Microsoft Corporation v Marks, Rodney David
[1995] FCA 1027
•15 DECEMBER 1995
CATCHWORDS
CONTEMPT - whether breach of restraining orders - whether reproduction of unauthorised computer programs - public interest element of punishment for contempt - charges to be proven beyond reasonable doubt - whether conduct "wilful and flagrant disobedience" or "blatant defiance" - whether conduct "contumacious" - authorisation - whether conduct authorised or countenanced - whether respondent "knew" or "had reason to suspect" conduct - whether vicariously guilty of contempt.
Australasian Meat Industry Employees' Union v Mudginberri Station Pty Limited (1986) 161 CLR 98.
Australian Design Council v Peter Borello (1989) 17 IPR 389
Witham v Holloway (1995) 131 ALR 401
Australasian Performing Right Association v Jain (1990)
26 FCR 53
University of New South Wales v Moorhouse (1975) 133 CLR 1
WEA International v Hanimex (1987) 17 FCR 274
Re Supply of Ready Mixed Concrete (No 2) (1995) 1 All ER 135
Seaward v Paterson (1987) 1 Ch. 545
CCOM Pty Limited v Jiejing Pty Ltd (1992) 36 FCR 542
Bryant v Keith Harris (1980) 33 ALR 437
Borrie & Lowe, Law of Contempt, 2nd ed (1983) at 403H
MICROSOFT CORPORATION, MICROSOFT PTY LIMITED & ORS v
RODNEY DAVID MARKS & CAROL JOYANNE MARKS
No G430 of 1991
Tamberlin J
Sydney
15 December 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. G430 of 1991
GENERAL DIVISION )
BETWEEN: MICROSOFT CORPORATION
First Applicant
MICROSOFT PTY LIMITED
Second Applicant
AUTODESK INC
Third Applicant
AUTODESK AUSTRALIA PTY LIMITED
Fourth Applicant
WORDPERFECT CORPORATION
Fifth Applicant
WORDPERFECT PACIFIC
Sixth Applicant
LOTUS DEVELOPMENT CORPORATION
Seventh Applicant
LOTUS DEVELOPMENT PTY LIMITED
Eighth Applicant
ASHTON-TATE CORPORATION
Ninth Applicant
ASHTON-TATE PTY LIMITED
Tenth Applicant
AND:
RODNEY DAVID MARKS
First Respondent
CAROL JOYANNE MARKS
Second Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 15 DECEMBER 1995
REASONS FOR JUDGMENT
Microsoft Corporation and the other applicants move the Court to imprison or "otherwise punish" Mr Marks for contempt.
The contempt is alleged to arise from breaches of restraining orders, made by consent, by Gummow J on 11 October 1991.
The applicants are well-known manufacturers of computer software of a commercial nature which include programs for word processing, data storage and spreadsheets.
During the relevant period, October 1994 to January 1995, the respondent's activities included the sale by retail of computer hardware, including desk computers and notebook computers, together with associated equipment such as CD ROM drives, hard disks and modems. The respondents' company also sold computer software.
The business was primarily carried on under the logo "CRM" at several locations in Victoria. Advertisements in evidence indicate that Rod Marks Computer Systems Pty Limited ("the Company"), offered hardware and software "packs" at specified prices.
The respondent, Rodney Marks, was formerly a director of the company which is now in liquidation.
The orders made by Gummow J on 11 October 1991 were as follows:
"1.The Respondents and each of them by themselves their servants and agents and the servants and agents of each of them be restrained from:
(a)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in Schedule "A" to the Statement of Claim ("the Microsoft Programs");
(b)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of any of the Microsoft Programs;
(c)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in Schedule "B" to the Statement of Claim (the "Autodesk Programs");
(d)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of the Autodesk Programs;
(e)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in Schedule "C" to the Statement of Claim (the "WordPerfect Programs");
(f)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of any of the WordPerfect Programs;
(g)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in Schedule "D" to the Statement of Claim (the "Lotus Programs");
(h)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of the Lotus Programs;
(i)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in Schedule "E" to the Statement of Claim (the "Ashton-Tate Programs");
(j)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of any of the Ashton-Tate Programs;
The Respondents and each of them by themselves their servants and agents and the servants and agents of each of them be restrained from representing in trade or commerce to persons to whom the Respondent supplies or offers to supply any unauthorised copy of any of the computer programs referred to in paragraph 1 (the "Applicants' Programs"):
(a)that the respondent is lawfully entitled to supply any such unauthorised copy;
(b)that such persons are entitled to use and be in possession of any unauthorised copy acquired from the Respondent; or
(c)that such persons do not require manuals for the efficient use of the Applicants' Programs."
Mr Marks did not comply with the orders and as a result appeared before Gummow J on charges of which he was guilty. Those charges were as follows:
"1.Reproducing the whole of the computer programs Microsoft Windows (3.0) and MS DOS versions (5.00) and (5.00. 333 beta 2) being the computer programs identified in Schedule A to the statement of claim dated 2 August 1991 and the subject of Order 1(a) entered on 28 october 1991.
Reproducing the whole of the computer program known as WordPerfect (5.1) being a computer program identified in Schedule C in the statement of claim dated 2 August 1991 and the subject of Order 1(e) of the orders entered 28 October 1991.
