SEALEGS INTERNATIONAL LTD v YUN ZHANG & ORS [2018] NZHC 1724

SEALEGS INTERNATIONAL LTD v YUN ZHANG & ORS [2018] NZHC 1724 [12 July 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2016-404-2256[2018] NZHC 1724BETWEEN SEALEGS INTERNATIONAL LIMITEDPlaintiffAND YUN ZHANGFirst DefendantORION LIMITED AND ORION MARINELIMITEDSecond DefendantsSMUGGLER MARINE LIMITEDThird DefendantDARREN LEYBOURNEFourth DefendantCONTHearing: 2, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 24, 25, 26October, 6, 7, 11, 12, 13 December 2017Appearances: B P Henry & C S L Foster for PlaintiffP J K Spring & A K Hyde for first, second, third, fourth, sixth andninth DefendantsJudgment: 12 July 2018Reissued: 6 December 2018: see Judgment of 5 December 2018JUDGMENT OF PAUL DAVISON JThis judgment was recalled and reissued by me on 6 December 2018 at 4:00 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Colin Woodroffe, AucklandKeegan Alexander, AucklandANDCONTVLADAN ZUBCICSixth DefendantWARREN FARRSeventh DefendantDAVID PRINGLE AND PAULINEPRINGLENinth DefendantsSTRYDA MARINE LIMITEDTenth DefendantTABLE OF CONTENTSIntroduction [1]Background [8]Concept boat 1 [11]Concept boat 2 [15]First model – prototype boat 1 [18]Mr Leybourne commences employment at Sealegs [24]The Sealegs three-wheel drive system – Prototype boat 136 [29]Project 100 [34]Mr Leybourne resigns [37]The Sealegs USB data stick [39]Mr Zhang visits New Zealand and presents Mr Leybourne with a businessproposition [44]Orion is incorporated and the business established [53]Mr Zubcic designs a wheel with an off-set rim [59]Sealegs provides Orion with its detailed specifications [63]Shanghai boat show in April 2014 [71]SL100 project suspended [74]Sealegs CEO photographs the Orion ARC600 craft [76]Shanghai boat show in April 2015 [88]Smuggler Marine's use of the Sealegs system [98]Mr Pringle approaches Orion [105]Orion starts work on producing a three-wheel system for Smuggler [111]Mr Pringle reports to Mr Leybourne [136]Peter Allen visits Smuggler Marine – 7 September 2016 [148]Sealegs commences proceedings and applies for interim injunctions [151]The expert witnesses [155]Dr Bruce Field [158]Dr Shayne Gooch [163]Mr David Dippie [168]Mr Brian Bellingham [175]Mr Peter Allen [179]Law and relevant legal principles: Analysis and discussion [189]Identifying the alleged copyright works [192]Originality [198]The plaintiff's case regarding originality [208]The defendants' case regarding originality [212]Analysis and discussion regarding originality [214]Are the Sealegs prototypes or the CAD models the original expression of MrBryham's ideas? [220]Ownership: Does the plaintiff own copyright in the three models? [226]The plaintiff's submissions [231]The defendants' response [234]Analysis and discussion regarding ownership [235]Infringement [246]Objective similarity [250]The parties' submissions [253]Functional constraints affecting design [259]Objective similarity in the front leg assemblies on Orion S25-3WDand Sealegs S60-3WD: analysis and discussion [262]Objective similarity in the rear leg assemblies on Orion S25-3WDand Sealegs S60-3WD: analysis and discussion [272]Objective similarity between the Orion S25-4WD front leg assemblyand the Sealegs S60-3WD and SL100 [278]Conclusions as to objective similarity [284]Causality and derivation [286]The plaintiff's submissions as to causality [296]The defendants' submissions as to causality [311]The issues [316]Mr Leybourne and the USB data stick [319]Mr Zhang's visit to New Zealand and the establishment of Orion [325]The Zubcic / Redpath conversation and its implications [332]Opportunity to copy [338]Was the Orion system developed by means of an independent design path? [341](i) The significance of the defendants' conceptual design decisions [343](ii) The four-stage design process [356](iii) The defendants' design path documentation and chronology [366](iv) Absence of documentation [377](v) Conclusion as to independent design path [388]Functional constraints and their relevance [389](i) Submissions [390](ii) Analysis and discussion regarding functional constraints [395]Substantiality [402]The plaintiff's submissions [410]The defendants' submissions [413]Conclusions as to substantiality [418]Summary and conclusions as to infringement of copyright [421]Overview [421]Conclusion as to alleged copyright infringement by first, second, fourth,and sixth defendants [435]Conclusion as to alleged copyright infringement by Smuggler Marine (thirddefendant) and David and Pauline Pringle (ninth defendants) [437]Alleged copyright infringement by Stryda and its directors [448]Relief [454]Plaintiff's allegation of flagrant breach of copyright [454]Design registration [463]Submissions [463]Analysis [465]Result [472]Costs [479]Introduction[1] The plaintiff, Sealegs International Ltd, manufactures amphibious kits forinstallation on small boats. These feature retractable legs that enable boats to be drivenover land and into and out of the water. Once afloat, the legs are retracted entirelyclear of the water so that they are positioned in front of the bow and at the stern of theboat. When returning to shore the retracted legs are again extended, and the craft maybe driven out of the water and back up the beach or ramp. The powered wheels enablethe craft to be driven at a moderate speed on land.[2] The design and development of the Sealegs amphibious system was the workof Mr Maurice Bryham, who built and tested initial versions of his designs over aperiod of years commencing in 2000. Sealegs has since achieved commercial successusing the core pattern or arrangement of components developed by Mr Bryham,having sold significant numbers of its amphibious craft in New Zealand andinternationally.[3] Orion Marine Limited was incorporated in 2012 to compete with Sealegs bydeveloping amphibious leg kits for application on medium-sized runabout boats of thesame size and type as those using the Sealegs amphibious system. Its business wasestablished by the fourth defendant, Mr Darren Leybourne, a former employee ofSealegs, and the first defendant Mr Yun Zhang. Shortly afterwards the sixth defendant,Mr Vladan Zubcic, also left his employment at Sealegs and joined Orion Marine.[4] Sealegs now alleges that Orion Marine Limited and the other defendants haveinfringed its copyright interests as the creator of original artistic works as expressedin three specified models of its craft, each of which are equipped with its amphibiousretractable leg system. Sealegs claims that it owns copyright in the way in which ithas combined and arranged the functional components of its retractable amphibiousleg assembly. It says that the amphibious leg assembly constitutes a unique pattern ofcomponents, albeit using well-known engineering mechanisms and principles.[5] On 19 December 2016 Sealegs was granted an interim injunction restrainingOrion and the other defendants from doing any acts that would infringe Sealegs'claimed copyright. Sealegs now seeks relief by way of a permanent injunctionrestraining the defendants from manufacturing, displaying, offering for sale or sellingcopies of the plaintiff's copyright works either in New Zealand or any other countryuntil the expiry of its copyright interests. Sealegs also seek an inquiry as to damagesor at its election an account of profits derived from the copying of its copyright pattern.[6] There are ten defendants, although the plaintiff has discontinued proceedingsagainst the fifth and eighth defendants. The first defendant, Mr Zhang, is the ownerand director of the second defendants, Orion Limited and Orion Marine Limited. Thethird defendant is Smuggler Marine Limited, a boat-building company of which theninth defendants (David and Pauline Pringle) are directors. The fourth, sixth andseventh defendants, (Darren Leybourne, Vladan Zubcic and Warren Farr respectively)are former employees of the plaintiff. The tenth defendant is a company, StrydaMarine Limited, of which Mr Zhang is the sole director.[7] References to "the defendants" throughout this judgment should be taken asreferring to the Orion defendants, namely Orion Ltd, Orion Marine Ltd, MrLeybourne, Mr Zubcic and Mr Zhang. The specific liability of the remainingdefendants will be addressed at the conclusion of the judgment.Background[8] As noted above, the Sealegs amphibious system was the work of Mr MauriceBryham, now the Chief Technology Officer of Sealegs. Mr Bryham resided at abeachside location in Auckland and was inspired to design and construct a three-legged amphibious boat with supporting legs and powered wheels that could bemanoeuvred while on land, driven from the beach into the water and the legs thenretracted when the boat was afloat. Sealegs was incorporated on 5 October 2000, withMr Bryham as its sole director and majority shareholder.[9] Mr Bryham set out to design and construct a product that would appeal to thehigh end of the recreational boating market, and which would provide the convenienceand safety of a boat that could be launched and returned to land without the occupantshaving to leave the craft. He explained in his evidence that while there are manydifferent ways of attaching and retracting supporting legs fitted to the hull of a boat,his idea was to locate the legs and wheels, as well as the hydraulic actuator that wouldpower the extension and retraction of the legs, all entirely external of the hull. Whenretracted, the legs and their wheels would be elevated above the waterline so as not tocompromise the hull's hydrodynamic performance.[10] Mr Bryham further explained that while other solutions might involve raisingand lowering the wheels vertically, or incorporating a hinge to enable the legs to befolded and more compact when retracted, he decided to employ an extension/retractionmovement of the front leg by attaching it to a pivot point located on the bow abovethe waterline, and extending and retracting it by means of a hydraulic-poweredactuator lifting and rotating the leg through a semi-circular arc as it moved from a nearvertical position when fully extended, up to its fully retracted position. When fullyretracted into the up position, the wheel would sit in front of the bow and the tyrewould act as a bumper to protect the hull from contact with a wharf or other craft.Similarly, the rear legs and their actuators would also be located on the outside of thehull. When extended or lifted by a hydraulic actuator, they would rotate around a pivotpoint located on the transom above the waterline, and when retracted they would beelevated above the waterline into an open position at the stern of the boat.Concept boat 1[11] Mr Bryham commenced his design project with the construction of his firstboat and model which is conveniently described as "concept boat 1". Mr Bryhamconstructed this boat entirely by himself. He purchased a 4.7 metre rigid-inflatableboat (RIB) and built wooden mock-ups of legs and wheels to create a pattern for theexternal legs and to work out the placement of the leg pivot points and actuatorconnection points on the hull, as well as the geometry of the movement they wererequired to perform in order to extend and retract externally of the boat. Having settledupon a system, he then had the pattern of his wooden mock-ups replicated by astainless-steel fabricator. On this initial boat, the front and rear legs – which rotatedaround external pivot points – were manually lifted out of the water and the rear wheelswere electrically driven. Mr Bryham considered several possible methods of steeringthe boat, including by means of driving and controlling the rear wheels independently.However, the solution he chose was to steer the front wheel by means of an externalactuator which would turn the front wheel. Working in his garage at home, he himselfassembled the legs and attached the amphibious leg system onto the RIB he hadpurchased. He then tested the completed concept boat 1 by driving it from his garageto the nearby beach, and into and out of the water.[12] After testing concept boat 1, Mr Bryham proceeded to improve and developthe design. From his test driving on the beach and from launching and returning toshore, he decided that the rather small wheels and tyres used on concept boat 1 shouldbe replaced with larger and wider wheels and tyres with a larger diameter in order toreduce the ground pressure. He also decided to use tyres with a particularly well-defined and prominent tread pattern in order to improve traction over sand and beachterrain.[13] During the design and development of concept boat 1, Mr Bryham and Sealegsengaged Pipers Patent Attorneys (Pipers), and on 17 December 2001 lodged a patentapplication for an invention described as "Motorised Retractable and Steerable BoatWheel System".[14] Then on 23 December 2002, with the assistance of Pipers, Sealegs lodged aDesign Registration with the New Zealand Intellectual Property Office (NZIPO). Thedesign was registered by the NZIPO and published on 16 January 2003, and followingsubsequent renewals had a final expiry date of 23 December 2017. The designregistration 'Statement of Novelty' stated that the novelty of the design resides in theshape and configuration of the boat as depicted in the accompanying representations,being computer-generated images which show the boat as having a retractableundercarriage system and which demonstrate both the wheels-up and wheels-downpositions. The computer images show that when retracted, the front wheel is almostentirely concealed within a recessed cavity located at the bow between the inflatablepontoons. The computer images show the rear legs when retracted to be almost fullycovered and enclosed within a recessed cavity at the rear of each of the pontoons.Concept boat 2[15] Mr Bryham and Sealegs then proceeded to further develop the design andsystem by means of "concept boat 2". To provide the basis for concept boat 2, onceagain a standard RIB boat was purchased from its manufacturer for modification bySealegs. To assist in developing the initial design and the production of the secondconcept model, Sealegs and Mr Bryham engaged several businesses and consultants.Mr Thomas Gardiner of Fulcrum Solutions Ltd (Fulcrum) was engaged to producecomputer-based engineering drawings of the various development pathways beingconsidered and the amphibious legs and their associated fittings. Mr Leybourne, thenthe owner and principal of Central Hydraulic Services Ltd (Central Hydraulics), wasengaged to provide advice regarding the hydraulic system required to power theactuators which would extend and retract the legs, and to power the hydraulic motorsused to drive the rear wheels.[16] During the early stages of the development of concept boat 2, Mr Bryham wasadvised by Fulcrum to dispense with his idea of rotating the front wheel forward andaway from the bow, and instead retract it backwards towards the stern of the boat andinto a recess created within the hull form. To demonstrate its proposed solution,Fulcrum had the hull recess built as a mock up. Mr Bryham, however, preferred hisoriginal concept boat 1 geometry with the front leg rotating forward, so that when fullyretracted, the leg and wheel were positioned in the open directly in front of the bow.He then built his own mock up to demonstrate the forward pivot system he had earlierdeveloped with concept boat 1, and which he preferred as being a simpler solution forboth the front and rear legs by being fixed and functioning on the outside of the hulland without requiring any modification of the hull form to accommodate them.[17] The concept boat 2 model had the hydraulic retraction system of the front leglocated inside the hull. Part of the front wheel steering system was also containedinside the hull. The front wheel was secured by an inverted "U" shaped fork, and therear legs were retractable by means of an external hydraulic lift cylinder. In the courseof its development the system initially used electric motors to drive the wheels, thenhydrostatic drive, then mechanical drive, before hydraulic power was finally selectedto drive the wheels. The hydraulic drive system for the rear wheels used a hydraulicmotor located inside the hull with chains running inside the rear legs, which had largerwheels and tyres with a more defined tread than had been used previously on conceptboat 1.First model – prototype boat 1[18] With the lessons learned from the development and construction of conceptboat 2, Sealegs and Mr Bryham then set about the design and construction of what wasto become prototype boat 1. As had been the case with concept boat 2, once againSealegs engaged a number of outside businesses and consultants to assist with theprocess, including Mr Gardiner of Fulcrum and Mr Leybourne of Central Hydraulics.[19] In the course of developing the design of prototype boat 1, Mr Gardiner andhis Fulcrum staff produced engineering drawings of alternative development pathwaysthat could be adopted, including the partly internal steering arrangement used onconcept boat 2. Mr Bryham decided, however, that the partly internal steeringarrangement was too complicated as it required a number of additional mechanicalparts to engage and disengage the steering mechanism when the front wheel wasextended or retracted. He decided to revert to his original design as employed inconcept boat 1, with both the front leg lifting actuator and the steering actuator locatedexternal to the hull, and with the rear leg lifting actuators also external to the hull. Thisarrangement was considered not only simpler, but also had the advantage that the legsand wheels were entirely clear of the water when retracted, without compromising thehydrodynamic qualities of the hull.[20] Mr Bryham said in evidence that after discussions with the Fulcrum staff andconsideration of a number of their drawings of his front leg and wheel design, he andMr Gardiner sat together at Fulcrum's design computer and prepared drawings to hisspecifications which were then entered into the SolidWorks CAD program1 to producea series of computer-generated renderings, or images, of the design showing what amanufactured boat would look like. Sealegs then commissioned Metal DesignsAuckland Ltd (Metal Designs) to prepare engineering drawings of the componentsrequired to construct the rear legs.[21] Mr Bryham and Sealegs then engaged Metal Designs to construct the hull andthe rear legs for prototype boat 1. Fulcrum was engaged to manufacture parts. Thefront leg and wheel assembly was manufactured by Gilbert Sheet Metals Ltd, which1 CAD, computer-aided design.was engaged and paid by Sealegs to construct the front leg in accordance with theengineering drawings prepared by Fulcrum to Mr Bryham's design.[22] Mr Leybourne and Central Hydraulics were also engaged by Sealegs to provideadvice regarding the hydraulic system. The hydraulic cylinders or actuators wereordered by Mr Bryham and built by Victor Hydraulics for Sealegs. The plaintiffproduced invoices from the consultants it engaged and Mr Bryham explained in hisevidence that all of the parties engaged and commissioned by Sealegs were paid fortheir work, and in each case they designed or built pursuant to his instructions andspecifications.[23] Prototype boat 1 was approved for production in late 2003 to early 2004, andthe retractable leg assembly developed for prototype boat 1 was known as "System40". Production drawings were subsequently prepared based on the prototype model,with the first production boat sold on 30 April 2004. As already noted, the initialdesign of the front leg had the wheel secured in an inverted U-shaped fork. The U-shaped fork was found to be subject to bearing and shaft failure and, because it used adifferent wheel from that on the rear legs, it also meant that a boat owner would needto have two different wheels for use as spares. Mr Bryham also wanted to produce amore aesthetically pleasing and sculpted look for the front leg, and decided that aninverted L-shaped single arm with a rectangular cross-section design would be animprovement. An engineering company was engaged to construct a prototype of thisnew front fork and once approved, production drawings of the new fork werecommissioned by Sealegs. The new inverted L-shaped fork was brought intoproduction and became a feature of all Sealegs boats sold from 5 September 2005.Mr Leybourne commences employment at Sealegs[24] In April 2004 Mr Leybourne commenced employment at Sealegs. He hadearlier that year sold his hydraulics business in which he was principally involved inthe servicing and repair of existing hydraulic systems, including marine-basedsystems. As I have already noted, he had been engaged by Sealegs during the periodbetween 2002 and 2004, through his company Central Hydraulics, to make and supplyhydraulic components and to provide technical consultant services relating to thehydraulics to be used by Sealegs for extending and retracting the amphibious legs andfor driving the rear wheels on concept boat 2 and prototype boat 1. Upon commencingemployment with Sealegs, Mr Leybourne was initially engaged in a mechanical fittingrole where he was involved with the construction of Sealegs boats. Subsequently,between 2004 and 2006, he also became involved in the repair and servicing of Sealegsboats within New Zealand and overseas.[25] Around 2006 Mr Leybourne's work at Sealegs shifted from day-to-dayoperational work to that of project management. This included managing theestablishment of an in-house hull fabrication process, which was a significantundertaking that involved the creation of a new business unit, the leasing of premises,significant capital expenditure on equipment, and the recruitment of staff, as well asthe establishment of new operational procedures and systems. Once Mr Leybournehad successfully completed this project he ceased involvement in its day-to-dayoperational management, while still maintaining a supervisory role. In 2009,following staff redundancies at Sealegs that resulted in a number of key operationalstaff leaving the company, Mr Leybourne resumed his responsibilities for day-to-daymanagement of the hull fabrication operation.[26] In mid-2010 Sealegs decided to bring the manufacture of machinedcomponents in-house. Mr Leybourne was given the role of managing theestablishment of this new operation, which once again required Mr Leybourne tooversee and manage significant capital expenditure, the recruitment of staff, and theestablishment of new systems and procedures. In the course of this project, MrLeybourne worked closely with Mr Zubcic, who had commenced his employment atSealegs as a mechanical and design engineer in February 2008. Once these projectshad established in-house manufacturing operations and capability, Mr Leybourne andMr Zubcic recommended the purchase and use of a computer-based materialrequirements planning (MRP) programme to more efficiently control and manage theproduction operation. Once again, the establishment of the MRP system wasundertaken and managed by Mr Leybourne, and it produced significant benefits interms of monitoring production capacity and planning.[27] Mr Leybourne explained in his evidence that although he was a hydraulicspecialist, hydraulics-related work was only a small part of the Sealegs business, andcomprised only a small part of his work at Sealegs. Over time, his project managementand operational management responsibilities expanded and he eventually becameresponsible for the on-going management of approximately 28 staff.[28] Throughout his employment at Sealegs, Mr Leybourne was frequently criticalof decisions made by Sealegs senior management and often raised his concerns in aforthright and outspoken manner. He frequently commented on what he consideredto be manufacturing faults and defects, and about what he saw as being a general lackof quality control and assurance in the production of the boats. He was especiallycritical of Sealegs for selling boats intended for use for commercial applications, as heconsidered the boats and their amphibious systems had neither been designed norproven suitable for such purposes.The Sealegs three-wheel drive system – Prototype boat 136[29] Around August 2009, Sealegs decided to develop and introduce a three-wheeldrive system by adding drive power to the wheel of the front leg. Mr Leybourne wasasked by management to take responsibility for this project. He strongly resisted beingassigned to the project, saying that he had made a "unique" contribution to the successof Sealegs in his existing role where he was engaged in the fabrication of the boats.He also considered that the production of quality hulls needed to be prioritised overthe creation of a three-wheel drive system. In a lengthy email sent to Mr Bryham andMr McKee-Wright2 on 4 August 2009, Mr Leybourne wrote:Why build a three wheel drive system when our main fuel tanks have potentialleaks, our aux fuel tanks do not fabricate square, the fuel overflow boxes arecustom fitted each time, or, when we employee [sic] a new fabricator he buildsthe hull 12 mm to [sic] long or welds on the wrong leg brackets because wedo not have the build manuals, or, or, or.You want me to walk away from continuing to set up fabrication, drivingquality, improving output to build three wheel drive?Is Sealegs suffering because we cannot build a three wheel drive boat? Notfrom what I can see. Production capacity restraint seems to be a biggerchallenge to overcome.2 Mr McKee-Wright was Sealegs' CEO.Will we suffer if we cannot produce a sufficient quantity of quality hulls? YESwe will.Interesting how the fabrication facility with all the cool stuff, router, pressbrake, CAD etc has become one of our most powerful sales tools.Why else am I unique, because I have a vision for Sealegs that many othersdont [sic]. I continue to see new ideas, new products, and new ways of doing.These I believe have considerable potential to continue to make Sealegsproduct a world beater.My dossier on these products is great. Most others simply pass by these newideas without giving any thought to how much better they can make theSealegs product.So in summary, I quote from todays [sic] meeting we have reached an impassebecause I am being asked to stop doing the job that I was asked to do becausethere was nobody else available after the last round of redundancies, a job thatI have made significant head way into, a job that I am enjoying, a job that Ihave been acknowledged as doing well.It is madness to have an individual of my calibre being put is [sic] this position.The last 12 months have been very stressful this now just adds to the stressand anxiety.[30] Despite his initial opposition, Mr Leybourne relented and became involved inSealegs' development of a three-wheel drive system with a powered wheel on the frontleg. Mr Leybourne's work related particularly to the hydraulic functioning andcontrols. The three-wheel drive system became known as 'Prototype boat 136' andwas a three-wheel drive version of the standard Sealegs production boat. It wassubsequently released to the market in 2010. The introduction of power to the frontwheel meant that as the craft transitioned from floating to being supported on its legs,the craft would be drawn by the front wheel when it made contact with the beach orramp, instead of being pushed by the outboard motor until the rear driving wheels hadmade sufficient contact with the ground to gain traction and provide forward motion.[31] The introduction of a hydraulic hub motor to power the front wheel requiredredevelopment of the hydraulic system and its controls. Mr Leybourne was involvedin the design and development of the hydraulic system. Sealegs also engaged the firmHydraulic Cartridge Valves Ltd (HCV) to assist with the system design. In hisevidence Mr Leybourne said that his involvement was in the nature of projectmanagement and that he had suggested that Sealegs engage HCV to design thehydraulic circuit and supply the valves.[32] A new differential lock system and a redesigned front steering arm were furthermodifications that were introduced on prototype boat 136. Apart from those features,prototype boat 136 was substantially the same as prototype boat 1. It was calledprototype boat 136 because the boat used as the basis for development of the prototypewas Sealegs' 136th production boat.[33] Prototype boat 136 was constructed in-house by Sealegs, as by 2010 thecompany had established its own fabrication and assembly workshop. Once testing ofthe prototype was completed, prototype boat 136 was approved for production, andproduction drawings were thereafter prepared by Sealegs' own engineering andcomputer design staff, principally Mr Zubcic. Once in production, the three-wheeldrive system was called "System 60" and became an option for customers to purchase.It proved very popular, and the fiftieth "System 60" was sold on 31 May 2011.Project 100[34] In mid-2010 Sealegs initiated a project to develop a new heavy-lift Sealegssystem for use on larger craft. The first phase of this project became known as "Project100". The objective was to upscale the existing System 40 and develop a system thatwould support an amphibious craft weighing 5000kg with a length of around ninemetres. Initially, Sealegs recruited a team of design engineers to specifically undertakeProject 100. Mr Paul Hood and Mr Anthony Wraight were the principal designengineers and they were assisted by Mr Andrew Percival.[35] Mr Percival is a qualified engineer who had previously operated an engineeringmanufacturing business called Allied Precision Engineering (1992) Ltd (APEL).From around 2003, APEL had been engaged by Sealegs to manufacture componentparts, and Mr Percival had redesigned and made parts required for Prototype 1 andPrototype Boat 136. In 2010 he sold APEL's assets to Sealegs; his machinery wasthen relocated and set up at Sealegs' factory, and he commenced working for Sealegsas an employee.[36] Because of his hydraulics expertise Mr Leybourne also became involved inProject 100. He undertook the calculations of the hydraulic requirements andspecifications for the proposed 5000kg craft weight. These calculations dictated thechoice of hydraulic components and those choices in turn dictated aspects of the designof the functional leg assemblies' components. Mr Hood and Mr Wraight directed themanufacture of the prototype leg assemblies which were fitted to a test platform knownas the "the barge". In around July 2011, Project 100 was suspended because of fundingissues, and Mr Hood and Mr Wraight were made redundant and left Sealegs.Mr Leybourne resigns[37] By email dated 31 May 2011, Mr Leybourne notified Mr Bryham of hisresignation. He explained that he had made his decision to resign following theannouncement of a new reporting structure for the upper level of Sealegs managementwhich would have him reporting to the Operations Manager and not directly to thenew CEO who was to be based in Hong Kong. He said that he had some flexibilitybefore taking up new employment and was happy to negotiate his final date at Sealegs.In his evidence Mr Leybourne explained that he was unhappy at Sealegs for a numberof other reasons relating to the senior management of the company, and that whenconfronted with the new reporting structure it was the "last straw" and he had made"a bit of an impulse decision to resign on the spot."[38] A short time after handing in his resignation, and after Mr Hood and MrWraight had already left the company, Mr Leybourne was asked to finish Project 100with the assistance of Mr Percival and Mr Warren Farr (the seventh defendant) beforehe left Sealegs. As a result, Mr Leybourne became involved in managing theconstruction of the barge, and the installation of the Project 100 amphibious legassembly system onto it, and he was present when it was first launched in November2011 shortly before his last day at the company on 30 November 2011.The Sealegs USB data stick[39] Mr David Redpath is employed at Sealegs as a Production Safety Manager andwas called as a witness by the plaintiff. In 2011 he was working as a MachiningManager reporting to Mr Leybourne. He said that in the weeks before Mr Leybourneleft the company, he had told him a "bizarre story" about having been given a SealegsUSB stick that had been found by a friend of his on a beach near Dunedin. Mr Redpathsaid that Mr Leybourne told him that a friend of his had found the USB stick whilewalking on a Dunedin beach, and had given it to Mr Leybourne as it contained Sealegsfiles. Mr Redpath said that Mr Leybourne said that he was downloading the stick ontohis computer at home, and that it contained "everything including financials".[40] Mr Redpath said that he considered the finding of the USB stick as indicatingthere had been a serious security breach, and that he had commented to Mr Leybourneat the time that he thought someone would lose their job at Sealegs because of it. Hesaid that Mr Leybourne had said it would not be possible to find out who haddownloaded the information onto the data stick. Mr Redpath said that he had alsocommented to Mr Leybourne that there were only three or four people in the companywho would have access to the information.[41] Mr Redpath said that although he considered the matter as representing a veryserious security breach by someone with access to the inner security files held in theSealegs computer system, he himself did not report this information to anyone as MrLeybourne was his "boss", and he expected that Mr Leybourne would himself raisethe matter with the senior executives of the company.[42] Mr Leybourne in his evidence disputed Mr Redpath's account of theconversation. He denies having told Mr Redpath that the USB stick had "everythingincluding financials" on it, or that he had said that he was downloading the stick ontohis computer at home. Mr Leybourne said in his evidence that he was telephoned bya friend of his, Mr Rod Nicol, who had previously done some building work forSealegs and who knew that he worked there. He said that Mr Nicol told him that hehad been in Dunedin and had found the Sealegs USB stick while walking along abeach. Mr Leybourne said that he did not remember whether the USB stick hadSealegs' name on it or whether Mr Nicol had opened it on a computer and had seen itcontained Sealegs information. Mr Leybourne said that after Mr Nicol gave him thedata stick, he would have checked what was on it using a company computer, and sawthat it had pdf drawings of the Sealegs parts at that time. Mr Leybourne said that hecould not recall precisely what he had done with the data stick, but suggested he hadgiven it to "one of the CAD guys". He said that so far as he was concerned it was a"non-issue".[43] Mr Rodney Nicol, who is a building contractor in Auckland, gave evidence forthe defendants by means of a signed witness statement. He was not required by theplaintiff to give evidence in person or be cross-examined. In his statement he said thatas a result of an introduction by his friend Mr Leybourne, he had undertaken buildingwork at Sealegs. He said that when in Dunedin with his wife in October 2011, he hadfound a USB stick while walking along a beach. He said that he picked it up and sawthat it had something on it which said Sealegs. He said after he returned to Auckland,he contacted Mr Leybourne, told him the story and dropped the USB stick off to him.Mr Zhang visits New Zealand and presents Mr Leybourne with a business proposition[44] Mr Leybourne said in evidence that at the time of his resignation and departurefrom Sealegs on 30 November 2011, he had no plans for any other employment, andhad decided that he would take some time off work for a while and see how he feltafter that. However, he says that he did undertake some contract work for hydraulicscompanies in New Zealand and Australia doing hydraulic system repairs andinstallations of the kind he had been involved with before joining Sealegs.[45] Mr Leybourne says that once back working in hydraulics, his knowledge of thefield was updated, and he started seeing where the industry was going and saw ideasthat could be applied to other amphibious systems. He said that he was particularlyimpressed with the evolution of hydraulic controls and thought there were some greatideas and new concepts that could be applied to amphibious systems, and this sparkedhis thinking. However, despite undertaking research and considering the possibleapplications of hydraulic controls and equipment in amphibious system applications,Mr Leybourne says that he had no intention of setting out to create a new amphibioussystem himself at that time.[46] Then in mid-2012 Mr Leybourne says he received a surprise visit to his homefrom Mr Zhang. Between 2003 and 2007, when Mr Zhang was a student, he had livedwith Mr Leybourne and his family on a homestay basis. After Mr Zhang returned toChina they had maintained contact. Mr Leybourne said that Mr Zhang had travelledto Auckland from China accompanied by his wife and their young child, but until theirunannounced arrival at the Leybourne residence, Mr Leybourne says he had no ideathat Mr Zhang was even in New Zealand. Although he says he can remember the visit"vividly", Mr Leybourne is unable to be specific as to the date or even the month ofMr Zhang's visit. He says the visit was a big surprise and took place on a Friday nightin the middle of winter, "possibly May, June in 2012."[47] Mr Leybourne says that Mr Zhang explained to him that he and his wife hadcome for a week to see if she would like New Zealand as a place to live. Mr Zhangsaid that if they decided to move to New Zealand, they would do so under theimmigration entrepreneurial scheme and would establish a business which wouldemploy a number of people. Mr Leybourne says that Mr Zhang then asked him if hewould like to go into business with him. Mr Leybourne says that he suggested to MrZhang that he and his wife should proceed with their trip first, and then come back andsee him again in a week. If they had decided to apply for residence in New Zealand,they could discuss the matter of starting a business together further.[48] Mr Leybourne says that a week later Mr Zhang and his wife returned and saidthat they had decided to apply for New Zealand residence and that Mr Zhang wantedto involve Mr Leybourne in establishing a new business. Mr Leybourne says that nodecision was made during Mr Zhang's visit to New Zealand as to what type of businessthey would go into, and after Mr Zhang and his wife had returned to China they hadinitially considered exporting milk powder and Manuka honey to China. MrLeybourne says although in hindsight it was an obvious choice, he cannot rememberwhen the idea of an amphibious boat business came up. He said that he had seen thatSealegs had been enjoying a monopoly in the amphibious boat market and thoughtthat he could do better than they were doing.[49] Mr Zhang gave his evidence by way of video link from China. He gave hisevidence in capable English without the need for any assistance from an interpreter.He confirmed that he is the sole director and shareholder of both Orion Marine Limitedand Orion Limited, and the sole director of the tenth defendant, Stryda Marine Limited(Stryda). He said that he and his family moved to New Zealand in 2015 and that heobtained permanent residency in January 2017.[50] Mr Zhang explained that he was born in China and had lived and studied inNew Zealand from 2002 (when aged 18) until April 2007, and had lived with MrLeybourne and his family from 2003 until his return to China. He said that since 2008he had been a director of one his family's companies called Jiangyin RongxingTechnology Development Co Ltd (JRTD), which was started in 2001 and whichcurrently manufactures and markets amphibious craft in China as "Surfcon". He saidhe came to New Zealand to talk to Mr Leybourne about business opportunities, andthat it was Mr Leybourne who had suggested that they establish an amphibious boatbusiness.[51] Consistently with Mr Leybourne's account, Mr Zhang said that he and his wifeand son came to New Zealand during the winter of 2012 and met with Mr Leybourne.However, contrary to Mr Leybourne's account, Mr Zhang says that he only met withMr Leybourne once during that visit. He said that he did not really talk about businesswith Mr Leybourne other than saying he was looking for business opportunitiesoutside China and that maybe they could work together.[52] Mr Zhang was unable to specify or confirm the date or year of his visit to NewZealand when he came and met Mr Leybourne to discuss going into business. He saidthat he had renewed his Chinese passport in 2016, and could not find his previouspassport, explaining that he had moved house twice in the time since that visit to NewZealand. He said that he had come to New Zealand in 2009 for a brief visit but hadnot been back in New Zealand again until his visit in 2012 when he met with MrLeybourne.Orion is incorporated and the business established[53] On 28 September 2012, Orion Marine Limited was incorporated. Mr Zhangprovided the funding and Mr Leybourne was responsible for locating and arranging tolease premises and the purchase of plant and equipment for the manufacture ofcomponents. Mr Leybourne explained in his evidence that there was never anyconcealment of the intention to set up Orion to design and manufacture a newamphibious system. As part of the planning for the establishment of Orion, MrLeybourne had spoken to Mr Zubcic and offered him employment at Orion. MrZubcic agreed and he resigned from Sealegs effective from 2 February 2013 andstraightaway commenced employment at Orion.[54] In early 2013 Mr Bryham, who by then knew that Mr Leybourne was settingup the new business, contacted Mr Leybourne and said that Sealegs would like to beOrion's first customer. He said that Sealegs wanted to engage Orion to assist with thecompletion of projects such as S60 SE, which was based on using a single engine forboth marine and land power, and with System 100 (SL100) which had previously beencalled Project 100.[55] Mr Leybourne and Orion agreed, and Sealegs' terms of engagement with Orionin relation to SL100 were set out in a detailed written design brief which wasnegotiated during March 2013 and dated 9 April 2013. The design brief stated thatOrion was to design, manufacture, install and validate an amphibious system suitablefor craft up to 6000kg gross vehicle mass (GVM) and stipulated that SL100 geometryis based on the existing SL40. At Sealegs' request the design brief further providedthat:The intellectual property of all proprietary components that are designed aspart of SL100 shall be the sole ownership of Sealegs Corporation Ltd.[56] In addition to the design brief, Orion required Sealegs to complete an accountapplication form and provided Sealegs with its written "Terms of Trade" which stated:These Terms apply to every supply of Goods and Services made by Orion tothe Customer. By placing an Order with Orion, the Customer agrees that it isbound by these Terms and that the Customer's own terms and conditions donot apply. These Terms may be modified by Orion's specific terms in a Quoteor Order.Nothing in this agreement will be construed as transferring to the Customerany intellectual property of Orion (including in relation to any designs,manuals, drawings, or other materials or information provided to theCustomer).[57] When Mr Leybourne for Orion accepted Sealegs' engagement to work onSL100, he realised that Orion would not have the engineering and design resourcessufficient to develop its own amphibious system while also undertaking the SL100project. Mr Zubcic was to be responsible for the design engineering of Orion's newamphibious system project, and so Mr Leybourne employed Mr Percival to take onthe design engineering for SL100. Recognising the conflicting interests of Orion andSealegs, Mr Leybourne organised for Mr Zubcic and Mr Percival to occupy separateoffices, while he "floated between both projects".