Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors (No.3)
[2007] FMCA 748
•24 August 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VIVID ENTERTAINMENT LLC & ORS v DIGITAL SINEMA AUSTRALIA PTY LTD & ORS (No.3) | [2007] FMCA 748 |
| COPYRIGHT – Infringement of copyright in films and customer lists – breach of confidence in the lists – whether the natural person respondent liable as well as the corporate respondents considered – whether additional damages should be paid considered – whether an account of profits should be taken in relation to the breach of confidence considered. |
| Bankruptcy Act 1966 (Cth) Copyright Act 1968 (Cth), ss.115, 116, 119 Federal Magistrates Court Rules 2001 (Cth) |
| Aristocrat Technologies Australia Pty Limited v D.A.P. Services (Kempsey) Pty Limited (in liq.) [2007] FCAFC 40 Zero Tolerance Entertainment Ince & Ors v Venus Adultshops Pty Ltd & Ors [2007] FMCA 155 |
| First Applicant: | VIVID ENTERTAINMENT LLC |
| Second Applicant: | VIVID VIDEO INC |
| Third Applicant: | SBO PICTURES INC Trading as WICKED PICTURES |
| Fourth Applicant: | WORLD WIDE RED LIGHT DISTRICT INC |
| Fifth Applicant: | ZERO TOLERANCE ENTERTAINMENT INC |
| Sixth Applicant | CONWEST RESOURCES INC Trading as FALCON STUDIOS |
| Seventh Applicant: | CHANDLER TOLUCA LAKE STUDIOS INC Trading as COLOSSAL ENTERTAINMENT |
| Eighth Applicant: | IO GROUP INC Trading as TITAN MEDIA |
| Ninth Applicant: | PW PRODUCTIONS INC Trading as ACID RAIN PRODUCTIONS |
| Tenth Applicant: | CALVISTA AUSTRALIA PTY LTD |
| Eleventh Applicant: | GALLERY TITLES PTY LTD |
| Twelfth Applicant: | GREENWICH TECHNOLOGIES PTY LIMITED |
| Thirteenth Applicant: | BAD MONKEY INC Trading as MANUEL FERRARA |
| First Respondent: | DIGITAL SINEMA AUSTRALIA PTY LTD |
| Second Respondent: | DIGITAL SINEMA PTY LTD |
| Third Respondent: | JIM KARAKIKES |
| File Number: | SYG1341 of 2006 |
| Judgment of: | Driver FM |
| Hearing dates: | 21-24 November 2006, 18, 23 May, 6, 10 August 2007 |
| Date of Last Submission: | 16 August 2007 |
| Delivered at: | Sydney |
| Delivered on: | 24 August 2007 |
REPRESENTATION
| Counsel for the Applicants: | Mr R Cobden SC Mr J Hennessy |
| Solicitors for the Applicants: | Gilbert + Tobin |
| Solicitors for the Respondents: | Mr T Tzovaras Tzovaras Legal |
ORDERS
The Court declares that the third respondent has infringed the copyright of the:
(a)first applicant in the Vivid Entertainment Infringed Films;
(b)second applicant in the Vivid Video Infringed Films;
(c)third applicant in the Wicked Pictures Infringed Films;
(d)fifth applicant in the Zero Tolerance Infringed Films;
(e)sixth applicant in the Falcon Infringed Films;
(f)seventh applicant in the Colossal Infringed Films;
(g)eighth applicant in the Titan Infringed Films;
(h)ninth applicant in the Acid Rain Infringed Films; and
(i)thirteenth applicant in the Manuel Ferrara Production Films.
The Court declares that each of the respondents have infringed the copyright of the tenth applicant in the Literary Works.
The Court declares that the third respondent has breached an obligation of confidence owed by him to the tenth applicant by, without the permission of the tenth applicant, disclosing or using the Literary Works without the authority of the tenth applicant for purposes unconnected with the tenth applicant’s business.
The Court declares that the third respondent has been party to, and a knowing participant in, the first and second respondent’s breach of confidence declared by the Court in order 9 made on 19 March 2007.
The third respondent, whether by himself, his servants or agents, be restrained from, without the licence of the copyright owner (and its exclusive licensee), importing, copying, selling or by way of trade letting for hire or offering or exhibiting for sale or hire or distributing for the purpose of trade or by way of trade exhibiting in public, any of the Infringed Films and from authorising any third person to do any of the foregoing in relation to any of the Infringed Films.
The third respondent, whether by himself, his servants or agents, be restrained from, without the licence of the copyright owner (and its exclusive licensee), importing, copying, reproducing, publishing, communicating to the public, selling or by way of trade letting for hire or offering or exhibiting for sale or hire or distributing for the purpose of trade or by way of trade exhibiting in public, and from authorising any third person to do any of the foregoing in relation to, the whole or a substantial part of any of the Catalogue Films.
Each of the respondents, whether by themselves, their servants or agents, be restrained, without the licence of the tenth applicant, from infringing the tenth applicant’s copyright in the Literary Works by reproducing in a material form the whole or a substantial part of any of the Literary Works, publishing or communicating to the public, selling or by way of trade letting for hire or offering or exhibiting for sale or hire or distributing for the purpose of trade or by way of trade exhibiting in public the whole or any substantial part of the Literary Works, and from authorising any third person to do any of the foregoing in relation to the Literary Works.
Each of the respondents, whether by themselves, their servants or agents, be restrained from, without the tenth applicant’s authority, using the Literary Works for any purpose unconnected with the tenth applicant’s business.
The third respondent shall pay damages of $1 pursuant to s.115(2) of the Copyright Act 1968 and $500 pursuant to s.116 of the Copyright Act.
The respondents shall pay damages of $500,000 pursuant to s.115(4) of the Copyright Act 1968 (Cth).
The respondents shall give an account of profits for the breach of confidence declared in orders 3 and 4 above and in order 9 made on 19 March 2007, for the period between 1 November 2005 and 30 June 2006.
Pursuant to rule 18.01 of the Federal Magistrates Court Rules 2001 (Cth), the taking of the account is referred to a registrar of the Court.
Annexure to orders
Definitions
Acid Rain Infringed Films means the cinematograph film produced by the seventh applicant and entitled One Hung Bitch Vol 3.
Applicants’ representative means Gilbert + Tobin solicitors of Level 37, 2 Park Street, Sydney.
Catalogue Films means all cinematograph films in any format (including in electronic format) having any one or more of the following features:
a)films produced by and the copyright in which is owned by any of the applicants;
b)films the copyright in which is owned by any of the applicants;
c)films marked with or displaying any of the following labels or brands: Vivid, Wicked, Manuel Ferrara Productions, Zero Tolerance, Falcon, Colossal, Titan or Acid Rain (either on its own or with other words such as, for example, Vivid Entertainment Inc); and
d)films displaying or bearing a copyright notice incorporating any of the following names (either in its own or with other words such as, for example, Vivid Entertainment Inc.): Vivid, Wicked, Manuel Ferrara Productions, Zero Tolerance, Falcon, Colossal, Titan or Acid Rain (including for example in the form © [year] Vivid Entertainment Inc, or in the form © [year] Produced by Vivid Entertainment Inc).
Colossal Infringed Films means the cinematograph film produced by the seventh applicant and entitled Salad Eating Sluts.
Falcon Infringed Films means the cinematograph films produced by the sixth applicant and entitled Taking Flight, Cross Country, Man Driven and Style.
Infringed Films means the cinematograph films produced by the each of the applicants as set out in the table below.
| Title | Applicant Producer |
| One Hung Bitch Vol 3 | Acid Rain |
| Salad Eating Sluts | Colossal |
| Taking Flight Part 1 | Falcon |
| Cross Country Part 1 | Falcon |
| Man Driven | Falcon |
| Style | Falcon |
| Anal Expedition #8 | Manuel Ferrara Productions |
| Alabama Takedown | Titan |
| Skin on Skin | Vivid |
| Last Girl Standing | Vivid |
| The New Devil in Miss Jones | Vivid |
| Take My Wife | Vivid |
| Jenna Loves Kobe | Vivid |
| Lickity Slit | Wicked |
| Blondilicious | Wicked |
| Open Wide | Wicked |
| Jenna’s Invasion of the Bootysnatchers | Wicked |
| Double Decker Sandwich 7 | Zero Tolerance |
| Girlvana | Zero Tolerance |
Literary Works means the original Literary Works comprising:
a)each and any of the mailing lists referred to in paragraph 40 of the affidavit of David Newnham sworn 9 May 2006; and
b)the Calvista Customer Database referred to in paragraph 27 of the affidavit of David Newnham sworn 9 May 2006.
