FEDERAL COURT OF AUSTRALIA

Mastec Australia Pty Ltd v Trident Plastics (SA) Pty Ltd (No 3) [2018] FCA 99

ORDERS

THE COURT DECLARES THAT:

1.    The First Applicant is the beneficial owner of:

(a)    the computer-aided design (CAD) drawings of the lid and pin to its 240 litre mobile garbage bin, referred to in the particulars at paragraph 10(a)(v)(1) and (2) of the Amended Statement of Claim and any draft or copy thereof (Product Drawings); and

(b)    the copyright in the Product Drawings.

2.    The Respondents have made unlawful use of the confidential information of the First Applicant by using information contained in the Product Drawings in the business of the First Respondent.

3.    The First Respondent engaged in conduct in contravention of s 18(1) of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law) (ACL) by making the following representations (in varying combinations):

(a)    it designed and built Mastec’s 140 litre and 240 litre bin mould;

(b)    it manufactured over 1,000,000 mobile garbage bins for Mastec between 2003 and 2011;

(c)    it manufactured over 950,000 mobile garbage bins for Mastec between 2006 and 2011;

(d)    it manufactured more than 192,000 mobile garbage bins for Mastec before 2008 or after 2011.

as part of tender submissions in the period from at least August 2014 to June 2016.

4.    The Second Respondent was involved (as defined in s 2 of the ACL) in the contraventions and conduct referred to in paragraph 3 above.

THE COURT ORDERS THAT:

1.    The First Respondent be restrained by itself, its servants or agents from making representations to the effect that it:

(a)    has designed and built the First Applicant’s 140 litre and 240 litre bin mould;

(b)    has manufactured over 1,000,000 mobile garbage bins for the First Applicant between 2003 and 2011;

(c)    has manufactured over 950,000 mobile garbage bins for the First Applicant between 2006 and 2011; and

(d)    has manufactured more than 192,000 mobile garbage bins for the First Applicant before 2008 or after 2011.

2.    Within 14 days of the date of these orders, the Respondents deliver up to the First Applicant the Product Drawings.

3.    Paragraphs 1-10, 12(a), 12(d)-(f), 13(b)-(d) of the Amended Originating Application otherwise be dismissed.

4.    The time for leave to appeal from these orders, together with any application for leave to appeal if necessary, be extended to 21 days after the date on which the Court makes final orders in relation to the Applicants’ claims for pecuniary relief.

5.    The costs of Stage One of the trial are reserved.

6.    There be liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WHITE J:

1    On 21 December 2017, I published findings in Stage One of the trial concerning the various claims brought by the first applicant (Mastec) in relation to the manufacture by the first respondent (Trident Plastics) of the lids and pins for mobile garbage bins (MGBs): Mastec Australia Pty Ltd v Trident Plastics (SA) Pty Ltd (No 2) [2017] FCA 1581. I found that Mastec is the beneficial owner of computed aided design (CAD) drawings concerning the lid and pin for 240 litre MGBs and of the copyright in those drawings; that the respondents had made unlawful use of CAD drawings in manufacturing MGB lids; and that Trident Plastics had engaged in misleading or deceptive conduct, to which the second respondent (Mr Saurbrey) was an accessory, in the representations it had made in tenders for the supply of MGBs. I found that Mastec’s remaining claims were not established. I then invited the parties to make submissions concerning the form of the orders appropriate to give effect to those findings, and adjourned the hearing for that purpose.

2    The parties have sensibly agreed on the terms of several of the orders. However, there remain differences as to the terms of the injunctions which are appropriate and on the question of costs. This judgment concerns those matters.

Injunctions

3    The parties are agreed as to the form of injunctions appropriate with respect to the misleading and deceptive conduct of the respondents.

4    In relation to the misuse of confidential information, Mastec seeks injunctions as follows:

[6]    Each of the Respondents be restrained by itself, its servants or agents from:

(a)    making any use of the Product Drawings;

(b)    making use of any drawing, tool or product that is derived from the Product Drawings, for such time as it continues to embody, in whole or in part, the design depicted in the Product Drawings;

(c)    without limiting paragraph (b) hereof, making any use of any tool, the creation or manufacture of which derives from the Product Drawings, for such time as it continues to embody, in whole or in part, the design depicted in the Product Drawings;

(d)    aside from the purpose of complying with these orders, disclosing to any person any content of the Product Drawings.

[7]    …

[8]    Subject to paragraph 7, the Respondents forthwith destroy any drawings in their possession, custody or control that derive[d] from the Product Drawings.

