Broderbund Software Inc. v Computermate Products (Australia) Pty Ltd - [1991] FCA 693

No judgment structure available for this case.

c i t

UUDGMENT No. ....&S J -...--,
CATCHWORDS

- infringement - importation and sale - 8 . 3 7
1966 - whether licence given.

RRODERBUND SOFTWARE INC. & ANOR v. - rs
No. G492 of 1990

BEAUMONT J.
SYDNEY
15 NOVEMBER 1991

:

URT OF

) )

1 No. G492 of 1990

- 1 1
-
First applicant

LOW C V
-
Second applicant

AND COMPUTERMATE PRODUCTS
-
First respondent
-
Second respondent
COMPUTERMATE PRODUCTS
First cross-claimant
Second cross-claimant

Second cross-respondent
First Cross-respondent

!x!BAM: BEAUMONT J.
L!u&: 15 NOVEMBER 1991
s!m.REz SYDNEY

1.   Direct that the applicants bring in short

minutes of orders in accordance with the
reasons for judgment.
2.    Costs reserved.
3.   Stand proceedings over to 2 December 1991 at
9.30 a.m. for mention.

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

S 1
1

No. G492 of 1990

1

- 1

BETWEEN:

UND SOP- INC.
First applicant
Second applicant

AND COMPUTE W E PRODUCTS
-
First respondent
Second respondent
COMPUTERKATE PRODUCTS
-
First cross-claimant
Second cross-claimant
First Cross-respondent

Second cross-respondent

!xuAn: Beaumont J.
UaE: 15 NOVEMBER 1991

ONS FOR-NT NO. 1
. . .

ion the issue of llabllltv on the a~~ljcants' cl-

These proceedings are concerned with what is claimed by the applicants to constitute the unlawful parallel importipg of computer software. By their amended application, Broderbund Software Inc., ("Broderbund"), the first applicant, and Dataflow Computer Services Pty. Limited, ("Dataflow"), the second applicant, seek an injunction to restrain Computermate Products (Australia) Pty. Limited, ( "Computermate"), the

first respondent, from importing into Australia a computer software program entitled "Where in the World is Carmen San Diego" ("the program") for the purpose of selling the program, letting it for hire or offering it for sale or hire in the course of trade or exhibiting the program in public in the course of trade. Consequential relief is also sought, but the parties have agreed that, at this stage, only the issue of liability on the parallel importation question be dealt with.

-

Broderbund, a Delaware corporation carrying on its business in California, manufactures and markets computer

software programs for use with personal computers, including

the Amiga and IBM standard versions of the program. Dataflow, a New South Wales corporation, markets and distributes computer software, including the program, in this country pursuant to a contractual arrangement with Broderbund.

Computermate, another local company, markets and distributes computer software and computer products in New South Wales. Raymond Firth, the second respondent, ie its controller and one of its directors.

in the w e n t of cl-

The material allegations in the applicants'
statement of claim, omitting allegations under 6.52 of the
Practices Acf no longer pressed, may be summarised as
follows: (1) Broderbund is the owner of the copyright in the
program. (This is now common ground.) (2) Computermate,
without the licence of Broderbund or Dataflow, has imported
into Australia articles being reproductions of the program for
the purpose, inter alia, of selling them. (3) Alternatively
Computermate, without the licence of Broderbund or Dataflow,
has, inter alia, sold articles being reproductions of the
program where, to its knowledge, the making of such articles
would, if the articles had been made in Australia, have
constituted an infringement of the copyright in the program.

(4) In the premises, Computermate has infringed the copyright

of Broderbund in the program.
X h L f S u

As has been noted, it is now admitted that (1) the source code of the IBM and Amiga standard versions, or "platforms", of the program is a literary work within the meaning of the co~vriaht Act 1968 ("the Act") ; (2) Broderbund

owns, and at all material times, has owned, copyright in both versions of the program. It is also now common ground that Computermate has imported into Australia, and sold in this country, computer discs which are reproductions of a substantial part of the Amiga version and of the IBM version,

respectively, of the program. It is accepted by the applicants that what is imported by the respondents are not "pirate" versions but genuine copies of the work produced by Broderbund in America. Many of the other facts in the evidence are contentious, or at least put in issue by the respondents. Before undertaking the exercise of making specific findings of fact in these contentious areas, it will assist if the history of the matters in dispute were described in general terms.

-

In December 1981, Broderbund and Studio Australia Pty. Ltd., a local company then carrying on business under the name "Imagineering", entered into a written agreement whereby Imagineering was appointed an exclusive distributor of Broderbund products in Australia for a term of one year,

parties. " "renewable at 12 month intervals by mutual consent of the

In May 1987, Broderbund and Imagineering entered into a fresh written agreement whereby, for the term of the agreement, Imagineering was appointed sole distributor of Broderbund Products for several territories, including Australia. Imagineering was also granted, for the term of the agreement, an exclusive licence in the territories to use Broderbund's copyright in the distribution and sale of Broderbund's software products. The term of the agreement was one year and thereafter for periods of one year unless either party gave 90 days' notice of termination.

By letter dated 5 February 1988, Studio Australia, then carrying on business under the name Questor Computer Entertainment Products, wrote to Mr. Firth confirming that Questor held exclusive Australian distribution rights and exclusive licence rights in respect of copyright for several software manufacturers then specified, including Broderbund. Questor requested Mr. Firth to "discontinue advertising, promotion or offering for sale any titles from the abovementioned licensors."
Shortly after receiving this letter, Mr. Firth
telephoned the offices of Broderbund in California and asked
to speak with whomever was in charge of international sales.
He was put through to Steven Dunphy. In many respects, the
terms of this conversation are contentious, the versions of it

given by Mr. Firth and Mr. Dunphy in their evidence being different in significant respects. It will be necessary to return to the detail of their evidence later. For immediate purposes it will suffice to note that, although this is disputed by Mr. Firth, Mr. Dunphy's evidence was that he then informed Mr. Firth that Broderbund had an exclusive
distributor in Australia and that he requested Mr. Firth not
to "go aroundm that agreement.

