Computermate Products (Aust) Pty Limited v Ozi-Soft Pty Limited

[1989] HCATrans 107

~

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl55 of 1988

B e t w e e n -

COMPUTERMA.TE PRODUCTS (AUST) PTY LIMITED

Applicant

and

OZI-SOFT PTY LIMITED

ACCOLADE INC

COSMI INC

C.R.L. GROUP PLC

VIRGIN GAMES LIMITED

MICROPROSE SOFTWARE INC

H.P. SOFTWARE INC

ARTWORK INC

FIRST STAR SOFTWARE INC

BOUNTY BOB ENTERPRISE INC

CDS SOFTWARE LTD

ALLIGATA SOFTWARE LTD

P.S.S. SOFTWARE LTD

LEVEL 9 SOFTWARE LTD

ARGUS PRESS PLC

Respondents

Application for special leave

Computermate

to appeal

MASON CJ DAWSON J GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 MAY 1989, AT 11.51 AM

Copyright in the High Court of Australia

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MR J.M. IRELAND:  If the Court pleases, in that matter I

appear with Mr J.V. NICHOLAS, on behalf of the

applicant. (instructed by Marcus B. Karpin and

Co).

MR D.K. CATTERNS:  May it please the Court, I appear with my

learned friend, MS A.H. BOWNE, for the respondent.

(instructed by Colin J. Cohen and Partners)

MR IRELAND: 

If Your Honour pleases, may I hand up copies of the two materials to which reference will be made; one is the relevant section in the printed version of the COPYRIGHT ACT and the other is this Court's decision in IPEC V TIME-LIFE.

MASON CJ: 

Yes.

MR IRELAND: 

Your Honours, this is an application for special

leave to appeal from a decision of the Full Court of
the Federal Court, given on 3 November last year,
the joint judgment of that court, appearing at page 25

and following in the application book.

Your Honours, the case concerns the operation and

effect of section 37 of the COPYRIGHT ACT. That is a

section which prevents the connnercial importation into

Australia of a foreign-made article which embodies a

copyright work where the importation takes place
without the licence of the copyright owner and it is
the meaning, in effect, of those words "without the
licence of the copyright owner" which was at issue

before the Federal Court.

Here, the goods in question were computer games.

They embodied copies of certain literary works which were, in effect, computer programmes and it was admitted

that · Australian copyright protection extended to

those works. The goods were made in various countries:

England, United States and Canada. They were genuine

goods placed on the market abroad with the authority of

the copyright owner.	They were exported from America
and Canada into the United Kingdom for sale there.

They were sold in the United Kingdom with the authority of the copyright owner without any restriction being placed upon resale or upon any trade destination.

The case was :determined at first instance and upon appeal on agreed facts and the agreed facts are

set out at page 25 to 27 of the application book.

Your Honours, we would say that the facts in this

case are highly typical of circumstances where an Australian trader acquires supplies of goods from overseas sources through genuine, orthodox trade

channels. This is not a piracy case. It is what the

connnentators call "a parallel import" case.

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The crucial dispute between the parties

was isolated to a single issue separately determined

by the trial judge and reviewed by the Full Court in

the appeal. The resolution of that single issue

predicated the result in the whole proceedings and
the single issue was whether the agreed circumstances

of acquisition by the appellant of these goods in the

United Kingdom showed the existence of a licence by

the copyright owner to import and sell the computer

progrannnes which were embodied in the games.

It was consequent upon the resolution of that

issue that the final proceedings were determined and

the respondents obtained final injunctive relief against

further importation. The case was decided against the

applicant at first instance and in the Full Court by

application of the decision of this Court handed down
in 1977 in IPEC V TIME-LIFE. This application for
special leave invites the High Court to re-examine

that decision and, in particular, to reconsider

whether the construction placed upon section 37 of
the COPYRIGHT ACT was correct.

In TIME-LIFE, the members of this Court were concerned with a claim for infringement of copyright

in cookery books printed in the United States. As

in this case, the cookery books were genuine products

projected into trade in the market abroad and acquired

by the Australian importer from an American wholesaler

for resale. Here, the acquisition was in the United

Kingdom,.1.

