Microsoft Corp v Business Boost Pty Ltd

[1999] FCA 1384

FEDERAL COURT OF AUSTRALIA

Microsoft Corp v Business Boost Pty Ltd [1999] FCA 1384

COPYRIGHT - whether launching computer program for temporary storage and operation in Random Access Memory (“RAM”) is a reproduction in a material form

TRADE MARKS – infringement – “WINDOWS”, “MICROSOFT”

INTERLOCUTORY RELIEF – application for injunctions restraining respondent - reproduction, authorisation of reproduction, importation and distribution of computer programs - infringement or authorisation of infringement of trade marks - misrepresentations – whether serious questions of law and fact– exclusive right to reproduce literary work in material form – balance of convenience – delay – hardship – absence of threat – undertaking as to damages– whether transfer of program to hard disk is a reproduction in a material form

WORDS AND PHRASES – “controlling mind”, “RAM”

Copyright Act 1968 (Cth) ss 31(1)(a)(i), 36(1)
Copyright Amendment (Computor Programs) Act 1999 (Cth)
Trade Marks Act 1995 (Cth)

Tesco Supermarkets Ltd v Nattrass [1972] AC 153, cited
Data Access Corporation v Powerflex Services Pty Ltd [1999] HCA 49, cited
WEA International Inc v Haminex Corporation Ltd (1987) 17 FCR 274, cited
Dyason v AutoDesk Inc (1989) 18 IPR 109, cited

MICROSOFT CORPORATION AND MICROSOFT PTY LIMITED v

BUSINESS BOOST PTY LIMITED, PERRY TAIT, PASSIONS PTY LIMITED AND THERESA MILOSEVIC
N 244 OF 1999

TAMBERLIN J
SYDNEY
8 OCTOBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N244 OF 1999

BETWEEN:

MICROSOFT CORPORATION
First Applicant

MICROSOFT PTY LIMITED
Second Applicant

AND:

BUSINESS BOOST PTY LIMITED
(ACN 070 654 732) trading as PERRY TAIT'S;
also trading as COMPUTER WHOLESALERS DIRECT
First Respondent

PERRY TAIT
Second Respondent

PASSIONS PTY LIMITED (ACN 066 213 741)
trading as STARWORKS PROMOTIONS MARKETING
Third Respondent

THERESA MILOSEVIC
Fourth Respondent

JUDGE:	TAMBERLIN J
DATE:	8 OCTOBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. By application filed on 29 March 1999, the applicants (“Microsoft”) seeks interlocutory relief against the fourth respondent Theresa Milosevic (“Milosevic”) restraining her from reproducing or authorising the reproduction of a number of itemised Microsoft computer programs (“the programs”) and from importing or distributing the programs, from infringing or directing or procuring the infringement of Microsoft trade marks and from making misrepresentations in relation to them.  Orders are also sought for delivery up of infringing programs and associated equipment.

2. Microsoft proffers the usual undertaking as to damages if relief is granted.

3. There is no evidence that any permission or licence was granted by or on behalf of Microsoft to engage in the conduct presently complained of.

4. Microsoft’s case in relation to Milosevic is that without licence she reproduced or authorised the reproduction of the Microsoft programs on the hard disks of computer systems supplied by her or by the third respondent, a company over which she had control in the sense of being the company’s directing mind and will: see Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170. At all material times she was the director and shareholder of the third respondent, Passions Pty Limited (“Passions”), which trades under the name StarWorks Promotions Marketing (“StarWorks”).

5. Specifically, it is alleged that Milosevic caused Microsoft windows to be reproduced on the hard disk of at least three hardware systems.  Sale of these systems occurred in the period November 1998 through January 1999.  Claims are made under the Trade Practices Act 1974 (Cth) (“the TPA”) that Milosevic made misrepresentations in relation to sales of the systems to the effect that the installed software was in broad terms “authorised” or licensed. There is also a claim under the Trade Marks Act 1995 (Cth) in relation to the unauthorised use of the trade marks “MICROSOFT” and “WINDOWS”.

6. It is common ground that the issues for resolution are whether there is a serious question to be tried and if so, where the balance of convenience lies.

   Microsoft End-User License Agreement

7. Relevantly the Standard Microsoft End-User License Agreement (“EULA”) provides:

   “SOFTWARE PRODUCT LICENSE
   The SOFTWARE PRODUCT is protected by copyright laws and international copyright treaties, as well as other intellectual property laws and treaties. The SOFTWARE PRODUCT is licensed, not sold.

