Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd - [2009] FCA 1495

FEDERAL COURT OF AUSTRALIA
Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2009] FCA 1495
COPYRIGHT – copyright infringement in gaming machines parts and components – infringement inferred from circumstantial evidence – burden of proof – authorisation of copyright infringement – joint liability – claim in conversion for resale of components acquired from scrap dealer fails – scrap dealer not a bailee of the goods – infringement of copyright established – damages and additional damages ordered.
Copyright Act 1968 (Cth), ss 36, 38, 115
Evidence Act 1995 (Cth), ss 135, 136, 140
Sale of Goods Act 1923 (NSW), s 23
Trade Practices Act 1974 (Cth)
Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 referred to
Associated Midland Corporation Ltd v Bank of New South Wales [1983] 1 NSWLR 533 referred to
Australasian Performing Right Association Limited v Jain (1990) 26 FCR 53 referred to
Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298 distinguished
Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 referred to
Briginshaw v Briginshaw [1938] 60 CLR 336 referred to
CBS Inc v Ames Records & Tapes Ltd [1982] Ch 91 referred to
CBS Songs Ltd v Amstrad Consumer Electronics PLC [1988] AC 1013 distinguished
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 referred to
Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577 distinguished
Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380 referred to
Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] All ER 700 referred to
Foxtel Management Pty Ltd v The Mod Shop Pty Ltd (2008) 165 FCR 149 referred to
Gauci v Commissioner of Taxation of the Commonwealth of Australia (1975) 135 CLR 81 referred to
Harding v Commissioner of Inland Revenue [1977] 1 NZLR 337 referred to
Jones v Dunkel (1959) 101 CLR 298 referred to
The Koursk [1924] P 140 referred to
Luxton v Vines (1952) 85 CLR 352 referred to
Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716 referred to
Motor Mart Limited v Webb [1958] NZLR 773 referred to
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 referred to
Nguyen v Cosmopolitan Homes [2008] NSWCA 246 referred to
Palmer v Dolman [2005] NSWCA 361 referred to
Papakosmas v the Queen (1999) 196 CLR 297 referred to
Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 referred to
Qantas Airways Ltd v Gama (2008) 167 FCR 537 referred to
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 referred to
Rejfek v McElroy (1965) 112 CLR 517 referred to
Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 referred to
Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 applied
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 referred to
Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 referred to
S.W. Hart & Co Proprietary Limited v Edwards Hot Water Systems (1985) 159 CLR 466 applied
Thompson v Australian Capital Television Pty Limited (1996) 186 CLR 574 referred to
The Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 referred to
Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1 referred to
Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 referred to
University of New South Wales v Moorhouse (1975) 133 CLR 1 referred to
WEA International Inc v Hanimex Corporation Limited (1987) 17 FCR 274 referred to
J.D. Heydon, Cross on Evidence (7^th Aust ed, 2004)
S. Odgers, Uniform Evidence Law (8^th ed, 2009)
N. Palmer, Bailment (2^nd ed, 1991)
F.A. Trindade, P. Cane & M. Lunney, The Law of Torts in Australia (4^th ed, 2007)
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715), ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) and ARISTOCRAT TECHNOLOGIES INC v GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589), ANTHONY EDWARD ANDREWS, IMPACT GAMING PTY LTD (ACN 109 299 461), TONITA ENTERPRISE PTY LTD (ACN 120 737 402), FRANCIS GEORGE BERNARD CRAGEN and RIAD ALLAM
NSD 1271 of 2006
JACOBSON J
15 DECEMBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1271 of 2006

BETWEEN:
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715)
First Applicant

ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158)
Second Applicant

ARISTOCRAT TECHNOLOGIES INC
Third Applicant

AND:
GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589)
First Respondent

ANTHONY EDWARD ANDREWS
Second Respondent

IMPACT GAMING PTY LTD (ACN 109 299 461)
Third Respondent

TONITA ENTERPRISE PTY LTD (ACN 120 737 402)
Fourth Respondent

FRANCIS GEORGE BERNARD CRAGEN
Fifth Respondent

RIAD ALLAM
Sixth Respondent

JUDGE:

JACOBSON J

DATE OF ORDER:

15 DECEMBER 2009

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The first and second respondents pay the applicants damages under s 115(2) of the Copyright Act in the amount of $US12,800, converted to $AU13,963.
2.The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, damages under s 115(2) of the Copyright Act in the amount of $US32,000, converted to $AU34,907.
3.The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, additional damages under s 115(4) of the Copyright Act in the amount of $AU450,000.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The text of entered orders can be located using the Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1271 of 2006

BETWEEN:
ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715)
First Applicant

ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158)
Second Applicant

ARISTOCRAT TECHNOLOGIES INC
Third Applicant

AND:
GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589)
First Respondent

ANTHONY EDWARD ANDREWS
Second Respondent

IMPACT GAMING PTY LTD (ACN 109 299 461)
Third Respondent

TONITA ENTERPRISE PTY LTD (ACN 120 737 402)
Fourth Respondent

FRANCIS GEORGE BERNARD CRAGEN
Fifth Respondent

RIAD ALLAM
Sixth Respondent

JUDGE:

JACOBSON J

DATE:

15 DECEMBER 2009

PLACE:

SYDNEY

1....... INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[1]
2. OVERVIEW........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[8]
3. THE CAUSES OF ACTION RELIED UPON........ ........ ........ ........ ........ ........ ........ ........ ..	[35]
3.1 Copyright........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[36]
3.2 Trade Marks........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[45]
3.3 Trade Practices Act........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[46]
3.4 Conversion of Behong stock........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[48]
3.5 Accessorial liability........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[53]
4. PRELIMINARY OBSERVATIONS AND STRUCTURE OF THE JUDGMENT........ ....	[57]
5. BACKGROUND FACTS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[66]
5.1 The Parties and their Activities........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[66]
5.1.1 The applicants........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[66]
5.1.1.1 Aristocrat........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[69]
5.1.1.2 AI and ATI........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[71]
5.1.1.3 Reputation of Aristocrat Gaming Machines ........ ........ ........ ......	[77]
5.1.2 The respondents........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[78]
5.1.2.1 Mr Andrews and Global........ ........ ........ ........ ........ ........ ........ ..	[81]
5.1.2.2 Mr Cragen and Impact........ ........ ........ ........ ........ ........ ........ ....	[89]
5.1.2.3 Mr Allam and Tonita........ ........ ........ ........ ........ ........ ........ ........	[95]
5.2 Gaming Machines........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[101]
5.2.1 Gaming Machines........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[101]
5.2.2 Game software and EPROMs........ ........ ........ ........ ........ ........ ........ ........ ..	[103]
5.2.3 Artwork........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[111]
5.3 Conversion kits........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[112]
5.4 Aristocrat Gaming Machines........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[114]
5.5 Aristocrat Trade Marks........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[117]
5.6 Gaming Machine Markets........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[120]
5.6.1 Markets in Australia and overseas........ ........ ........ ........ ........ ........ ........ ....	[120]
5.6.2 Regulatory background........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[121]
5.6.2.1 New South Wales........ ........ ........ ........ ........ ........ ........ ........ ...	[121]
5.6.2.2 Regulations in South American export markets........ ........ ........ .	[132]
5.6.2.3 Respondents’ submissions on regulation........ ........ ........ ........ ...	[135]
5.7 Joint Venture........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[139]
5.7.1 Overview........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[139]
5.7.2 1999/2000 to June 2003 ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[145]
5.7.3 June 2003 to April 2004 ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[146]
5.7.4 April 2004 to present ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[147]
5.7.5 Mr Allam/Tonita’s association with Joint Venture........ ........ ........ ........ ......	[149]
5.8 Nuevestar/Uruguay Transaction........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[152]
5.8.1 Purchase by Global/Impact and others........ ........ ........ ........ ........ ........ ......	[158]
5.8.2 Involvement of Mr Allam/Tonita........ ........ ........ ........ ........ ........ ........ .......	[162]
5.9 Behong........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[163]
5.9.1 Behong Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[163]
5.9.2 Mr Allam/Tonita’s dealings with Behong........ ........ ........ ........ ........ ........ ...	[167]
5.10 Procedural History........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[172]
5.10.1 Global proceeding........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[172]
5.10.2 Impact/Tonita proceeding........ ........ ........ ........ ........ ........ ........ ........ ........ .	[174]
5.10.3 Consolidated proceedings ........ ........ ........ ........ ........ ........ ........ ........ .......	[176]
6. THE PLAY KING TRANSACTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[177]
6.1 How the transaction occurred........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[177]
6.2 The inspection by Mr Coster........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[200]
6.3 Whether the Play King machines were counterfeit........ ........ ........ ........ ........ ........ ....	[207]
6.4 Play King machines never in the possession of Global........ ........ ........ ........ ........ ......	[216]
6.5 Spanish Artwork........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[224]
6.6 Four year gap........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[232]
6.7 The pattern of trade and the evidentiary onus........ ........ ........ ........ ........ ........ ........ ...	[242]
6.8 Jones v Dunkel........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[250]
6.9 Other matters in relation to Play King........ ........ ........ ........ ........ ........ ........ ........ ......	[260]
7. BUSINESS COMMUNICATIONS OF THE RESPONDENTS........ ........ ........ ........ ......	[264]
7.1 Communications going to infringement........ ........ ........ ........ ........ ........ ........ ........ .....	[269]
7.2 Findings in relation to the email communications........ ........ ........ ........ ........ ........ .......	[321]
8. MR CHANNA’S EVIDENCE........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[341]
8.1 Overview of Mr Channa’s evidence........ ........ ........ ........ ........ ........ ........ ........ ........	[341]
8.2 Preliminary observations at to Mr Channa’s credit........ ........ ........ ........ ........ ........ ...	[361]
9. THE SEIZED MATERIALS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[375]
9.1 The Florey and Mascot Premises........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[380]
9.1.1 Artwork at Florey and Mascot........ ........ ........ ........ ........ ........ ........ ........ .	[382]
9.1.2 Game sheets at Florey/Mascot........ ........ ........ ........ ........ ........ ........ ........ .	[395]
9.1.3 EPROMs and EPROM labels at Florey and Mascot........ ........ ........ ........ .	[398]
9.1.4 Game Software at Florey and Mascot........ ........ ........ ........ ........ ........ ......	[409]
9.2 The Botany Premises........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[419]
9.2.1 EPROMs at Botany........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[419]
9.2.2 EPROM label files at Botany........ ........ ........ ........ ........ ........ ........ ........ ....	[432]
9.2.3 Compliance plates at Botany........ ........ ........ ........ ........ ........ ........ ........ ....	[438]
9.3 The Bankstown Premises........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[441]
9.3.1 Compliance plates at Bankstown........ ........ ........ ........ ........ ........ ........ ......	[441]
9.3.2 EPROMs at Bankstown........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[443]
9.4 Compliance plates at the Botany and Bankstown Premises........ ........ ........ ........ ......	[447]
9.5 The Georges Hall Premises........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[459]
9.5.1 EPROM Labels at Georges Hall........ ........ ........ ........ ........ ........ ........ .......	[459]
9.5.2 Blank EPROMs at Georges Hall........ ........ ........ ........ ........ ........ ........ ......	[464]
9.5.3 Compliance Plates at Georges Hall........ ........ ........ ........ ........ ........ ........ ...	[468]
9.5.4 Aristocrat game software at Georges Hall........ ........ ........ ........ ........ ........ .	[475]
9.5.5 Computers at Georges Hall........ ........ ........ ........ ........ ........ ........ ........ ......	[477]
9.5.5.1 The voir dire........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[481]
9.5.5.1.1 Submissions of the respondents........ ........ ........ .....	[485]
9.5.5.1.2 Submissions of the Aristocrat companies........ .......	[488]
9.5.5.1.3 Admissibility of Mr McKemmish’s evidence........ ..	[493]
9.5.5.2 The Loose HDD........ ........ ........ ........ ........ ........ ........ ........ ......	[496]
9.5.5.3 Georges Hall Desktop 1........ ........ ........ ........ ........ ........ ........ ..	[520]
9.5.5.4 Georges Hall Desktop 2........ ........ ........ ........ ........ ........ ........ ..	[522]
10. CCC-14........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[530]
11. THE DATA MATCHING EXERCISE........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[536]
11.1 Overview........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[536]
11.2 The OLGR Matching Exercise........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[551]
11.3 The “fake” invoice exercise........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[563]
12. THE BURDEN OF PROOF........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[590]
13. AUTHORISATION/JOINT VENTURE: LEGAL PRINCIPLES........ ........ ........ ........ ......	[606]
13.1 Background........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[606]
13.2 Authorisation........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[610]
13.3 Joint tortfeasors........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[620]
13.4 Liability of officers........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[625]
14. CREDIT OF WITNESSES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[631]
14.1 The Aristocrat companies’ witnesses........ ........ ........ ........ ........ ........ ........ ........ .......	[631]
14.2 The respondents’ witnesses........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[635]
14.2.1 Mr Andrews........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[635]
14.2.2 Mr Cragen........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[656]
14.2.3 Mr Allam........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[667]
14.2.3.1 Compliance plates at Bankstown and Georges Hall........ ........ ..	[677]
14.2.3.2 False denials of use of CCC-14 and the Loose HDD........ .......	[707]
15. PRELIMINARY FINDINGS ON COPYRIGHT INFRINGEMENT........ ........ ........ .......	[713]
15.1 Subject matter of claims........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[713]
15.2 What flows from the credit findings........ ........ ........ ........ ........ ........ ........ ........ ........ .	[716]
15.2.1 The Tonita respondents burned Aristocrat game software onto blank EPROMs........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[724]
15.2.2 The Tonita respondents manufactured fake Aristocrat compliance plates....	[737]
15.2.3 Mr Andrews and Mr Cragen were aware that Mr Allam was burning Aristocrat game software ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[751]
15.2.4 Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing counterfeit compliance plates........ ........ ........ ........ ........ ......	[753]
15.2.5 Sending artwork to be copied........ ........ ........ ........ ........ ........ ........ ........ ...	[757]
16. FINDINGS IN RELATION TO THE JOINT VENTURE AND AUTHORISATION OF COPYRIGHT INFRINGEMENT	[763]
17. THE CONVERSION CLAIM........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[769]
17.1 Background........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[769]
17.2 Dealings between Behong and the Tonita respondents........ ........ ........ ........ ........ .....	[777]
17.3 The Behong Agreement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[787]
17.4 Conversion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[797]
18. THE 54 TRANSACTIONS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[821]
18.1 Introduction........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[821]
18.2 Machines at Clubs (MC)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[838]
18.3 Duplicate Numbers (DN)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[850]
18.4 Infringing Indicia (II)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[873]
18.5 Conclusion in relation to the 54 transactions........ ........ ........ ........ ........ ........ ........ ....	[879]
19. DAMAGES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[881]
19.1 Damages under s 115(2) ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[881]
19.2 Allocation of s 115(2) damages........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[902]
19.3 Additional damages under s 115(4)........ ........ ........ ........ ........ ........ ........ ........ ........ .	[906]
19.4 Trade marks and other causes of action........ ........ ........ ........ ........ ........ ........ ........ ..	[916]
20. MISCELLANEOUS MATTERS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[919]
21. ORDERS	[935]

