Microsoft Corporation v PC Club Australia Pty Ltd
[2005] FCA 1522
•28 OCTOBER 2005
FEDERAL COURT OF AUSTRALIA
Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522
COPYRIGHT – counterfeit certificates of authenticity (COAs) affixed to computers loaded with software onto hard disks thereof and accompanying restore compact disks – dispute as to ownership and subsistence of copyright in computer software – dispute as to standing of third Microsoft applicant to sue as exclusive licensee of first applicant – claim for damages for infringement of copyright – personal liability of appointed directors and de facto director – whether respondents had reasonable grounds for suspecting conduct involving purchase and use of COAs constituted infringement of copyright – flagrancy of infringements – injunctions – whether additional damages should be ordered – liability of directors in office as well as corporate infringer
TRADE MARKS – registered trade marks appearing on computer software flat packs, associated media and on-screen – whether conduct involving breach of copyright also infringed trade marks – injunctions – whether damage sustained
TRADE PRACTICES – whether conduct constituting infringement of copyright involved misleading and deceptive conduct – whether damage sustained
Copyright Act 1968 (Cth) ss 31(1)(a)(i), 35, 36, 38(1), 115(2), 115(3), 115(4), 116, 119, 126A, 126B, 128, 184, and 196
Copyright Amendment (Parallel Importation) Act 2003 (Cth)
Designs Act 1906 (Cth)
Foreign Corporations (Applications of Laws Act) 1989 (Cth)
Judiciary Act 1903 (Cth) s 79
Trade Marks Act 1995 (Cth)
Trade Practices Act 1974 (Cth) ss 52, 53(a), 53(a), 53(c) and 53(d)
Conveyancing Act 1919 (NSW) s 12
Copyright (International Protection) Regulations 1969 (Cth)
Federal Court Rules O 13 r 2Kenrick v Lawrence (1890) 25 QBD 99 cited
Microsoft Corporation v DHD Distribution Pty Ltd t/as Austin Computers (1999) 45 IPR 459 applied
Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337 referred to
Safe Sport Australia Pty Ltd v Puma Australia Pty Limited (1985) 4 IPR 120 referred to
Reardon Smith Line Ltd v Ynguar Hansen-Tangen [1976] 1 WLR 989 referred to
DTR Nominees v Mona Homes Pty Ltd (1978) 138 CLR 423 cited
Cameron & Co v Slutzkin Pty Ltd (1923) 32 CLR 81 referred to
Wood v Boosey (1868) LR. 3 QB. 223 referred to
Fiscal Technology Co Ltd v Johnson (1991) 23 IPR 555 referred to
Redwood Music Ltd v Chappell & Co Ltd [1982] RPC 109 cited
Taypar Pty Ltd v Santic (1989) 21 FCR 485 discussed
Dixon Projects Pty Ltd v Masterton Homes Pty Ltd (1996) 36 IPR 136 distinguished
Global Brand Marketing Inc v Cube Footwear Pty Ltd (2005) 65 IPR 44 discussed
Trendtex Trading Corp v Credit Suisse [1982] AC 679 applied
Commonwealth v Mewett (1997) 191 CLR 471 cited
Northern Territory v GPAO (1999) 196 CLR 553 referred to
University of Wollongong v Metwally (1984) 158 CLR 447 cited
Microsoft Corporation v Auschina Polaris (1996) 71 FCR 231 applied
University of New South Wales v Moorhouse (1975) 133 CLR 1 cited
Australasian Performing Rights Association v Tolbush Pty Ltd (1985) 82 FLR 52 cited
Microsoft Corporation v Goodview Electronics Pty Ltd (2000) 49 IPR 578 referred to
Henley Arch v Clarendon Homes (1998) 41 IPR 443 cited
Wheeler Grace & Pierucci v Wright (1989) 16 IPR 189 applied
Milwall v Olympic Amusements Pty Ltd (1989) 85 FCR 436 cited
General Tyre & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197 applied
Autodesk v Cheung (1990) 17 IPR 69 discussed
Microsoft Corporation v TYN Electronics Pty ltd (in liq) (2004) 63 IPR 137 discussed
Microsoft Corporation v Glostar Pty Limited (2003) 57 IPR 518 distinguished
Prior v Lansdowne Press Pty Ltd (1995) 29 FLR 59 cited
Ravenscroft v Herbert & New English Library [1980] RPC 193 at 208 cited
Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643 cited
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 discussed
Jones v Dunkel (1959) 101 CLR 298 referred to
Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 cited
Sheldon and Hammond Pty Ltd v Metrokane Inc (2004) 61 IPR 1 cited
Namol Pty Ltd v AW Baulderstone Pty Ltd (1993) 27 IPR 1 cited
Bailey v Namol Pty Ltd (1994) 53 FCR 102 cited
Milpurrurru v Indofurn Pty Ltd (1994) 54 FCR 240 cited
Microsoft Corporation v Ezy Loans (2004) 63 IPR 54 cited
Sullivan v FNH Investments Pty Ltd (2003) 57 IPR 63 cited
Autodesk Inc v Yee (1996) 35 IPR 415 cited
Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 24 IPR 461 cited
Thunderbird Products Corporation v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592 referred to
Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 referred to
National Australia Bank Ltd v Nobile (1988) 100 ALR 227 referred toK Garnett, G Davies and G Harbottle, Copinger and Skone James on Copyright, 15th edition 2005
J W Carter and D J Harland, Contract Law in Australia, 4th edition, 2002J G Starke, Assignment of Choses in Action in Australia, 1972
J Lahore and W A Rothnie, Copyright and Designs, Vol 1, Butterworths
MICROSOFT CORPORATION AND MICROSOFT PTY LIMITED AND MICROSOFT LICENSING, GP v PC CLUB AUSTRALIA PTY LTD AND DAVID LEE AND MYMY LEE (ALSO KNOWN AS MIMI LEE) AND KE-HSIEH FANG (ALSO KNOWN AS KANE FANG)
NSD 1080 OF 2004
CONTI J
28 OCTOBER 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1080 OF 2005
BETWEEN:
MICROSOFT CORPORATION
FIRST APPLICANTMICROSOFT PTY LIMITED
SECOND APPLICANTMICROSOFT LICENSING, GP
THIRD APPLICANTAND:
PC CLUB AUSTRALIA PTY LIMITED
FIRST RESPONDENTDAVID LEE
SECOND RESPONDENTMYMY LEE (also known as MIMI LEE)
THIRD RESPONDENTKE-HSIEH FANG (also known as KANE FANG)
FOURTH RESPONDENTJUDGE:
CONTI J
DATE OF ORDER:
28 OCTOBER 2005
WHERE MADE:
SYDNEY
INDEX OF JUDGMENT
Pages
Paragraphs
Heading
1 INTRODUCTION 1 - 6 1 - 9 A preview of the context to the litigation and the parties involved 6 - 7 10 - 12 The Anton Piller, Mareva and injunctive relief sought and obtained on an interlocutory basis and the subsequent course of the proceedings 7 – 9 13 – 16 The applicants’ case in outline 9 - 12 17 – 20 The respondents’ case in outline on the copyright and other issues outstanding 12 THE APPLICANTS’ ACTION FOR INFRINGEMENT OF COPYRIGHT IN WINDOWS XP HOME AND WINDOWS XP PRO 12 – 14 21 – 26 The relevant legislative provisions 14 – 18 27 – 35 The applicants’ standing to bring the infringement action 18 – 64 36 – 136 The respondents’ challenge to the applicants’ standing to sue for infringement of copyright in Windows XP Home and Windows XP Pro 19 – 37 38 – 71 The Respondents’ challenge to subsistence of copyright in Windows XP Home and Windows XP Pro and to Microsoft’s ownership thereof 21 – 29 40 – 56 (i) Whether there is a separate copyright in the ‘version’ of Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’, and that those versions so created fell within the description of ‘derivative works’ contained in sub-clause 2.1(i) of the Parent-Subsidiary Agreement 29 – 32 57 – 61 (ii) Whether MLI was the sole entity entitled to author Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’ and to own the copyright therein, therefore whether Microsoft is not entitled to the benefit of the evidentiary provisions and presumptions in the Copyright Act in order to claim ownership of any copyright that might subsist in the relevant programs 32 – 37 62 – 71 (iii)Whether the applicants failed to prove the subsistence and ownership of copyright in Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’ potentially owned by MLI 37 – 54 72 – 111 My conclusions on the respondents’ challenge to Microsoft’s reliance upon ss 126A, 126B and 128 as establishing subsistence and ownership of copyright in Windows XP Home and Windows XP Pro 37 – 41 72 – 80 (i) Sections 126A, 126B and 128 41 – 42 81 – 84 (ii) The burden of proof 42 – 53 85 – 107 (iii)The construction of cl 2.1 of the Parent-Subsidiary Agreement 53 – 54 108 – 111 (iv)The applicants’ further submissions 54 – 64 112 – 136 The respondents’ contention that MLGP failed to obtain a legally effective assignment of MLI’s exclusive rights to sue for infringement of copyright 64 – 71 137 – 149 The copyright issues falling for resolution consequentially upon the findings in favour of the Microsoft applicants in relation to entitlement to sue for infringement of copyright in the subject computer software products 71 – 73 150 – 154 The nature and scope of PC Club’s activities of assembly of computer hardware and acquisition of software as explained by Mr Lee 73 – 99 155 – 202 The sale of personal computers by PC Club with pre-installed software – the procedures put in place as explained by Mr Lee – the evidentiary basis for the respondents’ case as to ‘innocent infringement’ under s 115(3) of the Copyright Act 99 – 103 203 – 209 The respective roles and functions of Mr Lee, Mr Fang and Mrs Lee undertaken for PC Club 103 – 146 210 – 290 Further circumstances outlined by the applicants as derogating from the respondents’ assertions as to ss 115(3) and 115(4) of the Copyright Act and the quantification of damages or loss of profits for infringement of copyright 103 – 109 210 – 220 Damages pursuant to s 115(2) 109 – 133 221 – 264 Additional damages for breach of copyright 110 – 129 222 – 255 (i) The flagrancy of the infringements and my conclusions upon the credibility of Mr Lee 129 – 130 256 – 258 (ii) Conduct of the respondents after receipt of notification by Microsoft of the alleged infringing conduct 131 259 (iii)Benefits said to have accrued to the respondents by reason of the infringements 131 260 (iii) Need for deterrence 131 – 132 261 – 264 (v) Other relevant matters 133 – 134 265 – 266 Judicial precedents as to quantification of additional damages and their operation in the present circumstances 134 – 145 267 – 290 The quantification of damages for infringement of copyright 146 – 154 291 – 308 TRADE MARK INFRINGEMENT 154 – 156 309 – 313 INFRINGEMENT OF TP ACT 156 314 CONCLUSIONS ON THE CAUSES OF ACTION PURSUED BY THE APPLICANTS
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1080 OF 2005
BETWEEN:
MICROSOFT CORPORATION
FIRST APPLICANTMICROSOFT PTY LIMITED
SECOND APPLICANTMICROSOFT LICENSING, GP
THIRD APPLICANTAND:
PC CLUB AUSTRALIA PTY LIMITED
FIRST RESPONDENTDAVID LEE
SECOND RESPONDENTMYMY LEE (also known as MIMI LEE)
THIRD RESPONDENTKE-HSIEH FANG (also known as KANE FANG)
FOURTH RESPONDENTJUDGE:
CONTI J
DATE OF ORDER:
28 OCTOBER 2005
WHERE MADE:
SYDNEY
ORDERS
In these orders, the following expressions bear the respective meanings assigned thereto:
‘Date of judgment’ means 28 October 2005.
‘Incomplete Microsoft Program’ means a copy of the whole or a substantial part of any of the Microsoft Programs which is not accompanied by the associated media, the product manual, and the Microsoft COA Label which was originally affixed to that media or product manual.
‘Infringing Microsoft COA Label’ means any Microsoft COA Label which is either: (i) not attached to any computer, disk or manual; or (ii) is an Infringing Microsoft Product.
‘Infringing Microsoft Products’ means any Microsoft Class 9 Products or Microsoft Class 16 Products to which the mark ‘MICROSOFT’ or the mark ‘WINDOWS’ or a mark substantially identical with, or deceptively similar to, the mark ‘MICROSOFT’ or the mark ‘WINDOWS’ has been applied without the consent of the First Applicant.
