CBS Records Australia Ltd v Telmak Teleproducts Australia Pty Ltd

Re: CBS RECORDS AUSTRALIA LIMITED; CBS PRODUCTIONS PTY LIMITED; CBS (UK)
LIMITED; CBS INC.; MINDBANGLES INC.
And: TELMAK TELEPRODUCTS (AUST) PTY LIMITED; TELMAK TELEPRODUCTS (AUST) PTY
LIMITED (cross claimant); CBS RECORDS AUSTRALIA LIMITED; CBS PRODUCTIONS PTY
LIMITED; CBS (UK) LIMITED; CBS INC.
No. G154 of 1987
Trade Practices - Copyright - Equity - Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.

CATCHWORDS

Trade Practices - interlocutory application - sound-alike records and cassettes - whether sound and packaging misleading or deceptive or likely to mislead or deceive - whether passing off of records and cassettes as products of applicants - necessity to prove goodwill.

Copyright - interlocutory application - whether sound-alike records and cassettes breach copyright of songs by original artists.

Equity - interlocutory application - whether laches and delay or unclean hands a bar to relief.

Costs - security - applicant ordinarily resident outside Australia - discretion under 0.28 r.3(1)(a).

Trade Practices Act, 1974 s.52

Copyright Act, 1968 (Cth) ss. 10, 13, 14, 85, 101, 103

Copyright (International Protection) Regulations Reg. 4.

HEARING

SYDNEY

#DATE 8:5:1987

Counsel for the Applicants: Mr D. Catterns

Solicitors for the Applicants: Allen Allen & Hemsley

Counsel for the Respondent: Mr R.P. Meagher Q.C., Mr J.D. Heydon, Mr A.J. Sullivan

Solicitors for the Respondent: Moray and Agnew

ORDER

The Respondent be restrained until further order from advertising, promoting, selling or offering or exposing for sale or by way of trade distributing the record or cassette entitled "Chart Sounds 16 Hit Songs /-/-1" without:

(a) in the case of the record prominently displaying upon the front of the sleeve containing the record the words "NOT RECORDED BY THE ORIGINAL ARTISTS",

(b) in the case of the cassette prominently displaying on the paper insert in the plastic container of the cassette the words "NOT RECORDED BY THE ORIGINAL ARTISTS" so placed that these words will be readily seen and read by any person viewing the front of the container.

The Respondent be restrained until further order from using the coloured poster advertising "Chart Sounds 16 Hit Songs /-/-1" which is in evidence without prominently displaying upon the poster the words "NOT RECORDED BY THE ORIGINAL ARTISTS".

The Respondent be restrained from broadcasting or arranging the broadcast of any advertisement of "Chart Sounds 16 Hit Songs /-/-1" by means of the videotape already used on the Channel 7 television programme "Sounds" or any similar videotape without including an announcement at the beginning and at the end of the advertisement that the songs are not those recorded by the original artists.

The Respondent keep on and after 8 May 1987 until further order:-

(a) an account of the number of records and cassettes of "Chart Sounds 16 Hit Songs /-/-1" held by or for it in stock or on consignment;

(b) an account of any such records and cassettes sold or disposed of and of all sums received in respect of such dealings;

(c) an account of all profits made by it arising out of such dealings.

The application by the Respondent in its cross-claim for interlocutory relief be dismissed.

All parties have liberty to apply on 5 days notice.

The costs of and incidental to these interlocutory proceedings be costs in the suit.

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

JUDGE1

This is an application by CBS Records Australia Limited ("CBS Records"), CBS Productions Pty Limited ("CBS Productions"), CBS (UK) Limited ("CBS (UK)")and CBS Inc., for interlocutory relief against Telmak Teleproducts (Aust) Pty Limited ("Telmak"), the respondent. The applicants seek to restrain the respondent from advertising, promoting, selling or offering or exposing for sale or by way of trade distributing a certain record and a certain audio cassette. The applicants also seek to restrain the respondent from representing that the record or the cassette embody performances of the songs produced by various musicians or groups of musicians ("artists") set out in Schedule A in the application. Schedule A sets forth the following:

SCHEDULE A

SONG ARTIST

The Final Countdown Europe

Something In My House Dead or Alive

Shake You Down Gregory Abbott

I Knew You Were Waiting Aretha Franklin/ (For Me) George Michael

You Keep Me Hanging On Kim Wilde

Word Up Cameo

Everybody Have Fun Tonight Wang Chung

To Be A Lover Billy Idol

Don't Forget Me (When I'm Gone) Glass Tiger

Walking Down The Street The Bangles

Walk Like An Egyptian The Bangles

French Kissing In The USA Debbie Harry

C'est La Vie Robbie Nevil

Keep Your Hands To Yourself Georgia Satellites

You Can Call Me Al Paul Simon

The Rain Oran "Juice" Jones

The applicants also seek to restrain the respondent from representing that the record or the cassette embody performances of the songs set out in Schedule A of the same quality or sound as the performances by the artists set out in that Schedule. The applicants also seek to restrain the respondents from broadcasting or arranging for the broadcast of a television advertisement comprised in a video tape which became an exhibit in the proceedings and which was broadcast in a programme entitled "Sounds" compered by one Donnie Sutherland on Channel 7.
The applicants also seek an order restraining the respondent from making a copy or authorising the making of a copy of any of the sound recordings set out in Schedule B to the application. Schedule B listed the following:

SCHEDULE B

DEAD OR ALIVE Something In My House EUROPE The Final Countdown GREGORY ABBOTT Shake You Down ORAN "JUICE" JONES The Rain

The applicants also seek an order restraining the respondent from passing off the record or cassette as and for a record or cassette embodying performances of the artists set out in Schedule A. Certain other orders are sought and certain orders are included in the application which would be relevant upon the trial of the proceedings but which are not material to the interlocutory application such as orders for disclosure and delivery up of the articles complained of.
The dispute between the parties concerns a compilation produced by Telmak entitled "Chart Sounds 16 Hit Songs /-/-1" in the form of a record and a cassette. It commenced to be advertised on the "Sounds" television programme hosted by Donnie Sutherland on Saturday, 4th April, 1987. In evidence is a letter setting forth the arrangements between Herald-Sun TV Pty Limited ("Herald-Sun") and Telmak indicating that the advertisement was due to be repeated on three further Saturdays on that programme. However, on the 16th April a letter of complaint was written by the Solicitors acting for the applicants to Herald-Sun and thereafter the advertisement ceased to appear.
The application in these proceedings was lodged on the 22nd April, 1987. On the 24th April, 1987 an order was made by Ryan J. adding an additional applicant, namely Mindbangles Inc. The evidence is that this is a company incorporated in the United States of America which does not carry on business or own assets in Australia. It was joined on the basis that it was the owner of copyright in two of the songs included in Schedule A, namely, "Walking Down The Street" - The Bangles; "Walk Like An Eygptian" - The Bangles. These two songs are included in "Chart Sounds 16 Hit Songs /-/-1".
The application for interlocutory relief came before me on the 27th April. Some discussion took place as to whether the parties could agree on interim orders, if it were possible to arrange a hearing of the real issues between them at some not too distant date, rather than spend time on the somewhat different issues raised by a request for interlocutory relief. Counsel for Telmak offered an undertaking to keep an account of profits in any intervening period. However, in the result, the parties wished to proceed with the hearing of the application upon an interlocutory basis. Counsel for the applicants gave the usual undertaking as to damages.
At the commencement of the hearing before me counsel for Telmak obtained leave to file in Court a cross claim against the applicants other than Mindbangles Inc.. This cross claim refers to an agreement dated 31st March, 1986 between Telmak and Herald-Sun whereby in consideration of the payment of $10,000 the Herald-Sun agreed to promote Telmak's "Chart Sounds 16 Hit Songs /-/-1" by sponsoring a segment on the "Sounds" television show broadcast on Channel 7 and relayed to other television stations and by broadcasting an advertisement twice during the programme. The cross claim alleges that by a letter from the Solicitors for the applicants of the 16th April, 1987 a threat had been made to withdraw the licence of Channel 7 "Sounds" programme and Donnie Sutherland to broadcast a video clip on "Sounds" concerning the applicants' songs and recordings unless Donnie Sutherland refrained from promoting the Telmak record and cassette on that programme. Telmak, in its cross claim, asserts that this constituted an unlawful inducement to Herald-Sun to breach its agreement with Telmak. It seeks damages including exemplary damages and an injunction including an interlocutory injunction restraining the cross respondents from taking any step calculated to procure the breach of any contract to which Telmak was a party and seeking certain other orders.
Counsel for Telmak also sought an order for security for costs against CBS (UK), CBS Inc and Mindbangles Inc. in accordance with Order 28 rule 3(1)(a) of this Court's Rules. This rule gives the Court a discretion to order that an applicant give such security as the Court thinks fit for the costs of the respondent where in any proceeding it appears to the Court that an applicant is ordinarily resident out of Australia.
Turning to the application, the main issues raised by the applicants in relation to interlocutory relief were:-

(a) that Telmak had engaged in trade or commerce in conduct that was misleading or deceptive or was likely to mislead or deceive within the meaning of s.52 of the Trade Practices Act, 1974;

(b) that Telmak had engaged in passing off; and

(c) that Telmak was acting in breach of copyright.

