	KRUEGER TRANSPORT EQUIPMENT PTY LTD Respondent

JUDGES:	MOORE, LINDGREN AND BENNETT JJ
DATE OF ORDER:	5 NOVEMBER 2009
WHERE MADE:	SYDNEY

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 956 of 2008

BETWEEN:	VAWDREY AUSTRALIA PTY LTD Appellant
AND:	KRUEGER TRANSPORT EQUIPMENT PTY LTD Respondent

JUDGES:	MOORE, LINDGREN AND BENNETT JJ
DATE:	5 NOVEMBER 2009
PLACE:	SYDNEY

1 A transport company wanted to secure a significant contract transporting cardboard for a paper manufacturer. A specially designed trailer would enhance its prospects. It sought ideas from one trailer manufacturer. It was provided with sketches and drawings. It passed those ideas and perhaps more onto another trailer manufacturer. It won the contract and had the trailers built by the second trailer manufacturer. The second trailer manufacturer used the ideas of the first and perhaps more. In this way, the transport company unlawfully used confidential information provided by the first trailer manufacturer. The central issue in this appeal is whether the second trailer manufacturer infringed the copyright of the first trailer manufacturer. The primary judge found it did.

2 The appellant, Vawdrey Australia Pty Ltd which was the second trailer manufacturer, appeals against the findings of the primary judge in relation to copyright infringement, the quantum of damages and the costs in Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd [2008] FCA 803 (30 May 2008, liability judgment), in Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (No 2) [2009] FCA 1493 (9 October 2008, quantum judgment) and in Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (No 3) [2008] FCA 1592 (28 October 2008, costs judgment). The three judgments reflect the primary judge's three staged approach to the proceedings. There was a hearing on liability, a hearing on damages, and written submissions on costs and reasons for judgment published at each stage.

3 The following emerges from unchallenged findings of fact of the primary judge. Both Vawdrey and Krueger Transport Equipment Pty Ltd, the first trailer manufacturer, design and manufacture truck trailers for the Australian transport industry and are competitors. Glen Cameron Storage & Distribution Pty Ltd and Glen Cameron Nominees Pty Ltd are both companies in the Glen Cameron Group (together Camerons) and are, for present purposes, the transport company. Mr Glen Cameron (Mr Cameron) was the sole director of both companies. Mr Tindal was Camerons' sales manager.

4 In response to an invitation on 26 November 2002 to tender for the supply of distribution services to AMCOR Packaging (Australia) Pty Ltd, Camerons sought quotations from Vawdrey (from whom it had earlier obtained a quotation), Krueger and Barker Trailers Pty Ltd for the supply of about twenty 48ft drop deck curtain sided trailers. These quotations did not include drawings. The closing date for the final Amcor tender response was 13 December 2002.

6 Meetings were held between Vawdrey and Camerons, at 11.00 am on 2 December 2002 and between Krueger and Camerons at 12.45 pm that same day. A further meeting was held on 3 December 2002 between Camerons and Barker. At the Vawdrey/Camerons meeting a hand sketch was drawn by Paul Vawdrey of a new load restraint system involving a cargo net and a "1 Post Per Pallet Spacing" system. At the Krueger/Camerons meeting a sketch was drawn by John Krueger and contained Krueger’s "Slide-A-Gate Concept" (the Initial Krueger drawing). The sketches were each prepared to indicate a solution to a load restraint problem for Amcor's cargo of palletised cardboard boxes which were to be carried in double stacked pallets on the dropdeck of a trailer. The other matter discussed at the Krueger/Camerons meeting concerned the problem of the "lift out" gates in conventional curtain-sided trailers which caused occupational health and safety problems for the drivers.

7 Between the meetings on 2 December 2002 and the 13 December 2002, Vawdrey submitted to Camerons four quotations and two drawings, including the Third Vawdrey quotation (2 December), the First Vawdrey drawing (9 December), the Fourth Vawdrey quotation and the Second Vawdrey Drawing (12 December).

8 After the meeting on 2 December 2002 and before 12 December 2002, Krueger submitted three quotations and three drawings, including the Second Krueger Quotation and Initial Krueger Drawings (4 December) and the Third Krueger Quotation, Interim Krueger Drawings, and the Subsequent Krueger Drawings (5 December).

9 In the afternoon of 2 December 2002, John Krueger discussed the Slide-A-Gate concept with Adel Gerges, a Krueger engineer to evaluate whether it would work and drew another sketch for him (the Interim Krueger Drawings). The Interim Krueger Drawings were derived from the Initial Krueger Drawings. The following day Stephen Hunt, another Krueger employee, prepared engineering layouts of the Krueger concept and these were approved and converted into sales drawings (the Subsequent Krueger Drawings). On 4 December at 11.55 am John Krueger phoned Mr Tindal to explain how his concept would work. At 2.13 pm that same day Mr Cameron phoned Vawdrey when, the primary judge held at [81], the Krueger concept and solution was disclosed to Vawdrey by Mr Cameron. On 5 December 2002, at 12.46 pm Mr Hunt sent the Interim Krueger Drawings to Camerons and at 4.50 pm he sent them the Subsequent Krueger Drawings.

10 Her Honour accepted the evidence of Mr Underwood, an engineer at Vawdrey, that it was not until late in the afternoon of 4 December 2002 that he received instructions from Michael Vawdrey to prepare drawings which would include sliding side posts, and not the standard gates on hinges that Vawdrey usually used. Mr Underwood’s drawings were not completed until 5 December 2002. These were the First Vawdrey drawing, which was sent to Camerons by facsimile at 11.15 am on 9 December 2009.

11 The primary judge accepted that Mr Tindal told Vawdrey not only the details of the Krueger concept but also, upon the receipt of the Subsequent Krueger Drawings which depicted an increased number of vertical posts and increased size of the gates, he gave Vawdrey instructions to add to the number of vertical posts and to increase the size of the gates to overcome the inadequacy of Vawdrey’s earlier drawings, which themselves reflected an attempt to put the Krueger concept into practice. The primary judge’s findings were clear and unequivocal and not challenged. Her Honour concluded at [81] that it was more probable than not that the idea of the Krueger concept was not present in the minds of Mr Cameron, Mr Tindal or Mr Vawdrey before John Krueger revealed his solution to Camerons.

12 The Subsequent Krueger Drawings were the same as the Interim Krueger Drawings. However, they included Krueger's standard copyright and confidentiality notice. The Subsequent Krueger Drawings are central to this appeal (see annexure A to these reasons which is the drawing concerning the 48' trailer). It was these Subsequent Krueger Drawings which Camerons included with the final tender response to Amcor, after obtaining John Krueger's permission.

13 It is unnecessary, at this point, to recount related and subsequent events in any detail. Relevant matters of detail will be referred to when we consider the issues raised in this appeal. These related and subsequent events can, for the moment, be described at a high level of generality. Camerons won the contract with Amcor in February 2003. Later that month, Camerons engaged Vawdrey to build the trailers. It built them. In the course of doing so, Vawdrey created working drawings to facilitate manufacture. Three of those drawings were described by the primary judge as the Vawdrey Engineering Drawings. Those drawings were created in April 2003. Again, these drawings are central to this appeal (see annexure B to these reasons). Between mid April and early May 2003, Vawdrey delivered the manufactured trailers to Camerons.

14 Her Honour found in the liability judgment that there had been unauthorised use of confidential information by Camerons to the detriment of Krueger. However, before damages could be assessed, Camerons and Krueger settled. The proceedings against Vawdrey proceeded to final judgment. The trial judge found, uncontroversially in this appeal, that Krueger owned the copyright in the Subsequent Krueger Drawings. Controversially, her Honour found that Vawdrey had infringed the copyright in the Subsequent Krueger Drawings by making the Vawdrey Engineering Drawings and building the trailers. Her Honour viewed the trailers as a three-dimensional representation of the Subsequent Krueger Drawings. Her Honour assessed damages, ordered they be paid and made a costs order against Vawdrey.

15 It is convenient, in the remainder of this judgment, to deal separately with the seven issues raised in the appeal (and in the order addressed by Vawdrey) and, in so doing, to describe relevant detailed findings of fact made by the primary judge and the conclusion that her Honour reached in relation to each issue. To the extent that those findings or conclusions are challenged in the appeal, we will set out the contentions of the parties and our conclusions.

16 It appeared not in issue that, in order to establish infringement in a case such as the present, it is necessary for the owner of the copyright to establish that the content of the protected work informed the creation and content of the allegedly infringing work. Vawdrey contended that on the evidence before, and findings made by, the primary judge, this causal connection was not established.

17 The primary judge observed that to find infringement there must be a degree of objective similarity and some causal connection between the infringing work and the copyright work. It must also be possible to infer from the facts that this causal connection existed and to infer that the infringing party had access to the copyright work. Her Honour concluded at [132]:

18 Vawdrey submitted that the instruction given by Camerons was limited to the size of the gates and the number of posts and that the remainder of the sentence in [132] in bold relates to the reason why Camerons gave Vawdrey those instructions. Vawdrey relied on what it said are the differences between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings. Vawdrey said that the Krueger concept could have been put into effect in a number of ways and that these differences are material. It is clear that her Honour rejected that proposition as do we. The Vawdrey Engineering Drawings involved a taking of the expression of the Krueger concept as evidenced in the Subsequent Krueger Drawings including the number of posts and the relevant size and positioning of the gates to ensure that the load is restrained (the load being cardboard boxes). The reliance by Vawdrey on the fact that the Subsequent Krueger Drawings showed hatching on the gates, whereas the gates drawn by Vawdrey depicted internal bars, is of no real significance having regard to the overall similarity in the expression of the idea.

