Australian Computer Evaluation Consultants Pty Ltd v Datbury Pty Ltd
[1995] FCA 41
•10 Feb 1995
CATCHWORDS
COPYRIGHT - infringement - computer program - infringement not proved - no issue of principle involved.
TRADE PRACTICES - misleading and deceptive conduct - not proved - no issue of principle involved.
TRADE PRACTICES - passing off - not proved - no issue of principle involved.
Trade Practices Act 1974 (Commonwealth) s 52, s 53(a) (c) and (d), s 55
Copyright Act 1968 (Commonwealth) s 10, s 43A
AUSTRALIAN COMPUTER EVALUATION CONSULTANTS PTY LTD and COPPER SYSTEMS PTY LTD v. DATBURY PTY LTD, JOHN KEITH MARSTON, ROBERT GOW, MICHAEL T. COUGHLIN, DEREK GARDNER, HUNTLOW PTY LTD and MICHAEL EDWARD TURP
VG 332 of 1992
Olney J
Melbourne
10 February 1995
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION No VG 332 of 1992
B E T W E E N:
AUSTRALIAN COMPUTER EVALUATION CONSULTANTS PTY LTD
and COPPER SYSTEMS PTY LTD
Applicants
and
DATBURY PTY LTD, JOHN KEITH MARSTON, ROBERT GOW,
MICHAEL T. COUGHLIN, DEREK GARDNER, HUNTLOW PTY LTD AND
MICHAEL EDWARD TURP
Respondents
Coram: Olney J
Place: Melbourne
Judgment: 10 February 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The application be dismissed.
The question of costs is adjourned to 10.00am on Friday 24 February 1995.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION No VG 332 of 1992
B E T W E E N:
AUSTRALIAN COMPUTER EVALUATION CONSULTANTS PTY LTD
and COPPER SYSTEMS PTY LTD
Applicants
and
DATBURY PTY LTD, JOHN KEITH MARSTON, ROBERT GOW,
MICHAEL T. COUGHLIN, DEREK GARDNER, HUNTLOW PTY LTD AND
MICHAEL EDWARD TURP
Respondents
Coram: Olney J
Place: Melbourne
Judgment: 10 February 1995
REASONS FOR JUDGMENT
THE PROCEEDINGS
The applicants claim declaratory and injunctive relief and damages, as well as other related relief, against the respondents in respect of conduct which is said to have infringed the second applicant's copyright in a computer program and to have contravened sections 52, 53(a)(c) and (d) and 55 of the Trade Practices Act 1974 (Commonwealth). In the case of the sixth and seventh respondents, it also said that the conduct complained of constituted passing-off and in the case of the second, third, fourth, fifth and seventh respondents, the conduct is said to have constituted aiding and abetting, counselling or procuring and/or being directly or indirectly knowingly concerned in or party to the alleged
contraventions of the Trade Practices Act by the first and sixth respondents.
The trial commenced at Melbourne on 22 June 1994, it having been set down for a 3 day hearing. The evidence continued on 23 and 24 June 1994 and 18 and 19 July 1994. In order to accommodate interstate witnesses the hearing then continued at Brisbane on 20, 21 and 22 July 1994. At the conclusion of the evidence, I directed that final submissions be made in writing and that an opportunity be provided for counsel to address the Court on their submissions. This occurred on 30 September 1994 when I reserved my decision.
In all, 14 witnesses were called. Much of the cross-examination was directed to testing the credit of witnesses and exploring their motives rather than to the factual issues which were relatively few in number. It became obvious that the main protagonists had a history of disputation extended back prior to the commencement of these proceedings and by the end of the trial it was clear that what the parties were really fighting over was the costs of the proceedings. Even at its highest, the applicants' case involved a triviality. At its lowest, the proceedings were a vehicle for the first applicant to achieve some form of retribution for what may have been thought to be a past injustice. Be that as it may, I have put aside the personal animosities of the parties and judged the case according to facts established by the evidence.
I do not propose to canvass every issue raised during the hearing but rather will confine these reasons to a consideration of those issues which touch upon the outcome of the proceedings. In a number of places in what follows I have commented upon the credit of specific witnesses. I have done this in respect of issues which I consider to be central to the case. To the extent that these reasons contain findings of fact in respect of which I have not specifically canvassed the relevant evidence such findings are based upon either uncontested evidence or where there has been a conflict, upon the evidence which I consider to be the more credible.
THE PARTIES
The fourth respondent was not served and the applicants did not press any claims against him.
The first respondent (ACEC) is a company incorporated in Victoria which since 1984 has been engaged in the business of selling and supporting hotel computer systems. ACEC sells stock control, accounting, payroll and front office systems. Two of the programs sold by it are the hotel manager and the payroll manager program. ACEC trades under the business name Hoteliers Information Systems a name which is commonly abbreviated to HIS.
The second respondent (Copper Systems) is also a company incorporated in Victoria. It is the owner of the copyright in a computer program known as Telxon.Com which is the subject of these proceedings.
The first respondent (Datbury) is a company incorporated in Queensland. It carries on a business similar to that of ACEC. It is registered in Queensland as the proprietor of the business name Australian Commercial Electronics a name which is commonly abbreviated to ACE. The second respondent (Marston) and the third respondent (Gow) have at all relevant times been directors of Datbury. The fifth respondent (Gardner) has at all relevant times been an employee of Datbury. Gardner and Marston were formerly directors of a company called BEQ, to which reference is made below. Gow was formerly an employee of BEQ.
The sixth respondent (Huntlow) is a company incorporated in Queensland of which the seventh respondent (Turp) has at all relevant times been a director.
It is common cause that at all material times Datbury and Huntlow were trading corporations within the meaning of the Trade Practices Act.
OTHER COMPANIES AND INDIVIDUALS INVOLVED
In addition to the parties to the proceedings, the following companies and individuals will be referred to in these reasons.