On 26 February 1988, acting on the instructions of

Mr. Firth, Memsrs. Schwartz and Freeman, Chicago attornies,

wrote to several American software manufacturers, including Broderbund, saying that they had a client, not then identified, "interested in purchasing your computer software products from established U.S. distributors for export and resale to retailers in Australia". In their letter, Messrs. Schwartz and Freeman went on to inquire whether Broderbund had exclusive distribution arrangements in Australia and, if so, details were sought.

By letter dated 1 March 1988, Mr. Dunphy replied to Messrs. Schwartz and Freeman, informing them that he would "turn [it] over" to Broderbund's corporate attorney, who was then out of the country but was expected to return soon. In

fact, Broderbund made no further reply.

It appears that later in 1988 (as will be seen, Mr. Firth's evidence suggests that this occurred in June 1989) Mr. Firth again telephoned Mr. Dunphy and enquired whether Imagineering held an exclusive licence from Broderbund. Although the timing of the conversation is disputed, it is common ground that, in October 1988, Broderbund and Dataflow executed an agreement, as of 1 January 1989, appointing

Dataflow as Broderbund's exclusive distributor for a territory, which included Australia, for a term of one year and thereafter from year to year unless determined by one month's notice. Dataflow was also licensed, exclusively in the territory, to use Broderbund's copyright.

From May 1989 and thereafter, Computermate purchased supplies of software products, including the program, from several American distributors, principally American Software Distributors, Inc. ("ASD") and Micro-Pace, Inc., both based in Illinois.

(As has been said, according to the evidence of Mr.

Firth, in early June 1989, he telephoned Mr. Dunphy and enquired whether Broderbund had granted an exclusive licence to Imagineering; Mr. Dunphy replied that Imagineering was an exclusive distributor but did not have copyright in any of Broderbund's products; Mr. Dunphy added that Broderbund had

been talking to Dataflow and that, although nothing was finalised, it was expected that an arrangement similar to that

with Imagineering would be entered into. Mr. Dunphy agrees that a diecussion along these lines took place, but says that it occurred at an earlier point of time. For the reasons I give later, I have concluded that Mr. Dunphyps evidence on this point ought to be accepted.)

By letters dated 25 July and 9 August 1989, Mr. Firth wrote to Broderbund enquiring, inter alia, whether, apart from granting exclusive distributorship rights, Broderbund had assigned or licensed its copyright to an individual or corporation in Australia. No reply appears to have been received to these letters.

In October and November 1989, Broderbund and Dataflow executed a memorandum dated 10 November 1989, referring to the agreement made as of 1 January 1989, confirming that insofar as that agreement did not already do so, Dataflow was appointed exclusive licensee of the copyright in the software.

By letter to Mr. Firth dated 15 January 1990, Dr. Jeffrey Tobias, the managing director of Dataflow, said that he was extremely concerned to find on Computermate's latest price list products from, inter alia, Broderbund. Dr. Tobias

that Computermate "would cease selling products from said that he had understood from a conversation with Mr. Firth
publishers with whom Dataflow has exclusive Australian
distribution." Mr. Firth was asked to clarify his intentions.

In a long reply to Dataflow dated 18 January 1989, Mr. Firth denied that he had agreed with Mr. Tobias not to import Broderbund products. Mr. Firth went on to complain at length about the parallel importation provisions in the Act.

On 18 January 1990, Mr. Firth also spoke to Dr. Tobias along the lines of his written reply. At the end of the conversation, which is not now disputed, Dr. Tobias informed Mr. Firth that if Computermate continued to sell Dataflow's products, Dataflow would take legal action.

On 19 January 1990, Mr. Firth had a discussion on the telephone, which is not now disputed, with Mr. Dunphy in which the legal issues which now arise were further debated.

On 15 May 1990, Mr. Firth wrote to Broderbund restating his arguments against the existing legal restraints on parallel importation. He again enquired whether Broderbund had granted exclusive distributorship or licensing rights in Australia. Mr. Dunphy replied by letter dated 29 May 1990 stating, in effect, that Broderbund had granted both kinds of rights to Dataflow.

These proceedings were comenced in August 1990.
with resDect to the two contentious discussipna

Mr. F i r u and Mr.

As has been said, there is a dispute with respect to two of the discussions, in one case with respect to content, and in the other in regard to timing.

The content of the c o n v e r s a t i o n i n Februarv 1988

Although it i s common ground t h a t a d i s c u s s i o n t o o k

p lace a t t h i s t i m e , there i s a conf l ic t i n the ev idence w i t h

respect t o i t s t e r m s . I t i s c o n v e n i e n t , i n the f i r s t

i n s t a n c e , t o set o u t the r e s p e c t i v e v e r s i o n s o f the

c o n v e r s a t i o n .

M r . F i r t h ' s a f f i d a v i t e v i d e n c e was as f o l l o w s :

"3 . ( 1 ) S h o r t l y a f t e r r e c e i v i n g the s a i d letter

[i.e. the letter da t ed 5 February 1988 from pues to r

S t u d i o A u s t r a l i a ] , t e l ephoned the f irst a p p l i c a n t a t

17 Paul D r i v e , San R a f a e l , C a l i f o r n i a , V.S.A. and

asked t o speak w i t h whomever was i n charge o f

i n t e r n a t i onal s a l e s .

I was t o l d t h a t the person ' s name was Steven Dunphy
and was connected through to his o f f ice .

