Microsoft Corporation v Tram
[2010] FMCA 480
•6 July 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MICROSOFT CORPORATION & ORS v TRAM | [2010] FMCA 480 |
| COPYRIGHT – Application for default judgment – no response and no appearance by the respondent – blatant infringement of copyright – assessment of compensatory and additional damages – need for deterrence. |
| Copyright Act 1966 (Cth), ss.5, 31, 36, 38, 115, 116, 126 Fair Trading Act 1999 (Vic), s.9 Federal Magistrates Act 1999 (Cth), ss.14, 131D Federal Magistrates Court Rules 2001 (Cth) |
| Autodesk v Cheung (1990) 17 IPR 69 Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522 |
| First Applicant: | Microsoft Corporation |
| Second Applicant: | MICROSOFT PTY LIMITED ACN 002 589 460 |
| Third Applicant: | MICROSOFT LICENSING, GP |
| Respondent: | Vinh-phuoc "david" Tram Trading as Tramtek |
| File Number: | SYG 646 of 2010 |
| Judgment of: | Driver FM |
| Hearing date: | 6 July 2010 |
| Delivered at: | Sydney |
| Delivered on: | 6 July 2010 |
REPRESENTATION
| Solicitors for the Applicant: | Mr G Hansen Harris & Company |
No appearance by or on behalf of the Respondent
ORDERS
(1) The respondent, whether by himself, his servants, agents or otherwise howsoever, be restrained from infringing the first applicant’s copyright in the computer programs described on the Schedule hereto (“Microsoft Programs”) by reproducing or authorising the reproduction of Microsoft Programs or a substantial part thereof without the licence of the first applicant.
(2) The respondent is to pay to the applicants:
a.(a) damages for infringement of copyright pursuant to s.115(2) of the Copyright Act 1968 (Cth) in the sum of $907.25.
b.(b) additional damages pursuant to s.115(4) of the Copyright Act 1968 (Cth) in the sum of $30,000.
c.(3) The respondent is to pay the applicants’ costs and disbursements, fixed in the sum of $13,961.68.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT Sydney |
SYG 646 of 2010
| Microsoft Corporation |
First Applicant
MICROSOFT PTY LIMITED
ACN 002 589 460
Second Applicant
MICROSOFT LICENSING, GP
Third Applicant
And
| Vinh-phuoc "david" Tram Trading As Tramtek |
Respondent
REASONS FOR JUDGMENT
a.1. This decision concerns an application for default judgment on a claim of copyright infringement. The first applicant is Microsoft Corporation (“Microsoft”). Microsoft is a developer of computer software. The second applicant, Microsoft Pty Limited (“MPL”) is a wholly owned subsidiary of Microsoft incorporated in Australia. The third applicant is Microsoft Licensing, GP is the worldwide exclusive licensee of the copyright in Microsoft Original Equipment Manufacturer (“OEM”) programs and a wholly owned subsidiary of Microsoft.
b.2. The respondent has been engaged in the computer retail industry since at least 8 August 2008 under the name of “Tramtek” from the premises Shop 2/284 Hampshire Road Sunshine, Victoria 3020 (see the affidavit of Vanessa Hutley affirmed on 23 March 2010 at Annexure G, page 63).
Relief sought by the applicants
a.3. The relief sought by the applicants is set out in the application filed on 24 March 2010 and comprises:
b.a) an order restraining further infringement of Copyright of the computer programs prescribed in the Schedule to the application;
c.b) damages for infringement of copyright pursuant to ss.115(2) and 115(4) of the Copyright Act 1968 (Cth) (“the Copyright Act”);
d.c) damages for conversion pursuant to s.116 of the Copyright Act;
e.d) an order restraining the respondent from engaging in or being knowingly concerned in misleading or deceptive conduct in the course of trade in contravention of s.9 of the Fair Trading Act 1999 (Vic) (“FTA”);
f.e) order restraining infringement of specified registered trade marks; and
g.f) costs and interest on costs.
h.4. The relief sought under the Trade Marks Act 1995 (Cth) and the FTA is not pressed in the application for default judgment. Neither do the applicants press the claim for conversion damages.
