Dyason, M. v Autodesk Inc

[1990] FCA 555

JUDGMENT No. ........ -...... .- 555 J 90

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

BETWEEN:	MARTIN PATRICK DYASON and
ORS.

Appellants

AUTODESK INC. AND AUTODESK

AUSTRALIA PTY. LIMITED

Respondents

CORAM: HILL J PLACE: SYDNEY DATED: 19 SEPTEMBER 1990

EX TEMPORE REASONS FOR JUDGMENT

Autodesk Inc. and Autodesk Australia Pty Limited, hereafter referred to as the applicants ("the applicants"), move the court for a stay of so much of the orders of the Full Court of this Court comprising Lockhart, Sheppard and Beaumont JJ, as set aside injunctive orders made at first instance by Northrop J on 15 September 1989. By virtue of these orders the respondents, Mr and Mrs Dyason and Mr Kelly were restrained from marketing a device known as Auto-Key which the applicants claimed contained a computer programme which infringed their copyright in the programme contained within a device known as the AutoCAD lock. The orders further restrained the respondents from reproducing in any material form the whole or a substantial part, or any part, of what was

AutoCAD lock device or any adaptation thereof or selling or

referred to as a computer programme contained within the

letting for hire or by way of trade offering or exposing for sale or hire any article being a reproduction of the whole or a substantial part of the work said to be the computer programme within the AutoCAD lock.

The applicants market in Australia a software programme for computer assisted drafting known as the AutoCAD programme. That programme retails for approximately $5000. It is well known that software programmes may be simply, albeit illegally, copied to the detriment of the owner of the copyright in the so£ tware programme. However, the applicants had invented a device referred to as a "lock" which is described in the judgment of Sheppard J in the full court as being black and rectangular in shape and about 75 millimetres long, 43 millimetres wide and 15 millimetres deep and which at one end contains a plug which fits into the outward or serial port of the computer and at the other end there is a lead which connects the computer to peripheral equipment such as

the screen or printout.

The AutoCAD programme can only be used if the lock is fitted to the computer, thus illegal copies made are of no use unless the person making the copy has also purchased a lock. The lock is sold by the applicants together with the AutoCAD programme as one package and its price is included in the price for the programme. M r Kelly, one of the respondents, invented the device Auto-Key which produces the same result as the applicants' lock and before being restrained from so doing marketed it with the other respondents at a price of around $500. The market for the device is limited to persons who have purchased the AutoCAD software. It is said that there are some 6000 users of the AutoCAD programme to whom the device could potentially be sold, but each user could have need for as many of the devices as that user may require for use with copies of the AutoCAD programme.

At first instance, Northrop J held that the device breached the copyright of the applicants in what his Honour found was a computer programme constituted by or in the applicants' lock. His Honour found that Mr Kelly had produced a computer programme designed to perform the same function as the AutoCAD lock in breach of the applicants' copyright. He made permanent an interlocutory injunction that had earlier been granted. From that decision the respondents appealed to

the Full Court which allowed the appeal.

The issues in the appeal raised quite complicated questions as to the proper interpretation of the 1984 amendments to the Copvriaht Act 1968 ( "the Act") including inter alia the definition of computer programme in the Act and whether the respondents Auto-Key involved a reproduction or an adaptation of a substantial part of a computer programme being the lock itself or the lock together with the AutoCAD programme. These issues were unanimously decided in favour of the respondents. The applicants propose to seek special leave from the High Court to appeal against the decision of the Full Court. It could not be suggested that the issues in the appeal were other than difficult, a point made in the various judgments of the Full Court. It is, however, inappropriate for me to speculate upon the question of whether the High Court will regard them as being such as to warrant that court granting special leave to appeal the decision.

