Zhang v Sealegs International Ltd

• Jurisdiction: New Zealand
• Judge: Brown J
• Judgment Date: 27 August 2019
• Neutral Citation: [2019] NZCA 389
• Court: Court of Appeal
• Docket Number: CA454/2018
• Date: 27 August 2019

Between

YUN ZHANG

First Appellant

ORION LIMITED AND ORION MARINE LIMITED

Second Appellants

Smuggler Marine Limited

Third Appellant

Darren Leybourne

Fourth Appellant

Vladan Zubcic

Fifth Appellant

David Pringle

Sixth Appellant

Stryda Marine Limited

Seventh Appellant

and

Sealegs International Limited

Respondent

[2019] NZCA 389

Court:

French, Cooper and Brown JJ

CA454/2018

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Intellectual Property — breach of copyright — collocation-based copyright claim comprising known functional components and the application of well-known engineering mechanisms and principles — conceptual distinction between ideas and their expression — Copyright Act 1994

Counsel:

J G Miles QC and A K Hyde for Appellants

B P Henry, K M Elcoat and S S Singh for Respondent

• A The appeal is allowed. The orders in the High Court are set aside.

• B The respondent must pay the appellants one set of costs for a complex appeal on a band B basis plus usual disbursements. We certify for second counsel.

JUDGMENT OF THE COURT

Table of Contents

	Para No
Introduction	[1]
Relevant facts	[6]
Mr Bryham's idea	[6]
Two concept boats	[9]
Prototype boat 1	[13]
Mr Leybourne and Mr Zubcic join Sealegs	[15]
Prototype boat 136	[18]
The SL100 project	[21]
Mr Leybourne forms Orion Marine Ltd	[22]
The 2015 Shanghai Boat Show	[28]
Smuggler Marine and Sealegs	[29]
Prototype IKA11	[32]
Orion provides its amphibious system to Smuggler	[33]
Sealegs' intellectual property rights	[39]
NZ Patent 526705	[40]
Design registration 403199	[43]
Copyright	[46]
The changes in the formulation of Sealegs' copyright claim	[47]
The pleaded claim	[47]
Sealegs' case at trial	[50]
The report of the conference of experts	[53]
The High Court judgment	[57]
Scope of appeal	[62]
The relevant copyright work: identification	[64]
Ideas and their expression: patent vs copyright	[72]
Were the prototypes “models”?	[95]
Was the arrangement of features original?	[106]
Infringement — principles	[128]
Objective similarity?	[137]
The High Court's finding	[137]
Errors in approach	[138]
Functional resemblance — the third error	[141]
Dimensions and geometry — the fourth error	[146]
Our analysis	[154]
The relevance of an engineer's perspective	[164]
A failure to take account of the appellants' expert evidence?	[171]
Undue reliance on credibility issues?	[178]
Result	[181]

REASONS OF THE COURT

(Given by Brown J)

Introduction

1 Sealegs International Ltd (Sealegs) asserts copyright in models 1 in the form of prototypes of its arrangement of known mechanical components comprising the wheel assemblies of its amphibious system externally located on the hulls of boats. The copyright is said to be the expression of the novel idea to place wheel assemblies on the exterior of a boat hull which are retractable to visible positions outside the hull form, thereby providing a solution to the problem of amphibious capability for small craft.

2 Sealegs claimed that its collocation-based copyright was infringed by the amphibious system developed by the second appellants (Orion). It also contended that Orion had infringed Sealegs' registered design. However it elected not to sue for patent infringement.

3 In the High Court Davison J held that the arrangement of components comprising the central core of the Sealegs amphibious boat system was highly original and was appropriated by the design of the Orion amphibious system. 2 Differences identified between the systems were discounted because they did not alter the leg assemblies' fundamental functionality. Sealegs' registered design claim was dismissed.

4 The appellants challenge the High Court's findings of originality and objective similarity, and the rejection of their claimed independent design path. They contend that the judgment fundamentally misconceives the law of copyright with the consequence that Sealegs has been granted an unprecedented monopoly in a collocation of known functional components, untethered to any visual expression. While acknowledging that they adopted Sealegs' idea, they maintain that the Orion

arrangement was not a copyright infringement but inevitably derived from functional constraints

5 Hence in the context of a collocation-based copyright claim comprising known functional components and the application of well-known engineering mechanisms and principles, the parties' cases trod the notoriously ill-defined boundary between ideas and their expression.