It will be convenient to deal with each of these three topics separately. Before doing so, some general observations may be useful.
The evidence shows that the record industry is generally described in marketing terms as a fashion industry, one in which a new product must constantly be produced and in which the product must be constantly regenerated in order to appeal to the changing tastes of the record buying public. It is said that fashions and tastes in the record industry are constantly changing and can change very quickly. One of the marketing and research tools used in the industry is the record chart or hit parade. The record chart lists records by title in order according to the sales achieved during an identified period. They are compiled by an organisation generally based on sales from selected record stores. It seems that the most influential and important record chart, certainly the record chart used by CBS Records for its marketing and sales purposes, is known as the Kent Music Report. A copy of this report in evidence shows a number of highlights including the number one single of the week, the number one album of the week and the number one compact disc of the week. By number one the industry understands that reference is being made to the one which has achieved the highest volume of sales with the record retailers surveyed during the week under survey. On the third page of the Kent Music Report in evidence the 100 singles for the week 30th March to 5th April are listed. At the top of that table is a description of the source of the statistics used to compile the table. It includes various types of information including the position for the current week, the previous number of times appearing in the chart in the top 100, the highest position each has ever achieved and so on. Particular emphasis is given by the industry to being included in the top 10 positions in the chart known as the "Top 10". In the Telmak "Chart Sounds 16 Hit Songs /-/-1" three of the tracks, namely "I Knew You Were Waiting For Me", "You Keep Me Hanging On" and "Walk Like an Eygptian", achieved the number one position in the national top 100 singles chart in the Kent Music Report at some stage. A further seven tracks from that album are, or have been, included in the Top 10 in the Kent Music Report.
There is a practice in the industry of issuing compilations of songs by original artists. There is also now a practice of issuing compilations of songs by artists other than the original artists including unknown artists or lesser known artists. These are frequently known as "cover versions". Due to the operation of the compulsory licence provisions with respect to musical works in the Copyright Act, 1968 (Cth) and in the Copyright Acts of other countries which permit recording artists to record previously released songs without the permission of the songwriter, there is a vigorous market for "cover version" compilations. Some cover versions by much less well known artists are bought particularly for the melodies or songs chosen. Other cover versions are so recorded as to sound as alike as possible to the original recordings which have been issued. In order to achieve the "sound alike", a singer with a voice as similar as possible to the original artist is used along with emulators and synthesizers in the studio to alter and govern the nature of the sound produced. The songs listed in the "Chart Sounds 16 Hit Songs /-/-1" are "sound alike" versions. To mention two of the songs which were in evidence, the song "Walk Like An Eygptian" achieves a very close similarity to the original. On the other hand, the song "I Knew You Were Waiting (For Me)" shows a greater range of differences.
It appears from the evidence that the production of "sound alikes" in Australia has been a common feature in the industry for some years and apparently no action has previously been taken by the applicants in relation to "sound alike" versions of original songs belonging to them. There is a suggestion that the applicants have themselves issued "sound alike" records or cassettes and there is in evidence a catalogue which lists "sound alikes" available from them but the evidence does not show that they have ever sold "sound alikes" in Australia.
So far as the compilation "Chart Sounds 16 Hit Songs /-/-1" is concerned, it appears that the master recordings of the sounds embodied in the album were obtained from Countdown Music in Germany and Coombe Music in the United Kingdom. Each of these companies produce master recordings of currently popular songs performed by artists other than the artists who originally recorded the songs. Mr Hampton, a Director of The Direct Music Company Pty Limited, gave evidence that he assisted Telmak to produce the album. He placed orders with Countdown Music or Coombe Music for each of the songs featured on the album. He received from Countdown Music and Coombe Music master recordings of the songs which are featured in the album together with details of the songwriter and publisher of each song which would enable the respondent to fulfil its obligation under the compulsory licence provisions of the Copyright Act, 1968 (Cth). He gave evidence that Countdown Music and Coombe Music are two of many companies throughout the world which produce master recordings of performances of songs by artists other than those who originally recorded the song. These master recordings are sold to record companies throughout the world and are also generally known in the music industry as "sound alikes". These "sound alikes" are then compiled into an album on a number of different bases. One such basis is the compilation of songs first performed by different original artists such as the "Chart Sounds 16 Hit Songs /-/-1".
Mr Hampton further gave evidence that there is a broad level of pricing of records and tapes in the music industry in Australia. Full price records and tapes sell for approximately $13.99. These usually feature new releases by well-known original artists. Mid-price records usually sell in the range from $10 down to about $7. These may involve a re-release of an old album by an original artist; a compilation of songs sung by different original artists; records and tapes specially produced and manufactured for TV marketing which would include recordings such as the album "Chart Sounds 16 Hit Songs /-/-1". Budget line records sell in the range of $3 to $6. These include re-releases of old material and obsolete stock.
Mr Hampton expressed the view that persons who purchased records and tapes from time to time would be aware of the above price structure and would expect to pay considerably more than $10 for an album containing 16 contemporary hit songs performed by the original artists.
Finally, I should mention that a joint marketing agreement existed between CBS Productions, RCA Limited trading as Star Call Records, WEA Records Pty Limited and Polygram Records Pty Limited. By this agreement the parties arranged to produce in Australia and Papua New Guinea a record, a cassette and a compact disc entitled "87 Hits Out". This was a compilation of various songs actually sung by the original artists. This compilation was released for public sale on the 27th March, 1987 and carried a recommended retail price of $14.99. "Chart Sounds 16 Hit Songs /-/-1" carries a recommended retailing price of $9.99. The compilation "87 Hits Out" was in evidence in the form of a cassette. It contained the following songs which are also found in "Chart Sounds 16 Hit Songs /-/-1":

You Keep Me Hanging On

I Knew You Were Waiting (For Me) Something In My House

The Final Countdown

Shake You Down

Word Up.