20 Vawdrey submitted that the primary Judge erred in finding that "intermediate steps or links" existed which would show a causal connection between the Subsequent Krueger Drawings and the Vawdrey Engineering Drawings. What must be conveyed is the essential form of the copyright work, not just the idea or concept. Vawdrey conceded that oral or written instructions may be sufficient to create the link, but said that they would have to convey the "detail" of the copyright work, not merely an outline. At most, whatever instructions had been given by Camerons on 4 December 2002, they were, Vawdrey submitted, sufficient only to support a finding of breach of confidence. Vawdrey submitted that it was insufficient for her Honour to find at [132] that Vawdrey had "indirect access to the substance of the Krueger Drawings as a result of disclosure by Camerons". Further it submitted that LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 35 IPR 215 can be distinguished because the oral instructions in LED Builders were more detailed and concerned specific features of the house plans and were accompanied by detailed sketches. Similarly, in Solar Thompson Engineering Co v Barton [1977] RPC 537 and Plix Products Ltd v Frank M Winstone (Merchants) Ltd (1984) 3 IPR 390, detailed instructions were provided.

21 Vawdrey submitted that later instructions from Camerons to Vawdrey in February 2003 concerning the size of the gates and number of posts were "skeletal" without direction about how the instructions were to be implemented and that they did not address the shape or design of the gates, whether they were to be circular, oval, square or rectangular. Vawdrey submitted that the gates in the Vawdrey Engineering Drawings were simply an enlargement of the gates in the First Vawdrey drawing and the increase in size did not "[lead] inevitably and inexorably to a reproduction of the gates in the Subsequent Krueger Drawings". The number of gates was said by Vawdrey to be irrelevant and of no copyright significance. This was a bare indication of one part of the overall trailer design. Vawdrey submitted that its detailed design history leading to the Vawdrey Engineering Drawings was disregarded by her Honour.

22 We do not accept these submissions. In [132] of the primary judge's reasons quoted earlier, her Honour refers to the discussion in [70] to [78] of those reasons which concerned the development by Vawdrey in February 2003 of the design ultimately embodied in the Vawdrey Engineering Drawings. It is unnecessary to repeat or summarise all of what her Honour said. It is sufficient to note that the drawings then being created by Vawdrey resulting ultimately in the Vawdrey Engineering Drawings came to embody two features of the Subsequent Krueger Drawings. One was that the gates were larger. The other was that the number of posts to which the gates were affixed increased. As to the former, her Honour concluded (at [71]):

While the primary judge does not say so expressly in this passage, her Honour later indicates (in [132]) that the change in the number of posts was because Camerons had requested the change so that the design that had been documented by Vawdrey would conform with the design shown in the Subsequent Krueger Drawings.

23 In our opinion these inferences were reasonably open on the evidence. They support a conclusion that directions were being given by Camerons to Vawdrey in order to bring about (and with the effect of bringing about) a high level of conformity between the drawings being developed by Vawdrey (ultimately resulting in the Vawdrey Engineering Drawings) and the Subsequent Krueger Drawings.

24 It should be noted that Vawdrey does not raise any criticism of her Honour’s statement of principles nor of the application of the principles to the facts. Rather, it complains of the factual findings themselves with regard to the degree of similarity between the two drawings.

25 It must be borne in mind that the findings her Honour made involved a rejection of evidence led by Camerons and Vawdrey. In circumstances where the objective similarities between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings were sufficiently great (as was the case) and Vawdrey had the opportunity to gain access to the latter drawings (as was the case), Vawdrey bore the onus of establishing how they created the Vawdrey Engineering Drawings and that this had not occurred as a result of copying: see Pacific Gaming Pty Ltd v Aristocrat Leisure Industries Pty Ltd [2001] FCA 1636; (2001) 116 FCR 448 at [19]. Camerons and Vawdrey elected to give a false account (on her Honour's findings) of how the various Vawdrey drawings developed. It would have been open to them to have given an honest account which may have had a bearing on whether the same conclusion would be reached. But they did not. This challenge to this aspect of the primary judge's reasoning fails.

26 This issue substantially overlaps with the issue just discussed. It can be dealt with in short compass. The essential complaint of the appellant is that the conclusions of the primary judge entail an idea being afforded copyright protection rather than the form of the expression of the idea. The idea is what her Honour described as "the Krueger Concept". The Krueger Concept contained several elements, the critical one being the idea of "gates hanging off the sliding posts".

27 Vawdrey submitted that the copyright infringement case against it had to be distinguished from the breach of confidence case against Camerons. Vawdrey submitted as follows. The Krueger Concept found to have been communicated by Camerons in breach of confidence was the "idea of gates hanging off sliding side posts" and remained an idea or concept not elaborated into specific form. The First Vawdrey drawing was an "original artistic copyright work" created independently by Mr Underwood and it was created before the receipt by Camerons of the Subsequent Krueger Drawings. Subsequent Vawdrey drawings were derived from the First Vawdrey drawing.

28 With one qualification, all this may be accepted. However, as discussed in relation to the first issue, the primary judge found that the expression of the idea (the Krueger Concept) in the initial Vawdrey drawings was changed during February 2003 at the direction of Camerons "in order to conform" (to use the words of the primary judge in [132] of her reasons quoted earlier) with the design being the expression of the Krueger Concept shown in the Subsequent Krueger Drawings. Her Honour was alive to the need not only as a matter of principle but also in its application to the facts, to focus on the form of the expression of an idea and not simply the idea itself. The result was that the form of the expression of the idea in the infringing drawings (the Vawdrey Engineering Drawings) infringed Krueger's copyright in the Subsequent Krueger Drawings even accepting those latter drawings were also a form of expression of the same idea. Again, the challenge to this aspect of the primary judge's reasoning fails.

29 In the liability judgment of 30 May 2008, her Honour did not address the question of whether the trailers manufactured by Vawdrey were an infringing reproduction of the Subsequent Krueger Drawings. However her Honour did do so in the quantum judgment of 9 October 2008 at [16] and concluded they were. Her Honour said:

30 Not only was this finding relevant to the bare question of infringement but also, as the primary judge held, the "infringing act of manufacture of trailers occurred after Vawdrey had received indirect notice of Krueger's concerns about the infringing acts". This finding (and another) eroded the foundation of Vawdrey's innocent infringer defence under s 115 of the Copyright Act 1968 (Cth).

31 Vawdrey submitted that the primary judge's finding was clearly wrong and that there was no evidence to justify the finding of additional infringement. Vawdrey submitted that no analysis was undertaken of the existence of objective similarities between the two-dimensional drawing and the three-dimensional reproduction.

32 It can be accepted that her Honour did not explain how the conclusion set out in [16] was reached. Whether it was necessary to do so does not, for present purposes, really matter: see the observations of Gibbs C J in SW Hart & Co Pty Ltd v Edwards Hot Water Systems [1985] HCA 59; (1985) 159 CLR 466 at 474 to 475 and Kovan Engineering (Aust) Pty Ltd v Gold Peg International Pty Ltd (2006) 70 IPR 1 at [46] . It is sufficient, in this appeal, for us to assess whether the conclusion was correct. Several propositions underpinning such an analysis can be briefly stated. The first is that an artistic work in a two-dimensional form is deemed to have been reproduced if a version of the work is reproduced in a three-dimensional form: see s 21(3) of the Act. The second is that a drawing which is three-dimensional in the sense of being a perspective showing height, width and depth may be regarded as an artistic work in two dimensions: Fire Nymph Products Ltd v Jalco Products (WA) Pty Ltd [1983] FCA 82; (1983) 47 ALR 355 at 381. The width of the language in the section does not suggest that a drawing which is two-dimensional in the sense of lacking perspective, cannot be an artistic work in a two-dimensional form.

33 The third is that the question of whether there has been a three-dimensional reproduction is a question of fact. How that question is approached was discussed by Finkelstein J in Muscat v Le (2003) 60 IPR 276 at 287:

34 The fourth is that it may be necessary that there be some evidence as to the appearance of the three-dimensional object to the human eye: see LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24 at [66] though whether that is so in every case appears not to be a settled issue: see Eagle Homes Pty Ltd v Austec Homes Pty Ltd (1999) 44 IPR 535 at [26]-[27].

35 In the present case there are several matters which point to the primary judge's conclusion being correct. The first is that the infringing drawings, the Vawdrey Engineering Drawings, were, on the evidence, drawn to illustrate what the completed trailers would look like at least from one important perspective, namely looking at the side of the trailer from (what is readily apparent) ground level. If the Vawdrey Engineering Drawings were themselves infringing copies of the Subsequent Krueger Drawings with the requisite degree of resemblance, then it is not a large step to deduce that the completed trailers would likewise exhibit the requisite degree of resemblance to the perspective illustrated in the drawings.

36 The second is that there was photographic evidence of the trailers manufactured by Vawdrey from various perspectives revealing the whole or part of the side depicted in the Subsequent Krueger Drawings (which is plainly the passenger side of the trailer) or the opposite side (the driver's side of the trailer). The photographs show sufficient of the side of the trailer to sustain the inference which can otherwise be drawn having regard to the purpose of the Vawdrey Engineering Drawings (discussed in the preceding paragraph), namely that the trailers exhibit visually sufficient of the features of the Subsequent Krueger Drawings as to reproduce those drawings.

37 The third is that the fact that from other perspectives (for example from the rear or from above) it is probable there is no real resemblance to the original work does not deny the existence of sufficient resemblance to establish reproduction of the original work in a three-dimensional form. While it is not apparent from the reasons whether it is so, it is scarcely likely that the infringing Popeye brooches and plaster dolls in the seminal case concerning three-dimensional reproduction of a two dimensional work (King Features Syndicate Inc v O & M Kleeman [1941] AC 417) were examined unduly critically from the underside of the feet or base or the top of the head or, for that matter in relation to the brooches from the rear, in order to determine whether they were infringing copies of the two-dimensional cartoon drawings.

38 It was faintly put by Vawdrey that the issue of a three-dimensional reproduction was not raised in the pleadings. It is tolerably clear that it was. Again, this challenge to this aspect of the primary judge's reasoning fails.