[58] Because of the increase of the GVM from the 5000kg applicable to the Project100 barge to the 6000kg GVM for SL100, the engineering design process had to startagain from scratch. This applied not only to the hydraulic calculations undertaken byMr Leybourne, but also to all the components that Mr Percival was required to designfor SL100. In terms of the appearance of the leg assemblies, Mr Bryham wanted thedesign to maintain the existing curved form of the existing Sealegs assemblies. WhileMr Percival was the principal design engineer during the early phase of SL100'sdevelopment, he did not have the expertise necessary to run the FEA (finite elementanalysis) computer simulation system which was used to analyse the strength ofdesigned components. Consequently Mr Zubcic operated and ran the FEA of MrPercival's component designs during 2013, and in doing so inevitably became familiarwith the SL100 components that Mr Percival had designed.Mr Zubcic designs a wheel with an off-set rim[59] Mr Zubcic said in evidence that one of the first things he did at Orion tocommence the design and development of Orion's amphibious system was to preparesome sketches of a wheel with an off-set rim. An off-set rim would allow a hub motorto sit substantially within the wheel, and thereby direct the effects of weight and forceupon the motor to the optimal position as dictated by the motor manufacturer,compared to the sub-optimal location of weight and forces upon a motor connected toa standard centre rim wheel. On 22 March 2013 Mr Zubcic created a computer sketchof an off-set rim wheel in the Orion SolidWorks computer programme. On 16 May2013, Mr Zubcic sent an email to Mr Zhang attaching a copy of an off-set rim wheel,commenting that although the drawing was not fully defined, it had enoughinformation for pricing. Mr Zhang responded to Mr Zubcic in an email sent on 21May 2013, enquiring whether Mr Zubcic had asked Mr Bryham about the rim. MrZubcic replied that he had not yet done so.[60] On 5 July 2013, Mr Zubcic sent an email to Mr Bryham attaching six computersketches of off-set wheels. In his email Mr Zubcic referred to one of the sketches andasked Mr Bryham what he thought of it. Mr Bryham responded almost straight awayto Mr Zubcic in an email saying that the sketch looked great, and made somesuggestions for minor improvements.[61] Mr Zubcic stated in evidence that he had sent the six off-set wheel designs toMr Bryham because Mr Bryham knew he was working on designing a new wheel rim.He explained that over the preceding period, Mr Bryham had often called in to theOrion office to discuss and review drafting and machining work that Mr Zubcic wasdoing for him on other unrelated projects. Mr Zubcic said that he and Mr Bryhamwere friends at that time, and that he and Mr Bryham would discuss what he wasworking on. From these conversations Mr Zubcic says that Mr Bryham knew that hewas working on the design of a new wheel rim for Orion's own new amphibioussystem. Mr Zubcic says that the issue of copying never arose, because Mr Bryhamknew he was developing his own design.[62] Mr Zubcic did not explain why Mr Zhang had asked him whether he had askedMr Bryham about the rim, or why Mr Bryham's view of the rim was at all relevant towhat he was doing in designing a new wheel rim for a new Orion amphibious system.I note too that Mr Bryham's comments in his email of 5 July 2013 regarding one ofthe computer sketches Mr Zubcic sent to him appear to be more consistent with thoseof a client commenting on their own design preferences, rather than what might beexpected of someone in the position that Mr Zubcic says Mr Bryham was in. It is alsoclear that at the time of this email correspondence regarding the new wheel rim, Orionwas well underway working on the Sealegs System 100 project.Sealegs provides Orion with its detailed specifications[63] In an email sent by Mr Leybourne to Mr Bryham on 15 May 2013, he askedMr Bryham to call in to Orion the following day to discuss the SL100 front assemblywith Mr Percival. Mr Bryham agreed and a time was arranged. The following dayMr Leybourne sent an email to Mr Bryham saying:We are debating the method of determining the force required to steer SL100.We want to validate our thinking against a current Sealegs. Can we pick up aSealegs and bring [it] back to Orion for testing?[64] As a result of the request, arrangements were made for a Sealegs boat to bemade available to Orion at Sealegs premises for testing to be done, which includedOrion measuring the weight over the front tyre of the Sealegs boat.[65] On 21 May 2013, Mr Bryham sent Mr Leybourne the detailed operationspecifications for Sealegs: Generation 1 System 60; 7R System 40; and 6R System 40.Mr Bryham explained in his evidence that as Orion's design and development ofSL100 involved them upscaling the existing Sealegs design, they needed theinformation set out in the specifications to look at what sort of stresses and forcesneeded to be upscaled. In particular, Orion was looking at the amount of load, stress,and force that was on the front steering system. He explained that Orion wanted theinformation so as to have a starting point for designing the upscaled system requiredfor SL100. For example, Sealegs Generation 1 System 40 specifications were basedon a fully-laden craft or vehicle weight of 2500kg. The specifications set outinformation regarding the maximum static wheel loads on the front and rear wheels aswell as detailed information regarding the hydraulic system, wheel motors, tyres, themaximum inclines for which the system was designed, the maximum speed of thesystem over level ground, and the operating life of components.[66] In his evidence Mr Leybourne disputed Mr Bryham's explanation for Sealegshaving provided Orion with the detailed specifications. Mr Leybourne said that thereason that Mr Bryham provided the specifications had nothing to do with the forceson the steering system. Under cross-examination, Mr Leybourne said that by the datehe was sent the specifications, Orion had already undertaken the testing of a Sealegsboat and so would not have needed the specifications for that purpose. However, healso said that his evidence on this issue was based upon his reconstruction of the eventsrather than his recollection. He thought that Mr Bryham had sent him the threespecification documents because Mr Bryham had wanted his opinion or critique ofthem, as Sealegs lacked the expertise to do so. Mr Leybourne said that there hadobviously been some conversation between Mr Bryham and himself prior to thespecifications being sent to him, and as Orion was not working exclusively on SL100for Sealegs, he had concluded that the specifications sent to him related to mattersarising in general conversations between Mr Bryham and himself regarding the otherwork that Orion was doing for Sealegs at that time.[67] On Monday 15 July 2013, Mr Bryham sent Mr Leybourne an email askingwhat the status of the SL100 front and rear assemblies would be by the end thefollowing week. Mr Leybourne responded by email the following day saying:Hi Maurice,The design detail is being worked on by Vladan [Zubcic] and Andrew[Percival] at present.Because Vladan has the final sign off, he is peer reviewing the design(calculations, fitment, etc.). Vladan will let you know tomorrow how this isgoing, along with an ideal of when the assemblies will start to bemanufactured.[68] In 2013 Mr Zhang, as the owner of Orion, was introduced to Mr Bryham byMr Leybourne, who explained his background and their connection. Mr Bryham wastold that Mr Zhang and his family were seeking New Zealand residency and he agreedto write a letter that could be provided to Immigration New Zealand to support MrZhang and his family's residence applications. On 22 July 2013, Mr Bryham, asFounder and Chief Technology Officer of Sealegs, wrote to Orion Marine and MrZhang confirming that Sealegs had engaged Orion as a design partner to develop newamphibious marine solutions, and that Sealegs was already utilising the design anddevelopment services of Orion Marine. He went on:The team and skills that Orion Marine offer complement those of Sealegs.Orion Marine adds additional expertise and experience to the knowledge baseof Sealegs.We consider the establishment of Orion Marine is positive for Sealegs as itenables new projects to be commissioned and new improved amphibioustechnology to be development. [sic]Allen [Mr Zhang], we have found yourself and the team at Orion to be veryprofessional, to have a very high level of technical expertise, and be bothreliable and capable. We look forward to working with yourself and Orion aswe move forward on the development of the Sealegs System 100 andassociated amphibious technology.[69] By September 2013, Orion was making progress with the development ofSL100, and had made a frame on which it installed the three SL100 leg assembliesand which was for display at the Sealegs AGM that month. For the purposes of thedisplay the leg assemblies were electric rather than hydraulically powered. Shortlyafter its AGM, Sealegs suspended further development of SL100 because of fundingissues. Notwithstanding the suspension of the SL100 project, Orion continued toundertake other minor work for Sealegs. Mr Leybourne says that Mr Bryham waskeen to ensure that Orion did not take on another project that would prevent it fromresuming work on SL100 once Sealegs had secured further funding to enable theproject to proceed.[70] In early 2014 the SL100 project was resumed and Orion continued to work onits development until around the end of July, when Orion again stopped work becauseof Sealegs' funding issues.Shanghai boat show in April 2014[71] In April 2014 Mr Bryham and Mr McKee-Wright attended the Shanghai boatshow where they met and had discussions with Mr Leybourne and Mr Zhang. Theparties dispute what was said between them during their discussions about Orion'samphibious system projects.[72] Mr Leybourne says that he attended the April 2014 boat show at Mr Zhang'ssuggestion, and that they met Mr Bryham and Mr McKee-Wright who were therebecause Sealegs had one of their boats on display. Mr Leybourne says that by thattime, Mr Bryham and Mr McKee-Wright already knew that Orion was developing itsown amphibious system known as S25-4WD. He says that during their discussions,Mr Bryham and Mr McKee-Wright suggested that Orion should offer their S25-4WDsystem to Sealegs for exclusive worldwide distribution, except China. Mr Leybournesays that Mr Bryham and Mr McKee-Wright said that if Orion went ahead andlaunched its S25-4WD system other than through Sealegs, Mr Eric Series, theChairman of Sealegs' board of directors, would cause Sealegs to commence legalproceedings against Orion. Mr Leybourne says that he was told that an alternativewould be for Orion to offer Sealegs a "no fight fee" for each Orion S25-4WD systemit sold into an established Sealegs market. Mr Leybourne says that he responded tothis suggestion by saying that Orion was open to considering a "no fight fee" as ameans of keeping both parties happy. He says that Mr Bryham and Mr McKee-Wrightsaid that as soon as they were back in control of Sealegs, they would make it happen.[73] Mr Bryham agrees that he and Mr McKee-Wright had a discussion with MrLeybourne and Mr Zhang during the 2014 Shanghai boat show, but says that what MrLeybourne and Mr Zhang talked about was that Orion was developing an amphibioussystem on a flood rescue craft for the Chinese market, and he says that they assuredhim that the Orion product would not infringe Sealegs' intellectual property. MrBryham says that no specific details were provided by either Mr Leybourne or MrZhang about the Orion amphibious system or as to how many wheels it would have.Mr Bryham agrees that there was discussion around the prospect of Orion givingSealegs distribution rights for their yet-to-be-produced amphibious flood rescue craft,which Sealegs could sell and distribute into other Asian countries where there was aneed for such craft. He said that his understanding was that Orion would be producinga low-cost flood rescue product in China and that Sealegs might be able to sell thatproduct to other Sealegs customers in Asia, especially in Malaysia where Sealegs hadalready sold boats for use as flood rescue craft. He said that Mr McKee-Wright,Sealegs' Sales Manager at the time, had commented that if the price of the Orionamphibious rescue craft was $50,000 it could be sold into other Asian countries. MrBryham denies any discussion regarding a "no fight fee", and says that it is not a termhe has used. Mr Bryham also denies that he said that the Orion product looked like acopy of Sealegs. He says that at the time of the 2014 Shanghai boat show he had notseen the Orion amphibious system, and was in no position to make any such statement.SL100 project suspended[74] Mr Leybourne says that around June 2014 Orion encountered delays withSealegs paying its invoices. On 21 July 2014, Mr Leybourne forwarded an email toSealegs' CEO, Mr David Glen, advising that because of the ongoing uncertaintysurrounding SL100 and the sum outstanding, Orion staff would be deployed to otherprojects. He further said that a final invoice had been issued and it was time for apayment plan to be formalised and agreed upon.[75] Sealegs paid the outstanding amount due to Orion, and the SL100 project wasagain suspended.Sealegs CEO photographs the Orion ARC600 craft[76] Mr David Glen was employed as Chief Executive Officer of SealegsInternational Ltd in November 2011 and continued in that position until November2014. Mr Glen was subpoenaed by the defendants to give evidence. He said that MrLeybourne, who was regarded by senior Sealegs management as being a talentedhydraulic engineer, had already departed Sealegs and was working at Orion when hejoined the company as its CEO.[77] In the course of Sealegs' engagement of Orion on the SL100 project, Mr Glenobserved Mr Bryham and Mr McKee-Wright working closely with Mr Leybourne andfrequently attending meetings at Orion's premises. Mr Glen said in evidence that from2013, Mr McKee-Wright, Mr Bryham and himself were all well aware that MrLeybourne was engaged in developing a new amphibious craft for the Chinese marketwith the financial backing of a Chinese investor. They also knew that Orion hadengaged a number of former Sealegs employees, but he said that the situation was notof any major concern for Sealegs as China was not a market the company wasintending to target, and moreover Mr Leybourne was not subject to a restraint of tradeprovision.[78] In early to mid-October 2014, Mr Glen was driving in traffic on Auckland'sNorth Shore when he found himself driving behind a vehicle being driven by MrLeybourne. Mr Glen by then knew that Mr Leybourne was working on developing anamphibious system at Orion, and he was curious as to where he might be heading, sohe followed him into a marine businesses area off Wairau Road, which was not whereOrion's principal premises were located. Upon arrival at Mr Leybourne's destination,Mr Glen saw in a garage on the premises an amphibious craft of a kind he had not seenbefore. He concluded it was being developed by Orion.[79] On 22 October 2014, Mr Glen again drove past the Wairau Road premises andon this occasion saw what he thought was the same craft on the back of a truck. MrGlen stopped and took several photographs of the truck and boat using his cell-phone.When he returned to the Sealegs offices later that day he sent the photographs to MrSeries, and the following day he sent the photographs to Mr Bryham and Mr McKee-Wright.[80] Mr Glen said in evidence that although difficult to tell from his photographs,the amphibious craft he photographed could only have been the Orion ARC600 four-wheel drive version that was subsequently put on display at the 2015 Shanghai BoatShow, as Orion did not produce their three-wheel drive amphibious system until 2016.It is clear from Mr Glen's photographs, which were produced in evidence, that thecraft on the truck trailer is the same red coloured craft as shown in the Surfconbrochure produced by Mr Zhang's JRTD company in China, called the SurfconARC600, which has a four-wheel drive amphibious system.[81] Mr Glen said that after he had sent copies of his photographs to Mr Bryhamand Mr McKee-Wright, the three met to discuss them. Mr Glen says that at thismeeting both Mr Bryham and Mr McKee-Wright indicated that they had known of theexistence of a boat that Mr Leybourne was trialling, but they were surprised that MrGlen had been able to photograph it. Mr Glen says that at that time neither Mr Bryhamnor Mr McKee-Wright expressed any concerns about breach of patent or copyright.Mr Bryham says however that he could see very little design detail from thephotographs, and consequently had been unable to make any assessment or othercomment.[82] On 23 October 2014, the day after Mr Glen had taken his photographs, MrLeybourne sent an email to Mr Eric Series, Mr Glen, Mr Bryham and Mr McKee-Wright (with copies sent to Mr Zhang and Mr Zubcic). Mr Series had telephoned hima week earlier to ask whether Mr Bryham had personally engaged Orion to develophis own amphibious system. Mr Leybourne wrote:Hello Eric,Thank you for calling last Friday. I appreciate you taking the time to discussyour concerns and look forward to meeting with you in November.Too often little monsters grow because of rumours and half–truths, an honestconversation like last Fridays [sic] will put the monsters to bed. I reiterate –my comments were truthful and accurate – there is no need for us to bemisleading.Opportunities for Sealegs and Orion to work together are many, collectivelywe lead the world in the amphibious marine market. Continued innovativethinking solidifies our position as global leaders in this segment, thats cool.You should be proud in the knowledge that your support is a key componentof this success.A complimentary [sic] (not competitive) business, we have a combinedstrength that is unequalled. Thats also cool.Lastly, one of my colleagues noticed David Glenn [sic] taking some spyphotos of our customers craft yesterday. It is considered respectful to ask forpermission first, we would be happy to oblige.Additionally, I can ask our customer for approval for you to inspect the craft(in China) if you desire.RegardsDarren.[83] On 10 December 2014, Mr Leybourne wrote to Mr Bryham suggesting thatthey should meet to discuss the Sealegs/Orion relationship. He said:Allen [Mr Zhang] has asked for clarity of the Sealegs/Orion relationshipsooner rather than later.It would be great to conclude the meeting with an understanding that there isa shared vision. Equally, we have no problem if it is decided the time is rightfor Sealegs and Orion to head in separate directions.We are comfortable with either outcome.[84] The following day, on 11 December 2014, Mr Leybourne sent an email to MrBryham regarding the possible resumption of the SL100 project, noting that MrPercival could have capacity to work on SL100 for the remainder of the year.[85] Mr Leybourne says that at a meeting on 12 December 2014 he asked MrBryham about the suggested "no fight fee" regarding the Orion S25-4WD, and wastold by Mr Bryham that Sealegs did not think it appropriate to enter into that sort ofrelationship.[86] In mid-February 2015, Mr Bryham contacted Mr Leybourne regarding theresumption of the SL100 project. Mr Leybourne says that because of the previousproblems encountered in relation to payment for Orion's work on the SL100 project,he proposed a service agreement between the two companies. A service agreementwas executed and took effect from 31 March 2015. The "Introduction" section of theservice agreement provided:A. Sealegs is a manufacturer and supplier of amphibious vehicles tocustomers throughout the world.B. Orion Marine provides engineering design and development services tothe marine industry.C. Sealegs has engaged Orion Marine to design and develop an amphibioussystem to be known as SL100 (SL100 project).D. Due to previous delays to the SL100 Project caused by a shortage ofSealegs funding, the parties have agreed to enter into this agreement torecord the terms on which Orion Marine provides services to Sealegs inrelation to the SL100 Project, and any further projects that may be agreedby the parties from time to time.[87] Under the heading "Intellectual Property", the service agreement provided:6.1 Ownership. Unless otherwise agreed in a Statement of Work3, the partiesagree that:(a) subject to clauses 6.1(c) and 6.1(d), any Background IPR4 willremain the exclusive property of its owner;(b) any improvements to any Background IPR will remain theexclusive property of the owner of that Background IPR;(c) any Project IPR (and Improvements to) will be ownedexclusively by Sealegs, from the date at which the relevantIPR arises; and3 A Statement of Work Template dated 9 March 2015 set out the particulars of the SL100 project(described as RC34-SLG100).4 The term "Background IPR" is defined in the service agreement as: "Background IPR means allIntellectual Property Rights created or developed by a party before the date of this agreement orotherwise independently of this agreement."(d) to avoid doubt, any Third Party Background IPR (andimprovements to) will remain the property of that third partyowner whether or not included in or used in the provision ofthe Services.6.2 Residuals. Nothing in this agreement limits Orion Marine's right to useits ideas, concepts, methodologies, processes and know-how that are used,developed or created in the course of providing the Services, provided thatsuch use does not breach any confidentiality obligations owed to Sealegsunder this agreement or any IPR of Sealegs.5Shanghai boat show in April 2015[88] The Shanghai boat show was held between 9–12 April 2015. Mr Bryhamattended the boat show, and Sealegs again had a boat on display. On a stand near tothe Sealegs boat was the amphibious rescue craft branded "Surfcon ARC600",presented by Chinese company JRTD of which Mr Zhang was then the GeneralManager. On viewing the Surfcon craft, Mr Bryham could see that it was equippedwith a retractable three-leg amphibious system, which appeared to him to be asubstantial copy of the Sealegs amphibious system. Accompanying the display of theSurfcon ARC600 was a video showing the craft being driven into the water, on thewater and exiting the water at a location in China.[89] Sometime later during the boat show, Mr Bryham saw Mr Zhang in thecompany of Mr Leybourne and spoke to them. He says he told them that their boat'samphibious system looked like a copy of the Sealegs system. Mr Bryham says thatMr Leybourne and Mr Zhang told him that they were only going to sell the craft inChina, and that they had no intention of selling it outside the Chinese market. MrBryham says that while the Surfcon ARC600 craft had been built in New Zealand, heunderstood from what he was told at the time that further boats and amphibioussystems were to be built in China. Mr Bryham says that a discussion ensued aboutwhether the two companies and their products could exist together in the market.5 The term "Confidential Information" is defined in the service agreement as follows:"Confidential Information means the terms of this agreement, and all information (whether in oralor written form, or both) which is disclosed by the Discloser to, or otherwise accessed by, theRecipient, and:(a) is identified as being confidential upon disclosure;(b) is confidential in nature or ought reasonably be treated by the Recipient as being confidentialin nature; or(c) which relates to the Discloser's business affairs (including its finances, customers, suppliers,products, processes, inventions, research, technologies, and Intellectual Property Rights)."[90] In an email sent to Mr Bryham on 13 April 2015, Mr Leybourne said an offerto enter into a distribution agreement with Sealegs had merit and was worth furtherexploration. However, he considered that the difficulty would be in working out thedetail. He emphasised again that Orion and Sealegs were complementary, notcompeting businesses, and invited further dialogue with the Sealegs board so that theycould better understand the nature of Orion's business. As for SL100, Mr Leybournewrote that he was happy if the Sealegs Board wanted to cancel or postpone the project,although there would be a cost associated with this. He concluded by indicating thatOrion wanted to work collaboratively.[91] Mr Bryham prepared a written report to the Sealegs board which he sent thesame day, 13 April 2015. He recorded that he had seen Surfcon's ARC600 craft at theShanghai boat show, and recorded the following three options:I believe that Sealegs has 3 options with Surfcon in China;Option 1 – Do nothingOption 2 – Fight them legally on all IP frontsOption 3 – Look at a possible agreement that contains them and hascommercial upside for Sealegs.Option 1 is not acceptable in the medium/long term as it could encourageothers to follow in Surfcon's path.Option 2 is possible, but we have no Sealegs patent in China (nor in manyother currently non-key Sealegs markets), so we are weak on actually tryingto stop them on this front in China. There are possible copyright, ex-employeeavenues, but that could all be fairly time consuming, legally expensive andwith little commercial result to Sealegs.Option 3 is a possible option that could see agreement where Surfcon onlysell in China in certain markets, with a clause where Sealegs could buy theSurfcon craft to sell into our existing patented markets. This effectively wouldadd a new flood rescue ARC to the Sealegs range at no development cost toSealegs, and would legally lock down the Surfcon sales channel within China.I meet [sic] with Darren Leybourne (ex-Sealegs key hydraulics engineer) andAllan (the Chinese owner of Surfcon) to discuss Sealegs concerns. For Option2, I said that Sealegs would STRONGLY protect its IP using ALL avenues andthat it would be an expensive, time consuming process for all involved.[92] Mr Bryham went on to comment that Option 3 would be worth exploringbefore taking legal action. He also recorded his observations of the Surfcon ARC600craft, including criticism of some of its features.[93] Attached to Mr Bryham's report to the board were several photographs of theSurfcon ARC600 craft on display at the Shanghai boat show. One of the photographsshows the promotional video seen by Mr Bryham being played in the background.[94] At the Shanghai boat show Mr Bryham also saw a Surfcon brochure, writtenin both Chinese and English, which was being distributed to the public to promote theARC600 craft. The brochure set out the company's profile, stating that JRTD firstopened its doors in 2001, but "sharpened [its] focus" on amphibious craft design andproduction in 2011.[95] It is clear from Mr Bryham's report that although Sealegs had concerns aboutan infringement of their copyright, the fact that he had been told that the Surfcon craftwas not going to be sold outside China, and that he considered the Surfcon amphibioussystem looked inferior to the Sealegs system, were factors leading to his suggestionthat Sealegs should endeavour to negotiate a distribution agreement.[96] Mr Bryham responded to Mr Leybourne's email of 13 April 2015 on 14 April,saying that it was good to adopt a collaborative approach and to try to work out anagreement. However no steps were taken by either party to follow up the possibilityof a distribution agreement.[97] On 22 April 2015 Sealegs forwarded a "Sealegs Intellectual PropertyAgreement" to Mr Leybourne and Orion Marine, requesting that it be signed andreturned. The document, although signed by the Sealegs CEO, does not appear to havebeen either executed by Orion Marine or returned. The agreement containedprovisions whereby Orion would confirm and agree that all intellectual property rightsincluding copyright and the right to apply for patent or design registrations in respectof all design and product development work undertaken by Orion for Sealegs belongedto Sealegs. Despite Mr Bryham's initial view that the Orion system was inferior tothe Sealegs system, and despite Mr Leybourne's assurances that the amphibioussystem Orion had developed for Surfcon would only be marketed in China and not bein competition with Sealegs, this was an early sign that Sealegs nevertheless hadconcerns about Orion's activities and wished to obtain further writtenacknowledgement from Orion regarding Sealegs' ownership of intellectual propertyarising from the design and manufacturing work being undertaken on its behalf byOrion.Smuggler Marine's use of the Sealegs system[98] Smuggler Marine is owned and operated by Mr David Pringle and his wifePauline Pringle. Mr Pringle has extensive experience as a boat builder, having startedhis first boat building company in 1982. The company now known as SmugglerMarine was established in 1986, and changed its name to Smuggler in 2003 aroundthe time it began making and marketing boats using the Smuggler brand. SmugglerMarine is now a successful business and well-known brand, selling boats both in NewZealand and overseas. It manufactures fibreglass trailer boats and tenders for largemotor yachts. Included in the Smuggler range are RIB boats between four to 11 metresin length, which comprise Smuggler's Strata branded craft.[99] In 2011 Mr Pringle approached Sealegs CEO David Glen, whom he knew as afellow member of the Boating Industry Board, about the possibility of Sealegsbecoming an original equipment manufacturer (OEM)6 and supplying Smuggler withits amphibious system kits for installation on its boats. In May 2011 Sealegs andSmuggler reached agreement whereby Sealegs would supply its amphibious leg kitstogether with technical drawings and instructions to enable Smuggler to install thesystems on the hulls of its craft. Sealegs committed to supplying its system toSmuggler for a term of five years. The systems to be supplied by Sealegs were apackage that included the retractable legs as well as the power plant, instruments,hydraulics, drive, and controls that would be fitted to the Smuggler boats as bolt-onkits. Pursuant to the arrangements Smuggler would fit the Sealegs supplied systemonto its boats, and thereafter as part of the purchase price of $65,000 plus GST, Sealegsstaff would undertake the commissioning work to make the systems operative.6 The term used where a manufacturer makes a part or subsystem that is sold and used by anothermanufacturer in the construction of its products.[100] The first Smuggler craft to be fitted with the Sealegs system was known asSmuggler Strata 770 Centre Console (Strata 770 CC) and was fitted with the SealegsSystem 40. Although Smuggler was not intending to sell this first Strata 770 fittedwith the System 40, and intended to replace it with the bigger System 60 (capable ofsupporting a maximum design capability of 2,500 kg) before offering the boats forsale, it planned to display the Strata 770 at the Auckland on Water Boat Show inSeptember 2012. Prior to the boat show, differences arose between Mr Pringle andMr Bryham, as Mr Bryham did not want Smuggler to display the boat with the System40 on it. Despite their disagreement, the Smuggler boat was successfully displayed atthe boat show and orders for boats fitted with the Sealegs system were subsequentlyreceived.[101] Further difficulties in the relationship between Smuggler and Sealegs arose thefollowing year arising from what was called the TAAF project, which involvedSealegs developing a single-engine diesel amphibious boat for sale to the Frenchgovernment. Smuggler was engaged by Sealegs to make the hull. The projecteventually failed as the hull and added components were found to be too heavy for theSealegs System 60 fitted to it, resulting in the prototype being rejected by the Frenchgovernment. Sealegs maintained that Smuggler was responsible for the failure of theproject, claiming that the hull it had manufactured was overweight. As a result of thefailure of the project, the relationship between the two companies deteriorated further,and in September 2013 Sealegs advised Smuggler that it would no longer supply itwith its amphibious kits. However, after Smuggler changed its manufacturing processto use lighter materials to reduce the weight of its hulls, Sealegs agreed to resumesupply.[102] In November 2014, following Mr Glen's departure from Sealegs, Mr McKee-Wright (who had been reappointed as Sealegs CEO) proposed that a new agreementbe negotiated between the two companies setting out the terms on which Sealegswould agree to supply its kits to Smuggler. Negotiations regarding the contents of theproposed agreement proceeded through early 2015, with Sealegs preparing a draftagreement in February 2015 setting out the key terms to be included in a new 12-24month contract to be executed by 31 March 2015. The terms proposed by Sealegsrepresented a significant change to the terms of trade that had applied previously. Theproposed terms stipulated that the price of the OEM Sealegs system would be $75,000;that Smuggler was required to pay for the onsite installation support provided bySealegs; and that Smuggler would be required to purchase and pay for five kitsimmediately, and a further five kits in six months' time. Further proposed termsrequired Smuggler to agree to sell fully kitted-up hulls to Sealegs ready for Sealegs toinstall its system onto and then sell the boats in New Zealand, and through its dealersinternationally, branded as "Smuggler powered by Sealegs". Both Sealegs andSmuggler would also agree to promote and sell their respective "Smuggler Poweredby Sealegs" boats at the same price in New Zealand. Under the proposed termsSmuggler would not be permitted to sell its own craft equipped with the Sealegssystem overseas, and would be precluded from developing any new models orchanging its existing models without Sealegs' prior approval.[103] While Smuggler was not willing to accept the proposed terms, Mr Pringle andSmuggler were nevertheless keen to maintain their relationship with Sealegs so as tobe able to continue installing the Sealegs system on their boats. By early 2015,Smuggler had sold 15 of their boats fitted with the Sealegs system, and had beendeveloping and marketing a new mid-cabin model it was intending to produce andwhich had already attracted considerable interest from existing customers. Then on 3March 2015 the Chairman of Sealegs, Mr Eric Series, wrote an email to Mr Pringleadvising him that the Sealegs Board had instructed its CEO not to supply any furtherSealegs parts to Smuggler until a new agreement was executed and in place. Heacknowledged the existence of a current five-year contract, but noted that it wasunsatisfactory because it contained no reference to price and credit terms; nor was asales contract agreed. Mr Series said that a new agreement was necessary to "tidythese issues up". He also noted that Sealegs appreciated Smuggler's commitment,investment and success to date, and said that Sealegs wished to continue therelationship.[104] On 29 April 2015 Mr Pringle sent a memorandum to Mr Series and Mr McKee-Wright succinctly summarising Smuggler's position. In it he emphasised Smuggler'ssuccess and extensive experience in boat building, noting that Smuggler had sold 15Sealegs units, the last two at a price of $75,000 (plus GST). He also said that Smugglerhad enhanced the Sealegs brand and had been very compliant with all Sealegs'requests. He stated his view that Sealegs was a "fantastic product", but suggested thatthey needed to update their model. He also said that Sealegs was "a challenge to workwith".Mr Pringle approaches Orion[105] As a result of the difficulties Smuggler was having resolving their arrangementwith Sealegs, Mr Pringle began actively looking for an alternative to the Sealegssystem. One of his Smuggler staff who had previously worked at Sealegs had seen avideo of an amphibious boat which had been made by Orion being demonstrated inChina. The day after sending his memorandum to the Sealegs board on 29 April 2015,Mr Pringle emailed Mr Leybourne asking him to send him the link to Orion's videoof the barge fitted with their system on it. He said he was "keen to find an alternative",and commented that "Sealegs are too hard".[106] Mr Leybourne responded by email dated 4 May 2015 advising that he wouldbe "out your way tomorrow, will you be about". From their email exchange it is clearthat a meeting was to be arranged.[107] Mr Leybourne says that in late April 2015, Mr Pringle contacted him sayingthat he was having a tough time with Sealegs, and asked him whether Orion would beinterested in making a three-wheel drive amphibious system for installation on theSmuggler boats. Mr Leybourne says that he told Mr Pringle that Orion was too busywith Sealegs work at that time, but that they could discuss the matter again once Orionhad completed the SL100 project for Sealegs. Mr Leybourne said in evidence that, byreference to Mr Pringle's email of 30 April in which he requested the link to Orion'svideo of the ARC600 craft, he thought Mr Pringle's first approach to him was in lateApril 2015.[108] Mr Pringle's evidence is that in early May 2015 he did access and watch thevideo of the Surfcon ARC600 and, as he was interested in exploring the Orion systemfurther, he spoke with Mr Leybourne.[109] From their evidence and emails it is evident that around 30 April 2015, MrPringle and Mr Leybourne discussed the possibility of Orion producing a three-wheeldrive amphibious system for installation on the Smuggler boats in place of the Sealegssystem. It is also clear that at the time that Mr Pringle made his initial approach to MrLeybourne, Smuggler's relationship with Sealegs had become increasingly difficultfor Smuggler, particularly in light of Sealegs' recently proposed terms for thecontinued supply of its systems to Smuggler, which Mr Pringle viewed as being one-sided in favour of Sealegs, and expensive in terms of price. Mr Pringle was anxiousat the prospect of Sealegs deciding not to continue supplying its system to Smugglerand he was obviously looking to Orion to produce and supply an alternative system.[110] On 6 July 2015, Mr Pringle once again contacted Mr Leybourne by email tofollow up their earlier discussions regarding an alternative to the Sealegs system. MrPringle explained in his email that Smuggler had received a "serious enquiry" for a1100kg super-yacht tender, and asked whether Mr Leybourne would be interested inhelping him. Mr Leybourne responded saying that he was interested in working withthe team at Smuggler, but that at present Orion was fully committed to SL100 andwould be for at least another four weeks. He said he would call Mr Pringle later thefollowing month.Orion starts work on producing a three-wheel system for Smuggler[111] SL100 was installed on the prototype craft known as IKA11 and displayed atthe Auckland On Water boat show in September 2015.[112] In October 2015 Orion finished working on SL100 and the Sealegs boat IKA11fitted with the prototype SL100 system was sold for $500,000 and shipped to apurchaser in the United States of America around 14 October 2015.[113] Anticipating Orion's work on SL100 coming to an end in late September orearly October 2015, Mr Leybourne resumed his discussions with Mr Pringle regardingthe requested three-wheel system. On Friday 2 October 2015, Mr Pringle and MrLeybourne exchanged emails and arranged to meet that morning. At the meeting MrLeybourne introduced Mr Pringle to Mr Zubcic and they discussed Smuggler'srequirements for a three-wheel drive amphibious system to replace the Sealegs system60 that they had previously been fitting to their craft. Mr Pringle provided MrLeybourne and Mr Zubcic with a detailed drawing of its 7.5 metre mid-cabin RIBcraft. Smuggler had already fitted the Sealegs system to its mid-cabin craft, as isevident from the contents of Mr Pringle's email to Mr Zubcic on Monday 5 October2015 in which he said he had "done a reasonable amount of motoring around in twoof our mid cabin amphibious craft with no issues".[114] Mr Leybourne said in his evidence that Mr Pringle told him during their earlydiscussions that he wanted to do something completely different and better than theSealegs system, and that he wanted to get far away from the Sealegs design. MrLeybourne says that Mr Pringle said that he loved Orion's use of a fuel injected engineinstead of a carburetted one, and that he did not like how the Sealegs system requiredtwo keys compared to Orion's single key. He also preferred Orion's tidier and morecompact console with fewer parts. Mr Leybourne says that there were "lots of thingsabout Sealegs that Dave [Pringle] didn't like."[115] Mr Leybourne further said in evidence that Orion had looked at the Smuggler7.5 metre hull to see how an amphibious system would work, and used the geometryapplicable to that Smuggler hull as the basis from which it developed its design. Heexplained that they wanted to use the same method of attaching the legs to the hull asthey had developed for the Orion S25-4WD system. Referring to himself, Mr Zubcicand Mr Pringle, he says that they also wanted to use the same rear assemblies as hadalready been developed for the Orion four-wheel drive system, and accordingly Orionprovided Mr Pringle with drawings of its design to enable Smuggler to modify its hullto accommodate the Orion system for attaching and connecting their leg assemblies tothe hull.[116] Mr Leybourne further explained in his evidence that having examined theSmuggler 7.5 metre craft and its specifications, he found that it was very similar toOrion's ARC600 rescue craft in terms of size and weight, with the result that the three-wheel system Orion produced for Smuggler could have very similar specifications.Mr Leybourne says that in the interests of saving time, Mr Pringle had to make hisboats work using the rear leg assemblies that Orion had already produced for therescue craft, and which were designed for craft weighing 2,500kg. However, the Orionfront leg with its two wheels had been designed for a barge type of craft and after someinitial consideration it was soon decided that it would not be suitable for fitting to high-end recreational craft such as the Smuggler boats, where aesthetics was an importantconsideration. Rather, it was decided that the only realistic option they had was a frontleg assembly with one wheel.[117] Mr Leybourne said that as the existing Orion rear leg assemblies, hydraulicpower unit and user controls were suitable for the Smuggler craft, the only thing thatOrion needed to design was a new front leg assembly with one wheel. He explainedtheir approach as wanting the new front assembly to be based on the Orion four-wheeldesign as much as possible, as that would reduce development time and provideSmuggler and Mr Pringle with a prompt solution.[118] Mr Zubcic commenced work on designing the new single-wheel front legassembly later in October 2015. There was some initial delay because Mr Leybournewas occupied with SL100 for Sealegs until 13 October 2015, when Mr Leybournewrote to Mr Pringle suggesting a meeting so that they could "collectively firm up someof the ideas we have been pushing around". He proposed a meeting after 4pm "onceour guys have finished". Suggesting a meeting time after the Orion staff had finishedfor the day may simply have been a matter of convenience; however, as subsequentevents show, Mr Leybourne wanted to keep Orion's involvement with Mr Pringle andSmuggler confidential. Mr Zubcic explained in his evidence his approach to thedevelopment and design of the new front leg assembly:A. The starting point. As I explained above, we already had a functioningfour-wheel drive system so it made sense to use that as our startingpoint. The rear assemblies I had designed would also work in three-wheel drive system so the only new design I had to consider was ofthe front leg assembly. As with the four-wheel drive, we wanted thesystem to be modular so any boat builder could install it. With thefour-wheel drive system we had established our leg mounting system;we had tested glue and found that principle works for us. So, therewas no reason not to use the same mounting system for three- wheeldrive.We also already had our steering system, arm, hinge and cylinder, ourlifting cylinders, our hydraulic system, tyres and our wheel rim, all ofwhich could easily be carried over to a three-wheel drive system.What I needed to do was to put these things together in the design ofa front leg with one wheel only. I also wanted to use the sameprinciples and visual aesthetic I used for the four-wheel drive. So, forexample, I wanted to adapt my existing four-wheel drive yoke designin the three-wheel drive, rather than creating a new version altogether.As much as possible, I wanted to use the same parts for the twosystems. Having common and interchangeable parts is preferablefrom a manufacturing and inventory perspective, because it is easierto organise manufacturing and control stock. Design of front legassembly. When we began to develop a one wheel drive leg, October2015, I started thinking of possible options. I was never happywith Sealegs' front leg mechanism, which I thought required anunnecessary modification on a hull to accommodate the movement oftrunnion cylinder. So, I started playing with the kinematic of a legand experimenting and found it could be done in a completelydifferent way.