JR Consulting & Drafting Pty Limited & Ors v Cummings & Ors

[2016] HCATrans 202

[2016] HCATrans 202

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S87 of 2016

B e t w e e n -

JR CONSULTING & DRAFTING PTY LIMITED ACN 081 252 691

First Applicant

HAYES STEEL FRAMING SYSTEMS PTY LIMITED ACN 103 574 732

Second Applicant

GIANNI PACIONE AKA JOHN PACIONE

Third Applicant

STEEL FRAMING PTY LIMITED ACN 106 986 761

Fourth Applicant

and

ROBERT CUMMINGS

First Respondent

TANMARI PTY LIMITED ACN 106 986 761

Second Respondent

FRAMECAD IP LIMITED

Third Respondent

Application for special leave to appeal

GAGELER J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 2 SEPTEMBER 2016, AT 10.31 AM

Copyright in the High Court of Australia

____________________

MS T.M. CATANZARITI:   May it please the Court, I appear for the appellants.  (instructed by Simone Legal)

MS S.J. GODDARD, SC:   May it please the Court, I appear with my learned junior, MS S.L. ROSS, for the respondent.  (instructed by Sparke Helmore Lawyers)

GAGELER J:   Now, Ms Catanzariti, there are many aspects of this application that make it distinctly unattractive for a grant of special leave to appeal.

MS CATANZARITI:   Yes, and I will be focusing on three points.

GAGELER J:   Well, can I suggest one that might be the primary focus, at least, speaking for myself.  It is the subsistence of copyright point.  It appears to me that if there is any point of principle in the case, that is likely to be it, although at the moment, I must confess, I think you are on the wrong side of the line.  You can present the argument as you wish, but I would be assisted if you could concentrate on the subsistence of copyright point.

MS CATANZARITI:   Thank you, your Honour.  With the Court’s leave, I would like to hand up a short aide‑mémoire.  It is only a page, and it does formulate, in particular, the copyright point.  What is sufficient evidence to infer originality ‑ ‑ ‑

GAGELER J:   Yes.

MS CATANZARITI:   ‑ ‑ ‑ and does the court need evidence linking the effort and skill to specific and sufficiently distinct expression.  This issue is not fact dependent because there is no dispute about the evidence.  Mr Cummings spent time and labour developing 500 versions over 12 years, and there is no evidence of the 500 works in suit, so there is no question of fact or degree.

I will take your Honours to page 299, paragraph 304, starting at line 59 and then over the page.  The court said that the court can infer originality:  first, from the evidence that Cummings was the author across 500 versions; and, second, from Mr Cummings’ decision to release the whole program as updated.  We say this raises three difficulties.  The first is that there is no evidence whether the authorship and decisions involve intellectual effort, let alone creative spark.

GORDON J:   Is that right?  I am sorry – if you read from paragraphs 288 on 294 all the way through to the paragraph that in effect is the conclusion, does not the Court of Appeal go through and identify those very things?  The effort is set out by reference not only to time, but to in quantitative terms in page 299.  They deal with the code being rewritten.  They deal with the changes and developments in the way in which the program is created.  What else could there be, other than creativity, intellectual spark and effort?

MS CATANZARITI:   Well, your Honours, that leads to the second issue, which we say that the evidence of effort and skill is not linked to specific expression in a particular work in suit.  The evidence of effort and skill is across 500 versions.  This is the point that was raised by Justice Black in the trial that even though there was extensive evidence of the effort and skill, it was not linked to a particular work in suit, and so he was not able to say whether any particular work in suit had originality.

GORDON J:   Well, the Court of Appeal dealt with three in the end, did it not?

MS CATANZARITI:   No, the Court of Appeal said that every single 500 ‑ ‑ ‑

GORDON J:   I accept that, but in the ultimate, in terms of their orders, they identified three.

MS CATANZARITI:   No.  In terms of their orders, they annexed a schedule of all of the works in suit.  If you go to page 333 of the application book, the court orders that the orders are varied so that it refers to each version of the software set out in the schedule.