Offering for sale, selling and supplying an unbranded 386-33MHz computer (serial number 105629) (the 'Computer'), which had loaded on its hard disk unauthorised copies of the programs Microsoft Windows (3.0) and MS DOS versions (5.00) and (5.00 .333 beta 2), to D.J. Platten on Friday, 15 November 1991,
Offering for sale, selling and supplying the Computer, which had loaded on its hard disk an unauthorised copy of the program WordPerfect (5.1) to D.J. Platten on Friday, 15 November 1991."
On that occasion, Mr Marks did not dispute the particulars of contempt set out in the four paragraphs above. From this, his Honour concluded that it was not a case where the conduct complained of was casual, accidental or unintentional disobedience. See Australasian Meat Industry Employees Union v Mudginberri Station Pty Limited (1986) 161 CLR 98 at 109. Both sides provided evidence as to the circumstances surrounding the contempt which took place on 14 and 15 November 1991. In his judgment, after referring to the history of the matter and the evidence, Gummow J was not satisfied that he should make any general finding that Mr Marks was prepared to disregard his obligations under the Copyright Law and in particular, under the Court orders. His Honour found that Mr Marks appeared to be an energetic small businessman, who did not appreciate the significance of the orders of the Court made against him. His Honour refers to the profound regrets expressed by Mr Marks. He did not accept his explanation in a significant respect but was satisfied that Mr Marks "now had a deeper appreciation of the important nature of the orders of the Court". His Honour found that the charges were proven and ordered that Mr Marks be fined $2,000 and should pay costs assessed at $16,000.
Essentially, the present charges against Mr Marks relate to the unauthorised copying of the programs and unauthorised supply of those copies.
The Statement of Charge of Contempt sets out the detailed allegations against Mr Marks as follows:
On 11 October 1991 this Honourable Court ordered that the respondents and each of them by themselves their servants and agents and the servants and agents of each of them be retained from:
(a)reproducing or authorising the reproduction of the whole or a substantial part of any of the computer programs identified in schedules A,B,C,D and E to the statement of claim in these proceedings; and
(b)selling, offering for sale, supplying, offering to supply or distributing any unauthorised copy of these programs.
On 8 November 1991 at 10.30 am Bradley James Martin served the orders referred to in paragraph 1 (the "Orders") on the first respondent personally.
On or about 13 October 1994 the first respondent reproduced the whole or a substantial part of the computer program LOTUS 1-2-3.
On or about 13 October 1994 the first respondent sold to Frank Edward Douglas an unauthorised copy of LOTUS 1-2-3.
By reason of the matters referred to in paragraphs 3 and 4, the first respondent breached orders 1(g) and 1(h) of the Orders.
On or about 25 January 1995 the first respondent reproduced the whole or a substantial part of the computer programs MICROSOFT WINDOWS, MICROSOFT WORKS, MICROSOFT EXCEL, MICROSOFT WORD FOR WINDOWS, MICROSOFT ACCESS, MICROSOFT POWERPOINT and MICROSOFT OFFICE.
On or about 25 January 1995, the first respondent sold and supplied to Frank Douglas unauthorised copies of the computer programs referred to in paragraph 6.
By reason of the matters referred to in paragraphs 6 and 7, the first respondent breached orders 1(a) and 1(b) of the Orders.
On or about 30 October 1994 the first respondent, through his servant or agent Nick Marcou, reproduced the whole or a substantial part of the computer programs MS-DOS and MICROSOFT WINDOWS.
10.In the alternative, on or about 30 October 1994 the first respondent authorised the reproduction by Nick Marcou of the whole or a substantial part of the computer programs MS-DOS and MICROSOFT WINDOWS.
11.In or about early November 1994 the first respondent, through his servant or agent Nick Marcou, reproduced the whole or a substantial part of the computer programs MS-DOS and MICROSOFT WINDOWS.
12.In the alternative, in or about early November 1994 the first respondent authorised the reproduction by Nick Marcou of the whole or a substantial part of the computer programs MS-DOS and MICROSOFT WINDOWS.
13.On or about 30 October 1994 the first respondent, through his servant or agent Nick Marcou, sold and supplied to Gary Russell Chessum unauthorised copies of the computer programs MS-DOS and MICROSOFT WINDOWS.
14.In or about early November 1994 the first respondent, through his servant or agent Nick Marcou, supplied to Garry Russell Chessum unauthorised copies of the computer programs MS-DOS and MICROSOFT WINDOWS.
15.By reasons of the matters referred to in paragraphs 9, 10, 11, 12, 13 and 14, the first respondent breached orders 1(a) and 1(b) of the Orders.
16.In or about late October or early November 1994 the first respondent, through his servant or agent Nick Marcou, reproduced the whole or a substantial part of the computer program MS-DOS.
17.In the alternative, in or about late October or early November 1994 the first respondent authorised the reproduction by Nick Marcou of the whole or a substantial part of the computer program MS-DOS.
18.In or about late October or early November 1994 the first respondent, through his agent Nick Marcou, supplied to Jan Morus an unauthorised copy of the computer program MS-DOS.
