Directors' authorisation of design infringement: lessons from the bottom of a fruit container

A recent decision of the Federal Court is a reminder that directors can be found liable for infringement of designs by having "authorised" those infringements (Multisteps Pty Ltd v Specialty Packaging Aust Pty Ltd [2018] FCA 587).

The Multisteps designs and the Speciality Packaging containers

Multisteps Pty Ltd is the owner of a number of registered designs in Australia for plastic containers used to store fruit and other fresh produce for sale by retail.

Speciality Packaging Aust Pty Ltd supplies containers and over the course of 2013 to 2017 was said to have supplied eight different kinds of plastic containers. Multisteps alleged that five of these plastic containers infringed the Multisteps designs. They also made allegations against Mr Neil Alexander Ainslie (the General Manager/Director of Speciality Packaging) that he had authorised the infringement. Specialty Packaging cross-claimed against Multisteps, alleging that the Multisteps designs were invalid as they lacked distinctiveness as at the priority date of those designs.

The court held that the Multisteps designs were valid, and that Speciality Packaging had infringed the designs.

When can a person authorise design infringement?

A person may infringe a design by authorising conduct which is within the scope of the exclusive rights of the owner of the design. A person authorises conduct if the person sanctions, approves or countenances that conduct. Other key principles include:

1. A person can authorise conduct that results in infringement of a patent without intending to infringe and without knowing their conduct will have that result.
2. Control over the conduct constituting the infringement is critical.
3. A director of a company need not be a sole director to have the requisite degree of control to authorise an infringement.
4. Authorisation may be inferred including by indifference to a sufficient degree, although a person does not authorise an infringement by reason of mere knowledge and a failure to act to prevent the infringement and nothing more.

Why was a director of Specialty Packaging liable for authorising infringements?

There were various types of evidence that led the Court to hold that Mr Ainslie had infringed the Multisteps designs.

Mr Ainslie was a director of Specialty Packaging from 2013 to mid-2016. Up until mid-2016, he had, "in conjunction with others", been involved in management decisions on behalf of and in the management of Specialty Packaging. Formal admissions were made by Mr Ainslie to this effect and also that he was involved, in conjunction with others, in the sale by Specialty Packaging of 4 out of the 5 plastic containers alleged by Multisteps to infringe the Multisteps designs.

Multisteps also relied on documentary evidence to prove its authorisation case. The first was a LinkedIn profile printed on 1 February 2016 which identified a Neil Ainslie with a photograph. That document also stated that a Mr Ainslie was the current General Manager/Director of Specialty Packaging. The second was a document printed from the website www.specialtypackagingaust.com.au which stated that Neil Ainslie, General Manager Aust & NZ, was the contact for Specialty Packaging as at October 2016.

In addition to the documentary evidence, Justice Jagot relied on evidence given by a witness who had commercial dealings with Mr Ainslie in his capacity as the General Manager of Specialty Packaging and who gave evidence that Mr Ainslie was the "go to man" at Specialty Packaging for quotations.

No evidence was given by Mr Ainslie in relation to the authorisation point and the Court used this to draw the inference that his evidence would not have assisted him. Taking all of this into account, the Court accepted that even though Mr Ainslie may have had shared management responsibilities at certain times, all of the circumstances together were capable of supporting the inference that he did have "sufficient control over [Specialty Packaging's] infringing conduct to be found to have sanctioned, approved and countenanced the infringements".

Key lessons for directors and rights holders

This case demonstrates that the Federal Court can readily hold that a director authorised infringement of designs even if there may be, all things considered, minimal evidence showing such authorisation. Indeed, in these proceedings, there was no direct evidence from Mr Ainslie of any personal involvement in the alleged acts of infringement, with little evidence of his role and involvement in relation to the company's business.

Directors should therefore be very careful to ensure that they do not endorse or control company conduct that infringes third party rights.

Rights holders, on the other hand, should give consideration as to whether individual directors should be joined as defendants, when bringing infringement proceedings against a company.