GAGELER J:   Are you saying that there was not evidence of the differences between the specific versions?

MS CATANZARITI:   No evidence.  The work in suit was not in evidence, so there was no work in suit in evidence.

GORDON J:   I am having problems understanding that in terms of factual analysis, given what is set out in the Court of Appeal’s decision from pages 288 onwards.

MS CATANZARITI:   The Court of Appeal says that there are 500 works in suit, and that because there was effort and skill across all 500 versions, they were able to find a work of authorship in each version.

GORDON J:   But they do more than that, do they not?  They do not just make generalised statements.  It is done chronologically, I accept.  They identify at particular points significant changes to the development of not only the systems, but particular aspects of it – output files, the creation of data files, code.  There are specific changes identified.

MS CATANZARITI:   But they do not identify and do not link those changes to particular works.  The problem is that there may be original works of authorship within those 500 versions.  But the question is does every single one of those have sufficient distinction?

GORDON J:   The release notes do not answer that?

MS CATANZARITI:   No, because the copyright work is the set of instructions; the actual characters and symbols.

GORDON J:   Yes.

MS CATANZARITI:   If you look at Data Access v Powerflex, they say that it is not enough to describe the functionality or the ideas; you have to look at the code itself, because it is the code itself which is protected under section 32, and then under section 10, which is the computer program.

GORDON J:   So you challenge the finding at 292 that each release sets out the various alterations to the code for each sequential version?

MS CATANZARITI:   Well, we say that that may describe the difference, but it does not actually set out the difference.  If I can give you an example - if the release note says that it fixed a bug, it may be that fixing that bug will only be adding a semicolon.  Now, for the purposes of copyright law, adding a semicolon would not be sufficiently distinct to make it into a separate copyright work.  Because of cases such as CBS Records v Gross, Interlego v Tyco, Interlego v Croner, they say there has to be a significant difference, and if all that is happening is a semicolon, then that is not a significant difference for the purposes of copyright.

GORDON J:   So, if we go on in paragraph 292 to the findings by the Full Court, references to the facts that we have multiple editions and multiple changes by reference to a particular version?

MS CATANZARITI:   But there is no copyright – there is no evidence of how that release note has been translated into particular characters and symbols and in Data Access there was a suggestion that you needed to look at the particular level of abstraction, so you needed to look at the particular source code, the characters and symbols.  It was not enough to look at the functions and ideas, because that is protected by patent.

GORDON J:   I think you and I are at cross‑purposes.  I thought the last sentence or two sentences of 292 were dealing with that very issue, that is, they were addressing specific changes to the code identified in the release notes.  Paragraph 292 on application book 297 at the top, the last two sentences - I thought the Court of Appeal was addressing that specific point, i.e. in the release notes one could see “10 or more changes to the code”, additions or deletions to the code and other changes.

MS CATANZARITI:   Well, it says that there are changes, but it does not set out what those changes were.

GORDON J:   So I understand your submission, two things have to be shown, that the code changes have to be identified, and?

MS CATANZARITI:   That they are sufficiently distinct, so that if, for example, the only difference between the code version 1 and version 2 is a semicolon or is a bracket then even though functionally that may be a change, functionally that may cause differences that are reflected in the release notes, then for the purposes of copyright law which looks at the set of instructions as a literary work, as characters and symbols, then it is not sufficiently distinct.

GAGELER J:   If you go to page 300 - I think you were almost taking us to this some time ago; it is part of paragraph 304 – the Full Court draws certain inferences about authorship.  Now, do you say those inferences are not open?

MS CATANZARITI:   Yes, and we ‑ ‑ ‑

GAGELER J:   Do you have to go that far?

MS CATANZARITI:   We say that those particular inferences are not open and that is because the respondent has conceded that the works are not distinct enough to be original.  So that concession is on page 274 of the court book, paragraph 200, lines 50 to 51, that:

The cross‑appellants accept that from one version to another and one update to another, it may be that the changes made are too insubstantial to create a “new copyright”.