The applicants submit that the balance of convenience lies in granting a stay and continuing the injunction against the respondents; pending the determination by the High Court of the special leave application and, if leave be granted, pending the ultimate decision of that court on the appeal. The applicants offer, as well as the usual undertaking as to damages, to prosecute the special leave application in the appeal with due diligence. The applicants point to evidence that the respondents have little in the way

of assets so that if the appeal were allowed it would be

unlikely that the respondents would be able to satisfy any award of damages. I should say that the question of damages was an issue left open for later assessment by Northrop J.

Since the proceedings were commenced by the applicants in this court they have redesigned their AutoCAD programme with the result that the respondents' Auto-Key can no longer be used with any new versions of the AutoCAD programme. The applicants say, therefore, that the market for the respondents' product is limited to persons who have purchased the original AutoCAD programme and that makes it a finite market and may I say one may assume a declining market.

The applicants have, as the evidence demonstrates, the financial resources to stand behind their undertaking as to damages so it is said that the respondents are adequately protected in the event that the High Court not grant leave to appeal or so doing the ultimate appeal is dismissed with the result that the judgment of the Full Court stands.

On their part the respondents have offered an undertaking to the court that they will keep proper records and accounts to enable damages, if ultimately awarded, to be assessed and that they will not sell to persons who appear to be resellers (those persons perhaps not keeping adequate

accounts).

The jurisdiction to grant a stay is not in issue. There is however a dispute between the parties as to the proper principles to be applied. The respondents submit that a stay should be granted only where special circumstances exist which justify a departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of an appeal. Such special circumstances are to be found only (or if not only, generally) where it can be shown that the stay is necessary to prevent a successful appeal from being nugatory. That, it is said, is not this case.

Reliance is placed by the respondents on the

decision of Dawson J in Commissioner of Taxation v
Emporium Ltd 1986 60 ALJR 300 at p.301; Attornev-General (UKL
v Heinemann Publishers Australia Ptv Ltd (1987) 75 ALR 461 at
p.464 per Deane J who described the jurisdiction as "an

extraordinary one" to be exercised in exceptional

circumstances; Scarborouah v Lewrs Junction Stores Ptv Ltd [l9631 VR 129 at p.130 per Adam J; Jenninas Constructions Ltd v Buraundv Rovale Investments Ptv Ltd (1986) 61 ALJR 102 at pp.102-103 per Brennan J.

The applicants, on the other hand referred particularly to the decisions of the New South Wales Court of

Appeal in Alexander v Cambridae Credit Cor~oration Ltd [l9851

2 NSWLR 685 at pp.693-5 and John Fairfax & Sons Ltd v

(No. 2) [l9871 8 NSWLR 510 at pp.511-512. The first of these two cases considered the proper test to be applied in granting a stay where the judgment on foot was that of a single judge of the Supreme Court.

To some extent the judgment may be thought to depend upon the construction of the rules of the Supreme Court of New South Wales. The Court said in a unanimous judgment at page 694:

"The C o u r t h a s a d i s c r e t i o n w h e t h e r or not

t o g r a n t the s t a y and , i f so, a s t o the

t e n s t h a t would be f a i r . In the exercise

o f i t s d i s c r e t i o n , the C o u r t w i l l we igh

c o n s i d e r a t i o n s	s u c h	a s	the	b a l a n c e	o f
convenience	and	the	c o m p e t i n g	r i g h t s	of

the p a r t i e s before i t :	At tornev -Genera l	v
Emerson	(1889) 24 QBD 56.	W h e r e there i s

a	risk	t h a t	i f a	s t a y i s	g r a n t e d ,	the
a s s e t s	o f	the	a p p l i c a n t	w i l l	be	d i s p o s e d

o f , the C o u r t may, i n the exercise o f i t s

d i s c r e t i o n , r e f u s e t o Grant a s t a v : c f

C l vne v d e p u t v ~ommis.&oner o f & a t i o n

(1982) 56 ALJR 857. "

The Court rejected as incorrect an approach that it was necessary for an applicant for a stay to show exceptional circumstances in favour of a rule that an applicant for a stay demonstrate an appropriate case to warrant the exercise of discretion in its favour.

