Copyright Agency Ltd v Victoria University of Technology

[1995] FCA 75

CATCHWORDS

Copyright - multiple copying of works by educational institutions - whether unauthorised sale or use of copies so made - operation of licensing scheme comprised in Part VB of Copyright Act 1968 - for a financial profit - for educational purposes.

Copyright Act 1968
Copyright Amendment Act 1980
Copyright Amendment Act 1989
Copyright Amendment (Re-enactment) Act 1993
- s 135ZL;  s 135ZZH

Commissioner of Taxation v Brambles Holdings Ltd (1991) 28 FCR 451 - cons.
Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101 - cons.
Brandt v W.G. Tatham Pty Ltd [1965] NSWR 126 - cons.

COPYRIGHT AGENCY LIMITED & OTHERS v VICTORIA UNIVERSITY OF TECHNOLOGY

No. G713 of 1994

Beaumont, Burchett and Hill JJ.

Sydney

28 February 1995

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )      No.G713 of 1994
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
  OF AUSTRALIA

BETWEEN:COPYRIGHT AGENCY LIMITED AND OTHERS

Appellants

AND:VICTORIA UNIVERSITY OF TECHNOLOGY

Respondent

CORAM:    BEAUMONT, BURCHETT AND HILL JJ.

DATE:     28 FEBRUARY 1995  

MINUTES OF ORDER

THE COURT ORDERS:

Appeal dismissed, with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )      No.G713 of 1994
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
  OF AUSTRALIA

BETWEEN:COPYRIGHT AGENCY LIMITED AND OTHERS

Appellants

AND:VICTORIA UNIVERSITY OF TECHNOLOGY

Respondent

CORAM:    BEAUMONT, BURCHETT AND HILL JJ.

DATE:     28 FEBRUARY 1995

REASONS FOR JUDGMENT

THE COURT
INTRODUCTION
         This appeal is concerned with the proper construction of certain provisions of Part VB of the Copyright Act 1968 ("the Act"), which deals with the copying of works by educational and other institutions.

The appellants, other than the first appellant, are between them the owners or exclusive licensees of certain literary works in which copyright subsists pursuant to the Act. Those appellants are, amongst others, members of the first appellant. The respondent is an "educational institution" within the meaning of that term as defined by s.10(1) of the Act.

In 1989, and subsequently, acting on behalf of
parties including the other appellants, the first appellant entered into an agreement with a predecessor in title of the respondent relating to the photocopying of literary works ("the licence agreement").   The provisions of Part VB impact upon the operation of this contract:  shortly stated, acts which, in effect, are "licensed" or permitted under Part VB, will also be treated as if licensed under the licence agreement.

The appellants commenced proceedings in this Court seeking, inter alia, declaratory relief that the respondent had infringed the copyright in the works by reproducing them, or authorising their reproduction.  For its part, the respondent cross-claimed against the first appellant for declaratory relief, inter alia, that the copying of the works was done with the licence of the first appellant pursuant to the provisions of the licence agreement.  In essence, the issue in the proceedings was whether, in the circumstances of the case, the "statutory licence" provided for by Part VB operated.  At first instance, Gummow J. held that it did.   Accordingly, his Honour dismissed the appellant's claim, but made a declaration on the cross-claim that the copying by the respondent was done with the licence of the first appellant. (The judgment is reported: see Copyright Agency Ltd. v Victoria University of Technology (1994) 125 ALR 278; (1994) 29 IPR 263.)

THE STATUTORY PROVISIONS
         The history and general scheme of the legislation is fully described in the reasons of the learned primary Judge (at 280-5; 265-70) and that description need not be restated.  It is accepted by the parties that the issue between them turns on the true meaning of two provisions of Part VB, viz., s.135 ZL(1)(b) and s.135ZZH(1)(a) and (b).

By s.135ZL.(1) -

"...the copyright in a literary ... work ... is not infringed by the making of one or more copies of the whole or a part of the work by, or on behalf of, a body administering an educational institution if:

...

(b)the copy is made solely for the educational purposes of the institution ..."

