Microsoft Corporation & Ors v Mayhew
[2008] FMCA 121
•12 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MICROSOFT CORPORATION & ORS v MAYHEW | [2008] FMCA 121 |
| COPYRIGHT – Infringement – unauthorised copying of complete programs and operating systems onto computers for sale as a package which was more attractive to purchasers – the respondent’s breach made in the knowledge of the applicants’ rights – computer package containing unauthorised copy sold to applicants’ investigators. |
| Copyright Act 1968 (Cth), ss.10, 13, 14, 31, 36, 38, 115, 116 Powers of Attorney Act 1998 (Qld) Trade Practices Act 1974 (Cth) |
| Autodesk v Cheung [1990] FCA 97 Colombia Pictures Industry Link & Anor v Muckins [1996] FCA 1606 Fenning Films Services Ltd v Wolverhampton, Walsall & District Cinemas Ltd [1914] 3 KB 1171 Led Builders Pty Ltd v Equal Homes Pty Ltd (1999) 44 IPR 24 Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643 Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522 Nominet UK v Diverse Internet Pty Ltd (No 2) (2005) 68 IPR 131 Paramount Picture Corporation v Hasluck [2006] FCA 1431 Raven Croft v Herbert & New England Library [1980] RPC 193 Walsall v District Cinemas Ltd [1940] 3 KB 1171 |
| First Applicant: | MICROSOFT CORPORATION |
| Second Applicant: | MICROSOFT PTY LIMITED |
| Third Applicant: | MICROSOFT LICENSING, GP |
| Respondent: | RODNEY MAYHEW TRADING AS RODNEY’S COMPUTERS |
| File number: | SYG 1969 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 3 December 2007 |
| Delivered at: | Sydney |
| Delivered on: | 12 February 2008 |
REPRESENTATION
| Solicitors for the Applicants: | Mr G Hansen of Harris & Co |
| Advocate for the Respondent: | Mr L W Clampett |
ORDERS
Rodney Mayhew, whether by himself, his servants or otherwise howsoever, be restrained from infringing Microsoft Corporation’s copyright in the computer programs described on the schedule attached hereto (Microsoft Programs) by reproducing or authorising the reproduction of Microsoft programs or a substantial part thereof without the licence of Microsoft Corporation.
Rodney Mayhew, whether by himself, his servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom Rodney Mayhew supplies or offers to supply any Microsoft program, which has been wholly or partly reproduced, without a licence of Microsoft Corporation
Judgment be entered under s.115(2) of the Copyright Act 1968 (Cth) against Rodney Mayhew in the sum of $1,126.35.
Judgment be entered under s.115(4) of the Copyright Act 1968 (Cth) against Rodney Mayhew in the sum of $12,000.
Rodney Mayhew to pay the applicants’ costs of the proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1969 of 2007
| MICROSOFT CORPORATION |
First Applicant
And
| MICROSOFT PTY LIMITED |
Second Applicant
And
| MICROSOFT LICENSING, GP |
Third Applicant
And
| RODNEY MAYHEW T/AS RODNEY’S COMPUTERS |
Respondent
REASONS FOR JUDGMENT
This application was brought by Microsoft Corporation, Microsoft Pty Ltd and Microsoft Licensing, GP (together referred to as “Microsoft”) against Rodney Mayhew trading as Rodney’s Computers seeking injunctive relief and damages arising from what is alleged to be breaches by Mr Mayhew of copyright held by Microsoft and breaches of the Trade Practices Act 1974 (Cth).
Background
In the application lodged in these proceedings, it is alleged that
Mr Mayhew has been engaged in the computer retail industry since at least 3 December 2006 and is trading under an unregistered business name. He identifies himself to the consumer public as one of the “Official Microsoft Windows Vista Beta Testers”. Trademark Investigation Services (TMIS), on the instructions of Microsoft, conducted a test purchase of a computer hard drive from Mr Mayhew. The computer was supplied loaded with Microsoft software without appropriate licenses.
Microsoft filed an application in this Court on 26 June 2007 seeking an order that Mr Mayhew be restrained from infringing Microsoft’s copyright in their computer programs by reproducing Microsoft programs without a licence from Microsoft. The matter was first before the Court on 3 August 2007. There was no appearance by
Mr Mayhew or his representative. The Court was advised that all attempts by the applicants to serve Mr Mayhew at his known address were unsuccessful. I made an order for substituted service of the application and affidavits in support of these proceedings to be affected on Mr Mayhew’s father.
