The parallel supply chain scheme.

PGT was a Vietnam-based furniture business built around reclaimed timber, product design and export markets in Europe, North America and Australasia. The company had operated successfully in Vietnam for many years and continued to grow.

Its operating model was typical of many furniture manufacturers in Vietnam. PGT controlled the customer relationship, the product, the finishing, packing and export process, while much of the heavy joinery and machining work was carried out by subcontract workshops.

PGT began court action in 2014 after furniture made in Vietnam appeared in New Zealand through ESR Group, a New Zealand retailer. PGT claimed that the furniture copied its designs. Goods were detained by New Zealand Customs, and the dispute eventually reached the New Zealand Supreme Court.

From the court documents, we can reconstruct the route the goods had taken.

The furniture sold to ESR was presented as the Roseberry Collection. ESR bought through Morrow Marketing Management. Morrow sourced the goods from Galaxy Home Vietnam. Galaxy did not appear to manufacture the furniture itself. Its role was to buy furniture from joinery companies, apply colour or finish, add handles where needed, and dispatch the goods.

From the outside, this could look like an ordinary export supply chain: a New Zealand retailer, a supplier, a Vietnam finishing company and subcontract workshops.

The picture changes when the ownership and control are revealed.

Morrow Marketing Management was registered in the British Virgin Islands. Craig Morrow was a former employee of PGT. Galaxy Home Vietnam was owned by Morrow Marketing Management, and both Morrow and Galaxy were controlled by Craig Morrow.

The significance of Roseberry collection becomes clear only later. PGT’s original collection was Irish Coast. The court found that the Roseberry furniture reproduced a substantial part of PGT’s copyright works in the Irish Coast designs and Craig Morrow was an employee of PGT whilst PGT was selling Irish Coast.

This is the point at which the management problem becomes clear.

The parallel route did not need to recreate PGT as one complete competing factory. It separated the model into different legal and operating pieces. The sales interface sat with Morrow Marketing Management. The Vietnam finishing and dispatch function sat with Galaxy Home Vietnam. The physical production sat further back with joinery workshops. The supplier entity was registered offshore.

That structure made recovery against the second supply chain difficult. To take effective action in Vietnam, PGT would have needed to prove who copied the designs, who had access to them, who gave instructions, which workshops made the goods, what Galaxy knew, what Morrow controlled, and how the loss should be measured. Each party could point to another part of the chain.

Action against ESR was much clearer. ESR was in New Zealand, imported the goods into New Zealand, sold them in New Zealand, and had profits that could be measured. New Zealand Customs could detain the goods, and the New Zealand courts could act against the retailer.

It is also possible that ESR originally acted in good faith. The court record says ESR knew from 28 August 2014 that the furniture infringed PGT’s copyright. Before that point, ESR may have believed it was buying from a legitimate Vietnam supplier. If so, ESR was also exposed by the same structure that damaged PGT.

The scheme was effectively stopped in 2014. New Zealand Customs detained the goods, and ESR stopped selling the furniture in November 2014. That was the most important practical result.

The later litigation was about recovery. ESR’s profit from the full period of infringing sales was recorded at NZ$221,134.50. The much smaller figure after ESR knew of the infringement was NZ$9,316.50. In 2025, more than ten years after the goods were stopped, the New Zealand Supreme Court reinstated PGT’s right to recover ESR’s profits from the full infringing sales period and awarded NZ$25,000 in costs plus disbursements.

There is no public evidence found showing recovery from Morrow, Galaxy, Craig Morrow or the Vietnam-side production network.

The value in PGT was not just the product design. It was the whole commercial system: materials, construction knowledge, supplier capability, finishing methods, quality expectations, customer relationships, pricing and export know-how. Once someone understands enough of that system, the business can be copied without copying the factory.

That is why subcontracting creates a specific IP risk. The problem is not subcontracting itself. The problem arises when subcontractors receive enough product knowledge, and a current or former insider knows enough commercial context, to connect that capability to another buyer.

For experienced managers in Vietnam, the structure is recognisable: a current or former insider uses knowledge of customers, products and subcontractors to assemble a parallel supply route outside the original company.

This risk applies to Vietnamese-owned and foreign-owned businesses alike. PGT happened to be foreign-owned, but ownership is not the issue. The issue is whether valuable, copyable knowledge can be separated from the original company and reassembled through another legal and commercial route.

Case study takeaways

This is not a case study about avoiding subcontractors. It is a case study about controlling what subcontractors, staff and former staff know.

PGT’s success in New Zealand depended on visible goods, a visible retailer and measurable profits. A Vietnam action against the upstream structure would have required a different evidence base: proof of protected rights in Vietnam, proof that confidential designs and commercial knowledge were controlled, proof that Morrow and Galaxy had access to and used that knowledge, proof of which workshops made the goods, and proof of loss. Without that evidence created before the event, the commercial suspicion may be strong but the legal recovery weak.

Legal separation matters. A supplier in one jurisdiction, a finishing company in another, and workshops further behind the chain can make recovery against the real source of loss very difficult. If Galaxy bought unfinished furniture from unnamed joinery companies, PGT would need to identify which workshops made the Roseberry furniture and prove what instructions they received.

Without that, the chain is too fragmented. The workshop says it only made furniture to order. Galaxy says it only finished. Morrow says it only supplied. Each layer points away from itself.

The most important practical control is simple: Who knows enough to recreate the business outside the business?

Management needs to know what IP leaves the company, who receives it, which former staff still understand the business, and whether any supplier or agent could use that knowledge to reach another customer.

Public-source note

This case study is based only public-domain material, including New Zealand court records, public company/tax records and Andrew Brown KC’s public case summaries.