Jurisdiction of the Court
a.5. Part 5 of the Copyright Act “Remedies and Offences” provides the statutory basis for the proceedings.
b.6. Section 115(1) of the Copyright Act states that:
1. Subject to this Act, the owner of a copyright may bring an action for an infringement of the copyright.
a.7. Section 115(2) of the Copyright Act provides that:
1. Subject to this Act, the relief that a Court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the Court thinks fit) and either damages or an account of profits.
a.8. The Federal Magistrates Court has jurisdiction in relation to infringement of copyright pursuant to s.10 of the Federal Magistrates Act 1999 (Cth) (“the Federal Magistrates Act”) and s.131D of the Copyright Act.
b.9. Section 115(4) of the Copyright Act provides that:
1. Where, in an action under this section:
2.an infringement of copyright is established; and
3.the Court is satisfied it is proper to do so, having regard to:
4. the flagrancy of the infringement; and
5. the need to deter similar infringements of copyrights; and
6. the conduct of the defendant after the act
constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and
1. whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
2. any benefit shown to have accrued to the defendant by reason of the infringement; and
3. all other relevant matters;
4. the Court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
a.10. The Court’s jurisdiction to award damages under s.115(2) and additional damages under s.115(4) and injunctive relief under s.115(2) of the Copyright Act is therefore enlivened by an infringement of copyright.
b.11. Further, s.14 of the Federal Magistrates Act states:
1. In every matter before the Federal Magistrates Court, the Federal Magistrates Court must grant, either:
2.absolutely; or
3.on such terms and conditions as the Federal Magistrates Court thinks just;
4. all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible:
5.all matters in controversy between the parties may be completely and finally determined…
a.12. Pursuant to rule 13.03C(1)(e) of the Federal Magistrates Rules 2001 (Cth) (“the Rules”), if a party to a proceedings is absent from a hearing (including a first Court date), the Court may proceed with the hearing generally or in relation to any claim for relief in the proceeding.
b.13. Pursuant to rule 13.03C(2) of the Rules, if a party to a proceeding is absent from a hearing, the Court may also make an order of the kind mentioned in subrule 13.03B(1), (2), or (4), or any other order.
c.14. Pursuant to Rules 13.03B(2)(b) and 13.03B(2)(d) of the Rules, if a respondent is in default, the Court may:
1.grant leave to the applicant to enter judgment against the respondent for the debt or liquidated damages and if appropriate costs; or
2.give judgment or make any other order against the respondent.
Standing of applicants
a.15. An action for infringement of copyright may be brought by the owner of the copyright. (see s.115(1) of the Copyright Act). Section 126 of the Copyright Act provides:
1. In an action brought by virtue of this Part:
2.copyright shall be presumed to subsist in the work or other subject‑matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject‑matter; and
3.where the subsistence of the copyright is established-the plaintiff shall be presumed to be the owner of the copyright if he or she claims to be the owner of the copyright and the defendant does not put in issue the question of his or her ownership.
a.16. The respondent in these proceedings has not put in issue the question of copyright or its ownership and the Court can therefore rely on the presumptions in s.126 of the Copyright Act. Relevantly, the first applicant claims to be the owner of copyright in the Microsoft programs it alleges were unlawfully copied (viz Microsoft Windows XP Professional and Microsoft Office Enterprise 2007) in paragraphs 8 and 9 of the affidavit of Vanessa Hutley affirmed on 23 March 2010 and filed on 24 March 2010 (see paragraph 9 of that affidavit referring to Annexure A at pages 14 and 17 respectively).
b.17. The third applicant is the exclusive licensee of copyright in Microsoft OEM Programs. OEM Programs are explained in paragraphs 20 and following of the affidavit of Vanessa Hutley affirmed on 23 March 2010 and essentially are software which is licensed for sale only together with a PC.
Infringement
a.18. Section 31(1) of the Copyright Act relevantly provides that:
1. For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right:
2.in the case of a literary, dramatic or musical work, to do all or any of the following acts:
3. to reproduce the work in a material form…
a.19. Section 36(1) of the Copyright Act provides:
1. Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.
a.20. Section 38(1) of the Copyright Act provides:
1. Subject to Division 3 [which provides for certain defences not presently relevant], the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, in Australia, and without the licence of the owner of the copyright:
2.sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or
3.by way of trade exhibits an article in public;
4. if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted such an infringement.
a.21. Section 38(3) provides that in section 38 “article” includes a reproduction or copy of a work or other subject-matter, being a reproduction or copy in electronic form.
