Nintendo Company Ltd v Centronics Systems Pty Ltd

[1993] HCATrans 289

~ \

.

• 'I

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

Nintendo(2) 1 5/10/93

GAUDRON J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 5 OCTOBER 1993, AT 10.16 AM

Copyright in the High Court of Australia

MR R.C. MACAW, QC: If the Court pleases, I appear with my learned friend, MR B.N. CAINE, for the appellant.

(instructed by Purves Clarke Richards)

MR P.G. NASH, QC: If the Court pleases, I appear with my

learned friend, MR P.O. FRECKLETON, for the

respondent. (instructed by Xerri Rubinstein & Co)

MR O.J. ROSE, QC:  If the Court pleases, I appear with my

learned friend, MR G.R. KENNETT, for the

Commonwealth Attorney-General intervening on the

constitutional issues in support of the appellant.

(instructed· by Australian Government Solicitor)

MASON CJ: Yes, Mr Macaw.

MR MACAW:  May I hand up copies of our outline of argument

in support of the appeal.	I have, I am afraid,
seven copies only of this.	We have mistaken

perhaps the number of copies that might be

required. We can hand up eight if that would help.

MASON CJ:  If you could hand up an additional copy, then if

any further copies are required, the Court can have

those copies made.

MR MACAW:  May I mention at the outset that there is one

additional ground that we would seek to add to the

notice of appeal, the ground that in effect matches

a ground that is raised in the matters of

contention but is properly, we think, a matter for
appeal as opposed to a matter for contention. May

we hand to the Court a copy of the notice of appeal

with the underlined amended ground contained in

paragraph 6. I see that the document has been

stapled in a curious way so that the page that

should be the last page in fact is the second-last

page.	Your Honours will see that the proposed
amended ground in paragraph 6 is on the last page

of the document. What is sought to be raised by it

is the propriety of the learned trial judge's grant of an injunction against further importation by the respondents.

MASON CJ:  We should hear what the respondent has to say

about the application for leave to amend the notice

of appeal.

MR NASH:  We have no objection, if the Court pleases.

TOOHEY J: Is this notice in substitution for the amended

notice of appeal, Mr Macaw?

MR MACAW:  Yes, it is, Your Honour.

Nintendo(2) 2 5/10/93

TOOHEY J: It is just that there are substantial differences

between the two documents.

MR MACAW:	I think not, Your Honour.
TOOHEY J:	I beg your pardon.
MR MACAW:	Your Honour may have in mind the respondent's notice of appeal in the Full Federal Court.

TOOHEY J: Thank you.

MASON CJ: Leave to amend the notice of appeal accordingly

is granted, Mr Macaw.

MR MACAW:  Thank you, Your Honour. If the Court pleases,

the main point of the appeal concerns section 7 of
the Circuit Layouts Act, not only its construction,

but first of all whether it was appropriate for the

Full Federal Court to rely upon it as a ground for

allowing the respondent's appeal below.

At page 813 of the appeal book at line 16,

Justices Beaumont and Burchett said this:

As has been noted, under s.7, an action

does not lie "in respect of" any act done

before 1 October 1990. Here, the act of

importation for sale was before

1 October 1990. But, is it proper to construe

s.7 as applicable to exclude ~n action based

on the sale itself, even if that sale takes

place after 1 October 1990?

In our opinion. s.7 should be so

construed.

They went on to give a number of reasons for that

conclusion. But the conclusion itself involves

construing section 7 so that, of its own force, it

excludes an action for infringement for

exploitation by way of sale, after the date of

commencement of the act, of goods imported before

that date of commencement.

If one looks at section 7 itself; it is

perfectly plain, we would submit, from its own

terms that the limitation imposed by the language

from the word "but":

but an action does not lie under Part III in

respect of any act done before that

commencement in relation to the layout, a copy

of the layout, of an integrated circuit made

in accordance with the layout -

Nintendo(2) 3 5/10/93

is apt to bar the remedy but not to extinguish or
otherwise to interfere with the right which, by
this very section, is conferred in respect of

circuit layouts made before the commencement of the

Act.

The language, in any event "an action does not

lie" is language reminiscent of limitation of

actions language which has been held in many cases,

and in particular in Commonwealth v Verwayen at the

passages mentioned in the outline in paragraph 1,

as doing no more than barring the remedy, rather

than extinguishing any right, and accordingly
having the effect that it provides, in those

circumstances, a defence to the defendant which

must be pleaded.

We take the Court briefly to the passage first

at page 405 in the judgment of Your Honour the

Chief Justice. Section 5(6) of the Act is set out

at the foot of page 404:

"No action for damages for .

negligence ..... where the damages claimed by

the plaintiff consist of or include damages in

respect of personal injuries to any person,

shall be brought after the expiration of three

years after the cause of action accrued."

A little way down the page:

That Act was proclaimed to commence on

11 May 1983.

Although the terms of s 5(6) are such

that it is susceptible of being read as going

to the existence of the jurisdiction of a

court to hear and determine an action of the

kind described, limitation provisions

similarly expressed have not been held to

limit the jurisdiction of courts. Instead,

they have been held to bar the remedy but not

the right and thus create a defence to the

action which must be pleaded.

Your Honour Justice Dawson, at the passage

beginning at the foot of 456 and going over to 457,

cited a passage from the judgment of Lord Griffiths

in Ketteman v Hansel Properties which explains why

that is so, in this language. At the top of 457:

"I have never in my experience at the Bar or

on the Bench heard of an application to amend

to plead a limitation defence during the

course of the final speeches. Such an

application would, in my view, inevitably have

been rejected as far too late. A defence of

Nintendo(2) 4 5/10/93

limitation permits a defendant to raise a

procedural bar which prevents the plaintiff

from pursuing the action against him. It has

nothing to do with the merits of the claim

which may all lie with the plaintiff; but as a

matter of public policy Parliament has

provided that a defendant should have the

opportunity to avoid meeting a stale claim.

The choice lies with the defendant and if he

wishes to avail himself of the statutory

defence it must be pleaded. A defendant does

not invariably wish to rely on a defence of

limitation and may prefer to contest the issue

on the merits ..... If both parties on this

assumption prepare their cases to contest the

factual and legal issues arising in the

dispute and they are litigated to the point of

judgment, the issues will by this time have

been fully investigated and a plea of

limitation no longer serves its purpose as a

procedural bar."

We would submit that that is exactly what happened in this case. There were good reasons why

the respondent would choose not to take the

limitation point because its principal concern, as

was apparent in the way the case was conducted

below, was to contend that the chip within its

unit, which it was marketing, was not an infringing

chip. It was not a chip made in accordance with

the eligible layout in which rights resided and, of
course, that was a matter of principal concern to
it because its business was the importation and

sale of these chips. It constituted a significant
part of that business, and plainly enough its

principal concern would have been to ensure that

for the future it would go on doing what it had

done in the past.

MASON CJ: What were the acts of infringement alleged?
MR MACAW:	The exploitation of the layout, Your Honour.

MASON CJ: Yes, but that brings you to section 8(1).

MR MACAW:	Yes.
MASON CJ:	Now, what were the acts within section 8(1) that

were alleged to constitute infringement?

MR MACAW:  There were particulars given at an early stage

which were not updated, and I think they merely

recited, Your Honour, the various acts which do

fall within commercial exploitation within

section 8.

MASON CJ: What, categories (a), (b) and (c)?

Nintendo(2) 5/10/93

MR MACAW:  Yes. If Your Honour looks at the amended

statement of claim, at paragraph 28.

MASON CJ: Page - - -?

MR MACAW:  At page 15 of the appeal book:

Between a date unknown to the Applicant

and the date of issue of the Application herein, the First Respondent herein has, without the licence of the Applicant,

commercially exploited the PPU layout in

Australia.

And then in the particulars it refers to

importation, sale, and letting for hire,

distribution by way of trade and offering or

exposure for sale or hire, an importation for the

purpose of hire, and so on. So, it does not limit

the acts that fall within commercial exploitation

in section 8 but is apt merely to try to cover the

whole of that field.

MASON CJ: Section 7 would provide a defence, then, to the

acts of importation in so far as they are

particularized in paragraph 28?

MR MACAW:  Yes, Your Honour. So the question was whether,

as the Full Court thought, one should treat as one

act, in effect, an importation for the purpose of

sale and the subsequent sale, as opposed to

treating them, as section 8 would appear to

require, as separate acts. However, our first

proposition, before we get to the merits of the

construction that was adopted, which we in any

event say was wrong, was that it was not a point

that - - -

MASON CJ:

The question is whether or not an act of

infringement done after the commencement of

Part III can be categorized as "in re~pect of an

act of importation for sale" done before the

commencement of that Part?

MR MACAW:  Yes, Your Honour. I will come to the detail of

the reasoning shortly, but of course section 8

identifies three separate matters that fall within

commercial exploitation and can be regarded as

being acts for the purpose of section 7.

Section 17 defines what is the nature of EL rights

and includes the right:

to copy the layout, .....

to make an integrated circuit in accordance

with the layout .....

Nintendo(2) 6 5/10/93

to exploit the layout commercially -

and that latter, of course, takes one to section 8.

If I could come, however, to that question of

construction in a moment, because our first
contention, of course, is that it was simply
inappropriate for the Full Court to take the point
for themselves; it was a matter to be taken by the

respondent if it was to be taken at all, not only

because the language matches th~t of limitations

and actions language, but because by its own terms

it is apparent from section 7 that all it was doing

was barring ·a remedy and not a right and, in the

absence of the point having been pleaded, it was

simply wrong, we would submit, for the court to

take the point.

A further basis for saying that the court

ought not to have taken the point when it was not

relied upon at the trial is dealt with in

paragraph 2 and the footing for that submission is

that it may have been open to Nintendo to produce

evidence which could, for practical purposes, have

met the point - not the question of construction -

but met the point in the sense that it would become

academic. It is apparent, we will submit, from the

evidence already in the appeal book, some of which

but not all of which, I think, formed part of the

evidence before the trial judge, that it was by no

means a possibility to be excluded that the

applicant could show either further acts of
importation or, certainly, intended further acts of

importation.

We will take the Court briefly to the passages

at page 569 of the appeal book first. At the foot

of that page in His Honour the trial judge's
reasons, at line 23, he records: It is common ground between the parties

that UMC are the manufacturers of the UMC

chip -

UMC was a Taiwan-based manufacturer.

It is also common ground that Centronics was

an importer and seller in Australia of Spica

entertainment units being computer game sets

manufactured by Keyman Electronics Co Ltd

("Keyman") in Taiwan which incorporated the

UMC chip.

So it was in the nature of Centronics business, as

it was common ground so recorded, that it imported

and sold these goods. At page 805, there is set

out, in the judgment of Justices Beaumont and

Nintendo(2) 7 5/10/93

Burchett, some evidence of Mr Latin, who was the

principal officer of Centronics, and who gave

evidence, as Your Honours will see, at line 23 and

following, that there was an order placed:

in mid-November, 1989, first for 2000, but

ultimately for 15000 units -

he said - this was in-chief - there have not been

any further orders placed by Centronics for Spica

been stolen and, of the ones that were sold, about

systems. He said that there were about 100 left.

200 had been sold since 1 October 1990.

At page 796 will be found some paragraphs from

the affidavit of Mr Latin which had been sworn in

opposition to an application for interlocutory

injunctive relief. If I could take the Court to

paragraph 23 and following:

If there were to be an order prevent[ing]

Centronics from importing and selling its

games console it is doubtful whether

Centronics could remain in business. The

whole Spica system would have to come off the

market. The business of Centronics is

importing televisions and importing the Spica

Entertainment Unit. Approximately forty per

cent of the business is in the televisions and

sixty per cent in the Spica Units and

associated games cartridges which are sold

separately.

24. At present about $85,000.00 worth of

games cartridges stock are in storage in

Melbourne. It has all been paid for and it is

not possible to return any of it to Taiwan.

Further, Centronics has just concluded a

contract to sell one thousand units per year
to NAPF Electronics in Sydney.	By that same

contract, Centronics will supply $100,000.00

worth of Italian Formenti televisions of mixed

size every quarter. If the Spica Units cannot

be supplied the whole contract will be lost. It is worth $1,700,000.00 to Centronics over

the next four years.

25. Further Centronics has a contract for two

hundred Spica Units per quarter to a Melbourne
based partnership Zecha. This is worth

$28,000.00 - $30,000.00 a quarter. At present

Centronics is waiting on a contract in

Adelaide.

It is perfectly apparent that the supplies on hand, that is to say the 1500 initially imported, would

Nintendo(2) 5/10/93

not be adequate to meet the demands under these

contracts and that further importations would be

required. The evidence of course in-chief was that

there had been no further importations, but it was not a matter that warranted or demanded testing in

light of the fact that the point was not taken; it

was common ground that it was an importer. The

only real question at the trial was the question of

infringement and the other defences raised of

sections 20 and 23. Our submission is that the

possibility cannot be excluded that evidence

showing an actual further importation may have been

adduced. Certainly it is apparent that evidence of

intended further importation would have been

available.

We mention, Your Honours, that the status of these paragraphs of this affidavit is not

altogether clear. The affidavit, I think, was not

tendered as an exhibit in the proceedings.

Mr Latin was taken to paragraphs 1 to 22 in his

oral evidence and, in effect, adopted those

paragraphs, and was then asked questions further

about them. He was not taken to paragraphs 23 and

following because they related to the earlier

question of resistance of interlocutory injunctive

relief. So it may not be true to say that these

paragraphs were evidence before His Honour the

trial judge, but at the very least they demonstrate
that evidence of that kind would readily have been

capable of being adduced.

MASON CJ:	Was this point put to the Full Court?
MR MACAW:	What was put to the Full Court, Your Honour, was

that it was inappropriate for the Full Court to

take the point itself. The point only arose very

late in the appeal. When it seemed likely that at least Justices Beaumont and Burchett felt that the

point was an arguable one, we submitted that in the

absence of the point having been taken below, and

in the absence of it being relied upon by

Centronics in the appeal, it ought not be adopted

by the Full Court.

The question arose in those circumstances

whether it involved merely a question of

construction of the statute or whether there was

some prospect of evidence being led. We were given

leave because the matter came as something of a

surprise at the end of the appeal to put in written

submissions if we chose. We did put in written

submissions in which we made the point, but without

reference to these paragraphs of the affidavit,

that if the point had been raised below, then it

may have been open to us to provide evidence of

actual or intended further importation. It was

Nintendo(2) 9 5/10/93

frankly only when we came to prepare for the
application for special leave that the terms of
these paragraphs stood out, and they provide a very

much stronger basis for making that submission than

was provided to the Full Court when those written

submissions were put in.

The principles no doubt are well known to the

Court. There is a useful collection of the cases in the Banque Commerciale case. In particular at

page 284, there is a recitation of the most

relevant cases. In the judgment of Your Honour the

Chief Justice and Justice Gaudron - - -

MASON CJ:  Mr Macaw, I think it would be desirable for you

to indicate the reference to the authorities and
the page numbers because the transcript that is

being taken of the argument is much more easily

prepared if, in fact, you give the reference.

MR MACAW:  I am sorry, Your Honour, yes, of course. reference I earlier made to Commonwealth v Verwayen The

is (1990) 170 CLR 394, and the passages I referred

to were at pages 405 and 456 to 457. The reference

to Banque Commerciale v Akhil Holdings Ltd is

(1990) 169 CLR 279, and the passage I wish to draw

the Court's attention to is at page 284.

It is necessary to note the decision in Water

Board v Moustakas. In that case an appellant

was precluded from making a case that had not

been made at trial, although the elements of

that case had been pleaded and particularized.

The decision in that case was rested on the rule that, unless all facts had been

determined beyond controversy or the question

is one of construction or law and it is

expedient and in the interests of justice to

entertain the point, a party may not take a

point for the first time on appeal.

There is reference to Sutter v Gundowda which is

the case which adopts the language of whether, by

any possibility, the other party may have been able

to adduce evidence that covered the point.

Some aspects of that rule appear to derive

from public policy considerations directed to

ensuring the finality of litigation. On the

other hand, some aspects of the rule may have

their genesis in estoppel by election in the
conduct of litigation, although, if so, the

relevant consideration is not that the other

party is put in a worst position but that he

or she may have been so placed. See, for

example, Moustakas, where the refusal to allow

the appellant to raise a new case was rested

Nintendo(2) 10 5/10/93

on "the possibility that the (other party]

may, if it had been raised below, have wished

to call evidence in response to it.

So, for both those reasons, it is our

submission that the Full Court erred in taking this

point for itself. In any event, in our submission,

the construction placed upon section 7 was wrong.

DEANE J:  Mr Macaw, could I just take you back for a moment?

Paragraphs 24 and 25 of Mr Latin's affidavit, which

is set out in the joint judgment of

Justices Burchett and Beaumont, do I correctly

understand what you said, that they were not in

evidence before the trial judge?

MR MACAW:  I think that is right, Your Honour. I think all

that happened was that this affidavit was not

tended. The first 22 paragraphs, which dealt with

matters that were thought still to be in issue and

not merely interlocutory balance of

convenience - - -

DEANE J: Was examined or cross-examined about?

MR MACAW:  Mr Latin was asked about paragraphs 1 to 22. He

adopted them.	He was then asked to expand upon
them in-chief.	He was not asked to adopt

paragraphs 23 or following, and there was no

cross-examination on them.

DEANE J: But if he adopted them, something must have been

tendered to get on the record to show what he had

adopted.

MR MACAW: Well, I do not think there was any formal tender,

Your Honour. There ought to have been, but - - -

DEANE J: So, really, they are two points are there? One is

there was an oversight in tendering something for

the purpose of completing the record and making

Mr Latin's evidence comprehensive, and the second

is assuming we should treat something as tendered

whether, once you treat the whole affidavit or

simply the paragraphs that have been referred to?

MR MACAW:	Yes.
TOOHEY J:	And yet, those paragraphs along with other

paragraphs seem to be part of what the two judges

describe as the relevant evidence at first instance.

MR MACAW:  Yes they do.

TOOHEY J: If you look at page 783.

Nintendo(2)	11	5/10/93
MR MACAW:	They do so describe it Your Honour.	They also

describe the evidence of Mr Bedford at page 783.

When they talk about Nintendo's evidence, they say:

For present purposes, the main evidence

relied upon by Nintendo in its case in chief

was given by Raoul Dylan Bedford in his

affidavit.

Likewise, that was tendered and nor, in that case,

was it relied upon at all. Now there seemed to

have been some misapprehension on the part of the

Full Court about what was in evidence and I think

it would be· fair to say that if the error that

Your Honour Justice Deane refers to had been

corrected it may have been appropriately corrected

merely by tendering paragraphs 1 to 22. So that,

we would say, there is a basis in the evidence for
saying that further importation was likely.

Alternatively, if the point had been taken below

and that point had become relevant it was perfectly

plain that we could have adduced that evidence

easily. It would simply have been a question .of

asking Mr Latin, as well, to adopt those

paragraphs.

BRENNAN J: Is there anything in the Federal Court Rules

which deals with the availability of affidavits

filed in support of an application on the hearing

of an application?

MR MACAW:  I think not, Your Honour. I think what

ordinarily happens as a matter of practice is that

where affidavits have been filed and are intended

to be relied upon, then they are either exhibited

or at least the relevant paragraphs are set out in

some form so that they are incorporated into the

evidence.

BRENNAN J:  I can understand that might be the usual

practice.

MR MACAW:  Yes.

BRENNAN J: It might be followed, at least in Melbourne, but

I was just wondering if there is any statutory

provision - - -?

MR MACAW: Well, I am not aware of it, Your Honour, but I

will see that it is looked at, if I may? I had

omitted, mistakenly, to take the Court also to the

reference at page 550 of the appeal book. This is

a not very legible letter from Mr Reno Xerri who -

although this letter is marked at the bottom

"Fluoro Graphics" - was also a director of

Centronics, and it appears to be in reference to

the subject "Importation". It is a letter to Denny

Nintendo(2) 12 5/10/93

Chen, who is the Taiwan supplier of the unit to him:

Please confirm TT for converters and delivery

date. MOST URGENT!!!! We must deliver 500

units immediately with a backorder of 500

units. This client has signed a 4 year

contract to purchase a minimum of 1500 units

per year plus cartridges. We must service

this customer because he is the beginning of

business booming for SPICA. Danny please

advise also about transport arrangements for

converters.

Danny I mentioned to you yesterday that

Nintendo have filed an interlocutory

injunction and summons to sue.

Dates this letter at December 1990 and this does

provide actual evidence of the intention to import

more units than the initial batch of 1500 units.

If I could take the Court then to the points

we make about the proper construction of section 7,

the reference to an action not lying:

under Part III in respect of any act done

before that commencement in relation to the

layout -

is, in our submission, clearly a reference to the

distinct acts that fall within the EL rights

defined by sections 17 and 8. The acts of

commercial exploitation specified in section 8 are

distinct acts, and there is no reason to suppose

that a reference to "an act" in section 7 was

intended to run together any two or more of those

distinct acts. The legislation makes reference to

doing an act in relation to an eligible layout in a

number of other places. For example, in section 9

the exclusive right is so defined. That is:

to do an act in relation to an eligible

layout -

In section 25(1), again there is a reference to "an

act done by the Commonwealth". This is where a

licence is available for purposes of defence or

security. It talks in subsection (2) about:

An authorisation may be given before or

after the acts in respect of which it is given

have been done.

In section 45, which provides for assignments and licences of EL rights, subsection (2) provides

that:

Nintendo(2) 13 5/10/93

An assignment of EL rights may be limited in any way, including any one or more of the

following ways:

(a) so as to apply to one or more of the

classes of acts that, by virtue of this Act,

the owner of the EL rights has the exclusive

right to do -

In section 46(1), as one might expect, the provision in relation to "Groundl.ess threats of

legal proceedings", turns upon the acts in respect

of which th~ action or proceeding was threatened.

We submit that to construe section 7 in that
natural sense is consistent with the purpose of the
legislation. It was a purpose to provide better

protection for the makers of layouts for integrated

circuits. That was a purpose tempered by the

desire, as is apparent from the second reading

speech in particular, to ensure that some

reasonable level of availability existed for

exploiters, including importers of chips into

Australia.

But our submission is that the legislation

achieves that balance by providing protection to
the maker, amongst other things by means of
section 7, but by providing a number of defences
that do provide appropriate protection for

importers and recognition of their ability to make

use of such chips.

BRENNAN J:  Mr Macaw, I do not know that it makes any

difference to the result of your ultimate argument,

but if one looks at the language of section 7 and the phrase "an action does not lie", is there any

real analogy to be drawn with the statutes of

limitation that affect common law causes of action,

or should one read section 7 in the context of this	statute, so as to see that the statutory cause of
action which is created is limited by the language
of section 7?

MR MACAW:  It is not a statutory cause of action created by

section 7 itself - - -

BRENNAN J:	No, not by section 7.
MR MACAW:	EL rights are conferred by section 7, but then it

says, "an action does not lie" .

BRENNAN J:  Yes. My question to you though is: the causes

of action that are created by the Act, including

for example section 19, why are those causes of

action not limited by section 7 itself, so there is

no question of a cause of action lying in respect

of that which section 7 relates to?

Nintendo(2) 14 5/10/93

MR MACAW:  Your Honour, in a practical sense, of course, it

does confer a limitation on the ability of an EL

rights owner to enforce those rights, because the

section on the one hand confers the right.

BRENNAN J:  As I say, it may not matter very much to the ultimate argument. I just do not quite see why in

a statutory context, where the same statute both

creates the cause of action and limits its

enforceability, one does not construe the two

provisions together to determine what the extent of

the grant of a cause of action is.

MR MACAW:	Yes.
DAWSON J:	And if you look at section 28 which does provide for limitations it is differently expressed.
MR MACAW:	"An action shall not be brought ... " yes, we

accept that, Your Honour. The language is not

identical and the legislation has turned

specifically to a limitation of actions point.	So
that our proposition that one can only rely upon
this if pleaded because of the analogy with limitations language is perhaps not as strong as

the proposition that the section in its own terms,

by conferring the rights, but then limiting their

enforcement, requires that the point should be

taken.

In the context of the submissions we wish to

make about the purpose of the legislation, may we

first direct the Court's attention to the title:

An Act to provide for the protection of certain layouts for integrated circuits, and for related purposes.

There is an outline which forms part of the

explanatory memorandum to the Circuit Layouts

Bill 1988 which I hope the Court has amongst the

materials identified in our list. It is set out as

a foreword to the notes on the clauses. If it did

not find its way into the materials, I can indicate

that it is available amongst other places in the

Lahore Copyright Service right at the end under,

"Bills, other legislation". However, there is a

brief passage only that I can perhaps refer to

without requiring the Court to have a copy for the

moment:

This Bill provides a new copyright-style of intellectual property in original layouts for

integrated circuits. The Bill is consistent

with the main elements of a draft Treaty on

the topic developed by the World Intellectual

Nintendo(2) 15 5/10/93

Property Organisation, and with the laws of our major trading partners.

A layout is the plan which shows the three-

dimensional location of the electronic

components of an integrated circuit. Layouts

are usually highly complex. The intellectual

effort involved in creating an original layout

can be both considerable and valuable.

Then it goes to indicate what the nature of the

rights is.

It is, of course, protection conferred only for original circuit layouts, as appears from the

definition in section 5 of "eligible layout". The

requirement of originality is dealt with further in

section 11, so that a creative contribution by the

maker is required. The second reading speech which

is set out, I think, in the reasons of the

Full Court, because they refer to Avel's case which

had set out, in part at least, the second reading

speech. That second reading speech was included

amongst our list.

Can I take the Court to page 2397 of that

speech under the heading Copyright-Designs

Interaction, and this formed the last section of

the second reading speech concerning the Copyright Amendment Bill. Other provisions of the Copyright

Act were extensively amended by that legislation, but this is the only relevant section for present purposes:

The Bill will update the protection given

to artistic works that are either registered

as designs under the Designs Act 1906 or are
industrially applied without registration.

Manufacturers, artists and designers of a

diverse range of articles experience problems

with the excessive copyright protection of
'industrial' products by the Copyright Act,
the uncertain operation of the legislation and

its often inequitable effects. The

legislation has also attracted criticism from
both legal commentators and the courts.

The reference to "excessive copyright protection"
is no doubt a reference to the period of protection

conferred by copyright law, being 50 years plus the

life of the author.

Last year the Government published a

discussion paper that canvassed various

options for reform, and received submissions

from copyright owners and industry.	The
preferred solution was to remove the

Nintendo(2) 16 5/10/93

possibility of copyright protection for three

dimensional industrial products. It is

considered that these products should be

protected only under the designs legislation

or other appropriate law. The Designs Law

Review Committee report on the law relating to

designs in 1973 -

I interpolate that is the Franki report -

also reached this conclusion. The amendments

introduced by the Bill will amend the
Copyright Act accordingly.

In addition, the so-called 'non-expert

defence' in the Copyright Act is to be
repealed. It provides a qualified defence to
infringement of the copyright owner's right to

reproduce an artistic work in a different

dimension. It has not operated as intended

and has been the subject of much adverse

judicial comment. These changes will not

affect copyright protection for artistic works

reproduced on the surface of an article, such

as a T-shirt, or for buildings or works of

artistic craftsmanship for which a design has

not been registered. Thus, protection by

copyright will continue for these essentially

artistic creations, for example, tapestry or

certain craftwork. As well, the changes will

not affect designs for articles excluded by

regulation from registration under the Designs

Act.

He goes on to deal with the computer chips, the Circuit Layouts Bill. He says it:

protects computer chip layouts from unfair

copying.

It is the second part of the Government's
copyright reform package.	The Australian

computer chip industry is small but important

and growing. Australian chips, for example,

make bionic ears and heart pacemakers work,

detect messages from space and from the ocean

and convert sunlight to power. Importantly,

our specialised products have found valuable

markets overseas.

A consequence of the copyright-design

reforms already mentioned is that copyright

will be of very limited use to chip designers

to protect their products against piracy.	The
Designs Act may apply to some parts of chip

layouts but, like copyright, designs monopoly

protection is not suitable for chip layouts

Nintendo(2) 17 5/10/93

because it is excessive. Chips are essential

products in modern society. Innovators need

to be able to stop unauthorised copying in

order to protect their investment. However,

that protection should not be at the expense

of proper availability of the product for use

in machinery and consumer appliances.

So we have got the tension there between the need

to protect the innovator on the one hand, and the
desirability of available products on the other.

The Circuit Layouts Bill will repeal

Copyright Act

inappropriate and uncertain and for original chip layouts along the lines of

the laws passed recently in the United States,

Japan, Scandinavia and European Community

countries. The Bill is also consistent with

the major elements of the World Intellectual Property Organisations's draft Treaty on the Protection of Intellectual Property in respect

of Integrated Circuits. I expect this draft

Treaty to be finalised at a diplomatic

conference in Washington in May 1989. It is

highly desirable that this Bill be law before

that conference to ensure Australia's

negotiating position is equal to that of the

other countries which already have chip

protection laws.

In fact, that treaty was done, I think, but

Australia is still not a signatory to it.

I shall not read the whole of the speech, but

if I could pick it up again at the foot of

page 2398, bottom of the first column:

Finally, I note that the proposal to

introduce this legislation has been the

subject of consultation with industry since

1985. A detailed outline of the legislation

was circulated to over 40 companies and

industry organisations in July this year. If
Australia. is to obtain protection for its
designs in the vital United States and
European export markets - either under the

proposed treaty or as a result of reciprocal
arrangements - Australia must have a law, such
as this Bill, in place as soon as possible.

The Australian computer chip industry is

recognised by this Government as an important, innovative and growing one. The Government is

committed to fostering its development.	The
Circuit Layouts Bill is a significant and

timely demonstration of this commitment and

Australian companies. Both innovative

Nintendo(2) 18 5/10/93

producers and users of computer chip

technology will benefit from legal certainty

provided by this special legislation.

If I could, finally, take the Court to section 46 which effected the amendments there

Copyright Act Designs Act, "artistic work" in the Copyright Act was amended so as not to include a circuit layout within the meaning of the Circuits Layout Act, and likewise, the Designs Act was amended to exclude integrated

described to the and the

circuits in the definition of "article" or a mask

used to make such a circuit.

Now, there are provisions in this legislation

which provide defences, both to infringement or to

the full range of remedies available to the owner

of EL rights. The Court may be aware that

section 20 deals with innocent commercial
exploitation. We will come to the detail of the

section subsequently, but it provides protection

for an innocent acquirer of an unauthorized

integrated circuit, and deals with the case where

he subsequently becomes aware that the circuit was

unauthorized.

Section 21 provides there is no infringement

by making a copy of the layout for private use.

Section 22 deals with copying for research or teaching. Section 23 allows the layout to be used,

in practical terms, for reverse engineering, that

is to say it is permissible to make a copy of a
layout, an eligible layout, in order to determine

exactly what the function of the circuit is, and if one makes a copy, determines the function and makes

a layout of one's own, provided the layout one

makes of one's own is, in truth, an original

layout, the fact that it reproduces the

functionality of the eligible layout does not

matter. So, this provides an unusual measure,
perhaps, of protection - unusual in the context, at

least, of copyright law for somebody who pulls

apart an integrated circuit, makes a copy of it in

order to understand its functioning, but then makes

his own circuit based upon that evaluation and

analysis.

Section 24 protects a person who exploits a

layout which has been made and sold overseas with

the licence of the owner of the EL rights, and (2)

specifically overcomes the effect that

sections 37 and 38 of the Copyright Act would

otherwise have. It means, in effect, that to use

the colloquial term of "parallel importation",

parallel importation is permissible of eligible

Nintendo(2) 19 5/10/93

layouts and of the programmes, if any, contained

and the chips within them.

Section 27 contains provisions comparable to

those in the Copyright Act where the relief, which

is available to the EL rights owner, may be limited

in circumstances where the exploiter, at the time
of infringement, was not aware and had no

reasonable grounds for suspecting that the act

involved an infringement. So, what we say in

relation to the purpose of the legislation is that

section 7 is consistent with the purpose, in the

way we construe it, of providing the necessary

protection for the creators of integrated circuits

and, at the same time, ensuring a reasonable

availability of circuits within Australia.

MASON CJ:  Mr Macaw, how do sections 19(3) and 20(1) work

together, because section 19(3) which deals with

what constitutes infringement does contain, as one

element, the notion that if the person knows or

ought reasonably to know that he or she is not

licensed by the owner of that right to do so, that

constitutes one of the elements of infringement.

MR MACAW:  Yes.

MASON CJ: But then, section 20(1) goes on to provide as a

defence that a person did not know, and could not

reasonably be expected to have known, that the

circuit was unauthorized. What is the

inter-relationship between those two - - -?

MR MACAW:  Your Honour will see that "unauthorized" is

defined in section 20 to mean "made without the

licence of the owner of the EL rights". So that it

is dealing with the question of licence in relation

to the making of the integrated circuit, which is

Section 19 is dealing with the question of licence	acquired by the person referred to section 20(1).	of the exploiter to exploit. The exploitation,
according to section 8, being the importation, the
sale, or the offering for sale. Now, they both
refer to similar questions of knowledge of lack of
licence, but in the one case it is the licence
involved is that to exploit commercially in
Australia; in the other case it is the licence of the manufacture of the article.

If we could revert to what we say in

paragraph 3.3 of this outline. If it is

permissible to run together the distinct acts of

commercial exploitation in section 8 of the Act, in

the way the Full Court did, then it must follow, if

one is to be consistent, that a product which is

manufactured before the commencement of the Act,

and sold thereafter, either by the manufacturer or

Nintendo(2) 20 5/10/93

by a purchaser from the manufacturer, would not be

an Act in respect of which an action would lie and,

in our submission, that would be a very curious

result, certainly in the case of the manufacturer,

the acts referred to in section 8 do not comprise
the act of manufacturer, one would then have to
read "an act" in section 8, as effectively part of
the same transaction as the manufacture not dealt

with in section 8.

It could not be supposed, in our submission,

that somebody who has purchased, for example, an

integrated circuit before the operation of the Act,
could be free, pursuant to section 7, to sell it
thereafter in view of the clear language of

section 7. But that would be the consequence of

the construction that the Full Court placed on

this.

That is to say, it would not simply be

confined to an importer. It is not merely a
question of saying, "Well, one should sensibly read

an importation, for the purpose of sale, in

section 8(l)(c), as though it should form part of a
single transaction of which the subsequent is a

part." It would logically involve saying that the

reseller of goods manufactured in Australia, or

manufactured outside Australia but purchased from

an imported in Australia, would not be caught by

sales after the commencement of the Act, and nor

would a manufacturer be caught who had manufactured

products in Australia before the commencement and

sold them thereafter.

That would be a very curious result, in our

submission, particularly in circumstances where

this Act was assented to in May 1989 and did not

come into effect until October 1990. It may be

thought that ample opportunity was thereby given to

exploiters in Australia of copied circuits, which

before 1 October would not have been unlawful to

copy, to alter their affairs accordingly and in

circumstances where the nature of the article is

one where a very large number of them could be

manufactured and stockpiled. They are tiny little

articles, and the idea that the legislature was

intending to confer the ability on a manufacturer,

or importer for example, to stockpile large

quantities of those for sale after 1 October would

be odd and inconsistent with the evident purpose of

the legislation to protect the creator of original

circuit layouts.

The Full Court, in the reasons of

Justices Beaumont and Burchett, gave, amongst other

reasons for the construction that they adopted of

section 7, that the section should be assumed not

Nintendo(2) 21 5/10/93

to be retrospective. At page 816 of the appeal

book at line 9, they say:

Moreover, there is an assumption that

legislation is not retrospective so that,

prima facie, it is to be construed as not

attaching new legal consequences to facts or

events which occurred before its commencement. The principle no doubt may be accepted, with

respect, but section 7 in its own terms recognizes

exclusively rights from a date earlier than the
commencement of the Act, subject of course only to
the proviso·which is thereafter applied. In those
circumstances, our submission is that that canon of

construction or assumption simply has no room for

application. At page 815 at line 4, they say:

This interpretation -

that is to say the one they have adopted -

is, we think, reinforced by the general rule

of construction that legislation is presumed

not to interfere with vested proprietary

interests.

A passage from the judgment of Your Honour the

Chief Justice is then set out. Again, with

respect, we do not quibble with the proposition,

but it is of doubtful application in this case.

The ability of an importer of a product before

1 October 1990 to sell that product would of course

be subject to any relevant copyright rights of the

layout. Those copyright rights could reside in the

layout itself as an artistic work or, in a computer

programme, within a chip.

So far as the artistic work possibility is

concerned, it would be quite clear before the

amendments to the Copyright Act that the mask

layout itself would be an artistic work - it is in

the nature of a drawing of the layers of the chip -

and one would be confronted no doubt in an action

for infringement of that copyright by a defence of

industrialization under section 77 of the Copyright

Act.

That defence would, we conceive, be met by the

proposition that there would not be any
industrialization of a corresponding design within

section 77 because the integrated circuit itself,

when it is contained in the chip, is not something

which could be said easily to appeal to the eye.
It cannot be said within the definition of "design"

in the Designs Act to involve features of shape or

configuration that appeal solely to the eye.

Nintendo(2) 22 5/10/93

So there would be a real question whether such

a design would be registerable under the Designs

Act, and a real question accordingly whether

section 77 could apply. There would also no doubt

be a question, if it were raised, whether the

non-expert defence would apply, and one might think without detailed exploration of the point, that the same reason that might dictate that the layout

could not be a design within the meaning of that

definition in the Designs Act, may dictate also

that the non-expert defence would apply. Be that

as it may, it would be a matter for the defendant

to take the defence and its outcome can by no means

be said to be certain.

So far as the possibility of literary

copyright is concerned, the Court will be aware

that the definition of "literary work" in the

Copyright Act includes -

(b) a computer program or compilation of

computer programs.

"Computer program" is defined to mean -

an expression, in any language, code or

notation, of a set of instructions (whether

with or without related information) intended,

either directly or after either or both of the

following ..... to cause a device having digital

information processing capabilities to perform

a particular function.

This was not a case that was put at the trial, but it is evident from the materials that it is a case

that must be said to have had good prospects if it

had been put.

DEANE J:  But if you are dealing with construction of the

statutory provisions, must not this argument, if it	is to have any force, be that copyright rights must
exist in respect of everything affected under this
Act, because otherwise the argument about
retrospective operation will apply in relation to
some items, and if it applies in relation to some
items that is sufficient to found the argument?

MR MACAW:  Yes, but a weaker argument, with respect,

Your Honour. We do accept that if the point has

scope for application, then to that extent the

proposition might have some force. But this would

not be an unusual case, the case that we have here.

In all cases there would be artistic copyright.

DEANE J: But unless the copyright rights existed in

relation to everything, what you are really saying

is the statute would have a significant

Nintendo(2) 23 5/10/93

retrospective operation only in those cases where

it mattered.

MR MACAW: Well, unfortunately, it is not, of course,

possible to say that there would be copyright

rights capable of enforcement in every case of the

layout. We would have to accept that.

DEANE J:  Well, what I was putting to you is, once you

accept that, the whole argument really disappears

so far as intellectual conviction is concerned.

MR MACAW: With respect, Your Honour, not. The argument

plainly has more force if it is clear that the

effect of the construction for which we contend

would, in all cases, be to interfere with what

might thought to be vested rights. If in a

significant number, if not all cases, that could

not be said to be likely to be so, then the

argument is of much less potency, in our

submission.

DEANE J:  The other way of looking at it, of course, is that

the statute interferes with, or retrospectively

interferes with vested rights in those cases where

the vested rights were significant.

MR MACAW: Well, I am repeating myself, but if one were to

find, for example, in this case that there was

copyright - and that was, of course, not something

that was necessary for us in the way this case was

dealt with below to pursue - if one were to find

that, then there could easily be the position that
one could conclude that in the vast majority, if

not almost all cases, similar sorts of rights would

be likely to have existed.

But the object of the legislation, of course,

was to substitute, in effect, what were thought to

be less than satisfactory copyright and design

rights by the new eligible layout rights, the EL
rights. There are reasons to think, in some cases,

if the defence were taken, that there might not be

the ability to pursue copyright rights, but

certainly those rights, on the face of them, exist

in the layout and, in this case, and we would have

thought most others, in the chip, to the extent

that it contains a set of instructions and falls

within the meaning of the computer programme.

Now, we just give the Court, briefly, a

reference to a passage in His Honour the trial

judge's judgment at page 570. There set out, in

the middle of the page, a document that was the

respondent's summary of what was said to be:

"Areas of Significant Visible Difference".

Nintendo(2) 24 5/10/93

3.       TOP LEFT HAND CORNER:

3(a) Formation of the Transistors of the PAL

in the Vertical Decoder

The different position of the transistors and

the array structure of the PLA block which

constitutes the Vertical decoder. These can

be seen by the 'contact cuts' which show as

small circles or dots on the 'grid' or array

structure of the block. This PLA block containing the transistors controls the vertical timing of the image on the TV screen.

PLA stands for programmable logic arrays. One sees

the function that those programmable logic arrays

have to perform in the case of the vertical

decoder. The point that was sought to be made,

that the vertical decoder was different in the UMC

chip compared with the Nintendo chip, or integrated circuit, was a point which was dealt with as one of the primary matters of infringement, but failed, as

appears at page 579 of the appeal book in

His Honour's judgment, middle of the page:

The applicant submitted that the changes

to the vertical decoder layout are minor,

contending that "if the respondents' principal

independent expert (Mr Beckett) is correct,

the change in horizontal line 5 involves a

negligible change in layout -

and, at the foot of the page there is reference to

Mr Osborne and Mr Beckett's:

grids to their reports plotting PLA

(programmable logic arrays) encoding patterns.

At line 11:

In short, the applicant submitted that

the changes to the vertical decoder layout are

insignificant in design terms.

And then at page 583, His Honour accepts that at

line 7:

I accept these submissions and, as I have

already indicated, I believe that the

differences identified by the respondents were

insignificant. If no more appeared, the

applicant would have made out its case.

And he goes on to deal with the defences of

section 23 and so on. So that, we would submit, in

the circumstances of this case, that one could

infer that it would be a matter of some generality

Nintendo(2) 25 5/10/93

of application that there would be copyright rights

by way of the inclusion of computer programme in

the chip.

We submit, for all those reasons, that far

from the construction for which we contend

producing a capricious or unjust result, which is

the way in which is was characterized by

Justices Beaumont and Burchett, it produces a

result which not only accords with the natural

language and plain language of the section, but one

which is consistent where the contrary construction

is not, with the purposes of the legislation. That
is what we wanted to say about section 7.

Strictly speaking, when we come to section 20, which we do next, we are not dealing with a matter

that might strictly be said to be one of appeal.

What happened, as Your Honours would be aware, is

that His Honour the trial judge dealt with the matters of infringement and the defences under

section 20 and 23. He found there was an

infringement and he found that section 20(2)

applied, so that although the importer, Centronics,

may have acquired the integrated circuits

innocently, it had become aware that they had been

made without the licence of the owner, and

accordingly it was no longer within the protection

against infringement that section 20(1) provided.

In the Full Court that aspect of the matter

was not dealt with by Justices Beaumont and

Burchett. Instead they confined themselves to this question of section 7 in terms of the findings that they made. Mr Justice Northrop dealt with the case

on a different footing. He dealt with the case on

the footing that there was a pleading difficulty

about relying upon section 20(2), and accordingly

the respondent, Centronics, should be taken to have

made out a defence under Section 20(1), and that

was the end of the matter.

Now, we can deal with these matters shortly

now or, alternatively, we can deal with them in

response to my learned friend's contentions, which

do raise exactly the same points - really for the

convenience of the Court.

MASON CJ:	We may as well hear from you now, Mr Macaw.
MR MACAW:	As Your Honour pleases. At page 817 of the appeal book, Justices Beaumont and Burchett deal
with section 20.  They say:

It will be recalled thats 20 is in Part II of

the Act, so that the provisions of s 7 which

refer to Part III do not apply sos 20.

Nintendo(2) 26 5/10/93

However, much of the reasoning which us to

conclude that the provisions of Part III did

not apply to the subject shipments of goods is

also applicable to s 20.

And, at line 23:

For the reasons previously given, in the

absence of clear words, and none are present

here, s 20(2) should not be construed so as to

apply to the subject shipments.

Now, our submission is that, if it is

possible, the language is even plainer in the case

of section 20(2). It provides that:

Where a person referred to in

subsection (1) becomes aware, or could

reasonably be expected to have become aware,

that the integrated circuit is unauthorized -

which means "made without the licence of the

owner" -

that subsection ceases to apply to any

subsequent commercial exploitation of the

circuit, unless -

and so on. The expression "any subsequent

commercial exploitation of the circuit", in our

submission, must plainly include a reference to any
subsequent sale and it is difficult, with respect,

in our submission, to see how one could find a

basis for a contrary construction of the same kind

applied to section 7, namely that one should run

together, as forming part of the single notional
transaction, the separate acts of importation and
sale, because the section really contemplates that

the innocent acquisition may be by way, for

example, of importation, and the subsequent

exploitation may be by way, for example, of sale.

If we could deal then with His Honour

Mr Justice Northrop's approach to the matter. He

dealt with section 20 in two ways: one was, as I have indicated, to say that there was a pleading

difficulty about the application of section 20(2)

at page 757. He says at line 23:

That defence -

and he is referring to the defence set out at

into Australia. But in my submission, the

adjustment of those rights so as to achieve a

result that does represent just terms is entirely

possible through the operation of section 20(2).

If, however, there is some difficulty in that,

the question would arise whether the Act could be

read down so as to be limited to cases falling

within my paragraph 2, namely those who had

formerly had copyright protection and got something

less as a result of the Circuit Layouts Act. If the Act had been limited to that category, in my

submission, it would have been clearly valid, so

there is the reading down question whether it could

be read down so as to apply to those cases and not

to apply to cases which come within my paragraph 3,

which would be an issue of course only if

section 20(2) does not achieve the provision of

just terms.	If the Court pleases, they are my
submissions.

MASON CJ: Thank you, Mr Rose. Yes, Mr Macaw.

MR MACAW:  If the Court pleases, we prepared an outline in

anticipation of the kinds of things that my learned
friend, Mr Nash, might say. Although he did not
say them all in exactly the form anticipated, it

nevertheless might be of assistance, we think, to

hand up that outline.

MASON CJ: Yes, thank you.

Nintendo(2) 70 6/10/93

MR MACAW: If the Court pleases. In a nutshell in relation

to section 19(3), what we say is that the question

of knowledge, actual or constructive, is limited to

the question of licence to exploit by a person who

is in fact the owner. The question of knowledge,

actual or constructive, does not extend to that

issue of ownership. The legislation has used

different language in various different provisions,

we say deliberately. In section 19(3) the language

used is:

if the person knows or ought reasonably to

know, that he or she is not licensed

We say that the existence or otherwise of a licence

is peculiarly susceptible of knowledge. One can

readily imagine why it is difficult to say that the

question of subsistence or ownership is not readily susceptible of knowledge but, instead, of belief or

suspicion. The question of ownership, of course,

involves the question of subsistence. That
involves the question of whether the maker was a

qualified person, whether he made it in an eligible

country, whether it was an original circuit layout,

whether there has been some assignment that validly

confers rights on the person now claiming to be the
owner. These matters, in our submission, are not

readily matters of knowledge on the part of the

exploiter and, accordingly, the reference to

"knowledge" in the section was intended to have

limited application and to apply only to the

question of licence or the lack of it.

In section 20, as it was enacted, there was

not a reference to unauthorized integrated

circuits. There was instead a reference in terms

which are set out, amongst other places, in the

judgment of His Honour Mr Justice Northrop in the

Full Court at page 776. This is in the judgment of

Justices Beaumont and Burchett. The language there

adopted in subsection (1) was that:

the person did not know and could not

reasonably be expected to have known, that EL

rights subsisted in the layout.

Likewise in (2), the awareness and so on related to

the question whether EL rights subsisted in the

layout. So that where the legislature intended to

refer to matters other than matters of licence, it

demonstrated that it knew how to do so. Likewise

in section 27 of the Act to which brief reference

was made earlier, subsection (3) provides that

where, in an action for an infringement of EL

rights:

Nintendo(2) 71 5/10/93

it is established that an infringement was

committed but that, at the time of the

infringement, the defendant was not aware, and

had no reasonable grounds for suspecting, that

the Act constituting the infringement was an

infringement, the plaintiff is not entitled

to -

obtain certain relief. Different language there
adopted of awareness and reasonable grounds for
suspecting appropriately, in our submission, where
one is dealing with a question much broader than

the question of licence or the lack of it, but

extending to the questions of subsistence and

infringement.

Those matters of subsistence and infringement might be matters of awareness, might be matters of

suspicion, but are not readily to be regarded as

matters of knowledge and our submission is that

there was a deliberate use of that expression in
section 19(3) which signifies that it was intended

to be limited in its operation to the question of

licence or lack of it.

BRENNAN J:  Why is not the amendment to be construed as

picking up what used to be there, namely the
subsistence question, and the question of whether

the EL owner has granted a licence?

MR MACAW:  In the current section 20(2), Your Honour?

BRENNAN J: Yes.

Mr MACAW: Well, the submission that we are making is that

the subsistence of EL rights is not, one would

think, readily a matter of knowledge at all -

BRENNAN J: Well, that may well be so, but that means, of

course, if your submission be right, that once a

letter, such as the one that was written in this

case, is written, the risk of continuing to trade

is on the party who resists the claim?

MR MACAW:  Yes, Your Honour.

BRENNAN J: Well, now, what is the policy which suggests

that that should be the result of it all?

MR MACAW:  Your Honour, the exploiter has a number of options. He can have the licence, of course, of

the owner.	He can have, or believe that he has, a
licence on behalf of the owner.	He can have a

belief that the supplier to him who manufactures

the article is licensed, in which case he has

rights under section 20 - he is innocent - and it

is only after he is on notice that he is not

Nintendo(2) 72 5/10/93

permitted thereafter, unless he takes steps to

agree and pay equitable remuneration, to go on

selling what is, of course, a copied circuit.

BRENNAN J:  The ordinary situation in this rather

competitive market, one would expect that those who

claim EL rights would be making demands or threats
against those who import goods, or acquire goods
for sale from manufacturers and for their part, the
intermediate sellers would ordinarily turn to their
suppliers for assurance as to the legitimacy of
their conduct, so that they become the meat in the

sandwich. Why then should they be the meat in the

sandwich in the way in which your construction

would place them?

MR MACAW:  Your Honour, there are a number of simple things

that the exploiter, being an importer in this

situation, can do.	One would think the most
obvious thing is to go to the manufacturer.	UMC

ought to know whether it has independently created

a chip or instead merely copied, as the evidence

here was, it had merely copied a chip. I will take

the Court to the evidence in brief terms later on,

but what had happened in this case was that it had

copied it down to the point of copying redundant

circuitry. It had shrunk the integrated circuit.

But, at all events, that is the first thing that

one would do, go to the manufacturer. If one, in

this case -

BRENNAN J:  He might not know who the manufacturer is. He

would go to his supplier first of all, would he

not?

MR MACAW: Well, one would first go to the supplier. If one

was dealing with somebody in the position of a

supplier who either peddled inaccurate information or at all events, might be thought not to know the

real situation, then there was no difficulty about

going to the manufacturer. This is presupposing,

Your Honour, the application of section 20, because

it presupposes, for example, that the importer

thought that the manufacturer was somebody who was

entitled to do what he was doing.	In that sense,
he was innocent.

There are other protections, as I earlier

pointed out, that if the layout itself is, in fact,

made and put on the market by the owner, or by

anybody else authorizedly overseas, and there is no

difficulty about importing it, there is no question

about not being able to go on selling by virtue of

the old copyright provisions, such as sections 37

and 38, goods which are genuine goods. There is

the provision in section 23 which allows use to be

made of the circuit for legitimate purposes.

Nintendo(2) 73 5/10/93

Admittedly, that would normally be made by somebody

in a position of a maker of a circuit, as opposed

merely to somebody who was importing and selling.

But one starts, Your Honours, with the the

fact that before one even gets into an infringement

proceeding, one will have to establish a copied

circuit; a circuit made in accordance with an

eligible layout. So that the commercial merits are

not all with the importer, and there are avenues
readily available to him if he is put on notice, in

the form, for example, of the letter of 31 August,

to check the position, and it is reasonable, in our

submission, in those circumstances to say that if

he takes his chances and goes on selling, then he

would be liable for infringement proceedings.

The second more specific answer to

Your Honour's earlier question is that the change

in the language in section 20, from the language of
subsistence in the old section, to language of

licence in the new, and the use in that context of

knowledge and awareness, in our submission, is a

deliberate change by the legislature, confining the

question to that of licence, which is susceptible
of knowledge or awareness.

What my learned friend's construction would

amount to ultimately is that one would have to have
an infringement proceeding before ever you could

get to prove infringement because, in order to show

knowledge that the person who had not licensed you

was the owner, you would have, as I say, to know

all these questions about the way in which the

circuit was produced: who made it; was it original;

who assigned it; was it made by somebody in an

eligible country, and so on; was it a qualified

person?

In fact, that is the position my learned friend took, that until there was a finding by the

trial judge that all these issues should be

resolved in favour of the applicant in the case,

there could be no infringement because there could

be no knowledge. He concedes that the relevant

date is 26 April 1991, which is the date of an

affidavit by Mr Takahashi, setting out the way in

which the layout was constructed and indicating

that it was substantially handcrafted. But why

accept that, and why stop at that question of

subsistence, in the sense of demonstration, that

there was an original layout produced?

The proposition will involve, if it means

anything, to refer to the owner in this context,

also to show infringement because, really, it is a

logical extension of what my learned friend is

Nintendo(2) 74 5/10/93

saying, that unless you known that the circuit that

you are selling is something which can be judged as

belonging to the owner of the eligible layout, then

you do not have the requisite knowledge. So you

not only have to have knowledge on this submission

of all the matters going to subsistence and
ownership but you have also to have knowledge, it

seems, of all the matters going to infringement.

That really is to turn a relatively simple

provision in section 19(3) on its head and it is

not to be supposed that that was the intention

where the legislature, in particular in section 27,
dealt in more appropriate terms, that is to say,
reasonable grounds for suspecting, and so on, with

those questions of subsistence and infringement.

We mention also that section 37 of the Act

provides the benefit of a number of presumptions

for the purpose of infringement proceedings. These

presumptions are of a similar kind to those which

are provided for in the Copyright Act:

In an action under section 27:

(a) EL rights shall be presumed to subsist in

the circuit layout to which the action relates
if the defendant does not put in issue the
question whether those rights subsist in the
layout; and

(b) where EL rights subsist in the layout -

the plaintiff shall be presumed to be the

owner of the rights if he or she claims to be

the owner of the rights and the defendant does

not put in issue the question of ownership.

The provision of those benefits, in terms of

presumptions at an infringement proceeding, in our

submission, is in consistent with the proposition

that knowledge of all those matters has to be

established before one ever gets to establish an

infringement for the purposes of section 19(3). My learned friend, Mr Nash, took the Court to

part of the way in which His Honour concluded that

it was conceded that Centronics always knew it was

not licensed by Nintendo to exploit the layout.	It
was admitted on the pleading, at appeal book
page 22, in paragraph 27, that Nintendo was the owner of the EL rights. Paragraph 27, in the
statement of claim, appears at page 14 of the
appeal book:

At all times material, the Applicant is and has been the owner, within the meaning of

section 16 of the Circuit Layouts Act Cth

Nintendo(2) 75 5/10/93

1989, of EL rights in an original circuit

layout ("the PPU layout").

That is admitted, and in paragraph 29 on page 22 of

the appeal book:

They admit that the first Respondent has no

form of licence from the Applicant -

However, they say in effect, they did not think that they needed one because the UMC chip was

independently created. So what they chose, in

substance, was a battleground of infringement in
the sense of contesting that the UMC chip was made
in accordance with the eligible layout, of which
they conceded that Nintendo was the owner, and in

respect of which they conceded that they had no

form of licence.

In any event, in our submission, there was

specific knowledge of a relevant kind given by

Nintendo's letter of 31 August 1990. My learned

friend referred to that at page 589 of the appeal

book. The reference to the PPU, in our submission,

and I think my learned friend has conceded, is a

clear indication that the integrated circuit was

made in accordance with the Nintendo layout. So

that, leaving aside altogether the pleading, we

would submit that that letter of 31 August plainly

satisfied the requirement of section 19(3).

We do say that even if my learned friend's

construction is right, not only is there evidence

which would justify a finding that Centronics knew

that it did not have the licence of the owner, but

the evidence of that is compelling. May we mention

these matters briefly - I notice the time - does

the Court wish to sit on to conclude the matter

tonight, or not?

MASON CJ:  Mr Macaw, how long do you think your reply will

take? You are under no constraint of time.

MR MACAW:  I do wish to deal with the two cases referred to

in paragraph 9 of the outline, and I do wish to say

something a little bit more expansive about the

constitutional point.	I might be of the order of
25 minutes.

MASON CJ: In the circumstances, we will adjourn till

10 o'clock tomorrow morning.

MR MACAW: If Your Honour pleases.

AT 4.23 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 6 OCTOBER 1993

Nintendo 76 5/10/93