Heinz Watties Limited v Spantech Pty Limited
Court of Appeal, CA 198/04, 5 December 2005
The issue of authorisation of copyright infringement has been the focus of considerable international attention over the last year as a result of the Grokster case in the US Supreme Court and the Australian Federal Court decision in Universal Music Australia Pty Limited v Sharman License Holdings Limited (2005) 65 IPR 289 - both in relation to peer-2-peer file sharing.
In this case, the New Zealand Court of Appeal also considered the issue of authorisation. Its judgment contained some helpful comments defining the scope of authorisation. However the procedural nature of the appeal meant that it was forced to leave open several interesting issues.
Spantech had constructed three potato storage buildings for Heinz Wattie and owned copyright in its designs. Heinz Wattie sought tenders for a fourth potato storage shed. The third party, BPM, provided a lower tender than Spantech and was awarded the contract. Heinz Wattie directed that the specifications were to be “as per the existing adjacent Potato Stores”.
Spantech wrote to Heinz Wattie drawing attention to its copyright. Heinz Wattie duly passed this on to BPM. Spantech separately wrote to BPM. On 18 January 2001, there was a meeting of representatives of BPM and Heinz Wattie at which BPM advised that it had taken legal advice and there would be no breach of copyright by its construction of the potato store. BPM subsequently wrote to Spantech advising that the new building was a BPM/Zipperlock design and the copyright was owned by it and its consulting engineers.
Spantech asserted that the construction of the fourth potato storage shed represented an infringement of its copyright. As against Heinz Wattie, it alleged that by entering the contract with BPM and directing that the specifications be “as per the existing adjacent Potato Stores” and by assisting and approving the construction, Heinz Wattie had infringed its copyright. In making this contention, Spantech contended that Heinz Wattie wrongly authorised BPM to copy Spantech’s work.
Heinz Wattie applied for summary judgment or alternatively for an order striking out Spantech’s claim on the basis that there was no explicit or implicit grant of authority by Heinz Wattie to BPM to copy Spantech’s works. At first instance, the court held that there was a reasonably strong argument of authorisation. Heinz Wattie had argued that any implicit authorisation was negated by the events of January 2001 where BPM asserted that it owned copyright in its own design. The judge held that the proper time for ascertaining authorisation was at the time the contract with BPM was entered into and the initial instructions given and that any later events were irrelevant.
As to the time at which authorisation was to be considered, the Court of Appeal held on the weight of authority that an infringement of copyright constituted by authorisation “is not complete until there is in fact an act of infringement of copyright of the kind alleged”. This meant that all the relevant communications should have been taken into account by the judge - including the meetings and correspondence in January 2001.
A second and more interesting issue was whether there had in fact been authorisation. Heinz Wattie contended that, for there to be authorisation, BPM must have been led to believe that Heinz Wattie had the ability to authorise copying. Relying on the House of Lords’ decision in Amstrad [1998] AC 1013, it was contended that whatever may have been the position as at the time of entry into the contract, BPM could not possibly have believed that Heinz Wattie had that ability after the correspondence and meetings in January 2001.
The Court of Appeal was not prepared to regard the Amstrad decision as conclusive. In that case the House of Lords was dealing with a situation where the defendant provided the means to copy but there was no control whatsoever over the use to which the equipment was put (in circumstances where it could be used for both lawful and unlawful purposes). Amstrad must be read in that context and was not applicable here. For the purpose of the appeal, the court assumed that the instructions given by Heinz Wattie could amount to a direction to copy the other potato stores but plainly this was a matter for trial.
The court held that Heinz Wattie was the contracting party and that it had directed what was to be built through the contractual specifications and any accompanying instructions. If following the specification and instructions given by Heinz Wattie necessarily resulted in an infringing copy of Spantech’s works, then in any ordinary sense of the word, the copying, having been directed by Heinz Wattie, must have been authorised by it: Pensher Security Door Co Limited v Sunderland City Council [2000] RPC 249 applied.
The court did not consider that it mattered that Heinz Wattie thought, on the basis of BPM’s representations, that there would be no breach of copyright. Innocence was not a defence to a claim for infringement of copyright. (Insofar as the New Zealand case Brintons Limited v Feltex [1991] 2 NZLR 677, 681 suggested otherwise then the court did not consider it to have been correctly decided.) The court accepted the submission that it is normally sufficient if the authorisation is an authorisation to copy. It does not have to amount to an actual authorisation of a breach of copyright.
The court further accepted the submission that there must also be an argument, if the building is an infringing copy as alleged, that by commissioning it on the terms it did, Heinz Wattie became a joint infringer or procured the breach of copyright.
Finally, the court made it clear that it was not to be taken as deciding on the exact extent to which the Amstrad case has modified the concept of authorisation or as deciding whether the Australian case of Moorhouse v University of New South Wales (1975) 133 CLR 1 applies in New Zealand despite Amstrad. The court also expressly made it clear that it was not commenting on the applicability in New Zealand of the recent Grokster and Sharman decisions.