I turn now to the particular issues which have been argued in these proceedings.
Section 52 Trade Practices Act, 1974
Section 52(1) of the Trade Practices Act, 1974 provides that a corporation shall not in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Whether the particular conduct falls within this description is essentially a matter for the Court. Evidence of actual confusion, or actual deception, in a case under s.52 has often been tendered and will of course be considered by the Court in such cases. Ultimately, however, it is a matter for the Court to determine whether the facts proved bring a case within s.52 (Lego Australia Pty Limited v Pauls (Merchants) Pty Limited (1982) 42 A.L.R. 344 at p.351). The Court in considering this matter will have regard to the relevant section of the public which is concerned in the particular trade or commerce which is in question. In the present case, which deals with records and cassettes of popular music, the majority of purchasers would be in the younger section of the population. The Court will look to the question whether a significant section of that public was or is likely to be misled or deceived. It is not necessary to prove that the particular conduct in question was deliberately misleading or deceptive (See Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 C.L.R. 191).

In the present case it may be said it is likely that some members of the relevant public who have an interest in the purchase of records or cassettes of popular songs may be misled or deceived into purchasing the "Chart Sounds 16 Hit Songs /-/-1" in the mistaken belief that the songs listed, which were well known hits, were being performed by the original artists. The sound of each hit in the compilation is as alike as possible to the relevant recording in each case of the applicants. Furthermore, there is no statement of the artists' names but instead a statement of the composers' names under the title of each song. The word "Sounds" and the picture of Donnie Sutherland on the front of the album would, for some, associate the album with the television programme "Sounds" hosted by Donnie Sutherland on Saturday mornings on Channel 7, although the evidence tendered in support of the argument that confusion may result suggested that some might believe that Donnie Sutherland was the singer. I do not think that this would be a reasonable conclusion notwithstanding the evidence that it is a common practice to place on the front of a record or cassette the names or pictures of the original artist or artists.
In the case of the record, the reverse side of the sleeve contains a facsimile of a letter signed "Donnie". Amongst other assertions, this letter has the words "I have chosen 16 of today's hottest tracks, had them re-recorded in London and they are all on this one album for you for under $10". It was said that this was an incorrect statement because the word "re-recorded" is ordinarily used in the industry to refer to records which have been recorded on a later occasion by the original artist. However, I am not persuaded it would be restricted in its use to that situation by members of the public. In the context in which it appears in the letter, where it is followed by the comment "and they sound just as good as the originals" with the emphasis on the lowness of price, I would not be prepared to hold that people would be misled into thinking that they were being offered or sold a recording of performances by the original artists. Again, at the bottom of the reverse side of the sleeve containing the album appear the words "not recorded by the original artists". It is clear that any purchaser, even if starting out with some confusion of mind, would cease to be misled into believing that they were recorded by the original artists after reading these words. They are not prominent, but neither are they small nor insignificant on the reverse side of the record. If a similar disclaimer appeared on the front of the sleeve containing the record I would consider that no reasonable person among the relevant section of the public would be likely to be misled into thinking they were performed by the original artists.
So far as the cassette is concerned, it may be said that anyone viewing it from the outside would fail to see any disclaimer at all and might conclude that the performances were by the original artists. It is true that if the cassette is opened and the paper containing printed material is taken out from inside it will be seen that it contains two features similar to the back of the sleeve containing the record album. It contains in somewhat small type a facsimile of the letter signed "Donnie" and the disclaimer "not recorded by the original artists".
Also in evidence is a poster used to advertise the record and cassette and this poster carries no disclaimer. It is possible that some section of the relevant public reading this poster might be misled into thinking the recordings were by the original artists.
So far as the television advertisement is concerned, this appeared in the segment on the "Sounds" programme hosted by Donnie Sutherland. At one stage in the programme Donnie Sutherland said "I'm not trying to fool you; they are not the original artists". He also made reference to the low price of the product. It is difficult to assess the effect of this. Certainly it would be an effective disclaimer in the case of those who were attentive at that time and heard it. To others who did not hear this disclaimer the advertisement could be misleading.
It was argued on the basis of some evidence given by Mr Hammer, a Director of Telmak, under cross-examination, that Telmak had a deliberate intention to "sail as close to the wind as possible".

"Why did you put the words "Not original artists" on the cassette insert and the cover of the album? --- It is my belief that it is required to do so.

By whom? --- In order to ensure that we are not fooling the public.