In the last mentioned case the stay sought followed a decision of the Court of Appeal of New South Wales and was ordered prior to an application being made to the High Court for special leave. The Court of Appeal comprising Kirby P, Mahoney and McHugh JJA, said at page 511:

" I t was f o r m e r l y the a l m o s t i n v a r i a b l e

p r a c t i c e o f t h i s C o u r t , upon s i g n i f i c a t i o n

o f a n a p p l i c a t i o n t o the High C o u r t o f

A u s t r a l i a for s p e c i a l l e a v e t o appea l from

i t s o r d e r s , t o r e q u i r e t h a t a n y s t a y o f

those o r d e r s be g r a n t e d , i f a t a l l , by the

High C o u r t o f A u s t r a l i a or a j u s t i c e o f

t h a t Cour t . The o n l y e x c e p t i o n s t o th is

p r a c t i c e occurred i n c a s e s o f urgency

where it was n e c e s s a r y f o r some relief t o

be g i ven by the Court f o r a s h o r t t i m e t o

pe rmi t an a p p l i c a t i o n t o be made t o the

High Court for a s t a y . "

In Jenninas Construction Limited v Buraundv Rovale

Investments Ptv Limited (1986) 61 ALJR 102, Brennan J expressed the view that courts, such as this Court, should not

I

I	feel inhibited in granting a stay pending an application for special leave to appeal to the High Court of Australia. His
!	Honour said at page 103:

"When	an	a p p l i c a t i o n	for	s p e c i a l	l e a v e	t o
appeal	i s	made	to	this	Cour t ,	a

j u r i s d i c t i o n t o s t a y may be e x e r c i s e d by

the Court be low and	i t i s t o t h a t Court -
the Court i n which	the m a t t e r i s pending

and which i s f a m i l i a r w i t h the m a t t e r -

t h a t an a p p l i c a t i o n t o s t a y shou ld first

be made. In t h i s c a s e the Court o f

Appeal , n o t w i s h i n g t o pre-empt the v i e w

t h a t may be expre s sed i n this Cour t ,

t a i l o r e d i t s o r d e r accord ing l y . In

f u t u r e , there shou ld be n o inhibition on

the Court i n which the m a t t e r i s pending

framing a s t a y o r d e r , i f a s t a y be

appropr ia t e , t o avo id the necessity f o r

a p p l i c a t i o n t o th is Cour t . "

The New South Wales Court of Appeal in the John Fairfax case determined to adopt a more "discriminating" approach to applications for the grant of a stay pending special leave to the High Court. The Court said at page 512:

" I n s t e a d the Court w i l l n o r m a l l y grant a

s t a y o f twenty-one days from the d a t e o f

the judgment o f th is Cour t , t o pe rmi t an

a p p l i c a t i o n t o be made f o r spec ia l l e a v e

t o appeal t o the High Court o f A u s t r a l i a .

Such	a	s t a y w i l l	normally	endure	u n t i l
such	a p p l i c a t i o n	i s made	or,	i f l e a v e	be

granted,	the appeal pursuant	t o such l e a v e
i s disposed	o f by the High	Court o r u n t i l
the High	Court	i t s e l f o therwise orders . "

The reference to "normally grant a stay" meant in my respectful opinion not that a stay would normally be granted but rather that a stay, if appropriate to be granted, in accordance with principle was to be granted the terms of that stay would normally be as set out in the passage I have quoted. The Court continued at page 512:

"Necessar i ly , the above course w i l l n o t

m o d i f y the d i s c r e t i o n o f the Court o f

Appeal t o r e f u s e such a s t a y where, for

example, i t deems such an a p p l i c a t i o n t o

be p l a i n l y hopeless . Nor would i t a f f e c t

th is Court 's cons iderat ion o f the p o s i t i o n o f the opponents when determining any cond i t ions t o be imposed o r whether i t i s

proper, i n the circumstances t o d e c l i n e

the s t a y , r e q u i r i n g any such s t a y t o be

granted, a s i n the p a s t , by a j u s t i c e o f

the High Court. "