[119] On 21 October 2015, following a telephone conversation between Mr Pringleand Sealegs Sales Manager Mr Damon Jolliffe, Sealegs proposed terms that wouldenable them to move forward from the impasse which had resulted in Sealegs ceasingto supply Smuggler with amphibious kits.[120] On 28 October 2015 Mr Pringle and Mr Leybourne exchanged emails. MrPringle wrote in his email:HI Darren,How is your next boat going when will you be going to test ride it I'd be reallyKeen [sic] to come and see it in action.The other company are even more impossible to deal with it [sic] will talk toa pattern [sic] lawyer soon to help the way forward.[121] Mr Leybourne replied:Hi David,We are chipping away at finishing the test craft. Most of the mechanical partsare fitted – working on wiring looms/hydraulic hoses at this stage (everythingtakes longer)!!Vladan is working on a design for the single wheel front assembly, once wehave progressed this further we will send to you for comment. The design isheading towards a similar geometry as used by that other company. If thisproves unacceptable a radical re-design will be required.[Redacted paragraph]Darren.[122] On 25 November 2015 Mr Zubcic sent Mr Pringle a computer-aided firstdrawing of the three-wheel drive assembly, describing it as "an idea".[123] Mr Zubcic proceeded with the design of the front leg assembly and itscomponent parts during November and December 2015, and the machining of theparts to be made by Orion commenced. During this period Mr Pringle maintainedregular contact with both Mr Leybourne and Mr Zubcic regarding their progress. Theissue of design patents held by Sealegs featured in their communications. In an emailMr Pringle sent to Mr Leybourne on 15 December 2015 he wrote:HI DarrenHas the pattern [sic] Lawyer [sic] got any updates and when will your newboat be driving around I'd love to see it going.[124] On 11 February 2016, in response to an email from Mr Pringle advising thatSmuggler was receiving a lot of enquiries regarding their amphibious boat and sayingthat he would much rather pay Orion for an amphibious system than Sealegs, MrLeybourne wrote:Hi Dave,We are working on a concept that will stop the bow wheel turning in theretracted position. This would reduce the space needed to move the bow wheelback inside the hull/tube line.Result is an improvement to the "look" but more importantly, it could possiblyprevent infringing Sealegs patent because the bow wheel would no longer bea bumper.As always the devil is in the detail, once we have advanced the concept wewould then:• Need your input to advise if the hull/tube modifications arepossible/practical• Baldwin's [sic] to confirm this concept would not infringeSealegs patent.Darren[125] Mr Zubcic continued to work on the project. On 2 March 2016 he sent anemail to Mr Pringle advising that he had been working on a concept model, andproposed calling in at Smuggler as he had something to discuss with him.[126] On 24 February 2016, Mr Bryham and Mr McKee-Wright received an emailfrom Mr Mark Goodhew of Explorer Inflatable Craft NZ, in which he cancelled hisearlier request of 18 February to meet with them to discuss the production of anamphibious craft. The reason Mr Goodhew gave for cancelling the meeting was thatExplorer's client had undertaken their own research and had become interested incontracting Mr Leybourne and Orion to construct and supply an Explorer craft fittedwith the Orion amphibious system. Mr McKee-Wright reacted promptly to thisinformation by sending an email to Mr Leybourne that same afternoon, forwarding MrGoodhew's emails and requesting that they meet.[127] Mr Bryham subsequently met with Mr Leybourne and Mr Zhang at Orion on5 April 2016. Their discussion appears to have centred on whether the SL100 projectcould be taken further and put into production, and Mr Bryham asked questionsregarding the Orion amphibious system on Surfcon's ARC600. Following theirmeeting, Mr Leybourne sent Mr Bryham an email which he copied to Mr Zhang. Hesaid:I think we both agree that taking SL100 to production in its current designstate would be unwise. Orion are happy to continue discussions on futureSL100 opportunities if and when you believe Sealegs have the budget to takefrom the current Proof of Concept to Production Ready state.Both Allen [Mr Zhang] and I will email you a response to your questions aboutARC600 and S25 in the next couple of days.[128] As Mr Leybourne had indicated, Mr Zhang sent an email to Mr Bryham on 7April commenting that he thought Sealegs and Surfcon could work together, andsuggesting that they talk again.[129] Mr Bryham responded by email to Mr Zhang, copied to Mr Leybourne,suggesting a further meeting in the week of 26 April, and requesting an indicative pricefor the Orion S25 system. Mr Bryham and Mr McKee-Wright then met with MrLeybourne and Mr Zhang at Orion's premises on 26 April 2016. Mr Leybourne saysthat Mr Bryham and Mr McKee-Wright proposed an arrangement whereby Sealegswould become the exclusive distributor of Orion's systems and that there was alsofurther discussion of a "no fight fee" as an alternative arrangement. Mr Leybournetakes issue with Mr Bryham's assertion that he and Sealegs only found out that Orionhad built the S25-3WD system a few days before Orion proposed to display it publicly.He says that the matters discussed at the meeting on 26 April make it clear that MrBryham, Mr McKee-Wright and Sealegs were well aware in February that Orion hadbuilt the S25-3WD system, as that was the reason for the meeting on 26 April.[130] The day following his meeting with Mr Bryham on 26 April, Mr Leybournewrote to Mr and Mrs Pringle to alert them that Smuggler's name had been mentionedduring the conversation. It is clear from the contents of this email that Mr Leybourneand Orion had been trying to conceal from Sealegs their involvement with Smugglerand that they were developing an Orion amphibious system for Smuggler. MrLeybourne offered his suggestions of how Smuggler should respond to any queriesfrom Sealegs. He wrote:Hi Dave/Pauline,Yesterday during a meeting with Maurice and Dave [McKee-Wright] fromSealegs, Smuggler Marine was mentioned.We were asked a number of times why we would want to have a relationshipwith Smuggler which would jeopardise bigger opportunities with Sealegs.The points we communicated back (more than once) were as follows:• This is not just about Smuggler and Orion• Orion has had many parties contact us – including, suppliers, customers,employees (both current and former) – stating it is a challenge to have arelationship with Sealegs• Because of this "Challenge" there is a "Collective" of opportunities in themarket who are wanting an "Alternative" to Sealegs• The "Collective" are driving the creation of the "Alternative"No doubt you will be informally questioned about your current position in thecoming days.My suggestion would be to respond in general terms along the lines that youare considering your options and that you are observing what a number ofother parties are pursing [sic] in the wider amphibious market.In summary, they will try the bully boy tacit [sic]. We just continuallyreinforce back to Sealegs that Smuggler/Orion are not exclusively driving this– there is more horsepower on tap.Darren.[131] The following day, 28 April 2016, Mr Pringle met with Mr Jolliffe to discussthe terms on which Sealegs could purchase Smuggler craft to be fitted with the Sealegsamphibious system. Agreement was reached whereby Sealegs would provideSmuggler with its Amphibious Enablement System (AES) kits to be fitted ontoSmuggler's 770 Centre Console boats. Sealegs would then purchase the Smugglercraft for $95,000 and commission the amphibious system at Sealegs, adding Sealegsbadging on the boats. Shortly after their meeting, Mr Jolliffe sent Mr Pringle an emailconfirming the agreement and arrangements.[132] During April 2016 Mr Pringle maintained contact with Mr Zubcic regardingprogress being made by Orion, and on 11 April Mr Zubcic advised him that Orionwould shortly start machining the bow and stern hinge brackets which would beavailable in two weeks.[133] On 3 May 2016 Mr Leybourne sent Mr McKee-Wright and Mr Bryham anemail (copied to Mr Zhang) in which he advised that Orion was working with a numberof parties, whom he termed "the Collective", and was at an advanced stage ofdeveloping an alternative amphibious system. He said that Orion could no longer backout on its commitments to the Collective, and that conversations between Sealegs andOrion about a closer business relationship needed to have started six months earlier.Mr Leybourne further wrote that although he understood Sealegs wanting to protecttheir business model, they should not cross into anti-competitive conduct. He raisedthe prospect of a "no fight fee" again and suggested terms on which it could be paid.He went on to say:Again, I understand if Sealegs reject the concept of a NFF [no fight fee].But in deciding to reject (and presumably going legal) please consider allor at least some of the following:• We believe avoiding patent infringement is obtained by using ourCore technology• Should patent infringement be a possibility we simply adjust thedesign – we have this flexibility with Core technology• If an interim injunction is seeked [sic] (which we would contest) andgranted, Sealegs will need to have a strong belief in winning thelonger game• If Sealegs lose [sic] the long game the Collective will claim costsagainst Sealegs. The big number claimed will not be the legal costs,but the cost of lost business• The longer the game the larger the cost of lost businessClaiming (and winning) the costs of lost business – how much would thisimpact Sealegs?[134] The email then requested an "intelligent, technical discussion" that avoidedinflaming emotions, and mediation was suggested.[135] Mr Leybourne says that by raising the subject of a "no fight fee", he was notacknowledging that Orion had copied the Sealegs system, but rather he was lookingfor a possible pragmatic solution that would enable both companies to co-exist in themarket, and did so because Sealegs were threatening to ruin Orion unless it agreed toan arrangement whereby Sealegs became the exclusive distributor of its system andproducts.Mr Pringle reports to Mr Leybourne[136] On 15 June 2016 Mr Pringle and Mr Leybourne exchanged emails regardingthe steering system to be used in the Orion system, and whether Orion would supplya helm pump as Sealegs did. Mr Pringle then followed up his initial email with anotheradvising:I Forwarded [sic] the video to Damon [Jolliffe] they had seen it at the beachraces, quick on the beach.[137] Mr Leybourne replied:That is good – seen by Sealegs and no action taken.[138] The evidence does not establish what it was that Sealegs had seen at the beachraces, or what was recorded on the video Mr Pringle sent to Mr Jolliffe, but MrLeybourne's comment shows his anticipation of some reaction by Sealegs to whatOrion had been working on with Smuggler.[139] On 28 June 2016, Mr Pringle sent Mr Zubcic an email advising that Smugglerwas starting on its first hull modified to take the Orion system. The two arranged forMr Zubcic to visit Smuggler to discuss the work.[140] On 6 July 2016, Smuggler (Mrs Pauline Pringle) advised Sealegs (Mr Jolliffe)that it no longer wanted Sealegs to advertise the Smuggler boats on the Sealegswebsite. The following day Mr Jolliffe sent Mr Pringle a proposed "Smuggler –Sealegs Agreement" incorporating the terms and arrangements that had been discussedbetween them the previous day. The agreement was expressed as superseding allprevious discussions and arrangements. Included within the proposed terms was aprovision headed: "Intellectual Property Rights" which stated:Smuggler acknowledge all and enduring intellectual property rights owned bySealegs for the amphibious enablement of a Smuggler craft.In recognition of these IP rights, Smuggler agrees not to engage in anybusiness activity either directly or indirectly for the manufacture, assembly, orsale of amphibious products, which compete with, or are equivalent to,Sealegs products, except with the written permission of Sealegs.[141] Mr Pringle replied attaching a copy of the proposed agreement withhandwritten amendments, including the deletion of the whole of the IntellectualProperty Rights provision. Further discussions followed, and on 25 July Mr Jolliffesent Mr Pringle a further revised form of agreement. Mr Pringle did not immediatelyreply to Mr Jolliffe regarding execution of this revised version of the agreement.[142] Mr Series, the Chairman of Sealegs, then became involved and havingunsuccessfully tried to contact Mr Pringle directly, sent him an email on 28 Julyrequesting a response regarding the proposed agreement. Mr Pringle initiallydeflected responding, explaining that he was very busy with another matter, but whenpressed by Mr Series for a reply in an email on 29 July 2016, he wrote that Smugglerhas recently completed a review of its whole business and concluded that it would notenter into any exclusive supplier agreements. He considered that such agreementstended to favour one side, and that this one-sided outcome would restrict growthopportunities for Smuggler.[143] In response to Mr Pringle's email, Sealegs terminated its relationship andarrangements with Smuggler. In an email sent to Mr Pringle on 29 July, Mr Seriesexplained that Sealegs operated on the basis of an exclusive relationship with its boatbuilder partners, and because Smuggler did not want to enter into an exclusiverelationship with Sealegs, Sealegs had no option but to terminate their partnership.[144] On 15 July 2016, Orion issued a tax invoice addressed to Smuggler Marine forthe supply of one "S25-3W Amphibious System" at a price of $65,000.00 plus GST.The due date of the invoice was 1 September 2016 and it credited the sum of$22,425.00 as "Less Amount Paid".[145] Through July and August 2016, Mr Zubcic, Mr Leybourne and Mr Pringlewere in regular communication regarding progress with the construction of theSmuggler craft in accordance with the requirements for the fitting and installation ofthe Orion system. On 15 August, Mr Leybourne advised Mr Pringle that Orion wasassembling the front leg assembly, saying he would have it delivered to Smuggler forfitting on their craft.[146] On 1 and 2 August 2016, Smuggler accepted two written orders for amphibiousSmuggler Strata 770 Mid Cabin craft. The amphibious technology to be fitted to thecraft was described in the order specifications sheet as "S25 wheels, engine, allsystems for powering amphibious operation"[147] On 1 September 2016 Mr Pringle sent Mr Leybourne a series of photographsof a Smuggler 770 boat under construction, and showing components of the Orion S25fitted to it. They show the rear leg assemblies fitted to the hull and the power unit andhydraulic hoses installed with the craft awaiting installation of the front leg assemblyand the inflatable pontoon tubes. On 9 September Mr Pringle sent Mr Leybournephotographs of the Orion front leg assembly attached to the Smuggler craft.Peter Allen visits Smuggler Marine – 7 September 2016[148] Mr Peter Allen is a mechanical engineer employed as a patent engineer byPipers Intellectual Property (Pipers). Pipers was initially engaged by Sealegs in 2002to undertake the drafting and registration of a patent application for the Sealegsretractable leg amphibious system then in development. Mr Allen gave evidence forthe plaintiff regarding his involvement in the patent application and as regards thedefendants', and particularly Orion's, design path of the S25-4WD and S25-3WDsystems.[149] In its promotional material published in the September 2016 issue of theBoating New Zealand magazine, Smuggler said that it would be unveiling a "veryspecial" craft at the September 2016 Auckland On Water Boat Show, which it said was"destined to be a game changer". On 7 September 2016, Mr Allen was instructed byhis employer, Mr Piper, to visit the premises of Smuggler Marine in order to see ifthey were fitting any three-legged amphibious systems to their craft. Mr Allen wentto the Smuggler premises purporting to be interested in purchasing a Sealegs type ofboat, and spoke to Mr Pringle. Mr Pringle said that although they had used the Sealegssystem on their boats, "things [were] about to change". Mr Allen says that Mr Pringlewent on to explain that Smuggler was now making its own system, and showed him aphotograph of a new Smuggler boat and explained that the cowling that would coverthe front wheel when retracted was there to get around the Sealegs patent, as the wheelcould not be regarded as acting as a bumper.[150] Mr Allen says that Mr Pringle told him that Smuggler had already sold fourboats which would have the new system on them. Mr Allen further says that he wastold by Mrs Pringle, who was also present in the Smuggler office, that Smuggler boatswith the new amphibious system would be on display at the Auckland boat show on28 September, and that he was offered tickets for the boat show. Mr Pringle then tookMr Allen into the workshop where he says there were at least four boats underconstruction. Mr Pringle showed him one of the boats that already had the new frontleg assembly fitted and another boat that was awaiting installation of its front leg. Inthe course of their conversation, Mr Allen says he was told by Mr Pringle that the newamphibious system had been designed by one of the head designers from Sealegs whohad left Sealegs' employment to design the new system.Sealegs commences proceedings and applies for interim injunctions[151] On 9 September 2016 Sealegs commenced proceedings seeking an injunctionrestraining the defendants from displaying or selling copies of the Sealegs copyrightworks, or the Orion S25-3WD and S25-4WD products. The plaintiff also made aninter partes application for an interim injunction, and then also brought a withoutnotice application on a Pickwick basis seeking orders restraining the defendants fromexhibiting the Orion amphibious products at the Auckland On Water Boat Show whichwas shortly to commence on 29 September 2016. This application was heard by FaireJ on 23 September 2016. In his judgment of 26 September 2016, Faire J noted thatthe inter partes application was already set down for hearing on 28 October 2016, andhe declined to grant the without notice application relating to display of the Orionproducts at the boat show.7 He noted that the injunction sought related to a limitedperiod and only to marketing and not the actual sale of products, as any orders takenat the boat show could not be filled during that period.[152] The interim injunction application was heard by Peters J on 28 October 2016.In her judgment dated 19 December 2016, Peters J granted the application and madeorders restraining the defendants from copying, issuing (by sale or otherwise),showing to the public or adapting the plaintiff's claimed copyright works, and inparticular from issuing, showing to the public or adapting the Orion S25-3WD systemor any similar product.8[153] Mr Bryham says he first saw the Orion S25-3WD and S25-4WD systemstogether at the Auckland On Water Boat Show in late September 2016. He says thathe was unable to get a close look at the S25-3WD system, but was able to view therear of a craft fitted with the S25-4WD system which appeared to be the same as hehad seen on the Surfcon ARC600 craft in Shanghai, and which he considered was acopy of the Sealegs port and starboard rear leg assemblies.[154] Mr Bryham was subsequently able to inspect and examine the Orion S25-3WD assembly more closely pursuant to an order of the Court. Having done so, he7 Sealegs International Ltd v Zhang [2016] NZHC 2274.8 Sealegs International Ltd v Zhang [2016] NZHC 3143.concluded that the rear leg assemblies on both the S25-4WD and S25-3WD areidentical to each other, and appear to be substantial copies of the Sealegs rear legassemblies. He says that while employed at Sealegs, Mr Leybourne, Mr Zubcic andMr Percival all had access to and involvement in the development and recording ofdetails of the Sealegs' design information, and the only rational explanation for theclose similarity of the Orion front and rear leg assemblies to those produced by Sealegsis that Orion commenced and undertook the development of its amphibious system bysubstantially copying the unique design arrangement of the key components ofSealegs' amphibious leg assemblies.The expert witnesses[155] The defendants called Dr Bruce Field and Dr Shayne Gooch as expertwitnesses, while the plaintiff called Mr David Dippie, Mr Brian Bellingham and MrPeter Allen.[156] Both Dr Field and Dr Gooch explained that they had undertaken theirexamination and comparison of the Sealegs and Orion systems and their respectivedesign paths by reference to four key sequential elements of a design process typicallyfaced by a technical design engineers. These are:(a) Clarification of the task to be performed by the product: this processinvolves determining and defining specifications that the product mustcomply with or achieve and the problem to be solved.(b) Concept design: which typically includes the preparation of quicksketches of options or partial options and a sorting of partial solutions.At this stage decisions are made regarding the engineering functionsrequired to achieve the task.(c) Embodiment design: in this phase the concept and design requirementsand specifications are applied to determine the kinematic geometry ofthe systems that will comprise the product. During this design phase,the overall concept or idea is developed into an actual product anddetailed information required for manufacturing the product isproduced. An engineering analysis is undertaken includingcalculations, layout drawings, selection of commercial off-the-shelf(COTS) items and components, and the preparation of detailedcostings. The objective at this stage is to ensure that the product willperform the tasks required and meet the design specifications.(d) Detail design: in which the separate components are selected ordesigned from scratch to suit or meet kinematic or other constraintssuch as strength, weight, economics and aesthetics. The product of thisphase is a series of typically CAD drawings or 3D models from whichthe systems can be manufactured. In the final detail design phase, theembodiment decisions and information derived from calculations isapplied to the design of components to comply with kinematicrequirements. These are to be assembled in the manufacture of thefinished product.[157] Drs Field and Gooch explained that in a typical design engineering process andsequence, the design detail phase probably occupies up to 95 per cent of the engineer'stime.Dr Bruce Field[158] Dr Field is the managing director of an engineering and manufacturingcompany. He is highly qualified. He holds a Doctor of Philosophy, a Master ofEngineering Science, and a Bachelor of Engineering (Mechanical) (Honours). He hasbeen employed in an academic role in three different Australian universities as aspecialist in mechanical design and in developing, teaching and administering coursescombining mechanical engineering and industrial design. He has been activelyinvolved in the teaching of manufacturing and mechanical design processes formechanical engineers for more than 30 years. Dr Field also has extensive experienceas an advisor and expert witness in relation to disputes involving the design ofmachinery and has previously appeared as an expert witness at many levels of theAustralian court system.[159] In the present case, Dr Field reviewed the witness affidavits and statements anddiscovered documents. In June 2017, he inspected Smuggler boats fitted with boththe Sealegs and Orion amphibious systems. Dr Field examined both the Sealegs andOrion systems and identified many differences between the systems that he said arisefrom different design approaches and different goals, such as Orion's apparent attemptto build a product suitable for a wider range of hulls than Sealegs. His assessment ofthe differences that he identified led to him conclude that the Orion system is notderived or copied from the Sealegs system. He said:In my expert opinion, to a reasonable extent, differing design paths for eachof the Sealegs and Orion systems can be deduced from the resulting product.In particular, the starting points of designing the wheels and method ofmounting the amphibious assemblies to the hull are quite different and createdifferent design paths for each system, as well as different appearances of thearm's main portions.[160] Dr Field examined the design paths of the Orion S25-4WD and S25-3WDsystems. He noted that in designing the 4WD system, Orion had identified a differentmarket need or niche for a 4WD system as opposed to a 3WD system for a similarweight hull. On the evidence I do not consider that to be entirely correct, as Mr Zubcichas explained that the initial objective of Orion was to produce an amphibious systemthat would be applicable to single hull craft of six to seven metres and thereby competein the same market as Sealegs. However, Dr Field formed the opinion that Orion haddemonstrated by its development of the 4WD system that it possessed the ability toundertake an analytical design from a specification entirely different from the originalSealegs, while noting that Orion at the same time was developing Project 100 forSealegs.[161] In relation to the Orion 3WD system, Dr Field said that the design path ofOrion commenced by way of a specification for the system provided by Smuggler. Hesaid that the second phase of design, namely that of conceptual design, would besimilar to Sealegs as in both cases the designs were directed at an amphibious kitsuitable for installation on the Smuggler hull. Dr Field observed that not only wouldthe second phase of conceptual design be similar, but there would also be manycommon elements in the third embodiment design phase due to the functionalconstraints of designing an amphibious kit. He concluded:However in the fourth and final phase of the design process which comprises95% of the effort Orion took a markedly different path as I have explained inmy primary evidence. That independent path resulted in physically differentcomponents and a visually dissimilar kit. It may be relevant to add at thispoint that when one inspects with the naked eye the Sealegs and Orion systemsas applied to a Smuggler vessel – as I understand Your Honour did on Tuesday– a strong impression of similarity is likely to be obtained because most ofwhat is perceived is indeed identical, ie the Smuggler hull and the abstractkinematic geometry. However, a comparison of the two systems not appliedto a boat (ie on their own) shows that they are not at all similar A furthercomparison can be made by considering each of the rear legs individually (asopposed to being part of a system) because that removes the commonkinematic geometry which is a product of the functional constraint.[162] In commenting on Mr Bryham's evidence, Dr Field said:Mr Bryham maintains that the Sealegs amphibious design conceived by himis unique. I accept that it is unique in the sense that I have not been able tofind an identical combination of the elements of which he speaks includingexternal pivoting legs, hydraulically powered wheels and no openings in hullfor wheel. However, all of those elements were pre-existing in prior designs.Indeed, some could be called common place.Dr Shayne Gooch[163] Dr Gooch is currently the Head of Mechanical Engineering at the Universityof Canterbury and is the director of a company providing engineering consultancyservices in engineering design process issues, forensic investigations and failureanalysis involving engineering systems. He has a Doctor of Philosophy and aBachelor of Engineering from the University of Canterbury. Since 1999, Dr Goochhas held a fulltime academic position at the University of Canterbury. He previouslyworked as a research engineer and as a lecturer teaching mechanical engineeringdrawing.[164] Like Dr Field, Dr Gooch was engaged by the defendants to examine thefeatures claimed by Sealegs to have been copied by Orion, consider the design pathfollowed by Orion in relation to its 4WD and 3WD products and to address the issueof the engineering design process as applicable to the design of amphibious systems.[165] In his evidence Dr Gooch explained that having examined the Sealegs andOrion systems, he had concluded that the similarities between them are explained byfunctional constraints. He further concluded that differences between the two systemsmeant Orion followed an independent design path and that the Orion system was notderived from the detailed engineering design information that was used to make theSealegs system.[166] Having examined and compared the two systems, Dr Gooch concluded that theOrion engineers may well have had a pre-existing technical knowledge of the Sealegssystem. However, he said that much of this technical knowledge would normally beacquired during the initial task clarification phase of the design process as this is thephase where competitive products such as the Sealegs design and other similar systemsare analysed as part of developing the design specification. He said that bothamphibious systems have a similar overall concept and share some of the same basicworking concepts. However, that is not unexpected because both systems solve asimilar problem, namely providing an amphibious function to an otherwiseconventional watercraft using accessories. The design specifications for systems thatsolve that problem for similar-sized craft can also be similar.[167] Dr Gooch observed that it was in the development or embodiment of theconcepts where the two systems are very different. He said:The Orion 25 design is generally more sophisticated and this appears to be atechnical advance over the Sealegs system. The pre-existing designknowledge of the Sealegs system would have been of limited value to Orionengineers due to the differences in technical solutions that have beendeveloped.Mr David Dippie[168] Mr Dippie was engaged by the plaintiff as an expert witness. His backgroundis as a commercial engineer and he holds a New Zealand Certificate in Engineering.He has extensive experience working in a heavy engineering business during whichhe developed alternative technologies for wool scouring, before transferring to a heavyengineering business designing a range of industrial plant. He purchased EasteelIndustries in 1985, which designed thermal energy equipment and employed some 30engineers and designers and over 100 other project and technical staff.[169] Mr Dippie explained that he has had an interest in amphibious craft for nearly40 years and acknowledged that he was familiar with the Sealegs amphibious boatdesigns as he had looked at them in the context of considering the purchasing of onefor his own use.[170] Having reviewed the evidence of Dr Field, Mr Dippie comments that thedesign paths described by Dr Field, whilst accurate, are in his view an academicanalysis which requires "real world experience" to understand how new products aredesigned at the manufacturer and design level. Mr Dippie explained in his evidencethat in 1980, he and his father-in-law themselves designed and built an amphibiousboat which they called the Otter. The Otter was designed and intended for use in theexposed waters of Hawke's Bay and was required to enter and exit the sea via a hardsand beach and drive approximately 600 metres from the water's edge to a residence.Mr Dippie described in evidence the design process that he and his father-in-lawundertook, including at the outset establishing the design criteria and thereafter thedesign path that was followed. The Otter was very successful in that it performed wellat sea and on the road and was operated by Mr Dippie's family for some four years.[171] Mr Dippie explained that once the method of conveyance is determined by thedesigner, the configuration of the legs then needs to be considered and the range ofoptions is huge. He said that he became interested in purchasing a new amphibiousboat for himself and attended the Cannes Boat Show where he saw the amphibiousboat Iguana 29. Rather than wheels, it has a system of two retractable tracks eachbeing supported on two legs. Other amphibious craft manufacturers have opted forfour retractable wheels, such as the Humdinger, and Sealegs had opted for three. MrDippie notes that after determining the configuration of the legs, the next series ofdesign options are the method of retraction with the options being lifting the legvertically, pivoting the leg forwards, pivoting the leg backwards, pivoting the leg tothe left, or pivoting the left leg to the right. Mr Dippie notes that there are also otherleg retraction options, such as those used on aircraft where a complex arrangement oflinks allows a wheel to trace a compound motion. A further option arises as to wherethe leg is to be placed and stored whilst retracted. He notes that the range is againwide, including retraction wholly into and within the boat hull, partially into the boathull or entirely external of the boat hull and stored in front or on the sides or to therear of the hull.[172] In the Otter design, the front wheel was lifted almost vertically to be stored inthe hull and the rear wheels were also lifted upwards to be stored in the hull. MrDippie said:The Sealegs design is a powerful expression of an amphibious boat design, inmy opinion it made bold decisions to keep the lifting mechanism external tothe boat. To me that was a counter intuitive decision. It was/is one of the fewamphibious boat designs on the market with this feature. I believe in 2003when the boat was first designed it was a radical design departure from whatwould seem intuitively most marketable; to look like a boat underway withthe mechanisms concealed in the hull as we did with Otter. It has, in myopinion, created its own design appeal. I am aware people see it as ugly andothers as cool. I have come to like the aesthetics over time – form followsfunction.[173] Having considered the possible explanations for the Orion system's similarityto the Sealegs system, Mr Dippie expressed his opinion that given the wide range ofdesign decisions required to develop an amphibious boat from scratch, the odds of thetwo designs being as similar as Dr Field had described cannot be a coincidence. Henoted that three other craft with similar functions to Sealegs, namely the Iguana, theGibb's Humdinger and his own boat, the Otter, which were undoubtedly developedindependently, were all radically different in appearance and mechanical specifics. MrDippie expressed his opinion that the functional constraints identified by Dr Field donot in fact provide a limitation on design to the extent that he suggests. For example,as demonstrated with his own Otter boat, there is no structural impediment tomounting the front wheel aft of the bow and doing so was in fact a simpler and cheaperarrangement with other advantages such as reducing the ground clearance needed byshortening the wheel base. In Mr Dippie's opinion the picture painted by Dr Field ofthe inevitability of someone starting with a blank sheet of paper and ending up with adesign almost identical to Sealegs is "absurd".[174] In his view, the most charitable explanation as to why the Orion system looksand performs almost identically to a Sealegs system is that its designers werecomprehensively affected by confirmation bias as a result of their intimate knowledgeof Sealegs. Mr Dippie explained his reference to confirmation bias as follows:I've had a long experience of running design teams and I used to find that oncethey had been down a certain path and that they would be blinkered and headdown that path next time without considering how the circumstances havechanged and how they could do it differently, and so – and I understand in ascientific point of view that that's a trap that scientists also fall into and don'tconsider all of the possible possibilities that should be considered rather thanthe ones that they are familiar with.Mr Brian Bellingham[175] Mr Bellingham also gave evidence as an expert witness called by the plaintiff.Mr Bellingham has owned and operated a number of engineering-based businessesand describes himself as mainly a self-taught engineer. He also has expertise in marinetechnology, having constructed a number of air boats including four amphibious boatsall powered by air propellers. Mr Bellingham explains that he has been involved inbuilding air boats and amphibians for most of his working life, and in 1992 establishedhis company International Air Boats Limited in order to promote his amphibious airboats. He has also been involved in the manufacture of carbon fibre reinforcedlaminates and has constructed yacht masts for large ocean-going yachts. Of the fouramphibious boats he has built he constructed the hulls of three of them and had thefourth constructed by a boat builder. The fourth and most recent amphibious boat hebuilt was constructed with three retractable legs, the front leg being mounted internallyof the craft and extending through an aperture at the bow of the boat. The pivot pointis located inside the boat so that the front leg extends from a position just abovehorizontal downwards through an arc to be close to vertical when extended in order tosupport the front of the boat when on land. The two rear wheels, which are affixed tothe transom of the boat, move from their extended almost-vertical position, to be in analmost horizontal position above the waterline when retracted.[176] Mr Bellingham examined the evidence of Mr Zubcic and Mr Leybourne andthe defendants' discovered documentation relating to the Orion design path. MrBellingham says that as a practical engineer he has found that once an engineer sees aworking and effective solution to the problem they wish to achieve, it is virtuallyimpossible for it not to influence their own design work. Mr Bellingham referred tothe Orion computer drawings of its front leg assembly saying that he can see the clearinfluence of the Sealegs SL100/IKA11 design evident in the Orion assembly. He notesthat the design features from the hull to the motors that drive the wheels aresubstantially the same and that in his view the designer has substantially adopted theSealegs solution to the retraction of the wheel unit. He notes that the Orion 4WDsystem involves a double motor and two wheels at the bottom of the leg, which isdifferent from Sealegs but nevertheless uses a similar wheel to Sealegs. He says thatin his view, the key features of the Sealegs design are the design decisions made as toretraction of the conveyance mechanisms. The use of two motors on the Orion 4WDsystem, while a different design option, does not detract from the fact that substantiallythe design adopts the work and design decisions made by Sealegs in reaching theiramphibious solution.[177] In relation to the rear leg assemblies and particularly Sealegs SL100-IKA11,Mr Bellingham says that the Orion solution and system is an externally mountedrearward geometry with a similar style wheel and tyre to Sealegs, as they both have asolid aluminium block hydraulic cylinder to elevate the leg with essentially the samegeometry. Mr Bellingham notes that the Orion rear leg assembly has the oil gallerybuilt inside the leg which is a similar feature to Sealegs. In his opinion, whateverdesign path was followed, the similarities between the two designs cannot be acoincidence and the designer of the Orion system has been hugely influenced by hisknowledge of the Sealegs boat models and IKA11, being the latest generation of theSealegs models.[178] Mr Bellingham also commented on the defendants' evidence regarding Orionworking through design problems. He notes that "debugging" a design is a normalprocess as theory is always different when reaching the stage of practical application.He said that someone adopting the Sealegs design which has already been debuggedmeans they are taking advantage of the benefit of an integral part of the Sealegs designpath. Having built a series of amphibious boats, he says that a testing programme isinevitable. In his case, he said that the testing process was extensive and took years.He notes that he would expect to find the defendants having documented such aprocess, but was not referred to any documentation indicating that any such testingprocess had been undertaken. Rather, what he has seen are references to the Sealegsproduct, indicating Orion's use of that testing information to go straight to a finaliseddesign. Mr Bellingham says that in his opinion such an approach means that thedefendants have not had to make what he regards as the essential engineering decisionsto produce the design by adopting the Sealegs solution. Mr Bellingham says that suchan approach is not possible without the Orion design having been directly derived fromthe earlier Sealegs models, using those models to effectively take a short cut.Mr Peter Allen[179] Peter Allen is, as I have said, a mechanical engineer employed by PiperIntellectual Property (Pipers). Pipers is engaged by the plaintiff in the proceedings,and Mr Allen was called as an expert witness by the plaintiff. Mr Allen has a Bachelorof Engineering degree in mechanical engineering and a New Zealand Certificate ofEngineering. Prior to working as a patent engineer with Pipers, he trained as an aircraftmaintenance engineering tradesman with Air New Zealand and worked as an aircraftengineer for approximately 20 years.[180] Mr Allen first became involved with Sealegs in 2002 when Pipers wereengaged in relation to Sealegs' patent application. Mr Allen was personally involvedin drafting Sealegs' two initial patent applications relating to their retractable legsystem in 2002 and 2003.[181] In his evidence Mr Allen describes a visit he made to the premises of SmugglerMarine in September 2016 under the auspices of being a prospective buyer. He hadbeen instructed by Pipers to visit the premises with a view to ascertaining informationas regards Smuggler's use of the defendants' amphibious kits. Mr Allen spoke withMr Pringle regarding the defendants' amphibious kits and has given evidence aboutwhat he saw and what he was told.[182] The defendants object to Mr Allen giving evidence as an expert witness. Theysubmit that Mr Allen lacks independence, as is evident from the fact that he has beenthe patent engineer advising and assisting the plaintiff for some 15 years and from hisvisit to Smuggler Marine in September 2016 in which he posed as a prospectivepurchaser. The defendants say that Mr Allen has thereby shown partiality towards theplaintiff such as precludes him from complying with the Code of Conduct for ExpertWitnesses contained in Schedule 4 of the High Court Rules 2016. The defendants saythat by reason of his inability to comply with the Code, Mr Allen requires leave of theCourt pursuant to s 26(2) of the Evidence Act 2006 before being permitted to expresshis expert opinions.