Manuel Ferrara Productions Infringed Films means the cinematograph film produced by the thirteenth applicant and entitled Anal Expedition #8.
Titan Infringed Films means the cinematograph film produced by the eighth applicant and entitled Alabama Takedown.
Vivid Entertainment Infringed Films means the cinematograph films produced by the first applicant and entitled, Skin on Skin, Last Girl Standing, The New Devil in Miss Jones and Take My Wife.
Vivid Video Infringed Films means the cinematograph film produced by the second applicant and entitled Jenna Loves Kobe.
Wicked Infringed Films means the cinematograph films produced by the third applicant and entitled Lickity Slit, Blondilicious, Open Wide and Jenna’s Invasion of the Bootysnatchers.
Zero Tolerance Infringed Films means the cinematograph films produced by the fifth applicant and entitled Double Decker Sandwich 7 and Girlvana.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1341 of 2006
| VIVID ENTERTAINMENT LLC |
First Applicant
VIVID VIDEO INC
Second Applicant
SBO PICTURES INC
Trading as WICKED PICTURES
Third Applicant
WORLD WIDE RED LIGHT DISTRICT INC
Fourth Applicant
ZERO TOLERANCE ENTERTAINMENT INC
Fifth Applicant
CONWEST RESOURCES INC
Trading as FALCON STUDIOS
Sixth Applicant
CHANDLER TOLUCA LAKE STUDIOS INC
Trading as COLOSSAL ENTERTAINMENT
Seventh Applicant
IO GROUP INC
Trading as TITAN MEDIA
Eighth Applicant
PW PRODUCTIONS INC
Trading as ACID RAIN PRODUCTIONS
Ninth Applicant
CALVISTA AUSTRALIA PTY LTD
Tenth Applicant
GALLERY TITLES PTY LTD
Eleventh Applicant
GREENWICH TECHNOLOGIES PTY LIMITED
Twelfth Applicant
BAD MONKEY INC
Trading as MANUEL FERRARA
Thirteenth Applicant
And
| DIGITAL SINEMA AUSTRALIA PTY LTD |
First Respondent
| DIGITAL SINEMA PTY LTD |
Second Respondent
JIM KARAKIKES
Third Respondent
REASONS FOR JUDGMENT
Introduction and background
These proceedings concern a copyright dispute between the parties in relation to what are commonly referred to as “adult” films in DVD format. There are associated words and artwork on the DVDs themselves and on what are known as “slick” covers of the DVDs which are not a part of the dispute. There is also a dispute over customer mailing lists which raises issues both of asserted breaches of copyright and breaches of confidence. The applicants are companies incorporated in either the USA or Australia and engaged in the business of producing, acquiring rights to and licensing the distribution, in countries including Australia, of adult films or engaged in the business of importing and distributing such films in certain territories of Australia. The respondents are two Australian companies engaged in the business of owning and operating a wholesale and retail distribution business in adult films and a natural person who is the sole director of the two companies and involved in the day to day management of them.
These proceedings began with an application and points of claim and supporting affidavits filed on 9 May 2006. The applicants now rely upon a further amended application and points of claim filed on 22 November 2006. The applicants assert breaches of copyright in identified films and also in a customer database and customer lists produced from it. They further plead a breach of confidence and seek final relief in the form of declarations, perpetual injunctions, delivery up, damages, interest and costs. The respondents filed a response and points of defence on 8 June 2006. They now rely upon amended points of defence filed on 27 July 2006. On 3 July 2006 I granted the applicants interim relief, including injunctions and orders for the delivery up of allegedly infringing material.
On 19 March 2007 I gave summary judgment in favour of the applicants on many, but not all issues[1]. I gave judgment in favour of the applicants against the two corporate respondents in respect of the declarations sought as to infringement of copyright in the films and the breach of confidence claim in relation to the Literary Works in dispute, being customer lists. I made orders for perpetual injunctions against the corporate respondents in relation to the Infringed Films and the Catalogue Films (as defined) and ordered the delivery up by the corporate respondents of all copies of the Infringed Films and the Catalogue Films in their custody. I awarded nominal damages against the corporate respondents pursuant to s.115(2) of the Copyright Act 1968 (Cth) (“the Copyright Act”) and further damages against the corporate respondents pursuant to s.116 of the Copyright Act. I also made an order for costs of the summary judgment application which was quantified in a second judgment[2].
[1] Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors [2007] FMCA 157
[2] Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors (No 2) [2007] FMCA 688
I declined to give summary judgment against the third respondent, Mr Jim Karakikes, and I further declined to give summary judgment against the respondents in relation to the copyright claim over the Literary Works. I also declined to give summary judgment in respect of the principal components of the damages claim, being a claim for $250,000 damages pursuant to s.115(4) of the Copyright Act in respect of the Infringed Films and Catalogue Films and $100,000 in respect of the breach of confidence. I also held over, for consideration after a final hearing, the question of payment of interest and costs of the proceedings generally.
The first respondent has allegedly never traded. The second respondent was placed in voluntary administration on 25 July 2007. On 6 August 2007, with the consent of the administrator, I granted leave for the applicants to continue proceedings against it. On 7 August 2007 the third respondent was made bankrupt, apparently on his own petition. It was not argued that the Bankruptcy Act 1966 (Cth) stayed these proceedings against him.
The evidence
The applicants’ evidence at the trial of this matter was detailed in my summary judgment as set out in Appendix A to this judgment. That evidence was substantially concerned with proving the subsistence of copyright in the films and the Literary Works and to prove the ownership of copyright or the enjoyment of licences in respect of the copyright by the applicants. That evidence also goes to proof of the infringement of copyright in the films and is relevant to the question of the infringement of copyright in the Literary Works. To a more limited degree, the evidence is relevant to the question of the liability of Mr Karakikes and the question of whether additional damages should be awarded pursuant to s.115(4) of the Copyright Act, plus interest and costs.
The respondents rely upon the affidavit of Jim Karakikes made on 26 June 2006 and filed on the same day. A second affidavit of Mr Karakikes was excluded from the evidence by me in my summary judgment[3]. An affidavit by Riaz Taher Abba made on 6 June 2006 and filed on 26 June 2006 was initially not read due to the unavailability of Mr Abba for cross-examination. However, on 23 May 2007 Mr Abba was offered for cross-examination by telephone. After argument, I ruled that I would receive Mr Abba’s affidavit without cross‑examination, but would give it little weight for the purpose for which it was tendered, which was to support Mr Karakikes’ denial of any involvement in or knowledge of the use of the Calvista database and customer lists by the corporate respondents.
[3] Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors [2007] FMCA 157 at [49]
In his affidavit of 26 June 2006 Mr Karakikes deposes as to his role in the adult film industry and in relation to the business of the corporate respondents. He deposes that the first respondent (Digital Sinema Australia) has never traded and that the second respondent (Digital Sinema) was incorporated on 10 July 2003 and trades principally as a retailer by way of mail order of adult films. He deposes that the business was carried on some time before the incorporation of Digital Sinema. Previously, Mr Karakikes worked as a manager with an adult film retailing business known as Prestige Club Australia. Digital Sinema does business by periodically publishing and distributing catalogues to its customers through which it advertises films for sale. In 2004 Digital Sinema also established a website to promote the sale of adult films.
Mr Karakikes deposes that the day to day operations of the Digital Sinema business are carried on by a manager, Tony Constantinou. Mr Constantinou reports to Mr Karakikes usually on a daily basis in relation to the running of the business. The manager is principally involved in the selection of titles of adult films to be offered for sale and advertised in Digital Sinema’s catalogues and website. He is also responsible for the purchase of adult film DVDs or for their acquisition or disposal on a barter basis within the adult film industry in Australia. Mr Karakikes deposes that he is principally concerned with the financial management of the business and the purchase of adult film DVDs from the United States. Mr Karakikes deposes that he places considerable reliance upon his manager and that he becomes involved in management decisions that are “key decisions”. He also formulates business policies when appropriate and takes corrective action and gives appropriate directions to the manager when necessary. Mr Karakikes deposes that he also conducts a building and property development business. Nevertheless, he deposes that he has first hand knowledge of the Digital Sinema business including procedures undertaken in the day to day conduct of the business.
