DODSON MOTORSPORT LTD v LOGIICAL PERFORMANCE LTD [2019] NZHC 918

DODSON MOTORSPORT LTD v LOGIICAL PERFORMANCE LTD [2019] NZHC 918 [30 April 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-000110[2019] NZHC 918UNDER the Copyright Act 1994Fair Trading Act 1986IN THE MATTER OF Copyright InfringementBreach of ConfidenceConspiracyBreaches of the Fair Trading Act 1986BETWEEN DODSON MOTORSPORT LIMITEDPlaintiffAND LOGIICAL PERFORMANCE LIMITEDFirst DefendantDefendants continued overHearing: 29-31 October, and 1, 5-9, 12-16, 26 and 27 November 2018Further submissions received on 1 and 11 February, and18 April 2019Appearances: C L Elliott QC and B R Webster for the PlaintiffB P Cain and E Butler for the DefendantsJudgment: 30 April 2019[REDACTED] JUDGMENT OF EDWARDS JThis judgment was delivered by me on Tuesday, 30 April 2019 at 11.30 ampursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarCARL JOHN HANNAFORDSecond DefendantGRD ENGINEERING SERVICESLIMITEDThird DefendantKELVIN JAMES GRAYFourth DefendantTABLE OF CONTENTSThe clutch and ancillary parts ................................................................................... [4]The clutch parts ..................................................................................................... [4]Ancillary parts ....................................................................................................... [7]Logiical parts ......................................................................................................... [8]History of the dispute .............................................................................................. [11]COPYRIGHT .......................................................................................................... [32]Identification of the copyright works ...................................................................... [34]Copyright subsistence: are the Dodson parts original? ........................................... [44]Legal principles ................................................................................................... [44]The Dodson design pathway ............................................................................... [64]Outer basket ........................................................................................................ [74]Gear plate ............................................................................................................ [84]A basket ............................................................................................................... [93]B basket ............................................................................................................. [104]Inner Basket Steel (IBS).................................................................................... [110]A piston ............................................................................................................. [116]B piston ............................................................................................................. [122]Gear lock ........................................................................................................... [127]Selector fork ...................................................................................................... [131]Mechanical circlips ........................................................................................... [138]Clutch assembly ................................................................................................ [143]Summary of originality findings ....................................................................... [148]Who owns the copyright? ..................................................................................... [151]GRD drawings ................................................................................................... [155]The Bicknell and GS Works drawings .............................................................. [167]Has there been copyright infringement? ............................................................... [177]The defendants' design pathway ....................................................................... [179]Outer basket ...................................................................................................... [187]Gear plate .......................................................................................................... [193]A and B baskets ................................................................................................. [199]Inner Basket Steel (IBS).................................................................................... [202]A and B pistons ................................................................................................. [210]Selector fork ...................................................................................................... [213]Gear lock and mechanical circlips .................................................................... [216]Clutch assembly ................................................................................................ [222]Who is liable for the infringement and on what basis? ......................................... [225]GRD and Mr Gray ............................................................................................. [228]Logiical and Mr Hannaford ............................................................................... [233]What relief should be granted? ............................................................................. [248]The user principle .............................................................................................. [250]The expert evidence .......................................................................................... [254]Terms of the hypothetical licence ..................................................................... [259]Parties to the negotiation ................................................................................... [264]Commercial context and the parties' bargaining positions ............................... [267]Structure of the licence – a fixed fee? ............................................................... [274]Comparable licences ......................................................................................... [279]Share of profits .................................................................................................. [283]Reluctance and willingness ............................................................................... [289]Dodson's competitors ........................................................................................ [296]Extent of the copying ........................................................................................ [298]Eight Mile Style premium ................................................................................. [299]Assessment of compensatory damages ............................................................. [301]Additional damages for flagrancy of breach ..................................................... [305]FAIR TRADING ACT .......................................................................................... [313]Logiical and Mr Hannaford .............................................................................. [314]GRD and Mr Gray ............................................................................................ [330]Additional claims ............................................................................................. [335]Relief ................................................................................................................ [337]BREACH OF CONFIDENCE .............................................................................. [340]Does the information have the necessary quality of confidence? .................... [343]Was the information imparted in circumstances importing an obligationof confidence? .................................................................................................. [348]Was there unauthorised use of the information to the detriment of theparty communicating it? ................................................................................... [354]CONSPIRACY BY UNLAWFUL MEANS ......................................................... [360]SUMMARY OF FINDINGS ................................................................................. [373]RESULT ................................................................................................................ [380]Appendix A – Clutch Parts ..........................................................................................Appendix B – Cross-section view of Assembled Clutch ............................................Appendix C – Outer Basket ........................................................................................Appendix D – Gear Plate .............................................................................................Appendix E – The A Basket .........................................................................................Appendix F – The B Basket .........................................................................................Appendix G – IBS ........................................................................................................Appendix H – A Piston .................................................................................................Appendix I – B Piston ..................................................................................................Appendix J – Selector Fork .........................................................................................[1] Car enthusiasts around the world are likely to be familiar with the NissanGT-R R35 (R35). A distinctive feature of that car is its dual clutch transmission. Thiscase is about aftermarket clutch and ancillary parts for the R35 manufactured and soldby the plaintiff (Dodson) and first defendant (Logiical).[2] Dodson contends that the defendants (including a former employee,Mr Hannaford, and a former manufacturer, "GRD") have breached copyright in theDodson parts by manufacturing and dealing in copies of those parts. Dodson alsoclaims breach of the Fair Trading Act 1986, breach of confidence, and conspiracy byunlawful means.[3] The defendants deny all these claims. They say that copyright does not subsistin the Dodson parts because they are not original. They allege that the Dodson partsare derived from the original Nissan (OEM) parts, and contain commonplace features,or features dictated by functional constraints. However, to the extent copyright doessubsist, GRD says that it owns that copyright, and there has been no breach. Thedefendants also deny any misleading and deceptive conduct in breach of theFair Trading Act; deny they obtained information subject to an obligation ofconfidence; and deny any conspiracy or intent to injure Dodson by unlawful means.The clutch and ancillary partsThe clutch parts[4] The Dodson parts at the heart of this claim concern Dodson's Promax andSportsman clutch assemblies, and the individual parts that comprise those clutches.Pictures of those parts and assemblies are set out in Appendix A to this judgment (theclutch stacks and clutch core do not form part of the claim). A cross-section view ofthe assembled clutch is shown in Appendix B.[5] In very simple terms, the function of a clutch is to transmit power from theengine to the vehicle transmission system. In a dual clutch transmission, there are twoclutches operating simultaneously, with the gears split between them. Clutch A hasthe odd gears – 1, 3, and 5. Clutch B has the even gears – 2, 4, and 6. When the caris in drive, clutch A will have one gear engaged, and clutch B will simultaneously havepre-selected the next gear, allowing that gear to be immediately engaged. As Dodson'slead engineer, Mr Cupit, explained, essentially the car is "flipping backwards andforwards between clutch A and clutch B as it selects the next appropriate gear".1 Theprocess of engaging and disengaging the clutch discs allows for the transmission oftorque by means of mechanical friction.[6] The Promax clutch is Dodson's premier product and is totally self-contained.The Sportsman clutch uses some OEM parts in the overall assembly and isinterchangeable with the OEM parts. Dodson claims copyright in both the individualparts which make up the clutch assembly and the assembly itself. The individual partsat issue are: the outer basket, gear plate, A basket, B basket, Inner Basket Steel (IBS),A piston, and B piston. These are referred to as the "clutch parts" throughout thisjudgment.Ancillary parts[7] There are several ancillary parts that also form part of Dodson's claim, namely,two mechanical circlips (referred to as MC 1 and MC 2 respectively), a gear lock, andselector fork. The mechanical circlips and gear lock sit on the gear shaft. The selectorfork in issue is for the reverse and first gears of the car.Logiical parts[8] The Logiical parts which Dodson says infringe its copyright are found inLogiical's 9-plate and 22-plate clutch assemblies. The latter is known as the Ultimateclutch. The 9-plate assembly is interchangeable with the Nissan OEM parts; the 22-plate clutch is fully self-contained.[9] The Logiical 9-plate and 22-plate clutch components were manufactured byGRD. GRD also manufactured a selector fork for Logiical which Dodson says is acopy of its selector fork.[10] GRD did not manufacture a mechanical circlip or gear lock for Logiical.However, Logiical sold circlips and a gear lock that Dodson says infringe its copyright.1 Brief of Evidence, Mr Cupit at [65].Claims of secondary infringement are made against Logiical and Mr Hannaford inrespect of these parts.History of the dispute[11] Dodson's founding directors, Mr Dodson and Mr Cupit, met each other in theearly 2000s. Mr Dodson's involvement with the automotive industry continues afamily tradition stretching back over a number of generations. Mr Cupit has anextensive background in car engineering.[12] In 2004 they decided to set up business together, and Dodson was subsequentlyincorporated. Initially the business involved building race cars, specificallyNissan GTRs, for Dodson's customers. That complemented Mr Dodson's otherbusiness, Dodson Auto Spares Ltd, which was a Japanese car parts importer.[13] Mr Hannaford, the second defendant, began work with Dodson Auto SparesLtd in 2004 as a mechanic. Mr Hannaford left school when he was 16 and started anapprenticeship rebuilding automatic gearboxes. He got into motorsport soon after anddeveloped a love for building and preparing race cars.[14] The R35 was launched in Japan in 2007 and was subsequently rolled outaround the world. It was the much-hyped successor to the Nissan Skyline series,although it does not form part of that car family. Some commentators have suggestedthat in terms of acceleration, top speed, and head to head race-track performance theGT-R model rivals premier sports car brands such as Porsche, Audi, Lotus andLamborghini.[15] Mr Clark Proctor, a well-known personality in the New Zealand racing scene,was one of the first to import a R35 into New Zealand. In 2009 he experiencedtransmission failures with his car and, instead of returning the car to Japan at largeexpense, he brought it to Dodson to see if it could be fixed.[16] Mr Cupit and Mr Hannaford pulled the transmission apart and found a blownseal on one of the pistons. The seal was a "push in" seal moulded by Nissan and noteasily replaced. Mr Cupit approached Mr Peter Wieser at Marua Engineering Co Ltd(Marua) to manufacture a replacement part. Marua manufactured an A piston (thenknown, somewhat confusingly, as a B piston) with a push-in, rather than a push-on,seal.[17] From these inauspicious beginnings, the Dodson business grew. By this time,the R35 was becoming a popular race car and owners were modifying the vehicle inan effort to extract more power. Dodson's business expanded from fixing faults withthe original parts to making bigger and stronger clutches which could withstand thegreater power that car enthusiasts were demanding.[18] As a result of its rapid growth, Dodson required a greater volume of parts thanMarua had capacity to make. So, in March 2009, following an approach by Mr Cupit,Dodson engaged Edgeworth 2000 Ltd (Edgeworth) to manufacture the Dodson parts.Edgeworth is a specialised tool making and precision engineering company and itsworkshop was just around the corner from the Dodson premises.[19] Edgeworth manufactured an A and B basket, A and B piston, gear lock, and themechanical circlips. Machine drawings of these parts were prepared in June 2009 andDodson claims copyright in those drawings.[20] But the Dodson business continued to grow, and the demand for larger runs ofaftermarket parts rapidly outpaced Edgeworth's capacity. Dodson began to look for amore efficient and cost-effective way to manufacture its aftermarket parts. Mr Proctorrecommended GRD as a potential manufacturer, and he introduced Mr Gray, GRD'sdirector, to Mr Cupit.[21] Mr Gray was brought up in a practical, mechanical household, and followedhis father, grandfather, and great-grandfather into the field of mechanical engineering.In 2001 he incorporated GRD Engineering Services and began working on race cars.[22] Dodson claims that there was a meeting between Mr Proctor, Mr Gray, andMr Cupit at GRD's premises in August or September 2009 in which confidentialitywas discussed. That is disputed by Mr Gray and GRD. But whatever may have beendiscussed around confidentiality, it was agreed that GRD would manufacture theDodson parts. In October 2009, GRD made the first A baskets for Dodson. The otherparts followed in late 2009 and early 2010.[23] In early 2010, Dodson began work on its Promax clutch assembly. Detaileddrawings were required for this self-contained assembly, and Bicknell Auto SportEngineers Ltd (Bicknell) was engaged to prepare drawings of the necessary parts.Ownership of copyright in the Bicknell drawings is an issue in this proceeding.[24] The Dodson selector fork was manufactured by GRD in November 2011.Mr Gray sub-contracted the manufacture of that selector fork and drawings wereundertaken by Mr Glenn Simpson, trading as GS Works. Dodson claims copyright inthe GS Works drawings of the selector fork.[25] In August 2012, Dodson made the decision to create an in-house design teamto work with Mr Cupit. By this time, tensions between Mr Hannaford and Mr Cupitwere beginning to show, and Mr Hannaford resigned at the end of 2012. By allaccounts, it was not a happy split.[26] After leaving Dodson, Mr Hannaford went to work for a company owned byMr Proctor, and then left to set up his own business. This business was to becomeLogiical, which was incorporated on 3 April 2013 under a different name. Logiical'sbusiness involves the service, repair, and maintenance of vehicles, and the retail ofaftermarket clutch transmission components. This includes the sale of aftermarketparts for the R35, including those which are at the heart of this proceeding.[27] The acrimony characterising the end of the relationship between Mr Hannafordand Dodson reared its head again in 2014. Dodson commenced employmentproceedings against Mr Hannaford, but the parties reached a settlement before thematter was heard.[28] Meanwhile, GRD continued to manufacture the Dodson parts. But by mid-2012, Dodson was experiencing further significant growth, and the directors beganusing overseas manufacturers to make their parts. As a consequence, GRD'sworkflows began to dwindle. By 2014, most of Dodson's manufacturing wasconducted overseas, and GRD was forced to sell one of its machines and lay off staff.Dodson's last order with GRD was placed in July 2015.[29] In around 2013 or 2014, Mr Hannaford approached Dodson requesting topurchase parts for a Logiical customer seeking to repair a R35. When that avenue hita dead end, Mr Hannaford looked to purchase parts overseas, but was unable to sourceparts of a satisfactory quality. Eventually, he approached Mr Gray and GRD. Mr Grayinitially refused to supply parts to Logiical, but Mr Hannaford's approaches wore himdown and he eventually said yes. It is not clear just when that was, but the firstpurchase order for the Logiical parts was sent through in March 2015.[30] GRD initially manufactured the Logiical 9-plate clutch assembly. Design andmanufacturing began on the 22-plate clutch but was still under development whenthese proceedings were commenced. Logiical sold the clutch and ancillary parts atissue in this proceeding throughout 2015.[31] In 2016, Dodson became aware that Logiical was selling aftermarket clutchparts. It also became aware that Mr Hannaford had made certain statements regardingthe Logiical parts, and his own skills and experience, which Dodson considered weremisleading and deceptive. This proceeding soon followed and was filed in January2017.COPYRIGHT[32] Dodson's primary claim is breach of copyright. Dodson claims that thedefendants have breached its copyright by either making copies of the Dodson clutchparts and selector fork, or by dealing or possessing in those parts. Dodson also claimsthat Logiical and Mr Hannaford have breached copyright in the gear lock andmechanical circlips by possessing or dealing with those particular parts.[33] To prove its claim, Dodson must clearly identify the copyright work or workswhich it claims have been infringed. It must then show that copyright subsists in thoseworks. In this case, the subsistence issue turns on whether the parts are original. Ifcopyright does subsist, Dodson must then prove that it owns the copyright, either asthe original author of the works, or as the commissioner of them. Finally, Dodsonmust show that there has been an infringement of its copyright, either by copying theparts in issue, or by dealing in parts which are known to be copies. Each of theseissues is considered below.Identification of the copyright works[34] The first step is to identify the copyright works which are alleged to beinfringed. The obligation is on Dodson to clearly and accurately identify those worksin its statement of claim.[35] Schedule A to the fifth amended statement of claim dated 27 August 2018 liststhe copyright works Dodson relies on. That schedule lists the computer-aided design(CAD) and manufacturing drawings for each of the Dodson parts in issue. Thedrawings listed include those produced by Dodson's employees, and those created bymanufacturers, including GRD.[36] CAD drawings and manufacturing drawings are graphic works falling withinthe definition of artistic works in s 14(1) of the Copyright Act 1994. There is nodispute in this case that those drawings, which were produced in evidence, relate tothe parts either individually or as part of a design series.2[37] The issue in this case is one of pleading. The defendants say that the copyrightworks relied upon by Dodson are limited to those defined in Schedule A. ThatSchedule does not refer to Mr Cupit's sketches or the Dodson prototypes. Nor does itrefer to any of the drawings or test results produced by Bicknell in 2010 (Bicknelldrawings). And the Schedule does not expressly refer to the GS Works drawings ofthe selector fork undertaken in November 2011 (GS Works drawings).[38] In closing submissions, Mr Elliott confirmed that Dodson does not claimcopyright in Mr Cupit's sketches, or prototypes. Those sketches and prototypes are ofevidential relevance only. However, Dodson does rely on the Bicknell and GS Works2 See Oraka Technologies Limited v Geostel Vision Limited [2013] NZCA 111 at [12] confirmingthat a court may consider a series of independent drawings or diagrams in determininginfringement where it is apparent that those drawings relate to the same subject and are intendedto form part of a series or a whole.drawings. Mr Elliott submits that when the fifth amended statement of claim is readin its entirety, it is clear that both sets of drawings fall within the scope of the pleadedcopyright works relied upon by Dodson.[39] In Henkel KGaA v Holdfast New Zealand Ltd, the Supreme Court upheld therespondent's contention that Henkel's claim for copyright infringement in relation toa particular drawing was not available to it because of the way the claim was pleaded.3That conclusion was reached after considering the pleadings, the opening and closingaddresses, and the evidence called at trial. The Supreme Court concluded that therespondent had conducted its case on the basis of the appellant's pleadings and itwould be unfair to allow it to present a materially different case on appeal.4[40] This case is distinguishable from Henkel. Although the Bicknell drawings arenot specifically identified in a schedule to the claim, they are nevertheless referred toin the body of the pleading. Dodson specifically pleads that the copyright works wereoriginally created by, or derived from "employees of Bicknell Autosport EngineeringLtd (Bicknell) as sub-commissioned by GRD to undertake part of the work that it hadbeen commissioned to prepare for Dodson".5 Similarly, the text message exchangesbetween Mr Cupit and Mr Bicknell are specifically referred to in the claim asparticulars of the Dodson design process which underpins the claim to copyright.6[41] In addition, the Bicknell drawings were referred to in Dodson's openingsubmissions,7 and included in the evidence. Both Mr Cupit and Mr Gray were cross-examined about them,8 and they were referred to in closing submissions.9 There couldbe no real doubt that the Bicknell drawings were part of Dodson's claim at trial.