[9]    The respondents forthwith destroy any products in their possession, custody or control that derive[d] from the Product Drawings.

5    It was common ground that the fate of proposed orders [8] and [9] turned on the fate of proposed order [6].

6    The applicants’ position in seeking the orders in [6], [8] and [9] was relatively straightforward. They contended that the unlawful use by Trident Plastics of its confidential information is continuing and that the Court should restrain Trident Plastics from doing so.

7    The respondents oppose the making of any orders in these or similar terms. They referred to, and relied on, authorities concerning the springboard doctrine and springboard injunctions. The respondents submitted that, although the Court had made no formal findings on the topic, the effect of the findings is that they (the respondents) had taken a springboard advantage. The consequence is that any injunction should not be for a longer period than the period of advantage which they obtained by their misuse of the confidential information. That period, they submitted, is the time which it would have taken them to develop their own design of an MGB lid and pin which, on the basis of the evidence at trial and the findings, was of the order of three months and, on any view, less than 12 months. That period having now well and truly expired, the respondents submitted that none of [6], [8] and [9] is necessary or appropriate.

8    These submissions of the respondents led to some debate concerning the application and effect of springboard injunctions in the present context. On my understanding, the term “springboard injunction” is often used in two separate but related senses. First, it sometimes refers to the restraint of future lawful conduct when the respondent has, by previous unlawful conduct obtained a head start in a market. The injunction then prevents the respondent from deriving a benefit from its previous unlawful conduct, even though its future conduct may be lawful. Secondly, it sometimes refers to restraints of unlawful conduct, commonly conduct involving the misuse of confidential information. When the confidential information has subsequently come into the public domain (whether by publication of the information or by distribution of a product from which the information may be derived), the injunction is usually issued to prevent misuse of the confidential information only during the period in which the respondent will obtain a head start (a springboard) by that misuse.

9    Beach J referred to the first kind of springboard injunction in Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (No 2) [2015] FCA 140; (2015) 110 IPR 544:

[68]    A “springboard injunction” is an injunction usually in final form that may be granted to restrain an infringer from engaging in an act, even though that act would otherwise be lawful, in the sense of not infringing the claim(s) of the relevant patent(s).

[69]    Such an injunction is designed to deprive the respondent of a benefit that may have been produced by a prior infringing act. So, if a respondent has “built up a bridgehead or springboard into a market”, by such a prior infringing act, such an injunction may be granted and designed to deprive the respondent of that benefit by restraining future conduct, even though that future conduct may not be infringing …

(Emphasis in the original and citation omitted)

10    As is apparent from these passages, Streetworx was a patent case. The respondent had infringed a patent of Streetworx but, having obtained a foothold in the marketplace, wished to continue trading with a product modified so as not to continue the infringement. The description of a springboard injunction given by Beach J is to be understood in that context.

11    In Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458; (2012) 299 ALR 621, Gordon J referred to springboard injunctions in the second sense identified earlier:

[201]    Equity will restrain a former employee who seeks to use an employer’s information as a “springboard” to gain a head start, even where that information is capable of being independently ascertained …

[202]    The springboard doctrine seeks to prevent the misuse by one party of another’s confidential information in order to bring out its own product in a manner or time that it would not otherwise have been able to achieve; … The doctrine is founded on a concept of fairness. Parties are free to use information that becomes public so long as they do not take advantage of the “head start” of having the knowledge ahead of the public: … As Goldberg J said in Dart Industries at 408-9:

In short, if a person wishes to design a product without it being alleged the person has used confidential information he must proceed through an independent design sequence and not use confidential information as a springboard to just through the sequence.

(Emphasis added and citations omitted)

12    Counsel for Mastec submitted that the term “springboard injunction” referred only to injunctions of the kind described by Beach J in Streetworx. As is apparent, I do not accept that submission as it overlooks the context to which Beach J was referring. But even if it be correct, the authorities indicate that injunctions restraining the misuse of confidential information in a context like the present are usually limited to the period in which the respondent has obtained an unfair unadvantage.