Sale and reproduction of Microsoft programs
a.22. Rachel Nielson deposes at paragraphs 2 to 8 of her affidavit sworn on 9 March 2010 that she negotiated to purchase a PC loaded with Microsoft software from the respondent. Relevantly at paragraph 3 of her affidavit, Rachel Nielson deposes that an Asian male working at the respondent’s premises offered to load a pirated copy of Windows and Office for her stating words to the following effect:
1. Is it for home use or business use?... I was asking because if you just want it for home I can put on a pirated copy of Windows and Office for you. I wouldn’t do it if it was for business but if it’s just home use it will be fine.
a.23. Rachel Nielson deposes at paragraph 4 of her affidavit that the Asian male assured her again that if she was planning to use the software at home, she could use a pirated copy stating words to the following effect:
1. “Yeah, you won’t be able to update. But everything else works the same. It will just save you about $300. Software is really expensive and if it’s just for home use then you can use a pirated copy. Computer will be $600 and I will put Windows and Office on for you.”
a.24. The first invoice issued by the respondent is annexed to Rachel Nielson’s affidavit at Annexure A, page 6, and does not list the Microsoft programs Microsoft Windows XP Professional and Microsoft Office Enterprise 2007.
b.25. Vicki Munn deposes at paragraphs 2 and 3 of her affidavit sworn on 12 March 2010 that when she attended the respondent’s premises to pick up the PC loaded with the Microsoft software on 30 September 2009, she spoke to a person who identified himself as “David”. I find that that person is the respondent.
c.26. Vicki Munn deposes at paragraph 5 of her affidavit that the respondent handed over to her a box containing a computer tower, a keyboard, a mouse and a smaller motherboard box containing several CD drivers and manuals. Vicki Munn then deposes at paragraphs 7 and 8 of her affidavit that she placed what she received from the respondent into a box and marked the box as “Exhibit No 11293/09” and forwarded it to MPL by courier.
d.27. The second invoice issued by the respondent is annexed to Vicki Munn’s affidavit at Annexure A, page 4, showing the total amount of $660 as paid in full on 30 September 2009 but again does not list the Microsoft Programs, Microsoft Windows XP Professional and Microsoft Office Enterprise 2007 loaded on the PC.
e.28. Vanessa Hutley deposes at paragraph 52 of her affidavit affirmed on 23 March 2010 that MPL received by courier from Trademark Investigation Services (“TMIS”) a sealed DHL courier.
f.29. Vanessa Hutley deposes at paragraph 53 of her affidavit affirmed on 23 March 2010 MPL’s usual practice upon receipt of a DHL courier satchel from TMIS. DHL courier satchel received by MPL is delivered to and locked in the Legal and Corporate Affairs Department exhibit room. The DHL courier satchel is then opened and inspected by Product Identification Analysts contracted to work in the Legal and Corporate Affairs Department.
g.30. Sugumar Supramaniam, a Product Identification Analyst, deposes in his affidavit affirmed on 15 March 2010 that he examined the computer marked “Exhibit 11293/09”. Sugumar Supramaniam, in paragraphs 11 and 12 of his affidavit, deposes that that computer had the following programs installed on its hard drive:
h.a) Microsoft Windows XP Professional; and
i.b) Microsoft Office Enterprise 2007 ( “the software”).
See paragraph 16 of the Affidavit of Sugumar Supramaniam affirmed on 15 March 2010.
a.31. Further, the evidence of Rachel Nielson, and in particular paragraphs 3, 4, 5, 6, 8, 10 and the evidence of Vicki Munn, in particular paragraphs 3, 4, 5, permit the Court to infer that the reproduction of the software to the hard drive of the PC was either performed by the respondent himself or authorised by the respondent. In any event, the mere sale or offering for sale of the PC loaded with unauthorised software constitutes an infringement of s.38(1) of the Copyright Act.
b.32. I find that the reproductions of the software were unauthorised having regard to the affidavit of Vanessa Hutley affirmed on 23 March 2010 and in particular paragraphs 19, 24, 25, 26, 29, 33, 37, 38, 47, 55 and 57 of that affidavit.
c.33. Essentially, the evidence of Vanessa Hutley in her affidavit affirmed on 23 March 2010 is that the first applicant strictly controls the authorisation of the making of copies of its software. The only persons who may make authorised copies of software for sale are authorised replicators, royalty OEM’s, Microsoft OEM’s, system builders installing OEM software on PCs for sale or the purchases of retail software.
d.34. System Builders and purchasers of retail software may only resell the software if, in the case of OEM system, it is sold with a PC together with CD-ROMS, manuals and Certificates of Authenticity (collectively “media”) (see the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 38).
e.35. Purchasers of retail software may only resell it if they comply with the requirements of the End User Licence Agreement and the software sold is together with its media (see the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 42).
f.36. Accordingly, the sale of the software located on the hard drive of the computer purchased on 24 September 2009 were not authorised by virtue of the fact that no original disk or certificate of authenticity, manual or valid end user license agreement were supplied with the Software (affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 57).
g.37. Based on the matters deposed to by Vicki Munn at paragraph 5 of her affidavit, I infer that the respondent either copied the software or authorised the copying of the software to the hard drive of the PC provided to her and that he knew or ought to have known that the software loaded on the PC sold was an unauthorised copy within the meaning of s.38 of the Copyright Act.
h.38. The relief available in the above circumstances, and sought by the applicants in the Application for Final Orders, is for damages for breach of copyright pursuant to ss.115(2) and 115(4) of the Copyright Act.
Damages under s.115(2)
a.39. The PC purchased from the respondent was found to contain the software on the hard drive (affidavit of Sugumar Supramanuam affirmed on 15 March 2010, paragraph 16).
b.40. By virtue of the unauthorised reproductions identified in the evidence, the respondent has deprived the applicants of the licence fees attributable to the software installed on the PC and is prima facie liable for compensatory damages under s.115(2) of the Copyright Act.
c.41. In cases concerning infringement of copyright in software, the courts have usually calculated damages using the “licence fee” approach described in Autodesk v Cheung (1990) 17 IPR 69 per Wilcox J at page 75.
d.42. An account of profits under s.115(2) or damages for conversion under s.116 of the Copyright Act are not available to the applicants as the respondent has been completely unresponsive in these proceedings and, therefore, issuing a Notice to Produce in respect of all invoices and purchase orders in relation to the purchase of all components used to build the personal computer supplied to Vicki Munn on 1 October 2009 by the respondent was not a realistic option for the applicants.
e.43. Another approach the Court may take is to treat damages as being “at large” in the sense that the Court should award an amount it thinks right as if it were a jury (see Autodesk v Cheung per Wilcox J at page 75; Fenning Films Services Ltd v Woverhampton, Walsall and District Cinemas Ltd [1914] 3 KB 1171 at page 1174).
f.44. The fact that damages cannot be precisely calculated does not prevent the Court from making an award for damages, even if a degree of speculation and guesswork is involved (see Foxtel Management Pty Ltd v The Mod Shop Pty Ltd [2007] FCA 436 at [317] per Siopis J).
g.45. One approach used when assessing damages at large is to attempt to assess the estimated loss of income arising from the infringement (see Columbia Pictures Industries Inc & Anor v Luckins (1996) 34 IPR 504 at [13] per Tamberlin J). However, when the Court is required to perform as a “jury”, it is required to make certain arbitrary estimates and assumptions (see Foxtel Management Pty Ltd v The Mod Shop Pty Ltd at [326] per Siopis J).
h.46. In quantifying damages by applying this approach, I am guided by the decision in Microsoft Corporation & Ors v Mayhew [2008] FMCA 121 where it was accepted that a percentage discount from the recommended retail price of operating systems software to reflect a reasonable licence fee is 15 per cent and a percentage discount from the recommended retail price of office automation software to reflect a reasonable licence fee is 20 per cent (at [36] per FM Lloyd-Jones).
47. Microsoft Windows XP Professional was released by Microsoft in 2001. This operating system is no longer manufactured or distributed by or on behalf of Microsoft. The current equivalent operating system to Microsoft Windows XP Professional manufactured and distributed by or on behalf of Microsoft is Microsoft Windows 7 Professional (see the affidavit of Vanessa Hutley affirmed on 2 June 2010). The applicants submit and I accept that retail customers who are seeking to purchase Microsoft Windows XP Professional today will most likely purchase its current equivalent operating system, Microsoft Windows 7 Professional, and therefore, the last known recommended retail price of Microsoft Windows 7 Professional should be used to assess compensatory damages under s.115(2) of the Copyright Act, instead of the last known recommended retail price of Microsoft Windows XP Professional.
j.48. The last known recommended retail price for a single licensed copy of Microsoft Windows 7 Professional was $449.00 (see the affidavit of Vanessa Hutley affirmed on 2 June 2010, paragraph 3).
k.49. Microsoft Office Enterprise 2007 is designed for use by commercial customers and it is distributed as a volume licensing offer to Microsoft’s large commercial customers. Microsoft Office Enterprise 2007 is not available for sale through retail outlets (see the affidavit of Vanessa Hutley affirmed on 2 June 2010, paragraph 4). The applicants submit and I accept that retail customers who are seeking to purchase a standard Microsoft word processing application would normally purchase Microsoft Office Standard 2007 (see the affidavit of Vanessa Hutley affirmed on 2 June 2010, paragraph 4), and therefore, the last known recommended retail price of Microsoft Office Standard should be used to assess compensatory damages under s.115(2) of the Act.
l.50. The last known recommended retail price for a single licensed copy of Microsoft Office Standard 2007 was $657.00 (see the affidavit of Vanessa Hutley affirmed on 2 June 2010, paragraph 4).
m.51. I find that the percentage discount from the recommended retail price of operating system software to reflect a reasonable licence fee is 15 per cent.
n.52. I find that the percentage discount from the recommended retail price of Office Automation Software to reflect a reasonable licence fee is 20 per cent.
o.53. Therefore, compensatory damages should be awarded under s.115(2) in the amount of $907.25 for the unauthorised hard disk loading by the respondent of Microsoft Windows XP Professional and Microsoft Office Enterprise 2007 on the PC purchased on 24 September 2009. This figure reflects the licence fees foregone by Microsoft for the illegal loading by the respondent on the PC of a single licensed copy of Microsoft Windows XP Professional and Microsoft Office Enterprise 2007. This figure is calculated as follows:
1. = $449.00
2. minus 15% (percentage discount from RRP) = $381.65
3. RRP of Microsoft Office Standard 2007 = $657.00
4. minus 20% (percentage discount from RRP) = $525.60
5. TOTAL = $907.25
Damages under s.115(4)
a.54. Where, in an action under this section:
1.an infringement of copyright is established; and
2.the Court is satisfied it is proper to do so, having regard to:
3. the flagrancy of the infringement; and
4.the need to deter similar infringements of copyrights; and
5.the conduct of the defendant after the act
6. constituting the infringement or, if relevant, after the defendant was informed that the defendant had alleged infringed the plaintiff’s copyright; and
7.whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
8.any benefit shown to have accrued to the defendant by reason of the infringement; and
9.all other relevant matters;
10. the Court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
Deliberate infringements
a.55. The respondent has not filed or served any response to the applicant’s application filed on 24 March 2010.
b.56. The deliberate infringement of copyright for gain constitutes deliberate and flagrant conduct (see Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522 at [223] per Conti J; Ravenscroft v Herbert & New English Library [1980] RPC 193 at page 208 per Brightman J).
c.57. As noted above at [2], the respondent has been engaged in the computer retail industry since at least 8 August 2008. In his conversation with Rachel Nielson, the person whom she dealt with (an Asian male) in the premises of the respondent said words to the following effect (see the affidavit of Rachel Nielson sworn on 9 March 2010, paragraphs 3 and 4):
1. ...I can put a pirated copy of Windows and Office for you. I wouldn’t do it if it was for business but if it’s just home use it will be fine...you won’t be able to update. But everything else works the same. It will just save you about $300. Software is really expensive and if it’s just for home use then you can use a pirated copy. Computer will be $600 and I will put Windows and Office on for you.
a.58. Given that the respondent was identified on attendance at the premises on 30 September 2009 (see the affidavit of Vicki Munn, paragraph 3) he was fully aware of the sale of the PC and given the respondent’s failure to participate in these proceedings, I infer that it was the respondent who talked knowledgeably about “pirated” software. This is further supported by the concealment of the inclusion of the software in the sale on the relevant invoice (see [61] below).
b.59. I find that the respondent was aware that the loading of the software on the PC sold was unauthorised.
c.60. I also find, from the conversation referred to at [57] above, that the respondent also knew or ought to have known that by simply copying the software rather than buying it and supplying it lawfully, he was depriving the applicants of licence fees by providing copies of the software for “free”.
d.61. At annexure A to the affidavit of Rachel Nielson (page 6) and at annexure A to the affidavit of Vicki Munn (page 4) is an invoice made out to Rachel MacKeown. That invoice does not list any Microsoft software, or indeed any operating system of office application of any kind. The failure to list the software on the invoice shows that the respondent was aware that he had to conceal the fact of the sale of software.
e.62. The respondent therefore deliberately infringed the applicants’ copyright by loading illegal copies of the software onto the PC.
f.63. I find that the respondent deliberately and knowingly installed or authorised the installation of illegal copies of the software for a financial gain of $660.00 (see the affidavit of Vicki Munn sworn on 12 March 2010, paragraph 5).
g.64. I find that the respondent’s conduct constitutes a flagrant infringement of Microsoft’s copyright for financial gain.
Benefits accrued to the respondent by reason of the infringements
a.65. The infringement allowed the respondent to make a sale without purchasing software from authorised distributors (see the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraphs 30 to 33) and therefore, at no cost to the respondent.
b.66. It is clear that the respondent used the free installation of the software as a selling point, in order to entice Rachel Nielson into the sale of hardware (see the affidavit of Rachel Nielson sworn on 9 March 2010, paragraph 4).
c.67. The applicants submit, and I accept that, in the context of the very competitive computer industry, the market reacts to very small pricing differences. This view was accepted in Microsoft Corporation v PC Club Australia Pty Ltd at [259] per Conti J, and clearly supports the applicants’ position that the respondent infringed Microsoft’s copyright for his own financial gain, and as such, a benefit has certainly accrued to the respondent to the detriment of the applicants.
The need to deter similar infringement of copyright
a.68. Rachel Nielson did not ask the respondent to load the illegal copies of the software. In fact, she raised her concerns over using a pirated copy of the software that it may not work “properly” (see paragraph 3 of her affidavit). She was assured that “everything stills works the same” and was advised not to update as it was a pirated copy (see the affidavit of Rachel Nielson sworn on 9 March 2010, paragraphs 3 and 4). The fact that the person at the respondent’s premises (probably the respondent) volunteered the free installation of the copies leads me to infer that this is an ordinary practice of the respondent (see also the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 59).
b.69. The courts have accepted that the need to “deter the respondents, as well as other putative abusers, from committing infringements of copyright” is a consideration when determining whether damages should be awarded under s.115(4) (see Microsoft Corporation v PC Club Australia Pty Ltd at [260] per Conti J).
c.70. Indeed, the distribution of unlicensed Microsoft Windows XP Professional and Microsoft Office Enterprise 2007 compromises the integrity of Microsoft’s licensing and distribution system (see the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 56).
d.71. Furthermore, such infringements pose a threat to the business viability of legitimate dealers in Microsoft Programs, whose survival is essential to Microsoft’s effective marketing of Microsoft programs in Australia (see the affidavit of Vanessa Hutley affirmed on 23 March 2010, paragraph 56).
e.72. The respondent appears to be taking the matter of selling hard-disk loaded PCs lightly and has not co-operated in any way to resolve this matter. In fact, the respondent has invited the applicants to apply for default judgment on two occasions (see the affidavits of Mina Yu affirmed on 21 May 2010 and 3 June 2010, paragraphs 6). The applicants therefore have serious concerns about the respondent engaging in future infringing conduct.
f.73. I accept that the need to deter the respondent as well as other putative abusers from infringing Microsoft’s copyright is an important consideration of the Court in determining damages under s.115(4), in order to maintain the integrity of Microsoft programs.
Other relevant matters
a.74. A material consideration for the Court in deciding damages under section 115(4)(iii) is that whilst infringements of computer programs are easy to carry out, computer software infringements are difficult to detect (Autodesk v Cheung per Wilcox J at page 21). This was confirmed in Microsoft Corporation v PC Club Australia Pty Ltd at [263] per Conti J. As set out above at [57], the fact that the respondent so candidly offered to install free copies of Microsoft programs onto the test purchased computer without any undue pressure from Rachel Nielson strongly indicates that such practices are commonplace for the respondent (see Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643 per Tamberlin J).
b.75. Therefore, the applicants submit and I accept that the difficulties faced by them in detecting infringements such as those carried out by the respondent should be considered by the Court when deciding damages under s.115(4)(iii).
c.76. The respondent has not appeared in these proceedings, nor has he served any response in these proceedings. Further, the respondent has not offered up any licenses to the applicants in these proceedings. Essentially, the respondent has not in any way sought to defend himself against the claims made by the applicants in these proceedings.
d.77. I also draw the inference that had discovery been possible the applicants would in all likelihood have been able to identify a significant amount of other infringements by reference to the respondent’s invoices. That is, infringing sales would be discovered by the absence of software on relevant invoices as was the case with the test purchase in these proceedings.
e.78. The courts have accepted that a further factor in deciding whether or not the damages under s.115(4) of the Copyright Act should be awarded for flagrancy is, in particular, the inadequacy and shortcomings if the respondent’s responses in light of the evidence adduced by the applicants (see Microsoft Corporation v PC Club Australia Pty Ltd at [258] per Conti J).
f.79. The respondent’s failure to show any defence in light of the applicants’ evidence is unsatisfactory and I take that into consideration when deciding damages under s.115(4) of the Copyright Act.
Conclusion
a.80. The respondent has failed to comply with any of the Court’s directions and has failed to appear or file any response. Accordingly, the Court may proceed to grant any claim for relief in the proceedings (rule 13.03C(1)(e) of the Rules).
b.81. I will order that default judgment be entered in the applicants’ favour in these proceedings and that relief be given in accordance with their application filed on 24 March 2010.
c.82. The respondent clearly infringed Microsoft’s copyright by the unauthorised hard disk loading of Microsoft programs Microsoft Windows XP Professional and Microsoft Office Enterprise 2007. Damages under s.115(2) of the Copyright Act in the sum of $907.25 should be awarded to the applicants.
d.83. For the reasons given above, the respondent’s infringement was flagrant within the meaning of s.115(4) of the Copyright Act as it was deliberate and calculated and carried out to secure a financial benefit for the respondent.
e.84. An appropriate amount of additional damages, with regard to the need for deterrence, the standard practice of the respondent, the fact that the respondent completely ignored these proceedings, the flagrancy of the infringement and the decided cases is $30,000.
f.85. The applicants should also receive their costs of the application, which are quantified in the affidavit of Mina Yu, sworn on 1 July 2010.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 7 July 2010
SCHEDULE
Microsoft Programs
All versions of the following computer programs and associated manuals and documentation (including versions created or released subsequent to the date hereof):
Microsoft Excel
Microsoft Excel 2000
Microsoft Excel 2002 Standard Edition
Microsoft Excel 2003
Microsoft Excel 2001 Macintosh Edition
Microsoft Excel Students & Teachers 2003
Microsoft Excel Students 2006
Microsoft Excel Macintosh 2004
Microsoft Exchange CAL
Microsoft Exchange Conferencing Server
Microsoft Exchange Server – Enterprise
Microsoft Exchange Server – Enterprise 2003
Microsoft Exchange Server – Standard
Microsoft Exchange Server – Standard 2003
Microsoft Office
Microsoft Office 98 for Macintosh
Microsoft Office Professional
Microsoft Office 2000 Standard
Microsoft Office Standard 2003
Microsoft Office 2000 Developer
Microsoft Office 2000 Developer Tools
Microsoft Office 2000 Premium
Microsoft Office 2000 Professional
Microsoft Office 2000 Small Business Edition
Microsoft Office 2001 Macintosh Edition
Microsoft Office LCS Enterprise 2005
Microsoft Office LCS Standard 2005
Microsoft Office Macintosh 2004
Microsoft Office Macintosh 2004 Student and Teacher
Microsoft Office Macintosh Professional 2004
Microsoft Office Student 2006
Microsoft Office Professional 2003
Microsoft Office Small Business Edition 2003
Microsoft Office Student and Teacher 2003
Microsoft Office Proofing Tools Standard Edition
Microsoft Office Proofing Tools 2003
Microsoft Office X for Mac Professional Edition
Microsoft Office X for Mac Standard Edition
Microsoft Office XP Standard Edition
Microsoft Office XP Professional Edition
Microsoft Office Enterprise 2007
Microsoft Office Home and Student 2007
Microsoft Office Professional 2007
Microsoft Office Professional Plus 2007
Microsoft Office Small Business 2007
Microsoft Office Standard 2007
Microsoft Office Ultimate 2007
Microsoft Outlook 2000
Microsoft Outlook 2002 Standard Edition
Microsoft Outlook 2003
Microsoft Outlook Students&Teachers 2003
Microsoft Outlook Students 2006
Microsoft PowerPoint
Microsoft PowerPoint 2000
Microsoft PowerPoint 2001
Microsoft PowerPoint Standard Edition 2002
Microsoft PowerPoint Students&Teachers 2003
Microsoft PowerPoint Student 2006
Microsoft PowerPoint 2004 for Mac
Microsoft PowerPoint X
Microsoft SQL Server
Microsoft SQL Server CAL
Microsoft SQL Server CAL Runtime
Microsoft SQL Server Developer
Microsoft SQL Server Enterprise
Microsoft SQL Server Enterprise Runtime
Microsoft SQL Server Programmer’s Toolkit
Microsoft SQL Server Standard
Microsoft SQL Server Standard Runtime
Microsoft SQL Server 2000 Developer Edition
Microsoft SQL Server 2000 Enterprise
Microsoft SQL Server 2000 Standard Edition
Microsoft SQL Server Workgroup Edition 2000
Microsoft SQL Server 2000 Operations Guide
Microsoft Windows Server Enterprise 2003
Microsoft Windows Server for Small Business 2003
Microsoft Windows Server Standard 2003
Microsoft Windows Web Edition 2003
Microsoft Windows Server 2003 Terminal Services
Microsoft Windows Services for Unix 3.0
Microsoft Windows Small Business Server Premium 2003
Microsoft Windows Small Business Server Standard 2003
Microsoft Windows
Microsoft Windows 95
Microsoft Windows 98
Microsoft Windows 2000 Advanced Server
Microsoft Windows 2000 CAL
Microsoft Windows 2000 Internet Connector
Microsoft Windows 2000 Professional
Microsoft Windows 2000 Server
Microsoft Windows Trmnl Services CAL
Microsoft Windows for Workgroups
Microsoft Windows CAL
Microsoft Windows Millennium Edition
Microsoft Windows NT
Microsoft Windows NT CAL
Microsoft Windows NT Server
Microsoft Windows NT Server- Enterprise
Microsoft Windows NT Server – Terminal
Microsoft Windows NT Server – Terminal CAL
Microsoft Windows NT Workstation
Microsoft Windows XP Home Edition
Microsoft Windows XP Professional
Microsoft Windows XP Media Centre Edition
Microsoft Windows Vista Business
Microsoft Windows Vista Enterprise
Microsoft Windows Vista Home Basic
Microsoft Windows Vista Home Premium
Microsoft Windows Vista Ultimate
Microsoft Word
Microsoft Word 2001
Microsoft Word 2002
Microsoft Word 2003
Microsoft Word Student 2006
Microsoft Word Students & Teachers 2003
Microsoft Word Macintosh 2004
Microsoft Word 98 Macintosh Edition
Microsoft Works
Microsoft Works 6
Microsoft Works 7.0
Microsoft Works 8.0
Microsoft Works 2000
Microsoft Works Suite
Microsoft Works Suite 2001
Microsoft Works Suite 2004 Standard edition
Microsoft Works Suite 2005 Standard edition
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