Nintendo Company Ltd v Centronics Systems Pty Ltd

[1993] HCATrans 165

~

~ -.~·~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No Ml25 of 1992

B e t w e e n -

NINTENDO COMPANY LTD

Applicant

and

CENTRONICS SYSTEMS PTY LTD,

MAURICE LATIN, TIBERIO SALICE

and FABRIZIO LATIN

Respondents

Application for special leave

to appeal

DEANE J
TOOHEY J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 JUNE 1993, AT 10.05 AM

Copyright in the High Court of Australia

Nintendo 1 18/6/93

MR R.C. MACAW, QC:  May it please the Court, I appear with

my learned friend, MR B.N. CAINE, for the

applicant. (instructed by Purves Clarke Richards)

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

learned friend, DR P.D. FRECKLETON, for the

respondent. (instructed by Xerri Rubenstein & Co)

DEANE J: Yes, Mr Nash. Mr Macaw.

MR MACAW:	As the Court will be aware, the application involves the interrelationship principally of sections 7, 19 and 20 of the Circuit Layouts Act
the majority of the Full Federal Court,
(1989) and one of our central contentions is that effect of section 7. Section 7 - does the Court have copies available of the legislation?

DEANE J: Yes.

MR MACAW: Section 7, as the Court will be aware, provides

that the Act applies in relation to a circuit

layout whether made before or after the

commencement of Part II, but an action does not lie

under Pa~t III in respect of any act done before

that commencement in relation to the copy of the

layout or an integrated circuit made in accordance

with the layout.

Part II, as the Court will see, deals with the matters of ownership of EL rights and the nature of

EL rights and infringement of EL rights. It deals

also in section 20, amongst other sections, with

circumstances where infringement will be taken not

to have occurred. Part III, as the Court will see,

deals with remedies for infringement of EL rights.

Accordingly, section 7, which uses language

reminiscent of statute of limitations language, is

a section which bars the remedy, but not the right,

in the defined circumstances.

And the majority judgments of the Full Federal

Court either failed to take that into account and

sought to construe sections 19 and 20 in a limited

and unwarranted fashion or, further alternatively,

took-for themselves a point which, in the
circumstances, would co~sistently with the

decisions about limitation of actions defences,

have to be pleaded by the defendant in order for

the point to be a live one.

DEANE J: But even if one assumes that the argument of

statutory construction which you would wish to put

on an appeal is an arguable one, you have still got

problems in obtaining special leave, have you not?

Nintendo 2 18/6/93

I mean, it is effectively a transitional section.

The material before the Court indicates that there

may be one other case which would be affected, but

there is, in a context of over a year between

enactment and commencement, nothing to suggest that

it is a matter of great public importance. The

hurdle you have to face is, why should this Court

take on that question of construction?

MR MACAW: Well, in one sense, Your Honour, the Court would

not have to take on the question of construction at

all, because if we are right that section 7 merely

bars the remedy and not the right and if the

consequence of that is, as we submit, that it was

for the defendant to take the point, then one does
not have to worry about what would have been the
proper operation of section 7, had the point been
taken. There would be all sorts of reasons, no
doubt, as there would in a limitation of actions

defence, why the point may not be taken. Here was

an importer and seller of certain electronic

equipment, which plainly wished to continue its

importing and selling activities and which no doubt

chose, for its own good reasons, to adopt the basis

of defence of the proceeding.

What it chose to adopt was, in effect, three

defenses: one was to say that the circuit layout,

which was incorporated in their product, was

different and therefore not made in accordance with

the eligible layout in which rights subsisted;

secondly, that theirs was an original circuit

layout made after evaluation and analysis within

the meaning of section 23; and thirdly, that they

had the benefit of section 20. They were innocent

when they acquired it and they were not thereafter

aware of the EL rights in a way which would make

them thereafter liable.

Having chosen those grounds our submission is

they must be taken to have done so deliberately and

it was not for the Full Court itself to substitute

a ground which was open only to be taken by the

defendant. That is not something which will, of

necessity, involve the construction of section 7,

although if it came to the point we would submit

that had the point been taken by the defendant, the

construction would dictate a different result.

