C21 Pty Ltd (Trustee) v Hou (No 5) [2025] FedCFamC2G 479
File number(s):
SYG 2055 of 2021
Judgment of:
JUDGE MANOUSARIDIS
Date of judgment:
4 April 2025
Catchwords:
INTELLECTUAL PROPERTY – copyright – whether copyright of which the applicant employer is the owner subsists in data contained in files (RAMA Keycap template files) which when accessed by a computer program generates 2D and 3D representations of keycap design and keycap collaboration templates – copyright subsists - whether information the employee downloaded from the employer’s server to a device or devices the employee controlled included the RAMA Keycap template files – whether having downloaded the RAMA Keycap template files the employee infringed copyright that subsists in the RAMA Keycap templates – employee infringed employer’s copyright in the RAMA Keycap templates - whether the employee reproduced a substantial part of the RAMA Keycap design templates to create keycap design templates which the employee on her own behalf and as the controller of a company used to create keycap design templates which in turn the employee and the company used to manufacture and sell artisan keycaps in competition with the employer – employee and company reproduced a substantial part of the RAMA Keycap design templates and for that reason infringed the employer’s copyright in the RAMA Keycap design templates.
INTELLECTUAL PROPERTY – breach of confidence – where the employee downloads files from the applicant employer’s server which the employer alleges is confidential to the employer – whether the employer has identified the information the employee downloaded which the employer alleges is confidential – whether the information the employer has identified is confidential – employee downloaded information that is confidential to the employer – whether the employee’s downloading of the information was a breach of confidence – to the extent the information the employee downloaded included the RAMA template files whether the employee and through the company the employee established and controlled, misused the RAMA template files – the employee and through her the company misused the confidential information contained in the RAMA Keycap design template files to manufacture artisan templates which the company sold in competition with the employer.
EMPLOYMENT LAW – whether the employee breached terms of her employment contract, fiduciary duties, and statutory duties imposed by s 182(1) and s 183(1) of the Corporations Act 2001 (Cth) by downloading information that included the RAMA Keycap template files that were confidential to the employer for the purpose of establishing a competing business to the business of the employer and using that information to manufacture artisan keycaps which a company the employee established and controlled sold in competition with the employer – the employee breached her employment contract and the fiduciary and statutory duties – whether the company established by the employee to undertake the competing business knowingly assisted the employee in breaching her fiduciary duties and was involved in the employee’s contraventions of her statutory duties – the company knowingly assisted…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
C21 Pty Ltd (Trustee) v Hou (No 5) [2025] FedCFamC2G 479
Case
[2025] FedCFamC2G 479
Decision Date
CaseChat Overview and Summary
C21 Pty Ltd (Trustee) v Hou (No 5) involved a dispute between an employer and a former employee regarding the infringement of copyright and breach of confidence. The employer, C21 Pty Ltd, alleged that the former employee, Hou, had infringed its copyright in the RAMA Keycap template files, which generated 2D and 3D representations of keycap designs, by downloading them from the employer’s server and using them to create competing keycap design templates. Additionally, C21 Pty Ltd claimed that Hou had breached confidentiality by downloading confidential information, including the RAMA Keycap template files, and using them to manufacture and sell artisan keycaps in competition with the employer. The court was required to determine whether the copyright in the RAMA Keycap templates subsisted, if Hou had indeed downloaded these files, and if so, whether her actions constituted an infringement of copyright and a breach of confidence. The court also needed to assess if Hou had breached her employment contract, fiduciary duties, and statutory duties by establishing a competing business.
The court found that the copyright in the RAMA Keycap templates did indeed subsist and that Hou had downloaded these files. The court held that Hou had infringed the employer’s copyright by reproducing a substantial part of the RAMA Keycap design templates to create competing keycap design templates, which were then used to manufacture and sell artisan keycaps. Furthermore, the court determined that Hou had breached the confidentiality of the employer by downloading and misusing the confidential RAMA Keycap design template files. The court also concluded that Hou had breached her employment contract, fiduciary duties, and statutory duties by using the confidential information to establish a competing business. The company that Hou established and controlled was found to have knowingly assisted her in these breaches.
The court ordered that Hou and the company she established were to cease and desist from using the employer’s copyrighted material and confidential information. It also granted an injunction to prevent further breaches and awarded damages to the employer for the infringement of copyright and breach of confidence.
