P.m. Sulcs and Associates Pty Ltd v Detroit Diesel-Allison Australia Pty Ltd
[1997] FCA 1143
•31 OCTOBER 1997
FEDERAL COURT OF AUSTRALIA
PRACTICE & PROCEDURE - summary dismissal - whether the applicant’s claim has any serious prospect of success - strike-out application - whether parts of the statement of claim are embarassing.
COPYRIGHT - whether the applicant has an exclusive licence - whether in substance an exclusive authority to “use and license” the programs, as those words are used in a particular agreement, clearly does not import an exclusive right to do an act which otherwise only the copyright owner could do.
Federal Court Rules, O 20 r 2, O 11 r 16
Copyright Act 1968, s 119
P. M. SULCS & ASSOCIATES PTY LTD v DETROIT DIESEL-ALLISON AUSTRALIA PTY LTD and TBI PTY LTD and LEO EDWARD TUTT and
ROBERT CLEMENT STEVENSON and P. M. SULCS & ASSOCIATES LTD
NG 295 of 1997
LEHANE J
SYDNEY
31 OCTOBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 295 of 1997
BETWEEN:
P. M. SULCS & ASSOCIATES PTY LTD
APPLICANTAND:
DETROIT DIESEL-ALLISON AUSTRALIA PTY LTD
FIRST RESPONDENTTBI PTY LTD
SECOND RESPONDENTLEO EDWARD TUTT
THIRD RESPONDENTROBERT CLEMENT STEVENSON
FOURTH RESPONDENTP. M. SULCS & ASSOCIATES LTD
FIFTH RESPONDENTJUDGE(S):
LEHANE J
DATE OF ORDER:
31 OCTOBER 1997
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The motions are dismissed.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 295 of 1997
BETWEEN:
P. M. SULCS & ASSOCIATES PTY LTD
APPLICANTAND:
DETROIT DIESEL-ALLISON AUSTRALIA PTY LTD
FIRST RESPONDENTTBI PTY LTD
SECOND RESPONDENTLEO EDWARD TUTT
THIRD RESPONDENTROBERT CLEMENT STEVENSON
FOURTH RESPONDENTP. M. SULCS & ASSOCIATES LTD
FIFTH RESPONDENT
JUDGE(S):
LEHANE J
DATE:
31 OCTOBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
There are before me two motions. One is that of the first, third and fourth respondents; the other is that of the second respondent. In each case the notice of motion is dated 23 June 1997. The motion of the first, third and fourth respondents seeks an order under O 20 r 2 of the Federal Court Rules that the proceeding be dismissed as against those respondents. In the alternative, it seeks under that rule an order that the proceeding be dismissed as against those respondents so far as it relates to certain claims for relief in the application and so much of the statement of claim as supports those claims for relief: the particular claims are for relief for infringement of copyright and the relevant paragraphs for the statement of claim are those which allege subsistence, ownership and infringement of copyright in certain computer programs. Alternatively to an order under O 20 r 2, the first, third and fourth respondents seek an order under O 11 r 16 striking out those paragraphs of the statement of claim and the claims for relief based on them. The motion of the second respondent does not seek an order that the proceeding be dismissed, as against it, in whole. Otherwise, the orders which it seeks are substantially identical with those sought by the other respondents.
The statement of claim
The statement of claim alleges that copyright subsists in certain computer programs (identified, by rather general descriptions, in a schedule) as original literary works. The fifth respondent is claimed to be the owner of the copyright. There is then an allegation that the applicant is the exclusive licensee of the copyright. That is the allegation which is crucial to the motions, and it is appropriate to set it out in full:
6.By an agreement in writing made on or about 26 April 1990 the fifth respondent, as owner of the said copyright, authorised the applicant as licensee, to the exclusion of all other persons, to grant licenses for the use of the said computer programs, and other rights in relation thereto, in Australia and in other countries. In the premises the applicant is the exclusive licensee of the said copyright.
Particulars: The agreement is embodied in the following documents:-
(a)Contract dated 26 April 1990 between Bedor Limited and Fifth Respondent.
(b)Contract dated 26 April 1990 between Applicant and Bedor Limited.
(c)Contract dated 27 April 1990 between Bedor Limited and Fifth Respondent.
(d)Letter dated 15 May 1992 from Bedor Limited to Fifth Respondent.