Peter Geoffrey Summers (Summers) is the author of the hotel manager and the payroll manager programs referred to above. He is managing director of Summers Computer Software Pty Ltd (SCS). Since about 1981 he and his company have specialised in the hospitality industry which includes all matters to do with hotels, motels and restaurants. In 1985 ACEC and SCS entered into an agreement whereby ACEC was granted what is said by the applicants to be an exclusive worldwide licence to distribute Summers' hospitality industry programs.
Michael Edward Grosvero (Grosvero) is the managing director of ACEC. His wife Sandra Grosvero (Mrs Grosvero) is also a director of the company. Grosvero is an accountant by profession and practised as such before setting up ACEC. Mrs Grosvero carries out clerical duties for the company.
Louis Delacretaz (Delacretaz) is the managing director of Copper Systems and is the author of the computer program known as Telxon.Com.
Business Electronics (Queensland) Pty Ltd (BEQ) was a Queensland company. It has been wound up. BEQ was at the material time a non-exclusive distributor of ACEC's software products in Queensland. This arrangement operated until 1989 when a dispute arose which resulted in ACEC and SCS issuing Federal Court proceedings in February 1990. BEQ ceased operations in March 1990 and was later wound up.
The Billabong Group of hotels was a group of hotels owned ultimately by Mr & Mrs Laurie Beaumont. Turp joined the group in Victoria in 1979 and became its operations manager. At the end of 1983 Turp went to Queensland as the manager of Billabong Group Queensland.
Mr & Mrs Beaumont were the directors and shareholders of a company known as Jofre Pty Ltd which formerly leased the Junction Hotel in Brisbane from Carlton & United Breweries Ltd. In about 1987, CUB sold the Junction Hotel to Huntlow the shareholders of which were at the time Jofre Pty Ltd and Tavern Consultancy Services Pty Ltd (TCS), a company controlled by Turp and his wife. The Junction Hotel continued to operate as a member of the Billabong Group. In the period around and after 1989 Billabong Group Queensland was in financial difficulty. Some hotel leases were lost and other hotels were sold to pay outstanding debts. The group gradually ceased to operate. In the period between about October 1990 and February 1991 Turp and his wife purchased Jofre Pty Ltd's shares in Huntlow.
Doce Pty Ltd (Doce) is a subsidiary of Santos Limited and was for a period the owner of the Jindalee Hotel in suburban Brisbane. In about June 1991 Turp, through his company TCS, entered into an agreement with Doce to manage the Jindalee Hotel. The agreement was terminated in May 1992.
THE TELXON.COM PROGRAM
Before proceeding further it is appropriate that something be said of the computer program at the centre of the matters in dispute.
In the modern world few businesses can operate without the use of computers and this is particularly so in relation to retail businesses which of necessity must maintain accurate records of their stock. One such type of business is the retail liquor trade. It is one thing for a business to have on its computer details of its stock-in-trade; it is another for those details to be kept updated. To facilitate stock taking a device known as a portable data entry device (PDE) has been developed which can be used to record particulars of stock on the shelves of the business. These days each stock item has a bar code printed on it and by entering the appropriate number into the PDE each item of stock can be recorded. The PDE is somewhat like an electronic calculator in appearance and as the name suggests, is portable, that is, it is not connected to the computer on which the stock records are maintained. Earlier model PDEs required the bar code numbers to be physically entered into the device but later models have been fitted with a bar code wand which enables the PDE to read the bar code directly from the items of stock. In order to convey to the computer the information entered into the PDE during stock taking it is necessary for the PDE to be physically connected to the computer and for the information to be down-loaded onto the computer. To achieve this a computer program of the type presently in question is required.
There are various brands of PDEs but the only one of concern in these proceedings is that known as Telxon.
Prior to about 1985 Delacretaz had been a director and employee of a firm called Pulsar Electronics, from which firm Grosvero had purchased computer equipment. After Delacretaz had resigned from Pulsar Electronics, Grosvero approached him with a view to having him write a software program to enable a Telxon PDE to be used with the software authored by Summers. The need for such a program arose when IBM entered the personal computer market and introduced an operating system known as MS.DOS. The previous communications program for the Telxon PDE developed by Pulsar Electronics was not compatible with the IBM operating system. It was agreed between Grosvero and Delacretaz that Grosvero would pay Delacretaz or his company an hourly rate for the development of the program on the understanding that ACEC would have the sole rights to use the product. The program was developed and authored by Delacretaz. It is known as Telxon.Com and first became available to ACEC in 1985. After 1985 Delacretaz continued to refine the program and produced a number of upgrades and further versions. Version 4.2 was produced in 1986. There were later versions up to 4.6 in 1988 and thereafter versions 5 and 6 were created. In the further amended statement of claim (hereafter referred to as the statement of claim) ACEC pleads that Copper Systems has granted an exclusive licence to ACEC to offer for sale and sell copies of Telxon.Com including version 4.2 as well as versions as revised from time to time. The evidence is that the agreement was made orally between Grosvero and Delacretaz on behalf of their respective companies in 1985 and that there is not, and has never been, a written licence agreement.
ACEC'S DEALINGS WITH BEQ
Grosvero and Gardner first became acquainted in 1985. At the time Gardner was a director of BEQ. As a result of their discussions BEQ was appointed a non-exclusive distributor for ACEC's software products in Queensland. In Queensland the hardware was supplied by the distributor and ACEC supplied the software to run the systems. Under this arrangement BEQ sold and installed the hotel manager program and trained people in its use. BEQ was supplied with copies of the Telxon.Com program on diskettes which was required in cases where Telxon PDEs were sold as part of the system. Initially ACEC supplied BEQ with Telxon PDE devices but later BEQ purchased them directly from the manufacturer. The arrangement between ACEC and BEQ ceased upon their falling out in 1989.
TURP'S ROLE
Turp has had a long association with the hospitality industry. His involvement with the Billabong Group and his interest in the Junction Hotel have already been referred to.