39 In a case such as the present, it is necessary for the party alleging infringement to demonstrate that the infringing work embodies a substantial part of the original work. Vawdrey challenges the primary judge's conclusion that, in this case, the infringing work did. Her Honour's approach was as follows.

40 In considering whether there was copying of a substantial part of the work, her Honour took into account, uncontroversially, the objective similarity between the infringing work and the original work and the quality of what was alleged to have been copied, rather than the quantity. The Krueger Sketch was, her Honour concluded, "little more than the concept" [130] which is unprotected by copyright. The Vawdrey drawings which depicted one or more sliding side posts with what has been described as, things hanging off them, were detailed technical drawings expressing the concept in a practical form. They did not even look similar to the Krueger Sketch. However her Honour concluded that the Krueger Drawings "contain[ed] a distinct expression of the concept of the Krueger Sketch" and were protected by copyright, as were the almost identical Subsequent Krueger Drawings. Her Honour concluded that Vawdrey copied a substantial part of the protected drawings when a comparison was made between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings. Her Honour observed at [134] – [135] in the liability judgment:

• the relative importance of the visual representations of the sliding posts and gates to the trailer overall in the Subsequent Krueger Drawings;

• that a trailer of the same size and dimensions, adapted for the same purpose, was depicted in all the drawings;

• the First Vawdrey drawing and subsequent drawings all contained representations of sliding posts and attached gates which were unprotected by copyright; and

• the only differences relevant to the substantial part inquiry were, first the additional post and gate and secondly the enlarged size and shape of the attached gates.

42 The addition of a further post and gate was said by Vawdrey to be merely a functional consideration to increase restraint capacity and not related to visual expression or an expression of the Krueger concept. As explained by Vawdrey, the enlargement of the size and shape of the attached gates were derived from the post and hoop depicted in the First Vawdrey drawing. A substantial part of the Subsequent Krueger Drawings was not reproduced by Vawdrey. The specific elements of the Subsequent Krueger Drawings alleged to have been copied were "commonplace and familiar items that had been long used in the trucking industry". Detailed differences in visual expression in the Vawdrey Engineering Drawings included: gates of a uniform size; gates with spaced horizontal bars rather than diagonal or cross-hatched bars, and gates positioned differently along the sliding posts.

43 It is convenient, at this stage, to refer to our role as a Full Court. It was recently considered by another Full Court in a case which is substantially the same as the present: Metricon Homes Pty Ltd v Barrett Property Group Pty Ltd [2008] FCAFC 46; (2008) 248 ALR 364. In a considered joint judgment the Full Court referred to a number of earlier Full Court authorities addressing this question, namely S & I Publishing Pty Ltd v Australia Surf Life Saver Pty Ltd [1999] FCA 316; (1998) 88 FCR 354; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 and Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211. After setting out a passage from the judgment of Allsop J in Branir ([24]-[25]), the Full Court said at [20]:

44 In the present case, Vawdrey’s submissions do not go so far as to suggest that the primary judge erred in principle in her approach to this question. At their highest, they involve the contention that her Honour's conclusion was clearly in error, together with a subsequent recitation of the facts which would sustain a different conclusion. It is not apparent to us that the primary judge's conclusion was plainly and obviously wrong, to use the language in the passage just quoted. Elements in the Subsequent Krueger Drawings were reproduced in the Vawdrey Engineering Drawings. In particular, the distinguishing essential shape and size of the gates in the former drawings were reproduced in the latter. They were a qualitatively significant factor in the former and also in the latter. Further, the qualitative similarities were reflected in the quantitative similarities. There was an analysis of evidence before the primary judge showing the degree of similarity between the two sets of drawings. The only aspect where there was a percentage difference less than 80% was in respect of the gates, where there was 72% similarity. However, these differences were not with respect to the purpose of the design.

46 Vawdrey challenged the primary judge's rejection of its defence based on s 115(3) of the Act. It is not in issue that Vawdrey bore the onus of making good this defence. The defence of innocent infringement was rejected by the primary judge because Vawdrey failed to establish that, at the time of the infringement, it was not aware "and had no reasonable grounds for suspecting that the act constituting the infringement was an infringement". As her Honour noted there was no evidence to show that Vawdrey had made any inquiries as to the source of the material copied. Her Honour went on to observe that the only reasonable assumption Vawdrey could have made was that the "ultimate source of the instructions [given by Camerons to Vawdrey], and the owner of the copyright in the drawings that underpinned those instructions, was some entity outside Camerons".

47 A fundamental difficulty Vawdrey has in maintaining this aspect of the appeal is that it depends in substantial part on the acceptance of evidence given by its principals and employees. The evidence was, effectively, two template paragraphs denying the receipt of any oral or written communications about, amongst other things, the Subsequent Krueger Drawings. However, from the findings of the primary judge set out in passages from her reasons quoted at [17] and [19] earlier, this evidence was rejected by her Honour. Given these findings, one or several of these witnesses must have been involved in communications about the Subsequent Krueger Drawings. The onus was on Vawdrey to establish the defence. The evidence was rejected at trial but is now relied upon to form the basis of this aspect of the appeal. There is no good reason to go behind her Honour’s findings. This leads to the conclusion that the defence fails and that the primary judge was correct in so deciding.

48 It is trite to say that there has to be a causal connection between the act of infringement and the loss for which damages are sought. Having regard to observations at [15], [38] and [59] of the primary judge’s reasons, it is possible her Honour’s analysis in the damages judgment proceeded on the premise that the act of infringement of creating the Vawdrey Engineering Drawings occurred before Vawdrey secured the contract to manufacture the trailers. Her Honour spoke of Vawdrey not having been able to win the contract but for the infringement, of the infringement causing Krueger to lose the contract (that is, not to secure it) and of the unlawful disclosure of the confidential information by Camerons, enabling Vawdrey to improve its drawings so that it could be awarded the contract. However, as her Honour found in the liability judgment published over four months earlier, the infringing drawings were created after Vawdrey secured the contract. This was accepted by Krueger.

49 In substance, the argument before us proceeded on the footing that there either was or was not the requisite causal link in circumstances where both acts of infringement occurred after Vawdrey secured the contract.

50 Vawdrey submitted that there had to be a causal connection between the loss claimed in order for damages to be awarded, so that the loss claimed must be shown to result from the taking of the form of artistic expression rather than the concept. The instructions to Vawdrey from Camerons would have had to convey the "detail" of the work, not the bare outline, and it was insufficient for the primary judge to find indirect access to the substance of the Subsequent Krueger Drawings. Counsel, during the hearing, made reference to London General Holdings Ltd v USP PLC [2005] EWCA Civ 931 which in turn referred to Kuwait Airways Corporation v Iraqi Airways [2002] UKHL 19; [2002] 2 AC 883 and South Australia Asset Management Corp v York Montague Ltd [1996] UKHL 10; [1996] 3 WLR 87.

51 We are satisfied, in the face of the finding of infringement referred to earlier, that there was the requisite causal connection between the infringement and damage suffered by Krueger. As her Honour concluded in the quantum judgment [14]:

52 In the liability judgment, the primary judge found (at [71]) that Camerons were obliged, as a result of acceptance of their tender, to provide Amcor with a load restraint system substantially identical to that detailed in the successful tender proposal. The system detailed in the proposal was that later embodied in the Subsequent Krueger Drawings. It follows that Camerons were obliged to secure the manufacture of trailers which accorded with the Subsequent Krueger Drawings. There was evidence from Vawdrey’s engineering manager that in order to manufacture the trailers it was necessary for engineering drawings to be made which included, as a working layout drawing, the Vawdrey Engineering Drawings. Those drawings were necessary in order to depict the trailer in its entirety and exactly how it should look once manufactured. It is comparatively clear from this evidence that in order for Vawdrey to fulfil its contract with Camerons it was necessary for it to do what it did, namely produce the Vawdrey Engineering Drawings and, in so doing, infringe Krueger's copyright. That was so even though, as Vawdrey pointed out in the appeal, the actual written terms of the contract were less precise. The same process of reasoning leads to the same conclusion in relation to the trailers themselves. That is, for Vawdrey to fulfil its contract with Camerons it had to create the trailers and thereby infringe Krueger's copyright.

53 It is not unreasonable, in our opinion, to approach the question of causation on the basis that Vawdrey was only able to satisfy its contractual obligations by infringing Krueger's copyright and it would have been unable to satisfy, and therefore enter, the contract without engaging in that infringement. Camerons were obliged under their own contract with Amcor to supply a system in accordance with the Subsequent Krueger Drawings. Vawdrey could not have complied with its obligations to Camerons without producing a trailer in accordance with the Subsequent Krueger Drawings. In the course of producing that trailer it produced the Vawdrey Engineering Drawings which were, as her Honour found, an infringement. Vawdrey also produced the trailer. The trailer contained the posts and gates as broadly depicted in the Subsequent Krueger Drawings and the Vawdrey Engineering Drawings. If Vawdrey had been unable to enter the contract then, on the primary facts found in the primary judge's liability judgment, it is more likely than not that Krueger would have secured the contract, it alone being able to reproduce its drawings without any question of copyright infringement arising.

54 In challenging the primary judge's assessment of damages, Vawdrey criticised her Honour's conclusions in relation to flagrancy, deterrence and the goodwill it had gained. It is not apparent to us that her Honour was wrong in concluding that Vawdrey's infringement was not the most flagrant but also not innocent, that there was a need to deter similar infringements and that Vawdrey would have obtained additional benefits in the form of goodwill. Her Honour's approach certainly does not manifest any error of principle or suggest that she gave improper or insufficient emphasis to a fact or was mistaken as to a relevant fact and, accordingly, an appellate court should not interfere with the assessment actually made: see Futuretronics.com.au Pty Ltd v Graphixs Labels Pty Ltd [2009] FCAFC 2 at [50].

