Disktravel v Fiocco

[2000] HCATrans 474

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P61 of 1999

B e t w e e n -

DISKTRAVEL

First Applicant

JOHN GAETANO MARIO FIOCCO

Second Applicant

DIVOT PTY LTD

Third Applicant

HOLDEN BARLOW

Fourth Applicant

CECK INVESTMENTS

Fifth Applicant

and

AUSTRALIAN TRADE COMMISSION

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON FRIDAY, 27 OCTOBER 2000, AT 10.22 AM

Copyright in the High Court of Australia

___________________________

MR C.J.L. PULLIN, QC:  May it please the Court, with MS C.M. PRATT, I appear for the applicant.  (instructed by Minter Ellison)

MR A. ROBERTSON, SC:  May it please the Court, I appear with MR P.R. MACLIVER, for the respondent.  (Instructed by the Australian Government Solicitor)

GLEESON CJ:   Yes.

MR PULLIN:   Your Honour, there may have been an initial impression on receiving the papers in this that it is just something concerning a repealed Act and that would be a wrong impression because the point that we are concerned with in this case concerns a question of law involving copyright, and, in particular, publication, and, in particular, the wrong application of Avel v Multicoin to the facts in this case which are not complicated and although there is a suggestion that it involves a question of construction, of course, it is based upon a document which has to be looked at but there are no complications in relation to it.

Now, there has been a lot of talk about Australia having to become a new economy and this decision, if it stands, will not help that happen because it seriously reduces the rights of copyright owners to exploit their copyright under the protection of the monopoly rights which are conferred by Parliament.  But, the case arose in the context of this repealed Act, the Export Market Development Grant Act, and it had to be shown that there was a qualifying export development expenditure and that, in turn,

required the showing that there had been eligible industrial property rights and at page 143 you can see that definition in the middle of the page.  It:

means rights in relation to inventions or trade marks, or copyright –

and putting aside the argument for the moment about rights in relation to copyright, it certainly involves copyright.  So, the question was, under this arrangement, whether or not there was any copyright in the applicants for the grants.  So, the Act itself is irrelevant to this legal issue. 

Now, the facts were that a company called TVI owned the copyright in some software and ancillary intellectual property and that was installed on to disks, CD‑ROM disks, and it contained both the software and a collection of data.  So, in a sense, there were two elements to it.  One is the software that ran it and the other is the collation of information which constituted a list.

GUMMOW J:   I understand that.  You have to grapple with what Justice French said at paragraph 51 on page 154, I think.

MR PULLIN:   Yes, we do.  We grapple, in particular, with what he said at 155, but I will turn to 154.  Your Honour is referring to which passage?

GUMMOW J:   Paragraph 51.

MR PULLIN:   Yes, and then he reaches his conclusion over the page where he says that:

The travel agents were not the public and the distribution was undertaken in the exercise of an obligation to TVI.

Is his actual conclusion.  He, of course, was not in the majority.  The majority judgment is that of Justice Kiefel with whom Justice Mansfied agreed.  There are really two sentences that we complain about, one in Justice French’s judgment, and while we are on it I might as well deal with that.

GUMMOW J:   His Honour’s was a concurring judgment, it was not a joint judgment.  You cannot say it was a minority.

MR PULLIN:   The reasoning – I am sorry, yes.

GUMMOW J:   What I am saying to you is at the moment, Mr Pullin, and you may want to deal with it or you may not, but at the moment the reasoning in paragraphs 51 and 52 appeals to me.  If you want to make it unappealing, now is your chance.

MR PULLIN:   Yes, well, I do.  In 52 it is the sentence which reads – this is on page 155:

In my opinion the distribution of the disks to the travel agents would not have been a publication of the software to the public within the meaning of s 29.  The travel agents were not the public and the distribution was undertaken in the exercise of an obligation to TVI.

Now, there is two things we say about that.  One is that that suggests that there is something wrong with the fact that there was going to be publication to a limited number of travel agents and there was something like a hundred required to be supplied under the – well, that was the performance target.  And, of course, if more could be obtained so much the better.  Now, the authorities are pretty clear, and ‑ ‑ ‑

GUMMOW J:   But you have got to grapple with the word “publish”.  It has a very technical meaning in this Act.

