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Copyright
AUSTRALIA
The importance of clear determinations of Intellectual Property ownership
Gold Peg International Pty Ltd. v. Kovan Engineering Pty Ltd.
In Gold Peg International Pty Ltd. v. Kovan Engineering (Aust) Pty Ltd.,the Federal Court, in addition to a determination of many other issues, held that the applicant, Gold Peg International Pty Ltd ("Gold Peg") is the owner of copyright in drawings authored by the respondent, Kovan Engineering (Aust) Pty Ltd ("Kovan").
In simplified form, the case involved an agreement between the Gold Peg and Danish Membranefiltration ("DM") for Gold Peg to provide consultancy services in the further development of its inventions including production of a Direct Steam Injection cooker ("DSI cooker"). Gold Peg had prepared concept drawings and sketches of the DSI cooker. The agreement assigned Gold Peg's intellectual property rights to DM. The collaboration resulted in the production of two DSI cookers, the manufacture of which was carried out by Kovan Engineering (Aust) Pty Ltd ("Kovan").
Manufacturing drawings for the two DSI Cookers had been prepared by DM with limited assistance provided by Kovan ("DM drawings"). The drawings were prepared in constant consultation with Gold Peg with all changes being subject to Gold Peg's approval.
DM subsequently refused to commit to a joint venture arrangement with Gold Peg and informed Gold Peg that it no longer wished to comercialise the DSI cookers. Discussions between Gold Peg and DM resulted in a director of DM signing a letter written by Gold Peg to the effect that the consultancy agreement was terminated and all of Gold Peg's assets, "both intellectual and physical" in the DSI cookers were returned to Gold Peg ("the DM assignment letter").
Gold Peg subsequently commissioned Kovan to manufacture more DSI cookers. Over a period of about ten years, a further 26 DSI cookers were made. Each DSI cooker required customization to suit the needs of each client and consequently, new drawings ("the Gold Peg drawings were prepared by Kovan for each cooker manufactured with most changes being at the direction of and subject to the approval of Gold Peg.
The primary issue in dispute between Gold Peg and Kovan related to who owned copyright in the two sets of drawings (the DM drawings and the Gold Peg drawings) used in the development and manufacture of the DSI cookers.
The Federal Court held that for the DM drawings, the assignment of all Intellectual Property rights referred to in the DM assignment letter was valid and had the effect of vesting legal ownership of copyright in those drawings in Gold Peg.
The Federal Court also held that Gold Peg was the equitable owner of copyright in the Gold Peg drawings on the basis that Gold Peg had raised the issue of ownership of Intellectual Property rights in those drawings with Kovan at the outset, that whilst Kovan refused expressly to accept Gold Peg's claim of ownership, it knew that Gold Peg would never have commissioned Kovan to manufacture the DSI cookers if there was any doubt that Kovan would reject this term; that Kovan had been willing and did offer to acknowledge that Gold Peg owned all Intellectual Property in return for Gold Peg agreeing to enter into an exclusive manufacturing agreement with Kovan; and that the Kovan never challenged DM's ownership of intellectual property rights when it made the 2 DSI Cookers for DM.
In summary, while the usual rule is that the creator of artwork (and also written work such as instruction manuals) is the owner of that work, there can be exceptions. This case is an example of an exception. Although Kovan created the artwork, because of the exceptional circumstances, the court held that Gold Peg was the true owner of the copyright. Kovan appealed to the Full Court of the Federal Court in relation to findings on various contractual and trade practices issues which also arose in the case. In particular, Kovan appealed the finding that the agreement between Gold Peg and Kovan extended to all DSI cookers made by Kovan and that the agreement Kovan and Gold Peg contained a term that Gold Peg would own all intellectual property rights in any modifications or enhancements to the drawings. On 14 July 2006, the Full Court of the Federal Court of Australia delivered its judgement upholding the findings made by the Federal Court at first instance.
The message from this story is that in order to avoid lengthy and costly litigation, every effort should be made to ensure that ownership of intellectual property, including ownership of future that may arise through changes, innovations or improvements to the original concept, be made clear at the outset. In doing so, we strongly recommend to clients that the position be set out in writing at the time the business arrangement is entered into with other parties. If you require advice on ownership of intellectual property rights.
Marnie Sylvester
GRIFFITH HACK
Level 29, Northpoint, 100 Miller Street, North Sydney NSW 2060 |