At the directions hearing of 14 September 2007, Mr Mayhew attended by telephone and procedural orders were made including setting the matter down for final hearing on 3 December 2007. These orders included that subpoenas and notices to produce were returnable before a Registrar on 26 September 2007 but nothing was returned on that date. Nor was anything returned on three subsequent listings before Registrars on 17 October, 31 October and 14 November 2007.
Mr Mayhew’s representative
On 9 September 2007, the Court was notified by an email sent to my Associate that a Mr Leonard Clampett held power of attorney for
Mr Mayhew and was his representative. The email was in the following terms:
Your Honour,
I act for RODNEY MAYHEW in MICROSOFT CORPORATION, MICROSOFT PTY LTD AND MICROSOFT, GP V RODNEY MAHEW with Power of Attorney for this matter.
After considerable consultation, RODNEY MAYHEW has agreed to seek settlement. I have advised that GRANT HANSEN of HARRIS & CO SOLICITORS who have failed to respond at this time.
RODNEY MAYHEW prefers to settle this matter.
Thank you,
Leonard Clampett
Authorised Representative
In correspondence sent in September 2007 to Microsoft’s solicitors, Harris & Co Solicitors, Mr Clampett stated that he represented
Mr Mayhew and requested that all communication (verbal, written, electronic or otherwise) be directed to him. He provided his email and post office box addresses and telephone numbers. On 21 September 2007, a response prepared by Mr Clampett was filed. The response states that Mr Mayhew opposed the making of all orders sought in the application and did not consent to any orders. The response also sought settlement by negotiation, which was also listed as the ground of opposition. It was signed by “Leonard Clampett, Power of Attorney”.
Since the first email and the filing of the response, Mr Clampett has sent both my chambers and Harris & Co a considerable volume of correspondence, mainly directed at issues peripheral to the proceedings.
In a letter to Harris & Co copied to my chambers, Mr Clampett stated that he had placed a block on his email service, preventing receipt of any documents relating to these proceedings. Harris & Co continued to address correspondence to Mr Mayhew at his ordinary address. They responded that due to content and tone of Mr Clampett’s correspondence, they were no longer prepared to deal with him. As
Mr Mayhew was the respondent in these proceedings, they would continue to deal with him unless notified that a properly qualified solicitor admitted to practice in a relevant jurisdiction had been appointed to represent Mr Mayhew.
Adjournment application
At the directions hearing held on 14 September 2007, this matter was set down for a one-day hearing on 3 December 2007. On Sunday,
2 December 2007, the Registry received the following facsimile fromMr Clampett:
Dear Sir / Madam,
For the hearing scheduled for 10.15am on Monday the 3rd of December 2007, as advised by letter on Friday the 30th of November 2007, I require an adjournment.
The reason my letter regarding this matter was delivered on Friday Afternoon the 30th of December 2007 was because I have not been served with any papers by MICROSOFT for SYG 1969/2007.
The remainder of the letter contains inappropriate comments about members of the legal profession engaged by Microsoft.
At the commencement of the hearing on 3 December 2007, I confirmed with Mr Hansen, for the respondents, that he had received copies of the letter seeking an adjournment. I said that I intended to link
Mr Clampett by telephone and hear what he had to say about this adjournment. Mr Hansen then sought leave to tender an affidavit relating to the service of affidavits alluded to in Mr Clampett’s correspondence. I granted leave and also stated that a substantial volume of emails had been sent to my Associate about various issues concerning service and Mr Clampett’s representation of Mr Mayhew.
I indicated that I was unsure what status he claims other than that he holds power of attorney and wishes to appear as some form of lay advocate.
Mr Hansen also tendered a letter from Michael Wilson of counsel who appeared for Microsoft in the District Court of Queensland in proceedings commenced by Mr Clampett against Microsoft. That letter states:
…I am pleased to confirm that his Honour, Judge McGill, struck out the claim of the plaintiff and ordered our costs of the whole proceedings to be paid as assessed on the indemnity basis.
It must be noted also that his Honour:
struck out the claim on both the basis of no reasonable cause of action as well a technical point of the extent of the power of attorney. This will prevent the plaintiff simply refiling the claim.
Mr Clampett attended the hearing in this Court by telephone and confirmed that he appeared as a lay advocate and sought an adjournment of the hearing. His claimed power of attorney was also referred to. Essentially, the basis of Mr Clampett’s argument focused on the service of documents. Mr Clampett confirmed that he had originally informed Harris & Co that service of documents could be done by email and that he had provided them with these details. However, as mentioned above, he subsequently caused his email service to block attachments and documents in respect of this matter.