DEANE J: It is a little difficult to be confident from the

papers in the application book about precisely what

happened, in that Justice Northrop says that there

was argument about whether the respondent should

have leave to amend the notice of appeal; was that

so?

Nintendo 18/6/93

MR MACAW: Well, there was an amendment to the notice of

appeal in the course of running, and the - - -

DEANE J: But did it relate to section· - I am talking about

section 7.

MR MACAW:  No, about five minutes before the close of my

learned friend's reply, the point was raised by

either Mr Justice Beaumont or Mr Justice Burchett,

did not section 7 have the effect that section 19,

in its reference to commercial exploitation, should

be read such as to exclude the sale of articles

which had been imported into Australia for the

purpose of sale before the operation of the Act.

There was then some debate, in effect, by way of

invitation to my learned friend, whether that w:::1	a
point that he would wish to adopt.	The upshot

it was that he did not seek to amend his grounds of

appeal, objection was taken specifically on the

footing that it would be inappropriate to raise it,

at this stage, in any event, but certainly in the

absence of grounds of appeal covering the point.

Our complaint about the court intervening in

the way it did on this point goes at two levels and

has a number of consequences: the first is that it

ought not to have intervened when the point was not taken on appeal, despite the implicit invitation to

do so.

DEANE J: But the fact is, it did.

MR MACAW:  The fact is that the court did intervene, yes.

DEANE J: Well now, does it really come down to this, that

there has not been a formal amendment to the

pleadings, because again, I am just going on what

Justice Northrop said, he says that you argued

against the suggested construction of section 7.

MR MACAW:  We argued, Your Honour, during the course of oral

argument, when the point was first raised, that it

ought not now be taken in the way that it appeared

the court was proposing to take it, certainly in
the absence of the point being adopted by my

learned friend in his grounds of appeal and in the

absence of it having been dealt with below. We

were-given leave to put in written submissions

elaborating the point and took that opportunity.

So we did address the point that was raised by the

court. But our objection is not only that it was

dealt with by the court without it having been

chosen as a ground by my learned friend in the

appeal, but more basically perhaps, that it was
taken by the court when it was not taken as a

defence, pleaded as a defence, in the court below.

Nintendo	4	18/6/93
DEANE J:	I still do not quite follow.	I mean, what did

counsel on the other side say, when the point was

raised by the bench? Did he say, "I do not want to

rely on that"? Or did he say, "I accept that and I

do rely on that"?

MR MACAW: Well, what he said was that I would prefer - this

is my recollection - to, if the point is a good

one, rely on it as confirming, in effect, the

construction that we would wish to put upon

section 19(3). What my learned friend was saying

about section 19(3) was, that the requirement for

infringement, that the alleged infringer should know that he did not have the licence or have a

reasonable basis for assuming that he did not have

the licence, meant that he really needed to know

all the components of a successful infringement

action; needed to know that EL rights subsisted,

which involved knowledge of authorship or

assignments, needed to know that there was

infringement. And ultimately his point was, that

you could not satisfy section 19(3) until the court

had found that there was an infringement, because

unless and until there had been such a finding, you
could not have known all the components which

involved the subsistence and infringement of those

rights.

My learned friend did not say, "Yes, I adopt

that point and wish to pursue it". What he said in

substance was, "It is not a point we would choose

to put in that way, but it tends to support what we

would like to say about section 19(3) and the way

it has been put to the court".

TOOHEY J:  Mr Macaw, was it part of your objection to the

argument being adopted by the Full Court that in

some way the conduct of a trial might have been

different?

MR MACAW:  Yes, it was, we did put that to the court, and we

do contend, Your Honour, that the conduct of the

trial may have been different, at least in so far

as it may have been possible to adduce evidence

that there had been, or there were proposed to be,

further importations. May I direct the Court's

attention to the material at page 112 of the appeal

bookT The background of this is that, as Justices

Beaumont and Burchett recorded, 1500 of these units

were imported in December 1989. The evidence of

Mr Latin was that 1350 had been sold, about 200 of

them since 1 October 1990. At page 112 of the
appeal book, Your Honours see in paragraphs 23 and

following of Mr Latin's affidavit, which was sworn

in opposition to an earlier application for

interlocutory injunctive relief, material showing

that it was Centronics business to import and sell

Nintendo 18/6/93

these games consoles and that it had very

substantial orders, such that it was very likely

that additional importations either would occur or

had occurred in the interim.