REASONS FOR JUDGMENT
1.INTRODUCTION

The modern poker machine bears only passing resemblance to the original machines which first appeared in the United States in the latter part of the 19^th century. Today, poker machines are referred to in the industry as gaming machines. They are computer operated and viewed on video screens which simulate the spinning reels that were a feature of poker machines until the advent of the electronic era.
In 1974, the Report of the Western Australian Royal Commission into Gambling described the playing of poker machines as a “mindless, repetitive and insidious form of gambling which has many undesirable features”.
More recently, Jagot J referred to the concerns raised by a Local Council about the vulnerability of persons to the misuse and abuse of gaming machines and the extent to which these concerns are addressed in the provisions of the Gaming Machines Act 2001 (NSW): see Waugh Hotel Management v Marrickville Council (2007) 156 LGERA 414 at [91].
Notwithstanding these remarks, the manufacturers of those machines are nevertheless entitled to have their intellectual property protected against counterfeiting.
The essence of the applicants’ case is that the respondents were participants in a joint venture to counterfeit and sell, principally in South America, second hand gaming machines assembled in Australia using pirated copies of materials in which the applicants hold the copyright.
The allegations of copyright piracy were vigorously denied by the respondents in proceedings which occupied more than four weeks of court time.
The principal question which arises is whether I can infer copyright infringement in the absence of direct evidence of the gaming machines which are said to have been counterfeited.
2.OVERVIEW
The applicants (collectively “the Aristocrat companies”) are engaged in various ways in the manufacture, distribution and sale of gaming machines and gaming machine components in Australia and internationally.
The respondents participate in various ways in the business of refurbishing and supplying used gaming machines to overseas markets.
There are three groups of respondents. The first group is Global Gaming Supplies Pty Ltd (“Global”) and its principal, Mr Anthony Edward Andrews (collectively “the Global respondents”). The second is Impact Gaming Pty Ltd (“Impact”) and its principal, Mr Francis George Bernard Cragen (collectively “the Impact respondents”). The third is Tonita Enterprises Pty Ltd (“Tonita”) and its principal, Mr Riad Allam (collectively “the Tonita respondents”).
There was no real question that there was a joint venture for the supply of refurbished gaming machines to overseas markets between the Global/Impact respondents from about April 2005.
Nor can there be any real dispute that from about the same time, the Tonita respondents, or Mr Allam personally, carried out significant technical work and business functions for the Global/Impact Joint Venture.
The Aristocrat companies obtained Anton Piller orders which were executed at the premises of each group of respondents. Large numbers of components of Aristocrat gaming machines were seized at each of the premises. The Aristocrat companies claim that the seized materials include counterfeit copies of materials in which they held the copyright.
Much of the seized materials consisted of computer hard drives, but the materials included certain items of hardware and software which were an important part of the Aristocrat companies’ case.
The first was game software stored on sets of removable memory chips called Erasable Programme Read Only Memory chips which are known in the industry by the acronym EPROMs. The software stored on the EPROM storage devices enable electronic games to be played on the modern form of poker machines.
All EPROMs produced by the Aristocrat companies contain labels which identify, amongst other things, the particular Aristocrat game contained on the EPROM. The Aristocrat companies claim that their EPROM labels have certain specific recognisable formats and characters and that they are printed using specific printing methods.
The Aristocrat companies claim that the seized EPROMs were counterfeit because a number of their witnesses gave evidence that the labels on the EPROMs were not in the format used by the Aristocrat companies. In addition, a number of electronic EPROM label files and templates were amongst the material seized from the respondents, a fact which the Aristocrat companies say is evidence of the fabrication of EPROM labels and the EPROMs to which they were attached.
The second important item seized on the Anton Piller raids was compliance plates. It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer. The compliance plate affixed to such a gaming machine has a unique serial number which enables the regulatory authority in NSW to access information about that machine.
There are similar regulatory requirements in Queensland and the ACT (but much of the South American market appears to be unregulated).
The seized materials included nearly 100 compliance plates which resemble genuine Aristocrat compliance plates but which the Aristocrat companies claim to be counterfeit.
Various features of the seized compliance plates are relied upon to support the Aristocrat companies’ contention that the seized items are not genuine. One such feature is that some of the seized compliance plates were blank, and it is said that blank compliance plates would not normally be available in the market place for legitimate purposes. However, a complication arises in relation to this issue because in a transaction referred to as the “Uruguay” or “Nuevestar” transaction, the Aristocrat companies put into circulation certain blank compliance plates originally destined for South America.
I will describe the transaction in more detail below but it appears that some of the blank compliance plates associated with it re-entered NSW when the Global/Impact respondents obtained an interest in the gaming machines that were the subject of that transaction.
The allegations of counterfeiting were hotly contested by all of the respondents. One of the most bitter contests related to the materials seized on the raid at the premises of the Tonita respondents.
Four imaged copies of computer hard drives were seized at those premises. I will describe the seized materials in more detail later but they included an imaged copy of a loose hard disk drive known as the “Loose HDD” which Mr Allam claims to have been planted at his premises to incriminate him.
The Loose HDD contained software of a kind used to burn EPROMs (the “Dataman software”) and folders that were connected to an EPROM programming device. The folders contained files that indicated that the Dataman software had been used in connection with game software that was found on the Loose HDD.
There was no suggestion that another computer seized at the premises of the Tonita respondents (the “Georges Hall Desktop 2”) had been deliberately planted for an ulterior purpose. That computer showed that the Dataman software had been used in the same way on it as the use which was detected on the Loose HDD. However, the Tonita respondents submit that the Georges Hall Desktop 2 computer was located in an area at the Tonita respondents’ premises which was easily accessible by all employees at the premises.
The Anton Piller orders were obtained upon the basis of evidence given by Mr Christos Channa, a disaffected former employee of the Tonita respondents. Mr Channa provided the Aristocrat companies with a disk described as CCC-14, which he said he had obtained from Mr Allam. The disk contained binary game files and there was evidence that it had been viewed on the Loose HDD.
Mr Allam claimed that the disk, CCC-14, was fabricated either by Mr Channa or another person. The Tonita respondents made a substantial attack on Mr Channa’s credit. At the heart of the attack was the fact that Mr Channa received payments from the Aristocrat companies for providing evidence in support of these proceedings.
The essence of the defence of the Global/Impact respondents is that for many years, they have been engaged in refurbishing and supplying used gaming machines with genuine Aristocrat artwork and software.
The essence of the Tonita respondents’ defence is that Mr Allam operates his own business which is, and was at all times, distinct from that of the Global/Impact business. As I have said, the allegations of counterfeiting are strenuously denied.
The respondents also complained that the “snowstorm of paper” tendered against them by the Aristocrat companies was insufficient to establish the necessary elements of the serious claim made against them. In particular, they submitted that, notwithstanding the substantial resources of the Aristocrat companies, there was no physical evidence of infringing material.
In my view, the often repeated refrain of the respondents as to the absence of physical evidence is an overstatement. It ignores the force of the evidence obtained on the execution of the Anton Piller orders.
Ultimately, the Aristocrat companies identified 54 transactions of the respondents in relation to 618 Aristocrat gaming machines which they claimed that the respondents sold with infringing copies of Aristocrat games and artwork. The total value of the 618 machines, according to the respondents’ invoices was $1,096,690.
At the heart of the case is the question of whether the mass of material tendered by the Aristocrat companies is sufficient to satisfy their evidentiary onus and whether the denials of Mr Andrews, Mr Cragen and Mr Allam ought to be accepted.
3.THE CAUSES OF ACTION RELIED UPON
The Aristocrat companies pleaded and particularised a large number of causes of action. After the evidence closed, they provided a document setting out the claims which they maintained.
3.1Copyright
The Aristocrat companies claim that the respondents have, in the course of carrying out their business or businesses, reproduced, manufactured, supplied, offered to sell or distributed:
·imitation Aristocrat game software, copied on to blank EPROMs;
·imitation Aristocrat EPROM labels;
·imitation Aristocrat artwork; and
·imitation Aristocrat compliance plates.
These acts are said to have been carried out either separately or as part of the manufacture and sale of machines that were sold as Aristocrat gaming machines.
The Aristocrat companies claim that Aristocrat game software is a literary work within the meaning of s 10(1) of the Copyright Act 1968 (Cth). They claim that Aristocrat compliance plates and their layout are artistic works within the meaning of that sub-section of the Copyright Act. They also claim that Aristocrat artwork constitutes artistic work within the meaning of s 10(1).
The respondents did not challenge the subsistence of copyright or the Aristocrat companies’ claim of ownership in the literary or artistic works in those items.
The Aristocrat companies claim that the respondents, by doing the acts which I have set out in [36] above, have infringed their copyright in those works under s 36 of the Copyright Act.
In addition to the claims of primary infringement under s 36, the Aristocrat companies also allege that by dealing with infringing copies of the works with knowledge or constructive knowledge of the infringements, the respondents are guilty of secondary infringement of copyright under s 38 of the Copyright Act.
The Aristocrat companies claim compensatory damages under s 115(2) of the Copyright Act in an amount in excess of $1.5 million. They also claim additional damages under s 115(4).
Although the Aristocrat companies also claim damages for conversion under s 116 of the Copyright Act, that claim is made in the alternative, if the damages awarded under