[183] While Mr Allen does not satisfy the prerequisite of independence required bythe Code by reason of his involvement with the plaintiff's patent applications and thesteps taken by him in visiting Smuggler Marine in September 2016 to gatherinformation on behalf of his employer, I consider that he has nevertheless given hisevidence in a manner which is characterised by his professional objectivity rather thanpartiality. Accordingly I admit Mr Allen's evidence as an expert. However, I proposeto reflect his lack of independence in the weight to be given to his expert opinionevidence and in particular to any evidence which is not otherwise consistent with otheradmissible evidence.9[184] As well as giving evidence of his visit to Sealegs on 7 September 2016, whichI have already referred to, Mr Allen gave evidence following his review of thedefendants' discovery and the defendants' evidence regarding the design path followedby Orion. Mr Allen said that following his examination of the defendants' discoveryhe had been unable to locate any relevant documentation amongst the defendants'documents that referred to an amphibious flood rescue craft in any detail or anydocuments showing how the design brief affected any of the design decisions. Helooked for but did not locate any documents showing evidence of investigations bythe defendants into the conditions in which a Chinese flood rescue vehicle wouldoperate; the speed requirements or terrain over which the vehicle would have to travel;the loads it would be expected to carry; and how rescued people would get in and outof the vehicle in poor weather conditions. He further explained that he had looked fordocuments indicating that Orion engineers had reviewed the design of other vehiclesor vessels that could have provided some helpful design ideas which could have beenincorporated into their rescue craft design.[185] Mr Allen further said that he had been unable to locate any documents amongstthe defendants' discovery relating to an iterative development process in the stepstowards producing the defendants' rescue vehicle in a manner consistent with thedesign path described by Dr Gooch. He said he was looking for initial conceptsketches, photos of prototype models, cardboard mock-ups, calculations of vehicleweights, sketches of leg swing geometries, trials of prototype vehicles in different9 See Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2016] NZCA 67, [2016] 2 NZLR750 at [94]–[101].terrains and with different wheels and tyres, turning circle tests, changes in enginepower requirements as the design matured, changes in design direction, and recordsof designs that were discarded along the way. No such material or documentation waslocated.[186] Mr Allen noted that the discovery documents do however contain a number ofspreadsheets relating to hydraulic component requirements. He also found amongstthe defendants' discovery documents relating to the final design parameters, forexample the final all-up vehicle weight distribution, the final configuration of theretractable leg, the final leg hinge location, finalised stowed wheel positions, finalengine type, final engine location, final drive motor type, final drive motor numbers,and final drive motor locations. However, he did not find any preliminary roughcalculations or follow-on calculation sheets where everything is updated after initialtrials. He said that there is no indication in the calculations provided of any iterativeprocesses in determining final specifications, and that he could find no documentaryevidence of any trial work, for example navigation over different types of terrain, thatmay have led to a need for reassessment or recalculation.[187] As regards the Orion 4WD front leg assembly, Mr Allen says that the retractionpivoting action, steering pivoting action and rotation of the wheels are arranged in thesame sequence as appears on the Sealegs front leg assembly. He further says that hehas reviewed the defendants' discovery documents looking for any developmenthistory relating to the Orion 4WD front leg assembly, such as photos of an initialprototype, records of how and where the leg assembly was tested, and records ofproblems experienced and design changes made in the course of a usual iterativedesign process. He says he was unable to find any documents indicating such aprocess had been undertaken.[188] Mr Allen said that he had been instructed to undertake an extensive search ofpublicly available information for drawings, photographs, websites or patentspecifications that showed any other amphibious vehicles having the combination offeatures present in the Sealegs amphibious assemblies and also present on the Orionamphibious leg assemblies. He said that despite his search he had been unable to findany amphibious vessels other than the Sealegs and Orion vessels that have that samecombination of features.Law and relevant legal principles: Analysis and discussion[189] In New Zealand, the law of copyright is governed by the Copyright Act 1994(the Act). To succeed in a claim for breach of copyright, the plaintiff must show firstthat it is the owner of a copyright work, and secondly that the defendant has infringedthe plaintiff's copyright in that work.10[190] The first issue I must consider is whether the Sealegs amphibious leg assemblypattern, which Sealegs claims to be an original artistic work constituting a novel andunique arrangement of features, is protected by copyright. Section 14(1)(a) of the Actrelevantly provides:14 Copyright in original works(1) Copyright is a property right that exists, in accordance with this Act, inoriginal works of the following descriptions:(a) literary, dramatic, musical, or artistic works:[191] I begin by identifying the works that the plaintiff seeks to protect by way ofcopyright.Identifying the alleged copyright works[192] In opening the plaintiff's case, Mr Henry said that the plaintiff's copyrightwork(s) are the combination of features developed by Mr Bryham after he had madeand tested a series of models. He says that while all of the individual features are wellknown, they were never previously assembled and collocated in the combinationdeveloped by Mr Bryham. Mr Henry submits that the original quality of the plaintiff'scopyright work is the combination of features that together comprise retractable frontand rear leg assemblies which, when attached to a craft, give it amphibious capability.10 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [34].[193] The combination of features identified and relied on by the plaintiff and forwhich copyright is claimed are those set out in schedules A, B, C, D, E, F, and G ofthe plaintiff's fifth amended statement of claim dated 25 August 2017. Thoseschedules detail the claimed copyright features of:(a) the prototype boat 1 retractable front leg assembly (schedule A);(b) the port and starboard assemblies of the rear retractable legs andpowered wheels (schedule B);(c) the modified prototype retractable front leg assembly of Model boat 1(schedule C);(d) the port and starboard assemblies of the rear retractable legs andpowered wheels of model Boat 1 with a single billet hydraulic liftcylinder (schedule D);(e) the powered front retractable leg assembly of prototype boat 136(schedule E);(f) the powered front retractable leg assembly of prototype IKA11(schedule F); and(g) the rear port and starboard powered retractable legs of prototype IKA11(schedule G).[194] The copyright claimed by the plaintiff relating to the Sealegs front legassemblies of the several models detailed in the schedules can be convenientlysummarised by reference to the features present in Boat 136:(a) A front leg fixed at a pivot point on the bow external of the hull, whichlocks down in a near vertical position, and which when retracted rotatesin an arc around the pivot point and directly forward of the bow of thecraft. When fully retracted, the front leg is elevated above the waterlineand directly ahead of the bow.(b) The leg is extended and retracted by means of a hydraulic actuatorconnected to a yoke and to which the lower steerable section of the legis also connected.(c) The front leg has a steering pivot creating an upper static section andlower steerable section and wheel.(d) The front leg is attached at one end to the hull pivot point on the bowand at the other end has an axle-mounted wheel.(e) A hydraulically powered steering actuator is located on the static uppersection of the leg, and connected to the wheel fork to provide frontwheel steerage.(f) The wheel on the leg is powered by a hydraulic motor.(g) The powered wheel has a balloon type of tyre with a well-defined Vtread pattern.[195] The copyright claimed by the plaintiff relating to the Sealegs rear legassemblies of the several models detailed in the schedules can also be convenientlysummarised by reference to the features present in Boat 136:(a) Two retractable hydraulically powered leg assemblies locatedon the transom of the craft, each with:(i) a hydraulic lifting actuator attached to the exterior of thehull; and(ii) hydraulically-powered wheels with motors located onthe wheel hubs.(b) The powered wheel has a balloon type of tyre with a well-defined V tread pattern.[196] The IKA11 model shares the same features as Boat 136 in the samecombination, with added features being:(a) the legs being constructed with a box section and an "industrial design"appearance;(b) an alloy front fork with hydraulic hoses located inside the leg; and(c) an off-set rim front wheel hub with a hydraulic motor concealed withinthe off-set wheel cavity.[197] I turn next to consider whether the identified works are sufficiently original tobe protected by copyright.Originality[198] Although an artistic work need not be of artistic quality, in the sense of beingvisually appealing, s 14 makes it clear that the work must be original in order to beprotected by copyright. Originality is not defined in the Act,11 so common lawprinciples apply. The courts have indicated that the threshold for originality is low.12The work need not be novel or unique in form; it must simply originate from its authorand be the product of more than minimal skill and labour.13 The Supreme Court ofCanada described the requirement for originality as follows:14What is required to attract copyright protection in the expression of an idea isan exercise of skill and judgment.[199] It went on to explain:15By skill, I mean the use of one's knowledge, developed aptitude or practisedability in producing the work. By judgment, I mean the use of one's capacityfor discernment or ability to form an opinion evaluation by comparingdifferent possible options in producing the work. This exercise of skill and11 Beyond s 14(2), which clarifies that a work is not original if it is a copy of another work or itselfinfringes copyright.12 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [38]; seealso University of Waikato v Benchmarking Services Ltd (2004) 8 NZBLC 101,561 (CA) at [27].13 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [37]–[38];see also Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) at 664.14 Law Society of Upper Canada v CCH Canadian Ltd 2004 SCC 13, [2004] 1 SCR 339 at [16].15 At [16].judgment will necessarily involve intellectual effort. The exercise of skill andjudgment required to produce the work must not be so trivial that it could becharacterized as a purely mechanical exercise.[200] As noted, it is original skill or labour in execution that is required for copyrightto arise, not originality of thought.16[201] Although the threshold for originality is low, the extent of the work'soriginality will be relevant to the scope of copyright protection.17 The Court of Appealexplained the practical effect of this in Land Transport Safety Authority of NewZealand v Glogau:18Where the originality is low, it is to be expected that anything other thanalmost exact reproduction will not support an inference of copying amountingto infringement, whereas where there is a higher degree of originality in thework an inference of copying will more readily be drawn even where thedegree of similarity is less. In this way the reward in the scope of protectionwill tend to be related to the degree of originality. Retaining a low thresholdfor protection therefore presents no real harm.[202] The defendants submit that the plaintiff cannot claim copyright in anarrangement of individually unoriginal features. They say they are not aware of anycase in which an arrangement of features has itself been found to constitute a copyrightwork, and that discussions of collections of features have always arisen as a point ofcomparison between a copyright work and an allegedly infringing item.[203] It is plain from the decisions in Bonz Group (Pty) Ltd v Cooke and Henkel thatcopyright may arise in a collection of individual features which are not in themselvesoriginal and which would not attract copyright if assessed on their own.19 This isbecause the work's originality lies in the skill and labour required to arrange orcollocate those features.2016 Gillian Davies, Nicholas Caddick and Gwilym Harbottle Copinger and Skone James on Copyright(17th ed, Thomson Reuters, London, 2016) at [3-227], an identical passage from an older editionof Copinger was cited with approval in Martin v Polyplas Manufacturers Ltd [1969] NZLR 1046(SC) at 1050.17 Ian Finch (ed) James & Wells: Intellectual Property Law in New Zealand (3rd ed, ThomsonReuters, Wellington, 2017) at 389; Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102,[2007] 1 NZLR 577 at [38].18 Land Transport Safety Authority of New Zealand v Glogau [1999] 1 NZLR 261 (CA) at 271.19 Bonz Group (Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC) at 220; Henkel KGaA v Holdfast NewZealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [40]–[41].20 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [40]; seealso Bonz Group (Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC) at 220.[204] In Bonz Group, the plaintiff claimed that the defendants had infringed itscopyright in relation to handknitted woollen garments depicting dancing lambs andgolfing kiwis, among other things. Tipping J held that originality was not in issuebecause the "collocation of features" found in the plaintiff's garments was accepted asbeing original, as opposed to the features individually.21 However, because theplaintiff relied for its copyright on a collection of individual features, this hadramifications when it came to infringement. Tipping J commented:22To infringe in such circumstances the defendant must have used the same or asubstantially similar arrangement or collocation of the individual features. Ifthe defendant has copied the individual features but has made its ownarrangement of them, this will not represent an infringement. That is becausethe plaintiff has no monopoly in the individual features as such but only intheir arrangement or collocation.(emphasis added)[205] In Henkel, the plaintiff claimed infringement of its copyright in artistic worksunderlying its packaging of adhesive products. The pleaded features of its artisticwork included a red and blue card with blister pack; a red horizontal stripe at the topof the card with the majority of the rest of the card being blue; and writing in white atthe top right-hand corner within the red horizontal stripe, among others. The SupremeCourt held that this was a case involving copyright that derives from a collocation orarrangement of features which are not original in themselves. It cited a passage fromBonz Group with approval, including the excerpt at [204] above, and furthercommented:23As we observed earlier, it may be relevant for infringement purposes todetermine how much skill and labour went into the making of the copyrightwork. This point can have particular relevance in arrangement cases. The skilland labour which has given rise to the arrangement is what gives the work itsoriginality, and if that skill and labour is not great, another arrangement of thesame unoriginal underlying features may not have to depart greatly from thecopyright arrangement in order to avoid infringement. If the level oforiginality in the copyright arrangement is low, the amount of originalityrequired to qualify another arrangement of the same elements as original isalso likely to be low. Substantial reproduction of those aspects of the work inwhich the originality lies must be shown to establish infringement. This isconsistent with the purpose of the law of copyright, which is to recognise andprotect the skill and labour of the author of the copyright work.21 At 219.22 At 220.23 At [41].(footnotes omitted)[206] It is clear from these cases that copyright may be established in an originalcollection of individually unoriginal components or features, although there may beimplications at the second stage of the analysis (infringement). Lord Reid explainedthe proper approach in Ladbroke (Football) Ltd v William Hill (Football) Ltd:24A wrong result can easily be reached if one begins by dissecting the plaintiffs'work and asking, could section A be the subject of copyright if it stood byitself, could section B be protected if it stood by itself, and so on. To my mind,it does not follow that, because the fragments taken separately would not becopyright, therefore the whole cannot be. Indeed, it has often been recognisedthat if sufficient skill and judgment have been exercised in devising thearrangements of the whole work, that can be an important or even decisiveelement in deciding whether the work as a whole is protected by copyright.[207] The defendants seek to distinguish Ladbroke on the grounds that the pleadedcopyright work in that case was a literary work in the form of a compilation, but Iconsider that Lord Reid's comments are of broader general application and align withthe approaches taken in Bonz Group and Henkel.The plaintiff's case regarding originality[208] Sealegs claims that it holds copyright in its Sealegs prototype boat one,prototype boat 136, and Sealegs model IKA11, saying that each represents highoriginality and is the result of the effort and skill applied by Mr Bryham and Sealegsin the development of the Sealegs amphibious system. The plaintiff says that thecopyright works are an arrangement of features that were placed in their eventualcombination by Mr Bryham (as an employee of the plaintiff) after a process in whicha series of models were made and tested before the final models were produced. Theplaintiff says that in this case the quality of the design is the original way in which MrBryham combined otherwise known features to develop retractable front and rear legassemblies for an amphibious craft.[209] The plaintiff accepts that the individual elements or features of the legassemblies may not of themselves have originality in an engineering sense; rather, itrefers to the original way in which Mr Bryham combined and arranged those features24 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 (HL) at 277.on a boat to create an amphibious craft with fully retractable legs, all external of thecraft. The plaintiff says that this combination of features represents an expression foran amphibious system which was and is entirely original: before Mr Bryham andSealegs developed the system, no other such system had been developed, produced ormanufactured anywhere else in the world. There can therefore be no suggestion thatMr Bryham or Sealegs copied the arrangement of features and components that makeup its system from any other design or from any other person.[210] The plaintiff says that the Sealegs retractable amphibious leg system wasproduced as a result of the application of considerable skill, effort, labour and expenseon the part of the plaintiff and it is that which it seeks to protect in asserting copyrightover its amphibious system.[211] The plaintiff further says that the Sealegs design path can be seen in thedevelopment of the series of concept models, followed by prototype models, prior toproduction. Throughout this process of development, the Sealegs system wasimproved from prototype model one by the addition of a new front fork, a single blockrear hydraulic cylinder, model 136 with its addition of power to the front wheel, andthe SL100 designs ending in the IKA11 with its components designed to have anindustrial and functional look. The plaintiff says that the originality of its design isemphasised by the fact that the placement of the retractable legs on and outside thehull ran contrary to conventional thinking of good design at the time that Sealegscreated its system. Rather than attempting to retract and conceal the legs and wheelsinto positions that would not project beyond the hull form, the Sealegs system placedits retractable legs entirely outside the hull with no attempt to conceal them whenretracted. At the time that Mr Bryham and Sealegs developed this design, it was anentirely new and original approach that had not been accomplished before anywherein the world. The plaintiff says that the subsequent commercial success of Sealegsand its amphibious boats itself emphasises the nature and extent of the innovation.The defendants' case regarding originality[212] The defendants acknowledge that the standard for originality to be met by theplaintiff is low, in that the plaintiff must show that the work originates from its authorand is the product of more than minimal skill and labour. The defendants, however,raise another issue as to whether the prototypes in respect of which the plaintiff claimscopyright are in fact copies of underlying CAD-based computer models and if so theysay that the plaintiff has not identified, produced or even pleaded the original worksin which copyright might subsist.[213] The defendants further acknowledge, however, that were the Court to find theplaintiff to be the author of the independently designed copyright works involving theexpenditure of effort and skill, the Court may consider that the low standard oforiginality required under the Act has been met. The defendants say that such ananalysis must be undertaken in relation to each element of the prototype and byreference to an identified author.Analysis and discussion regarding originality[214] I am satisfied from the evidence that the Sealegs' retractable amphibioussystem when developed was unique and quite different from anything that had beenpreviously developed by any other manufacturers of amphibious craft. This wasaccepted by Dr Field. Dr Field conducted extensive research of amphibious craft andidentified a wide range of craft manufactured to have amphibious capability. Whilenoting that most of the elements of the Sealegs system could be found in use in othercontexts, he accepted that the Sealegs system as a whole is unique in that there is noother identical product available anywhere. Dr Field said, referring to the Sealegsamphibious design:I accept that it is unique in the sense that I have not been able to find anidentical combination of the elements of which he [Mr Bryham] speaksincluding external pivoting legs, hydraulically powered wheels and noopening in hull for wheels. However all of those elements were pre-existingin prior designs. Indeed, some could be called commonplace.[215] Produced in evidence are photographs depicting a wide range of amphibiouscraft including motor cars modified to operate on the water, and boats with wheelappendages both static and retractable back within the hull form, which have anamphibious capability. This evidence is consistent with the Sealegs system beingoriginal and illustrates that there was no prior existing system of any similarity to thatdeveloped by Mr Bryham. In his evidence Mr Bryham has explained how hedeveloped the Sealegs system and he makes no reference to being inspired by anyother pre-existing system. None of the amphibious systems employed on earlierproduced boats bear any visual resemblance to the Sealegs system. In all materialrespects what Mr Bryham and Sealegs developed was novel and original in terms ofthe placement of bow and stern retractable legs on the exterior of the boat hull, to beeither extended or retracted while at all times remaining entirely outside the hull form.The amphibious legs of the Sealegs system do not retract into recesses within the hullform, and there is no attempt made to conceal the legs and wheels as is often a featurewith many other amphibious craft. When retracted the Sealegs wheels and legs remainentirely visible and obvious. I accept the evidence of Mr Dippie that this was a radicaldesign departure from other amphibious boats on the market.[216] As well as the exterior positioning on the boat hull of the retractable legs, thecomposition of the functional features of the retractable legs is also original in myview. The front leg assembly is comprised of components that are arranged andcombined to achieve the functions of being extended and retracted by rotating throughan arc directly forward of the bow of the craft, and when extended provide drivenpower and steerage.[217] I shall undertake a closer examination of the Sealegs system in the context ofthe issue of whether the Orion products are objectively similar to the Sealegs system;however, I am satisfied that the collocation of components and features comprisingthe Sealegs system is the product of substantial skill and labour and is an original workfor the purposes of the Act.[218] I further consider there to be a high degree of originality in the Sealegsassembly pattern. While each individual functional component of the leg assemblyperforms well-known mechanical functions which are themselves not original, thecombination and arrangement of the components so as to achieve the functionality andmovement required to extend and retract the amphibious legs, coupled with their openpositioning at the bow and transom when retracted, combine to make a highly original,effective and immediately recognisable amphibious system of a kind that had notpreviously been produced by anyone anywhere in the world.[219] The arrangement of the components developed and determined by Mr Bryhamcan be contrasted to artistic works which involve the purely aesthetic assembly ofknown features or elements in order to achieve and original work. Here, the originalityof the arrangement of the components yielded a novel solution to the problems ofproviding amphibious capability for small craft. Moreover, the originality resultedfrom Mr Bryham adopting an arrangement that is appropriately described by MrDippie as being counter-intuitive. Mr Bryham rejected his initial designs and modelsin which the retracted wheels were substantially concealed and enclosed withinrecesses built into the hull form, in favour of the external positioning of the legs onthe exterior of the hull, meaning they are prominent and entirely visible in theirretracted positions. While such an arrangement and positioning may be regarded asvisually detracting from the aesthetic and hydrodynamic form of the boats on which itis installed, the advantages and utility of the amphibious capability it provides clearlyoutweigh those purely aesthetic considerations. The commercial success of theSealegs system is evidence that despite being obvious and utilitarian in appearance, aswell as generally inconsistent with conventional marine design aesthetics, the systemis nevertheless well received and regarded in the market, reflecting its originality asan effective amphibious solution.Are the Sealegs prototypes or the CAD models the original expression of Mr Bryham'sideas?[220] The defendants submit that while the plaintiff has claimed copyright in thethree models,25 those prototypes are in fact copies of underlying computer-assisteddesign (CAD) models. The defendants submit that it is the CAD computer modelswhich are the original expression of the ideas in which copyright might subsist. Thedefendants say that the plaintiff is purporting to claim copyright in prototypesmanufactured from what were the original underlying 3D CAD computer models. Thedefendants say that the plaintiff has not pleaded its CAD models as being its originalwork, nor have the CAD models been produced in evidence.[221] The plaintiff says that the three key models for which it claims copyright arethe physical prototypes built by the plaintiff to test their design concepts. At the25 Prototype boat 1, prototype boat 136 and IKA11.completion of the design process, it was these prototypes that were used to developthe CAD-based plans required for the manufacture of components and the productionof its amphibious boats. The process of design development undertaken by MrBryham and Sealegs involved progressing through a design path aimed towards theconstruction of a physical prototype to be tested and modified before finalising thedesign. The process of designing and manufacturing components was undertaken byMr Bryham with the assistance of consulting and manufacturing engineers engagedby Sealegs. While this process involved sketches and engineering drawings at variousstages, it was not until the prototype had been completed and settled on that the processof creating CAD drawings of the prototype and thereby a CAD computer model of theprototype was commenced and production drawings were prepared based on theprototype model. The plaintiff submits that as a result of its design developmentprocess, prototype boat one became the first copyright work. The plaintiff says thatprototype one is the model which contains the features of its amphibious system andin which copyright is claimed.[222] Similarly, as regards prototype boat 136, the same development process wasadopted, with the prototype boat 136 model being the final expression of the plaintiff'sartistic work in which copyright is claimed. Once again it was that model from whichthe production drawings were subsequently developed on the SolidWorks computersystem, including a computer model and component design drawings.[223] In relation to IKA11, the plaintiff says that this prototype was developed as adesign project and intended by Sealegs to be finalised once approved as a physicalmodel from which computer drawings to enable production will be made.[224] While professional design engineers will in most cases progress the design oforiginal works starting from initial sketches, progressing to CAD drawings andcomputer models, and then moving to the manufacture of components based upon theCAD drawings and physical models, such an approach is obviously not the onlymethod of converting an original idea into the physical expression of the idea. InSealegs' case, the approach adopted was more of a trial and error method by whichfunctional solutions were tested and various components manufactured and trialledbefore the prototype was finally acceptable and settled on. It was only when that stagehad been reached that CAD production drawings and a computer model were preparedwhich would enable production of the prototype.[225] I accept Mr Bryham's explanation of the process of design development thatended with the creation of the prototypes for prototype boat one and prototype boat136, and accordingly I am satisfied that those prototypes are the original work thatwas produced by the application of the skill and labour of Mr Bryham and Sealegs.Consequently I reject the defendants' submission that the underlying CAD model wasthe actual original work. The sketches and drawings that were created along the designpathway prior to the creation of the prototype boats, including those undertaken on acomputer, were in the nature of design work undertaken in the course of a designpathway where the objective was the creation of a final prototype, rather than beingexpressions of the original idea of Mr Bryham and Sealegs. The development of theexpression was not complete until the prototypes had been settled upon and at thatpoint each prototype represented the plaintiff's original expression of its idea for anamphibious system.Ownership: Does the plaintiff own copyright in the three models?[226] The author of a copyright work is the person who contributes the skill, labourand judgment comprising the actual work.26 The default position in s 21(1) of the Actis that the author of a work is the first owner of any copyright in the work. Where twoor more authors collaborate in producing a copyright work, it is a work of jointauthorship.27 All of those authors are then taken to be the owners of copyright in thework.28[227] There are two important exceptions to the default rule that the author of a workis the owner of copyright:26 Oraka Technologies Ltd v Geostel Vision Ltd [2010] NZCA 232, (2010) 88 IPR 227 at [20].27 Copyright Act, s 6(1).28 Copyright Act, s 8(1).(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;29 and(b) where a person commissions and pays for, 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.30[228] In determining whether an employee made a copyright work "in the course ofemployment", it is necessary to consider the scope of what the employee wasemployed to do, and whether the creation of the copyright work can be regarded asfalling within the employee's role.31 It is also relevant to consider whether thecopyright work was made during work hours, on the employer's premises, using theemployer's equipment and materials, and using ideas and expertise that were gainedin the course of or related to the employee's employment duties.32[229] As for commissioning, to "commission" simply means to order or to request.33This must take place before the work is made.34 However, the Court can infer theexistence of a commission; there need not necessarily be a written agreement.35[230] Section 21(4) of the Act makes it clear that the parties may contract out of thesestatutory presumptions of copyright ownership.36The plaintiff's submissions[231] The plaintiff says that by means of Mr Bryham's own design work, coupledwith Sealegs' engagement of consultant engineers and manufacturers, it produced the29 Copyright Act, s 21(2).30 Copyright Act, s 21(3).31 See Empress Abalone Ltd v Langdon [2000] 2 ERNZ 53 (CA).32 See Fleming v Fletcher Concrete and Infrastructure Ltd HC Auckland CIV-2005-404-4598, 1December 2006 at [68].33 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 (CA) at [55].34 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 (CA) at [56].35 Pacific Software Technology Ltd v Perry Group Ltd [2004] 1 NZLR 164 (CA) at [52]–[53] and[60].36 See Oraka Technologies Ltd v Geostel Vision Ltd [2010] NZCA 232, (2010) 88 IPR 227 at [23].original works which were the models in which it claims copyright. Amongst theexhibits presented by the plaintiff are tax invoices rendered to Sealegs by a number ofconsultants and suppliers of services, parts and components in relation to itsdevelopment of its prototype boats with its amphibious system. The consultantsincluded: Fulcrum Limited and its principal Mr Thomas Gardiner; Metal DesignsAuckland Limited; Central Hydraulics Limited and its principal Mr Leybourne; andAllied Precision Engineering (1992) Limited and its principal Mr Andrew Percival.[232] The invoices produced include one from Metal Designs from 28 April 2003 forthe manufacture of a prototype hull. The Fulcrum invoices produced include one dated16 May 2002 for work described as "completion phase one Sealegs prototype DVL".Thereafter, throughout the remainder of 2002 and continuing into 2003, Fulcruminvoiced Sealegs almost monthly for computer-based design work. The work beingundertaken by Fulcrum was obviously substantial as reflected by the total of theinvoices being in excess of $180,000.[233] Also produced in evidence by the plaintiff are invoices issued to Sealegs byAllied Precision for work undertaken during 2004 and 2005 in relation to themachining of parts and components required for the Sealegs assembly. Sealegs alsoengaged Watts Engineering Limited in 2002 to undertake design work for thedevelopment of a driven amphibious leg and engineering work required for theconstruction of a prototype. Also produced are the invoices issued by Mr Leybourne'sCentral Hydraulic Services Limited from 2002 through to March 2004 for the supplyof items relating to the hydraulic systems and also installation work, developmentwork relating to the hydraulic power system, and fit-out work.The defendants' response[234] The defendants submit that the plaintiff has produced only some of the invoicesthat relate to work by consultants and suppliers engaged by the plaintiff. Thedefendants submit that it is incumbent on the plaintiff to prove the commissioning ofthe design and development work which was involved in the creation of the originalwork and which it owns as a consequence of its commissioning. The defendantssubmit that the Court should not be left to speculate regarding the fundamental issueof ownership.Analysis and discussion regarding ownership[235] From the invoices produced by the plaintiff and the evidence of Mr Bryhamwhich I accept, I am satisfied that Mr Bryham proceeded as he described by engagingconsultants, such as Fulcrum, to assist with the development of computer-baseddrawings and designs of the prototype boat one and prototype boat 136 models. I alsoaccept that Central Hydraulics was engaged by the plaintiff to manufacturecomponents and to assist with the design and development as well as the supplycomponentry, and that Allied Precision Engineering were engaged to manufactureparts and machinery. There can be no question that although actual design work wasundertaken by principals and staff of such consultant firms as Fulcrum and CentralHydraulics, those businesses were engaged and commissioned by Sealegs to do so andthe copyright in the original work they produced is consequently owned by Sealegs.[236] The development work of prototype boat 136 and particularly the developmentof the new three-wheel drive system with a motorised front wheel was developedsubstantially in-house by Sealegs. Mr Leybourne was himself directly involved in thedevelopment of this system and the hydraulic functioning and controls. As anemployee of Sealegs, any design and development work that he undertook in relationto prototype boat 136 is the property of Sealegs.[237] Similarly, the work undertaken from mid-2010 onwards in relation to project100 involved a design team comprised of Sealegs' employees with the assistance ofAllied Precision Engineering who were engaged and paid for their services. TheProject 100 progression to IKA11 was also undertaken by Sealegs' own staff includingMr Leybourne. As such, all or any copyright in the original work produced in the formof the Project 100 amphibious system installed on the barge prior to Mr Leybourne'sdeparture from Sealegs as an employee in November 2011 is also the property ofSealegs.[238] Next I turn to the work Orion carried out for Sealegs on SL100. As I havepreviously noted, the terms of Sealegs' engagement of Orion in March 2013 werecontained in the written Orion terms and conditions and the Sealegs Design Briefdocuments. The Sealegs design brief for its SL100 dated 9 April 2013 provides thatthe intellectual property of all proprietary components shall be the sole ownership ofSealegs. However, the subsequent Service Agreement entered into between Sealegsand Orion on 31 March 2015 provided:Entire Agreement. This agreement records the entire agreement andunderstanding of the parties in relation to the subject matter of this agreement,and supercedes and cancels all previous understandings or agreements(whether written, oral or both) between the parties relating to that subjectmatter.[239] A further provision of the Service Agreement deals with intellectual propertyand states that unless otherwise agreed in the Statement of Work Schedule attached tothe Agreement, any background intellectual property rights (defined as being thoseintellectual property rights created or developed by a party before the date of theagreement), would remain the exclusive property of its owner. The Agreement alsoprovides that any improvements to any background intellectual property rights willremain the exclusive property of the owner of that background intellectual property.The Agreement further provides that the parties agree that unless otherwise agreed inthe Statement of Work:(c) any Project IPR (and improvements to) will be owned exclusively bySealegs, from the date at which the relevant IPR arises; and[240] The Statement of Work schedule attached to the Service Agreement describedthe services that Sealegs engaged Orion to carry out, defined "Project IPR", andcontained other terms as follows:Services: SL100 amphibious system for craft designation: RC34- SLG100 inits current design state.Project IPR: All proprietary amphibious components belonging to Sealegscurrent family of design and technology..Other Terms: . Orion Marine is being engaged to install and commissionSL100 in its current design state. Design changes required aftercommissioning will be considered out of the scope of this Statement of Workand will require the parties to enter into a new Statement of Work.[241] The defendants say that at the time the Service Agreement was entered into inMarch 2015, Orion had already completed the design of its S25-4WD system. Thedefendants say that from the terms of the agreement it is plain that it was contemplatedthat Orion had by then already developed its own "background intellectual propertyrights", which having regard to the timing would have included that relating to its ownamphibious system, even if Mr Bryham and Sealegs did not know the detail of thedefendants' designs. The defendants submit that Orion's later developed S25-3WDsystem was a development from or modification of its S25-4WD system, which fallswithin the definition of an "improvement" to Orion's background intellectual propertyrights.[242] The defendants acknowledge that the intention of the Agreement was thatSealegs would be the owner of any new intellectual property that arose from originalwork undertaken in the course of Orion's engagement. However, the defendants saythat the plaintiff has failed to establish ownership of any intellectual property arisingfrom or relating to the work undertaken by Orion pursuant to its engagement and thatit has failed to identify any artistic work or works in respect of which it claimscopyright.[243] Sealegs says that by the time that Orion was engaged to assist with thedevelopment of SL100, and particularly to manufacture a prototype, being the IKA11,the combination of features comprised in its amphibious system was well established.The plaintiff says that IKA11 is a further original work, and a further iteration of thecopyright work. The plaintiff says that while IKA11 has a new form in relation tosome features, it is nevertheless still an expression of the copyright works. Inparticular, the plaintiff refers to the addition of a second front lifting cylinder havinga pivot point located at its top, and the development of an off-set front wheel hub.[244] I consider that it is clear from the terms of the Service Agreement that anyintellectual property arising from Orion's work and engagement on the SL100/IKA11project was to be the property of Sealegs.[245] The defendants say that features such as the offset wheel rim and box sectioncomponents used on IKA11 had already been developed and used by Orion on its S25-4WD, and consequently Sealegs cannot claim ownership of any copyright existing inthose features. However, the issue of whether Orion has breached Sealegs' copyrightby its development and manufacture of the S25-4WD and S25-3WD is the centralissue for determination in this proceeding. If the plaintiff is successful in establishingthat the defendants have breached its copyright by adopting and reproducing themanner in which the plaintiff arranged and organised the features which comprise theSealegs retractable leg assemblies, then the question of the ownership of the copyrightarising from the IKA11 engagement will also be determined.Infringement[246] Infringement of copyright occurs when a person copies a copyright workwithout authorisation.37 Section 2(1) of the Act defines copying as "reproducing,recording, or storing the work in any material form (including any digital format), inany medium and by any means". As the Court of Appeal has observed, this does notprovide a useful explanation of what copying actually entails.38 Development of theconcept has been left to the common law.