(e)Letter dated 24 June 1992 from Fifth Respondent to Bedor Limited.
(f)Contract dated 26 June 1992 between the Applicant and Bedor Limited.
The statement of claim then proceeds to allege two agreements by which the applicant granted to the second respondent non-exclusive licences to use certain of the computer programs; it alleges that those agreements incorporated certain terms, which are described, that those terms were breached by the second respondent and that each agreement was terminated by the applicant in accordance with its terms. (There is also a claim that the agreements have been rescinded). Then it is alleged that each of the first four respondents represented to the applicant that neither agreement had been breached, that that representation was made in order to induce the applicant to grant a licence to the first respondent to use certain of the computer programs and that, acting on the faith of the representation and in the belief that it was true, the applicant granted the first respondent such a licence. It is then claimed that the representation was not true and that it was made fraudulently. Then certain terms of the first respondent’s licence are alleged; it is said that the first respondent breached those terms and that the applicant has suffered loss by reason of the breach; and the applicant claims to have terminated the licence by reason of the breach. It is said that each of the licences to the second respondent and the licence to the first respondent required the licensee, within ten days of termination, to certify that it had destroyed the original and all copies of the computer programs licensed, and those two respondents are said to have breached that obligation. The alleged representation by the first two (corporate) respondents is claimed to have infringed s 52 of the Trade Practices Act 1974 and each of the third and fourth respondents is claimed to have been a person involved in the contravention, by reason of which the applicant claims to have suffered loss. Finally, each of the first four respondents is said to have infringed copyright in the computer programs by reproducing them, or parts of them, in Australia and thereafter supplying copies to others without permission of the applicant, and by using them without the permission of the applicant. The infringements are said to have been flagrant; the applicant claims to have suffered loss and damage by reason of them; each of the four respondents is claimed to have made profits by reason of the infringements; and it is claimed that the respondents threaten to continue to infringe unless restrained.
Strike-out application
For the purpose of the application under O 11 r 16 “the information before the Court is confined to the statement of claim”: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129. In the end, but for an argument based on the “premises” in which para 6 of the statement of claim says there is an exclusive licence (which I shall consider when dealing with the claim for summary dismissal) and one other point, no submissions were made to the effect that, on that footing, the relevant paragraphs of the application and statement of claim should be struck out. The “other” point to which I have referred emerged only during the respondents’ submissions in reply, and was to the effect that the description of the computer programs in the schedule to the statement of claim was in such general terms that the programs were not sufficiently identified and on that footing the claims as to subsistence, ownership and breach of copyright ought to be struck as embarrassing. The schedule describes the programs as follows:
Schedule
1. General Ledger
2. Accounts Receivable
3. Accounts Payable
4. Material Control System
5. C2
6. Purchase Orders
7. Job Costing
8. Unit Information
9. Fixed Assets
10. General Ledger Report Writer
It is necessary, however, to bear in mind the distinction between common law pleadings and the present system of pleading: see The Mutual Life & Citizens’ Assurance Company Ltd v Evatt (1970) 122 CLR 628 at 631; Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 414. There can be little doubt that (leaving aside the “premises” point) it would be open to the applicant, upon the paragraphs of the pleading dealing with copyright issues, to prove facts which would constitute a cause of action. As for the claim of embarrassment, it may be noted that each of the first, third and fourth respondents (by whose counsel the submission was made) have pleaded to the statement of claim by way of defences which, among other things, admit that each of the programs identified in the schedule is a literary work. The claim that the pleading is embarrassing in its generality was not foreshadowed or supported in written submissions filed and served on the motion. The necessary conclusion is, in my view, that no part of the statement of claim should be struck out on that basis.
Summary dismissal - exclusive license
The argument in support of the summary dismissal applications concentrated primarily on a submission that, on the face of the agreements on which the applicant relies, its claim to be the exclusive licensee of the copyright must necessarily fail, with the consequence that it has no standing to sue for infringement.