13    Effect is commonly given to the springboard doctrine in the pecuniary relief (damages or account of profits) ordered in respect of a misuse of confidential information. Thus, in Aquaculture Corporation v New Zealand Green Mussel Co Ltd (1985) 5 IPR 353 at 384, Pritchard J said:

From this it seems to follow that justice will be done if the confidant who takes an unfair advantage is deprived of the fruits of his wrongdoing. Provided the information used by the confidant is all in the public domain there is no justification for enjoining him for all time from exploiting the knowledge which he now shares with the public at large, for that would place him at an unfair disadvantage vis á vis the rest of mankind. The remedy, then, is to make him accountable to the person who was the original source of the information – but only to the extent by which he has gained an advantage by virtue of having had information in advance of the general public. Reducing this to practicalities, the advantage unfairly gained can be measured in terms of time saved and, thence, in terms of money.

(Emphasis added)

14    The principle that an injunction to restrain the use of confidential information in the development and manufacture of a product in a context like the present is usually limited to the period which it would have taken the respondent to have produced the product without making use of the confidential information is reflected in a number of the authorities. In Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375 at 391-2, Roxburgh J said:

As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a spring-board for activities detrimental to the person who made the confidential communication, and spring-board it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public. … [T]he possessor of the confidential information still has a long start over any member of the public. The design may be as important as the features. It is … inherent in the principle upon which the Saltman case rests, that the possessor of such information must be placed under a special disability in the field of competition in order to ensure that he does not get an unfair start …

(Emphasis added)

15    To similar effect, Fullagar J said in Beta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 (in factual circumstances not dissimilar to the present case), at 194-5:

Prima facie the plaintiff is entitled to prevent the defendants from making or selling any injection-moulded, all-plastic, one-piece, polypropylene furniture drawers, at least for a period of time found by adding together the following periods:

1.    the time it will now reasonably take the plaintiff to get its plastic drawer on the market in substantial quantities;

2.    the time it would thereafter reasonably take some uninformed competitor or designer (that is to say one without the current know-how of the defendants derived from their design work performed for the plaintiff and from their sales in breach of contract) to pull apart and analyse the drawer and ascertain its mode of construction and thereafter design and construct and get into production a tool for the manufacture of similar drawers.

It is the second limb of this formulation which is pertinent presently.

16    In Roger Bullivant Ltd v Ellis (1987) 13 FSR 172, Nourse LJ reviewed several of the authorities and continued, at 184:

All these observations support the view that the injunction should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue. That is in my judgment the period for which an injunction should normally be granted in springboard cases.

17    The decision of Moshinsky J in IPC Global Pty Ltd v Pavetest Pty Ltd (No 4) [2017] FCA 260; (2017) 124 IPR 101, at [35], provides another example of this form of injunction.

18    The decision of Gowans J in Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 to which counsel for Mastec referred does not suggest that any different approach is appropriate presently. It is true that Gowans J issued a permanent injunction, but that seems to have occurred because the confidential information in question in that case (concerning the design of particular machinery) was not publicly available at all. The designs and specification for the complete machine had not been published and the machine itself was not available for public inspection. It was accordingly a different kind of case from the present.

19    It is true that several of the authorities in which the principles have been stated have concerned interlocutory injunctions rather than, as in this case, a permanent injunction. However, I respectfully agree with the view of Moshinsky J in Pavetest, at [23], that the stated approach is also apposite when a springboard injunction is sought by way of final relief.

20    In Streetworx, Beach J identified a number of principles bearing upon the issue of a springboard injunction restraining future lawful conduct, namely:

[74]    First, the nature and quality of any unwarranted advantage needs to be identified. One needs to identify with precision the relationship between the past unlawful activity and the threatened otherwise lawful conduct but unwarranted advantage. ...

[75]    Second, the injunction must be framed in a form and with a duration that is proportionate to and linked with the unwarranted advantage such that the injunction does no more than to enjoin the conduct conferring such an unwarranted advantage.

[76]    Third, and relatedly, the injunction must not put the applicant in a better position than the applicant would have been in absent the prior unlawful activity. Such an injunction is not to be used as a back door means for the patentee to restrain otherwise lawful competitive activity by a rival.

[77]    Fourth, such an injunction usually ought not to be granted if there are other available and apposite remedies such as damages or an account of profits. To state such a proposition is unremarkable if one was dealing with an interlocutory injunction. But in the case of a final injunction where one is considering enjoining otherwise lawful activity, such a stricture should also apply, as distinct from the availability of alternative remedies merely being a matter to consider in the mix, particularly where innocent third parties may be affected. If damages or an account of profits are an adequate remedy, detriment to third parties can be avoided by refusing the injunction and leaving the patentee to such remedies.

[78]    Fifth and relatedly, the need to exercise considerable restraint is required where the effect of such an injunction would be to adversely affect innocent third parties, such as a party to a contract who would then be precluded from receiving supply of an otherwise lawful product (ie non-infringing product) under the contract from the counter-party.