(Emphasis supplied)

(By s.10(1A) of the Act, it is provided as follows:

"(1A)Without limiting the meaning of the expression `educational purposes' in this Act, a copy of the whole or a part of a work or other subject-matter shall be taken, for the purposes of the provision in which the expression appears, to have been made, used or retained, as the case may be, for the educational purposes of an educational institution if:

(a)it is made or retained for use, or is used, in connection with a particular course of instruction provided by the institution;  or

(b)it is made or retained for inclusion, or is included, in the collection of a library of the institution.")

By s.135ZZH. -

"(1)where a copy ... of a work ... being a copy .... referred to in a prescribed provision of ... Part (VB):

(a)is sold or otherwise supplied for a financial profit;

(b)is used for a purpose other than the purpose specified in the prescribed provision ...

with the consent of the administering body by whom, or on whose behalf, it is made, the prescribed provision does not apply, and shall be taken never to have applied, to the making of the copy."

(Emphasis supplied)

By s.135ZZH(2), for the purposes of the section, s.135ZL(1), amongst others, is a prescribed provision.

Central to the questions for determination in these proceedings was the proper interpretation, and application, of the emphasised parts of these provisions.  On behalf of the appellants it was contended that the photocopying here was not done solely for the respondent's educational purposes;  and that the copy was sold by the respondent for a financial profit.  In dismissing the appellants' claim, Gummow J. rejected both of these contentions.

THE BACKGROUND FACTS
         There was no real dispute about the background facts and his Honour's findings, which are not challenged, may be summarised as follows:
(1)  It is common practice for tertiary institutions to make multiple copies of extracts from different literary works which relate to a particular course, to collect those extracts, sometimes bound in book form, and to supply them to students enrolled in that course.

(2)  In one instance (Ex. A), a series of booklets were prepared by a member of the staff of the respondent for students undertaking a course in which there was no single textbook available which dealt with all aspects of any of the four subjects being studied.  Accordingly, students were required to supplement their reading by going to parts of various other texts.  The staff member selected several articles and extracts from textbooks.  These were divided into booklets so as to allow students to buy some, but not all, of the collections where appropriate.  Another objective was to make it easier in subsequent years to replace, or to add to, the collection without the need to scrap the whole of a large volume each time a change was made.  In the other example (Ex. B), a member of staff in another faculty assembled a collection of materials in a similar way when there was no suitable textbook available for the whole of the subject.  Previously, the main reading in the subject was made available by placing photocopy articles and sections from textbooks on counter reserve in the library, but, in practice, many of the students were unable to gain access.  A copy of Ex. B was then produced for each student to acquire, but not every student purchased one, so that some were left over for sale in the following academic year.

(3)  Each campus of the respondent has a bookshop, positioned away from passing trade, which sells textbooks, course materials (including the subject collections), but not general titles such as works of fiction, unless they are prescribed texts.

(4)  The respondent's bookshops mark up by 30% the cost of the printed materials received from the print room in order to recover its identified costs of supplying the printed materials to students.  The costs intended to be covered by the mark up include salaries for staff, including provision for payroll tax and superannuation, together with, amongst other things, insurance, telephone, packaging, wrapping and computer maintenance;  there is also an allowance for occupancy costs, picking up lighting and heating, cleaning services and building maintenance, and for accounting services provided by the respondent's central administration. 

(5)  The respondent's general system of financial management was based, in part, upon annual budget allocations of operating income to several "costs centres", including the bookshop, the print room and the cafeteria, which charge for goods and services, and are described as "self funding" in the sense that they are expected to recover direct costs from self-generated revenues, although some "university wide" costs may not be recovered.  The aim of the budget of the bookshop is to break even, but in the result, it operated at a loss.

(6)  The booklets Ex. A. and Ex. B were produced and distributed by the respondent with the objective of providing copies to students at minimum cost (to them).  It was not part of its objective to attempt to "maximise" sales.  Rather, the objective was to ensure that students could obtain copies of the materials at a price which covered costs, both direct and, in some cases, indirect.