s 115(2) are not an adequate remedy.
In respect of each type of primary infringement by any respondent, the Aristocrat companies maintain a claim of authorisation infringement under s 36(1) and s 36(1A) against all of the respondents, but only from 24 May 2004 which was the date of incorporation of Impact. A number of infringements are alleged to have occurred before that date. Authorisation infringements in respect of those transactions are maintained only against Global and Mr Andrews.
3.2Trade Marks
The Aristocrat companies claim that by engaging in the acts referred to in [36] above, the respondents have infringed their registered trade marks. The relevant marks include ARISTOCRAT and the names of various games. They accept that if damages are awarded under s 115(2) of the Copyright Act, no further damages for trade mark infringement would be appropriate.
3.3Trade Practices Act
The Aristocrat companies allege that by “rebirthing” gaming machines with counterfeit Aristocrat works, the respondents have represented in trade or commerce that the rebirthed machines emanate from the Aristocrat companies and have their approval.
They claim that the representations were false because the rebirthed machines have important components that are not authentic. Nevertheless, as with the claims of trade mark infringement, the Aristocrat companies accept that if they are awarded damages under

s 115(2) of the Copyright Act, no further claim for damages under the Trade Practices Act 1974 (Cth) would be appropriate.
3.4Conversion of Behong stock
The Aristocrat companies make a claim against the Tonita respondents for conversion of a large number of items of stock and equipment acquired by those respondents from Behong Import & Export (Australia) Pty Ltd (“Behong”), a scrap merchant located in Sydney.
Behong was appointed by one of the Aristocrat companies as its authorised scrap collector.
I will refer in more detail below to the basis upon which the claim of conversion is made. It is sufficient to say by way of introduction that the Aristocrat companies claim that the effect of their contractual arrangements with Behong was that Behong was prevented from on-selling for reuse as gaming machine equipment the stock obtained by Behong under the scrapping contract.
The Aristocrat companies claim that the Tonita respondents acquired from Behong second hand gaming machines and equipment, the property in which remained with the Aristocrat companies, and that by using the components in the assembly of other machines, the Tonita respondents converted the components to their own use, or to the use of the Global/Impact respondents.
The Aristocrat companies also allege that the Global/Impact respondents are joint tortfeasors with the Tonita respondents in the tort of conversion.
3.5Accessorial liability
The Aristocrat companies claim that each of the respondents is liable as a joint tortfeasor with the other respondents for copyright infringement, trade mark infringement and conversion, as explained briefly below.
The claim against the Global/Impact respondents is that:
·from the date of incorporation of Impact on 24 May 2004, Global and Impact were participants in a joint venture with respect to 21 of the 54 transactions identified by the Aristocrat companies (the “Joint Venture”); and
·Mr Andrews and Mr Cragen are personally liable for the acts of their companies.
The claim against the Tonita respondents is that they were engaged by the Global/Impact Joint Venture for reward, to supply services and to procure parts and equipment for the purposes of the joint venture and that they are “so personally involved in the commission of the unlawful act[s], that it is just that [they] should be rendered liable”: Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 at [434]; cf Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380 at [1], [74], [161].
Alternatively, the Aristocrat companies claim that, in any event, the Tonita respondents were acting with the full countenance and approval of the Global/Impact respondents who are therefore vicariously liable for the unlawful acts of the Tonita respondents.
4.PRELIMINARY OBSERVATIONS AND STRUCTURE OF THE JUDGMENT
The 54 transactions identified by the Aristocrat companies cover the period from September 2001 to February 2006.
Since the Global/Impact Joint Venture commenced at the earliest on 24 May 2004, the transactions which took place before that date were alleged only against the Global respondents. The transactions before that date cover those which were numbered 1 to 33 in the Aristocrat companies’ schedule of infringing transactions.
One of the transactions falling into this category was known as the “Play King Transaction” because it involved the sale by Global to a company in Peru known as Play King SA (“Play King”).
The Play King Transaction is of some importance in these proceedings, in particular because there was direct evidence that a number of the machines which were the subject of the transaction were inspected in Peru and found to be counterfeit.
I will therefore deal separately with the Play King transaction before turning to the balance of the Aristocrat companies’ case.
All of the claims in respect of the remaining transactions depend upon whether I am prepared to draw the inferences of infringement sought by the Aristocrat companies.
The inferences of infringement are said to flow from a vast quantity of material that was adduced in evidence. This included:
·the materials seized on the Anton Piller raids;
·the evidence of Mr Channa;
·business records generated by the respondents in the course of conducting their business operations, in particular email correspondence relating to the supply of gaming machines to the South American market; and
·a very large volume of invoices generated by the Global/Impact respondents. These invoices were analysed in a computerised data matching exercise which was said to demonstrate that the serial numbers of gaming machines shown on the invoices were not genuine.
I will deal separately with each of these evidentiary bases for the claim of infringement.
Before doing so, I will set out certain background facts which are not controversial. They are drawn from a document entitled “Factual Findings Contended for by the Applicants”. In stating these facts, I have taken into account the submissions of the respondents, in particular the comments of the Tonita respondents who resisted some of the findings sought by the Aristocrat companies.
5.BACKGROUND FACTS
5.1The Parties and their Activities
5.1.1The applicants
The Aristocrat corporate group is engaged in the business of supplying gaming technologies and services to the international gaming industry, including the manufacture and sale of electronic gaming machines and game software.
The applicants are members of the Aristocrat corporate group. The Aristocrat corporate group is based in Sydney, Australia; is listed on the Australian Stock Exchange through the holding company Aristocrat Leisure Limited; and has offices throughout the world.
5.1.1.1Aristocrat
The first applicant (“Aristocrat”) is the main operating company responsible for conducting Aristocrat Leisure Limited’s business operations. Aristocrat employs all of the Aristocrat corporate group’s Australian employees.
Aristocrat designs and manufactures gaming machines, gaming machine components and conversion kits for Aristocrat gaming machines. It also sells Aristocrat gaming machines and conversion kits in Australia.
5.1.1.2AI and ATI
The second applicant (“AI”) and third applicant (“ATI”) exploit Aristocrat’s products (and associated intellectual property rights), including Aristocrat gaming machines, outside Australia. AI is a wholly owned subsidiary of Aristocrat Leisure Limited. AI primarily sells products to its subsidiary companies in various markets for on-sale to customers.