19.In or around November 1994 the first respondent, through a servant or agent being an employee of Rod Marks Computers, reproduced the whole or a substantial part of the computer programs MS-DOS and MICROSOFT-WINDOWS.
20.In the alternative, in or around November 1994 the first respondent authorised an employee of Rod Marks Computers to reproduce the whole or a substantial part of the computer programs MS-DOS and MICROSOFT WINDOWS.
21.In or around November 1994 the first respondent, through a servant or agent being an employee of Rod Marks Computers, supplied to Jan Morus unauthorised copies of the computer programs MS-DOS and MICROSOFT WINDOWS.
22.By reason of the matters referred to in paragraphs 16, 17, 18, 19, 20 and 21, the first respondent breached orders 1(a) and 1(b) of the Orders.
23.The first respondent has, on other occasions at present unknown to the applicants, reproduced or authorised the reproduction of computer programs and sold, offered for sale, supplied and offered to supply and distributed unauthorised copies of computer programs, in breach of the Orders.
24.Rodney David Marks committed the conduct referred to in paragraphs 1 to 23 above well knowing:
(a)that the Orders had been granted by this Honourable Court; and
(b)the precise terms of the Orders.
25.Rodney David Marks committed the conduct referred to in paragraphs 1 to 23 above in contumacious disregard of the Orders, and as a deliberate breach thereof."
The Evidence
A number of affidavits were filed on behalf of the applicant. The deponents of these affidavits were not required for cross-examination. Objections were taken to some parts of the affidavits and substantial portions were not admitted in evidence.
Mr Marks and two former employees swore affidavits which were read in evidence. Mr Marks was cross-examined.
It is common ground that at relevant times Mr Marks and his wife Carol Marks, were directors of the Company, and that Mr Marks was the Secretary of the Company. Mr Peter Vince was appointed as liquidator in a creditors' voluntary winding up which commenced in February 1995.
A "legal administrator" employed by Microsoft, Faye Chatillon, gave evidence that she was responsible for enforcement of Microsoft's intellectual property rights in Australasia. She had been employed by Microsoft for more than 8 years. She said that Microsoft supplied copies of its programs in sealed shrink-wrap packages, containing floppy disks on which authorised copies of the programs were stored, together with associated user manuals. She used the term "authorised copy" to mean a copy made for Microsoft and imported into Australia with its consent. She said that customers of computer retailers were sometimes asked to load a computer program onto a computer which the customer buys from the retailer. Where the retailer supplies the original package, disks and manuals, the retailer is authorised to load the program from the original packaged disk onto the hard disk of the computer.
Mr Curtis, the Finance Director of the eighth applicant gave evidence, on affidavit, that an authorised copy of Lotus 1-2-3 was a copy made by or on behalf of Lotus Development Corporation and imported into Australia with the consent of Lotus. Where the retailer has supplied to the customer the original package disks and manuals for the program the retailer may load the program from the original disks onto the hard disk of the computer.
A private inquiry agent, Mr Frank Douglas, swore two affidavits in the proceedings. On 13 October 1994, he went to the Nyora premises of the Company and was told by Mr Marks that the computer system which Mr Douglas had previously inquired about, had been completed and was ready for collection and that he had loaded the software. He also claims that Mr Marks said that some of the software boxes had already been packed. Mr Douglas paid Mr Marks $2,300, being the balance of the ultimately agreed purchase price and received an invoice for $2,500.
The invoice, dated 13 October 1994, shows a price for the hardware, together with software including Lotus 1-2-3, MS Works for windows, MS Publisher, WordPerfect for Windows, DOS 6.2 and Windows and Instant Artist. There was no breakdown in price as between software and hardware or individual software items.
Mr Douglas said he returned to his office with the computer (the "October computer") and placed it in security storage. On 14 October 1994 he unpacked it and set it up. He then searched the boxes provided by Mr Marks and found no original copy disks, manuals, shrink-wrap box, licence certificates or licence agreement relating to Lotus 1-2-3.
On 25 January 1995, Mr Douglas returned to the Nyora premises and spoke with Mr Marks. After informing Mr Marks that he was in the market for another computer system, he asked Mr Marks about packages. Mr Marks asked him what he was interested in. He said that he would appreciate getting Office, including Excel as part of Office, together with Instant Artist. Later he returned to that store and Mr Marks told him that he had given him DOS, Windows, Office, Instant Artist and "heaps of others".
Mr Douglas then noted from the computer screen that Microsoft Excel had not been properly loaded into the computer memory. He saw Mr Marks attempt to reload the program using a CD but it would not load correctly. Mr Marks then obtained a copy of Microsoft Excel in original shrink-wrap packaging, opened the package and extracted a disk and attempted to load Microsoft Excel, but the machine would not accept it.
Marks is alleged to have said that he would have to load it onto another computer. Mr Douglas noticed a 5 metre computer lead which "appeared" to come from the back of a computer on one side of Mr Marks' workshop to the work bench where Mr Marks was working on the subject computer. Mr Marks is alleged to have said that the lead was used for the purposes of loading of computer programs and that it was much quicker than loading from disks.