[42] The GS Works drawings relate to the selector fork. The statement of claimincludes a pleading that Dodson commissioned the design and manufacture of theselector fork through Mr Cupit.10 Particulars of that pleading include the dates on3 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577.4 At [32].5 Fifth Amended Statement of Claim, 27 August 2018 at [16.6].6 At [17.7].7 For example, see [14(e)], [24], [25], [41] of the plaintiff's written opening submissions.8 For example, see pages 351, 439, 741, and 783 of the Notes of Evidence.9 For example, see [30] of the plaintiff's written closing submissions.10 Fifth Amended Statement of Claim, 27 August 2018 at [30].which Dodson commissioned GRD to prepare the moulding. As with the Bicknelldrawings, the GS Work drawings were produced in evidence, and it was clear thatDodson claimed copyright in those drawings. In those circumstances, I am satisfiedthat the pleaded copyright works relied upon by Dodson include the GS Worksdrawings.[43] In summary, I find that the copyright works at issue in the proceeding are thedrawings underpinning the Dodson parts which are listed in Schedule A to the fifthamended statement of claim, and include the Bicknell drawings, and the GS Worksdrawings.Copyright subsistence: are the Dodson parts original?Legal principles[44] Before it can prove copyright infringement, Dodson must establish thatcopyright subsists in the copyright works. Under s 14 of the Copyright Act, copyrightwill only subsist if an artistic work is "original".[45] The threshold for originality is low. But the extent of the work's originality willbe relevant to the scope of copyright protection. An inference of copying will be morereadily drawn where there is a high degree of originality, even where the degree ofsimilarity is less.11[46] The work need not be novel or unique in form; it must simply originate fromits author and be the product of more than minimal skill and labour. Importantly, it isthe execution or expression of the idea or concept that is protected by copyright law,rather than the idea or concept itself.12 In the same vein, copyright does not protecthow things work, as that is the remit of patent law. But purpose and function maynevertheless provide important context in which to assess originality.11 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [38]; LandTransport Safety Authority of New Zealand v Glogau [1999] 1 NZLR 261 (CA) at 271.12 Holdfast NZ Ltd v Henkel KGaA [2007] 1 NZLR 336 (CA) at [55].[47] As Davison J found in Sealegs, copyright may arise in a collection of individualfeatures which are not in themselves original and which would not attract copyright ifassessed on their own.13 In those circumstances, the work's originality lies in the skilland labour required to arrange or collocate those features.14[48] Section 14(2) of the Copyright Act clarifies that a work is not original if it is acopy of another work or itself infringes copyright. The defendants claim that theDodson clutch parts, viewed either individually or collectively, are not originalbecause they are copies of the Nissan OEM parts, with any differences between themexplained by functional or manufacturing constraints rather than independent design.[49] As the defendants' challenge to the claim of originality in this case involves anallegation of copying, the principles relating to infringement of copyright apply to thequestion of subsistence also. The test for infringement by way of copying involvesthree elements:15(a) Objective similarity between the infringing work and the copyrightwork.(b) A causal connection between the copyright work and the infringingwork in the sense that the copyright work is the source from which theinfringing work is derived.(c) Copying of either the entire work or of a substantial part of it.[50] As to the first step, the Court undertakes a visual comparison between the twodesigns, noting similarities and differences. The purpose of that examination is "notto see whether the overall appearance of the two designs is similar, but to judge13 Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1729 at [203], citing Bonz Group(Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC) at 220, and Henkel KGaA v Holdfast New ZealandLtd [2006] NZSC 102, [2007] 1 NZLR 577 at [40].14 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 (HL) at 277.15 The test was established in Wham-O MFG Co v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA).In Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111, the Court of Appeal set out thepreferred order in which these factors should be considered. See also Sealegs International Ltd vYun Zhang & Ors [2018] NZHC 1724 at [248].whether the particular similarities may be disregarded because they are commonplace,unoriginal, or consist of general ideas".16[51] The extent of similarity between the copyright work and the allegedlyinfringing work has evidentiary significance in terms of proving copying. Theassessment of objective similarity is a matter of impression for the court. Expertevidence may be of assistance, but the court must reach its own view.17[52] The second step involves establishing a causal connection linking theplaintiff's copyright work with the defendant's alleged infringement. As theSupreme Court noted in Henkel, it is this second step which important in copyrightinfringement cases:18The ultimate issue in a breach of copyright case concerns derivation, notsimilarity, albeit the degree of similarity between the copyright work and theallegedly infringing work has evidentiary significance. Proof of copying willseldom be direct; in most cases the court will rely on inference. The closer thesimilarity between the two works the stronger the inference is likely to be thatthe one was copied from the other. If the alleged infringer has had access to,and therefore an opportunity to copy, the copyright work, and the similaritybetween the works supports an inference of copying, it may well beappropriate for the court to conclude, on the balance of probabilities, that therewas indeed copying. This, of course, is subject always to the evaluation of anyevidence there may be that no copying actually took place.[citations omitted][53] In Steelbro NZ Ltd v Tidd Ross Todd Ltd, the Court of Appeal observed that thefactors to which courts commonly have regard to in assessing causal connection areas follows: 19 the "starting point" of the defendant's work; the extent of the defendant'salteration (i.e. whether a substantial part of the plaintiff's work survived in thedefendant's so as to appear to be a copy of the original work); and generallythe way in which the defendant has taken advantage of the plaintiff's work.[54] The final step concerns substantiality. The copying must be either of the entirework or a substantial part of it. In Oraka, the Court of Appeal said that the16 Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR2416 (HL) at 2425.17 Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1724 at [251].18 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43]19 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [109].substantiality test can be regarded as a practical threshold designed to limit claims ofinfringement to those that are real and substantial. The issue of substantiality is to bedecided on the basis of what is actually found to have been copied, rather than on whatmight be wider allegations of copying.20[55] What constitutes a "substantial" part is a question of fact to be determined ineach case, but in general it constitutes such a degree of similarity that it may be saidthat the infringement has adopted the essential features or substance of the original.21A substantial part in an artistic work depends more on the qualitative visual impressionrather than on a quantitative analysis.22 In percentage terms, "substantiality" can forma very small part of the infringing work.[56] Evidence that there are functional constraints on design can support aninference of an independent design path. In Oraka, the issue of functional constraints,and the notion of "commonplace" features, was explained by the Court of Appeal asfollows:[131] The issue of functional constraints may become important at thispoint. If similarities between two works are dictated by the function of theitem, then the similarities are an inevitable consequence of the object and itsfunction rather than the labour and skill of the claimant, against whosemisappropriation the law of copyright seeks to protect.[132] Functional constraints have been considered in the United Kingdomunder the notion of "commonplace". If the claimant's design is very ordinary(commonplace) given the constraints imposed by the function of the objectand there is nothing new added, then the originality of the claimant's workmight be non-existent or so low that the defendant can easily avoid breach byadding something of his or her own to the design. The situation has beendescribed as follows:If a number of designers working independently of one anotherin the same field produce very similar designs by coincidencethe most likely explanation of the similarities is that there isonly one way of designing that article. In those circumstancesthe design in question can fairly and reasonably be described as"commonplace". It would be a good reason for withholding theexclusive right to prevent the copying in the case of a design20 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [87].21 Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 669, citing King Features SyndicateInc v O & M Kleeman Ltd [1941] AC 417, [1941] RPC 207, 210.22 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [129]; Henkel KGaA v HoldfastNew Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [44].that, whether it has been copied or not, is bound to besubstantially similar to other designs in the same field.[133] Although the existence or otherwise of functional constraints isprimarily relevant to earlier questions regarding the originality of the workand whether copying has in fact occurred, functional constraints may alsoassist in determining the originality of the respective works and whether asubstantial part of the claimant's labour and skill has been taken by thedefendant.[citations omitted][57] Access to a copyright work, and the opportunity to copy from that work, cansupport an inference of copying. However, the drawing of that inference is alwayssubject to evidence showing that copying did not actually take place, and evidence ofan independent design pathway can rebut an inference of copying.23[58] This raises the issue of how to assess originality where modifications have beenmade to existing material. Two cases are particularly relevant to the facts of this case.The first is the Court of Appeal's decision in Wham-O.24 One of the issues in that casewas whether the addition of rings to a plain surface frisbee was sufficient to impartoriginality to the whole of the toy.[59] The Court of Appeal cited from the judgment of Lord Atkinson in Macmillan& Co Ltd v Cooper confirming that it is not the appropriation of the raw material thatis at issue in copyright claims but the appropriation of another's labour, skill andcapital.25 Accordingly, to secure copyright for the product it is necessary that labour,skill and capital should be expended "sufficiently to impart to the product some qualityor character which the raw material did not possess and which differentiates theproduct from the raw material".26[60] As to the particular facts in Wham-O, the Court of Appeal held that copyrightsubsisted because:2723 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43];Inverness Medical Innovations, Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 (HC) at [168];Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [109].24 Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA).25 Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 57–58.26 Macmillan & Co Ltd v Cooper (1923) 40 TLR 186 at 188.27 Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 665. the independent skill and labour in that case was directed not simply to theidea of a flying disc but to the form in which that idea was expressed by thedistinctive image created upon the upper surface of the disc. Further, in so faras copyright exists in any drawings, there is no suggestion that they werecopied from any previous drawings of another author.Having considered the evidence in the case we are satisfied that Wham-O isentitled to copyright protection for the whole of the materials and not simplyfor the ribs or rings upon them as Mr Hillyer contended for.[61] The second case is Steelbro.28 Subsistence and ownership of copyright werenot contested in that case. The only issue was whether the copyright in the plaintiff'ssideloading trailer had been breached. Steelbro did not dispute that it had inspectedand measured the plaintiff's sideloader. Nevertheless, it maintained that its sideloaderrepresented the logical evolution of the Steelbro range of sideloading trailers, and itwas designed independently without resort to copying.[62] The Court of Appeal summarised the competing policy argumentsunderpinning copyright infringement. It held that there was no valid policy reason forupholding substantial copying. Conversely, if Steelbro's design represented an"innovative development drawing upon but further developing existing technology itshould be welcomed and encouraged".29[63] The Court of Appeal upheld the trial Judge's findings that the Steelbro designwas derivative, that Steelbro had endeavoured to replicate the TRT model, and had"checked back" against what the plaintiff had done. An inference of copying wasavailable on the evidence, and it was open to the Judge to find copying in that case.Although Steelbro did a great deal of work itself, the Court of Appeal said that all ithad done was build "a better mousetrap".30The Dodson design pathway[64] The principles in Wham-O and Steelbro are directly engaged in this case. Thatis because there is no dispute that Dodson had access to, and the opportunity to copy,the OEM parts. Dodson freely admits that the OEM parts were the starting point for28 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486.29 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [101].30 At [113].the Dodson designs. But, just because they were the starting point does not mean theywere also the end-point. The originality inquiry involves more than just consideringthe starting point for the design.[65] Although it started off designing replacement parts, Dodson's business quicklyprogressed to designing parts for a different, higher performance use of the R35.Mr Cupit explained this development in his evidence as follows:31As time went on people started putting more power into their cars. There wasa need to make bigger and stronger clutches. This was a separate desire tofixing faults. This in turn meant that more efficient and stronger parts neededto be designed and made. Parts were breaking because of the growing powerin the car together with what I believe were inherent design flaws.[66] Dodson points to this changed use, and the different target market, to explainsome of the key differences between their parts and the OEM parts. For example, theneed to make bigger and stronger clutches led to the decision to machine the Dodsonparts from single pieces of alloy billet, which provides for a more robust and rigid partthan the OEM equivalents which are manufactured from pressed steel.[67] Similarly, the pursuit of increased power also led to the creation of more roominside the clutch assembly to house additional frictions. The creation of additionalspace within the overall clutch assembly, whilst operating within the dimensionalconstraints posed by the R35, is a key driver of some of the features which Dodsonsays are not only original, but novel.[68] Despite these different design objectives, the defendants say that Dodson'sdesign pathway falls short of the threshold for formal design that one would expect ifthe design had been truly independent rather than derived from the OEM parts. DrGooch was engaged to give expert evidence on the expected design pathway in thefield of mechanical engineering. I agree with Mr Cain that Dodson's design pathwaydid not follow Dr Gooch's approach. But that does not automatically lead to aconclusion that Dodson copied the OEM parts. The question is not whether the designprocess followed, or fell short of, a textbook approach, but whether it was trulyindependent. That is a question of fact to be determined on the evidence in each case.31 Brief of Evidence, Mr Cupit at [30].[69] The evidence in this case shows that Dodson's design pathway was generallyone of trial and error. Mr Cupit explained that in the early days he would preparesketches of what he wanted and give those to the manufacturer (initially Marua, thenEdgeworth and subsequently GRD). Prototypes would be prepared and trialled, andmodifications would be made to rectify any problems found with the parts, or toimprove performance. Later, in 2012, CAD drawings were prepared for each of theDodson parts. Once a detailed CAD drawing was made, design features of those partswere able to be changed using the CAD software programme.[70] Mr Cain challenges Mr Cupit's evidence regarding the use of prototypes in thetesting process. He suggests that the parts were not prototypes but instead weredesigned to fill orders, and referred to Mr Proctor's evidence as to the trialling of partsin his car. But I prefer Mr Cupit's evidence to that of Mr Proctor. It was evident attrial that Mr Proctor blamed Dodson for various mishaps that occurred during racing.His deep sense of grievance coloured his evidence and tainted his recollections.[71] Further, other evidence called at trial corroborates Mr Cupit's evidence thatearly prototypes were trialled and tested in Mr Proctor's car in a racing carenvironment. For example:(a) Emails exchanged between Mr Hannaford and Mr Cupit in 2009 referto trialling the seal before manufacturing the pistons, trying an "O" ringbefore ordering, and making a pan to try first before manufacturing aset of 10.(b) An invoice from GRD to Dodson for 11 pans, includes a handwrittennote stating "Clarke Proctor as prototype".(c) In 2010, Dodson engaged Bicknell to undertake stress testing of thePromax assembly. Mr Cupit explained that stress testing was donebecause the assembly was new, and Dodson needed to know how themetal was going to physically react to the higher duty. As a result ofthis stress testing, modifications were made to the overall clutchassembly.[72] A high-level assessment of this evidence suggests that while the OEM partsmay have been the starting point for the Dodson designs, what then developedfollowed an independent pathway. That evidence provides a solid basis to rebutallegations of copying and support the claim for originality. However, Dodson claimscopyright in respect of each of the clutch parts, ancillary parts, and assemblies at issuein the claim. Originality must be assessed on a part by part basis. The focus of theenquiry is on the independent skill and labour evident in any modifications, andwhether any additional elements are sufficient to make the total work original.32[73] Witnesses called by both parties in this case (in particular, Dr Gooch, Mr Cupit,and Mr Gray) undertook that assessment by comparing the physical features anddimensions of the parts themselves. I follow that approach as set out below. Theindependent expert engaged by the defendants limited his evidence to a comparisonof the respective measurements and dimensions of the parts. There were numerouserrors and inaccuracies throughout his evidence which rendered it unreliable andunhelpful. The defendants did not rely on or refer to this evidence in closing, and Ialso set it to one side.Outer basket[74] As the name would suggest, the outer basket sits on the outer side of the clutchassembly and encases the rest of the clutch parts. The gear plate connects through thefingers at one end of the outer basket, and the A piston slots in at the other.[75] Visually, the Dodson and OEM outer baskets appear very similar. The overallshape, profile and configuration of the two parts are more or less the same, althoughthe Dodson part is larger. Both parts have the same number of fingers, a circlip grooveon the outer teeth, and cut-outs which are used to connect to the A piston. The squareoil flow holes around the circumference are also the same shape and configuration.These features of the outer basket are shown in fig.1 of Appendix C.32 Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) at 665; Martin v Polyplas MFLtd [1969] NZLR 1046 (SC) at 1050; Interlego AG v Tyco Industries Inc [1989] AC 217, (1989)12 IPR 97 (PC) at 263.[76] However, there are three key differences between the parts. The first is the sizeand shape of the Dodson part fingers, as shown in fig. 2 of Appendix C. Those fingersslot into the 10 matching slots in the gear plate as shown in fig. 3 of Appendix C.There is minimum clearance between the fingers and the gear plate slots, providing aprecision fit. This fit is different to the OEM equivalents which, when fitted together,have significant clearance between the two parts – leading to movement and "rattle"in the clutch.[77] Mr Gray says that the larger finger size was a consequence of a manufacturingdecision and does not reflect original design. Unlike the OEM part, which is made outof pressed steel, the Dodson outer basket is made out of aluminium billet. As thealuminium billet is softer than steel, Mr Gray says that the whole part, and not just thefingers, had to be made thicker to be strong enough. He expanded on this in hisevidence, suggesting that the design of the fingers to fit together with the gear platearose out of a decision to remove the interior dimple on the OEM part. That decisionin turn, he said, was driven by manufacturing constraints. Mr Gray explained it thisway:33The problem we faced with leaving this dimple in here was that if you wereto put the cutting tool in here, as I've just described, this dimple would get inthe way so it would make it virtually impossible to cut that groove with thatdimple being there because the tool would interfere with it. So the solutionwas just to remove that because we knew that if we made this a closer fit withthe gear plate, that would create the same driver or do the same function asthat and replace that. So that's pretty much how the bigger fingers in theirwidth with a closer fit on the gear plate came about, it was because we neededto replace what the function of that was, because obviously we couldn'tmanufacture the part.[78] Manufacturing constraints, such as the "softer" qualities of the aluminiummaterial, may have played a part in the size and shape of the fingers, but I am satisfiedthat the key driver of the changes was design. Mr Cupit explains that the thickerfingers on the OEM basket provide a much larger area to push on the clutch and clampthe frictions and steels together. That allows more area within the clutch, and alsoallows a more even distribution in the clamp load on the clutch. Creating greater areawithin the clutch was a design objective which finds expression in several Dodsonparts.33 Notes of Evidence at 710.[79] [REDACTED][80] [REDACTED]. This was not a decision prompted by manufacturingconvenience, but a deliberate design choice consistent with the Dodson philosophy.There is a high degree of originality in this particular feature of the Dodson outerbasket.[81] The second key difference to the OEM part can be found at the other end ofthe outer basket. Different shaped cut-outs, a deeper circlip groove, and the absenceof the pressed dimples on either side of the tooth found in the OEM part, provides fora better connection to the A piston. The simplicity of these design features does notmake them commonplace. Rather, these features reflect independent skill and labourin the design of the fit between the outer basket and A piston in the overall clutchassembly.[82] The third key difference is in the thicker wall of the outer basket. The thickerwall reduces the risk of distortion as a result of the higher load the Dodson clutch partsare designed to absorb. Mr Cupit said that finding the optimum wall thickness wasnot straightforward, and that initial stress tests on a prototype outer basket saw theshape deformed. The thicker wall was designed to counteract that tendency. I acceptthat evidence. It suggests that the thicker wall was a design solution to a problemposed, rather than a consequence of the use of the softer aluminium material. Thetesting of the part leading to modifications in the design negates any allegation thatthere was copying of the OEM part.[83] Although the quantity of the differences between the two parts may not besignificant, the quality of them is. They reflect independent skill and judgment indesign of the part which is at odds with the claim of copying. Although manufacturingease may explain some of the design differences, I am satisfied that the key driver forthese changes was design, with the objective of creating a stronger clutch assemblywhich could withstand greater power. Whether considered individually orcumulatively, I consider the quality of the differences reflects an originality in theDodson outer basket which distinguishes it from the OEM part. Copyright subsists inthe Dodson outer basket.Gear plate[84] The OEM gear plate is made of pressed steel. It has 15 holes around itscircumference, and three hole and slot formations. On the outer rim, it has 10 aperturesthrough which the fingers from the outer basket protrude. The outer edge containssmall teeth which slot into the IBS. The OEM oil pump gear drive is a machined partwhich is permanently welded onto the gear plate.[85] The Dodson part is machined from alloy. The gear plate also has the holesaround the circumference, although it has more than the OEM part, and they are allthe same dimension. It also has apertures around the outer circumference, but they area different shape and dimension to those on the OEM part as they are designed to fitthe larger, thicker, fingers on the Dodson outer basket. As mentioned previously, the[REDACTED] which is original to the Dodson design. The features of the gear plateare shown in fig. 1 and fig. 2 of Appendix D.