‘Infringing Microsoft Program’ means a copy of the whole or a substantial part of any of the Microsoft Programs which has not been made by or with the licence of the First Applicant.
‘Microsoft COA Label’ means any document which is or is purported to be a Microsoft Certificate of Authenticity label (whether or not genuine).
‘Microsoft Class 9 Products’ means computer programs, magnetic disks and tapes containing computer programs, computer software, computer hardware, memory boards for use with computers, programmed chips, cartridges embodying computer programs and computer software and firmware embodied in computers or designed to be used therewith.
‘Microsoft Class 16 Products’ means printed instructional and teaching material related to computers and computer software, books, paper and printed matter for use with computer equipment, computer hardware and software manuals, newsletters featuring information about computer hardware and software, paper, paper tape and cards for the recordal of computer programs.
‘Microsoft Programs’ means the computer programs Microsoft Windows XP Home and Windows XP Pro, and their associated documentation and works.
‘Microsoft Trade Marks’ means any or all of the First Applicant’s registered trade marks comprising the mark ‘MICROSOFT’ and numbered 371528(9) and 377674(16) or comprising the mark ‘WINDOWS’ and numbered 576996(9) and 576997(16).
THE COURT ORDERS THAT:
As to the copyright claims:
1.Pursuant to section 115(2) of the Copyright Act 1968 (Cth) the respondents and each of them 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, importing or distributing any Infringing Microsoft Program;
(c)selling, offering for sale, supplying, offering to supply, importing or distributing any Incomplete Microsoft Program;
(d)selling, offering for sale, supplying, offering to supply, importing or distributing any Infringing Microsoft COA Label; and
(e)authorising, directing or procuring any other company or person from engaging in any of the conduct sought to be restrained by sub-paragraphs (a), (b), (c) and (d) above.
2.Pursuant to sections 115 and 116 of the Copyright Act 1968 (Cth), the respondents and each of them deliver up to the applicants and verified on oath each Infringing Microsoft Program which is in the possession, power, custody or control of the respondents or any of them and any equipment used to make any such infringing copy within 7 days of the date of judgment.
3.Judgment be entered for the third applicant against the respondents and each of them jointly and severally in the sum of US$188,950 being damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth).
4.Judgment be entered for the third applicant against the respondents individually and therefore cumulatively in the following sums for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth):
(a)as against the first respondent in the sum of AUD$350,000;
(b)as against the second respondent also in the sum of AUD$350,000;
(c)as against the third respondent in the sum of AUD$30,000;
(d)as against the fourth respondent in the sum of AUD$50,000.
5.The award of damages under s 115(2) of the Copyright Act 1968 (Cth) which is presently expressed in terms of United States dollars (US) shall be payable in the equivalent sum of Australian dollars (AUD) according to the rate of exchange prevailing at 11 am on the day of judgment, such prevailing rate to be determined by the applicants in accordance with the procedure contained in s 6(11A) of the Foreign Judgments Act 1991 (Cth), which is to be read so that the ‘conversion day’ referred to therein is taken to be the date of judgment in these proceedings.
As to the trade mark claims:
6.The respondents and each of them 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;
(b)authorising, directing or procuring any other company or person from engaging in any of the conduct sought to be restrained by sub-paragraph (a) above.
7.The respondents and each of them deliver up to the applicants and verified 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 respondents or any of them within 7 days of the date of judgment.
As to the Trade Practices Act claims
8.The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the relevant respondent supplies or offers to supply any Infringing Microsoft program or Infringing Microsoft Product:
(a)that any such product has been made with the licence of the First Applicant; or
(b)that the relevant respondent is lawfully entitled to supply any such product.
9.The respondents and each of them whether by their servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the relevant respondent supplies or offers to supply any Infringing Microsoft COA Label:
(a)that any such Infringing Microsoft COA Label evidences or constitutes a copyright licence from the first applicant; or
(b)that any software loaded onto a computer to which the Infringing Microsoft COA Label may subsequently be affixed is licensed or approved by the first applicant.
10.That the second, third and fourth respondents 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 orders 8 and 9 above.
Other orders
11.The respondents and each of them pay interest pursuant to s 51A of the Federal Court Act 1976 (Cth) in respect of the damages awarded under s 115(2) of the Copyright Act 1968 (Cth) from 12 July 2004 until the date of judgment.
12.The respondents and each of them pay the applicants’ costs of the proceedings (including any reserved costs).
13.The applicants have liberty to apply within 14 days in respect of the content and form of these orders upon two days’ notice, and relief pursuant to s 87 of the Trade Practices Act 1974 (Cth) as to the publication of advertisements or notices shown to be appropriate or expedient in order to give force and effect to any of the foregoing orders.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1080 OF 2005
BETWEEN:
MICROSOFT CORPORATION
FIRST APPLICANTMICROSOFT PTY LIMITED
SECOND APPLICANTMICROSOFT LICENSING, GP
THIRD APPLICANTAND:
PC CLUB AUSTRALIA PTY LIMITED
FIRST RESPONDENTDAVID LEE
SECOND RESPONDENTMYMY LEE (also known as MIMI LEE)
THIRD RESPONDENTKE-HSIEH FANG (also known as KANE FANG)
FOURTH RESPONDENT
JUDGE:
CONTI J
DATE:
28 OCTOBER 2005
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
A preview of the context to the litigation and the parties involved
Microsoft Corporation (‘Microsoft’), being the first applicant, is a well known corporation incorporated under the laws of the State of Washington in the United States of America. It is one of the largest publishers and distributors of computer software for personal computers in the world. Microsoft carries on business of manufacturing, marketing, distributing and supplying the numerous computer programs identified in the schedules to the statement of claim, including all versions of those computer programs, along with the associated manuals and documentation. Microsoft asserts copyright ownership in those programs, manuals and documentation as original literary works first published in the United States, and therefore copyright therein, and for the purposes of the present litigation, in particular in the programs entitled Microsoft Windows XP Home (‘Windows XP Home’) and Microsoft Windows XP Professional (‘Windows XP Pro’). The first and most critical issue arising in the proceedings relates to the validity or otherwise of Microsoft’s ownership, and the subsistence of, that copyright, such that the same may be enforced by one or more of the applicants to the proceedings against the respondents in certain controversial circumstances.
Microsoft Pty Limited (‘MPL’), being the second applicant, is an Australian incorporated subsidiary of Microsoft, and provides marketing and technical support on behalf of the Microsoft Group in Australia in relation to all versions of the computer programs; it is also an authorised user of Microsoft’s trade marks.
Microsoft Licensing, GP (‘MLGP’), being the third applicant, is a general partnership established under the laws of the State of Nevada in the United States of America, and asserts entitlement to sue in that partnership name pursuant to the laws of that State. It is the exclusive licensee of, inter alia, the right of reproduction of Microsoft programs distributed in the so-called original equipment manufacturer channel, abbreviated in these reasons by description as the ‘OEM channel’. OEM is in turn an abbreviation for ‘original equipment manufacturer’, the principal function of OEMs being to manufacture computer hardware equipment.
Computer programs were first published by Microsoft in the United States of America in the 1980s and its name and trade mark ‘Microsoft’ appeared on those programs as first published, and has continued to do so at least at all times material to the proceedings. Microsoft asserted at the outset of the proceedings that pursuant to s 128 of the Copyright Act 1968 (Cth) (‘Copyright Act’) and regulation 4(1) of the Copyright (International Protection) Regulations 1969 (Cth) (‘Copyright Regulations’) given effect through s 184 of the Copyright Act, copyright has been and continues to be presumed to subsist in the Microsoft programs, and Microsoft is presumed to be the owner of the copyright in the Microsoft programs at the time they were first published, unless the contrary be established. Alternatively it is the case of the Microsoft applicants that there is prima facie evidence that Microsoft is the owner of the copyright which subsists in the Microsoft programs by virtue of ss 126A and 126B of the Copyright Act. It was further asserted that the joinder of the third applicant, MLGP, was in accordance with s 120 of the Copyright Act, by virtue of MLGP’s status as exclusive licensee of certain of the rights comprising the copyright said to subsist in the programs. The extent of that exclusive licence and its legal efficacy were matters of controversy between the parties to the present proceedings.
Microsoft further asserts proprietorship of the following registered trade marks under the Trade Marks Act 1995 (Cth) (‘Trade Marks Act’) respectively relating inter alia to the following computer programs, as marketed and sold to the public in Australia:
‘371528(9) MICROSOFT Computer programs, magnetic disks and tapes containing computer programs, computer software, computer hardware, memory boards for use with computers, programmed chips, cartridges embodying computer programs, computer software and firmware embodies in computers or designed to be used therewith (“Microsoft Class 9 Products”)
377674(16) MICROSOFT Printed instructional and teaching material related to computers and computer software, books, paper and printed matter for use with computer equipment, computer hardware and software manuals, newsletters, featuring information about computer hardware and software, paper, paper tape, cards for recordal of computer programs (“Microsoft Class 16 Products”)
576996(9) WINDOWS Computer systems software, computer systems software and programmers reference and users manuals sold as a unit (“Windows Class 9 Products”)
576997(16) WINDOWS Books, computer documentation, namely, reference books, user and instructional manuals, data sheets, reference cards and templates; periodical and newsletters; all the foregoing featuring information about computer hardware and software and information about computer operating systems and environments (“Windows Class 16 Products”).’
Microsoft asserts that the events giving rise to its claims for breach of copyright have also given rise to or involved breach of those trade marks, and have also given rise to or involved misleading and deceptive conduct in contravention of ss 52, 53(a), 53(c) and 53(d) of the Trade Practices Act 1974 (Cth) (‘TP Act’). The addition of those two causes of action to that for infringement of copyright is in line with what has become largely a traditional pattern in more recent times, with the primary emphasis remaining however on the copyright based claims for relief.
The first respondent, PC Club Australia Pty Limited (‘PC Club’), is a company registered in the State of New South Wales, and conducts and has for some time conducted a substantial business at and from Rhodes in the State of New South Wales of wholesaling computer hardware and software since about April 2000. The second respondent (‘Mr Lee’) is said by the applicants, though denied by the respondents, to have the overall control of the day to day operations of PC Club, and the third respondent (‘Mrs Lee’) and the fourth respondent (‘Mr Fang’) were asserted by the applicants to be directors of PC Club and to be accustomed to act in accordance with the instructions of Mr Lee in relation to PC Club. Mrs Lee testified that she was actively involved in the day to day operations of PC Club, partly in the capacity of a purchasing officer, and Mr Fang testified to having undertaken the offices of managing director, ‘technical director’ and chief executive officer of PC Club.
The complaints of the applicants giving rise to the proceedings are that PC Club has engaged in conduct by way of unauthorised reproduction of Windows XP Home and Windows XP Pro in which Microsoft claims copyright, and to which the above Microsoft trade marks relate, and has done so on a large scale, such as to give rise to substantial claims for damages, especially for infringement of copyright. The respondents have denied any such misconduct, but alternatively the respondents’ defence of the proceedings extended to the radical and evidently unprecedented claim that none of the three applicants, and Microsoft as first applicant in particular, has had the standing at any material time to bring the subject proceedings, for the reason that Microsoft was unable to rely upon the evidentiary provisions in ss 126A and 126B and the statutory presumption in s 128 of the Copyright Act establishing subsistence and ownership of copyright, at least for the reason that the only entity entitled to author the programs at their time of first publication was Microsoft Licensing, Inc (‘MLI’), a further corporate entity wholly owned at the time of first publication of the programs by Microsoft, which was not a party to the proceedings, and that the applicants had failed to adduce evidence establishing that MLI had not in fact created the programs. Moreover, MLI being said to be the only entity entitled to create the programs, the applicants were further said by the respondents to have failed to establish the subsistence and ownership of copyright in the programs by MLI in the manner required by the Copyright Act, those aforementioned evidentiary provisions and statutory presumptions being unavailable to MLI. That was asserted by the respondents to be because between 31 December 1997 and 1 September 2003, MLI was the worldwide exclusive licensee, pursuant to a so-called Parent-Subsidiary Agreement purportedly entered into ‘as of December 31, 1997’ between Microsoft and MLI with respect to certain of the copyright in and distribution of the so-called Windows XP Home and Windows XP Pro editions ‘in the OEM channel’, being versions of Microsoft programs supplied to and by OEMs for distribution as part of computer hardware packages (hereafter referred to as the ‘Parent-Subsidiary Agreement’). Collateral to the Parent-Subsidiary Agreement and entered into contemporaneously between Microsoft and MLI was a so-called Memorandum of Understanding (‘MOU’).