THE REASONING AT FIRST INSTANCE
         On the question of construction of the statute, Gummow J. said (at 289; 274):

"...the legislation does not contemplate that the decision as to (i) whether a copy is made solely for the educational purposes of the institution or (ii) whether, even if so, the copies were sold or otherwise supplied for a financial profit, will turn upon subsequently ascertainable facts to show if such a profit indeed was made.  The complexities in day to day administration of educational institutions to which such a construction would give rise serve to emphasise the point.  It is further emphasised by the facts of this case.  After extensive evidence there is left the barren dispute whether on accounts which are necessarily imperfect, given the difficulty in computing the proper allowance for royalty, regard should be had to the `gross' or `net' profit, in either case with very small sums being involved.  The proper construction of Pt VB must, in my view, be approached on a broader footing."

His Honour went on to say (at 290; 275):

"The phrase in s 135ZZH(1)(a) in terms does not ask the question which would be appropriate on the taking of an account of profits, namely whether the copy was sold or otherwise supplied at a financial profit.  Rather, it asks whether the copy was sold or otherwise supplied for a financial profit.  This directs attention to the state of affairs at the time of sale or supply and to the object or purpose with which the sale or supply was effected."

In conformity with his findings of fact in (6) above, Gummow J. held (at 291; 276):

"The sales here were made in the course of a system established and operated by the respondent, the aim of which was to enable students to acquire the materials at a price which covered the costs of the respondent, including indirect costs.  The facts of this case show that what was done by the respondent did not involve sales with the object or purpose of returning a profit to the respondent.  It follows that para (a) of s 135ZZH(1) had no application."

Gummow J. held, after referring to s.10(1A) of the Act, that each copy produced was made exclusively for use in connection with a particular course of construction provided by the respondent, so that s.135ZL(1)(b) operated to provide immunity. His Honour said (at 291; 276):

"There is no evidence to suggest that the copies of the booklets which were supplied to students were used for a purpose other than in connection with the relevant courses of instruction provided to them by the respondent.  It follows that s 135ZZH(1)(b) has no application to them."

THE GROUNDS OF APPEAL:
         Although, as has been noted, no challenge is made by the appellants to the primary Judge's findings of fact, it is submitted that, on those findings, his Honour should have held
that the supply of the materials was done "for a financial profit" within the meaning of s.135ZZH(1)(a);  and that the copies were not made "solely for the educational purposes" of the respondent.

On the first branch of the argument, it is submitted that, as a matter of accountancy and of copyright law, a notion of profit which focuses on the individual transaction is appropriate; and that notion must be gross or incremental profit. The alternative notion of net profit, which is that contended for by the respondent, is, the appellants' argument runs, inappropriate and could not have been intended by the Parliament. Whereas, they say, gross profit can be readily ascertained at the time the act was done, it is impossible to ascertain net profit at that time since, for instance, the amount of equitable remuneration payable under the Act would not then be known. Moreover, they submit, an overall system having the object or purpose, as found here, of recouping indirect, as well as direct costs, involves a "net" profit approach which could not have been contemplated by the statute. It is also argued that inherent in his Honour's finding that the respondent's aim was to recover more than its direct costs is the conclusion that its aim was to make a gross or incremental profit, and this is a sale "for a financial profit" within s.135ZZH(1)(a). It is further said that an intention to engage in an activity which makes a contribution to general university overheads is incompatible with s.135ZZH(1)(b).

On the second branch of their argument, the appellants say that the sole educational purpose required by s.135ZL(b) was not made out. At the time of making the copies, the submission goes, the intention of the respondent was to make books, relevant to educational purposes, for sale at the University Bookshop to whoever chose to buy them; no restriction was made on those who could buy. This may be contrasted with the process contemplated by s.10(1A) of making copies for direct distribution to students. Moreover, the argument runs, the respondent's purposes included the saving of expenditure on its library and the protection of library holdings; also, it intended to engage in an activity which made a contribution to general university overheads. These aims, they say, were incompatible with s.135ZL(b).

CONCLUSIONS ON THE APPEAL
         We cannot accept either branch of the appellants' argument.

We turn first to the interpretation of s.135ZZH(1)(a).