In my view there is a clear difference between the circumstances in which a stay of the judgment of a single judge would be granted as was the case in Alexander from the issue involved in staying a judgment of the Full Court of this Court. In the former case, the appeal lies as of right. In the latter case, even where application to the High Court for special leave has been made, there is no appeal on foot. The applicant for special leave is not an appellant and there is no appeal unless and until the High Court determines that the case is such as to justify leave being granted. The judgment of the Full Court is therefore in law and in fact the final judgment, unless the High Court grants special leave. Further, that leave is dependent upon the High Court determining that there are special circumstances which justify leave being granted.

So it could well be that the tests to be applied in considering a stay of a judgment of the Full Court are more rigorous than those to be applied where there is a right to appeal from a judgment of a single judge. As Jessel MR said

in Polini v (1879) 12 CHD 438 at 444:

"The	t e rms	i n which	the	j u r i s d i c t i o n	i s
c o n f e r r e d	a r e	general	and	u n l i m i t e d .	How
t h a t	j u r i s d i c t i o n	shou ld	be	e x e r c i s e d	i s a
q u e s t i o n	o f	j u d i c i a l	d i s c r e t i o n	which	mus t

be guided by proper r u l e s founded on

p r i n c i p l e . I t i s n o t every c a s e i n which

the Court or Judge shou ld i n t e r f e r e . I t

i s not t o be s a i d t h a t when a p a r t y

l i t i g a n t h a s succeeded i n two Cour t s he i s

t o be i n the same p o s i t i o n a s i f he had

never succeeded a t a l l . In m y o p i n i o n it

requires a s t r o n g e r and more s p e c i a l c a s e

t o i n d u c e the Court t o i n t e r f e r e a g a i n s t

him on b e h a l f o f the o t h e r p a r t y t han

would have been r e q u i r e d i f there had n o t

been a n y t r i a l o f the a c t i o n . "

That view would be consistent with the judgments of the High Court in and Heineman to which I have referred, and in neither of which was it suggested that the special circumstance rule was a special rule confined only to a consideration of a stay made by a justice of the High Court. I say this notwithstanding the comments of Brennan J in Buraundv Rovale Investments which signal the inappropriateness of applications being made initially to the High Court rather than to the court from which the appeal lay by way of special leave.

The decision in Carnbridse Credit has generally been followed in this and in other courts where the issue was the stay of an order of a single judge pending an appeal being brought against that decision: See Griffiths v Australian Postal Commission (1987) 87 FLR 139 per Miles CJ in the Supreme Court of the Australian Capital Territory;

Browbank (1985) 12 FCR 254 at p.255 per Beaumont J; Water Industrv Salaried Officers' Union v Professional Officers' Association of New South Wales (1987) 22 IR 178 at p.183 (Industrial Commission of New South Wales); Westaflex Aust Pty Limited v (unreported) 17 January 1990 per Gray J at

pp.3-4 but cf Deuutv Commissioner of Taxation v Fontana [l9891

WAR 262 per White M where the Western Australian Authority of Cox v Simeon (unreported) Full Court of the Supreme Court Western Australia 7 September 1983 propounding the "special

circumstances" test was followed.

I am inclined to think that the difference in formulation may involve more a matter of difference in emphasis than a real difference in principle. In any event, even the formulation of the "special circumstances" rule admits of the possibility that various matters may be taken into account in determining whether such special circumstances exist. In the present case I doubt if the difference in formulation makes any difference to the end result.

There can be no dispute, whichever principle is adopted, that the grant of a stay involves the exercise of judicial discretion. Where the judgment sought to be stayed is that of a full court, it is obvious that there must be taken into account the fact that a full court has passed upon the matter and found against the case for the applicant for stay.