Mr Douglas saw a machine "in the corner" called a "Copy Master 1000" which is apparently a machine for the rapid copying of programs and data from one computer hard disk to another. In relation to this Mr Marks said that this machine was used only for copying "Shareware" or public domain type programs. Mr Douglas does not say he ever saw the "Copy Master" in use.
Mr Douglas stayed with Mr Marks as he loaded the CD containing Microsoft Office onto the computer. The computer was then placed into boxes and Mr Douglas paid a purchase price of $2,340. He took the computer to his office and placed it in security storage. On 27 January 1995 he removed the computer and handed it to an associate, Mr Robert Hart.
The invoice of 25 January 1995 does not specify any separate price for software, but simply refers to an all-up price of $2,340 which appears to include software.
There was evidence from another private inquiry agent, Mr Robert Hart, which backed up in some respects, parts of the evidence of Mr Douglas. Mr Hart, however, did not ever attend at any of the stores.
On 27 January 1995 Mr Hart took possession of the computer bought on 25 January (the "January computer"). He booted it up, entered various commands instructing the computer to print a full list of file programs and saw on the screen Microsoft programs including Windows for Workgroups, Works, Excel, Word for Windows, Access and Powerpoint. He checked the boxes which were with the computer and found no original copy disks, shrink-wrap boxes, licence certificates or licence agreements relating to those programs. He then repacked the computer system. On 2 and 14 March 1995 Mr Hart made the October computer and the January computer available to Mr Steve Jackson of Microsoft for inspection.
Another witness for the applicant, Mr Garry Chessum, a private customer not related to the applicants, went to the Traralgon store of Rod Marks Computers, on 21 October 1994. He saw a sign advertising a computer. He spoke to a Mr Marcou, the salesman at the store. Mr Marcou is alleged to have said that there were none of the computers, advertised on the sign, available at the moment but he was taking names and would advise when they became available. Mr Chessum paid a $50 holding deposit.
On 30 October 1994 Mr Chessum, after telephoning Mr Marcou, went to the Traralgon store and saw Mr Marcou and a woman who appeared to work in the shop, working on a computer. Mr Marcou is alleged to have said that they were loading the software and that there was MS DOS and Windows on the computer. Mr Marcou then handed him packages containing disks and manuals for MS DOS 6.22 and Microsoft Works for Windows. He was not given any disks or manuals for the Program, Microsoft Windows.
When the packages were handed to him, Mr Marcou said to Mr Chessum that by law he had to give it to him but that it would of no use to Mr Chessum. Mr Chessum then paid the balance of the purchase price and left the shop. The invoice he received indicated a price of $1,240 for the hardware and $90 each for DOS 6.2 and Windows 3.11. A few days later, because the computer did not function properly, he went back to the store with it. He was given a replacement computer and he then saw Mr Marcou load the computer programs MS DOS and Windows onto the computer. Mr Marcou identified the programs. Mr Chessum was not given any original disks or manuals at that time, and
the only ones he ever received were those given to him on 30 October 1994.
A "salesman", Mr Jan Morus, bought a computer from Rod Marks Computers on 21 October 1994. After experiencing difficulties with its operation, he returned it to the Traralgon shop and spoke with Mr Marcou. Mr Marcou said that he would load MS DOS onto the computer. He saw Mr Marcou connect the computer to another computer in the shop, using a cable and enter commands into both computers. Mr Marcou then said that MS DOS had been loaded. Mr Morus again had a problem with the computer and went back to the store. He spoke to a man and a woman who were unnamed. The man is said to have told him that they could reload MS DOS into the computer from disk. Mr Morus said that he was thinking also of getting Windows. The man at the store said words to the effect that they could put Windows on as well. He said that he watched them the man and woman load the programs MS DOS and Microsoft Windows onto the computer from disks. He was not given any disks or manuals relating to MS DOS or Microssoft Windows at any time. His invoice was dated 21 October 1994. It showed that he bought the hardware for $1,290.
Mr Jackson also swore an affidavit. He was the senior Systems Engineer of Microsoft Pty Limited. He obtained from Mr Douglas and Mr Hart, the Private Investigators, the October computer and the January computer.
Mr Jackson booted up the October computer and entered commands. He located a copy of Lotus 1-2-3 among other programs loaded on the hard disk. He then booted up the January computer. He entered commands and he located copies of Microsoft programs including Windows for Works Groups, Office (which included Word, Excel, Powerpoint and Access) and also Microsoft Works.
On 14 March 1995, he again examined the October computer and the January computer and entered commands which showed the program, Lotus 1-2-3 in the October computer and other programs in the January computer, together with Windows Version 3.11.
Mr Marks swore an affidavit in reply to the applicant's affidavits in chief. He said that he was familiar with the order of the Court on 11 October 1991 and had since given "strict directions" to all employees not to load software programs onto computers without the customer buying the appropriate manual and disks. He said that at the time of the alleged breaches in October there were at least 9 employees of his company.