Unlike this case, the copyright owner had granted

an exclusive licence which was placed in evidence in

respect of Australian dealings. In the present case,

there were non-exclusive dealings between the

respondents which were conceded not to constitute an

exclusive licence of Australian copyright.

The members of this Court in TIME-LIFE approached

the issue of licence for the purpose of section 37 in

different ways. Mr Justice Stephen with whom the

Chief Justice agreed and Mr Justice Gibbs, as he then

was, concentrated upon a submission that the contract

between the American wholesaler and the Australian

importer should be treated as containing an implied

term which licensed importation into Australia. In

propounding that submission, the appellant in TIME-LIFE

had to demonstrate that the contract lacked business

efficacy in the absence of such a term.

Mr Justice Murphy focused on the impact of the trade practices legislation and it was the judgment of

Mr Justice Jacobs that was fundamental to the result

in the present case in its application by the Full Court

which recognized that the licence contemplated by

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section 37 can be and often will be something

less than a contractual term and may be treated

as equivalent to a consent or permission.

Mr Justice Jacobs, at page 556 and following,

held that section 37 of the COPYRIGHT ACT required

what His Honour called a positive licence and that

absence of restriction placed upon the copyright

owner upon dealings with the goods could not

constitute a positive licence in the necessary

sense. This approach was followed by the Full Court

in the present case.

DAWSON J:  Does "positive" mean anything more than "express"

there?

MR IRELAND:  Your Honour, it is always said that His Honour was

dealing with implied licences as well as express

licences when that phrase was used. His Honour goes

on, at 557 at ab0ut point 2, to give an example:

A positive licence to import -

DAWSON J: Yes, I see. It is not necessarily an express

licence.

MR IRELAND: That is so.

DAWSON J:  You can have a positive implied licence.

MR IRELAND:  That seems to be the notion, Your Honour. It is

that notion that is at the centre of this application

and, if special leave be granted, Your Honour, we would

seek to reagitate that approach. There will be many

cases of this type. It should be recognized that, of
course, the imposition by the copyright owner abroad

of a restriction governing the destination of goods

will very often be an infringement of the municipal

law.

In the United States this results from the

application of the Sherman Act which was mentioned

in TIME-LIFE. In Europe, it results from the operation

of the Treaty of Rome. The paradox which is thrown up

by the decision in TIME-LIFE, in our respectful

submission, is that in many cases such as the present,

whilst it would be unlawful and, indeed, criminal for

the copyright owner to impose a restriction preventing

the freedom of movement of goods, say within the

European economic community, yet as a result of the

application of section 37 following the approach of

this Court in TIME-LIFE, by saying nothing about the

destination of the goods and enforcing its copyright,

a restriction on the destination of the goods is

effectively accomplished.

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This ability to carve up the world

territorially has been thrown away in the law

of trademarks and the later cases conclude that

by casting the goods on the sea of commerce they may wash up on any foreign beach. We say that a

revisitation of an approach to section 37 is, in

modern conditions, permissible and legitimate and

we respectfully ask the Court to afford us that

opportunity.

MASON CJ: Has this question been considered elsewhere?

MR IRELAND:	No, Your Honour.
MASON CJ:	It must be a question that arises outside Australia

or have significance outside Australia.

MR IRELAND: Well, it has been considered in England, for

example, in CBS and POLYDOR but the result there

is dictated typically by the European community

legislation and it is the result of freedom of

movement of the goods.

MASON CJ:	Yes.
MR IRELAND:	In America it never arises because the Sherman Act prevents the imposition of the necessary
restriction.  We cited POLYDOR V HARLEQUIN, it is,
to the trial judge. It is not mentioned in the Full Court.

MASON CJ: Yes.