The explanation for this action was confused and Mr Clampett launched on a strident attack on the legal profession and this Court. Highly provocative comments were made alleging inappropriate behaviour from Microsoft’s solicitors. This was also interspersed with illogical references to the Powers of Attorney Act 1998 (Qld), the proceedings in the District Court of Queensland on claims of trespass and some unusual comments regarding the operation of the Trade Practices Act (Cth) and the Australian Constitution.
The application for adjournment was denied and I proceeded with the hearing as scheduled. I said that I would hear formal submissions from Mr Hansen in respect of his application and that if Mr Clampett wished to make any submissions, he would have an opportunity to do so.
Evidence
Mr Hansen read the following affidavits:
i)affidavit of Giselle Kirsty Brasier sworn 26 June 2007 (first affidavit of Ms Brasier);
ii)affidavit of Rachel Hodge sworn 5 June 2007;
iii)affidavit of Stephen Tsigounis sworn 25 June 2007;
iv)affidavit of Giselle Kirsty Brasier sworn 31 August 2007; (second affidavit of Ms Brasier)
v)affidavit of Melanie Ang sworn 14 September 2007;
vi)affidavit of Melanie Ang sworn 16 October 2007 (second affidavit of Ms Ang);
vii)affidavit of Vanessa Hutley sworn 13 November 2007;
viii)affidavit of Mark William Crawford sworn 29 November 2007
ix)affidavit of Melanie Ang affirmed 30 November 2007 (third affidavit of Ms Ang);
x)Exhibit “A1”, Conditional notice of intention to defend filed in the District Court of Queensland in proceedings 3086/2007;
xi)Exhibit “A2”, letter of Michael F Wilson dated 14 November 2007.
When Mr Clampett was asked whether he objected to those affidavits, he said that he objected to them all on the basis that they were all untrue. I noted Mr Clampett’s objection.
An affidavit of Mr Mayhew was affirmed on 13 September 2007 but not file stamped by the Court Registry. This was provided to Harris & Co. and I will allow the affidavit into evidence. This affidavit was not addressed by Mr Clampett who instead appeared to direct all his efforts to criticising the Court and solicitors for the other side rather than advancing Mr Mayhew’s interests.
Microsoft and Microsoft programs
The corporate structure and relationship of the applicants is drawn from uncontested evidence in the first affidavit of Ms Brasier. The first applicant, Microsoft Corporation, has its place of business at 1 Microsoft Way, Redmond, Washington, USA and is one of the largest publishers of computer software for PCs in the world. The second applicant, Microsoft Pty Limited, is an Australian company with its registered office in New South Wales and is a wholly owned subsidiary of Microsoft Corporation. Microsoft Pty Limited provides marketing and technical support for Microsoft Corporation’s products in Australia. The third applicant, Microsoft Licensing GP, is a Nevada General Partnership and the worldwide exclusive licensee of the copyright of Microsoft Original Equipment Manufacturers (OEM) programs. It is also a wholly owned subsidiary of Microsoft Corporation. Prior to 1 September 2003, the licensee of Microsoft OEM programs was Microsoft Licensing Inc. However, from that date all rights, titles and interests in the OEM licensing business were transferred to Microsoft Licensing, GP.
Microsoft Corporation retains ownership of the copyright and other intellectual property rights subsisting in Microsoft OEM products. These programs are marketed by reproducing them on CD-ROM and packaged with manuals and other documentation. The programs are frequently updated and new versions issued. Every copy of a Microsoft program published by Microsoft Corporation bears a copyright notice identifying Microsoft Corporation as the publisher and copyright owner on each component item of that product included within the program itself, on CD-ROM, the product manual and the packaging. This practice has been adhered to consistently since Microsoft Corporation commenced publishing computer programs.
Microsoft Corporation does not permit persons to reproduce Microsoft programs unless they are licensed to do so, either as part of the manufacturing distribution process or pursuant to Microsoft’s End-User licensing arrangements. Authorised copies of Microsoft programs are reproduced on CD-ROM and assembled and packaged by companies known as “authorised replicators”. Authorised replicators are obliged to observe strict standards and specifications in relation to the making, assembling and packaging of the copies. Subject to an agreement, they are entitled to sub-contract their obligations in respect of replication and assembly of products. Microsoft does not licence, and has not at any time licensed, any person or entity other than authorised replicators and their approved sub-contractors to reproduce Microsoft programs for distribution on compact discs. From the records of Microsoft Corporation, Microsoft Pty Ltd and Microsoft Licensing, it is possible to ascertain whether a particular personal company is an Authorised Replicator or an approved sub-contract.