In relation to the October computer he referred to the affidavit of Mr Douglas and said that the programs he gave to him were WordPerfect DOS 6.2, Windows, MS Publisher, Instant Artist, Lotus 1-2-3 for Windows and MS Works Windows. He said that the only set of manuals which he did not give was Lotus 1-2-3 for Windows. He says that, although that program was loaded, one of the files was corrupt and the software package was therefore returned to the supplier (Digisoft Systems of Rosebud). He said that he explained to Mr Douglas what had happened and presumed that the complete software package had been sent directly to Mr Douglas by the supplier.
In relation to the evidence of Mr Douglas that on 14 October 1994 he had not found any original floppy disks, manuals, shrink-wrap box, licence certificate or licence agreement relating to Lotus 1-2-3, Mr Marks said that he had explained that he had installed the program on the computer but that the program was corrupt and he had to return the product to the supplier. However, he had no other copies of the program available. He said that he told Mr Douglas that he was selling the software "at cost" in order to keep the sale and cut out the opposition. Mr Marks did not want people to be aware that he was selling at cost just to sell computer hardware. This, he said, was the reason why he asked Mr Douglas not to "tell anyone." He said in his affidavit that the programs were all on CD ROM and therefore the programs would not work on the computer properly without the original compact disk. He agreed that on or about 25 January 1995 he loaded programs for Mr Douglas. He said that on that day the store had sold between 15 to 18 computers and he had noticed that a box of disks and software packages had been left behind by one of the customers. Due to the number of customers on that day he did not know who had forgotten the disk and software packages. Mr Marks was not contacted by anyone to say that software had not been received. He says that Mr Douglas had left a box of disks behind.
Mr Marks referred to the Copy Master machine as seen by Mr Douglas in January, and said that it was used for copying hard disks and that it saved hours in loading programs onto a computer. He said it was used to duplicate "Shareware Programs" or programs for public domain. He also said that the Company had a larger machine which copied compact disks but that it had never been used before the Company went into liquidation. There was no evidence to the contrary. Mr Marks said that it was company policy, communicated to all employees, that under no circumstances were customers to be supplied with programs without the relevant software disks being provided. His said his reason for this was that he was concerned about copyright and that he was aware that there were court orders specifically stating that neither he nor his agents were to copy any programs.
He says that he was diligent in ensuring that his staff did not breach the orders. The staff at the time comprised at least 9 persons running 3 shops. He also had 50 distributors operating a number of shops in the Gippsland area.
Affidavits were also read by 2 former employees, Mr McNaughton and Mr Dupuy. Mr McNaughton testified that he was employed at Nyora as a salesman and technician between early 1992 and February 1994 and that upon commencement of his employment, Mr Marks specifically advised him that under no circumstances was he to sell a computer without the relevant disks and manuals being provided to the customer and that this was continuously stressed by Mr Marks on many occasions during his employment. Mr McNaughton was told that Mr Marks had a court order against him for that type of conduct. Mr Dupuy deposed that Mr Marks made it clear at the commencement of his employment in 1992 which lasted through to February 1994 that while some companies might make copies of software, it was company policy that no computer was to be allowed to be loaded with software without the relevant disks and manuals being given to the customer. Mr Dupuy was aware of the court order and was told that there were grave penalties if the policy was not adhered to. Neither Mr Dupuy nor Mr McNaughton were required for cross-examination. It should be noted however that their evidence was filed at the last minute.
Mr Douglas responded to the affidavit of Mr Marks and denied that there was any reference in October 1994 to a computer program being corrupt. He recalls Mr Marks saying in relation to the program Lotus 1-2-3, words to the effect that the store was out of stock of those manuals and he would get one in and post it to Mr Douglas. However, Mr Douglas did not receive this manual. He denies that Mr Marks referred to selling software at cost, or cutting out the opposition. He also swears that the only original disks handled by Mr Marks, when Mr Douglas purchased the January computer, were the disks for Microsoft Excel and the disk for Microsoft Office. He says that those disks were never offered to him nor were any manuals or licences, certificates or warranty cards offered to him.
Principles
The power to punish for contempt is the ultimate coercive power of the Court and is therefore central to the effectiveness of the judicial process. Without this sanction court orders would be disobeyed with impunity. The underlying rationale of the contempt power is the necessity to protect the effective administration of justice and ensuring compliance with Court orders. There is a manifest public interest in the exercise of that power in the case of disobedience to an order of the Court. See Australian Design Council v Peter Borello (1989) 17 IPR 389 at 395 and Mudginberri (supra) at 161 CLR 98 at 114-115.
Charges of contempt whether civil or criminal, however, must be proved beyond reasonable doubt. This is established by the High Court decision in Witham v Holloway (1995) 131 ALR 401 at 408. All members of the Court considered that there was much to be said for abolishing the distinction between civil and criminal contempt but since such a submission had not been made the Court did not proceed to what perceived to be a logical consequence flowing from their reasons for decision.
At page 405 , the Court pointed out that:
"In general terms, the distinction between civil and criminal contempt is that a civil contempt involves disobedience to a court order or breach of an undertaking in civil proceedings, whereas a criminal contempt is committed either when there is contempt in the face of the court or there is an interference with the course of justice. However, disobedience or breach of an undertaking amounts to a criminal contempt if it involves deliberate defiance or as it is sometimes said, if it is contumacious."