Section 115(1) of the Copyright Act 1968 provides that, subject to the Act, the owner of a copyright may bring an action for infringement. Division 3 of Pt V of the Copyright Act makes provision for proceedings in relation to a copyright in respect of which an exclusive licence is in force; and s 119 provides as follows:
119Subject to the succeeding sections of this Division:
(a)except against the owner of the copyright, the exclusive licensee has the same rights of action as he or she would have, and is entitled to the same remedies as he or she would be entitled to, by virtue of section 115 if the licence had been an assignment, and those rights and remedies are concurrent with the rights and remedies of the owner of the copyright under that section;
(b)except against the owner of the copyright, the exclusive licensee has the same rights of action as he or she would have, and is entitled to the same remedies as he or she would be entitled to, by virtue of section 116 if the licence had been an assignment; and
(c)the owner of the copyright does not have any rights of action that he or she would not have, and is not entitled to any remedies that he or she would not be entitled to, by virtue of section 116 if the licence had been an assignment.
An exclusive licence is defined by s 10(1) as:
...a licence in writing, signed by or on behalf of the owner... of copyright, authorising the licensee, to the exclusion of all other persons, to do an act that, by virtue of this Act, the owner of the copyright would, but for the licence, have the exclusive rights to do...
“Exclusive licensee” is given a corresponding meaning. In relation to a literary work (the computer programs are literary works), s 31(1) gives the owner of copyright the exclusive rights, among others, to reproduce the work in a material form and to make an adaptation of it. It is unnecessary to list the other things which the copyright owner is given the exclusive right to do: it was not suggested that any of them are relevant for present purposes.
Copies of the documents listed in the particulars of paragraph 6 of the statement of claim are in evidence on the summary dismissal motions. The crucial document is the first, that is the contract dated 26 April 1990 between Bedor Limited and the fifth respondent. The other documents, it is common ground on the motions, are the applicant’s chain of title: they show how the rights granted to Bedor Limited were acquired by applicant. It is the first document, described as a “distribution license agreement”, which defines the rights which the applicant claims to have acquired. Those rights were conferred on Bedor Limited by clause 2 of the distribution license agreement, as follows:
Whereas LICENSOR has the right to grant the distribution license granted hereunder LICENSOR authorizes DISTRIBUTOR, on a exclusive basis within the Territory, to use and license each Licensed Program as follows:
(a)as an End User;
(b)as a DP Service Supplier:
(c)as a DP Professional which licenses End Users and DP Service Suppliers.
(d)as a Distributor which licenses DP Professionals.
There is no definition of the expression “use”; a number of the expressions used in the clause are, however, defined. “End User” is an entity which uses the programs “solely for its own administrative, accounting and or management purposes”; “DP Service Supplier” is an entity which uses the programs to provide data processing services to End Users “on computer equipment owned or controlled by the DP Service Supplier”: the expression includes “Service Bureaus, time sharing services and the like”. “DP Professional” means an entity which supplies others with computer equipment, software or professional advice regarding either: the expression includes computer manufacturers, dealers, distributors, retail stores, “original equipment manufacturers”, software houses and data processing consultants. “Distributor” is an entity which licenses other DP Professionals. Finally, the “Territory” is “the countries and or the dominions of Australia, New Zealand, Singapore, Papua New Guinea and Hong Kong”.
The distribution license agreement thus grants “on an exclusive basis within the Territory” the right to “use and license” the programs in each of the ways described; but neither use nor licensing is one of the listed acts which the Copyright Act gives the owner of copyright the exclusive right to do. (I shall for convenience, ignore the chain of title and refer to the agreement as if it were one between the fifth respondent and the applicant). The present question, therefore, is in substance whether an exclusive authority to “use and license” the programs, as those words are used in the distribution license agreement, clearly does not import an exclusive right to do within the Territory an act which otherwise only the copyright owner could do.
Before considering that question, I should mention two other provisions of the distribution license agreement from which the respondents sought to draw support. One is clause 4, which provides (having regard to the later documents) that the fifth respondent is to provide the applicant with updates and enhancements to the programs, in the form of new releases or versions. That, of course, contemplates that the licensor will make copies or adaptations of the programs and (the respondents submitted) the agreement should not be construed so as to prohibit the fifth respondent from doing so in the Territory. The other provision referred to was clause 7, which provides:
The original and any copies of the Licensed Programs in whole or in part, which are made by DISTRIBUTOR or DP Professional, shall be the property of LICENSOR. All additional software which may from time to time be supplied or designed for DISTRIBUTOR by LICENSOR so as to enhance the use of the Licensed Programs shall be the property of LICENSOR.
