Implied confidence saves
distinctiveness of design
Inspire June 2021
In Justice Greenwood’s recent decision 1 in Key Logic v Sun Wizard,
we remarkably see the application of s 68(6) of the Designs Act (the Act)
for the first time, as well as a consideration of circumstances which gave
rise to an obligation of confidence through email communication.

As Sun-Wizard had requested
Australian Design Registration
examination and argued revocation,
AU332890 (the design) was filed on
His Honour explained that
24 September 2010 and certified on
Sun-Wizard bore the burden of
13 January 2012. The design relates
satisfying the Court that the design
to a bollard having a solar-powered
was not registrable. At paragraph
light source mounted on top. The
design was originally filed in the name [42], Justice Greenwood stated that
the owner of the design, Key Logic,
of Exlites Pty Ltd (Exlites) and was
transferred to Key Logic by assignment. bore the onus of demonstrating
the obligation of confidence arose
On 16 February 2015, Sun-Wizard
between the sender and the
filed a request for re-examination
recipients of the contentious emails.

of the design. Sun-Wizard
Regarding whether an obligation
contended that emails pre-dating
of confidence arose in respect of
24 September 2010 were sent by
the email correspondence between
employees of Exlites to a network
Exlites and the group of certified
of certified installers, and that these
installers receiving the emails, the
emails were a publication of the
Court’s analysis is of particular
design, thus rendering it not new
interest as an explicit confidentiality
or distinctive. Sun-Wizard further
agreement did not exist. The
argued that the registration was
emails did contain a pro-forma
not sufficiently distinctive
confidentiality footer. However,
in light of earlier superseded
Justice Greenwood considered this
models of the design. As a result
footer to be insufficient on its own
of re-examination based on the
to impart an obligation of confidence
new material provided by
Sun-Wizard, the design was revoked. on an intended recipient of an email.

Key Logic lodged an appeal to the
Federal Court under s 68(6) of the Act
against the decision of the delegate.

Reversing the decision to revoke
the design, the Court found it to be
new and distinctive, and that the
circumstances in which the emails
Maintaining appropriate
were sent gave rise to an obligation
confidentiality over new
of confidence on the recipients.

technology developments
At paragraphs [38] and [39]
can be crucial to
of the Court’s decision, Justice
maximising the value
Greenwood dealt with the
of intellectual property
question of onus.

Rather, Justice Greenwood found
it determinative that the emails
were sent to a closed and limited
group of certified installers who
were provided with benefits
and advantages through their
membership. Justice Greenwood
considered the information
contained in the emails to be
inherently confidential, as it
addressed features of the product
still under development and the
information was put to the cohort
in order to obtain their opinions.

Ultimately His Honour found that
the emails were provided to
recipients in their capacity as
members of a select private
network, solely for the purposes
of that network, and not for
public use, therefore giving rise
to an obligation of confidence.

Maintaining appropriate
confidentiality over new technology
developments can be crucial to
maximising the value of intellectual
property derived from them.

In circumstances where some
degree of disclosure to third
parties is necessary, confidentiality
can be protected through use of
confidentiality agreements, the
importance of which can be seen
in the above example. Had such
agreements been in place between
Exlites and its certified installer
network, the need to file an appeal
with the Federal Court of Australia
may have been avoided.

derived from them.

8 Peter Wassouf | Associate
B.Eng (Mech) (Hons), B.Bus JD MIPLaw
peter.wassouf@pof.com.au 1
Key Logic Pty Ltd v Sun-Wizard Holding
Pty Ltd [2021] FCA 208 (12 March 2021)



Seeking security
in uncertain times
If they do succeed, they will
generally be awarded a significant
proportion of their legal costs.

However, if the applicant is a foreign
resident, recovery of costs can be
difficult. Consequently, a respondent
will usually look to have a foreign
applicant provide security for costs
and do so early in the case.

The Federal Court has recently
handed down its decision in C.M.E.

Blasting & Mining Equipment v Rock
Tool Refurbishment Solutions 1 in
relation to security for costs in a
patent dispute, where the applicant
is a Canadian based mining
equipment company.

