Microsoft Corporation v CPL Notting Hill Pty Ltd (No 7)

[2022] FedCFamC2G 590

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Microsoft Corporation v CPL Notting Hill Pty Ltd (No 7) [2022] FedCFamC2G 590

File number(s):

SYG 1205 of 2016

Judgment of:

JUDGE BAIRD

Date of judgment:

30 September 2022

Catchwords:

INTELLECTUAL PROPERTY – COPYRIGHT – Infringement – computer programs – unauthorised use – use outside licensing and distribution scheme of copyright owner – copyright in Windows 7 computer programs – significant purchases alleged of loose certificates of authenticity of programs – genuine products – alleged reproduction of programs by installation and affixation of certificates to new computers – sales – authorisation of installations – authorisation of reproduction by end‑users – wholesaler – retailer – 30 admitted installations – egregious conduct alleged – 30 unauthorised reproductions and authorisation of reproductions established – compensatory damages on lost licence fees – flagrancy alleged post -  no flagrant conduct – assessment of damages – no additional damages awarded

TRADE MARKS – Infringement of Windows and Microsoft trade marks – award of damages at large and additional damages – nominal damages – s 123 TM Act defence raised – s 123 TM Act defence established – no infringement

CONSUMER LAW – Misleading and deceptive conduct

PRACTICE AND PROCEDURE – Adequacy of pleadings –fraud disavowed – admissibility – relevance – authenticity – documents subpoenaed from third party

HEARING ON REMITTAL

Legislation:

Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) ss 18, 232, 236

Copyright Act 1968 (Cth) ss 36, 38, 43B, 47B, 115

Evidence Act 1995 (Cth) ss 53, 55, 56, 57, 58, 69, 135, 136, 140

Federal Circuit and Family Court (Division 2) (General Federal Law) Rules 2021 (Cth) rr 16.03, 16.08

Federal Court Rules 2011 (Cth)

Intellectual Property Laws Amendments (Productivity Commission Response Part 1 and Other Measures) Act 2018 (Cth)

Trade Marks Act 1995 (Cth) ss 20, 120, 122A, 123, 126

Cases cited:

Antov v Bokan [2018] NSWSC 1474

Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCAFC 40; (2007) 157 FCR 564

Australian Competition and Consumer Commission v Air New Zealand Ltd (No 1) [2012] FCA 1355; (2012) 207 FCR 448

Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; (2009) 75 ACSR 1; [2009] NSWSC 1229

Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88

Campaigntrack Pty Ltd v Real Estate Tool Box [2022] FCAFC 112

Commissioner of Taxation v Cassaniti [2018] FCAFC 212; (2018) 266 FCR 385

CPL Notting Hill Pty Ltd v Microsoft Corporation (No. 2) [2019] FCA 223

DPP v Chen [2017] VCC 735

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471

Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 5) [2017] FCA 63; [2017] 122 IPR 279

Henley Arch Pty Ltd v Del Monaco [2019] FCCA 3848

Henley Arch Pty Ltd v Lucky Homes Pty Ltd (2016) 120 IPR 317

Inverness Medical Switzerland GMBH v MDS Diagnostics Pty Ltd [2010] FCA 108; (2010) 85 IPR 525

JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20; (2016) 116 IPR 440

Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (1998) 42 IPR 111

Microsoft Corporation & Ors v CPL Notting Hill & Ors (No 6) [2019] FCCA 2192

Microsoft Corporation & Ors v CPL Notting Hill Pty Ltd & Ors (No. 5) [2019] FCCA 1255

Microsoft Corporation v Glostar Pty Ltd [2003] FCA 210; (2003) 57 IPR 518

Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522; (2005) 148 FCR 310

Milpurrurru v Indofurn Pty Ltd [1994] FCA 975; (1994) 30 IPR 209

Milwell Pty Ltd v Olympic Amusements Pty Ltd (1999) 85 FCR 436; 161 ALR 302; 43 IPR 32; [1999] FCA 63

Multisteps Pty Ltd v Specialty Packaging Aust Pty Ltd [2018] FCA 587

Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91; 243 FCR 152

Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd [2014] FCA 1366; 110 IPR 82

Tamawood Ltd v Habitare Developments Pty Ltd [2015] FCAFC 65; 112 IPR 439

Truong Giang Corporation v Quach [2015] FCA 1097; (2015) 114 IPR 498

Tubby Trout Pty Ltd v Sailbay Pty Ltd (1992) 42 FCR 595

University of New South Wales v Moorhouse (1975) 133 CLR 1

University of Sydney v Objectvision Pty Ltd [2017] FCA 554

Woodcroft‑Brown v Timbertop Securities Ltd (2011) 253 FLR 240; (2011) 85 ACSR 354; [2011] VSC 427

Yalda v Consulate General of the Republic of Iraq, Sydney [2021] FCCA 499

Division:

Division 2 General Federal Law

Number of paragraphs:

782

Date of last submission/s:

15 August 2022

Date of hearing:

19-23 August 2019 and 16 December 2019

Place:

Melbourne (19-23 August 2019), and
Sydney (16 December 2019)

Counsel for the Applicants:

Mr R Cobden SC and Mr A Fox SC

Solicitor for the Applicants:

Harris & Company Solicitors

Counsel for the Respondents:

Mr C Truong QC and Mr C Thompson

Solicitor for the Respondents:

Ssmith & Associates

ORDERS

SYG 1205 of 2016

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

MICROSOFT CORPORATION

First Applicant

MICROSOFT PTY LTD (ACN 002 589 460)

Second Applicant

MICROSOFT REGIONAL SALES CORPORATION

Third Applicant

AND:

CPL NOTTING HILL PTY LTD

First Respondent

WEI LI

Second Respondent

CPL DISTRIBUTION PTY LTD

Third Respondent

WANG JIN
Fourth Respondent

order made by:	JUDGE BAIRD
DATE OF ORDER:	30 September 2022

THE COURT:

1.PURSUANT to s 231(1)(a) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) on the grounds that it is necessary to prevent prejudice to the proper administration of justice, publication or other disclosure of the Confidential Annexure to these reasons is prohibited, other than to the applicants and the legal representatives of the parties in this proceeding.

2.STANDS OVER the proceeding for directions on 9 November 2022 at 10:15am, before Judge Baird, such directions to be conducted via MS Teams, unless the Court advises otherwise administratively.  Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