Now, at the very least, we submit, it would have been an easy matter in those circumstances for

us to adduce evidence that the respondent below

proposed to go on importing and selling and indeed,

that is the very reason, perhaps, why the section 7

point had not been taken. The point of principle

was, is our product one which was made in

accordance with the eligible layout, are we

entitled to the benefit of section 23, are we

entitled to the benefit of section 20? If the

point had been taken in the pleading below as, in
our submission, is the only proper way in which it
could be taken, going as it does to the remedy and

not the subsistence of the EL rights, then, at the

very least, it would have been open to us to adduce

that evidence and - - -

DEANE J:	Was the statement of claim framed in a way that
included relief in terms of threatened action, as
distinct from past action?

MR MACAW:  Yes. There was an allegation that the respondent

proposed to go on doing what it had been doing and

the relief sought, and indeed -

DEANE J: Well, where do we see that?

MR MACAW: In the statement of claim?

DEANE J: Yes.

MR MACAW:  It is not in the appeal booA, Your Honour, the

statement of claim, and the sections of the

statement of claim that have been reproduced in the

appeal book do not extend to that, but it was

paragraph 36 of the original statement of claim

that pleaded, as one might expect, that the first

respondent threatens and intends, unless

restrained, to continue to infringe the copyright

in the PPU program and the EL rights of the

applicant in the PPU layout. I am sorry; it does

appear in the appeal book at page 44 paragraph 31.

DEANE J: Page 44?

MR MACAW:	Page 44, at the top of the page, Your Honour.
TOOHEY J:	Mine is blank.
MR MACAW:	I am sorry.  My learned friend had shown me the

appeal book in the Federal Court appeal. It was

paragraph 31, but it did, not surprisingly, allege

Nintendo 6 18/6/93

a threat to continue with that conduct. And

indeed, Mr Justice Sweeney, in his judgment at

page 11 of the appeal book, records:

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 ..... in

Taiwan which incorporated the UMC chip.

So, there was not any call in the way the case was

dealt with below to adduce evidence which showed

that there was a threat to continue; it was

accepted as common ground that it was in the

business of importing, it would go on doing so, it

was likely,· in the way the case was conducted.	The
substantial issues in the case really wanted to
deal, it seemed, with the questions of principle.

McHUGH J: But what about the passage at page 133 in the

judgment of the majority, at the bottom of

page 132, over to page 133. They say:

Although Centronics, until recently, contended

that there was no copying involved, there was

no evidence or other material before

his Honour to justify the conclusion that

Centronics intended, in the future, to import

more of the SPICA units.

MR MACAW: Well, we would say, Your Honour, that there

either is material in the form of those paragraphs

in Mr Latin's affidavit, or if they had not

formally been relied upon at the trial, they were

plainly material from which it would easily have

been open to the applicant below to formally adduce

that evidence. There was no question really; it

was common ground that the respondent below had not

merely engaged in a one-off transaction, but its

business was to import and sell these units.

DEANE J: Yes, of course there is nothing in the judgment

that would prevent you obtaining relief on a quia

timet basis in future proceedings; indeed, the

judgment would help you in obtaining such relief.

MR MACAW: Against the same respondent?

DEANE J: Yes, or really against any respondent.