As far as the legal principles are
concerned, the Court confirmed
that it has an “effectively unlimited
or confined” discretion to order
security, which involves an exercise
in risk management. As regards
to quantum, the Court will usually
take a broad brush approach, which
“embodies to a considerable extent
reliance upon the ‘ feel of the case’
after considering relevant factors”.

At the time that the security for costs
application was heard, the case
had almost reached the end of the
pleadings stage. Rock Tool had, by
then, incurred some AU$197,000 in
legal fees and estimated that it would
likely incur another AU$350,000
to AU$450,000 in fees up to the
completion of evidence. They sought
security be provided to cover that
point in the proceedings in the
amount of US$250,000 (equivalent
to about AU$355,000), on the basis
that party/party costs are generally
about 65% of total costs.

CME resisted the security application,
on two bases. Firstly, it had provided
its Australian lawyers with US$180,000,
and given what it said were irrevocable
instructions to only release those funds
to meet a costs order. Secondly, CME
claimed it had product inventory in
Australia worth several hundreds of
thousands of dollars, which could be
called upon to satisfy a costs order.

The Court was not persuaded that
either basis was adequate protection
for Rock Tool. The Court accepted
their submission that so called
‘irrevocable’ instructions are not
necessarily watertight and that reliance
on such instructions can lead to its
own litigation, and in the process
incur further legal costs. The Court
also considered that CME’s inventory,
which consisted of equipment and
replacement parts, was too uncertain
a resource. In those circumstances the
Court indicated that it was appropriate
to order security be provided.

CME then submitted that the
amount of the security should be set
by reference to the cost of enforcing
a costs order in Canada, where
they were resident. This type of
approach had been taken in some
earlier cases by the Federal Court.

In considering whether this was the
correct approach the Court looked
at two factors. Firstly, whether
there was reciprocal enforcement
of judgements legislation in the
two jurisdictions – Australia and
Ontario, Canada. Secondly, whether
there was evidence that CME was
reputable and financially substantial.

There is no reciprocal enforcement
of judgments legislation in Australia
and Ontario. Although that was not
in itself fatal, as Rock Tool could
still sue at common law, it would
be an inconvenient and convoluted
process. In those circumstances
the Court needed to ensure Rock
Tool would not be subject to any
unacceptable disadvantage by
reason of CME’s foreign residence.

The Court took guidance from an
earlier decision in Maxim’s Caterers,
where the judge had ultimately
looked to the considerations of
justice underlying the discretion
to award security for costs. In so
doing, the judge looked at evidence
as to the existence and location of
assets, and the ease or otherwise
of enforcing a judgment in the place
where the assets were located.

In this case
there was no
evidence as to CME’s
assets and liabilities, the
location of its assets, and how
difficult or easy it may be to enforce
a judgment against them. The Court
accepted that CME was a sizeable
company with international trading
relationships, but the evidence
before the Court did not go
beyond that.

In those circumstances the Court
ordered CME to post security to the
tune of US$220,000. This represents
a slightly more conservative figure
than the US$250,000 sought by
Rock Tool, which represented 65%
of the lower range of its estimated
costs to the end of evidence.

The security was to be provided
by payment to the CME’s solicitors’
trust account, but in contrast to the
irrevocable authority sought to be
relied upon by CME, was subject
to an order of the Court.

Although security was ultimately
ordered along fairly conventional
lines, the case is perhaps most
interesting in its consideration
of potential alternatives to the
traditional approach of simply
providing security to the expected
costs of the proceeding, where
the applicant is a foreign entity.

Inspire June 2021
Parties being sued often do not have much
choice in the matter. Unless they are prepared to
surrender, they will defend themselves in the belief,
or hope, that they will ultimately be successful.

9 Malcolm Bell | Principal
BSc(Hons) LLB LLM FIPTA MRACI
malcolm.bell@pof.com.au C.M.E. Blasting & Mining Equipment Ltd
v Rock Tool Refurbishment Solutions Pty
Ltd [2021] FCA 160 (2 March 2021)
1