The consequence of the decision in Witham is that each element in the conduct, said to constitute contempt, must be established to the criminal standard and the whole case must be proved beyond reasonable doubt. In the instant case, it is claimed that the evidence established that the respondent's conduct constituted a "wilful and flagrant disobedience" of the consent orders and that there is displayed an attitude of "blatant defiance" by Mr Marks of his obligations under the Copyright Law and to the Court. It is also alleged that the conduct is "contumacious" as being wilful and not casual, accidental or unintentional and that therefore Mr Marks should go to gaol.
Mr Marks is said to be liable for the actions of Mr Marcou and the unnamed "man and woman" referred to in the applicants' affidavits.
In Australasian Performing Right Association v Jain (1990) 26 FCR 53 at 61, the Full Federal Court said:
".... one of the meanings of the word "authorise" in the context in which it is here used is "countenance". It may be that not every act which amounts to the countenancing of something is an authorisation. Every case will depend on its own facts. ... But the evidence in the present case reveals, ... a studied and deliberate course of action in which Mr Jain decided to ignore the appellant's rights and to allow a situation to develop and to continue in which he must have known that it was likely that the appellant's music would be played without any licence from it. It was within his power to control what was occurring but he did nothing at all. In those circumstances we have reached the conclusion that the appellant established that Mr Jain authorised the infringement of copyright in question contrary to s 36 of the Act." (Emphasis added)
In University of New South Wales v Moorhouse (1975) 133 CLR 1 at 12-13, Gibbs J said:
"Express or formal permission or sanction, or active conduct indicating approval, is not essential to constitute an authorization; "Inactivity or indifference, exhibited by acts of commission or omission, may reach a degree from which an authorization or permission may be inferred" ... However, the word "authorize" connotes a mental element and it could not be inferred that a person had, by mere inactivity, authorized something to be done, if he neither knew nor had reason to suspect that the act might be done...." (Emphasis added)
The relevant principles in relation to "authorisation" were examined by Gummow J in WEA International v Hanimex (1987) 17 FCR 274 at 285-287.
In Re Supply of Ready Mixed Concrete (No 2) (1995) 1 All ER 135, the House of Lords held that two concrete manufacturers were guilty of contempt in circumstances where the company issued a prohibition at senior level against the making of an agreement or arrangement. Without knowledge of the company's management the arrangement were entered into by employees in the course of their employment. The agreements provided for price fixing and job allocation arrangements with representatives of other companies. This was in breach of an injunction. The company had taken steps to prevent them from doing so by issuing the prohibition. Nevertheless, the House of Lords held that the companies were guilty of contempt. The decision was grounded on two principles. The first was that a company is an entity separate from its members but is only capable of acting by its agents. The second principle was that the company in its capacity as supplier of goods falls to be judged by its action and not its language. In the view of their Lordships, directions, instructions and exhortations by top management to middle management (language) did not insulate the company from liability for contempt where the prohibited agreements were in fact entered into (actions) within the scope of employment. The prohibition could go to penalty.
It may be that if the applicants had otherwise proven the contempts alleged in the instant case, the company might have been liable on the principles in the Ready Mixed Concrete case. The above decision does not go so far as to say that an individual who is a director or employee of the company, in a position such as Mr Marks, would be guilty of contempt in such circumstances merely by virtue of his position within the company.
Mr Marks has not been charged as an aider or abettor to the conduct of his employees but rather as having committed the contempt personally or vicariously "by his servants and agents". Cf Seaward v Paterson (1897) 1 Ch. 545 which was applied in CCOM Pty Limited v Jiejing Pty Ltd (1992) 36 FCR 524. See also Borrie and Lowe's Law of Contempt, 2nd edn, (1983) at 403 ff where the question of aiding and abetting is discussed.
It has not been established that Mr Marcou or any other person referred to in the evidence was the servant or agent of Mr Marks in relation to the conduct alleged.
In the present case, the evidence does not warrant the conclusion that Mr Marks, to use the language of Gibbs CJ, in Moorhouse, "knew" or "had reason to suspect" that any unauthorised copying might be done by Mr Marcou or any other employee.
Intention and Knowledge
Once the earlier contempt proceedings were determined I am satisfied that Mr Marks was fully apprised of the significance of any further contravention. There is no evidence of any other contempt proceedings after the decision of Gummow J in February 1992 until the present charges.
Although I approach the evidence of Mr Marks with some caution, because under cross-examination his responses were at times inconsistent, I am not persuaded that he had an intention to engage in prohibited conduct. I accept his evidence that he gave instructions to his employees not to sell computers and/or software without software disks and manuals being provided and that the employees were made aware of the contempt order by the Court against him and that he emphasised to them the necessity for strict compliance. The affidavit of Mr Dupuy indicates that it was made clear to him that copies of software should not be made. To ensure this result he was told no computer or software was to be sold without the disks and manuals being handed over. Mr Dupuy was also made aware of the penalties. Both Mr McNaughton and Mr Dupuy, said they were reminded of these matters at various intervals during their employment.
The taking of these steps over the period 1992 to 1994 lends support to a conclusion that Mr Marks did not intend to breach
the orders by making unauthorised copies or by the sale or supply of unauthorised copies.