Mr Karakikes deposes that Digital Sinema acquires adult film DVDs within Australia for cash or barter from people within the adult film industry and from the United States. The manager is responsible for local acquisitions. Mr Karakikes is responsible for purchases of adult films from the United States. Since 2005, Digital Sinema has purchased adult films from a business called “All You Can Eat Inc” (AYCE), the principal of which is a Mr Scott Saturday. Mr Karakikes deposes that, prior to early 2005, he purchased adult DVDs from between 20 and 30 adult film producers in the United States (as well as AYCE) including three of the applicants. However, in early 2005 Mr Karakikes decided to make future purchases through AYCE and to deal with Mr Scott Saturday. Digital Sinema purchases adult film DVDs from AYCE for between US$1 and US$12 per unit. The average price is about US$4. Digital Sinema sells its adult film DVDs (whether purchased domestically or from the United States) for between A$25 to A$39, with discounts for bulk purchases. Digital Sinema mails out a catalogue every four to six weeks. Purchase orders are received from the sale catalogue from customers telephoning a call centre at Campsie. Orders are also received by mail and fax and via the website. Mr Karakikes deposes that all DVDs purchased and sold by Digital Sinema are new and shrink wrapped to verify their new condition.
Mr Karakikes deposes that the practice of only buying new stock is a measure to minimise the risk of copyright infringement and that he also has confidence in AYCE as a reputable dealer. Mr Karakikes deposes that neither he nor his manager open shrink wrapped DVDs in order to inspect them.
Mr Karakikes deposes that after he was served with the application in these proceedings, he checked Digital Sinema’s computer database to see what was being sold and in particular to identify titles the subject of the proceedings. He stopped the sale of identified titles and removed from sale all titles of DVDs which appeared in a list on pages 1 to 3 of exhibit DHN3 to Mr Newnham’s affidavit of 9 May 2006. Mr Karakikes stopped the distribution of Digital Sinema catalogue number 22 which had commenced distribution in South Australia and Western Australia. He also withdrew from sale all DVDs of films from companies in the United States who appeared as members of the Adult Industry Copyright Organisation. He also made consequential changes to the Digital Sinema website.
Mr Karakikes deposes that, at the time he was served with the application, Digital Sinema had already completed the processing of all mail orders in relation to its catalogue number 20, which had been circulating between mid February and March 2006. The business was in the process of promoting and circulating catalogue number 22. He deposes that it is the practice of the business to dispose of all remaining stock at the conclusion of sales relating to a particular catalogue. About six weeks after the commencement, promotion and circulation of a new catalogue, the business disposes of stock by way of wholesale trade. At the time the present proceedings were commenced, Digital Sinema was trading on catalogue number 21 and all stock relating to catalogue 20 had been disposed of.
Mr Karakikes also deposes about the Digital Sinema mailing list. He deposes that he purchased a mailing list from Mr Ray Abba in about 1993 but did not use it until mid 2003 when he set up the Digital Sinema business. He also acquired a customer list from the principal of Prestige Club Australia when that business ceased trading. He combined the two lists which became the Digital Sinema customer list. That list is used in the course of promotion of catalogues, including catalogues 20 to 23. Mr Karakikes deposes that he is not aware that any part of the Digital Sinema customer list is similar to the Calvista Australia customer list. The Digital Sinema list is augmented continuously as names of new customers are received.
Mr Karakikes deposes that the mail order business of Digital Sinema is its main business with its wholesale business being a mere by product of the mail order business. He deposes that since mid 2003, the business has earned a gross revenue well in excess of $1 million annually with a profit of around $200,000 annually.
I permitted Mr Tzovaras to lead additional evidence in chief from Mr Karakikes to deal with certain aspects of the affidavit which had been excluded on objection. Mr Karakikes stated that he is also known as Jim Karas and confirmed that, of the two corporate respondents, only Digital Sinema carries on business. He said that Mr Constantinou was not an employee but was an independent contractor and had left the business for health reasons. He was also known as Tony Conti. Mr Karakikes confirmed his affidavit evidence in relation to the division of responsibility between him and Mr Constantinou and his purchase of adult film DVDs from the United States. He also gave evidence as to conversations he had with representatives of two of the applicants shortly after service of the application in which those representatives stated they were not aware of the proceedings. Mr Karakikes said that 90 to 95 per cent of American purchases of adult DVDs by Digital Sinema were through AYCE.
In relation to the mailing lists, Mr Karakikes confirmed his affidavit evidence and denied purchasing any other mailing lists. He said that the Digital Sinema mailing list changed “minute to minute” as new customers were added, principally as a result of calls to the call centre[4]. Mr Karakikes said that he had no involvement in the build up of the Digital Sinema mailing list and no knowledge of the contents of the list from 2005 onwards. Mr Karakikes does not know of any involvement by Mr Constantinou in the build up of the list.
[4] The applicants’ counsel stated, during the course of the examination in chief of Mr Karakikes, that the applicants’ copyright claim was limited to the skill and labour applied by Calvista to its mailing list.
Under cross-examination Mr Karakikes stated that there was no written contract between Digital Sinema and Mr Constantinou and that Mr Constantinou had left the business in April 2007 for health reasons. There are between one and two call centre staff who are also independent contractors with no written contract. Mr Karakikes said that he took some advice from Mr Constantinou in relation to particular titles purchased from the USA. He did not know what local distributors were used by Mr Constantinou as the latter was responsible for local acquisitions. He understands that Mr Constantinou dealt with a range of individuals and stores in Sydney and Melbourne. He did not know what proportion of Digital Sinema stock was purchased in Australia in 2005/2006. Mr Karakikes confirmed that the principal business of Digital Sinema since 2003 has been retail sale by mail order but that between 15 and 20 per cent of the business was wholesale business. He said that Digital Sinema Australia was to conduct a wholesale business but has never traded. Somewhat surprisingly, Mr Karakikes said that his purchases from AYCE in the United States were mainly for the wholesale trade. He conceded, however, that the catalogue business was the main business of Digital Sinema.
Mr Karakikes confirmed under cross-examination that he would regularly discuss the operations of the business with Mr Constantinou. Mr Constantinou reported to him on performance issues and made recommendations in relation to the acquisition of particular titles and other aspects of the business. Mr Karakikes confirmed that he was very familiar with the Digital Sinema business.
Mr Karakikes stated that his purchases through AYCE were made orally and sometimes paid in advance. He was not sure what invoices were received between 2005 and 2006 but believed that statements would have been received periodically. He said that some acquisitions were for a retail outlet he operated independently of the Digital Sinema business at Kogarah. Mr Karakikes stated that he is a director and sole shareholder of a company called Hustler Australia Incorporated. This company trades from Mr Karakikes’ home and deals in the wholesale adult DVD trade to other Australian stores.
Mr Karakikes stated that Mr Constantinou had been replaced by Mr Kargis whose role is currently the same as Mr Constantinou but Mr Karakikes planned to take a larger day to day role in the management of the business. He was shown catalogue number 30 (exhibit A3) and confirmed that the catalogue business had now been taken over by a new company called SD Limited trading as SD Digital. He said that the company is owned by overseas entities and will trade from the USA worldwide. The catalogue identifies a post office box number in Darwin. Mr Karakikes is an employee of this new business. Digital Sinema now trades in the wholesale trade of adult films and also in toys and other adult products. The last catalogue issued by Digital Sinema was catalogue 29. Mr Karakikes said that the transfer of the business to SD Limited had not yet been completed as the owners of SD Limited wanted to assess the value of the trade over a trial period of about six months.
Mr Karakikes was shown bank statements for an account in the name of Digital Sinema Australia and confirmed that substantial funds passed through that account from May 2006. He said that he had put his own money into that account to cover cheques written in respect of the Digital Sinema business.
Mr Karakikes was shown an affidavit he prepared on 30 June 2006 in response to a notice to produce. He confirmed that the only documents he had available to produce were those attached to the affidavit which he had obtained from Mr Saturday on request, and which he acknowledged related substantially to the Hustler Australia business. He acknowledged that he had not mentioned the Hustler business in his principal affidavit. He said that it was his practice to dispose of invoices or statements received from AYCE once a particular order had been dealt with.