[247] In determining whether there has been copying, the law must strike a fairbalance. As Hoffmann J put it:39On the one hand, wholesale copying is not fair competition. On the other hand,all technological progress depends upon the adaptation and improvement ofother people's ideas.[248] The test for infringement by copying has three well-established steps:40(a) Objective similarity: there must be sufficient objective similaritybetween the infringing work and the copyright work.37 Copyright Act, ss 29(1) and 30; Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102,[2007] 1 NZLR 577 at [42].38 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [84].39 Billhöfer Maschinenfabrik GmbH v TH Dixon & Co Ltd [1990] FSR 105 (Ch) at 124.40 Wham-O MFG Co v Lincoln Industries [1984] 1 NZLR 641 (CA) at 666; see also OrakaTechnologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [85]–[86] in which the Court of Appealapproved that test but adjusted the ordering of the steps.(b) Causal connection: there must be some causal connection between thecopyright work and the infringing work, in the sense that the copyrightwork is the source from which the infringing work is derived.(c) Substantiality: the copying must be either of the entire work or of asubstantial part.[249] There is a degree of overlap between these three issues.Objective similarity[250] Objective similarity is not the court's main concern in a breach of copyrightcase: the ultimate issue is derivation, not similarity.41 However, the extent of similaritybetween the copyright work and the allegedly infringing work has evidentiarysignificance in terms of proving copying.42 As Lord Millett explained in DesignersGuild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC):43The copyright owner does not complain that the defendant's work resembleshis. His complaint is that the defendant has copied all or a substantial part ofthe copyright work But while the copied features must be a substantial partof the copyright work, they need not form a substantial part of the defendant'swork Thus the overall appearance of the defendant's work may be verydifferent from the copyright work. But it does not follow that the defendant'swork does not infringe the plaintiff's copyright.The first step in an action for infringement of artistic copyright is to identifythose features of the defendant's design which the plaintiff alleges have beencopied from the copyright work. The court undertakes a visual comparison ofthe two designs, noting the similarities and the differences. The purpose of theexamination is not to see whether the overall appearance of the two designs issimilar, but to judge whether the particular similarities relied on aresufficiently close, numerous or extensive to be more likely to be the result ofcopying than of coincidence. It is at this stage that similarities may bedisregarded because they are commonplace, unoriginal, or consist of generalideas. If the plaintiff demonstrates sufficient similarity, not in the works as awhole but in the features which he alleges have been copied, and establishesthat the defendant had prior access to the copyright work, the burden passesto the defendant to satisfy the judge that, despite the similarities, they did notresult from copying.41 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43].42 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [43].43 Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR2416 (HL) at 2425.Even at this stage, therefore, the inquiry is directed to the similarities ratherthan the differences. This is not to say that the differences are unimportant.They may indicate an independent source and so rebut any inference ofcopying. But differences in the overall appearance of the two works due to thepresence of features of the defendant's work about which no complaint is madeare not material Once the judge has found that the defendants' design incorporates featurestaken from the copyright work, the question is whether what has been takenconstitutes all or a substantial part of the copyright work. This is a matter ofimpression, for whether the part taken is substantial must be determined by itsquality rather than its quantity. It depends upon its importance to the copyrightwork. It does not depend upon its importance to the defendants' work, as Ihave already pointed out. (citations omitted)[251] Whether there is objective similarity is largely a matter of impression for theCourt.44 Although the Court may be assisted by expert witnesses,45 it must ultimatelyreach its own view.46[252] The objective similarity analysis in Oraka Technologies Ltd v Geostel VisionLtd is instructive. In that case, the plaintiff claimed copyright in the cup assemblycomponents of its automatic asparagus grading machine.47 It said the defendant hadmanufactured and sold a cup assembly that was a substantial copy of the plaintiff'scopyright works. In comparing the two cup assemblies, the Court of Appeal engagedin a feature-by-feature analysis. It noted that there was objective similarity with regardto the dimensions of the two cups, the presence of flared or ramped ends on the cup,and the use of a bracket to mount the cup.48 The trigger, pivot points, latcharrangements and chassis plate measurements were also similar.49 On the other hand,there were also significant differences between the two cup assemblies, particularlyrelating to the integration of the chassis with the chain link, the spring that joined thebracket to the pivot pin and the different trigger mechanisms.50 However, the expertsall accepted that the defendants' cup assembly essentially resembled a "second44 Eight Mile Style, LLC v New Zealand National Party [2017] NZHC 2603 at [53].45 Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR2416 (HL) at 2423, cited in Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [106].46 Plix Products Ltd v Frank M Winstone (Merchants) Ltd (1984) 1 TCLR 176 (HC) at 188–189,citing Ancher, Mortlock, Murray and Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR278 (SC) at 286.47 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111.48 At [109].49 At [109].50 At [110].generation model" of the plaintiff's cup assembly.51 Overall, the Court concludedthere was objective similarity between the two works.52The parties' submissions[253] The plaintiff submits that the Orion S25-3WD front leg assembly is verysimilar to the Sealegs assembly, and has all of the features of the Sealegs system in thesame order and arrangement as for prototype 136 (S60-3WD) and Sealegs SL100. Theplaintiff says that while there is a difference in the positioning of the Sealegs wheelmotor outside the wheel hub, as compared to the positioning of the Orion wheel hubmotor within the wheel hub, that difference does not apply in the case of the SealegsSL100 which has an offset front wheel rim with the wheel-motor mountedsubstantially within the wheel in the same way as on the Orion front leg assembly.[254] The defendants say that the Court is required to look at the defendants' productsand decide whether, visually, they are objectively similar to an identified copyrightwork. This approach must be undertaken on a work-by-work basis and not by adoptinga global approach based on whether each work exhibits some features of the copyrightwork. The defendants submit that it would be wrong to approach this issue byeffectively summarising the Sealegs works by reference to the underlying arrangementof features without undertaking an examination in the form of a visual comparison ofthe works. They submit that the plaintiff's leg assemblies have a low level oforiginality, and that consequently any small differences between the two systems,particularly any considered by an engineer to be significant, will be of greatersignificance.[255] The defendants say that a certain level of similarity is to be expected as aconsequence of Orion adopting some of the same ideas as Sealegs, which necessarilyled to similarities. Mr Spring for the defendants says that, for example, they do notdeny the Orion leg assemblies use hydraulic cylinders to raise and lower the legs in asimilar manner to Sealegs. However, he submits that simply having commoncomponents does not create objective similarity. In his submission, when the51 At [111].52 At [112].hydraulic cylinders are looked at more closely and from an engineer's perspective,numerous differences are apparent, such as:(a) Different attachment locations on the hull, with consequent differentretracting and extension motion.(b) Orion's decision not to use hydraulic hoses outside the hull by insteadpassing hydraulic oil through conical pins that penetrate the hull andattach to an internal plate.(c) Orion's hydraulic cylinders include holding valves incorporated in thecylinder tube, while the load holding valves on the Sealegs assembliesare contained in a separate block attached to the cylinder.(d) The front lift cylinder on the Orion system is designed to accommodatebump loads when it strikes an object, while the Sealegs system uses anadditional component to accommodate bump loads by a mechanicalstop.(e) The front lift cylinder on the Orion system has a rectangular cross-section and standard end connections, while the Sealegs front cylinderhas a round cross-section with a trunnion mounting.[256] In closing for the defendants Mr Spring said that the defendants do not denythat their systems are underpinned by an "arrangement" which necessarily arises fromfunctional constraints. He further acknowledges that the defendants cannot and do notdeny that similarity exists at the conceptual level of the design stages. This wasaccepted by Dr Field in cross-examination:Counsel: Well, just come back to the question. The question is, when you lookat the geometry and the alignment of features in the geometry in the stickfigure, do you agree that the Sealegs [and] the Orion design are simplydifferent iterations of that geometry as per the sketch there?Dr Field: Different iterations, yes.Counsel: One is a second iteration of the other because one is first in time?Dr Field: Well, an iteration isn't a copy.Counsel: I'm not asking if it is. I'm asking you if you would agree with theproposition that the Orion front leg assembly is a second iteration of thefeatures in the geometry that we see in the stick figure when compared to thefirst in time, Sealegs.Dr Field: I still say no. I need to give you an example. I look at the so calledoutline of the steering box which has got this cylinder through it. The Sealegsone has a circle in the middle. This is where diameter 6 is indicated and it isright there. The equivalent diameter on the Orion one, you can see the circle,but above the circle by a significant amount is the small circle representingthe end of the same part. So is it an iteration, or is it not? It's certainly notcoinciding with the red circle, so I'm having trouble answering the question.Some parts are similar and some are quite different.Counsel: So what you're saying is that if we dig down to the fourth level ofthe design process that you talk about, it's not. I'm asking, if we come backup to the second level, do you agree that one is the second iteration of theother?Dr Field: The second level is concept design, yes.[257] However, significantly in this regard, the defendants' expert witness Dr Fieldsaid that he accepted that as a whole, the Sealegs system is unique in that there is noother identical product available. Dr Field said that he had identified two aspects ofthe Orion front assembly which are similar to the Sealegs system and which are notpurely functional. These are the location of the hydraulic steering cylinder, and theconnection of the hydraulic steering cylinder to the lower leg. In all other respects DrField said that the actual similarities are the result of employing conventionalengineering solutions to a set of identical design constraints. When comparing the twosystems, Dr Field commented that the biggest differences between them were internaland consequently hidden from view. He said:220. In my opinion, most of the similarities listed by Mr. Bryham arisefrom the constraints imposed by the selection of the same basic hull for bothassemblies, along with the common goal of minimising modifications to thehull. There are many differences in the front wheel assembly not listed by Mr.Bryham, such as:(a) Hydraulic motor mounted inside the wheel (Orion) / outside the fork(Sealegs).(b) Retraction cylinder with trunnion (Sealegs) / with end clevis (Orion).This is the attachment point between the cylinder and basically thehull. One end or the other end of the cylinder quite different.(c) Steering oil supply through trunnion (Orion) / through external hoses(Sealegs).(d) Retraction oil supply through trunnion (Orion) / through externalhoses (Sealegs).(e) External bow bracket (Sealegs) / internal mounting frame (Orion).(f) Steering cylinder position sensor (Orion) / no steering sensor(Sealegs)." They're hidden inside, you can't see them.(g) Wide upper yoke (Sealegs) / narrow upper yoke (Orion)." We'll seesome of those later.(h) Small-offset wheel (Orion) / large-offset wheel (Sealegs).(i) Retraction clevis in separate block (Sealegs) / retraction clevisthrough yoke (Orion)." I can point those out in diagrams later. Themechanical construction is different.(j) Pivot clevis outside yoke (Orion) / inside yoke (Sealegs)." Again, thatwould be shown on a diagram when I get to it. I should have made areference here.(k) Aluminium alloy mono-block retraction cylinder (Orion). That is asolid block of aluminium cut-out, but with the fabricatedsteel/stainless steel cylinder (Sealegs). Quite different constructions.221. Importantly, Mr Bryham's schedules do not allow for the fact thatsome of the biggest differences between the two systems are hidden.For example, the hydraulics at the rear wheels [underlining added][258] Apart from the position of the wheel motor being located substantially withinthe Orion wheel, and the larger Sealegs yoke compared to the Orion yoke, all of theother dissimilarities identified by Dr Field relate either to the choice of materials ormanufacturing processes used in making the Orion components, or to engineeringsolutions which have resulted in functions being located inside components, forexample the transfer of hydraulic fluid by means of internal hydraulic galleries locatedinternally within components, in contrast to Sealegs' use of external hydraulic hoses.Functional constraints affecting design[259] In relation to the issue of whether there is objective similarity between theplaintiff's and the defendants' leg assemblies, the defendants also submit that the Courtshould exercise caution and recognise that where there are manufacturing or functionalconstraints, competing products will necessarily have some similarities, anddifferences may be of particular significance.[260] Mr Spring submits that functional constraints and common concepts and ideasshould be put aside for the purposes of assessing similarity. He identifies a largenumber of functional constraints applicable to the design of externally-located legassemblies for amphibious craft. He submits that these functional constraints are whatdetermined the presence and arrangement of the components comprising the Oriondesign in the same way as they determined the plaintiff's design. He says that thesimilarities between the two systems should be viewed as existing by reason of thefunctional constraints, and that when these functional constraints are put to one side,what remains to be compared between the two systems shows them to have noobjective similarity.[261] However, at this first step in my determination of whether the plaintiff'scopyright has been infringed, I consider it appropriate to address the issue of whetherthere is an objective similarity between the Sealegs and Orion systems on the basis oftheir visual appearance, leaving the question of functional constraints to be addressedin the context of determining the issues of causal connection (the second step) andsubstantiality (the third step). This sequential approach avoids confusing the threesteps in the analysis, and was adopted and approved by the Court of Appeal in OrakaTechnologies Ltd v Geostel Vision Ltd.53 Further, the extent to which similarities arethe result of functional constraints is more logically relevant to the second and thirdstages of the analysis, as similarities that are purely the result of functional constraintsmay indicate a lack of causal connection between two works, or they may indicate thatthe defendants have not copied a "substantial part" of the plaintiff's copyright work.Objective similarity in the front leg assemblies on Orion S25-3WD and Sealegs S60-3WD: analysis and discussion[262] The defendants cite the observations of Panckhurst J in Hammar Maskin AB vSteelbro New Zealand Ltd and submit that the Court must consider and compare the53 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [85]–[88].relevant works through the eyes of an engineer.54 Panckhurst J said:[173] whether there is visual objective similarity between a copyright workand the alleged infringement is to be assessed through the eyes of the kind ofperson to whom the relevant drawings are addressed. Visual similarity andsignificance to a layman is not the test. Accordingly, I turn to the expertevidence.[182] The focus is necessarily upon the similarities evident in the respectivedesigns. I have already made the point that in comparing engineering drawingsit is the impact upon an engineering eye which is important. Matters of detail,which may not attract the eye of a layman, may nonetheless be important.Equally the originality, or distinctiveness, of the copyright work will berelevant to the assessment of substantiality. Conversely, manufacturing andengineering constraints may dictate that product design is necessarily similar.In such cases even lesser differences of design may be of significance.[263] It is important to note that in Hammar Maskin, Panckhurst J was consideringwhether there had been an infringement of copyright in relation to four engineeringdrawings relating to the design of a stabiliser leg attached to a truck. In assessingobjective similarity, it was therefore logical and necessary to consider the impact ofthe drawings on an engineering eye. Here, the relevant items for comparison are notengineering drawings, but the actual leg assemblies as manufactured by Sealegs andOrion. I do not consider the approach Panckhurst J adopted, and his consideration ofexpert evidence as to the engineering significance of features of the relevantengineering drawings, is the appropriate approach here at this stage of myconsideration as to whether the defendants' leg assemblies are objectively similar tothose of the plaintiff.[264] I commence my assessment of whether there is objective similarity betweenthe Sealegs and Orion systems by visually comparing the two systems in terms of theirexternal appearance (including size and dimensions), and obvious functioning. At anearly stage of the trial I conducted a view and had the opportunity of seeing andcomparing both the Sealegs and Orion systems attached to boat hulls and frames. Bothparties displayed their systems attached to a number of different craft and eachseparately demonstrated the functioning of their retractable leg systems. In some54 Hammar Maskin AB v Steelbro New Zealand Ltd HC Christchurch CIV-2006-409-977, 8 October2008.examples, the leg assemblies had been attached to frames for the purposes ofdemonstrating their functioning. Orion also demonstrated the functioning of itselectronic control unit with S25-4WD leg assemblies attached to a frame.[265] Broadly speaking, I consider that the front leg assemblies of the two systemsare visually similar both in their appearance and functioning. The features of the twosystems are identified on photographs and placed side by side in an exhibit producedby the plaintiff.55 In both the Sealegs and Orion systems:(a) the front leg assemblies are connected to the hull of the boat by meansof a bracket at the bow;(b) the front leg assemblies are retracted and extended by means of ahydraulic actuator or cylinder;(c) from their extended position the legs are retracted by being drawnforward of the bow through an arc into a retracted at rest position, inwhich they are located above the waterline and in front of the bow inan external position;(d) the legs rotate around a pivot point that appears to be similarlypositioned at the bow of the craft;(e) a yoke is connected to the leg pivot point, to which the hydraulicactuator is connected to extend or retract the leg – while the shape ofthe yokes of the two systems differ, with Sealegs having a larger yokecompared to Orion's, the functioning of both is the same and the overallimpression and appearance is one of similarity;(f) the yoke is connected to a single-sided wheel fork, to which the frontwheel is connected;55 Appendix, figure 1.(g) steering the front wheel and turning the wheel fork is achieved bymeans of a hydraulic steering cylinder, which in both systems is locatedat the rear of the yoke and moves a steering link arm connected to thewheel fork;(h) the tyres and wheels attached to the wheel forks are of similar size andappearance, with the wheels being driven in both cases by a hydraulicmotor located on (in the case of Sealegs) or within (in the case of Orion)the wheel hub. Despite the difference in terms of the positioning of thehydraulic hub motors, and the visually obvious wheel hub motorhousing on the Sealegs system compared to the internally located Orionhub motor, the overall appearance is nevertheless one of similarity; and(i) the hydraulic fluid to power the wheel hub motor is supplied by meansof external hydraulic hoses – while there are differences in how thehydraulic hose lines are connected and as to how the hydraulic fluid isconveyed to the hub motors, the overall appearance is one of similarity.[266] Each of the abovementioned features are evident on both the Sealegs S60-3WD(which is the production version of Sealegs Prototype 136), and on the Orion S25-3WD. Moreover, the two assemblies are also substantially similar in terms of theirdimensions and geometry.[267] The plaintiff produced several further photographs of the two front legassemblies as well as overlayed line drawings depicting the leg assembly componentswith measurements, dimensions and geometry to show the close similarity betweenthe Sealegs and Orion systems. In one diagram,56 nine features of the Sealegsassembly are drawn and identified in a diagrammatical presentation, which is thenoverlayed upon photographs of the Sealegs S60-3WD and the Orion S25-3WDshowing the features common to both.[268] In a second diagram, the dimensions and geometry of the two systems asinstalled on a Smuggler hull are presented side by side. As is apparent from this56 Appendix, figure 2.diagram, the two systems both have the same or very similar dimensions. Forexample, in both cases the measurement of the distance between the ground and theleg pivot point is exactly the same, 1.0 metres. The size of the wheels and tyres areexactly the same (0.3metres and 0.6metres respectively). The distance between thepivot point and the centre of the wheel hub is the same (0.7metres). Where themeasurements and geometry are different between the two systems, those differencesare minor. The difference in the arc of movement between the assemblies' extendedpositions and retracted positions is 13 degrees (Sealegs 110 degrees, Orion 97degrees). The greater arc of the Sealegs system is due to its leg being closer to verticalwhen extended than is the case with the Orion leg when it is extended.[269] Mr Bryham explained the preparation of the diagram, saying that he had takenthe measurements of the dimensions of the two assemblies and had determined theradius of the movement of the two legs when extended and retracted. Mr Bryham saidof this comparison:So the important thing is here effectively I believe all of those dimensions aresubstantially similar, if not identical. The main differences probably arethere's a slight difference in how higher the wheel raises above the water. ButI mean again if you were looking at it without any measurements you may notactually be able to discern that difference.[270] I consider that it is evident from a direct visual comparison of the two front legassemblies (as illustrated by the comparative photographs and diagrams) that they bothpossess the same arrangement of functional components, and that they aresubstantially similar in overall appearance. The two leg assemblies are also closelycomparable in terms of their size and dimensions. Moreover, such dissimilarities inappearance and design as do exist between them are not of a kind or degree as woulddisplace the overall appearance of the two leg assemblies as being objectively similar.I do not consider that the dissimilarities identified by Dr Field are such as to concludethat the two systems are not objectively similar, when in my view the dominantimpression on comparing them is one of substantial similarity.[271] I have already noted that Dr Field has referred to a number of differencesbetween the two systems relating to engineering methods and solutions which are notapparent by reason of being located internally within the relevant Orion components.I shall address the significance of these concealed components (such as the hydraulichub motor) and the internally located functions (such as the hydraulic galleries usedfor the passage of hydraulic fluid as an alternative to external hydraulic hoses) in thecontext of causality and substantiality. However, I do not consider that any of theconcealed functional features that have been identified by Dr Field and the defendantsare such as would lead to a different conclusion on the question of objective similarity.Objective similarity in the rear leg assemblies on Orion S25-3WD57 and Sealegs S60-3WD,58 SL10059 analysis and discussion[272] The rear leg assemblies of the Orion and Sealegs systems are in each caseaffixed to the transom at the stern of the craft and are extended and retracted by meansof a hydraulic actuator or cylinder and rotate around a pivot point located on the sternof the boat. There are two rear leg assemblies located to port and starboard of thetransom of the craft. When retracted, the legs are rotated away from the stern of theboat and are elevated above the water-line to a rest position at the rear of the boat hull.[273] The methods by which Sealegs and Orion attach the rear legs to the hull of theboat are different in appearance. The Sealegs system uses a bracket mounted by boltsto the exterior surface of the transom, which extends from the top of the transom tothe pivot point located at or just above the waterline. The oblong and bevelled-edgequadrangular-shaped hydraulic actuator is attached to a pivot point at the top of thestern bracket. It is milled from a single metal block. The top of the leg is connectedby a pivot point located at the bottom of the stern bracket, with the lifting rod attachednear the top of the leg. The hydraulic fluid to drive the hub mounted motors isconveyed by hoses that are attached to pipes passing through the stern. The leg itselfhas a curved sculptured shape.[274] The Orion S25-3WD and S25-4WD share the same leg assemblies. Theplaintiff produced a diagram to compare the rear leg assemblies of the Sealegs S60-3WD and Orion S25-3WD as attached to Smuggler RIB hulls. As with a comparisonof the front leg assemblies, here too the dimensions of the wheels and tyres are the57 Orion S25-3WD rear leg assembly Appendix, figure [4].58 Sealegs S60-3WD rear leg assembly Appendix, figure [4].59 Sealegs SL100 Appendix, figure [6].same. With the rear leg extended, the measured distance between the ground and thebottom of the inflatable pontoon is also exactly the same at 0.83 metres (829millimetres), and the length of the leg measured from pivot point to the centre of thewheel is the same at 0.60 metres (595 millimetres).[275] There are some obvious visual differences between the Sealegs S60-3WD andOrion systems and how the Orion assemblies are installed onto the stern of the hull.Instead of an exterior surface mounted bracket as used in the Sealegs system, the Orionrear leg and lifting actuator are connected to a plate bracket located and glued on theinside of the hull. While the leg itself is connected to the hull in a similar location toSealegs, the lifting arm is connected to the hull in a lower and closer position to theleg than the Sealegs system. Whereas the lifting rod on the Sealegs system isconnected at the top of the leg, the lifting rod on the Orion system is connected to apivot point located near the bottom of the leg.[276] Compared to the sculpted shape of the Sealegs S60 rear leg assembly, the Orionleg is a straight sided oblong shape with an engineered appearance. The Orion liftingactuator is similarly oblong shaped and has a quadrangular profile. However, theSealegs SL100 rear leg assembly also has an engineered appearance and styling.[277] While the differences to which I have referred readily enable the Orion systemto be distinguished from the Sealegs system, I nevertheless consider that the Orionrear leg assemblies are objectively similar to the Sealegs rear legs. I shall howeveraddress the significance of these differences when dealing with the issues of causalityand substantiality.Objective similarity between the Orion S25-4WD60 front leg assembly and the SealegsS60-3WD and SL10061[278] The plaintiff says that the Orion S25-4WD front leg is comprised of all of thesame features in the same sequence as in its Sealegs systems, including the S60-3WDand the SL100 front leg assembly which was manufactured for Sealegs by Orion. Themost obvious point of dissimilarity is that it has two front wheels attached to an axle,60 Orion S25-4WD Appendix, figure [5].61 Sealegs SL100 Appendix, figure [6].and no single-sided wheel fork. The hydraulic steering cylinder is located at the frontof the yoke rather than on the back as is the case with the Sealegs S60-3WD, SL100,and the Orion S25-3WD.[279] In both the SL100 and the Orion S25-4WD, the top of the lift cylinder isattached to the hull pivot point instead of to a trunnion mount as used in the plaintiff'sprototype 136, which the plaintiff says results in both systems sharing the samegeometry. The plaintiff further says that the "box section industrial design" of thefront fork and wheel assemblies on the Orion S25-4WD have the same look andappearance as the Sealegs SL100, and that the S25-4WD front leg assembly isobjectively similar to both the Sealegs S60-3WD and SL100 front leg assemblies.[280] A diagram prepared by the plaintiff showing the Sealegs S60-3WD and theOrion S25-4WD (as attached to Smuggler hulls) contains measurements of the legassemblies, wheels and the arc of movement of the leg between the extended andretracted positions. The distance between the pivot point on the hull and the centre ofthe wheel is the same on both assemblies (0.7 metres). The size of the wheel and tyreare also the same (0.3 metres and 0.6 metres respectively). There is a small differencebetween the arc of travel between full extension and full retraction on the Sealegsassembly (110 degrees) and the Orion assembly (97 degrees), and another smalldifference in the elevation of the wheels in their retracted position.[281] A visual comparison of the Orion S25-4WD with the Sealegs S60-3WD showsthat while there are close similarities in terms of dimensions and geometry, there arealso some obvious differences. The visually apparent differences present on Orion'sS25-4WD are: the two front wheels; the front mounted steering actuator; and theconnection of the top of the hydraulic lifting cylinder to a hull pivot point, comparedto the Sealegs S60-3WD where the lift cylinder is connected by a trunnion mount onthe bottom of the lift cylinder. However, as with the Orion S25-4WD, the top of thetwo lift cylinders of the SL100 are connected to a pivot point on a hull mountedbracket.[282] In both the Orion S25-4WD and the Sealegs SL100, the lifting cylinders havea straight flat-sided squared-off shape (the 'engineered' shape), compared to the roundcylindrical shape of the Sealegs S60-3WD lifting actuator. The same engineeredappearance of the Orion S25-4WD is however also evident in the appearance and styleof the SL100.[283] Although the differences I have identified between the Orion S25-4WD andthe two Sealegs assemblies are clearly apparent, there are nevertheless similarities interms of the squared-off engineered appearance seen on the SL100, and the closesimilarities in terms of size and dimensions when compared to the S60-3WD. TheOrion S25-4WD front leg assembly has other features similar to the Sealegsassemblies, including its position at the bow, its retraction/extension movement arounda pivot point to a rest position outside the hull, and the use of hydraulic hub motors.Conclusions as to objective similarity[284] In summary, I consider that the Orion S25-4WD and S25-3WD front leg andrear leg assemblies possess the same arrangement of features and functionalcomponents required to perform the extension and retraction of the amphibious legsystem, and show a sufficiently close visual and functional resemblance to the Sealegsassemblies as to be objectively similar to the Sealegs front leg and rear leg assemblieswhich appear on the Sealegs prototype boat one, prototype 136 (S60-3WD) andSL100. Furthermore, while there are certainly differences in appearance as I havenoted, in each case the positioning of the assemblies on the boat hulls and themovement functions performed by the front and rear assemblies are the same. Theoverall size and dimensions of the Orion systems are either the same or very similarto the Sealegs S60-3WD front and rear assemblies, and although on a different scale,also similar in function and general appearance to the front and rear assemblies of theSealegs SL100 system.[285] The differences that are visually apparent and the functional and internallylocated differences identified by the defendants are in my view more appropriatelyconsidered, as I have said, in the context of considering causality and substantiality.As the plaintiff must also establish both causality and substantiality to succeed inestablishing an infringement of its copyright, those features and functions which thedefendants rely on as showing an independent design pathway will be addressed laterin this judgment.Causality and derivation[286] Infringement of copyright does not occur if the defendant has independentlycreated a work that happens to be objectively similar to that of the plaintiff.62 Rather,the plaintiff must show that the defendant copied the plaintiff's work. As regards proofof copying, the Supreme Court in Henkel explained:63The 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 closerthe similarity between the two works the stronger the inference is likely to bethat the one was copied from the other. If the alleged infringer has had accessto, 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, thatthere was indeed copying. This, of course, is subject always to the evaluationof any evidence there may be that no copying actually took place.(footnotes omitted)[287] Where the plaintiff has provided prima facie evidence of copying, for exampleby showing substantial similarity combined with the possibility of access, theevidential burden shifts to the defendant to show that it has not copied the plaintiff'swork.64 The defendant may discharge this burden by giving evidence of independentcreation or some alternative explanation for the similarities.65 One such alternativeexplanation may be that the similarities are the result of functional or manufacturingconstraints, rather than copying. In such a case, however, one would expect evidencefrom the defendant demonstrating how its work was produced, and showing an62 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [113].63 At [43].64 Gillian Davies, Nicholas Caddick and Gwilym Harbottle Copinger and Skone James on Copyright(17th ed, Thomson Reuters, London, 2016) at [7-24], a similar passage from an earlier edition wascited in Inverness Medical Innovations Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 (HC) at[168].65 Gillian Davies, Nicholas Caddick and Gwilym Harbottle Copinger and Skone James on Copyright(Thomson Reuters, London, 2016) at [7-24], a similar passage from an earlier edition was cited inInverness Medical Innovations Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 (HC) at [168].independent design path that started with the general functional constraints of theproduct.66[288] In Wham-O v Lincoln Industries Ltd, the Court of Appeal addressed therequirement for proof of causation and explained:67In order to succeed in a copyright action, a plaintiff must prove that thedefendant has directly or indirectly made an unlawful use of the plaintiff'scopyright work. It is not necessary to show that the defendant has copieddirectly from the plaintiff's work. It is sufficient for the plaintiff to establishsome chain of causation linking the plaintiff's copyright work with thedefendant's alleged infringing copy. The copying need not be direct copying.It may be indirect. What must be shown, however, is that either directly orindirectly the alleged defendant copier has in making his copies appropriatedthe labours of the plaintiff. That copying has taken place is for the plaintiff toestablish and prove as a matter of fact. The beginning of the necessary proofnormally lies in the establishment of similarity combined with proof of accessto the plaintiff's productions [289] In another case the Court of Appeal observed that the factors to which thecourts commonly have regard in assessing causal connection include:68 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.[290] The fact that the defendant has added separate original work to an infringingcopy, perhaps enhancing the product in the process, does not make it any the less aninfringement.69[291] Chisholm J's analysis in Tidd Ross Todd Ltd v Steelbro New Zealand Ltd,70which was upheld on appeal,71 demonstrates these points. In that case, the defendantdeveloped a sidelifter (the SB121) which the plaintiff alleged was an infringing copyof its own (the TRT triple). Chisholm J found that the defendant's engineer had accessto the TRT triple while developing the SB121: it had engineering drawings showing66 See Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [115] and [119].67 Wham-O v Lincoln Industries Ltd [1984] 1 NZLR 641 (CA) at 66868 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [109].69 Bleiman v News Media (Auckland) Ltd [1994] 2 NZLR 673 (CA) at 679; see also LB (Plastics)Ltd v Swish Products Ltd [1979] FSR 145 (HL) at 152.70 Tidd Ross Todd Ltd v Steelbro New Zealand Ltd HC Christchurch CIV-2004-409-1386, 1December 2005.71 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486.the dimensions of the TRT triple as well as opportunities to view the TRT triple andtake measurements. He further found that the defendant's engineer inputted the TRTtriple dimensions when commencing geometry optimisation for the SB121, and thatthe inputting of these measurements was deliberate rather than dictated by functionalconstraints or pure coincidence. Although the defendant subsequently modified thedesign with a view to producing a "more effective and efficient 'TRT style triple,"72Chisholm J found that there was a clear chain of causation linking the plaintiff'scopyright work to the defendant's SB121.73 The defendant's access to the plaintiff'sproduct and the use made of it went "far beyond keeping an eye on a competitor'sproduct".74[292] The Court of Appeal upheld Chisholm J's conclusion, observing:75The key points are that Steelbro started with TRT's product distinctly in mind.That is a critical finding of the trial judge which we are not minded to disturbon appeal. In that sense the Steelbro product is derivative. Steelbro thenendeavoured to replicate the TRT model, in the sense of building a bettermodel of that kind. From time to time Steelbro "checked back" against whatTRT had done. In fairness, there is no question Steelbro did a great deal ofwork itself. In the classic economist's phrase "it built a better mousetrap".Nevertheless, an inference of copying was possible, indeed probable, unlessSteelbro could negative it by establishing that the similarity was not due to thecopying.[293] By way of contrast, the case of Hammar Maskin AB v Steelbro New ZealandLtd demonstrates that simply copying the plaintiff's original idea is not aninfringement of copyright.76 In that case, the plaintiff developed the concept of anegatively inclined stabiliser leg on a sidelifter. Panckhurst J held that the evidencestrongly supported the conclusion that the defendant "filched the idea" of negativeinclination of a stabiliser leg from the plaintiff, particularly given that one of theplaintiff's former design draughtsmen was employed by the defendant.77 However,the Judge emphasised that copyright law does not prevent people from copying others'ideas. Although the designs of the plaintiff and defendant demonstrated the adoption72 At [127].73 At [134].74 At [107].75 Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [113].76 Hammar Maskin AB v Steelbro New Zealand Ltd HC Christchurch CIV-2006-409-977, 8 October2008.77 At [209].of a common idea, the embodiments of that idea were significantly different and therewas no infringement of copyright.78[294] Similarly, the Court of Appeal in UPL Group Ltd v Dux Engineers Ltdconcluded:79Although we have little doubt that [the defendant] has filched the idea of aconnector piece from [the plaintiff], that which it has produced is in ouropinion not substantially the same as [the plaintiff's product].[295] In Oraka, the Court of Appeal explained the implications of the Court findingthe defendant's work to be objectively similar to the plaintiff's copyright work:80[113] Where a claimant's and a defendant's works are objectively similar,there are four possible explanations: the defendant copied the claimant's work;the claimant copied the defendant's work; both arose from a common source;or the similarities occurred though mere chance or coincidence. It is only inthe first case that an infringement of the claimant's work has occurred. Noinfringement occurs by an act of independent creation.[114] In most cases, copying can only be deduced by inference from all thesurrounding circumstances. It is unusual for there to be evidence of actualcopying from someone observing the person making his or her work. InHenkel KGaA v Holdfast New Zealand Ltd the Supreme Court remarked thatcausality is the "ultimate issue" in a copyright case. The Court said that thedegree of similarity between two works has evidentiary significance and is ofassistance in satisfying causality: the greater the similarity between the twoworks, the stronger the inference is likely to be that the one was copied fromthe other. The Court went on to say that, if an alleged infringer has had accessto, 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 that there was copying. This, however, issubject always to the evaluation of any evidence there may be that no copyingactually took place.[115] Evidence of independent design will assist in rebutting any inference ofcopying. The fact that a defendant fails to give evidence to indicate how thealleged infringing work was produced can be taken into account.(footnotes omitted)78 At [186]–[187] and [210]–[211].79 UPL Group Ltd v Dux Engineers Ltd [1989] 3 NZLR 135 (CA) at 144.80 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111.The plaintiff's submissions as to causality[296] Mr Henry for the plaintiff submits that here there is overwhelming evidence ofthe defendants' access to the plaintiff's copyright works from their direct involvementwith the Sealegs products during their employment by the plaintiff, and theirconsequent close familiarity with the particular collocation and arrangement of thefeatures of the Sealegs amphibious leg systems as represented on prototype 136 andSL100.