The submission was that that reservation of property in the programs should be regarded as inconsistent with the conferral of an exclusive licence, on the footing that the Copyright Act gives an exclusive licensee (apparently to the exclusion of the copyright owner) the right to seek damages for infringement.
There was some concentration, in submissions, on the description of the document as a “distributor license agreement”, the description of the licensee as “DISTRIBUTOR” and the similarity between the substance of the distributor license agreement and an agreement under which a manufacturer might appoint a company as the exclusive distributor of its products in a particular territory. An exclusive right, conferred in that way, to distribute goods which incorporate works in which copyright subsists is not, of itself, an exclusive licence for the purposes of the Copyright Act: Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88. But that does not assist greatly in answering the present question. That question is, is it so clear that the rights in terms conferred by the distributor license agreement do not include an exclusive license to do an act comprised in the copyright that a claim, based on the proposition that they do, should be summarily dismissed?
It is apparent that clause 2 of the distributor license agreement may well - the question whether in fact it does is not for decision now - confer on the applicant, on an exclusive basis, rights which give it substantial control over the distribution and end use of the programs within the Territory. It is not easy to see how the programs might be put to “End Use” within the Territory, consistently with the agreement, otherwise than through a chain commencing with the applicant. It is not apparent by the light of nature, or from an acquaintance with the ordinary meanings of the terms used in clause 2, that the “use” and “licensing” for which it provides do not necessarily involve, or include, for example, reproduction of the programs; nor, I think, is it by any means clear beyond argument that if, for example, a right of reproduction is included in the rights to use and to license, the right to reproduce would be held to be non-exclusive. If, indeed, use and licensing include reproduction, or the licensing of a right to reproduce, it is by no means obvious that, the right to use and license being exclusive within the Territory, the right to reproduce included in it should not be exclusive also. In other words, I do not think it is possible for me, on the respondents’ motions and simply as a matter of construction of the distributor license agreement, to conclude that a claim that the right to use and license which the document provides incorporates an exclusive right to reproduce the copyright works in the territory, in certain circumstances or for certain purposes, has no serious prospect of success.
The applicant does not, in its pleading, allege an implied term; and counsel for the applicant made it clear, in his submissions, that while it should not be taken to abandon the possibility that it might seek to rely on an implied term, the applicant based its claim on the express words of clause 2. Counsel submitted, however, rightly in my view, that evidence of surrounding circumstances and, more particularly, of trade usage would be relevant to the question, what acts are included, in the present context, in the expression “to use and license each Licensed Program” in the ways which the agreement contemplates: counsel referred to Bowring & Walker Pty Ltd v Jacksons Corio Meat Packing (1965) Pty Ltd [1972] 1 NSWLR 277.
For those reasons, in my opinion it is not open to me to be satisfied to the General Steel standard that, as the respondents submitted, the distributor license agreement does not confer a licence to do an act comprised in the copyright or that, if there is such a licence, it is not exclusive. That being so, I do not think that clause 4 assists the respondents: if it is accepted that the provision of updates and enhancements involves reproducing or making adaptations of the programs, it does not follow that the acts of reproducing or adaptation contemplated are among those comprised in the applicant’s licence. Nor, in my view, is clause 7 of much assistance: if clause 2 is otherwise to be construed as conferring on the applicant an exclusive license to do certain acts by way of reproducing or adapting the works, it is not clear that clause 7 necessarily requires some more limited construction: the retention of property for which clause 7 provides is not necessarily inconsistent with an exclusive licence, as the Copyright Act defines that term.
In written submissions lodged by the second respondent, and adopted by the other respondents, it was conceded that an owner of copyright might assign or license part only of a right, for example by an exclusive licence to reproduce for a limited purpose only: this would nevertheless constitute an exclusive licence for the purposes of the Copyright Act. In oral submissions, counsel for the first, third and fourth respondents submitted that a licence is an exclusive licence for the purpose of the Copyright Act only if it grants to the licensee the right, exclusive of all other persons including the copyright owner, to do one or more of the categories of acts listed in s 31(1): thus, in the case of a licence to reproduce a work, an exclusive licence must cover all reproductions, not merely reproductions made in limited circumstances or for limited purposes. I was referred to no authority specifically on the point, and I know of none, but it is by no means clear that the argument is correct: the passage in Lahore, Copyright and Designs paras 22,010 and 22,015 (to which counsel referred) suggests, as I read it, the contrary. The definition of “exclusive licence” in s 10(1) of the Copyright Act refers to “a licence... to do an act that... the owner of the copyright would, but for the licence, have the exclusive right to do”, words which are more apt to refer to a particular act or particular acts than to categories of acts.