Rodney Mayhew
Rodney Mayhew trades under an unregistered business name of “Rodney’s Computers”. He has been engaged in the computer retail industry since at least 3 December 2006 and identifies himself as one of the “Official Microsoft Windows Vista Beta Testers”. A search of the records of Microsoft Corporation, Microsoft Pty Ltd and Microsoft Licensing reveals that Rodney Mayhew, trading as Rodney’s Computers is not, and never has been, an Authorised Replicator or approved sub-contractor of an Authorised Replicator. Searches also indicate that Microsoft has not instructed or authorised any Authorised Replicator to deliver products to Rodney Mayhew, nor does he hold or ever held a Royalty OEM. Similarly, searches reveal that Mr Mayhew is not and never has been a Microsoft OEM distributor.
Microsoft’s claims
The uncontested evidence of Ms Brasier in her first affidavit at [47] is that on 27 November 2006, she instructed Trademark Investigation Services (“TMIS”) to conduct a test purchase of computer hard drive from Rodney’s computers. On or about 13 April 2007, TMIS purchased a computer from Mr Mayhew which was loaded with Microsoft Windows XP Professional Edition and Microsoft Office XP Professional Edition, but no licenses in respect of that software supplied with that software. Supplied with a computer were two white coloured TDK branded recordable compact discs with “Window XP Pro” and “Office XP Pro” written respectively on the surface of the discs in what appears to be blue ink. Ms Brasier’s evidence is that the computer discs are counterfeit copies respectively of Microsoft Windows XP Professional Edition and Microsoft Office XP Professional Edition.
The affidavit of Rachel Hodge states that she is an employee of TMIS which was retained by Microsoft Pty Ltd to investigate reports of infringement of Microsoft Corporation Copyright in Australia. Her affidavit contains a number of emails between herself and Mr Mayhew in respect of purchasing a personal computer (PC) loaded with Microsoft software. When those arrangements have been completed, she attended the premises of Mayhew and spoke to a man who identified himself as “Rodney”. She deposes that “Rodney” packed a computer in a box and that she subsequently marked the purchased computer 07001/07 and forwarded it to Ms Brasier. Ms Brasier deposes that she instructed Stephen Tsigounis to examine the computer marked 07001/07 and two CDs which accompanied it marked 07002/07(A) and 07002/07(B).
Mr Stephen Tsigounis in his uncontested affidavit indicates that he is employed by Datacom Connect, a company which provides IT support services to Microsoft Pty Ltd. He has held a number of positions in that organisation and since February 2004 has carried out PC audits which involves determining what programs are loaded on a particular PC associated with Microsoft anti-piracy activities. He holds a number of technical qualifications which qualify him to undertake this work.
Stephen Tsigounis deposes that Ms Brasier requested he examine a computer identified as 07001/07 and confirms that that computer had Microsoft Windows XP Professional Edition and Microsoft Office XP Professional Edition installed on its hard drive.
Consideration
Copyright infringement
Section 10 of the Copyright Act 1968 (Cth) (“the Act”) defines “literary work” to include computer programs and compilations of computer programs. The combined effect of ss.13,14,31, 36 of the Act is that it is an infringement of copyright in a literary work for a person to reproduce or authorise reproduction of a literary work in a material form without the licence of a copyright owner. Section 38(1) of the Act provides that it is also an infringement of copyright if a person, without licence from the owner of the copyright:
(a) sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or
(b) by way of trade exhibits an article in public;
if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright…
All of the evidence before this Court is in the form of uncontested affidavits. The evidence of Ms Hodge permits this Court to infer that the reproduction of the Microsoft Software to the hard drive of the PC identified as 07001/07 and the creation of the CDs marked 07002/07(A) and 07002/07(B) was carried out by or on the behalf of Rodney Mayhew. Mr Mayhew told Rachel Hodge in email dated 12 April 2007 (affidavit of Rachel Hodge, annexure E p.15):
I’ll then install Windows on it and Office.
I am satisfied that the mere sale or offer for sale of the PC loaded with the unauthorised copies of the Microsoft Software constitutes an infringement of. s.38(1) of the Act.