M r . Dunphy and I had a conver sa t i on d u r i n g which

words t o the f o l l o w i n g e f fec t were spoken:

( 2 ) F i r t h : ' I have recently r e c e i v e d a letter from

pues tor / Imagineer ing s t a t i n g t h a t they a r e the

e x c l u s i v e d i s t r i b u t o r o f Broderbund produc t s i n

A u s t r a l i a and t h a t they a l s o have the e x c l u s i v e

-licence i n A u s t r a l i a for a l l Broderbund

produc t s . Is this correct. *

( 3 ) Dunphy: ' W e do n o t dea l d i r e c t w i t h anyone i n

A u s t r a l i a b u t i t cou ld be t h a t they have some

arrangement w i t h A c t i v i s i o n , who d i s t r i b u t e a l l

Broderbund products. '

( 4 ) F i r t h : 'Are you aware o f the c o p y r i g h t laws i n
Aus t ra l ia? '

( 5 ) Dunphy: ' N o t a s such.'
( 6 ) F i r t h :

' W e l l , i t appears t h a t under A u s t r a l i a n

c o p y r i g h t law, i f a p a r t y i n A u s t r a l i a h a s been

granted the e x c l u s i v e licence to your produc t s

then because o f t h a t licence they i n f a c t

because o f this some o f these companies a r e now become the copyr igh t owners for A u s t r a l i a and
a t t e m p t i n g t o s t o p independent d i s t r i b u t o r s

l ike o u r s e l v e s from i m p o r t i n g these produc t s

i n t o A u s t r a l i a from l e g i t i m a t e d i s t r i b u t o r s i n

the U.S. and Europe, c la iming t h a t we a r e
breaching their copyr ight . '

( 7 ) Dunphyr 'Who a r e you buying from i n the U. S . '
( 8 ) F i r t h r

'CSS (Computer Sof tware Service) i n
Chicagv. '
( 9 ) Dunphy:

' W e l l a l l I can s a y i s t h a t we have an

a f f i l i a t i o n w i t h A c t i v i s i o n and can s t a t e t h a t

n e i t h e r Ques tor n o r any other p a r t y have

e x c l u s i v e r i g h t s t o our products. There i s

products from CSS or anyone else and s e l l i n g no th ing I can do t o s t o p you from buying our

them i n Austral ia . '

( 1 0 ) F i r t h : 'Okay, wel l w e j u s t keep going the

way we a r e and when you dec ide t o deal d i r e c t ,

don' t f o rge t t o get i n touch w i th us , because

w e would Broderbund. '

be

i n t e r e s t e d

i n dea l ing

d i r e c t

w i t h
"

Mr. Dunphy's a f f i d a v i t evidence was as fo l lows:

" 4 . As t o the n i n t h sub-paragraph o f paragraph 3 o f

F i r t h ' s A f f i d a v i t I deny making any remarks t o

the e f fec t a l l eged i n the first sentence. I

d i d s a y words t o the e f fec t set ou t i n the

second sentence o f t h a t paragraph b u t I a l s o

sa id words t o this e f f ec t :

'However, we have an agreement w i t h a

d i s t r i b u t o r i n Aus t ra l ia which I would l ike to

honour and I would apprec ia te i t i f you would

n o t go around t h a t Agreement.'

5 . As t o the t e n t h sub-paragraph o f paragraph 3 o f

F i r th ' s A f f i d a v i t I deny saying any th ing t o the

e f fect t h a t Broderbund d id n o t have any d i r e c t

dea l ings w i t h an Aus t ra l ian d i s t r i b u t o r a t t h a t

t ime. Throughout the period r e f e r r e d to i n

paragraph 3 o f F i r t h ' s A f f i d a v i t Broderbund had

a d i s t r i b u t o r i n Aus t ra l ia . "

Each w i tness was cross-examined v igorous ly b u t each

a f f i r m e d h i e evidence i n c h i e f . Having regard t o a l l the

surrounding circumstances , I have come t o the conclus ion t h a t ,

t o the e x t e n t t h a t there i s a c o n f l i c t , Mr. Dunphy's v e r s i o n

is to be preferred, for the following reasons.

Earlier in his affidavit, Mr. Dunphy gave evidence, which was not challenged, that, to his knowledge, Activision had never been authorised to distribute Broderbund products any where in the world. At the same time it is clear that in February 1988, Broderbund had a formal relationship with Studio Australia, i.e. Questor or Imagineering. Since the agreement with Studio Australia had only recently been renewed, it is unlikely that Mr. Dunphy, as the executive in charge of these matters, would have mistakenly referred to Activision instead. In fact, Mr. Dunphy was a witness to the execution of the renewed agreement with Studio Australia dated May 1987. The objective circumstances support Mr. Dunphyls version and are quite inconsistent with Mr. Firth's evidence.

-On behalf of the respondents, reliance is placed

upon a typed note prepared by Mr. Firth in March 1988 from

extensive inquiries carried out by Mr. Firth and Schwartz and information collected by him and his attornies as a result of

Freeman with respect to the Australian distribution arrangements made by many overseas software producers. The note, under the heading "Imagineering claims", is in these
terms :

"Broderbund. Affiliated to Activision but Broderbund state that Questor nor any other party have exclusive rights to any of their products in Australia."
Later in the note there is a reference to Activision

U.K. Ltd., but in another context.

In Questor's letter dated 5 February 1988, as has been said, ~everal licensors were mentioned, including Broderbund. Activision was another licensor then referred to.

It will be seen that the note now relied on by the respondents suggests that Broderbund and Activision were "affiliated". Usually this would suggest a corporate association or connection as distinct from an arms' length distribution or licensing arrangement.

At this time, Mr. Firth and his attornies were pursuing many inquiries from a wide range of sources. The note now relied on is a composite work, endeavouring to summarise the investigations of several persons. Mr. Firth's

original or source material used, in part, for this note have

now been destroyed. On the whole, I think that Mr. Firth has

been confused by the amount of research he has carried out in his campaign to reform the copyright laws. To the extent that, in this context, his evidence conflicts with the version of Mr. Dunphy, I prefer the evidence of Mr. Dunphy and I so find.

h to have

In his affidavit, Mr. Firth gave the following

evidence:

"9 . I n e a r l y June 1989 I telephoned S teven Dunphy.

During our converse t i o n words t o the fo l lowing

e f fec t were used:

F i r t h : ' S t even , have you now granted e x c l u s i v e
l i c e n c e to Imagineering a s they claim?'

Dunphyr 'What I can s a y i s t h a t Imagineering

i s our e x c l u s i v e d i s t r i b u t o r and purchase f u l l y

f i n i shed products on ly . They do not have t h e

copyright t o any o f our products.
F i r t h r

'And what about this new d i s t r i b u t o r

a l s o c la iming to have copyright i n your
products.

Dunphy: ' Y e s we have been t a l k i n g to Dataflow

b u t no th ing i s f i n a l i s e d . I f t h i n g s should

change I ' l l le t you know b u t it w i l l be a

s i m i l a r arrangement t o what we have now wi th
Imagineering. '

-In his affidavit, Mr. Dunphy said that although the

substance of the conversation given by Mr. Firth was true, the

discussion did not take place in June 1989.

Again the objective facts support Mr. Dunphy. It is clear that by October 1988, Broderbund had terminated its relationship with Imagineering and, instead, Broderbund had entered a formal relationship with Dataflow. Here also, to the extent that the evidence in this respect is in conflict, I prefer the version given by Mr. Dunphy.

In its essential ingredients, the applicants' case

may be summarised as followsr

(1) Copyrights subsists in the program. (This is admitted.)

(2) Broderbund owns the copyright in the program. (This is

admitted. )

(3) Since January 1989, or at the latest, November 1989, Dataflow has been Broderbund's exclusive licensee in Australia. (This is disputed.)

(4) Since at least May 1989, Computermate has imported into

Australia, and sold in this country, copies of the program. Computermate has acquired the program from several American distributors, including ASD and Micro-Pace. (These facts are common ground.)

( 5 ) The respondents' defence pleads no facts amounting to an

express or implied licence to this importation and sale. In particular, no licence should be implied from the undisputed

distributors without imposing any restriction on resale. facts that Broderbund sold the program to American

There is no evidence that Broderbund gave any formal permission to Computermate to import the program. (The respondents say that, in all the circumstances of the case, the giving of a licence by Broderbund should be inferred.)

(6) Importation and sale, without licence, of goods (even if genuine) which are copies of copyright works, is an infringement of copyright. Reliance is placed by the applicants upon 88.37 and 38 of the Act and upon the reasoning in the - case and the - case.

(BY 8.37 of the Act, it is relevantly provided that the copyright in a literary work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of selling the article where, to his knowledge, the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright. By 8.38 of the Act, it is relevantly provided that the copyright in a literary work is infringed by a person who, in Australia, and without the licence of the owner of the copyright, sells an article where, to his knowledge, in the case of an imported article, would if the article had been made in Australia by the importer, have constituted such an infringement.

With respect to the authorities relied on by the applicants, it will be necessary later to consider some of the
reasoning but, for the moment, it will suf fice to mention the
head-note of the report of the - case (1977) 138 CLR

534, as follows: The owner of copyright in a series of books in the United Statee and Australia granted to an affiliated company an exclusive licence to publish and sell the books anywhere in the world except the United States and Canada; an American wholesaler bought a quantity of the books from the copyright owner's general distributor in the United States and sold them to an Australian bookseller; neither the copyright owner nor the distributor imposed any restriction on the resale of the books by the American wholesaler; the bookseller did not seek the consent of any person to import or sell the books. It was held by the High Court that the bookseller did not have the licence of the copyright owner to import the books into Australia, or to sell them in Australia, within ss.37 or 38.

Again it will be necessary to look at the actual reasoning later, but according to the head-note in the

case (1988) 20 FCR 46, diskettea embodying computer programs, copyright in which was owned by the respondents, were purchased by the appellant in the United Kingdom, the diskettee having been manufactured in that country and in America; the respondents, as the American manufacturers, had consented to their sale in the U.K.; no restriction was imposed on the appellant, as purchaser of the articles in the

U.K., as to the way in which it might deal with the program; the appellant imported the articles into Australia for sale.

It was held by the Full Federal Court, upholding a first instance finding of infringement, thatr (i) 6.37 places upon the applicant for relief the burden of showing, inter alia, absence of licence, rather than placing upon the other side the burden of showing a licence; (ii) even though an importer did not have a contractual licence, it may be a defence to a claim under 8.37 if positive permission or consent can be implied from the circumstances of the particular case; (iii) the giving of a licence to permit importation could not be inferred from the absence of any restriction upon use of the articles, whether on a label or otherwise.)
(7) No implied licence arises from the sale of genuine goods
without restriction. The applicants rely on the - and

the Qzi - Soft cases.

(8) The making of copies of the program in Australia without licence would have constituted an infringement of copyright in the work. Reference is made by the applicants to the

reasoning in Dvasw v Autodesk Inc, (1990) 24 PCR 147 and m mcronics Ptv. Ltd. v Five Star Com~uters Ptv. Ltd. (1990) 18 IPR 225.

(9) Although the knowledge required under 88.37 or 38 is actual, and not merely constructive, knowledge, it is knowledge of the material facts that is required and the existence-of this knowledge on the part of a particular person may be inferred on the assumption that such a person has the

ordinary understanding expected of persons in his line of business, unless by his or other evidence, the court is
convinced otherwise. The applicants rely on CO~DO-
V ustom V e S Ptv. Ltd, (1978) 19 ALR 123.