Relevant facts

Mr Bryham's idea

6 Mr Maurice Bryham, an Auckland beachside resident, was inspired to design and construct an amphibious system comprising three supporting legs and powered wheels which when attached to a powerboat enabled it to be manoeuvred while on land, driven from the beach into the water and the legs then retracted when the boat was afloat. Such a product, which would provide the convenience and safety of a boat that could be launched and returned to land without the occupants having to leave the boat, was expected to appeal to the high end of the recreational boating market. He named the design “Sealegs” and incorporated the respondent on 10 May 2000. All his work on the prototypes for the Sealegs amphibious boat system was undertaken as its employee.

7 Mr Bryham explained why he considered his idea was unique:

4 There are many, many ways to achieve a design of a three-legged amphibious boat system. These include the use of hull recesses with opening flap doors, vertically lifting and lowering wheels, or having wheels that deploy from the side of the hull. The decision I made was unique at the time, as the way I conceived to achieve the retraction of wheels from a boat is to have the wheels, the legs, the retraction actuator and the front steering actuator all located outside the hull leaving the boat streamlined in the water when underway.

5 Other solutions are to have the wheels, legs, retraction actuator, and/or steering actuator partly inside and partly outside of the boat hull. The combinations available to a designer are many and varied.

6 I thought it would be better to have the legs and retraction assembly attached to the outside of the hull with the legs and the retraction actuators all externally mounted. When the legs were retracted, the wheels would be lifted and stored above the boat waterline.

This concept maintained the integrity of the hull, but resulted in the external attachments of the legs, wheels, retraction actuator and front steering actuator.

Hence his idea was not merely an amphibious boat, as the written submissions for Sealegs suggested, but rather, as his reply brief described, the unusual design decision to have “ all the motorised wheels and amphibious assemblies located outside the watertight hull in both land and water positions”. 3

8 Mr Bryham also experimented with another design in which the legs when retracted were substantially concealed and enclosed within recesses built into the hull of the boat. He obtained design registration 403199 in relation to that design. However he did not seek registration of the design which was the subject of the copyright claim.

Two concept boats

9 The first stage in Mr Bryham's design endeavours was known as “concept boat 1”. He purchased a 4.7 metre rigid inflatable boat (RIB) and built wooden mock-ups of legs and wheels to create a pattern for the external legs and to work out the placement of the leg pivot points and actuator connection points on the hull, as well as the geometry of the movement they were required to perform in order to extend and retract externally of the boat. He then had the pattern of his wooden mock-ups replicated by a stainless-steel fabricator. The front and rear legs on concept boat 1 were lifted out of the water manually and the rear wheels were electrically driven. The front wheel was steered by means of an external actuator. Having assembled the legs and attached the amphibious leg system onto the RIB in his home garage, he tested concept boat 1 by driving it from his garage to the nearby beach and into and out of the water.

10 Mr Bryham and Sealegs further developed the design by means of “concept boat 2”, again purchasing a standard RIB for modification. The fourth appellant, Mr Leybourne, then the owner and principal of Central Hydraulics Services Ltd, was engaged to provide advice regarding the hydraulics system required to power the

actuators which would extend and retract the legs and to power the hydraulic motors used to drive the rear wheels

11 The modifications introduced by concept boat 2 were described in the High Court judgment in this way:

[17] The concept boat 2 model had the hydraulic retraction system of the front leg located inside the hull. Part of the front wheel steering system was also contained inside the hull. The front wheel was secured by an inverted “U” shaped fork, and the rear legs were retractable by means of an external hydraulic lift cylinder. In the course of its development the system initially used electric motors to drive the wheels, then hydrostatic drive, then mechanical drive, before hydraulic power was finally selected to drive the wheels. The hydraulic drive system for the rear wheels used a hydraulic motor located inside the hull with chains running inside the rear legs, which had larger wheels and tyres with a more defined tread than had been used previously on concept boat 1.

12 Informed by the development of concept boat 2, Sealegs and Mr Bryham proceeded to construct what became “prototype boat 1”, the first of three prototypes which ultimately formed the basis of the copyright...