The first affidavit of Ms Brasier, in particular paragraphs [18], [33], [24], [25], [28], [32], [36], [37], [45], [51], [52] and [54], clearly establishes that the reproduction of the Microsoft software was unauthorised. The evidence is that Microsoft Corporation strictly controls the authorisation of the making of copies of its software. The only persons who may make authorised copies of software for sale are “Authorised Replicators”, Royalty OEMs, Microsoft OEM System Builders installing OEM software on PCs for sale and the purchasers of retail software. System builders and purchasers of retail software may only resell the software if, in the case of OEM Systems, they are sold with a PC together with CD-ROMs, manuals and certificates of authenticity. Purchasers of retail software may only resell them if they comply with the requirements of the End User License Agreement and the software is sold together with documentation.
The undisputed evidence is that Mr Mayhew was operating as a Personal Computer System Builder. Rachel Hodge contacted him and indicated that she wanted a computer with certain characteristics. Mr Mayhew then proceeded to acquire or put together that computer package as if he were acting lawfully, and that he would be able to buy OEM software from a distributor of Microsoft Corporation and load that software onto the hard drive of the computer he proposed to sell. I accept the evidence of Ms Brasier that if that had happened, then the PC sold by Mr Mayhew would have certain identifying characteristics. In particular, it would have a certificate of authenticity but this was not present. The original discs for the operating system are clearly identifiable by the high quality finish carrying Microsoft identification. These discs have complex security built into them, making them hard to counterfeit. The discs supplied with this system clearly did not meet those criteria. The package would be also supplied with a manual but this was not present.
The System Builders Licence makes clear that the System Builder can only supply OEM software provided that the builder includes certificates, discs and manuals. I accept the evidence of Ms Brasier that the certificate, discs and manual did not accompany this PC and that I accept that this was an unauthorised sale. The reproduction to the hard drive was carried out unlawfully and the reproduction to the CD-ROM supplied with the PC was also unlawful.
Compensatory damages
Mr Mayhew’s unauthorised reproduction of the Microsoft software has deprived Microsoft of the licence fees attributable to that software. Microsoft is consequently entitled to compensatory damages under s.115(2) of the Act. The traditional approach to calculate damages for infringement of copyright is to use the “license fee” approach described in Autodesk v Cheung [1990] FCA 97 at [75] per Wilcox J. The evidence of Vanessa Hutley is that the OEM and the retail prices of Microsoft software is highly confidential and sensitive.
Mr Hansen submits that the manner in which Mr Mayhew and his purported authorised representative, Mr Clampett, have conducted themselves throughout this matter raises serious concern about their credibility. The evidence of Ms Ang indicates that either Mr Mayhew or Mr Clampett have disclosed “without prejudice” discussions to a purported third party, Mr Charles Windemere. This, together with other behaviour identified above, confirms that there would be considerable risk in disclosing commercially confidential information to Mr Mayhew or a representative of his, in assessing damages on a “license fee” basis.
I also accept the submission of Mr Hansen that an account of profits under s.115(2), or damages under conversion under s.116 of the Act, is not available to Microsoft as Mr Mayhew and Mr Clampett have not provided all invoices and purchase orders relating to the purchase of components used to build the PC supplied to Ms Hodge on 16 April 2007. This is despite the fact that Microsoft requested these documents in its notice to produce issued on 9 October 2007.
As it is inappropriate in this case to apply the “license fee” approach, I will treat the damages as being “at large” in accordance with the authorities set out in Autodesk v Cheung and Fenning Films Services Ltd v Wolverhampton, Walsall & District Cinemas Ltd [1914] 3 KB 1171 at 1174. In pursuing this course, I will attempt to assess the estimated loss of income arising from the infringement as discussed by Tamberlin J in Colombia Pictures Industry Link & Anor v Muckins [1996] FCA 1606 at [13]. To assist this task, I rely on the uncontested evidence of Mark William Crawford who has prepared a report calculating a reasonable license fee and sets out a sum which would be agreed between a winning licensor and licensee in a hypothetical arms length negotiation. I also rely on Nominet UK v Diverse Internet Pty Ltd (No 2) (2005) 68 IPR 131; Paramount Picture Corporation v Hasluck [2006] FCA 1431; Led Builders Pty Ltd v Equal Homes Pty Ltd (1999) 44 IPR 24.