AI is responsible for the export, distribution and sale of Aristocrat’s products to third parties outside Australia.
ATI is a wholly-owned subsidiary of AI, and is based in the state of Nevada in the United States. It is engaged in the manufacture and supply of Aristocrat gaming machines in North and South America.
The Aristocrat companies led evidence that under the Aristocrat corporate group’s internal organisational arrangements, Aristocrat is the designated holder of all of their intellectual property. They summarised the relevant licence arrangements in the table below.

Agreement title Parties Date of execution Term Summary of relevant IP provisions

Head Distribution & Intellectual Property Licence Agreement
Aristocrat

AI
19/07/2006
Commenced 1 Jan 2005.

1 year term with automatic 1 year renewal periods.
Aristocrat gives AI exclusive licence to intellectual property in respect of products worldwide other than Australia, but including products made for export outside of Australia.

Distribution Agreement
AI

ATI
03/05/2006
Commenced 1 Jan 2006.

1 year term with automatic 1 year renewal periods.
AI gives exclusive licence to ATI to grant sublicences, lease, and reproduce products embodying intellectual property rights held by AI within the territory comprising North America (except British Columbia), South America, the Caribbean and Latin America (except Argentina and Puerto Rico in relation to Recurring Revenue transactions).

Deed of Variation
Aristocrat

ATI
28/12/2006
Varies Distribution Agreement (above) to exclude Peru from the territory.

Confirms that licensee may sue for and recover damages for infringement of intellectual property rights.

Intellectual Property Development Agreement
Aristocrat

ATI
04/01/2002 ATI agrees to develop intellectual property and assign all rights in that intellectual property back to Aristocrat.

The Aristocrat companies then submitted that none of the respondents were licensed by Aristocrat, AI or ATI to use or otherwise exploit Aristocrat’s intellectual property.
The Tonita respondents challenged the summary of licence arrangements put forward by the Aristocrat companies. In essence, they argued that the evidence that had been produced did not support the findings for which the Aristocrat companies contend, and in particular, the agreements had not been proven to be relevant and important. The records which had been produced, they argued, were in a “poor state”, thereby calling into question the accuracy and reliability of any records held by the Aristocrat companies in relation to licensing and the absence of any license held by the respondents.
The Global/Impact respondents also challenged the purported terms and effectiveness of the license agreements relied upon by the Aristocrat companies. In particular, they denied that none of the respondents were licensed by the Aristocrat companies, and submitted that the respondents, as recipients of second-hand Aristocrat gaming machines, have an implied license to use the intellectual property contained in those gaming machines.
5.1.1.3Reputation of Aristocrat Gaming Machines
In the course of carrying out their business, the Aristocrat companies submitted that they have acquired valuable goodwill and reputation, including in Aristocrat gaming machines in Australia and the world.
5.1.2The respondents
The respondents participate in the refurbishing and supplying of used gaming machines, including Aristocrat gaming machines and conversion kits, to markets overseas.
Mr Cragen and Mr Andrews began jointly supplying gaming machines to markets overseas in about 1999 or 2000; they had known each other for some years prior to that through business connections in the gaming industry.
Tonita and Mr Allam provide technical and customer services and raw materials for the Joint Venture.
5.1.2.1Mr Andrews and Global
Mr Andrews commenced carrying on the business of selling second hand gaming machines to markets overseas in late 1999 under the name Catkem Pty Ltd, which was the name of Global at that time (the company, having been incorporated on 24 August 1979, changed its name to Global on 28 June 2000).
Mr Andrews has at all relevant times conducted his activities through Global.
MrAndrews is:
·the sole director, secretary and shareholder of Global; and
·is and was at all relevant times involved in the day to day management and operations of Global.
Global’s business is geographically located in Australia. Its main office is located in Edman Close, Florey ACT (the “Florey Premises”).
For a time, Global also used an office at Ricketty Street, Mascot, NSW (the “Mascot Premises”).
From 2000 to 2005, Global’s general business model consisted of:
·trading in second-hand gaming machines;
·advertising via a website located in Australia at the URL thereby attracting overseas customers;
·prospective overseas customers contacting Global in Australia;
·sourcing gaming machines from suppliers in Australia; and
·shipping gaming machines from Australia to the overseas customers.
Mr Andrews is also a director and shareholder of Huricane Pty Ltd (“Huricane”). Huricane was, at all relevant times, involved in the development of computer platforms and software relating to gaming.
Since 2000, Global has also owned and operated a business through Starburst Games that hires and sells home gaming equipment.
5.1.2.2Mr Cragen and Impact
Mr Cragen has been involved in the gaming industry for about 35 years. He worked for the Aristocrat corporate group from 1972 to 1983. He also held the position of General Manager of a company manufacturing gaming machines in competition with the Aristocrat companies, and held senior sales positions within, and consulted to, the gaming company known as IGT (Australia) Pty Ltd, trading as International Game Technology (“IGT”).
In 1997, Mr Cragen commenced supplying second hand gaming machines to overseas customers, initially through a company he acquired known as Bondtren Pty Limited (“Bondtren”).
Mr Cragen has at all relevant times conducted his activities through corporate vehicles, initially Bondtren, and then Impact. Impact was incorporated on 26 May 2004.
MrCragen is:
·the sole director, secretary and shareholder of Impact; and
·involved in the day to day management and operations of Impact.
Impact carries on business from an office and warehouse at 5/10 Morgan Street, Botany (the “Botany Premises”). Prior to December 2006, Impact’s business was conducted at 3/10 Morgan Street, Botany. Mr Cragen visited the Botany Premises on a daily basis.
Mr Cragen is also a director and shareholder of Huricane.
5.1.2.3Mr Allam and Tonita
Mr Allam is a gaming machine technician. From 1990, he worked as a workshop technician and managed the workshop for Olympic Video Games, and later worked in the research and development department at IGT. From January 2000, he worked as a gaming machine technician for Ay-Jay Electronics. From 2002, he subcontracted to Goldstar Gaming (“Goldstar”) as a field technician.
Mr Allam’s association with Mr Andrews/Global and Mr Cragen/Impact began in about January 2003 while he was subcontracting to Goldstar. He was performing significantly more work for Mr Cragen/Impact by January 2004 and thereafter for the Joint Venture, such that by 2005, Mr Allam was being referred to by Mr Andrews as the Joint Venturers’ “technical guy”.
Tonita was incorporated on 14 July 2006. Thereafter, Mr Allam provided his services to the Joint Venture through Tonita and conducted his activities under the business name Tonita Enterprises.
MrAllam:
·is a director, secretary and shareholder of Tonita; and
·is involved in the day to day management and operations of Tonita.
Tonita and, before its incorporation, Mr Allam carried on business at Impact’s warehouse (ie the Botany Premises) and at MrAllam’s residence in Georges Hall, NSW (the “Georges Hall Premises”).
Tonita was also carrying on business at a warehouse in Bankstown at the time search orders were made in this proceeding (the “Bankstown Premises”). Mr Allam leased the Bankstown Premises from May 2006 to February 2008 in order to store materials obtained from Behong.
5.2Gaming Machines
5.2.1Gaming Machines
A gaming machine consists of computers which play a game of chance based on odds of winning according to computer programs, and it simulates the spinning reels of mechanical gaming machines on a video monitor.
A gaming machine comprises, inter alia, the following hardware and software:
·a cabinet;
·artwork panels affixed to the cabinet (identifying the particular game housed in the cabinet);
·pay scale artwork (listing the pay scale for the particular game housed in the cabinet);
·a monitor;
·game software (stored on EPROMs) that permits electronic games to be played on the machine;
·system software (software which is more generally required for a gaming machine to function without being specific to a particular game);
·a logic board (electronic circuit board) into which EPROMs are plugged;
·a logic cage (a metal box with hinged door that sits within a cabinet and that securely holds gaming systems such as the logic board and EPROMs);
·a currency validator; and
·mechanic meters.
5.2.2Game software and EPROMs
Software, including game software, can be reproduced onto an EPROM or a number of EPROMs.
The process for reproducing, or burning, software onto EPROMs requires a personal computer, EPROM burning software and an EPROM burning device connected to a computer.
In addition to being copied onto EPROMs, Aristocrat game software can be copied in other ways onto other media.
In the case of those Aristocrat gaming machines that use EPROMs in order to operate, the data must be “printed” to a complete set of EPROMs before it can be used. Each Aristocrat gaming machine uses multiple EPROMs.
It is not in dispute that one of the manufacturers of devices used to burn EPROMs is known as “Dataman”. Dataman supplies portable EPROM burning devices, which allow files contained on EPROMs to be easily uploaded to a computer hard drive and then burned onto blank EPROMs. Those burning devices also enable the software contained on an EPROM to be copied and stored on a computer.
It is also not in dispute that Dataman software may be downloaded over the internet, however the relevance of this fact is challenged by the respondents.
The Aristocrat companies led evidence that game software is divided into a number of separate files, which are contained on individual EPROMs. In addition, EPROMs contain a number of pins or “legs” which enable them to be plugged into motherboards. The EPROMs must be plugged into specific locations within the motherboard of a gaming machine in order to function properly. EPROM locations are typically identified by reference to the letter “U” and a number.
The respondents did not challenge this evidence. However, they argue that the Aristocrat companies have provided no explanation of how the game software is divided into separate files, such that if less than a full set of such files is located, the Court might be in a position to assess the substantiality of an alleged taking.
5.2.3Artwork
Artwork includes the visual themes, words, symbols and images which are physically printed and appear on the bottom (“belly panel”) and top (“top panel”) sections of a gaming machine.
5.3Conversion kits
It is possible to make changes to gaming machines (ie to change the relevant game), by way of, for instance, conversion kits, or by using components such as EPROMs and corresponding artwork.
Conversion kits comprise game software on EPROMs and artwork panels that correspond to the game on the EPROMs. Conversion kits sold by the Global respondents also provided components to enable an upgrade of gaming machines.
5.4Aristocrat Gaming Machines
There are different versions of gaming machines, which are referred to as “Mark IV”, “Mark V”, and “Mark VI”. It is possible to upgrade a Mark IV series to a Mark V series 1, and series 2 Mark V to a Mark VI.
Aristocrat gaming machines are comprised of the following components:
·Aristocrat games, which are electronic games of chance comprised of a combination sheet and a game specification, documents created by Aristocrat’s game designers. Combination sheets are basic technical design documents which describe the structure and mathematics of a particular game, including the number of reels and the prize tables. Game specifications are like a story board, and contain information about how the game is intended to play, including a general description of the game, the pay structure, any special features, and information about the artwork, video and sound.
·Aristocrat game software, which is comprised of computer programs and data and is created by software engineers by incorporating elements of the combination sheet and game specification, and embodying key elements of the game into source code and software binaries. The game software includes reel strips, simulated images of reels which are depicted on the monitor of a gaming machine when activated, and pay tables, which set out the number of credits that a player will be awarded for each combination of winning symbols.
·Cabinets for Aristocrat gaming machines.
·Aristocrat artwork, which is designed for each particular Aristocrat game by Aristocrat’s employees. Prior to 2001, Aristocrat artwork was printed using a screen printing method, which involves applying ink to a stencil. Since that time, Aristocrat artwork has been printed using digital printing technology.
·Aristocrat compliance plates, which are manufactured in accordance with a written design specification which sets out precise layout and design information. Aristocrat compliance plates are fabricated from aluminium with a matt-anodised finish. Through a technique known as anodising, the surface of the compliance plates is converted so as to form a coating, to which dye is added. Each Aristocrat compliance plate has information engraved on it, including the relevant serial number.
·Aristocrat EPROM labels, which are produced with every Aristocrat EPROM. The EPROM label records a unique program number associated with the software program on the EPROM; the name of the relevant Aristocrat game; the position in the motherboard where the EPROM is to be inserted; the memory capacity of the EPROM; a combination number, which is a unique number assigned to each combination sheet; the number of the EPROM in the set; and the copyright symbol (©), year and the name “Aristocrat”. Templates for Aristocrat EPROM labels were tendered into evidence.
The respondents do not dispute that copyright subsists in the component parts of an Aristocrat gaming machine listed above. Copyright is specifically claimed by the Aristocrat companies in Aristocrat games, game software, artwork and compliance plates.
5.5Aristocrat Trade Marks
At all relevant times, Aristocrat claims to have been the registered owner in Australia of approximately 80 registered trade marks upon or in relation to Aristocrat gaming machines and Aristocrat conversion kits. The Tonita respondents concede the accuracy of the list of trade marks provided by the Aristocrat companies, with the exception of seven trade marks which they say are either not held by Aristocrat or have lapsed, expired or been withdrawn. The Global/Impact respondents do not accept that Aristocrat owns the registered trade marks as claimed, but have not given reasons for this.
By reference to distribution and license agreements which are in evidence, the Aristocrat companies claim that at all relevant times, AI and ATI have been authorised users of Aristocrat trade marks.
They also claim that each of the respondents has used one or more of the Aristocrat trade marks in the course of undertaking their activities. The respondents do not concede this, and the Tonita respondents in particular argue that it is unsafe for the Court to assume the accuracy of those assertions.
5.6Gaming Machine Markets
5.6.1Markets in Australia and overseas
Markets exist for gaming machines and conversion kits throughout the world, including in Australia, Asia Pacific, Europe, North America and South America.
5.6.2Regulatory background
5.6.2.1New South Wales
The market for gaming machines in NSW is heavily regulated. In order to undertake gaming machine-related activities, such as servicing gaming machines, selling spare parts, and dealing with compliance plates, it is necessary to hold the relevant licence.
The regulatory authority in NSW used to be known as the Liquor Administration Board or “LAB”, until it became the Office of Liquor, Gaming and Racing (the “OLGR”).
The OLGR is responsible for administering various pieces of legislation including the Gaming Machines Act 2001 (NSW).
The manufacture, use and servicing of gaming machines is controlled by the Australian and New Zealand Gaming Machine National Standards. These Standards regulate the configuration of a gaming machine, and together with the NSW Gaming Machine Communications Protocol, ensure that data regarding the machine’s operation is sent to the OLGR.
It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer.
Each gaming machine contains a unique serial number on its compliance plate which enables the machine to be identified and tracked.
In NSW, Aristocrat serial numbers start with the prefix XAW. After the prefix there is a 6 digit number.
For every gaming machine or conversion kit purchased in NSW, the purchaser must request an approval form from the OLGR to authorise the venue for its purchase and installation. Approval forms must include details such as the serial number, game being operated and venue of the machine.
The OLGR maintains records on all gaming machines in operation in registered clubs and hotels, based on the information supplied by venues and sellers.
Aristocrat receives periodic reports from the OLGR on all Aristocrat gaming machines in circulation. The reports display the number of Aristocrat gaming machines in circulation in NSW, identified by serial number, as well as the games installed in those machines and the venue where those machines are located.
In addition to the records held by the OLGR, the Aristocrat companies maintain their own database records of serial numbers which they have given to Aristocrat gaming machines that have been sold. This database was known as “Manfact” up until 2000 when it changed to “PeopleSoft”.
5.6.2.2Regulations in South American export markets
The regulation of gaming machines differs in each country in South America. The first South American country to pass national laws regulating gaming machines was Argentina in 2000.
Certain Latin American countries, such as Peru, require games to be specifically approved and adapted to local conditions (known as “homologated machines”) and may require Spanish language games and artwork. They also require demonstration that a machine has a unique serial number and has been genuinely manufactured.
In Peru, gaming machine sales consist predominantly of refurbished machines due to a combination of high import duties (45%) and relatively low average daily revenue generated by machines. In the past six years, the gaming industry has been largely unregulated and it has only recently become a more strongly regulated industry.
5.6.2.3Respondents’ submissions on regulation
The respondents do not deny the existence of the regulatory regime set out above, except that they challenge any attempt by the Aristocrat companies to relate regulatory activities that take place in NSW to any other state in Australia or any other jurisdiction.