The fact that an application for special leave is to be made is a matter that can be taken into account as well as the need for special circumstances to be found if that be necessary. The complexities of the issue will be relevant

will be granted or indeed if it be granted, whether the

although the court will not seek to anticipate whether leave

ultimate appeal will be successful, although there may be a case, of which this is not an example, where the prospects are so remote that a court will clearly enough take them into account.

The fact that the party opposing the stay has obtained a judgment of the Full Court is relevant, for prima facie that party is entitled to retain the fruits of that judgment. Hence, even if the circumstances required to grant a stay need not be exceptional, it is obvious that something will need to be shown to warrant the grant of the stay. The most significant matter is that addressed by the High Court in the cases to which I have already referred including, for example, the Mver Em~orium case at page 301, namely, the possibility that the fruits of a successful appeal may be rendered nugatory in a case. The example given by M r Justice Dawson in that case is a case where, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance.

Another example closer to the present case is a circumstance where because of the financial state of the respondents to the prospective appeal there is no reasonable prospect of recovering moneys paid in the event that damages	are ultimately assessed. This is a matter which clearly	supports the applicants.
However, as Dawson J stressed in W, it is not the only consideration. In my view it is appropriate to take into account as well the following matters in exercising my discretion. First, that the market for the product is finite in the sense earlier explained which at least confines the ultimate amount of damage. Second, that the respondents have been restrained from carrying on their business for a considerable period of time and that that injunction has effectively destroyed the business of the respondents or certainly stopped the respondents from developing a business and presumably contributed to some extent to their present financial position. Third, that the future market available to the respondents is declining and there is a possibility that that market could have substantially disappeared by the time an appeal is heard and decided in the High Court if leave were to be granted. Fourth, the two undertakings proffered by the respondents ensure that the calculation of damage will be possible. Fifth, the difficulties of computing damages in the event that the applicants succeed with their appeal should be taken into account. Sixth, the difficulties of computing damages under the undertaking for damages should the applicants not obtain special leave or fail in an appeal to the High Court if leave be granted is a relevant matter. These last two matters are but two sides of the one coin and	rather balance each other. They come about because of the	great discrepancy in price between the respondents' product

purchased alone and the applicants' product which is sold
together with the applicants' software.

The applicants urge as I understand their submissions that I should take into account the public interest involved in not encouraging breaches of the copyright law by the copying of programmes which could be used with the Auto- Key of the respondents. The difficulty I have with that submission is that even if I assume or can assume that persons will breach the law in making copies of software, there is a difficulty in determining whether the evidence before Northrop

J justified the conclusion that the applicants had licensed

its users to copy programmes by representations made at the time of sale. In these circumstances I regard this as a matter of little significance.

I find the competing considerations fairly evenly balanced but in the end it seems to me that the applicants do demonstrate that there is a significant possibility that if they were to succeed in their appeal, at least that part of their case as concerns the recovery of damages from the respondents would be rendered nugatory by reason of the financial situation of the respondents. Although the calculation of damages under the undertaking as to damages may be a difficult one, that is not a particularly unusual

undertaking as to damages which in essence contains the circumstance. Indeed, in calculating damages under the usual

undertaking that the applicants will pay such amount as the court considers to be just involves the court in doing the best it can to calculate the damages that are suffered by a respondent. That task is not a scientific one but rather one that involves a process of estimation rather than calculation. Although difficult, it clearly is not an impossible task. It follows therefore for the reasons I have given that I would grant the stay.

I certify that this and the

preceding (15) pages

are a true copy of the Reasons
for Judgment herein of his Honour

Mr Justice Hill.

Associate: $W B+Yi Date: 10 October 1990

Counsel and Solicitors

for Applicants:  Mr D.K. Catterns instructed by Messrs Stephens of South Melbourne

Counsel and Solicitors

for Respondent:  Mr J.W.K. Burnside QC

& Mr I.G. Waller

instructed by Messrs Nevett Ford o f Melbourne

Dates of Hearing:  18 September 1990

19 September 1990

Date Judgment Delivered: