Microsoft Corporation v Ezy Loans Pty Ltd

Case [2004] FCA 1135

FEDERAL COURT OF AUSTRALIA

Microsoft Corporation v Ezy Loans Pty Ltd
[2004] FCA 1135

MICROSOFT CORPORATION & ORS v EZY LOANS PTY LIMITED & ORS
N 1129 OF 2001

STONE J
2 SEPTEMBER 2004
SYDNEY (HEARD IN BRISBANE)


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

N 1129 OF 2001

BETWEEN:

MICROSOFT CORPORATION 
FIRST APPLICANT

MICROSOFT PTY LIMITED
SECOND APPLICANT

MICROSOFT LICENSING INCORPORATED
THIRD APPLICANT

AND:

EZY LOANS PTY LIMITED
FIRST RESPONDENT

EARL SEYMOUR DAVIS
SECOND RESPONDENT

JUDGE:

STONE J

DATE OF ORDER:

2 SEPTEMBER 2004

WHERE MADE:

SYDNEY (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1.In these orders, terms defined in the annexure to these orders shall have the meanings set out in that annexure;

2.Judgment be entered for the applicants against the first and second respondents jointly in the sum of $70,000 being:

(a)$20,000 for damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth)

(b)$50,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

3.In addition judgement be entered for the applicants against the second respondent in the sum of $520,625 being:

(a)$220,625 for damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth)

(b)$300,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

4.The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from:

(a)Reproducing or authorising the reproduction of the whole or a substantial part of any of the Microsoft Programs without the licence of the first applicant;

(b)Selling, offering for sale, supplying, offering to supply or distributing any Infringing Microsoft Program;

(c)Selling, offering for sale, supplying, offering to supply or distributing any Incomplete Microsoft Program; and

(d)Authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by the orders in subparagraphs (a), (b) and (c) of this order.

5.The respondents deliver up on oath within 7 days, each infringing Microsoft Program and any equipment used to make any such infringing copy in the possession, power, custody or control of the respondents or any of them.

6.The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from infringing the Microsoft Trade Marks by:

(a)manufacturing, procuring the manufacture of, importing, purchasing, selling, offering to sell, supplying, offering to supply or distributing any Infringing Microsoft Product; and

(b)authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by sub-paragraph (a) above.

7.The respondents deliver up to the solicitors of the applicants on oath all Infringing Microsoft Products and any equipment used or intended to be used for making Infringing Microsoft Products in the possession, custody or control of the respondent or any of them.

8.The first respondent, whether by its servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to…

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Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135
Case
[2004] FCA 1135
Decision Date

CaseChat Overview and Summary

In the case of Microsoft Corporation v Ezy Loans Pty Ltd, the court was asked to consider claims of copyright infringement and trademark infringement by the respondents against the applicants. The applicants alleged that the respondents were selling computers equipped with Microsoft software without proper licensing. The respondents denied the allegations and counterclaimed for damages. The court had to decide whether the respondents infringed the applicants' copyright and trademarks, and if so, what the appropriate remedies and damages should be.

The court found that the respondents did not provide adequate evidence in support of their defence and failed to comply with pre-trial orders, which weakened their position. The applicants presented detailed evidence from multiple witnesses, including employees and experts, who testified about the nature of the respondents' business and the alleged infringement. The court accepted the applicants' evidence as credible and found that the respondents had indeed infringed the applicants' copyright and trademarks by selling computers with unlicensed Microsoft software.

The court ordered that the respondents were to pay substantial damages to the applicants for copyright infringement, as well as additional damages for the infringement of the applicants' trademarks. The court also issued permanent injunctions preventing the respondents from further infringing the applicants' copyright and trademarks. Additionally, the respondents were ordered to deliver up all infringing products and equipment to the applicants. Finally, the court ordered the respondents to pay the applicants' costs.

Orders

Orders of the court

1. In these orders, terms defined in the annexure to these orders shall have the meanings set out in that annexure;

2. Judgment be entered for the applicants against the first and second respondents jointly in the sum of $70,000 being:

(a) $20,000 for damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth)

(b) $50,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

3. In addition judgement be entered for the applicants against the second respondent in the sum of $520,625 being:

(a) $220,625 for damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth)

(b) $300,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

4. The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from:

(a) Reproducing or authorising the reproduction of the whole or a substantial part of any of the Microsoft Programs without the licence of the first applicant;

(b) Selling, offering for sale, supplying, offering to supply or distributing any Infringing Microsoft Program;

(c) Selling, offering for sale, supplying, offering to supply or distributing any Incomplete Microsoft Program; and

(d) Authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by the orders in subparagraphs (a), (b) and (c) of this order.

5. The respondents deliver up on oath within 7 days, each infringing Microsoft Program and any equipment used to make any such infringing copy in the possession, power, custody or control of the respondents or any of them.

6. The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from infringing the Microsoft Trade Marks by:

(a) manufacturing, procuring the manufacture of, importing, purchasing, selling, offering to sell, supplying, offering to supply or distributing any Infringing Microsoft Product; and

(b) authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by sub-paragraph (a) above.

7. The respondents deliver up to the solicitors of the applicants on oath all Infringing Microsoft Products and any equipment used or intended to be used for making Infringing Microsoft Products in the possession, custody or control of the respondent or any of them.

8. The first respondent, whether by its servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the first respondent supplies or offers to supply any Infringing Microsoft Programs, Incomplete Microsoft Programs, or Infringing Microsoft Products:

(a) that the first respondent is lawfully entitled to supply any such product; or

(b) in the case of Infringing Microsoft Programs and Infringing Microsoft Products, that any such product has been made with the licence of the first applicant.

9. The second respondent be restrained from aiding, abetting, counselling, procuring or being in any way directly or indirectly a party to or concerned in the conduct sought to be restrained by order 7.

10. The first respondent, whether by its servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the first respondent supplies or offers to supply any Infringing Microsoft Programs, Incomplete Microsoft Programs, or Infringing Microsoft Products:

(a) that the first respondent is lawfully entitled to supply any such product; or

(b) in the case of Infringing Microsoft Program and Infringing Microsoft Products, that any such product has been made with the licence of the first applicant.

11. The second respondent be restrained from aiding, abetting, counselling, procuring or being in any way directly or indirectly a party to or concerned in the conduct sought to be restrained by order 9.

12. The second respondent, whether by his servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the second respondent supplies or offers to supply any Infringing Microsoft Programs, Incomplete Microsoft Programs or Infringing Microsoft Products:

(a) that the second respondent is lawfully entitled to supply any such product; or

(b) in the case of Infringing Microsoft Programs and Infringing Microsoft Products, that any such product has been made with the licence of the first applicant.

13. The respondent to pay the applicants’ taxed costs including all reserved costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