While working for the Billabong Group in Victoria Turp had dealt with Summers in relation to the computer needs of the group and when he went to Queensland to manage Billabong Group Queensland he continued to deal with Summers. ACEC and Summers had apparently struck a deal concerning the hotel manager program for which ACEC says it has exclusive rights of sale worldwide but the agreement was subject to the exception that Summers would continue to service the Billabong Group as his connection with the group through Turp had been established prior to establishing the distributorship arrangement with ACEC.
Most of Billabong Group Queensland's computer hardware was purchased from BEQ. This included the purchase of about 14 Telxon PDEs acquired by Turp on behalf of the group. In addition Turp purchased 2 Telxon PDEs for his own use. For the most part, Turp's dealings with BEQ were through Gardner.
Once the operations of Billabong Group Queensland began to wind down some of the equipment formerly owned by members of the group and not otherwise disposed of was sent to the group's head office at the Junction Hotel. When Turp and his wife purchased the shares in Jofre Pty Ltd from Mr & Mrs Beaumont they or their companies thereby acquired all the equipment that was then in the Junction Hotel. Thus it was that Huntlow had a Panther computer with various programs on it including PC.MOS, Wordperfect 5.1 and some hotel manager and payroll manager software and 4 Telxon PDEs and the Telxon.Com program. With the 2 Telxon devices purchased directly from BEQ, Huntlow thus had 6 units, all of which were used, from time to time, in running the Junction Hotel.
When Turp's company TCS took on the management of the Jindalee Hotel the computer equipment at the hotel was unsatisfactory and Turp suggested to the owner that a new system was required. At that time the owner was interested in selling the hotel and did not wish to purchase hardware but nevertheless it was appreciated that accurate records of the hotel's operation would be of assistance in making a sale. Turp put 2 options to the owner, namely, purchase the hotel manager system sold by ACEC for about $8,000 or purchase Datbury's ACM software for $2,000. The owner elected to purchase the ACM system.
In 1991 Turp had been given a licensed copy of the ACM software for testing to see if he wanted to use it. He set up the system at the Junction Hotel on the Panther computer and installed some of his own data for testing purposes. To enable him to use his Telxon PDEs with the ACM system it was necessary for an interface program to be written. He discussed this requirement with Gardner (who by then was an employee of Datbury) and Gardner wrote such a program which he named JUNC.PDE
After Doce chose the ACM system for the Jindalee Hotel, Turp and members of his staff spent some 2 or 3 weeks setting up the system on the Panther computer at the Junction Hotel. Subsequently, the Panther computer was taken to the Jindalee Hotel where it was reconnected. Doce paid Datbury $2,000 for the ACM software and the licence to use it. Huntlow arranged a hiring agreement with Doce for the use of various items of computer equipment it had provided to the Jindalee Hotel, for which Doce paid a monthly charge.
In May 1992 when the management agreement between TCS and Doce was terminated, Doce instructed Turp to leave his computer and other equipment on the premises until Doce made a decision as to its future use. Turp's response was that Doce could purchase the equipment from him otherwise he would take it back. Doce chose to purchase the equipment which included 4 Telxon PDEs. A copy of Telxon.Com was on the computer.
During the period of his management of the Jindalee Hotel it was Turp's practice to do a full back-up of the Jindalee computer system at least once a fortnight. There were several reasons for doing this, notably because first, there were quite a few "patches" and upgrades of the system coming through; second, there were difficulties with the power supply at Jindalee; third, there were problems caused by lightning hitting the roof of the building; and fourth, there were problems with the computer's hard disk. When the back- ups were done they were stored on the hard disk at Datbury's premises.
THE ANTON PILLER RAID
In about July 1992 Grosvero was advised by his then distributor in Brisbane one Reginald John Reynolds (Reynolds) that a copy of Telxon.Com was on the computer at the Jindalee Hotel. Grosvero was surprised by this information as the Jindalee Hotel was not a customer of ACEC. On about 19 July 1992 Summers faxed to Grosvero a copy of a screen dump which had been sent to him by Reynolds and which Reynolds had obtained from the Jindalee Hotel computer. Grosvero was satisfied that the screen dump related to Telxon.Com. After obtaining legal advice Grosvero contacted the manager of the Jindalee Hotel, one Royes, and was told that the computer system had been supplied by Gardner when Turp was the manager of the hotel. Royes agreed that Reynolds could take a full copy of the software programs on the Jindalee Hotel system for forwarding to Grosvero. On 3 September 1992 Ryan J made an order, inter alia, requiring the first to fifth respondents to permit the entry of not more than 3 persons (one of whom was to be a solicitor retained by the applicant) to Datbury's premises at 409 Ipswich Road Annerley Queensland to search for copies of:
(a)the Telxon.Com computer program, as well as any substantial reproduction or adaptation thereof ("the program"), including any disk copies of the program, printouts of the program, or source code for the program;
(b)all copies of accounts from Telxon Australia Pty Ltd or a supplier of Telxon hand-held devices showing purchases by the respondents, or any of them, of Telxon hand-held devices;
(c)all copies of accounts showing details of sales by the respondents, or any of them, of:
(i)Telxon hand-held devices; and/or
(ii)the program or any computer program sold by reference to the name "Active Computer Management" or by reference to the initials "ACM".
On 4 September 1992 Grosvero accompanied by his solicitor Anthony Brooke Watson (Watson) and a Federal Police officer Byron Stewart Collie (Collie) attended at Datbury's premises and proceeded to execute the order made by Ryan J on 3 September 1992. In the course of the search, a copy of Telxon.Com was located on the hard disk of a computer on the premises. Copies of Telxon.Com and the interface program JUNC.PDE were made available to the searchers. The Telxon.Com program was then deleted from the computer. In addition, Watson was given access to Datbury's records from which he made a list of Datbury's clientele, including but not limited to, the clients covered by paragraph (c) of the Anton Piller order. In accordance with the usual practice, Watson made some notes as to what occurred during the search, but I have some reservations as to whether such notes are sufficiently comprehensive to provide an accurate record of all that was said and done during the raid.
FINDINGS OF FACT
To the extent that the foregoing contains statements of fact, I am satisfied that such statements are either undisputed or are consistent with the weight of the evidence, and I so find.