Yes. Is there a concern that if you did not have those notices there the public might be fooled? --- Well, certainly there would be less of an opportunity for us to claim our innocence in the knowledge of it so happening.

Less opportunity to claim your innocence? --- That is right.

But there is the possibility that if they are not there the public would be fooled? --- Some of the public, not necessarily all of the public.

No, not all of them, but some members of the public could be fooled if they did not see those notices? --- That is a possibility, yes."

In my view, Mr Hammer's evidence falls short of indicating an intention to deceive from which an inference should be drawn that Telmak was likely to achieve success in carrying out such an intention. (cf. Cadbury Schweppes Pty Limited v Pub Squash Co.Pty Limited (1980) 2 N.S.W.L.R. 851 at p.861.)
It was strongly argued on behalf of the respondent that there was nowhere any single false statement which could constitute a misrepresentation which would mislead or deceive or be likely to mislead or deceive a member of the public in any of this material which I have discussed. It was stressed that the lowness of the price emphasised in the letter would itself indicate the songs were not recordings by the original artists and the express disclaimer "not recorded by the original artists", both on the sleeve of the record album and on the paper in the cassette, would adequately convey to any purchaser the true position. The oral disclaimer by Donnie Sutherland in the course of the session on Channel 7 entitled "Sounds" was also said to be adequate.
I should mention some evidence of actual confusion which was offered. There was a good deal of affidavit evidence tendered in relation to persons who had been stopped in the street and interviewed in relation to the Telmak record and cassette. Those interviewed for the applicants' case were either played part of two songs - "Walk Like An Egyptian" and "The Final Countdown" - or shown the record or the cassette and asked various questions about them. Of those who listened to the tape, all, or at least all those whose affidavits are in evidence, identified the performers as being the original artists. Of those who were simply shown the record or cassette most also responded that they thought the performers were the original artists. Those interviewed for the respondent's case were also shown the Telmak record or cassette and asked certain questions. Various responses were given. The weight of the responses was against the view that the performers were the original artists.
In view of the circumstances in which these interviews occurred, I have had some difficulty in gaining much assistance from them. They were not conducted in a normal trade situation, the framing of questions by each party was considerably different and it might be significant that in relation to the cassette playing only part of the two songs was played, presumably not the whole.
In the end, having regard to all the evidence before me, I have come to the conclusion that there is a serious question to be tried in relation to s.52 of the Trade Practices Act. It is preferable that I express no detailed conclusions at this interlocutory stage. Indeed at the final hearing the evidence may be in a different state. I will deal later with the question of the balance of convenience and as to whether any orders should be made.
Passing Off
Many of the elements of a claim for passing off are similar to the elements in a claim under s.52 of the Trade Practices Act. However, in the case of an action for passing off the Court is concerned with protecting a proprietary right, that is a right of property in a business or goodwill likely to be injured by the misrepresentation or actions of the defendant (Erven Warnink B.V. v J. Townend & Sons (Hull) Ltd (1980) R.P.C. 31.) In other words, it is necessary to establish the existence of a business or goodwill and the existence of damage or the likelihood of damage to that business or goodwill in the case of an action for passing off even though it may in some circumstances not be shown to demonstration that customers are aware of the corporate name of a particular owner of the goodwill or business (Kerly's Law of Trade Marks and Trade Names 11th ed. para. 16-32).
In the case of two of the applicants, CBS Records and CBS Productions, there is evidence that they are incorporated and carry on business in Australia but the evidence relating to the nature of the business in either case is extremely sketchy. Almost no attempt was made to prove goodwill attaching to either of those applicants. According to the evidence, they are related corporations and are wholly-owned subsidiaries of another company, CBS Australia Pty Limited. This last mentioned company is not a party to the proceedings and the evidence does not show whether it has a business or goodwill in Australia. The evidence is that CBS Australia Pty Limited is a wholly-owned subsidiary of CBS Inc., which, of course, is an applicant. The matter is not clarified by the fact that reference is also made to CBS Records International, a division of CBS Inc., and it is not entirely clear how far the activities of that division extend. No evidence has been given that the relevant members of the public would associate any of the hits on the "Chart Sounds 16 Hit Songs /-/-1" with either CBS Records or CBS Productions.