A.       Introduction	[1]
Overview of Microsoft parties claims	[4]
Retail case	[5]
Supply case	[9]
Conduct gives rise to the copyright, ACL and trade mark claims	[13]
Overview of CPL parties’ response	[15]
Fraud and credit – centrality of allegations of dishonesty, active concealment, alteration and destruction	[19]
B.       The parties, IP rights and relevant period of the dispute	[22]
The Microsoft parties and their relevant intellectual property rights	[22]
The CPL parties	[28]
Relevant period	[34]
C.       Some procedural HISTORY	[35]
The proceeding was heard on remittal	[36]
Delay	[40]
CPL witnesses credit is in issue	[42]
D.       the pleaded case	[44]
The Microsoft parties’ pleaded case	[45]
Microsoft parties’ pleading - copyright infringement	[47]
Retail case – pleading and particulars	[48]
Copyright claim authorisation case pleaded against Ms Li	[53]
Supply case – pleading and particulars	[56]
Copyright claim authorisation case pleaded against Mr Wang	[60]
ACL claim and trade marks claim	[61]
ACL claim pleaded	[62]
Trade marks claim pleaded	[70]
‘Microsoft Computer Programs’ - Windows 7	[78]
Claims for compensatory damages - ‘lost licence’ fee	[80]
Claims for additional damages – Copyright Act and TM Act claims	[81]
Additional damages – overview of Microsoft parties contentions at hearing	[86]
Pecuniary relief – quantum sought	[91]
CPL parties pleading in defence	[92]
Defence to the copyright claims	[92]
Retail case	[92]
Supply case	[93]
CPL parties say supply case should be dismissed	[95]
Defences to the ACL and trade mark claims	[96]
Fraud and dishonesty – the obligation to plead	[99]
Parties to be held to their pleaded cases	[119]
E.       The hearing	[120]
Chen invoices and Chen related Material (provisionally admitted/ rulings deferred)	[123]
View	[132]
Statement of facts and events; statement of issues	[135]
The witnesses and evidence at hearing	[139]
Microsoft parties witnesses	[139]
Mr Noble	[140]
Ms Yip	[141]
Sgt O’Sullivan	[143]
Mr Ng	[146]
Mr Ng’s and Sgt O’Sullivan’s evidence of the Chen invoices and ‘duplicate’ invoices	[150]
Microsoft witnesses cross-examined at hearing	[153]
Other Microsoft witnesses	[154]
CPL parties witnesses	[155]
Mr Pan	[156]
Ms Li	[159]
Messrs Lu, Guo, Xu and Godby	[163]
Mr Wang	[164]
No supply after notice; observation on credit	[166]
F.        Relevant facts and events	[168]
1        .Microsoft’s supply and licensing system for Windows 7	[169]
(a)       Microsoft distribution and licensing channels for Windows 7	[169]
Windows 7 availability period	[171]
Microsoft’s exclusive licensees for Windows 7 distribution	[173]
(b)      Certificates of authenticity - COAs	[176]
(c)       Pre-installation, set-up and activation process for Windows 7	[180]
Set-up and activation after expiration of 30 day period	[188]
Use of the trade marks on the admitted pre-installations	[194]
(d)      The MOO database	[195]
(e)       Microsoft has activated the copies of Windows 7 pre-installed by CPL Notting Hill	[198]
(f)       End User Licence Agreement, and software validation check	[199]
2.        CPL companies’ dealings in system builder packs; Windows 7 and COAs in issue	[201]
(a)       CPL is a commercial OEM and member of Microsoft system builder program	[201]
(b)      The Windows 7 system builder packs used by CPL Notting Hill including in the relevant period	[203]
(c)       Copies of Windows 7 and COAs in issue	[206]
(d)      The Affixed COA Label is a genuine COA issued for use in the refurbisher channel	[208]
Affixed COA Label contained no statement of limitations on use	[209]
3.        The supplier LDS, Mr Felix Chen and his wrongful activities	[215]
4.        CPL’s premises, employees and businesses in the relevant period	[230]
(a)       CPL’s premises	[230]
7 Howleys Road	[234]
The server room	[241]
9 Howleys Road	[242]
(b)      CPL businesses	[244]
(c)       CPL companies’ directors and employees	[246]
(d)      CPL companies usual procedure for receiving goods, dispatch, building computer systems, and invoicing	[256]
5.        June 2015 purchase of 50 loose COAs and disks	[261]
Mr Pan’s evidence	[263]
Mr Xu’s evidence	[269]
Mr Lu’s evidence	[277]
Mr Guo’s evidence	[278]
Mr Godby’s evidence	[280]
CPL witnesses’ evidence of loose COAs, and June 2015 purchase; conclusions	[282]
6.        The stock code merger - Windows 7 stock codes and Mr Pan’s merger of stock codes on 9 June 2015	[284]
Business Assistant / Business Assist	[284]
Stock database codes for Windows 7	[285]
Merger of stock codes upon the June 2015 purchase	[290]
7.        30 new computers built and supplied using stock from the June 2015 purchase	[299]
8.        Events in the period September 2015 to commencement of proceeding	[302]
Documents identified in Ng 3	[305]
CPL/LDS Payables List	[307]
4 November email	[308]
22 Chen invoices	[311]
Mr Chen’s visit to CPL Notting Hill in early November 2015 and emails	[312]
Chen/Zhang email	[313]
Sgt O’Sullivan’s visit to CPL’s premises and production of the CPL/LDS Payables List	[319]
Microsoft letter of demand 8 January 2016	[328]
CPL’s response and return of LDS stock in January 2016 and Ms Li’s interactions with Mr Chen/LDS	[331]
Mr Pan’s evidence	[332]
Mr Lu’s evidence	[337]
Ms Li’s evidence	[338]
Mr Chen provides a ‘soft yellow manila folder’ of copy LDS invoices; Ms Li provides invoices to police	[345]
Ms Li’s lack of knowledge of the criminal investigation of Mr Chen; Mr Liu’s visit	[357]
Conversation between Mr Liu of LDS and Ms Li	[359]
9.        Test Purchase – Ms Lanyon and Mr Guo	[370]
10.      Commencement of proceeding, production of sales ledger, sales to Alpine and AV2PC	[373]
Sales to Alpine (Mr Purcell)	[377]
Mr Purcell	[380]
CPL witnesses’ evidence re sales to Alpine	[383]
Sales to Alpine - discussion	[389]
Conclusions regarding the Alpine invoices and sales	[395]
Sales to AV2PC	[399]
Conclusion regarding the AV2PC invoices and sales	[402]
11.      Mr Wang’s involvement in the CPL companies	[403]
12.      2017 data loss	[407]
Consideration and conclusions on 2017 data loss	[421]
13.      The CPL/LDS invoices	[426]
g.       the chen invoices and chen related material	[433]
1.        The Chen invoices	[435]
Source of the Chen invoices	[439]
(a)       The Chen (LDS) invoices	[441]
(i)        Chen (LDS/laptop) invoices	[442]
(ii)       Chen (LDS/manila) invoices	[446]
(b)      The CPL/LDS invoices, and the LDS/Chen (3rd party) invoices	[452]
(i)        CPL/LDS invoices, and comparison with Chen (LDS) invoices	[454]
(ii)       LDS/Chen (3rd party) invoices	[460]
(c)       Chen (Ever Success) invoices	[463]
(i)        Chen (ES/print) invoices	[465]
Source of Chen (ES/print) invoices is Yang 25 November email	[466]
Yang 25 November email	[467]
(ii)       Chen (ES/search) invoices	[470]
2.        Mud Map	[473]
3.        The parties submissions on the Chen invoices	[476]
Microsoft parties submissions	[477]
CPL parties submissions	[481]
4.        Relevant provisions and principles	[487]
5.        Consideration	[499]
(a)       Chen (LDS) invoices	[501]
(i)        Chen (LDS/laptop) invoices	[504]
(ii)       Chen (LDS/manila) invoices	[513]
Summary	[530]
(b)      The Chen (Ever Success) invoices	[531]
(i)        Chen (ES/print) invoices	[531]
(ii)       Chen (ES/search) invoices	[536]
ES 2015730C	[537]
ES 20150817A	[542]
6.        Conclusions and disposition - the Chen invoices	[544]
7.        The Chen related Material and the Provisional Ruling	[546]
4 November email	[546]
Yang 25 November email	[550]
Balance of Chen related Material	[551]
h.       cpl witnesses’ credit	[553]
1.        Overview - Credit of the CPL parties’ witnesses	[553]
Mr Pan	[557]
Ms Li	[561]
Mr Lu	[563]
Mr Guo	[565]
Mr Xu	[566]
Mr Godby	[568]
i.         further and other matters, sibmissions, consideration and conclusions	[570]
(a)       The stock code merger	[570]
(b)      Mr Chen’s visit to CPL on 4 November 2015, police 2015 attendance on CPL, and production of the CPL/LDS Payables List	[582]
(c)       LDS June 2015 invoice	[592]
(d)      January 2016 return of 15 Loose COA Labels and Disks	[593]
Findings on number of loose Windows 7 COA labels in the CPL warehouse in the relevant period	[596]
(e)       Microsoft’s public communications about the refurbisher channel and, and knowledge of CPL witnesses	[606]
J        summary of some EVIDENTIARY FINDINGS FOR THE retail case and the supply case.	[615]
Relevant purchases and supplies by CPL Distribution in the relevant period	[616]
Relevant pre-installations and supplies by CPL Notting Hill in the relevant period	[617]
The supply case fails	[620]
K.       COPYRIGHT CLAIM	[621]
Microsoft parties ‘key’ propositions for copyright claim	[623]
1.        Copyright reproduction	[624]
Discussion and consideration – CPL Notting Hill	[629]
(a)       System builder licence	[630]
Licence obtained via end users	[637]
2.        Sale of articles	[650]
3.        RAM reproductions - authorisation of reproduction by end users	[667]
4.        Authorisation cases - infringement of copyright	[672]
)       Copyright – authorisation claim against Ms Li(a	[674]
The legal test	[676]
Submissions and consideration	[677]
(b)      Copyright – authorisation claim against Mr Wang	[683]
l.       defence to COPYRIGHT infringement -	[692]
Innocent infringement – s 115(3) Copyright Act	[692]
M.      pencuniary relief - damages	[702]
1.        Compensatory damages	[702]
2.        Additional damages	[715]
The pleaded case	[724]
Submissions	[726]
Consideration	[731]
N.       ACL CASE	[738]
Consideration	[738]
O.       Trade marks claims	[756]
Consideration	[771]
P.        disposition	[779]

REASONS FOR JUDGMENT

Judge Baird

A.       Introduction

1. This proceeding concerns claims of copyright infringement under ss 36 and 38 of the Copyright Act 1968 (Cth), of misleading and deceptive conduct in contravention of s 18(1) of the Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) (ACL), and of trade mark infringement under s 120(1) of the Trade Marks Act 1995 (Cth) (TM Act) arising from certain dealings alleged in relation to computer programs – the Windows 7 operating system – copyright in which is owned by the first applicant, Microsoft Corporation.

2. In brief overview, the applicants (described below as the Microsoft parties) allege the third respondent, CPL Distribution Pty Ltd, supplied to the first respondent, CPL Notting Hill Pty Ltd, ‘loose’ certificates of authenticity (COAs) for Windows 7, which COAs were intended by Microsoft for use in connection with refurbished computers pre‑installed with Windows 7, but which COAs the Microsoft parties allege CPL Notting Hill affixed to new computers on which it pre‑installed copies of Windows 7 without authority, and which new computers it then supplied to end users.  The Microsoft parties allege that the respondents (described below as the CPL parties) variously did, or authorised the doing of, the resultant acts which they allege constitute copyright and trade mark infringements, and misleading and deceptive conduct.

3. The alleged acts comprises: first, conduct alleged in relation to some 30 or up to 44 occasions, of which 30 occasions are largely admitted, and secondly, conduct alleged in relation to some 1,617 (the pleaded case is ‘on at least 1,467’)[1] alleged occasions which is denied and vigorously contested, and central to which requires my ruling on the admissibility of, and acceptance as probative, certain documentary materials (defined below as the Chen invoices), and evidence concerning or relating to those materials (defined below as the Chen related Material), which I provisionally admitted at hearing, or deferred ruling on (Provisional Ruling).

   [1]The applicants pleaded case at [28A] of the Further Amended Statement of Claim is that ‘on at least 1,467 occasions …’, however at final hearing they allege 1,617 occasions.  Both numbers include the COAs comprised in an admitted purchase of 50 COAs by CPL Distribution in June 2015, 30 COAs and copies of Windows 7 of which the respondents admit were installed on new computers and supplied.  In closing submissions the applicants say it makes little difference whether the number of loose COAs is 1,467 or 1,617, or any number in between.

   To minimise repetition in these reasons, unless I consider the context requires otherwise, I use the pleaded number of 1,467 occasions (noting that this number includes the 50 COAs admitted acquired in June 2015, and thus of that 50, the 30 installations and sales admitted by CPL Notting Hill)

   Overview of Microsoft parties claims

1. It suffices in this introduction to outline the Microsoft parties’ claims by reference to their claims of copyright infringement.

   Retail case

2. The first case principally arises from the admitted conduct of CPL Notting Hill in the period July 2015 to 16 December 2015 (the Microsoft parties also nominate the period as up to 31 December 2015, and to 8 January 2016) of custom building and supplying to order to end users 30[2] new computers pre‑installed with Windows 7 Pro[3] and on each of which a loose COA (that is, a COA not packaged together - in the same packaging - with media containing a copy of Windows 7 for installation[4]) was affixed, which COAs were intended by Microsoft for use with refurbished computers.  The factual allegations the subject of the 30 admitted Windows 7 Pro pre‑installations, in the main, were not contested. 

   [2]The applicants’ pleaded case at [20] of the Claim is that on “at least 39 occasions” such new computers were built and sold with Windows 7 pre‑installed and COAs affixed.  The respondents admit 30 new computers were built to order and sold with Windows 7 Professional pre‑installed, and a COA affixed to the case of the computer

   [3]See terms defined below at [23]

   [4]As described further below, one COA and one Microsoft loadable software CD packaged together is a system builder pack

3. The CPL parties acknowledge that the 30 COAs affixed to those new computers were part of a purchase of 50 COAs and Windows 7 Pro installation disks[5] made by CPL Distribution on 9 June 2015 (June 2015 purchase)[6].  The CPL parties’ evidence is that 15 COA labels and some installation disks were returned to the supplier on 13 January 2016, and that 5 were lost or stolen.  The Microsoft parties, however, do not accept as complete the CPL parties’ concession of 30 installations arising further to the June 2015 purchase.  The Microsoft parties rely on a purchase on 13 November 2015 of a new computer pre‑installed with Windows 7 Pro and to which a loose COA was affixed built to order and supplied by CPL Notting Hill (which I refer to below as the test purchase computer).

   [5]In the evidence adduced both spellings ‘disc’ and ‘disk’ are used interchangeably, and I have followed suit

   [6]The respondents admit the third respondent acquired 50 COAs and accompanying CDs containing loadable Microsoft software on 9 June 2015: Defence [23A]; they deny that the COAs were loose COAs, that is, not accompanied by CDs containing loadable Microsoft software

4. The Microsoft parties contend that by the above conduct CPL Notting Hill infringed copyright in Windows 7 (making unauthorised reproductions[7], and supplying infringing articles[8]), and that it also authorised infringement by end users of the new computers so supplied with Windows 7 pre‑installed and on which COAs were affixed or allegedly affixed (that is, the end users’ use of the software)[9].  The Microsoft parties further contend that the second respondent, Ms Wei (Mabel) Li, authorised CPL Notting Hill’s reproduction of Windows 7 in infringement of copyright[10].

   [7]S 36(1) of the Copyright Act: Claim [21]-[24], [25]

   [8]S 38 of the Copyright Act: Claim [24A], [25], [29]-[30]

   [9]S 36(1) of the Copyright Act: Claim [26]-[26A] 

   [10]S 36(1) of the Copyright Act: Claim [27]-[28]

5. I refer to this first case arising from the June 2015 purchase and CPL Notting Hill’s admitted conduct in relation to 30 new computers, and also encompassing claims concerning sales alleged made to two businesses trading respectively as Alpine Tech Computing, and as AV2PC, as the ‘retail case’.