Mr Karakikes said that Digital Sinema operates a computer database which lists all titles of adult film available for sale in current catalogues. He said that titles are “automatically” removed from the database when particular titles are out of stock.
Mr Karakikes was asked questions about his actions immediately following service of the originating process in these proceedings around 9 May 2006. He gave evidence as to his actions to check and remove infringing titles from the Digital Sinema stock and catalogue. He admitted that it was possible for him to check what titles the business had on hand by reference to the computer database but confirmed that titles of stock which had been exhausted were deleted from the database. He admitted that his earlier evidence about titles being automatically deleted from the database when stock was exhausted was inaccurate. It is a manual process. Mr Karakikes gave evidence as to how orders were taken. Orders were taken via the internet, by telephone, by fax and by mail and it was not uncommon for orders to be not able to be filled because particular titles ordered were out of stock. Mr Karakikes said that in such cases the clients were sent letters offering a refund or an alternative title. He denied suggestions that Digital Sinema filled orders by burning copies of DVDs and copying slick artwork.
Mr Karakikes was asked questions about his dealings with US studios and his conversations with representatives of certain studios immediately after he was served with the originating process in these proceedings. He admitted that Digital Sinema had not purchased adult DVDs from the Acid Rain company. He was taken to records of purchases through AYCE and admitted that these did not provide direct evidence of purchases by Digital Sinema. He denied suggestions that the documents he produced with his affidavit of 30 June 2006 were obtained in order to support a claim of prior dealing with certain US studios.
Mr Karakikes was asked about his dealings with Mr Vlottes in relation to the Jenna Sex Marathon compilation that Mr Karakikes was responsible for. He modified his earlier evidence in which he asserted that Mr Vlottes had given him authority to make the compilation. Mr Karakikes said that Mr Vlottes had not withheld authority and had knowingly permitted him to make the compilation because he was aware of what he was doing and had raised no objection.
Mr Karakikes was taken to Mr Weston’s affidavit of 9 October 2006. He denied the references to the conversation between him and Mr Weston deposed to in that affidavit that conflicted with his own evidence.
Mr Karkikes was taken to records obtained of printing orders placed with Galloping Press. He denied having seen all of these previously. He agreed some of the records were correct but denied the accuracy of other records. He agreed that a typical catalogue print run was 20,000 catalogues but denied the accuracy of invoices indicating that up to 50,000 had been ordered for a particular catalogue number. Mr Karakikes stated, however, that Digital Sinema was dealing with customers on a customer list containing 60,000 names. He denied a suggestion that an apparent order for printing 50,000 copies of three catalogues was placed to deal with a larger class of customers derived from the Calvista mailing list.
Mr Karakikes was asked about the purchase of a high quality colour photocopier. He agreed that such a photocopier had been purchased and that it was located at business premises in Campsie. He said that the photocopier was used for artwork and printing. He denied that it was used to copy slick artwork to accompany counterfeit DVDs. He accepted that the colour photocopier had produced 30,000 colour prints in November 2005 but said that it was used to undertake work for other businesses.
Mr Karakikes was taken to the banking records of Digital Sinema and explained the various entries. He denied that there had been a dramatic increase in income of the business between November 2005 and May 2006. He indicated that while there may have been an increase in revenue at about that time it was probably associated with the establishment of the Digital Sinema internet site.
Mr Karakikes denied suggestions that he had paid Mr Scott Saturday a substantial sum to assist in constructing evidence to support the defence of the present proceedings, denied suggestions that he had “offloaded” stock in order to “cover his tracks”, denied deriving substantial income from counterfeiting DVDs or from using the Calvista customer lists. He denied suggestions that he had adopted a deliberate policy of withholding documents in the course of the proceedings. He further denied that he adopted the practice of destruction of documents in order to frustrate inquiry during the proceedings.
Under re-examination, Mr Karakikes said that Mr Constantinou had declined to give evidence in the proceedings because he was unwell and did not want to get involved. Mr Karakikes also said that the turnover of the business in the financial years ended 30 June 2005 and 2006 was $1.3 million and $1.4 million respectively. In the financial years ended 2004 and 2005 the turnover was $1.1 million and $1.2 million respectively. He was shown recently prepared financial statements, including a profit and loss statement for 2004/2005 and 2005/2006 and said that these had been prepared from sales records and billing records. Mr Karakikes said that the financial statements had been prepared by his accountant on his instructions. He said that relevant instructions in relation to specific figures had been given as recently as two weeks ago.
Mr Karakikes also reviewed his evidence in relation to the customer lists used in the Digital Sinema business and he confirmed his earlier evidence.
I also received a number of documents as exhibits:
A1 Extracts from Mr Karakikes’ affidavits
A2 Website printout – “Axisshop”
A3 Catalogue – SD Digital 30
A4 Letter from Gilbert + Tobin to Tzovaras Legal, 21 May 2007
A5 Letter from Gilbert + Tobin to Tzovaras Legal, 21 May 2007
A6 Receipt for envelopes
A7 Bundle of documents behind tab
A8 Fuji Xerox documents
A9 Bank accounts – bundle
A10 Chart – Digital Sinema Monthly Average Income
A11 Chart – Supplier payments
R1 Medical records relating to Mr Karakikes
R2 Bundle of documents from Dr Jenkins
R3 Bundle of financial statements and reports
R4 Document – “Australian Copyright Protection Association”
R5 “Simena records matching Foxpro database”
R6 Brief to Mr Carson
R7 Financial statements year ending 30 June 2006
On 6 August 2007 at a post trial directions hearing following the appointment of an administrator to the second respondent I received the following additional evidence:
a)the affidavit of Jim Karakikes made on 25 May 2007 and filed on 30 May 2007 relating to the assets of the corporate respondents;
b)the sixth affidavit of Graeme Edward Dunne made on 1 August 2007 (filed 2 August 2007) and the exhibits to it; and
c)the sixth affidavit of Christopher Edmund Duvall Williams made on 3 August 2007 (filed 6 August 2007) and the exhibits to it.
On 10 August 2007 at a further directions hearing following Mr Karakikes’ bankruptcy I received the following additional affidavits:
a)the seventh affidavit of Christopher Edmund Duvall Williams made on 9 August 2007 (filed on the same day); and
b)the affidavit of Jim Karakikes made on 9 August 2007 (filed 10 August 2007) pursuant to orders made by me on 6 August 2007.
On 10 August 2007 I required further evidence from Mr Karakikes in relation to his assets and other matters. Three further affidavits by him were made on 14 August 2007 and filed the following day. On that day I made an order in chambers receiving those affidavits.
Submissions
The applicants filed written submissions on 26 June 2007. The applicants reviewed the procedural history of the matter and identified the remaining issues to be determined as follows:
a)Mr Karakikes’ personal liability in respect of the applicants’ claims of copyright infringement;
b)Mr Karakikes’ personal liability for the breach of confidence in relation to the Literary Works;
c)the respondents’ liability for infringement of Calvista’s copyright in the Calvista customer list; and
d)the quantum of pecuniary relief in respect of those causes of action for which damages have been elected (the applicants having elected for an account of profits for their breach of confidence claim).
The applicants continue to rely upon their submissions dealt with in my previous judgment. In particular, they emphasise the following matters:
a)Mr Karakikes’ conduct in the proceeding generally[5] and specifically in regard to the scope of the controversy,[6] discovery,[7] non-compliance with orders[8] and the respondents’ “cynical” adjournment application;[9]
b)the alleged copying of Infringed Films for the Digital Sinema business;[10]
c)the parallel importation of Infringed Films,[11] including the applicants’ uncontested claims;[12]
d)the sale and distribution of Infringed Films,[13] including the applicants’ uncontested claims;[14]
e)breach of confidence in the Literary Works;[15]
f)alleged breach of copyright in the Calvista customer list;[16]
g)Mr Karakikes and Digital Sinema/Digital Sinema Australia (“DSA”) being “one and the same”[17] and the claims against Mr Karakikes;[18] and
h)relief,[19] quantum of pecuniary relief[20] and costs.[21]
[5] including the respondents’ failure to challenge the submissions on this point – see Reply para 5
[6] submissions paras 11 & 18, 22-23 & 30, 44-45
[7] Ibid paras 12, 20, 24-25, 27
[8] Ibid para 19-20, 24-27
[9] Ibid para 28-29
[10] submissions para 38 and to a lesser extent paras 39-42; and reply paras 56 & 58
[11] submissions para 44 and to a lesser extent paras 45-47; and reply paras 59-60
[12] reply para 4
[13] submissions para 48 and to a lesser extent paras 49-50; and reply paras 59-60
[14] reply para 4
[15] submissions para 45 & 52-57 & 62; and reply paras 69-70
[16] submission paras 43-44 & 53-57; and reply paras 65-67
[17] submissions paras 45 & 61
[18] submissions paras 58-62; and reply para 71
[19] submissions paras 64-85; and reply para 72
[20] submissions para 86; but now extremely re-particularised as to the outstanding claims
[21] ibid paras 92-93
In their present submissions, the applicants address the following matters:
a)Copying the Infringed Films. The applicants’ cross-examination of Mr Karakikes has strengthened their claim of direct infringement against each of the respondents. Of course, there need not be “direct evidence” of copying activities. It is sufficient that such acts be inferred from the surrounding facts, matters and circumstances.