   1GRANT OF LICENSE.  This EULA grants you the following rights:

   ·    Systems Software.  You may install and use one copy of the SOFTWARE PRODUCT on a single computer.  If the SOFTWARE PRODUCT includes functionality that enables your single computer to act as a network server, any number of computers or workstations may access or otherwise utilize the basic network services of that server.  The basic network services are more fully described in the printed materials accompanying the SOFTWARE PRODUCT.

   …

   2         DESCRIPTION OF OTHER RIGHTS AND LIMITATIONS

   …

   ·    Software Transfer.  You may permanently transfer all of your rights under this EULA, provided you retain no copies, you transfer all of the SOFTWARE PRODUCT (including all component parts, the media and printed materials, any upgrades, this EULA and, if applicable, the Certificate of Authenticity), and the recipient agrees to the terms of this EULA.  If the SOFTWARE PRODUCT is an upgrade, any transfer must include all prior versions of the SOFTWARE PRODUCT.

   ·    Termination.  Without prejudice to any other rights, Microsoft may terminate this EULA if you fail to comply with the terms and conditions of this EULA.  In such event, you must destroy all copies of the SOFTWARE PRODUCT and all of its component parts.

   …

   4.COPYRIGHT.  All title and copyrights in and to the SOFTWARE PRODUCT (including but not limited to any images, photographs, animations, video, audio, music, text, and “applets”, incorporated into the SOFTWARE PRODUCT), the accompanying printed materials, and any copies of the SOFTWARE PRODUCT, are owned by Microsoft or its suppliers.  The SOFTWARE PRODUCT is protected by copyright laws and international treaty provisions.  Therefore, you must treat the SOFTWARE PRODUCT like any other copyrighted material except that you may either (a) make one copy of the SOFTWARE PRODUCT solely for backup or archival purposes, or (b) install the SOFTWARE PRODUCT on a single computer provided you keep the original solely for backup or archival purposes.  You may not copy the printed materials accompanying the SOFTWARE PRODUCT.”

   Serious question

8. Microsoft relies on twelve affidavits and a number of exhibits.  Milosevic has filed a short affidavit in relation to evidence concerning difficulties with respect to service on her.

   Legislation

9. The subsistence of copyright in Microsoft is not in dispute. Microsoft says that the applicant has infringed s 36(1) of the Copyright Act 1968 (Cth) (“the Act”) which provides:

   “36     Infringement by doing acts comprised in the copyright.

   (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.”

10. The relevant right asserted by Microsoft is its exclusive right in the case of a literary work to reproduce the work in a material form: see s 31(1)(a)(i).

11. Literary work is defined in s 10 in the Act to include a computer program or compilation of computer programs. That section defines computer program to mean:

    “an expression, in any language, code or notation, of a set of instructions … intended, either directly or after either or both of the following :

    (a) conversion to another language, code or notation,
    (b) reproduction in a different material form;

    to cause a device having digital information processing capabilities to form a particular function.”

12. The subsistence and infringement of copyright in computer programs was recently considered in some detail by the High Court in Data Access Corporation v Powerflex Services Pty Ltd [1999] HCA 49. However, that case was principally concerned with the question whether copyright subsists in individual commands and whether an individual command could be a “computer program”. The High Court held that it was not because it was not within the description of a “set of instructions” or a “substantial part” thereof.

13. In the present case Microsoft points out that s 36(1) covers authorization of the infringing act as well as performance of the infringing act itself. Both the reproduction of the work and its authorization have been described as being separate and distinct so that infringement in either form is a distinct tort: see WEA International Inc v Haminex Corporation Ltd (1987) 17 FCR 274 at 284 per Gummow J.

14. Microsoft submits that in the present case the reproduction and authorisation of the infringement occurred by the loading and storing of the program on a hard disk and causing it to be loaded therefrom into Random Access Memory (“RAM”) each time the program was launched.

15. Microsoft says that Milosevic has infringed its copyright by installing or authorizing installation of the WINDOWS program onto the hard disks or by turning on the computer.  In addition, it alleges that she has authorised the reproduction of the program.

16. With respect to the question whether the launching of a program into RAM from Read Only Memory (“ROM”) can constitute, on the authorities, an infringement, it is fair to say that the question is an open one.  In Dyason v AutoDesk Inc (1989) 18 IPR 109, the members of the Full Court adverted to this question. At 141 Sheppard J said:

    “I deal with these questions as follows.  Counsel for Autodesk submitted that the transfer of the program in the disk to the computer’s random access memory or to a hard disk contained within the computer constitutes a reproduction or an adaptation.  If the proposition is otherwise sound, I do not think that it matters whether one takes the view that what is in the random access memory is a reproduction or an adaptation.  If it is not a reproduction, it must be an adaptation because it is a version of the work.  I have, however, serious misgivings whether it is appropriate to say that the transfer of the program to the random access memory itself constitutes either a reproduction or an adaptation.  I have less difficulty with the notion that the transfer of the program from a floppy disk to a hard disk within the computer is a reproduction or adaptation.  In my view it is.  I think that it may be inferred from the evidence that some users of AutoCAD would transfer the program to hard disks in their computers.  Counsel for Autodesk also submitted that the display on a screen connected to the computer of information contained within the program was, if not the reproduction, then an adaptation of a substantial part of what was contained within the program.  The same submission was made in respect of printouts of parts of the information contained within the program obtained from a printer attached to the computer.”  (Emphasis added)

17. It should be noted that his Honour considered that the loading onto the hard disk from a floppy disk was a reproduction.  His misgivings concerned the transfer of the program to RAM.

18. In the same case Beaumont J at 165 said:

    “On behalf of the appellants, it is submitted that loading a program into RAM in order to run it does not constitute a ‘reproduction’ of the program ‘in material form’.  They contend that running a program is analogous to reading a book or hearing a musical work.  They say it is the very use intended to be made of the work.

    There is force in the appellants’ submission. However, for reasons which will be given shortly, it is not necessary to decide the point. Instead, I will assume, for the purposes of the argument, that running AutoCAD should be treated as a reproduction in a material form for the purposes of … the Act.”

19. Lockhart J at 120 left the question open.

20. In order to support its position on this aspect, Microsoft referred to the explanatory memorandum to the Copyright Amendment (Computer Programs) Act 1999 (Cth), which proceeds on the assumption that “running” a program could amount to copyright infringement. The Draft Report on Computer Software Protection of the Copyright Law Review Committee in June 1993, also proceeded on the basis that each time the purchaser of a copy of a computer program used a program, he or she arguably exercised the copyright owners right to reproduce the program in a material form: see par 10.07 under the heading “Exceptions to Exclusive Rights”. It seems to me, however, that this material is only of marginal assistance in the present case.

21. For present purposes I am satisfied that there is an open and serious question of law as to whether the launching of a computer program for temporary storage and operation in RAM is a reproduction in a material form and also as to whether the transfer of a program to the hard disk is a reproduction in a material form.

22. In relation to the issue of whether there is a serious question on the facts, the principal evidence relied on concerned the purchase of computers with software by two persons, Ms Helen Richter and Ms McPhie.  Ms Richter says that in October 1998 she placed an order with StarWorks (the business name of Passions) for a PC system advertised at a purchase price of $604.  She received a letter on or about 14 October signed by Milosevic confirming the purchase which was expressed to include:

    “Ex government refurbished Famous Brand 486
    complete with the SVGA Screen, the hard drive,
    the floppy drive, the keyboard and the mouse
    …”

23. On 10 November 1998 she received the PC.  She experienced some operating problems and on 17 November contacted an independent computer firm “Hire Intelligence” to assist.  She was told that the PC had installed on it a copy of WINDOWS 3.1 and MICROSOFT DOS.  She says she contacted StarWorks and complained that she had not received any disks of the software or any manuals or a licence agreement and was told they were “shareware”.

24. On 20 November 1998, she says that she again contacted StarWorks and spoke to Milosevic who told her that the software was “shareware”.  She was then referred to a technician.  On about 7 January 1999, the system ceased to operate and she returned the first computer to StarWorks.  On 12 January she received a replacement.  Included in the documentation from StarWorks with the replacement computer was a brochure entitled “HELLO THERE” which relevantly reads:

    “Thank you for Purchasing your new computer from Star Works!
    …
    Firstly, I would like to tell you a little bit about the windows version you have.  I have installed & set up for you WINDOWS ‘95b (beta).  This version is much better than the original Windows ‘95, because it had lots of bugs in it, where as this one doesn’t!” (First emphasis added)

25. On setting up the system she saw that it had Windows 95 installed. A few days later she complained to Milosevic about not being given any disks or licence for Windows. She says that Milosevic said to her:

    “That’s just the way it is.  We actually bought the rights from Microsoft and we just download it.” (Emphasis added)

26. In early February 1999 the PC stopped working and StarWorks sent Ms Richter a start-up disk for Windows 95 but that also did not work.

27. Ms McPhie gave evidence that in mid-October 1998 she ordered a computer from StarWorks.  On 22 October she received a letter signed by Milosevic confirming the purchase of an:

    “Ex government refurbished Famous Brand 486
    complete with SVGA Screen, the hard drive,
    the floppy drive, the keyboard and the mouse
    All for   $449.00”

28. Also included in the sale at a separate price of $100 was Windows 95.

29. Although a deposit of $280 was paid on 16 October the computer did not arrive.  On 4 November 1998 Ms McPhie spoke with Milosevic at which point Ms Milosevic said that the PC would not be dispatched until payment was made in full. On 5 November the balance was paid.