Thus, in my opinion, the arguments based on the construction of the distributor license agreement fail. It was submitted, in support of the strike-out application, that para 6 of the statement of claim, by the terms in which it describes the authority granted to the applicant by the distributor license agreement, does not disclose a cause of action because it does not plead a licence, let alone an exclusive licence, to do an act comprised in the copyright. It may, ideally, have been preferable if the phrase “in the premises” had referred back to words more clearly indicating to the proper subject matter of an exclusive licence. On the footing, however, of my conclusions about the possible meaning of the expression “use and license” in the distributor license agreement, I think it would inappropriate to strike out the copyright claims on that basis.
Summary dismissal: other matters
The respondents sought to read a paragraph of an affidavit of a member of the firm of solicitors acting for their first, third and fourth respondents, referring to an annexed document described as a software licensing agreement between the fifth respondent and Cullens Detroit-Diesel Allison Limited “dated and effective March 31, 1990”. The relevance of the document was said to be that it demonstrated that the rights granted to the applicant under the distributor license agreement could not be exclusive, because concurrent rights had previously been granted by the software licensing agreement. I did not admit the software licensing agreement or the paragraph in the solicitor’s affidavit referring to it: my view was, and remains, that to embark on the course proposed by the respondents was to accept an invitation to conduct a (presumably limited) preliminary trial of what may be expected to be among the more significant issues of fact ultimately to be resolved between the parties. The copy document, on its own, could not, in my view, enable me to reach, certainly according to the General Steel standard or possibly at all, any conclusion about the factual context relevant to the effect to be given to the distributor license agreement. To permit the software licensing agreement to be proved and to admit it would have required that an opportunity be given to the applicant to lead evidence which, no doubt, it is likely to lead at the trial: an exercise which, in my view, is quite inappropriate on a motion of the present kind. At the trial the applicant will bear the burden of proving the elements of its claims; it is not required to discharge that burden now.
The respondents submitted also that I should conclude that the fifth respondent was not the owner of copyright in all the programs licensed by the distributor license agreement. This contention was supported principally by reference to a sublicence agreement dated 16 July 1987 between the second respondent and the applicant: that is one of the license agreements which, in the statement of claim, the applicant alleges to have been breached by the second respondent and to have been terminated. The immediate point is that in a schedule to the document which describes the software with which it deals, a company other than the fifth respondent is listed as the “licensor” in relation to three programs (“General Ledger”, “Accounts receivable” and “Accounts payable”) bearing the same names as three of the programs dealt with by the distributor license agreement. Again, however, that document does not, for the purpose of the respondents’ motions, demonstrate according to the required standard the proposition for which the respondents contend. It indicates that there may be a question of fact whether the programs with which the two documents deal coincide or overlap and that there may equally be a question (on which at the trial the applicant will bear the onus of proof) as to whether the fifth respondent, when the distributor license agreement was entered into, indeed owned the copyright in the programs as the documents suggests. In my view it advances the matter no further.
Th first, third and fourth respondents sought orders wholly dismissing the proceeding. Their submission, as to the claims other than those based on copyright, was that they should be dismissed because they could not, if the copyright claims were dismissed or struck out, lead to the grant of any relief. But it was not suggested that, if the copyright claims proceed, the other claims should not be left on foot as well.
Conclusion
For the reasons I have given the respondents’ motions are dismissed. Counsel indicated that they wished to have an opportunity, in the light of my reasons, to make submissions about costs; when I deliver this judgment I shall set the matter down for argument on that point and in order to make directions for the future conduct of the proceeding.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane
Associate:
Dated: 31 October 1997
Counsel for the Applicant: Mr D M Yates and Ms A J Silink Solicitor for the Applicant: Hillman Mura & Consultants Counsel for the First, Third and Fourth Respondents: Ms J R Baird Solicitor for the First, Third and Fourth Respondents: Bonnins Solicitors Solicitor for the Second Respondent: Mallesons Stephen Jaques Date of Hearing: 24 October 1997 Date of Judgment: 31 October 1997
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