The respondents do challenge certain aspects of the factual background relied upon by the Aristocrat companies. First, they deny that the “periodic reports” received by Aristocrat from the OLGR can provide assistance to the Court, as the OLGR only has jurisdiction in NSW and gaming machines are at times moved outside of NSW.
The respondents also contest the extent of information received by the Aristocrat companies from the OLGR. They say that the only witness who attested to the receipt of periodic reports from the OLGR acknowledged that he did not have any involvement in their actual receipt, was not familiar with how the original files arrived, and was not employed in the research department which received the reports. I will discuss this in further detail below: see section 11 on the data matching exercise.
In addition, the respondents challenge the reliability of the Manfact and PeopleSoft database records. They argue that the records from those databases become inaccurate as soon as a gaming machine leaves Aristocrat’s premises. They say that two of the witnesses for the applicants conceded that the records of gaming machines located outside NSW may have been inaccurate in certain cases.
5.7Joint Venture
5.7.1Overview
The arrangements between Mr Andrews/Global and Mr Cragen/Impact for the sale of refurbished gaming machines to markets overseas constituted a joint venture. The Global/Impact respondents admit that the Joint Venture was in place, but only from April 2005. The Aristocrat companies allege that the Joint Venture was in place since May 2004.
The Joint Venture’s operation included the following features:
·Impact provided the capital to buy gaming machines;
·Global provided back office services, including making all the freight arrangements;
·Global managed the refurbishment of gaming machines by Tonita; and
·Impact and Global both sourced gaming machines and sales (although the arrangement developed so that Impact did most of the sourcing of the gaming machines).
Impact held any licences required for the Joint Venture.
The activities of the Joint Venture, including obtaining supplies for second hand gaming machines and storing them, and refurbishing gaming machines and packing them for delivery, took place at Impact’s premises, the Botany Premises.
Global had no staff permanently located at Botany. Mr Andrews went to Botany from time-to-time to ensure the activities were being conducted properly.
Mr Andrews kept records relating to the Joint Venture at the Florey Premises.
5.7.21999/2000 to June 2003
From 1999 or 2000, Mr Cragen and Mr Andrews jointly supplied second hand gaming machines to customers and then issued invoices in the name of whichever of their companies (ie Global or Bondtren/Impact) had had dealings with the customer.
5.7.3June 2003 to April 2004
Mr Andrews and Mr Cragen dealt with each other in relation to the supply of gaming machines to markets overseas from (at least) late 2003.
5.7.4April 2004 to present
The Aristocrat companies allege that since about April 2004, Mr Andrews, Global, Mr Cragen and Impact have operated on the basis of a “joint venture arrangement” between them. The Global/Impact respondents accept that from about April 2004, Impact started to become a major supplier to Global for selected transactions, and that in those selected transactions, surplus revenue may have been shared on a joint venture basis. However, as stated above, they deny that the Joint Venture was in place until April 2005.
In about April 2005, the manner in which the Joint Venture was conducted changed at Mr Cragen’s behest; thereafter, all receipts were banked into Impact’s account only.
5.7.5Mr Allam/Tonita’s association with Joint Venture
Mr Allam’s association with the Joint Venture included the carrying out of the following work:
·undertaking the refurbishment work on behalf of the Joint Venture at the Botany Premises;
·sourcing spare parts; and
·acting as a contact point for the receipt of materials into the Botany Premises.
Mr Allam was described and regarded by Mr Andrews as the Joint Venture’s “technical guy” and “main guy”.
Invoices were issued by Tonita to Impact which listed items including EPROM model numbers and conversion kits.
5.8Nuevestar/Uruguay Transaction
In 2002, ATI entered into an agreement with a Uruguayan company called Nuevestar S.A. for the supply of 1300 “upright” Mark V Aristocrat gaming machines, and 1000 Mark V “slant top” Aristocrat gaming machines into the Brazil market (the “Nuevastar transaction” but also referred to during the course of the hearing as the Brazilian machines and the Uruguay project).
The Aristocrat gaming machines were supplied by ATI into a bonded area in Montevideo for alteration and were then shipped to Brazil. At that time, gaming machines sold in Brazil were required to be approved by the Brazilian regulatory authorities as having a particular type of cabinet which was unique to Brazil.
As a result of Brazilian gaming regulations, all of the components were removed from the Aristocrat steel cabinets and installed in Brazilian approved gaming machines.
The Aristocrat gaming machine cabinets and spare parts were removed and stored in a warehouse in the Uruguay bonded area. They did not have any games in them. In order for the gaming machines to be put back into the market, the gaming machines would have had to have EPROMs and artwork installed onto them.
After the gaming machines were placed in the Uruguay bonded area, Aristocrat was approached by Nuevastar about repurchasing the unused cabinets. Aristocrat declined the offer.
Evidence from the respondents’ witnesses indicated that the gaming machines which formed part of the Nuevastar transaction were disassembled when shipped to Uruguay. Evidence from those witnesses also suggested that as part of the component parts of the gaming machines, loose blank compliance plates were shipped to South America.
5.8.1Purchase by Global/Impact and others
In 2004, Impact acquired a one-third interest in the unused Aristocrat gaming machine cabinets from the owners of the warehouse in which they were stored. Mr Vladimir Trajkovski and Mr Andreas Kan were business associates of Impact and Global in a venture to utilise the new cabinets for the sale of refurbished Aristocrat gaming machines.
Meetings were held during the course of 2005 to set down groundwork for the arrangement between Mr Andrews, Mr Cragen, Mr Trajkovski and Mr Kan in relation to the refurbishment of Aristocrat gaming machines and placement of them into the South American market. One such meeting was held in Sydney in August 2005.
Mr Andrews accompanied Mr Allam on a visit to South America on behalf of the Joint Venture in early 2005, during which a meeting took place with Mr Trajkovksi in Peru.
Approximately 100 of the gaming machines were brought back into Australia and dealt with at the Botany Premises, and then re-exported.
5.8.2Involvement of Mr Allam/Tonita
Mr Allam/Tonita participated in activities associated with the refurbishment and supply of the machines in the Nuevestar transaction. Mr Allam dealt with technical issues for customers in South America via Mr Andrews, and he would sometimes be in direct contact with customers. The Aristocrat companies also claim that Mr Allam was responsible for supplying a stock of EPROMs and artwork which would allow the gaming machines to be refurbished and sold and that he manufactured counterfeit compliance plates.
5.9Behong
5.9.1Behong Agreement
Behong was a scrap merchant located in Sydney.
From 1 July 2005 until 30 November 2006, Aristocrat had a contractual agreement with Behong pursuant to which Behong was the appointed scrap collector for Aristocrat (“Behong Agreement”). Under the Behong Agreement, Behong would pick up scrap inventory, comprising unusable or obsolete inventory of gaming machines and components designated for disposal, from Aristocrat’s Rosebery plant, including second hand gaming machines and artwork.
The services provided to Aristocrat by Behong under the Behong Agreement, were described as “scrap metal containment, removal, disposal and purchasing services”.
The Behong Agreement included a term prohibiting Behong from on-selling for reuse material supplied to it under the Behong Agreement. Clause 3.5.2(b) states that Behong must “only use such rubbish and waste for scrap reclamation and must not be sold for reuse”. In closing addresses, the Aristocrat companies abandoned reliance on this clause but they pointed to other provisions of the Behong agreement to support the claim of conversion.
5.9.2Mr Allam/Tonita’s dealings with Behong
Mr Allam was first introduced to Behong and its principal, Mr Hong, through Mr David Fisher. Mr Fisher is an electronics and gaming machine technician who has known Mr Allam for about 17 years and has provided technical services to him over a number of years.
With Mr Fisher’s initial assistance, Mr Allam and Tonita purchased certain items, including Aristocrat gaming machine parts and components, from Behong in the period 1 February 2006 to 30 November 2006. The quantity included the following:
·in or around February 2006, Mr Allam’s first purchase, which was arranged by Mr Fisher, comprised between 300 and 350 gaming machine monitors;
·in the course of the next 10 to 12 weeks (that is, from about February 2006 to April 2006) Mr Fisher made about a dozen trips to Behong to collect scrap parts and components for Mr Allam;
·from the end of May 2006 to the end of June 2006, Mr Allam obtained several truckloads of materials;
·in late June and early July 2006, Mr Allam obtained approximately 100 boxes containing Aristocrat artwork and conversion kits from Behong with new Aristocrat EPROMs and artwork panels. Mr Allam also obtained over 100 boxes of used artwork panels;
·from around the beginning of July 2006 until early November 2006, Mr Allam went to the Behong scrap yard several times per week. On many occasions, Mr Allam took away whole bins and whole pallets, selected what he wanted and returned the rest; and