[297] Mr Henry says that by the time that Orion was engaged by Sealegs to assistwith the development and manufacture of SL100 and particularly to manufacture aprototype (the IKA11), the plaintiff's copyright in the arrangement and combinationof features present in its models was well established and well known to thedefendants. He says that the defendants' knowledge of the plaintiff's copyrightinterest in its leg assemblies is confirmed by the contents of the 4 April 2013 DesignBrief, which Orion signed in relation to their engagement to design, manufacture,install, and validate SL100. The Design Brief referred to Sealegs' sole ownership ofthe intellectual property of all proprietary components designed as part of SL100. MrHenry also relies on the Service Agreement dated 31 March 2015, which stipulatedthat any background intellectual property (being intellectual property rights created ordeveloped before the date of the agreement) would remain the exclusive property ofits owner.[298] Mr Henry submits that because the Orion products are objectively similar tothe plaintiff's models and the defendants had extensive prior access to the plaintiff'scopyright works, an evidential burden shifts to the defendants to show that they havenot copied the plaintiff's work.[299] Mr Henry says that the defendants are unable to discharge the evidentiaryburden that applies, as they cannot rebut the "insurmountable inference" of copyingwhich in this case is the only possible explanation for the objective similarity thatexists between the defendants' and the plaintiff's products. He says that the followingfacts and circumstances support a finding of direct copying:(a) the in-depth knowledge on the part of the defendants' design team ofthe plaintiff's combination and arrangement of features that constitutedits copyright in the Sealegs models;(b) the absence of any evidence presented by the defendants of theexistence of their independent design path to the production of theiramphibious leg system;(c) the defendant's adoption of the same starting point as Sealegs byproducing an amphibious system for use on craft of the same size andtype as that for which the Sealegs system was designed;(d) the defendants' repeated reference to the Sealegs design to avoid orsolve similar problems; and(e) the defendants' product being designed to share the same geometry asSealegs, as evident from Mr Leybourne's email to Mr Pringle on 28October 2015 in which he said:The design is heading towards a similar geometry as used bythat other company. If this proves unacceptable a radical re-design will be required.[300] The plaintiff says that by reason of their employment at Sealegs, Mr Leybourneand Mr Zubcic had full access to the Sealegs models, designs and manufacturingprocesses which provided them with complete and detailed knowledge of theplaintiff's copyright works. The plaintiff further says that Mr Pringle also had a fulland detailed knowledge of the plaintiff's products and copyright works through hispurchase and installation of the plaintiff's amphibious systems onto his Smugglerboats and close business association with Sealegs.[301] Mr Henry says that Mr Leybourne's possession of a Sealegs USB stick in late2011, which he told Mr Redpath contained "everything including financials", isevidence of his possession of detailed plans and design information relating to Sealegs'products shortly before he left Sealegs. Counsel submits that Mr Leybourne'sexplanation that he had handed the USB stick to another staff member, and did not sayanything about the matter to Sealegs' senior management, is implausible given thehighly unusual explanation of how it had come into his possession.[302] Mr Henry says that Mr Zubcic and Mr Leybourne were friends and closeassociates while both employed at Sealegs. He notes that shortly after Mr Leybournehad left Sealegs, Mr Zubcic told Mr Redpath that he was committed to working forMr Leybourne, explaining that he had turned down a promotion opportunity at Sealegsbecause he had made a commitment to Mr Leybourne that he would leave Sealegs andgo and work for him.[303] The plaintiff says that the defendants have failed to discover any documentsrelating to the period between Mr Leybourne's departure from Sealegs in November2011 and the opening of a new Orion business in February to March 2013. Mr Henrysubmits that in order for Mr Zhang to obtain a visa in the entrepreneurial category, hewould have had to submit a business plan setting out information regarding theproposed business he was intending to establish, but there has been no discovery ofsuch a business plan.[304] Furthermore, Mr Henry says the defendants have failed to discover anydocuments recording or relating to a decision to adopt the same arrangement offeatures as exist on the plaintiff's amphibious system. He says the defendants havefailed to discharge the onus upon them to present documentary evidence regarding thebusiness plan, the design criteria of the Orion system, and as to how they selected thesame arrangement of features as Sealegs and a product that was manufactured to besuitable for use on the same type and weight of boats as the Sealegs system.[305] Mr Henry notes that under cross-examination Mr Leybourne accepted thatduring the development of Orion's amphibious system, he had proceeded on theunderstanding that the only legal impediment to how Orion designed its system wasthe Sealegs patent in relation to the positioning of the front wheel and tyre assemblyso as to act as a bumper when the front leg was in the retracted position. Because ofthat understanding, Mr Leybourne also proceeded upon the basis that there were noother aspects of the Sealegs system that were the subject of intellectual property, andhe had no appreciation of Sealegs claiming to have a copyright interest in thecombination and arrangement of features that made up its systems.[306] Mr Henry further says that in his evidence, Mr Zubcic accepted under cross-examination that he had commenced the process of developing the Orion design bystarting from the position of the Sealegs system, with the intention of improving on it:Counsel: Mr Zubcic, do we get to the position that in terms of the design ofyour systems, that effectively what you've done is taken all your knowledgefrom Sealegs and you have just simply carried on working from those designsto develop the Orion system?Mr Zubcic: I am an engineer, I am a professional and all my knowledge I amcarrying with me. So, you can't, I can't tell – it's not true, it is everything Ilearned in my life I carry with me, is it learnt in Sealegs or is it learnt wherever.Counsel: Well, I am asking a little bit more than that. What we're saying isthat when you joined Orion you just carried on developing the technology thatyou'd worked at Sealegs and when you got to Orion it was a seamlesscontinuation of developing the Sealegs system as you built the Orion system?Mr Zubcic: It's, it will be, telling that will be bit too simplified, you know, it'snot – I wasn't part of Sealegs development and our system we start fromscratch so it wasn't development, it was starting from beginning developing aproduct or developing the same idea of amphibious system so.Counsel: What I'm putting to you is that what happened when you got to Orionis you decided to develop a competing amphibious system, correct?Mr Zubcic: Yes.Counsel: And what you did is you had all the knowledge of the Sealegs systembecause you'd been working in the [sic] Sealegs for a number of years andyou'd been able to assess and see their technology, the good and the bad?Mr Zubcic: That's true.Counsel: And what you did is you kept the good and you developed the wayyou saw it should be developed what you considered to be the bad?Mr Zubcic: I developed what I consider Counsel: What you considered to be the bad –Mr Zubcic: To be better, better than Sealegs.Counsel: To make it better than Sealegs?Mr Zubcic: Oh yes, this is what I believe, still believe. Maybe I'm wrong atthe time [sic] going to show but this is what I did.Counsel: So you believe you have used the lessons you learnt at Sealegs as towhat you considered they had made mistakes on and you proceeded on thatknowledge and information to make what you considered to be better, that's afair summary of what you've done?Mr Zubcic: It's a simplification but I can agree, yes, all my knowledge I tookwith me.Counsel: Well that's not the question is that you took the knowledge with youand then you used that knowledge from Sealegs in areas where you thoughtyou could do better to do better in designing an amphibian?Mr Zubcic: I didn't use knowledge from Sealegs to make better. I used myknowledge to make system better than – learning on a bad experience.Counsel: So you learned from what you saw was the bad experience and thenyou applied your knowledge to what you considered had been a badexperience or a mistake by Sealegs to improve on the design of an amphibian?Mr Zubcic: Yeah that's true.Counsel: That's true?Mr Zubcic: Yeah.[307] Mr Henry submits that Mr Zubcic embarked on the Orion design process usingthe detailed knowledge he had gained while employed at Sealegs as a starting point,and then set out to improve on the Sealegs design. He says this is a clear demonstrationthat the Orion design is directly derived from the Sealegs design. He submits that sucha process clearly shows that Orion appropriated the skill and knowledge applied bySealegs in the development and production of its system, including the Sealegsarrangement of features, and did so without the consent or approval of Sealegs, so asto be an infringement of Sealegs' copyright.[308] The plaintiff also refers to the evidence of the defendants' expert witness DrField who responded to questions from the Court regarding a design engineer's use ofprior knowledge and experience:Court: And so an engineer confronted with this kind of task will operate quitedifferently, I presume, depending on whether they are starting afreshthemselves with no constraints on a white piece of paper, or with a series ofconstraints imposed either by decisions they've made as to what the use is orby a client as what the client wants?Dr Field: Theoretically yes, but no one starts with no constraints.Court: So if you could just help me with this. How does the situation differwhen the designer has had extensive involvement with the development of aproduct, has been effectively at the heart of the decision-making throughoutthe development of a product and is then confronted with the task, do theyignore everything which they have learned or do they start from where theyleft off?Court: I was really thinking about the engineering sequence, not necessarilytheir personal motivation, which is another matter, it may affect their actionsbut I'm talking about their engineering design development.Dr Field: Yes, I – the practical, as I said the practical application is everyoneuses their past experience to do the best they can now in any area, so it's nodifferent from anything else So in general terms one will use as much aspossible what one already knows as a normal course of human problemsolving.Court: So where problems have been addressed and solved as part of a designpath it would be natural to adopt the same solutions, because thosesolutions had already been achieved as a result of whatever process the designhad undertaken, is that right?Dr Field: Well that is correct, that would say there had to be the same designpath, not a similar design path. There's an important difference.[309] Mr Henry submits that once the defendants were familiar with the Sealegssystem and the solution that Sealegs had arrived at in the course of designing itssystem, it was impossible for them to put that solution out of their minds when it cameto designing the Orion system, especially when the intention was to manufacture anamphibious system which would compete with Sealegs.[310] As regards Mr Pringle and Smuggler Marine, the plaintiff notes that Mr Pringlerequested Orion to construct its own amphibious system to replace the Sealegs S60-3WD system he had been installing on the Smuggler boats. The Orion system was tobe designed to the same geometry as the Sealegs' system, and was for use on the sameSmuggler boats. Mr Pringle sought to avoid the Sealegs patent by designing andconstructing a cowling extension at the bow of the craft to create a recess into whichthe front leg wheel assembly would be retracted, so as not to act as a bumper.The defendants' submissions as to causality[311] Mr Spring for the defendants submits that even if the plaintiff establishesobjective similarity between the Sealegs and Orion leg assemblies, it has singularlyfailed to prove any derivation of the Orion design from its own. Mr Spring says thathere, unlike other cases where infringement has been found to have occurred, theplaintiff cannot point to the defendants using the plaintiff's assemblies as a referencepoint for the development of their design or any specific instances of the defendantsderiving one or more of the allegedly infringed features from or with reference to theplaintiff's copyright work.[312] Mr Spring says that the plaintiff has conflated the opportunities for copyingthat would have been available to Mr Leybourne and Mr Zubcic during theiremployment at Sealegs with actual copying. He submits that the plaintiff has failed toproduce any evidence to show that actual copying took place. He further submits thatMr Leybourne and Mr Zubcic in their evidence, and particularly in the course of theircross-examination, rebutted the likelihood of any copying having taken place.[313] Mr Spring submits that Mr Zubcic made it clear in his evidence that heregarded the Sealegs system as having a number of inadequacies and had no wish orintention of copying what he regarded as an inferior product. Mr Spring says thathaving regard to Mr Zubcic's view of the Sealegs system, the plaintiff's contentionthat he would leave Sealegs in order to replicate what he considered to be a flawedsystem is implausible.[314] The defendants say that Mr Zubcic is a highly competent engineer with 25years of experience and a specialisation in Computer Assisted Design (CAD) andComputer Assisted Manufacturing (CAM) technology. Mr Spring says that Mr Zubcicwas not involved in the Sealegs design team that worked on the amphibiousassemblies, but was employed as a production engineer and as a Computer NumericalControl (CNC) programmer to manufacture parts for the assemblies. Mr Zubcic didhowever directly assist the Sealegs design team when asked to resolve issues relatingto the rear leg and the designing of the front leg hub motor cover. More significantly,at the commencement of his employment at Sealegs, Mr Zubcic had spent the firstmonth or so modelling Sealegs parts by making CAD drawings of existing Sealegsparts. This involved an examination and measurement of each part, and then thecreation and entering of a CAD drawing of the part into the Sealegs computer systemusing the software program called SolidWorks. In his evidence Mr Zubcic describedthis process as being practically a reverse-engineering of the Sealegs parts andcomponents. As a result of this process Mr Zubcic's name appears on the SealegsSolidWorks computer drawings in its system, although he had not been involved inthe actual design of the parts and components. While Mr Spring is correct to note thatMr Zubcic was not involved in the designing of the Sealegs parts that he examinedand drew in the course of this work, it is clear that he necessarily acquired a detailedknowledge of the Sealegs parts and leg assemblies as a result of this process.[315] Mr Spring also refers to Mr Zubcic's evidence under cross-examination inwhich he rejected a suggestion that when designing the Orion system he had adoptedthe same sequence of components or features as used by Sealegs in its front legassemblies, saying that:Mr Zubcic: This is not taking Sealegs' sequencing. This is simply – those partsare parts of an assembly and a mechanism that you simply have to have. Youhave to have a part, I [call] that "yoke", or you can call it, "mounting block",or you can call it – but you need to have that part in order to achieve thefunctionality of the leg. So you have to have it and it can look like this or looklike that, but function [sic] of that part is required by the function of themechanism.Counsel: So, what you actually did is you took the Sealegs designs and youapplied knowledge that you had gained while at Sealegs of things that werewrong with their design and you brought them into your design, didn't you?Mr Zubcic: No, that's completely wrong. I didn't take Sealegs' design. Ilearned their mistakes and I had idea [sic] how to do that right and I did itcompletely different.Mr Zubcic: No. I haven't changed anything in Sealegs' design to come up tomy design. I start my design with my start point. It's different than Sealegs.So, I didn't change anything in Sealegs' design.The issues[316] I propose to begin my analysis by discussing the implications of MrLeybourne's possession of the Sealegs data stick, the timing of Mr Zhang's visit toNew Zealand, and the conversation between Mr Zubcic and Mr Redpath. While thesemay seem like tangential points, given that the focus is properly on whether or notOrion copied the Sealegs pattern, I consider these aspects of the factual background tobe nevertheless relevant as informing my assessment of the credibility and reliabilityof the important defence witnesses.[317] Next I will set out my findings as to the opportunity to copy, which relates tothe knowledge that Mr Leybourne and Mr Zubcic brought from Sealegs when theycommenced their design work at Orion.[318] Finally, I will address the defendants' contentions that there was no copying.Mr Spring for the defendants accepted that should the Court find objective similaritybetween the plaintiff's copyright works and Orion's allegedly infringing works, thedefendants bear the evidential onus of showing that their systems were independentlydesigned, and that there are alternative explanations for any similarities. There aretwo primary ways in which the defendants seek to rebut the conclusion that the Orionsystem was copied from the plaintiff's leg assembly: first, that the defendants followedan independent design path and any similarities are the result of coincidence; andsecondly that functional constraints explain the similarities between the Sealegs andOrion leg assemblies. I will address these in turn.Mr Leybourne and the USB data stick[319] Mr Spring submits that Mr Leybourne's resignation from his employment wasfor mature and balanced reasons, and that he had no intention to establish a competitivebusiness at the time. He says that the decision to start a new business to compete withSealegs was not made until after Mr Zhang's visit during the winter of 2012, andfollowing Mr Leybourne's earlier return to work on hydraulics during the first half ofthat year. Counsel submits that despite some conflicts and tensions with Mr Bryhamand Mr McKee-Wright, there is no evidence of any malice on the part of Mr Leybournetowards Sealegs, nor any evidence of intent on his part to misappropriate theintellectual property of his employer.[320] As for the Sealegs USB stick, Mr Spring says that the evidence shows that MrLeybourne was given the USB stick by his friend Mr Nicol, who had found it whilewalking on a beach near Dunedin. He says that while Mr Leybourne accepted that hetold Mr Redpath about receiving the USB stick containing confidential Sealegsinformation and where it had been found, he absolutely denied telling Mr Redpath thathe was downloading the contents of the USB stick onto his computer at home, andthat it contained "everything including the financials". Mr Spring notes that MrNicol's evidence was presented by consent as a written witness statement withoutcross-examination, and says that consequently the Court must accept the bizarre storyof where and how it was found as true. This means, says Mr Spring, that MrLeybourne's account as to how he had come into possession of the USB stick shouldalso be accepted to be true.[321] Mr Spring further says that had Mr Leybourne been planning at the time to setup a competing business, he would have kept the existence of the USB stick to himselfand would not have mentioned it to Mr Redpath or to the other Sealegs staff.Moreover, says Mr Spring, if Mr Leybourne had wanted to remove confidentialinformation from Sealegs he could have done so surreptitiously any time between Mayand November 2011, after he had given notice of his resignation and prior to hisdeparture.[322] Mr Nicol's account of finding the Sealegs USB stick on a beach near Dunedinis indeed bizarre. The chances of a Sealegs USB stick somehow finding its way fromAuckland, where Sealegs has its premises, and onto a beach near Dunedin where itwas seen and picked up by someone who knew a senior member of the Sealegs staffand was thus able to return it to the company must be exceedingly remote. However,Mr Nicol's evidence was not challenged by the plaintiff, and accordingly I accept it asproviding an accurate explanation of how the USB stick came into Mr Leybourne'spossession. Nevertheless, it was at the very least, highly fortuitous that the USB stickwas found and returned to someone at Sealegs. Once Mr Leybourne knew that itcontained pdf files of Sealegs parts, the obvious thing for him to have done would beto immediately bring the matter to the attention of Mr Bryham or another member ofthe Sealegs senior management. Not only was it such an unusual event, it also raisedimportant issues regarding the security of Sealegs' data which would obviously be amatter of concern to the company. However, in his evidence Mr Leybourne said thatthe matter was a "non-issue" for him, and that he had retained the USB stick in hispossession for three weeks before handing it to anyone at Sealegs.[323] Mr Leybourne's explanation that he had possession of the USB stick for somethree weeks before rather casually giving it to one of the Sealegs CAD staff isinconsistent with what would be expected of anyone in his position who had receivedan item containing significant information belonging to his employer, and I find MrLeybourne's evidence regarding the USB stick to be implausible and lackingcredibility. I prefer and accept Mr Redpath's evidence that Mr Leybourne told himthat he had downloaded the contents of the USB stick onto his computer at home, andthat the USB stick contained "everything including financials". Mr Redpath in hisevidence quoted those words as having been those actually spoken by Mr Leybourne,and he clearly remembered them being said.[324] While there is no evidence that Mr Leybourne did any more than simply lookat the contents of the USB stick before passing it on to the Sealegs CAD staff, I findthat it shows that he had downloaded pdf drawings of the Sealegs amphibiousassembly parts onto his home computer, in and around November 2011, andconsequently had possession of that information shortly before leaving the company.Mr Zhang's visit to New Zealand and the establishment of Orion[325] Mr Henry submits that the defendants have failed to disclose or produce anydocuments that show dates to prove when Mr Zhang came to New Zealand with hiswife and family and had the initial discussions with Mr Leybourne leading to theirdecision to establish a new business to manufacture amphibious systems incompetition with Sealegs. Mr Leybourne in his evidence was not specific as to whenin 2012 Mr Zhang had visited him, saying only that the visit took place in the middleof winter, possibly May or June. Mr Henry says that a brochure published by MrZhang's family business in China, trading as Surfcon, states that the companycommenced looking at designing and developing amphibious craft in 2011, which wasthe same year that Mr Leybourne handed in his notice of resignation, and of course ayear before Mr Leybourne says he and Mr Zhang had their first discussion about thepossibility of going into business together. Mr Henry says that Mr Leybourne mayhave resigned from Sealegs in May 2011 in a fit of pique or because he had alreadybegun planning to start his own business. He says that the dates correlate exactly ifMr Zhang's visit was in 2011 rather than the claimed 2012.[326] Under cross-examination by Mr Henry, Mr Zhang said that he had been unableto locate his passport or any other documents which would verify the date of his visitto New Zealand with his wife and child in 2012. Mr Henry particularly notes that thedefendants have not disclosed or produced the business plan that Mr Zhang wouldnecessarily have provided to Immigration New Zealand in support of his visaapplication, and says that the defendants have displayed prevarication around the 2011date appearing in the Surfcon brochure.[327] Mr Spring says that had Mr Leybourne started planning to establish Orionwhile still employed at Sealegs, it would have been a serious breach of his duty ofgood faith to his employer, but there is no evidence of him having in fact done so. Hesays that the only evidence that would tend to support that suggestion is the referencein the Surfcon brochure prepared for the Shanghai boat show which states that thecompany started focussing its attention on amphibious craft design and production in2011. Mr Spring says that the 2011 date is a mistake made in the Surfcon publicationand has been explained as such by Mr Zhang in his evidence where he said that theSurfcon Sales Manager had prepared an inaccurate document.[328] I find the evidence of the defendants on this issue unsatisfactory andunconvincing. It is simply inconceivable that Mr Zhang is unable to locate anydocumentation relating to his travel to New Zealand in mid-2012 if that is when hecame. Mr Zhang may have lost his passport, but his wife must also have a passportwhich would contain information confirming the dates of travel to New Zealand. Theuse of credit cards, travel and accommodation bookings and other documentationwould confirm the dates of their travel to New Zealand.[329] At the conclusion of his evidence, in questions by the Court, Mr Leybournewas asked if he could explain the inconsistency between the 2011 date referred to inthe Surfcon brochure as being when the company started to focus on amphibious craftand production, and his evidence that the idea of establishing Orion to produceamphibious systems had not arisen until Mr Zhang's visit to New Zealand during thewinter of 2012. This was the first time that this apparent inconsistency had beenmentioned during the hearing. Mr Leybourne said he could not explain it and said thatMr Zhang would have to. Mr Leybourne then appeared to faint and collapsed in thewitness box and was unable to continue giving evidence. He returned to conclude hisevidence on a later date. As Mr Leybourne's collapse was referred to by counsel forthe plaintiff in closing as being relevant to Mr Leybourne's credibility, I simply noteits occurrence and its immediate coincidence with the issue being raised of when heand Mr Zhang had met and began their planning to establish a new business. However,I prefer to regard the matter as an unfortunate coincidence, and I do not draw anyadverse inference as regards Mr Leybourne's credibility from what occurred.[330] However, I found Mr Zhang's evidence and explanation regarding thereference to 2011 in the Surfcon brochure to be unconvincing. He blamed the SurfconSales Manager for making the error which he had not noticed at the time it was usedand distributed at the Shanghai boat show. He also did not notice the same dateappearing on the Surfcon website which also had the brochure information on it.When giving evidence Mr Zhang produced a document which he said he had locatedon his own personal computer the previous night and which he thought was amarketing document written by a former company marketing manager. It alsocontained errors as to the date of events referred to in the document, the inferencebeing that the same marketing manager responsible for the Surfcon brochure had madeother errors in the information he had produced.[331] The most effective manner of establishing the dates of Mr Zhang's trip to NewZealand would be his travel and accommodation records. If they are lost or misplaced,it was open to Mr Zhang and his solicitors to obtain the relevant information from theNew Zealand immigration or Customs authorities. Had those documents and recordsshown that Mr Zhang travelled to New Zealand in 2012 and not 2011, it would haveconfirmed Mr Leybourne's evidence. However, the defendants' inability to prove MrZhang's travel dates to New Zealand in 2012 only serves to undermine the reliabilityand credibility of Mr Leybourne's evidence regarding the meeting with Mr Zhang thathe says took place in 2012 well after he had already resigned from Sealegs.The Zubcic / Redpath conversation and its implications[332] As earlier mentioned, Mr David Redpath, who is employed by Sealegs in therole of Production and Safety Manager, gave evidence that sometime after MrLeybourne had left Sealegs, Mr Zubcic told him that he had been offered the role ofmanaging the research and development department (R&D) at Sealegs, but that hecould not take the position because he had given Mr Leybourne his word that he wouldjoin him when he was ready for him at the new business he was establishing. MrRedpath maintained this version of events under cross-examination.[333] In reply, Mr Spring says the evidence of Mr Redpath to that effect is mistaken.He says that Mr Zubcic in his evidence denied saying anything to Mr Redpath abouthaving made a commitment to work for Mr Leybourne when telling him about turningdown the position at Sealegs. Rather, Mr Zubcic says he was not asked by MrLeybourne to go and work for the new company until September 2012, and theconversation he had with Mr Redpath in which he told him that he had turned down apromotion at Sealegs had taken place some considerable time earlier, either in late2011 or early 2012. Mr Spring says that Mr Redpath has mistakenly combined twoseparate conversations into one.[334] The significance of this conversation and its timing is of course relevant toshow when Mr Zubcic had made his commitment to Mr Leybourne. Mr Zubcic saysthat at the end of 2011 or early 2012, being soon after Mr Leybourne had left thecompany, he was asked to consider the R&D position at Sealegs and had turned itdown. He says that much later, around September 2012, he told Mr Redpath about hisintention to join Mr Leybourne at the new company. Mr Redpath, however, said thatMr Zubcic had told him sometime after Mr Leybourne had left that he had turneddown the R&D role, because of his commitment to Mr Leybourne. Mr Redpath saidthat it was well over a year before Mr Zubcic left to go and work at Orion, and that hewas surprised by Mr Zubcic's decision to turn down a very good role at Sealegs.[335] I prefer Mr Redpath's evidence with regard to this matter. Mr Redpath recallsa single conversation during which Mr Zubcic gave him an explanation as to why hehad turned down the R&D position. On Mr Zubcic's own account, the R&D positionwas offered to him soon after Mr Leybourne had left Sealegs, and Mr Zubcic'sexplanation to Mr Redpath about having made a commitment to Mr Leybourne washis justification at the time for what would otherwise be an unusual decision to turndown the opportunity of appointment to a more responsible and senior position atSealegs. The implications of this conversation taking place in either late 2011 or early2012 are significant, as it shows that Mr Leybourne had already raised the topic of MrZubcic working for or with him at a new company by early 2012, which was wellbefore the meeting he says he had with Mr Zhang during mid-2012 at which he saysthe idea of starting a business together was first discussed. It is a further indicationthat Mr Leybourne had ideas of starting the new business well before he stated this tobe the case in his evidence.[336] In summary, Mr Leybourne's explanation of when he decided to start abusiness to manufacture amphibious kits is inconsistent with Mr Redpath's evidenceof his conversation with Mr Zubcic, and the reference in the Surfcon brochure to thecompany commencing its focus on the design and production of amphibious craft in2011. Furthermore, the failure of the defendants to produce any reliable documentaryevidence as to the timing of Mr Zhang's claimed visit to New Zealand in mid-2012 isanother feature of the evidence that contributes to the unsatisfactory and implausiblenature of the defendants' account of these events.[337] Accordingly I find the evidence of Messrs Leybourne, Zubcic and Zhangregarding the timing and events that preceded the establishment of Orion to beunreliable, and that finding is relevant to and informs my assessment of the reliabilityand credibility of their evidence regarding the key question of whether the Orion legassemblies were copied from and derived from the Sealegs leg assembly pattern.Opportunity to copy[338] Mr Leybourne embarked upon the new business venture at Orion with theintention of producing an amphibious leg assembly to compete with the Sealegsproduct. Mr Leybourne himself had a detailed knowledge of the Sealegs legassemblies, their specifications and how they were designed and manufactured, havingbeen directly involved in the manufacturing and assembly of components comprisingthe Sealegs system and in attending to after-sale problems. In addition to the detailedknowledge he had accumulated by the time of his departure from Sealegs in November2012, he also had access to CAD SolidWorks drawings of the Sealegs parts as a resultof having downloaded the contents of the USB stick onto his home computer.[339] Mr Leybourne then enlisted and engaged Mr Zubcic as the design engineer atOrion at least by early 2012, meaning that Mr Zubcic spent the remainder of hisemployment at Sealegs knowing that he would be leaving to design a system for Orion.While Mr Zubcic had not himself designed the Sealegs system, he nevertheless had avery detailed knowledge of all the parts that it was comprised of and how they wereassembled and combined from his work in measuring the parts, creating CADdrawings, and entering the Sealegs parts into the SolidWorks computer programme.As a result of their work at Sealegs, Mr Leybourne and Mr Zubcic knew everythingnecessary to copy and reproduce the Sealegs system in their Orion system. Unlikemost cases where the plaintiff seeks to establish that the defendant/s have hadopportunities to copy the plaintiff's copyright work, here the plaintiff need not do morethan prove that Mr Leybourne and Mr Zubcic possessed a detailed knowledge of theSealegs system and then used that knowledge to copy the Sealegs system.[340] I also note that during the period that Orion's S25-4WD system was beingdesigned and manufactured, Mr Zubcic and Orion were also working on thedevelopment of the SL100 system for Sealegs, which involved the design of the off-set rim wheels and the adoption of an "industrial" style with box-like legs rather thanthe sculpted look used on the previous Sealegs leg assemblies.Was the Orion system developed by means of an independent design path?[341] Despite the knowledge that Mr Leybourne and Mr Zubcic carried with themfrom Sealegs, the defendants contend that the Orion S25-4WD and S25-3WD legassembly systems were produced as the result of the defendants' wholly independentdesign path and were not copied from or derivative of the plaintiff's models for whichcopyright is claimed. Mr Spring rejects any suggestion made by the plaintiff thatOrion may have taken information or data from Sealegs and used it to assist their ownCAD testing. He says that such a suggestion was not put to Mr Zubcic, and that noevidence was produced by the plaintiff showing that any such information would beof assistance to Orion in the development of its design. He says that in any event, theuse of another party's data for testing a prototype has no relevance to a copyrightclaim.[342] The defendants say that the Orion systems were principally designed by MrZubcic in collaboration with Mr Leybourne, and that they started "from scratch" todevelop an entirely new design for an amphibious kit suitable for use on a standard-sized New Zealand runabout boat. They acknowledge the absence of a complete papertrail, but say that there was nevertheless sufficient documentation of the design processto satisfy Drs Field and Gooch that the Orion system was produced as the result of anauthentic independent design path.(i) The significance of the defendants' conceptual design decisions[343] The defendants accept that the Orion system is underpinned by an arrangementof features that is the same as in the Sealegs system. They therefore accept thatsimilarity exists with the Sealegs amphibious leg assemblies at the conceptual level ofthe Orion design.[344] The defendants rely on Orion's design and development of a series of featuresand components as evidencing that they undertook an independent design path. Suchitems include:(a) The method of fixing the leg assemblies to the boat hull by means of aninternal mounting block glued to the hull interior with a compositebonding material so as to become a structural component of the hull.(b) The design and use of a wheel with an off-set rim so as to enable thehydraulic hub motor to be located substantially within the wheel, andin a position where the load on the bearings complied with the motormanufacturer's specifications.(c) The use of hollow extrusion for the leg assemblies as compared to thesolid cast metal used by Sealegs.(d) The funnelling of hydraulic oil through internal galleries in the liftingcylinders, thereby dispensing with hydraulic hoses.(e) The placement of the steering cylinder directly on the yoke, enablinghydraulic oil to be fed into the cylinder through the yoke and dispensingwith external hoses.(f) Machining the steering arm from aluminium alloy billet.[345] In my view, all these items were designed for the Orion system after thedecision to adopt the same pattern and arrangement of leg assembly components asused by Sealegs. They each relate to different engineering methods or differentmaterials chosen by Mr Zubcic to perform the functions of equivalent parts orcomponents of the Sealegs system.[346] The defendants say, however, that their conceptual approach to a number ofaspects of the Orion system demonstrates that they adopted an independent designpath. They decided that the Orion system would have three legs that would rotateforward of the bow and towards the rear of the stern. They decided that the Orionsystem would be built to support 2500kg so as to be suitable for installation on a boatof six to seven metres in length. They decided to use hydraulic power for the legactuators and to power the hub wheels. They decided that the Orion system would befunctional rather than aesthetic in its appearance. They decided that they would designa system that would be modular, in that it would be capable of being fitted to a varietyof different hulls.[347] However I consider that those conceptual design decisions confirm that theysimply adopted the same three-leg system as Sealegs and the same geometry asSealegs in terms of the placement of the legs onto the hull and in terms of the use ofhydraulic powered actuators for extension and retraction of the legs. The adoption ofthe 2500kg load bearing specification was also the same as Sealegs, as was the use ofhydraulic power for the hub wheels. Further, while the defendants made choices togive the Orion system a functional appearance in contrast to the sculptured appearanceof the Sealegs system, that did not represent any material departure from theestablished Sealegs combination of features for which the plaintiff claims copyright.The different design features that Dr Field and the defendants rely on as demonstratingthat they adopted an independent design path are not differences so far as thecomposition and collocation of the functioning components of the leg assemblies areconcerned, but are rather due to different approaches being taken to aspects of designdetail. I consider this distinction to be of real significance in this case.[348] The defendants further say that Mr Zubcic's work in designing the S25-4WDfront leg assembly with two wheels is also evidence of their independent design path.Mr Zubcic said in evidence that the defendants had decided to develop a front leg withtwo wheels so it would be different from the Sealegs system. It is clear from theevidence that the decision to attach two wheels to the front leg assembly to be used onthe Surfcon ARC600 craft required the preparation of a design detailing the attachmentof the wheels onto the front leg, the conveying of hydraulic oil to power the hubwheels, and the placement of the steering actuator.[349] However, although this system incorporated two wheels, it neverthelessemployed the same externally-mounted placement of the legs on the hull and the samegeometry in terms of the extension and retraction of the front leg assembly, being thesame arrangement of features as exist on the Sealegs system. Despite the obviousdifferences relating to the 4WD front leg design, I do not consider that they areevidence that the defendants undertook an independent design path in creating the4WD that was not derived and copied from the Sealegs system and its arrangement offeatures. As with the other differently designed features relied upon by the defendants,I consider the design of the Orion 4WD system to be effectively a further iteration ofthe Sealegs system, specifically adapted for use on the Surfcon ARC600 flood rescuecraft.[350] Mr Leybourne and Mr Zubcic also say that the Orion S25-3WD was producedas the result of their independent design path, and they deny that Mr Pringlecommissioned Orion to make a copy of the Sealegs system for his Smuggler boatsafter he had fallen out with Sealegs in mid-2015. They say that far from requesting acopy of the Sealegs system, Mr Pringle wanted a different and superior amphibiouskit for installation on his boats.[351] The defendants submit that in his design of the Orion S25-3WD system, MrZubcic made a number of decisions that show his independent design path. These are:(a) Front leg angle and lifting cylinder: in order to avoid using a supportfor the lift cylinder (as on the Sealegs system), the front leg ispositioned on a 15-degree angle from vertical. The lifting cylinderdesign was based on Mr Zubcic's pre-existing rear cylinder on theOrion S25-4WD.(b) The front fork: Mr Zubcic designed the front fork to be fully machinedinto a 'C' shape, unlike the Sealegs fork which is manufactureddifferently.(c) The yoke: when designing the yoke, Mr Zubcic initially designed ayoke that, although suitable in terms of kinematic and strengthrequirements, in appearance looked quite similar to the Sealegs yoke.He then proceeded to re-design the yoke so that it was narrower andquite different in appearance to the Sealegs yoke. By virtue of beingnarrower, the final design was more easily able to be designed to supplyhydraulic oil through an internal gallery.(d) Steering cylinder: the position of the steering cylinder was changedfrom its position on the front of the yoke on the 4WD front leg to therear side of the yoke.(e) Partial retraction of front wheel into Smuggler hull recess: wheninstalled on the Smuggler craft with a specially designed bow, the frontwheel when retracted is located and concealed within a recess at thebow. The defendants say this was done to avoid the Sealegs patent, andto hide the otherwise exposed front wheel, which Mr Pringle regardedas unsightly.[352] Mr Zubcic explained in his evidence that when given the task of designing afront leg assembly for the Smuggler craft with a single front wheel, he wished to useas much of the existing Orion S25-4WD system as possible to avoid cost and delay.He also said that he wanted to improve on the Sealegs front leg assembly.