I gained the impression, from the evidence given by Mr Marks, that there was a genuine confusion in his understanding as to the effect of not giving manuals and disks to a purchaser. I accept he held the belief, at relevant times, that unless all disks were supplied the programs would not function properly because of the absence of comprehensive "Help" files. Even if that belief was wrong in fact, I accept that it was a belief genuinely held by Mr Marks. It was not outside the broad bounds of reasonableness to hold this belief. I do not conclude that he acted recklessly in the sense that he did not care whether the orders were breached.
In addition, to my not being satisfied that the conduct said to constitute contempt has been made out, for reasons set out below, I am further not satisfied that the evidence showed an intention or state of mind on the part of Mr Marcou or the unnamed employees referred to in evidence to make or supply unauthorised copies of any of the programs.
In particular, I am not satisfied that Mr Marks was aware of, or ought to have known of the conduct alleged. The specific charges of deliberate and blatant breach and contumacious disregard of the Court's orders are not justified on the evidence.
The Charges
The Mid-October Charge
The mid-October charge relates to the Lotus program. The charge is that Mr Marks reproduced that program and sold an unauthorised copy to Mr Douglas on or about 13 October 1994.
There is no direct evidence that Mr Marks made an unauthorised reproduction of the program. The case turns on inference. The evidence of Mr Douglas is that Mr Marks said that he had loaded Lotus 1-2-3 with other programs onto a computer. Mr Marks agreed that Mr Douglas had received this program with the computer but said that Mr Douglas did not get the manuals for Lotus because on loading the program one of the files was corrupt and the software package was returned to the supplier. Mr Marks believed, he said, that a replacement package had been sent to Mr Douglas within seven days. While Mr Douglas denies any reference to a corrupt file, he agrees in his affidavit in reply, that Mr Marks said that he would obtain a manual and would post it to Mr Douglas. No such manual was ever sent. There is no doubt that the program was installed in the hardware of the computer.
Mr Douglas was the sole witness as to the observed conduct of the respondent in relation to the purchase of the October and January computers. These were the only two computers alleged to have been sold by Mr Marks personally.
I have substantial reservations as to the accuracy and completeness of the recollection of Mr Douglas in relation to his meetings with Mr Marks. In his first affidavit in relation to the mid-October meeting, Mr Douglas did not mention any statement by Mr Marks that he would be sent a Lotus 1-2-3 manual, or that Mr Marks said that he would get in the manual. Mr Douglas does however recall it after having the statement drawn to his attention by the affidavit in reply of Mr Marks. He then agrees with Mr Marks that this statement was made. However, in this circumstance it is odd that if Mr Marks had told Mr Douglas on 13 or 14 October that he would "get in" a Lotus manual, that Mr Douglas would swear in relation to the purchase of the October computer on 14 October 1994, that he searched the boxes supplied and found no relevant manual as he stated in paragraph 12 of his first affidavit. If he had been told on 13 or 14 October that there was no such manual, but that one would be obtained and posted to him, one might ask why he thought it necessary to search the boxes for such a manual.
Furthermore, Mr Douglas denies that Mr Marks said anything in mid-October about a corrupt Lotus file. However, Mr Marks produced in evidence, a purchase order dated 14 October 1994, in relation to the Nyora store, which seeks replacement of faulty Lotus software. The order requests that the replacement be posted to "F. Edwards" at 21 Moe Street, Drouin, which was the false name and the address given by Mr Douglas when making his October "trap" order. The purchase order of 14 October 1994 was not shown to be in any way a false document. On this important matter I accept the evidence of Mr Marks over that of Mr Douglas. I consider that this casts significant doubt on the reliability of the accuracy and comprehensiveness of the recollection of Mr Douglas. Perhaps his recollection may have been improved if appropriate steps had been taken soon after the meeting to notify Mr Marks of the trap order in accordance with the recommended practice. See Bryant v Keith Harris (1980) 33 ALR 437 at 439-440 and 450-452.
Exhibit 1 tabled by the respondent showed that substantial purchases were made of Microsoft programs by the company during the period mid to late 1994. In addition, there is a specific invoice in October as to the purchase of Lotus 1-2-3.
The substantial purchases of such software indicate that the stores did stock quantities of authorised Microsoft software programs in or about the relevant period which is October 1994 to January 1995 from which to install programs in computers in an authorised manner.
It is submitted for the applicant, that while some programs in stock may have been legitimate purchases by the respondent, it does not follow that all software programs installed in computers were from such stock. However, it does show, in my opinion, that there was legitimate stock available for installation in an authorised manner on computers purchased. It is not the case that there was no evidence of any legitimate software being available for authorised installation. The onus, of course, rests on the applicant to prove beyond reasonable doubt that the programs were not installed with the authority of the relevant applicant. In my view they have not done so.
In determining what occurred, I also take into account the fact that there is no evidence of any breach of the Court orders in the period between the making of the contempt orders by Gummow J on 4 February 1992 and mid-October 1994. Further, there is the evidence of Mr Marks and his employees as to the instructions given in relation to copies and furnishing of manuals and disks.
In addition, I am satisfied that following the orders for contempt were made by Gummow J, the respondent was genuinely concerned to take measures to ensure that there would be no recurrence.