·from August to September 2006, Mr Allam collected about 10 or 12 bins of artwork panels, of which he retained only a small quantity.
The Aristocrat companies allege that as Behong was prohibited under the terms of the Behong Agreement from selling the waste obtained from Aristocrat for reuse, Behong remained the bailee of the waste until it completed its obligation to destroy it. Consequently, the Tonita respondents’ acts in dealing with the waste constituted acts of conversion.
The Tonita respondents do not deny that they obtained significant quantities of material from Behong. Indeed they rely upon the fact of having obtained second-hand material from Behong to explain the presence of some of the items seized from their premises in Anton Piller raids (discussed below).
However, the respondents dispute that a relationship of bailment existed at the relevant time between Aristocrat and Behong. They submit that the terms of the Behong Agreement do not prohibit the re-sale of the waste and that the Aristocrat companies ceased to have title or any right of possession in the waste after delivery. They say that no claim in conversion can therefore be made against any of the respondents.
5.10Procedural History
5.10.1Global proceeding
Part of the current proceeding was initially brought against Global and Mr Andrews, and commenced by way of an application for search orders.
The first Anton Piller orders were made by Allsop J on 30 June 2006 against the Global respondents. The search orders were executed on 3 July 2006 at:
·the Florey Premises; and
·the Mascot Premises.
5.10.2 Impact/Tonita proceeding
A separate proceeding against Impact, Mr Cragen, Tonita and Mr Allam (NSD 133 of 2007) was commenced by way of application for search orders. Those orders were made by Branson J on 31 January 2007 and searches took place at the following premises on 1 February 2007:
·the Botany Premises;
·the Georges Hall Premises; and
·the Bankstown Premises.
Search orders were also made in relation to Mr Cragen’s residence in Killarney Heights, NSW. However, those search orders were unable to be executed. Mr Cragen gave evidence that at the time of the search orders he was in Argentina.
5.10.3Consolidated proceedings
On 22 June 2007, I ordered that the Global proceeding and the Impact/Tonita proceeding be consolidated.
6.THE PLAY KING TRANSACTION
6.1How the transaction occurred
On 12 July 2002, Mr Andrews received an email from one of his overseas customers, Mr Sergio Ortega Barrie about the possible supply of ten Aristocrat Mark IV gaming machines at $US650 per machine to Mr Barrie’s client, Play King, in Peru.
There was further communication between Mr Andrews and Mr Barrie about the price and number of the gaming machines to be supplied. It was Mr Andrews’ usual practice to send pro forma invoices to his clients before sending the final commercial invoice. Mr Andrews’ evidence is that around 14 July 2002, he sent to Mr Barrie a pro forma invoice number 352 for the supply of 20 Aristocrat Mark IV gaming machines.
Pro forma invoice number 352 does not contain details of the games that were to be supplied but it does state a total price of $13,000 for the gaming machines.
At or about the same time, Mr Andrews contacted Mr Lawrence (Laurie) Birks, the principal of a Queensland based company known as Gaming Machine Consulting Services Pty Ltd. Mr Andrews’ evidence was that he dealt with Mr Birks’ company on about seven occasions and that the Play King transaction was one of the earliest of them.
There is no written record of Mr Andrews’s first communication with Mr Birks, which was by way of a telephone conversation. Mr Andrews gave evidence of the conversation in very brief terms. He said that he asked Mr Birks whether Mr Birks could supply 20 Aristocrat gaming machines and that Mr Birks said he could.
No details of the machines or their serial numbers or the games, or even the price, are mentioned in Mr Andrews’ evidence of the conversation with Mr Birks. However, he says that after the conversation, Mr Birks sent him a list of 20 Aristocrat Mark IV gaming machines that Mr Birks could supply and that Mr Andrews prepared a new pro forma invoice number 360 from that list. Mr Andrews was unable to find the list, but the pro forma invoice was in evidence.
Pro forma invoice number 360 was dated 14 July 2002. It was for the supply of 20 Mark IV machines. Details of the serial numbers and the games were included on the invoice. The price stated on the pro forma invoice was US$650 per machine, with a total price of US$13,000.
Following the dispatch of pro forma invoice number 360, Mr Andrews apparently had email correspondence with Mr Barrie in which Mr Barrie requested that the number of machines be increased to 32. Mr Andrews was unable to locate those emails.
Mr Andrews’ evidence is that he then telephoned Mr Birks who told him that he (Mr Birks) could supply the increased number that had been requested.
Mr Andrews says he then raised commercial invoice number 360 dated 14 July 2002 but, curiously, there are a number of differences between the details on this invoice and the details recorded on pro forma invoice number 360.
First, the price per machine on the commercial invoice is lower than on the pro forma. The price on the pro forma was US$650 per machine whereas on the commercial invoice it was US$500 per machine. This discrepancy does not seem to be explained in the evidence.
Second, the details of the games which were recorded on the pro forma invoice do not appear on the commercial invoice, which lists the machines only by reference to their serial numbers. The explanation for this appears to be that, nearly a month later, on 7 August 2002, Mr Andrews received an email from Mr Barrie requesting Mr Andrews to remove the names of the games from the invoice as it was said not to be a requirement of Peruvian Customs that the name be stated.
Mr Andrews is unable to locate the email correspondence with Mr Barrie about this alteration. But assuming the explanation to be correct, it must follow that the commercial invoice number 360 which was in evidence as the final invoice was not raised on 14 July 2002. The evidence referred to later indicated that this commercial evidence was not raised until August 2002.
The evidence given by Mr Andrews as to the terms of the sale by Mr Birks’ company for onsale by Global to Play King was set out in Mr Andrews’ affidavit. The evidence discloses that the agreed price was A$525 plus GST per machine, making a total of A$18,400.
There was documentary evidence of the payment of this sum by Global to Mr Birks’ company.
The 32 machines that were the subject of the Play King transaction were shipped to Peru in August 2002. Global’s Shippers Letter of Instruction addressed to JAS International (Aust) Pty Ltd of Alexandria, NSW (“JAS”) was in evidence.
Importantly, whilst Global was shown on the Instruction as the shipper, the pick up address was recorded as being Mr Birks’ company, with the address described as Unit 3, 35 Tradelink Road, Hillcrest, Queensland. Mr Birks’ name was shown next to the company’s name as the contact person.
The consignee was recorded on the instruction as Play King and its address in Peru was set out.
Mr Andrews gave evidence that on or about 7 August 2002, he arranged for an inspection report on the 32 gaming machines. There was a copy of the inspection report in evidence which described the goods as 32 used/refurbished Aristocrat Mark IV “slot machines, as per the attached invoice”.
It appears that Play King paid an initial deposit on the 32 machines and Mr Andrews’ evidence was that Play King paid the balance on 7 August 2002. A copy of the payment advice was in evidence.
Mr Andrews’ evidence is that on or about 8 August 2002, he forwarded an “amended” commercial invoice number 360 to JAS, who was apparently the freight forwarder. Mr Andrews says that the copy of the invoice which was in evidence was the final version of the document. He says that it was in the same form as the document to which I referred at [186] above.
On or about 18 September 2002, Mr Andrews received an email from Mr Barrie informing him that one of the serial numbers on commercial invoice number 360 did not match any of the machines that had been shipped and that the Peruvian Customs Department was threatening not to release the machine.
Mr Andrews does not have a copy of the email from Mr Barrie but he produced in evidence a copy of a letter (not on letterhead) dated 25 September 2002. The letter was addressed “to whom it may concern” and advised of an error in commercial invoice number 360 because of a last minute substitution of one of the machines forming part of the shipment.
6.2The inspection by Mr Coster
In April 2006, that is to say nearly four years after the Play King transaction took place, Mr Garry Coster carried out an inspection of the gaming machines at the offices of Mincetur, which is the Peruvian Ministry of Foreign Trade and Tourism.
At the time of the inspection, Mr Coster held the position of Special Projects Manager of Aristocrat and, in that capacity, he was engaged in the conduct of an investigation into counterfeit Aristocrat gaming machines in Peru.
Mr Coster carried out his inspection on 13 April 2006 at a warehouse occupied by Mincetur in Lima. A lawyer acting for Play King was present during the inspection. The lawyer showed Mr Coster a copy of an invoice that appeared to record that the seized machines had been purchased by Play King from Global.
Mr Coster initially formed the view that each of the seized machines was counterfeit. He formed that view on the basis that the artwork and the EPROMs incorporated into the gaming machines were non-genuine, and the hand engraving of the serial numbers on the compliance plates was of poor quality.