(10) The licence granted to Dataflow is an exclusive licence within the meaning of the definition of "exclusive licence" in s.lO(1) of the Act as that definition was explained in

v W t i c o i n Amusements Ptv. Ltd, (1990) 171 CLR 88.
(By that definition, such a licence means -

"A licence in writing, signed by or on behalf of the owner...of copyright, authorising the licensee, to the exclusion of all other persons, to do an act that, by virtue of this act, the owner of the copyright would, but for the licence, have the exclusive right to do..."

By s.31(1) (a) of the Act, copyright, in relation to a work, is the exclusive right, inter alia, to reproduce the work in a material form.

Broadly speaking, by S. 119 of the Act, except against the owner of the copyright, the exclusive licensee has the same rights of action and remedies for infringement as if the licence had been an assignment. By virtue of s.lZO(l), it is necessary, in proceedings for infringement, to join as parties both the owner of the copyright and the exclusive licensee.)

I propose now to consider the matters which remain

in contest.

The nature of the re W s h i ~ _ b e t w e e n u n d and Dataflow

In the case, where an agreement between an

overseas manufacturer of amusement machines and a local distributor conferred on the local company exclusive selling

and distribution rights in Australia, the High Court held that a distinction mhould be drawn between an exclusive distributor of goods on the one hand and an exclusive licensee of copyright on the other. Mason C.J., Deane and Gaudron JJ.

said (at 93-4) :

"(iii) The distribution agreement did not make the distributor an 'exclusive licensee' of the copyright in the artwork or the computer programmes of the particular models. The exclusive rights of local sale conferred upon the distributor in respect of machines of those models did not encompass exclusive rights of first or other publication. In particular, Williams, as owner of the copyrf ght, remained entitled to publish, and to authorize another to publish, the artwork and computer prograrmnes incorporated in machines of those models. It could, for example, have authorized another to publish that artwork or those computer programmes as part of another product. It could have authorized another to exhibit them as part of the particular models for promotional purposes. Nor did the distribution agreement confer upon the distributor the exclusive authority to do within the copyright territory any other act comprised in the copyright. It follows that the distribution agreement did not authorize the distributor, 'to the exclusion of all other persons', to do an act that, by virtue of the Act, the owner of the copyright would, but for the agreement, have the exclusive right to do (see the Act, S. 10 (definition of 'exclusive licensee') and

s.31(1).

(iv) The distributor, not being an 'exclusive licensee' (or the legal or equitable owner of the copyright), could not itself bring proceedings for

infringement of copyright. "

See also per Dawson J. at 103-4; per McHugh J. at

In the present case, the terms of the material

provisions of the agreements between Broderbund and Dataflow
are as followa.

In the agreement entered into as of 1 January 1989,

Dataflow was appointed a distributor on these terms:

"2. Appointment of Dataflow as Distributor
2.1 For the duration of this Agreement and subject to all conditions contained in this Agreement, Broderbund appoints Dataflow as its sole and exclusive distributor for software products in the Territory. Broderbund's sole obligation pertaining to this exclusivity is that it will not ship goods directly into the territory except for those shipnents going to Dataflow. Broderbund shall be under no obligation to prevent customers from transshipping goods i nto the territory. Dataflow acknowledges that Broderbund will also be engaged in the marketing and sale of products not being Software Products, and such products are not the subject of this Agreement."
Copyright was dealt with in this agreement as

follows :

" 4. Copyright , Trademarks and Tradenames
4.1 Broderbund hereby grants to Dataflow during the Term of this Agreement, an exclusive license in the

distribution and sale of Broderbund's software Territory to use Broderbund's copyright in the
products and all Trademarks, designs and logos.

4.2 For the better protection of Broderbund, its trademarks, its copyright and its proprietary information relating to the Software Products, Broderbund hereby grants to Dataflow the rights, should Dataflow so desire to exercise it, to request the ultimate user of the Software Products to enter into license Agreements for the use of the Software Products. Furthermore, Dataflow shall be entitled to place a label on any of the Software Products to the following effect:
'Distributed by Dataflow under licence
from Broderbund Software.'

4.3 In o r d e r t o protect Broderbund w i t h respect t o

the So f tware Products d i s t r i b u t e d i n the Territory,

Dataf low s h a l l h o l d this name i n t r u s t for the
benefit o f Broderbund. "

In the supplementary agreement executed in November 1989, it was provided as follows:

"RE: Agreement o f 1 January 1989 between Broderbund

and Dataf low
W e refer to the above mentioned Agreement ('the

Agreement ' ) .

In o r d e r t o c l a r i f y and c o n f i r m the r i g h t s granted

under the Agreement the p a r t i e s hereby agree and

c o n f i r m a s f o l l ows :

1 . I n s o f a r a s the Agreement does not a l r e a d y

grant from Broderbund to Dataf low the r i g h t s o f

an E x c l u s i v e L icencee , Broderbund, i n

c o n s i d e r a t i o n o f Dataf low c o n t i n u i n g t o deve lop the market for Broderbund produc t s i n the
T e r r i t o r y and f o r Dataf low t a k i n g such s t e p s a s

a r e n e c e s s a r y t o p r o t e c t the i n t e l l e c t u a l

p r o p e r t y r i g h t s o f Broderbund i n the T e r r i t o r y ,

hereby a p p o i n t s Dataf low a s i t s E x c l u s i v e

L icencee for the So f tware i n the T e r r i t o r y .

-2 . F o r the purposes o f t h i s letter 8Exc lu s i ve

Licencee' s h a l l have the same meaning a s i s

asc r ibed t o t h a t t e rm i n S e c t i o n 10 o f the

Copyright Ac t o f the Commonwealth o f A u s t r a l i a

1968. "

The agreement made as of January 1989 proceeds on the footing that there is a difference between an exclusive distributor of products and an exclusive licensee of copyright in a work. As has been seen, c1.2.1 deals with the former aspect of the relationship by Broderbundvs promise not to ship goods directly into the territory except to Dataflow; it is then noted that Broderbund has no obligation to prevent its customers from transshipping goods into the territory. It appears that the latter provision was added, for more abundant caution, to avoid a suggestion of any implied duty on Broderbund to take positive action to police the possibility of transshipment. At the same time, it is clear, I think, that it is not open to infer from it that Broderbund is, by implication, consenting to an infringement of its copyright.