30. On 17 November, the PC not having been delivered, Ms McPhie says she complained to the NSW Department of Fair Trading.  The PC system was received on 18 November.  Windows 95 was installed on the hard disk drive but no software or manuals were included with the PC.  The system jammed and she complained to Milosevic.  She took the system to a local technician, CompuSound Computer Centre and Mr Tosen, a technician, examined it.  On 23 November she again spoke to Milosevic and was told that a refund would not be issued. 

31. An affidavit by Mr Tosen was filed.  He says that he found Microsoft Windows 95 installed in the system with parts of Microsoft Plus! For Windows.

32. Searches at the Australian Securities and Investments Commission (“ASIC”) in relation to the third respondent, Passions Pty Limited, disclosed that Milosevic was the sole director, secretary and shareholder and that Passions was the current proprietor of the business name “StarWorks Promotions and Marketing.”  The previous proprietor of the name up to 30 October 1998 was shown as Milosevic. 

33. Evidence of the terms of the standard Microsoft Licence Agreement are contained in the affidavit of Laurine Fabbrick of 30 April 1999.  There is no evidence of any permission having been given to Milosevic in any form to carry out the acts complained of.

34. On the evidence presently before me I am satisfied that there are serious questions of fact and law to be tried as to whether there has been infringing conduct by Milosevic installing the Microsoft programs or authorising the reproduction of the programs including, in particular, Windows 3.11 and Windows 95.

    Trade Marks

35. I am satisfied for present purposes that Microsoft is the registered owner of trade marks registered in classes 9 and 16 for the marks “MICROSOFT” and “WINDOWS” under the Trade Marks Act 1995 (Cth) (“TMA”). I am also satisfied that there is a serious question, raised on the evidence referred to above, whether StarWorks has used those registered marks without permission. I am also satisfied that Milosevic was at all relevant times the controlling mind and directing will of the third respondent Passions. In particular, the “HELLO THERE” brochure referred to in the evidence of Ms Richter shows that the words “WINDOWS 95” and “Microsoft” were used by the third respondent and that there is a serious question to be tried on those matters.

36. Accordingly, in light of the evidence referred to above, I am also satisfied that there is a serious question on the allegations made under the TMA.

    Balance of convenience

37. No evidence was given by Milosevic on this point.  However, several matters were raised in submissions.  The first is that there is no evidence that since early 1999 Milosevic has engaged in the conduct complained of, and that there is no evidence of any threat to currently resume that or similar conduct.  Next, it is submitted that the hardship to Milosevic if interlocutory relief is granted, will be greater than that which might be suffered by Microsoft.  It is also said that there has been undue delay on the part of Microsoft.

38. The “delay” argument is not strong. The application was taken out at the end of March 1999. The evidence indicates that solicitors were engaged at least by early February 1999 and it was in my view reasonable for Microsoft to make investigations before commencing proceedings.  Interlocutory relief was sought on 29 March 1999 and there had been some difficulties in effecting service.  I do not attach any particular significance to the problems concerning service on the material before me.  The matter was fixed for hearing in May.  In these circumstances, I am not satisfied there was any delay which would disentitle Microsoft from interlocutory relief.

39. I do not consider that the absence of any threat to repeat the conduct complained of is of importance because the proceedings have in fact been on foot since March and this would partly explain the absence of infringing conduct by Milosevic since that time.

1. On the question of balance of convenience and competing hardships, the evidence of Microsoft, in my view, outweighs any generalised presumptive hardship which is asserted on behalf of Milosevic.  The absence of any evidence by Milosevic on this aspect as to particular hardship strengthens the inference that there is no greater hardship imposed on her. In reaching this conclusion I have borne in mind the existence of the usual undertaking as to damages and the capacity of Microsoft to meet this undertaking if required.

2. Accordingly, I am satisfied that a case for interlocutory relief has been made out, and on the basis that Microsoft has proffered the usual undertaking as to damages, I will make appropriate orders.

3. I direct the applicant to bring in proposed Short Minutes of Order within seven days.

4. Also listed before me was a motion by the Milosevic for particulars.  I was informed at the commencement of the hearing that that question had disappeared.  Accordingly, that motion should be dismissed and this might be embodied in the proposed draft orders.

I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated:             8 October 1999

Counsel for the Applicant:	R Cobden
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the Respondent:	D Ash
Date of Hearing:	22 September 1999
Date of Judgment:	8 October 1999