MR PULLIN:   Yes, it does.  First publish, the right to first publish.

GUMMOW J:   Yes.

MR PULLIN:   That is what Avel v Multicoin says and the right to ‑ ‑ ‑

GUMMOW J:   It does not just mean reproduce?

MR PULLIN:   No, it does not and that is why I should just stay with the – perhaps I should deal with the facts and just explain it a little more.  TVI owned the copyright in the way that I have indicated, so there was unquestionably copyright in these disks and that was accepted and you can see that at application book 145.  Then, an exclusive licence was granted by Travel Vision International to these various applicants and we have one example of the agreement at the front of the book in relation to Disktravel, the first of them in relation to Ireland.

Now, copyright is a bundle of exclusive rights.  Everyone can accept that.  There is no dispute about.  Section 31 is set out at page 172, to refresh memory, that is rights:

(i) to reproduce the work in a material form;
(ii) to publish the work;
(iii) to perform the work in public –

Now, you can, of course, break those up into slices so you can grant the right to reproduce to one person, the right to publish to somebody else and the right to perform in public to somebody else.  It was accepted in this case that what we had been granted – that is my client had been granted – was the right to publish and publish is to make public for the first time in the stated territory.  And, so, in relation to the agreement that we are looking at and if we can just go quickly to the agreement and start at page 5 we can see the definition of “Disk” is a “CD‑ROM disk”.  “Intellectual Property” means, as is defined there.  “Product” is the software, et cetera.

If you then go over the page in clause 2:

In consideration for the Initial fee and the Advertising Service Fees, the Licensor hereby grants to the Licensee a licence to use and to commercially exploit the Intellectual Property and the Product in…..the Territory –

So, this was within Ireland in this particular case.  Then, if you go to 6, over the page, there was an obligation for prompt distribution and then over on 8 – this is the important clause:

The Licensee shall use its best endeavours to procure travel agencies within the Territory to enter into Travel Agency Licenses to use the Product –

and there is performance requirements referred to and if you go to the schedule at the back you will see that the performance requirements in this case was to supply to a hundred travel agents.  So, we say that although there was an obligation to do these things this constituted first publication within the Territory and if you go to page 11 you will see that these rights were exclusive rights, which is course necessary if it is to be copyright, and to distinguish it from Multicoin.  So, 14.1(3):

other than in the Territory, the Licensor has the sole right, authority and absolute discretion…..to grant any licences, privileges or endorsements in respect of the Intellectual Property –

So, the licensor has the right everywhere but not in the Territory, the clear implication being - and I think accepted by Justice Kiefel and Justice Mansfield that they did have right within the Territory, and they also had a right to grant sub-licences which can be seen back in 7.1.  So, to have something to sell they have got to have copyright to sub-licence and to go to the travel agent so that it does not get pirated they have got to have copyright and what they do get, we submit, is the right to publish and the fact that it is only to a hundred does not matter.

There is High Court authority on that in Telstra Corporation v Australasian Performing Right Association where it is made perfectly clear that the fact you have got a very restricted number of people involved does not mean that there is not publication to those people.  That is not publication.  In other words, it is not private is the contradistinction that is usually advanced.  Now, what Justice Kiefel said – and the sentence we complain about is found at page 175 – her Honour said just above paragraph 111:

As the respondents’ submissions recognise, the most that could be said is that the licensees were authorised to distribute the disks to travel agents in their Territory.  A right to distribute, and even to sell, even if it be expressed as an exclusive right, does not however equate to the right to publish, within the meaning of the Copyright Act;  see Avel v Multicoin –

Well, that is just a misapplication of Avel v Multicoin because Avel v Multicoin was a case where the importer, the distributor, gained the right to import certain machines and to sell them and there was some copyright involved in the machines, that drove these machines, and in that case it was said that did not give any right to them to first publish the copyright, the owner of the copyright could come into the Territory and in fact publish the copyright.

