Nintendo Company Ltd v Centronics Systems Pty Ltd

[1993] HCATrans 291

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M91 of 1993

B e t w e e n -

NINTENDO COMPANY LTD

Appellant

and

CENTRONICS SYSTEMS PTY LTD,

MAURICE LATIN, TIBERIO SALICE

and FABRIZIO LATIN

Respondents

MASON CJ
BRENNAN J
DEANE J

DAWSON J

TOOHEY J

GAUDRON J

Nintendo(2) 77 6/10/93

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 6 OCTOBER 1993, AT 10.02 AM

(Continued from 5/10/93)

Copyright in the High Court of Australia

MASON CJ: Yes, Mr Macaw.

MR MACAW:  I was taking the Court last evening to

paragraph 9 of our outline, and I would like to

take the Court briefly to Sillitoe v McGraw-Hill

Book Co, (1983) FSR 545. It is a copyright case and deals with the question of knowledge in a

provision similar to that of sections 37 and 38 of

our Copyright Act, that is to say knowledge of the

subsistence and infringement of copyright. What it

and other like cases stand for is the proposition

that being put on notice of the relevant facts and

in some circumstances having a reasonable time for

inquiry will constitute knowledge for that purpose.

In Sillitoe's case, as the Court will see from

the headnote, literary copyright was involved in

0 level literature studies. The Court will see

from point (iv) at the foot of page 545 one thing

that was contended by the defendants was:

having obtained counsel's opinion, they did

not have the knowledge required by section 5 -

counsel having advised that there was no

infringement. At the foot of page 555, the point

that is reminiscent of the way the respondents here

wish to conduct the case:

Mr Jeffs's final point was that there

cannot be "knowledge" on the part of the

defendants if it takes a law suit to determine

whether or not there is an infringement.

Here, he said, the defendants had seen an

Advice of counsel concerning the plaintiffs' claim and in the Advice those claims were

rejected. The defendants had gone ahead in

reliance on the Advice. This argument means,

as I understand, that a defendant who does not

dispute the facts can nevertheless rely on having no "knowledge" within section 5(2) if	he accepts and acts on legal advice, whether
the advice turns out to be right or wrong.

And, in the middle of that page, 556, there is

reference made to the New South Wales decisions of

Albert v Hoffnung and RCA Corporation v Custom

Cleared Sales. In that latter case:

The judgment of the court includes these

words:

"In other words, the true position is

that the court is not concerned with the
knowledge of a reasonable man but is concerned

with reasonable inferences to be drawn from a

Nintendo(2) 78 6/20/93

concrete situation as disclosed in the

evidence as it affects the particular person

whose knowledge is in issue."

It follows that one must consider the

concrete situation disclosed by the evidence

in this case and then decide what knowledge is

to be attributed to the defendants, either in

the way of express knowledge or knowledge that

these particular defendants must have

inferred.

And, the court went on to deal with some of the other cases on the next page where the elapse of a reasonable time after notice of a claim was given, or was held to constitute relevant knowledge.

We mention likewise that the case of

Albert v Hoffnung and RCA Corporation was referred to also in Columbia Pictures Inc v Robinson,

(1987) 1 Ch 38 at page 67. In that case

Mr Justice Harvey in the Hoffnung case was quoted

as saying:

Knowledge in the section cannot mean in my

opinion any more than notice of facts such as

would suggest to a reasonable man that a

breach of the copyright law was being

committed ... In my opinion knowledge means

notice, which would put a reasonable man on

inquiry.

Of course, sections 37 and 38 use the expression

"knowledge", whereas the section 19(3) we are here

concerned with uses as well the concept of ought

reasonable to have known.

My learned friend made some observations,

which it is perhaps desirable to put into context.

He mentioned a reputable Taiwanese manufacturer and

differences in the detail of the two layouts and

We mention that findings were made about the fact	goes from transcript references to those matters.
that there was copying down to redundant circuitry
in the Nintendo layout; that finding is at page 582
point 9 of the appeal book. My learned friend
mentioned a difference in funtionality, which was a
claimed difference said to avoid infringement. The
learned trial judge found at page 581 point 1 of
the appeal book and at page 583 line 7, that any
attempt to confer different funtionality had
failed.

My learned friend referred to visible

differences, but His Honour dealt with that at page

584 of the appeal book and following, where he

concluded that any visible differences were the

Nintendo(2) 79 6/10/93

result of a mechanical shrink process, and that was

explained in the evidence that His Honour referred

to; shrink means, in effect, that you can capture a

layout into a computer and then scale it in a way

that you might wish to scale it, for example, to

accommodate the use of different sized transistors

or different widths of interconnecting metal. And

so you might be left with something that looks

different in the sense that the blocks might be of
different size, but the interconnections, the start

and the end of all the interconnections, remains

the same.

All those matters, of course, were matters on which findings of fact were made. They were the

subject of appeal in the Full Federal Court. Those

points were abandoned in the Full Federal Court,

and instead points were taken of the kind that were

the subject of the notice of contentions here.

The relevant material - and it can be very

briefly mentioned - which we would say not only

denies my learned friend's proposition that there

was no evidence upon which, even if he is right as

a matter of construction, there was relevant

knowledge but, indeed, compels the opposite

conclusion, can be traced from page 785 of the

appeal book in the joint judgment of

Justices Beaumont and Burchett. If I could give

the Court some brief references to the relevant

passages: at page 785 at line 31, paragraph 6,

reference in Mr Latin's affidavit to his awareness

of the games made by Nintendo. He said:

I was not aware that it had intellectual

property claims over any of the items making

up the sample Spica Entertainment Units.

This was as at July 1989 when unsolicited samples

were sent to him. In the passage spanning

pages 786 to 787 is the letter from Keyman,

Danny Chen in Taiwan, containing the "under the

table" reference at the top of 787, and pointing

out immediately under that:

When you take any advertisement, you only can

specify your machine is 'NINTENDO

compatible' -

and indeed, that was what was done. It was said by

the respondent to be 100 per cent Nintendo

compatible.

On page 788 is set out the letter from Purves Clarke Richards, solicitors for Nintendo which,

amongst other things, at line 30, gave notice that:

Nintendo(2) 80 6/10/93

The game cartridges included in the Spica Unit

would appear to be counterfeit copies of

Nintendo games.

At page 790 is set out the text of the recponse to

that letter. At line 15 is the proposition that:

We obviously have not had an opportunity to consider our clients, or your clients code but

we have been informed that our clients code

was developed independently and thus believe

that it is not an infringement of copyright.

The assurance -

DEANE J: These are using words that do not mean much to me.

As I follow it, the references to the games is

something quite distinct from the original circuit,

or the circuit. Is that so?

MR MACAW:  Yes, it is, Your Honour.

DEANE J: So, all you get out of the references to the games

is that the respondent knew its supplier was

involved in some questionable activities in

relation to the games?

MR MACAW:  Yes, and it is only relevant for the context that

it provides to the later letter - - -

DEANE J:  I follow that. Well, now you are referring to

code?

MR MACAW: That is code in the games, Your Honour.

DEANE J: That is in the games, not in the circuit?

MR MACAW:  No, I am sorry. We are here speaking about the

games only. What happened was, you have a unit

which, amongst other things, has the PPU chip in it

and the unit is capable of playing games that are

inserted by way of a cartridge, of the kind that

one - - -

DEANE J: Well, can I ask you this? Does any of this

material do more than establish that the respondent

was aware, or should have been aware, of the fact

that it was dealing with a rather shady supplier?

Perhaps shady supplier is a bit strong or a bit

weak.

MR MACAW:  I would say considerably weak, Your Honour, but

no, I think not. The particular context of

relevance though, that I was about to draw

attention to, is that on the basis of assurances

from the supplier it was said that the code in the

games was independently created and that is a

Nintendo(2) 81 6/10/93

proposition of doubtful validity, and it certainly

was not sought afterwards to make good that

proposition, and likewise the position taken, of

course, in relation to the circuit layout was that

it was independently created too. That was the

whole point upon which it was said that there was

no infringement. So we merely draw attention to

the fact that a similar basis had been put forward

in relation to the copyright in the games.

At 794 one sees a copy of the letter from

Purves Clark Richards of 31 August, to which

reference has already been made, in particular the

paragraph beginning at line 16. At 795 is set out

in Mr Latin's affidavit what his response was. He says that he made inquiries of Keyman, that is the

supplier. In paragraph 16 he says he:

compared a PPU chip from a Nintendo games

machine with the one in a Spica machine at

that time.

So he had access to the two machines. My learned

friend correctly indicated yesterday that this was

in fact a flawed test, as appears from the evidence

of Mr Latin conceding as much at page 303 of the

appeal book. The other thing that he did, as is

apparent from pages 803 to 804 of the appeal book

is he went to see the patent attorneys whose letter

of 7 September is set out spanning pages 804 to

805. At 804 line 27, is the reference that my

learned friend yesterday mentioned to the Circuit

Layouts Act.

So what was done in response to the notice was

to make unidentified further inquiries of Keyman

and get some kind of assurances from Keyman, to

find from Messrs Tatlock & Co that the Circuit

Layouts Act had been passed but not yet proclaimed,

and otherwise nothing. It did not, for example, go

to UMC.	We would say that what it decided to do
was to take its chances. As a matter of timing, we

would say that that meant that at the very least

some time shortly after the letter of

31 August 1990, it would, even if the copyright

cases test were applied here, which is really what

my learned friend seeks to apply, have been in a

position of knowledge for section 19(3) purposes.

Certainly by the time the writ was issued in

December of 1990, that knowledge would have to be

inferred and, indeed, strengthened by the issue of

the writ.

DEANE J:  Mr Macaw, what do you say is the relevant date for

the purposes of 19(3)? The date of the writ; is

that the latest relevant date?

Nintendo(2) 82 6/10/93

MR MACAW:  Yes, Your Honour, except that if one is concerned

with a question of injunction, one would want to be confident of course that sales thereafter were made with the relevant knowledge, but that would follow

automatically from knowledge being established at

an earlier time.

DEANE J: But do you accept - and I am not suggesting you

should; I am just asking - that 5 December 1990,

which seems to be the date of the application, is

the latest relevant date for the purposes of

section 19(3)?

MR MACAW:  Yes, save for the question of injunction.

DEANE J: Can I ask you this: at the time the initial

letter was written, there was no mention of EL

rights, for an obvious reason. When was the first

time, if at all, that your client asserted that it

had relevant EL rights?

MR MACAW:  The evidence does not disclose any further

correspondence before the issue of the writ,

Your Honour. I am not sure whether there was - - -

DEANE J:  If one comes to this Act, why would not section 46

make it, for practical purposes, essential that a

person who sought to prevent conduct by another

person, in reliance of EL rights, spell out the

fact that he or she claimed to have EL rights?

MR MACAW: Section 46 gives somebody a right where

groundless threats are made.	That might give rise
to its own entitlement on the	part of a recipient
of a demand, or notice, but -

DEANE J: But section 46 provides the whole basis of a case

such as this, and that is if somebody makes a

threat on the basis of alleged EL rights the person

against whom the threat is made is protected.

MR MACAW:  Protected in the sense that as a person aggrieved

he can seek certain relief.

DEANE J: In other words, the person can say, "Well, he has

made a threat to me on the basis of an allegation

that he has EL rights. I can stop and investigate

it because if the threat proves to be groundless I

can recover damages."

MR MACAW:	Yes.
DEANE J:	Now, here, your client at no stage, as I

understand your answer, alleged that it had EL

rights in relation to the relevant circuit.

Nintendo(2)	83	6/10/93
MR MACAW:	Yes.	Your Honour, there is a difference, of

course, between a threat of the kind that is caught

by section 46, and a notification of EL rights,

subsection (2) makes that plain, and all we here
are concerned with for section 19(3) purposes is a

notification of facts of a kind from which the

relevant knowledge, under section 19(3), on my

learned friend's construction of it, would be

inferred.

DEANE J: What I am really putting to you is, why should the

courts hold that on the basis of assertions which,
at no time, amount to allegations of EL rights,

the person against whom or to whom the threats or

assertions are made should be treated as having

constructive knowledge of EL rights?

MR MACAW:  Because, Your Honour, you do not have to put a

label of that kind on it in order to have the

relevant knowledge.

DEANE J:  Would you say your client was liable to

proceedings under section 46 for a threat made
before this Act even came into operation, and not

repeated?

MR MACAW:  I have not given that consideration, Your Honour.

I think that Tatlock and Co gave it consideration

in the letter of 7 September. So plainly they

treated the letter, on the footing that my learned

friend yesterday conceded it to be, a letter at

least drawing attention to the rights of the kind

that when the Circuits Layout Act came into

operation, would subsist.

Our answer really, Your Honour, is that one

would not have in this context or under the
Copyright Act context a requirement to provide a

legal label. All that would be required would be

to put the person on notice of the facts which

would be necessary to ground the legal right.

DEANE J:  You say that, and it may well be in this case

there is force in what you say, but one could also

be dealing with the comparatively unknowledgeable
proprietor of a shop. Now, why is the approach to

be taken that in a context where the plaintiff has

never said he has EL rights, that person is to be

assumed to work through all this strange language and to reach a conclusion that even though he has

never claimed to have any rights under the

legislation, that really must be what he is

claiming?

MR MACAW:	Our answer, Your Honour, is the proposition we make we do so as a general application, but we are
here concerned with particular facts. The question

Nintendo(2) 84 6/10/93

here is whether the respondent had the relevant

notice as is indicated in the copyright cases that

I referred to a moment ago. One is always

concerned with what one would infer from the

particular circumstances of knowledge, and it is

plain, in our submission, that that was enough

here.

DEANE J:  Can I delay you just a little longer. Can I take

you to section 19(3). On your construction of it,

does the alleged infringer have to know of the

existence of a right in an eligible layout?

MR MACAW:  No, Your Honour. He need merely know that he is

not licensed by the person who turns out to be the

owner of that right.

DEANE J:  So he does not have to know that there is a right

in an eligible layout at all?

MR MACAW:  No, Your Honour. All he needs to know is that he

is not licensed.

DEANE J: It seems to me that between your construction of

section 19(3) and Mr Nash's construction, there is

another possible set of facts, and that is, assume

that the evidence established that the respondent

knew of the Nintendo circuit and knew that Nintendo

had eligible rights in its circuit. Do you want to

say anything about how section 19(3) works in that

context, even if your primary construction is not

correct? I might say it seems to me as a matter of

language it does not obviously work the way Mr Nash

suggests it works.

MR MACAW: Well, the licence, Your Honour, is to exploit the

layout. That is to say, in the relevant context,

to sell an integrated circuit made in accordance

with the eligible layout.

DEANE J: Perhaps I should spell out what I am asking about,

and that is, on one approach to section 19(3) it

operates to say that, if the alleged infringer knew

of the existence of an eligible layout, or knew

that X was the owner of the right in an eligible

layout, the only knowledge it requires is knowledge

that he was not licensed by X, but he does not have

to have knowledge about infringement, that that is

a factual matter? Do you follow?

MR MACAW:	Yes, I do, Your Honour.
DEANE J:	Do you want to say anything about that?
MR MACAW:	We would add here, Your Honour, to the

construction that we contended for, which is to say

that the question of subsistence and - - -

Nintendo(2) 85 6/10/93

DEANE J:  No, what I am putting is against your construction

in that, on your construction he does not even have

to know of the existence of any rights in an

eligible layout. What I was asking you about is,

if one rejects that construction, but goes to the next stage where he knows that X has rights in an

eligible layout and knows that he was not licensed

by X but does not know anything about infringement

or likely infringement.

MR MACAW:  If one starts with the proposition that one

rejects our con~truction, then that is plainly a

preferable construction than the one our learned

friend contends for, because of the extraordinary

consequences that my learned friend's contention

produces.

DEANE J: Well, what I was really concerned to do was to

make sure that that midway construction was one

that was out in the open, in the sense that we have
to work out the construction not merely because of

what is put by the parties, but the way we

ultimately see it.

MR MACAW:  I understand that, Your Honour, and the answer

is, if our construction which we adhere to is

rejected, then we would plainly prefer that

construction to our learned friend's. The matters

that we have dealt with under section 19(3) really

apply likewise to section 20(2). Again, we say the

knowledge limits the question of lack of licence on

the part of the maker, similar considerations
apply, and as we point out in paragraph 11, there

was a finding by the trial judge that Centronics

had such constructive knowledge, at least, from

1 October 1990. It was sufficient to say that

there was constructive knowledge from at least that

date. One would think that the constructive

knowledge had been acquired earlier.

My learned friend, in the course of his

observations in relation to what

Mr Justice Northrop had said in relation to
section 20(2), indicated in answer to a question of

Your Honour Mr Justice Brennan that if the parties had gone to the Federal Court to have equitable remuneration fixed and it had been fixed and it had

not been paid, then there would be infringement.

That produces, in our submission, an extraordinary

and unworkable result. On this scenario of our

learned friends, one goes to court to test

infringement. One has to get the court to give a

verdict about infringement before there is

knowledge, on my learned friend's case about

section 19(3).

Nintendo(2) 86 6/10/93

But leave that aside for the moment. One has

a finding of infringement. We are dealing with a

defendant, on this hypothesis, who has not made and

proposes not to make any offer of equitable

remuneration or to take any steps to pay it.	The
applicant, having succeeded, then has to go to

court to have that equitable remuneration fixed.

it is fixed. It is not paid. Has to go to court

to sue for infringement. That, in our submission,

cannot conceivably be the way the legislation was

intended to operate.

BRENNAN J:  The converse is no less appetizing though, is

it? The converse is no more appetizing because if

one takes it that, upon discovery of the fact of

infringement, there has to be an application to the

court, does it mean that there cannot be any

further exploitation until that amount is fixed and

then the amount is paid? If that is so, it could

sterilize the ordinary commercial operations of a

person who is entitled to the benefit of 20(2).

MR MACAW:  Yes, we would say that, Your Honour, although it

is not necessary for the purposes of this case to

say it because we are here dealing with a case

where there has been no offer or any intention to

make one.

BRENNAN J:  The only point is that 20(2), whichever way one

looks at it, is productive of commercial difficulty

of some sort.

MR MACAW:  Yes. We accept that, Your Honour. We deal then

briefly with the points my learned friend made in

relation to section 7. In paragraph 1 of his

outline he deals with the presumption not to

interfere with vested rights, and we simply say as

to that, that, of course, that gives way to any
clearly manifested intention. In paragraph 2 he

dealt with a possibility of further evidence being

adduced and said that that could be excluded given the issues that were involved at the trial. We

observe that the trial was limited to questions of

liability in the sense that matters of quantum were

put to one side for another day, and once there was

knowledge established of lack of licence for

section 19(3) purposes, it followed, of course,

that any subsequent exploitation would be the

proper subject-matter of an injunction, which of

course would be the principal relief that anybody

would be concerned with, granted the quantities

involved, and damages or an account.

The trial on that account was dealt with on

the footing that there was really no need to delve
into questions of further importation between the

initial importation and the date of the trial.

Nintendo(2) 87 6/10/93

Those matters would be matters to be worked out as

a matter of quantum thereafter.

My learned friend referred to an agreed chronology. It appears at page 616 of the appeal

book under that heading, but it is apparent from

its face that it is not the agreed chronology that

His Honour Mr Justice Sweeney referred to in his

reasons at page 569 because it includes, as one
sees on page 618, amongst other things, dates that

postdate the date of the trial. In fact, what this

document is is a chronology which was produced by

the respondent here for the purpose of the

Full Court appeal. It contains, I should mention,

a mistake at the foot of page 616 because it was

conceded that 11 November 1990 was not the date of

last sale by Centronics of a Spica unit.

There was, as is apparent from His Honour the

trial judge's reference at page 569 at line 20, an

agreed chronology filed in court which established

at least that 1985 was the first year of commercial
exploitation of the present Nintendo PPU chip,

which is another reason why it is apparent that the

document set out at 616 is not that document,

because it makes no such reference. Whatever else

was in the agreed chronology referred to by

His Honour in setting out in some convenient form

the chronology of facts that had been the subject
of evidence for the assistance of His Honour, it
does not alter the fact that the matters in

controversy between the parties, which were

essentially a matter of infringement, meant that it

was not necessary to delve into the question of

further importation at that stage.

So far as section 8 is concerned, my learned friend said that something could be gained from the

use of the language, "a circuit layout shall be

taken to have been commercially exploited", as

opposed to saying, "a circuit layout is
commercially exploited when".	We simply point out

that there are at least three purposes for

establishing what is commercial exploitation. One

is because it forms part of the definition of EL

rights; another is because it may determine when

the protection period defined by section 5 begins;

and a third is to specify acts of infringement.

The language might be thought to be suitable for

application to those three different purposes. At

all events, it can make not a jot of difference

that that language is used. Section 8 of course

refers disjunctively to (a) sales; (b) offer for
sales; or (c) importation.

Next, we submit, that there is no logical basis for distinguishing the case where the same

Nintendo(2) 88 6/10/93

person performs the act of importation and

subsequent sale from the case where a different

person performs those acts, for example, where

there was a manufacture before 1 October and an

importation or sale thereafter. My learned friend

conceded, indeed, on the application for special
leave that that case would be caught on the

construction that the Full Court adopted and for

which he was contending. If it were, of course,
then section 7, in our submission, would be left

without any scope for operation at all.

Even if one is dealing with the same person

involved, for example, in the importation and
subsequent sale, it is apparent from the
legislation that apart from the disjunctive use of

the definition in section 8 that each of the

discrete acts has to be regarded separately. For

example, the limitation of actions provision in

section 28 would plainly fix on any one of those

three acts. It would not be open, for example, to

the importer to say that his sale was permitted as

being - because an action for it was statute barred

on the footing that the importation, which preceded

the sale, fell outside the limitation period.

Finally, in reference to the expression "in respect of" we observe that it is always as a

matter of course to look at its context, and here

the natural meaning is simply to identify the

distinctly stated, and indeed disjunctively

expressed, acts falling within the definition of EL

rights.

May we turn then, finally, to the

constitutional question. There is, in our
submission, a superficial attraction in the

proposition that because EL rights are defined to

include the exclusive right to exploit a circuit

layout, the grant of such rights involves the

acquisition of the exploiter's right to sell. The

exclusive rights, however, have more closely, in

our submission, to be analysed. They include the

right to sell integrated circuits made in

accordance with an original circuit layout.

In substance, accordingly, the exclusive right

conferred is a limited right to prevent or exclude

other people from selling a copy of an original

circuit layout. That is compendiously to state it;

obviously copy is not the right language precisely, but it will do for this purpose, in our submission.

The limits that I have in mind in referring to

it being a limited right include, of course, the

limit imposed by section 20 which provides that it

is not an infringement in certain circumstances,

Nintendo(2) 89 6/10/93

for example, for an innocent acquirer to sell a

circuit layout unless and until he has requisite

knowledge.

The rights, that is to say the EL rights, the

exclusive rights, do not include a right to sell
the alleged infringer's goods and it is stating the
obvious, of course, to say that the alleged

infringer, of course, had no previous right to

exclude others from exploiting, for example, by

sale a copy of someone else's original circuit

layout.

Those observations, we would submit, are of general application. The person who imports goods

manufactured after 1 October 1990, for example, has

his right to sell limited by the ability of the EL

rights owner to enforce his rights to the extent

that he is able. It is similar, we would say, to

other cases where statutes grant intellectual

property rights, such as patents, trade marks,

designs. In each case the rights are identified as

exclusive rights, for example, to exploit the

patent;· exclusive rights to apply the design;

exclusive rights to apply the mark or sell goods to

which it has been applied. One does not think in

those circumstances of that conferral of rights

involving any acquisition of the right to sell that

otherwise a person would have were that exclusive
right not in place.

It makes no difference, in our submission, for the purpose of this analysis whether the goods were

in existence or not at the date the legislation

comes into force, testing it again by reference to

patent, trade mark or design legislation. The

structure, of course, is that rights entitling the

owner to sue do not come into existence until the
grant of the patent or the trade mark or the

design, but date back to the date of application

for the patent or the trade mark or the design. So

plainly enough, what can happen is that somebody

comes into possession of goods or a machine after

the date of application but before rights are
conferred, and to the extent that exclusive rights
are subsequently conferred by registration, the
right of that person to deal in the goods that he
had acquired before that time are diminished.

Again, we would submit that nobody would think

of that kind operation as involving an acquisition
of rights or as involving a law with respect to the

acquisition of property. We point out, of course,

that in the case of a patent, the ability of the

registered proprietor to seek relief by way of

damages is limited to a period after the date upon

which the patent application has become open to

Nintendo(2) 90 6/10/93

public inspection. But his right to obtain an

injunction, subject to ordinary, equitable

discretionary considerations, to prevent the use or

sale of product which has come into existence

before the date of his registration would apply, so

that, for example, somebody who had a machine made

after the date of application but before grant,

could be restrained from using it in a way which

would infringe a process claim on the patent.

Now, we submit that the proper way to regard

that kind of case - and the position of EL rights

is in no different position - is that it is a

matter of adjustment of competing rights and

interests. It involves the conferral of rights.

It does not, in ordinary use of language, in our submission, involve any acquisition of property

from the person who becomes liable to suit, and the

character of the law does not change, in our

submission, on account of the fact that it

recognizes and confers rights in respect of

original circuit layouts that have already been

made.

In our submission, the position is not, in

principle, different either from a law such as -
and one could think of lots of examples no doubt -

section 52 of the Trade Practices Act. It gives a

statutory right to a person to prevent, for

example, somebody who may already have acquired

goods of a particular get-up or character, or

marked in a particular way, which would mean that
the subsequent sale of them would be deceptive or

misleading.

BRENNAN J:  How would you get an infringement of a patent in

respect of goods manufactured prior to the date on

which the patent was open to public inspection?

MR MACAW:  You would have infringement, Your Honour.

BRENNAN J:  How would there be a copying of that which is

novel?

MR MACAW:  There does not have to be a copying, Your Honour,

for patent purposes; it is a monopoly right. If

what is done falls within the scope of the claim to

monopoly then there would be an infringement. We

are postulating, Your Honour, something done after

the date of application and so not depriving the

claimed invention of novelty, but before grant and,

indeed, before the date of open to public

inspection. The OPI date limits the ability to

claim damages and on ordinary principles, no doubt, one's ability to get an account of profits would be

limited by lack of notice; somebody might be

thought not to be liable for an account of profits

Nintendo(2) 91 6/10/93

on ordinary equitable principles if he had not the

faintest idea that what he was doing was an

infringement.

Just reverting to the section 52 example

again: it would make not the faintest difference,

in our submission, whether the goods were owned as

at the time section 52 came into effect or required

thereafter. In no circumstance would one think of
the conferral of rights to prevent somebody selling

their goods in those circumstances as involving an

acquisition of the right to sell the goods or

indeed any other proprietary interest.

So we would say that the case here is one

where, to adopt the language in the Tasmanian Dams

case, Commonwealth v Tasmania, (1984) 156 CLR 1,

for example, of Your Honour the Chief Justice at

page 145 point 2; His Honour Mr Justice Murphy at
page 181 point 8; of Your Honour Mr Justice Brennan

at page 247 point 6 and of Your Honour

Mr Justice Deane at page 283 point 3, that the

diminution in rights, which results from the

conferral of exclusive rights in Australia, I

mention, does not involve the acquisition of any

proprietary interest.

May we refer the Court briefly to His Honour

Justice Aikin's judgment in Trade Practices

Commission v Tooth, (1979) 142 CLR 397, at

page 453. His Honour at point 6 on the page says:

The cases dealing with bankruptcy,

taxation and penalties require some

examination. One general observation may

however be made by way of introduction. Such

subject matters may properly be said to
involve, at least in some instances, the
passing of the legal title and in others both

the legal and the beneficial title to the

Commonwealth, or its officers or to designated

persons, but nonetheless the processes

involved are not such as would ordinarily in

1900 or today be described as the "acquisition

of property" or as falling within its ordinary

meaning.

we would say that a like process of reasoning

applies in this case. At page 454 His Honour dealt
with the matter of taxation and forfeiture of
prohibited imports. At 455 at the top:

The same would be true of fines imposed

by the courts for breaches of Acts of the
Commonwealth Parliament and of various

statutory penalties, including those referred to ins 76 of the Act. Both forfeiture under

Nintendo(2) 92 6/10/93

customs legislation and the imposition of

fines by way of punishment for criminal
offences were well known in 1900 and would not
then or now ordinarily be described as the

"acquisition of property".

We would say that the same applies. His Honour

concluded at the foot of page 457 by saying:

it seems to me to be clear that the so called

exceptions to the general rule as to the operation of s 5l(xxxi) are not in truth exceptions at all, and that it leads to

misconception and misunderstanding to refer to

them as exceptions.

To adopt a language like that adopted by His Honour

Justice Stephen in Tooth's case - I am referring to

the passage beginning at page 413 - it is a matter here merely of reasonable regulation involving the necessary subordination of individual rights in the

public interest. We would say that part of the

context that one must take into account in

following that approach is that the EL rights are

given by way of substitution for copyright rights,

and further that there was in the case of this legislation a significant ability conferred on

persons on notice of the assent to the legislation

to make arrangements for re-export or indemnity or

whatever may be in relation to a product which had

involved copying of circuit layouts.

It is effectively, we would submit, another

way to put that same point in terms similar to

His Honour Justice Stephen's approach to speak as

Your Honour Justice Deane did in the Dam's case at

page 283 and as the Court did also in the Blank

Tapes case, Australian Tape Manufacturers

Association Ltd v Commonwealth of Australia, (1993)

67 ALJR 315 of an adjustment of competing rights

and interests. At page 324, column two, in the

joint judgment of Your Honour the Chief Justice and

Your Honours Justices Brennan, Deane and Gaudron,

at point Fon the page, is this passage:

In a case where an obligation to make a

payment is imposed as genuine taxation, as a

penalty for proscribed conduct, as

compensation for a wrong done or damages for

an injury inflicted, or as a genuine

adjustment of the competing rights, claims or

obligations of persons in a particular

relationship or area of activity, it is

unlikely that there will be any question of an

"acquisition of property" withins 5l(xxxi) of

the Constitution.

Nintendo(2) 93 6/10/93

We would say, if the Court pleases, that this

case for practical purposes might be thought to

present the converse of the point under

consideration in the Blank Tapes case. At page 318

in column 2, consideration is given of

section 135ZZM(l) in these terms:

Dawson and Toohey JJ have demonstrated in

their reasons for judgment, s 135ZZM(l) - I interpolate that it is to be found, Your Honours,

on page 327 in the second column, in the middle of

the column -

is not a law with respect to the acquisition of property. The subsection, which provides

that the making on private premises of a copy

of a sound recording on a blank tape for the

private and domestic use of the person who

makes it is not an infringement of copyright

does not acquire from the copyright owners the

whole or part of the exclusive right conferred

bys 3l(l)(a) of the Act to reproduce the

copyright work in material form. Instead,

s 135ZZM(l) provides that something which was

formerly an infringement of copyright is not

an infringement. To that extent, the Act

reduces the content of the exclusive right

conferred bys 3l(l)(a). It does not,

however, effect an "acquisition" of property

for the purposes of s Sl(xxxi) of the

Constitution.

Reference is then made to what Your Honour the

Chief Justice said in the Dam's case.

The provision which provided that it was not an infringement of copyright to use a blank tape

for private purposes might sensibly be regarded in

the context as giving a right to copy, but it was

not suggested in the case that that practical right

could be said to be carved out or excised from the	that formerly had not existed, was something which
bundle of exclusive rights, including the exclusive
right to copy that the copyright owner had, and by
a parity of reasoning we would say here that one
cannot sensibly regard the conferral of EL rights by virtue of the Circuit Layouts Act and, in particular, in reference to the operation of section 7 as involving that kind of carving out or acquisition.

We make the point in paragraph 13 of the

outline that we made in relation to section 7 which

was to say that there is a real question on the
facts of this case, if they had been explored, if

the point had been taken below, and a real question

Nintendo(2) 94 6/10/93

more generally whether there was, in any event, a

right to sell on the part of Centronics, and we

would submit that it is not a very satisfactory way

for the Court to have to deal with a question like

this, it being raised at this level for the first

time, in circumstances where the point may have

been capable of better definition, or being dealt

with in some more sensible fashion had it been

raised below. We submit further that if there were

an acquisition, in any event, it is not shown to be

on other than just terms. In our submission the

concept of equitable remuneration under

section 20(2) will necessarily produce just terms.

Finally, my learned friend said something

about costs -

DEANE J:	Mr Macaw, are you passing from just terms?
MR MACAW:	Yes, Your Honour.

DEANE J: Is not the Tape case arguably more relevant in

terms of what is said about the relationship

(xxxi).
between the taxation power and subsection copyrights and patents is to take something away

from the person who manufacturers or owns goods in

favour of the person who owns the copyright and the

patent and, that that being so, there is the sort

of ..... between subsection (xvii) and

subsection (xxxi), which the Court recognized as

existing between the taxation power, and

subsection (xxxi)?

MR MACAW:	Yes.
DEANE J:	Do you follow the question I am asking?
MR MACAW:	Yes, I think I do, Your Honour.

DEANE J: In other words, if one treats this Act as covered

by subsection (xvii) and coming within the

legislative notion of copyrights, trade marks and

similar legislation, why is it not of the nature of

the power to make laws with respect to patents and

copyright to do precisely the sort of thing that

this Act does?

MR MACAW: That would be our submission, Your Honour, and

that was really the nub of what we wanted to say in

support of the proposition that there was no

acquisition.

DEANE J: But there is a slight difference between

Justice Aickin's approach which focused on

acquisition, and the approach adopted in the

Tapes case with respect to taxation in that that

Nintendo(2) 95 6/10/93

approach focuses more on realizing that, however

you look at subsection (xxxi)'s guarantee, it can only apply within the context of characterization of laws and, that being so, there is a preliminary

question and there must always be a preliminary
question of reading the legislative powers

together.

MR MACAW:  Yes, Your Honour. I am not sure that that makes

me answer differently from what I put a moment ago.

DEANE J:  I think, on one approach it was implicit in what

you were putting but, again, from my point of view,

I just wanted to make sure it was brought out in

the open.

MR MACAW:  Indeed, Your Honour, that was intended to be comprehended by the way we put it. I was finally

just wanting to mention this question of costs. My

learned friend submits, amongst other things, that
the appellant here should pay the costs of the

application for leave and the appeal in any event.

In our submission, there is no sensible basis

proposed for that. It seems to be based on the

unstated proposition that my learned friend's

client is not in a position financially to support

this kind of legislation. We would say as to that

that it was it, of course, which launched the

appeal to the Full Federal Court after a trial on

the issues of infringement which were thought at

that stage to conclude the matters between the

parties. The way the case was run -

DEANE J: Except it is not quite as simple as that, is it,

in that by virtue of the way things were done at

the leave application, we are fully entitled to

look at the costs of this appeal on the basis that

in a situation where, to use words not offensively,

a small-time operator had won its case in the first

court of appeal, a large corporation was given

leave to bring the matter up here, but on a clearly

spelt out basis that it did so in full realization

that the rights and wrongs of granting leave to

appeal would, as it were, follow through to the

final order of costs in this Court.

MR MACAW:  Indeed, Your Honour, I recall the way in which it

was put from the Bench on that occasion. But the
underlying premise also that this small-time
operator, as Your Honour puts it, does not have,
for example, the backing of UMC, is one that ought
not lightly to be adopted. My learned friend has

not put that, and the respondent here has plainly

felt free to range not only over all the matters

that were dealt with below, but as well to agitate

the constitutional question. One should not

Nintendo(2) 96 6/10/93

assume, in our submission, that we are dealing with

an impoverished small-time operator.

DEANE J:  I am interrupting you far too much, but I will

throw one final thing, and that is, if we do come
to costs in the context where your client succeeds

all the way in this Court, why would it not be

relevant that in the context of section 46 of the

Act you never plainly enunciated a claim that you

owned EL rights which were being infringed before

you instituted proceedings?

MR MACAW: Well, when Your Honour says in the context of

section 46, Your Honour no doubt means bearing in

mind the kinds of matters that are dealt with in

section 46.

DEANE J: Well bearing in mind that you never extended to

the respondent the protection which section 46 was

designed to give it.

MR MACAW:  Your Honour, section 46 only operates where there

has been an unjustified threat; it does not operate

where there has been merely notification of the

existence of rights and in this case the short

answer is that, in any event, as has been pointed

out and conceded, the respondent understood the

letter in the way that we would contend it should

be construed. So that whether or not - - -

DEANE J: Well, that might be so, but that does not answer

the query, does it. I mean, is your proposition

really that a letter which does not mention EL

rights, which was written before this Act even came

into operation, should be understood as giving

rise, or as a communication which gives rise, to

the operation of section 46?

MR MACAW:  It could do, yes. One would not have to mention

the words "EL rights" and the fact in this case,

going back to Your Honour's point about costs, the

fact that EL rights were not in terms identified

made no difference to the understanding of the

respondent about what was complained of, so that if

that were thought to be the reason why a different

cost order should follow, it would have no

foundation, in our submission. It would have been

neither here nor there, for these purposes, whether

the label, EL rights, was adopted in the letter.

What the letter had said plainly enough was that it

was Nintendo's chip and that this has been found to

be a copy of the layout on the chip. If the Court

please, they are the submissions we wish to make.

MASON CJ: Yes, thank you, Mr Macaw.

Nintendo(2) 97 6/10/93

MR NASH:  Would the Court permit me six sentences by way of

reply to the points of contention?

MASON CJ: Yes.

MR NASH:  The first sentence is that the agreed chronology,

or the chronology that appears as an agreed
chronology in the appeal book, was in fact a
chronology prepared by the respondents which was

put before the Full Court and, except in respect of the item at the bottom of page 1 of that chronology

at page 616, was accepted as accurate by the

appellant; why it appears with the term agreed

chronology, we do not know. On page 617 however,

there is - and it is something we should have

raised in our primary address - there appears the

dates of assignments by Ricoh to Nintendo of

rights: on 11 December 1990 there is an assignment

by Ricoh to Nintendo of its Australian EL rights

and copyright in the two CO7 layout; that is the

layout which is described in Mr Justice Sweeney's

judgment as the Nintendo PPU. The only proposition

we wish to make, and it is a short one, is that one

cannot have constructive knowledge under

section 19(3) or constructive awareness under

section 20(1) of something which is not a fact.

The pleadings do admit EL rights in Nintendo

in the Nintendo PPU. Therefore, until lights

started flashing last night, we had assumed that we

were stuck with that as a fact. It is a fact in
relation to the question of where the EL rights
existed; it is not a fact by which we were bound,
in our submission, in relation to the question of

constructive knowledge or constructive awareness.

It is our submission in a nutshell that one cannot

be constructively aware of or constructively know

what does not exist.

BRENNAN J: Are you saying that in truth the appellant was

not the holder of EL rights in the relevant PPU

until 11 December 1990?

MR NASH:  Yes, Your Honour, but that is inconsistent with

the pleadings, unfortunately.

BRENNAN J: What was the basis on which the litigation was

conducted?

MR NASH:  The litigation was conducted on the basis of the

pleadings, and it is for that reason, Your Honour,

that until now that issue has not been specifically

raised because the litigation has been conducted

all along on the basis of an admission of EL rights

in Nintendo. But we say that that does not bind us
in relation to inferences which the Court says the

individual should have drawn, that there is a

Nintendo(2) 98 6/10/93

difference between pleading Nintendo had the EL

rights and saying because of that pleading, one is
fixed for the purpose of drawing inferences as to

Centronics' state of mind with that pleading.

BRENNAN J: That means that the state of mind has never been

an issue in the courts below.

MR NASH:  The state of mind was in issue, Your Honour,

before the Federal Court, it was in issue before

Mr Justice Sweeney. This chronology was before the

Full Court; it was not before Mr Justice Sweeney. We say it is relevant, and we say it is only relevant for the present purposes because of the way the pleadings have been drawn and the

litigation has been conducted. It is relevant only

as to the question of constructive knowledge.

BRENNAN J: Is this fact that Nintendo acquired the relevant

EL rights on 11 December a fact which does not

appear in the evidence before the trial judge but

was asserted in this document which was produced

only for the Full Court?

MR NASH:  Yes, Your Honour. The situation is we were given

copies of the assignments and that is how it
appears, and this was not disputed before the

Full Court. If the Court pleases, they are the

submissions by way of reply.

MASON CJ:  Mr Macaw, do you wish to deal with that last

submission made by Mr Nash?

MR MACAW:  Only to say, Your Honour, that something that he

has brought into existence for the purpose of the

appeal can hardly undo the way in which the case

was dealt with at the trial. The case was dealt
with at the trial on the footing my learned friend

has conceded and on the basis of the pleadings and

it is not now open for my learned friend to rely

upon something that he says was not in evidence

before the trial judge and was not part of the way

in which the case was dealt with then.

MASON CJ:  But what use was made in the Full Court of this

particular item in the document?

MR MACAW:	None.
MASON CJ:	None at all?
MR MACAW:	No.
MASON CJ:	By either side?
MR MACAW:	No.

Nintendo(2) 99 6/10/93

BRENNAN J: That means you were never in a position to give

a licence before the date of the commencement of

the proceedings.

MR MACAW:  I think what the evidence did disclose in

Mr Takahashi's material was that Ricoh had, in

effect, created the layout under a contract for

Nintendo. The evidence probably did disclose that

it was always intended that Nintendo should own the

layout.

BRENNAN J:  It might have been intended but I mean the fact

is you had no right to grant a licence prior to the

commencement of the proceedings.

MR MACAW:  I am not sure, Your Honour, now whether the

evidence went so far as to disclose, for example,

that Nintendo was the equitable owner of the right

and was in a position to compel the grant of a

licence, but it simply was not a matter that was,

as my learned friend concedes, an issue.

DEANE J: Where is that letter on which you place such

reliance?

MR MACAW:	Where is it to be found, Your Honour?
DEANE J:	I was just looking for the letter in which you

said you owned the thing.

BRENNAN J:	The letter of 31 August 1990.
MR MACAW:	It appears at page 794, Your Honour.
DEANE J:	What, does one assume that that carefully did not

contain an allegation that you were the owner?

MR MACAW:  It, on its face, does not mention ownership, no,

Your Honour.

DEANE J: But, it would certainly convey an assertion that

you would have owned it?

MR MACAW:  By its reference to "the Nintendo Entertainment

System" would convey that, I think, yes,

Your Honour.

DEANE J:	And the threats to start legal proceedings.
MR MACAW:	Yes, the threats, of course, relate immediately

to the cartridges and as well as the entertainment

units.

DEANE J:  Of course, if you had spelt out a claim that you

were the owner, it would have certainly given rise

to section 46 considerations. Indeed, if you had

given a section 46 notice without spelling out - or

Nintendo(2) 100 6/10/93

a notice of the sort referred to in section 46 -

the fact that you were not the legal owner, it

would have been misleading, would it not?

MR MACAW:	Your Honour, somebody who is the equitable owner and in a position to compel the legal owner to join
in proceedings would not, on account of not being
the legal owner, necessarily fall foul of
section 46, in our submission.  I am afraid I am
not in a position, because the point has only just
been raised, to call to mind what the evidence was
which might have led one sensibly to infer that,
whatever the legal ownership was, Nintendo was the
equitable owner.
DEANE J:	The assignment might even state that your client

was the equitable owner.

MR MACAW:  Yes. My learned friend says, and I am afraid

that I do not have an independent recollection of

this, that the assignment itself may have, in its

terms, operated retrospectively to a date where it

was assumed that Nintendo had become equitable

owner. Certainly, I think, that the evidence went

so far as to say that the layout was created for,

and on the instructions of, Nintendo. Yes, my

learned friend accepts that the evidence was at

least clear about that, that it was made for

Nintendo. If the Court pleases.

MASON CJ:  The Court will consider its decision in this

matter.

AT 11.25 AM THE MATTER WAS ADJOURNED SINE DIE

Nintendo(2) 101 6/10/93