Phonographic Performance Company of Australia Ltd v The Martini Lounge & Nightclub Pty Ltd - [2013] FMCA 67

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD & ORS v THE MARTINI LOUNGE & NIGHTCLUB PTY LTD & ORS

[2013] FMCA 67

COPYRIGHT – Infringement of copyright in sound recordings – proceedings commenced by collection society – where no appearance by respondents – where application for summary judgment – where damages claimed for loss of licence fees – where additional damages sought – consideration of factors under s.115(4) Copyright Act 1968 – assessment of damages – fixed costs assessed.

Copyright Act 1968, (Cth) ss.85(1)(b), 115, 115(2), 115(4)(b)(i)
Federal Magistrates Court Rules 2001, r.13.03B(2)(d)

Sega Enterprises Limited v Galaxy Electronics Pty Limited (1998) 39 IPR 577
Autodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69
Microsoft Corporation v Goodview Electronics (2000) 49 IPR
Autodesk Inc v Yee (1996) 68 FCR 391
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88
Ravenscroft v Herbert and New English Library (1980) RPC 1
APRA v Cougars Tavern [2008] FMCA 369
Phonographic Performance Company of Australia Limited v All Girls Entertainment Pty Ltd & Ors [2010] FMCA 593
Phonographic Performance Company of Australia Ltd & Ors v Adelaide City Entertainment [2005] FMCA 923
Microsoft Corporation v Glostar Pty Limited (2003) 57 IPR 518
PPCA Limited & Ors v Jabouri Brothers & Ors Pty Ltd [2011] FMCA 799
PPCA & Ors v Camilleri [2012] FMCA 147

Applicants:

PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD
ACN 000 680 704 & ORS

First Respondent:

THE MARTINI LOUNGE & NIGHTCLUB PTY LTD (ACN 140 302 790)

Second Respondent:

JIM FOULIDIS

Third Respondent:

NEIL GIANNA

Fourth Respondent:

JUSTIN CHAPKOUN

File Number:

SYG 2260 of 2012

Judgment of:

Raphael FM

Hearing date:

29 January 2013

Date of Last Submission:

29 January 2013

Delivered at:

Sydney

Delivered on:

29 January 2013

REPRESENTATION

Solicitors for the Applicants:

K&L Gates

For the Respondents:

No appearance

ORDERS

The respondents have infringed the applicants’ copyright in the following sound recordings (Identified Infringing Recordings):

Artist	Title
Florence & The Machine	You Got the Love (Club Mix)
Medina	You and I
Rihanna	Only Girl in the World

The respondents, whether by themselves, their servants, agents or otherwise, be permanently restrained from causing or authorising the Identified Infringing Recordings being performed in public without the licence of the relevant applicants.
The respondents, whether by themselves, their servants, agents or otherwise, be permanently restrained from causing or authorising any sound recordings licensed to the first applicant (being those sound recordings recorded under the labels listed at being heard in public, without the licence of the first applicant or the respective copyright owner(s).
The respondents shall pay the first applicant the sum of $15,212.20 pursuant to s.115(2) of the Copyright Act 1968 (Cth) (Act).
The respondents shall pay the first applicant interest on the section 115(2) damages in the sum of $2,250.18 pursuant to s76 of the Federal Magistrates Act 1999 (Cth).
The first respondent shall pay the first applicant the sum of $25,000.00 pursuant to s.115(4) of the Act.
The second respondent shall pay the first applicant the sum of $40,000.00 pursuant to s.115(4) of the Act.
The third respondent shall pay the first applicant the sum of $40,000.00 pursuant to s.115(4) of the Act.
The fourth respondent shall pay the first applicant the sum of $25,000.00 pursuant to s115(4) of the Act.
The first respondent shall pay the first applicant the sum of $8,136.59 for breach of contract.
The respondents shall pay the applicants’ costs in the fixed sum of $8,200.00.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2260 of 2012

PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD ACN 000 680 704 & ORS

Applicants

And

THE MARTINI LOUNGE & NIGHTCLUB PTY LTD
ACN 140 302 790

First Respondent

JIM FOULIDIS

Second Respondent

NEIL GIANNA

Third Respondent

JUSTIN CHAPKOUN

Fourth Respondent

REASONS FOR JUDGMENT

There comes before me today an application made under Rule 13.03B(2)(d) of the Federal Magistrates Court Rules 2001 for summary judgment against the respondents in an action commenced on 11 October 2012. The action is brought under the Copyright Act by the applicants, the Phonographic Performance Company of Australia Limited, which I shall hereinafter refer to as the “collections society”. It is notorious that the collection society operates as a non-exclusive licensee of most of the record companies whose product is sold in Australia. A complete list of those companies is contained with the papers. The collection society charges a licence fee to sub-licensees for the performance of the copyright works either in venues or by broadcast, amongst other methods. The collection society also polices the compliance by persons who should hold sub-licenses because of the nature of their activities, and where there is a failure to obtain such a licence, brings proceedings in this and other relevant courts. I have noted in the past that the bringing of such proceedings is a time-consuming and expensive business for the collection society. It appears that such action is only taken in the most extreme of cases. This is reflected in the damages that have been awarded where breach of the copyright contained in s.85(1)(b) of the Copyright Act 1968, (Cth)[1] has been found.
[1] “Act”
In this matter a first court date took place on 12 November 2012. There had been no appearance by any of the respondents and so I made orders that they were to file and serve on the applicants a response to the application no later than 26 November 2012. In default of compliance with that order the collection society had leave to apply for default judgment. No response was filed and this is the hearing of the application for default judgment.
The respondents are the proprietor and the directors of the former proprietor company of a nightclub that was known as The Martini Lounge but is now known as Seclusion. It operates from premises at 229 Queensberry Street, Carlton, Victoria. According to the affidavit of Fahad Zafar Memon, sworn on 13 September 2012, the ground floor contains a bar, a dance floor and some sofas. A smoking room was located upstairs. There was also a second upstairs room containing a bar. When Mr Memon visited the premises at the request of the collection society on 18 March 2011 he heard there played three tracks of recorded music detailed at paragraph 13 of his affidavit. The tracks referred to have been identified as being material the copyright in which has been licensed to the collection society.
The reason that Mr Memon was sent down to investigate what was occurring at the premises was because the respondents had agreed to take out a licence in October 2010. Although this had been done, the licence fee was not paid, and so the licence was terminated on 28 February 2011. The purpose of Mr Memon’s visit was to discover whether or not the premises was still operating and causing recordings to be heard in public for which no licence had been obtained.
Subsequent to Mr Memon’s visit a considerable amount of correspondence ensued between the collection society and a solicitor acting on behalf of the respondents. This correspondence is all contained in an affidavit of Ms Anna Killick and it shows an attempt by the collection society to obtain payment of the outstanding licence fees and to ensure that, if the respondents intended to continue operating the nightclub, a further licence was taken out and the fees therefore paid. None of this occurred. Eventually the collection society determined to bring winding up proceedings against the company for the outstanding fees and costs. The power to claim costs is found in part 3.5 of the licence agreement between the first respondent and the collection society. Some money was paid but an amount of $8,136.59 remained outstanding and this sum is claimed in the application before me by way of breach of contract in the accrued and associated jurisdiction of this court.
There can be no doubt, from the content of Ms Killick’s affidavit and that of Mr Memon, the respondents were aware that, by continuing to play recorded music licensed to the collection society in the nightclub, they were in breach of copyright. It appears that the third respondent, Mr Chapkoun, resigned as a director of the company in 2011 but prior to that he had been involved in the venue’s operation. Mr Foulidis and Mr Gianna remain involved with the premises. Mr Foulidis operates it in his personal capacity as a sole trader, the company being in the process of being deregistered, but not having been deregistered, as at 23 January 2013 as a search contained as an exhibit to the affidavit of Bianco Davis sworn on 25 January 2013 reveals. It should be stated at this point that the collection society has joined as additional applicants all the record companies with whom it has a non-exclusive licence and the court is satisfied that in this way it has the right to sue for infringement of copyright; Sega Enterprises Limited v Galaxy Electronics Pty Limited (1998) 39 IPR 577 at [581-2].
The court has been provided with some helpful outline submissions prepared by the applicants and served upon the respondents. These submissions will be kept with the file and have been of great assistance to the court in determining this application. The court is satisfied from reading the affidavits of Ms Killick and Mr Memon previously referred to, that an infringement of copyright for which the collection society can bring proceedings has occurred. It is also satisfied that the breach was deliberate and is satisfied that the collection society has made every effort to ensure that the respondents, in particular the first respondents, entered into the appropriate agreements so that it could broadcast the copyright works to the public. It is satisfied that these entreaties have been ignored and that licensed recorded music continues to be performed on the premises. This leads it to believe that it will be appropriate to make a permanent injunction against the respondents and to make an award of damages under s.115 of the Act.
Section 115 provides remedies for breach of copyright and those remedies include under s.115(4) a remedy of additional damages. The collection society seeks such damages in addition to damages under s.115(2) which have been calculated in the sum of $15,212.20 under what is known as the “licence fee” approach. It has been applied in the Federal Court and in this court on many occasions; Autodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 at [75][2] per Wilcox J; Microsoft Corporation v Goodview Electronics (2000) 49 IPR at [55][3] per Branson J. This assessment is based upon an inference that the court may make. Presented with a choice between paying a licence fee and not using the work the infringer would have paid the licence fee; Autodesk, Microsoft.
