Case: Kovan Engineering (Aust) Pty Ltd v Gold Peg International Pty Ltd [2006] FCAFC 117
Outcome: referred to
Futuretronics relied on the decision of Crennan J in Gold Peg . That case went on appeal: Kovan Engineering (Aust) Pty Ltd v Gold Peg International Pty Ltd [2006] FCAFC 117 but the appeal was dismissed and there was no suggestion by the Full Court that her Honour erred in her approach. The applicant was the inventor of the Direct Steam Injection Cooking Machine (the DSI Cooker). The first respondent was a manufacturer of the DSI Cooker. The principal issue in the case was the ownership of the copyright used in the development and manufacture of the DSI Cooker. That was resolved in favour of the applicant. Her Honour also addressed whether terms could be implied to the following effect: (e) Kovan would not make any use of and would keep confidential the Assigned Rights and the drawings created by Kovan to manufacture the cooking machines for Gold Peg; and (f) Kovan would not use the Assigned Rights and the drawings created by Kovan to manufacture the cooking machines other than for manufacturing cooking machines for Gold Peg to its order. In dealing with those issues her Honour said: "I am also satisfied that it is necessary to imply a term into the agreement that the first respondent would not make any use on its own behalf of, and would keep confidential, the Alfa Laval Drawings and the drawings created by the first respondent to manufacture the machines. This is a clear matter of business efficacy; the applicant would not have been able to maintain its rights to exclusively manufacture its machine if its manufacturer were to assert rights in the drawings against it or to refuse to maintain confidence in the drawings. I am also satisfied that the first respondent would never have been retained by the applicant to undertake manufacture for it if the first respondent had sought to debate these issues. I am also satisfied Mr Miller and Mr Zakis well understood this at the time of commencement of manufacture for the applicant. Similarly, I am satisfied that it is appropriate as a matter of business efficacy to imply a term that the first respondent would not use the Alfa Laval Drawings or the manufacturing drawings it created to manufacture cooking machines for the applicant other than for the purposes of manufacturing for the applicant. This term was, in any event, partly oral and was agreed to by Mr Smith and Mr Miller in around 1992. Both Mr Miller and Mr Zakis confirmed this was their understanding of the general agreement between the parties for the manufacture of cooking machines by the first respondent to the order and specification of the applicant." 132 In my opinion, Gold Peg is clearly distinguishable from the present case. The terms in Gold Peg related to the use of drawings of the DSI Cooker either in existence or to be brought into existence. They or their forerunners were technical drawings in respect of which patent applications had been made. In this case the implied term does not relate to drawings but rather to an idea which did not involve a patentable invention or confidential information. 133 In my opinion, the fact that the product was not unique and does not involve confidential information, the fact that the contract or contracts between Futuretronics and Graphix Labels were not for a set term and did not involve a minimum quantity and the fact that the proposed term was so general indicate that it is not appropriate to imply a term of the nature advanced by Futuretronics. It is not necessary for the reasonable or effective operation of the contracts constituted by each order to imply such a term.