One substantial issue of fact in the proceedings has to do with the question of whether any, and if so what, contractual or other limitations were imposed by the applicants and/or BEQ upon Billabong Group Queensland and Turp in connection with the use of Telxon PDE devices and Telxon.Com.
Grosvero would have it that during the period that BEQ was ACEC's agent, BEQ had copies of Telxon.Com which were to be sold with ACEC's system if a customer also purchased a Telxon PDE. Grosvero agreed that he did not instruct BEQ to impose any restrictions in relation to the purchase of Telxon PDEs, nor were there any conditions, written or otherwise, relating to the use which could be made of Telxon.Com. No restrictions regarding the use to be made of the Telxon PDE were contained in the packaging of the device. The Telxon.Com program did not come packaged and accordingly no restrictions were expressed on any external packaging. Grosvero also agreed that there were no restrictions or limitations referred to in the program itself. He said that Telxon.Com would normally be supplied with a copy of the hotel manager programs and he asserted that he had agreed with Gardner that Telxon.Com could only be used in conjunction with the supply of those programs.
The evidence of both Marston and Gardner contradicted that of Grosvero on the last mentioned matter. Marston said there were no restrictions imposed by Grosvero or ACEC on BEQ in relation to the supply of Telxon PDEs or the Telxon.Com software. Nothing to that effect had been said to him by Grosvero or by his fellow directors or other employees. He knew of no written or verbal restrictions in the form of a licence concerning the use of the program. For his part, Gardner denied that Grosvero had directed BEQ to impose any restrictions or limitations on purchasers of Telxon PDEs or Telxon.Com. He was not aware of any contractual restraints on purchasers of those items. When it was suggested to him by the applicants' counsel that BEQ was never allowed to provide a copy of Telxon.Com to a non-HIS site, he said that no one had ever said whether BEQ could or could not do such a thing nor had anyone said that BEQ was allowed or not allowed to do anything with the Telxon.Com program.
I find that the applicants have failed to establish that it was agreed as between ACEC and BEQ that Telxon.Com could only be used in conjunction with the supply of ACEC's hotel manager programs. On this issue, and on a number of other issues, I find the evidence of Marston and Gardner to be credible and to the extent that it contradicts Grosvero's evidence I accept Marston's and Gardner's versions in preference to Grosvero's. Quite apart from the personal credit of the witnesses, it seems to me improbable that if Grosvero was indeed intent on imposing the type of restriction he says applied, he would have failed to have it expressed in writing in a way that not only BEQ but also its clients would be unable to ignore. Nor is there any evidence that BEQ conducted its business in a manner that suggested that any restrictions or limitations would apply.
I turn now to consider whether any limitations were imposed as between BEQ on the one hand and Billabong Group Queensland and Turp on the other in relation to the supply and use of Telxon PDEs and Telxon.Com.
Consistent with the evidence just referred to, Marston denied that BEQ had ever imposed any restrictions or limitations on the use Billabong Group Queensland could make of Telxon PDEs or Telxon.Com. And Turp's evidence was to the same effect. In the circumstances I find that BEQ did not impose any restrictions or limitations on Billabong Group Queensland or on Turp personally as to the use which could be made of Telxon PDE devices or Telxon.Com.
ACEC contends that by reason of an agreement made on 1 December 1986 between itself and Billabong Group Queensland there was a contractual limitation on Billabong Group Queensland selling Telxon.Com. It will be necessary to deal in some detail with the evidence relating to this issue, but before doing so it should be mentioned that the alleged agreement was not pleaded by the applicants. In paragraph 8B of the statement of claim the applicants plead that:
Since at least 22 August 1991, the sixth respondent and/or seventh respondent has reproduced, adapted, published, let for hire, offered for sale and sold version 4.2 of the program, or a substantial reproduction or adaptation thereof, to the Jindalee Hotel in Jindalee, Queensland, or authorized the doing of same, without the permission or authority of the applicants
They then particularise their assertion thus:
PARTICULARS
The applicant refers to the Affidavit of the seventh respondent sworn herein and dated 24th September 1992.
The affidavit referred to was sworn by Turp after the Anton Piller raid and before he had been made a party to the proceeding. The substance of the affidavit is as follows:
I am the former Manager of the Jindalee Hotel & Function Centre ("the Hotel") situated at Cinnamon Road, Jindalee in Queensland and a
Director of Tavern Consultancy Services Pty Ltd which company specialises in providing consultancy services to clients within the hospitality industry.
I make this affidavit from my own personal knowledge unless stated to the contrary in relation to the circumstances by which the respondents and, more particularly, the firstnamed respondent ("ACE") came into possession of a copy of the Telxon.Com computer program ("the Telxon program"); the subject of this proceeding.
In around 1987, precisely when I cannot recall, my company Huntlow Pty Ltd purchased from the firstnamed applicant, trading as Hotelier Information Systems, or its authorised agent a Telxon hand-held data entry device and a copy of the Telxon program both of which were used in the stock control of a Hotel at which I was then the owner.
During the approximate period August, 1991 to May, 1992 I was engaged by the licensee of the hotel, Doce Pty Ltd, as the Manager responsible for the overall business performance of the Hotel.
In my capacity as Manager and during the course of managing the Hotel I used the Telxon hand-held device and a copy of the Telxon program in stock taking proceedures, (sic) in June 1992 the Telxon hand-held devices and a copy of the Telxon program was purchased by the said licensee from Huntlow Pty Ltd.
In around August, 1991 the licensee purchased from ACE the ACM program at a cost of $2,000. I refer to the exhibit marked "MEG-2" to the Affidavit of Michael Edward Grosvero sworn on 2nd September, 1992 to which is attached a copy of an invoice number 220B dated 22nd August, 1991 issued by ACE to the said licensee and marked to the attention of Mr Kip Heinke. That invoice records the supply of (inter alia) the ACM program by ACE to the Hotel on or about the date of the invoice.