Now, I just wanted to hand up one case.  That is a case of Justice Lehane, where he said, speaking about disks containing – or - intellectual property – that is the case of Sulcs v Detroit Diesel-Allison.  What Justice Lehane said – it was a strike-out application, and really there was an argument based on Avel, again, to say that in relation to a distributor licence agreement - and this shows that it is pretty common to have this kind of arrangement, so there is going to be exploitation of copyright by these kinds of agreements - and what his Honour said in relation to this on page 333 just above 25:

There was some concentration, in submissions, on the description of the document as a “distributor licence agreement”…..a manufacturer might appoint a company as the exclusive distributor of its products in a particular territory. An exclusive right, conferred in that way, to distribute goods…..is not, of itself an exclusive licence for the purpose of the Copyright Act: Avel Pty Ltd v Multicoin –

so far so good.  And, then he said, just under 35:

It is apparent that cl 2 of the distributor licence agreement may well…..confer on the applicant, on an exclusive basis, rights which give it substantial control over the distribution and end use of the programs within the territory.  It is not easy to see how the programs might be put to “end use” within the territory, consistently with the agreement, otherwise than through a chain commencing with the applicant.

That is the right reasoning.  That is what Justice Kiefel should have said.  If this reasoning is left to stand, it is a Full Court decision of the Federal Court, it will be trotted out with every one of these distributorship agreements to say, “Well, there has been no copyright conferred when you are selling or publishing the right to first publish a disk containing copyright information in territories”.  This is an extremely common ‑ ‑ ‑

GUMMOW J:   But how will the question arise?  In an infringement action?

MR PULLIN:   It would arise, I suppose, in determining whether or not the monopoly rights exist and have been conferred by an agreement.  It will come up in an infringement action, I suppose, because someone will say, “Well, you did not have any rights to copyright”.  The person who has the territorial rights will say, “I have copyright.  I have the right to first publish” and Avel v Multicoin will be trotted out in company with this decision with two judges of the Federal Court who will say, “Well, you are just distributing the disks”.  Well, with a disk you cannot do anything else with the software and, in our submission, that is quite wrong, and as I say, is going to seriously diminish the right to exploit copyright in Australia because this decision will stand as a diminishing factor in relation to those rights.

The other point – I am sorry, I said Justice French was the dissenting judgment.  He was not dissenting, it was his own separate reasoning.  He is also wrong to suggest that because the travel agents were to receive these disks and that they were limited in number - he does not actually say that. He just says, “The travel agents were not the public”.  Well, that is contrary to the reasoning of the High Court in Telstra Corporation where it is made perfectly clear that a select section of the public will still constitute the public, particularly in a commercial setting.  This was most definitely in a commercial setting.   It was available to the public in the sense that any travel agents you could locate could come along and obtain the rights.

So, they are the reasons, your Honour.  We run another ground which is based upon the interpretation section and whether or not there were rights in relation to copyright but I will not say anything more than we have in our outline there because clearly they do relate to a repealed Act.  They are my submissions, may it please the Court.

GLEESON CJ:   Thank you.  Yes, Mr Robertson.

MR ROBERTSON:   If your Honours please.  As to that second question which is not abandoned by the applicant, as we have put in our written submissions, the 1974 Act has been repealed.  The 1997 Act which replaces it has no equivalent phrase in it and the affidavit that is set out at pages 212 and 215 of the application book, the affidavit of Mr Cockerell of 4 February, makes clear that the only claim which is outstanding in relation to the old Act is the present claim, so, on that basis we submit that ‑ ‑ ‑

GUMMOW J:   But he said this public importance runs over into licensing law, generally.