[86] Although the Dodson gear plate connects to the IBS with the teeth on the outeredge, there are fewer teeth, and they are of a different shape, to the OEM part. Thisdesign was arrived at after a trial of a threaded version which allowed for a differentconnection to the IBS, but which became problematic as more and more power wasput into the car. As explained further below, although both the OEM and Dodson partshave outer teeth, the fit to the IBS is different between the two parts. Dodson uses acirclip to lock the gear plate in position, and when the outer basket is placed over thegear plate and the IBS, it encases the circlip completely, preventing it from poppingout.[87] Objectively analysed, there is a basic similarity between the OEM and Dodsonparts. They are of a similar dimension and shape and perform the same function in theoperation of the clutch. They each have holes on the inner rim, apertures for the fingersof the outer basket on the outer rim, and teeth on the outer edge to connect to the IBS.But I consider the differences between the two parts reflect original design and are notdriven by functional requirements or manufacturing processes, for the reasons thatnow follow.[88] First, the decision to bolt the gear drive to the gear plate rather than weld it wasto achieve greater flexibility in altering gear ratios. That is, by designing a part thatcould be bolted and unbolted, Dodson could alter the oil pump gear ratio to meet therequirements of a particular vehicle.[89] Second, the apertures around the edge, which accommodate the outer basketfingers, allow for a precision fit between the [REDACTED] not found in the OEMequivalents. That fit also means that additional internal space is created within theclutch assembly, which allows for a greater number of frictions and seals to beinserted, which in turn allows for additional power to be transmitted. That is anoriginal design change.[90] Third, although the gear plate fits to the IBS through the use of "teeth", the fitis quite different as between the OEM and the Dodson parts. The OEM gear plateteeth push in to the OEM IBS part. Without the circlip, there is nothing to hold thegear plate in place, and it would simply fall through. However, the Dodson gear platefits on to the IBS, with the teeth resting in the corresponding cut-outs in the IBSallowing it to sit, unsupported, on the IBS. The fit between the gear plate and the IBSis shown in fig. 3 of Appendix D. The circlip ensures that the fit remains snug, andthe entire connection is encased by the outer basket which also prevents the circlipfrom popping out, and the gear plate coming loose.[91] That change was achieved as a result of an iterative design process, wherebythe original threaded version, itself different to the OEM part, was initially developedand trialled. When the threaded connection was failing, Dodson went back to thedesign drawing board, and came up with a solution which met the particular problemposed.[92] In summary, despite the apparent similarity between the two parts, there issufficient evidence to show that the different features of the Dodson part are the resultof independent skill and labour. The rationale for those changes is the creation of amore robust and reliable transmission which can withstand the greater duty from ahigh-performance use of the car. Overall, I consider the quality of the Dodson features,considered cumulatively, and in the context of the clutch assembly as a whole, aresufficient to impart originality to the gear part. Consequently, copyright subsists inthis part also.A basket[93] The function of the A and B baskets is to transmit power to the gear box. The"snout" of the A basket (shown in fig. 1 of Appendix E) connects to the gearbox. TheA basket houses the clutch plates for clutch A.[94] The OEM A basket is made out of pressed steel and is comprised of two pieceswelded together. The outer circumference has a number of "teeth" which have slottedholes in a 2:1 pattern. These slots distribute oil to the frictions. The inner surface iscorrugated.[95] At first glance, the Dodson A basket looks quite similar to the OEM equivalent– particularly in its shape and profile. They both have outer teeth with holes for thedelivery of oil, and the function performed by both parts is the same. However, oncloser inspection, it is apparent that there are a number of differences between the twoparts.[96] First, the Dodson A basket is machined from one piece of high tensile steel.That means there is no weld joint in the Dodson part. That method of manufacturealso leads to a smooth inner profile on the inside of the basket, rather than thecorrugated surface on the inside of the OEM part. Those different profiles are shownin fig. 2 of Appendix E.[97] Mr Gray contends that the decision to machine the part from high tensile steelwas a manufacturing decision. But I accept Mr Cupit's evidence that the choice ofmanufacturing material was a design decision driven by the need to have a more robustpart capable of absorbing the higher duty that the Dodson clutches are designed totake. [REDACTED][98] Another subtle difference concerns the height and profile of the teeth (as shownin fig. 3 of Appendix E). The teeth on the Dodson part are marginally longer than thecorresponding teeth on the OEM part. Mr Gray contends that the tooth-shape profileis dictated by the requirement of the clutch plate which is the same in both the Dodsonand Nissan assemblies. Further, Mr Gray says that the height of the teeth is determinedby the number of clutch plates to be fitted, which is a functional, rather than design-driven feature. As to the profile of the teeth, Mr Gray says that this also arises out ofmanufacturing processes rather than any conscious design decision.[99] Mr Cupit gave evidence that Dodson had trialled a different tooth profile forboth the A and B baskets and had engaged Auckland Gear Cutters to make thebroaching tool used to manufacture those teeth. He explained that the decision tolengthen and alter the profile of the teeth was necessary to fit further frictions andsteels into the clutch assembly. I accept that evidence. It is consistent with the Dodsondesign objective of creating clutch assemblies for a higher performance use of the car,and it counters the allegations of functional or commonplace design.[100] The shape and pattern of the holes on the outer teeth is also different betweenthe two parts. The OEM part has slots in a 2:1 pattern. The Dodson part has roundedholes which are configured in a 3:2 pattern. A later iteration of the Dodson design hasthe holes in a 3:3 pattern slightly offset against each other.[101] This is another feature which the defendants argue is functional in nature. Iaccept that the round shape of the holes is determined by manufacturing convenience.Round holes are easier to drill into steel billet. However, the positioning of those holesreflects purposive design. [REDACTED]. The fact that the placement evolved froma 3:2 pattern to a 3:3 pattern reflects an independent design pathway in relation to thisfeature of the Dodson A basket.[102] Finally, Mr Cupit pointed to [REDACTED]. The defendants did not proffer analternative explanation [REDACTED], and I accept Mr Cupit's evidence on that basis.[103] Overall, the two parts are objectively similar. But that similarity is explainedby the common function of the two parts, and the constraints posed by the operationalrequirements of a clutch. The differences between the two parts are not quantitativelynumerous, but they are nevertheless of qualitative significance. They evidenceDodson's independent skill and labour in finding design solutions to the particularissues posed by high performance use of the R35. The trial and error process evidentin the evolution of the oil hole patterns is inconsistent with Dodson "slavishlycopying" the OEM part. The cumulative effect of those differences reflects originalityin the Dodson A basket and copyright subsists accordingly.B basket[104] The OEM B basket is made out of two pressed steel parts which are weldedtogether. The internal spline connects to the solid shaft that fits into the gearbox. Thetooth profile around the outer edge is slightly rounded on the top. There is an innertooth profile, or corrugated pattern, that is a by-product of the pressing process. Theslotted apertures on the teeth are arranged in a 2:1:2 formation around thecircumference of the B basket. On the upper circumference, the oil slots are arrangedin a 2:1:1 pattern.[105] The Dodson B basket has the same overall profile. There are apertures for oilrelief and teeth around the outer circumference. The spline at the top of the B basketis also of the same shape and profile. The features of the OEM and Dodson B basketsare shown in fig. 1 of Appendix F.[106] However, as with the other Dodson parts, there are some key differences. Theoil apertures are round holes, rather than slots. The holes on the outer teeth arearranged in a 3:2:3 formation which differs to the 2:1:2 formation on the OEM part.The holes on the upper circumference of the Dodson part are arranged in a regular2:1:2 pattern, rather than the 2:1:1 pattern on the OEM part. Although not obvious tothe naked eye, the overall profile of the Dodson basket is thicker, and it has a constantwall thickness. The tooth profile is also slightly different, with a squarer and sharperedge compared to the rounded edge of the tooth on the OEM basket.[107] These design features play the same function and purpose as those on the Abasket. That is, [REDACTED] the tooth profile allows more room within the overallclutch assembly, and the smooth inner profile of the basket allows a more equaldistribution of force.[108] Similarly, as with the A basket, Mr Cupit gave evidence about the designpathway for this part which involved trialling different tooth profiles, oil hole patterns,and producing different versions of the B basket as part of the design evolution of thepart. That evidence is at odds with this part being a mere copy of the OEM equivalent.[109] I find the Dodson B basket to be original for the same reasons I found theA basket to be original. Copyright subsists in this part.Inner Basket Steel (IBS)[110] The IBS is the core part of the clutch assembly as it takes the torque from theengine.[111] The OEM part is made from two pressed steel parts, welded together at theinternal centre disk. Three circlip grooves and a series of slots in a 2:2 pattern arelocated on the circumference of the OEM basket. The outer and inner profile of theOEM and Dodson IBS are shown in fig. 1 and fig. 2 of Appendix G.[112] As with the other parts, the Dodson IBS has the same shape and profile as theOEM part, and it performs the same general function in the overall clutch assembly.But there are some obvious differences between the two parts. Some of thosedifferences may be attributed to manufacturing technique. For example, I acceptMr Gray's evidence that the teeth on the internal surface of the Dodson part and thesmooth outer radius are by-products of the manufacturing method used. They are notexpressions of originality in and of themselves.[113] However, other features of the Dodson IBS are evidence of original expression.First, the middle plate in the Dodson IBS is flat, and is thinner than the OEMequivalent. This allows frictions to be placed directly on top of the integrated wearplate which affords greater space than in the OEM part. Similarly, the inside diametersand internal heights are different which also aids in the creation of additional space tofit additional frictions to generate greater power. Those features are all signatures ofDodson's design philosophy and are reflective of the independent skill and judgmentbrought to bear in designing the Dodson part.[114] As discussed in relation to the outer basket, a distinguishing feature of theDodson IBS is the means by which it connects to the outer basket, and to the gear plate(as shown in fig. 3 of Appendix G). That different form of connection means there aredifferent shaped cut-outs on the top edge of the IBS. [REDACTED].[115] When the similarities and differences between the two parts are considered intotal, I am satisfied that the differences between the two parts are expressions ofindependent design and are sufficient to impart originality to the Dodson IBS as awhole. Copyright subsists in the IBS.A piston[116] The A piston connects to the outer basket. It performs part of the clampingfunction which generates and transmits power. As Mr Cupit explained, when theA piston is applied it reduces the area inside the clutch assembly, and basically clampsthe clutch. The B piston does that on the other side of the clutch assembly. It is theclamping function which transmits power.[117] The OEM A piston is made from pressed steel. It is located on the outer basketby means of three contact points located between 10 external teeth on the outer radiusof the piston. Those 10 external teeth fit within 10 slots in the outer basket and ensurethat the A piston turns with the outer basket. A rubber cup seal pushes on to theA piston to hold it in place. The OEM part has four raised dimples which are pistonstops and a bent lug to prevent rotation of the outer basket circlip. These features canbe seen in fig. 1 and fig. 2 of Appendix H.[118] Mr Cupit covered the design evolution of the Dodson A piston at some lengthin his evidence. The starting point for the entire Dodson business was the blown sealon the A piston in Mr Proctor's car. As earlier noted, Mr Cupit changed the design ofthe piston seal so that it was a push-in, rather than a push-on, seal. From there,Mr Cupit, in collaboration with Mr Wieser, began designing the A piston. Mr Cupitsays the design started with a solid piece of steel. A prototype piston was thenmanufactured and put into Mr Proctor's car to trial. The design of the piston evolvedover time as new design solutions were trialled, and faults with the existing parts wereuncovered. Mr Cupit referred to five different versions of the A piston in his evidence,with minor modifications and adjustments made to each of those versions over time.[119] One of the most significant refinements made to the A piston was thedevelopment of the piston seal. The design of the seal involved a deliberate decisionto move away from what Mr Cupit considered was a "rather complicated approach"adopted in the OEM part, because he "felt that a flexible seal might be morereliable/serviceable", and easier to manufacture.34 Mr Cupit explained the designprocess of the piston seal in the first three versions of the A piston as follows:35In basic terms, the first three versions of the modified piston had an externalpiston seal – a protruding part of the piston which the seal went around. Withthe later versions the seal went in. It was exactly the opposite to the OEM partin terms of design and functionality.[120] Further refinements followed. Mr Cupit designed both a multi-piece steel ring,and a flexible seal, to fit inside the piston groove. Many attempts to design a flexibleseal were made and a company in Pukekohe was commissioned to make some pistonrings to suit the particular seal groove. Those piston rings did not provide a perfectsolution, and Dodson approached a company in the United States to manufacture apiston seal that fit the piston seal groove in the Dodson A piston. Further refinementsto that particular seal resulted in a metallic seal that Dodson calls the "seal for life"(shown in fig. 2 of Appendix H). Mr Cupit reflected on the evolution of this seal asfollows:36Once this lengthy R&D process was over, I realised that the fundamentaldesign breakthrough with our modified seal was that it is internal. This meansthat it is both captured and protected by steel on top and bottom and also onboth sides. This was a completely novel design solution which took a hugeamount of time and effort to reach. While it may look simple, it was the bainof our life for some time – particularly because of leakages. As I have said,the Promax® Clutch is a significant improvement on the original OEM clutch.In fact, we promoted the new seal as a :"lifetime seal". The OEM clutch wouldmax out at 650 HP. The Promax® goes all the way to 3,000+ HP.[121] The evolution of the A piston design exemplifies the Dodson design pathway.The trial and error process led to refinements to the A piston which were entirely of34 Brief of Evidence, Mr Cupit at [189].35 Brief of Evidence, Mr Cupit at [222].36 Brief of Evidence, Mr Cupit at [241].Dodson's own making. Some of those refinements, such as the piston seal, were notonly original, but innovative too. The quality of those refinements imparts originalityto the overall part. This was not just a better mousetrap, but a different trap designedfor a different species of mouse. Copyright subsists in the A piston.B piston[122] The B piston performs the same function as the A piston but for the clutch onthe other side. The OEM and Dodson parts are depicted in Appendix I to thisjudgment.[123] The OEM B piston is made from pressed steel and comprises two parts weldedtogether. It has an internal rubber lip seal. Four raised dimples operate as piston stops.Around the lower circumference is a series of square apertures, with smaller roundedapertures above.[124] At one level, the two parts have a similar overall profile, shape andconfiguration. They both have a smooth outer radius, a smooth outer surface, and theyalso have holes on the outer circumference which serve the same purpose, namely oilrelief. But the differences between the two parts are more visually apparent than theyare with some of the other parts at issue. The Dodson part is noticeably taller. It alsohas a different lower profile with three slots in the outer circumference. The shapeand dimension of the apertures around the outer edge are different, as are the pistonstops on the inner part. The connection between the two parts is also different to theOEM version. An earlier iteration of the Dodson part included a threaded connection;the later version has an interference fit.[125] These features reflect independent skill and labour. For example:(a) The larger flat surface area of the B piston is designed to accommodategreater push on the steels and frictions.(b) The greater height from the piston stop to the clamp face increases theinternal capacity of the B piston by three or four millimetres. That alsoallows for more area inside the clutch assembly.(c) The "interference" fit between the two parts of the Dodson part(referred to as the outer and inner) was the result of several designiterations. The first version was screwed in, and it had a tag to "rock"it in even further. Subsequently, Dodson moved to an internal threaddesign where the inner screwed in from the inside and was again heldin place by a locking tab. The final design involved shrinking the innerpart together with the outer part, removing the need to weld the partstogether.(d) The change in the shape of the piston stops (four dimples in the OEMversion and a wavy design in the Dodson model) made themanufacturing process easier, but that does not detract from the factthat it was the product of independent skill and labour.(e) The seal groove is also different on the Dodson part. This allowed forthe push-in seal, rather than the push-on seal for the OEM part. Theposition of the seal is accordingly different.[126] The Dodson B piston does not reveal the same level of innovation in design as,for example, the A piston. Nevertheless, the various iterations in some of these designfeatures prove that they were the result of independent skill and labour. And, theconscious design decisions made in accordance with the clear design objective toincrease space in the clutch imparts originality to the Dodson B piston. Copyrightsubsists in this part.Gear lock[127] As the name would suggest, the gear lock "locks" the gear onto the gearboxshaft. The OEM R35 clutch does not have a gear lock. The originality issue is notderivation, but functionality, in relation to this part.[128] The origins and subsequent development of this part point towards originality.Mr Cupit said that over the years Dodson found that the OEM circlip (a spring steeltype clip) which holds the gear on was the probable cause of gearbox failure. To avoidthat problem, Dodson designed the gear lock to hold the circlip more securely in place.The design of the part went through a number of iterations as Dodson's own designdeficiencies were exposed in the market, and Dodson's dealers sought a part whichcould be removed to allow easy access to service the gearboxes.[129] Furthermore, there are innovative features of the gear lock which put theoriginality enquiry beyond dispute. The gear lock incorporates both a wedge and ataper. [REDACTED].37 Accordingly, the gear lock plays two functions: it holds thecirclip in place, [REDACTED] providing for a more secure fit on the gearbox shaft.[130] I am satisfied that these features of the gear lock are original to Dodson andcopyright in the gear lock accordingly subsists.Selector fork[131] The function of the selector fork is to engage the gear. The selector fork inissue is for the first and reverse gears. Photographs of each of the OEM, Dodson andLogiical parts inspected by Dr Gooch were included in his brief of evidence, and arereproduced in Appendix J.[132] There are noticeable differences between the OEM and Dodson models. TheOEM selector gear is a two-piece cast aluminium part. It has a short detend arm, alarge shaft housing, and a selector ring area with a small chamfer. The casting isthicker than the Dodson equivalent, and there is a large brace on the fork.[133] The Dodson selector fork is made from one piece of solid billet steel. It isintegrated into a one-piece design which is overall smaller than the equivalent OEMpart. The Dodson part has a longer detend arm and the area behind that arm isnarrower. The smaller shaft housing means there is less material in the part whichleads to a streamlined design. A larger chamfer in the selector ring contact area allowsfor better oil lubrication. The Dodson selector fork has less material on the selectorlever and a smaller brace.37 Brief of Evidence, Mr Cupit at [371].[134] Mr Gray claims that the changes to the selector fork arose out of manufacturingchanges that either he, or Mr Glenn Simpson of Trimac made to overcomemanufacturing hurdles. Accordingly, he says these are not design changes instigatedby Dodson but features which are dictated by manufacturing constraints.[135] I prefer Mr Cupit's evidence as to the development of this part. Mr Cupitexplained that several Dodson customers were returning with selector forks that werebreaking in the same place. Accordingly, Dodson decided to manufacture a strongerpart using a single piece of solid billet. That decision is consistent with Dodson'soverall design objectives in designing parts capable of withstanding greater forcegenerated in the car.[136] The other features of the Dodson selector fork are also a result of purposivedesign, rather than manufacturing convenience. The smaller size provides greaterclearance around the gears designed by Dodson, and the streamlined shaft housing anddetend arm contribute to the overall strength and durability of the part.[137] Overall, the OEM and the Dodson selector forks are not objectively similar;there is no evidence that one was derived from the other; and the differences betweenthem cannot be explained by manufacturing constraint. Copyright subsists in theselector fork.Mechanical circlips[138] The mechanical circlips designed by Dodson also hold the gears in place onthe gear shaft. The original version of the circlip is referred to as MC 1. A later versionis called MC 2. The OEM circlip is a standard spring steel circlip, and there is noequivalent to the Dodson-designed part.[139] Dr Gooch described the Dodson mechanical circlip as a "locking collar" – amechanical stop which he said is reasonably common in transmission systems.38Despite that commonplace use in other areas, I am satisfied that the Dodson design isoriginal for the following reasons.38 Brief of Evidence, Dr Gooch at [287].[140] First, the design of the circlips responded to a specific problem identified as acause of gear box failure in the high-performance use of the car. Mr Cupit explainedthat Dodson had to find a way to hold the gears on the shafts more effectively giventhe increased power being generated in the car.39 The gear lock sits on the front of theshaft, but there was no room for another gear lock on the back of the shaft.Accordingly, Dodson designed a mechanical circlip which was bolted in place tosecure the gears in place.[141] Second, the various design iterations of the part are also consistent with thepart being original. The first version had a straight cut through the middle with no oildrainage flow holes. This design was then developed to ensure the delivery of oil tothe bearing sitting behind the circlip. Oil flow holes were drilled into the top andbottom of the circlip and a washer was built in to the circlip. That design processsuggests that this was not just a case of taking a commonplace item and using it in adifferent context.[142] Third, and most significantly, is the angled cut in the centre of the circlip. Thatsimple, yet innovative, design solution [REDACTED]. Dr Gooch described thisfeature as an "unusual design" and represented a point of difference to similar circlips(or locking collars) used by other aftermarket parts suppliers.40 That designimprovement reflects independent skill, judgment, labour and effort and is thehallmark of originality in this part. Copyright subsists in the mechanical circlips.Clutch assembly[143] In addition to the individual parts, Dodson claims copyright in the clutchassemblies, being both the Promax and Sportsman clutch systems.