Microsoft claims that such somewhat belated issue is misconceived in terms as to the subject matter and language of the Parent-Subsidiary Agreement (which was referred to at times as the ‘OEM License’ by the applicants), and that in any event, the radical point so raised is broadly answered by the circumstance that as of 1 September 2003, and pursuant to a so-called Contribution Agreement entered into between MLGP (that is of course the third applicant) of the one part, and MLI of the other part, MLGP acquired from MLI the rights, titles and interests of MLI conferred by the Parent-Subsidiary Agreement. Such assignment was asserted by the applicants to have had the effect that MLGP replaced MLI as Microsoft’s exclusive licensee with respect to certain of the copyright in and distribution in the OEM channel of OEM versions of Microsoft programs the subject of the Parent-Subsidiary Agreement, and MLGP thereby acquired the statutory rights to sue and recover damages for infringement of the copyright in the OEM versions of Microsoft programs held by MLI prior to 1 September 2003.
The construction and operation of the Parent-Subsidiary Agreement, along with the MOU, thus became the initial issue arising in the proceedings, being an issue of complexity which will shortly be addressed. Moreover the construction and operation of the Contribution Agreement became a further issue, by reason of the respondents’ contention that the Contribution Agreement could have no effective operation in law as an assignment of MLI’s exclusive license to MLGP, by reason that s 12 of the Conveyancing Act 1919 (NSW) (‘Conveyancing Act’) had not been complied with by the giving of notice to the respondents of that assignment. In fact it was not apparent until the proceedings had been well on foot that the respondents became aware of the Parent-Subsidiary Agreement and the Memorandum of Understanding in the first place.
The Anton Piller, Mareva and injunctive relief sought and obtained on an interlocutory basis and the subsequent course of the proceedings
On 12 July 2004, the applicants sought and obtained ex parte from Whitlam J Anton Piller and Mareva orders and injunctive relief against PC Club, Mr Lee and Mrs Lee in relation to the reproduction, sale and distribution of the whole or any substantial part of Microsoft computer programs and associated documentation, including so-called ‘COA’ (abbreviation for Certificate of Authenticity) labels. At that stage Mr Fang had not been joined as a respondent. At the same time proceedings were instituted by the applicants for delivery up of the allegedly offending material, damages and an account of profits. The Anton Piller order was executed on 13 July 2004 at PC Club’s premises at Rhodes, a suburb of metropolitan Sydney. Subsequently those initial three respondents made an application to set aside the Mareva orders, but the status quo in terms of the Mareva and injunctive relief has remained in force. Mr Fang was added as a fourth respondent on 19 July 2004. Microsoft’s claim for damages was addressed at least mainly by evidence tendered at the final hearing. The initial interlocutory relief granted has remained in force pending the grant of any final relief in conformity with these reasons.
The hearing of the proceedings on a final basis commenced on 8 September 2004, and continued on 9 and 10 September 2004, during which three days, apart from relatively brief opening addresses of counsel for the parties on both sides of the record, supplementary testimony in chief and cross-examination took place. The hearing of the proceedings continued on 4 and 5 November 2004, when the cross-examination of affidavit deponents took place. The parties furnished comprehensive closing written submissions which the parties then addressed the Court on 3 and 4 March 2005 upon. Thereafter both parties provided further comprehensive written submissions.
Four large folders of written exhibits were tendered at the hearing, inclusive of confidential exhibits, as were many exhibits in the form of articles and equipment, such as compact disks (‘CDs’). Written submissions were not partitioned in relation to the recording, discussion and resolution of confidential exhibits, and understandably so, since the untangling of many areas of written submissions into segments of allegedly privileged and non-privileged material would have been a daunting undertaking for the parties and would have rendered more onerous the task of comprehensible decision writing.
The applicants’ case in outline
The applicants’ case was outlined in initial written submissions (and thereafter maintained and supplemented) as follows:
(a)PC Club infringed the copyright subsisting in Windows XP Home and Windows XP Pro owned by Microsoft and conferred under the Copyright Act by:
(i)reproducing, without the licence of the applicants, copies of the Microsoft computer programs Windows XP Home and Windows XP Pro on the hard disk drives of computers sold by PC Club, and on those compact disks called restore (or ‘recovery’) CDs supplied by PC Club along with computer hardware; this was described as ss 36 and 31(1)(a)(i) Copyright Act infringement, that is, the reproduction of literary… work in a material form;
(ii)selling those copies of the computer programs in circumstances where the respondents knew, or ought reasonably to have known, that the making thereof constituted infringement of copyright pursuant to s 38(1) of the Copyright Act.
(b)PC Club infringed Microsoft’s registered trade marks Microsoft and Windows by:
(i)doing the acts in (a) above, given that the computer programs displayed Microsoft’s ‘Microsoft’ and ‘Windows’ trade marks in the normal course of the operation thereof; and
(ii)stocking for the purposes of sale, and/or attaching to computers supplied by PC Club to its customers, counterfeit Microsoft COAs, which bore signs substantially identical to the ‘Microsoft’ and ‘Windows’ trade marks.
(c)PC Club engaged in conduct in contravention of ss 52, 53(a), 53(a), 53(c) and 53(d) of the TP Act by expressly or impliedly representing to purchasers of computers supplied by PC Club, concerning the copies of Windows XP Home and Windows XP Pro on the hard disks of the computers and on the restore CDs supplied by PC Club, that:
(i)those copies were made by or with the licence of Microsoft;
(ii) the respondents were lawfully entitled to sell such copies; and
(iii) the purchasers of such copies were lawfully entitled to use them.
(d)Each of Mr Lee, Mrs Lee and Mr Fang is personally liable to the relevant corporate applicant(s), in relation to the conduct set out in (a) to (c) above, as persons who have authorised the infringements of copyright and/or as joint tortfeasors and/or as persons otherwise involved in contravention of the TP Act.
(e)In the circumstances, the applicants are entitled to compensatory damages pursuant to s 115(2) of the Copyright Act, and a substantial award of additional damages pursuant to s 115(4) of the Copyright Act, as well as injunctions restraining further infringement.
The matters said by the applicants to be no longer in dispute are as follows:
(a) PC Club has committed trade mark infringement by:
(i)selling at least 2,181 computers with copies of Windows XP Home loaded onto the hard disk and accompanying restore CDs, with counterfeit COAs affixed to those computers;
(ii)selling at least 203 computers with copies of Windows XP Pro loaded onto the hard disk, and accompanying restore CDs, with counterfeit COAs affixed to those computers.
(b)The copies of Windows XP Home and Windows XP Pro referred to above in (a) were reproduced and sold by PC Club without the licence of Microsoft Corporation.
(c)Subject to arguments relating to ownership and subsistence of copyright, and standing to sue for infringement of copyright, the correct multiplier for the s 115(2) Copyright Act compensatory damages, which may be awarded to MLGP for infringement of copyright, is $US75 for each infringing copy of Windows XP Home and $US125 for each infringing copy of Windows XP Pro.
The following matters from the perspective of the case framed by the applicants were said to remain in dispute:
(a) ownership and subsistence of copyright in Windows XP Home and Windows XP Pro;
(b)the standing of MLGP to sue as exclusive licensee (in the OEM channel) for infringement of the copyright in Windows XP Home and Windows XP Pro;
(c) the personal liability of Mr Lee, Mrs Lee and Mr Fang as above pleaded;
(d)the number of copies of Windows XP Home and Windows XP Pro which infringed Microsoft Corporation’s copyright and trade marks by the respondents over and above the numbers set out in sub-paragraph (a) of the last preceding paragraph;
(e)the availability to the respondents of a ‘defence’ of innocent infringement under s 115(3) of the Copyright Act; and
(f)the entitlement of the applicants to an award of additional damages pursuant to s 115(4) of the Copyright Act.
I should make the general observation that the complexity of the issues arising is such as to render the task of definitive description somewhat impractical, though the broad outlines I have set out above provide a measure of guidance at least. It was submitted by the applicants that the respondents’ case on the issues the subject of sub-paragraphs (c), (d), (e) and (f) immediately above depend on the Court accepting the testimony of Mr Lee, and that for reasons later to be recorded in these reasons, Mr Lee should not be accepted as a witness of truth, and further if that submission of the applicants be accepted, then the respondents’ defences the subject of those four sub-paragraphs were bound to fail. I will defer the consideration and resolution of those issues until I first resolve the issues broadly the subject of sub-paragraphs (a) and (b) immediately above. That task involves issues and subjects of considerable complexity, which as will later be seen, demonstrate that the foregoing outline of issues tends to somewhat unwarranted simplicity in expression or framework.
The respondents’ case in outline on the copyright and other issues outstanding
Leaving to one side the respondents’ challenge to the applicants’ case on ownership and subsistence of copyright which I have already briefly foreshadowed, the respondents acknowledged that if subsistence and ownership of copyright was forensically capable of proof in favour of Microsoft, and if the standing of MLGP (as the third applicant) was susceptible to demonstration in principle for the purpose of enforcement of the claim for breach of copyright, ‘there will be no issue that there has been infringement by [PC Club], in the sense that Windows XP Home and Windows XP Pro have been reproduced by [PC Club] on the hard disks of computers assembled and sold by it, and on recovery discs, as [PC Club] now understands without the license of the applicants…’. However ‘relying on the provisions of s 115(3) of the Copyright Act, [PC Club] was not aware, and had no reasonable grounds for suspecting, that the acts constituting the infringements were infringements of copyright, and no one of the applicants is therefore entitled to any damages in respect of the infringements, but is entitled to an account of profits’. It was by reason of that alternative defence that there occurred a substantial amount of cross-examination of the PC Club directors at the instance of the applicants.
In any event as to quantification of damages for breach of copyright, the respondents contended that assuming that the applicants have any entitlement at all to sustain the relief sought in the proceedings, the respondents contended that quantification thereof had been ‘grossly inflated’ by the applicants, in that the basis of the claim made for US$1.83 million was founded on incorrect assumptions and arithmetic, and that if based instead on actual sale figures, the quantum of damages was said by the applicants to be a small fraction of the amount so claimed. The respondents’ case on the damages issue was clarified to the effect that ‘… there is now no dispute about the quantum of the multiplier, namely the minimum amount in royalties which MLGP would receive in relation to the sale in Australia by an authorised distributor of a copy of Windows XP Home and Windows XP Pro respectively (namely US$75 and US$125), but that there was a substantial dispute regarding the number of allegedly infringing programs which should be multiplied by the relevant figure…’. Further as to the quantification of damages for breach of copyright, the respondents submitted that there should be no entitlement to additional damages because the alleged infringements were not flagrant, there having been reasonable grounds for PC Club’s representatives believing (as they in fact claimed) that their conduct was legitimate. Moreover Mr Lee, Mrs Lee and Mr Fang for their part did not concede any personal liability for any award of damages.
As to the extent of the trade mark infringement issues arising:
(i)the respondents conceded that Microsoft is the proprietor in Australia of registered trade marks inclusive of 371528(9) MICROSOFT in relation inter alia to computer programs, and 576996(9) WINDOWS in relation inter alia to computer systems software, and that at least those two trade marks had been infringed by PC Club by using, as a trade mark, each of the registered marks on COA labels and on computer programs, in that the trade marks are visible on the screen of a computer when the computer program is started, and as PC Club ‘now understands without the license of Microsoft’;
(ii)the respondents accordingly admitted that Microsoft is entitled to relief under the Trade Marks Act against PC Club, including injunctions, but would not admit that Microsoft had proved any damage suffered by it as the proprietor of the registered trade marks; in any event with regard to damages, the respondents denied that Microsoft had proved that it had suffered any damage, the same being said to be, as above recorded, ‘grossly inflated’, but the respondents emphasised that the $1.83 million claim for damages said to have been suffered related to copyright infringement, and that there was no evidence that Microsoft as trade mark proprietor has suffered any damages as a result of trademark infringement; furthermore Mr Lee, Mrs Lee and Mr Fang again would not concede any personal liability on their respective parts.