   Supply case

6. The Microsoft parties also allege a larger case which it is convenient to refer to as the ‘supply case’ principally against CPL Distribution, and the fourth respondent, Mr Jin Wang.  This case relies on the Chen invoices and the Chen related Material.  The Microsoft parties allege that the Chen invoices show that CPL Distribution acquired and supplied some 1,467 loose COAs to CPL Notting Hill in the period 1 August 2014 to 8 January 2016[11], that CPL Distribution was not licensed to supply the loose COAs[12], and that it must be inferred from the Chen invoices that CPL Notting Hill then dealt with those COAs in the same manner as the admitted conduct (see [5] above) by affixing those loose COAs allegedly acquired to new computers pre‑installed with Windows 7 which it built to order and supplied to end users: the Microsoft parties plead that “the provision of loose COAs … to the First Respondent necessarily resulted in the substantial reproduction of … Windows 7”[13].

   [11]Whilst the Claim at [28A] contends that the period is 1 January 2008 to 11 November 2015, by closing submissions the alleged period resolved to the period 1 August 2014 to 8 January 2016

   [12]Claim [28C]

   [13]Claim [28D]

7. The Microsoft parties allege that by its inferred supply of those loose COAs to CPL Notting Hill, CPL Distribution authorised CPL Notting Hill’s reproduction of Windows 7 in infringement of copyright[14]. The Microsoft parties further allege that having regard to the acts of CPL Distribution (per the Chen invoices), Mr Wang authorised the doing of acts in infringement of the copyright in Windows 7, in breach of s 36(1) of the Copyright Act[15].

   [14]Claim [28D]-[28E]

   [15]Claim [28F]

8. The pleaded allegation against CPL Distribution that it supplied 1,467 loose COAs to CPL Notting Hill encompasses the 50 COAs comprised in the June 2015 purchase, in respect of which the CPL parties admit 30 subsequent pre‑installations of Windows 7 on new computers and their supply to end users.  To this extent the supply case intersects with the retail case against CPL Notting Hill and Ms Li.  There is otherwise no allegation pleaded against CPL Notting Hill of pre‑installation or supply of the alleged 1,467 unlicensed copies of Windows 7, or authorisation of that conduct by Ms Li.

9. The Microsoft parties say that the supply case is based on inferential reasoning[16].  In written reply submissions, Microsoft accepts that ‘it is asking the Court – on a reasoned basis – to proceed on the footing that for each loose COA bought [by CPL Distribution] there was a copy of Windows 7 installed (omnia praesumuntur [contra spoiliatorem]); and Microsoft equally accepts that it is conceivable there was a small amount of loss or wastage, so to fix on an exact number at or between 1,467 and 1,617 would be to strive for unnecessary exactitude’[17]. 

   [16]Applicants opening submissions (AOS) [75]

   [17]Applicants Reply Submissions (ARS) [4]

   Conduct gives rise to the copyright, ACL and trade mark claims

10. The conduct alleged under each of the retail case and the supply case gives rise to each of the copyright case, the ACL case, and the trade mark case.

11. The Microsoft parties seek declarations, permanent injunctions, and compensatory and substantial additional damages.  They seek pecuniary relief in the order of $2.5 million, together with interest, and costs.

    Overview of CPL parties’ response

12. The CPL parties deny any infringement of copyright, trade marks or contravention of the ACL, and all claims of authorisation.  In relation to the retail case, inter alia, they admit 30 pre‑installations following the June 2015 purchase, defensively call in aid the terms of Microsoft’s system builder licence then applying to CPL, and its end user licence terms (EULA), and rely on Microsoft’s activation of the copies of Windows 7 thereby permitting use by end users, which use has not been de‑activated. In their defence, they also plead reliance on the temporary reproduction and incidental use provisions under ss 43B and 47B of the Copyright Act, and should infringement be established, raise positive defences under s 115(3) of the Copyright Act of innocent infringement. In relation to the trade mark claims, the CPL parties raise a defence under s 123 of the TM Act, in the form then in force.  They point to deficiencies in the pleadings, and of the evidence.

13. The CPL parties say the proceeding could have been fought on a much smaller basis – the admitted 30 installations and supplies comprised in the retail case.  However, the Microsoft parties continue to prosecute the supply case.

14. The CPL parties say that the Microsoft parties supply case is not maintainable, it relies on inadmissible and unreliable evidence having no probative value –the Chen invoices, and Chen related Material, and cannot succeed.  They submit that the supply case necessarily depends on the Court rejecting other business records of CPL which are not the subject of any fraud allegation, and the consistent, compelling, evidence of the CPL parties’ witnesses. 

15. These business records of CPL include CPL Distribution’ LDS payables list, LDS invoices evidencing sales of hardware to CPL Distribution bearing the same invoice number, date and price as the Chen invoices, and CPL Distribution’s corresponding stock receive forms for the LDS hardware purchased (defined later in these reasons as the CPL/LDS Payables List, and CPL/LDS invoices, and stock receive forms, respectively).  The CPL parties’ submit that the Court would need to find that the CPL/LDS invoices were fraudulently generated and produced, and that the Chen invoices or documents corroborating them were hidden or destroyed, none of which is pleaded. 

    Fraud and credit – centrality of allegations of dishonesty, active concealment, alteration and destruction

16. Central to the Microsoft parties case at hearing is their contention that the CPL parties ‘have been dishonest and have engaged in conduct in flagrant disregard of the Microsoft parties’ intellectual property rights’[18].  They mount a vigorous and sustained attack on Ms Li’s credibility, in particular.  They say that the CPL parties’ witnesses cannot be believed; that they have crafted a ‘web of deceit’[19], which encompasses, and also travels beyond, Ms Li’s evidence (which they say is fabricated and must be disbelieved) of her conversations, meetings, actions and events she describes in the period November 2015 to May 2016, and which extends to the CPL parties conduct in the proceeding thereafter.  They submit that the CPL parties have ‘actively concealed, altered and destroyed evidence in the proceeding in an attempt to minimise any identified infringement’[20].  The Microsoft parties submit that conduct is necessarily flagrant, and further, involves dishonesty. 

    [18]AOS [18]

    [19]Applicants Closing Submissions (ACS) [70]

    [20]          E.g., ACS [257]

17. No allegations of alteration, concealment, destruction, dishonesty, or fabrication are made in the Claim, or particularised.  There is no pleading of fraud or deceit.  In opening, the Microsoft parties’ senior counsel, Mr Cobden SC, disavowed his clients were pursuing any fraud case.  The Microsoft parties submit that fraud is not an element of a claim of copyright infringement, and their attacks are merely as to credit.

18. The CPL parties emphatically reject the Microsoft parties’ characterisation of their witnesses, and the above attack.  Further, they say the Microsoft parties’ attack is tantamount to an allegation of fraud, and such serious allegations should have been, but are not, pleaded.  It is untenable to submit, as the Microsoft parties’ senior counsel did at hearing, that serious accusations of criminal conduct put to Ms Li in the witness box, which also, and in any event, necessarily implicated other CPL parties’ witnesses, concerning documents of central importance to the supply case, merely went to credit.

B.       The parties, IP rights and relevant period of the dispute

The Microsoft parties and their relevant intellectual property rights

1. The first applicant, Microsoft, is a corporation incorporated under the laws of the state of Washington, United States of America.  It owns copyright in various versions of computer programs comprising the Windows operating system. 

2. The relevant computer programs (also referred to in the course of the proceeding as software) identified by the parties as being in issue are the Windows operating systems Microsoft Windows 7 Home Premium and Microsoft Windows 7 Professional.  In these reasons I refer to these computer programs together as Windows 7, save where it is necessary to distinguish them, which I do as Windows 7 Home, and Windows 7 Pro respectively.  Copyright subsistence and Microsoft’s ownership of copyright in Windows 7 are not disputed.

3. Microsoft is the registered owner of 6 Australian registered trade marks variously comprising the word MICROSOFT, the word WINDOWS, and a ‘Windows device’ (device described on the Register of Trade Marks as ‘wavy square, quartered’), registered variously in respect of goods including in class 9 and 16 of the Nice Classification of Goods and Services, each of which trade marks it alleges has been infringed.  I identify and describe the relevant trade marks in issue further below, in the context of my consideration of the trade marks case at section O of these reasons.

4. The second applicant, Microsoft Pty Ltd, is a wholly owned subsidiary of Microsoft.  It markets, sells, distributes and supports Microsoft products and services in Australia, operating a retail store located in Pitt Street, Sydney through which it supplies goods and services, including related third party products and services.  It is not in dispute that it is an authorised user of the trade marks.

5. The third applicant, Microsoft Regional Sales Corporation (Microsoft Sales), is a corporation incorporated under the laws of the state of Nevada, United States of America, a wholly owned subsidiary of Microsoft, and operates an online retail store[21] in Australia for the distribution of Microsoft products through the retail channel.  The Microsoft parties allege that Microsoft Sales has an exclusive licence from Microsoft to resell Microsoft computer programs in Australia and some other Asia Pacific markets through the retail channel, but excluding programs distributed and licensed by Microsoft through the original equipment manufacturer (OEM) channel.

   [21]The Claim [13] identifies the online retail store as located at

6. Where I do not consider it necessary to distinguish among them, I refer to the applicants together as the Microsoft parties. 

   The CPL parties

7. The first respondent, CPL Notting Hill, was incorporated in 2007.  It is a retailer of computers and parts and builds and sells new computers in response to customers’ orders, sometimes pre‑installed with a Microsoft Windows operating system, including at the relevant time, Windows 7.  It is an OEM ‘system builder’.  It carries on business online and from retail premises at 7 Howleys Road, Notting Hill[22] Melbourne, Victoria.  

   [22]The evidence referred to the same premises as being located at Notting Hill, and at Clayton.  Notting Hill and Clayton (encompassing Monash University Clayton Campus) are adjoining localities.  Nothing turns on this

8. The second respondent, Ms Li, is and was at all material times, the sole director of CPL Notting Hill.

9. The third respondent, CPL Distribution, was incorporated in 2007.  It is a computer parts wholesaler.  It buys computer parts and software from third party suppliers, and receives, warehouses, and ships (that is, it dispatches) those goods to CPL Notting Hill and others[23].  CPL Distribution’s warehouse is located at 9 Howleys Road, Notting Hill, Melbourne, next to CPL Notting Hill’s retail premises. 

   [23]Claim [16A]; Defence [16A]

10. CPL Notting Hill and CPL Distribution are separate legal entities.  The evidence establishes that the warehouse distribution and retail businesses employ people having distinct roles and responsibilities, although the two companies share some staff.  CPL Notting Hill employs sales, technical and accounting staff.

11. The fourth respondent, Mr Wang, is and was at all material times the sole director of CPL Distribution.  At the relevant times a company associated with Mr Wang was the sole shareholder of CPL Notting Hill[24].