These considerations, are not of course, determinative or controlling, but they do tend away from a conclusion that the respondent acted in "wilful and flagrant disobedience of the orders" and "displayed an attitude of blatant defiance" of its obligations under the Copyright Law and to the Court. It also tends against a conclusion that the conduct was contumacious.
Having regard to the above considerations, and what has been said in relation to the question of intention and knowledge, I am not satisfied that the evidence presented to the Court establishes, to the criminal standard, that any programs were reproduced in an unauthorised manner by Mr Marks during the relevant period. Nor do I consider it established that there was a sale of an unauthorised copy. The circumstantial material relied on is not sufficiently cogent to lead me to this conclusion. The evidence falls far short of proving, to the criminal standard, that any copy installed on the machines sold to Mr Douglas was an unauthorised copy.
Accordingly, the charges in relation to the mid-October reproduction in copying are not made out.
Late October-November Charges - MS DOS and Microsoft Windows
The allegations of late October to November relate to the reproduction of MS DOS and Microsoft Windows by Mr Marcou and other employees, either as servants or agents of Mr Marks, or by Mr Marcou pursuant to authorisation from Mr Marks.
Also, during this period, it is alleged that Mr Marcou, either pursuant to authority from Mr Marks, or as servant or agent of Mr Marks, sold or supplied unauthorised copies of these programs to Mr Chessum and Mr Morus.
These allegations rely on affidavits by Mr Chessum and Mr Morus.
The evidence of Mr Morus is that in October 1994 at Traralgon, Victoria, he saw Mr Marcou connect the computer, which Mr Morus had purchased, to another computer with a cable and enter commands into both computers. After this Mr Marcou said words to the effect that MS DOS had been loaded. Later Mr Morus returned to the shop and he saw a "man and a woman" load MS DOS and Microsoft windows onto the computer from disks. No copies of the disks or manuals were given to him or to members of his family which is said to be a normal procedure when software is sold. These employees are unnamed.
As against Mr Marks, this evidence is quite unsatisfactory. There is no evidence that the persons in question were authorised by Mr Marks directly or indirectly or that their conduct was countenanced. The evidence does not establish that Mr Marcou was acting on behalf of Mr Marks when he connected the computer using a cable. Nor does the evidence establish that the installation was unauthorised. Further, it is not shown that the primary act of reproduction or unauthorised sale took place.
The evidence of Mr Chessum is of even less assistance on the question before me. He says that about 30 October 1994 he went to the Traralgon store and met with Mr Marcou who said that he was loading MS DOS and Windows onto the computer which Mr Chessum purchased. Mr Chessum was given by Mr Marcou, disks and manuals for DOS and Works, but not for Windows. He also was given a package of disks for DR-DOS.
A few days later, because of problems with the hardware, Mr Chessum went back and watched Mr Marcou load MS DOS and Windows. He was given no further disks or manuals.
This evidence does not establish that Mr Marcou was authorised by Mr Marks to make copies, nor does the evidence establish that the software installed involved unauthorised reproduction sale or supply of the software.
It has not been shown that Mr Marks was aware of any of the breaches alleged against Mr Marcou or the unnamed employees to which the applicants refer. Nor has it been proved that Mr Marks caused any such conduct on the part of his employees or agents. He could not be said to have "countenanced or sanctioned" any such conduct.
25 January Charges - Microsoft
These charges relate to the range of Microsoft programs which include Windows, Excel, Word, Powerpoint and Office.
Again, it is alleged that Mr Marks personally reproduced the programs, sold and supplied unauthorised copies of these programs to Mr Douglas. I have previously stated my reservations in relation to the evidence of Mr Douglas.
At this encounter although Mr Douglas says that he observed the "Copy Master 1000" in a corner, he does not say that he ever saw it being used.
I accept the explanation given by Mr Marks that he did not want Mr Douglas to tell anyone about the programs because he was selling the software at cost to sell the hardware.
On this occasion, Mr Marks said to Mr Douglas that he had given him a batch of Microsoft products but there was some problem with the loading of Excel. Excel is part of the Microsoft "Office" suite of programs. The evidence is that Mr Marks then opened an original package and attempted to load the program from the disk in that package but was unsuccessful. This evidence lends support to the conclusion that Mr Marks did load from original packages from time to time in an authorised manner.
Mr Douglas saw Mr Marks load the Microsoft Office program (which would have contained Excel) from a compact disk onto the January computer which was another computer in the showroom. The evidence did not establish that the Microsoft Office compact disk from which the program was loaded on that occasion was an unauthorised copy.
In my opinion, the charges in relation to the January computer are not made out.
Conclusion
None of the charges made have been proved. For the above reasons, I propose to dismiss the application. I will hear the parties on costs, at a time to be arranged.
I certify that this and
the preceding thirty-four (34)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 15 December 1995
Counsel for Applicants: Mr D K Catterns QC
Ms S J Goddard
Solicitors for Applicants: Mallesons Stephen Jacques
Counsel for Respondent: Mr B A Connell
Solicitors for Respondent: Belleli King & Associates
Date of Hearing: 19 October 1995
Date Judgment Delivered: 15 December 1995
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