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Oraka Technologies Ltd v Geostel Vision Ltd

(2013 NZCA 111, 18th April 2013)

Previously the Court of Appeal overturned a High Court decision and found that Oraka Technologies Ltd (OTL) had a valid claim to copyright in the drawings associated with their asparagus grading machines since the relevant works were produced on a conditional commissioning basis. Although OTL had not specifically paid for the drawings, their subsequent payment for the production of tooling was considered by the Court of Appeal to be a transaction that included payment for the drawings. The Court of Appeal then remitted the case back to the High Court for determination of both specific ownership of copyright and whether copyright had been infringed.

In 1996, following financial difficulties, OTL ceased to trade, although it remained on the companies register. Oraka Technologies (Holdings) Ltd (OTHL) was formed and took over the commercial activity associated with the Oraka grader. Napier Tool & Die Limited (NTD), who produced the drawings and tooling for both OTL and Geostel Vision Ltd (GVL), claimed that copyright had also transferred to OTHL, meaning that proceedings in the name of OTL could not succeed. The High Court Judge found there was insufficient basis to find that OTL had transferred copyright to OTHL. Regarding infringement the Judge was satisfied that the claim concerned a substantial part of OTL’s copyright work and that there was a causal connection between the GVL and OTL cup assemblies. However, the Judge held there was insufficient objective similarity between the cup assemblies and associated parts on account of the similarities being largely determined by functional constraints and a significant number of differences in design.

The Court of Appeal reconsidered all issues before the High Court. Regarding ownership the Court of Appeal found there was no evidence of an assignment of copyright or goodwill from OTL to OTHL. OTHL did not have to own the copyright to operate its business, it only needed a licence and such a licence did not need to be in writing (or require the payment of a royalty).

Regarding infringement the Court of Appeal applied the same three criteria as the High Court of substantiality, objective similarity and causal connection. However, the Court of Appeal considered objective similarity should be considered first as the substantiality test should only be applied to what was actually copied. The Court of Appeal noted there were both significant similarities and differences between the cup assemblies and associated parts, but held that overall there is objective similarity between the two designs. The Court of Appeal found that there was no independent design path for the GVL cup assembly and associated parts. The evidence showed that NTD’s design process started with and referred back to the OTL cup assembly, rather than being driven by the functional constraints of the product or surrounding technology. That the two cup assemblies are not interchangeable did not detract from that finding. Regarding substantiality the Court of Appeal noted from precedent that what constitutes a substantial part is necessarily a question of fact and degree and that the quality or importance of what has been taken is more significant than the quantity. Further, functional constraints can assist in determining whether a substantial part of the claimant’s labour and skill has been taken. The Court of Appeal held that the Judge was wrong to equate the constraints of OTL’s grader with market constraints. While OTL’s grader contains third party technology, OTL’s configuration of all the elements has originality and is not the only possible configuration. As New Zealand has no spare parts exception to copyright infringement, OTL’s configuration does not constitute a functional constraint. On balance, after discarding the similarities that are due to functional constraints, it was found that a substantial part of OTL’s original work had been copied, and so infringement was held to be established.