[79]    Sixth and generally, great care should be exercised in granting a final injunction restraining otherwise lawful activity.

(Emphasis in the original)

21    Principles one and six were more directed to the particular circumstances of the patent infringement which had been found in Streetworx. However, I consider that principles two to five are pertinent in respect of the injunction sought by Mastec in the present case. The authorities to which reference has already been made indicate that the duration of the injunction should be proportionate to the advantage obtained by the respondent; the injunction ought not to put the applicant in a better position that it would have been in had the respondent engaged in the same activity but without misuse of the confidential information; regard should be had to the availability of pecuniary remedies; and regard should be had to any adverse effects on innocent third parties.

22    Neither party asked the Court at this stage to make any finding as to the time which it would have taken Trident Plastics to develop a tool for the manufacture of MGB lids and pins without misusing Mastec’s confidential information. Nor did any party ask the Court to make a finding as to the date from which that period should be taken to have run. However, I accept the respondents’ submission that, whatever that period may be, it has now (some six years after Trident Plastics accessed Mastec’s confidential information and commenced to use it) expired.

23    Mastec is not entitled to be put in a better position than it would have been had the respondents’ unlawful conduct not occurred, that is, had Trident Plastics gone about developing its own design of the tools for the manufacture of MGB lids and pins. The grant of a permanent injunction would not be proportionate to the advantage obtained by Trident Plastics, given the time which has elapsed since its misuse of the confidential information commenced.

24    Mastec has not shown that pecuniary relief will not provide an adequate remedy.

25    Consideration of the effect on innocent third parties is important because it seems likely that Trident Plastics has current contracts with purchasers for the supply of MGBs. To an extent, the potential for prejudice to third parties may be mitigated because Mastec does not seek to preclude Trident Plastics from using the second tool for the manufacture of MGB lids which it commissioned in July 2016. See the principal judgment at [62]. However, the differences in the lids produced by this tool and those produced by the tool Trident Plastics developed in 2012 using Mastec’s confidential information appear not to be significant. There would seem to be some artificiality in restraining the use of one tool, but not the other.

26    All of these matters indicate that the grant of orders in the terms sought by Mastec would be inappropriate.

Costs

27    Mastec sought the following order with respect to costs:

The respondents pay the applicants’ costs of the initial trial on party and party basis forthwith.

28    The respondents, on the other hand, submitted that the issue of costs should be deferred until the completion of Stage Two of the trial, when the Court will have determined Mastec’s claim for pecuniary relief.

29    In support of its submission that an order for costs should be made now, Mastec referred to the approach of Finkelstein J in Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 325:

[5]    [I]n a case where there has been a split trial of disputed questions of fact or law and it is possible at each stage of the case to identify the successful party, the ordinary rule which is applied after a final hearing should also be applied to the split trial. That is, there is no justification for implying to the discretionary power to award costs a limitation to the effect that costs should only be ordered once the outcome of the whole action is known.

30    Mastec also emphasised that there may yet be some significant lapse of time before the second stage of the trial can be completed and judgment delivered.

31    Despite these submissions, I am not satisfied that an order with respect to costs is appropriate at this stage. First, although r 40.13 of the Federal Court Rules 2011 (Cth) is not applicable in the context, some of the matters bearing upon the exercise of the discretion under that rule are pertinent, in particular, the avoidance of the need for multiple taxations in a proceeding, the avoidance of the unfairness which can arise when a party is unable to set off an order for costs in its favour against an earlier liability to pay costs, and the avoidance of inhibiting the Court’s ability to fashion an appropriate order with respect to the costs of the whole proceedings including, possibly, a gross sum costs order.

32    Secondly, although time will elapse before the second stage of the trial can be completed, there is no reason to suppose that it will be unduly prolonged.

33    Thirdly, there was no submission that Mastec will suffer prejudice if an order for costs is not made now or that there is reason to doubt the respondents’ ability to meet an order for costs if it is not made until the conclusion of the second stage of the trial.

34    Accordingly, I refuse Mastec’s application for an order in terms of the proposed [10]. Instead, there will be an order that the question of costs be reserved.

Conclusion

35    In summary, for the reasons stated above, I decline to include in the orders [6], [8], [9] and [10] as sought by Mastec. Otherwise I will issue orders in the terms agreed upon by the parties.

36    I will hear from the parties further with respect to the conduct of Stage Two of the trial.

Associate:

Dated:    16 February 2018