55 Again, this aspect of the appellant's challenge to the primary judge's reasoning fails.

56 Vawdrey challenges the primary judge's order requiring a portion of Krueger's costs in relation to the trial on liability be paid on an indemnity basis. In the quantum judgment the primary judge referred to Vawdrey's conduct in its defence as a factor bearing on the issue of cost because it "added significantly to the length of the trial". Reference was made at [63] to inconsistent contentions, backdating of the electronic copy of the second Vawdrey drawing, internal job sheet of a hand drawing said to have been created in 1995 and to the absence of any explanation about Vawdrey's possession of a copy of Krueger's invoice for the manufacture of trailers with Camerons' staff handwriting on it. Her Honour explained, in greater detail, in the costs judgment (at [16] to [19]), why these matters inclined her to order costs on an indemnity basis.

57 Vawdrey does not point to any error of principle in relation to the primary judge's conclusion that certain of the costs should be paid on an indemnity basis. The order involves the exercise of a discretionary power and we see no basis upon which, in this appeal, the order should be disturbed.

58 In the appeal, Vawdrey challenged her Honour’s treatment of the offer of compromise made by Krueger. Vawdrey contended that her Honour first should have apportioned liability as between the respondents and then assessed the value of the offer of compromise. It is not clear that that point was raised by Vawdrey at trial. However, the liability of the respondents was joint and several and no error is demonstrated.

59 The appeal should be dismissed with costs. It is unnecessary to deal with issues raised by Krueger in its notice of contention.

60 Since preparing these reasons we have had the benefit of reading the judgment of Lindgren J in a draft form. Because of the way we have approached the question of three-dimensional reproduction, it has been unnecessary for us to explore the legal issues discussed by Lindgren J concerning that question. We have also considered it unnecessary to consider the contentions of the respondents given our conclusions on the points raised by the appellant. Otherwise we agree with the reasons of Lindgren J which, extremely helpfully, add to and complement our reasons.

I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore and Bennett.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 956 of 2008

BETWEEN:	VAWDREY AUSTRALIA PTY LTD Appellant
AND:	KRUEGER TRANSPORT EQUIPMENT PTY LTD Respondent

JUDGES:	MOORE, LINDGREN AND BENNETT JJ
DATE:	5 NOVEMBER 2009
PLACE:	SYDNEY (HEARD IN MELBOURNE)

61 I have had the benefit of reading the joint reasons for Judgment of Moore and Bennett JJ (the Joint Reasons) for which I am thankful.

62 The facts are set out in the Joint Reasons. This enables me to proceed immediately to discuss the issues raised on the appeal. I will use the headings that appear in the Joint Reasons, noting, as their Honours do, that there is overlap between them. I will also use their Honours’ abbreviated forms of reference.

63 Of the Krueger Drawings, it is necessary to refer only to the Subsequent Krueger Drawings. They were contained in Annexure 1 to the primary Judge’s reasons for judgment. There were two of them. Although I will refer to the Subsequent Krueger Drawings (in the plural), Vawdrey constructed only the 14.62m (48') drop deck trailer, not the 16.20m (53') drop deck trailer. Accordingly, it is only the former Drawing that calls for attention, and my reference to "Drawings" will be a reference to it alone unless the context otherwise indicates.

64 It is no longer disputed that the Subsequent Krueger Drawings were original artistic works and that Krueger owned the copyright in them. They were each of an elevation of the posts, gates, trailer deck or tray and wheels of the passenger’s side.

65 They were identical to the Interim Krueger Drawings but for one difference which does not matter, namely, that the Subsequent Krueger Drawings contained Krueger’s standard form of confidentiality and copyright notice which was missing from the Interim Krueger Drawings.

66 The Vawdrey Engineering Drawings which the primary Judge found infringed Krueger’s copyright in the Subsequent Krueger Drawings constituted Annexure 7 to her Honour’s reasons. There were three of these, although most, if not all, of the debate concerned the elevation of the posts, gates, trailer tray and wheels of the passenger’s side of the trailer – the first of the three. Accordingly, although I will refer to the Vawdrey Engineering Drawings (in the plural) it is only that elevation that calls for attention.

67 The first issue or cluster of issues concerns causal connection with the copyright work, indirect copying of that work and the onus of proving that similarities were not causally linked to the copyright work.

68 By its notice of contention, Krueger argues that her Honour ought to have found, by way of inference drawn from the established facts, that Vawdrey had direct access to the substance of the Krueger drawings. In support, Krueger relied on three facsimile transmissions, the first on 4 February 2003 from Paul Vawdrey to Mr Tindal of Camerons, the second from Paul Vawdrey to Camerons on the same date, and the third from Vawdrey to Camerons on 7 February 2003. Krueger gave a notice to produce these faxes but they were not produced.

69 The problem with Krueger’s contention is that the faxes could not support an inference that by means of them Camerons provided Krueger Drawings to Vawdrey because they were travelling in the wrong direction: they were from Vawdrey to Camerons, not from Camerons to Vawdrey.

70 Although senior counsel for Vawdrey did not abandon the contention, he seemed to accept that the faxes were travelling in the wrong direction to support it. I would not uphold the contention.

71 By reason of s 31(1)(b)(i) of the Act, Krueger had the exclusive right to "reproduce" the Subsequent Krueger Drawings in a material form. Neither "reproduce" nor any derivative of that word is defined in the Act. It is trite, however, that a work is "reproduced" if (a) there is a sufficient degree of objective similarity between the copyright work and the work said to infringe (infringing work); and (b) there is "some causal connection" between the form of the infringing work and the form of the copyright work: Francis Day & Hunter Ltd v Bron [1963] Ch 587 at 614 per Willmer LJ; SW Hart & Co Pty Ltd v Edwards Hot Water Systems [1985] HCA 59; (1985) 159 CLR 466 at 472 per Gibbs CJ (with whom Mason and Brennan JJ agreed). Where the objective similarities are sufficiently great and the alleged infringer had an opportunity of access to the copyright work, the Court will infer the causal connection unless the inference is displaced by evidence, the onus of adducing which rests on the putative infringer: Pacific Gaming Pty Ltd v Aristocrat Leisure Industries Pty Ltd [2001] FCA 1636; (2001) 116 FCR 448 at [19].

72 Vawdrey contends that her Honour erred in finding that the form of the Vawdrey Engineering Drawings was causally connected in the relevant sense to the form of the Subsequent Krueger Drawings. Vawdrey accepts that the required causal link may be established otherwise than by direct copying and may be inferred from sufficient similarity coupled with access, including indirect access, to the copyright work. Vawdrey submits, however, that it is not enough that there be the communication of a mere idea or concept. Vawdrey so characterises the increase in the number of posts from six to seven and the enlargement of the gates, and says that that is all that was found to have happened here.

(a) it is not shown that her Honour erred in finding that there was sufficient objective similarity to give rise to the inference;

(b) her Honour did not find that what Camerons told Vawdrey was limited to adding a post and enlarging the gates; and

(c) the unsatisfactory nature of the testimony given by the Vawdrey witnesses, including their formulaic false denial that Camerons had given Vawdrey even the Krueger Concept (the Slide-A-Gate idea), entitled her Honour to draw inferences against Vawdrey as to what passed to it from Camerons.

74 A comparison between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings shows that the number of posts (7) is identical, that their placement along the trailer is identical or nearly so, and that the size and shape of the gates are similar. An affidavit of Adel Gerges made on 26 August 2005, and in particular Exhibits AG7-AG14 to that affidavit, record measurements showing the extent of the similarities between the Subsequent Krueger Drawings and the Vawdrey Engineering Drawings. I refer to this evidence in some detail in section D at [151] – [152] below.

75 It must be conceded that there are also differences between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings. First, the Vawdrey Engineering Drawings do not show a pelmet or roof, whereas the Subsequent Krueger Drawings do, thereby concealing what, if anything, is at the top of the posts, whereas in the Vawdrey Engineering Drawings a cross member is exposed at the top of each post. Second, the first two gates (on the upper deck) in the Subsequent Krueger Drawings are smaller than the rear five, with the result that the tops of all seven gates lie in the same horizontal line, whereas all seven Vawdrey gates are of the same size, and to compensate for this there is a stepping down in the line of the tops of the gates as between the front two gates and the rear five. Third, the Subsequent Krueger Drawings show numerous diagonal lines over the surface of the gates whereas the Vawdrey Engineering Drawings show three horizontal bars within each gate.

76 The question which arises is whether her Honour is shown to have erred in concluding that there was sufficient similarity, in conjunction with the other circumstances, including the communication of the Krueger Concept (see below), to call for the leading of evidence by Vawdrey displacing the inference of a causal link back to the Subsequent Krueger Drawings.

77 It is to be remembered that the task of the Court on an appeal by way of rehearing on the evidence that was before the primary Judge is the correction of error: see ss 24(1)(a) and 27 of the Federal Court of Australia Act 1976 (Cth) and Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17; (2001) 205 CLR 507 at [75]; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 at [22]- [25] per Allsop J, with whom Drummond and Mansfield JJ agreed; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [20]- [31]; CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1 at [16]- [24]. In Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138; (1999) 87 FCR 415 at [113]- [119], Weinberg J explained why a primary Judge’s finding of fact on the issue of similarity should be accorded the utmost respect and not departed from unless the appellate court is persuaded that the finding was erroneous in principle or plainly and obviously wrong. His Honour’s observations were approved by a Full Court of this Court in Metricon Homes Pty Ltd v Barrett Property Group Pty Ltd [2008] FCAFC 46; (2008) 248 ALR 364 at [20].

78 In my opinion this deference to the findings of the primary Judge applies to that finding of sufficient similarity, which when coupled with a finding of some causal link (see below), will require exculpatory evidence to be led by the putative infringer.