With respect to copyright by c1.4.1, Broderbund grants to Dataflow an "exclusive licence in the Territory to use Broderbund's copyright in the distribution and sale of Broderbund's software." The language of the definition of "exclusive licensee" in 6.10 of the Act is somewhat different. The Act speaks of a licence to do act which, by virtue of the Act, the owner has the exclusive right to do, including, for instance, the act of reproduction of the work in a material form (~.3l(l)(a)(i)).

Reference should also be made to the definition, in cl. 1.2 of the 1908 agreement, of "Software Products" so as to

include any software for microcomputers designed or developed

by Broderbund. Notice should also be taken of the definition, in cl.l.3, of "documentation" so as to include instructional material, manuals or books published or distributed by Broderbund, and any material into which copy disks, cassettes or cartridges suitable for use in microcomputers are placed for the purposes of distribution.

In a recent a r t i c l e e n t i t l e d "The Scope o f Copyright

Protection for Computer Programsm publ ished i n the Modern Law

Review (1991 ) 54 MLR 643 a t 645, David I . Bainbridge w r i t e s :

"The owner o f a c o p y r i g h t can dea l w i t h t h a t

c o p y r i g h t , he can a s s i g n the c o p y r i g h t or grant

licences i n r e s p e c t o f it. I t should be no t ed t h a t

the grea t b u l k o f computer s o f t w a r e i s d e a l t w i t h by
means o f a licence agreement. The licence w i l l set o u t the scope o f the a c t s which the licensee can d o w i t h o u t i n f r i n g i n g the c o p y r i g h t i n the computer

s o f t w a r e , for example, it migh t a l l o w the licensee

t o make a s i n g l e c o p y o f the programs for back-up
purposes . "

I n a f o o t n o t e t o t h i s , Mr. Bainbridge s a y s :

" 'Sof tware ' i s a t e rm w i t h no p r e c i s e d e f i n i t i o n b u t

it i s u s u a l l y t a k e n t o i n c l u d e computer programs and

a s s o c i a t e d documentat ion and manuals. Persons

a c q u i r i n g computer s o f t w a r e may think t h a t they a r e

b u y i n g the s o f t w a r e r a t h e r t han o b t a i n i n g a licence

t o u s e the s o f t w a r e . L i c e n s i n g o f s o f t w a r e b r i n g s

i n t o doubt the a p p l i c a b i l i t y o f i m p l i e d t e rms , for

example under the g a l e o f Goods Ac t . . . In some c a s e s ,

a hybr id c o n t r a c t may a r i s e , the documentat ion and

d i s k s b e i n g brought o u t r i g h t w h i l s t the programs a r e
l i c e n s e d . "

Againet t h a t background, it appears t h a t the

in t ended o p e r a t i o n o f c1.4 o f the 1988 agreement was a s

f o l l o w s : ( 1 ) D a t a f l f o w was l i c e n s e d t o d i s t r i b u t e and s e l l

the program i n A u s t r a l i a pursuant t o c1 .4 .1 . ( 2 ) Dataf low was

empowered, pursuant t o c1 .4 .2 , t o require an u l t i m a t e u s e r t o

enter in to a l i c e n c e agreement for the u s e o f the program.

Al though it appears t h a t , under the 1987 agreement,

Dataf low was not e x p r e s s l y l i c e n c e d t o make or reproduce the

work in a material form (see s.31(1) (a) (i) of the Act), it is necessary, in this connection, to have regard to the operation of the supplementary agreement made in 1989 which, in express terms, appointed Dataflow an "exclusive licensee" as that term is understood in the Act. Prima facie, this would mean that it was intended that Dataflow have the exclusive right in Australia to do at least some of the act6 specified in s.31(l)(a) of the Act, including the right to reproduce the work in a material form. There being no contrary indication in the other terms of the 1989 variation, in my opinion, this prima facie meaning should be adopted.

It follows, in my view, that from at least November 1989, Dataflow had the right conferred on it by Broderbund, to the exclusion of all other persons, to reproduce the program in Australia. As well, as has been noted, from at least 1 January 1989, Dataflow had the exclusive right to sell the program in Australia.

m s the DrogXam m r t e d into Australia without the licence of
Broderbund?

In the - case, Gibbs J. said (at 539) that

the word "licence" in 8.37 meant "consent" and, for this purpose, a licence need not result from a formal grant, but may be given orally or be implied by conduct. He gave (at 543), an example of a possible indication of consent in the case of an owner of copyright selling in America a commercial quantity of books for delivery to a buyer in Australia, whom he knew to be a bookseller in Australia. Having rejected (at 544) a submission that 6.37 applied only to the importation and sale of (1) articles which already infringed ("piratical" copies) and (2) articles sold subject to an express restriction on subsequent importation and sale, Gibbs J. went on to hold (at 545) that a licence cannot be inferred from the mere fact that the owner has sold the goods without any express restriction on their subsequent disposal. Stephen J. (with the agreement of Barwick C.J.) also concluded (at 554) that there was no basis for making an implication of consent. Jacobs J. was of similar view, saying (at 557) that the purpose of 6.37 is to deal with the case where no positive licence has been given; this purpose would be defeated if mere absence of restriction were held to import a licence.

