PPCA v Adelaide City Entertainment
[2005] FMCA 923
•29 June 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PHONOGRAPHIC PERFORMANCE & ORS v ADELAIDE CITY ENTERTAINMENT | [2005] FMCA 923 |
| COPYRIGHT – Decision where applicant does not appear – consideration of the requirements for proof of claim – discussion of damages – whether additional damages should be awarded – assessment of damages – assessment of costs under Federal Magistrates Court Rules. |
| Copyright Act 1968, ss.26, 115(4) Federal Magistrates Act 1999, s.76 |
| Microsoft Corporation v Goodview Electronics (2000) 49 IPR at [66-67] Audodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 Universal Music & Ors v Hendy Petroleum & Ors [2003] FMCA 373 Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135 |
| Applicant: | PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD & ORS |
| Respondent: | ADELAIDE CITY ENTERTAINMENT PTY LTD |
| File Number: | SYG 1138 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 29 June 2005 |
| Date of Last Submission: | 29 June 2005 |
| Delivered at: | Sydney |
| Delivered on: | 29 June 2005 |
REPRESENTATION
| Counsel for the Applicant: | Ms S Balafoutis |
| Counsel for the Respondent: | No Appearance |
ORDERS
The Respondent has infringed the Second to Fifth Applicants’ copyright in the following sound recordings referred to in the affidavits of Jason McLennan and Paul Condous sworn on 27 and 29 April 2005 respectively (the Identified Infringing Recordings);
Artist Title Big Audio Dynamite Rush George Michael Faith The Romantics What I Like About You Buggles Video Killed the Radio Star Eurythmics Sweet Dreams Dee –lite Groove is in the Heart J Geils Band Centrefold The Knack My Sharona David Bowie/Queen Under Pressure The Beatles Twist and Shout 500 Miles (I’m Gonna Be) Proclaimers
The Respondent, whether by itself, its servants, agents or otherwise, be permanently restrained from causing or authorising any of the Identified Infringing Recordings being heard in public without the licence of the relevant Applicant.
The Respondent, whether by itself, its servants, agents or otherwise, be permanently restrained from causing or authorising any sound recordings contained within the First Catalogue (as defined in Attachment A hereto) being heard in public, without the licence of the First Applicant or the respective copyright owner(s).
The Respondent shall pay the First Applicant the sum of $48,812.53 pursuant to s.115(2) of the Copyright Act 1968 (Cth).
The Respondent shall pay the First Applicant the sum of $9,268.43 as interest on s.115(2) of the Copyright Act 1968 (Cth) damages pursuant to s.76 of the Federal Magistrates Act 1999 (Cth).
The Respondent shall pay the First Applicant additional damages pursuant to s.115(4) of the Copyright Act 1968 (Cth) in the sum of $85,000.
The Respondent shall pay the First Applicant’s costs of this Application to be assessed in accordance with Schedule 1 of the Federal Magistrates Court Rules.
Order 6 is stayed for 21 days or until 9.15am on 28 July 2005 if the Respondent files prior to 20 July 2005 an application returnable on
28 July 2005 to be heard on the award contained therein.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1138 of 2005
| PHONOGRAPHIC PERFORMANCE COMPANY OF AUSTRALIA LTD & ORS |
Applicant
And
| ADELAIDE CITY ENTERTAINMENT PTY LTD |
Respondent
REASONS FOR JUDGMENT
The proceeding before me today is an application by the Phonographic Performance Company of Australia Ltd and four record companies, for injunctions, damages and additional damages against the respondent, which is the proprietor of a nightclub known as Heaven operating in the City of Adelaide. The proceedings were commenced by application on 3 May 2005, and were given what is known in this court as a "first court date" on 3 June 2005. There was filed with the Registry on 23 May 2005 an affidavit of Dean Clarke Bowen indicating that he had served the application and the affidavits in support of it on the respondent on 9 May.