Reference has previously been made to a compilation entitled "87 Hits Out" of various songs sung by the original artists. Of these, several songs, as stated, are also to be found in the compilation "Chart Sounds 16 Hit Songs /-/-1". Even in respect of these songs appearing in the compilation "87 Hits Out" it is not apparent that any member of the public would associate them with any of the applicants. In evidence is the joint marketing agreement which provided for the making of "87 Hits Out" to which reference has already been made. It was the production of a joint venture by various companies. Furthermore, evidence has not been given particularising damage to any goodwill or business of CBS Records or CBS Productions in Australia. No copy of the record "87 Hits Out" was in evidence so I am not aware what may have appeared on the sleeve containing the record. A cassette of "87 Hits Out" is in evidence. The actual cassette features the words STARCALL CASSETTE. The paper insert in the cassette container on the outside spine bears the words STARCALL. If one removes the paper from inside the container in very small type one may read "THIS COMPILATION (P) 1987 RCA/ARIOLA INTERNATIONAL A RCA/ARIOLA/CBS/WEA/POLY- GRAM PROJECT."
Three of the applicants, namely, CBS (UK), CBS Inc. and Mindbangles Inc. are overseas corporations. In the case of CBS (UK) and Mindbangles Inc. there was no evidence of any business or goodwill of theirs in Australia. Reference will be made to the evidence in relation to CBS Inc. in the following paragraph.
The applicants tendered some "single" records each of which featured the original artist. Some of these were records of songs which were included in "Chart Sounds 16 Hit Songs /-/-1" in the form of "sound alikes". Of these "single" records five did contain references to CBS Records and CBS Inc.. Eleven contained the names of other companies or concerns but did not refer to the applicants. Two of the eleven, "Walk Like An Egyptian" and "Walking Down Your Street" by the Bangles, contained no reference to the fifth applicant Mindbangles Inc. but featured the name "Liberation Records".
So far as I am aware no evidence was given covering the sale of any of these single records, or the manner of sale or the impression created in the minds of purchasers, such as may have led to a conclusion that relevant persons might associate any of the songs on "Chart Sounds 16 Hit Songs /-/-1" with any of the applicants. The evidence as presented to me at this interlocutory stage was entirely inadequate to establish goodwill in any of the applicants.
In the result, I have formed the view on the evidence before me that no case has been made out by the applicants that there is a serious question to be tried in relation to passing off.
Copyright
So far as copyright is concerned, this case relates to sound recordings. A "sound recording" is defined in s.10(1) of the Copyright Act, 1968 to mean "the aggregate of the sounds embodied in a record". "Record" is defined in the same section to mean "a disc, tape, paper or other device in which sounds are embodied". Section 85 of that Act provides that copyright in relation to a sound recording is "the exclusive right to do all or any of the following acts: (a) make a copy of the sound recording ...". By s.13(1) of the Act a reference in the Act to "an act comprised in the copyright in a work or other subject-matter shall be read as a reference to any act that, under this Act, the owner of the copyright has the exclusive right to do". By s.14(1)(a) in the Act a reference to the doing of an act in relation to a work or other subject-matter shall be read as including a reference to the "doing of that act in relation to a substantial part of the work or other subject-matter". By s.101(1) it is provided that a copyright subsisting by virtue of Part IV is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright. By s.103(1) a copyright subsisting by virtue of Part IV is infringed by a person who in Australia and without the licence of the owner of the copyright "(a) sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article ... where, to his knowledge, the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright". Reference to knowledge that the making of an article constitutes an infringement refers to knowledge of the necessary facts being present which would suggest breach of copyright rather than knowledge of the law (Apple Computer Inc. v Computer Edge Pty Limited 53 A.L.R. 225 at p.238). By s.10(3)(c) a reference to "a copy of a sound recording" shall be read as a reference to "a record embodying a sound recording or a substantial part of a sound recording being a record derived directly or indirectly from a record produced upon the making of a sound recording".
By the Copyright (International Protection) Regulations it is provided that the provisions of the Copyright Act in relation to, inter alia, sound recordings made or first published, in a country that constitutes, or forms part of, the territory of a Country specified in Part I or Part II of Schedule I in like manner as those provisions apply in relation to, inter alia, sound recordings made or first published in Australia (reg. 4). It will be noted that the United Kingdom appears as one of the countries referred to in Part I of Schedule I and that the United States of America appears as one of the countries mentioned in Part II of Schedule I. It was not a matter in contest between the parties that the Copyright Act in relation to sound recordings applied in respect of the sound recordings in evidence in these proceedings.
The real issue between the parties was whether a "sound alike" was within the description of a copy of a sound recording, as referred to in s.10(3)(c) of the Copyright Act, or whether to be within that phrase the sound recording had to be found to embody the whole or a substantial part of the sound recording in which the copyright actually existed. In other words, it was submitted by the respondent that a mimicking, as distinct from reproducing the whole or a part of the sounds embodied in the sound recording constituted no breach of copyright. Reference was made to Lahore's Intellectual Property in Australia page 190 para. (1013) where it is stated:

"The reproduction right A "record" refers to the disc, tape, paper or other device in which the sounds are embodied, and the term "sound recording" refers to the aggregate of the sounds embodied in a record: s.10. The reproduction right in sound recordings is therefore limited to the actual copying or dubbing of a recording by making another device such as a tape embodying the sounds recorded on that recording. The act may be done by directly or indirectly making use of a record embodying the recording: s.101(3)."

I am not aware of any case where this question has arisen in relation to sound recordings. Counsel were aware of none. However, Counsel did refer me to three cases where a similar question had arisen in relation to films, which are governed by broadly similar provisions. The first of these was Zeccola v Universal City Studios Inc. (1982) 67 F.L.R. 225. That case concerned a film entitled "Great White" dealing with a killer shark terrorising human beings. Proceedings were brought upon the basis that it infringed copyright in the novel, the screen play and the film of "Jaws". It was held by the Court that copyright in the novel and the screen play was infringed. Lockhart and Fitzgerald JJ. left open the question whether there was an infringement in respect of the film "Jaws", stating there was no need to decide this question (see at p.229). The third member of the Court, Jenkinson J., at p.232 was inclined to accept that counsel for the appellant was correct in submitting that the film "Great White" was not a copy of the film "Jaws" in the relevant sense.
The second case was Telmak Teleproducts Australia Pty Limited v Bond International Pty Ltd (1985) 5 I.P.R. 203. One of the questions Wilcox J. had to deal with in that case was whether one film was a copy of another in breach of copyright. He stated at p.208 -

"I think that it is clear that this question must be answered in the negative. The respondent's film, the subject of this application, was shot and sound recorded by its own agents. Whatever the script of the film may have owed to the films of the applicants, the respondent did not make a "copy" of either of the applicants' films. The noun "copy" is defined in s.10 of the Act, in relation to a film, as meaning "any article or thing in which the visual images or sounds comprising the film are embodied". The respondent did not reproduce the particular visual images and sounds which together make up the cinematograph films to which the applicants hold the copyright."

The third case to which I was referred was Telmak Teleproducts Australia Pty Limited v Bond International Ltd (1986) 6 I.P.R. 97 which again related to a claim for breach of copyright in respect of a film. Wilcox J. heard this matter also. He took the view that whatever might be the position in relation to a comparison between the respondents' film and any script which was used as a basis for the applicant's film, as he stated at p.99 -

"there could not be an infringement of copyright in the film itself unless there was an actual reproduction of the sounds and visual images contained in the applicant's film."

In the present case it is not asserted that "Chart Sounds 16 Hit Songs /-/-1" includes material which is a reproduction of the whole or any part of the actual sounds embodied in the original sound recordings of the various songs in question. What is asserted, and proved by the evidence, is that they are "sound alikes", that is they are made independently by different artists and different persons using different equipment, with the intention of making them as alike as possible. This is brought out in the evidence of Mr D.L. Bruner who is Marketing and Promotions Manager of Powderworks Records which is a record company in Sydney. He was called by the respondent. Part of his evidence under cross-examination was as follows:

"Could you leave aside cover versions for the moment and stick to sound alikes. Part of the object of a sound alike, I am right, are not I,(sic) is to sound as close to the original as possible? --- Yes.

And how is that achieved in making the recording? --- Well, with modern day technology that is achieved by the use of synthesizers; synthesizers such as emulators which can actually sample a sound and reproduce a sound through a keyboard. But, as is often the case, those are exactly the same techniques as are used in the original recordings.

So, is what is done is this, in part, that you take the original sounds from the original recording? --- No.

Well, could you explain perhaps a little more how the emulator works? --- Well, a sound can be from any source. It can be the sound of a barking dog which is then sampled with an emulator and then played back through many octaves in keyboard fashion but to the best of my knowledge sound alikes do not actually sample a sound from an original recording, although they may have access to the same sound as the original artist used. For example, the sound of a hand clap.

And do you use the emulator to adjust the sound to sound as close to the original as you can? --- Yes.

So, if on the original recording somebody claps a hand or hits a drum, you then use the emulator; you hit a drum in your own studio and use the emulator to modulate it to get as close to the original as you can? --- Yes.

And is that done also with singing? --- No. Perhaps in backing vocals where they may be a choir used, say, in the original recording, say, if John Farnham knew the voice (sic). If there was an original, originally a choir, a sound alike version may use a Fairlight computer instrument or emulator or many other keyboard instruments to emulate the sound of a real choir."