In relation to the TP Act issues arising, the respondents conceded that the conduct of PC Club, as a corporation, occurred in trade and commerce, and that in so far as the same involved the use of the trade marks MICROSOFT and WINDOWS in relation to computer programs, the reproduction whereof not being authorised by Microsoft, the conduct alleged was likely to mislead or deceive, and the respondents accordingly admitted that Microsoft, as the applicant having the relevant reputation on the evidence, is entitled to relief by way of injunction on that account. The respondents would not admit however that Microsoft, or any of the other two applicants MPL and MLGP, had proved the sustaining of any damage, and submitted that if damages are notwithstanding payable, then the same would be co-extensive with any damages sustained by reference to the other causes of action, and that no separate award of damages would be justified, and further that the quantum of the claim was in any event ‘grossly inflated’; furthermore Mr Lee, Mrs Lee and Mr Fang would not admit any personal liability on their respective parts in relation to any such TP Act head of damages.
THE APPLICANTS’ ACTION FOR INFRINGEMENT OF COPYRIGHT IN WINDOWS XP HOME AND WINDOWS XP PRO
The relevant legislative provisions
The current infringement proceedings were purportedly brought by Microsoft against the respondents in its capacity as owner of copyright in Windows XP Home and Windows XP Pro and by MLGP as exclusive licensee of the right of reproduction of the programs vested in Microsoft by the Copyright Act, which is alleged to have been infringed (see s 119 of the Copyright Act). The owner of copyright in a work or a subject-matter other than a work has available to it several statutory causes of action in respect of which various forms of relief are available. Section 115(1) of the Copyright Act provides that the owner of copyright may bring an action for infringement of copyright. Section 115(2) states that subject to the Copyright Act, the court may grant relief in an action for infringement in the form of an injunction, an account of profits and damages. In addition the owner of copyright has available to them actions for conversion and detention in relation to infringing copies of the copyrighted work or subject-matter other than work or the device used to make those infringing copies under s 116.
In circumstances where copyright is subject to an exclusive licence, except against the owner of copyright, the exclusive licensee has the same rights of action as he or she would have, and is entitled to the same relief as he or she would be entitled to, by virtue of ss 115 and 116 if the licence had been an assignment: s 119. That provision also states that the rights and remedies of the exclusive licensee are concurrent with those of the owner of the copyright. I will address s 119 in more detail later since it provided the basis for the applicants’ rejoinder to certain aspects of the respondents’ challenge to the standing of MLGP to bring the present infringement action against the respondents.
Copyright protection is only available to what are referred to in the Copyright Act as ‘literary, dramatic, musical and artistic works’ (Part III of the Act) or ‘subject-matters other than works’ (Part IV of the Act). As a first step in bringing an action for infringement of copyright in a literary work, it is necessary to demonstrate that copyright subsists in that work.
In the present action, Microsoft asserts ownership of copyright in Windows XP Home and Windows XP Pro as computer programs, within the meaning of that expression in s 10(1) of the Copyright Act. That same section defines ‘literary works’ as including ‘a computer program or compilation of computer programs’. The nature of copyright in original literary, dramatic, musical and artistic works is relevantly defined in s 31 as follows:
‘(1) copyright, in relation to a work, is the exclusive right: (a) in the case of a literary, dramatic or musical work, to do all or any of the following acts: (i) to reproduce the work in a material form…’
Subsistence of copyright in a literary work is relevantly defined in s 32 as follows:
‘32(2)Subject to this Act, where an original literary…work has been published: (a) copyright subsists in the work…if, but only if: (c) the first publication of the work took place in Australia; (d) the author of the work was a qualified person at the time when the work was first published…
…in this section a qualified person means an Australian citizen, an Australian protected person or a person resident in Australia.’
For the purposes of literary works first published overseas, s 184 of the Copyright Act together with reg 4 of the Copyright Regulations effectively allows for the interposition of ‘the United States of America’ for ‘Australia’ in s 32, such that subsistence of copyright in the programs can be established by the applicants if they were to prove that the programs were ‘an original literary work’, and furthermore that publication had occurred in the United States and the author of the work was a citizen or resident of the United States.
The author of a literary work is the owner of any copyright subsisting in the work: s 35(2). Where a literary work to which neither of subss 35(4) and (5) apply (as is the case here), is made by the author in pursuance of the terms of his employment by another person under a contract of service or apprenticeship, that other person is the owner of copyright subsisting in the work: s 35(6). ‘Author’ is defined in s 10 only in relation to a photograph. As a general rule, case law has defined the author as the person who reduces the work to material form as opposed to the person providing the underlying ideas expressed in the work: Kenrick v Lawrence (1890) 25 QBD 99.
By virtue of ss 126(a) when a defendant does not put it in issue, subsistence of copyright in a literary work is presumed to exist. Likewise, s 126(b) provides that if subsistence is established and when the defendant does not put ownership of copyright in issue, the latter is also presumed. The respondents have in these proceedings placed both subsistence and ownership of copyright by Microsoft in Windows XP Home and Windows XP Pro in issue. Accordingly the applicants were put to proof of subsistence and ownership of copyright.
The applicants’ standing to bring the infringement action
Microsoft pleaded two separate bases for its contention that it owned copyright in the programs sufficient to give it, and its exclusive licensee MLGP, standing to bring the present applications for relief in respect of the respondents’ alleged infringement of copyright in Windows XP Home and Windows XP Pro, pursuant to ss 115(2) and 115(4) of the Copyright Act.
First, Microsoft contended that copyright subsisted in Windows XP Home and Windows XP Pro by virtue of the fact of being original literary works within the definition of that expression contained in s 10(1), and of being first published in the United States. Reliance was placed by Microsoft upon two evidentiary provisions of the Copyright Act that were introduced by the Copyright Amendment (Parallel Importation) Act 2003 (Cth), those provisions being ss 126A and 126B.
Section 126A provides as follows:
‘(1) This section applies to an action under this Part in which the defendant puts in issue the question whether copyright subsists in the work or other subject matter to which the action relates.
Labels or marks
(2) If a copy of the work or other subject matter, or the packaging or container in which the copy is packaged or contained, bears a label or mark stating the year and place of the first publication, or of the making, of the work or other subject matter, then the label or mark is admissible as prima facie evidence of the facts so stated.
Foreign certificates
(3) If a certificate or other document issued in a qualifying country in accordance with a law of that country states the year and place of the first publication, or of the making, of the work or other subject matter, then the certificate or other document is admissible as prima facie evidence of the facts so stated.
Mr T C Rubin, a copyright attorney employed by Microsoft in Washington since November 1998, testified that the Microsoft computer programs Windows XP Home and Windows XP Pro were first published by Microsoft on 25 October 2001 simultaneously in many countries worldwide, including the United States, the United Kingdom, Australia and New Zealand; the United States being the place of first publication. Mr Rubin tendered a copy of the United States certificate of registration of Windows XP Pro. By virtue of s 126A of the Copyright Act, and sub-section (3) in particular, that certificate is admissible as prima facie evidence of the facts therein stated as to the United States being the place of first publication and that such publication took place on 25 October 2001. Moreover, Mr I N Walker, described as a system builder account manager employed by MPL since 2 July 2002, and who had been previously involved in the Microsoft IT sector for four years, and in the components supply channel for more than two years, testified that Windows XP Pro ‘… is simply a premium version of Windows XP Home’, and moreover ‘… is the same program as Windows XP Home edition with a number of extra modules included… to form a consolidated computer program which is sold as Windows XP Professional’. Hence it was the applicants’ case that Windows XP Home was subsumed for copyright purposes within Windows XP Pro, and thus that the United States of America was and remains the place of first publication of Windows XP Home.
The applicants acknowledged that they had chosen not to present evidence of originality and authorship of the programs in order to establish subsistence of copyright, and instead that they relied solely on the s 126A evidentiary provisions and the presumption stipulated in s 128 (see below). The applicants submitted that the Parliament’s intention in legislating for the inclusion of the evidentiary provisions, in particular of ss 126A and 126B in the Copyright Act, was ‘to relieve parties in the position of [the applicants] from proving originality and authorship when there [were] notices on the products…’. Counsel for the applicants referred generally for support on the extrinsic materials for the bill which introduced ss 126A and 126B. Accordingly, Microsoft contended that it had established, to the strength of prima facie evidence, subsistence of copyright in Windows XP Home and Windows XP Pro. For what it may matter, that contention was perhaps framed too broadly, because s 126A does not purport to address the entirety of subject matters essential to constituting subsistence.
Section 126B creates an evidentiary presumption of ownership. That provision is entitled ‘[e]vidence in relation to ownership of copyright’ and is relevantly in the following terms:
‘(1)This section applies to an action under this Part in which the defendant puts in issue the question of the plaintiff’s ownership of copyright in the work or other subject matter to which the action relates.
Labels or marks
(2)If a copy of the work or other subject matter, or the packaging or container in which the copy is packaged or contained, bears a label or mark stating that a person was the owner of copyright in the work or other subject matter at a particular time, then the label or mark is admissible as prima facie evidence of the facts so stated.’
Mr Rubin exhibited to his affidavit sworn 27 August 2004 copies of the original retail Microsoft packaging of Windows XP Pro and Windows XP Home and marked as ‘JBJ-1’ and JBJ-2’. Both forms of packaging identified ‘Microsoft Corporation’ as the owner of the copyright of the programs, from and including the year ‘2001’. Accordingly, the applicants submitted that such labels or marks are prima evidence that Microsoft was at all material times the owner of copyright in Windows XP Home and Windows XP Pro, as at and from 2001. Mr Walker exhibited the form of the flat packaging used in the ‘OEM’ distribution channel (also referred to by Mr Walker as multi-pack of software), in which Windows XP Pro was packaged, at the time of swearing of his affidavit of 10 August 2004, as ‘IW-1’. The form of flat packaging in which Windows XP Home was packaged for distribution in the OEM distribution channel at the time of swearing Mr Lee’s affidavit of 27 August 2004 was exhibited thereto as ‘DL-1’. Mr Lee testified that such ‘multi-pack’ article contained what was labelled an ‘OEM Preinstallation Kit CD3’, such OEM description having the connotation which I have earlier identified. Mr Lee admitted that he made the reproductions in question in these proceedings from the ‘OEM Preinstallation Kit CD3’. Thus the applicants submitted that they had proved, pursuant to subs 126B(2), to the level of prima facie evidence, whether one considered the ‘OEM’ packaging (exhibits DL-1 and IW-1), or the retail packaging (exhibits JBJ-1 and JBJ-2), that Microsoft was the owner of copyright in Windows XP Home and Windows XP Pro.
Secondly, the applicants relied upon the statutory presumption contained in s 128 of the Copyright Act as establishing subsistence of copyright in Windows XP Home and Windows XP Pro and ownership of the same by Microsoft. Section 128 is in the following terms:
‘128 Presumption in relation to publisher of work
Where, in an action brought by virtue of this Part in relation to a literary, dramatic, musical or artistic work, the last preceding section does not apply, but it is established:
(a)that the work was first published in Australia and was so published during the period of 50 years that ended immediately before the commencement of the calendar year in which the action was brought; and
(b)that a name purporting to be that of the publisher appeared on copies of the work as first published;
then, unless the contrary is established, copyright shall be presumed to subsist in the work and the person whose name so appeared shall be presumed to have been the owner of that copyright at the time of the publication.’
The reference above in s 128 to the last preceding section is of course to s 127, which relates to presumptions as to authorship of work. Section 128 (and s 129) thus stipulates for a rebuttable presumption, as distinct from ss 126A and s 126B, which relates to prima facie evidence.
Section 184 provides for the making of regulations to apply any of the provisions of the Copyright Act in relation to a country other than Australia in any one or more of the ways specified in s 184(1). One of those ways enables the provisions to apply in relation to literary works first published in that country in like manner as those provisions apply in relation to literary works first published in Australia (s 184(1)(a)). That subsection also provides for the application of provisions of the Copyright Act to persons who are citizens, or are resident or are incorporated under the laws of, another country. Accordingly reg 4 of the Copyright Regulations allows provisions of the Copyright Act, which apply in relation to literary works first published in Australia, to apply in the same way to literary works first published in certain foreign countries as if they had been first published in Australia. It was not disputed that reg 4 applies to works first published in the United States, so that there was no question that Microsoft was entitled to rely upon s 128, in its modified form such as to pick up the operation of the regulatory provisions in operation as to first publication in the United States.