b)Copying the Calvista customer list. The respondents have not explained (because they cannot, without correspondingly admitting liability, do so) how the Respondents’ List came to have the seed names on it. Unauthorised access has already been established[22] and the remaining issue is the question of substantial reproduction. Plainly there must have been at least one act of reproduction on the respondents’ part to bring about the situation whereby 53.82 per cent of the names therein matched the names on the Calvista customer list. Those names included seed names that were only created after Calvista acquired its list, thus defeating the respondents’ “feeble and unsubstantiated” suggestion that the parties’ lists share a common provenance. The applicants’ claim “must now succeed”.
c)Mr Karakikes’ personal liability. The picture of the Digital Sinema business remains largely the same. Mr Karakikes is, in reality, Digital Sinema and DSA.
d)Relief and quantum. The sheer scale of the Digital Sinema business makes the case for a large damages award “overwhelming”.
[22] Vivid Entertainment at [44]
The applicants contend that there is now a persuasive case that the respondents have engaged in copying the applicants’ films. They submit that:
a)there is a significant unexplained discrepancy in the level of stock purchased and sold by the respondents;
b)there is a logical disconformity between the respondents’ avowed practice of obtaining only 10-15 copies of any particular title and meeting the demands of the customers of this large scale and successful enterprise;
c)the respondents had access to sophisticated colour photocopying equipment to facilitate the duplication of “slicks” for the packaging of counterfeit films; and
d)the respondents conducted themselves at the hearing in a manner that gives rise to the application of the principles in Blatch v Archer and Jones v Dunkel.
The applicants are highly critical of Mr Karakikes’ performance in evidence. He is accused of intentionally giving false evidence and failing to discover business records. The applicants contend that Mr Karakikes was determined not to shed any light on the Digital Sinema business. The applicants contend that much of his evidence was patently false and even absurdly so. The applicants invite the Court to draw an inference that the evidence of Mr Constantinou and staff at the Digital call centre would not have assisted the respondents.
In relation to the Calvista customer lists, the applicants submit that there can now be no dispute that copyright subsists in the list to the extent that Calvista adapted it by adding and deleting names and addresses since 2000. They note that the respondents have not challenged the subsistence of that copyright and that Mr Karakikes’ evidence as to how Digital Sinema came by the customer list it used is “implausible”. The applicants also point to the evidence relating to the apparent increase in contract printing of catalogues from November 2005.
The applicants contend that Mr Karakikes is personally liable for the copyright infringements and the breach of confidence. They point out that Mr Karakikes is the sole director, secretary and shareholder of Digital Sinema and that Mr Karakikes is in a position to control its activities. They further submit that:
a)while Mr Karakikes would have the Court believe that he does not work at the Digital Sinema premises at 7/11 Elizabeth Street, Campsie,[23] it is noteworthy that he met Mr Tomaras at that location in the course of Mr Tomaras preparing the list of documents for discovery. While he contends that he is otherwise located wherever his property development enterprise takes him, that activity has provided him with a nil return over the last 3 financial years.[24] His income is solely derived from the activities taking place at the Campsie premises and so the goings on in that office must at the very least have been at the front and centre of his mind; [25]
b)Mr Karakikes is responsible for purchasing the stock of adult films from overseas;[26]
c)Mr Karakikes is responsible for the financial management and records of Digital Sinema;[27]
d)Mr Karakikes has “first hand knowledge of the DS Business, including the procedures undertaken in the day to day conduct of that business”;[28]
e)Digital Sinema has several members of “staff”, none of whom is an employee – Mr Constantinou was the manager, until April 2007, pursuant to an undocumented consultancy arrangement,[29] there are two staff in the call centre, both of whom also work pursuant to undocumented consultancy arrangements,[30] and an unspecified number of packaging staff;[31]
f)Mr Constantinou reported to Mr Karakikes “usually on a daily basis”;[32] and
g)Mr Karakikes had regular and frequent dealings and discussions with Mr Constantinou and from time to time with the call centre operators.[33]
[23] Karakikes XN at transcript, p.14.19
[24] Karakikes XXN at transcript, p.107.11
[25] Karakikes XXN at transcript, p.107.19
[26] Karakikes XN at transcript, p.13.25 & Karakikes XXN at transcript, pp. 25.44 & 27.45
[27] Karakikes XN at transcript, pp.13.28 & 14.11
[28] Karakikes affidavit 26.6.06, para 18
[29]Karakikes XN at transcript, p.13.18 & transcript, pp.24 & 25.1
[30] Karakikes XN at transcript, p.13.21 & Karakikes XXN at transcript, p.25.9
[31] Karakikes XN at transcript, p.13.21
[32] Karakikes affidavit 26.6.06, para 15
[33] Karakikes XXN at transcript, p.35.19
The applicants refer to Mr Karakikes’ own evidence that he is “very familiar with all operational aspects of Digital Sinema and its business and the procedure or process that is involved in Digital Sinema’s purchase of adult film and DVDs”.[34] The applicants also submit that Mr Karakikes’ knowledge about copyright made it impossible for him to avoid liability for his company’s infringements. In particular:
a)he had known for a considerable length of time, and certainly before 2003, that there were pirate DVDs available on the market;[35]
b)he knew about the nature of copyright and in particular that it is an infringement of copyright to make a copy of a film;[36] and
c)he knew, as at mid-2005 to mid-2006, that if Digital Sinema were to burn or create a copy of a DVD containing a copyright film from an American studio that that would amount to an infringement of copyright.[37]
[34] Karakikes XXN at transcript, p.36.41
[35] Karakikes XXN at transcript, p.73.36
[36] Karakikes XXN at transcript, p.73.40
[37] Karakikes XXN at transcript, p.74.1
The applicants further attack the credibility of Mr Karakikes’ evidence. In that regard, they refer to his evidence that he is principally focused on his building and development business from which he had not derived any income from the last three years and his evidence that Digital Sinema did not buy by title but on a production by production house basis. The applicants submit that this evidence is improbable given the nature of the catalogue business undertaken by Digital Sinema. In particular:
a)it was Digital Sinema’s practice to issue a catalogue about every 4 to 6 weeks;[38]
b)Mr Karakikes conceded that for Mr Constantinou to finish laying out a 16-page catalogue he had to have available to him a copy of each of the films that were going to be included in the catalogue – he would have to know at the time of issuing a catalogue that he would have sufficient stock to warrant including a title in the catalogue to send out to the public;[39]
c)insofar as the timing of the production of the catalogue was concerned, Digital Sinema needed to know that it would have sufficient stock to supply orders that might be placed for a total number of titles that were included in the catalogue;[40] and
d)Mr Karakikes had already given evidence about the ordering process in his affidavit to the effect that it involved obtaining samples “which form the basis of subsequent orders.”[41]
[38] Karakikes XXN at transcript, p.32.36
[39] Karakikes XXN at transcript, p.34.16
[40] Karakikes XXN at transcript, p.37.5
[41] Karakikes affidavit 26.6.06, para 32
The applicants make the following submissions in relation to s.115(4) damages:
Undetected infringements
In the course of a s.115(4) enquiry the Court will take into account undetected and undetectable infringements connected to the applicants.[42] The number of applicant studios’ titles that appear in the Digital Sinema catalogues as a proportion of the total titles is on average approximately 8% (see paragraph 0 now following). Once this proceeding was commenced and interlocutory injunctions were in place, however, with the consequence that those studios’ titles were out of play, Digital Sinema’s revenue promptly reduced by about 33%.