    [24]Respondents’ written closing submissions (RCS) [101]

12. Where I do not consider it necessary to distinguish among the respondents, I refer to the respondents together as the CPL parties.  I refer to the two corporate respondents as CPL or the CPL companies where it is not necessary to distinguish between CPL Notting Hill and CPL Distribution, or where the witnesses did not separately identify the company in their evidence, or on some of the instances where the parties did not do so in their submissions.

    Relevant period

13. As I have adverted to above, the pleaded case encompasses the period from 1 January 2008 to 16 December 2015.  At the final hearing before me, the Microsoft parties’ senior counsel, Mr Cobden SC, stated in opening that the relevant period of the alleged infringements was 9 June 2015 to 8 January 2016[25].  In written closing submissions (ACS), the Microsoft parties state that the relevant period is 1 January 2014 to 31 December 2015[26].  I reconcile these overlapping periods in which the Microsoft parties’ allege the CPL parties’ infringing conduct occurred, as being: first, concerning the retail case, principally arising from the June 2015 purchase of 50 COAs and Windows 7 disks, the period from about 9 June 2015 to 8 January 2016 (being the date of Microsoft’s letter of demand), and secondly, concerning the supply case, the period from 1 January 2014 to 31 December 2015.  In these reasons, unless the context otherwise requires, I refer to 1 January 2014 to 8 January 2016 (and thus both periods) as the relevant period.

    [25]August hearing, 19.08.2019: T64:32-41

    [26]ACS [43]

C.       Some procedural HISTORY

1. The Microsoft parties commenced the proceeding against CPL Notting Hill and Ms Li by originating application and statement of claim filed 13 May 2016, particularising the alleged occasion giving rise to the claims of copyright and trade mark infringement, and ACL contravention by reference to a CPL Notting Hill invoice dated 11 November 2015 for the test purchase computer.  The Microsoft parties joined CPL Distribution and Mr Wang as parties by amended originating application dated 7 September 2017, and Further Amended Statement of Claim dated 7 September 2017[27], pursuant to leave granted by the Court on 4 August 2017.  The Claim expanded the retail case, introduced the supply case, and made the claims against all respondents.

   [27]The Court Registry processed the filings on 11 September 2017

   The proceeding was heard on remittal

2. The proceeding was heard by me in August and December 2019 on remittal from a Full Court of the Federal Court of Australia (constituted by O’Callaghan J).  By orders made 5 February 2019, the Full Court allowed the appeal from a decision of a judge of this Court (the Court then named the Federal Circuit Court of Australia), and set aside the orders made ex tempore on 29 August 2018 by that first judge at final hearing heard 27 to 29 August 2018 (first hearing): see CPL Notting Hill Pty Ltd v Microsoft Corporation (No. 2) [2019] FCA 223 (CPL v Microsoft No 2).

3. Upon remittal, and allocation to my docket, the Microsoft parties’ sought leave first, to amend the amended originating application, and secondly to add a claim against all four respondents for liability for copyright infringement as joint tortfeasors, requiring further amendment of that application and the further amended statement of claim relied upon at the first hearing: see Microsoft Corporation & Ors v CPL Notting Hill Pty Ltd & Ors (No. 5) [2019] FCCA 1255 (Microsoft v CPL No 5) at [5]-[6].  At [26] of those reasons I identified the pleadings relied upon at the first hearing.  On the issue of the form of the hearing on remittal, and on the issue of leave to amend I said, at [68]-[70](emphasis omitted): 

   [68]His Honour considered the appellants (respondents before me) justified in asserting that the matter be tried again.  However, because, particularly, of the credit issue, he considered that it was not appropriate for him, as the appellate court, to embark on a retrial.  He therefore remitted the matter for “re‑hearing”. 

   [69]Viewing the Appeal Reasons in their entirety it is clear that by paragraph 3 of the Order of O’Callaghan J intended that the parties have the opportunity for their cases to be heard again, for the parties to make submissions, and for another judge to make findings and provide reasons.  His Honour’s references at [63] to Mifsud v Campbell, and his discussion at [64], and observation that the findings of fact of the first trial judge were purportedly based in significant part upon his assessment of the credibility of Ms Li, lead to the conclusion that paragraph 3 of the Order operates to enable a new trial to occur upon remittal.  His Honour envisaged that the judge on remittal would have the benefit of seeing the witnesses under cross‑examination, forming her own views as to the credibility of witnesses, and reaching her own findings of fact and credit. 

   [70]This is not to say, however, that the Microsoft parties have a free hand to change the case that they have pleaded and on which they went to the first trial.  This much is clear from the tenor of the Appeal Reasons viewed in their entirety. 

1. I allowed amendment to the amended originating application to add a claim for compensatory damages pursuant to s 115(2) of the Copyright Act against Ms Li and Mr Wang, bringing the application into conformity with the Claim, and the case submitted at the first trial, and thus enlivening a claim for additional damages pursuant to s 115(4) of the Copyright Act against all respondents.  I dismissed the application to amend the Claim to add a further claim.

2. The hearing before me has been conducted in accordance with the above, on the pleadings I identify below in these reasons at section D.

   Delay

3. It is obvious that I have taken considerable time to deliver these reasons.  My reasons have been delayed through the lockdowns of the Covid‑19 pandemic, and into 2022 by the reality and consequences of those lockdowns and the events in the period since the conclusion of the hearing, by the complexity of the proceeding, and the manner and content of the presentation of the parties’ evidence and arguments, and by other unavoidable and unrelated matters.

4. The time that has passed, however, has conferred the considerable benefit of a detailed review and consideration of the documentary materials and physical exhibits, and the written and oral evidence with the benefit of the complete transcript, my contemporaneous notes and recollection, the parties’ lengthy written submissions, oral submissions, and supporting materials and aides memoire.  Because of the passage of time, I have placed somewhat more weight on the written evidence as augmented by the transcript of the hearing.  The cross‑examination of the various CPL parties’ witnesses did not disturb in any significant way the positions taken by the witnesses in their affidavits.

   CPL witnesses credit is in issue

5. The Microsoft parties’ counsel’s opening statements before me at the final hearing informed me that the credit of the CPL parties’ and their witnesses, particularly Ms Li, was central to the Microsoft parties’ case.  I was strongly urged to disbelieve their explanations of key events and documents, including about CPL’s business records and the Chen invoices.  On the first day of the final hearing, Mr Truong QC, senior counsel for the CPL parties, also informed me that the CPL witnesses’ credibility was very much in issue, and submitted that the Court could benefit from seeing the witnesses giving limited supplementary oral evidence[28].  So informed and prompted, my attention at hearing was particularly focused on the CPL witnesses’ evidence and demeanour in the witness box.

   [28]August hearing, 19.08.2019, T36:6-35

6. My conclusions on all the witnesses’ evidence and their credit (in the case of CPL witnesses) arises from careful attention to their written evidence, and their oral evidence in chief and under cross‑examination, augmented by the transcript, and aided by my contemporaneous notes, my distinct recollections of witnesses in the witness box, specifically, the CPL parties’ witnesses. 

D.       the pleaded case

1. The Microsoft parties’ pleaded case against the CPL parties at hearing on remittal is set out in the Claim.  The Microsoft parties claim the relief set out in the Further Amended Application dated 29 May 2019, further to leave granted 16 May 2019: see [38] above, and Microsoft v CPL No 5.  The CPL parties’ case is set out in the Amended Defence dated 17 August 2018.  The Microsoft parties did not file any reply.

   The Microsoft parties’ pleaded case

2. In the Claim the Microsoft parties allege that the CPL parties have:

   (a)infringed Microsoft’s copyright in Windows 7 under ss 36 and 38 of the Copyright Act (the infringing acts of reproduction of Windows 7, sale of an infringing article, and authorising infringements); and connected to, or arising from those acts,

   (b)engaged in misleading and deceptive conduct in contravention of s 18 of the ACL, or were directly or indirectly knowingly involved in that conduct within the meaning of s 232(1)(e) of the ACL; and

   (c)infringed Microsoft’s registered trade marks under s 120(1) of the TM Act, or are liable for having authorised the infringing acts or as a joint tortfeasor.

3. The CPL parties admit copyright subsistence and Microsoft’s ownership of copyright in Windows 7, and its registered ownership of the trade marks, and that Microsoft Pty Ltd is an authorised user.

   Microsoft parties’ pleading - copyright infringement

4. The Microsoft parties’ main case is in copyright. I have characterised the pleaded and particularised allegations as the retail case and the supply case, which I have described at [5]‑[11] above.

   Retail case – pleading and particulars

5. The Microsoft parties plead at Claim [20] that ‘on at least’ 39 occasions of installation on a new computer built by CPL Notting Hill (in Claim at [20] defined by the 39 occasions as the ‘Computer Systems’) it infringed Microsoft’s copyright.  The particulars to the retail case set out at Claim [20] particularise the Computer Systems so built by 32 dates, 34 sale invoices said to be in respect of 39 individual installations of Windows 7 Pro on Computer Systems in the period 28 February 2014 to 16 December 2015.  Of those 34 invoices, 5 invoices are identified by an invoice number (one of which relates to the test purchase computer in evidence, and the remaining 4 are identified in the evidence as invoices of sales to Alpine).  Of those 39 alleged installations, 3 invoices of sales to Alpine fall within the period before the June 2015 purchase, whilst 36 of the alleged installations fall within the period from 9 June 2015 to 16 December 2015.  Six of the alleged installations in the period following the June 2015 purchase relate to a CPL Notting Hill invoice IN1535094 dated 29 June 2015 (Alpine 2015 Invoice).  The Alpine 2015 Invoice and alleged installations are the subject of evidence by, and cross‑examination of, Mr Purcell, a Microsoft parties’ witness, and CPL witnesses in response.  The 30 installations admitted by the CPL parties further to the June 2015 purchase (noting that infringement is not thereby admitted)[29] appear to include two installations not particularised.

   [29]Defence, [23A]-[28], and see reasons, [5]-[8]

6. The Microsoft parties plead at Claim [17]-[20], [24A] that the reproductions were unlicensed on the basis I have set out at [2], and [5] above, in sum as CPL Notting Hill affixed to each of the Computer Systems so installed with Windows 7 a loose COA label created solely for the refurbisher distribution and licensing channel, and CPL Notting Hill was not an authorised refurbisher or licensed by one. The Microsoft parties then plead that CPL Notting Hill infringed copyright under s 36 of the Copyright Act by those reproductions in the process of installation, and also separately (at Claim [26]) by authorising reproductions in RAM by use of the Computer Systems, that is, use by end users. They plead that CPL Notting Hill further infringed copyright under s 38 of the Copyright Act by selling the new computers so installed with Windows 7 (Claim at [24A], [25], and at [29] asserting the CPL parties knew or ought to have known that making the copies of Windows 7 constituted infringement). 