First, in DAP Services, the Aristocrat companies claimed damages only upon one basis, namely, the value of lost sales calculated by reference to the report of a chartered accountant who attempted to calculate the loss of profits for each lost sale: see DAP Services at [30].
However, the claim for compensatory damages failed in DAP Services because the evidence did not establish that each sale by the respondents was at the expense of a new Aristocrat machine: see DAP Services at [31].
Second, it was suggested in DAP Services at [34]ff that there may have been other bases upon which damages could have been assessed. These included the possibility of finding that Aristocrat had lost some proportion of the sales made by the infringing respondents: see Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [8] per Emmett J.
However, these alternatives were not open in DAP Services because there was no evidence to support the assessment of damages on those bases.
In the present case, the Aristocrat companies contend that the appropriate measure of compensatory damages is the loss of profit that would have been made from the sale of second-hand or refurbished Aristocrat gaming machines by the Aristocrat companies, or the loss of profits on the sale of conversion kits. The evidence in support of that assessment was contained in the affidavits of Mr Irarrazaval and Mr Graham Ward, the Group Financial Controller of Aristocrat.
Mr Irarrazaval’s evidence dealt in some detail with the market for the sale of Aristocrat new and refurbished gaming machines to countries in South America. Evidence was given as to the volume of second-hand or refurbished gaming machines supplied by the Aristocrat companies to companies in South America during 2002 to 2007, and the prices at which Aristocrat second-hand or refurbished gaming machines were supplied in the South American market.
Mr Irarrazaval gave evidence in relation to the market in a number of South American countries. In relation to Peru, Mr Irarrazaval said that notwithstanding the significant size of the gaming machine market, and the large number of Aristocrat gaming machines installed and operating across the various venues in Peru, the relevant member of the Aristocrat group of companies had difficulties selling Aristocrat gaming machines to customers between 2002 and 2006. Mr Irarrazaval attributed that difficulty to the high number of counterfeit gaming machines being sold in Peru at prices significantly below the prices at which the Aristocrat companies were able to offer genuine refurbished gaming machines.
Mr Irarrazaval gave evidence as to the prices that were obtained by the respondents for sales in South America covering the period from 2002 to 2004 in respect of gaming machines recorded on “seized invoice spreadsheets”. Whilst it is true that the Aristocrat companies have not established that all of those gaming machines were counterfeit, it is relevant to record that, as Mr Irarrazaval says, the amount obtained for those machines was around $US1000 to $US1500 per machine. He observed that this is lower than the price at which the Aristocrat companies sold their refurbished gaming machines into South America at that time, which was put at between $US3500 and $US4500 per unit.
Mr Ogborne submitted that Mr Irarrazaval’s evidence established that the Aristocrat companies were operating in a different price band of the market to Global and Impact. He also submitted that Mr Irarrazaval’s evidence was to the effect that the Aristocrat companies could not and did not compete with the cheap end suppliers like Global and Impact.
Mr Ogborne also sought to attack one part of Mr Irarrazaval’s evidence in which he identified a number of Global/Impact customers to which sales may have been made by the Aristocrat companies. Mr Ogborne went on to submit that in these circumstances, the Aristocrat companies have failed to prove that they had lost any infringing sales made by the Global or Impact.
I reject Mr Ogborne’s submissions which, in my view, are contrary to the proper and fair reading of the whole of Mr Irarrazaval’s evidence. It is true that the Aristocrat companies had difficulty in competing with “cheap end suppliers”, but this was because, as Mr Irarrazaval said, the counterfeiters were selling at much lower prices than the Aristocrat companies.
It seems to me that the overall effect of the evidence was that the Aristocrat companies have made sales of second-hand or refurbished machines in South America, albeit at prices higher than those obtained by the Global/Impact respondents, and they have also sold conversion kits. Indeed, there was evidence in Mr Coster’s certificate of the sale of two conversion kits to replace counterfeit components in Aristocrat gaming machines. Whilst it is true that those two counterfeit gaming machines are not shown to have been supplied by the respondents, Mr Coster’s evidence indicates that there are at least some buyers who will purchase genuine conversion kits at the higher price.
In view of Mr Irarrazaval’s evidence, I am entitled to infer that the Aristocrat companies would have sold at least a proportion of the machines that are the subject of the 11 infringing transactions. In the present case I find that the Aristocrat companies would have been able to sell 50 percent of those machines in the South American market.
It is then necessary to consider the quantum of the lost profit on each of those sales. I accept Mr Ward’s evidence that the lost profit was approximately $US1545 per machine, or approximately $US1770 per conversion kit. The steps in the reasoning process by which Mr Ward arrived at these figures contain some inconsistencies, but I have come to the view that I should accept his conclusions.
The Global/Impact respondents submitted that Mr Ward’s evidence was based on intra-company pricing. Whilst there seems to be some force in that submission, I think that on a fair reading of both Mr Irarrazaval and Mr Ward, I am nevertheless entitled to accept the figures that Mr Ward puts forward in support of the claim.
However a difficulty arises because, as I said earlier, it is impossible to tell precisely which infringing components were contained in the machines that were the subject of the 11 infringing transactions. Nevertheless, it seems to me to be more likely than not that the infringing components included counterfeit Aristocrat game software. There would have been little point in having fake serial numbers for gaming machines containing genuine Aristocrat software. Accordingly, I am entitled to proceed upon the basis that 50 percent of the gaming machines sold in the infringing transactions represented lost sales to Aristocrat.
There were 16 machines in the four infringing transactions in the “MC” category that were identified by Ms Oldfield, and 56 machines in the seven infringing “DN” transactions, totalling 72 infringing machines. However, 16 of these machines were supplied outside of the South American market, namely four to the USA and 12 to Cyprus. There was no evidence as to the markets for second-hand gaming machines in those countries and accordingly, the Aristocrat companies have failed to prove that those sales were made at the expense of the Aristocrat companies.
It follows that the total number of infringing machines sold in South America was 56. Proceeding upon the basis that the Aristocrat companies would have been able to sell 50 percent of those machines, they are entitled to recover damages under s 115(2) of the Copyright Act for 28 machines.
Applying Mr Ward’s analysis, and averaging the figures so as to allow for the different profits attributable to the sale of gaming machines or conversion kits, I will adopt a figure of $US1600 per machine. The Aristocrat companies are therefore entitled to damages under s 115(2) for $US44,800, converted at the exchange rate prevailing on the day before judgment.
On the basis of the exchange rate quoted in The Australian Financial Review on 14 December 2009, namely the average of the buy/sell rate which was 1.09085, the Aristocrat companies are entitled to damages under s 115(2) for $AU48,870.
19.2Allocation of s 115(2) damages
As I have said on several occasions, I find that the Global/Impact Joint Venture did not commence until 1 October 2004. It follows that any infringing transactions prior to transaction number 34 can be supported only against the Global respondents. Any of the transactions numbered 34 to 54 which were proved to be infringing transactions can be maintained against the Global/Impact respondents.
They can also, in my view, be maintained against Mr Allam because it is plain on the evidence that Mr Allam authorised each of the infringing transactions in the sense that he sanctioned, approved or countenanced them. He was the person who was supplying the technical know-how to the Global/Impact Joint Venture and his involvement in that way must have made it clear to him that he was at the very least approving the sale of infringing components to the South American market.
As I have said earlier, Tonita was incorporated on 14 July 2006. All of the 54 transactions alleged against the respondents took place before that date; the latest in date (transaction number 54) was dated 20 February 2006. On this basis, none of the 54 transactions can be maintained against Tonita.
There were 16 machines that were the subjects of transactions 13, 28 and 29 that have been proved against the Global respondents. Compensatory damages for transaction number 20 have not been proved because those machines were supplied to Cyprus. It follows that the Global respondents are liable for $US12,800 or $AU13,963 and that Global, Impact, Mr Andrews, Mr Cragen and Mr Allam, jointly and severally, are liable for the balance, $US32,000 or $AU34,907.
19.3Additional damages under s 115(4)
Where it is established that a defendant has infringed copyright, the Court may, in assessing damages, award additional damages if it is satisfied that it is proper to do so, having regard to the flagrancy of the infringement, and the other matters referred to in s 115(4)(b) of the Copyright Act.
The principles upon which additional damages are awarded were discussed in DAP Services at [40]ff. It is not necessary to set out the principles in any detail. It is sufficient to say that the objectives include deterrence, and that an element of penalty is an accepted factor in the remedy. Also, the assessment of the amount to be rewarded is a somewhat imprecise exercise and the Court is to have regard, amongst other things, to the flagrancy of the infringement and the need to mark the Court’s disapproval of the conduct.
In the present case, as in DAP Services, the actions of the respondents demonstrate a cynical and flagrant exploitation of the Aristocrat companies’ copyright. Although the number of infringing transactions was ultimately proved to be far less than the number claimed by the Aristocrat companies, it is plain that the respondents were engaged in a commercial exercise. Their actions were plainly flagrant and undertaken for commercial gain.
The Aristocrat companies claimed that the true nature of the respondents’ business was a large scale counterfeiting operation. They failed to make this good. But the statements made in the emails when considered with much of the materials seized on the Anton Piller raids show the willingness of the respondents to engage in counterfeiting when it suits their commercial purposes.
There is no need for any proportionality between the amount of compensatory damages under s 115(2) and the amount of additional damages under s 115(4): DAP Services at [45].
I am also entitled to take into account the conduct of the respondents after the acts constituting the infringement. Accordingly, I am entitled to include in my calculation of additional damages the attitude of the respondents to this litigation, in which they vehemently denied any involvement in counterfeiting.
For the reasons mentioned above, additional damages cannot be maintained against Tonita as it has not been established that Tonita was involved in any of the 54 impugned transactions.
The amount of additional damages awarded in DAP Services was $200,000 against Vidtech and Mr Parry: see DAP Services at [53] and [116].
Here, the activities were on a scale which seems to me to be larger than that which existed in DAP Services. In addition, there are three groups of respondents. I have come to the view that I ought to award an amount of $450,000 for additional damages under s 115(4) against the Global respondents, the Impact respondents and Mr Allam, jointly and severally.
Although Mr Allam was an independent contractor, he was intimately involved in the venture and there is no basis for awarding a lesser sum of additional damages against him.
19.4Trade marks and other causes of action
Damages were also sought for infringement of trade marks, breach of the provisions of the Trade Practices Act and passing off. However, these claims were pressed only to the extent that damages awarded for copyright infringement were inadequate.
In view of the orders I propose to make for damages under s 115(2) and (4) of the Copyright Act, I do not need to address the other claims.
Damages for copyright infringement for dealings in blank EPROMs are sufficiently covered by awarding nominal damages (to the extent necessary) and are otherwise covered by the award of additional damages.
20.MISCELLANEOUS MATTERS
The respondents submitted that the Aristocrat companies’ internal documentary records were shown to be haphazard and unreliable. There was some force in this. But the conclusion which the respondents sought to draw from that cannot be maintained.
The conclusion which the respondents suggested was that I could not be confident that the Aristocrat companies had failed to grant a licence to the respondents to deal in the used gaming machine components in South America or other overseas markets.
That submission is without substance. No suggestion was ever made by any of the respondents’ witnesses that such a licence had been granted.
Nor is there any substance in the submission that the respondents had an implied licence to exploit the copyright in those components. The position here is quite different from that which occurred in the well established authorities that have considered the question of implied licence to use copyright materials; see Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298; Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577.
Another submission pressed strongly by the respondents was the need for the Aristocrat companies to prove their claims to the requisite standard. I am satisfied that the Aristocrat companies have proved their claims in respect of the 11 transactions set out above in accordance with the principles stated in section 12 of my reasons.
If it is necessary for me to reach a level of actual persuasion in relation to those claims (see [597]), I have reached that state of satisfaction. So too I am satisfied that additional damages ought to be ordered under s 115(4) in a substantial sum.
The respondents also submitted that in the absence of the production of the counterfeit gaming machines, I could not be satisfied as to the substantiality of the components which were comprised in the copyright infringement.
I reject this submission. Whilst I cannot be certain as to the actual infringing components, I consider it is more likely than not that they consisted of fake Aristocrat game software and fake compliance plates. That is sufficient to meet any test of substantiality.
Whilst I have not been able to conduct a visual comparison of the infringing compliance plates with the Aristocrat companies’ originals, the evidence is sufficient for me to infer that the test stated by the High Court in S.W. Hart & Co Proprietary Limited v Edwards Hot Water Systems (1985) 159 CLR 466 at 472, 478 and 479 is satisfied. The Tonita respondents had prior access to the copyright works. From the material before me going to infringement of compliance plates, in particular the evidence of Mr Parsons, I infer the elements of resemblance, actual use and causal connection. The onus then passed to the Tonita respondents to rebut the inference of copying but they failed to discharge that onus: Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] All ER 700 at 708-9.
Moreover, I am entitled to take into account the unauthorised use made by the respondents of the Aristocrat companies’ artwork. Even if there was no infringing artwork in the 11 proved transactions, it is clear that on other occasions, artwork was supplied to South American customers to facilitate counterfeiting. That is a matter which is relevant to additional damages under s 115(4).
Mr Ogborne made much of the fact that photos were taken by Mr Channa at the Botany warehouse yet they disclosed no evidence of counterfeiting. That is a matter which goes against the Aristocrat companies’ claim that the respondents’ real business was one of counterfeiting. But is does not answer the claim in relation to 11 proved transactions. Nor is it an answer to the claim for additional damages.
The respondents also stressed the need to confine the Aristocrat companies’ claim to the pleaded case. I am satisfied that the proved transactions were within the pleaded claims or sufficiently within the case conducted by the Aristocrat companies.
I accept that the Aristocrat companies unleashed a “snowstorm” of paper, some of it insufficiently distilled to meet the requirements of modern commercial litigation. But ultimately the claims were sufficiently clear to enable the respondents to address them.
Nor did I consider it was appropriate to exercise my discretion under s 136 to limit the evidence as was sought by the respondents.
I was satisfied that evidence which was admitted provisionally was admissible against all the respondents. The case of joint liability was made good for the reasons referred to above.
Finally, I reject the Tonita respondents’ submission that only nine of the transactions were pressed against them. If that were correct, then some of the transactions which I have found to be made out would not be able to be maintained against them. However, Mr Cobden made it plain that all transactions from number 34 onwards were pressed against all of the respondents. This is sufficient to dispose of the Tonita respondents’ submission.
21.ORDERS
The orders that I will make are as follows:
4.The first and second respondents pay the applicants damages under s 115(2) of the Copyright Act in the amount of $US12,800, converted to $AU13,963.
5.The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, damages under s 115(2) of the Copyright Act in the amount of $US32,000, converted to $AU34,907.
6.The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, additional damages under s 115(4) of the Copyright Act in the amount of $AU450,000.
I will hear the parties as to costs.