[144] This claim does not relate to the order of the assembled parts. Dodson doesnot claim copyright in the basic arrangement of the clutch parts. The order is dictatedby the functioning requirements of the dual clutch system. To that extent the39 Brief of Evidence, Mr Cupit at [389].40 Brief of Evidence, Dr Gooch at [288]. Also see Notes of Evidence at 174/32–176/2.collocation claim is different to the collocation claim in Sealegs, which involved anoriginal arrangement of parts which were not themselves original.41[145] In this case, the collocation claim is directed at the way the individual partsconnect and operate together as a fully functioning clutch. Although Dodson claimscopyright in both the Promax and Sportsman clutch assemblies, the claim in relationto the latter simply duplicates the claim in relation to the individual parts. Accordingly,I proceed on the basis that the copyright claim is directed at the Promax clutchassembly, which is a self-contained clutch assembly not interchangeable with theOEM parts.[146] Although there is considerable overlap with the claim to copyright in theindividual parts, there is no duplication. I have approached Dodson's claim on thebasis that the sum of the individual parts is more than the whole, with copyrightclaimed in the "whole". Considered on that basis, I am satisfied that copyright subsistsin the Promax clutch assembly. The originality is reflected in the following features:(a) The nature and fit of the connection between the parts. For example,the connection between the gear plate and the inner basket involves anoriginal design on the teeth of the outer rim of the gear plate so that itsits on the inner basket, rather than pushes in to it. The circlip securesit further, and the whole ensemble is further secured by the outer basketencasing the circlip and the connection even further.(b) [REDACTED](c) The location and dimensions of oil apertures which ensure the precisedelivery of oil to clutch parts. The oil hole patterns on the A and Bbaskets, which evolved from a 3:2:3 pattern to a 3:3:3 pattern, is anexample of design evolution to meet a specific problem.(d) The creation of more space within the clutch assembly, allowing agreater number of frictions to be inserted. Small design changes to41 Sealegs International Ltd v Yun Zhang & Ors [2018] NZHC 1724.create additional space can be seen in the A and B pistons, the flatinternal wear plate on the IBS, and the protrusion of the fingers on theouter basket through the gear plate apertures to create a flat surface toaccommodate more frictions.[147] The innovative features of the clutch assembly reflect the different purpose ofthe Promax clutch when compared to the OEM version. Although the Dodson partsmay have had their beginnings in aftermarket replacement parts, that was rapidlysuperseded by the design of a clutch assembly for a high-performance use of the car,capable of withstanding increased power and greater rotational forces.Summary of originality findings[148] Standing back, it is clear that Dodson has taken Nissan's idea of a dual clutchtransmission. That explains the substantial similarities between the various parts.Those similarities are the result of the functional constraints imposed by a dual clutchtransmission, and the space constraints imposed by the dimensions of the R35. Thatthat does not mean Dodson has copied the OEM parts. It was entitled to take the ideaof a dual clutch transmission – copyright does not protect ideas.[149] Insofar as the expression of the idea, it is the differences between the parts thatare telling. Those differences are the product of independent skill, labour and effort,and an independent design path involving development by trial and error. There is noevidence of copying; to the contrary many of the features of the Dodson parts are notonly original, but innovative too. Those features are enough to impart originality tothe individual parts, and the clutch assembly as a whole.[150] This is not a case of "building a better mousetrap". Rather, it is a case of addinginnovation to existing technology, just like the addition of rings on a frisbee. That isexactly the type of innovation that copyright law is designed to protect, and indeed,encourage. Whether considered as individual parts, or as part of the overall clutchassembly, the Dodson clutch parts, and the ancillary parts, are original. Copyrightsubsists in the claimed copyright works.Who owns the copyright?[151] GRD and Mr Gray contend that to the extent that copyright subsists in theworks, then they own the copyright and not Dodson. Specifically, GRD and Mr Grayclaim ownership of the copyright in the GRD manufacturing drawings, and theBicknell and GS Works drawings too.[152] The author of a copyright work is the person who contributes the skill, labourand judgment comprising the actual work.42 The default position in s 21(1) of theCopyright Act is that the author of a work is the first owner of any copyright in thework. However, there are two exceptions to that default rule:(a) Where an employee makes a copyright work in the course of his or heremployment, the employer is the first owner of any copyright in thatwork;43 and(b) Where a person commissions and pays, or agrees to pay, for a work(other than a literary work) and the work is made in pursuance of thatcommission, that person is the first owner of any copyright in thatwork.44[153] Whether a work is commissioned, and if so, the scope of the commission, andthe date on which the commission arises, are all questions of fact.45 However, thereare three essential elements to a commissioning:46(a) A request to make the copyright work;(b) An antecedent payment or an agreement to pay for the copyright workin money or money's worth; and(c) The making of the work.42 Oraka Technologies Ltd v Geostel Vision Ltd [2010] NZCA 232, (2010) 88 IPR 227 at [20].43 Copyright Act 1994, s 21(2).44 Copyright Act 1994, s 21(3).45 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 (CA) at [52].46 Oraka Technologies Ltd v Geostel Vision Ltd [2010] NZCA 232, (2010) 88 IPR 227 at [40].[154] The critical element is the second one, that is, an antecedent payment or anagreement to pay for the works in money or money's worth. The agreement to paymay be express or implied.47 It is not necessary that there be an agreement as to theprecise amount to be paid. The payment is a "quid pro quo" for the copyright.48GRD drawings[155] The issue in relation to the GRD drawings is whether the scope of theengagement included payment for those drawings. As the Court of Appeal noted inPacific, it would have been preferable for the parties to address this explicitly inwriting, but the fact that they did not is not fatal to Dodson's claim.49 The bulk of theevidence suggests that Dodson agreed to pay GRD for all work necessary tomanufacture the parts, and this necessarily included any drawings made by GRD. Myreasons for reaching that conclusion are as follows.[156] First, the evidence suggests that the parties' expectations were that Dodsonwould pay for everything required to manufacture the parts. When Mr Cupit firstapproached Mr Gray, he was looking for a manufacturer who could produce greatervolumes than either Edgeworth or Marua. Dodson had "paid" for any design workthat either Edgeworth or Marua had undertaken in relation to these parts.50 Mr Cupit'sexpectation in approaching Mr Gray therefore was that Dodson would be paying forwhatever was necessary in order to manufacture the parts.[157] Correspondingly, Mr Gray and GRD's expectation was that payment would bemade for all work undertaken in relation to the Dodson parts. Mr Cupit said that whenhe met with Mr Gray, the latter made it very clear that he had a business to run and hecould not afford to carry design, research and development or any other costs.Although the discussion may not have been as detailed as Mr Cupit suggests, Iconsider it probable that Mr Gray indicated that he would not carry any costs. That47 At [40].48 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 (CA) at [58]; see alsoAlwino Co Products Ltd v Crystal Glass Industries Ltd [1985] 1 NZLR 716 (CA).49 At [53].50 Mr Wieser, director of Marua, could not recall rendering a formal invoice to Dodson, and acceptedthat he might have been compensated by Dodson doing some work on his car for free. However,he was in no doubt that he had been compensated (Notes of Evidence at 197, line 10).upfront approach is consistent with his later request for a progress payment in relationto the Promax development. Mr Gray described that request as follows:51If they wanted me to carry on through one month into the next with that beingmy sole focus, at that stage I asked Harry for a – what did you call it – progresspayment to keep things moving forward otherwise it would've come to a stopand Glenn wouldn't have got the first Promax on time.[158] Mr Gray's clear expectation was that he would be paid for any and all of thework undertaken in relation to the manufacture of the Dodson parts.[159] Second, the design drawings undertaken by Mr Gray were part of themanufacturing process. The GRD drawings of the parts were required to be able toprogramme the machines to manufacture those parts, and to make the necessarychanges to them. In that sense, the drawings formed part of the overall manufacturingof the parts – which is what GRD was engaged to do. To say that the manufacturingprocess was charged and paid for, but not the drawings which formed part of thatmanufacturing process, is somewhat strained.[160] Third, GRD's invoices reflected the common expectation of both the parties.Several of GRD's invoices referred to "R&D".52 Mr Gray said that he understood"R&D" to mean the work required to set up the machine, make the machine codes,and make the jigs required to hold the part in the machines while doing themanufacturing, but did not include any manufacturing or design drawings. I do notaccept that explanation. Other invoices issued by Mr Gray specifically referred totooling, and jig costs, suggesting that R&D was different in kind. Further, there is noreason to isolate "R&D" to particular tasks, but not others. A more plausible meaningof that term is that it was used as a broad catch-all phrase that referred to any stepstaken in relation to research and development work in the course of manufacturing thepart - including any drawings.[161] The fact that R&D was not expressly referred to in every invoice does not meanthat it was excluded from that invoice. The more probable explanation is that the priceof the drawing was included in the price of the part. Mr Cain submits that if this was51 Notes of Evidence at 789, line 20.52 For example, see Common Bundle of Documents pages 72, 91,117,123, and 183.so, then it would be reasonable to expect the price of the part to be initially higher,with it dropping once the price of the drawing had been recovered. The fact that therewas no change in the price of a part over time, he says, suggests that the price for thedrawing was not included in the price of that particular part at all.[162] I consider a more likely explanation is that the cost of producing manufacturingdrawings was not always identified as a separate cost for a specific part – particularlyif it was of little significance in the overall picture. It was simply a cost ofmanufacturing which could be expected to be recovered, in broad terms, in the cost ofthe part. Reduction of the price following recovery of the drawing and design costdoes not necessarily reflect commercial realities. Mr Duncan of Edgeworth explainedit succinctly in these terms:53Q. But you would have recovered the cost of your drawing though by thetime you came to produce the second order, yes?A. YesQ. But there is no deduction in your price?A. No. It's called business.Q. So notwithstanding the drawing had already been paid for, youmaintained the same price for those parts all the way through theperiod of time –A. It's called good businessQ. – you were manufacturing? It's called good business, right, asopposed to reduce the price because of –A. That's called bad businessQ. – you've already recovered the price. That's called bad business?A. Yeah.[163] Fourth, the parties' later conduct is also consistent with Dodson agreeing topay, and then paying, for the manufacturing drawings. In early 2010, Dodson beganwork on the Promax clutch, which was then known as the 1000hp clutch. GRD wasengaged to manufacture the additional parts required for this assembly – namely theIBS, outer basket, and gear plate. Dodson agreed to pay GRD a progress payment of53 Notes of Evidence at 193, lines 14–27.$15,000 to allow GRD to work on the development phase of the project. Mr Cupitexplained in evidence that Dodson understood there were development costs involvedin the Promax assembly and that the payment was necessary to fund GRD through thatphase.[164] Mr Gray corroborated that evidence. He said that Dodson had to provide aprogress payment to keep things moving forwards otherwise "it would've come to astop and Glenn wouldn't have got the first Promax on time ".54 The agreement tofund the development of the Promax assembly by way of a progress payment is goodevidence that GRD's commission included payment for design work, including anymanufacturing drawings.[165] Finally, and in a similar vein, Mr Gray did not challenge or question Dodson'sdemands that intellectual property clauses in a credit application form presented byMr Gray be deleted. That was the time to raise issues about copyright ownership. Thefact that Mr Gray did not assert at this time, or at any time up until this proceedingwas commenced, that he was the owner of copyright undermines the genuineness ofthat assertion now.[166] Considering the relationship as a whole and in context, it is clear that Dodsondesigned the parts, and commissioned GRD to manufacture them. That commissionincluded all that was necessary to manufacture the parts, including the manufacturingdrawings produced by GRD. Dodson was invoiced for this work, including for"R&D", and Dodson paid those invoices. There is no real doubt that Dodson was thecommissioner of the works, and ownership of the copyright in the GRD drawingsresides with it.The Bicknell and GS Works drawings[167] The question of who owns the copyright in the Bicknell and GS Worksdrawings raises an issue around sub-commissioning. The general principle is that the54 Notes of Evidence at 784, lines 20–34.person who commissioned the work, and who is ultimately liable to pay for it, is theperson who commissioned it.55[168] In 2010, Bicknell was engaged to produce drawings of the Dodson parts andto undertake stress testing of the Promax clutch. Mr Gray says that GRD contractedBicknell to do the drawings. Mr Gray explains that detailed drawings were necessarybecause the dimensions of the IBS and outer basket had to be adjusted to accommodatemore plates, and the gear plate also had to be made differently. Duane Bicknell, ofBicknell, had the necessary skills and expertise in the SolidWorks programme tocomplete the drawings. Mr Gray did not have these skills at this time.[169] Although the contact regarding the drawings was between Mr Gray andMr Bicknell, I nevertheless consider that the Bicknell drawings formed part ofDodson's commission. Dodson, and more particularly, Mr Cupit, was the designer ofthe Promax clutch assembly. GRD was engaged to manufacture the parts. Detaileddrawings were necessary to allow that to occur and to assist with the tweaks andchanges made to the parts during the development process.[170] Dodson expected to pay for this work and did in fact pay for this work.Bicknell's invoices were addressed directly to Dodson and were paid for by Dodson.Mr Bicknell emailed Mr Cupit requesting the Dodson logo to be sent through so thathe could put it on the drawings. That is good evidence that all parties understood thatDodson was commissioning, and paying, for the work.[171] The GS Works drawings relate to the selector fork. Mr Gray approachedTrimac Engineering to manufacture the selector fork, and they had suggested hecontact Glenn Simpson to prepare the necessary drawings. Mr Gray says he paid cashfor these drawings but did not charge Dodson for it. He denies recovering this cost inthe price of the part and relies on the fact that the price for the selector forks remainedconsistent in his invoices to Dodson and did not drop, as would be expected if thedrawing cost was amortised over the price of the parts.55 James Arnold & Co Ltd v Miafern Ltd [1980] RPC 397 (Ch) at 404.[172] Although Dodson did not pay for the GS Works drawings in this case, that doesnot alter the fact that Dodson is the owner of the copyright. Dodson commissionedGRD to produce the Dodson parts which Mr Cupit had envisaged and designed. Thedrawings required to undertake that engagement were part of that commission.Implicit in the arrangement was a promise by Dodson to pay GRD for all the stepsnecessary to perform that task.[173] The decision to sub-contract part of that work to GS Simpson does not alterthe terms of the commission between GRD and Dodson. Nor does the fact that GRDpaid for that drawing and elected, unilaterally, not to pass on that cost to Dodson. Inhis evidence in chief, Mr Gray explained that he did not charge for the drawings,because:56I was looking at the bigger picture – by not charging for the drawings I wasgoing to build goodwill with Dodson's. So I took on the cost myself.[174] He confirmed that position in cross-examination:57At this time in the business there was lots going on and they were putting a lotof work through me, so it was just like, oh well, that's gone now, just get onwith it. That was the whole business relationship with Dodson's, was I wasputting in just as much effort to build a good strong friendship and businessrelationship with Dodson's so that I stayed on being their supplier, that I didn'tworry about it.[175] It is not the fact of payment that is determinative of the question ofcommissioning, but the antecedent promise to pay. The fact that Mr Gray elected toabsorb the cost of the GS Work drawings himself does not alter the fact that Dodsonwas ultimately liable to pay for these drawings, and the sub-commissioning formedpart of the overall commissioning of the works. Seen in the context of the relationshipbetween Dodson and GRD as a whole, I am satisfied that Dodson owns copyright inthe GS Works drawings as the commissioner of that work.[176] In summary, I find that Dodson is the owner of the copyright in the GRD,Bicknell and GS Works drawings. The next issue is whether that copyright has beeninfringed.56 Brief of Evidence, Mr Gray at [155].57 Notes of Evidence at 804, line 30.Has there been copyright infringement?[177] Dodson alleges that its copyright has been infringed through the manufacturingof the Logiical parts (primary infringement)58 or the possessing or dealing with copiesof the copyright works knowing that they are infringing copies (secondaryinfringement).59[178] The Act defines "infringing copying" in s 12, but what the concept actuallyentails has been fleshed out in the common law. Those principles have beensummarised earlier (from [49] to [63]). This time they are applied in a comparisonbetween the Dodson parts on the one hand, and the Logiical parts on the other.The defendants' design pathway[179] Just as Dodson pointed to evidence of an independent design pathway toestablish originality, the defendants defend the claim of infringement by pointing totheir own independent design pathway. However, the evidence adduced on behalf ofthe defendants was not as coherent or conclusive as that produced by Dodson.[180] Initially, the defendants took the line that the starting point for the design ofthe Logiical parts was the OEM version. Mr Hannaford says that he approached GRDto manufacture the parts as replacements for the OEM components. Mr Gray initiallysaid that he designed Logiical's 9-plate clutch assembly with the OEM part besidehim. He confirmed that in his oral evidence, emphasising that he only referred to theOEM clutch and his own knowledge in designing the Logiical parts. The 22-plateclutch, he said, took a little longer because it involved development of the main hub.But, again, he stressed that he did not make reference to the Dodson parts or drawingswhen he was designing the Logiical assemblies.[181] However, that position changed when Mr Gray was presented with someSolidWorks drawings of the Logiical components in cross-examination. These GRDdrawings had creation dates of 2012 or later. Mr Gray's evidence that they weredrawings of OEM parts undertaken by Mr Ineson, a GRD employee, for the purposes58 Copyright Act, ss 29–30.59 Section 36.of a SolidWorks training course, was unconvincing. Mr Ineson worked nearlyexclusively on the Dodson parts while on a SolidWorks training course at the ManukauInstitute of Technology. It is significant that the drawings were created at about thesame time that some of the Dodson parts were being manufactured. This provides afirm evidential base from which it may be inferred that the Dodson parts and drawingsformed the starting point for the Logiical parts.[182] Mr Gray then took the line that he used the knowledge that he had acquiredfrom drawing and designing the Dodson parts to design and manufacture the Logiicalparts. He did not consider there to be anything wrong with that given his view that theparts were simply copies of the OEM parts, and any differences were a result ofmanufacturing initiatives taken by him, and not Dodson. Irrespective of whetherMr Gray genuinely believed that to be the case, the point is that know-how derivedfrom the Dodson work was used in the manufacture of the Logiical parts, and theprocess did not start from a "clean sheet of paper".[183] Of course, that alone is not sufficient to justify an inference of copying. Asseen with the Dodson parts, modifications to original material that are a result ofindependent skill and labour may be enough to impart originality to the whole.However, the difference in this case is that there is little or no evidence from which aninference of independent skill and labour may be drawn.[184] Specifically, there was very little evidence of testing on the parts. GRD didnot undertake any testing; Mr Hannaford was responsible for that. Mr Hannaford saidthat he tested the 9-plate assembly in Mr Proctor's car, and the 22-plate assembly wastested in a race car in Australia. However, in stark comparison to the testingundertaken by Dodson, there was no evidence of refinements or adjustments made tothe clutch assemblies as consequence of this testing, and no evidence of the evolutionof the part as a result.[185] Similarly, and as described further below in relation to each part, there was notthe same degree of rationalisation for the design features reflected in the Logiical partsas there was for the Dodson parts. That is, the differences between the Logiical partsand the Dodson parts did not themselves reflect a comprehensive trial and error designprocess or a clear design philosophy.[186] In general terms, the evidence of an independent design pathway for theLogiical parts is thin on the ground. The weight of the evidence points towards, notaway from, an inference of copying. With that in mind, a comparison of each of theDodson and Logiical parts now follows.Outer basket[187] The Dodson and Logiical baskets have the same general profile anddimensions, but there are some differences which are apparent on a visual inspection(see fig. 4 and fig. 5 of Appendix C). There are 16 fingers in the Logiical version, asopposed to 10 fingers in the Dodson outer basket. Similarly, at the opposite end, theLogiical outer basket has more fingers than the Dodson equivalent. The holes on theouter circumference are an elongated slot shape, and there are more of them than inthe Dodson outer basket.[188] Mr Gray was unable to offer any reason for the differences between the twoparts. Dr Gooch was unable to see any mechanical advance in these differences either,noting that they performed the same basic function. He concluded that the differencesbetween the Logiical and Dodson parts made no material impact on the function of thetwo parts.[189] There are, however, some important similarities between the two parts. TheLogiical outer basket is made out of machined aluminium billet, like the Dodson one.The fingers are also fatter, which is a point of difference to the OEM version.[REDACTED]. Consequently, like the Dodson part, the Logiical outer basket doesnot have the internal dimples found on the OEM version. The circlip groove on theouter teeth also has the same profile as the Dodson circlip groove. The walls of theouter basket appear to be the same thickness, and Dr Gooch's evidence was that theLogiical outer basket had the same inside and outside diameter and thickness to theDodson outer basket.[190] In substance, the Logiical outer basket has the very features of the Dodsonouter basket which differentiate the Dodson component from the OEM part. Asexplained above, these Dodson design features were not responses to manufacturingor functional constraints as Mr Gray suggested. They were deliberate design decisionsaimed at increasing the performance of the R35.[191] Dr Gooch gave evidence of other potential design pathways that GRD couldhave followed in designing the outer basket. He concluded that the Logiical part wasbased on the Dodson design, and it had followed the same design path. I agree. Theevidence strongly suggests that the Logiical outer basket was derived from the Dodsonequivalent.[192] The substantiality threshold is also met in relation to this part. Effectively,Logiical has adopted the essential features or substance of the Dodson part. There isno evidence of an independent pathway leading to that same design. Overall, theevidence points to Logiical having copied the Dodson outer basket, and I findaccordingly.Gear plate[193] The Dodson gear plate and the Logiical gear plate are very similar to look at,but much of that similarity is dictated by the function of the part within the overallclutch assembly. Version 2 of the Dodson gear plate is depicted in fig. 4 ofAppendix D, and the Logiical gear plate is shown in fig. 5.