The applicants therefore submitted that they enlivened the presumption in s 128 in relation to Windows XP Home and Windows XP Pro by virtue of the evidence that I have already set out at [30] and [32]. That is, the United States certificate of registration was prima facie evidence that Windows XP Pro was first published in the United States on 25 October 2001, being a date within the 50-year limit imposed by s 128. Furthermore, the name of Microsoft Corporation, who purports in these proceedings to be the publisher, appeared on copies of the work as first published and on its packaging: see exhibits JBJ-1 and JBJ-2 referred to above. Those copies and that packaging identified ‘Microsoft Corporation’ as the owner of the copyright in the programs, and it was submitted that this sufficed as an identification of the relevant entity purporting to be the publisher of the programs. The applicants referred to Microsoft Corporation v DHD Distribution Pty Ltd t/as Austin Computers (1999) 45 IPR 459, in which Lehane J upheld Microsoft’s reliance upon s 128 in the context of different programs. Microsoft was said by the applicants to be entitled to the benefit of that s 128 presumption, unless the contrary is established, and hence copyright would be presumed to subsist in Windows XP Home and Windows XP Pro, and Microsoft would be further presumed pursuant to s 128 to have been the owner of that copyright at the time of publication. As later appears, that submission of the applicants is correct.
The respondents’ challenge to the applicants’ standing to sue for infringement of copyright in Windows XP Home and Windows XP Pro
The respondents admitted that Microsoft has carried on at the material times the business of manufacturing, marketing, distributing and supplying the computer programs identified in the Schedule to the applicants’ statement of claim, including all versions of those computer programs prefixed Windows, but did not admit that those Microsoft programs, the subject of the current proceedings Windows XP Home and Windows XP Pro, are original literary works first published in the United States of America, and did not admit that copyright has subsisted in those Microsoft programs at the times material to the issues arising in the proceedings, or that Microsoft (or for that matter any of the applicants) is the owner of the copyright therein or has been at any material time.
In addition to those joinders of issue by non-admission, the respondents made two contentions. First, that Microsoft was not entitled to take advantage of the prima facie evidentiary provisions and the statutory presumptions as to subsistence and ownership of copyright, as set out in ss 126A, 126B and 128 respectively of the Copyright Act. Secondly, that the respondents had not received notification of the assignment of certain exclusive rights by MLI to MLGP under the Contribution Agreement as required by s 12 of the Conveyancing Act. The contended result of that defect was that the assignment took effect in equity only, rather than in law, and thus MLGP lacked standing to sue for damages and other relief for infringement of copyright. I will address each of those contentions seriatim.
The Respondents’ challenge to subsistence of copyright in Windows XP Home and Windows XP Pro and to Microsoft’s ownership thereof
The essence of the respondents’ challenge was that as at 25 October 2001, the time of publication attested to by Mr Rubin, Microsoft was not a person entitled to own copyright in what the respondents called the ‘relevant computer programs’, or to be the author of those programs, and therefore that the statutory presumptions and evidentiary provisions establishing subsistence and ownership of copyright by Microsoft were unavailable to it. This was said to emerge from the affidavit evidence filed on behalf of the applicants and from the agreements tendered by the applicants. The respondents pleaded this challenge in their amended defence filed 9 September 2005, which provided relevantly:
‘2.2… the relevant Microsoft Programs were first published in the United States on or about 25 October 2001 (the “publication date”) under the name of the purported publisher “Microsoft Corporation” (the first applicant).
2.3The relevant computer programs alleged to be infringed by the first respondent are Windows XP Home and Windows XP Pro distributed in the OEM channel and are derivative programs of the original Microsoft Windows program (the “relevant programs”).
2.4On the publication date the first applicant had irrevocably divested itself of the right to make the relevant programs and the entity who had, between 31 December 1997 and 1 September 2003, the worldwide exclusive right to make the relevant programs was Microsoft Licensing Inc. [MLI] pursuant to a written agreement dated 31 December 1997.
2.5In the premises, on the publication date the first applicant had no right to make the relevant programs, and therefore could not have been the author thereof and is not entitled to claim ownership of any copyright that might subsist therein by virtue of the fact of first publication under its name in the United States on the publication date or at all.
2.6In the premises the respondents do not admit that copyright subsists in the relevant programs and deny that the first applicant is entitled to assert ownership of copyright in the relevant programs by virtue of the aforesaid publication or at all, and plead that if copyright does subsist in the relevant programs (which is not admitted) the only person who had a right to make the programs during the relevant period was Microsoft Licensing Inc and that it has not been shown that derivative programs made in the OEM channel (which are the relevant programs) by Microsoft Licensing, Inc were original or that any copyright that might subsist therein was owned by Microsoft Licensing Inc and has been acquired by any of the applicants.’
I will deal with that pleaded challenge to Microsoft’s ownership of copyright and the applicants’ entitlement to take advantage of the evidentiary provisions and statutory presumptions in the Copyright Act under the following headings, which briefly paraphrase the sequence of the respondents’ challenge:
(i)there is a separate copyright in the ‘version’ of Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’, and that those versions so created fell within the description of ‘derivative works’ contained in sub-clause 2.1(i) of the Parent-Subsidiary Agreement;
(ii)MLI was the sole entity entitled to author Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’ (so described in the applicants’ affidavit evidence) and to own the copyright therein to the exclusion of Microsoft;
(iii)therefore Microsoft is not entitled to the benefit of the evidentiary provisions and presumptions in the Copyright Act in order to claim ownership of any copyright that might subsist in the relevant programs; furthermore the applicants did not prove the subsistence of copyright in Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’ potentially owned by MLI.
(i) Whether there is a separate copyright in the ‘version’ of Windows XP Home and Windows XP Pro distributed ‘in the OEM Channel’, and that those versions so created fell within the description of ‘derivative works’ contained in sub-clause 2.1(i) of the Parent-Subsidiary Agreement
As earlier foreshadowed, certain intra-Microsoft corporate group agreements provided the basis for the respondents’ challenge to Microsoft’s ownership of copyright in Windows XP Home and Windows XP Pro. Evidence of Microsoft group practices in respect of the manufacture and distribution of software in Australia was provided by a number of the applicants’ witnesses and I will first set out the salient features raised, since those practices give meaning to the terms of those agreements the subject of controversy. That evidence was provided largely by the affidavit of MPL’s Ms Brasier sworn 9 July 2004, who had earlier attended Microsoft’s Head Office in Seattle in the United States, and also Microsoft’s Regional Office in Singapore, for training inter alia in the licensing of Microsoft programs. Ms Brasier’s affidavit was objected to by the respondents on the basis of relevance. Similar evidence was provided by Mr Kolb, Microsoft’s General Manager of Worldwide System Builder Channel and License Compliance in his affidavit sworn 30 August 2004, which was also read subject to objection on the ground of relevance. The evident relevance of both affidavit testimonies appears below.
In her affidavit evidence, Ms Brasier referred to ‘Microsoft programs’ as encompassing programs developed, manufactured and marketed by Microsoft, together with their associated manuals and other documentation. As to the manufacture of Microsoft programs, Ms Brasier confirmed at the outset of her affidavit that Microsoft programs are reproduced onto CD-ROMs, assembled and packaged by ‘authorised replicators’ (or their approved sub-contractors) who are licensed by Microsoft, and so packaged along with associated manuals and other documentation, and that it is Microsoft’s practice not to permit any other persons or entities to reproduce the Microsoft programs for distribution on CD-ROM unless licensed by Microsoft so to do. She testified as to standards and specifications prescribed for authorised replicators in relation to the reproduction, assembly and packaging of Microsoft programs, and as to the existence of strict controls prescribed by Microsoft on the distribution of Microsoft programs by authorised replicators to Microsoft’s authorised distributors.
Ms Brasier’s affidavit evidence stated that authorised copies of Microsoft programs are packaged for distribution in two forms: for retail distribution and for distribution by OEMs. Ms Brasier attested to that distinction being visibly presented by way of contrast in packaging only. The applicants relied particularly on [20] and [21] of her affidavit, which are as follows (the emphasis in non-italics is that of the applicants’):
‘20.Retail products are packaged in brightly coloured boxes. OEM products are packaged in shrink-wrap packaging.
21.The important distinction between the two methods of distribution is that OEM products are intended and marked for distribution with new (and sometimes second hand) PCs or other non-peripheral computer hardware. Retail products are intended for distribution on a stand-alone basis.’
Thus Ms Brasier explained the two separate ‘channels’ of distribution for Microsoft programs, distinguished only by the form of packaging used for the products sold within each channel and the intended method by which those products were to be loaded onto the ultimate customer’s personal computer. Her evidence further demonstrated that Microsoft exercises control over all aspects of the manufacture and distribution of its software programs and accompanying media. Those authorised replicators distribute the reproduced software to distributors nominated by Microsoft. Evidence on those points to the same effect was given by Mr Kolb at [33] of his affidavit (the emphasis below being again that of the applicants):
‘In Australia, all licensed copies of Microsoft Programs distributed in each of the retail and OEM distribution channels conform to certain packaging standards prescribed by Microsoft. These standards are placed on Authorized Replicators in their agreements with Microsoft Licensing.’
In respect of distribution of Microsoft programs per medium of OEMs, Ms Brasier explained the operation of two further distribution systems put in place by Microsoft in relation to two different categories of operators, first, that conducted by so-called ‘royalty OEMs’ and secondly, by system builders.
‘Royalty OEMs’ are high volume OEMs with whom [MLGP] has in place a Royalty OEM Agreement. Microsoft’s authorised replicators make Microsoft programs packaged for OEM distribution directly available to Royalty OEMs, who are entitled to reproduce copies of the programs on each personal computer they manufacture in exchange for a royalty. Concurrent evidence to this effect was also provided by Messrs Kolb and Walker in their affidavits.
‘Authorised Product Distributors’ are all other OEMs that have not entered into Royalty OEM agreements with MLGP (typically OEMs with lower sales volumes which are referred to as ‘System Builders’). System builders (such as was PC Club at all material times) obtain Microsoft programs packaged for OEM distribution in the form of ‘multi-packs’ from intermediate distributors authorised by MLGP, who in turn receive those multi-packs from authorised replicators. System builders assemble personal computers which are sold as a package including software operating systems such as Windows XP Home or Pro. Those multi-packs each contain somewhere between 3 and 10 units of software products and to each multi-pack there is affixed by the authorised replicator a standard so-called OEM System Builder Agreement. Authorised replicators will only provide those multi-packs to intermediate distributors and system builders who have agreed to the terms of those agreements. In accordance with those agreements, which the system builder is deemed to have accepted upon breaking of the seal on the multi-pack by opening it, the system builder is licensed to ‘preinstall’ one copy of a Microsoft program packaged for OEM distribution on a computer system supplied by that system builder to the customer. Having done that, the system builder is required to supply its customers with the original Microsoft program packaged for OEM distribution on CD-ROM and the associated manual for that program; furthermore, the system builder must adhere the certificate of authenticity (‘COA’) supplied with that software to the exterior of the personal computer’s chassis.
That testimonial explanation is admissible and relevant as descriptive of current industry structures and practices at all material times put in place by Microsoft, and explanatory or indicative of the substratum to the Parent-Subsidiary Agreement and the collateral MOU, such as to enable the Court to comprehend the substratum of circumstances and the meaning of contractual expressions adopted in and by that inter-corporate documentation. In that regard the authoritative dicta of Mason J (as he then was) in Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337 at 352, which I have cited and discussed below, is apposite.
The respondents sought to characterise the ‘relevant computer programs’, being those programs whose copyright is the subject of the applicants’ infringement action, as Windows XP Home and Windows XP Pro ‘in the OEM channel’, and thereby to distinguish those programs from so-called ‘Windows XP Home and Windows XP Pro made available for general distribution’. Upon that controversial footing, the respondents contended that on the face of the applicants’ evidence and of those intra-Microsoft corporate group agreements comprising the Parent-Subsidiary Agreement and MOU, Microsoft had ‘irrevocably divested’ itself of the copyright in Windows XP Home and Windows XP Pro programs distributed in the ‘OEM channel’. Copies of Windows XP Home and Windows XP Pro created for distribution ‘in the OEM channel’ were thus said to be ‘derivative works’, within the respondents’ contended meaning of that expression as it appears in cl 2.1 of the Parent-Subsidiary Agreement, such that Microsoft had thereby also ‘irrevocably divested’ itself of the right to create Windows XP Home and Windows XP Pro ‘in the OEM channel’.