I certify that the preceding nine hundred and thirty-six (936) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.
Associate:
Dated: 15 December 2009

Counsel for the Applicants: Mr R. Cobden SC with Mr J.M. Hennessy

Solicitor for the Applicants: Gilbert + Tobin

Counsel for the First, Second, Third and Fifth Respondents: Mr A. Ogborne

Solicitor for the First, Second, Third and Fifth Respondents: Paul Bard Lawyers

Counsel for the Fourth and Sixth Respondents: Mr M. Green with Ms E.M. Peden

Solicitor for the Respondents: Bruce Stewart Dimarco Lawyers

Date of Hearing: 29 September -10 October 2008; 20 - 24 October 2008; 9 - 13 March 2009; 30 April - 6 May 2009

Date of Judgment: 15 December 2009

JUDGE:	JACOBSON J
DATE OF ORDER:	15 DECEMBER 2009
WHERE MADE:	SYDNEY

JUDGE:	JACOBSON J
DATE:	15 DECEMBER 2009
PLACE:	SYDNEY

Agreement title	Parties	Date of execution	Term	Summary of relevant IP provisions
Head Distribution & Intellectual Property Licence Agreement	Aristocrat AI	19/07/2006	Commenced 1 Jan 2005. 1 year term with automatic 1 year renewal periods.	Aristocrat gives AI exclusive licence to intellectual property in respect of products worldwide other than Australia, but including products made for export outside of Australia.
Distribution Agreement	AI ATI	03/05/2006	Commenced 1 Jan 2006. 1 year term with automatic 1 year renewal periods.	AI gives exclusive licence to ATI to grant sublicences, lease, and reproduce products embodying intellectual property rights held by AI within the territory comprising North America (except British Columbia), South America, the Caribbean and Latin America (except Argentina and Puerto Rico in relation to Recurring Revenue transactions).
Deed of Variation	Aristocrat ATI	28/12/2006	Varies Distribution Agreement (above) to exclude Peru from the territory. Confirms that licensee may sue for and recover damages for infringement of intellectual property rights.
Intellectual Property Development Agreement	Aristocrat ATI	04/01/2002	ATI agrees to develop intellectual property and assign all rights in that intellectual property back to Aristocrat.

Counsel for the Applicants:	Mr R. Cobden SC with Mr J.M. Hennessy
Solicitor for the Applicants:	Gilbert + Tobin
Counsel for the First, Second, Third and Fifth Respondents:	Mr A. Ogborne
Solicitor for the First, Second, Third and Fifth Respondents:	Paul Bard Lawyers
Counsel for the Fourth and Sixth Respondents:	Mr M. Green with Ms E.M. Peden
Solicitor for the Respondents:	Bruce Stewart Dimarco Lawyers

Date of Hearing:	29 September -10 October 2008; 20 - 24 October 2008; 9 - 13 March 2009; 30 April - 6 May 2009
Date of Judgment:	15 December 2009