As Manager of the Hotel I used the ACM program in conjunction with the Telxon hand-held device and Telxon program to do stock takes of the Hotel. The program was stored along with ACM programs on the hard disk (under the same sub-directory). I consider it necessary to do daily/weekly backups of data files and periodic backups of the whole system. Copies of these are also stored off site.
A backup of all files was also stored at the ACM office for security and testing. I consider this to be prudent business management.
Presumably, by pleading in the manner described, the applicants accept as fact the matters deposed to by Turp. In those circumstances the absence in the particulars of any reference to any contractual restriction or limitation applying to the use of Telxon.Com by Turp cannot be logically explained.
According to Grosvero's evidence, Turp telephoned him in late November 1986 and asked if he could make an arrangement whereby the Billabong Group could use Telxon.Com with Summers' software. He said that Turp agreed to pay a lump sum of $500 if Grosvero would agree to him making multiple copies of the program for hotels in Queensland operated by the Billabong Group. Grosvero's recollection was that the conversation took place not very long after Turp's appointment as manager of Billabong Group Queensland. It is said that Turp asked that the invoice be sent to his home address and that following this conversation Grosvero wrote out an invoice addressed to Turp which Mrs Grosvero later typed. The text of the typewritten invoice is said to have been as follows:
1st December, 1986.
Mr Michael Turp,
34 Timor Ave.,
LONGANHOLME. 4129
INVOICE NO 2267
To Supply Telxon Communications program for use with computer systems in your Queensland based hotels.
This program is sold to you on the condition that it is used solely by your Group and cannot be resold by you for use in any other hotels or any interstate hotels.
The program TELXON.COM may be copied as many times as required and installed in any hotels owned by you in Queensland both presently and in the future.
Cost: $500-00
The application in this proceeding was amended on 27 October 1992 to join Huntlow and Turp as parties. The invoice of 1 December 1986 was not discovered in the applicants' original affidavit of documents sworn 11 December 1992. Grosvero explains this omission by claiming that the document was not located until late December 1992. The original of the invoice was not initially discovered as a document which had formerly been in ACEC's possession, which one would expect to have been done if such a document existed and was thought to be of relevance. The document was later discovered in an affidavit of documents sworn on 26 March 1993.
Grosvero says that invoice 2267 was paid by the Billabong Group on 9 December 1986. The copy invoice produced in evidence has written on it in Grosvero's hand the words and figures "Paid 9/12/86". It also has written on it the word "Query" which is said to have been written in Mrs Grosvero's hand. The applicants put in evidence a book of bank deposit slip butts covering the period 16 April 1986 to 28 January 1987, comprising 50 butts. A butt dated 9 December 1986 evidences the payment into the ACEC's bank account of $3,975. A copy of the relevant bank statement reveals a corresponding credit on 9 December 1986. The reverse side of the butt in question contains the following particulars:
DETAILS AMOUNT
B.E. QLD (BAL) 2000.00
BILLABONG 1475.00
(INV 2234)
BILLABONG 500.00
(INV 2252) _______
$3975.00
With one exception, no other butt in the book contains any reference to invoice numbers. The sole exception is a deposit made on 24 December 1986. The invoice number in
respect of the payment of $500 referred to on the reverse of the butt dated 9 December 1986 is not the number appearing on the invoice dated 1 December 1986. Grosvero claims that the payment does in fact relate to that invoice and he says that the variation may be due to "an error in transcription" whatever that may mean. He was unable to produce the two invoices referred to on the deposit slip butt or any other invoice for the period in question apart from that dated 1 December 1986. Nor was he able to produce any other accounting record which would substantiate his claim that invoice 2267 was paid on 9 December 1986, or at all.
Turp denies having had the telephone conversation alleged by Grosvero; and he denies either receiving the invoice dated 1 December 1986 or having paid same. In support of his denials he gave evidence as to the following matters: While in charge of Billabong Group Queensland he (Turp) was responsible for the payment of accounts associated with the computers. It was company policy to stretch payment of all accounts (other than brewery accounts) to at least 60 days, if not to 90 days, unless there was extreme pressure to do otherwise. As an example of this policy in action he referred to an exhibit (Ex A15) which is an invoice from SCS dated 7 April 1987 for $1080 for computer programs supplied. The invoice refers to three earlier invoices totalling $1980. At the foot of the invoice the following notation appears:
As some of the above accounts are considerably overdue prompt payment would be appreciated
The invoice for $1080 was paid on 23 July 1987, some 3½ months after the account was rendered. There is no evidence as to the payment of the other outstanding accounts.
Turp also said that he has spoken to Grosvero on only 3 occasions and only once before the end of 1986. He was confident that if he had spoken to him late in November 1986 he would have recalled the conversation.
The applicants have failed to prove that Turp and Grosvero made an agreement in November or December 1986 in the terms of the invoice of 1 December 1986. No explanation has been offered as to how it is that Grosvero was able to produce the invoice dated 1 December 1986 but none of the other invoices for the same period and in particular, those noted on the reverse of the deposit slip butt. There is no reason to doubt Turp's evidence as to his company's policy in relation to the payment of accounts and although it may have been possible, it is highly improbable, even in the absence of such a policy, that in the ordinary course of business an account posted from Melbourne to an address in suburban Brisbane on 1 December 1986 would have been paid so promptly as to enable the cheque to be banked in Melbourne on 9 December 1986. On this issue Grosvero was an unimpressive witness. He was plainly wrong when he said the conversation took place in late November 1986 shortly after Turp's appointment to manage Billabong Group Queensland. Turp took up his appointment at the end of 1983. Further, Grosvero acknowledged that in December 1986 he was still having dealings with Billabong Group Victoria and Billabong Group South Australia and given the absence of any reference to the particular State branch of the group on the deposit slip butt, and the variation in the invoice number, there must be a reasonable probability that the payment of $500 deposited on 9 December 1986 could have been paid by another branch of the Billabong Group.
Although the applicants rely upon the invoice dated 1 December 1986 as evidence of an agreement with Turp to the effect that the permission to use Telxon.Com was to be restricted to sites operated by Billabong Group Queensland, nowhere in his oral testimony did Grosvero say that such a restriction was agreed to, or even discussed, in his alleged telephone conversation with Turp.