The Parent-Subsidiary Agreement relied upon by the respondents as operating to exclude Microsoft’s entitlement to reliance on copyright in relation to Windows products was purportedly entered into ‘as of December 31, 1997’ between Microsoft (referred to in that agreement as ‘MS Corp.’) and MLI (referred to therein as ‘Subsidiary’), and signed by MLI’s President on 8 December 1997 and by Microsoft’s Assistant Treasurer on 9 December 1997. Although the governing law of the Parent-Subsidiary Agreement (and of the collateral MOU entered into at the same time) was expressly stated to be that of the State of Washington in the United States, and that of the subsequent Contribution Agreement, by which MLI purported to assign its rights under the Parent-Subsidiary Agreement to MLGP, to be that of the State of Nevada, the parties appeared content to assume that the general law of Australia would apply to all issues of construction and interpretation of the relevant terms in each agreement.
Clause 2.1 of the segment of the Parent-Subsidiary Agreement headed ‘Manufacturing and Distribution of MS Retail Software Products’ is in the following terms:
‘2.1 License Grant
MS Corp. [i.e. Microsoft] hereby irrevocably grants Subsidiary [i.e. MLI] the exclusive, world-wide license, under MS Corp.’s copyrights patents, trade secrets and all other applicable intellectual property rights of MS Corp., during the Term (as described in Section 4.1 below):
(i) to create derivative works based on MS Software Products (and related documentation and other associated materials) as appropriate to customize the respective MS Software Products for the particular needs of each OEM;
(ii) to use (and reproduce as necessary) MS Corp. software to facilitate the creation of such derivative works and the incorporation of MS Software Products and such derivative works in OEM Packages;
(iii) to reproduce MS Software Products (and related derivative works, documentation and other associated materials) as appropriate for the incorporation of MS Software Products (and related derivative works, documentation and other associated materials) in, and for distribution thereof as part of, OEM Packages;
(iv) to distribute MS Software Products (and related derivative works, documentation and other associated materials) and copies thereof as part of OEM Packages; and
(v) to authorise third parties to exercise any or all such rights (including the right to enter into and carry out the terms of OEM Agreements and Authorised Replicator Agreements with respect to MS Software Products); such rights shall be exclusive to Subsidiary vis-à-vis MS Corp., as well as third parties.
In addition, MS Corp. hereby irrevocably grants Subsidiary such rights, under MS Corp.’s copyrights, patents, trade secrets and all other applicable intellectual property rights of MS Corp., in MS Software Products (and related derivative works, documentation and other associated materials) as may be reasonably necessary or appropriate for Subsidiary to carry on the business contemplated hereunder, which rights shall be exclusive to Subsidiary, vis-à-vis MS Corp., as well as third parties, with respect to OEM distribution of MS Software Products.’
Clause 1 contained definitions of some of the expressions used in cl 2.1:
‘“Authorized Replicator” shall mean a third party approved by Subsidiary from which an OEM may acquire MS Software Products and associated materials (such as certificates of authenticity, end user license agreements, product registration cards, etc) reproduced in accordance with specifications determined by Subsidiary.
“Authorized Replicator Agreement” shall mean a non-exclusive license between Subsidiary and an Authorized Replicator pursuant to which the Authorized Replicator may manufacture copies of MS Software Products (and associated documentation and materials authorized by Subsidiary) for distribution to OEMs and distribute the same to OEMs for further distribution pursuant to an OEM Agreement.
“Computer System” shall mean an assembled computer system which includes at least a CPU, a motherboard, a power supply, and a case; by way of example, personal computers, servers, laptops, hand-held computers, and similar multi-purpose computers now manufactured and/or hereafter developed and/or manufactured are Computer Systems.
“MS Software Products” shall mean all MS Corp. computer software products that are generally made available by MS Corp. for commercial distribution anywhere in the world during the term of this Agreement. Without limiting the generality of the foregoing, appended to this Agreement as Schedule A is a list of certain MS Software Products as of the date of this Agreement (but MS Corp. makes no representation that said list is complete).
“OEM” shall mean an original equipment manufacturer of Computer Systems (whether or not the actual manufacturing is performed by one or more subcontractors).
“OEM Agreement” shall mean a non-exclusive, limited, non-transferable license between Subsidiary and an OEM pursuant to which the OEM is entitled to (i) reproduce and install one copy of the applicable MS Software Products(s) on the hard drive or ROM of each unit of a Computer System and (ii) to distribute with such Computer System (w) such single preinstalled copy, (x) one copy of such applicable MS Software Product(s) on external media (such as diskette or CD-ROM) as acquired from an Authorised Replicator or Subsidiary, (y) one copy of the relevant end user documentation as acquired from an Authorised Replicator or Subsidiary, and (z) associated MS Software Product materials such as a certificate of authority, an end user license agreement, a product registration card, and/or other materials which an OEM may acquire from an Authorised Replicator or Subsidiary.
“OEM Package” shall mean a collection of software and/or related documentation selected by an OEM and distributed by the OEM as an integral element of certain of the OEM’s Computer Systems, preinstalled on the hard drive or ROM and/or on an external medium (such as a diskette or CD-ROM) included as part of the Computer System package.’
The expression ‘derivative works’, which appears in cl 2.1(i)-(iv), and again at the conclusion of cl 2.1, is not defined in cl 1 of the Parent-Subsidiary Agreement.
The respondents advanced what may be described as the bold submission that the applicants’ evidence, in particular that of Mr K Fay, a senior attorney of Microsoft to whose affidavit the Parent-Subsidiary Agreement was exhibited, made it clear that the ‘relevant programs’ (that is, the works subject to the infringement action brought by the applicants) are not Windows XP Home and Windows XP Pro, but ‘Windows XP Home and Windows XP Pro in the OEM channel’. Reliance was placed by the respondents on the following excerpts from paragraphs 5 and 6 of Mr Fay’s affidavit sworn 19 August 2004, which purported to describe respectively the effect of the Parent-Subsidiary Agreement and the Contribution Agreement (the emphasis appearing in non-italics is that of the respondents):
‘5.Pursuant to [the Parent-Subsidiary Agreement] Microsoft Licensing, Inc., was, between 31 December 1997 and 1 September 2003, [Microsoft’s] exclusive licensee with respect to the copyright in and distribution of Microsoft programs (including Microsoft Windows XP Home Edition…and Microsoft Windows XP Professional Edition)…in the “OEM channel” of distribution whereby Microsoft programs are supplied to original equipment manufacturers or assemblers (“OEMs”) for distribution as part of a computer hardware package…
6.Pursuant to [the Contribution Agreement], Microsoft Licensing, Inc. transferred all of its rights, title and interests in its OEM licensing business to [MLGP] (including the rights of Microsoft Licensing, Inc pursuant to the [Parent-Subsidiary Agreement]), and [MLGP]…thereby:
(a)replaced Microsoft Licensing, Inc. as [Microsoft’s] exclusive licensee with respect to the copyright in and distribution of all Microsoft programs (including Windows Home and Windows Pro) distributed in the OEM channel; and
(b)took an assignment of the rights to sue for, and recover damages for, infringements of copyright in Microsoft products distributed in the OEM channel, whether such infringements occurred before or after 1 September 2003.’
The evidence discloses that PC Club benefited financially, and to a relatively speaking substantial extent, from the sale of infringing copies of Microsoft’s products. No financial accounts or statements of PC Club were tendered by it in evidence, such as might have provided some insight into the extent of the financial benefits derived directly or indirectly from its breaches of copyright. The applicants have sought to establish the gross income which inferentially would have accrued to PC Club, in the light of the cost base attributable to its acquisition of the COAs from SAC and JCIMC at the purported prices which it apparently outlaid. PC Club’s sale price to its largest customer Hyundai was reduced from $125 for genuine Microsoft XP Home to $109 for ‘COA only’ versions, as Mr Jackson’s affidavit evidence indicated. Conversely the evidence enables the conclusion to be drawn that the cost to PC Club for the acquisition of Windows XP Home was reduced from what had been previously about $118 for authentic product to amounts ranging between $55 and $79 for counterfeit product acquired from SAC and JCIMC. Those figures demonstrate the gaining of substantial profitability illicitly from infringement of copyright, as well as a considerable advantage over competing system builders in what was clearly a highly competitive market.
Other matters relevant to the quantification and other determination of the relief appropriate to be granted were submitted by the applicants to include the evident difficulty, reflecting ultimately in cost, directly or indirectly, that computer program manufacturers such as the applicants necessarily incur in taking measures to protect and enforce their respective copyrights (cf TYN Electronics at [46] per Stone J). Any such quantification would however tend to be to imprecise, so far as the evidence extends.
The authorities have established that the assessment of an award of additional damages under s 115(4) nevertheless ‘… must of necessity be a somewhat imprecise exercise’, as the subsequent Full Federal Court decision in Bailey v Namol (1994) 30 IPR 147 at 158 emphasised. As Burchett J pointed out moreover in Raben Footwear at 104, ‘… the circumstances giving rise to and surrounding copyright infringement, must always vary infinitely and, in my view, it is not desirable to adopt any principle which results in the broad general discretion [as to additional damages] carefully formulated in s 115(4) being fettered in any arithmetical or mechanical way’. I have already cited instances of quantification of varying sums awarded to copyright owners appearing in recent authorities. The applicants contended that the infringements of copyright involved in TYN Electronics closely reflect such circumstances as to severity of infringement as are involved in this case, and emphasised in particular that counterfeit COAs were used to conceal copyright infringement, yet in the context where the applicants had put in place the COA system as a means purportedly to prevent copyright infringement. The applicants adopted as here apposite Wilcox J’s description in Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 24 IPR 461 at 479 as to ‘… breathtaking flagrancy’, and the theme that ‘[i]f copyright protection is to mean anything the courts must take a severe view in cases as blatant as this’.
Since an award of damages under s 115(2) is required to be compensatory in nature, that award of US$188,950 should be made against the respondents jointly and severally, since the position and role of all four respondents is analogously to that of joint tortfeasors. For the purposes of an award of s 115(4) damages however, what is required is analysis of the respective roles and contributions of the respondents in relation to such of the discrete factors as are set out in such of the sub-paragraphs of s 115(4) as are applicable. On the footing that damages in respect of the undetected sales are to be awarded under s 115(2), the applicants submitted what were described as ‘the following ranges of damages under s 115(4)… appropriate for each of the respondents [respectively]… and the relative culpability of each of the respondents:
(a) PC Club: $300,000 - $400,000;
(b) David Lee: $400,000 - $485,000;
(c) Mymy Lee: $25,000 - $40,000;
(d) Kane Fang: $150,000 - $200,000.’
Those varying and of course cumulative quantifications purport to reflect proportionately the respective functions of office and activities of Mr Lee, Mrs Lee and Mr Fang, but were implicitly, to my perception, geared to s 115(2) damages inclusive of some US$861,150 in respect of the undetected sales, which for the reasons I have given, are not to be made the subject of an award in the circumstances.
The respondents joined issue upon the applicants’ case as to flagrancy, asserting that ‘… there is no proof of flagrancy’, and further that ‘… even if infringement is not innocent, it is not necessarily flagrant’. Moreover the respondents submitted that no allowance for ‘undetected sales’ should be included in any event for ‘flagrancy’, or for any other subsection (4) considerations of relevance. I agree with that proposition in principle, irrespective of the subpar 115(4)(b)(iv) provision as to ‘all other relevant matters’ though the nature and extent of infringement may well bear upon the flagrancy, deterrence and accrued benefit factors falling within s 115(4)(b), including ‘any benefit shown to have accrued’. The applicants emphasised that flagrancy ‘… is evidenced by facts showing a calculated disregard of the plaintiff’s rights, a cynical pursuit of benefit, not mere carelessness or inadvertence’, citing thereby J Lahore and W A Rothnie, Copyright and Designs, Vol 1, Butterworths at [36,260]. The learned author introduced the above description of general principle by the generality of expression ‘… may be evidenced…’, and thereafter stated that ‘[f]lagrant conduct will include conduct that is “deliberate, deceitful and serious”’, citing Atifo, and further that ‘[f]lagrancy is not a threshold which must be crossed, but merely one of the factors to be taken into account in calculating an award of damages’, referring to Raben Footwear. The respondents pointed furthermore to the author’s emphasis that ‘[f]lagrancy implies the existence of scandalous conduct, or deceit, or deliberate and calculated infringements…’, and further that ‘[f]lagrancy is not established by proof of mere knowledge of copying otherwise every act of indirect infringement would attract additional damages because knowledge is an essential element of the infringing act’. Nonetheless the author continued that ‘[i]n the case of infringement of copyright in computer software it is relevant to take into account the fact that computer software is easy to duplicate, distribute and conceal’, citing in that regard Autodesk v Cheung.