7. The Microsoft parties plead at Claim [23A] that CPL Notting Hill was aware and had reasonable grounds to suspect that the installation of Windows 7 and affixing of a loose COA for Microsoft’s OEM refurbisher channel on the respective Computer Systems particularised at Claim [20] infringed copyright, because (summarising [23A(a)-(g)]):

   (a)CPL Notting Hill obtained the product keys “used to install [Windows 7] on the Computer Systems in the form of Loose COAs” [at Claim [19B] defined as “loose COA labels unaccompanied by media or normal packaging”];

   (b)CPL Notting Hill is not a member of the refurbisher program and was not permitted to acquire such COAs;

   (c)the COAs were acquired by CPL Distribution from LDS International Pty Ltd, which was not an authorised distributor of such COAs;

   (d)CPL Distribution paid LDS for those COAs in cash (at a significant discount, see Claim [23A(f) and (g)]);

   (e)CPL Distribution supplied the COAs to CPL Noting Hill “for the purpose of the unauthorised activation” of Windows 7 on the Computer Systems built by CPL Notting Hill;

   (f)CPL Notting Hill knew or ought to have had reasonable grounds to suspect that the purchase of loose COAs and the use of product keys on those COAs to activate and install Windows 7 on each Computer System was not a means of distribution of licenced Windows 7 authorised by Microsoft;

   (g)[23A(f) (sic) and (g)] the loose COAs were purchased by CPL Distribution from LDS for between $65 to $97 each for Windows 7 Pro; and in the period 1 January 2014 to 16 December 2015, the price at which Microsoft sold commercial OEM versions of Windows 7 Pro was at least $130 USD.

8. The Microsoft parties plead knowledge as a matter relevant to infringement, and to additional damages (at Claim [23A], including that LDS was not an authorised distributor of loose COAs, and at Claim [32]-[33]).

9. By the particulars to Claim [26] the Microsoft parties expand their retail case to also claim CPL Notting Hill authorised the reproduction of Windows 7 Home on the data storage of computer systems, and subsequent reproduction to RAM on computer systems identified in 5 numbered invoices in the period 24 April 2014 to 27 October 2014, subsequently identified in the evidence as invoices to AV2PC (AV2PC invoices).  By those particulars, the Microsoft parties also allege that CPL Notting Hill authorised the subsequent reproduction of Windows 7 Home on computers by the sale of loose COAs for Windows 7 Home identified in the AV2PC invoices.  In Claim [26A], the Microsoft parties plead that that conduct was unlicensed.

   Copyright claim authorisation case pleaded against Ms Li

10. The Microsoft parties plead at Claim [16] that Ms Li is (a) the sole director of CPL Notting Hill, (b) responsible for the day to day decisions of CPL Notting Hill, and (c) “responsible for making decisions regarding the business operations of CPL Notting Hill, including in relation to the goods purchased and distributed in Australia by CPL Notting Hill.”  The CPL parties admit (a), and deny (b) and (c).

11. The authorisation case pleaded against Ms Li (at Claim [27] – [28]) is that “Further to paragraphs 20 to 25, in the course of carrying out business in the period from at least 1 January 2008 to 8 January 2016” she authorised the reproductions by CPL Notting Hill on the Computer Systems, and that she thereby “authorised the doing of an act comprised in” Microsoft’s copyright in the Microsoft Programs (that is, Windows 7) without its licence.  The matters particularised to Claim [27] are that Ms Li:

    (a)authorised each of 39 pleaded unlicensed installations of Microsoft’s Windows 7 software on the Computer Systems built by CPL Notting Hill, to which COAs were affixed that had been created by Microsoft solely for use in its refurbisher program;

    (b)authorised the subsequent reproduction of that software from the Computer System’s data storage to RAM;

    (c)is and has at all material times been the sole director of CPL Notting Hill;

    (ca)managed the day to day affairs of CPL Notting Hill; and

    (d)Ms Li sanctioned, approved and/or countenanced CPL Notting Hill’s pleaded conduct described in [20] to [26A] Claim, namely:

    ·the 39 unlicensed installations[30];

    ·the sale of the Computer Systems (that is, installed with Windows 7 Pro), and computer systems and loose COAs for Windows 7 Home (that is, per the AV2PC Invoices)[31]; and

    ·authorisation of reproduction of the software from data storage to RAM[32].

    [30]Claim [20]‑[22], [24] and [25].

    [31]Claim [24A].

    [32]Claim [26].

12. There is no pleading that Ms Li participated in, or was actually aware of, any of the acts of CPL Notting Hill or CPL Distribution the subject of copyright infringement allegations prior to receiving the letter of demand in January 2016.

    Supply case – pleading and particulars

13. The Microsoft parties plead (Claim [28A] – [28E]) that CPL Distribution supplied CPL Notting Hill “at least 1,467” loose COAs for Windows 7 “in the course of carrying out business”, which supply was not licensed by Microsoft, which permitted CPL Notting Hill “to activate, install and operate” Windows 7 on new computer systems (by definition, the “new computer systems” in Claim [28B] are not the ‘Computer Systems’ defined at Claim [20], or those particularised at [26]), and which “necessarily resulted in the substantial reproduction of the [Windows 7] associated with the [loose COA and the product keys on the COAs] by CPL Notting Hill (at Claim [28D]), and accordingly that CPL Distribution authorised the doing of acts comprised in the copyright without Microsoft’s licence (at Claim [28E]). 

14. The particulars (at Claim [28A]) to the supply case are solely the Windows 7 Pro and Windows 7 Home licences identified on the face of 17 of the Chen (LDS) invoices, and the 5 Chen (Ever Success) invoices, and the 50 Windows 7 Pro licences on the LDS invoice for the June 2015 purchase.  The date range of the particularised invoices is 17 April 2014 to 17 August 2015.

15. As I have noted at [11] in these reasons, there is no express pleaded allegation of primary infringement of copyright by CPL Notting Hill in respect of the alleged supply of the 1,467 loose COAs pleaded.  The pleaded allegations against CPL Notting Hill of reproduction in infringement of copyright are confined to the 39 occasions pleaded and particularised in the Claim at [20], and the subsequent sales of those Computer Systems, and authorisation of the uses of Windows 7 by end users’ use of the Computer Systems, and further to the allegations at Claim [26]-[26A] in relation to the AV2PC Invoices, the authorisation of post‑sale installation of Windows 7 Home and loose COAs, and subsequent use.

16. The supply case pleaded against CPL Distribution necessarily depends on establishing primary acts of infringement by CPL Notting Hill.  There cannot be an act of authorisation done without an act of primary infringement, and a secondary infringement is completed only when the primary infringement has taken place: Roadshow Films Pty Ltd v iiNet Limited [2012] HCA 16; (2012) 248 CLR 42, at [94]; Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748; (2012) 293 ALR 272, at [27] and [30].

    Copyright claim authorisation case pleaded against Mr Wang

17. The copyright case pleaded against Mr Wang is pleaded at [28F] of the Claim.  It is that “having regard to paragraphs [28A] to [28E]” (the supply by CPL Distribution, and resultant acts, as I have identified at [56]) he has authorised the doing of acts comprised in the copyright in the Microsoft Programs, without the licence of Microsoft.  The particulars to Claim [28F] are:

    (a)section 36(1) of the Copyright Act;

    (b)Mr Wang is the sole director of CPL Distribution;

    (c)Mr Wang controlled CPL Distribution;

    (d)Mr Wang managed the day to day affairs of CPL Distribution; and

    (e)Mr Wang did not take any reasonable steps to prevent or avoid the reproduction in a material form of the whole or a substantial part of [Windows 7] without Microsoft’s licence.

    ACL claim and trade marks claim

18. The ACL and trade marks cases are grounded in the same factual contest as pleaded in respect of the copyright case, and in broad terms stand or fall with the copyright case.

    ACL claim pleaded

19. The ACL pleaded case against CPL Notting Hill at Claim [35]-[38] is that by the matters pleaded in the retail case (selling the Computer Systems particularised in the Claim at [20] on which a copy of Windows 7 Pro was made without Microsoft’s licence), it has in the course of trade or commerce, expressly or impliedly represented to purchasers certain “Computer Software Representations”, and by reason of the sale of the loose COAs for Windows 7 Home particularised by the AV2PC Invoices made the “COA Representations”, which were misleading and deceptive because each of them was untrue in contravention of s 18(1) of the ACL.

20. The Computer Software Representations pleaded at Claim [35] are that CPL Notting Hill was licensed by Microsoft to install Windows 7 on the Computer Systems it sold, and authorised to affix the COAs as a badge of authenticity of the copy of Windows 7 so installed, and that the purchasers were licensed by Microsoft to use the Windows 7 so installed.

21. The COA Representations pleaded at Claim [35A] are that CPL Notting Hill was licensed by Microsoft to supply and trade in loose COAs for Windows 7 Home, purchasers of those loose COAs were licensed to apply the loose COAs to a computer system built by the purchaser, and to install, activate and use the Windows 7 Home program associated with those loose COAs.

22. Ms Li is alleged to have contravened s 18 of the ACL, and to have been directly or indirectly knowingly concerned in CPL Notting Hill’s conduct within the meaning of s 232(1)(e) of the ACL, because she was the sole director, responsible for its day to day decisions, and responsible for making decisions regarding its business operations, including in relation to the goods it purchased and distributed (that is, as pleaded in Claim [16]): Claim [38A]-[38B].

23. CPL Distribution is alleged to have contravened s 18 of the ACL, and to have been directly or indirectly knowingly concerned in CPL Notting Hill’s conduct within the meaning of s 232(1)(e) of the ACL, because it is duly incorporated under the Corporations Act 2001 (Cth), and able to be sued, and in the business of purchasing and reselling computer hardware and/or software to CPL Notting Hill in Australia (that is, as pleaded in Claim [16A]): Claim [38C]‑[38D].

24. Mr Wang is alleged to have contravened s 18 of the ACL, and to have been directly or indirectly knowingly concerned in CPL Notting Hill’s conduct within the meaning of s 232(1) of the ACL, because he was the sole director of CPL Distribution, responsible for its day to day decisions, and responsible for making decisions regarding its business operations, including in relation to the goods it purchased and distributed (that is, as pleaded in Claim [16B]): Claim [38E]-[38F].

25. The Microsoft parties then plead at Claim [39], that by reason of the above, they are entitled to damages pursuant to s 236 of the ACL.

26. The Microsoft parties seek declaratory, injunctive and pecuniary relief in the Application consistent with the ACL claims pleaded.

    Trade marks claim pleaded

27. The trade marks claim is pleaded at Claim [40]-[43A]. 

28. Microsoft pleads it is the registered owner, and Microsoft Pty Ltd is an authorised user of the trade marks, comprising registered trade marks numbers 371528, 377674, 733702 (each for the word MICROSOFT), 576996, and 788966 (each for the word WINDOWS), and 871341 (the Windows device).  As I have said above (at reasons [25], and [46] above), the CPL parties do not contest that Microsoft is the registered owner in Australia, and Microsoft Pty Ltd is an authorised user, of the 6 trade marks. 

29. At Claim [40] the Microsoft parties designate by the suffix (9), and/or (16) appended to each trade mark’s registration number (e.g., ‘371528(9)’), the class of goods within the trade marks’ respective specifications which they rely on, relevantly goods in class 9, and/or class 16 as designated by the Nice Classification of Goods and Services.  At Claim [42] the Microsoft parties allege that that CPL Notting Hill applied the trade marks or marks deceptively similar or substantially identical to the trade marks ‘to items’, in respect of which the trade marks are registered without Microsoft’s consent. They thereby allege infringement under s 120(1) of the TM Act. No pleading or particulars identify what the ‘items’ are that are said to infringe.