The respondent did not appear at the hearing on 3 June. On that day I made orders adjourning the matter until 9.30am, on 21 June 2005, and I ordered the applicants to advise the respondent of the adjourned hearing date. On 14 June 2005, the applicant through its legal officer wrote to the respondent informing it that a new hearing had been listed on 21 June 2005 at 9.30 am. The letter continued:
“In the event that Adelaide City Entertainment Pty Ltd does not appear at the hearing on 21 June (which we presently understand will be the case), we confirm that the applicants will seek judgment against the company for the sum of $48,812.53 being the full amount of the PPCA licence fees, which we believe are due to date, as set out in the affidavit of Jason McLellan dated
27 April 2005, together with interest and legal costs.”
The letter went on to suggest that if the respondent wished to make representations to the court it should appear.
The matter came on before me on 21 June and the respondent was not in attendance. The applicants sought ex-parte judgment but I was unable to deal with the matter on that day. I adjourned the proceedings until 2.15 on 29 June 2005, and once again, ordered the applicant to advise the respondent. There has been tendered to me today a copy of a letter written on 21 June 2005 to the respondent advising it of this adjourned hearing. On 28 June 2005, a further letter was sent. The importance of this letter is that it indicates that the applicants will be seeking:
“All the relief and on the terms set out in the application filed on 3 May 2005.”
This statement is important because the letter of 14 June 2005 does not warn the respondent of the possibility of a very large sum of money being awarded by way of additional damages. That matter could be said to be hinted at by the letter of 28 June. The fact that the respondent may not clearly understand the nature of the relief claimed, and not have been aware of it from the correspondence with the applicants, is a reason for me to make the form of orders which I will make concerning damages later in these reasons.
I have been provided with an outline of submissions prepared by
Mr Balafoutis, counsel for the applicants. I propose that a copy of this outline should be kept with the papers because it deals with all the necessary matters required in order to obtain judgment in a copyright matter of this nature. It refers in detail to the evidence contained in the affidavits which have been filed, and it seems to me unnecessary where the respondent has shown such scant respect for the court to repeat many of the matters contained therein. I will, however, give a short outline.
In order to commence proceedings under part 5 of the Copyright Act, it is necessary for the applicants to establish that they have copyright in the works, which they claim have been infringed. The Copyright Act provides in section 126 for two assumptions to be made, and the applicants in this case rely on both of them. Section 126 is in the following form:
126. Presumptions as to subsistence and ownership of copyright
In an action brought by virtue of this Part:
(a)copyright shall be presumed to subsist in the work or other subject-matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject-matter; and
(b) where the subsistence of the copyright is established—the plaintiff shall be presumed to be the owner of the copyright if he or she claims to be the owner of the copyright and the defendant does not put in issue the question of his or her ownership.
As the defendant has not appeared, I can accept that it does not put in issue the question of whether the copyright subsists in the work, nor does it put in issue the question of the ownership of the copyright alleged.
The record companies having established to my satisfaction they own the copyright, are entitled to grant a licence to allow the sound recordings to be heard in public. They have done this. The record companies have each licensed by way an agreement entitled Public Performance and Transmission Input Agreement, the PPCA to cause what I will describe as "controlled sound recordings" to be heard in public. An example of one of these agreements is found in exhibit JBM7 to the affidavit of Jason McLellan. The PPCA then provides a sub-licence to individual persons, companies or organisation who wish to play music in public, and for this they charge a licence fee which is distributed amongst copyright owners in accordance with the terms of the input agreement. I am satisfied that, in this way, PPCA has the right to be named as an applicant in these proceedings, as are the four record companies referred to.
The existence of copyright having been established, it is necessary for the applicants to prove that that copyright in those sound recordings has been breached, but in this case, the applicants go further. The evidence, in particular, the affidavit of Mr Jason McLellan, shows that the nightclub Heaven has been operating for some considerable time, but that from 15 July 2002, it was operated by the respondent. The evidence establishes that from March 1994 until 15 July 2002, the company, which owned and operated Heaven paid licence fees to PPCA, the first applicant, but since that time no licence fees have been paid. The payment of a licence fee to PPCA covers the venue for playing the sound recordings of any company that is a signatory to an input agreement. For the avoidance of doubt, I would add that the payment of the licence fee allows the venue to play any recording, on any label, of any company that has signed an input agreement.
