Case: TS&amp;B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444
Outcome: followed
In TS &amp; B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at [177]-[178], Finkelstein J described joint tortfeasors in the following terms: The common law rule is that one tort may be committed by two or more persons: they are usually referred to as joint tortfeasors. Although the term is commonly used, the concept is not well defined. To be joint tortfeasors it is not sufficient that the independent wrongful acts of two persons have caused the same damage. Those persons are several tortfeasors. In Sir John Haydon's Case [1572] EngR 356 ; (1612) 77 ER 1150 at 1151 joint tortfeasors were described as "all coming to do an unlawful act, and of one party, the act of one is the act of all of the same party being present." The rule goes back to when an action in trespass was principally criminal ( Sir Charles Stanley's Case [1708] EngR 26 ; (1663) 84 ER 1094) but has been extended. There are three classes of joint tort: where a party is vicariously responsible for the acts of another as in master and servant, principal and agent and partnership; when there is a breach of a joint duty, be it a statutory or common law duty; and concerted action. As regards the third class (concerted action) to be joint tortfeasors the unlawful act must be for a "joint purpose" ( Clark v Newsam and Edwards [1847] EngR 531 ; (1847) 154 ER 55) or "concerted action... towards a common end" ( The Koursk [1924] P140, 152). In Thompson v Australian Capital Television Pty Limited [1996] HCA 38 ; (1996) 186 CLR 574 the High Court accepted as a correct description of joint tortfeasors that given by Sargeant LJ in the The Koursk [1924] at 159-160, namely that "there must be a concurrence in the act or acts causing damage not merely a coincidence of separate acts which by their conjoined effect cause damage". So, employing the language of criminal lawyers, all persons who aid or counsel direct or join in the commission of a tort are joint tortfeasors: Pratt v British Medical Association [1919] 1 KB 244 at 254 citing Petrie v Lamont [1841] EngR 66 ; (1841) 174 ER 424 at 426. Intent, of course, is not an ingredient of the tort for we are dealing with the civil law, not criminal conduct. 30 What then is the proper method for calculating the amount of loss caused by the infringement? Various methods of measuring damages for infringement of copyright have been described: see Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746 at [11] and TS&amp;B Retail Systems Pty Ltd 158 FCR 444 at [204]-[209]. 31 One method for assessing damages is the licence fee or royalty method. Under this approach, the owner of the copyright recovers "a sum equal to the fee that would fairly be charged for use of the copyright work": TS&amp;B at [206]. As Vawdrey properly conceded, such a method is often rejected if the court takes the view that the applicant would not have granted such a licence to the respondent because, for example, the parties are competitors or the copyright work was devised for a particular purpose and that purpose was frustrated or destroyed by the infringing use of the work by the respondent: see Bailey v Namol 53 FCR at 112 (concluding that lost profits is the better measure of damages where the copyright work was created for a specific purposes which has been frustrated by the infringement) and TS&amp;B at [206] (stating that the a lost profits approach is preferable to a licence fee approach where the plaintiff and infringer are "in actual or potential competition in relation to the copyright work"). See also Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [27]-[29]; Norm Engineering Pty Ltd v Digga Australia Pty Ltd (2007) 162 FCR 1 at [257], appeal allowed in part on other grounds at 166 FCR 268. 34 The appropriate measure of damage in circumstances such as these (ie where the plaintiff and defendant are in actual or potential competition in relation to the copyright work) was described by Finkelstein J in TS&amp;B at [207] as follows: ... Then lost profit is usually the best measure of damage. The plaintiff must show that he has lost sales to the defendant as a result of the infringement and quantify the loss suffered. This requires the court to explore the counterfactual hypothesis of the contracts the plaintiff would have obtained absent the infringement and the costs associated with them . Necessarily the process will involve a degree of speculation, but that is no bar to recovery. The claim is not for loss of revenue but for loss of profits. The profits to be calculated are the lost net profits. By net profits I mean revenue less all costs including variable and indirect costs, but not including income tax. Care must be taken to ensure that costs savings are brought to account. If a plaintiff sells less of his products he will have less costs and that should be treated as a gain to be offset against the lost revenue which forms the basis of the computation of lost profits. The plaintiff is also entitled to recover indirect losses (such as damage to goodwill) as long as the cause is the infringement, the loss is foreseeable and is not unduly speculative. It will often be impossible to be precise in the calculation of lost profit. If needs be, the calculation can be rough and ready, with the benefit of any doubt favouring the plaintiff. (Emphasis added.) See also Bailey 53 FCR at 111-112 (acknowledging that the lost profits assessment depends upon a counterfactual). 37 In TS&amp;B at [208], Finkelstein J described the issue and the relevant principle as follows: There is a question whether the relevant lost profits are those that would have been earned by the plaintiff from use of the copyright work alone or where, as here, the copyright work is employed by the plaintiff as part of a wider profit-making venture. While there was, at one point, doubt about the matter, modern cases permit the recovery of any secondary loss caused by the infringement. Secondary loss would include for example loss of sales of non-copyright work that is sold with the copyright work. Again, the issue is one of causation, and perhaps also of foreseeability: Gerber Garment Technology [1995] RPC 383 ; on appeal Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443. 