30. The Microsoft parties plead cases against Ms Li and Mr Wang of authorisation of, and joint tortfeasor in, the pleaded trade mark infringements pleaded against CPL Notting Hill.

1. In respect of Ms Li, they plead at Claim [42A]-[42B] that Ms Li without the authority of Microsoft authorised (within the meaning of s 20(1)(b) of the TM Act) and carried out or was a joint tortfeasor in the infringing conduct of CPL Notting Hill, by reason of the same matters identified at Claim [16] as pleaded under the ACL claims: that she was the sole director, responsible for its day to day decisions, and responsible for making decisions regarding its business operations, including in relation to the goods it purchased and distributed.

2. In respect of Mr Wang, the Microsoft parties then plead at Claim [42C]-[42D] that Mr Wang without the authority of Microsoft authorised (within the meaning of s 20(1)(b) of the TM Act) and carried out or was a joint tortfeasor in the infringing conduct of CPL Notting Hill, by reason of the matters identified in Claim [16A] – that CPL Distribution is duly incorporated and able to be sued, and in the business of purchasing and reselling computer hardware and/or software to CPL Notting Hill in Australia, and in Claim [16B] - that he was the sole director of CPL Distribution, responsible for its day to day decisions, and responsible for making decisions regarding its business operations, including in relation to the goods it purchased and distributed.

3. Although the Microsoft parties in the trade mark claim pleaded do not make allegations against CPL Distribution of trade mark infringement, or authorisation or joint tortfeasorship in such infringement, at Claim [43A] they plead that by the acts and conduct of CPL Notting Hill referred to in Claim [42] (see above at [72]), Microsoft is entitled to additional damages from the CPL parties, particularised as pursuant to s 126 of the TM Act.  

4. In respect of the trade mark claim, in the Application the Microsoft parties seek declaratory, injunctive and pecuniary relief against CPL Notting Hill, and against each of Ms Li and Mr Wang as a joint tortfeasor with CPL Notting Hill.  In the ACS [288] and the final orders they propound, however, the Microsoft parties seek relief for infringement of the trade marks, including pecuniary relief, against all respondents.  The claim for relief so formulated cannot succeed against CPL Distribution. 

   ‘Microsoft Computer Programs’ - Windows 7

5. By reference to the schedule to the Claim (and also repeated as a schedule to the Application), the Microsoft parties define as the ‘Microsoft Programs’ alleged infringed 12 computer programs listed by name, and claim infringement of ‘all versions of [those 12] computer programs, and associated manuals and documentation (including versions created or released subsequent to the date hereof)’.  In relation to the copyright claims, they seek declaratory and injunctive orders in the Application, which by reference to its schedule, which encompasses all those 12 computer programs and versions, and manuals and documentation.  It is not in dispute, however, that the case is about Windows 7. 

6. It is convenient here to address the claim for relief in respect of ‘associated manuals, and documentation’.  The Microsoft parties do not identify any manuals or documentation alleged infringed, or in relation to which there has been a contravention of the ACL, or, beyond the reference to ‘items’, trade mark infringement.  There is no evidence of any such manuals or documents infringed, nor any submission expressly referring to any such works.  It is appropriate here to dispose of these allegations and the claim for orders encompassing manuals and documentation.  To the extent that any claim of infringement is made, I find that the Microsoft parties’ claim in relation to infringement of Microsoft’s copyright in associated manuals and documentation fails. 

   Claims for compensatory damages - ‘lost licence’ fee

7. The Microsoft parties accept that the ACL claim follows the copyright claim, and that the question of injunctive relief stands or falls with the outcome of the copyright claim. If damages pursuant to s 115(2) Copyright Act - compensatory damages - are awarded for copyright infringement on the ‘lost licence’ fees approach (which the Microsoft parties contend is appropriate), then they do not seek a separate award of damages under s 236(1) ACL[33].  The Microsoft parties accept that their trade marks claim largely follows the copyright claim[34], and whilst they claim entitled to an award of at least nominal damages, if s 115(2) Copyright Act damages are awarded as they seek, do not seek an award of damages under s 126(1) TM Act.

   [33]ACS [271]

   [34]ACS [281]

   Claims for additional damages – Copyright Act and TM Act claims

8. The Microsoft parties seek substantial additional damages under s 115(4) of the Copyright Act against each of the CPL parties. They seek an award of additional damages against each of the CPL parties under s 126(2) of the TM Act on the same basis they say it is appropriate that a substantial award should be made for the copyright claim (I have observed that there are no pleaded trade mark claims against CPL Distribution). The Microsoft parties in the ACS say should the Court award the substantial damages under s 115(4) of the Copyright Act that they seek, they accept that award may affect the quantum of additional damages under the TM Act.

9. The Microsoft parties plead their claim for additional damages pursuant to s 115(4) Copyright Act at Claim [32] and [33] as follows:

   [32]Further, the said infringements referred to above were committed flagrantly and deliberately by the First to Fourth Respondents [1‑4 CPL parties], well knowing the First Applicant’s [Microsoft’s] rights, with the intention of appropriating their own use and benefit the property of [Microsoft] and so appropriating the property of [Microsoft]. 

   Particulars

   (a)The Microsoft Programs were at all material times widely known and extensively published in Australia. 

   (b)The subsistence of copyright in the Microsoft Programs [relevantly, Windows 7] was readily able to be ascertained from the packaging of the Microsoft Programs. 

   (c)The [1‑4 CPL parties] well know or ought to well know that the unlicensed reproductions of Microsoft Programs was an infringement of [Microsoft’s] rights. 

   (d)In the alternative, the conduct of the [1‑4 CPL parties] was carried out in reckless disregard of the subsistence of copyright in the Microsoft Programs.

   (e)From their experience in the computer retail industry, the [1‑4 CPL parties] well knew or ought to have well known that [Microsoft] does not permit the sale of Microsoft Programs from the Microsoft Refurbisher Program unless the [CPL parties] are a member of that program and the Microsoft Program is installed on a refurbished computer system. 

   (f)The [1‑4 CPL parties] knew or ought to have known that the COA referred to in paragraph 23 was distributed pursuant to the Refurbisher Programs. 

   (g)The [1‑4 CPL parties] knew or ought to have known that [Microsoft] does not distribute loose COAs [that is, loose COAs unaccompanied by media or normal packaging]. 

   (g)(sic)The Applicants reserve the right to provide further particulars following discovery and any interlocutory steps. 

   [33]By the acts and conduct referred to in paragraph 32 above [Microsoft] is entitled to additional damages from the [CPL parties]. 

   Particulars

   (a)Additional damages pursuant to s 115(4) of the Act.

   (b)Refer to the particulars in paragraph 32 above. 

10. By reason of amendments to the Claim (made pursuant to leave granted in August 2017, as stated at [38] above), there is no paragraph [23] in the Claim (referred to in Claim [32] particular (f)]. Paragraph [20D], however, pleads as follows:

    Each Computer System [defined in [20]] had a COA label affixed to it by the First Respondent [that is, CPL Notting Hill], which COA label had been created by [Microsoft] solely for use in the Refurbisher Program [the latter defined in [19]].

11. The Microsoft parties plead their claim for additional damages pursuant to s 126(2) of the TM Act at Claim [43A], by reference to [42] (see discussion at [76] of these reasons), as follows:

    [42]The First Respondent [CPL Notting Hill] has infringed the Trade Marks [trade marks numbers 371528(9), 377674(16), 576996(9), 733702(9)(16), 788966(9), and 871341(9)] by applying the Trade Marks or marks deceptively similar or substantially identical to the Trade Marks to items, in respect of which the Trade Marks are registered, without the consent of [Microsoft]. 

    …

    [43A]By the acts and conduct referred to in paragraph 42 above, [Microsoft] is entitled to additional damages from the Respondents [CPL parties]. 

    Particulars

    (a)Additional Damages pursuant to section 126 of the Trade Marks Act 1995 (Cth).

12. There is no other pleading or particulars in support of the claim for additional damages under any of the Copyright Act or the TM Act in the Claim, nor any provision of particulars.  Specifically, there is no pleading of any matters that post‑date the alleged infringing acts.  There is no pleading that CPL created false invoices or deliberately hid or destroyed evidence.

    Additional damages – overview of Microsoft parties contentions at hearing

13. In the ACS, and in oral closing, the Microsoft parties submit that a substantial award of additional damages in the order of 200% of s 115(2) compensatory damages is justified, having regard to:

    (f)the flagrancy of the infringements;

    (g)the need to deter similar infringements of copyright;

    (h)the conduct of the CPL parties after the act constituting the infringements; and

    (i)the benefit accrued to the CPL parties by reason of the infringement[35].

    [35]ACS, [245]

14. As I have said at [19] above, the Microsoft parties submit that the CPL parties have actively concealed, altered and destroyed evidence in the proceeding, and did so in an attempt to minimise any identified infringement, which conduct is necessarily flagrant, and involves dishonesty. They submit it is appropriate that the award of damages show the strongest disapproval of the Court.

15. In support of the above submission the Microsoft parties say that the CPL parties have not made any concessions with respect to liability, they have “vigorously opposed steps initiated by” the Microsoft parties in the proceeding, they say, for example, opposing discovery orders made by Judge Street on 4 August 2017, by filing an appeal to the Full Court, which was dismissed, and by opposing their 2019 interlocutory application (subsequent to remittal) to amend the application to claim s 115(4) damages, pleaded in the Claim (see, [40]-[41] above).

16. The Microsoft parties also point to the CPL parties’ “steadfast maintenance” of their position that any infringing activity was limited to the June 2015 purchase.  The Microsoft parties continue (at ACS [263]) that “it is evident that the [CPL parties] have taken active steps to thwart any investigations” to identify the quantum of infringement in the proceedings, and that “The failure to produce documents which are relevant to these proceedings that ought to be in the control and possession of the [CPL parties], should [they submit], have the consequence that appropriate adverse inferences ought be drawn against [them].”

17. None of the preceding matters are pleaded or particularised in the Claim. 

    Pecuniary relief – quantum sought

18. Further to the relief they seek in the Application, as a guide the Microsoft parties attach to the ACS the orders they seek.  As to pecuniary relief, Microsoft seeks judgment:

    (a)against the CPL parties jointly and severally for infringement of copyright pursuant to s 115(2) of the Copyright Act in the sum of $256,066.08, and interest,

    (b)against each of the CPL parties severally by way of additional damages pursuant to s 115(4) of the Copyright Act, in the sum of $500,000 against each respondent; and

    (c)against each of the CPL parties severally by way of additional damages pursuant to s 126(2) of the TM Act in the sum of $50,000 against each of CPL Notting Hill and CPL Distribution, and $25,000 against each of Ms Li and Mr Wang.