[194] There are a few differences between the two parts. The apertures around theouter circumference differ in shape and number – that reflects the different size andgreater number of fingers on the Logiical outer basket. The shape and number of teetharound the outer rim of the gear plate in the 9-plate clutch assembly also differ.Mr Gray explained that Logiical increased the number of fingers to make itinterchangeable with the OEM inner basket steel. Consequently, the shape andspacing of those teeth is dimensionally the same as the OEM gear plate.[195] There are also similarities between the parts:(a) The Logiical gear plate is machined from two parts – a high strengthsteel plate and a steel oil pump gear. The Logiical gear plate also has aremovable gear to drive the oil pump – as does the Dodson part.(b) Dr Gooch gave evidence that the spigot diameter of the two parts wasexactly the same, despite that dimension being nominal to the functionof the part.(c) The parts were bolted together using 10 bolts which have the samedistance between them.(d) The gear plate and IBS were connected using precision fit teeth, with acirclip locking it in place.(e) The gear plate and outer basket were connected through the fingersfrom the outer basket fitting through apertures on the gear plate.[196] The similarity between the latter three features is particularly significant.These are the key features which differentiate the Dodson part from the OEM part.The fact that the parts have been bolted together, using exactly the same number ofbolts, at exactly the same distance apart, is very strong evidence that the essence ofthe Dodson part has been reproduced in the Logiical part. That Mr Gray may havecome up with this solution when designing the Dodson parts only makes it more likelythat this solution was simply copied over in the Logiical part.[197] Finally, [REDACTED] and the use of a circlip to lock the gear plate in place,is a signature of Dodson's innovation. There is no evidence that the defendants trialledother methods of connecting the gear plate to the outer basket, or other means ofsecuring it in place. Dr Gooch produced a morphological matrix regarding thepotential design pathways for the gear plate. He concluded that Logiical had adoptedthe same design solutions as Dodson based on the similarities between the parts. Iaccept that evidence.[198] The Logiical gear plate reproduces, in substance, the essential features of theDodson part. It was clearly derived from the Dodson part. The Logiical gear plate isa copy of the Dodson gear plate and infringes the latter's copyright.A and B baskets[199] The defendants accept that both the A and B baskets are objectively similar tothe Dodson equivalents. That is apparent from a comparison of the various versionsof the parts as shown in fig. 4 (Dodson) and fig. 5 (Logiical) of Appendix E, and fig. 2(Dodson) and fig. 3 (Logiical) of Appendix F.[200] Although I found the differences between the Dodson and the OEM A and Bbaskets to be subtle, they were nevertheless representative of a different designphilosophy. The Logiical parts adopt and reproduce the essential features of theDodson equivalents, namely:(a) They are machined from one piece of high tensile steel, whicheliminates the need for a weld joint and provides for a more robust part.(b) The increased stack height accommodates additional frictions andsteels.(c) The round oil holes are arranged in the same sequence as versions ofthe Dodson A and B baskets.(d) They have a greater wall thickness than the OEM version.[201] Those similarities reproduce the substantial part of the Dodson design. Theyprovide a foundation for concluding that the Logiical parts were derived from theDodson parts. Infringement of copyright in relation to the A and B baskets isestablished.Inner Basket Steel (IBS)[202] Dodson claims that both the Logiical 9-plate IBS, and the 22-plate IBS infringeits copyright. Versions of the Dodson and Logiical IBS are set out in fig. 4 and fig. 5of Appendix G.[203] On a visual inspection, the similarities between the various parts are as follows:(a) They are all machined from solid high tensile steel.(b) They all comprise three parts welded in the centre.(c) They have teeth on the internal surface only, and a smooth outer radius.(d) They have a flat, integrated wear plate at the centre.(e) They have bevelled edges.(f) They have inset circlip grooves to hold the circlip more securely.[204] There are also some apparent differences:(a) The top rim of the Logiical IBS has a different profile. The DodsonIBS has notches cut out on the top edge which is where the gear platesits. Those notches are absent in both Logiical parts.(b) The apertures on the outer circumference are a different shape and arearranged in a different pattern to the apertures in the Dodson part. Inthe Logiical 9-plate part, the apertures are single, elongated slotsarranged at regular intervals. The 22-plate part has elongated aperturesin a vertical line, and four additional small round holes arranged in-between.(c) The Logiical 9-plate part appears to be slightly shorter than the Dodsonequivalent; but the Logiical 22-plate part is marginally taller than theDodson part.(d) The Logiical 9-plate part has the four dimples on the outercircumference which allows interchangeability with the OEM version.Neither the Dodson, nor the Logiical 22-plate IBS have this feature.[205] These differences are not material in the overall comparison of the Dodson andLogiical parts. The most obvious difference is in the number and shape of theapertures around the circumference of the IBS. Dr Gooch could not see any technicaljustification for the difference and considered the additional holes to be undesirablefrom a structural perspective.[206] The similarities between the parts are more revealing. The very features whichdistinguish the Dodson part from the OEM part are reproduced in the Logiical part.In particular, the use of a flat, integrated wear plate, and the circlip grooves to hold thecirclip in place have been substantially reproduced in the Logiical parts. In Dr Gooch'sopinion, the similarity between the parts suggested that the Logiical parts had beenderived from the Dodson equivalents. I agree.[207] Mr Gray did not contest that he had adopted the Dodson features. Rather, hetook the position that the Dodson features were solutions that he had devised toovercome flaws in the OEM version, and accordingly he considered he was justifiedin using them. The following exchange during cross examination illustrates hisposition:60Q. So you once again went back to what you knew, the Dodson solutionand avoided the drawbacks of the OE version?A. Like you said before, the common denominator is me, we came upwith a solution, Duane and I came up with a solution to go to the thinplate to start with. It wasn't a suggestion from Mr Cupit, it was asolution that Duane and I came up with, so the common denominatoris me.Q. So you basically just used your previous solution for the new product?60 Notes of Evidence at 893, lines 11–18.A. That would be a sensible thing to do, wouldn't you think?[208] I consider this exchange puts it beyond doubt that the Logiical IBS is derivedfrom the Dodson part. There is no evidence of independent skill and labour indesigning the parts which would refute the inference of copying.[209] I find that the Logiical IBS infringes Dodson's copyright in the equivalentDodson part.A and B pistons[210] The defendants accept that the Logiical A and B pistons are objectively similarto the Dodson equivalents.[211] Based on his observations of various versions of the Dodson and Logiical parts,Dr Gooch concluded that the Dodson parts were the most likely starting point for theLogiical parts. That was due to features unique to the Dodson part being replicated inthe Logiical equivalent. For example:(a) The larger radius between the boss and the flange in the Dodson Apiston was replicated in the first version of the Logiical A piston.However, there was no evidence to suggest that this feature had beenarrived at through independent trial and error.(b) The same waved pattern for the piston stops were found in bothLogiical and Dodson's A pistons. Dr Gooch's opinion was that if thedesign had been from scratch you would more likely see somethingsimilar to the dimples on the OEM A piston.(c) The split ring seal design was also present in both the A and B pistons.In Dr Gooch's opinion, that was unlikely to be a coincidence.(d) The Logiical B piston incorporated the Dodson interference fit featurewithout any evidence of independent design pathway leading to thesame result.(e) The dimensions between the Logiical and Dodson B pistons were"practically identical" in Dr Gooch's opinion. Some of thosedimensions were nominal in nature, and Dr Gooch stated that he wouldhave expected more variation had there been independent design.[212] The defendants were not able to offer a genuine explanation for the substantialsimilarity between the two parts. Although some of the similarities may have beendriven by manufacturing constraints, others were clearly adopted because they madegood design sense. Dodson's skill and hard work in evolving the design to incorporatethese features was simply adopted by Logiical without independent thought orexpression. When all the features are considered in their entirety, I am satisfied thatthat the Logiical parts are a copy of the Dodson equivalents.Selector fork[213] The defendants accept that their selector fork is objectively similar to theDodson selector fork. Indeed, the only real difference between the two parts is thedifferent manufacturing material. The Logiical part is manufactured out of aluminiumalloy; the Dodson part is out of steel.[214] That difference fades into insignificance given the degree of similarity betweenthe parts:(a) The Logiical version is an integrated one-piece design, with a longerdetend arm protruding from a smaller shaft housing. The selector ringcontact area has a larger chamfer than the OEM equivalent. These arethe features which distinguish the Dodson selector fork from the OEMselector fork and were the product of Dodson's skill and labour.(b) The Logiical part replicates the dimensions of the Dodson selector fork,so that when the drawings are overlaid, they appear to be dimensionallyidentical.(c) Dr Gooch's expert opinion was that the Dodson and Logiical selectorforks had been manufactured using the same computer aided draftinginformation.[215] It is clear that the Logiical part is a substantial reproduction of the Dodsonversion if not an exact replica of the part. The coincidence in shape and dimension isnot the result of manufacturing or functional constraints. Rather, it points stronglytowards the Logiical part being an exact copy of the Dodson part. I find that theLogiical version breaches Dodson's copyright in the selector fork.Gear lock and mechanical circlips[216] GRD and Mr Gray did not manufacture a gear lock or mechanical circlips.Nevertheless, Dodson claims that Logiical and Mr Hannaford have infringed Dodson'scopyright in those parts by importing, possessing or selling infringing copies of theseparts contrary to s 36 of the Copyright Act.[217] Establishing liability under s 36 involves proving, on the balance ofprobabilities, that the part is in fact an "infringing copy". The definition of "infringingcopy" in s 12 of the Act includes the making of an object that constitutes aninfringement of the copyright in the work in question, including, in relation toimportation, the making of a part that would have infringed copyright had it been madein New Zealand (subject to certain exceptions which do not apply in this case).[218] Dodson initially alleged that Logiical was selling a gear lock which was aninfringing copy. However, the only evidence adduced at trial established that theLogiical gear lock was in fact a Dodson gear lock with the Dodson logo substantiallyremoved. In the absence of any direct evidence regarding the alleged infringing parts,the claim for breach of copyright cannot be maintained in relation to the gear lock.[219] As far as the mechanical circlips are concerned, there is no dispute that Logiicalimported SSP circlips. Mr Hannaford admitted as much in his evidence. Dodson didnot produce as exhibits those parts that they say infringe. However, the defendantsproduced SSP circlips through Mr Hannaford in his evidence in chief.[220] Visually, the SSP circlips share some similarities to Dodson's MC 1. Butobjective similarity alone is not sufficient to prove that the imported parts are"infringing copies". There is no evidence at all from which the assessment of the keyelement of copying – that of derivation – may be made. The fact that Dodson mayhave separately alleged copyright infringement against SSP, and there had beendiscussions in chat forums as to the general similarity between the parts, is not proofthat these parts were copies. In the absence of that evidence, Dodson cannot dischargeits burden in relation to the mechanical circlips.[221] Accordingly, Dodson cannot show that Logiical and/or Mr Hannafordimported a gear lock or mechanical circlips which infringed Dodson's copyright. Itfollows that the claims of secondary infringement in relation to these parts must bedismissed.Clutch assembly[222] Dodson pleads that the assembled clutches sold by Logiical and Mr Hannafordreproduce the whole or a substantial part of the Dodson clutch assemblies. Althoughnot particularised, I have treated this claim as being directed at the Logiical 22-plateclutch system which is totally self-contained – just like the Promax.[223] It flows from my analysis of the individual parts which make up the Logiical22-plate clutch assembly, that this assembly also infringes Dodson's copyright in thePromax clutch assembly. All the features which lead me to find that copyright subsistsin the Promax assembly (at [146]) are reproduced in the Logiical 22-plate clutchsystem. They have been copied from the Dodson parts.[224] I find that the Logiical 22-plate clutch assembly infringes copyright inDodson's Promax clutch assembly.Who is liable for the infringement and on what basis?[225] Having established that the Logiical clutch parts and selector fork breachDodson's copyright, the next question to determine is who should be held liable forthat breach and on what basis.[226] The Copyright Act provides a number of different routes by which liability forcopyright infringement might be established. The following sections are applicable inthis case:(a) Section 29 provides that copyright is infringed by the doing of a"restricted act" in relation to either a whole or any substantial part of acopyright work, and either directly or indirectly.(b) Section 30 provides that the copying of a copyright work is a "restrictedact".(c) Section 2 defines "restricted act" as meaning any of the acts describedin s 16.(d) Section 16 sets out the acts which an owner of copyright has anexclusive right to do in New Zealand. They include copying the work,issuing copies of the work to the public, whether by sale or otherwise,and authorising "another person to do any of the acts referred to" inparagraphs (a) to (h) of s 16.(e) Section 36 provides that copyright in a work is infringed by a personwho possesses an infringing copy in the course of business, or whootherwise sells, offers for sale, exhibits or distributes, "an object that is,and that the person knows or has reason to believe is, an infringing copyof the work". This is known as "secondary liability".[227] The heads of liability alleged against each of the four defendants is consideredbelow.GRD and Mr Gray[228] GRD manufactured the Logiical clutch parts, the selector fork, and the 9-plateand 22-plate clutch assemblies. I have found that the individual parts making up thoseassemblies, and the 22-plate assembly itself, breach Dodson's copyright. Accordingly,GRD is in breach of ss 29 and 30 for the copying of a copyright work.[229] Dodson says Mr Gray is also liable for copyright infringement as he authorisedGRD to copy the copyright works and that is a "restricted act" for the purposes of s 29.[230] All parties agree that the question of Mr Gray's liability is to be approached byconsidering whether his acts, as director of GRD, can found separate liability forcopyright infringement under the Act. That approach was followed in InvernessMedical Innovations Inc v MDS Diagnostics Ltd.61 In that case, Woodhouse J foundthat MDS Diagnostics Ltd's director was liable for a separate statutory wrong ofinfringement by authorising MDS to issue infringing copies to the public. His Honourheld that because MDS was a corporation, the act of issuing to the public by MDScould only have occurred as a consequence of authority being given by another person(whether a corporate entity, or individual). As the Act did not exclude directors orcorporations from those who may be liable for authorising another act of infringementby a corporation, the director in that case could be held liable for authorising theinfringing act.[231] Applying those principles to this case, it is clear that Mr Gray is directly liablefor authorising copyright infringement. Mr Gray held 99 per cent of the shares inGRD, with the remaining one per cent held by his wife. Mr Gray was the face of thecompany, and the one who Mr Hannaford approached when he wanted partsmanufactured for Logiical. In reality, GRD and Mr Gray were one and the same withMr Gray being the directing mind and will of his corporate entity. The decision tomanufacture the Logiical parts, and to replicate the Dodson parts, was a decision takenby Mr Gray. In that respect, Mr Gray "authorised" GRD to copy the Dodson parts,thus infringing Dodson's copyright.[232] Accordingly, both GRD and Mr Gray are liable for copying Dodson's work,with Mr Gray being personally liable for authorising the copying of that work.Logiical and Mr Hannaford[233] Dodson says that Logiical is also liable for copyright infringement. There isno evidence to show that it was directly involved in the manufacturing process and so61 Inverness Medical Innovations Inc v MDS Diagnostics Ltd (2009) 93 IPR 14 (HC).it cannot be held directly liable for copying or reproducing the copyright works.Dodson alleges two other routes by which Logiical might be found liable:(a) First, by authorising GRD to copy the Dodson parts contrary tos 16(1)(h) of the Act.(b) Second, by being in possession of infringing copies, selling or offeringto sell an object that it "knew or had reason to believe was an infringingcopy" in the course of business.[234] The first route of liability involves considering the concept of authorisationthrough a lens different to that used to consider the distinction between corporate anddirector liability. The scope of what is meant by "authorise" in this sense wasconsidered by the Court of Appeal in Heinz Watties Ltd v Spantech Pty Ltd.62 It wasalleged that Heinz Watties had contracted with BPM Contracts Ltd to construct abuilding "as per the existing adjacent potato stores".63 The adjacent potato storebelonged to Spantech, who argued that Heinz Watties had, as a result, authorised BPMto breach Spantech's copyright.[235] The Court held that an instruction to build "as per the existing adjacent potatostores" could amount to a direction to copy those other potato stores.64 As HeinzWatties was the contracting party and directed what was to be built through thecontractual specifications, it could be held liable for authorising copyrightinfringement if what was built did in fact breach Spantech's copyright.65 That HeinzWatties did not think that this amounted to copyright was immaterial. It was sufficientthat Heinz Watties made an authorisation to copy – even if no authorisation was givento actually infringe copyright. The Court of Appeal also accepted that it was arguablethat if the building was an infringing copy, then by commissioning the building on theterms that it did, Heinz Watties became a joint infringer or procured the breach ofcopyright.62 Heinz Watties Ltd v Spantech Pty Ltd (2006) 8 NZBLC 101, 679, (2005) 11 TCLR 591 (CA).63 At [5].64 At [32].65 At [33].[236] Applying those principles to this case, to prove its claim against Logiical,Dodson would need to show, on the balance of probabilities, that Logiicalcommissioned GRD to manufacture the Logiical clutch parts knowing that theresulting product would be a copy of the Dodson parts.[237] There is no direct evidence of an instruction in those precise terms, but there issufficient evidence from which to draw the necessary inferences. That evidenceincludes the following:(a) Mr Hannaford approached Mr Gray to manufacture the Logiical partsafter failing to secure supply of the Dodson parts from Dodson directlyand failing to secure parts of the necessary quality from overseassuppliers. It may be inferred from that evidence that Mr Hannafordwanted parts equivalent to the Dodson parts. His assertions that he onlycommissioned GRD to manufacture "replacement" parts lackscredibility in the face of that evidence.(b) Mr Hannaford knew that Mr Gray and GRD had manufactured parts forDodson and so he knew that GRD had the capabilities and know-howto replicate the Dodson parts.(c) Mr Hannaford appeared to believe that if GRD was not manufacturingparts for Dodson any more, it would be "ok" for GRD to manufactureparts for Logiical. Similarly, Mr Gray believed that GRD was entitledto use his know-how derived from Dodson to manufacture the Logiicalparts. Mr Gray's description of the approach made by Mr Hannafordexemplifies the point:66Carl asked me, "Would you make some bits for us?" and Isaid, "Well, I'm not particularly interested" and he said, "well,you know, you're not making it for Dodson's any more. I can'tbuy it, what about just make the stuff that you're not doing forthem". I was like, "Nah, can't really be bothered still". Herang me a few times, and each time I said no. In the end,around Autumn 2015 I thought "Well, yeah, Dodson's arerunning away with what I felt to be my hard work". So, I66 Brief of Evidence, Mr Gray at [380].agreed to do some baskets for him. We weren't making thebaskets for Dodson's at the time, or the pistons, because theywere all being made offshore. It wasn't some grandconspiracy though, to get back at Dodson's. I had knowledge,which I wasn't barred from using under any agreement withDodson's, and I was not doing a lot so I agreed to put the timeinto it.(emphasis added)(d) Mr Hannaford had worked for Dodson during the development of theDodson clutch and gear parts. He also worked closely with Mr Grayand GRD and accepted that he was involved in the refinement of the22-plate clutch design. He must have known when he saw the Logiicalparts manufactured by GRD that they were copies of the Dodson parts.His continuing course of conduct in instructing Mr Gray to manufacturethe parts constitutes a continuing authorisation to copy those parts.[238] Accordingly, I find that Logiical authorised GRD to breach copyright pursuantto s 16(1)(h) of the Act.[239] The second route of liability, that of secondary infringement, arises under s 36of the Act. Under that section, copyright is infringed by a person who possesses ordeals with an object "that is, and that the person knows or has reason to believe is, aninfringing copy of the work". I have already found that the Logiical clutch parts,selector fork, and clutch assemblies, are "infringing copies" for the purposes of thissection. The remaining issue is whether Logiical knew or had reason to believe thatthe Logiical parts were infringing copies.[240] The principles relevant to the knowledge requirement under s 36 were set outby the Court of Appeal in Jeanswest Corp (New Zealand) v G-Star Raw.67 Section 36requires actual knowledge ("knows") or constructive knowledge ("has reason tobelieve"). The latter includes a party wilfully closing its eyes to the obvious or wilfullyfailing to make inquiries that an honest and reasonable person in the circumstanceswill make.68 Ignorance of copyright law is no excuse, so that lack of knowledge based67 Jeanswest Corporation (New Zealand) Ltd v G-Star Raw C.V. [2015] NZCA 14, (2015) 13 TCLR787.68 At [110].on an error of law may still amount to infringement. The appropriate inquiry iswhether the defendant knew the relevant facts to determine whether a work was acopyright work.69[241] Where, as in this case, the secondary infringer is a corporation, the knowledgeelement of s 36 is to be considered by looking at the knowledge of the director, in thiscase Mr Hannaford. The following evidence shows that Mr Hannaford had eitheractual knowledge or constructive knowledge that the Logiical clutch parts and selectorfork were "infringing copies":(a) Mr Hannaford worked for Dodson and had intimate knowledge of theevolution of the design of the Dodson parts and their particularattributes.(b) Mr Hannaford was also aware that Dodson had claimed copyright intheir products and that they demanded confidentiality in relation tothose parts to protect their investment.(c) Logiical's promotion of its products appeared targeted at the samemarket as Dodson. That is, aftermarket parts for high performance use.Mr Hannaford's suggestion that they were simply designingreplacement parts for the R35 lacked credibility in that respect.(d) The evidence set out at [237] relied on to find that Logiical "authorised"GRD to copy the Dodson parts.[242] It follows that Logiical is liable for secondary infringement under s 36 of theAct.[243] The final question is whether Mr Hannaford should be held separately liablefor copyright infringement. Dodson pleads that Logiical "acted under the direction,69 At [114]–[117], citing with approval Ian Finch (ed) James & Wells Intellectual Property Law inNew Zealand (2nd ed, Thomson Reuters, Wellington, 2012) at 301; Kevin Garnett et al (eds)Copinger and Skone James on Copyright (16th ed, Sweet & Maxwell, London, 2011) vol 1 at [8–10]; Husqvarna Forest and Garden Ltd v Bridon New Zealand Ltd [1997] 3 NZLR 215 (HC) at226; Brintons Ltd v Feltex Furnishings of New Zealand (No 2) [1991] 2 NZLR 683 (HC) at 688.control and authorisation of Mr Hannaford and that Mr Hannaford has caused,encouraged, procured and/or authorised Logiical to copy and reproduce theCopyright Works or to engage, instruct, or commission GRD and Mr Gray to do sowithout license from Dodson". Alternatively, Dodson pleads that Logiical andMr Hannaford have acted in the furtherance of a common design.