79 At [134] the primary Judge correctly rejected a submission that the form of the drawings was dictated by function; the First Vawdrey Drawing had used only six sliding posts and small hoop-shaped gates. Her Honour also accepted the evidence of Krueger’s expert, Dr Hart, that the Krueger Concept (Slide-A-Gate) could be expressed in different ways. The addition of a seventh post and some enlargement of the gates was dictated by function, but this was not shown to explain the degree of similarity that resulted. I refer to more detail of the similarities below, including the size and shape of the gates. In addition there was detailed evidence of Adel Gerges particularising the similarities (see section D at [151] - [152] below). Her Honour found that the Vawdrey Engineering Drawings used substantially the same form of expression as the Subsequent Krueger Drawings. The difference between both of them on the one hand and the First Vawdrey Drawing (Annexure 6 to her Honour’s reasons) on the other hand is great.

80 How did the Vawdrey Engineering Drawings come to be similar to the Krueger Subsequent Drawings? Vawdrey’s witnesses did not give a satisfactory answer to this question. Indeed, their evidence, rejected by her Honour, was that the Slide-A-Gate idea was devised within Vawdrey.

82 Her Honour found (at [82] and [83]), contrary to Vawdrey’s denial, that Vawdrey’s solution expressed in the First Vawdrey Drawing, incorporating as it did the elements of gates or hoops hanging off sliding posts (the Krueger Concept), was based on a disclosure by Camerons to Vawdrey of the Krueger Concept.

83 On 4 December 2002, Michael Vawdrey instructed Jason Underwood, an engineer and former Vawdrey employee, to prepare a drawing. Two aspects of Michael Vawdrey’s instructions to Mr Underwood (according to Mr Underwood’s affidavit) may be noted. The first is that Michael Vawdrey had decided to weld hoops, similar to those attached to the Ancra "shoring post" or the "Wingliner Goldbars" (also called "Gold Wingbars"), to Vawdrey’s "standard sliding side posts in order to provide the additional load restraint" sought by Camerons. The second is that Michael Vawdrey told Mr Underwood that with the addition of the hoops, one post for every two pallets should suffice to restrain the load. Her Honour accepted (at [59]) Mr Underwood’s evidence as to the instructions that he was given.

84 Mr Underwood implemented those instructions on the following day, 5 December 2002, and so produced the First Vawdrey Drawing.

85 The First Vawdrey Drawing was for a 48 foot drop deck Kurtainer and showed six posts, each with a hoop having some similarity to the hoops of the Gold Wingbars and the Ancra "Cargo-Sta" which were depicted in Annexure 5 to her Honour’s reasons.

86 There is no suggestion that the First Vawdrey Drawing infringed any copyright, even though it incorporated the Krueger Concept. Indeed, so far as the evidence suggests, Vawdrey owned copyright in the First Vawdrey Drawing.

87 On 13 December 2002 Camerons submitted its tender to Amcor. The tender included (with Grant Krueger’s consent) a copy of the Krueger Subsequent Drawing for the 14.62m (48') drop deck Kurtainer.

89 On the day of acceptance of the tender or the following day Camerons requested Vawdrey to change its design. Her Honour referred to the request as a request to increase the number of posts from six to seven and to enlarge the size of the gates.

90 Vawdrey contends that a request so described was to convey only an idea or concept, not a matter of form or expression. There is some force in this contention. It may be accepted too that the functional purpose of these changes was, and was understood by Vawdrey to be, to increase the capacity of the posts and gates to restrain the pallets.

91 It is not clear whether Camerons’ instruction on 11 or 12 February 2003 conveyed to Michael Vawdrey that the purpose of the instruction was to make Vawdrey’s drawing accord with Krueger’s, or whether her Honour was merely saying that this was Camerons’ subjective and undisclosed motivation. As appears below, I do not think the distinction matters on the question of infringement.

92 It is necessary to consider the context in which her Honour described Camerons’ request to Vawdrey in the terms that she used.

93 The evidence of Paul Vawdrey and Mr Underwood was that they could not recall why the size of the gates was increased (at [71]). Both assumed, however, that, consistent with common practice, any increase resulted from a request of the customer, and, in particular, from Mr Tindal at Camerons (at [71]). Mr Tindal, however, denied making such a request. In support of his denial he referred to the facts that Camerons did not employ any engineers and that it was incumbent on Vawdrey to ensure adequate restraint of the pallets. Her Honour rejected Mr Tindal’s evidence (at [71]).

94 Michael Vawdrey, the father of Paul Vawdrey and the most senior person at Vawdrey, said that he increased the number of gates from six to seven because a Vawdrey engineer, Mr Worboys, told him to do so. Mr Worboys, however, gave evidence, which her Honour accepted, that he had no involvement in the job until March 2003 (at [77]). Another Vawdrey engineer, Alastair Lang, accepted that the change from six to seven posts occurred before 27 February 2003 and was not made pursuant to a direction from the Vawdrey engineering department (at [77]).

96 In sum, neither Camerons nor Vawdrey led any evidence to explain the course of events from the First Vawdrey Drawing to the Vawdrey Engineering Drawings or how it came about that the latter were similar to the Subsequent Krueger Drawings. In particular, there was no explanation of how an instruction to enlarge the gates led Vawdrey to abandon its small "hoop" gates in favour of large rectangular shaped gates with rounded corners similar in shape and size to Krueger’s.

97 In the light of the evidentiary vacuum with which Vawdrey confronted her Honour, the appeal raises questions as to the nature of the causal link that must be established between a copyright work and the putative infringing work, the meaning of "indirect access" or "indirect copying" as those expressions have been used in the authorities, and the inference appropriate to be drawn by a failure to explain similarities between the infringing work and the copyright work.

98 As noted earlier, Vawdrey does not dispute that indirect access coupled with sufficient similarity can suffice to give rise to an inference of a causal link, or that the intervening route between the copyright work and infringing work may not involve a work at all and may be oral; see, for example, Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537; House of Spring Gardens Ltd v Point Blank Ltd [1983] FSR 213; Frank M Winstone Merchants Ltd v Plix Products Ltd [1985] 1 NZLR 376 (discussed below); LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 35 IPR 215; Ultra Marketing (UK) Ltd v Universal Components Ltd [2004] EWHC 468 (a case in which it was concluded, however, that the putative infringer had taken ideas, not form). Vawdrey’s submission is that her Honour’s finding that Camerons instructed Vawdrey to add an additional post and to enlarge the gates shows that Camerons communicated only an idea or concept, and that this is insufficient. In my respectful opinion this submission does not accord sufficient importance to (a) the primary Judge’s assessment of the similarities between the Vawdrey Engineering Drawings and the Subsequent Krueger Drawing, and (b) the unsatisfactory nature of the evidence led by Vawdrey.

99 On the question of indirect copying, her Honour described the present case as being ‘on all fours’ with LED Builders v Eagle Homes Pty Ltd (1996) 35 IPR 215. Her Honour referred to the Court’s finding of indirect copying based on the giving of oral instructions by an intermediary to bring the infringing design plans into line with the copyright holder’s.

100 The critical passage from the judgment of Davies J in LED Builders is as follows (at 225):

101 Vawdrey submits that the instructions given by Mr Cardile to his draftsmen to amend their plans were more detailed than Camerons’ instructions to Vawdrey. It is true that the primary Judge did not make express findings of detailed instructions to make particular changes of form given by Camerons to Vawdrey. She could hardly do so in the evidentiary vacuum with which those companies confronted her Honour. Nor, however, should she be treated as having found that the instructions were in their terms limited to adding a post and enlarging the gates. It is necessary to recall that Mr Tindal denied requesting the alterations at all; Paul Vawdrey and Mr Underwood said that they had no recollection of the matter; and Michael Vawdrey gave false evidence that he increased the number of gates because a Vawdrey engineer had told him to do so.

103 In these circumstances, and in the light of her Honour’s assessment of the similarities between the appearance of the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings, it would be wrong to read her Honour’s finding as excluding the possibility that the instructions given were more detailed than simply to "add a post" and "enlarge the gates". That was just a convenient way of summarising them. It is clear that her Honour’s view was that Camerons must have given Vawdrey whatever instructions were necessary, whether by supplying a copy of the Subsequent Krueger Drawings or otherwise, to produce the similarities that the Vawdrey Engineering Drawings bore to the Subsequent Krueger Drawings.

104 It does not matter either, in my view, that those at Camerons who had possession of the Subsequent Krueger Drawings were not employed by Vawdrey. The argument to the contrary would be based on the proposition that the author of the infringing work must have had indirect access to the copyright work itself or through its agent. In the present case Camerons and Vawdrey were dealing with each other at arm’s length and it is difficult to conceive of Camerons as Vawdrey’s agent.

105 "Access" to the copyright work is but an aspect of proof of the causal link element of reproduction. Infringement does not require that the putative infringer intend to reproduce or be conscious of the causal link. Like the element of similarity, the causal link element of reproduction is a matter of objective fact.

106 Frank M Winstone (Merchants) Ltd v Plix Products Ltd [1985] 1 NZLR 376 bears on the present issue. Plix designed and manufactured a range of containers for carrying kiwifruit called "pocket packs". It had copyright in the drawings, patterns, moulds and kiwifruit pocket packs. The Plix range was successful. The New Zealand Kiwifruit Authority (Authority) and the New Zealand Kiwifruit Exporters Association (Association) laid down specifications and instructions, which were derived from the Plix range.

107 Winstone wished to enter the kiwifruit pocket pack market but was aware of the need not to infringe the copyright claimed by Plix.

108 Winstone’s designer relied on copies of the Authority’s specifications and the Association’s instructions, and was supplied with a quantity of ungraded kiwifruit. He had never, to his recollection, seen a kiwifruit pocket pack, let alone a Plix pocket pack. He was told that he must work on his own without discussion with any person who had knowledge of kiwifruit pocket packs and that he should on no account look at any existing pocket packs. Working in this way for a period of about 260 hours spread over six months, he designed a range of pocket packs.

109 The specifications and instructions gave the designer so much information that even though he was independent and attempts were made to avoid infringement, the work he produced was still held to be an infringing reproduction.