    CPL parties pleading in defence

    Defence to the copyright claims

    Retail case

19. As to the retail case, the CPL parties defence to the Microsoft parties’ claims is, in sum:

    (a)30 such computers were built to order and supplied by CPL Notting Hill in the period after the June 2015 purchase;

    (b)they deny that CPL Notting Hill’s reproduction of Windows 7 on those computers was unlicensed (Defence [20], [24], [25]), save that they admit that CPL Notting Hill “loaded un‑activated software code for activation and installation remotely by the Microsoft parties via the internet”, in accordance with its rights and entitlements as a system builder; and

    (c)they say that a Microsoft Program (Windows 7) “can only be installed on a computer system where the Microsoft parties have “facilitated and authorised the installation by the acceptance of a COA and product key via the internet to enable installation and usage of [Windows 7] by the end user” (Defence [19C], and the Microsoft parties “remotely via the internet installed, activated and thereafter never deactivated each” copy of Windows 7 (Defence [20B], [20C], [24(a)]), and by doing so, have authorised the use of such software (Defence [26A], [27], [28]).  See also, in respect of the supply case, Defence [30];

    (d)save that they admit that each computer system had a COA label affixed to it (Defence [20D]), none of the COA labels were issued pursuant to the refurbisher program (Defence [20D(a)], not pressed at hearing), none of the COA labels contained identification that they were issued pursuant to the refurbisher program, or alternatively, CPL Notting Hill was unaware the labels were solely for use in the refurbisher program (Defence [20D(b)-(c)], the retail supplies occurred without the requisite knowledge of infringement – the CPL parties were not able to identify there being any limitation applicable to Windows 7 such as being limited for use pursuant to the refurbisher program, and they genuinely believed the COAs and accompanying CDs it purchased from LDS were genuine Windows 7 Pro OEM, which belief was reinforced by the Microsoft parties’ remotely activating and installing Windows on machines for use by end users in conjunction with COA product keys (Defence [24]);

    (e)as to the authorisation case pleaded at Claim [26] and [26A], they deny the allegations and say further that all [Windows 7] were activated and installed remotely by the Microsoft parties (Defence [26] and [26A]); and by operation of ss 43B or 47B (or both) of the Copyright Act, the alleged “subsequent reproduction from data storage to RAM” was not an infringement of copyright (Defence [26]); 

    (f)however, if infringement is established, CPL Notting Hill was an innocent infringer; the CPL parties were not aware, and had no reasonable grounds for suspecting that CPL Notting Hill had infringed any copyright, and rely upon s 115(3) of the Copyright Act [Defence [25], [31]);

    (g)they say further, as to the claims for compensatory damages under s 115(2) Copyright Act, Microsoft in activating, installing or otherwise failing to de‑activate unauthorised Windows 7 failed to mitigate its loss and damage (Defence [31(b)]); and

    (h)submitted at hearing, in the alternative, that there should only be a small or nominal award of compensatory damages to Microsoft for any lost royalties, and any damages awarded should be cumulative, since any damage arises from a single course of conduct in respect of which Microsoft would have received a single licence fee, and there should be no additional damages (under s 115(4) Copyright Act) having regard to the circumstances in which the impugned products were obtained and used, including CPL’s prompt response upon receipt of Microsoft’s letter of demand.

    Supply case

20. As to the supply case, the CPL parties deny the allegations at Claim [28A], say further that no such transactions and/or supply of labels occurred save the 50 Windows 7 Pro identified in the LDS Invoice for the June 2015 purchase (Defence [28A]); deny the allegations made in Claim [28B]-[28F] (including against CPL Distribution, and Mr Wang), and say further that the Microsoft parties have activated and remotely installed [Windows 7] and by doing so have authorised the use of such software (Defence [28B]).

21. The CPL parties’ pleading of innocent infringement, and failure to mitigate, at Defence [31], encompasses the supply case.  They deny the remaining allegations of infringement, loss and damage, including flagrancy, and entitlement to additional damages: Defence [31]-[33].

    CPL parties say supply case should be dismissed

22. The CPL parties say that the supply case should be dismissed as it is based on the Chen invoices created by a convicted fraudster in the course of a criminal enterprise, which are inherently unreliable, have not been authenticated by any witness, and are wholly inconsistent with other records discovered and authenticated by CPL parties, including those I have referred to above, and the credible evidence of the CPL parties’ witnesses. 

    Defences to the ACL and trade mark claims

23. The CPL parties deny the ACL allegations.  They submit at hearing that the ACL claim should be dismissed because no misrepresentations have been established, and there is no pleaded or actual loss.

24. As to the trade mark infringement allegations, the CPL parties say that the use of the trade marks was a lawful and licensed usage, and by operation of s 123 of the TM Act (in the form it took at the relevant time), the use of the trade marks did not constitute an infringement (Defence [42]).  They deny the allegations of authorisation and joint tortfeasorship made against Ms Li and Mr Wang. 

25. They submit the claims against Ms Li and Mr Wang have no legal or factual basis and should on any view be dismissed.

    Fraud and dishonesty – the obligation to plead

26. As I have stated above, the CPL parties assert that the claim (I apprehend the supply case, and the claim for additional damages) made by the Microsoft parties at hearing is an unpleaded fraud case, and say that insofar as the claim is an unpleaded fraud case, it cannot be entertained, and has not been established on the evidence and the limited puttage to witnesses. 

27. The CPL parties submit that there can be no suggestion that the parties have agreed to conduct their cases on any bases not pleaded, and should be held to that position.  This is particularly so having regard to the fact that the proceeding has been heard by me on remittal, and that both parties’ 2019 applications to amend their pleadings (and for the CPL parties to introduce a cross‑claim) have been refused: see Microsoft v CPL No. 5, referred to above; and Microsoft Corporation & Ors v CPL Notting Hill & Ors (No 6) [2019] FCCA 2192 (Microsoft v CPL No 6).  In Microsoft v CPL No 6, at [20]‑[29] I summarised in broad and general terms the allegations and defences of the parties. That summary did not purport to be exhaustive.

28. That the Microsoft parties alleged fraud was expressly disavowed by the Microsoft parties, by Mr Cobden SC, during oral opening[36] (see at [20] above), and reiterated later in the course of the August hearing during an objection in cross‑examination of Ms Li (ruled in the CPL parties’ favour).

    [36]August hearing, 19.08.2019 T95

29. The Microsoft parties say this is not a fraud case and they do not have to plead and particularise fraud as part of a copyright infringement claim; it is not an element of any cause of action on which they rely.  They say such allegations as they make are regularly made and accepted in copyright infringement cases, without any suggestion that fraud ought to have been pleaded. 

30. They submit[37] that it is “open on both the substantive and procedural law for Microsoft to assert that CPL, and persons on its behalf, have engaged in the destruction or concealment of documents for the purposes of avoiding discovery obligations, and the fabrication of documents for the purposes of the proceeding”.  They say that their case is “merely a question of disbelieving evidence given by witnesses about the veracity of certain documents, or about events that have taken place.”  They also submit that as the matters on which they rely arose in the course of the proceeding, plainly, they could not be the subject of an anterior pleading.

    [37]          ACS [34], [36].

1. Section 236(1) of the ACL provides:

   If:

   (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and

   (b) the conduct contravened a provision of Chapter 2 or 3;

   the claimant may recover the amount of the loss or damage by action against that person, or against any person involved in the contravention

2. I have summarised Microsoft’s pleaded case in relation to their ACL claim above in section D, at [87]‑[93]. 

3. Microsoft alleges that, by reason of selling new computers with unlicensed copies of Windows 7, CPL Notting Hill expressly or implicitly made certain “Computer Software Representations” and “COA Representations” in trade or commerce to purchasers of its new computers (together, the Representations). 

4. The alleged ‘Computer Software Representations’ pleaded are:

   (a)that CPL Notting Hill was licensed to install Windows 7 on the computer and to affix the COA as a badge of its authenticity; and

   (b)that the purchaser was licensed to use the installed Windows 7.

5. The ‘COA Representations’ pleaded are that:

   (a)CPL Notting Hill was licensed by Microsoft to supply and trade in loose COAs for Windows 7 with no media or “normal packaging”; and

   (b)a purchaser of those loose COAs was licensed by CPL Notting Hill to apply them to a computer system it built and to install, activate and use Windows 7 associated with the loose COAs and product keys. 

6. Microsoft submits that the Representations were misleading and deceptive because each of them was, by reason of the matters pleaded in its primary copyright infringement case against the CPL parties, untrue.  Microsoft does not rely on matters not pleaded in its copyright claim, its pleaded case is directed specifically and only at what was represented specifically to the purchasers of its computers.

7. The principles concerning misleading conduct are well established.  Whether conduct can be said to convey an alleged representation is a question of fact to be determined having regard to all of the particular circumstances. 

8. Where damages are sought for misleading conduct, proof of loss and damage is an essential element of the cause of action. In the present case I accept Microsoft parties’ position that ACL claim follows the copyright claim. Where s 115(2) damages are awarded for copyright infringement Microsoft do not seek separate damages under s 236(1) of the ACL because damages are subsumed in the award of compensatory damages for copyright infringement.

9. Microsoft relies on implications arising from CPL Notting Hill’s conduct the subject of the retail case, the fact of CPL Notting Hill selling and supplying new computers to purchasers on which un-activated copies of Windows 7 were pre‑installed and to which loose COAs were affixed.  In deciding the ACL claim, by reason of my findings I am concerned with the 30 relevant instances, and instance of which is provided by the purchase of the test purchase computer. 

10. The CPL parties accept that:

    (a)by offering to supply Windows 7 to a prospective purchaser with a new computer, it may be accepted that CPL Notting Hill implicitly represented that the software would be genuine Microsoft software.  This is not a pleaded representation; there is in any case no evidence that it is untrue;

    (b)by making such an offer, it may be accepted that CPL Notting Hill represented to the purchaser that the Windows 7 software could be used in all the normal ways that Windows 7 can be used, including that software updates could be obtained from Microsoft in the normal way; this is not a pleaded representation and there is in any case no evidence that it is untrue; and

    (c)by affixing a Windows 7 COA label to the computer case, it may be accepted that CPL Notting Hill implicitly represented that the label was authentic and could be used to activate the installed, genuine, copy of the Windows 7.

11. The CPL parties submit that:

    (a)there is no evidence to support an inference about what particular purchasers would have done had they formed a belief, for example, about the specific licence to which they would be entitled, that may (as a question of law) be incorrect;

    (b)lay purchasers of a computer would not be likely to understand a computer retailer to be making representations about the niceties of copyright licensing; and

    (c)Microsoft has not established that it suffered any loss or damage “because of the conduct” of CPL Notting Hill.  In any case, any loss or damage to Microsoft would be subsumed in its copyright damages.

12. Further, the CPL parties submit that the Microsoft parties’ ACL claim should be dismissed insofar as it is alleged that they directly contravened the ACL as there is no pleaded foundation or evidence that they did so.  The pleaded conduct was that of CPL Notting Hill as a corporation involved in retailing computer hardware and software. 

13. The only matters pleaded against CPL Distribution are that it was duly incorporated and was “in the business of purchasing and reselling computer hardware and/or software to [CPL Notting Hill]”.  This is insufficient. 

14. Further for the reasons I have concluded above, as against Ms Li and Mr Wang the Microsoft parties have not made out accessorial liability. 

15. As I have set out above at [80], the Microsoft parties accept that the ACL claim follows the copyright claim. Where s 115(2) damages are awarded for copyright infringement Microsoft do not seek separate damages under s 236(1) of ACL because damages are subsumed in the award of compensatory damages for copyright infringement.