GAGELER J:   I am sorry, where are you reading from?

MS CATANZARITI:   Sorry, page 274, paragraph 200, lines 49 to 50.

GAGELER J:   Yes, thank you.

MS CATANZARITI:   Then if we look at paragraph 292 – sorry, 304 on 299, the court says that there may be versions which, at least quantitatively - noting that that is not the test; it is qualitatively - if it is insubstantial, then an inference arises from the authorship and the election to release.  But that would lead to the situation where you may have two works and the only difference between those two works and previous works is a semicolon.  One work does not have copyright because it is only a semicolon, so it is not sufficient enough and distinct enough to be its own copyright work.

The other work does have copyright because it was the author who added the semicolon, and that author was the author of all the previous programs, and that author thought about it and considered whether or not that decision was consistent.  But it cannot be the case that two works which are identical have two separate outcomes depending on whether the author added it or a stranger added it.  You should be able to look at the works and determine whether they have copyright based on a difference.  It should not be the case that it depends on who the author is.

We would say that in cases such as Sands & McDougall and then in those other cases that I referred to, Interlego and CBS Records, that the courts are very clear it has to be a sufficiently distinct work in order to have its own copyright.  If “The man who broke the bank at Monte Carlo” or a TV schedule or a newspaper headline is not substantial enough to be a copyright work, then how could it be that adding a semicolon makes a work which is based on another work a new copyright work?

GAGELER J:   All right, we understand that point.

MS CATANZARITI:   If I can briefly take you to the confidential information point ‑ ‑ ‑

GAGELER J:   You can.

MS CATANZARITI:   The issue is the cases suggest that confidential information is not property but it is protected as if it is property and it may have a proprietary character.  So in Farah Constructions there is a suggestion that a trade secret may be transferred.  Then there are a number of New South Wales and Victorian Supreme Court decisions which talk about trade secrets in the context of ex‑employees and whether or not you can restrain an ex‑employee from disclosing information.  You can restrain an ex‑employee if it is a trade secret; you cannot restrain an ex‑employee if it is merely confidential information.

Those New South Wales and Victorian cases refer to cases such as
Faccenda Chicken in England, which set out a number of factors that say there is confidential information and then the subset of that is a trade secret.  In this case, the courts have not looked at those Del Casale factors.  The courts have equated confidential information and trade secrets.  The trial judge says, “This is confidential information.  I don’t need to consider the Del Casale factors”. 

In particular, Justice Black refers to the Del Casale factors on page 198 of the application book.  At the top of paragraph 383, we refer to the Del Casale factors and say that they need to be addressed to be a trade secret and Justice Black says, “I don’t need to consider those issues because this information is confidential”.

That is because Justice Black had made an error that he thought all of the relevant parties were parties to the cross‑claim.  So all he found was confidential information.  His finding on page 199, at the bottom of paragraph 384, “The information was plainly confidential, so there is no finding of trade secret”.

GAGELER J:   And the Full Court?

MS CATANZARITI:   The Full Court on page 318, paragraph 388 from line 38 say that the reasons for concluding confidential information justify trade secret and that is even though Justice Black deliberately did not address the Del Casale factors and only considered whether it was confidential.  So we say the only way the Full Federal Court could have done that was to equate confidential information and trade secret.  They had no separate test, they introduced no additional threshold, which means that that decision is very different from the New South Wales and Victorian decisions which say a trade secret cannot just be confidential information; you need to address additional factors.

Often many companies assign confidential information ‑ in sale agreements, in joint ventures – and there is no thought to whether or not it is a trade secret.  The High Court has never explained the difference between trade secrets and confidential information.

GORDON J:   Is the last sentence in 388 against you on that point?

MS CATANZARITI:   No, because it says that it – we accepted that trade secrets can be assigned but we do not accept confidential information can be assigned.