I have been provided with the following evidence to perform this assessment:
a)during the period from 2002, the recommended retail price for a single licenced copy of Microsoft Windows XP Professional Edition was $479 (second affidavit of Ms Brasier at [3]);
b)the last known recommended retail price for a single licence copy of Microsoft Office XP Professional Edition was $899 (second affidavit of Ms Brasier at [4]);
c)the percentage discounted from the recommended retail price of operating systems software to reflect a reasonable licence fee is at minimum 15% and at maximum 50% (affidavit of Mark William Crawford at [2(ai)]);
d)the percentage discounted from the recommended retail price of office automation software to reflect a reasonable licence fee is a minimum of 20% and a maximum of 50% (affidavit of Mark William Crawford at [2(bi)]);
In all the circumstances, I find that Microsoft is entitled to compensatory damages under s.115(2) of the Act in the sum of $1,126.35 from the unauthorised hard disc loading buyer, Mr Mayhew of Microsoft XP Professional Edition and Microsoft Office XP Professional Edition on the PC (identified as 07001/07) purchased on 13 April 2007. This figure is calculated as follows:
RRP of Microsoft Windows XP Professional Edition = $495
minus 15% (minimum percentage discount from RRP) = $407.15
RRP of Microsoft Office XP Professional Edition = $899
minus 20% (minimum percentage discount from RRP) = $719.20
Total = $1,126.35
Additional damages
In addition to compensatory damages, the applicants also seek additional damages under s.115(4) of the Act based on a claim that there was a deliberate infringement of copyright for gain which constitutes deliberate and flagrant conduct: Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522 per Conti J at [223]; Raven Croft v Herbert & New England Library [1980] RPC 193 per Brightman J at [208].
In Mr Mayhew’s affidavit at [13], he deposes of himself in the third person, that he has been an accredited beta tester for Microsoft Corporation for about ten years and has tested many pre-released programs. Further that he is still being asked to partake in further beta testing and holds a Master Licence Agreement with Microsoft Corporation for beta testing. I have considered that evidence together with the matters deposed by Rachel Hodge and the emails which form the exhibits to her affidavit. I am satisfied that Mr Mayhew is not a naïve user of software and has deliberately infringed copyright. I have formed the view that the correspondence exchanged between Mr Hodge and Mr Mayhew clearly indicates that if Mr Mayhew meets purchaser resistance in making a sale, he gets around that impediment by dropping the price. If the purchaser still wants the software, Mr Mayhew infringes copyright because that infringement is free of charge to him. I am satisfied that there is sufficient evidence to indicate that the infringement was deliberate.
Mr Mayhew’s affidavit, which was issued in response to the claims made against him, makes no attempt to meet any of the allegations put against him. Nor does he seek to justify what has happened on the basis that it could have happened legally.
Evidence of Mr Mayhew’s deliberate infringement is found in the evidence of Rachel Hodge and set out in her affidavit. Annexure “C” to that affidavit contains an email from Mr Mayhew:
…the thing that pushes the price up is Windows even though it’s an OEM version (original equipment manufacture – version installed on new PC’s) as it’s worth around $200 on its own.
Another way is the same system - $200 cheaper and ill-installed Windows XP at no cost for you if you wish – so that price will drop to $690 and ill [I’ll] see that what I can do about Office.
Mr Mayhew is aware of what the software itself is worth and, by simply copying the software rather than buying and supplying it lawfully, he deprived Microsoft of their licence fee.
In annexure “D” to Ms Hodge’s affidavit, Mr Mayhew emailed Ms Hodge on 11 April 2007 and stated:
…The grand total is $638 for the following system, and [I’ll] install Windows and Office XP Professional instead of 2007 – your choice.
The email then contains a quote for the PC which does not list any Microsoft software, operating system or office application of any kind. Annexure “E” to Rachel Hodge’s affidavit contains Mr Mayhew’s email to her of 12 April 2007 at 2.32pm which states:
I have received word that the system would be ready this afternoon, [I’ll] then install Windows on it and Office.
In the further email on 12 April 2007 at 5.52pm, Mr Mayhew states:
Picked up all items for your system this afternoon. I also then discovered that my copy of Windows XP Professional (home version no longer available) needs to be replaced. I’ll put a fresh install on your computer including service pack 2.
In annexure G of Rachel Hodge’s affidavit is an email forwarded by Mr Mayhew to Rachel Hodge on 13 April 2007 where he confirms that:
XP Pro and Office 2003 are included as well as copies on CD for backing up purposes.
In annexure “I” is an invoice made out to Rachel McKeown. That invoice mirrors the quote by Mr Mayhew in the email contained in annexure “D” (at [41] above). That invoice does not list any Microsoft software or indeed any operating system of Office applications.
I am satisfied from the evidence that the failure to list the software on the invoice shows that Mr Mayhew was aware that he had to conceal the fact and nature of the sale of the software. Further, I believe that there is sufficient evidence to support the view that Mr Mayhew deliberately and knowingly installed copies of Microsoft software on the PC and copied that software onto compact discs for a financial gain of $638, which constitutes a flagrant infringement of Microsoft’s copyright for financial gain.