The evidence which I have recorded concerning the conduct of PC Club, and that of Mr Lee in particular as PC Club’s controlling mind, has I think, established flagrant conduct on his part as the controlling mind and decision-maker of PC Club. Moreover Mr Lee’s previous involvement in infringement, indirectly per medium of DAT Computers, suggests that Mr Lee was a persistent infringer and a person not readily deterred by unsuccessful litigious experience or court ordered injunctions. Moreover it does not seem to me that either Mrs Lee or Mr Fang can avoid the operation adversely of the flagrancy factor, irrespective of their respective subordinate roles, or the other factors of s 115(4)(b) to which I have referred, given their acceptance of appointment as directors of PC Club, contemporaneously with their respective employment positions. The respondents’ submissions tended to ‘roll up’, as it were, Mr Lee’s conduct relevantly with that of Mrs Lee and Mr Fang, but that is not the approach taken by the applicants, in my opinion correctly, in their submissions which I have above recorded in particular in relation to s 115(4) damages, and which purport to reflect individual and thus varying quantifications of awards of damages pursuant to that subsection. Both of them must bear an appropriate measure of responsibility for what they knew or ought reasonably to have known concerning the flagrancy of abuse of copyright which occurred over a relatively significant period of time, though the Court cannot exclude the relevance of Mr Lee’s dominant role in the management and direction of PC Club’s affairs, Mrs Lee’s relationship with him as his wife, and the evident dominance by Mr Lee of Mr Fang in relation to PC Club’s management, direction and decision-making, despite the nature of the duties of management said to have attended his employment.
I think that the ratio or structure of the applicants’ fractional apportionment of s 115(4) damages tends to reflect the reality of PC Club having been at all material times, both in terms of policy implementation, decision-making and direction, dominated by the control and direction de facto of Mr Lee. As I have indicated, Mr Lee was the controlling and directing mind of PC Club in virtually if not all, matters of business significance to PC Club, and for their part Mrs Lee and Mr Fang were each obeisant to his dominant decision-making and management in that regard. On the other hand, Mr Fang did accept an executive appointment in terms of the management of PC club’s affairs, and both he and Mrs Lee accepted appointment as directors of PC Club in addition to their employee roles or functions.
I am therefore of the opinion that to the extent of the potentially differing assessments of additional damages which should be quantified for the purposes of s 115(4) of the Copyright Act, the amount which should apply adversely to Mrs Lee and Mr Fang respectively is in the sums of AUD$30,000 and AUD$50,000 respectively. I would make orders against Mrs Lee and Mr Fang for additional damages pursuant to s 115(4) in those respective sums. The amount for which PC Club must pay to MLGP pursuant to s 115(4) is AUD$350,000 and I would also hold Mr Lee liable to MLGP for additional damages of AUD$350,000. Those two latter awards are in no way intended to be concurrent so that both PC Club and Mr Lee are individually liable to MLGP for additional damages in the sum of AUD$350,000.
TRADE MARK INFRINGEMENT
As I have earlier recorded in the preview to these reasons for judgment, the respondents conceded infringement of Microsoft’s trade marks to the extent of sales of 2181 computers containing copies of Windows XP Home and 203 computers containing copies of Windows XP Pro, each reproduced onto the hard disks affixed to those computers, and onto the accompanying restore CDs with counterfeit COAs, being infringements committed without the license of Microsoft. Those trademarks the subject of that concession comprised what I have earlier identified as Microsoft 371528(9) and Windows 576996(9), and such infringements related to each of the computers sold by PC Club that was loaded with copies of Windows XP Home and Windows XP Pro using the ‘COA only’ method.
Such concession of the respondents was described by the applicants as inevitable for the following reasons:
(i)the personal computers produced and sold by PC Club contained copies of those programs on their hard disks, and the screen display of those programs as reproduced by PC Club each showed the Microsoft and Windows trade marks, as did the restore CDs reproduced by PC Club;
(ii)the seized counterfeit COAs also bore those trade marks, the ‘inescapable’ inference from the evidence being that all of the loose COAs purchased by PC Club were counterfeit, and hence were also inherently infringing trademarks; in that regard I was referred for comparative illustration to the single justice decision of the High Court in Thunderbird Products Corporation v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592, and the Full High Court’s decision subsequently in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414. Although both decisions related to the 1955 precursor Trade Marks Act legislation, they serve to demonstrate the broad approach required to be taken in relation to the concept of uses in Part 12 of the current legislation. Consequently the applicants’ case was that there occurred trade mark infringement in relation to the counterfeit COAs seized at the Rhodes premises pursuant to the Anton Piller order, as well as in relation to those attached to the computers which PC Club had earlier manufactured and sold from those premises.
The respondents accordingly conceded further that the applicants were entitled to injunctive relief by reason of PC Club’s trade mark infringements, but not to relief by way of damages for such infringements suffered. My reference to the applicants generally in this segment of reasons is for convenience, though as will appear, the applicants relevantly entitled are Microsoft and/or MLGP. The respondents denied that damage had been sustained by any of the applicants as a consequence of the trademark infringements on the part of PC Club. The reasoning in support of that denial is complex. Before examining the same, I will address the case of the respondents in relation to the remaining trademarks earlier identified in the reasons.
As I have also earlier recorded, the applicants alleged infringement of two other trademarks, which I identified as Microsoft 377674(16) and Windows 576996(16) relating inter alia to instructional manuals etc. Although the respondents’ defence put those matters in issue, their subsequent written submissions did not appear to provide any reasoned or explanatory basis for so doing. Of course in terms of damages for trade mark infringement, the potential extent of quantification of loss does not involve the potentially multiple quantification implications as to vulnerability to damages for breach of copyright. The position adopted by the respondents in relation to trademark damages issues generally appeared to boil down to that of an absence of evidence as to loss or damage suffered as a result of the alleged trademark infringements.
The quantification of the applicants’ claims for damages for breach of trademarks was framed initially on the following basis:
(i)during the period January 2003 to July 2004, the net revenue derived by MLGP (ie the third applicant) for each supply in Australia by MPL’s authorised distributors of a single licensed copy of an OEM version of Microsoft Windows XP Home to retailers and wholesalers, such as PC Club, was in excess of US$75.00.
(ii)during the period January 2003 to July 2004, the net revenue derived by MLGP for each supply in Australia by MLGP’s authorised distributors of a single licensed copy of an OEM version of Microsoft Windows XP Pro to retailers and wholesalers, such as PC Club, was in excess of US$125.00.
(iii)MPL (ie the second applicant) was asserted to be an authorised user of Microsoft trademarks.
Initially each of those matters was formally admitted by the respondents in the respondents’ Notice Admitting and Disputing Facts filed 9 August 2004, except that the same was confined in terms of quantification to the above sums of US$75 and US$125, and therefore did not extend to any amounts respectively in excess thereof.
Although the applicants also sought injunctive relief in relation to what it alleged to have been trade mark infringements, the applicants did not seek in principle any award of damages referable thereto additionally to what the applicants ultimately quantified for breach of copyright pursuant to s 115(2) of the Copyright Act. The debate between the parties on the damages issue arising from breach of trademarks is outlined below. Of course the complexity of this debate only needs to be resolved as a practical matter if the applicants’ case for breach of copyright, contrary to my conclusions, should fail, and therefore no damages would be recoverable for breach of copyright.
Clause 4.7 of the Parent-Subsidiary Agreement should first be reproduced below (the references therein to ‘Subsidiary’ is of course to MLI):
‘4.7 Trademarks, Service Marks and Trade Names
(a)In connection with Subsidiary’s activities authorised pursuant to this Agreement, Subsidiary is granted the right to use the trademarks and service marks used by MS Corp. in conjunction with the sale and distribution of MS Software Products and such other marks as MS Corp. may specify in writing, but only in connection with Subsidiary’s distribution of MS Software Products in such distribution; as pertains to said OEM market, such rights shall be exclusive vis-à-vis MS Corp. and third parties. If permissible and commercially reasonable in a jurisdiction, Subsidiary may sublicense MS Corp. trademarks, service marks and trade names in that jurisdiction; provided that each sublicense shall agree to comply with all terms of this Agreement to the extent they relate to the rights sublicensed. Notwithstanding the foregoing, to the extent that any jurisdiction restricts MS Corp’s rights to transfer to Subsidiary the authority referred to in this Section 4.7(a), or makes such transfer commercially unreasonable, then to the extent that MS Corp. can do so without jeopardizing its rights in such marks MS Corp. agrees to license rights in such marks to the licensee(s) designated by Subsidiary to the extent necessary or appropriate for Subsidiary to conduct its business as contemplated under this Agreement.
(b)The nature and quality of all products and services with which such marks are associated, the business with which such trade name(s) are associated, and the form and manner of use of marks and trade name(s) shall be subject to the control of MS Corp. Any MS Software Products licensed by Subsidiary will be packaged, if applicable, in approved MS Corp. packaging and comply with all requirements for use of MS Corp’s marks. The products shall be of good workmanship and quality and meet the specifications publicised in writing by MS Corp, the services shall be performed in a good workmanlike manner and the business shall be operated in a good businesslike manner and each shall meet the standards specified by MS Corp. from time to time (with the intent that the quality of the software distributed by OEMs will be equivalent in quality to the software distributed by MS Corp. to the general public). MS Corp. shall have the right to inspect Subsidiary’s facilities, to examine the manner in which Subsidiary’s services are being rendered and to examine the business and the manner in which the business is being conducted for the purpose of compliance with such standards.
(c)Subsidiary agrees to take such steps as MS Corp. request to establish or confirm MS Corp’s ownership and Subsidiary, or any sublicense of Subsidiary, as an authorized user.’
The reference to ‘Subsidiary’ above is to MLI, being the grantee of the licence the subject of that Agreement.
The applicants next pointed out that the Parent-Subsidiary Agreement, when read with the subsequent Contribution Agreement made between MLI and MLGP, established that MLGP was an ‘authorized user’ within s 8 of the Trade Marks Act, which provides that a person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark. Thereafter the applicants referred to s 26 of the Trade Marks Act, which relates to the powers of an authorised user of registered trade marks, and which provides relevantly as follows:
‘(1)Subject to any agreement between the registered owner of a registered trade mark and an authorised user of the trademark, the authorised user may do any of the following:
…
(b)the authorised user may (subject to section (2)) bring an action for infringement of the trade mark:
(i)at any time, with the consent of the registered owner;
…
(2)If the authorised user brings an action for infringement of the trade mark, the authorised user must make the registered owner of the trade mark a defendant in the action…’
Here of course, the trade mark owner Microsoft is already an applicant, whilst in consequence of the Contribution Agreement made between MLI and MLGP, the authorised user MLGP is of course also an applicant. Section 126 of the Trade Marks Act provides as follows:
‘The relief that a court may grant in an action from infringement of a registered trademark includes:
(a)an injunction, which may be granted subject to any condition that the court thinks fit; and
(b)at the option of the plaintiff but subject to section 127, damages or an account of profits.’
It was upon the footing above outlined that the applicants submitted that MLGP was able to recover, as an authorised user of the trademarks of Microsoft, though as a mutually exclusive alternative to damages payable under s 115(2) of the Copyright Act, the amount of US$75.00 for each infringing sale of XP Home and of US$125.00 for each infringing sale of XP Pro, that being the net revenue receivable by MLGP for each respective genuine sale of those two products. All that is because, so the applicants further submitted, there is an inescapable inference that had the respondents not sold computer hardware loaded with Microsoft software labelled with trade mark infringing stickers, the respondents would have sold those same computers loaded with genuine copies of Windows XP Home and Windows XP Pro: see in that regard the same so-called ‘one-to-one substitution’ point addressed earlier in these reasons in relation to damages for breach of copyright, which holds equally valid for damages for trade infringement.
