Lorenzo & Sons Pty Ltd v Roland Corporation

[1992] FCA 483

Re: LORENZO and SONS PTY LIMITED
And: ROLAND CORPORATION and ROLAND CORPORATION (AUSTRALIA) PTY LIMITED
No. N G8 of 1992
FED No. 483
Copyright
(1992) AIPC 90-904
(1992) 23 IPR 376

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
Beaumont(1), Gummow(1) and Cooper(1) JJ.

CATCHWORDS

Copyright - infringement - "parallel" importation - whether implied licence - onus of proof - "corresponding design" - extent to which action for copyright infringement permitted by s. 77 of the Copyright Act 1968.

Copyright Act 1968,

Copyright Amendment Act 1991

Interstate Parcel Express Co. Proprietary Limited v Time-Life International (Nederlands) BV (1977) 138 CLR 534, Avel Proprietary Limited v Multicoin Amusements Proprietary Limited (1990) 171 CLR 88, Computermate Products (Aust) Pty Ltd v Ozi-Soft Pty Ltd (1988) 20 FCR 46, applied.

Star Micronics Pty Limited v Five Star Computers Pty Limited (1990) AIPC 90-717,

Broderbund Software Inc. v Computermate Products (Australia) Pty Limited (1991) 22 IPR 215, approved.

HEARING

SYDNEY

#DATE 3:7:1992

Counsel and Solicitors for Mr A.J. Bannon and
the Appellant: Ms B. MacRae instructed by

Vardanega Roberts

Counsel and Solicitors for Mr D.M. Yates
the Respondents: instructed by Barker Gosling

ORDER

THE COURT:

1. Orders that the appeal be dismissed and the cross-appeal be allowed.

2. Declares that the appellant has infringed the copyright in each of the R device and the B device, representations of which are shown as schedules 1 and 2 respectively to the application, by reproducing those devices in the catalogue, which is identified in the particulars to para. 7 of the Statement of Claim, and by publishing that catalogue.

3. Orders that the appellant pay the respondents' costs of the appeal and the cross-appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an appeal, by leave, from declarations made after a Judge of this Court (Pincus J.) had decided the issues, saving those set up by a defence that the second respondent (Roland Australia) had contravened the exclusive dealing provisions of the Trade Practices Act 1974. His Honour's judgment is reported, (1991) 105 ALR 623.

1. The present respondents were not wholly successful below and there is also before the Court a cross-appeal. The notice of appeal and notice of cross-appeal contain various grounds. However, on the matter being called on before us, counsel indicated that the issues on both the appeal and the cross-appeal had been narrowed. What remained were issues concerning the existence of an implied licence for the commission of what otherwise would be acts of infringement of copyright in literary and artistic works existing pursuant to the Copyright Act 1968 ("the Act").
   The Appeal

2. We turn first to consider the facts relevant to that issue as it arises on the appeal.

3. The first respondent ("Roland") is a Japanese company which was founded in 1972. It makes, for sale in Japan and for export, musical equipment, such as electronic synthesisers. Roland uses two devices described in the evidence as the "R device" and the "B device". The first is used primarily for the more sophisticated Roland equipment. The latter is used for the Boss line of less expensive items made by Roland. It also produces comprehensive instruction manuals and associated literature for use by consumers. These materials are included with the instruments in the packages in which they leave the premises of Roland in Japan. The appellant ("Lorenzo") is an Australian company which sells musical equipment by mail order under the name "Pro Audio". The branch of the respondents' case below with which we are now concerned was that Lorenzo had, without the licence of Roland, imported into Australia manuals to distribute them for the purpose of trade in circumstances falling within s. 37 of the Act. Section 37, in part, is as follows:
   

"37. The copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of: . . .

(b) distributing the article:

(i) for the purpose of trade; . . . where, to his knowledge, the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright."

The relevant events occurred before the coming into force of the amendment to s. 37 effected by s. 3 of the Copyright Amendment Act 1991, and nothing turns upon that amendment.