It was not thought to be a break in the chain of causation that the designer had relied on the specifications and instructions laid down by the Authority and the Association, both of which were independent of both Plix and Winstone. All that mattered was that as a matter of fact the form of the infringing work was attributable to that of the copyright work.

111 Such a case, like the present one, might be explained in either of two ways. It might be said that the proved causal link between the forms of the copyright work and the putative infringing work means that the putative infringer is deemed to have had access to the copyright work for present purposes, or, on the other hand, that access to the copyright work, is but one way of proving causal link and need not be present if the causal link is established without it. The difference does not matter for present purposes although I venture the opinion that the latter is the preferable explanation.

112 In the present case access to the copyright work (or causal link) is not negated by the fact that Camerons, and Mr Tindal in particular, was not Vawdrey’s agent.

113 In the light of the similarities, as her Honour assessed them, between the Krueger Subsequent Drawings and the Vawdrey Engineering Drawings and the causal link between them, the onus was on Vawdrey to establish that the form of the latter did not result from the form of the former. A Full Court of this Court noted the relevant principle in Pacific Gaming Pty Ltd v Aristocrat Leisure Industries Pty Ltd [2001] FCA 1636; (2001) 116 FCR 448 at [19]. Referring to what Jacob J said in Ibcos Computers Ltd v Barclays Mercantile Highland Finance Ltd [1994] FSR 275 at [296]-[297], the Full Court stated:

Their Honours accepted that in such circumstances the onus rests on the defendant to rebut the inference of copying. The Full Court also cited Ancher, Mortlock, Murray & Woolley Pty Limited v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 at [289]; Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138; (1999) 87 FCR 415 at [437]- [438].

114 There can be no question but that Vawdrey failed to rebut the inference. It gave no plausible explanation as to the progression from the first Vawdrey Drawing to the Vawdrey Engineering Drawings.

115 Vawdrey’s grounds of appeal based on absence of causal connection should not be upheld.

116 I agree with Moore and Bennett JJ and wish to add nothing to their observations under this heading and my own in section A above.

117 Her Honour found three-dimensional infringement at [16] and [59] of the Quantum Judgment. At [16] her Honour found that the manufacture by Vawdrey of the trailers in April to May 2003 "in accordance with the Camerons-Vawdrey contract and the successful Amcor Tender" was an infringing act separate from the making of the Vawdrey Engineering Drawings. At [59] her Honour stated that despite being on notice of the alleged infringing act, Vawdrey "proceeded to manufacture trailers in accordance with the infringing drawings...".

118 Grounds of appeal 10(a) and (b) relate to infringement said to have been constituted by the manufacture of the trailers. I will deal with the Ground 10(b) first.

119 Ground 10(b) is that her Honour erred in finding that the Vawdrey trailers infringed copyright in the Subsequent Krueger Drawings because no claim to that effect was made in the proceeding.

120 The Further Amended Statement of Claim (FASC) was not a model of clarity in this respect. The expression "Infringing Trailers" is used, but not to refer to trailers infringing copyright. It is used to refer to curtain sided trailers manufactured by Vawdrey for use by and on behalf of Amcor pursuant to Vawdrey’s tender which demonstrated disclosure by Camerons to Vawdrey of the Krueger Concept in breach of Camerons' obligation of confidence (see para 12 of the FASC).

121 At para 13 of the FASC it was pleaded, relevantly, that in or about March or April 2003 Vawdrey infringed copyright in what were referred to as "the Confidential Drawings (and/or the Confidential Sketch)" (the expression "the Confidential Drawings" included the Subsequent Krueger Drawings) by:

This allegation is confused. The timing "from about March or April 2003" is referable to manufacture of the trailers and there is express reference in the words that I have emphasised to knowledge on the part of Vawdrey that its manufacture of them constituted infringement. Confusion, however, is created by the reference to "selling or by way of trade offering or exposing for sale" and by the fact that it is the knowledge that the making of the trailers was an infringement that is pleaded, and then merely as a circumstance that qualifies the selling etc.

122 As particulars of the allegation in para (b) set out above, Krueger referred to and repeated the particulars in the immediately preceding paragraph (para 12). Those particulars were to the effect that from about March or April 2003, Vawdrey manufactured for Camerons "curtain sided trailers for use by or on behalf of Amcor pursuant to the Tender (‘the Infringing Trailers’)". Again, the allegation here is that Vawdrey’s manufacturing of the trailers was an infringement.

123 The amended application unequivocally alleged that Vawdrey infringed Krueger’s copyright by manufacturing the Infringing Trailers referred to in the particulars under para 12 of the pleading.

124 The primary Judge recorded (at [16] of the Quantum Judgment) that Krueger had submitted at trial of the issue of liability, although it was then unnecessary to decide the issue, that Vawdrey had infringed copyright by the manufacture of the trailers in April to May 2003 "in accordance with the Camerons-Vawdrey contract and the successful Amcor Tender".

125 Notwithstanding the element of confusion referred to at [121] above, in my opinion the FASC, fairly construed, put Vawdrey on notice that the allegation was being made that it had infringed Krueger’s copyright in the Subsequent Krueger Drawings by manufacturing the trailers from about March or April 2003.

126 I turn now to ground of appeal 10(a). The complaint made is that there was no evidence to support a finding as to "the three dimensional form of [the] trailers and particularly the underside, ends and roof thereof". This is a reference to the whole of the trailers.

127 With respect, in my opinion this ground reveals a misconception. The form of the entire trailer, whether the underside, ends or roof or otherwise, is irrelevant to the question whether, by manufacturing the trailers, Vawdrey infringed Krueger’s copyright in the planar elevation of the passenger’s side of the trailer, which was the nature of the Subsequent Krueger Drawings.

128 One of the exclusive rights constituting copyright in relation to an original artistic work is the right "to reproduce the work in a material form": s 31(1)(b)(i) of the Act. Section 14(1)(b) provides that in the Act, unless the contrary intention appears:

The drawing of the sliding posts and gates device (Slide-A-Gate) was a substantial part of the Subsequent Krueger Drawings: the elevation drawing of the trailer itself, its deck and wheels do not appear to have been original in the sense in which that term is used for the purpose of determining what is a substantial part: see IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14; (2009) 254 ALR 386 (IceTV) at [30]-[32], [154]-[171]. If the trailer as manufactured can be said to have reproduced the sliding posts and gates part of the Subsequent Krueger Drawings, the manufacture of them infringed Krueger’s copyright in those Drawings because they reproduced a substantial part of those Drawings.

129 Prior to the passing of the Copyright Act 1911 (UK), which was declared to be in force in Australia from 1 July 1912 by the Copyright Act 1912 (Cth), it seems that only reproduction in a medium similar to that of the copyright work itself was regarded as an infringement.

130 Section 1(2) of the Act of 1911 referred to reproduction in "any material form whatsoever". The courts had no difficulty in treating this provision as catching the reproduction of a drawing in a three-dimensional version even before s 21(3) of the Act (see below) or its English forebear was introduced dealing with the matter expressly. Illustrative cases are Chabot v Davies [1936] 3 All ER 221 (building of a shopfront held to infringe copyright in a drawing of the front elevation); King Features Syndicate Inc v O & M Kleeman Ltd [1941] AC 417 (dolls, toys and brooches held to infringe copyright in "Popeye" cartoon sketch); Lend Lease Homes Pty Ltd v Warrigal Homes Pty Ltd [1970] 3 NSWR 265 (dwelling house held to infringe copyright in architectural floor plan).

131 The present case is adequately viewed simply as one of reproduction in a material form in the side of the manufactured trailer of a substantial part of a two-dimensional planar elevation. There is a third dimension in the constructed object, namely, the thickness of the posts and gates, but this is irrelevant. There would be a reproduction even if they were twice as thick because no thickness was represented in the planar elevation that was the copyright work.

132 In 1952 the Report of the Copyright Committee (the Gregory Committee) appointed by the President of the Board of Trade characterised the development that had occurred of treating a three-dimensional construction as capable of infringing a two-dimensional copyright work, as "reasonable" (para 258).

133 The Copyright Act 1956 (UK) which commenced on 1 June 1957, took a different approach from the Act of 1911. The relevant infringing act was reproduction "in any material form", although the omission of the word "whatsoever" does not seem to have been significant. The definition section, s 48, introduced in subs (1) a definition of the word "reproduction" which, in the case of an artistic work, was said to include a three-dimensional version into which a two-dimensional copyright work was converted, and vice versa.

134 This provision was treated as having simply made express provision for the position that already existed under the 1911 Act: see, for example, Copinger and Skone James on the Law of Copyright (9^th ed, 1958) at p67.

135 Unlike the United Kingdom Act of 1956, the Act, which commenced on 1 May 1969, did not contain a definition of "reproduction" but expressed the provision concerning three- (or two-) dimensional reproduction separately in s 21(3). That subsection has never been amended and is as follows:

(In the United Kingdom’s Copyright Designs and Patents Act 1988, the relevant provisions are also now to be found in separate provisions: s 17(3).)

136 The inclusory definition of "material form" which was introduced into s 10(1) of the Act by s 3(g) of the Copyright Amendment Act 1984, has no bearing on the present discussion. Nor is it necessary to discuss either the provisions relating to registrable designs, or, in this connection, the non-expert observer requirement which has now disappeared from the Act.

137 The foregoing account of the historical background to s 21(3) shows that in a case such as the present one, either it is not necessary to rely on s 21(3)(a) at all, or, if it is necessary to rely on it, it is necessary to do so only for the purpose of recognising the three-dimensional version that has in fact been made, not for the purpose of having regard to its third dimension.

138 Even in some of the cases decided since the "three-dimensional provision" was introduced, reproductions of plans and elevations have been found without reference to that provision: see, for example, Carla Homes (South) Ltd v Alfred McAlpine East Ltd [1995] FSR 818 (reproduction of elevations of drawings of homes in the constructed homes – the elevations are reproduction at pp 848-9 of the report).