[2] “Autodesk”
[3] “Microsoft”
I am prepared to make such an inference in this case as the applicant submits:
“The respondents rely upon the public playing of music to attract customers and generate their business. It is a ready inference that the infringers would pay the licence fee rather than change the nature of their business.”
The amount claimed is based upon the collection society’s fee structure and on an undated application made by Mr Foulidis on behalf of Martini Lounge received on 8 June 2011. A calculation on this basis is probably generous to the respondents and I am prepared to accept it and to award damages in that sum together with interest.
I am also prepared to grant damages for breach of contract as claimed in the sum of $8,136.59. I am satisfied that those costs were incurred through the documentation contained in Ms Killick’s affidavit and of the right of the collection society to obtain these funds pursuant to the contract which the first respondent signed but did not comply with.
I would also be prepared to make an award of damages under s.115(4) of the Act as additional damages. These additional damages are an independent head of relief to any damages awarded under s.115(2): Autodesk Inc v Yee (1996) 68 FCR 391 at [394]; Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at [92] per Burchett J. The section sets out a number of matters that the court has to have regard to in considering whether additional damages should be awarded and, if so, the amount. The first of those matters is the flagrancy of the infringement. It is now established that flagrancy includes “deliberate and calculated copyright infringement”; Autodesk; Ravenscroft v Herbert and New English Library (1980) RPC 193 at 208. In this case I have already indicated that I am satisfied that the breach complained of was deliberate. All the parties are well aware of their obligations to the collection society and of their failure to comply with them.
The second matter to which the court should have regard is the need to deter similar infringements of copyright. This court has been approached by the collection society on a number of occasions where the broadcasting of unlicensed material in nightclubs has occurred. Three such cases were APRA v Cougars Tavern [2008] FMCA 369; Phonographic Performance Company of Australia Limited v All Girls Entertainment Pty Ltd & Ors [2010] FMCA 593 and Phonographic Performance Company of Australia Ltd & Ors v Adelaide City Entertainment [2005] FMCA 923. In each of those cases the court made it clear that it considered there was a strong need to deter similar infringement and ordered substantial sums by way of additional damages in order to have this effect.
The third matter which the court should take into account is the conduct of the defendant after the act constituting the infringement or the defendant was informed that he had infringed the copyright. The evidence which is before me indicates that, upon being informed of the infringement, the various respondents did little or nothing to remedy the situation. Some money was paid towards the outstanding licence fee but no money was paid in respect of future licence fees and all correspondence between the collection society and the respondents has been one way.
The court must also look to any benefit shown to have accrued to the respondent by reason of the infringement. The first respondent has had the benefit of playing unlicensed music for some years now at a time when other law abiding nightclubs have been paying a licence fee. This has given them a substantial commercial advantage and has commercially disadvantaged both the collection society and its principals.
The final requirement is to consider all other relevant matters. To the extent that this is not included in the “conduct of the respondents” under s.115(4)(b)(i) I would say that the court should take into account the failure of any of the respondents to take part in these proceedings in any manner whatsoever.
There is no science in awarding these damages. The applicant has provided the court with a number of examples that are listed from paragraphs 99 to 109, pages 16 and 17 of the submissions. These show sums ranging from $291,625.00 in Microsoft Corporation v Glostar Pty Limited (2003) 57 IPR 518, to $30,000 in PPCA Limited & Ors v Jabouri Brothers & Ors Pty Ltd [2011] FMCA 799[4] and PPCA & Others v Camilleri [2012] FMCA 147[5]. Jabouri involved playing sound recordings in a clothing store where licence fees for past infringement had been paid shortly before the hearing and the respondents appeared at the final hearing and made submissions with regard to mitigating circumstances. In Camilleri the respondent played sound recordings via a jukebox in a hotel and she also had paid the full amount of the licence fees prior to the hearing.
[4] “Jabouri”
[5] “Camilleri”
In assessing the additional damages in this case I have taken into account the matters adumbrated above and the applicant’s submissions that an appropriate figure would be $70,000.00 for the first respondent, $70,000.00 for the each of the second and third respondents and $50,000.00 for the fourth respondent. I am sensible of the fact that it is unlikely that any award made against the first respondent will produce funds. If the company was still financially healthy it would be operating the venue but it is no longer. Mr Foulidis is so doing.
I acknowledge the fact that Mr Chapkoun resigned as a director of the first respondent in 2011 and there is no evidence that he had anything more to do with the business thereafter. I think the court should have regard to the totality of the amounts awarded in cases where the applicant is asking not for a general order against all of the respondents together but what are, in effect, individual orders. Taking those matters into account I will be prepared to make orders against the first respondent for additional damages in the sum of $25,000.00, against the second respondent Mr Foulidis in the sum of $40,000.00, against the third respondent Mr Gianna in the sum $40,000.00, and against the fourth respondent Mr Chapkoun in the sum of $25,000. I would order that the sums awarded for general damages under the Act and for breach of contract bear interest at the court rates as calculated by the respondents in a schedule of interest provided to the court.
I believe that the best order to make in all the circumstances is that the applicant prepare, within seven days, short minutes of order, taking into account the awards made in these reasons, sending a copy to each of the respondents. The court will then enter those orders in 14 days of today unless application is made by any of the respondents. The letter which the applicant should send to the respondents enclosing the short minutes of order should make reference to that fact.
The applicant has also asked for costs to be assessed in the sum of $8,200.00 which is the same amount as was awarded in Camilleri. I thought the assessment of costs in that sum was generous to the respondents and think that it is so in this case but that will be the award I shall make.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Raphael FM

Date: 12 February 2013