The evidence shows that when it came to the attention of PPCA that the ownership of the respondent had changed, correspondence commenced requesting that the new owners enter into a licence agreement. About 30 letters were sent and although some replies were received no licence agreement was ever entered into. Notwithstanding this, the nightclub continued to be operated, and evidence shows that it is a successful and popular venue. I am asked to infer from this evidence that since the
15 June 2002, the respondent have acted in breach of copyright by playing sound recordings which would have attracted a fee to PPCA.
The PPCA has limited resources. The evidence indicates that breaches of copyright surrounding the playing of sound recordings is rife.
It could be argued that PPCA delayed unnecessarily in seeking the relief which is now requested from this court, and that I should take this into account when deciding firstly to grant permanent injunctions, and secondly, the damages requested. I might have been prepared to do this if the respondent had attended the hearing, but it has not. The evidence indicates that on the nights of 4 and 5 February 2004, a
Mr Condous attended the nightclub and he heard there played the particular infringing sound recordings that are described in the application and in which copyright is held by the second to fifth applicants as identified in the schedule of definitions forming part of the proposed orders in the application. The evidence which I have, in the form of the affidavits, satisfies me that the copyright of the applicants has been breached. I am also satisfied that the second to fifth applicants have given the first applicant their power of attorney to commence these proceedings, and that, therefore, all the necessary matters that would allow me to make orders against the respondent have been established.The applicants seek permanent injunctions and damages. In order that I may grant a permanent injunction, I must be satisfied not only that an infringing act has occurred, but that the injunction is necessary to prevent such acts being repeated. In his submissions, Mr Balafoutis refers to the decision of Branson J in Microsoft Corporation v Goodview Electronics (2000) 49 IPR at [66-67], where injunctions in broad terms were indicated to be warranted where the defendants have shown themselves to be untrustworthy or have flagrantly breached copyright. The evidence which I have of some three years of operation without signing a PPCA a licence agreement, and the failure of the respondent to appear or to indicate in any way that their conduct will change, is to my mind sufficient reason to give the permanent injunctions requested by the applicants. The respondent should note that the form of orders do not confine themselves merely to the catalogued sound recordings which were heard to have been played in February and are identified as "identified infringing recordings". The orders prohibit the respondent from playing any sound recording contained within the first catalogue (as defined) of the first applicant and that catalogue, I am informed, is large indeed. I am informed by Mr Balafoutis that this catalogue is contained in information that can be found on the website of PPCA and the respondent would do well to download this information.
Two types of damages are requested by the applicants. Firstly, damages pursuant to subsection 115(2) of the Act. That is, damages for infringement as opposed to an account of profits. Mr Balafoutis submits that the appropriate measure of damages is "the licence fee" approach, which has been adopted in a number of cases including Audodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 at [75] per Wilcox J, and the other authorities to which Mr Balafoutis refers in his written submissions. Given the method by which PPCA deals with its licence holders, this seems to me a particularly appropriate method of assessing damages. I am satisfied from a consideration of the input agreement that damages awarded to PPCA will find their way to the relevant copyright owners through an allocation and distribution process, which is set out in clause 6 of that agreement.
Mr Balafoutis on behalf of all the applicants has agreed that damages should be awarded only to the first applicant so that there can be no possibility of an argument that damages are being unfairly distributed only to the four music companies named in the proceedings, when it is clear from the evidence that other music companies, who are associated with PPCA, had their titles broadcast and their copyright infringed by the actions of the respondent. In paragraph 81 of the affidavit of
Mr McLellan he sets out the annual fees which would have been payable by the respondent if it had obtained the licence from PPCA that they should have obtained in order to play recorded items from the catalogue of PPCA. These total the sum of $48,812.53. Mr McLellan points out that this amount does not include any provision for public performance of protected sound recordings in the respondent's bar facilities, which are open more days per week than the number of nights of operation indicated in the table found at paragraph 81 and, therefore, the damages claimed may be an under estimate rather than an over estimate.In the absence of any argument to the contrary, I am satisfied that Mr McLellan's calculations are appropriate and I would award damages in the sum of $48,812.53 pursuant to subsection 115(2). I have also been asked, and will agree, to award interest on those damages which, up to today's date, has been calculated in the sum of $9268.43 pursuant to section 76 of the Federal Magistrates Act 1999 (Cth).