139 Where the two-dimensional copyright drawings give a perspective, that is to say, indicate the third dimension (as in LB (Plastics) Limited v Swish Products Limited [1979] RPC 551, for example) different considerations arise. Since the third dimension is represented in the two-dimensional work, it would be necessary to have regard to it in deciding whether the three-dimensional object that has been manufactured reproduced the two-dimensional work or a substantial part of it.

140 The Subsequent Krueger Drawings were, relevantly, an elevation. A substantial part of them (the drawing of the posts and gates) was reproduced in the form of the outward appearance of the sliding posts and gates device as constructed on the trailers.

141 There was ample evidence, including photographic evidence, before her Honour of the appearance of the posts and gates device as manufactured. This was to be found in an affidavit of John Grant Krueger made 26 August 2005, paras 91-98 and exhibits JGK-7 and JGK-9 to that affidavit; and the affidavit of Alastair Anthony Lang, Engineering Manager of Vawdrey, made on 21 December 2005, paras 47-58 and the associated exhibit AAL-10. The evidence of the appearance of the trailers was not limited to the testimony that they were manufactured in accordance with the Vawdrey Engineering Drawings.

142 The following is an alternative approach to the three-dimensional reproduction issue with which I do not agree but which yields the same result. Based on their nature and function, it can be inferred that the depth or thickness of the posts and gates shown in the Subsequent Krueger Drawings was limited to the thickness of things having the nature and function of posts and gates capable of sliding along the tracks of the trailer. It is clear that the posts and gates that were manufactured also had that limited thickness. Therefore, even taking into account the (understood) third dimension of the substantial part of the copyright work, there was a reproduction of that substantial part, and again any enquiry in relation to the underside, ends and roof of the entire trailers as constructed is beside the point.

143 Her Honour is not shown to have erred in finding that Vawdrey’s manufacture of its trailers constituted an infringement of Krueger’s copyright in the Subsequent Krueger Drawings.

144 Vawdrey complains in ground of appeal 12 that her Honour erred (at [134]-[135]) in finding that the Vawdrey Engineering Drawings constituted a reproduction of a substantial part of the Subsequent Krueger Drawings, alternatively that that finding was against the evidence or the weight of evidence. In essence this complaint harks back to issues discussed in earlier sections. Vawdrey complains that the number of posts (seven) and the size and shape of the gates were part of the Krueger Concept and not qualitatively different from it, so that they cannot be properly regarded as a "substantial part" for the purposes of s 14(1) of the Act.

145 Vawdrey draws attention to the fact that the trailer itself is of a standard size and dimensions. It then emphasises that the Vawdrey gates are all of a uniform size whereas the front two gates in the Subsequent Krueger Drawings are smaller than the remaining five, and that the Vawdrey gates have three spaced horizontal bars whereas the Krueger gates appear to have closely spaced diagonal bars.

146 Ground of appeal 12A is that if, contrary to ground 12, the number of posts and size and shape of the gates constitute a substantial part of the Subsequent Krueger Drawings, the scope of copyright protection is limited to the specific appearance of those features, but the Vawdrey Engineering Drawings do not reproduce that specific appearance.

147 IceTV authoritatively describes the correct approach to identification of a "substantial part" of a copyright work (esp at [30]-[32] and [154]-[171]) and emphasises the importance for that purpose of authorship and the identification of the author and the authorial work involved. The primary Judge found that, relevantly, the Subsequent Krueger Drawings were produced by Stephen Hunt from the Krueger Sketch and from oral explanations of the weight restraint issue given to him by Adel Gerges (at [127] – and see [33], [35]-[37]) and were "original" (at [125]-[128]). Her Honour had earlier traced through the process (at [28]-[39]) and she stated (at [127]) that the fact that the Krueger Drawings were similar did not mean that they were less likely to be original because the re-drawing of a technical drawing might still involve considerable skill, time and effort on the part of the drafter. While her Honour did not, in the context of the "substantial part" issue, discuss the specific nature of Mr Hunt’s work in drawing the posts and gates device, it is clear that she treated that part of the Subsequent Krueger Drawings as a substantial part of them.

148 It was not seriously suggested on the appeal that the drawing of the Slide-A-Gate device was not a substantial part of the copyright Subsequent Krueger Drawings. Ground of appeal 12 was that the Vawdrey Engineering Drawings had reproduced only the Slide-A-Gate idea or concept. Ground of appeal 12A was that if the Slide-A-Gate form as distinct from the Slide-A-Gate idea formed a substantial part of the Subsequent Krueger Drawings, copyright protection was thin, and it would be necessary for Krueger to show that the Vawdrey Engineering Drawings reproduced the "specific appearance" of that part of the Subsequent Krueger Drawings.

149 I therefore think it not necessary to outline the evidence that was before her Honour of Mr Hunt’s authorial work relating specifically to the Slide-A-Gate part of the Subsequent Krueger Drawings.

150 The similarities between the Subsequent Krueger Drawings and the Vawdrey Engineering Drawing in relation to the Slide-A-Gate device went beyond the number of posts and similarity in the size and shape of gates, although the latter similarity is not accounted for by a simple instruction to Vawdrey to make its gates (small hoops) "larger".

151 In his affidavit made 26 August 2005, Adel Gerges, who was Group Engineering Manager for Krueger and had held that position for the preceding 13 years, stated as follows:

152 Annexed to these reasons are copies of exhibits AG-7, AG-8, AG-10, AG-12 and AG-14 referred to in the passage set out above.

153 While her Honour did not refer to the detail of this evidence, she stated that there was nothing in the unprotected Krueger Concept that dictated the number of posts or the size of the gates, and that the Vawdrey Engineering Drawings and the Subsequent Krueger Drawings featured seven posts "with gates attached of nearly identical size and shape" (at [134]). Her Honour rejected Vawdrey’s submission that the similarities were an inevitable result of the fixed parameters of a 48ft trailer and pointed to the first Vawdrey Drawing as demonstrating the error in that submission. It will be recalled that in that drawing, Vawdrey had attempted to implement the Krueger Concept by using only six sliding posts with small hoop-shaped gates "hanging off them".

154 Her Honour was entitled to find that in not only taking the number of posts and making its own gates larger, but also taking the Krueger gates’ shape, size and location on the trailer, and using generally similar dimensions, Vawdrey took a substantial part of the Subsequent Krueger Drawings.

155 The primary Judge dealt with Vawdrey’s submission that it was not liable to pay damages to Krueger because it had established the innocent infringer "defence" provided for in s 115(3) of the Act at [8]-[19] of the Quantum Judgment.

156 In its notice of contention, Krueger argues that her Honour ought also to have held that Vawdrey could not succeed under s 115(3) because its case (which her Honour rejected) that it independently conceived of and implemented a sliding gate solution was wholly inconsistent with innocent infringement.

157 Vawdrey refers to the testimony of the Vawdrey witnesses that they did not have a copy, or any knowledge, of the Subsequent Krueger Drawings. In their affidavits, Paul Vawdrey, Michael Vawdrey, Shane Matthew Worboys, an engineer employed by Vawdrey who had worked there since November or December 1999, Alastair Anthony Lang, Vawdrey’s Engineering Manager who had worked at Vawdrey since November 1994, and Jason Paul Underwood, a former Vawdrey Engineer and Draftsman, all denied, in accordance with a standard linguistic formula, having received any oral or written communication or instruction from anyone at Camerons or at Vawdrey in relation to any of the Krueger Drawings, the "Slide-A-Gate" concept, or "any other matter which Krueger may have communicated to Camerons".

158 The primary Judge did not accept that no person at Vawdrey had been given the detail of the Subsequent Krueger Drawings. Moreover, she found (Quantum Judgment at [19]) that Camerons had put Vawdrey on notice in April 2003, prior to Vawdrey’s construction of the first trailer, that questions had been raised as to the source of the design of the load restraint system in the trailers to be manufactured by Vawdrey. Her Honour said that she thought it probable that Vawdrey knew that it was Krueger that was raising these questions, but did not find it necessary to make a finding in that respect. Her Honour said (at [19] of the Quantum Judgment):

159 I agree with Moore and Bennett JJ that her Honour’s rejection of the formulaic denials by the Vawdrey witnesses goes a long way towards justifying her rejection of the innocent infringement argument. In any event, Vawdrey’s knowledge by the time manufacture commenced that questions were being raised prevents Vawdrey from successfully relying on s 115(3) in relation at least to the infringement that occurred in the manufacturing of the trailers.

160 I would also uphold Krueger’s notice of contention in so far as it contends that Vawdrey could not maintain an innocent infringement defence under s 115(3) because its false claim that it independently conceived of and implemented the Slide-A-Gate solution was inconsistent with innocent infringement.

161 Ground of appeal 15 is that the primary Judge erred in finding that the infringing conduct constituted by the making of the Vawdrey Engineering Drawings caused the loss to Krueger of the contract with Camerons, alternatively, that that finding was inconsistent with her Honour’s findings in the Liability Reasons (at [117], [118](5)) that the cause of that loss was Camerons’ breach of confidence which occurred well before the creation of the Vawdrey Engineering Drawings.

162 At [117] of the Liability Reasons, her Honour found that but for the disclosure by Camerons to Vawdrey of Krueger’s confidential information, Krueger would have won the contract with Camerons. At [118](5) of the Liability Reasons, her Honour found that but for that wrongful disclosure, the advantage of the Krueger Concept would have outweighed in Camerons’ mind its confidence in Vawdrey, arising from its successful past dealings with that company. That is to say, Camerons would have engaged Krueger to construct the trailers. Her Honour concluded that Camerons’ disclosure of Krueger’s confidential information to Vawdrey caused Krueger to miss out on winning the contract with Camerons.