1. The primary Judge held that Roland at all material times had been the owner and Roland Australia had been the exclusive licensee in Australia of the copyright subsisting in Australia in the literary and artistic works comprised in the "owners manual", "guidebook", "soundchart", "implementation booklet" and "edit map" for the Roland Linear Synthesiser D-50 which together are identified as the "D-50 Booklets". The primary Judge also decided that Lorenzo had infringed that copyright by importing the D-50 Booklets into this country for the purpose of distributing them for the purpose of trade.

2. Lorenzo purchased three Roland D-50 synthesisers from Tower Music Limited in Hong Kong. The D-50 Booklets were supplied with each synthesiser. Because of their complexity it was virtually impossible to use the synthesisers as they were intended for use, without the materials supplied in the D-50 Booklets. Lorenzo contends that Pincus J. erred in determining that Lorenzo had no implied licence from Roland to import those D-50 Booklets into Australia for the purposes of trade. That is the issue which was debated on the appeal.

3. Roland Australia is a partly owned subsidiary of Roland which arranges for the importation into this country of products manufactured by Roland. The prices for Roland synthesisers in Australia range between $1,200 and $6,000 per unit. Roland has what are described in the evidence as joint venture companies in a number of countries including the United States of America, the United Kingdom, Germany, Canada, New Zealand, and Taiwan. Roland has a substantial reputation for its products in various markets including Australia. Roland makes modifications and variations to the items in its product range to ensure they are suitable for the market in which they are intended for sale to consumers.

4. Roland Australia and Roland co-operate to ensure that the products manufactured by Roland for sale in this country are suitable for the Australian market. In particular, products supplied to Roland Australia by Roland are modified to include electrical connections and transformers suitable for 240 volt AC electricity supply. This is the standard throughout this country. Further, to meet local safety requirements, all instruments which are not double insulated are fitted with earthing circuits and electrical connections. Certain Roland products are sold in some South East Asian markets without earthing circuits because they are not a practical possibility in those countries. However, the sale of such products in Australia would harm Roland's reputation.

5. The products manufactured by Roland for sale in Asia have a two pin plug which is connected to a two pin socket at the rear of the unit. The D-50 synthesisers imported by Lorenzo with the relevant D-50 Booklets had the two pin socket which is incorporated in units manufactured for sale in Asia.

6. Roland manufactures the D-50 synthesisers with a transformer for conversion of the power supply voltage to 12 volts AC as the operating voltage of the instrument. Whilst the D-50 synthesisers imported by Lorenzo were fitted with genuine Roland transformers the wiring was attached to a 220 volt connection which is suitable for power supply in parts of Asia such as Hong Kong.

7. There was no doubt that the booklets and equipment in question had been produced in Japan by Roland. However, the primary Judge concluded that there was not to be implied any licence to their importation into Australia for the purpose of distribution for the purpose of trade within the meaning of s. 37 of the Act. Pincus J. said (105 ALR at 634) that the physical facts strongly suggested an importation without the licence of Roland and that the equipment imported was plainly not intended for Australian use.

8. Lorenzo complains that in reaching an adverse conclusion to it on the question of implied licence, the primary Judge failed to take into account or sufficiently to take into account what it says are the relevant circumstances surrounding the purchase of the D-50 synthesisers and the D-50 Booklets by Lorenzo in Hong Kong. He submitted that the evidence showed that since at least 1985 Roland has supplied substantial quantities of D-50 synthesisers and booklets to a business carried on under the name of "Tom Lee Music" which is closely associated with Tower Music Limited, the seller to Lorenzo. Counsel for Lorenzo submitted that we should infer that Tom Lee Music was one of Roland's "joint venturers". He contended that we should further infer that Roland was kept informed by Tom Lee Music of its activities, or that Tom Lee Music was permitted by Roland to authorize the importation into Australia of the booklets or that, at least, Roland accepted that Tom Lee Music would act as it had in dealing with Lorenzo.

9. Counsel for Lorenzo emphasized that it was now established that the onus of proving the absence of a licence by the owner of a copyright in relation to an issue of infringement under s. 37 of the Act lay on the party who asserted the infringement, that is to say, upon Roland and Roland Australia, and that it was not for Lorenzo to establish the presence of such a licence: Avel Proprietary Limited v Multicoin Amusements Proprietary Limited (1990) 171 CLR 88.