[244] In terms of statutory liability, Mr Hannaford may be liable if he "authorised"GRD and Mr Gray to copy the parts. That avenue of liability is not closed off simplybecause I have found Logiical liable for that authorisation. Joint liability forauthorising an infringement is consistent with the broad net cast by s 29 of theCopyright Act which provides that infringement by the doing of a restricted act maybe done "directly or indirectly" and it is "immaterial whether any intervening actsthemselves infringe copyright".70 In any case, even if there is no separate statutoryliability, Mr Hannaford may be held liable as a joint tortfeasor for committing arestricted act.71[245] There is no statutory liability for authorising secondary infringement unders 36 of the Act. Mr Hannaford's liability for secondary infringement must thereforebe considered under the law of tort. The authors of Intellectual Property Law inNew Zealand outline two different approaches in New Zealand case law toestablishing the liability of directors for the tortious conduct of their companies in theintellectual property context. The first is the least favoured "making the tortious acthis own" test, and the second is the "procured or directed" test. The focus of thesecond test is on the director's conduct, and its relationship with the tortious conductfor which the company is liable.72 Dodson relies on this second test in alleging thatMr Hannaford is jointly and severally liable for Logiical's infringement.[246] Ultimately, whatever route is followed, I am satisfied on the evidence thatMr Hannaford, together with Logiical, should be held liable for copyrightinfringement. Mr Hannaford is Logiical's sole shareholder and director, and his70 Copyright Act, s 29(2).71 Electroquip Ltd v Craigco Ltd HC Ak CIV 2006-404-006719, 3 September 2008, per RodneyHansen J at [134].72 At [114]–[117], citing with approval Ian Finch (ed) James & Wells Intellectual Property Law inNew Zealand (3rd ed, Thomson Reuters, Wellington, 2017) at 4.10.7.knowledge (including that gained from his time as a Dodson employee) is Logiical'sknowledge. Logiical could only act, and did only act, on Mr Hannaford's say so. Hemade all decisions about what Logiical did and did not do, and he was effectivelyindistinguishable from Logiical as he accepted in cross-examination:73Q. And you make all the important decisions on behalf of the company?A. Yes.Q. And all the important actions taken by the company are taken by youeffectively?A. Yes.Q. So would you accept if I said that you are effectively Logiical?A. Yes.[247] In reality, it was Mr Hannaford who authorised GRD and Mr Gray tomanufacture parts that were a copy of the Dodson parts, and it was Mr Hannaford whodirected Logiical to deal with those copied parts. Logiical was the vehicle throughwhich Mr Hannaford acted for the purposes of copyright infringement, and in thatsense, both Logiical and Mr Hannaford acted together. Mr Hannaford was directlyand intimately involved in Logiical's tortious conduct. I accordingly findMr Hannaford jointly liable for Logiical's copyright infringement.What relief should be granted?[248] Dodson seeks declaratory and injunctive relief, and an order requiring thedelivery up of all infringing copies of the copyright works. That relief is appropriate,and orders in those terms are set out at the end of this judgment.[249] Dodson also seeks damages – an award calculated according to the userprinciple, and additional damages pursuant to s 121 of the Copyright Act. The claimto the former is considered first.73 Notes of Evidence, page 535, lines 11–17.The user principle[250] The user principle provides a means of calculating damages where a copyrightowner cannot establish loss of profits, or a normal royalty fee.74 The basis of the userprinciple is that the copyright owner "is entitled to receive from the infringers the pricethat would have reasonably been charged for permission or authorisation to carry outeach infringing act".75[251] The assessment is based on a hypothetical negotiation between a willinglicensor and a willing licensee for a notional licence fee to be paid for each infringingact. The assessment involves considering what sum would have been arrived at innegotiations between the parties had each been making reasonable use of theirrespective bargaining positions, bearing in mind the information available to theparties and the commercial context at the time that the notional negotiation would havetaken place.76[252] In Eight Mile Style, the Court of Appeal endorsed the features of the userprinciple set out in Copinger and Skone James on Copyright as follows:77(i) The hypothesis is that the actual licensor and the actual infringer arewilling to negotiate with each other as they are, with their strengthsand weaknesses, in the market as it existed at the date of theinfringement. Accordingly the task of the court is to assess the valueof the use to the defendant, not to a hypothetical person.(ii) However, any impecuniosity on the part of the notional licensee is tobe disregarded, as are the personal characteristics of the parties (e.g.an easy-going or aggressive nature), as opposed to the objectivefactors with which they were faced. Such matters are not consideredto provide any guidance as to what the right is worth.(iii) The fact that one or both parties would not in fact have reached anagreement is irrelevant.74 New Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [27]–[28]; General Tireand Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 1 WLR 819 (HL) at [826].75 Napier Tool and Die Ltd v Oraka Technologies Ltd [2016] NZCA 554, [2017] 2 NZLR 611 at [74].76 Force India Formula One Team Ltd v One Malaysia Racing Team SDN BHD [2012] EWHC 616(Ch), cited in 32 Red PLC v WHG (International) Ltd [2013] EWHC 815 (Ch) at [25]; OrakaTechnologies Ltd v Geostel Vision Ltd [2018] NZHC 769 at [27], [29] and [33].77 Gillian Davies, Nicholas Caddick and Gwilym Harbottle (eds) Copinger and Skone James onCopyright (17th ed, Sweet & Maxwell, London, 2016) vol 1 at [21–292], as quoted inNew Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [29].(iv) The terms of any notional licence must reflect the actual infringement.Accordingly, where only part of a copyright work has been infringed,the notional licence is a licence to carry out the infringing act and nota licence to use the whole of the copyright work. The period of thelicence is the period of actual infringement. Where the infringerenjoyed exclusivity in practice, the notional licence should accordwith the reality. Likewise, the licence should permit the infringer tocontract with others on the terms on which it actually contracted.(v) Where there has been nothing like an actual negotiation between theparties, it is reasonable for the court to look at the eventual outcomeand to consider whether or not that is a useful guide to what the partieswould have thought at the time of their hypothetical bargain.(vi) The court can take into account other relevant factors, and in particulardelay on the part of the claimant in asserting its rights.(vii) It is relevant under this head that the defendant could have arrived atthe same result by lawful means if the parties can be expected to havetaken that fact into account in their hypothetical negotiation. Thatalternative need not have had all the advantages or other attributes ofthe infringement.(viii) In the absence of comparable licences or other compelling evidencethe royalty may be based on the "available profits" method: thedefendant's actual profits are calculated; it is assumed that the partieswould have accurately predicted these profits when negotiating; theprofits are then (in effect) divided between the claimant and thedefendant.(ix) In some cases it may be appropriate to award as damages the cost ofproducing or commissioning the material in a form which did notinfringe copyright.(x) In a case within this group, the court may have to call into play"inference, conjecture and the like", and apply "a sound imaginationand the practice of the broad axe".[253] The assessment is one of judicial estimation of the available indications. It isfor the plaintiff to adduce evidence which will guide the Court. General considerationswill be relevant, but where there is evidence of actual licensing fees specific to thework and use in question, general evidence is likely to carry less weight.78 Thenotional fee must be assessed in the commercial context as at the relevant time. Thatmeans that alternative courses of action open to the parties will be relevant in settingthe notional fee, as will the value of the infringing use to a defendant.7978 General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819 (HL) at 824–825; New Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [4]–[41].79 New Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [47]; 32 Red at [41].Oraka Technologies Ltd v Geostel Vision Ltd [2018] NZHC 769 at [30], referring to at Force IndiaThe expert evidence[254] Each party engaged expert witnesses who gave evidence on the calculation ofdamages. Mr Hussey was engaged on behalf of the plaintiff. He assessed damagesaccording to two scenarios. The first scenario was predicated on the parties notknowing the actual sales made by Logiical. Mr Hussey considered the parties wouldhave agreed that the licensee pay a fixed fee of $100,000 per annum, plus a royaltyrate of 10 per cent of infringing sales. Damages were calculated at $357,000 accordingto this scenario.[255] The second scenario was based on the parties having knowledge of the actualnumber of infringing sales made by Logiical. Under this scenario, Mr Hussey assumedtwo licences – one with Logiical and one with GRD. The structure of each notionallicence agreement was payment of a royalty on each infringing sale. The royalty ratewas calculated according to an estimated split of profits between the parties. That splitwas calculated by considering the profits which Dodson would have lost as a result oflicensing Logiical (the "cannibalisation rate"). That set the minimum rate whichDodson would have agreed. A 20 per cent premium was added to allow Dodson toprofit on the arrangement. On instructions, Mr Hussey added a further 20 per centpremium to this figure, relying on the High Court judgment in Eight Mile Style. Thedamages calculated on this scenario were between $106,008 and $160,618 dependingon the cannibalisation rate chosen.[256] Mr Beylefeld was engaged by the defendants. He also calculated theapplicable royalty rate according to two different scenarios. In the first scenarioMr Beylefeld had reference to a database of the royalty rates in the auto-manufacturingintellectual property field. That established a royalty rate of 6.1 per cent of sales.Mr Beylefeld uplifted that to 10 per cent to account for issues particular to thepositions of the parties in this case. That resulted in damages of $25,127.[257] Mr Beylefeld's second scenario was based on the royalty rate being determinedby an agreement on the share of profits. Mr Beylefeld applied the "25 per cent rule",Formula One Team Ltd v Aerolab SRL [2013] EWCA Civ 780 at [107], [426]–[427], [455]–[458];Gallagher Electronics Ltd v Donaghys Electronics Ltd (1991) 4 TCLR 344 (HC) at 350.that is, a presumption that the parties would agree that 25 per cent of Logiical's profitswould be paid to Dodson as licensor. That yielded a royalty rate of 19.6 per cent,which was rounded up to 20 per cent. Mr Beylefeld then considered factors whichwould result in an increase, or decrease of this royalty rate, and concluded that theybalanced each other out so that no further adjustment was necessary. The damagescalculated according to this approach were $50,254.[258] The various issues raised in each of the four scenarios put forward by theexperts are considered in the context of the hypothetical negotiation over the licencefee as set out below.Terms of the hypothetical licence[259] The parties' experts agreed the term of the hypothetical licence is 40 months.There was a difference between them on the commencement and end dates of thislicence period, but that difference is immaterial. I have adopted 25 February 2015 to15 June 2018 which are the first and last dates for which invoices with infringing saleshave been discovered.[260] The subject matter of the licence is the manufacture and sale of the infringingparts. That encompasses the manufacture and sale of the clutch parts and selector fork,but not the gear lock and mechanical circlips.[261] Territory is another relevant factor in setting the appropriate royalty rate.80Mr Cain submits that it is open to the Court to only assess damages on the sales madein New Zealand, as that is where the copyright infringement occurred. However, thatapproach is unduly narrow. Logiical made sales to customers both in New Zealandand overseas, and the hypothetical negotiation would be for a licence of all those sales.That approach is consistent with the compensatory objective of the user principle.Both experts included overseas sales as part of their analysis and I proceed on thatbasis.80 New Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [65].[262] That raises a further issue about whether the licence would be tied to particularregions or would apply worldwide. Although Dodson's dealership practice suggeststhat any non-exclusive agreement would be linked to a particular geographical region,there was insufficient evidence to infer the particular region in which the sales wouldtake place. Even if the geographical territory was limited to the actual place of theinfringing sales, there was no evidence about the number of Dodson's dealers in thatparticular geographical location, and so nothing to suggest how a territorial limitwould affect the notional fee.[263] Mr Beylefeld assumed a non-exclusive agreement and made an upwardsadjustment to the market royalty information he sourced for that purpose. For thepurposes of this exercise, I also assume that a non-exclusive licence, not tied to anyparticular geographical location, is being negotiated.Parties to the negotiation[264] Dodson will be at the negotiating table as the notional licensor. But there is anissue as to whether both Logiical and GRD will be there as notional licensees. Putanother way, the question is whether there will be a single notional licence, or two.[265] The same issue was considered by Hinton J in Oraka Technologies.Her Honour held that the appropriate licensee in that case was Geostel Vision Ltd –the seller of the grading machine that was operating in competition with the plaintiffs'grader. The manufacturer of the defendant's grader, Napier Tool and Die, was not atthe negotiating table, and its profits were considered irrelevant.81[266] I respectfully agree and follow that approach. On that basis, Logiical is thenotional licensee. Logiical is the main beneficiary of the breach of Dodson'scopyright.82 Accordingly there is only one notional licence, and not two.81 Oraka Technologies Ltd v Geostel Vision Ltd [2018] NZHC 769 at [55].82 Force India Formula One Team Ltd v I Malaysia Racing Team SDN BHD [2012] EWHC 616 (Ch)at [435].Commercial context and the parties' bargaining positions[267] The hypothetical negotiation is to be conducted on the basis that each party ismaking reasonable use of their respective bargaining positions bearing in mind theinformation available to the parties, and the commercial context, at the time.83[268] At the time of the hypothetical negotiation, Dodson had a dominant position inthe market for its high-performance aftermarket clutch parts for the R35. Ninetyper cent of its business was export based, and it had an established network of dealersworldwide.[269] There was no evidence about how many dealers and distributors Dodson hadin 2015, but by 2018, Dodson had 120 to 150 dealers, and two distributors (including[REDACTED]). Dodson did not, and does not have any dealers in New Zealand,although it did have a standalone service centre which Mr Cupit described as beinglike a dealer in some respects. Not all dealers were entitled to sell the full range ofDodson clutch parts, and none of the dealership arrangements included a licence tomanufacture the Dodson parts.[270] Although the dealership agreements are not expressly limited to a particularterritory, Dodson controls the number of dealers operating in the same geographicalregion. Dodson's dealership agreements typically include a minimum spendrequirement, which varies depending on where the dealer is located and the numberof cars sold in the region.[271] At the time of the hypothetical negotiation, Logiical had been operating for afew years. Its principal business was the service, repair and maintenance of vehicles,with some sales of aftermarket components for the R35. Mr Hannaford had soughtpermission from Dodson to sell its parts but was unsuccessful in securing supplydirectly. However, the fact that Dodson would not have made the deal with Logiicalor Mr Hannaford in reality is irrelevant to the overall assessment.83 32Red Plc v WHG (International) Ltd [2013] EWHC 815 (Ch) at [35].[272] As to the wider commercial context, there were several other companies sellingaftermarket clutch parts for the R35 at the relevant time. Mr Beylefeld's expertevidence was made on the basis that Logiical could have sourced the same parts fromseven other suppliers worldwide. Dodson disputes that these companies were trulycompetitors operating in the same market.[273] For the purposes of the hypothetical negotiation, I consider these parties to becompetitors. The fact that they may be selling inferior parts, or parts which were nottargeted at the high-performance end of the market, relates to the extent of thecompetition posed by these seven companies. That impacts on Logiical's ability toobtain parts that are the same as, or similar to, the Dodson parts from other sources. Itis also a factor to be weighed in the mix when considering the impact on Dodson'sbusiness of licensing Logiical. These are features which are addressed at [296] to[297] of this judgment.Structure of the licence – a fixed fee?[274] Mr Hussey's first scenario was premised on the parties not having knowledgeof the actual infringing sales achieved by Logiical. In Mr Hussey's opinion, thenegotiated royalty in those circumstances would have allowed for the prospect of thearrangement causing significant harm to the Dodson business. That impact would, inhis opinion, have been reflected in the parties agreeing a fixed annual licence fee of$100,000 per annum, plus a 10 per cent royalty rate on all infringing sales.[275] The premise underlying this approach – that the parties did not have knowledgeof the actual number of infringing sales – is consistent with the hypotheticalnegotiation taking place prior to infringement. The actual outcome is only a guide asto what the parties would have thought at the time of their hypothetical bargain.84 Ialso agree that Dodson would have taken into account the impact of licensing Logiicalon its business in determining the minimum royalty rate it was willing to accept. Thatimpact includes the potential to lose sales during the term of the licence, and after theterm of the licence expires.84 32 Red PLC v WHG (International) Ltd [2013] EWHC 815 (Ch) at [25]; Oraka Technologies Ltdv Geostel Vision Ltd [2018] NZHC 769 at [33(i)].[276] However, while that impact is relevant, I am not persuaded that Dodson wouldhave considered it to be "significant". Dodson was dominant in the market at the timeof the hypothetical negotiation, with dealers positioned worldwide. Logiical was stillin an early start-up phase and did not have established sales channels or a solidcustomer base in New Zealand or overseas. Obviously, that might have changed inthe future with the sale of Dodson parts, but I do not consider the parties would haveanticipated a major impact on Dodson's market share at the time they were negotiatingthe hypothetical licence.[277] Even if there was a significant impact, I am not persuaded that this would haveled the parties to agree on an annual fixed fee arrangement, whether of $100,000 orany other sum. That structure, and those sums, are not grounded in the evidence, andMr Hussey candidly acknowledges that they are arbitrary.85 The market evidencerelied on by Mr Beylefeld (referred to further below) establishes that the most commonstructure of licensing agreement is the payment of a fee calculated on a percentage(the royalty rate) on each sale.[278] Accordingly, I consider the structure of the notional agreement would be aroyalty agreement based on the number of anticipated sales, without a fixed fee. Thekey issue in contest between the parties concerns the royalty rate which the partieswould have agreed on in their negotiations. Evidence directed to that issue isconsidered next.Comparable licences[279] Evidence as to the royalty rate set in any existing licensing agreements, and therate set in market agreements may be used as a guide as to what the parties would haveagreed.[280] Dodson produced a distribution agreement signed in June 2018 with aEuropean distributor, [REDACTED]. Broadly speaking, the terms of the85 Mr Hussey pointed to the [REDACTED] agreement as support for his fixed fee approach. But aone-off requirement to purchase stock at a certain level is not comparable to an annual fixed feeunrelated to product purchases or sales targets. Accordingly, I am not persuaded that the[REDACTED] agreement substantiates the fixed fee approach.[REDACTED] agreement suggest that Dodson could command a higher royalty ratein any negotiation. But the agreement is not directly comparable, in that it does notstipulate a royalty rate per se, and adjustments would need to be made for additionalterms agreed (such as the purchase of product upfront, and minimum salesrequirements). The agreement also post-dates the hypothetical negotiation by anumber of years. Neither party had reference to this agreement in reaching their expertopinions, and I consider it to be of little value in the overall assessment.[281] Mr Beylefeld's first scenario was based on the royalty rates referenced in theIPSCIO Royalty Source – a royalty rate and licencing agreement database. He derivedroyalty rates of around six per cent for license agreements in the automotive industry.He then increased that royalty rate to 10 per cent to account for the notional rate beingbased on a non-exclusive agreement, and not including a territorial restriction.[282] Again, while that evidence is of relevance, its generality reduces its utility forcomparison purposes. And, for the reasons set out below, the fact specific features ofthe negotiation between the parties in this case suggest that the royalty rate agreedwould be significantly higher than 10 per cent.Share of profits[283] Both experts accepted that royalties are a means of sharing actual or expectedprofits. The expected profits that each party may reasonably expect to be generatedby the notional licence is therefore a relevant factor to be taken into account inassessing the royalty rate.[284] Mr Beylefeld's second scenario was based on a share of profits using the "25per cent rule" as a starting point. The 25 per cent rule provides that the parties wouldhave agreed that the licensee would have paid 25 per cent of the profits to the licensoron each sale of an infringing item. Mr Beylefeld's application of the 25 per cent rulein this case led to a royalty rate of 19.6 per cent, which he rounded to 20 per cent.[285] Mr Hussey's second scenario was also based on a profit split. But he assessedthe royalty rate to be negotiated based on a share of profits from a different startingpoint. He considered what profits Dodson might expect to lose as a result of licensingLogiical (the cannibalisation rate) and used that to calculate the royalty rate that wouldapply to allow Dodson to recoup these profits. He considered this 'break-even" rateto be the minimum royalty rate which Dodson would agree to in any negotiation. Anadditional 20 per cent premium was then added to allow Dodson to profit from thenotional licence with Logiical.[286] As noted above, the impact on Dodson's business, including the potential tolose sales, is relevant to the hypothetical negotiation between the parties. But there isinsufficient evidence to suggest that Dodson would have anticipated the impact on itsbusiness to be as significant as Mr Hussey assumes.[287] Even if the actual sales figures could be used as a guide to what the parties mayhave thought at the time of the hypothetical negotiation, there is no evidence to inferthat Dodson would have made 50 per cent, or even 33 per cent of the infringing salesitself. If there was such evidence, then damages should have been assessed using theloss of profits measure – at least in respect of those sales.86 Damages calculated inaccordance with the user principle is the appropriate measure when the plaintiff cannotprove a loss of profits. Calculating the hypothetical royalty rate by reference to theloss of profits suffered on actual sales confuses the two measures.[288] Hinton J did not rely on the 25 per cent rule in Oraka Technologies, as she didnot consider there to be any need to adopt a fall-back position in that case.87 But inthe absence of any evidence in this case as to what the parties may have considered tobe an appropriate profit split between them, the 25 per cent rule provides a usefulstarting point. The application of that rule leads to a 20 per cent royalty. I adopt thatroyalty rate as the starting point in the hypothetical negotiations and consider whetherany adjustments should be made to it for the features peculiar to this case.86 In Electroquip Ltd Craigco Ltd (No 2) HC Auckland CIV-2006-404-6719, 29 April 2010, damageswere assessed on a loss of profits basis for those sales that the plaintiff could prove it would havemade, and on the basis of a notional royalty rate for those sales that it could not prove it wouldhave made.87 Oraka Technologies Ltd v Geostel Vision Ltd [2018] NZHC 769 at [133].Reluctance and willingness[289] As noted above, the hypothetical negotiation is predicated on a willingness byboth parties to reach agreement. The fact that one party would not have ever licensedthe other is irrelevant. Nevertheless, the commercial factors which might make oneparty more reluctant, and the other more willing, will be relevant to the bargainultimately struck.