38 Any loss related to non-copyright items is recoverable where it is a foreseeable consequence of the infringement. In the present case, the loss in relation to the whole trailer was foreseeable because, as I found at [69] in the reasons for decision, "the concept of restraints fitted to the side sliding poles was both innovative and key to Camerons' proposal and its ultimate success in the Tender." That Tender was not for a load restraint system but for the supply of distribution services for, and cartage of, the Amcor cargo. That in turn, required the manufacture of trailers. From the outset, Vawdrey was aware that the successful trailer designer would manufacture trailers and, in particular, trailers with a load restraint system suitable for the cartage of the Amcor cargo. Moreover, Vawdrey was also aware from the outset of the importance of the load restraint system to the overall trailer design: see [20] of the reasons for decision. In those circumstances, I conclude that it was reasonably foreseeable that the Camerons-Vawdrey infringement of the load restraint system design would cause (and did cause) Krueger to lose not just the design for the gates, but the overall contract for the design and manufacture of trailers in accordance with the Amcor Tender. 39 For those reasons, the loss related to the gates is not severable from the overall loss in relation to the trailers. 40 I now turn to consider the calculation of the damages payable by Vawdrey for the infringement. 41 Krueger called Neil Leslie Bridgman, its General Manager of Finance &amp; Administration. Mr Bridgman calculated Krueger's damages claim on what was described as a component approach. Mr Bridgman estimated the direct material and labour costs that would have been incurred in manufacturing the trailers the subject of the dispute. As noted earlier, this exercise was hypothetical. Estimated materials and labour costs were addressed separately. In relation to the materials costs, a hypothetical bill of materials, being a list of each of the components that would have been required by Krueger to manufacture the finished goods (the trailer with the gates) and identifying the quantity of each item and the cost of that item, was prepared. Mr Bridgman estimated that the total direct costs of materials that would have been incurred in the manufacture of a trailer with a set of sliding side gates would have been $23,826.73. That amount included $2,672.73 for sign writing (a matter I will deal with presently). 54 As I have already noted, subject to issues of causation and foreseeability, any secondary loss, including goodwill, caused by the infringement is recoverable: TS&amp;B at [207]-[208]. In the present case, I find that it was reasonably foreseeable that infringement of the load restraint system would cause a loss of goodwill to Krueger in terms of brand-name recognition and a first-entrant advantage in connection with the load restraint system. Unsurprisingly, truck manufacturers strategically place their name on each truck they manufacture to advertise not only that they manufacture trucks but trucks of a particular size capable of carrying the customer's cargo. It is free advertising. The fact that the load restraint system in the present case could not be viewed because it was covered by the curtains is irrelevant. It is the association of the manufacturer's name with trucks and with a particular customer which generates goodwill and the possibility of new orders. It can scarcely be denied that the chance to have its name associated with Camerons and an important end-client like Amcor was a thing of value to both Krueger and Vawdrey. Moreover, the chance to be the first to market with a new and innovative load restraint system would likely have given Krueger an advantage in competing for the design of trailers for the transport of other non-standard cargos. As they say, success breeds success. So much was ultimately conceded by Vawdrey when Krueger tendered an advertisement published by Vawdrey containing a photograph of Mr Glen Cameron standing in front of a truck manufactured by Vawdrey bearing both names Camerons and Vawdrey. While the precise quantification of Krueger's lost goodwill is necessarily speculative to some degree, I would award it an additional sum of $10,000 in this regard. That amount represents the best assessment I can make in the circumstances of the advertising and first-entrant advantage loss that Vawdrey's infringement caused to Krueger. 55 In addition to lost goodwill, Krueger also argued that it should be awarded the sum of $59,404.89 as consequential damages in the form of mitigation costs. Specifically, Krueger claims $31,904.89 as the costs of emergency marketing undertaken "in an effort to have Krueger recognised in the market as the innovator of the Krueger concept," and $27,500 as the costs of creating demonstration trailers fitted with the Krueger Concept and offering them to various companies for free trial and evaluation. For the following reasons, I reject the claim for mitigation costs. 56 The fundamental problem with the claim for mitigation costs is that the use of the Krueger Concept by Vawdrey was not an infringing act because, as I found in the reasons for decision, it is an unprotected idea rather than a protected expression of an idea: see [130] of the reasons for decision. On the other hand, the loss suffered by Krueger for infringement of the concept as expressed in the Krueger Drawings (which were protected expressions of the slide-a-gate concept created for the specific purpose of winning the Tender and the contract with Camerons) is wholly encapsulated in the lost profits and lost goodwill from the contract that would have been obtained with the copyrighted work had it not been infringed. There was no evidence that the particular load restraint system expressed in the drawings for the Amcor Tender could be or was used other than for the cartage of the Amcor freight as specified in the Tender. Thus to the extent that mitigation costs might be recoverable at all, they would be recoverable only from Camerons as part of the damages for breach of confidence.