163 One submission made by Vawdrey may be disposed of at the outset. This is that it was erroneous to assess the quantum of compensatory damages by reference to the manufacture of the trailers in circumstances in which there was no finding that three-dimensional reproduction had occurred and none had been pleaded. I refer to what I have said in this regard in section C at [117]-[143] above.

164 I turn now to Vawdrey’s main submission in relation to causation of loss: that its infringement of Krueger’s copyright in the Subsequent Krueger Drawings in the form of its own Vawdrey Engineering Drawings did not cause Krueger to miss out on getting the contract with Camerons.

165 It is not to the point that her Honour attributed causation of the same loss to Camerons’ disclosure of the Krueger concept to Vawdrey. There can be more than one cause of a loss so that the loss sufferer is entitled to recover the whole amount from either actor (though not more than that amount overall). We are not here concerned with the positions of Camerons and Vawdrey inter se.

166 On 25 November 2002 Amcor (Amcor Fibre Packaging) issued a "Request for Proposal" (RFP). The RFP stated that responses would represent a "firm offer" to contract with Amcor.

167 Camerons submitted its proposal on 13 December 2002. It included the Subsequent Krueger Drawings, including dimensions, and stated in relation to that Drawing:

168 As noted earlier, on 11 February 2003 Amcor accepted Camerons’ tender and on that day or the following day Camerons instructed Vawdrey to change its design as noted earlier.

169 The Camerons/Vawdrey contract was dated 26 February 2003 and signed 27 February 2003. It was for the supply of twenty two (22) 14.6 metre drop deck trailers, with seven "special sliding posts for load restraint per side". This reflected the instructions that Camerons had given to Vawdrey on 11 or 12 February 2003.

170 The Amcor/Camerons contract was dated 1 April 2003. By cl 4.1 the parties acknowledged that they were entering into the agreement relying on the information set out in the Amcor RFP and in Camerons’ response to it. Accordingly, the system portrayed in the Subsequent Krueger Drawings was being relied on.

171 Engineering drawings had to be prepared as a precursor to manufacture of the trailers. The evidence was clear that the device portrayed in the First Vawdrey Drawings would not have been adequate to the task. Even Mr Underwood, the author of them, conceded that at the time he had been unaware of the nature of the freight to be restrained, "whether it was loosely packed or shrink wrapped pallets or whatever, so there was always the expectation of to'ing and fro'ing between the sales department to fine tune it".

172 The only way in which Camerons could have performed its contract with Amcor without Vawdrey infringing Krueger’s copyright was for Camerons to engage Krueger, instead of Vawdrey, to manufacture the trailers.

173 I do not accept Vawdrey’s submission that Camerons’ contract with Amcor did not oblige Camerons to manufacture in accordance with the subsequent Krueger drawings. This submission turns on the words "the drawing below [the Krueger Subsequent Drawing for the 14.62m (48ft) Dropdeck Kurtainer] shows the system", and the argument that this obliged Camerons only to manufacture generally in accordance with "the system" exemplified in the Subsequent Krueger Drawings – the Drawing that formed part of Camerons’ tender. That Drawing showed dimensions. Minor departures may have been permissible consistently with the contractual arrangement between Amcor and Camerons, but such minor departures would not have been effective to avoid infringement of Krueger’s copyright.

174 No error is shown in her Honour’s conclusion that Vawdrey’s infringement of Krueger’s copyright enabled Vawdrey to win, and prevented Krueger from winning, the contract with Camerons for the construction of the trailers.

175 Ground of appeal 13(b) is that the primary Judge erred in finding that Vawdrey was liable to pay Krueger additional damages pursuant to s 115(4) of the Act in the sum of $30,000 or at all.

176 After referring to observations made by Besanko J in Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746 at [17], her Honour said that while Vawdrey’s infringement was not the most flagrant, it was also not innocent. She stated (at [59] of the Quantum Judgment):

177 In support of her award of additional damages, the primary Judge also referred to the need to deter similar infringements of copyright and to the significant benefit that Vawdrey gained from the infringement. However, she said (at [62]) that given that the infringement was indirect and not of the most flagrant sort, the award should not be "overly large".

178 In its notice of contention Krueger submits that an additional ground supporting the award of the additional damages was that Vawdrey’s conduct after the infringements and after it was informed that it had infringed, "was reprehensible and entirely unmeritorious".

• her Honour appears to have proceeded on the assumption that lack of innocence equates to "flagrancy" for the purposes of s 115(4)(d)(i);

• her Honour’s reference to deterrence is misplaced in the absence of evidence that Vawdrey had previously engaged in infringing conduct or was likely to do so, or more generally that "this was an industry in which there was a need for such an award to deter other parties from infringing copyright"; and

• the reference to the "benefit" received by Vawdrey is unquantified, particularly in relation to the issue of goodwill.

180 I would reject these submissions and in addition support her Honour’s award of additional damages on the ground referred to in the notice of contention.

181 First, I do not think that [59] of the Quantum Judgment is properly read as indicating that her Honour equated flagrancy with non-innocence. Her Honour referred in that paragraph to Vawdrey’s having proceeded to manufacture the trailers after being on notice of the allegation of infringement.

182 Second, it was enough to support the deterrence basis of the award that, as her Honour observed (at [60]), in a competitive world conduct of the kind engaged in by Vawdrey should be deterred. Clearly, her Honour had in mind the competition between Vawdrey, Krueger and Barker Trailers Pty Ltd to win the contract with Camerons.

183 Third, it was not necessary that the precise extent of Vawdrey’s benefit from the infringement be quantified. In cross examination Paul Vawdrey acknowledged:

• that it was to Vawdrey’s benefit that Vawdrey should succeed in getting the contract with Camerons;

• that those in the industry would hold Vawdrey in high regard if it was associated with a substantial successful transport company such as Camerons; and

• that Vawdrey in fact advertised such associations in order to tap into that public perception, because "success breeds success".

Indeed, Paul Vawdrey acknowledged that in Vawdrey’s newsletters, its relationship with Camerons was advertised.

184 In the light of her Honour’s findings, it was reprehensible and unmeritorious for Vawdrey to maintain throughout, not only that it had not been given any detail of the Subsequent Krueger Drawings, but that it had independently devised the Slide-A-Gate concept itself.

185 I agree with the Joint Reasons at [56]-[58] in relation to her Honour’s order that Vawdrey pay on an indemnity basis one third of Krueger’s costs of and incidental to the proceeding through to the end of the trial on liability. In addition to what Moore and Bennett JJ have said, I also think that the award of indemnity costs should be sustained on the basis referred to in Krueger’s notice of contention. This was that:

(a) Vawdrey failed to accept an offer of compromise made by Krueger in accordance with O 23 of the Federal Court Rules; and

and Krueger obtained judgment on the claim to which the offer related not less favourable to Krueger than the terms of its offer.

186 The offer in question was made by Krueger on 18 September 2006. On that date, Clayton Utz, the solicitors for Krueger, wrote to the solicitors for both respondents offering to accept $250,000 as damages plus interest of $91,351.03 together with costs as taxed (on a party and party basis) or agreed, and any GST or similar tax payable on any of those amounts. In addition to enclosing a notice of offer under O 23 r 2 of the Federal Court Rules, the letter stated that the offer contained in it adopted "the principles in Calderbank v Calderbank [1975] 3 WLR 586".

187 The rejection of the offer raised a rebuttable presumption in favour of an award of indemnity costs from 19 September 2006: see O 23 r 11(4) of the Federal Court Rules. That presumption should be departed from only for proper reasons which, generally speaking, will arise only in an exceptional case: see Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 (Port Kembla) at [17], [18]; Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 at [10].

188 Vawdrey accepts that the result before her Honour was no less favourable to Krueger than Krueger’s offer and that in these circumstances there was a presumption in favour of indemnity costs. Vawdrey also accepts that the presumption is not rebutted merely by proof that it was reasonable for it to take the view that it had a good chance of successfully defending the proceeding: see the cases cited by Hely J in Port Kembla at [18]. Rather, Vawdrey emphasises that there is a discretion embodied in O 23 r 11(6) of the Federal Court Rules which must be exercised with regard to the reasonableness overall of the copyright defence. In this respect, Vawdrey draws attention to the fact that it was not put to any Vawdrey witness that the Krueger Drawings were seen by them.

189 It suffices to say that the considerations mentioned by Vawdrey do not show that her Honour erred in the exercise of her discretion in allowing the presumption in favour of an award of indemnity costs to operate.

190 For the above reasons I agree with Moore and Bennett JJ that the appeal should be dismissed with costs.

I certify that the preceding one hundred and thirty (130) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the Appellant:	R Macaw and S Ricketson

Solicitor for the Appellant:	Cornwall Stodart Lawyers

Counsel for the Respondent:	A J Ryan and K B Beattie

Solicitor for the Respondent:	Griffith Hack

ITEM	KRUEGER 97-1139-1	VAWDREY 20448-69	SIMILARITY
Number of gates per slide	7	7	100%
Location of gate on the post	Above camleg	Above camleg	100%
Gate to weather strip	300	330	90%
Gate height	1860	1580	85%
Gate width	1360	1160	85%
Gap between front wall and 1^st gate	600	650	92%
Gate between 1^st & 2^nd gates	600	650	92%
Location of 2^nd post from the drop	460	591	72%

1. The dimensioning tool of AutoCAD was used to establish the above dimensions on Vawdrey drawing 20448-69 (Exhibit AG-11)

2. Dimensions shown on drawing 20448-69 are almost in line with measurement taken by John Krueger of an actual Vawdrey trailer.

3. The dimensioning tool of AutoCAD was used to establish some of the dimensions on Krueger drawing 97-1139-1.

4. Gate to weather strip dimension on Vawdrey was taken from Vawdrey drawing (Exhibit AG-13).

Date of Hearing:	4 and 5 May 2009

Date of Judgment:	5 November 2009

Federal Court of Australia - Full Court

Vawdrey Australia Pty Ltd v Krueger Transport Equipment Pty Ltd [2009] FCAFC 156 (5 November 2009)