(It should be noted, for the record, that on behalf
of the respondents it is now submitted that some of the

reasoning of Gibbs J. and of Jacobs J. in Time-Lifg cannot

stand in the light of the decision in W . )

In pzi - Soft , Sheppard, Spender and Gummow JJ. said (at 49) that a claim under 8.37 against an importer will fail if the importer has a bare licence not supported by consideration and non-exclusive in character. They went on (at 52) to agree with a submission that, whilst a bare consent or permission might constitute a licence for our purposes, nevertheless there must be evidence of the necessary facts from which one can properly infer the giving of that consent or permission by the copyright owner.

In W , Mason C.J., Deane and Gaudron JJ. said (at

94) that the onus of proving the absence of the licence of the owner of the copyright in relation to an issue of infringement under 8.37 lies on the party who asserts infringement. On the question of onus, Dawson J. was of the same opinion (at 105),

as was McHugh J, (at 119) who approved Qzi - SofQ (at 48) on the

point (at 119-120). The further question, whether in all circumstances of that case, it was proper to infer the permission of the owner of the copyright, naturally turned on the evidence before the court at first instance. Because there was a division of opinion in the High Court in the way the evidence could be analysed, it is not proposed now to refer to the reasoning there employed.

Accepting, as the settled course of authority establishes, that the onus is on the applicants to show that

the respondents imported the program without the permission of

Broderbund, what does the evidence show? In the first place, it indicates that Broderbund gave no formal consent. But did it give its permission informally? Are there circumstances present here from which the existence of consent may be inferred?

In my opinion, these questions must be answered in the negative. At all material times, the conduct of Broderbund has been consistent only with the stance that it wiehed Dataflow to be its sole importer of the program. Broderbund implemented its policy in this regard by its entry into the exclusive distributorship and exclusive licencing arrangements with Dataflow in 1988 and 1989. The entry into such arrangements was inconsistent with an intention to consent to another trader importing the program.

For the respondents, it is said that the fact that

the program was sold by Broderbund to American distributors without any express restriction is a basis for drawing an

inference of consent. But, for the reasons given in m -

and Qzi - Soft , those circumstances, standing alone, cannot

justify such an inference. Nor, in my view, is there anything that was -said or written by Mr. Dunphy or Dr. Tobias that is now in evidence which could be said to lay the foundation for

permission, informally, to the importation by Computermate. the drawing of an inference that, thereby, Broderbund gave its

Did the res-e "know" that the lggkina of the Dram

From the findings already made, it follows that from February 1988, Mr. Firth was put on notice, by Questor's letter and Mr. Dunphy's remarks, that Broderbund had appointed an exclusive distributor in Australia. On receipt of Dr. Tobiaet letter dated 15 January 1990, at the latest, Mr. Firth must have known that Dataflow was by then the exclueive distributor. From the evidence given by Mr. Firth and from the tone of hie lengthy and argumentative correspondence
throughout this period (which is in evidence) . Firth, a8

the controller of Cornputermate, was aware of the following: (a) that copyright eubsisted in the program; (b) that the

reepondents did not own the program; (c) that making copies

of the program in Australia would infringe the copyright; (d) that the respondents had no permission to make copies of the program in Australia.

It follows, in my view, that the applicants have eetablished their claim under 8.37.
Ponn of re-
In the circumstances, the applicants have made out a
case for the grant of appropriate declaratory relief. I
propose to direct that the applicants bring in short minutes
of orders accordingly.

I certify that this and the preceding
twenty-eight (28) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Beaumont.
-

Counsel and Solicitors Mr. D.K. Catterns instructed
for Applicant8 and by Abbott Tout Ruseell Kennedy
Cross-reepondentsr
Couneel and Solicitors Mr. G. Burton instructed by
for Reepondente and Marcus B. Karpin h Co.
Croae-claimante:
Dates of hearing: 14, 15, 18, 22, 23, 24 and 25
October 1991
Date Judgment delivered: 15 November 1991

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Citations

Broderbund Software Inc. v Computermate Products (Australia) Pty Ltd [1991] FCA 693

Cases Citing This Decision

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Avel Pty Ltd v Multicoin Amusements Pty Ltd [1990] HCA 58

Interstate Parcel Express Co Pty Ltd v Time-Life International (Nederlands) BV [1977] HCA 52

RRODERBUND SOFTWARE INC. & ANOR v. -	rs
No. G492 of 1990
BEAUMONT J. SYDNEY 15 NOVEMBER 1991

!x!BAM:	BEAUMONT J.
*L!u&:*	15 NOVEMBER 1991
s!m.REz	SYDNEY

Broderbund, a Delaware corporation carrying on its business in California, manufactures and markets computer	software programs for use with personal computers, including
the Amiga and IBM standard versions of the program. Dataflow, a New South Wales corporation, markets and distributes computer software, including the program, in this country pursuant to a contractual arrangement with Broderbund.
Computermate, another local company, markets and distributes computer software and computer products in New South Wales. Raymond Firth, the second respondent, ie its controller and one of its directors.

parties. "	"renewable at 12 month intervals by mutual consent of the
In May 1987, Broderbund and Imagineering entered into a fresh written agreement whereby, for the term of the agreement, Imagineering was appointed sole distributor of Broderbund Products for several territories, including Australia. Imagineering was also granted, for the term of the agreement, an exclusive licence in the territories to use Broderbund's copyright in the distribution and sale of Broderbund's software products. The term of the agreement was one year and thereafter for periods of one year unless either party gave 90 days' notice of termination.
By letter dated 5 February 1988, Studio Australia, then carrying on business under the name Questor Computer Entertainment Products, wrote to Mr. Firth confirming that Questor held exclusive Australian distribution rights and exclusive licence rights in respect of copyright for several software manufacturers then specified, including Broderbund. Questor requested Mr. Firth to "discontinue advertising, promotion or offering for sale any titles from the abovementioned licensors."
Shortly after receiving this letter, Mr. Firth telephoned the offices of Broderbund in California and asked to speak with whomever was in charge of international sales.
He was put through to Steven Dunphy. In many respects, the
terms of this conversation are contentious, the versions of it
given by Mr. Firth and Mr. Dunphy in their evidence being different in significant respects. It will be necessary to return to the detail of their evidence later. For immediate purposes it will suffice to note that, although this is disputed by Mr. Firth, Mr. Dunphy's evidence was that he then informed Mr. Firth that Broderbund had an exclusive
distributor in Australia and that he requested Mr. Firth not to "go aroundm that agreement.