Orders
Orders of the court
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Background
Background to the litigation
The second observation that may be made about the passage from Shariff J’s judgment in Laing O’Rourke is his Honour’s noting that the party on whom the legal burden of proof lies “had no duty of full disclosure, and the proceedings were not ones that required it adduce all information and evidence that existed”. It is of course true that a party in a civil proceeding does not have a duty, analogous to the duty a prosecutor might have in a criminal proceeding, to disclose to another party, as a matter of fairness, material that is or may be relevant to the other party’s case. That is what the High Court held in Australian Securities and Investments Commission v Hellicar in relation to a regulator who applies for civil penalties.[13] But that has nothing to do with the maxim stated in Blatch v Archer. As Glass JA observed in Parker, the maxim “is a principle of the law of evidence whereby a particular form of reasoning is authorized”, which treats an unexplained failure by a party “to adduce evidence as a reason for increasing the weight of the proofs of the opposite party or reducing the weight of the proofs of the party in default”. Thus, the reasoning the maxim in Blatch v Archer authorizes does not arise from a party’s failure to comply with a duty of full disclosure; it arises from a party’s unexplained failure to adduce evidence it is reasonable to expect would be in that party’s power to adduce.BACKGROUND [13] Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345, at [141]- [143]Keycaps Keycaps are objects that form part of mechanical keyboards. A mechanical keyboard enables a user to communicate with a computer by the user initiating spring-activated switches situated on the keyboard. The user does this by pressing or striking keycaps that have been placed over the switches. By striking the keycaps that cover the spring-activated switches, the user communicates to the computer the letter, number, punctuation, or other information depicted on the face of, or otherwise associated with, the keycaps. Mechanical keyboards differ from standard keyboards; they usually consist of several layers of plastic membranes which, when a key is pressed, connect and close an electric circuit which sends a signal to the computer. The market for artisan keycaps Mechanical keyboards possess a number of features that has generated a demand for their use. One is they make unique sounds when a user strikes or presses a keycap that activates a key switch. Another feature is that the pressing or striking of a keycap creates haptic feedback through the user’s fingers. Yet another feature is that the keycaps are detachable from the keyboard. That means that the keycaps that form part of a mechanical keyboard, as originally manufactured, can be removed and replaced with custom-made keycaps. This last-mentioned feature of mechanical keyboards has generated a distinct demand by users of mechanical keyboards for artisan keycaps to replace the originally manufactured keycaps, or artisan keycaps users of mechanical typewriters have already used to replace manufactured keycaps. This demand, in turn, has induced, and continues to induce, persons and entities to design artisan keycaps, and offer to sell to users of mechanical keyboards keycaps that embody their designs.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Mr Ramadan has given evidence of other keycap design templates he has created, noting that each of the keycap design templates is located in a distinctly named file. These include files for what Mr Ramadan has described as the “DSA Profile Templates”, the “KAM Profile Template”, the “SA Profile Templates”, the “DCS Profile Templates”, the “KAT Profile Templates”, and the “OEM Profile Templates”.[65] [65] Affidavit of R Ramadan 16.08.2022, [44]CREATION OF RAMA KEYCAP COLLABORATION TEMPLATES As I have already noted, a collaboration with an artist usually consists of RAMA having accepted a proposal from an artist or collaborator to produce an artisan keycap that embodies the artists’ motif at the top of the keycap. Assuming RAMA has accepted the collaboration, RAMA uses the relevant RAMA Keycap Design template to create a template on which there is engraved the artist’s motif (these being what I have described as “RAMA Keycap Collaboration templates”), and then arranged for the manufacture of keycaps in accordance with the RAMA Keycap Collaboration templates. The steps by which this occurred are as follows:[66](a)A RAMA industrial designer (this role was performed by Ms Hou when she was employed by RAMA) checks the artist’s design, adjusts it using the programme called “Adobe Illustrator”, and saves it as a “DXF” file, being a 2D drawing file that is searchable by the SolidWorks software.(b)The DXF file is imported into the relevant RAMA Keycap Design template file in the SolidWorks software on a 2D plane sitting above the keycap.(c)The RAMA designer copies the artist’s 2D image (as contained in the DXF file) onto the face of the RAMA Keycap Design template in the SolidWorks software. By this process the artist’s motif is “imprinted” on the top of the RAMA Keycap Design template.(d)The file bearing the imprinted design keycap template is exported to a “STEP” file (being a universal CAD format file).[67] The STEP file is used in production and manufacturing, and also for making renders of how the keycap will appear when manufactured. (A “render” is a photorealistic 2D image of a 3D model.[68])(e)The industrial designer sends the STEP file to the manufacturer for production. The manufacturer RAMA engaged uses a CNC machining process to make the keycaps in accordance with the RAMA Keycap Collaboration template, and then carve the artists’ motif onto the keycap top. The carved motif either remains as an indent, or is filled with enamel.[66] Affidavit of R Ramadan 16.08.2022, [54][67] More particularly, “STEP” stands for “Standard for the Exchange of Product Data ”. As Mr Simpson notes later in the first Simpson report (at [58]), STEP “is a common ISO standard exchange format, that is, a file format that is used for sharing files that contain 3D data”.[68] Affidavit of R Ramadan 15.08.2022, [101]