MR ROBERTSON:   Which is not his ground 2 of the alleged special grounds but is his only ground 1, as we would see it.  If I can go to that question, then.  It is said on page 217, but with no evidence to support it, in paragraph 6 of the reply, that:

This type of licence agreement is quite common –

In our submission, apart from there being no evidence to that effect, it is most unlikely to be the case really for the reasons that her Honour Justice Kiefel gave beginning at paragraph 111 of her Honour’s judgment which is at page 175 of the application book, and her Honour says and Justice Mansfield agrees:

It follows, in my opinion, that despite references to copyright in the Licence Agreement no right to undertake an act of copyright can be identified as passing to a licensee (and therefore to a sub-licensee).  There was no eligible right, the subject of disposition, for the purpose of s 11Z(8).  The references to such property in my view were likely to have been included in the hope of attracting a grant under the Act.  They do not bear any relationship with the undertaking involved.

Essentially, in our submission, it is a question of fact, that is, a question of the construction of this licence agreement with this peculiar aspect to it.  It has another peculiar aspect which your Honours will see on page 17 of the application book and that is that all these obligations on the licensees that were discussed were suspended because the licence ‑ ‑ ‑

GUMMOW J:   I am sorry, page 17?

MR ROBERTSON:   Page 17 at line 35, your Honour.

GUMMOW J:   “Operative Part”.

MR ROBERTSON:   A variation executed on the same day as the licence agreement whereby the licensor agreed that the licensee’s obligations – some of which my learned friend has taken the Court to:

shall only apply to the extent that those obligations are met under the terms of any sub-licence agreements.

So that that is another aspect by virtue of which this is a unique agreement.  If I can make one other point about it, if I can ask your Honours to look at page 11, we do not accept for a moment that these were exclusive rights.  If your Honours were to look at clause 14 on page 11 - and it really comes back to what it is that the licensee or sub-licensee gets the right to distribute.  First of all, 14.1(2) says:

the rights granted to the Licensee under this Agreement shall in no way affect the exclusive ownership by the Licensor of the Intellectual Property –

And then it says:

other than in the Territory, the Licensor has the sole right…..to grant any licences, privileges or endorsements in respect of the Intellectual Property –

It was that clause that her Honour Justice Kiefel focused on in paragraph 114 of the book which in her Honour’s view, and we would submit quite rightly, aligned this agreement with the agreement, the Williams’ agreement that was under consideration by this Court in Avel, that is, what her Honour says at the foot of page 176.  It says:

The provision of clause 14.1(3) confirm that no other licence will be granted.  Whilst it speaks, meaninglessly in my view, of a promise on the part of TVI not to grant any other privileges in respect of any intellectual property, had the question whether any right in copyright was exclusively authorised arisen in this case, it could not have been inferred from this clause that the copyright owner was prevented from using the software, or exhibiting and publishing the program for itself –

and, so, it is this difference, really, between the software, which no doubt form part of the disk, and the travel information that was on the disk and the reasoning of the Full Court is that a mere right to distribute the disk to the travel agents did not involve any right of a copyright and that was why the copyright aspect of it was decided as it was.  If your Honours please.

GLEESON CJ:   Yes.  Yes, Mr Pullin.

MR PULLIN:   Your Honours, the reference to the sub-licence on 17 does not alter things at all.  There was always the provision in the agreement itself under clause 7.1 on page 7 for the licensee to:

grant a Sub-licence to a person within the Territory –

So, all it is doing is saying that that is how it is to operate through a sub‑licence and all that is doing is extending the chain.  The question still arises as to whether or not what is passing down the chain is a copyright, that is the right to first publish.  The reference that has been made to page 177 is just a continuation of the misapplication of Avel v Multicoin because there can be no doubt, no serious argument that the clause which I referred to earlier which is the clause 14.1 – that is on page 11 – has the effect of conferring exclusive rights on the licensee, that is:

the sole right, authority and absolute discretion…..to grant any licences privileges or endorsements in respect of the Intellectual Property.

That is under 14.1(3).  And, so, for all of those reasons we submit that this question of public importance remains and that special leave should be granted for those reasons.  May it please the Court.

GLEESON CJ:   The decision in this case turned largely upon the terms of the particular agreement.  The Court is of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave and the application is dismissed with costs.

We will adjourn for a short time to reconstitute.

AT 10.44 AM THE MATTER WAS CONCLUDED