MR MACAW: Well, perhaps, Your Honour. What we really

complain about, apart from the error of law

involved and the court taking to itself section 7

when it had not been pleaded, is that it was

inappropriate to choose ground - which the parties

have not chosen - in circumstances where evidence

may have borne upon the result had that ground been

Nintendo 7 18/6/93

chosen. We suffered, if Your Honours please, a

similar sort of procedural unfairness, we submit,

at the hands of Mr Justice Northrop, who said, in

substance, "Well, there was not any reply pleading

section 20(2); section 20(1) ought be asswr..ed to be

made out; QED, there is no infringement". Now, the

case below was dealt with on the footing that the

real issue was whether the conditions of

section 20(2) were satisfied, and that appears most

clearly perhaps in the recitation by

Mr Justice Sweeney, at first instance, at page 30

of the appeal book, where he says, in the middle of

the page:

The respondents also sought to rely on

section 20 of the Act. They submitted that

Centronics did not know or could not

reasonably be expected to have known that the

UMC PPU was unauthorised at the time when it

acquired the circuit (section 20(1)); and that it had not become aware or could reasonably be

expected to have become aware at any later

time that the circuit was unauthorised

(section 20(2)).

Now that was not, as His Honour Mr Justice Northrop

thought, an impermissible attempt to cast the onus

on the respondent below; it was simply a

recognition of the fact that that was the issue

which was debated below. It was put by the

applicant that subsection (2) was satisfied; it was

put by the respondent that it was ·not. And it was

absolutely clear that the way the case was dealt

with below turned upon whether subsection (2)

operated. In those circumstances - - -

DEANE J:  Mr Macaw, I think you have really pretty well

covered what can be put in support of the

application. We might hear what Mr Nash has to say

and you will have a right of reply, of course.

Yes, Mr Nash.

MR MACAW: If Your Honour pleases.

MR NASH:  If the Court pleases, this does not raise a point

of general importance; as Your Honour the presiding

judge said, it deals with a transition situation.

Equally importantly, in terms of whether leave should be granted, ignoring the merits of this

case, the merits of the decision below, is the fact that the interpretation of section 19(3), which was contended for below, if the majority of the Full

Court was wrong, gains strength from that position.

There is another point which was not raised

below, and deliberately not raised below, because

we did not want the Attorneys-Generals to descend

Nintendo 18/6/93

upon us and find ourselves in this honourable

Court. If the majority decision is wrong, there is

a question of whether the Act involves, in the

circumstances of this particular case, an

acquisition under section Sl(xxxi). I am not

saying that is a reason for granting special leave,

but rather of going to the merits as to whether
this is an appropriate vehicle, taking into account

the situation of the parties, that we have

succeeded below.

We say that we should succeed, if not on this

ground, then on the section 19(3) point, then on
the section 20 point, because, as was pointed out,

prior to the actual judgment being handed down by

and as appears from the reasoning of

Mr Justice Sweeney, on which we could fall within

section 20(2), is very slight. We receive a letter

before the Act comes into force, saying we claim

rights. We have a computer chip which, on its face if you blow it up and analyse it, appears to belong

to someone other than Nintendo; it appears to have

belonged to UMC.

Now, if you take those facts before we go to

the merits, this is not a proper vehicle for

granting leave, because what we have - and this

appears from the appeal book, and I can take the

Court to the relevant passages of the appeal book -

is a situation where, on Mr Latin's evidence, there

were 300 units sold at approximately $140 each,

after the Act came into force. That evidence was

uncontradicted. That, at a rough calculation, is

$42,000.

If one assumes a 100 per cent mark up and,

plucking figures out of the air, a 30 per cent of
gross profit being used in overhead, we are talking
about an infringement in the past of $15,000, in

respect of which, if the reasoning of

Mr Justice Northrop is correct, ultimately we would

be asked to pay equitable remuneration on that

profit of $15,000. I would draw the Court's

attention to the expression in section 20(2),

"equitable remuneration".

-That, in our submission, bears out the

reasoning of Mr Justice Northrop in relation to the

effect of section 20(2), otherwise one would have the situation that there would be an infringement

continuing until someone had finally determined

what was equitable remuneration, or the innocent

importer would have to sit there, maybe for

12 months, with his Christmas stock going down the

drain, unable to sell it without committing an

infringement. As a matter of commercial reality,

Nintendo 9 18/6/93

we say this is not a case where the High Court
should grant special leave.