[290] In Eight Mile Style, the Court of Appeal highlighted the distinction betweenobjective and subjective reluctance. In the context of that case, objective reluctanceon the part of the licensor reflected the potential risk of political association to thefuture commercial value of the copyright work. The subjective reluctance was theneed for alignment with the licensor's views and morals, that is, the subjective reactionto the particular viewpoint of the licensee in that case. Applying the same principle,but on the other side of the bargaining table, the Court of Appeal found that thesubjective willingness of the licensee (described as the licensee's "specialwillingness") in the hypothetical negotiation was irrelevant to the determination of thenotional fee.88 This was because a subjective reluctance to license is incompatiblewith the assumption of a willing licensor.[291] Both experts agreed that Dodson's reluctance to licence Logiical was a factorthat could justify a higher fee, but neither of them drew a distinction between objectiveand subjective factors in their evidence. I consider that Dodson's reluctance tonegotiate with Logiical due to matters of personal distaste, concerns aboutcompetency, or even hostility towards each other are subjective factors irrelevant tothe hypothetical negotiation. I put them to one side.[292] However, the commercial factors which may have caused Dodson to demanda higher fee (in other words, a reluctance to accept anything below a certain level), arerelevant to the overall assessment. The impact on Dodson's business as a result ofentering into the licence with Logiical is one such factor. That impact is both directand indirect. As previously mentioned, Dodson could expect to lose sales inNew Zealand, and some sales may also have been lost worldwide, during the term of88 New Zealand National Party v Eight Mile Style LLC [2018] NZCA 596 at [92].the licence. The indirect loss would flow from licensing a competitor to not only sell,but also manufacture the Dodson products. Such a licence would facilitate Logiical'sentry into the New Zealand and world market.[293] Originally, Dodson submitted that the loss of quality control in relation to themanufacture of its parts would also be a factor driving up the royalty rate. But,following the Court of Appeal's decision in Eight Mile Style, Dodson conceded thatquality control was not a relevant factor. I am bound by that judgment, and so put thelack of quality control to one side.[294] Nevertheless, even without the quality control issues, I consider the impact onDodson's business means that Dodson would have demanded a higher royalty ratethan 20 per cent. On the flip side, I consider Logiical would have been prepared topay that higher royalty rate. Dodson was the market leader for aftermarket clutchcomponents for the R35. Logiical would have been the first and only licensee to beable to both sell and manufacture Dodson parts. This would have been a major coupfor a relatively small company just starting out.[295] In addition to selling Dodson parts, Logiical is also likely to have anticipatedmaking additional profits from selling non-licensed (i.e. non-infringing) parts andproviding ancillary services. The fact that Logiical sold frictions and steels having avalue of approximately $34,000 substantiates such an adjustment. These substantialbenefits are likely to have led Logiical to agree a royalty rate in excess of 20 per centon each sale.Dodson's competitors[296] Mr Beylefeld considered there were various factors which would have counter-balanced any upward adjustment to the royalty rate. The primary factor was the effectof competition in the market. That is relevant to the alternatives open to Logiical fromwhich to source similar parts.[297] As noted above, I accept that Dodson faced competition in the market. But thequality of that competition would not have made a material difference to the parties'negotiating positions in my view. There was very limited evidence directed towardsthis issue at trial, but what little evidence there was did not suggest that any of theseven competitors identified provided serious inroads into Dodson's market share.Looked at in the broader context, this would not have been a factor leading to adownwards adjustment in the negotiated hypothetical royalty rate.Extent of the copying[298] The extent of the copying is relevant to the licence fee to be struck. I havefound that the Logiical parts reproduced the essence of the innovative features in theDodson parts. In that sense, there has been extensive copying. But there are somedifferences between the parts, and it must be borne in mind that some of the similaritiesare explained by the functional constraints imposed by the R35 dual clutchtransmission. Considered in the round, I consider the extent of the copying requiresan uplift to the 20 per cent starting point, but only by a modest amount.Eight Mile Style premium[299] Mr Hussey's calculations included a 20 per cent premium he was instructed tomake on the basis of the High Court judgment in Eight Mile Style. In closing,Mr Elliott identified six separate factors which he said justified the application of a20 per cent premium in this case. As to these factors:(a) Three of them (use by a former employee, the fact that the defendantsknew full well that they would not be able to access the Dodson parts,and the fact that they held themselves out as associated and connectedto Dodson) are far removed from the hypothetical negotiation uponwhich the user principle is based. They verge on being punitive innature, which is at odds with the compensatory focus of the principle.(b) One of the factors (the impact on the dealer network) has already beentaken into account.(c) As set out above, and in accordance with the Court of Appeal judgmentin Eight Mile Style, the loss of quality control is not a relevant factor.(d) The alleged compromise of the value of the copyright works by theproduction of low quality copies, is just a variation of the loss of qualitycontrol factor.[300] Mr Hussey did not provide an independent expert opinion in support of theadditional premium, acknowledging that he had only applied it on instructions. I donot consider there to be any basis to apply a premium, whether of 20 per cent or someother figure, and I decline to do so.Assessment of compensatory damages[301] It follows from the above that the royalty rate of 20 per cent (derived from thesplit of profits according to the 25 per cent rule) is to be adjusted upwards to accountfor the potential risk to the future commercial value of the copyright works Thequantum of that adjustment is a matter of judicial estimation.[302] Given the respective bargaining positions of the parties, and the commercialcontext in which the hypothetical negotiation was taking place, I consider an uplift ofeight per cent, for a total royalty rate of 28 per cent, reflects the overall balancing ofthe factors considered above.[303] As to the sales figures that this royalty rate should be applied to, the expertsagreed that Logiical made sales of $286,075.50 during the period in question. But, thefollowing sums should be deducted from this amount:(a) The sum of $34,806.19 for frictions and steels. The frictions and steelssold do not form part of Dodson's claim. They are non-infringing sales;and(b) The sum of $3,076.50 for the sales of the gear lock ($2,084.75) and themechanical circlips (a total of $991.75) that I have found were notinfringing copies.[304] Applying the 28 per cent royalty rate to the sum of $248,192.81 results in a(rounded) damages award of $69,494.00. That sum is to be awarded against alldefendants jointly and severally for copyright infringement.Additional damages for flagrancy of breach[305] Section 121(2) of the Copyright Act allows a Court to make an award ofadditional damages having regard to the circumstances, and in particular the flagrancyof the infringement and any benefit accruing to the defendant as a result.[306] "Flagrancy" implies the existence of "scandalous conduct, deceit and such like;it includes deliberate and calculated copyright infringements".89 The damagesawarded are not linked to compensation awards, and are akin to awards of exemplarydamages at common law.90 All relevant conduct of the parties up to the time ofjudgment may be considered.91[307] In Jeanswest Corporation (New Zealand) Ltd v G-Star Raw CV, the Court ofAppeal annexed a table setting out examples of cases in which additional damages hadbeen awarded, and the quantum of those awards.92 Factors relevant to the exercise ofthe discretion include the nature of the infringement (and the degree of flagrancy); thebenefit to the defendants from the breach; the adequacy of the compensatory award;the means of the infringing parties; and the deterrence effect of an award.93[308] The following factors weigh in favour of an additional award of damages:(a) The infringement in this case was flagrant. It involved an ex-employeeand former manufacturer blatantly reproducing the essential, andinnovative, elements of the Dodson parts.89 Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66 (CA) at 69, citing Ravenscroftv Herbert [1980] RPC 193, 208 (Ch).90 Skids Programme Managements Ltd v McNeill [2012] NZCA 314, [2012] 1 NZLR 1 at [106].91 At [108].92 Jeanswest Corporation (New Zealand) Ltd v G-Star Raw C.V. [2015] NZCA 14.93 Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2012] 1 NZLR 1; JeanswestCorporation (New Zealand) Ltd v G-Star Raw C.V. [2015] NZCA 14. As to deterrence, seeSeafolly Pty Ltd v Fewstone Pty Ltd [2014] FCA 321, (2014) 313 ALR 41 at 642–643.(b) The assessment of compensatory damages according to the userprinciple does not fully reflect the degree of flagrancy in the breach.(c) Although there was no direct evidence of the benefit derived by thedefendants, it may be inferred that by copying the parts, both Logiicaland GRD avoided the significant costs involved in designing the partsfrom scratch.(d) Logiical and Mr Hannaford traded off the back of Dodson's investmentin both time and money, and specifically promoted the parts as beingequivalent to the Dodson brand.(e) Deterrence is relevant in these circumstances. Prosecuting copyrightinfringement can be difficult and time-consuming. Deliberate copyingrequires an additional award to act as a deterrent to others who may betempted to engage in similar behaviour.[309] Dodson submits that the defendants' denial of copyright infringementthroughout these proceedings is a further ground to award additional damages. Butsomething more than putting forward a defence to a claim is required to engage theexemplary purposes of the s 121 award. To the extent that there is conduct specificallyrelating to the carriage of the proceedings, then that conduct may sound in costs.[310] Although these factors suggest an additional award should be made, there arethree factors that suggest such an award should be relatively modest:(a) The defendants appear to be of limited means. This is not a copyrightcase between two substantial competitors. Mr Hannaford describedLogiical and Dodson as being like a dairy and supermarket respectively.There is truth in that comparison.(b) The sales of Logiical parts were relatively modest, and the developmentof the 22-plate clutch assembly was halted when proceedings werestarted.(c) There is no evidence that the Logiical sales caused harm to Dodson'sreputation, or that Dodson's business has in any way suffered as a resultof the Logiical sales.[311] In terms of quantum, I have considered all those cases reviewed in the table tothe Jeanswest decision, and the award in Jeanswest itself. I consider this case to beclosest to Norm Engineering Pty Ltd v Digga Australia Pty Ltd in which an award ofAUD $19,450 was made against a single defendant in 2007.94 In this case, some 12years later, there are four defendants, and effectively two major parties involved in themanufacturing and sale of the Logiical parts.[312] Taking all these factors into account, I make an award of $60,000 in additionaldamages against all defendants jointly and severally.FAIR TRADING ACT[313] Dodson claims that each of the defendants engaged in misleading anddeceptive conduct in breach of ss 9, 10, and/or 13 of the Fair Trading Act 1986 (theFTA).Logiical and Mr Hannaford[314] Dodson claims that Logiical breached the FTA in two ways. First, it claimsthat a statement on Logiical's website breached the FTA. Second, it claims thatLogiical's supply of gear locks with the Dodson logo machined off was misleadingand deceptive.[315] The statement at the centre of the first claim appears at the bottom of theLogiical website and provides:Logiical Performance are New Zealand's leaders in Nissan R35 GT-RDevelopment[316] The background to that page is an enlarged picture of a gear lock. On the right-hand side of the page are three smaller pictures arranged underneath each other. The94 Norm Engineering Pty Ltd v Digga Australia Pty Ltd [2007] FCA 761, (2007) 162 FCR 1.top picture shows a gear lock in situ, the next is an A basket, and a picture of a B basketis on the bottom. At the centre-left of the page is a statement in large font, "strengthenyour R35 GT-R Gearbox", and in smaller font underneath "reliable launches everytime", "see range" and "road, race and rally transmissions".[317] Dodson alleges that the statement is misleading in two different respects. First,Dodson says that the statement misrepresents Logiical's alleged leadership in NissanR35 GT-R development. Second, Dodson says that the statement represents that theLogiical gear lock is part of such a development when it was not.[318] I treat Dodson's first allegation as a claim falling within s 13(1)(b) of the FTA.That section prohibits a person in trade from making a false or misleadingrepresentation that services are:"of a particular kind, standard, quality or quantity, or that they are suppliedby any particular person or by any person of a particular trade, qualificationor skill, or by a person who has other particular characteristics"[319] There is no issue that the representation was made, that it was made in trade,and that it was made in connection with the supply, possible supply, or promotion ofthe supply of goods or services. It also concerns the standard and quality of theservices to be supplied by Logiical, and the characteristics of the person (in this case,Logiical) supplying them ("leaders in the development of R35").[320] The only issue is whether the statement is false and misleading. Mr Hannaforddenies that it is. He says that the statement about being New Zealand's leaders inNissan R35 GT-R development is in relation to the Nissan R35 as a whole, and notjust the gearbox. That explanation is strained. The most prominent statement on thewebsite page relates to strengthening the gear box. There is reference to reliablelaunches, and road, race and rally transmissions. The photographs on the page relateto components of the gearbox and transmission. The clear message conveyed is thatLogiical is a leader in the development of stronger and more reliable gearboxes andtransmissions for the R35.[321] That representation is both false and misleading. It is simply not true to saythat Logiical is a leader in the development of the R35 GT-R. The findings on thecopyright cause of action establish that Logiical's business was built on the back ofcopies of Dodson's parts. Logiical was not involved in the development of itsaftermarket clutch parts for the R35, let alone being a leader in the field. Inducingcustomers through misleading statements made on company websites is just the typeof conduct captured by s 13(b). Logiical's misrepresentation breaches s 13(b) of theFTA.[322] Dodson's claim that the statement is also misleading because it represents thatthe defendants' gear lock is part of the R35 development, when it was not, is moreproblematic. It is far from clear that such a representation is conveyed by thephotographs and statements on the website. There was no evidence that the targetedsector of the public (owners of R35s looking to strengthen the gearbox andtransmissions) are likely to have been misled in that way. I consider the allegations inrelation to the gear lock are more appropriately considered in the context of Dodson'ssecond claim that the supply of one or more of Dodson's gear locks with the Dodsonlogo machined off was in breach of the FTA. That claim is considered next.[323] Initially, Mr Hannaford said that he had sold second-hand products, but that hehad never received, nor sold any Dodson parts. He denied machining off the Dodsonlogo on these parts. However, there was a shift in that evidence, and Mr Hannafordbecame particularly uncomfortable when questioned further about this as thefollowing exchange demonstrates:95Q. Just so we can clarify the gear locks. Are you aware that it's beenalleged that someone has defaced them by machining off the Dodsonname?A. Yes, that's what it looks like.Q. And was that you?A. They were – I can't recall if they were me. There were some that weredamaged.Q. Have you had a chance to look at the exhibit 44. May I approach thewitness, Your Honour?95 Notes of Evidence, page 503, lines 3–20.A. Yes, it has been cleaned up, I can see that. I can't, I can't recall if I didthis myself, I don't think I would've. Where did this gear lock comefrom, what gearbox?Q. It's dealt with in the evidence. I'm just asking you whether you evertook the Dodson name off a gear lock?A. I did polish a few of them. This one here I did, might've been the one,there was one that had been done and I polished it off, I polished it tomake it smooth so this potentially could've been the one that was atthe workshop, it would've been one of the second-hand ones that camein, they were all beaten up and –[324] Mr Hannaford's claim that he polished a few second-hand Dodson gear locksbecause they were beaten up lacks credibility. The above exchange is sufficient toprove, on the balance of probabilities, that Mr Hannaford machined off the Dodsonname from at least one gear lock.[325] There is no real doubt that Logiical's supply of the Dodson gear locks, with thename sheared off, constitutes misleading and deceptive conduct in breach of s 9 of theFTA. The fact that only one or two of these gear locks were supplied, and there is noevidence of customers being misled, is not determinative of the claim. There are someparallels to Holdfast New Zealand v Mechanical Plastics Corp, where the Court ofAppeal upheld the High Court's findings that supplying "Toggler" fasteners inHoldfast packaging was misleading and deceptive conduct in breach of s 9.96Objectively assessed, Logiical's actions were capable of misleading and deceivingcustomers into thinking that the gear lock supplied was a Logiical one, when that wasnot true. That is sufficient to establish a breach of s 9.97 I find accordingly.[326] Dodson makes two claims of breach of the FTA against Mr Hannafordpersonally. The first is a statement in a NZ Performance Car magazine article fromSeptember 2016 that Mr Hannaford was the "head mechanic at Dodson performancefor eight years".[327] Mr Hannaford says that he never meant to convey that he held the position of'Head Mechanic' at Dodson. Instead, he was providing a descriptive and general96 Holdfast New Zealand Ltd v Mechanical Plastics Corp [2013] NZCA 335.97 As per the test set out in Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR492 at [28].explanation of the role he performed for the company. That explanation is implausible.As Mr Hannaford later admitted, he was "talking himself up". He was trading offDodson's pre-eminent reputation in the market by associating himself with thedevelopment of their products. His statements suggest to the magazine readership thathe has a particular trade, qualification or skill that he does not have, and that he isaffiliated to Dodson in a way that he is not.98 It is a false and misleading statementunder s 13(b) of the FTA.[328] The second statement relied upon by Dodson was made during a conversationwith a private investigator who was posing as a potential customer. The conversationtook place on 16 August 2016 and was recorded by the private investigator who gaveevidence at trial. When referring to clutch parts, Mr Hannaford said that he "developedall this stuff when I was at Dodson's".[329] There are two potential meanings conveyed by Mr Hannaford's statements. Itcould be interpreted as Mr Hannaford claiming responsibility for the development ofthe Dodson parts. It could also be interpreted as meaning that Mr Hannaford wasinvolved with the development. That latter interpretation is not false, nor misleading.Considered in the context of the discussion as a whole, I am not persuaded that thisstatement was false or misleading within the meaning of ss 9, 10 or 13.GRD and Mr Gray[330] Dodson claims that GRD and Mr Gray made two separate representationswhich breach the FTA.[331] First, Dodson claims that both GRD and Mr Gray held themselves out as beinglawfully entitled to manufacture and deal in the Dodson parts, and as being the rightfulowners of the copyright in the copyright works.[332] Dodson's statement of claim does not identify when, where, and to whom therepresentation was made. In closing, Mr Elliott submitted that Mr Gray held himselfout as the rightful owner of the Dodson designs in his statement of defence.98 Fair Trading Act 1986, ss 13(b) and (f).Representations made in a statement of defence are not representations made "intrade" and so fall outside the ambit of the FTA. In the absence of any evidenceregarding the particulars of the representations relied upon, Dodson is unable to prove,on the balance of probabilities, a breach of the FTA.[333] Second, Dodson claims that both GRD and Mr Gray made various assurancesregarding the destruction of unfinished components and tooling, the deletion of filesand machine codes, the sale of machines used to manufacture the Dodson parts, andthe deletion of all hard drives and back-ups of Dodson's information. Theseassurances were made in a letter to Dodson once the relationship with GRD had cometo an end. Dodson says that these statements were false and misleading as GRD andMr Gray had not in fact destroyed and deleted the tooling, machine codes and Dodsoninformation as represented.[334] Despite the broad definition of "trade" under the FTA, I am not persuaded thatGRD's assurances fall within that definition. The assurances were made in responseto Dodson's requirements at the end of a business relationship between the two parties.As discussed further in this judgment (at [350]–[352]), the terms of that relationshipincluded the protection of confidential and commercial information. Seen in that light,Dodson's requests were akin to the enforcement of contractual obligations, and GRD'sresponses was in the nature of a private undertaking.99 This is not the type of conductthe FTA was intended to capture.100 I decline Dodson's claim of breach of the FTAagainst GRD and Mr Gray.Additional claims[335] Dodson submits that during the course of the trial it became clear that thedefendants had engaged in other misleading and deceptive conduct. It referred tostatements made by Logiical and Mr Hannaford regarding a "finite element analysis"and the sale of second-hand parts.99 See Desmone Ltd v University of Auckland Senior Common Rooms Inc (2002) 7 NZBLC 103, 580(HC); Malayan Breweries Ltd v Lion Corp (1988) 4 NZCLC 64, 344 (HC).100 Fair Trading Act 1986, s 1A.[336] These claims were not pleaded and no application to amend the statement ofclaim was made either prior to, during, or at the close of trial. It is true that Dodsonclaimed relief for all breaches of the FTA because the precise number, extent, and datesof each of the breaches were then unknown. But that pleading was ineffective inreserving Dodson's rights to advance additional claims. The purpose of a statementof claim is to inform the opposing party and the Court of the basis of a claim and itsnecessary ingredients.101 Notice of the claim is the backbone of natural justice.Mr Hannaford and Mr Gray did not have notice of these additional claims againstthem, and, in these circumstances, I decline to entertain these un-pleaded claims.Relief[337] Dodson seeks declaratory and injunctive relief against the defendants. Logiicalhas not given an undertaking that it will remove the offending website statements ordesist from supplying Dodson's gear lock as if it was its own. There are also no othermeans of ensuring that Mr Hannaford does not continue to "talk himself up" byreferring to himself as Dodson's head mechanic when promoting Logiical's business.Declarations marking that conduct as misleading and deceptive are in the publicinterest. Injunctive relief to enforce those findings is also "desirable" (as per s 41 ofthe FTA). Orders in those terms are set out at the end of this Judgment[338] Dodson also sought orders under s 43 awarding damages. However, there wasno evidence to support the claim for damages. Mr Hussey considered that any lossarising out of the breach of the FTA was already reflected in the damages assessed inrelation to the copyright infringement. Mr Beylefeld did not address the damagessought under any other cause of action other than the copyright infringement claims.Accordingly, I decline to make an award of damages.