MR IRELAND:  We acknowledge that the whole of the circumstances of the sale must be examined in each case. The problem

in this case - this case is determined on agreed facts and that attracts attention below but the significance of that approach is this: whilst it may be said in

many cases that the special facts would yield the

result, in this case, the Full Court has, as it were,

recognized that it is bound to apply the TIME-LIFE

approach. Unless we can bring forward a case of this

type where the facts are general, then special leave

is unlikely to be afforded.

In other words, if this was a case where the

particular circumstances of the sale yielded the

conclusion, then the case would probably stop in the

Full Court which would likely be bound in the way that

it indicates in this case it has been bound. So, the

only manner in which the applicant can get this question

open for re-agitation - we acknowledged below that it was not open, apart from distinguishing TIME-LIFE and the exclusive licence was the difference - is by this

application for special leave which we seek.

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MASON CJ: Well, if you put TIME-LIFE to one side, you

would not have a sufficient foundation for special

leave, would you, because then you would be seeking

to imply a licence or permission from the particular

circumstances of the case - - -

MR IRELAND:	That is so.
MASON CJ:	- - - and then you would have very considerable

difficulty because there is such a meagre statement

of the relevant facts in this case.

MR IRELAND:  Yes, Your Honour. Well, we do not blush at the

meagreness of that statement because it is the typical

case.

MASON CJ: Well, you may not but there is a very great difficulty

in any court implying a licence, permission or an

authority from meagre facts such as those stated here.

MR IRELAND:  Yes, Your Honour, we recognize that but the

Full Court has faced up to that difficulty and approached it by application of this notion of positive licence.

That is the phrase Mr Justice Jacobs adopted. We,

with respect, challenge the gloss which exists there.

"Licence" mearu1 permission. Permission is negative,

if anything, in its nature, not positive. The

applicant, the copyright owner,has to negate the

permission, that is the onus which falls under

section 37, and the introduction of this gloss, we

respectfully suggest is wrong.

MASON CJ:  Now, just to come back to your challenge to TIME-LIFE

for a moment, assume that the Court was minded to

reconsider TIME-LIFE and.to hold that TIME-LIFE was

wrong, what is the proposition that you would contend

for, to replace TIME-LIFE?

MR IRELAND: That tllicence" in section 37 is equivalent to

permission and that the launching of goods into a foreign market abroad, in a commercial setting, without	any restriction at all which is the conceded fact here,
amounts to that permission and, hence, that licence.
That will be our submission, if we - - -

MASON CJ: In any circumstances at all?

MR IRELAND:  Yes, Your Honour, and particularly in a forum

where illegality exists in the imposing of a restriction.

MASON CJ:	Yes.
MR IRELAND:	Those are our respectful submissions.

MASON CJ: Yes, Mr Catterns.

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MR CATTERNS:  May it _please the Court, in our submission,

the ratio of the TIME-LIFE case was whether the
appellant could rely on a licence from one of two

sources; the first was a licence implied by law

in the nature of the contract and, as the Court

remembers, that reliance was placed on the patent

cases and the judgments of the High Court all hold

that that is not a proper source for the licence.

The other basis dealt with and rejected by the

High Court in TIME-LIFE was the notion of an implied

warranty of acquired possession thereby giving somebody

the right to import into Australia. In our submission,

the reliance by the Full Court in this case on TIME-LIFE

is rather limited. It relied on TIME-LIFE as authority

for a number of propositions which we did not dispute;

namely, in obiter remarks, that a positive licence can

be implied. There was no dispute in this case that a

licence can arise from something other than contract.

What the case, really, boils down to, both in the

Full Court and if it were on an appeal before

Your Honours, is whether these very narrow facts give

rise to a bare licence as the Full Court said.

The question of law in the TIME-LIFE case just

does not arise in that analysis. It is just a simple

question whether those facts that are set out at

application boo~ 25 and 26 add up to a licence if

-the absence of restriction is sufficient and the casting in

the sea of trade, as my learned friend puts it, is

sufficient to add up to a bare licence. So, in our

submission, nothing turns on, effectively, the correctness

or otherwise of the TIME-LIFE case.