In my opinion, the position in regard to sound recordings is similar to that which has been said to be the case with films. There is no copy in the sense used in s.10(3)(c) of the Copyright Act unless the alleged copy actually embodies a sound recording or a substantial part of a sound recording being a record derived directly or indirectly from the original record produced upon the making of the sound recording. I may add that ss.110A and 110B inserted in the Copyright Act by the Copyright (Amendment) Act 1986 appear to be drawn in a manner which is consistent with that view.
The cases which raise an issue whether there is a serious question to be tried fall into three classes. The first class involves a question of fact, the second a question of mixed fact and law, and, the third a question of law. In the third class of case it may sometimes be appropriate for the Court hearing the application for interlocutory relief to decide the question of law there and then. In other cases it may be inappropriate to decide the question of law on an interlocutory application because it is novel or difficult or the urgency of the interlocutory application is such that it is impracticable to give proper consideration to the question (Cohen v Peko-Wallsend Limited 68 A.L.R. 394 at p.397; and see Kolback Securities Limited v Epoch Mining N.L. 1 April 1987 unreported McLelland J.).
The question here involved is novel and important. Although my provisional view is that the "sound alikes" here in question do not breach copyright, I believe I should not express a concluded opinion on that question at this stage. It is a question which can be dealt with more fully and adequately at the hearing of this matter. In the meantime the position of the applicants will be adequately protected by my ordering the respondent to keep an account of profits.
Balance of Convenience
I turn now to the question of the balance of convenience. On the one hand it is said that to grant an injunction restraining Telmak from proceeding with the advertising and sale of "Chart Sounds 16 Hits /-/-1" would, in its effect, be almost equivalent to the grant of a final injunction. This, it is said, is because of the nature of the industry. It is, as previously stated, a fashion industry with charts listing hits from week to week. An injunction imposed over the fairly substantial period of time which must now elapse before the Court would be in a position to give a final hearing might render the final hearing virtually irrelevant. Provided an account of profits is kept, the applicants if finally successful can be adequately compensated for any wrong they may ultimately be proved to have suffered.
On the other hand, it is said that if an injunction is not granted, the applicants will be subjected to competition which will result in loss of sales of records, cassettes and the compilation "87 Hits Out" and will suffer damage which will be difficult to quantify, if they are successful at the final hearing.
I may say that the evidence certainly established that the products would be dealt with in a competitive market. However, it was not established that this was a finite market, in the sense that the sale of one "Chart Sounds 16 Hits /-/-1" record or cassette would mean the loss of, for example, a sale of an equivalent "87 Hits Out". The evidence as to the effect of competing sales was extremely sketchy. However, for present purposes I am prepared to assume that competition would lead to some reduction of sales both ways.
It remains to consider the interests of the public which s.52 is designed to protect. If no injunction is granted and upon the final hearing it is held that the respondent's conduct was misleading or deceptive, then some members of the public will in the meantime have suffered prejudice.
There remain one or two other matters to be considered but weighing the factors affecting the balance of convenience I am of opinion I should make orders restraining the respondent until further order from advertising or selling the record or cassette without clearly indicating that the sixteen hit songs thereon are not by the original artists. I would regard a notice on the front of the sleeve of the record "Not recorded by the original artists" and a similarly worded notice on the paper contained in the cassette cover, so placed as to be clearly visible from the outside, as sufficient compliance with the first-mentioned order. I would also make an order restraining the respondent until further order from using the advertising poster "Chart Sounds 16 Hits /-/-1" without clearly indicating upon it that the songs were not by the original artists. I would also be disposed to restrain the use of the television advertisement, a video tape of which is in evidence, without a more satisfactory form of disclaimer.
Delay, Laches and Unclean Hands
Counsel for the respondent submitted that the interlocutory relief sought by the applicants should be refused upon the ground that Mr Robert, Director of Marketing and Sales for CBS Records and CBS Productions had known for years that there was a sound alike market. He further submitted that the Managing Director, Mr Hanlon, was also aware of it although he had not been called to give any evidence. He submitted that the applicants had been sitting back with full knowledge for a considerable period and should be denied relief on this ground. It did not appear, however, that any damage or prejudice had been suffered by Telmak arising directly from any delay attributed to the applicant beyond the fact that Telmak might have been lulled into imagining that they would not be proceeded against in putting forward a "sound alike" compilation.
Counsel for the respondent also submitted that the applicants themselves dealt in "sound alikes" and, therefore came to the Court with unclean hands. As I have mentioned, although in evidence was a catalogue in which "sound alikes" were listed for sale by one of the applicants there was no evidence that any applicant had sold or dealt in "sound alikes" in Australia.
In my view, interlocutory relief should not be refused on any of these grounds advanced by counsel for the respondent.
Security for Costs
Counsel for the respondent also asked for an order for security for costs to be made against CBS (UK), CBS Inc. and Mindbangles Inc. in accordance with Order 28 rule 3(1)(a). This rule certainly gives a discretion to the Court to make an order for security. However, it appears to me that it is a discretion to be exercised upon rational grounds and any party applying for security carries the onus of establishing a case showing that security should be granted. The fact that an applicant is ordinarily resident outside Australia is a pre-condition to an application under that part of the rule but is not sufficient in itself, in my view, to induce the Court to exercise its discretion to make an order, particularly in circumstances such as the present. No evidence was given to assist the Court in relation to the amount which might be required for security.
I am not persuaded that I should exercise the discretion conferred by Order 28 rule 3(1)(a) to make an order for security for costs as asked by the respondent.
Cross Claim
Telmak, by its cross claim, sought an injunction restraining the applicants from making threats in relation to the television programme on "Sounds" conducted by Donnie Sutherland. The dates on which the television programme was to be broadcast have now expired and there is no current suggestion that further threats will be made, particularly in light of judgment being given in these interlocutory proceedings. Furthermore, it would appear that damages would be an adequate remedy for any wrong which Telmak may prove it has suffered in this particular manner. I refuse to grant interlocutory relief as asked for in the cross claim.

[1987] FCA 213

08 MAY 1987