asked	t o speak w i t h whomever was i n charge o f
i n t e r n a t i onal	s a l e s .

words	t o the f o l l o w i n g	e f fec t were	spoken:
( 2 )	F i r t h :	*' I* have recently r e c e i v e d a	letter from

pues tor / Imagineer ing	s t a t i n g	t h a t	they	a r e	the
e x c l u s i v e	d i s t r i b u t o r	o f	Broderbund	produc t s	i n
A u s t r a l i a	and	t h a t	they a l s o have	the	e x c l u s i v e
-licence	i n	A u s t r a l i a	for	a l l	Broderbund

n e i t h e r	Ques tor	n o r	any	other	p a r t y	have
e x c l u s i v e	r i g h t s	t o	our	products.	There	i s

don' t	f o rge t	t o get	i n touch w i th	us ,	because
w e would Broderbund. '	be	i n t e r e s t e d	i n dea l ing	d i r e c t	w i t h

the	e f fec t a l l eged	i n the	first	sentence.	I
d i d	s a y words	t o the	e f fec t set	ou t	i n the

e f fect t h a t	Broderbund	d id	n o t	have	any d i r e c t
dea l ings	w i t h	an	Aus t ra l ian	d i s t r i b u t o r a t	t h a t

extensive inquiries carried out by Mr. Firth and Schwartz and	information collected by him and his attornies as a result of
Freeman with respect to the Australian distribution arrangements made by many overseas software producers. The note, under the heading "Imagineering claims", is in these
terms :

At this time, Mr. Firth and his attornies were pursuing many inquiries from a wide range of sources. The note now relied on is a composite work, endeavouring to summarise the investigations of several persons. Mr. Firth's	original or source material used, in part, for this note have	now been destroyed. On the whole, I think that Mr. Firth has
been confused by the amount of research he has carried out in his campaign to reform the copyright laws. To the extent that, in this context, his evidence conflicts with the version of Mr. Dunphy, I prefer the evidence of Mr. Dunphy and I so find.

change I ' l l	le t you	know b u t it w i l l be	a
s i m i l a r arrangement	t o what	we	have now wi th
Imagineering. '

(1) Copyrights subsists in the program.	(This is admitted.)
(2) Broderbund owns the copyright in the program.	(This is
admitted.	)

*distribution and sale of Broderbund's software*	*Territory to use Broderbund's copyright in the*
*products and all Trademarks, designs and logos.*
4.2 For the better protection of Broderbund, its trademarks, its copyright and its proprietary information relating to the Software Products, Broderbund hereby grants to Dataflow the rights, should Dataflow so desire to exercise it, to request the ultimate user of the Software Products to enter into license Agreements for the use of the Software Products. Furthermore, Dataflow shall be entitled to place a label on any of the Software Products to the following effect:

4.3	In	o r d e r t o protect	Broderbund	w i t h respect	t o
the	So f tware Products	d i s t r i b u t e d	i n	the	Territory,

"RE:	Agreement o f 1 January *1989* between Broderbund
and	Dataf low

under the Agreement	the p a r t i e s hereby agree and
c o n f i r m a s	f o l l ows :

Reference should also be made to the definition, in cl. 1.2 of the 1908 agreement, of "Software Products" so as to	include any software for microcomputers designed or developed
by Broderbund. Notice should also be taken of the definition, in cl.l.3, of "documentation" so as to include instructional material, manuals or books published or distributed by Broderbund, and any material into which copy disks, cassettes or cartridges suitable for use in microcomputers are placed for the purposes of distribution.

licences	i n r e s p e c t o f it.	I t should be	no t ed	t h a t
the	grea t	b u l k o f computer s o f t w a r e	i s d e a l t	w i t h by

t o make a	s i n g l e c o p y o f the programs	for back-up
purposes . "

a c q u i r i n g	computer	s o f t w a r e	may	think	t h a t	they	a r e
b u y i n g	the	s o f t w a r e	r a t h e r	t han	o b t a i n i n g	a	licence
t o	u s e	the	s o f t w a r e .	L i c e n s i n g	o f	s o f t w a r e	b r i n g s

d i s k s b e i n g brought	o u t r i g h t	w h i l s t	the programs	a r e
l i c e n s e d . "

Accepting, as the settled course of authority establishes, that the onus is on the applicants to show that	the respondents imported the program without the permission of
Broderbund, what does the evidence show? In the first place, it indicates that Broderbund gave no formal consent. But did it give its permission informally? Are there circumstances present here from which the existence of consent may be inferred?
In my opinion, these questions must be answered in the negative. At all material times, the conduct of Broderbund has been consistent only with the stance that it wiehed Dataflow to be its sole importer of the program. Broderbund implemented its policy in this regard by its entry into the exclusive distributorship and exclusive licencing arrangements with Dataflow in 1988 and 1989. The entry into such arrangements was inconsistent with an intention to consent to another trader importing the program.

Counsel and Solicitors	Mr. D.K. Catterns instructed
for Applicant8 and	by Abbott Tout Ruseell Kennedy
Cross-reepondentsr
Couneel and Solicitors	Mr. G. Burton instructed by
for Reepondente and	Marcus B. Karpin h Co.
Croae-claimante:
Dates of hearing:	14, 15, 18, 22, 23, 24 and 25
October 1991
Date Judgment delivered:	15 November 1991