MASON CJ:  But that is not quite correct, is it, if you look at

it from the perspective of the argument presented by

Mr Ireland? Mr Ireland is saying TIME-LIFE is wrongly

decided and, if TIME-LIFE is wrongly decided, the Court

ought to embrace a proposition that merely launching

the goods into connnerce in circumstances where they

will find their way into the foreign market, in any

circumstances, constitutes an authority impled by

law.

MR CATTERNS:  Yes, Your Honour, and, in our submission, that

was not the central aspect of the dispute in the

TIME-LIFE case, although a number of the Justices

deal with it, as it were, in passing. The focus of

tliat.case was on the two matters I have already raised.

Their Honours are rather dismissive. It does not seem,

in a sense, to have been argued there or debated there,

whether the bare sale absent restriction constituted

a licence. The focus there was all on the patent cases.

For example, if Your Honours please, at page 557, in

the judgment of Justice Jacobs, the second full

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paragraph beginning "The only evidence" and, perhaps,

if the Court would also go to the judgment of

His Honour Justice Stephen at the top of page 548,

the full paragraph beginning "This implied licence".

MASON CJ: Yes, I follow that but, as I understand Mr Ireland, he is challenging that approach to the matter and he

is saying the Court should reconsider it.

MR CATTERNS: Well, Your Honours, to the extent that the

High Court in TIME-LIFE, as it were, proceeded on

the basis without much consideration of it, with

respect is right. It is inherent in the TIME-LIFE

that bare sale without restriction does not add

up to a licence, therefore, the more complex questions

of the patent cases arose.

MASON CJ: Yes.

MR CATTERNS: Well, I cannot disagree with that, with respect,

but, in our submission, first, that question is not attended by any or sufficient doubt as expressed by the Full Court at pages 37 and 38. The question of

whether those bare facts a mere sale, .. can equal a

positive licence just is not attended by sufficient
doubt, in our submission. It cannot. There has to

be something more than that.

For example, His Honour-Justice_Jacobs

gave examples of sale to a person in Australia knowing

that they were going to import it into Australia; they
are the sort of factual circumstances which could arise

to such a bare licence but the very confined facts in

this case, in our submission, just cannot add up to

that.

GAUDRON J:  The facts here do not suggest that the copyright

owner was the vendor either, do they?

MR CATTERNS:  No, they are neutral as to that, Your Honour.

DAWSON J:  The facts do throw up the question which Mr Ireland

wants to agitate, do they not?

MR CATTERNS: That a bare sale without restriction gives rise

to a licence, yes, Your Honour, they do.

DAWSON J: Yes.

GAUDRON J:  But it is by a middle person or it may be by a middle

person. We do not know who the vendor is, do we?

MR CATTERNS: That is right, Your Honour. In TIME-LIFE, they

were bought from somebody down the line from the

copyright owner and the facts are - - -

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MASON CJ: Well, is that right? Mr Ireland did state at the

outset of presenting the application that the

question was whether a sale by the copyright owner?

MR CATTERNS:  Yes, Your Honour, but the fact is,at pages 25,

26 and 27 t it is uncertain from that whether the

sale was direct from the copyright owner to the

purchaser or through a wholesaler. At least, in

some cases there was a wholesaler because they were

sold in Canada or the US, thence to England and thence

by somebody who was not a copyright owner to the

respondents below.	As my learned friend says, each
of those sales was authorized.	Unless I can assist

Your Honours further, they are our respectful submissions.

MASON CJ: Yes, thank you, Mr Catterns. Yes, Mr Ireland?

MR IRELAND: Just to clarify that last matter, Your Honour, at

page 26 there is an intermediate wholesaler - that is

not proved - but there is and it is not disclosed - I am sorry, it is not disclosed from whom we bought the

goods. What is disclosed and agreed is that every sale,

the sale to us, takes place - that is, in the United

Kingdom, having been manufactured outside the United

Kingdom - with the authority and consent of the relative copyright owner. So, there is no problem about that.

MASON CJ:  ~· do not know that there is no problem about it.