This infringement allowed Mr Mayhew to make a sale without purchasing software from an authorised distributor and, therefore, at no cost to himself. Mr Mayhew used the free installation of the Microsoft software as a selling point to entice Ms Hodge into the sale of the PC hardware. This behaviour took place in an environment of a competitive computer industry which reacts to very small price differences.
I am guided by Conti J in Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522 at [260]:
(iv) Need for deterrence
[260] As the designation ‘certificate of authenticity’ implies, the applicants emphasised that the COA system constituted a means put in place by Microsoft by way of assurance to bona fide users of acquisition of authentic Microsoft products. The applicants’ case was that the respondents’ infringement of copyright, taking the form of the purchase and profitable disposition of counterfeit COAs in the course of the operation of PC Club’s business of computer hardware system building, constituted a serious abuse of Microsoft’s security device designed to minimise infringements of copyright. The applicants asserted the need for the Court to deter the respondents, as well as other putative abusers, from committing infringements of the Microsoft copyright by the use of counterfeit security devices such as COAs.
The fact that Mr Mayhew volunteered free installation of the software indicates to me that this was his ordinary practice when he encountered resistance and, borrowing the words of Conti J, this Court needs to “deter the respondent, as well as other putative abuses, from committing infringements of Microsoft’s copyright”.
The second affidavit of Ms Brasier indicates that the distribution of unlicensed software of the type in this case compromises the integrity of Microsoft’s licensing and distribution system. Ms Brasier’s uncontested evidence is that such infringements pose a threat to the business viability of genuine dealers in Microsoft programs whose survival is essential to Microsoft’s effective marketing of their programs in Australia.
The original application to this Court filed on 26 June 2007 sought orders in the following terms:
1. An order that the respondent, whether by himself, his servants, agents or otherwise howsoever, be restrained from infringing the first applicant’s copyright in the computer programs described on the schedule hereto (“Microsoft programs”) by reproducing or authorising the reproduction of Microsoft programs or a substantial part thereof without the licence of the first applicant. In this application Microsoft programs have been wholly or partly reproduced without the licence of the first applicant I referred to as infringing programs.
5. An order that the respondent, whether by himself, his servants, agents or otherwise, be permanently restrained from representing in trade or commerce to person to whom the respondent supplies or offers to supply any infringing programs;
(a) that the respondent be lawfully entitled to supply any such programs; or
(b) the case of infringing programs, any such program has been made with the licence of the firs applicant.
Mr Hansen submits that Microsoft have serious concerns about the Mr Mayhew engaging in future infringing conduct as he declined to agree to the injunction sought in that application. I agree with that submission and that there is a need to deter Mr Mayhew as well as other putative abusers from infringing Microsoft’s copyright, which I believe is a major consideration in determining the quantum of damages to be awarded under s.115(4) of the Act.
I am conscious of the letter forwarded to Mr Mayhew at his residential/business address at Albany Creek which contains an open offer of settlement of these proceedings. This letter is attached to the third affidavit of Ms Ang in Annexure “D”. In that open letter is an offer to settle the proceedings on the basis that Mr Mayhew consents to the injunction set out in the application filed on 26 June 2007 and consents to judgment in an amount to be determined by the Court. No reply has been received in respect of that letter. This refusal of an injunction restraining future infringement, as well as the need to deter other potential infringes, becomes another reason for giving additional damages under s.115(4) of the Act.
In determining the quantum of damages to be awarded under s.115(4), I also take into account the following issues:
i)infringement of computer programs is easy to carry out but difficult to detect: Autodesk v Cheung; Microsoft Corporation v PC Club Australia Pty Ltd;
ii)that Mr Mayhew offered to install three copies of Microsoft programs onto a test purchase computer without undue pressure and Ms Hodge indicates that such practice is common practice for Mr Mayhew: Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643 per Tamberlin J;
iii)the response filed on 21 September 2007 does not detail any defence;
iv)the notices to produce issued on 28 September 2007 and 9 October 2007 were not responded to on the specified return date;
v)Mr Mayhew’s inability to provide any licences for software is indicative of his infringement of copyright regardless of whether the software was gifted and cannot be transferred without accompanying documentation.