I find that it is more probable than not that the conversation said to have taken place between Grosvero and Turp in late November 1986 did not take place, that the invoice dated 1 December 1986 was not sent to Turp, and that Billabong Group Queensland did not pay the amount of $500 which was deposited to the credit of ACEC's bank account on 9 December 1986. Accordingly, there is no evidence of any agreement having been made between Grosvero and Turp (or the respective companies they represented) that Billabong Group Queensland's, Turp's or Huntlow's authority to use Telxon.Com was restricted to sites operated by Billabong Group Queensland or by Turp or his company.
At the trial further evidence was given concerning a so called Billabong Group users' licence. This evidence was given by Watson and Glendon Francis Young (Young) a solicitor acting for Turp and Huntlow. I propose to summarise the evidence of these two witnesses relating to telephone communications between them in October 1992. At this stage Huntlow and Turp had not been joined as parties nor had Grosvero yet given discovery of the invoice of 1 December 1986.
In evidence-in-chief, which he gave without reference to any contemporaneous notes, Watson said he had a discussion with Young on 15 October 1992 in which Young said to him that the copy of Telxon.Com at the Jindalee Hotel had been a copy of the program supplied under the Billabong Group users' licence, and that upon the closing down of the Billabong Group in Queensland, the program had come into Turp's possession and had been installed by him at the Jindalee Hotel without knowing there was any prohibition on doing so. Watson said that Young mentioned the Billabong Group users' licence negotiated with HIS. Under cross-examination, Watson said Young contacted him and advised him that he acted for Turp. He, Young, said that his client believed he had the right to use the program on the basis that it was one of the programs which had been supplied by HIS to the Billabong Group under the Billabong Group users' licence. Watson said he told Young that on his instructions the Billabong Group users' licence did not permit Turp to use the program other than at a Billabong Group hotel in Queensland and that on the termination of the group the licence would have died. Watson said that Young then asked for a copy of the agreement, but as he, Watson, did not have any written agreement he told Young that on his instructions, the agreement was oral. Watson said he had been told by Grosvero that there was an invoice recording the terms but at that stage he had not been able to find it. Watson said that although he thought there was a document, his instructions at the time were that there had been an oral agreement and that Grosvero had sent an invoice for $500 and the invoice had been paid. Later in his evidence Watson said his recollection was that he said to Young there was an oral agreement but he could not recall whether he had said it could not be found or whether Young had even asked for the agreement. He sought to explain the difficulty he had with his recollection about whether Young asked for a copy of the document by saying that it was a long conversation.
In his evidence, Young said that he did not have an independent recollection of the conversation and he had to rely upon his contemporaneous notes made during the telephone attendance. He said that he had two conversations with Watson on 15 October 1992. In the first, Watson said that there was a group users' agreement settled with Turp to make more copies of the program for authorised Billabong Group hotels. Other matters were also discussed.
In a further conversation later the same day when he rang Watson, Young said he believed Watson told him that there was an oral agreement made between Turp and Grosvero about the sum of $500 in relation to the group agreement. On the following day, Young wrote Watson a letter dated 16 October dealing with a number of matters including aspects of the conversations on 15 October 1992, an extract from which will be set out below. Young said that at the time of the conversations and the letter of 16 October 1992 he had only limited instructions from his client as Turp was not yet party to the action and that at the time, he (Young) had no practical experience of computers, their use or computer software. It was put to Young in cross-examination that it was he who said to Watson that the Billabong Group had a group users' agreement with HIS. Young did not accept this and said that it was not the case for otherwise he would not have written as he did in his letter of 16 October 1992 where he recorded that Watson told him about the group users' agreement. Watson did not dispute this in later correspondence with him.
The relevant part of Young's letter of 16 October 1992 is as follows:
During our conversations, we note that you made reference to a Group Licence Agreement. In the first instance, we understood your client held a document signed by Mr Turp as State Manager for the Billabong Group and Mr Grosvero for the applicant which agreement provided that the programs were sold subject to provisions of that agreement obliging the purchaser to use the programs only in respect of this specific site nominated for use of the program. We now understand that your clients do not assert that such an agreement was signed but understand your clients assert an oral agreement confirmed by a letter between Mr Grosvero and Mr Turp. We have requested a copy of that letter and note your advice that the letter is unavailable presently. We have taken instructions from our client who refutes that any such conversation occurred or correspondence exists. Therefore, we would like to sight a copy of the correspondence that you refer to.
Having heard and observed both witnesses I accept without hesitation the account given by Young. To the extent that he had made contemporaneous notes, his testimony was consistent accordance with those notes, and in my view the letter written on 16 October 1992 provides compelling support for his recollection, particularly as there is no suggestion that Watson took issue with the statements contained in the passage quoted. There is nothing in the evidence of the conversations between Watson and Young which causes me to doubt my finding that the so called group users' licence was not something Turp had ever agreed to.
The evidence establishes, and I find, that Huntlow and other members of Billabong Group Queensland purchased Telxon PDE devices and authorised copies of the Telxon.Com from BEQ free of any restriction or limitation as to the use that could be made of either the devices or the program and that it was a copy of the program so obtained that was later used in the management of the Jindalee Hotel and was part of the assets later sold by Huntlow to Doce.
I also find that the copy of Telxon.Com found on Datbury's computer during the Anton Piller raid on 4 September 1992 had been made as part of a regular practice adopted by the management of the Jindalee Hotel to make regular back-ups of its computer software and data. There is no evidence to contradict what Marston and Gardner said on this issue and in
this respect both impressed me as honest and credible witnesses.
I am satisfied from the evidence, and so find, that Copper Systems is the owner of copyright in the literary work constituted by the computer program known as Telxon.Com 4.2. It follows that Copper Systems is entitled to sue in respect of any proven infringement of that copyright.