[42] Aristocrat Technologies Australia Pty Limited v D.A.P. Services (Kempsey) Pty Limited (in liq.) [2007] FCAFC 40 at [47]
A simple proportion of the applicants’ films traded by the Digital Sinema Business can be calculated by counting the number of titles advertised in Digital Sinema’s catalogues in evidence as set out below:
| Catalogue # | Exhibit | Total DVDs | AICO member DVD titles | % of total | Applicant studios’ DVD titles | % of total |
| Catalogue 19 | DHN-9 | 212 | 60 | 27% | 3 | 1% |
| Catalogue 1 (Gay) | DHN-8 | 100 | 41 | 19% | 12 | 12% |
| Catalogue 20 | DHN-6 | 211 | 15 | 15% | 12 | 6% |
| Catalogue 2 (Gay) | DHN-10 | 111 | 42 | 20% | 13 | 12% |
| Catalogue 21 | GED-2 | 180 | 14 | 13% | 13 | 7% |
| Catalogue 22 | DHN-29 | 278 | 63 | 35% | 26 | 9% |
The median proportion of applicant studios’ films across these catalogues is 8% and the median proportion of AICO films advertised is 25%.
The above method of calculation does not provide an indication of the volume of the applicants studios’ DVDs sold. A more accurate picture can be obtained from contrasting revenue levels between the period of trading from November 2005 (ie from time of acquisition of Calvista’s customer list) and May 2006 (when proceedings were commenced) with the trading period following the grant of injunctions that prevented further sales of the applicant studios’ DVDs on 3 July 2006.[43]
[43] represented graphically by exhibit A10
Digital Sinema’s monthly revenue dropped from an average of $218,373.05 to $148,359.27 per month. This difference can reasonably be attributed to the value of sales in the applicants’ titles (i.e. $70,013.78 per month), which is a 32.06% drop in revenue. This calculation of the proportion of sales attributable to the applicant studios’ DVDs is set out in further detail in Schedule C to these submissions.
Focusing on the revenue of Digital Sinema up until 3 July 2006 (i.e. the date of injunctions), which totalled $4,009,223.05, as a guidance to undetectable infringements – the existence of which can never be finally determined no matter what further enquires as to damages were undertaken – a figure of approximately $1.25M of trading is attributable to the applicant studios’ titles (once a deduction is allowed for costs of manufacture). That figure represents the sort of limit the Court might treat as available to the applicants by way of additional damages, and is a touchstone for a Court as it is guided to the appropriate amount to be awarded in the applicants’ favour.
Conduct after the commencement of this proceeding
In addition to the matters already raised in the Submissions and Reply about the respondents’ conduct after the commencement of the proceeding (a relevant consideration under s. 115(4)(ib)) the applicants rely on the matters set out [below].
The PCA transaction – non-compliance with delivery up orders
Mr Karakikes entered into a transaction with Prestige Club Australasia Pty Limited (PCA) on 21 June 2006, i.e. just four weeks after this proceeding had commenced and approximately a fortnight prior to the interlocutory hearing.
Prestige Club Australasia is a respondent in a Federal Court proceeding concerning large sale copyright infringement currently on foot (No. NSD 1940 of 2006) which proceeding was commenced (by some of the applicants in this case) on 5 October 2006 (i.e. after this case had been commenced). Other respondents in the Federal Court proceeding are Mr Elias (aka Louie) Armenis and Mr Theo Armenis. Mr Theo Armenis is well‑known to this Court as a respondent in: SBO Pictures Inc v Kaos Shop Pty Ltd [2006] FMCA 82; Digital Playground Inc & Ors v Hustler (Australasia) Pty Limited & Ors, No. SYG3519 of 2006; and Arena Entertainment, Inc & Ors v Kaosshop Pty Limited ACN 105 651 652 & Anor, No. SYG1737 of 2006. Mr Elias Armenis was a respondent in AVODN, Inc & Ors v Sexsy Pty Ltd & Anor, No. SYG1738 of 2006. Mr Karakikes and Messrs Armenis have, in the past, been involved jointly in the PCA adult entertainment business venture.[44]
[44] Karakikes at para 9 and Karakikes XXN at transcript, p.126.39
The transaction involved Digital Sinema selling 2,700 films to PCA at a price of $2.86 per unit.[45] Digital Sinema sold the units at loss. On Mr Karakikes’ own evidence the cost price per unit was around $3.00.[46]
[45] Karakikes XXN at transcript, p.126.34 & exhibit A10 p.168
[46] Karakikes XXN at transcript, p.127.24
Mr Karakikes made no express mention of the transaction when he asserted in his affidavit that all films advertised in catalogue 20 had been “disposed of”[47] in accordance with what he said was a practice of the Digital Sinema Business to dispose of all stock advertised but not sold in one catalogue “by way of wholesale”.[48]
[47] Karakikes affidavit 2.6.06, para 49
[48] ibid para 48
Plainly Digital Sinema sought to offload counterfeit units of DVDs before its obligation to give them up on discovery in this proceeding occurred.
The payment of a large sum of money to Mr Saturday
In a brazen attempt to create documentation to assist the respondents’ case, on or about 23 May 2006 (shortly after the proceeding had been commenced) Mr Karakikes contacted Mr Saturday and asked him to produce documentation by placing orders with studios. He did so in a manner that was designed to deceive the studios by placing the order in the name of Hustler Video Australia rather than the respondents’ names.
Mr Karakikes’ ploy may be inferred from the abnormally large invoices placed by AYCE on 25 and 30 May 2006. Mr Karakikes conceded that they were larger-than-usual invoices.[49] The placing of these invoices correspond to a payment on 25 May 2006 to AYCE of $72,761.58.[50]
[49] Karakikes XXN at transcript, p.105.9
[50] exhibit A9, p161
Mr Karakikes also conceded at the time that he asked for the invoices he was aware of the looming interlocutory hearing on 3 July 2006, including the injunctive relief that the applicant would be seeking on that occasion.[51] The following exchange made the position clear:
[51] Karakikes XXN at transcript, p.105.26
Mr Cobden:Despite the fact you had no documents to produce you went about the business of getting some documents on 29 June you say?
Mr Karakikes: Yes, I tried to obtain documents relevant to the Court proceedings.[52]
[52] Karakikes XXN at transcript, p.106.1
Consistent with his general approach to this litigation Mr Karakikes was prepared to give false evidence in his affidavit[53] by deposing to a conversation he says he had with Mr Saturday in which he requested invoices “which show that I purchased from you and also that you purchased from my (Digital Sinema) behalf.” His response to that inconsistency was: “well, Digital Sinema would have been implied [sic] in case there were any invoices for Digital Sinema from these companies”.[54] Four of the five invoices he relied upon were not from Mr Saturday to the Digital Sinema Business or even the Hustler business; they were invoices from Wicked Pictures to All You Can Eat Inc and bore no apparent connection to the respondents.[55]
[53] Karakikes 30.6.06 para 3[2]
[54] Karakikes at XXN at transcript, p.94
[55] Karakikes 30.6.06 annexure “B”
Attempts to dispose of Digital Sinema’s assets after summary judgment
Mr Karakikes entered into an arrangement to divest the Digital Sinema Business of its only asset, the mail order business, to a foreign corporation known as SD Digital Limited.[56] Mr Karakikes chose not to inform the applicants or the Court about the transaction.
[56] Karakikes XXN at transcript, p.46-47
The applicants were alerted to the matter by references in catalogue 30 to a different website address (which does not function), different freecall numbers and the name “SD Digital”. Only when those matters were brought to Mr Karakikes’ attention in cross-examination did he acknowledge the transaction.[57] Even then, he was typically unforthcoming with details about the arrangement, limiting his answers to the barest of information about the acquirer, his involvement in it, his status in the new venture as an employee of the company, the status of the transaction and the terms of the arrangement.[58] He claims that it is an undocumented transaction.
[57] Karakikes XXN at transcript, p.46
[58] Karakikes XXN at transcript, p.47-51
Continuing failure to produce documents
During the course of the resumed hearing the respondents remained steadfast in their refusal to produce fully materials sought by the applicants.