16. The copies of Windows 7 installed pursuant to the retail case were in each case genuine copies of Windows 7 Pro  to which a genuine Windows 7 COA label was affixed but which was altered, on which a genuine product key was depicted.  The evidence is that Windows 7 Pro functioned without activation.  It is not in dispute that the copies of Windows 7 Pro were in each case activated, and not thereafter deactivated. 

17. In these circumstances, I am not persuaded that any of the pleaded alleged representations arise, and the ACL claim fails.  I further accept the CPL parties’ submissions that in fact that no user was mislead or deceived or likely to be mislead or deceived: in each case, they acquired a genuine copy of Windows 7 Pro, which Microsoft permitted them to use without obtaining activation, and to the extent that they sought activation, Microsoft activated their copy of Windows 7 Pro. 

O.       Trade marks claims

1. I have set out the Microsoft parties pleaded trade marks case above at [71]‑[77].  They rely on 6 trade marks registered on the Register of Trade Marks in respect of specified goods in or including in class 9, and/or class 16 of the Nice Classification of Goods and Services, being Australian registered trade marks numbers 371528, 377674, 733702 (each for the word MICROSOFT), 576996, and 788966 (each for the word WINDOWS), and 871341 (the Windows device).  As I have said above (at [25 and 46]), it is not in dispute that Microsoft is the registered owner in Australia, and Microsoft Pty Ltd is an authorised user, of the 6 trade marks alleged infringed. 

2. I have observed earlier in these reasons (section D, at [72]) that none of the Claim or any particulars evidenced in inter partes correspondence identify what the Microsoft parties contend are the ‘items’ in relation to which infringement is alleged, nor what of the goods within the specifications of each trade mark the Microsoft parties’ rely upon as that infringement.

3. In closing submissions, the Microsoft parties contend the relevant acts of trade mark infringement are:

   (i)pre‑installing Windows 7 onto new computers ‘such that’ the trade marks were displayed on the computer screen when it is booted up; and

   (ii)applying the COA labels on which the trade marks are depicted on the cases of computers on which Windows 7 was pre‑installed[287]. 

   [287]ACS [283]

4. The evidence is limited to the test purchase computer, and the use of the word WINDOWS on the CPL website and in the June 2015 Invoice.

5. Reading the Claim with the case on which the Microsoft parties closed, it is apparent that the trade marks which they allege have been infringed are those registered in class 9 (relevantly for the goods “computer software”, “computer systems software”, or “operating system programs” within those specifications).  There is no contention that any ‘item’ falls within class 16.  As I have said above at [79], the trade mark claims relating to specified goods in class 16 for ‘associated manuals and documentations’ fails. 

6. The CPL parties do not dispute that the goods in respect of which the trade marks are registered are or include ‘computer software’, ‘computer systems software’, or ‘operating system programs’ (Microsoft goods), excepting trade mark 377674 (MICROSOFT), which is registered in respect of class 16 goods (including computer software manuals).  The Microsoft parties did not open on, and make no submissions separately concerning that trade mark registration.  From the above, it follows that trade mark registration no. 377674(16) is not infringed.  In any event, as the Microsoft parties do not claim a separate amount of damages per trade mark, trade mark 377674 may be disregarded.  I so proceed.

7. The CPL parties further do not dispute that:

   (a)the trade marks (meaning the words and device) are visible when running the Windows 7 software as pre‑installed on new computers by CPL Notting Hill, and appear on COA labels affixed to new computers and Windows 7 disks supplied with those computers (that is, the 30 admitted pre‑installations and affixations); and

   (b)by selling those 30 new computers on which Windows 7 software was pre‑installed and could be run, and to which COA labels were affixed authenticating the Windows 7 software, CPL Notting Hill used the registered Microsoft marks as trade marks in relation to the Microsoft goods.[288]

   [288]RCS [464]

8. Whilst the trade marks appear on Windows 7 software and the loose COA labels (relevantly those comprising the June 2015 purchase, including the Affixed COA Label), Microsoft did not plead or seek to prove that either the Windows 7 software or the COA labels were non‑genuine or inauthentic.  The Microsoft parties’ case is that the COA labels were created by Microsoft or with its consent and were licensed by Microsoft under its refurbisher program (viz, the Affixed COA Label made by the Refurbisher Company). 

9. In its defence, CPL Notting Hill pleads that by operation of s 123 of the TM Act its uses of the trade marks were not infringing uses, as, where s 123 of the TM Act in the form it took at the relevant time is engaged, it provides a complete defence to trade mark infringement.  

10. Section 123(1), in the form it took at the relevant time, provided as follows:

    123Goods etc. to which registered trade mark has been applied by or with consent of registered owner

    (1)In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

11. Section 123(1) has since been repealed and replaced by a new s 122A headed “Exhaustion of a registered trade mark in relation to goods”.  See the Intellectual Property Laws Amendments (Productivity Commission Response Part 1 and Other Measures) Act 2018 (Cth).  However, the new provisions only apply to infringement actions begun on or after 25 August 2018. 

12. The operation of s 123(1) TM Act was discussed by the Full Court in Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91; 243 FCR 152. At [63]‑[64] their Honours Besanko, Nicholas and Yates JJ stated:

    [63]It is important to keep in mind when interpreting s 123(1) that a registered trade mark may be used in many different ways which do not involve physically applying the mark to goods. Trade mark use can also occur in relation to goods in print and electronic advertising, invoices, bills of lading and other commercial documents, or even in conversations between a salesperson and a customer, in many different markets involving the supply of all manner of goods. If s 123(1) is to operate as intended (ie reflecting the principle in the Champagne Heidsieck case) it must be interpreted in a manner that allows it to apply in the wide variety of circumstances in which a mark may be used in relation to goods. 

    [64]Suppose that a retailer acquires packaged goods from the registered owner who applied its mark to the goods at the time of manufacture. The retailer places the goods on display for sale. It then attaches to the display unit a sign it created reproducing the mark. It then arranges advertising in which the mark is reproduced for the purpose of advertising the goods. None of these acts constitute trade mark infringement. This is not because the retailer does not use the mark, but because it has a defence available to it under s 123(1) of the 1995 Act. The fact that the trade mark owner does not approve or consent to these acts on the part of the retailer (because, for example, the retailer is supplying “parallel imports” or engaged in discounting) is irrelevant to the operation of s 123(1)…

13. The Microsoft parties’ position is that the s 123 TM Act issue follows the determination of the question of licence or authority in the copyright claim, that is, it only arises if the copyright claim succeeds. As I have found above that the copyright claim has succeeded in relation to the 30 relevant instances, the s 123 issue remains to be determined.

14. The CPL parties’ on the application of s 123 TM Act to the 30 relevant instances found, submit:

    (a)it should be inferred from the evidence that the Microsoft marks (viz, the trade marks) were originally applied to the Windows 7 software and the COA labels in issue in the case by or with the consent of Microsoft; and

    (b)in these circumstances, the marketing and supply of new computers with pre‑installed Windows 7 software, to which the COA labels were affixed, falls squarely within s 123(1). It is immaterial for this purpose whether the reproduction of the Windows 7 software on new computers by CPL Notting Hill, or end users, or the affixing of the COA labels to the computer cases, were acts that were licensed by Microsoft.

15. The Microsoft parties submit that the CPL parties’ argument as to s 123 TM Act ignores the fact that the relevant use of the trade mark is when the COA label (which bears the trade mark) is applied to the assembled computer with unlicensed software on it.  The CPL parties say this submission is incorrect.  The Microsoft parties are misconceived as to the goods in issue.  The relevant goods are not the computers supplied by CPL Notting Hill to which the COA labels are affixed, but Microsoft’s Windows 7 software pre‑installed on the computers. 

    Consideration

16. For the reasons that follow I am satisfied that the CPL parties have made out their defence under s 123 TM Act, and accordingly the Microsoft parties’ trade mark claim is not made out. 

17. The affixing of the COA labels to new computers by CPL Notting Hill does not signify a connection in the course of trade between Microsoft and these computers.  The Full Court’s reasoning in Scandinavian Tobacco relevantly applies.  The computers themselves are connected in the course of trade only with their assembler, CPL Notting Hill.  The affixing of the Windows 7 COAs to the assembled computers signifies a trade connection between Microsoft and the Windows software that has been pre‑installed on those new computers. 

18. By virtue of having licensed the production by the Refurbisher Company of loose COAs enabling activation of its Windows 7 Pro software, and by licensing the creation of the accompanying disks that were supplied to CPL, the Microsoft parties overlook that it consented to the application of its trade marks in relation to its software. 

19. The connection in the course of trade between the Windows 7 Pro COA, their associated Windows 7 Pro software and Microsoft is not severed by reason of those COAs having been physically affixed to new computers by CPL Notting Hill.  Whether or not CPL Notting Hill’s own acts were licensed, they involved in substance no more than the supply of Microsoft’s Windows 7 Pro software under Microsoft’s own trade marks, in each case in relation to genuine Microsoft goods (as defined above). 

20. Although given my conclusions, the claim for relief does not arise, for completeness, I observe if however on the counterfactual, I had found that the Microsoft parties had been successful in establishing their trade mark case, and that the CPL parties failed to make out their s 123(1) TM Act defence, I would order only nominal damages, given the award of the lost licence fee, subsumed in the award under s 115(2) Copyright Act. 

21. Although the Microsoft parties do not make any claims against the third respondent, CPL Distribution, in the Claim nor seek any relief for infringement of trade mark against it, in ACS at [288] and in the final orders they propound, they seek relief, including pecuniary relief against all respondents.  The claim for relief so formulated cannot succeed against CPL Distribution. 

22. For the above reasons I am satisfied that the CPL parties have made out their defence under s 123(1) of the TM Act.  The trade mark claim fails. 

P.        disposition

1. I have found that Microsoft succeeds on its copyright claim under s 36(1) of the Copyright Act against CPL Notting Hill for reproduction by pre‑installation, and against CPL Distribution for authorising that reproduction in respect of the 30 relevant instances. I will award s 115(2) Copyright Act compensatory damages limited to the 30 relevant instances for the above copyright infringements.  I will award interest. 

2. I consider that declatory relief, so limited is appropriate. 

3. Declarations and any injunctive relief will be limited to Windows 7 Pro, and to those 30 relevant instances. 

4. As to the appropriateness of injunctive relief under s 115(2) of the Copyright Act, given that Windows 7 Pro was entirely superseded by Windows 10 in mid‑2015, and the last supplies to the OEMs was in the last quarter of 2016 (see above, reasons at [196]-[197]), and given the passage of time both before the hearing on remittal, and since, I have real reservations as to the necessity and utility of ordering injunctive relief to restrain future conduct.  In any event, I consider the form of injunctive relief sought by the Microsoft parties as at closing submissions too broad.  

5. In these circumstances, I will give the parties an opportunity to consider these reasons and to make submissions concerning what orders I should make to reflect these reasons, and to deal with costs.  In the circumstances, I make no orders today, other than the confidentiality order. 

I certify that the preceding seven hundred and eighty two (782) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird.

Associate:

Dated: 30 September 2022

however the evidence of Microsoft Pty Ltd’s in‑house solicitor Mr Clayton Noble is that it operates the online store located at the URL Noble 3 [11]. Given the CPL parties’ concessions, and my conclusions, this inconsistency is not material