ACEC has pleaded that Copper Systems has granted it an exclusive licence to offer for sale and sell copies of Telxon.Com 4.2 and versions thereof as revised from time to time. The exclusive licence is said to have been granted by an oral agreement made between Delacretaz and Grosvero on behalf of their respective companies in 1985. It is clear that ACEC does not have an "exclusive licence" as that term is defined in s 10 of the Copyright Act, and cannot sue for infringement of the copyright. ACEC's claim is not based upon any alleged infringement of copyright but on alleged contraventions of the Trade Practices Act.
INFRINGEMENT OF COPYRIGHT
In paragraph 9 of the statement of claim the applicants plead that Datbury and/or Gardner and Huntlow and/or Turp have infringed the Copper Systems' copyright in Telxon.Com 4.2 by, without the licence or authority of the applicants, doing and/or causing or authorising the doing in Australia of the
reproducing, adapting and/or publishing of Telxon.Com 4.2 or a substantial reproduction or adaptation thereof.
In paragraph 10 it is pleaded that Huntlow and/or Turp have infringed Copper Systems' copyright by, without the licence or authority of the applicants, selling, letting for hire or by way of trade offering or exposing the program for sale, where they knew or ought reasonably to have known that the reproduction or adaption thereof infringes the copyright.
On the view I have taken of the evidence, I am satisfied that it is more probable than not that all Telxon PDEs and all copies of Telxon.Com 4.2 acquired by or on behalf of Billabong Group Queensland, Huntlow and/or Turp were acquired from BEQ in circumstances in which no restrictions or limitations applied to the use to which the devices and program could be put. There is no evidence to suggest that apart from the question of back-up which is dealt with below, any of the respondents ever made or caused to be made any reproduction or adaptation of Telxon.Com nor that they published Telxon.Com.
The only letting for hire and sale of Telxon.Com that has been proved is that associated with the hiring agreement between TCS and Doce to which reference has been made and to the subsequent sale of the equipment to Doce.
In my opinion, assuming that such hiring and sale were effected by or on behalf of Huntlow, such hiring and sale did not involve a breach of the Copper Systems' copyright in Telxon.Com.
Huntlow had acquired the copy of the program in a legitimate manner and it was Huntlow's to hire or sell as it thought fit, provided that in doing so it did not copy, reproduce or adapt the program, which it did not do.
The applicants have argued that whenever Telxon.Com is activated the whole of the program is copied from the hard disk of the computer onto the random access memory and thus, it is said, there is an infringement of the copyright. The respondents dispute that such movement into memory constitutes an adaptation of the program so as to constitute an infringement. Summers was prepared to acknowledge that if the original program is legal then it is legal to derive it from memory. The movement of software from the hard disk to memory is a usual function of a computer's operation which must necessarily be authorised by the virtue of the owner's licence to use the program. For it to be otherwise there would be no purpose in acquiring the program.
THE BACK-UP COPY OF TELXON.COM
There is only one allegedly infringing copy of Telxon.Com in issue in these proceedings and that is the copy found on Datbury's computer during the Anton Piller raid on 4 September 1992. And the evidence is, and I accept it to be fact, that this copy was deleted from the computer virtually as soon as it was discovered. There is no evidence to support any suggestion of a general copying or distribution of the program to the public.
Section 43A of the Copyright Act provides:
43A.(1) Subject to subsection (2), the copyright in a literary work being a computer program is not infringed by the making of a reproduction of the work, or of a computer program being an adaptation of the work, if:
(a)the reproduction is made by, or on behalf of, the owner of the copy (in this section referred to as the "original copy") from which the reproduction is made; and
(b)the reproduction is made for the purpose only of being used, by or on behalf of the owner of the original copy, in lieu of the original copy in the event that the original copy is lost, destroyed or rendered unusable.
(2) Subsection (1) does not apply to the making of a reproduction of a computer program, or of an adaptation of a computer program:
(a)from an infringing copy of the computer program; or
(b)contrary to an express direction by or on behalf of the owner of the copyright in the computer program given to the owner of the original copy not later than the time when the owner of the original copy acquired the original copy.
(3)For the purposes of this section:
(a)a reference to a copy of a computer program or of an adaptation of a computer program is a reference to any article in which the computer program or adaptation is reproduced in a material form; and
(b)a reference to an express direction, in relation to a copy of a computer program or of an adaptation of a computer program, includes a reference to a clearly legible direction printed on the copy or on a package in which the copy is supplied.
I have already indicated that I accept as factual the explanation given by Turp, Marston and Gardner as to the practice adopted concerning the backing-up of the programs and data held on the Jindalee Hotel computer. Despite opinions and assertions to the contrary, I am satisfied that the practice described by the respondents' witnesses was followed
and that no sinister implication can be drawn from the fact that other people experienced in the field may not have adopted a similar practice. The copy of Telxon.Com on Datbury's computer was made for the purpose only of being used, by or on behalf of the owner of the original copy (i.e. the owner of the Jindalee Hotel) in lieu of the original copy in the event that the original should be lost, destroyed or rendered unusable.
The copy of the program from which the back-up was made (that is the copy on the Jindalee Hotel computer) was not an infringing copy. It was purchased by the owner of the Jindalee Hotel, along with the computer and other equipment from Turp's company which had acquired it via its own or Billabong Group Queensland's dealings with BEQ. Nor was the original copy acquired by the owner of the Jindalee Hotel subject to any express direction (as that term is used in s 43A) by or on behalf of the owner of the copyright.
In the circumstances the copyright in Telxon.Com was not infringed by the making of the back-up copy found on Datbury's computer.
THE TRADE PRACTICES ACT CLAIMS
The following summarises the applicants' pleading in relation to alleged contraventions of the Trade Practices Act. It is said that Datbury and/or Huntlow represented in the course of trade or commerce that they were entitled to make use of, reproduce, adapt, publish and/or (in the case of Huntlow) let for hire, offer for sale and sell version 4.2 of the Telxon.Com; that such representations were misleading and deceptive and/or likely to mislead and deceive and were false; and that Marston, Gow, Gardner and Turp aided, counselled or procured and/or have been directly or indirectly knowingly concerned in, or party to, the pleaded contraventions.