The applicants also seek from this court additional damages under subsection 115(4). That is in the following form:
115(4). Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
The court must have regard to the matters referred to in subparagraphs 4(b)(i) to (iv) and, in particular, because they are matters only recently enacted, subparagraph (4)(b)(1a) and (1b). In that regard I make the following comments. Firstly, I am satisfied that the infringement by the respondent has been flagrant. To totally ignore a series of 30 letters over a period of three years, and to play recorded music, clearly the copyright of third parties, to large audiences in a popular nightclub is, to my mind, flagrant activity. It is activity designed to insult the copyright owners and to bring the existence of copyright protection into disrepute.
Second, I have no doubt that it is appropriate to try and deter similar infringements. Subsection 115(4)(1a) was deliberately inserted into the Act because of pressure upon the parliament from copyright owners in this field, and in the field of motion pictures, who notoriously have been the victims of unlicensed activity. Any steps which the court can take to prevent the continuance of this type of activity should be taken. Third, it could be said that the respondent was aware from the very first letter that it had an obligation either to sign a license agreement with PPCA or not play the recordings of companies associated with it. In fact, the evidence goes further. It indicates that one of the current officers of the respondent company was an officer of the previous owner which did, in fact, make licence payments to PPCA. Notwithstanding this, it allowed three years to pass and did nothing and it has allowed these proceedings to be commenced and has also done nothing. Fourth, subsection (4)(b)(2) is not relevant in this case but subsection (4)(b)(3) would appear to be. It is axiomatic that if a business is not required to pay a licence fee of some $15,000 per annum in order to carry on its business, it is in a better position to attract customers than another similar corporation which does act in accordance with law. I have taken all these matters into account. Damages in copyright cases are at large. They are what is described as "matters for the jury". I must, of course, make my decision judicially and taking notice of previous awards. I considered these matters in the first such case brought in this court, Universal Music & Ors v Hendy Petroleum & Ors [2003] FMCA 373. In that case I awarded additional damages of $17,500, where only a few CDs had been found to have been "burnt", and in all the circumstances of that case, I opined that the conduct of the respondent would fall towards the lower end of the range of flagrancy. I was also influenced by the fact that compensatory damages were limited to $299. I am aware of the authorities cited by Mr Balafoutis at paragraph 53 of his submissions, such as, Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135, where very high amounts of damages were awarded for illegality which he describes as "concealed, deliberate, and for the considerable pecuniary benefit of the respondent".
The applicants have suggested that a figure between $80,000 and $100,000 would be appropriate as additional damages in this case.
I believe it would serve as a loud warning to other current and potential infringers. If it did this, it would greatly assist the applicant in its responsibilities to police a large and ephemeral music playing industry. I would, therefore, propose, subject to what I shall say below, to award the first applicant, on behalf of all of its licensors, the sum of $85,000 by way of additional damages under subsection 115(4). This is a large sum of money, and as I discussed earlier in these reasons, it may be that the respondent did not entirely realise the seriousness of their conduct and its repercussions.
I will, therefore, stay that part of my order which gives damages under subsection 115(4) for a period of 21 days during which time I will arrange for a copy of this judgment to be sent to the respondent, and provide them with an opportunity to request to be heard on the additional damages at 9.30am, on 28 July 2005. I should make it clear that this opportunity is only offered in respect of the subsection 115(4) damages. The injunctions are effective immediately upon service of the orders, and the judgment for subsection 115(2) damages and interest equally come into force at the time when the orders are taken out.
Finally, I would award the applicant its costs of the proceedings. The costs should be calculated in accordance with schedule 1 of the Federal Magistrates Court Rules noting that the applicant is entitled to a certificate for counsel and that in order to assist in the calculation of the amount due, I believe the applicants would be entitled to a fee under stage 1, fees for attendance at the directions hearing and a preparation fee for a one day matter under stage 5 together with a half day hearing fee plus the appropriate advocacy loading. For the avoidance of doubt, I would point out that counsel's fees are not a disbursement.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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