The respondents’ defence arguably suffered more from their failure to give the proceeding the attention it warranted in pre-trial stages and from taking a cavalier attitude to the respondents’ obligations in relation to pre-trial directions made by the Court. As is usual, in the months prior to the hearing of the applicants’ claims various pre-trial directions were made. It would appear that, almost without exception, the respondents failed to comply with these orders, including orders for discovery, despite protests by the applicants’ solicitors which went unanswered. The paucity of evidence submitted by the respondents was such that, for reasons explained in detail below, it did little to advance their defence. APPLICANTS’ EVIDENCE The applicants have the burden of proving that the conduct of which they complain actually occurred as well as the burden of proving that the respondents were not licensed; Avel Proprietary Limited v Multicoin Amusements Pty Ltd (1990) 171 CLR 88. In the circumstances, the inherent reliability of the applicants’ claims and, in particular, the extent and frequency of the alleged breaches of the applicants’ rights require careful scrutiny. For this reason I have summarised separately, and in some detail, the evidence given by each witness for the applicants. The applicants relied on the evidence of nine witnesses, among whom was Ms Gemma Dalgleish, a solicitor employed by Mallesons Stephen Jaques, the solicitors for the applicants, and Mr Kenneth Taylor, a private enquiry agent and owner of Trade Mark Investigation Services. The only purpose of Ms Dalgleish’s affidavit was to put into evidence letters to Mr Davis from Mallesons complaining of his failure to comply with orders for discovery. In so far as Mr Davis sought to cross-examine Ms Dalgleish his questions were directed to matters concerning without prejudice negotiations between the parties and were not permitted. The evidence of Mr Taylor related to the service of documents in the proceeding, including a notice to admit facts. The respondents did not dispute any of the facts set out in the notice and Mr Taylor was not required for cross-examination. I shall summarise the evidence of the other seven witnesses in some detail. Mr Nathan Clamp Mr Davis engaged Mr Clamp as a contractor to work in the business of Harmony from July 1999 to March 2001. According to Mr Clamp, a typical transaction was for a customer to rent a computer over a period of two years after which the customer became the owner of the computer. Mr Davis generally purchased computers at auction. In the main they were ex-government computers that had been superseded by newer models or were otherwise surplus to requirements. In most cases all the data and software had been deleted from the hard drives of these computers. Mr Clamp’s job was ‘to rebuild the hard drive’ by installing Microsoft software onto the hard disk. He said he received his instructions from Mr Davis who would instruct him to load the computer with ‘Windows and Office’. He stated that he often heard Mr Davis talking on the phone to customers and promising to load Windows 98 and Office 97 on the computers they were to acquire.

Decision

Reasons for decision

STONE J

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Ratio Decidendi

Legal Principle Established

Established by: STONE J

One of the most damning concession that Mr Davis made on cross-examination was to agree that the respondents could not have supplied computers at prices of $499 (see the evidence of Ms Tran-Nguyen at [28] above) or $1,000 (see the evidence of Mr Hollingsworth at [27] above) if licensed software had been included. FINDINGS AND CONSIDERATION Copyright infringement Computer programs and compilations of computer programs are literary works within the definition of that term in s 10 of the Copyright Act. It is an infringement of the copyright in a literary work for a person to reproduce or authorise the reproduction of a literary work in a material form without the licence of the copyright owner; Copyright Act ss 13, 14, 31 and 36. Section 38 of the Copyright Act provides that it is also an infringement of copyright if a person, without licence from the owner of the copyright:‘(a)sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or (b) by way of trade exhibits an article in public;if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright …’ Although less than precise in some aspects, the applicants’ evidence created a reasonably coherent picture of the Harmony business. On cross-examination none of the applicants’ witnesses resiled from the evidence given nor was any significant inconsistency revealed. The witnesses generally gave straightforward answers to Mr Davis’ questions and, except where otherwise indicated, I accept their respective accounts as correct and honest. Unfortunately, the same cannot be said of Mr Davis’ evidence and I do not accept him as a witness of truth. As previously indicated, Mr Davis’ evidence was concerned mainly with the evidence given by Mr Clamp. There was no direct rebuttal of the claims made by Mr Schocroft, Mr Quinn, Mr Hollingsworth, Ms Tran-Nguyen or Ms Hutley. On cross-examination Mr Davis showed a tendency to give self-serving answers - at times even contradicting answers he had given only moments before. He prevaricated when confronted with inconsistencies in his own evidence and responded frequently that it was just Mr Cobden’s opinion. It was clear from admissions that he made on cross-examination that not only were parts of his affidavit false but that he knew this to be so when he made the affidavit. Other aspects of Mr Davis’ evidence were just not credible. For instance the suggestion that the library copies of software referred to in [53] above were merely backup copies of authorised software that he kept at home is risible given that this was the first mention of this explanation. Similarly, it is inconceivable that if he had entered into the Rental Agreement with Microsoft that he would have waited until early in 2003 to rely on it. Other factors that suggest no such agreement was ever made included there being no copy signed by Microsoft and the respondents not acting in accordance with the terms of the agreement; see [53] above.