If I can go very quickly to the merits, the applicant was given an opportunity to make written

submissions on the issue raised by the court. If I

can hand to the Court copies of the closing part of
the transcript, which my learned friend mentioned.

The situation is that at pages 297 to 298 my learned friend was asked to make written

submissions. Written submissions were made and

those written submissions did not point, any more

than does the special leave application, to any

really tangible evidence that could be led.

The transcript, at the pages which I have handed to the Court, bears out the proposition that

the respondent did not really want to respond to

the invitation of the court. There is a mention at

page 297 by my learned friend that the point was

orally adopted:

perhaps in some apologetic alternative

fashion.

And with respect to my learned friend - the Court

has all the relevant transcript there - that is

probably a fair assessment of what did happen.

Counsel for the respondent did say, however, that

if he succeeded on the point raised by the bench,

the effect on costs, of course, would be that we

would have to bear the costs below.

So the point was, in our submission, before the court. It was, even if reluctantly, adopted by

counsel for the applicant below. If we go to the
pleadings, paragraph 30 of the amended statement of

claim and paragraph 30 of the amended defence,

which appear at pages 5 to 7 of the application

book, do raise the issue of infringement under

section 19 and, in our submission therefore, do

will bear with me for a moment - the importation	raise the question as to whether - if the Court
and sale, where goods are imported for the purpose
of sale, constitute a single transaction.

I say that was raised on the pleadings,

because there cannot be an infringement under

section 19 unless the person who complains of the

infringement was, at the date of the infringement, the owner of the EL rights under section 16 of the

Act. If the relevant "infringement" occurred prior

to the commencement of the Act, the person who

complains of the infringement would not have been

the owner of EL rights at the time of that alleged

infringement.

Nintendo 10 18/6/93

Therefore the interpretation of section 7

turned - namely, is the sale following importation
for sale the same transaction for the purposes of

infringement, the single -

McHUGH J:  The same act, is it not?

MR NASH:  The same act, yes, Your Honour. Is it a single

act?

McHUGH J: Well, section 8 itself distinguishes between-

sale, offering or exposing for sale and importing

for sale; they are three separate acts.

MR NASH: There are three separate acts, Your Honour, and

with respect, we say that that, in one sense,

supports the reasoning of the majority, because if

sale is a separate transaction, there is no real

need to control importation for sale; the only

reason is ease of administration.

McHUGH J: It seems to me that, prima facie at least, the

majority in the Court of Appeal look at the

operation of section 7 the wrong way around.

Page 46, line 7, they say:

A literal interpretation of the Act would mean

that goods could be lawfully imported for sale

but not lawfully sold although imported for

that very purpose.

And that would be a capricious result. But what

section 7 is doing, is it not, it .says, "Well, this

Act comes down at this particular point of time.

In so far as any act done before the commencement

of the Act, then you're outside it, but for any act

done after it, you're caught by it". So the

importation for sale, which is within section 8, is taken outside of section 8 because of the operation of section 7, but the moment you sell it, then that

is another act.

MR NASH: Well, with respect Your Honour, if one looks at

the three things that are mentioned in section 8,

one is the sale, one is the offering for sale and

the other is the importation for sale. Our

submission is that the legislature did not intend -

let us take the situation of where, after the Act

comes into force, I import for sale, I offer for

sale and I sell. In our submission, the

legislature intended that. If it is, if one likes

to call it, a single series of transactions, that, in our submission, is one infringement, not three.

In other words, that one should read those

three paragraphs disjunctively rather than

conjunctively. It is open, Your Honour, and we say

Nintendo 11 18/6/93

that one has to assume that the legislature did

not, in our submission, intend to deprive anyone of

a vested right. They did not intend, as

Mr Justice Beaumont used the expression, to

sterilize the goods which had been imported. If

they did intend to do that, then one does

have - - -

McHUGH J: Well, take a case where goods have been imported

before the Act and sold before the Act to somebody

else and then that person offers them for sale

after the commencement of the Act, or sells them

after the commencement of the Act. That person is

caught ·by the Act, is he not?