The Court has a broad discretion in relation to the quantum of additional damages and I believe that the quantum should clearly signal the Court’s disapproval of the respondent’s conduct. Rodney Mayhew and his claimed representative, Leonard William Clampett, in their conduct have demonstrated a total disregard for the breach of copyright by Mr Mayhew who, on his own evidence, indicates that he has had considerable exposure to Microsoft’s products and their licensing conditions. Further, this was drawn to his attention by these proceedings.
Mr Clampett, claims to be Mr Mayhew’s representative and lay advocate regardless of any status that he may assume as Mr Mayhew’s power of attorney. He has done very little to meaningfully represent Mr Mayhew or resolve these proceedings. He has also adopted a belligerent attitude towards the solicitors representing Microsoft. The function of the Court system generally has been frustrated by the conduct of Mr Mayhew and subsequently Mr Clampett. I award additional damages in the amount of $12,000.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 12 February 2008
Schedule
Microsoft Programs
All versions of the following computer programs and associated manuals and documentation (including versions created or released subsequent to the date hereof):
Microsoft Access 2000
Microsoft Access 2003
Microsoft Access Developers Toolkit for Windows
Microsoft Access Distribution Kit
Microsoft Access for Windows
Microsoft Access Solution Pack for Windows
Microsoft Access Upsizing Tools for Windows
Microsoft Age of Empires
Microsoft Age of Empires Expansion: The Rise of Rome
Microsoft Age of Empires II – The Age of Kings
Microsoft Age of Empires II – Conquerors
Microsoft Age of Empires II – Gold Edition
Microsoft Age of Mythology
Microsoft Age of Mythology – Gold Edition
Microsoft Age of Mythology – The Titans
Microsoft Application Centre Enterprise Ed
Microsoft Allegiance
Microsoft Ancient Lands
Microsoft Arcade for Windows
Microsoft Asheron’s Call
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Microsoft Asheron’s Call Dark Majesty
Microsoft Azuirik: Rise of Perathia
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Microsoft BackOffice Server
Microsoft Basic Optical Mouse
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Microsoft Beethoven for Windows: The Ninth Symphony
Microsoft Best of Entertainment Pack
Microsoft Biz Talk Server
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Microsoft Blinx: The Time Sweeper
Microsoft Blood Wake
Microsoft Brute Force
Microsoft Bookshelf
Microsoft Bookshelf 1995
Microsoft Business Network 1.0 Professional Edition
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Microsoft Business Network Professional Edition
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Microsoft Caribbean Scenery
Microsoft Casino
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Microsoft Cinemania 1995
Microsoft Class Server 3.0 Standard Edition
Microsoft Client Access Licence
Microsoft Close Combat
Microsoft Close Combat Russian Front
Microsoft Combat Flight Simulator
Microsoft Combat Flight Simulator 2: WWII Pacific Theatre
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Microsoft Comfort Curve Keyboard 2000
Microsoft Comfort Optical Mse 3000
Microsoft Commerce
Microsoft Commerce Server Standard 2002
Microsoft Complete Basketball 1995 for Windows
Microsoft Complete NBA Basketball 1995 for Windows
Microsoft Content Management Server 2002 Enterprise Edition
Microsoft Cordless Wheel Mouse
Microsoft Counter Strike
Microsoft Crimson Skies
Microsoft Crimson Skies – High Road to Revenge
Microsoft Creative Writer
Microsoft CRM
Microsoft Customer Relationship Mgmt
Microsoft Data Analyser 2002
Microsoft Data Centre Edition
Microsoft Dangerous Creatures
Microsoft Deploying. Net Applications Lifecycle Guide
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Microsoft Digital Image Suite 10.0
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Microsoft Digital Media Professional Keyboard
Microsoft Dinosaurs
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Microsoft Dungeon Seige: Legends of Aranna
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Microsoft Encarta World English Dictionary
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Microsoft Explorapedia: World of Nature
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Microsoft Fable to Lost Chapters
Microsoft Fine Artist
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Microsoft FORTRAN Compiler
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Microsoft Guidelines for Application Integration
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Microsoft Web Application Security: Threats and Countermeasures
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Microsoft Mozart for Windows – The Dissonant Quartet
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Microsoft the Magic School Bus explores the Solar System
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Microsoft Unix Application Migration Guide
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Microsoft Visual Studio Tools for Office 2003
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Microsoft Whacked
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Microsoft WinCE Tool Kit for VB
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Microsoft Windows Millennium Edition
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Microsoft Intellimouse Explorer – FP
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Microsoft Works Suite 2005 Standard edition
Microsoft Zoo Tycoon version 1.0
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Microsoft Zoo Tycoon Complete Collection
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