10. In response, counsel for the respondents submitted that the appellant was inviting the Court to proceed on assumptions and conjecture as to any relationship between Roland and one or more of the businesses in Hong Kong, let alone the resale by them to Australian purchasers of Roland products which would be unsuitable for use in Australia. He submitted that whilst undoubtedly the respondents had borne the onus to prove the absence of a licence by Roland that did not mean that in the course of reaching a conclusion upon that issue there would arise, in the conduct of the trial, an evidential burden as distinct from the ultimate legal burden of proving (or disproving) the ultimate fact in issue: see Byrne and Heydon "Cross on Evidence", 4th Australian Ed., 1991, paras. 7005-7030. We accept that submission. Counsel for the respondents contended that when all the relevant circumstances were looked at they did not lay a proper foundation for the drawing of an inference that Roland had given its permission, informally, to the importation of the D-50 Booklets.

11. The relevant principles as to the implication of licences in this field are discussed in Interstate Parcel Express Co. Proprietary Limited v Time-Life International (Nederlands) BV (1977) 138 CLR 534, Computermate Products (Aust) Pty Ltd v Ozi-Soft Pty Ltd (1988) 20 FCR 46 (Full Court), Avel Proprietary Limited v Multicoin Amusements Proprietary Limited supra, Star Micronics Pty Limited v Five Star Computers Pty Limited (1990) AIPC 90-717 (Davies J.), and Broderbund Software Inc. v Computermate Products (Australia) Pty Limited (1991) 22 IPR 215 (Beaumont J.).

12. In order to qualify as an "exclusive licence" for the purposes of such provisions of the Act as those in ss. 117-125, a licence must be in writing, signed by or on behalf of the owner or prospective owner of copyright. This follows from the terms of the definition of "exclusive licence" in sub-s. 10(1). However, the Act otherwise does not require writing or any other particular formality for a licence which is an answer to a claim of infringement of copyright in a work. As we have indicated, the present case concerns a defence to what otherwise would be infringement by reason of s. 37 of the Act. In Computermate Products (Aust) Pty Limited v Ozi-Soft supra at 51, the Full Court said that it did not read the judgment in the High Court in Time-Life as supporting the view that the only kind of licence with which s. 37 is concerned is a contractual licence.

13. The question in Ozi-Soft, and in the more recent authorities in this Court to which we have referred, was whether there were circumstances present from which the existence of consent might be inferred. Counsel for the appellants pointed to passages in the judgment of Gibbs J. in Time-Life, particularly at 542-3. There the rights of the owner of copyright in a work were described by reference to s. 31 of the Act, without attaching particular significance to the existence of the additional rights in relation to importation given to copyright owners by provisions such as s. 37.

14. However, Jacobs J. (at 556-7) did refer to s. 37 and his Honour's remarks are relevant to the issue of implied licence which arises on this appeal. Jacobs J. said:
    

"Section 37 can take effect according to its terms in those cases where it is not shown that the copyright owner positively intended to grant a licence to import into Australia in commercial quantities. It is true that the sale of books by an owner gives the purchaser the ordinary rights of an absolute owner, one of which is the right or liberty to resell the books as physical chattels. However, such a right or liberty as an incident of ownership of a chattel cannot be regarded as a licence under s. 37 if the circumstances of the sale do not lead to the implication of a licence. The purpose of s. 37 is to make it clear that a positive licence is required. If an unrestricted sale abroad were to confer a licence under s. 37, the section would in effect only be applicable where the overseas seller positively imposed a restriction. But the section does not say that the importation for sale is allowed unless a restriction to that effect has been imposed. Importation is forbidden unless a licence has been given. If s. 37 were construed as the appellant contends, it would be unnecessary. If on a sale outside Australia an express positive restriction were imposed on import into Australia for purposes of sale, there would be no liberty to sell in Australia quite apart from s. 37. The purpose of the section is to deal with the case where no positive licence has been given and its purpose would be defeated if mere absence of restriction were held to import a licence. A positive licence to import for purposes of sale is not necessarily an express licence. A positive licence may in certain circumstances be implied, as for example where a copyright owner overseas sells copyright articles in commercial quantities to a purchaser in Australia. But that is very different from implying a licence to import into Australia for purposes of sale from the mere fact that the copyright owner made sales in his own country in commercial quantities to a purchaser in that country without expressly imposing a restriction on importation into Australia. ..."