GORDON J:   Is there not a link?  I thought the question was you accepted that trade secrets were transferred or assigned so the question of confidential information did not arise.

MS CATANZARITI:    No, we accept that trade secrets can be assigned; we do not accept confidential information can be assigned and we say the Full Federal Court has not distinguished between confidential information and trade secrets because Justice Black has referred to confidential information.  He does not make a finding of trade secret, whereas the Full Federal Court says his finding is sufficient to be a trade secret and there is no analysis of why.

GAGELER J:    Did you want to say something about the last point?

MS CATANZARITI:   The last point of abandonment, whether a contract can be abandoned by the conduct of a company which is not a party to the contract; this was a case where there was a contract between A and B; X and Z entered into another contract, the court said, “I’m going to impute X’s director, what happened here, so I am going to pierce the corporate veil and then I am going to attribute X’s director to A and B because X is also a director of A”, piercing the corporate veil twice.  This is in circumstances where there are completely different shareholders.

So it is piercing the corporate veil and looking at the conduct of company X and attributing company X’s conduct with company A’s conduct ‑ so through X, through its director, through its director and through that conduct.  Now, the law of abandonment refers to inferring conduct of the parties objectively construed and that is Fitzgerald v Masters, Summers v Commonwealth and DTR Nominees.  But in this case, you are not looking at the conduct of the parties.

GAGELER J:   Well it is really the inference to be drawn in a rather messy factual context, is it not?

MS CATANZARITI:   But we say that it is unacceptable to pierce the corporate veil when you do not have a sole director/sole shareholder company.  If it was merely an alter ego that may be a permissible inference but when this company is 80 per cent owned by an external third party and where this company is only 50 per cent owned by that director, we say it is not permissible to merely infer that that person’s conduct and the director’s conduct is identical and then that director’s conduct and that company’s conduct are identical where that director is acting in completely different capacities for different shareholders with fiduciary duties to those different shareholders.  Those are my submissions.

GAGELER J:   All right, thank you very much.  We only need to hear from you on the subsistence of copyright point, Ms Goddard.

MS GODDARD:   Your Honours, the Full Court was correct to find on the evidence, and we say this is a factual matter, that the copyright subsisted in each version of the QSS software and there was insufficient doubt about that finding.  These were factual questions.  There was no error demonstrated in the court’s approach to that and we will come to the reasons why in short, but just before I do that, I am sorry, your Honours, even if the Full Court was wrong and the finding of subsistence of the primary judge were reinstated, our friends do not challenge that finding in relation to subsistence and that provided a proper foundation for the injunction and the inquiry as to damages.

GAGELER J:   Including the schedule to the order made by the ‑ ‑ ‑

MS GODDARD:   I am sorry, your Honour?

GAGELER J:    Would that cover the totality of the order made by the Full Court?

MS GODDARD:   No, your Honour, sorry; it would cover the three particular versions that his Honour the primary judge found copyright subsisted in and at paragraph 342 of his judgment he said that is sufficient to go on to the inquiry as to infringement.  It may be down the track that there may be questions, as there were, for example, in LED Building and Austec Homes where at the inquiry the court looks at the particular versions and makes a decision as to what comes in and what comes without.

But the principal proposition from us is that there was a finding of subsistence in three versions in any event and our friends do not challenge that.  However, going on to them all, we say we defend the Full Court’s decision in finding subsistence in all of the versions, in particular – I will summarise it quickly – as your Honour Justice Gordon notes, the release notes addressed the specific changes to the software and I will come to them if we need to. 

Each one was dated over a series of the whole of the period from 2002 to 2011.  Each one was dated and each one set out in summary form, as their Honours describe at paragraph 292, what additional work was done.  But importantly, your Honours, combined with that, as their Honours throughout the series of summary of the evidence from Mr Cummings, who was the author of the software and there is no dispute that he wrote the whole thing, the entirety of the code, his evidence was, as the Full Court importantly noted, that each edition that he released added a new source code; it was not simply the addition of a data file or a menu file, as my friend said.