One may well need to know the circumstances in which

the copyright owner is said to have authorized or

consented to the sale before one could imply in any

circumstances a licence.

MR IRELAND: Well, Your Honour, the relevant circumstance, which

is the difference of fundamental fact from TI:ME-LIFE,
is that that sale - that the sale and distribution

of the products abroad takes place with the authority of the respective copyright owner without restriction

accompanying fact which attended the distribution was

and in circumstances where no exclusive licence exists.

the existence of an exclusive licence. That is the

only differnce.

MASON CJ: Yes, well, TI:ME-LIFE may be different but, at the

same time, there is a real question as to whether we

should grant special leave in circumstances of this

kind when it is not a sale by the copyright owner.

MR IRELAND: Well, Your Honour, in my respectful submission,

the result cannot be different because the usual case

will be that the copyright owner who owns some work

will have had goods made and those will have gone into

a wholesale chain and the connnercial purchaser overseas,

as in this case, as in TI:ME-LIFE, buys from an

intermediary but with the consent to that transaction

in an unrestricted form.

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GAUDRON J: Well, a consent - well, I do not know that we

can read that.. Perhaps, I should tell you my little

fears - I do not know that you can read that into

paragraph 6 of the agreed statement of facts but

I would assume, just reading that, that there was

an agreement to sales being made without restriction.

MR IRELAND: That is right.

GAUDRON J:	If you were to read paragraph 6 further, then I would have some great difficulty in so
doing without facts.
MR IRELAND:	We concentrate upon the sale in the United

Kingdom, after importation into that country, both

the importation there and the sale being with consent of the copyright owner and without restriction. That

is what it adds up to.

GAUDRON J; Well, the consent was to sale without restriction

in that country.

MR IRELAND:  Yes.

GAUDRON J: Yes.

MR IRELAND:  As it had to be. Those are our respectful submissions.

MASON CJ:  Thank you, Mr Ireland. The Court will announce its

decision in this matter at 2.15pm.

AT 12.15 PM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

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UPON RESUMING AT 2.16 PM

MASON CJ:	The issue here is whether there was to be implied
from the sale of diskettes in the United Kingdom with the authority and consent of the copyright
owners, a licence to import into and sell in
Australia the computer prograrrnnes incorporated in the diskettes - those prograrrnnes being the
subject of copyright.  The Full Court of the
Federal Court held that the meagre facts recited
in the statement of agreed facts were insufficient
to sustain an inference that the copyright
owners had given their consent or permission to
importation into, or sale of the prograrrnne& in,
Australia.

In reaching this conclusion the Full Court

accepted, in accordance with the authority of

this Court's decision in the TIME-LIFE case, (1977)

138 CLR 554, that there is not to be implied a

general licence to sell a literary work anywhere

in the world from the sale of that work in a

particular country. The applicant seeks to

challenge the correctness of the TIME-LIFE case,

notwithstanding that it was an unanimous decision.

Needless to say, we would be extremely reluctant

to grant special leave to appeal to enable a
challenge to be mounted to an unanimous decision
of the Court when the applicant is unable to

point to any subsequent decision or development

that has undermined the authority of the decision,

or the reasoning on which it was based.

But, in any event, we do not consider that

the meagre facts of the present case make it a

suitable vehicle for the determination of the

questions sought to be raised. Without more detailed

material, throwing light on the circumstances in

which the copyright owners gave their consent or

authority to the sale, it would not be possible to

determine whether a general licence was given

by those owners, even if the TIME-LIFE case was

wrongly decided.

And if we accept the authority of that case

then the meagre facts of the present case deprive a decision on those facts of any general utility.

The decision, whether upholding or denying a

particular licence, would have no application

beyond its own facts. Accordingly, we would

refuse the application.

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MR CATTERNS:  Would the Court make an order for costs?

MASON CJ: And you cannot resist that, can you,Mr Ireland?

MR IRELAND:	I would say not.
MASON CJ:	The application is refused with costs.

AT 2.19 PM THE MATTER WAS ADJOURNED SINE DIE

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