1. In Avel the High Court held (at 94-5, 105, 119-120) that the reason why, in relation to an issue of infringement under s. 37, the onus of proving the absence of the licence of the owner falls upon the plaintiff is that the absence of the licence constitutes an element of the wrong of infringement under that section, as distinct from a justification or excuse for doing something which prima facie constitutes infringement. McHugh J. also pointed out (at 123) that whilst indifference may reach a stage where authorization or permission may be inferred, a failure to object or even an intention not to take any action to object to the importation of articles does not necessarily constitute a licence for the purposes of s. 37. His Honour also said that if, on the evidence, the defendant has proved that the owner of the copyright was neutral, it has thereby, for the purposes of the section, proved that the owner did not consent to the importation of the articles in question.

2. The litigation in Avel concerned amusement machines the copyright in relation to which existed in artwork and computer programs. Authorities such as Time-Life indicate that if the machines were the subject of an Australian patent, the manufacturer would give to the purchaser and to any sub-purchaser from it an implied licence under the patent law to import the machines into Australia for resale and to resell them here. In Avel (at 98) Mason C.J., Deane and Gaudron JJ. observed that a failure to negate the existence of such patent rights might be seen, in the context of the evidence in a particular case, as supporting the conclusion that the plaintiff had failed to discharge the onus of showing that the import and resale of articles, allegedly in infringement of copyright in a work or works, was without the licence of the owner of the copyright. Nothing turned upon this consideration in the present case.

3. From at least April 1985 Roland delivered to Tom Lee Music in Hong Kong a substantial number of its products, including a substantial number of D-50 synthesisers. The export and shipping documentation for the D-50 synthesisers in question which were purchased by Lorenzo were in the name of Tower Music Limited. The orders had been placed during a visit to Hong Kong by a Mr Gambale, a director and shareholder of Lorenzo, in the course of which he had dealt with a Mr Allen Tang at the head office of Tom Lee Music. Tom Lee Music had retail stores at five other premises in the colony and Mr Gambale was shown around two of them by Mr Allen Tang. At the meeting at Tom Lee's head office in the World Shipping Centre, Harbour City, Hong Kong, Mr Gambale was introduced to a Becky Liu and told by Mr Tang that she and other people would be handling the export of the products his company had agreed to purchase. The head office of the business in the World Shipping Centre, Harbour City, had the same telephone number as that given for Tower Music Limited on the shipping documents.

4. In these circumstances it would properly be open to infer that the three D-50 synthesisers had been purchased by Tom Lee Music from Roland and that Tom Lee Music and Tower Music Limited were related businesses. But we would not infer that Tom Lee or Tower Music was a joint venture company of the class referred to elsewhere in the evidence given by Roland. Even if we were to draw that inference, we would not draw the further inference that Roland knew of and did not object to the resale by the Hong Kong businesses of the D-50 synthesisers for importation into Australia for the purpose of distributing them for the purpose of trade. The evidence indicates a substantial retail business of Tom Lee Music in the colony of Hong Kong itself.

5. The case that Roland and Roland Australia had shown that a licence was not to be implied from the circumstances is immeasurably strengthened if due weight is given to the following considerations:-
   

(i) Roland Australia's role as subsidiary of Roland and exclusive Australian importer of products manufactured by Roland since 1976;

(ii) Roland's policy of tailoring products to meet the needs of particular overseas markets, in particular their modifications and variations necessary to accommodate differing safety requirements and electrical systems in various markets;

(iii) In particular, the care taken by Roland to ensure that electrical components for the Australian market are suitable for use in conjunction with 240 volt power supplies and that earthing circuits are provided; and

(iv) The circumstance that the equipment in fact imported by Lorenzo from Hong Kong could not have been intended by Roland for sale to consumers in Australia because it was not earthed and was not wired to operate on 240 volts; rather it was manufactured for the South East Asian market.