The respondents rejoined first to the effect that recovery of trade mark damages at the instance of MLGP was not specifically pleaded. The response of the applicants to that rejoinder was threefold, as follows:
(i)the substance of the Parent-Subsidiary Agreement and the subsequent Contribution Agreement were respectively pleaded in pars 11 and 12 of the statement claim, and par 38 thereof along with par 8 of the amended application, which were contended to be wide enough to encompass a claim for damages for trade mark infringement at the instance of MLGP pursuant to s 126 of the Trade Marks Act;
(ii)although it was Microsoft’s registered trade marks that were infringed, MLGP as authorised user for its part suffered damage, or should validly be so treated, and it can establish loss on that hypothesis;
(iii)the authorised trade mark user claim of MLGP arises entirely out of evidence already placed before the Court, and constitutes an alternative legal characterisation of the applicants’ claim based on or referrable to the same facts and circumstances;
(iv)that alternative characterisation on the part of the applicants was prompted, for more abundant caution, by the respondents’ so-called ‘technical arguments on copyright’, which were not pleaded ‘until the trial began’, but were raised shortly thereafter;
(v)in those circumstances, the enabling provisions of Order 13 rule 2 of the Federal Court Rules empowers the Court to grant leave for the purpose of determining the real questions raised by… the proceedings, being leave said to be customarily granted.
The interests of justice clearly require that the applicants be permitted to pursue relief in relation to admitted trade mark infringement in the forgoing circumstances, and in my opinion, no prejudice could conceivably thereby flow in substance or reality to the respondents (see National Australia Bank Ltd v Nobile (1988) 100 ALR 227 at 227 per Davies J); moreover as the applicants pointed out, the status of MLGP as an authorised user was not controversial. To the extent that formal amendment to the Statement of Claim may be required, I would grant leave to the applicants nunc pro tunc to amend par 14 of the statement of claim, so that the same would now read:
‘Each of the second and third applicants is an authorised user of the Microsoft Trade Marks.’
The respondents contended that irrespective of the foregoing amendment, so much did not solve a so-called insuperable obstacle to the applicants’ claim for damages for breach of trade marks. That repudiated claim of the applicants was said to be to the effect that it was only MLGP which claimed to have suffered any damage as a result of the conceded trademark infringement, that being the loss of copyright royalties of US$75 per copy of Windows XP Home and US$125 per copy of Windows XP Pro. The respondents submitted that if MLGP was unable to prove an entitlement to damages under the Copyright Act, MLGP would not be entitled to be compensated for the loss of copyright royalties under the guise of the Trade Marks Act, or for that matter under the TP Act.
The next step in the respondents’ submissions was the assertion that as the owner of the registered trade marks, Microsoft had not proved any loss at all, in that it was merely endeavouring to rely on the losses sustained by MGLP, by way of lost copyright royalties. It was further asserted that the applicants were alleging for the first time in closing oral submissions that they could establish those losses because MGLP was at all material times an authorised user of the trade marks. A claim under s 26 of the Trade Marks Act, relating of course to the powers of an authorised user of registered trade marks, had not been specially pleaded, so the respondents’ contentions continued, and had not been proved on the applicants’ case, mere reference to clause 4.7 of the Parent-Subsidiary Agreement (ante) being asserted by the respondents to be insufficient. That was said by the respondents to be because under s 8 of the Trade Marks Act relating to the definition of authorised user, it is necessary to show that the user of registered trade marks does so under the ‘control’ of the registered proprietor; however under the terms of the Parent-Subsidiary Agreement, the respondents submitted that the conduct of the MGLP as the user is not under the control of Microsoft in the relevant sense. That was further said to be because the rights of MLGP, and before it MLI, to make ‘derivative works’, and to distribute Microsoft programs in the OEM channel, were all ‘exclusive vis-à-vis Microsoft’, and not conduct that was under Microsoft’s control. On the contrary it was said that Microsoft had excluded itself from that part of PC Club’s market (described by the respondents as the OEM market), and MLGP therefore had the relevant rights to the exclusion of Microsoft. There is a measure of unreality in that analysis, involving as it does the postulation that Microsoft was unable to exercise control over MLGP such that Microsoft would have been unable to reclaim from its general partner MLGP its so-called exclusive rights in the OEM market instantly or at any time of its choosing. The inference of entire control of MLGP by Microsoft in any relevant sense is I think clearly to be inferred from the relevant (non-arms length) documentation. In any event, the effect of the respondents’ submission is to denude any exclusive licensee of copyright, who is granted concomitant rights in respect of trademarks of the licensor, from the status of an authorised user under the Trade Marks Act.
Nevertheless the respondents contended that there was no necessary corollary ‘under the structure’ of s 26 of the Trade Marks Act that makes the measure of an authorised user’s loss equate with that of the trade mark proprietor. In that regard it was pointed out by the respondents that MLGP’s loss was the loss of royalties for use of the copyright works, being its Windows computer program, and I was again referred to [5] and [6] of the affidavit testimony of Microsoft’s senior attorney, Mr Fay, which I have extracted earlier in these reasons for judgment. However I am unable to comprehend why MLGP’s loss would not in substance and reality be reflected, at least inferentially as a corresponding loss to Microsoft.
In any event, the respondents asserted that there was no attempt made to prove, or to quantify, any loss suffered as a result of alleged trade mark infringements, as distinct from loss suffered by MLGP as a result of copyright infringement, and further that potential damages for trade mark infringement were not co-extensive with MLGP’s loss of copyright royalties, that being said to be the evident loss sought by MLGP to be recovered by it. The respondents placed emphasis again on Mr Fay’s testimony, referring as it did to the rights to sue for copyright infringement only. Moreover MLGP’s claim for the full amount of the revenue lost, by way of copyright royalties, assumed that Microsoft would have made the same level of sales, and this was said by the respondents to be an incorrect assumption for the purpose of calculating damages for trade mark infringement. The respondents referred in that regard to the testimony of Mr Walker to the effect that there are other operating systems for use on computers, Windows being no more than one of those, along with others such as Linux and the relevant operating systems available for use on Apple McIntosh computer systems. As counsel for the applicants observed during argument however, the market for Microsoft operating systems is novel. Hence once PC Club had committed itself to selling personal computers advertised as carrying Microsoft Windows operating systems, it was almost impossible to infer that they could sell those PCs with any of the other operating systems postulated by Mr Walker. As I have already indicated, the inference that PC Club would have purchased the program legitimately rather than used other operating systems, or forewent those systems entirely, is open to be drawn in the present circumstances.
In my opinion, there is no substance or reality reflected in the respondents’ foregoing submissions. There is no evidence to suggest otherwise than at all material times, Microsoft remained the registered owner of the trademarks MICROSOFT and WINDOWS and merely authorised its controlled entity MLGP to have the benefit of the relevant trade marks for the time being. The fact that MLGP is one of the applicants for the same relief in the proceedings is enough to complete its standing, MLGP being subject to the entire control of Microsoft; as Microsoft’s controlled entity, the status of Microsoft and MLGP as applicants renders the point technically sought to be taken by the respondents’ nugatory and of no realistic or operative effect. Similarly the respondents’ contention to the effect that MLGP had no right to damages to compensate the conceded trademark infringement in the event that it was found ineligible to obtain damages for copyright infringement is fallacious. Although the measure of damages in respect of MLGP’s loss caused by infringement of the trademarks matches that measure adopted for infringement of its copyright, the entitlement to the latter does not therefore predetermine the entitlement to the former. The statutory basis for the award of damages in respect of copyright infringement is wholly separate from that grounding the award of damages for trademark infringement.
At this point in time, the applicants sought orders confined entirely to injunctive relief in relation to trade mark contraventions.
INFRINGEMENT OF TP ACT
The applicants further pleaded that by the respondents selling and offering to sell infringing copies of Windows XP Home and Pro and related products to which the Microsoft trade marks applied, without the license of the applicants inclusive of course of Microsoft, the respondents expressly or implicitly represented falsely to purchasers of those products, as follows:
(i) such items were made by or with the license of Microsoft;
(ii) the respondents were lawfully entitled to sell such items; and
(iii) the purchaser of such items was entitled to use such items.
Consequently the applicants pleaded that PC Club had engaged in conduct in contravention of ss 52, 53(a), 53(c) and 53(d) of the TP Act, and each of Mr and Mrs Lee and Mr Fang were involved in those contraventions by being knowingly concerned in and party to those contraventions.
The applicants pointed out that the Court was only required of course to consider those causes of action for damages, pursuant to s 82 of the TP Act, if it was to find that the applicants were not entitled to recover damages for infringement of copyright under s 115(2) of the Copyright Act, either because the Court may find that a ‘defence’ under s 115(3) thereof had been made out in relation to any of the respondents, or because the Court ‘finds against the Applicants on technical copyright argument’. The applicants’ claim for injunctive relief against the respondents was of course pressed in any event.
The respondents’ submission in response was, in short, that there was ‘just no evidence to prove damages for contraventions of the TP Act, and that if the applicants are entitled to damages at all, they are entitled, or more accurately MLGP is prima facie entitled, to damages for copyright infringement’. If however the applicants were to fail in their copyright claim because of what the respondents described as their ‘technical arguments’, or if the applicants were to fail in their copyright claim for damages for copyright infringement because of the operation of s 115(3) of the Copyright Act as to so-called innocent infringement, the respondents submitted that the applicants cannot recover any alleged losses as a result of copyright infringement, as they sought to do under the so-called guise of the TP Act.
The respondents’ contention suffers from a similar misconception as that which they advocated in respect of the applicants’ entitlement to sue for trademark infringement. The measure of damages proposed by the applicants in respect of its causes of action under s 82 of the TP Act should not be confused with the wholly distinct statutory basis for damages granted under that measure. That is, just because the applicants have adopted the quantum of damages available under s 115(2) of the Copyright Act as the measure (my emphasis) for damages under s 82 of the TP Act does not mean that in addition to making out the s 82 causes of action, they need also to have satisfied the requirements of the Copyright Act for an infringement action.
The respondents did not dispute that Microsoft had used that name in the context of the business operations of itself and its wholly controlled entities, nor that Microsoft, or MPL or alternatively MLGP, had acquired the relevant reputation in that name in Australia in respect of the products presently the subject of dispute. Likewise the respondents did not deny that the above three representations are false. All of this provides the basis for the applicant’s claims for misleading and deceptive conduct on the part of the respondents. I also find that Mr Lee, Mrs Lee and Mr Fang are persons involved in a contravention of ss 52, 53(a), 53(c) and 53(d) of the TP Act by virtue of their being knowingly concerned in, or parties to, PC Club’s contravention within the meaning of s 75B(1)(c). As I have found each of those persons were aware of, or in the case of Mr Lee, actively involved in, the procurement of COAs, the adoption of the ‘COA only’ method and the marketing and sale of PCs installed with infringing copies of the programs. As per the dictum of Lee J in Wheeler Grace v Pierucci, each of Mr and Mrs Lee and Mr Fang therefore had ‘knowledge’ of the claims of the contravention of ss 52, 53(a), 53(c) and 53(d).
CONCLUSIONS ON THE CAUSES OF ACTION PURSUED BY THE APPLICANTS
For essentially the reasons I have outlined, the applicants are entitled to maintain and to succeed, in principle, on their respective causes of action for breach of copyright, breach of trade marks and for misleading and deceptive conduct under the TP Act, and I will grant injunctive relief at this stage pursuant to the applicants’ request. Since I have found in the applicants’ favour to the effect that MLGP, as exclusive licensee of the right to reproduce copies of Windows XP Home and Windows XP Pro, is entitled to an award of damages pursuant to ss 115(2) and 115(4) of the Copyright Act from each of the respondents in respect of their infringement of that copyright, I have not considered it necessary to formulate an appropriate damages award in respect of the action brought by the applicants under the Trade Marks Act or the TP Act. This is in accordance with the applicants’ submissions. It is appropriate however that I also make orders preventing PC Club from taking any further steps in contravention of either of those Acts.
I certify that the preceding three hundred and fourteen (314) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti J. Associate:
Dated: 28 October 2005
Counsel for the Applicant: R Cobden SC; P Flynn Solicitor for the Applicant: Mallesons Stephen Jaques Counsel for the Respondent: A Franklin SC Solicitor for the Respondent: Maxwell IP Dates of Hearing: 8, 9, 10 September and 4, 5 November 2004, 3, 4 March 2005 Date of Judgment: 28 October 2005
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