It is accepted by the parties, as his Honour held, that a sale or supply "for a financial profit" contemplates a transaction with the object or purpose of that profit;  and that this criterion should be distinguished from a provision which contemplates a sale or supply "at" a profit.  Under that different criterion, the inquiry would be directed at the actual, rather than the intended, result of the transaction.  We agree with this approach.  The ordinary dictionary meaning of "for", in a context such as that of the section, is: "with the object or purpose of:  to go for a walk" (Macquarie Dictionary, 2nd ed.  cf. Commissioner of Taxation v Brambles Holdings Ltd. (1991) 28 FCR 451 at 463). There is no reason to suppose that "for" was used here in any other sense than its ordinary meaning and this is not, as we have said, in contention. The debate, in this area centred on the meaning of "financial profit."

The ordinary dictionary meaning of "profit" is -

"1. Advantage or benefit to a person or group" (The New Shorter Oxford English Dictionary, 4th ed.).

The ordinary dictionary meaning of the adjective "financial" is -

"1. pertaining to monetary receipts and expenditures;  pertaining or relating to money matters;  pecuniary; (Macquarie Dictionary, 2nd ed.).

In our opinion, there is nothing in the language or context of the Act to suggest that the phrase "for a financial profit" in s.135ZZH(1)(a) was intended to have any meaning other than its ordinary one, even if the calculation of a profit in a particular situation may be a matter about which different opinions may be held (cf. Dart Industries Inc. v The Decor Corporation Pty. Ltd. (1993) 179 CLR 101). If, for
instance, the question was whether there was or had been a sale at a profit, it may be, as Ferguson J. held in Brandt v W.G. Tatham Pty. Ltd. [1965] NSWR 126 at 127, that a net profit is "the only true profit". But, on any view, such an inquiry does not arise here. As has been noted, it is no part of the legislative scheme that there be an inquiry into whether there was, in fact, a sale at a profit. The relevant inquiry is whether the respondent had the object or purpose of making a profit, however it be calculated.

In our opinion, as his Honour's factual findings indicate, the respondent did not have that purpose or object.  Rather, the respondent's aim was to provide its students with materials for use in its courses.  It did not follow from the respondent's decision to implement a "user pays" policy and to mark up the product as it did, that the respondent's object was to make a financial profit.  Its aim remained that mentioned, namely the provision of materials to its students for use in its courses.

Similar considerations apply, in our view, to s.135ZL(2), since, as Gummow J. observed (at 290; 275) there is "some coalescence between the issues presented under ss 135ZL and 135ZZH".  As, again, the findings of the trial Judge indicate, the sole purpose of the respondent was to make the material available to its students for its courses, in the
absence of any challenge to those findings, it must follow that the other purposes sought to be attributed by the appellants to the respondent did not exist;  the foundation for the appellants' argument is undermined accordingly.  In any event, as has been said in the context of s.135ZZH(1)(a), the circumstance that the respondent introduced a "user pays" system is not inconsistent with the respondent's having the sole educational purpose required by s.135ZL(1)(b).

We should add that, although the point was not pressed in the oral argument, we agree with Gummow J. that the sale to a person not a student under a trap order is not of significance for present purposes.

Finally, we should also note that the appellants relied upon a statement in the second reading speech to the Copyright Amendment Act 1989 to the effect that the legislation is intended to "achieve a fair balance between the respective needs and entitlements of educational institutions and copyright owners". However, given his Honour's findings, we see nothing in the present outcome which is inconsistent with the Minister's statement.

ORDERS
         It follows that we agree with Gummow J., essentially for the reasons he gave, that the appellants were not entitled to the relief sought.  The appeal will be dismissed, with costs.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Court

Associate

Dated:  28 February 1995 

Counsel and Solicitors      Mr. D.K. Catterns Q.C.

for Appellant:              instructed by Phillips Fox

Counsel and Solicitors      Mr. A.R. Emmett Q.C.

for Respondent:             instructed by Baker & McKenzie

Date of hearing:            16 February 1995

Date Judgment delivered:         28 February 1995