The applicants say that Datbury contravened the Trade Practices Act:
(a)by representing to the owner of the Jindalee Hotel that it was entitled to use, reproduce and adapt Telxon.Com, and
(b)by facilitating the unauthorised use, reproduction and adaptation of Telxon.Com at the Jindalee Hotel by permitting the use of JUNC.PDE at the Jindalee Hotel
and that Marston, Gow and Gardner aided and abetted, counselled or procured Datbury's conduct.
It is further said that Huntlow contravened the Act:
(a)by representing to the owner of the Jindalee Hotel that it was entitled to make use of, reproduce and adapt Telxon.Com;
(b)by representing that it was entitled to let for hire to the Jindalee Hotel, offer for sale and sell Telxon.Com to the Jindalee Hotel;
(c)by representing to Datbury, Marston and Gardner that it was entitled to make use of, reproduce, adapt and/or publish the program in the course of arranging for JUNC.PDE to be made, and
(d)by representing to Datbury, Marston and Gardner and the owner of the Jindalee Hotel that it was permitted to make or allow to be made copies of the program for back-up and testing purposes
and that Turp aided and abetted, counselled or procured that conduct.
There is no evidence to suggest that Datbury or any of its directors or employees made any representations to the owner of the Jindalee Hotel and in particular there is no evidence that the representations referred to above were made. The applicants' claim against Datbury for contravening the Trade Practices Act must fail as must the associated claims against Marston, Gow and Gardner.
In relation to the Trade Practices Act claim against Huntlow the following matters are relevant:
Telxon PDE devices and copies of the ancillary software program were purchased from the applicants' agent in Queensland (BEQ) free of any contractual restrictions or limitations as to their use. Thereafter, subject to the law of copyright, as the ultimate owner of the devices and software Huntlow was free to use same as it saw fit. To the extent that a representation was made to the owner of the Jindalee Hotel that Huntlow was entitled to use Telxon.Com in association with the Telxon PDE devices, the representation was true. No representation was made by Huntlow to the owner of the Jindalee Hotel that it was entitled to reproduce or adapt Telxon.Com.
Huntlow denies that it let Telxon.Com for hire to the Jindalee Hotel. It is fact that TCS in managing the Jindalee hotel used the Telxon PDEs and the accompanying software but no specific charge was made to Doce for this. Even if a charge were made for the hire of the Telxon PDEs and Telxon.Com, Huntlow as the owner of the devices and program was entitled to do so. Similarly, Huntlow was entitled to sell the PDEs and the accompanying software to Doce. There was no misrepresentation.
There is no evidence that Huntlow ever represented Datbury, Marston or Gardner, or at all, that it was entitled to reproduce, adapt or publish Telxon.Com in the course of arranging for the writing of JUNC.PDE. Huntlow was entitled to use the program and any representation it may have made to that effect was not false.
Huntlow was entitled to make or have made on its behalf copies of the program for back-up purposes. There is no evidence that Huntlow ever represented to Datbury, Marston or Gardner that it was permitted to make or allow to be made copies of Telxon.Com for testing purposes, nor is there evidence that it or the other respondents made a copy of Telxon.Com for testing purposes. The copy of Telxon.Com on the Datbury computer resulted from a full back-up of the Jindalee Hotel computer. Turp, Gardiner and Marston all agreed, and I so find, that at no time did Turp ask representatives of Datbury to conduct any tests of Telxon.Com. Any testing done on the back-up held at Datbury's premises related to the ACM program.
The applicants' Trade Practices Act claim against Huntlow and the associated claim against Turp must fail.
PASSING OFF
The applicants plead that Huntlow and/or Turp have passed off their business and/or goods as the business and/or goods of the applicants and/or as a business or goods endorsed or approved by the applicants.
In order to succeed on such a claim, the applicants must show that:
(a)there is some reputation or goodwill which attaches to their name, mark or get-up;
(b)Huntlow and/or Turp have used the same or a deceptively similar name, mark or get-up so as to confuse or deceive the relevant public; and
(c)as a result of such conduct, damage has been caused or is likely to be caused to the applicants' business reputation or goodwill.
Neither Huntlow nor Turp have been shown to have used the name, mark or get-up of the applicants or either of them or deceptively similar name, mark or get-up. The only relevant sale of Telxon.Com was made to Doce. The evidence in relation to the sale is that Doce wished to retain use of Huntlow's equipment and so purchased same. It was merely a case of buying the equipment that was already in use at the hotel. There is no evidence that the applicants' respective names, marks or get-ups were referred to in relation to the sale. There was no occasion for any confusion or deception of the public in relation to the sale. Nor for that matter could any damage have been sustained by the applicants by virtue of the sale. Delacretaz said that version 4 of the program finished at version 4.6 and there were three or four versions of version 5 and there have been two versions of version 6. The program had been modified over time to incorporate changes and developments, for example, the capacity to read bar codes. Version 4.2 does not have the capacity to read bar codes. It is for practical purposes obsolete and would not be sold to anybody seeking a contemporary program. Telxon.Com 4.2 is relevant only for those people who use old Telxon PDE devices which cannot read bar codes and those who have old IBM operating systems on their computers.
CONCLUSION
The applicants have failed to establish any of the several causes of action pleaded against the various respondents. The application will be dismissed. The question of costs is adjourned to 10.00am on Friday 24 February 1995.
I certify that this and the preceding 37 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney.
Associate:
Dated: 10 February 1995.
Heard: Melbourne 22, 23 & 24 June and 18 & 19 July 1994
Brisbane 20, 21 & 22 July 1994
Melbourne 30 September 1994
Judgment: Melbourne
Date: 10 February 1995.
APPEARANCES:
Mr C.D. Golvan (instructed by Coltmans) appeared for the applicants.
Mr A.A. Nolan (instructed by Browne & Co) appeared for the first, second, third and fifth respondents.
Mr P.J. Cosgrave (instructed by Stephens & Tozer) appeared for the sixth and seventh respondents.
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