In answer to the applicants’ notice to produce issued on 23 April 2007, which sought: (a) copies of all management accounts, profit and loss statements and balance sheets of Digital Sinema; and (b) tax returns of the respondents for the financial years ending 2004, 2005 and 2006; no management accounts or tax returns were produced by Digital Sinema.[59]
[59] transcript, p.86.24
The excuse proffered by the respondents’ solicitor to the Court was that the principal of the accounting firm engaged by the respondents “has had his own personal problems in the past 6 months or so and that had been the reason for the delay”.[60] That of course does not explain the delay extending back to 2004. It is not in truth an explanation even for the last six months.
[60] transcript, p.86.38
The financial statements eventually produced by the respondents in part on 16 May 2007 and further on the first day of hearing of 18 May 2007[61] were not prepared by Mr Karakikes’ accountant until after the issue of the applicants’ notice to produce of 23 April 2007. This was made clear during this passage of the re-examination of Mr Karakikes:
[61] exhibit R7
Mr Tzovaras: Your Honour, I can assist your Honour by asking one question for the witness before I respond.
When did you instruct your accountant to prepare the financial statements that are before you, that is for the years ending 30 June 2005 and 30 June 2006?
Mr Karakikes: It’s been at least six months since I asked him to prepare them.
Mr Tzovaras: When did you instruct your accountant specifically in relation to the figures that are set out in the profit and loss accounts?
Mr Karakikes: That would’ve been two weeks ago now. ”[62]
The financial statements cannot be relied upon as an accurate account for the following reasons:
a)they have been compiled from figures provided to his accountant by Mr Karakikes from computer records that have not been discovered;[63]
b)like the invoices obtained from Scott Saturday, they appear to have been concocted for the purposes of the proceeding;
c)the amount shown by the NAB bank statements to be revenue does not correlate to the amounts set out in the financial statements as sales income;
d)directors’ (sic) fees paid to Mr Karakikes’ matched his personal income as declared in his tax returns exactly (despite the alleged losses on his property development business);[64]
e)the figures recorded in the financial statements produced on 16 May 2007 did not match those produced on 18 May 2007 (there being an overlap in the provision of financial statements for the year ending 30 June 2006);[65] and
f)the financial statements were never signed off.
[62] Karakikes RXN at transcript, p.139.8
[63] transcript, p.139.17
[64] Karakikes XXN, transcript, p.107.16
[65] In particular “Retained Profits” figures had been inserted into the second set of financial statements produced on 18 May 2006 in relation to prior year’s trading. Presumably this is because the financial statements were prepared in reverse order and are a recent invention.
A further notice to produce was issued on 21 May 2007[66] which sought documents relating to the disposal of Digital Sinema’s business to SD Digital Limited. The respondents produced nothing.[67]
[66] exhibit A4
[67] transcript, p.87.13
Continuing contempt of Court
Mr Karakikes remains to this day in unpurged contempt of the 22 September 2006 Orders to which he consented and which require him to verify the respondents’ list of documents.
The applicants make the following further submissions in relation to additional damages:
The evidence now supports a dramatic revision to the damages that should be awarded in this case.
The starting point is that the revenue derived by Digital Sinema from its business between August 2003 and July 2006 was approximately $4M,[68] of which somewhere between approximately 8% and 33% was attributable to copyright infringing activities (based on the proportion of the applicant studios’ titles offered for sale in the catalogues and the value of that proportion to the Digital Sinema Business).
Mr Karakikes conceded that:
(a)the average monthly income of Digital Sinema from August 2003 to August 2005 was about $87,000.00 to $90,000.00 without wholesale sales;[69] and
(b)there was then a dramatic increase in the average revenue in the period November 2005 to May 2006 from about $90,000.00 to $220,000.00 a month and from July 2006 to April 2007 it dropped down to about $150,000.00.[70]
The Digital Sinema Business increased dramatically the number of catalogues sent to customers after October 2005 – … Plainly, the reason catalogue production reduced again was because the respondents were prevented from using the Calvista customer list and the applicant studios’ titles following the granting of an interlocutory injunction.
As a consequence of the above additional considerations and the clear picture that has now emerged about the scale of the Digital Sinema Business, the applicants now revise their particulars of additional damages from $250,000.00 to $1.35M.
This is a clear case for the operation of the maxim omnia praesumuntur contra spoliatorem, an approach with a distinguished pedigree in assessing damages for infringement of copyright, and in allied cases: see Infabrics v Jaytex [1985] FSR 75 at 79-80 and the other cases there referred to.
Revenue attributable to DVDs from the applicants’ studios is approximately $1.3M (i.e. $4,009,223.05 x 33% = $1,323,043.61). A nominal cost of production of $1 per unit ought to be allowed to the respondents, which results in an expenses deduction of approximately $50,000 (i.e. ($1,323,043.61 / $29.00[71]) x $1.00 = 45,622.19); leaving a total of $1.25M as an appropriate award of additional damages that reflect both undetectable infringements and the recovery of “benefits shown to have accrued” to the infringer (cf. sub-para 115(4)(b)(iii)). An amount should then be added to that figure to account for the matters set out in paragraphs 66 to 90 of the applicants’ Submissions in accordance with the Court’s discretion under s115(4)(b).
[68] The precise figure calculated from the NAB statements recorded in Schedule B is $3,960,429.83.
[69] Karakikes XXN at transcript, p.123.44
[70] Karakikes XXN at transcript, p.124
[71] i.e. Digital Sinema’s average DVD sale price as accepted by Mr Karakikes
In respect of the infringement of copyright in the Calvista customer list, there being nothing to displace the suggestion that it must have been copied because it had the seed names on it. An additional amount of $100,000.00 would still be appropriate. However, the applicants concede that the Court should take into account the additional relief of an account of profits for the misuse of the Calvista customer list such that the amount determined in that account of profits may be sufficient for the purposes of treating the respondents as having disgorged the benefit they derived from the list. It follows that the Court may not have to make a significant award in respect of additional damages for infringement of copyright in the Calvista customer list.[72]
[72] see Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1995) 6 ALR 445 at 446
Account of profits
Some general principles relating to the taking of an account of profits, with which the Court will be familiar, are set out for convenience in Schedule D to these submissions.
Having absorbed all the evidence in this case and having the notable advantage of being absorbed in all the matters to make findings on matters of general assessment,[73] the Court is able to make some necessary and/or appropriate findings on matters of general assessment. There are clearly attributable profits from the time that the Calvista customer list began to be used by the respondents in about October/November 2005 until the grant of injunctions on revenue of approximately $914,000…
The combination of seed names appearing on the Respondents’ List and the corresponding increase in revenues and significant increase in print runs of the catalogues are all attributable to the use and high yield of the Calvista customer list.
The respondents are jointly and severally liable for that account of profits. As a starting point the Court should find the amount of $914,000 less costs in profits is attributable to the misuse of Calvista’s confidential information. This represents the increase in business attributable to Digital Sinema’s acquisition of Calvista’s customer list. The sharp increase in revenues and increase in catalogue print-runs supports the inference that this occurred in October/November 2005. The lift in revenue from November 2005 to June 2006 (being 7 months) can be calculated as follows:
Total revenue $1,528,611.32[74] less expected[75] average revenue (of 7 x $87,792.79 = $614,549.53) = $914,061.79
The amount, if any, to be deducted from the figure of $914,000 is the sum of the direct expenses that can be proved by the respondents and such proper share of overheads[76] as can be proved by them against the background of their inadequate discovery and failure to comply with notices to produce. There will be a very limited capacity on their part to identify and prove expenditures that are properly deductible from that amount of money. That is not an exercise that the Court needs to go into immediately but an account has to be taken.
The appropriate course is for a direction to be made for the taking of an account with the starting point being the estimation of the increased revenue for the period November 2005 to June 2006 of $914,061.79.
[73] see Biogen Inc v Medeva PLC [1997] RPC 1 at 34 per Lord Hoffman
[74] as set out in Schedule A; and being $218,373.05 per month as recorded in exhibit A10.
[75] i.e. revenue levels prior to the acquisition of Calvista’s customer list as referred to at para 89(a) above and recorded in exhibit A10. The figures supporting that summary document are set out at Schedule B.
[76] Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179 CLR 101
No further submissions were received from the corporate respondents. Submissions on behalf of Mr Karakikes were filed on 15 August 2007. Relevantly, those submissions are:
Copying the Infringed Films
Burden of Proof
The applicants allege that the respondents copied Infringed Films.
The applicants have the burden of proving such allegation and, it is submitted they have failed to discharge such burden.