[353] While the design elements introduced by Mr Zubcic result in the Orion S25-3WD front leg assembly having a different appearance than the Sealegs system, thoseengineering solutions are in this context different methods of achieving the samefunction as the Sealegs system by means of the same arrangement of features with thesame fundamental geometry. The close similarity in terms of geometry wasrecognised at the time by Mr Leybourne in his email to Mr Pringle in which he saidthat:The design is heading towards a similar geometry as used by that othercompany. If this proves unacceptable a radical re-design will be required.[354] Mr Pringle in his evidence said that when he met with Mr Leybourne and MrZubcic in October 2015, he was shown an S25-4WD. He said that he asked MrLeybourne if Orion could design Smuggler a three-wheel drive system with the frontwheel enclosed within a recess at the bow when in the retracted position. He said thathe did not ask Orion to copy the Sealegs system, and the whole point of going to Orionwas to get an amphibious system that was superior to the Sealegs system.[355] However, I find that the evidence establishes that as a direct consequence ofthe deterioration of his company's relationship with Sealegs, Mr Pringle was anxiousto obtain an alternative source for an amphibious kit to replace the Sealegs kit forinstallation onto the Smuggler boats. What he wanted was in effect a similarfunctioning system to Sealegs at less cost. The replacement system would be requiredto meet the same specifications as the Sealegs' system and have the same dimensionsso as to fit readily into the established attachment positions being used by Smugglerfor fixing the Sealegs system on its boats. Mr Pringle and Mr Leybourne were awareof the Sealegs patent and its reference to the front wheel operating as a bumper, andhaving taken legal advice they believed that they would not infringe the Sealegs patentif they could find a way of retracting the front leg wheel into a covered recess createdat the bow of the boat. Mr Zubcic's choice of engineering innovations and appearancedifferences did not amount to him adopting an independent design path, as his startingpoint was the Sealegs system, and his objective was to produce a system that could bereadily substituted by Smuggler for the Sealegs system they had been using.(ii) The four-stage design process[356] I have rejected the defendants' contention that the differences of detail in theOrion design amounted to the defendants adopting an independent design path.However, the defendants also frame this point in another way, relying on Drs Fieldand Gooch's four-stage analysis of engineering design.[357] Dr Gooch explained in his evidence that the conventional analysis of theprogression of mechanical engineering design can be divided into the four stages thatI set out earlier, being: clarification of the task; concept design; embodiment design;and detail design. Dr Field and Dr Gooch both say that the embodiment and detaildesign phases of the design sequence will generally occupy the bulk of an engineer'stime required to develop a final design.[358] Having compared the Sealegs and Orion amphibious systems and examinedOrion's design path documentation, Drs Field and Gooch concluded that because ofthe differences they identified, the Orion system was the product of an independentdesign path. They both acknowledge that at a concept level, the Orion systemrepresents a series of fundamental design decisions and solutions that are apparent inthe Sealegs system. However, they say that where an independent design path hasbeen followed, it is not uncommon to see concepts overlap. Drs Field and Goochexpressed their opinions that because the bulk of the design work is undertaken duringthe embodiment and detail design stages, the detailed design work undertaken by MrZubcic showed that the Orion system was the result of independent design work.[359] Relying on this evidence, Mr Spring submits that the Orion design path mustbe considered in the context of modern, professional engineering design, rather thanby reference to what he describes as Sealegs' design process of 'trial and error'. Heemphasises that the law of copyright does not protect ideas; rather, it protects the skilland labour employed in the expression of ideas. He therefore submits that an"independent design path" in copyright law means independence at the embodimentand design stages only: the defendants' design path is only required to be independentfrom the point at which the embodiment design function begins. He submits thatoverlap at the clarification and conceptual design stages is entirely permissible: it isthe embodiment stage that determines how the designed item actually looks.[360] Adopting that approach, the defendants seek to rely on their efforts indeveloping the detailed aspects of the Orion system as demonstrating that theyundertook an independent design path, avoiding any implications and consequencesof their use of the same arrangement of features that was developed by Sealegs on thebasis that they are conceptual features not protected by copyright.[361] I consider the defendants' submission that design overlap is permissible at theclarification of task and conceptual stages of the design process to be misconceived.Provided the plaintiff has embodied an original idea into a work for which copyrightmay legitimately be claimed, it does not matter at what stage of the professionalengineers' design path that process occurred. Where it is alleged that copyright in anartistic work has been infringed, the question of whether an independent design pathhas been followed in the creation of a product is not answered by reference to howmuch time and effort has been expended on design details, or indeed whether extensivedetailed design work has been undertaken to create a product that is different as regardsthe choice of certain engineering solutions and methods. Here the plaintiff does notallege that the detailed features designed and incorporated into the Orion system byMr Zubcic were copied from the Sealegs system. What the plaintiff alleges is thatOrion copied the arrangement of functional features in its assembly, including theexternal placement position of the leg assemblies on the boat hull, the geometry of thesystem and its movement. Those same fundamental design decisions and solutionsthat were developed by Sealegs and which are incorporated and represented in theassembly of components comprising its amphibious system had to have been adoptedby Mr Zubcic before he could possibly proceed to address the aspects of detaileddesign which in each instance related to alternative engineering solutions forcomponents and functions already resolved and apparent in the Sealegs system.[362] I agree with the evidence of Mr Dippie in which he explains the significanceof the design decisions incorporated into the Sealegs arrangement of featurescomprising its leg assemblies, and Orion's adoption of that arrangement as the basisof its own leg assemblies. The differences between the Orion system and the Sealegssystem as identified by Dr Field, whilst achieved by skilled engineering and whichmay be seen as being improvements, are nevertheless alternative engineering solutionsto achieving the same functions performed by the equivalent Sealegs components, andthey do not alter the leg assembly's fundamental functionality. An example is Orion'sincorporation of drilled galleries in the retraction and steering cylinders to transferhydraulic oil, rather than using external hydraulic hoses. Using this method theassociated hydraulic hoses remain static and do not articulate as the leg extends andretracts, thereby extending their longevity.[363] Another example is the front and rear leg assembly mounting frames, locatedinside the hull, to secure the leg assemblies at the bow and transom. The mountingframe is bonded to the inside of the hull with a structural adhesive, and has taperedholes to accept the tapered spigots for the hinged mounts of the lifting cylinder. Whilethis method of connecting the leg assembly to the hull is quite different to that used bySealegs, which uses an external mounting, it is nevertheless simply a means ofattaching the leg onto the hull. In the case of the rear leg assemblies, the internalmounting plates provide an advantage by reducing the bulk of the assembly on thetransom, as compared to the large bracket used to secure the rear legs on the Sealegssystem. Again, however, the use of the mounting brackets is an alternate method offixing the legs to the boat hull, and while there are advantages derived from thissolution, they make no change to the fundamental functionality of the leg assembliesas innovated by Sealegs. Dr Field acknowledged this to be the case:The Sealegs and Orion systems have the same set of sub systems because theyare products that apply to the same amphibious craft (type 'E' in Figure A1):these subsystems include wheels, hydraulic drives, retraction mechanisms,steering mechanisms and hydraulic power packs. Sealegs's and Orion'ssubsystems also have some physically different but 'equivalent' parts becausethey have to perform the same generic functions or because they are the beststandard way of fulfilling their function: these include tyres, retraction arms,retraction cylinders, steering fork, steering cylinder and control valves. Butthere also parts in each system that are unique to either Sealegs or Orion,which I set out below.[364] The unique parts referred to by Dr Field include the hydraulic cylinders withinternal galleries and the internal mounting plates that I have referred to. I do notconsider that either of these result in a materially different leg assembly than that ofSealegs. Another unique part referred to by Dr Field is Orion's use of an off-set wheelhub to enable the hydraulic hub motor to be positioned within the wheel where thevertical wheel loads can be transferred into the motor's shaft and bearings for optimumweight-bearing. However, Mr Zubcic and Orion had designed a wheel with an off-sethub for use on the Sealegs SL100 in July 2013 in the course of carrying out work onSL100 pursuant to the Sealegs Design Brief, which provided that the intellectualproperty of all components designed as part of SL100 were the sole property ofSealegs. Consequently, this feature was not unique to Orion.[365] I therefore consider that the defendants cannot discharge the onus of showingan independent design path by means of evidence showing that the bulk of the designtime and effort was spent on the detailed design stage and by a process similar to thatof a professional engineer's design pathway. Comparing the Sealegs design processto that of a professional engineer is of little relevance to the issues that I am requiredto determine here, where the evidence is clear that what Mr Bryham and Sealegsdeveloped and produced was an original design to produce a functional amphibioussystem of a kind that had not been achieved before, by either qualified or unqualifiedengineers.(iii) The defendants' design path documentation and chronology[366] Mr Leybourne explained Orion's design path in his evidence.81 He said thatthe first step in any design process is to understand the customer's proposedapplication, and to get a feel for the product's market. As the first amphibious productto be designed and built was for a flood rescue craft for use in China, the first stepstaken were to determine the type of craft on which the new amphibious system wouldbe used. He said this process resulted in a decision that the craft would be six metresin length and would have a dry weight of 1500kg and be capable of carrying a payloadof 1000kg (approximately 10 people and equipment). That meant the amphibious legsystem would need to be capable of supporting a gross weight of 2500kg. MrLeybourne said that consideration was also given to compliance with the European81 Mr Leybourne explained that the description he would give of the Orion design process was in thenature of a guide, as the various steps were often run together or even in reverse order. He agreedthat his account of the sequence was not an actual account of the Orion design process but was ineffect "a reconstruction".standards for craft of that type and to the cost of production so as to ensure the productwas commercially viable.[367] Mr Leybourne said that once it was determined what type of craft the systemwas to be designed for and once the commercial considerations had been addressed,an operating specification was required. The operating specifications that weredetermined included: the payload to be supported (2500kg); wheels to be clear of thewater when retracted; the ground clearance (400mm); the land speed of the system (9kph); maximum drive incline (10 degrees); capable of operating over soft sand;capable of being driven over obstacles of a maximum height of 200mm; capable ofcontinuous operation on land for 10 minutes before overheating; and an operatingtemperature between negative five degrees Celsius to 42 degrees Celsius.[368] Mr Leybourne said that once the operating specifications had been determined,they were used as the basis for undertaking calculations to determine the requirementsof power, torque, cooling and filtration and to determine the specifications of thehydraulic motors and pump systems of the COTS components to be ordered.[369] Mr Leybourne then explained that he had used a spreadsheet to make thecalculations related to the hydraulic system that would power and turn the wheels, andanother set of calculations to determine the size of the hydraulic cylinders used on thesystem for lifting the legs and steering. These calculations enabled him to determinethe required specifications of the hydraulic motor, the transmission pump, and enginepower as well as determining hydraulic cylinder sizes and the size of the oil cooler.Mr Leybourne said that he and Mr Zubcic discussed his idea of using a structuraladhesive to attach the leg assemblies to the hull, and the use of load-holding valvesinside the hydraulic cylinders resulting in allowing a tighter (or closer) leg-to-cylinderclearance. He explained that they had also investigated the viability of using electricpower but had discounted it.[370] Mr Leybourne said that once the key design features were decided he had donehis preliminary calculations, and the process of designing the component parts beganwith the first part designed being the wheel with an off-set rim to accommodate thehydraulic hub motor and a suitable tyre.[371] As regards the S25-3WD, which was built following the request from MrPringle and Smuggler, Mr Leybourne said that because Mr Pringle wanted a solutionas soon as possible it was decided to base the new front assembly on the Orion 4WDsystem as much as possible. He explained that he was conscious that by moving to athree-wheel drive system the Orion system was getting closer to the Sealegs systemand, knowing of the Sealegs patent, he took legal advice. This led to the decision tomodify the design of the Smuggler boat to be fitted with the Orion assembly, so thatwhen the front leg was fully retracted, the wheel would be concealed within a recesslocated at the bow. This required the use of a sensor to self-centre the wheel so that itwould enter the bow recess correctly and accurately. Mr Leybourne located andsourced the sensor system required.[372] In response to the plaintiff's notices to answer interrogatories, Mr Leybourneswore an affidavit in which he described Orion's development of their 4WD and 3WDsystems. The affidavit was produced as an exhibit. Attached and exhibited to hisaffidavit were a large number of documents, including emails, computer images,drawings and photographs related to each step of the design process. Mr Leybournequalified the accuracy of the completeness of this material by saying that he cannotattest to the absolute accuracy of the steps described or dates, and that design stepscould be comingled, concurrently or consecutively or even reversed.[373] Regarding the existence of any documents relating to the initial steps taken bythe defendants in formulating their understanding of the application of their plannednew amphibious system, Mr Leybourne states that he is not able to provide a specificstart date, and the best he can say is that the process commenced approximately duringFebruary – March 2013. He says that there are no documents relating to the initialplanning stage but that there were verbal discussions between himself, Mr Zubcic andMr Zhang.[374] The first dated documents produced are dated 15 February 2013 and are anemail exchange between Mr Zubcic and the firm Solitec regarding the purchase of theSolidWorks software programme. The first design-related documents are dated 15March 2013 and are a computer drawing prepared by Mr Zubcic of a wheel rimsubsequently used for both the 4WD and 3WD systems, and a report prepared forOrion regarding an electric drive system. In his affidavit Mr Leybourne explains theabsence of any SolidWorks CAD conceptual models of the Orion systems as beingbecause the conceptual models either evolved into final models or were discarded asunsuitable.[375] Mr Zubcic described the process of designing the Orion system in much thesame terms as Mr Leybourne. He said the intention was to build a system that wasmodular and run by hydraulics. He said he wanted to design a system that wasfundamentally functional rather than aesthetic in appearance. He said that he and MrLeybourne had worked closely together on the design of the Orion system. As regardsthe positioning of the legs on the hull and the geometry of their extension andretraction, Mr Zubcic said that the method they settled on was obvious. He explained:The most common kind of six metre craft, which our modular system wouldattach to, is the ordinary mono-hull boat. The shape of ordinary mono-hullboat is kind of triangle, so it was natural option to have three legs, practicallyone on each corner. Three points of contact with the ground at the same timeis minimum required for stability. One leg attached on each side of transomand one attached on bow. There is a certain number of possible options howyou can move legs up and down, but if we talk about simple ways to do that,we come to very few options. Those options are the ones that imitate humanextremities. Such mechanisms are widely used all around the world, especiallyin earth-moving heavy machinery. For Darren it was so obvious solutionbecause he was in that industry good part of his life. Such mechanisms arecommon in aircraft industry too which I am familiar with. Therefore, wedecided to stay right there, simple, so our legs move up and down rotatingaround a horizontal axis and get powered with hydraulic cylinder as anactuator (like the muscle in human arms). Having three legs attached on thehull makes so obvious that front leg, in order to be lifted above water line, hasto rotate forward and rear legs to rotate backwards. Otherwise, legs would hitthe hull. It was an existing option in that it appeared not only in the Sealegssystem but some others too.[376] Mr Zubcic's evidence regarding his designing of the Orion parts demonstratesthe extensive work and industry he applied to designing the Orion components toachieve those objectives, for example by designing the system of attaching the legs tothe hull with an internal bracket bonded onto the hull; by designing the componentsso that hydraulic oil could be conveyed internally without the use of external hoses;and by adopting a functional rather than aesthetic style for the leg assemblies.However all of what Mr Zubcic did in terms of design was founded upon the samepattern of assembly, or arrangement of features, as exists in the Sealegs system.(iv) Absence of documentation[377] Although Mr Leybourne explained in his evidence how he and Mr Zubcic hadmade decisions regarding the COTS parts required, the style of the Orion system, thesurface finish to be used on the aluminium parts (anodising) and many other designdetails, he did not produce any document or correspondence that recorded the detailedproduct specifications that he referred to in his evidence. Nor did he explain a designpath or design process that started with an evaluation of the possible options fordesigning an amphibious system for a small craft. Rather, what he described isconsistent with proceeding from a start point where the system to be produced wouldfunction in the same way as the Sealegs system, and would require the same functionalcomponents arranged in the same way as the Sealegs system that was so well knownto both him and Mr Zubcic.[378] Mr Spring submits that spreadsheets created by Mr Leybourne whenundertaking hydraulic drive calculations, hydraulic cylinder size calculations andcooler size calculations are evidence of him investing skill and labour in formulatingthe independent design of the hydraulics for the Orion amphibious system. However,the spreadsheets produced as exhibits have creation dates ranging between 23 March2014 and 10 December 2014, which is well after the time at which the defendants saythey commenced designing the Orion system and made the decisions that determined,in a conceptual sense, what type of system they were intending to make. Thespreadsheets therefore do not represent documentary evidence regarding thedefendants' initial decisions about the type of system they would create and itsapplication, which the defendants say were made in or around February-March 2013.[379] Mr Spring also refers to another spreadsheet prepared by Mr Zubcic as part ofhis work in designing the Orion 4WD system as evidencing his independent andoriginal design work. While Mr Zubcic says that he made the calculations on thespreadsheet in early 2013, there is no date recorded on the spreadsheet, and thedocument properties information records that the document was last modified on 9November 2015. Therefore this spreadsheet does not amount to documentaryevidence of the initial design and proposed product decisions made at thecommencement of the Orion design path.[380] The defendants say that confirmation that they adopted an independent designpath can also be seen from the steps they took to consider and evaluate an electricpowered system as an alternative to using hydraulic power to drive the hub motors.Mr Leybourne explained that he and Mr Zubcic wanted to test whether electric drivetechnology was sufficiently advanced to be viable and economic to produce, but theydecided that an electric system would not be cost competitive and so proceeded withhydraulics which Mr Zubcic says was the obvious solution as both he and MrLeybourne were so familiar with it. The defendants have produced a report on anelectric drive concept that Mr Zubcic obtained from a friend and which he received on11 April 2013. However, the defendants' consideration of an electric powered systemto drive the wheels as an alternative to hydraulics does not mean that they wereconsidering a different composition or arrangement of the geometry or the featuresused in the Sealegs system.[381] Further, although the defendants produced in evidence numerous and detaileddrawings created in SolidWorks for the purpose of designing the parts and componentscomprised in the two Orion systems, there is nothing amongst this extensive materialwhich is evidence of the initial design decisions taken to produce an amphibioussystem suitable for installation onto six to seven metre craft and which would competein the market with the Sealegs system. The design documents produced by thedefendants certainly demonstrate that extensive design work was undertaken by thedefendants in designing the parts of their system once the geometry and arrangementof component parts and functions had been determined, but there is nothing that showsan independent design path which led to adopting and choosing the arrangement ofthe functioning elements of the leg assemblies, or the positioning on the hull andgeometry of the leg assemblies.[382] At the conclusion of his evidence the Court asked Mr Zubcic about the absenceof documentation and he said that he did not make any notes or record thespecifications of the new product as he had no need to. Mr Zubcic said that if he hadbeen designing something as an "official job from a customer" he would need a writtenspecification, but for the purposes of designing the Orion system, he simply did notneed to. As a consequence, there is no written material prepared by either MrLeybourne or Mr Zubcic containing any reference to the design objectives, parametersor specifications of the system that Mr Zubcic was to design. Mr Zubcic said that theonly records relating to the design specifications of the Orion system are representedin the drawings he created in the Orion SolidWorks computer programme, onspreadsheets, or in his own memory.[383] I consider the explanations of Mr Leybourne and Mr Zubcic as to the absenceof any contemporaneous records of their design decisions to be wholly implausible,and inconsistent with the defendants' contention that they developed the design of theOrion system by means of an entirely independent design path and process. In orderfor Mr Leybourne to communicate his and Mr Zhang's intentions to Mr Zubcicregarding the development of the Orion amphibious kit, some form of written orelectronic communications would be necessary. Even if the requirements of the newsystem were discussed directly and informally by Mr Laybourne and Mr Zubcic, itwould be remarkable if neither of them made any record as to the matters discussedand agreed on in their discussions. There are no emails exchanged between the threemen, nor are there any costings or other contemporary records that could be expectedto accompany the designing of an authentically new product.[384] The total absence of any relevant contemporaneous design-related recordscontaining information regarding the defendants' proposed new amphibious system isin my view highly significant. For a professional engineer such as Mr Zubcic to start"from scratch" as is claimed by the defendants, it seems unusual that he would departfrom the practices and requirements he would generally apply to any otherprofessional design work where specifications and descriptions of the tasks theproposed product would be required to perform would be set out and recorded in orderto establish the design criteria.[385] Furthermore, it is surprising that professionals embarking on the process ofdesigning and manufacturing a new and authentically original amphibious system forcommercial production and sale would not document the process or refer to what theywere proposing in emails passing between them, when they have no reason not to doso. This is reinforced by the detail referred to by Mr Leybourne when describing thekey specifications that were determined during discussions between Mr Zubcic, MrZhang and himself. Detail of that kind, which includes weights and measurements indegrees, makes the absence of any contemporaneous records relating to the key aspectsof the design and its composition, even more implausible.[386] Had such contemporaneous records been made and retained, they would havebeen relevant to the issue of how the Orion design process was commenced andwhether any part of the Sealegs system was referred to or relied on as a basis fromwhich to develop the Orion design. I consider that the absence of any records or othercontemporaneous correspondence setting out the initial design objectives and requiredcapabilities of the new Orion system provides support for the plaintiff's contentionthat the defendants started their design process by copying the plaintiff's leg assemblysystem and particularly the arrangement of features and components as used in theSealegs system. Assuming the Orion design starting point was the Sealegs assembly,there would perhaps be no need for the defendants to undertake the process of definingthe specifications and required functioning of the new system they were intending toproduce.[387] I also note that the absence of such records is consistent with the manner inwhich the defendants maintained confidentiality of the development of their new legassembly system from Mr Bryham and Sealegs until October 2014 when it was seenattached to the Surfcon ARC600 by Sealegs CEO Mr Glen, who photographed it.(v) Conclusion as to independent design path[388] I do not consider that the evidence shows that the Orion amphibious systemwas produced as a result of an independent design path. What it shows is that MrLeybourne and Mr Zubcic commenced their design process with full knowledge of theSealegs system, and their design efforts were directed to making innovativeimprovements to the components and refining the functioning of the existing Sealegssystem. Despite the introduction of some innovations, improvements, and alterations,in each case their real starting point was their detailed knowledge of the Sealegssystem and the proven arrangement of the Sealegs pattern of features. Rather thanproducing an original work as the result of following an independent design path, whatthe defendants produced was a further iteration and reproduction of the Sealegspattern, albeit with some differences in appearance and adopting some alternativeengineering solutions, to perform the same functions as in the Sealegs system.Functional constraints and their relevance[389] The second major submission made by the defendants in relation to causalityand derivation is that functional constraints dictated the defendants' design and explainthe similarities between the Orion and Sealegs leg assemblies. The propositionadvanced by the defendants here is that, having embarked upon the design of anamphibious kit for use by boats of the same type and size as were being fitted with theSealegs amphibious kits, it was inevitable that the Orion design process would producethe same outcome, and that the two systems would necessarily share many of the samefunctional components, some of which would be identical.(i) Submissions[390] Mr Spring says that the functional constraints that the defendants haveidentified are those that arise once the conceptual decisions had been made to makean externally-mounted amphibious kit suitable for attachment to any hull, and whichcan be raised and lowered to provide amphibious capability.[391] Mr Spring referred to the evidence of Dr Field in which he said that importantdesign constraints applied to the Orion amphibious system because Orion had decidedto produce amphibious equipment for craft of the same weight and hull type asSealegs, with the same or similar capabilities on land in terms of ground clearance,land speed, incline limits, depth of outboard motor and existing steering system asSealegs. Because of Orion's decision to enter the same market as Sealegs and producean amphibious kit that met close to the same specifications as the Sealegs system, DrField said it was therefore inevitable that most of their functional constraints would beidentical, leading to similar optimal solutions being adopted, and in some casesidentical components such as the hydraulic motors and tyres. However, said Dr Field,that did not mean that the features of the Orion system were copied from the Sealegssystem, and he noted that there were several features of the Orion system that had noSealegs equivalent.[392] Mr Spring also referred to the evidence of Dr Gooch on this issue, in which hesaid that to create an amphibious craft there are some basic functional dimensions thatconstrain the design. Mr Spring therefore submits that in respect of a front legassembly, for example, it must for reasons of functional necessity possess:(a) a tractive, steerable front wheel attached to the hull which can be raisedabove the waterline and lowered to the ground while providingadequate ground clearance;(b) part of the leg must be steerable and part will be fixed, to which themechanism for raising and lowering the leg is attached;(c) the steerable part of the leg must connect the wheel/s to the leg, withthe wheel on the centre-line of the assembly and secured by an arm(fork) on one side;(d) the fixed part of the leg, which will be the upper part, must be:(i) connected to the hull at a point which will allow thewheel to be raised above the waterline when retracted,and connected to the hull in a manner that will spreadthe load bearing into the hull;(ii) hinged to allow it to be raised and lowered, andconnected to the lifting actuator; and(iii) of sufficient length to provide adequate groundclearance for the craft;(e) the lifting cylinder must be attached to the hull and to the leg, and of asize and capacity to support the weight of the craft on land and to liftand retract the leg;(f) the steering system must be fixed to the unmoving upper leg andconnected to the steerable part of the lower leg;(g) the wheel and tyre must be large enough to enable satisfactory groundpressure and small enough to be able to be retracted above thewaterline, and the tyre must have a suitable tread pattern for tractionover soft terrains; and(h) where the front wheel is to be driven, the tractive power must beconnected to the wheel, and if a hydraulic-powered wheel motor ischosen, it will need to be located in a position where it can bear the loadforces to which it will be subjected.[393] Mr Spring also made the same submission regarding the components of theOrion rear leg assemblies where there are equivalent components in the Sealegs rearleg assemblies. He says that in each case the Orion components and features arepresent by reason of functional necessity.[394] In response, Mr Henry submits that functional constraints do not arise fromdesign decisions where an engineer has a wide range of choices in the course ofprogressing along a design path; rather, actual functional constraints are those that alldesigners must of necessity adopt. He submits that any design constraints are not truly"functional constraints" if they apply after the designer has chosen to design anamphibious leg assembly that adopts the same design decisions as were made by MrBryham regarding the Sealegs leg assemblies. He says that the design constraintsrelied on by the defendants are only constraints that arose from Orion choosing tocompete in the same market as Sealegs, and to start from and copy the Sealegsarrangement of features, which thereafter necessarily constrained Orion within thatdesign or arrangement.(ii) Analysis and discussion regarding functional constraints[395] Drs Field and Gooch say that the Sealegs arrangement of functional featuresare comprised of commonly known and understood engineering solutions as used inother engineering and industrial contexts, albeit not in marine applications. Dr Fieldacknowledges, however, that the Sealegs solution and leg assembly can be regardedas unique as he could find nothing like it having been created previously.[396] I consider that Sealegs had already developed and selected from a wide rangeof options and had composed an arrangement of functional components that comprisedan effective amphibious kit. As indicated in the evidence of Mr Allen, Sealegs chosea pattern or arrangement of components that had never been done previously anywherein the world and was truly unique. It was this pattern that was the product of the designdevelopment and the application of skill by Mr Bryham and Sealegs, and it is thispattern which the plaintiff seeks to protect by copyright. The components each havea functional purpose for their presence within the Sealegs pattern and they combinetheir various individual functions to produce fully retractable amphibiousfunctionality.[397] I agree with the plaintiff that all the functional constraints identified by thedefendants are in fact due to their appropriation and use of the Sealegs pattern andconsequently due to the design decisions that Sealegs had already made in selectingand arranging the functional components that combine to make up the Sealegs legassembly. It follows that the functions required to be performed by each of thecomponents of the appropriated leg assembly pattern must necessarily also be presentin the Orion leg assemblies. These are not functional constraints that apply to anyamphibious system, but rather functional constraints applicable to the particularcomponents of the leg assembly pattern previously developed and adopted by Sealegs.[398] Accordingly I find that the decision made by the defendants to appropriate theSealegs leg assembly component pattern is what explains the close and objectivesimilarity of the Orion system to the Sealegs system, rather than the similarity beingdue to functional constraints dictating Orion's design.Conclusion on causality and derivation[399] When Mr Zubcic embarked upon the process of computer-aided drafting of thecomponent parts of the Orion amphibious leg assembly, I find that what he and thedefendants did involved copying of the Sealegs assemblies as regards the combinationand arrangement of features that made up its systems. There is no evidence of anyconsideration having been given to any alternative geometry other than that used inthe Sealegs system, which is characterised by its externally located and mounted legassemblies. There is no evidence of any consideration having been given to any othercombination of features or components which would be other than that alreadydeveloped and used by Sealegs. In my view, it is clear that Mr Zubcic began the designprocess by using his detailed knowledge of the Sealegs system to copy and reproduceits functions and key features, albeit while looking to make engineeringimprovements. As noted above, I do not consider that his design choices resulting inreproduction of Sealegs' features were dictated by functional constraints.[400] To conclude, I find that the plaintiff has established that the Orion design wasa copy of and directly derived from the Sealegs system and the arrangement of featuresthat are comprised in the models for which copyright is claimed. I further find thatthe defendants have not established that the Orion amphibious leg assemblies, andspecifically the arrangement of the essential functional components, were developedby means of their adopting an independent design path. While the defendants didindependently design and incorporate alternative engineering solutions for severalaspects of the Orion leg assemblies, those solutions did not materially or substantiallydepart from the functional arrangement of features comprised in the Sealegs models.[401] For these reasons, I find that the objective similarity of the Orion S25-4WDand S25-3WD to the Sealegs S60-3WD and SL100 is explained by the fact that theywere in each case copied from and directly derived from the Sealegs system.Substantiality[402] The last remaining question is whether the defendant copied a substantial partof the plaintiff's copyright work. This is a mixed question of fact and law, in that theCourt must apply a legal standard to the facts as found.82 As the Court of Appeal notedin Oraka:83The "substantiality" test can be regarded in part as a practical thresholddesigned to limit claims of infringement to those that are real and substantial.[403] Assessing substantiality involves a value judgment as to:8482 Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR2416 (HL) at 2423, cited in Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [106].83 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [87].84 UPL Group Ltd v Dux Engineers Ltd [1989] 3 NZLR 135 (CA) at 144. the balance between the private right to exploit the expression of theauthor's ingenuity, skill, labour or imagination and the public interest inobtaining the benefit of creative work and thought.[404] The substantiality test requires the Court to evaluate the overall significance ofany features the defendant has copied from the plaintiff.85 The Court explained inOraka:86The essential test is whether a claimant can show substantial use by thedefendant of those features of the claimant's work that, by reason of theknowledge, skill and labour employed in their production, constituted it as anoriginal copyright work. It is wrong to jump to the conclusion that a substantialpart was taken simply on the basis that copying occurred. What constitutes a"substantial part" is necessarily a question of fact and degree. The quality orimportance of what has been taken is much more significant than the quantity.This means that what is or is not "substantial" is closely associated with howoriginal the work, or respective part of the work, is. The law of copyright isnot concerned with originality of ideas but with originality of expression.Protection is given to a work (being a pattern of ideas), not a general idea orprinciple. The line between ideas and their expression, however, is notoriouslyill-defined. Originality, in the sense of the contribution of the author's skilland labour, tends to lie in the detail with which the basic idea is presented. Thegreater the originality, the greater the protection that copyright will afford it.The issue of functional constraints may become important at this point. Ifsimilarities between two works are dictated by the function of the item, thenthe similarities are an inevitable consequence of the object and its functionrather the labour and skill of the claimant, against whose misappropriation thelaw of copyright seeks to protect.(footnotes omitted)[405] In Billhöfer Maschinenfabrik GmbH v TH Dixon & Co Ltd, Hoffmann Jphrased the question as being whether the particular dimensions and spatialarrangements copied by the defendant from the plaintiff's design would to an engineerhave been of sufficient importance to constitute a substantial part of the overall work.87In that case, Hoffmann J evaluated the similarities and concluded that the visualfeatures and dimensions copied were not qualitatively sufficient to make thedefendant's work a substantial copy of the plaintiff's work.88 The dimensions that85 Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR2416 (HL) at 2423, cited in Steelbro NZ Ltd v Tidd Ross Todd Ltd [2007] NZCA 486 at [106].86 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [129]–[131].87 Billhöfer Maschinenfabrik GmbH v TH Dixon & Co Ltd [1990] FSR 105 (Ch) at 122.88 At 123.were copied were not critical to the overall work, and there were considerabledifferences in design.[406] The extent of originality in the copyright work will inform the Court'sassessment of whether or not a substantial part has been copied. As foreshadowedearlier, where the level of originality in the copyright arrangement is low, the amountof originality required to qualify another arrangement of the same elements as originalis also likely to be low.89 In this context, it is relevant to consider whether similaritiesare the inevitable result of functional constraints. The Court of Appeal explained inOraka:90Functional constraints have been considered in the United Kingdom under thenotion 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.(footnotes omitted)[407] Functional constraints may therefore assist in determining the originality of thecopyright work and whether the defendant has appropriated a substantial part of theplaintiff's labour and skill.91 The Court will discard any similarities that are due totrue functional constraints.92[408] UPL Group Ltd v Dux Engineers Ltd provides an example of functionalconstraints limiting the originality of the plaintiff's copyright work, and ultimatelyleading to a conclusion that there was no copying.93 That case concerned lavatoryseats and lids which were similar in appearance but with some small differences:94The curves, while nearly the same, do not exactly match. As well the Hibiscuslid is more convex than that of the Dux so as to form an increasingly wideredge than that of the Dux. The front of the seats similarly exhibited, displaylike differences, in particular the similarity of curve is not so close and thewidth of the Dux seat is somewhat greater.89 Henkel KGaA v Holdfast New Zealand Ltd [2006] NZSC 102, [2007] 1 NZLR 577 at [41].90 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [132].91 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [133].92 Oraka Technologies Ltd v Geostel Vision Ltd [2013] NZCA 111 at [145].93 UPL Group Ltd v Dux Engineers Ltd [1989] 3 NZLR 135 (CA).94 At 145.