So there is just no question of the fantasy semicolon that my friend refers to.  That is in paragraph 300 where the court – I will take your Honours back to the detail of it if necessary.  Once he finished – this is on the top of the paragraph in lines 2 and 3 - making changes to the source code he released the entire package again, including new source code but not including ancillary files such as data files or menu files.

GORDON J:   It was that new package that was given a new version number?

MS GODDARD:   Yes, your Honour, and further down, he was actually writing source code, and that is not including the other work about which he gave evidence elsewhere, for 40 hours a week over the entire period.  That was his full‑time job.  At paragraph 303, their Honours refer also to - draw their conclusions critically:

His evidence establishes the history of his development of QSS; his authorship of the software; his conversion of –

it from the previous human readable form, each sequential change:

the dedication of his time, effort and judgement to the “actual writing” of the lines of “source code” for QSS; and his release of the “entire package” –

So it is not just a question, as my friend has put it, of adding a semicolon here or there.  That is inconsistent with the evidence that was given by the author and not challenged.  So we do not understand where our friend’s semicolon comes from and their Honours in the Full Court did not – they looked at both those critical sources of evidence, both what the author said he did over the full period of time and what was written in the release notes.

GAGELER J:   We do not need to hear you further.

MS GODDARD:   Thank you, your Honour. 

GAGELER J:   Do you wish to reply, Ms Catanzariti?

MS CATANZARITI:   Three issues, your Honour.  First, when Ms Goddard talks about a fantasy semicolon, the release notes do say things like “create a work around” or “fix a bug”.  That bug may have been caused by a missing semicolon.  So it is not correct to say it is a fantasy semicolon.  It may be that creating the work around, fixing the bug may be adding a semicolon or adding a comma or it could be there are some release notes that say that they will – that they have added a CNC file.  All that means is that there is a command “attach” and then that file is attached. 

That command may not again be sufficient for the purposes of copyright law to be sufficiently distinct.  It is because Data Access refers to the levels of abstraction you need to look at the level of abstraction that they are claiming is the source code.  So it is the source code that needs to be identified and whether there are sufficient differences in the source code because the set of instructions that is protected is the characters and symbols, not the functionality, not the ideas.

To correct a comment that is made by my friend, on page 297 at the bottom of paragraph 297, line 60, when Mr Cummings says that he estimates that he spends 40 hours he says that he is “writing new source code” and he says that that is creating new functionalities, improving and enhancing the functionalities, creating new methods and fixing the bugs.

Now, that is preparatory work because that work does not specifically relate to writing characters and symbols, writing the source code.  There is a decision of Justice Laddie in Fylde Microsystems which suggests that all of the work about testing the bugs, framing the specifications, figuring out what new functionality should be, that is important work ‑ ‑ ‑

GORDON J:   I think the problem is that the paragraph that Ms Goddard took us to was 300 which cross‑references to different paragraph numbers of Mr Cummings’ affidavit. 

MS CATANZARITI:   Well, it is that he says he spends 40 hours doing this work of correcting bugs, framing specifications and it could be said generically that writing source code involves testing for bugs, involves framing the functionalities, creating the specifications but in terms of writing the words themselves that form the source code it may be that that work is not necessarily all of the work of an author.

GAGELER J:   Well, it may be that it was not tested in cross‑examination, was it? 

MS CATANZARITI:   Well, with respect, we say they had the onus of proof.  They were put to proof and, in particular, they elected not to put any of the source code into evidence which we say means that the court was not able to determine whether it was sufficiently distinct.

GAGELER J:   Thank you.

We are not persuaded that the inferences of fact drawn by the Full Court to conclude that copyright subsisted in each version of the software were not open.  Nor are we satisfied that the case raises any question of principle warranting the consideration of this Court.  Special leave is refused with costs.

The Court will now adjourn to 2.15 pm on Tuesday, 4 October in Canberra.

AT 11.01 AM THE MATTER WAS CONCLUDED