MR NASH:  I have no problem there, but I am talking about a

person who is the importer, offerer and seller,

provided - if he is an importer for sale, if he

se ls on, that is one thing; if he does not sell

or then that is another thing. That the -

DEANE J:  What about the person who manufactures the goods

in Australia? How does section 7 apply there?

MR NASH:  I am sorry, Your Honour, I was really talking

about section 8, but if the goods are manufactured

in Australia - - -

DEANE J:  No, but you have been asked about section 7; let

us go back to section 7. You have a manufacturer

in Australia who has manufactured the goods.

MR NASH: Before the - - -

DEANE J: Before the commencement, and who then offers them

for sale after the commencement. On the section 7

argument would you say - well, there you say

manufacture and sale were the same thing.

MR NASH:  If one adopted the reasoning of the majority,

Your Honour, one would have to say that the

manufacture and sale are considered as the one

transaction, because the majority - - -

DEANE J: Even though manufacture is not within the

definition of commercial exploitation?

MR NASH:  Yes, with respect Your Honour, I am forced

reluctantly to accede to Your Honour's point, but -

McHUGH J: That seems to indicate why you seem to be

reluctant to adopt the argument in the Full Court.

MR NASH:  Your Honour, if I can go back to my original

point, my real point in opposing this is that the

reasoning of Mr Justice Northrop in relation to the

Nintendo 12 18/6/93

operation of section 20(1) - leave 20(2) aside for

the moment - is correct. There was no material

before the court, and if I can take the Court to

the application book at pages 30, 31 and 32, one
there sees the reasoning by which

Mr Justice Sweeney found that there was the

requisite knowledge to bring section 20(2) into

play - - -

DEANE J:  I do not want to deter you, Mr Nash, but against

what you are putting, one might point out that the

further you go, the less it seems to be just a

question of construction of the transitional

provision, in that your - - -

MR NASH: With respect, Your Honour, that is absolutely the

case if the appeal is heard, but - - -

DEANE J: Yes, but you are really maintaining that the

construction of section 20 is wrong, which is not a

transitional provision.

MR NASH:  No, Your Honour, I am saying that the construction

of section 20(1) by Mr Justice Northrop is correct;
that there was no material before the court to
justify the conclusion that Mr Justice Sweeney came

to, and that appears clearly from His Honour's own

reasoning, frankly, and in the absence of evidence

to bring section 20(2) into play, then the result -

forget about technicalities of pleading - reached

by Mr Justice Northrop was the correct one. And,

for that reason, irrespective of the reasoning of

the majority on the transition point, this is not a

valid special leave point. With respect, that is

really all we can say by way of opposition.

DEANE J: Thank you, Mr Nash. Mr Macaw, the Court is

disposed to grant leave, but I should indicate to

you that in view of the relevant nature of the

interests involved in obtaining this Court's views

on the questions of construction involved here, it

may well be that the Court might take the approach,

if you do succeed, that the ordinary order for

costs would not be made. I do not want you to deal

with that now, but I just want to make clear to you

that if you do wish to have a grant of leave, that

point has been made and you should be aware of it.

MR MACAW: 

If the Court pleases. We proceed then on the

footing that if having taken instructions the
client regards that prospect as unpalatable, we

will communicate in a way which would have the

leave revoked.

DEANE J: Well, I was not indicating any view as to what

would happen one way or another, but I was simply

indicating to you that the Court, in granting

Nintendo 13 18/6/93

leave, would reserve to itself the right to take
account of considerations beyond those which

automatically apply in the making of an order for

costs.

MR MACAW:  Yes, thank you, Your Honour. May I mention

simply that the proposed notice of appeal failed to

include a ground which attacked the reasoning of

the majority as applicable to section 20(2) and

ought to have done so. We have an amended form

here, but we - - -

DEANE J:  We are not putting a constraint on the grounds of

appeal.

MR MACAW:	As Your Honour pleases.
DEANE J:	In this matter there will be a gr t of special

leave to appeal.

AT 10.46 AM THE MATTER WAS ADJOURNED SINE DIE

Nintendo 14 18/6/93