[409] The Court of Appeal concluded that the defendant had not copied a substantialpart of the plaintiff's work:95In the case of common domestic appliances such as lavatory seats and lids tocover the same, the range of curves adapted to a front having a squareappearance is probably not large and small differences will be enough to rebutthe inference of copying. Sufficient differences exist in this case and wetherefore reject the appellants' claims.The plaintiff's submissions[410] Here, Sealegs says that the copyright work is the original expression of ideasrepresented by the combination of functional features chosen by Mr Bryham andcomprised in the copyright models. Mr Henry submits that it is the Sealegsarrangement which is the substance of its copyright and it is that arrangement whichOrion has appropriated. He says that the Orion designs rely completely on the sameset of features ordered in the same arrangement as the copyright models. He says thatthe defendants' witnesses and submissions confuse the quality of the plaintiff'scopyright work with the quality of the engineering, while in fact the two are quitedifferent.[411] Mr Henry responds to the defendants' submission that similarities due tofunctional constraints should be set aside when the issue of substantiality is consideredby saying that that the design constraints relied on by the defendants are onlyconstraints that arose from Orion choosing to compete in the same market as Sealegs,and to start from and copy the Sealegs arrangement of features. They do not explainaway the similarities between the two systems, and should not be set aside as thedefendants submit. Mr Henry submits that the quality of the Sealegs design is thehighly original and unique arrangement and sequencing of the key leg assemblyfeatures which he says represents a "pattern of ideas". He says that it is this assembly,arrangement or pattern that has been copied and taken by the defendants in its entirety.He submits that the defendants have thereby infringed the plaintiff's copyright byhaving copied a substantial part of the plaintiff's copyright work. Any differencesrelating to alternative engineering methods or solutions or arising from superficial95 At 145.appearance are immaterial in the context of assessing the substantiality of what hasbeen copied.[412] As regards the Orion S25-4WD, the plaintiff says that the front and rear legassemblies possess the Sealegs geometry. In the case of the front leg, it has two hullpivots, with the lifting cylinder attached to the upper pivot and the leg yoke attachedto the lower pivot. The lifting cylinder is also attached to the yoke, with the wheelassembly and steering assembly attached at a pivot point in the base of the yoke. Theobvious difference is the addition of two motorised wheels compared to the singlewheel on the Sealegs assembly. Mr Henry submits the close similarity between theOrion 4WD assembly and the Sealegs prototype boat 136 (S60-3WD) and system 100(SL100) is clearly demonstrated by the evidence that when designing the S25-3WDfor Smuggler Marine, all Orion had to do was change the lower wheel assembly bysubstituting a single-sided fork and one motorised wheel. In relation to the Orion S25-3WD, the plaintiff says that it is clear that it is a direct copy of the arrangement andsequencing of features present in the Sealegs copyright models. Mr Henry says thatwhile Orion has changed the shape of some of the features, especially the yoke whichwas narrowed from an initial design which looked similar to the Sealegs yoke, theSealegs arrangement of components can clearly be seen to have been copied.The defendants' submissions[413] Mr Spring notes that reproduction of a part which by itself has no originalitywill not normally be a substantial part of the copyright, and will not be protected. Hesubmits that functional constraints in design may minimise the originality involved inthe copyright work and the protection afforded to it. The defendants say thatfunctional constraints should not be included in the assessment of the extent of anycopying found to have taken place.[414] He further says that where it is alleged that a defendant has altered a plaintiff'scopyright work, such that an altered copy has been produced, the Court will look towhether the defendant has appropriated the time, labour, skill and judgementcontributed by the original author creating the copyright work.96 He submits that thelaw of copyright does not protect ideas.[415] Mr Spring submits that while Mr Bryham claims to have taken a significantamount of time and effort to develop the Sealegs products, that effort was to a largeextent due to his inexperience, and would not have been required by an experiencedengineer. He says that what Mr Bryham determined through a process of trial anderror were matters that an engineer would know immediately. As a result, a high levelof effort was put into achieving a design of very low originality. Mr Spring refers toMr Bryham's design progression from the initial use of 0.3 metre tyres to the finalchoice of 0.6 metre tyres to cope with the soft sand terrain over which the boats wouldtravel when transitioning in and out of the water. He says that an analytical designpath employed by an engineer would have quickly concluded that a larger tyre wasrequired to perform better over soft ground. The choice of an aggressive V-tread tyrewas also an obvious solution for travel over soft ground.[416] Mr Spring says Orion did not require a great deal of testing because of thesimplicity of the amphibious leg mechanism of its product. The defendants say thattheir application of ordinary engineering principles meant that they were not requiredto expend the same amount of time and effort as Mr Bryham. As a result, theirdevelopment of the Orion system did not constitute an appropriation of Mr Bryham'sefforts which they say were largely unnecessary.[417] The defendants further say that in any event, Mr Zubcic and Mr Leybournethemselves expended considerable skill and effort on developing the Orionamphibious systems. As an example, they refer to Dr Field's evidence that Orion'sthrough-trunnion, tapered-spigot oil channels require very specialised manufactureand result in the leg attachments being exceptionally rigid.96 He relies on Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC)[2000] 1 WLR 2416 (HL).Conclusions as to substantiality[418] The substance of the copyright claimed by the plaintiff is represented in thearrangement of functional features comprising the Sealegs system. It is clear from theevidence that Mr Bryham and the plaintiff expended extensive time, effort andresources in the course of progressing the design from the initial concept modelsthrough to the final prototype models. As noted earlier, I do not accept that theplaintiff's copyright works are of low originality. Nor do I accept the defendants'submission that the features identified by the defendants are due to actual functionalconstraints.[419] While the defendants say that Mr Bryham's "trial and error" approach was dueto his lack of engineering expertise and that any qualified engineer would haveimmediately known the solution, the evidence clearly establishes that prior to MrBryham developing the Sealegs leg assembly, no other person had done so. I rejectthe defendants' submission that Mr Bryham's extensive work and efforts wereunnecessary because an engineer would have readily solved the design problems.Moreover, whether or not the design and development work undertaken by Mr Bryhamcould have been achieved more quickly by others is not in my view relevant. What isrelevant is that, having expended considerable effort and skill in developing andconstructing an innovative and original design, Mr Bryham's and Sealegs' system waswholly adopted and copied by Orion when the defendants set about designing theOrion system.[420] I find that what the defendants did copy was a substantial part of the Sealegscopyright models by reason of their adoption and reproduction of the Sealegsarrangement or pattern of features. By doing so they did much more than "filch" thecore design concepts and features embodied in the Sealegs pattern, they unreservedlyappropriated it. Having first appropriated the Sealegs arrangement or pattern, theindependent design work thereafter undertaken by the defendants resulted in somedifferent engineering solutions and a different appearance, but nevertheless retainedthe essential Sealegs pattern and composition of components.Summary and conclusions as to infringement of copyrightOverview[421] In conclusion, I find that when Mr Leybourne and Zubcic embarked upon theprocess of designing the Orion amphibious system, they commenced by appropriatingthe collocation and arrangement of components that comprised the essential core ofthe Sealegs system. This was an arrangement or pattern of components which wasalready well known to them. What they then designed and produced in the Orion S25-4WD and S25-3WD products was a substantial copy and reproduction of the Sealegsamphibious leg pattern for both the front and rear leg assemblies in which Sealegs heldcopyright. I reject the defendants' contention that the Orion system was produced asa result of the Orion defendants following an independent design path. While theOrion defendants certainly adopted alternative engineering solutions for some visualand functional aspects of the Orion leg assemblies, in each case they related to designdetails and did not involve changes or substantial differences in terms of thecomposition and arrangement of what was the existing and well-known Sealegspattern.[422] I regret to say that I found the evidence of Mr Leybourne, Mr Zhang and MrZubcic lacking in credibility as regards their explanation of the development of theOrion design and their claim that they did not found the Orion design on the Sealegspattern. Mr Leybourne's and Mr Zhang's account of the origins of the Orion businessand just when they decided to go into business manufacturing amphibious systemslacks cogency and is in my view implausible.[423] The evidence establishes that by mid-2011 Mr Leybourne, who was clearly anexperienced and very competent senior member of the Sealegs operational staff, hadbecome increasingly critical of the senior management at Sealegs. Through his timewith Sealegs he had acquired a detailed knowledge of the Sealegs amphibious legassembly and its functioning. He had worked closely with Mr Zubcic in relation tothe Sealegs' in-house component manufacturing and assembly operation, and it is clearthat between them they identified what they considered would be improvements thatcould be made to the Sealegs system.[424] Although I find the defendants' evidence as to when and what occurred to beunsatisfactory, the visit by Mr Zhang and his wish to start a business in New Zealandin order to satisfy immigration requirements provided the opportunity for MrLeybourne to set up Orion to compete with Sealegs. Mr Leybourne and Mr Zubcicbelieved that they could improve on the Sealegs amphibious system and produce asuperior kit for use on small recreational craft, and Mr Zubcic agreed to leave Sealegsand join Mr Leybourne at Orion with that objective.[425] In Mr Leybourne's communications with Sealegs and Mr Bryham followingthe establishment of Orion, he stated on several occasions that Orion was notproposing to compete with Sealegs and that the Orion business should be regarded bySealegs as being complementary to its own business, rather than a competitor. Therewas of course nothing to stop Orion competing with Sealegs with a product that wasproduced by means of an independent design path and which was not derived from theSealegs copyright pattern. However, the statements claiming that Orion was not acompetitor were inconsistent with Orion's actual intention of competing with Sealegs,and show that Mr Leybourne and Orion wished to convey to Sealegs that it need haveno concerns about the Orion amphibious system in terms of competition in the market,or by reason of it being based on the Sealegs design. While maintaining theconfidentiality of a new and independently designed product makes commercial sense,especially from a competitor, those statements went well beyond what was necessaryto maintain confidentiality.[426] It appears, however, that while Mr Leybourne and Mr Zubcic were well awarethat Sealegs claimed intellectual property rights relating to its amphibious legassemblies, they were focussed on the existence of the Sealegs patent andconsequently may not have fully appreciated the effect of Sealegs' copyright. Fromthe evidence it appears that they proceeded to develop the Orion products upon theunderstanding that they were not constrained in any way when developing the Oriondesign, other than by the Sealegs patent which related to using the front leg wheel andtyre as a bumper when the leg assembly was in the retracted position.[427] The first Orion product (the S25-4WD) was developed and produced forinstallation on a flood rescue craft to be sold in China through Mr Zhang's familycompany trading as Surfcon. With that type of product being sold into the Chinesemarket, it was not likely that Sealegs' commercial interests would be affected to anysignificant degree. However, Mr Leybourne and Orion nevertheless went toconsiderable trouble to ensure that Mr Bryham and Sealegs did not know about thesystem that they were developing.[428] It is also relevant to note that while Orion was in the initial stages of developingits S25-4WD system, it was also working for Sealegs to design and manufacture theSealegs SL100. Between May to July 2013, well before the Orion S25-4WD wasconstructed, Mr Zubcic worked on the design of an off-set rim wheel for use on theSL100 for Sealegs. This off-set rim wheel enabled the hub motor to sit inside thewheel in the same way as the wheels used on the Orion S25-4WD. While Mr Zubcicsays that one of the first things he did at Orion was to make sketches of an off-set rimwheel for the Orion amphibious system, I consider it to be significant that when hesent Mr Zhang a copy of the computer sketch in May 2013 to enable Mr Zhang toobtain prices for its manufacture, Mr Zhang's response was to ask whether he hadasked Mr Bryham about it yet. That exchange is a clear indication that Sealegs andMr Bryham were being treated as Orion's client in relation to the wheel design underdiscussion. The subsequent exchange between Mr Zubcic and Mr Bryham (in whichMr Bryham nominated the sketch he preferred) confirms this. I do not accept MrZubcic's explanation that he sent the sketches to Mr Bryham because of his friendshipwith Mr Bryham.[429] The provisions of the SL100 design brief stipulated that the intellectualproperty of all proprietary components designed as part of SL100 would be the soleownership of Sealegs. I find that Mr Zubcic's design work for the SL100 off-set wheelrim in mid-2013 produced intellectual property belonging to Sealegs pursuant to theterms of the SL100 design brief. This preceded the manufacture of the Orion S25-4WD which took place in the second half of 2014.[430] By reason of Orion's engagement by Sealegs on that design brief, Orion'semployees – including especially Mr Leybourne and Mr Zubcic – had ongoing directaccess to Sealegs' design information and involvement with the development of thenew SL100 Sealegs design and its features. While Mr Leybourne claims to havemaintained separation between Orion staff involved in designing the Orion productsand those engaged in the design and manufacture of SL100 for Sealegs, any effectiveseparation between the two groups was in practice impossible. Mr Percival was unableto undertake the essential computer-based testing of the Sealegs designs and wasassisted by Mr Zubcic in this regard. Having regard to the small number of staffemployed by Orion and the significant role that Mr Zubcic played in relation toOrion's engineering designs, I consider that the only reasonable inference to draw isthat Mr Zubcic was well aware of the design work being done on the Sealegs SL100as he was directly involved in performing aspects of it himself. Mr Leybourneexplained in his evidence that although Mr Zubcic and Mr Percival sat in separateoffices, he "floated between" them, and so I consider that he too was privy to thedesigns and progress being made by both.[431] The reasons for the objective similarity between the Orion products and theSealegs boat 136 and SL100 are obvious when examined under this light. Thesituation here is quite unlike most cases where infringement of copyright is allegedand where the plaintiff seeks to rely on an inference that the objective similaritybetween its product and the defendants' is due to copying. Here, the plaintiff hasproved that the authors of the allegedly infringing works were its own formeremployees who therefore had a detailed knowledge of the plaintiff's copyright work.Moreover, the same former employees – with the assistance of other former Sealegsemployees – were engaged to work on the plaintiff's new amphibious leg assemblydesign (SL100) at the very same time as they were developing their own amphibiousproduct.[432] I find the plaintiff has proved that copying of its copyright pattern did takeplace by the way that Mr Zubcic and Orion reproduced the Sealegs amphibious legassembly copyright pattern in the design and manufacture of the Orion products. Thedetailed knowledge of the Sealegs pattern by Mr Leybourne and Mr Zubcic and theirreproduction of the Sealegs copyright pattern as the basis of the Orion configurationclearly establishes, in my view, that the two Orion designs were directly derived fromthe Sealegs leg assembly pattern.[433] While the Orion defendants were able to produce in evidence considerabledocumentation relating to the design, manufacture and acquisition of the componentsrequired for assembling the Orion products, they produced nothing whatsoever in theform of documentation of the design choices and decisions made regarding the patternor composition of the Orion leg assemblies. No records of decisions or notes wereproduced and no emails or other correspondence were presented in evidence regardingOrion's crucial design decisions that would establish the starting point of its designpath.[434] While the plaintiff contends that the Orion defendants have been selective intheir discovery and that there must be documents relating to those matters, analternative and possible explanation is that quite simply there were no such documentsor communications because the Orion defendants never needed to address thosefundamental design decisions, as they had already decided to adopt the Sealegs patternand there was therefore nothing to be discussed or decided. Apart from the lack ofdocumentation there is no evidence to support the plaintiff's allegation that thedefendants have withheld discoverable material, and on reflection I conclude that theabsence of any design-related documentation regarding the type and generalcomponent configuration of the Orion systems is consistent with the Orion defendantshaving appropriated the Sealegs copyright pattern, rather than having withheld anysuch material.Conclusion as to alleged copyright infringement by first, second, fourth, and sixthdefendants[435] Having found objective similarity between the Orion products and the Sealegscopyright models; a causal connection between the Sealegs copyright models and theOrion products in that the Orion products were derived from the Sealegs copyrightmodels; and that the Orion products reproduce the Sealegs component pattern andthereby a substantial part of the Sealegs copyright work, I find Sealegs' copyright tohave been infringed by the first, second, fourth, and sixth defendants.[436] Mr Leybourne and Mr Zubcic were most directly and actively involved in thesteps taken to copy the Sealegs system, but Mr Zhang was also involved from theoutset with the initial plans for Orion to develop an amphibious system to compete inthe same market as Sealegs, with a product that would be suitable for application onthe same type of small craft as the Sealegs system. Mr Zhang was also involved in thesourcing of components necessary for the construction of the Orion products, and heclearly knew what Mr Leybourne and Mr Zubcic were doing by adopting andappropriating the Sealegs leg assembly pattern as the starting point of the Oriondesign.Conclusion as to alleged copyright infringement by Smuggler Marine (thirddefendant) and David and Pauline Pringle (ninth defendants)[437] Having found that the Orion S25-3WD infringes the plaintiff's copyright, Iturn to address the question of whether the plaintiff has established that SmugglerMarine also infringed the plaintiff's copyright.[438] Mr Henry submits that both Smuggler and Mr Pringle are responsible forprimary infringement of the plaintiff's copyright, pursuant to ss 29 to 31 of theCopyright Act 1994. The effect of those sections is that copying a work or issuingcopies of a work to the public are primary infringements of copyright.[439] Mr Henry notes that in his sworn answers to interrogatories, Mr Leybournenamed the persons involved in the decision to develop the S25-3WD as being himself,Mr Zhang, Mr Zubcic and Mr Pringle. Mr Henry therefore says that Smuggler andMr Pringle are primary infringers by reason of Mr Pringle's direct involvement withOrion to appropriate the Sealegs assembly pattern and reproduce it in the Orion 3WDsystem, and by reason of Smuggler and Mr Pringle selling boats fitted with theinfringing Orion leg assemblies to the public and thereby issuing copies to the public.[440] Mr Spring says that Smuggler denies any infringement of copyright, whetherprimary or secondary. He submits that Sealegs has no copyright in the Smuggler hull,and that the Smuggler hulls to which the Orion S25-3WD systems were attached weredifferent hulls to those on which the Sealegs systems were used. However, I do notunderstand the plaintiff to have alleged that Sealegs did have copyright in theSmuggler hulls.[441] Mr Spring further says that Smuggler cannot be liable under s 31 of the Act forissuing copies to the public as it was Orion who first issued or circulated copies to thepublic by selling the S25-3WD assemblies to Smuggler. Mr Spring says thatSmuggler's on-sale of the Orion S25-3WD assemblies attached to its hulls weresubsequent distributions or sales of the copies, which are excluded by s 9(1)(a) of theAct from the definition of issuing to the public. However, I consider that such ananalysis fails to recognise that Mr Pringle and Smuggler were not simply purchasersof the Orion 3WD system; rather, they had been directly and jointly involved withOrion in the production of the Orion 3WD system which they knew commenced withan appropriation of the established pattern of functioning components and geometrycomprised in the Sealegs leg assemblies. Accordingly, by selling its boats with theOrion system installed on them, Smuggler and Mr Pringle put into circulation copiesnot previously put into circulation.[442] I reject Mr Spring's submission that Mr Pringle and Smuggler played little orno role in the design and manufacture of the S25-3WD. It is clear from the evidencethat as a result of differences with Sealegs over price and terms of supply, Mr Pringlehad reached a point in late April 2015 at which he was keen to source an alternativeamphibious system to use on the Smuggler boats in place of the Sealegs system he hadbeen using for some time, because Sealegs was "too hard" to deal with. In May 2015,Mr Pringle told Mr Leybourne that he was interested in exploring the Orion systemfurther. By October 2015, Mr Pringle had sent plans of the Smuggler 750 RIB toOrion, which had commenced work on designing a single-wheel front assembly. Inan email exchange on 28 October 2015, Mr Leybourne advised Mr Pringle that theOrion design was heading towards a similar geometry as that used by Sealegs. MrPringle replied proposing to speak to a patent lawyer regarding the way forward. It isclear from these communications that Mr Pringle knew that Sealegs held intellectualproperty rights over its amphibious system design, and was also well aware that thedesign Orion was developing was "similar" in terms of geometry to the Sealegssystem.[443] On 25 November 2015, Mr Zubcic sent Mr Pringle a computer drawing of a3WD system from which it can be seen that the front leg retains the same key featuresand geometry as the Sealegs system. In further email correspondence on 11 February2016, Mr Leybourne advised Mr Pringle that Orion was working on a solution to aproblem that would result in the bow wheel no longer functioning as a bumper, andthat Orion would seek legal advice as to whether the solution would avoid infringingSealegs' patent. While Mr Leybourne and Mr Pringle were both focussed on the issueof whether the new Orion 3WD product they were developing would infringe Sealegs'patent rather than its copyright interest, it is nevertheless clear that Mr Pringle wasactively involved in design-related discussions and decisions, and knew that theproduct Orion was developing was substantially derived from the Sealegs system andwould emulate the Sealegs functionality.[444] The plaintiff pleads that Mr Pringle and his wife Pauline Pringle are directorsof Smuggler Marine and are joint tortfeasors with Smuggler Marine. Mr Springrealistically acknowledges that were the Court to find that Smuggler Marine did breachthe plaintiff's copyright by manufacturing and or selling its Smuggler craft with theOrion S25-3WD installed, then Mr Pringle would be liable as a joint tortfeasor.However, Mr Spring says that although Mrs Pringle is a director of Smuggler Marine,there is no evidence that she played any part in the infringing acts.[445] Any person who infringes copyright by doing a restricted act, such as copying,will be liable. Where more than one person acts, they may be liable as jointtortfeasors.97 Company directors who themselves infringe copyright will be liabletogether with the company itself: they cannot rely on the rules of limited liability incompany law to escape the consequences of infringement.98[446] Here, Mr Pringle was directly involved with Orion in the copying of theSealegs copyright work. His actions were undertaken in his capacity as director ofSmuggler Marine, on behalf of the company and for the benefit of the company'sbusiness, and his actions are therefore attributable to Smuggler Marine. I find thatboth Mr Pringle and Smuggler Marine are liable for the infringement of the plaintiff'scopyright.97 Electroquip Ltd v Craigco Ltd HC Auckland CIV-2006-404-6719, 3 September 2008 at [133].98 Electroquip Ltd v Craigco Ltd HC Auckland CIV-2006-404-6719, 3 September 2008 at [134],citing Susy Frankel and Geoff McLay Intellectual Property in New Zealand (LexisNexis,Wellington, 2002) at [5.27]. See also MCA Records Inc v Charly Records Ltd [2001] EWCA Civ1441 at [29]–[53].[447] There is no evidence that Mrs Pringle was directly involved in those activitiesor that she played any other part in the infringing acts. Accordingly, I find that MrsPringle is not liable to the plaintiff for any infringement of its copyright.Alleged copyright infringement by Stryda and its directors[448] The plaintiff alleges that the tenth defendant, Stryda Marine (Stryda) hasinfringed its copyright by purchasing Orion S25-4WD amphibious systems, installingthem onto its craft and then selling the Orion-equipped craft to the public in NewZealand and in China.[449] Although the plaintiff alleges that the first defendant, Mr Zhang, and theseventh defendant, Mr Warren Farr, are both directors of Stryda and are also bothexecutives of the company, the evidence shows that Mr Farr is not in fact a director ofStryda.[450] The plaintiff further alleges that Mr Zhang was directly involved in Orion'sactions in infringing the plaintiff's copyright, and that Mr Farr knew that Mr Zhangwas involved in the design and development of the Orion system which infringed theplaintiff's copyright.[451] Mr Spring says that the plaintiff has not led any evidence regarding Mr Farr'sinvolvement, and says that the plaintiff has failed to establish that he committed anyact amounting to primary infringement of the plaintiff's copyright.[452] Here too, Mr Spring acknowledges that should the Court find that Stryda hasinfringed the plaintiff's copyright by manufacturing and/or selling its boats with theOrion S25-4WD system installed on them, then it is accepted that Mr Zhang will beliable as a joint tortfeasor for primary infringement.[453] As I have already said, it is clear from the evidence that Mr Zhang was closelyand directly involved from the outset with the initial plans for Orion to develop anamphibious system to compete in the same market as Sealegs with a product thatwould be suitable for application on the same type of small craft as the Sealegs system.He was also involved in the sourcing of components necessary for the construction ofthe Orion products, and he knew what Mr Leybourne and Mr Zubcic were doing byadopting and appropriating the Sealegs leg assembly pattern as the starting point ofthe Orion design. Accordingly I find that by arranging for Stryda to purchase the OrionS25-4WD assemblies for installation onto Stryda craft, and then arranging the sale ofthe Stryda boats to the public in New Zealand and China, both Mr Zhang and Strydaare joint tortfeasors and are both liable to the plaintiff for infringing its copyright.ReliefPlaintiff's allegation of flagrant breach of copyright[454] In addition to the injunctive orders sought by the plaintiff in its prayer for relief,the plaintiff also seeks an inquiry as to the damage it has incurred, or alternatively atits election an account of profits derived by the defendants from the sales of the OrionS25-3WD system including additional damages for the flagrancy of the infringementof the plaintiff's copyright.[455] For the plaintiff to be entitled to an award of damages for the flagrancy of thebreach of its copyright, it must establish that there has been deliberate copying of theplaintiff's copyright models, undertaken with knowledge of the plaintiff's copyrightinterest and with conscious disregard for the plaintiff's copyright interest. InWellington Newspapers Ltd v Dealers Guide Ltd, McMullin J described what isrequired for conduct to be regarded as flagrant.99 He said:The ordinary dictionary meaning of flagrant is 'glaring, scandalous, oroutrageous'. Flagrancy was described by Brightman J in Ravencroft v Herbert[1980] RPC 193, 208 as:'Flagrancy in my view implies the existence of scandalous conduct,deceit and such like; it includes deliberate and calculated copyrightinfringement.'What is flagrant must of course be a question of fact and degree to be decidedagainst the background of relevant facts.[456] Here the plaintiff says that the defendants were well aware of its copyrightinterest in the composition and arrangement of features of its amphibious legs and,despite that knowledge, proceeded to deliberately copy the arrangement in the99 Wellington Newspapers Ltd v Dealers Guide Ltd CA47/83, 17 August 1984.development of the Orion product. The plaintiff refers to an email sent by MrLeybourne to Mr Bryham and Mr McKee-Wright on 3 May 2016 in which he proposedas a compromise to the differences that were by then arising over Orion's developmentof a competitive amphibious product that Orion would pay Sealegs a "no fight fee" of$5,000.00 for each Orion system used or sold into markets protected by Sealegs patent,until 100 systems were sold or the Sealegs patent expired. In exchange for thepayment of the 'no fight fee', Mr Leybourne sought full freedom for Orion to operatewithout restraints. Mr Leybourne further said that the defendants believed that theywere avoiding patent infringement by using their own "core technology", and thatshould infringement be a possibility, they would "simply adjust the design."[457] The plaintiff says that Mr Leybourne's emailed proposal shows that he and thedefendants were well aware of the plaintiff's copyright and they had proceeded toproduce their product and subsequently sell it in the full knowledge that by doing sothey were acting in breach of the plaintiff's copyright.[458] It is clear from the evidence that the defendants had been careful to maintainconfidentiality of the work they were doing to develop the S25-4WD system until itwas seen by Sealegs CEO Mr David Glen in October 2014, on the Surfcon ARC600craft being transported on a truck. The next day Mr Leybourne sent an email toSealegs in which he referred to Sealegs CEO Mr David Glen's sighting of the Orionsystem, wherein he said Mr Glen had taken "spy photos", and said that if asked, Orionwould be prepared to show the craft to them.[459] Mr Bryham and Mr McKee-Wright subsequently saw the Orion S25-4WD atthe Shanghai boat show in April 2015, and in an email sent to Mr Bryham soonthereafter, Mr Leybourne again said that although the Orion system and productswould "... occupy similar space, we are complementary not competitive businesses."[460] Those comments by Mr Leybourne, while misleading insofar as they describeOrion as not intending to compete in the same market as Sealegs, are neverthelessconsistent with a belief that the leg assemblies that Orion was producing at that timedid not infringe Sealegs' intellectual property interests.[461] I consider that the comments made by Mr Leybourne in his email of 3 May2016 in which he referred to the Sealegs patent, while consistent with him knowingabout the Sealegs patent, do not indicate an appreciation of Sealegs' copyright in thecomposition and arrangement of the features of its leg assembly. The focus of MrLeybourne's attention as regards possible infringement relates to the Sealegs patent,and he suggests that Orion could avoid infringing by making design adjustments. MrPringle similarly referred to the Sealegs patent in his email communications with MrLeybourne regarding the design and production of the S25-3WD, and he and MrZubcic proceeded to design and construct a new bow section for the Smuggler craft tocreate a recessed cowling into which the front wheel would retract, in order to avoidthe Sealegs patent by not having the tyre on the front leg wheel acting as a bumperwhen the leg was retracted.[462] In my view, the understanding upon which Mr Leybourne and the otherdefendants proceeded was that the only restriction on the scope of the Orion designwas the Sealegs patent and the need to avoid infringing it. Accordingly, I consider thatthe defendants proceeded without an appreciation of the existence and significance ofthe Sealegs copyright interest in the composition and arrangement of the features ofits leg assembly. In such circumstances the defendants have not been shown by theplaintiff to have acted in a flagrant manner in disregarding its copyright interest, ofwhich they appear to have had no appreciation.Design registrationSubmissions[463] In its first cause of action the plaintiff alleged that the first to ninth defendantsthat they had jointly infringed the plaintiff's rights pursuant to its registered designnumber 403199, dated 16 January 2003, by manufacturing and displaying for sale atthe Auckland Boat Show in 2016 a boat fitted with an Orion S25-3WD system that isnot substantially different from the plaintiff's registered design. The plaintiff soughta permanent injunction restraining the first to ninth defendants from infringing theplaintiff's exclusive right pursuant to the registered design, by sale or sales ofinfringing amphibious boat systems attached to boats.[464] The plaintiff further alleges that prior to the interim injunction granted on 19December 2016 the defendants caused the plaintiff damage by means of themanufacture of five Orion S25-3WD systems which were installed onto RIB craft soldto the public. The plaintiff seeks an inquiry as to the damage it has incurred due to thesales by the defendants of the S25-3WD systems, or alternatively at its election anaccount for the profits derived by the defendants from the sales.Analysis[465] The final expiry date of the registered design was on 23 December 2017, andconsequently the plaintiff's rights in the registered design have now expired, and theplaintiff can no longer maintain its claim for relief by way of an injunction.[466] The plaintiff's registered design includes 3-D computer drawings of an RIBboat with three retractable legs, one at the bow, and two at the stern. The computerdrawings of the boat with the legs retracted show the front leg retracted by beingswung forward, with the wheel located within an enclosed recess in the pontoons atthe bow so that only part of the wheel and tyre extends beyond the pontoons. Similarly,the images show that when the stern legs are retracted, the wheels are swung to therear and into a position in which they too are substantially enclosed within recesses atthe rear of the port and starboard pontoons when fully retracted, so as to only partlyextend beyond the pontoon. The novelty in the design:resides in the features of shape and configuration of the boat as shown inthe accompanying representations. The boat has a retractable undercarriagesystem, and the accompanying representations show the appearance of theboat with its wheels up, and the appearance of the same boat with its wheelsdown.[467] Section 11(1) of the Designs Act 1953 sets out the right given by registrationof a design. It provides:The registration of a design under this Act shall give to the registeredproprietor the copyright in the design, that is to say, the exclusive right in NewZealand to make or import for sale or for use for the purposes of any trade orbusiness, or to sell, hire, or offer for sale or hire, any article in respect of whichthe design is registered, being an article to which the registered design or adesign not substantially different from the registered design has been applied,and to make anything for enabling any such article to be made as aforesaid,whether in New Zealand or elsewhere.[468] In UPL Group Ltd v Dux Engineers Ltd, Somers J for the Court said:100Whether there is an infringement of copyright in a registered design is aquestion of fact of which the eye is the Judge It is not necessary for aplaintiff to establish a causal connection between the design and the infringingarticle as it is in the case of infringement of copyright under the CopyrightAct. That emerges from the provisions of s 11 of the Designs Act 1953, set outabove.The test is whether the article alleged to be an infringement has substantiallythe same appearance as the registered design. This involves a comparisonbetween the article complained of and the representations of the articlecontained in the application for registration. It is not always easy to comparea two-dimensional design with a three-dimensional object There is also a relationship between the degree of novelty or originality of aregistered design and the issue of infringement. If there is substantial noveltyor originality small variations in the article alleged to infringe will be unlikelyto save the defendant. On the other hand if the features of novelty or originalityare but little removed from prior art small differences may avoid aninfringement.[469] The plaintiff says that the registered design has substantial novelty as shownby the prior art searches produced in evidence which show nothing visually similar.The plaintiff says that the appearance of the registered design RIB boat as shown withthe legs down and the Smuggler 770 craft produced by Smuggler Marine is identical.The plaintiff accepts that there are some minor differences; for example, in the wheels-up position all wheels on the registered design are covered, while on the Smugglercraft only the front wheel is covered by the enclosed pod at the bow. However, theplaintiff says that given the degree of novelty at the time of registration, the Courtshould conclude that the Smuggler RIB is visually substantially the same as shown inthe computer drawings of the registered design.[470] I consider however that while there is some similarity between the images ofthe registered design RIB and the Smuggler RIB fitted with amphibious retractablelegs (in particular the use of three legs retracted by swinging fore and aft of the craft),there are also sufficient dissimilarities to lead me to conclude that when comparing thetwo they do not share substantially the same design. When retracted, the front leg ofthe registered design craft lifts the front wheel to an enclosed recess within thepontoons at the bow in a similar manner (in terms of appearance) to that of the100 UPL Group Ltd v Dux Engineers Ltd [1989] 3 NZLR 135 (CA) at 139.Smuggler RIB. However, when the rear legs and wheels of the registered design areretracted they are each located within a recess in the inflatable pontoon where they aresubstantially covered and enclosed. By comparison, the Smuggler wheels whenretracted remain entirely visible and obvious. The overall impression is one of broadsimilarity but not such as to give the two craft substantially the same appearance.[471] Accordingly, I find that the plaintiff's first cause of action based upon itsregistered design fails.Result[472] The plaintiff has established that the first, second, third, fourth, sixth, ninth (MrPringle only) and tenth defendants have all infringed the plaintiffs copyright works asdescribed in paragraphs [193] – [196].[473] The plaintiffs' claim against the seventh defendant and the ninth defendant(Pauline Pringle) is dismissed.[474] Pending further order of the Court, the first to fourth, sixth, ninth (Mr Pringleonly) and tenth defendants are restrained from infringing the plaintiff's copyright inthe pattern or arrangement of features outlined in paragraphs [193]–[196] of thisjudgment, as contained in the external amphibious assemblies on the prototypesknown as Boat 1, Boat 136 and IKA11.[475] In particular, pending further order of the Court, the first to fourth, sixth, ninth(Mr Pringle only) and tenth defendants are restrained from manufacturing, displaying,offering for sale, or selling substantial copies of, or completing the sale of, the externalamphibious assemblies of the Orion S25-4WD and/or the external amphibiousassemblies of the Orion S25-3WD either as a separate kit or installed on the hull of acraft.[476] I make an order for an inquiry as to damages incurred by the plaintiff due toall or any sale or sales by the second and third defendants of the Orion S25-3WDsystem, and in the alternative at the election of the plaintiff an account for any profitderived and obtained by the second or third defendants from the sale or sales of theOrion S25-3WD system.[477] The duration of injunctive relief comprised in the orders at [474] and [475] isto be determined following a hearing to ascertain the duration of the plaintiff'scopyright. I order that the interim injunction made by Peters J on 19 December 2016is no longer in force.[478] The plaintiff also seeks an order directing the defendants to deliver all and anyinfringing items and products in their possession or control to the plaintiff fordestruction. The defendants request that they be heard in relation to that matter.Accordingly, I direct that the matter of delivery and destruction of any infringing itemsin the defendants' possession shall also be heard together with the plaintiff'sapplication for an inquiry as to damages.Costs[479] The plaintiff has succeeded and is entitled to costs. I direct the plaintiff to fileand serve a memorandum as to costs within 15 working days from delivery of thisjudgment.[480] The defendants are to file their memorandum as to costs within a further 10working days following their receipt of service of the plaintiff's memorandum.[481] The costs memoranda are not to exceed five pages in length, apart from anyattached schedules and addenda comprising material relating to disbursements._____________Paul Davison JAPPENDIX