Amphibious boat supplier Sealegs is chasing across the seven seas those rivals copying its unique system of using retractable legs enabling boats to be driven in and out of the sea. It took action against former employees, Chinese investors and a local boat manufacturer who thought they were cleverly skirting round Sealeg’s patents, only to be caught by copyright law protecting ‘artistic works’.
The High Court issued a permanent injunction stopping former employees Darren Leybourne, and Vladan Zubcic together with Chinese investor Yun Zhang from manufacturing and selling products similar to Sealegs under their Orion brand. The injunction also extends to local company Smuggler Marine Ltd which used Orion products. All have to account for profits made using the copied design and hand over for destruction all copies manufactured.
Mr Leybourne was employed by Sealegs for seven years, leaving in 2011. With considerable expertise in hydraulics, he rose through the ranks becoming project manager. The High Court was told he left Sealegs in frustration over production inefficiencies and annoyance at a new corporate structure which altered management reporting lines. Mr Zubcic worked at Sealegs as a mechanical and design engineer. He joined Mr Leybourne in 2013 at new company Orion Marine Ltd. Orion was registered in 2012. It was funded by Chinese investor Yun Zhang with the backing of family interests in China. Mr Zhang had lived in New Zealand with the Leybournes on a homestay basis for five years whilst on a student visa. He became a permanent resident in 2017.
Initially, Sealegs and Orion enjoyed a collaborative working relationship. Sealegs contracted out work to Orion on new prototypes. Evidence was given of growing suspicion by Sealegs that Orion was setting up in competition. An Orion amphibious craft for use in flood rescue equipped with retractable legs was on display at the 2014 Shanghai boat show. Auckland-based Smuggler Marine had been previously fitting the Sealeg system to its craft, having sold fifteen units prior to 2015. Then it switched to an Orion product, telling the High Court Sealegs was ‘a challenge to work with’. All along, Mr Leybourne emphasised in his contact with Sealegs that the way forward was to work together collaboratively. He offered Sealegs a ‘no fight fee’: without conceding its product was in breach of Sealeg’s intellectual property rights it would pay a fee of $5000 to Sealegs on each Orion product sold until either 100 units were sold or Sealeg’s patent expired, whichever came first.
In the High Court, Justice Davison said Orion’s legal focus was on any potential breach of Sealeg’s patent. Its patent specification emphasised use of the retracted front wheel as a bumper sitting at the bow, providing protection from contact with a wharf or other craft. Orion was confident its use of a cowling over a retracted front wheel was sufficient to circumvent the patent. Orion failed to appreciate its substantial copying of the Sealegs product was a breach of copyright. Its product was a copy of and directly derived from the Sealegs system, Justice Davison ruled. Sealeg’s product was protected as an ‘artistic work’ under the Copyright Act. There is no registration requirement for copyright. Copyright applies automatically to original works.
Sealegs International Ltd v. Zhang – High Court (12.07.18)
18.138