[339] Finally, Dodson seeks orders directing the defendants "to return, deliver up, ordestroy on oath all product, printed matter, digital references or other materials in thepossession or power or under control of the Defendants the use of which would offendagainst any injunction granted". I am satisfied that Dodson, or indeed a futurecustomer, is likely to suffer loss if an order requiring Logiical to deliver up the101 Reay v Attorney-General [2016] NZCA 519, [2016] NZAR 1672 at [16].offending gear locks is not made. An order under s 43(3)(e) is appropriate in thosecircumstances. However, there is no basis to go beyond that and I decline to grant theorder in the terms as sought.BREACH OF CONFIDENCE[340] Dodson's third cause of action against all defendants is for breach ofconfidence. Dodson alleges that the defendants have used its confidential andcommercially sensitive information to design and manufacture the Logiical parts.[341] Breach of confidence is an equitable cause of action. There are three elementswhich must be proved for the cause of action to succeed:102(a) The information must have the necessary quality of confidence;(b) The information must have been imparted in circumstances importingan obligation of confidence; and(c) There must be unauthorised use of the information to the detriment ofthe party communicating it.[342] Each of these requirements is considered below.Does the information have the necessary quality of confidence?[343] Dodson's statement of claim defines the confidential information which it sayshas been misused in some detail. It includes prototypes, information about thesourcing of parts and materials, fabrication, drawings, intelligence received from themarket, Dodson's employees and dealers, insights and information regarding theworkings of the clutch assemblies, knowledge of faults, knowledge of the significanceof the dimensions and material used, and knowledge of the improvements andmodifications made in the Dodson design process.102 Coco v A.N. Clark (Engineers) Ltd [1969] RPC 41 (Ch) at 47.[344] Whether information has a quality of confidence is a fact-based inquiry. Butthere are certain facts which will indicate confidentiality. These include: the extent ofthought and work expended to produce the material, whether the information is uniqueor a trade secret, and the extent to which the owner has considered the informationconfidential and taken steps to preserve and guard its secrecy.103 Information cannotbe confidential where it is "public property or public knowledge".104[345] The defendants argue that the information was not confidential. They say thisis because the information was in the public domain in three ways:(a) Any person could acquire knowledge of Dodson's clutch parts bysimply pulling the parts apart.(b) The procedures for making aftermarket parts are common knowledgeamong mechanical engineers.(c) Dodson had posted about faults of the OEM clutch on public internetforums, along with other competitors and publicly available sources ofinformation about the clutch parts and assemblies.[346] Once a manufacturer releases its product for public sale, it cannot maintainconfidentiality over features that are either visible or readily ascertainable, absentrelevant intellectual property laws. But it can maintain confidentiality overinformation that is not visible or readily ascertainable. This includes, for example,drawing plans, market information, or improvements made in the design andmanufacturing process.[347] Much of the information being claimed as confidential in this case is not aboutvisible aspects of the clutch design. Nor is it limited to procedures for installingaftermarket parts, or information exchanged on group chats. The confidentialinformation at the heart of the claim is something different to those limited categories.103 Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR1 at [80].104 Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, [1963] 3 AllER 413 at 415, cited in A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR515 (CA) at 521.It is information and knowledge gained through the design, testing and manufacturingprocesses for the R35 clutch. This knowledge finds its end expression in the clutchparts and ancillary parts themselves, but clearly goes beyond that which is visible inthe part itself. I consider the pleaded information has the necessary quality ofconfidence, and the first element of the confidence cause is met.Was the information imparted in circumstances importing an obligation ofconfidence?[348] The second requirement is that the circumstances must impose an obligationof confidence on the person in receipt of the information.[349] There can be no real doubt that Mr Hannaford received information subject toan obligation of confidence. Confidentiality obligations were set out in hisemployment agreements signed in 2006 and 2009. These agreements made it crystalclear that any information obtained by Mr Hannaford in the course of his employmentwith Dodson was confidential.[350] The position with Mr Gray and GRD is less clear cut. Mr Cupit says that hemet with Mr Gray and discussed confidentiality at the outset of their relationship. Thatis denied by Mr Gray. I prefer Mr Cupit's evidence on this point for the followingreasons:(a) First, Dodson's business was growing exponentially by the time of themeeting in 2009. Indeed, greater manufacturing capacity was one ofthe reasons Mr Cupit and Mr Gray were meeting. Confidentialityaround the features of the Dodson parts that set them apart from thecompetition was essential to maintaining this demand.(b) Second, the value of confidentiality was already reflected in theagreements which Dodson required its employees to sign. The fact thatDodson was alive to the importance of confidentiality makes it muchmore likely that it was raised in any conversation with a potential newcontractor.(c) Third, Mr Cupit and Mr Gray had not met before, and did not knoweach other. Based on my observations at trial, it would be consistentwith Mr Cupit's style and approach to raise issues such asconfidentiality directly, and at the outset.[351] In any case, regardless of whether the parties discussed confidentiality, anobligation of confidentiality generally arises out of a relationship where one party hasimparted information to the other on the basis that it is only to be used for the limitedpurpose for which it was given. In the absence of any confidentiality agreements, it isenough that a person knows or ought to know that information has been divulged to itin confidence. This obligation has been extended to cover pre-contractual bargaining,and more generally applies to business relationships.105[352] Even if confidentiality was not specifically discussed, GRD should haveunderstood that the information given to it by Dodson was confidential, and that itcould not use the information for its own purposes. Innovation in the development ofDodson's clutch parts was the point of difference between it and its competitors andwas the backbone of its business. GRD would have understood this. Indeed, GRD'swebsite contains the following statement: "with strict access controls to our workshop,you can be assured of confidentiality and the protection of your intellectual property".That is a clear recognition of the importance of confidentiality to customers, and thecircumstances in which information would be imparted.[353] I find that the information was imparted in circumstances of confidentiality.This second element of the cause of action is also met.Was there unauthorised use of the information to the detriment of the partycommunicating it?[354] The third element of the cause of action concerns unauthorised use of theinformation. Dodson alleges that the defendants have used the confidentialinformation to "unlawfully create, source, develop and sell the Logiical parts," and105 A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA).that they threaten to utilise the confidential information in wilful disregard of Dodson'srights and entitlements.[355] In Norbrook Laboratories Ltd v Bomac Laboratories Ltd, the Court of Appealset out some guiding principles for ascertaining whether confidential information hadbeen misused.106 The Court emphasised that the purpose of protecting confidence wasto prevent misuse, not to stifle competition. Thus, mere possession of confidentialinformation, or deriving comfort from the fact that it conforms with other informationfrom an independent source, is not enough to constitute misuse. Conduct will onlyamount to a misuse if the knowledge or comfort causes the person to do, or to omit todo, something. For example, it is a misuse for a person to use confidential informationto avoid having to undertake some part of the process required to develop a productthemselves.107[356] In this case, there is no real doubt that GRD and Mr Gray misused Dodson'sconfidential information to manufacture the Logiical parts. That flows from myfindings that GRD did not follow an independent pathway and that the Logiical partswere copies of the Dodson equivalents. Mr Gray's use of the SolidWorks drawings,which probably incorporated Dodson's commercially sensitive information, is goodevidence of misuse. By using that commercially sensitive information, GRD was ableto skip the design, testing, and market feedback processes which formed part of theevolution of the Dodson parts. GRD and Mr Gray wrongfully appropriated thatinformation to their own economic advantage, and to manufacture parts in directcompetition with Dodson. The breach of confidence cause of action is made outagainst GRD and Mr Gray.[357] Establishing a breach against Mr Hannaford is not as straightforward. Dodsondoes not particularise the way in which Mr Hannaford and Logiical have misused theconfidential information. It is not alleged that Mr Hannaford disclosed commerciallysensitive information to GRD to facilitate the making of those parts. Nor is it allegedthat Mr Hannaford misused confidential information to source particular parts,identify sales channels, or to install the relevant parts in customer's cars. I was not106 Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2004] 3 NZLR 39 (CA) at [35].107 At [35].taken to any evidence from which it may be inferred that Mr Hannaford had misusedconfidential information.[358] That particularisation is all the more important in Mr Hannaford's case becausein November 2014 he reached a settlement of his employment dispute with Dodson[REDACTED]:[REDACTED][359] Whether a particular act or omission amounts to misuse of confidentialinformation, or whether it falls within this permitted use, can only be determined inlight of the particular misuse alleged. In the absence of such particularisation I cannotbe satisfied, on the balance of probabilities, that there has been a misuse. The breachof confidence cause of action against the first and second defendants must bedismissed.CONSPIRACY BY UNLAWFUL MEANS[360] In the final cause of action, Dodson alleges that all the defendants acted inconcert with a constructive intent to injure Dodson's business. The cause of actionadds flavour to Dodson's other claims, but, like the Fair Trading Act and breach ofconfidence causes of action, received comparatively little attention at trial.[361] There are two forms of the conspiracy tort. This case concerns the secondform, that of conspiracy by unlawful means. That tort is committed where two or morepersons agree to perform an unlawful act that causes damage to the plaintiff. There isno dispute as to the elements of the cause of action, which are:108(a) The existence of a combination;(b) Unlawful action (unlawful means);(c) Intention to injure the claimant; and108 The principles relevant to the tort were most recently reviewed and restated by the Court of Appealin Wagner v Gill [2014] NZCA 336, [2015] 3 NZLR 157 at [47]–[52].(d) Actual damage caused to the claimant.[362] As to the first element, Mr Cain submits that there is no evidence of acombination – only a customer and supplier relationship. That submission is targetedat the lack of evidence concerning an agreed intent to act to injure Dodson. I addressthat submission in relation to the third element of the cause, that of an intention toinjure the claimant. For present purposes, it is sufficient that all four defendants wereworking in combination to produce and sell the Logiical parts.109[363] As to the second element, Dodson pleads misuse of its confidentialinformation, and infringement of the copyright as the unlawful means. The former isproblematic given the dismissal of that claim against Mr Hannaford and Logiical.However, the latter has been established against all four defendants, and I proceed onthe basis that breach of copyright is the alleged "unlawful means".[364] There has been some uncertainty regarding the scope of what constitutes"unlawful means" for the purposes of the conspiracy tort. Following a review of thevarious decisions in Wagner v Gill, the Court of Appeal observed that an overridingtheme was "that the encroachment of the common law into the regulation of economiccompetition must for obvious reasons be subject to some limits".110 Those limitsdepend on policy considerations, having regard to the underlying purpose of the tort.[365] The policy considerations in this case weigh against finding that the statutorybreaches constitute "unlawful means". There is no "gap in the law" that needs to befilled by the conspiracy by unlawful means tort. The Copyright Act sets out acomprehensive regime for the regulation of the unlawful conduct at issue in thisproceeding. However, the parties did not specifically address me on these points, orindeed whether breach of either of these statutes constitutes "unlawful means". And,as outlined further below, the cause of action fails regardless. It is not necessary tofinally decide the point for that reason. Nevertheless, for the purposes of argument, Iproceed on the basis that breach of the Copyright Act is sufficient to establish thiselement of the cause.109 A company is a separate legal entity and can conspire with its directors: Wagner v Gill at [27].110 At [79].[366] The real contest in this case concerns the third element – an intention to injurethe claimant. It is not necessary for Dodson to prove that the defendants had the soleor predominant purpose of injuring it, but something more than reasonableforeseeability that the unlawful conduct was likely to cause harm is required.111 Justwhere the line between those two ends should be drawn in any particular case is moredifficult to discern. In Wagner v Gill, the Court of Appeal preferred, on balance, toretain the requirement that the conduct be directed at a claimant, although it was notnecessary to reach a concluded view on that issue in the case.112[367] The primary evidence of intention relied upon by Dodson in this case is thesense of grievance that each defendant took away from their relationship with Dodson.There is no doubt that both Mr Hannaford and Mr Gray felt a deep sense of bitternesstowards Dodson at the way their respective employment and manufacturingrelationships came to an end. Neither of those relationships ended on good terms andthe resulting acrimony was evident at trial.[368] But that evidence needs to be considered in light of all the evidence called attrial, some of which contains contraindications of an intention to injure. For example,when Mr Hannaford left Dodson's employment, he started working on R35 cars.Dodson knew about that and took no issue with it. Mr Hannaford says that he onlystarted to look for replacement parts because customers started asking for them. Hethen approached Dodson but was unsuccessful in securing supply. Other attempts tosource parts were unsuccessful and it was only then that he approached Mr Gray. Thisevidence suggests that the decision to manufacture the Logiical parts was motivatedby a desire to feed customer demand, and to build a competing business (albeit by wayof copying), rather than injure Dodson in any way.[369] Similarly, Mr Gray declined the request to manufacture the Logiical parts onseveral occasions, before finally succumbing to Mr Hannaford's requests. At the timethat he did finally succumb, GRD's work from Dodson had dwindled, and Mr Graydecided to make the parts as a favour to his friend, Mr Hannaford. That is at odds witha concerted effort to damage Dodson's business in any way.111 At [89] and [90].112 At [106].[370] Finally, both Mr Hannaford and Mr Gray scoffed at the idea that they couldeven contemplate making a dent in Dodson's market share. There are reasonablegrounds for that view. Dodson is the leader in the field with an extensive network ofdealers across the world. Neither Mr Hannaford nor Mr Gray had the nous or themeans to take Dodson down a peg or two, and, I consider it unlikely that they eventried.[371] Overall, I am not persuaded that the evidence of a grievance, when weighedtogether with all the other evidence called at trial, is sufficient to draw an inferencethat the defendants' conduct was targeted at Dodson. Rather, taken at its highest, theevidence suggests that Mr Hannaford wanted to set up a business in competition withDodson, and he engaged GRD to manufacture the parts. That, in and of itself, is notsufficient to constitute an intention to injure. The cause of action fails on proof of thisthird element.[372] Even if intention could be proved, the cause of action would nevertheless failon the fourth element – proof of damage to the claimant. There was no evidence thatthe conspiracy had in fact caused damage to Dodson. The only evidence called at trialrelating to loss was for the copyright cause of action. In the absence of any evidenceregarding loss, the elements of the cause of action cannot be established, and the causeof action against all defendants must be dismissed.SUMMARY OF FINDINGS[373] In summary, I have found that the copyright works at issue in the proceedingare the drawings underpinning the Dodson parts which are listed in Schedule A to thefifth amended statement of claim, and include the Bicknell drawings, and theGS Works drawings. Copyright subsists in those copyright works as they are originalworks. Dodson is the owner of the copyright works either as the author of those worksor as commissioner.[374] The Logiical clutch parts, Logiical selector fork, and the Logiical 22-plateclutch assembly infringe Dodson's copyright in the copyright works. There isinsufficient evidence to support a claim of infringement in relation to the Logiical gearlock and mechanical circlips, and those claims are dismissed.[375] GRD is liable as a primary infringer. Mr Gray and Logiical are liable forauthorising GRD to undertake that copying. Logiical is liable as a secondary infringerin relation to the Logiical clutch parts, Logiical selector fork and Logiical 22-plateclutch assembly. Mr Hannaford is liable for authorising copyright infringement andas a joint tortfeasor in relation to secondary infringement.[376] Damages against all the defendants jointly and severally are assessed at$129,494. This sum comprises the sum of $69,494 calculated according to the userprinciple, and additional damages in the sum of $60,000 pursuant to s 121 of theCopyright Act. Injunctive and declaratory relief is granted in addition.[377] In terms of the FTA cause of action, I have found that Logiical's statement onits website, and the supply of Dodson's gear locks with the logo sheared off breachss 13 and 9 respectively of the FTA. Mr Hannaford's statement about being the headmechanic at Dodson similarly breaches the FTA. The conduct alleged against GRDand Mr Gray is not conduct falling within the meaning of "trade" and is accordinglyoutside the scope of the FTA. Those claims are dismissed. Declaratory and injunctiverelief is appropriate, as is limited "deliver up" orders in relation to the gear lock. Thereis no evidence to support the claim for damages, and the scope of the other reliefsought under s 43 is too broad.[378] The breach of confidence cause of action is established against GRD andMr Gray. Orders to deliver up the confidential information are made below. There isinsufficient evidence and particularisation of the misuse of confidential informationby Logiical and Mr Hannaford, and accordingly the breach of confidence cause ofaction against them is dismissed.[379] The conspiracy by unlawful means cause of action against all defendants isdismissed as there is insufficient evidence of an intent to injure Dodson, and noevidence of damage caused to Dodson as a result.RESULT[380] As to the copyright causes of action, I make the following orders.(a) Dodson's claim for primary infringement of copyright is allowed. Theclaim for secondary infringement of copyright is allowed in respect ofthe Logiical clutch parts and selector fork but is dismissed in relationto the gear lock and mechanical circlips.(b) The Logiical clutch parts and the Logiical selector fork are declared toinfringe Dodson's copyright in the Dodson Parts (comprising theDodson clutch and ancillary parts).(c) Logiical and Mr Hannaford, whether by their servants, agents, orotherwise, are restrained from copying, issuing to the public,possessing in the course of business, manufacturing, distributing,offering for sale, selling or making available the Logiical clutch parts(whether by way of individual parts or in an assembled clutch), and theLogiical selector fork.(d) The defendants shall deliver up or destroy all remaining Logiical clutchparts and the Logiical selector fork.(e) Damages are awarded against all the defendant jointly and severally inthe sum of $129,494 comprising $69,494 in compensatory damages,and additional damages in the sum of $60,000.(f) Interest is awarded in accordance with the Interest on Money Act 2016.[381] As to the Fair Trading Act 1986 cause of action, I make the following orders:(a) Dodson's claim against Logiical is allowed in relation to statementsmade on the Logiical website, the supply of the Dodson gear lock, andas against Mr Hannaford in relation to the statements in theNZ Performance Car magazine. All other claims are dismissed.(b) It is declared that:(i) Logiical breached the Fair Trading Act 1986 by making thestatement at [315] on its website and by supplying a Dodsongear lock as if it was its own(ii) Mr Hannaford breached the Fair Trading Act 1986 by makingthe statements at [326] to the NZ Performance Car magazine.(c) Logiical shall remove the statement at [315] from its website anddeliver up all Dodson gear locks (whether the logo has been removedor not) in its possession.(d) Logiical is prohibited from posting the statement at [315] on its websiteagain, and from supplying Dodson gear locks in the future.(e) Mr Hannaford is prohibited from making the same or substantially thesame representations as set out in [326] again.[382] As to the breach of confidence cause of action, I make the following orders:(a) Dodson's claim is allowed as against Mr Gray and GRD but dismissedas against Logiical and Mr Hannaford.(b) It is declared that Mr Gray and GRD breached their duty of confidenceowed to Dodson.(c) Mr Gray and GRD shall destroy or deliver up any of the confidentialinformation pleaded at paragraph 57 of the Fifth Amended Statementof Claim.[383] The conspiracy by unlawful means cause of action is dismissed.[384] As to costs, Dodson is the overall winner and is entitled to an award of costs.If counsel cannot agree on the quantum of costs and disbursements, or there are anyfactors affecting the award costs of which I am not aware, then memoranda as to thoseissues may be filed and served within 20 working days of the date of this judgment.Costs shall be determined on the papers unless otherwise ordered.[385] Finally, I direct this judgment be initially released to the parties and theircounsel only so that commercially sensitive information may be identified andredacted in the public copy of the judgment. Counsel shall confer and file memoranda(preferably joint) within 15 working days from the release of this judgment as to thosecommercially sensitive parts of the judgement to be redacted.___________________Edwards JCounsel: C L Elliott QC, AucklandSolicitors: Morgan Coakle, AucklandJames and Wells, TaurangaAPPENDIX A – CLUTCH PARTSAPPENDIX B – CROSS-SECTION VIEW OF ASSEMBLED CLUTCHAPPENDIX C – OUTER BASKETFig. 1 – Outer basket featuresFig. 2 – Outer basket fingersFig. 3 – Dodson outer basket and gear plate fitOEM DodsonCut outsInteriordimplesOil reliefholesTeeth and circlipgroove dimplesFingersThicker fingersOEM DodsonGear plateOuter basket fingersFig. 4 – Dodson outer basketFig. 5 – Logiical outer basketAPPENDIX D – GEAR PLATEFig. 1 – Gear plate featuresFig. 2 – Gear plate and oil pump gear driveFig. 3 – Fit between Dodson gear plate and IBSDodson OEMTeeth connection to IBSApertures forouter basketfingersHole and slotsformationBoltedon oilpumpgeardriveWelded oilpump geardriveOEM DodsonGearplateGear plateCirclip GrooveIBSFig. 4 – Dodson gear plate (v.2)Fig. 5 – Logiical gear plateAPPENDIX E – THE A BASKETFig. 1 – A basketFig. 2 – A basket inner profileDodson OEMSnoutWeldWelded jointOEM DodsonFig. 3 – Teeth and oil holesFig. 4 – Dodson A basket versionsHeight and profile ofteethShape and pattern of oilholesOEM DodsonFig. 5 – Logiical A basket versionsAPPENDIX F – THE B BASKETFig. 1 – B basket featuresFig. 2 – Dodson B basket versionsOEMRounded oil holes in regularpattern on the tooth profileCorrugatedprofileDodsonSlotted aperturesFig. 3 – Logiical B basket versionsAPPENDIX G – IBSFig. 1 – IBS outer profileFig. 2 – IBS inner profile and middle plateFig. 3 – Fit between Dodson IBS and gear plateOEM DodsonOEM DodsonGear Plate CirclipDesignSlots for GearPlateFig. 4 – Dodson IBS version 1 (upper) and version 2 (below)Fig. 5 – Logiical IBS 9 plate (upper) and 22 plate (below)APPENDIX H – A PISTONFig. 1 – A pistonFig. 2 – Piston stops and sealantirotationallugOEM Dodson (v 4)pistonseal (v 5)sealwavedstops(v 4)dimplesOEM Dodson (v 4)Fig. 3 – Dodson versions 3, 4, and 5Fig. 4 – Logiical versionsAPPENDIX I – B PISTONFig. 1 – B PistonFig. 2 – Dodson B Piston (versions 3 and 4)OEM Dodson (v 3)Fig. 3 – Logiical B PistonAPPENDIX J – SELECTOR FORK