1. Notwithstanding that the primary Judge, in reaching his conclusion on this implied licence issue did not refer in his reasons to the various matters which were put to us on appeal, and which we have endeavoured to discuss above, we have reached the clear view that his Honour's ultimate conclusion, that Roland and Roland Australia had discharged the onus in this regard placed upon them by s. 37 of the Act, was correct. As this was the only issue agitated before us by the appellant, it follows that the appeal should be dismissed.
   The Cross-Appeal

2. There remains the cross-appeal. The issue here again concerns the alleged existence of an implied licence, but it arises not under s. 37, in relation to an importation of articles, but under the primary infringement provision, sub-s. 36(1) of the Act. This states:
   

"36(1) Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright."

Copyright in relation to an artistic work is the exclusive right, inter alia, to reproduce the work in a material form: sub-para. 31(1)(b)(i).

1. The cross-appeal arises in the following way. The primary Judge held that copyright subsisted as artistic works in two logo devices which represent particular letters in a fanciful form. The two logos were described as the "R device" and "B device". They appeared in the "Pro Audio" Mail Order Music Catalogue 1988/89, Number 5. However, his Honour held that the devices were artistic works in respect of which a "corresponding design" had been "applied industrially, by or with the licence of, the owner of the copyright in the work", within the meaning of sub-s. 77(1) of the Act as it stood before the insertion of a new s. 77 by the Copyright Amendment Act 1989. It followed, in his Honour's view, that by reason of sub-s. 77(2) no suit laid against Lorenzo for infringement of the two devices by reproducing them in its catalogue and by publishing that catalogue.

2. The articles to which the devices, as "corresponding designs", had been applied were electronic keyboard instruments and equipment known as "effects pedals". They were the "articles made to the corresponding design" which had been sold or exposed for sale in Australia within the meaning of para. 77(1)(c) of the Act. On the appeal it was accepted by both sides that whilst, by reason of the operation of sub-s. 77(2) of the Act, Roland had lost its right to sue for copyright infringement in respect of user upon the relevant articles, sub-s. 77(2) did not act as a complete bar to copyright infringement. In particular, there was no bar in respect of the use by Lorenzo of the devices in its catalogue. This follows from the reasoning of Wilcox J. in Hutchence v South Seas Bubble Co Pty Ltd (1986) 64 ALR 330 at 340-342. Accordingly, and this was not disputed, the primary Judge erred in holding that the provisions of s. 77 of the Act applied so as to provide a defence to the claim of infringement of the artistic copyright in the two devices by their reproduction in the Pro Audio catalogue.

3. However, Lorenzo as a cross-respondent, resisted the cross-appeal on a further ground which, whilst raised by para. 10(A)(c) of the second further amended defence, apparently had not been the subject of specific argument below.

4. Paragraph 10(A)(c) states:
   

"In relation to the `B' device, the `R' device ... by their nature they are designed to be used by distributors and retailers in the promotion and sale of (Roland's) products and have been so used by such persons to the knowledge of (Roland and Roland Australia) and without objection."

1. The evidence included various examples of use of the two devices in advertising and promotional material and telephone directories by various retailers in relation to equipment distributed in this country by Roland Australia. In cross-examination, Mr C.S. Cumming, a former officer of Roland Australia, said that Roland Australia was aware of this practice by retailers, but that it was acceptable because the use was in relation to products which has been purchased by the retailers from Roland Australia. That was not the case with the equipment advertised by Lorenzo in the Pro Audio catalogue. The catalogue shows the two devices in relation to various Roland equipment, not confined to the D-50. At the time of the release of that catalogue neither Roland Australia nor Roland had supplied to Lorenzo any of the products promoted in that catalogue.

2. In all of these circumstances there should not be implied any licence to reproduce the two devices in favour of retailers other than those who had purchased their Roland products from Roland Australia.

3. It follows that the cross-appeal should be allowed. There should be a declaration that Lorenzo has infringed the copyright in each of the R device and the B device, representations of which are shown as schedules 1 and 2 respectively to the application by reproducing those devices in the catalogue identified in the particulars to para. 7 of the Statement of Claim and by publishing such catalogue.

4. The appellant should pay the costs of the appeal and cross-appeal.