Supply and Demand
There is no evidence that the respondents have copied any of the Infringed Films. However, the applicants seek to infer such copying principally on the basis of an alleged unexplained discrepancy in the level of stock purchased and sold by the respondents.
There is no evidence of the alleged discrepancy of stock. The applicants appear to infer the alleged discrepancy on the basis of the respondents’ failure to produce documentation on discovery in relation to the supply of the Infringed Films.
In other words, the inference of the alleged copying of the Infringed Films is itself drawn from a further inference. It is submitted that the deductions and inferences made by the applicants in support of the allegation that the respondents have been copying the Infringed Films is purely speculative and artificial.
Further, such allegation is totally unsupported by fact and cannot possibly extend specifically to each or any of the 19 titles comprised in the Infringed Films.
By way of clarification, the fact that the second respondent’s turnover is allegedly of the order of $2 million per annum (it will later be submitted that this figure has been substantially exaggerated) does not lead to the inference that a proportionate amount of such turnover related to the 19 titles. It cannot be assumed that of the 200 odd titles comprised in any one catalogue, each title (including those comprised in the Infringed Films) achieved the same level of sales.
The applicants also seek to draw an inference that the respondents have been copying Infringed Films on the basis of the further inference that demand exceeded supply and, what they contend to be the implausability of Mr Karakikes’ evidence that when this occurred and there was no stock to satisfy the excess demand, the second respondent simply did not order more copies.
Mr Karakikes’ explanation is not implausible given the large turnover of new titles that occurs in the industry.
Mr Karakikes’ Performance
Mr Karakikes is criticized by the applicants for the non-production of documents during the discovery process and the alleged practice of destroying business records. Whether or not such criticism is warranted, it certainly does not justify the drawing of an inference that Mr Karakikes for the second respondent has been engaged in unauthorized copying of the Infringed Films.
The absence of documents does not constitute evidence of any impropriety on the part of second or third respondents or, in any case, evidence from which one could conceivably infer that those respondents have engaged in copying of the Infringed Films.
Blatch v Archer and Jones v Dunkel do not assist the applicants in the drawing of such inferences.
Photocopying
The applicants seek to draw an inference that the second and third respondents have been copying Infringed Films on the basis of the commercial character of the colour photocopying equipment used by the second and third respondents pursuant to an arrangement they had with Fuji Xerox Australia Pty Limited. They rely on documents produced under subpoena by Fuji Xerox which they assert show that 220,981 colour copies were made on such photocopier during the period from November 2005 to April 2007.
Apart from that figure being incorrect, the correct figure being 195,696, there is no evidence of what has been photocopied. Mr Karakikes’ evidence is that he provided colour photocopying services to third parties.
However implausible it may be said that Mr Karakikes’ evidence may be, it is submitted that such volume of colour photocopying cannot legitimately provide a basis for the drawing of an inference that the second respondent in fact used such equipment to photocopy the slick artwork of the DVD cases of counterfeit copies of adult films and, in particular, any of the 19 titles comprising in the Infringed Films.
Blatch v Archer and Jones v Dunkel
As stated above, neither Blatch v Archer nor Jones v Dunkel, assist the applicants in inferentially proving that the second and third respondents engaged in the copying of the Infringed Films.
The Applicants have the positive burden of proving that the respondents copied the Infringed Films. The failure by the respondents to adduce evidence that provides an explanation for the non-production of documents, the apparent excess supply over available stock, and the large volumes of colour photocopying cannot discharge the applicants burden of proof.
The Applicants make much of the respondents failure to call Mr Constantinou and the related concession by Mr Karakikes that Mr Constantinou was capable of swearing an affidavit. The applicants conveniently omit to refer to the evidence given by Mr Karakikes during his re-examination in this respect, namely that Mr Constantinou refused to swear an affidavit or be involved in the proceedings: M. Karakikes RXN T-133.15-24.
In any event, for the reasons stated above, no adverse inference may be drawn that would discharge the applicants’ burden of proof from the respondents failure to have M. Constantinou giving evidence.
Copying Calvista’s Customer List
In relation to the copyright claim, there is no evidence that the respondents copied any of the Calvista customer lists. Nor is there any evidence from which an inference to that effect may be drawn.
The evidence of the print runs and mail out relied upon by the applicants and referred to in paragraph 44 of their submissions cannot possibly provide a basis for an inference that the respondents have copied any of the Calvista customer lists.
Accordingly, the tenth applicant has not established its copyright claim in respect of the Literary Works.
Further, it is submitted that such copyright claim cannot be established for the reasons stated in the Outline Submissions of the Respondents on Applicants’ Application for Summary Judgment set out in paragraphs 91 to 98:
…
Personal Liability
The applicants rely on Mr Karakikes’ capacity as the sole director, secretary and shareholder of the first and second respondents for attributing the requisite knowledge attracting personal liability in respect of such liability as is found against the first and second respondent.
It is submitted that the mere fact that Mr Karakikes is the sole director, secretary and shareholder of the first and second respondents in circumstances where substantially all operations at all material times were undertaken by Mr Constantinou does not provide a basis for fixing Mr Karakikes with the requisite knowledge.
There is no evidence that the first respondent has been trading or carrying on business involving purchase and sale of DVD’s of adult films. The evidence is that such business was conducted by the second respondent.
Mr Karakikes’ gave evidence that his role in the second respondent was substantially limited to the financial management of the second respondent’s affairs and did not involve the day to day management of its operations.
His evidence to this fact is not contradicted by the fact that he met Mr Tomaras at the second respondent’s business premises in the course of the preparation of the Respondent’s List of Documents during the discovery process (paragraph 48(a) of Applicants’ Submissions).
Nor is it correct that, as contended by the applicants in paragraph 48 of their submissions, Mr Karakikes is to be considered to be involved in the day to day conduct of the company merely because of his knowledge of the procedures undertaken on a day to day basis and his regular contact with his manager, Mr Constantinou.
The evidence is that Mr Karakikes is very familiar with all operational aspects of the second respondent and its business, and procedures or processes involving its purchase of adult film DVD’s. There is no evidence that Mr Karakikes was engaged, as distinct from being familiar in the sense stated earlier, in the operations or the conduct of the business of the second respondent.
Absent evidence of such involvement, it cannot be said that Mr Karakikes had the requisite knowledge to attract personal liability for copyright infringement in respect of the Infringed Films or for that matter Literary Works. Nor is there evidence of the requisite knowledge or evidence providing the basis for inferring finding the requisite knowledge in respect of the second respondent’s breach of confidence in relation to the Literary Works.
Relief and Quantum
The applicants’ claim for pecuniary relief falls under two categories, namely, additional damages under s 115(4) of the Act, and account of profits in respect of breach of confidence.
The revised amount now claimed by the applicants in respect of additional damages is $1.35 million. The amount that the applicant’s claim in respect of the account of profits is approximately $914,000 less an amount for direct expenses.
Additional Damages Not Justified
In order for the applicants to be entitled to additional damages in respect of an infringement of copyright, the court must be 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
It is submitted that the court will not be satisfied that in the present case it is proper to award additional damages on the basis set out in prargraph 109 (b) of the Outline Submissions of the Respondents on Applicants’ Application for Summary Judgment:
…
The third respondent also relies on paragraphs 110 to 112 of the Outline Submissions of the Respondents on Applicants’ Application for Summary Judgment:
…
As to the applicant’s complaint in relation to the respondents’ conduct of the proceedings, and the alleged contempt:
(a)The non-production of documents by the respondents provides no basis for the award of additional damages given that the respondents say that they have no documents to produce. There is no evidence of any improper conduct by the respondents in relation to their inability to produce any documents;
(b)Similarly, the non-delivery up of DVD’s, the respondents answer is that there are none to deliver up;
(c)As to the payment to Mr Saturday by the respondent of $72,761.58, there is no evidence and no basis to support the plaintiffs submissions of improper conduct by Mr Karakikes as stated in paragraphs 74 to 77 of their submissions;
(d)In relation to the applicant’s contention that Mr Karakikes attempted to dispose of the second respondent’s assets after the summary judgment, such contention is unsupported and there is no evidence that the customer list of the second respondent was provided to SD Digital after the summary judgment was delivered. In his affidavit of 9 August 2007, Mr Karakikes states that he supplied a copy of the DS customer list to SD Digital in about March 2007. The summary judgment was handed down on 19 March 2007. In any event, Mr Karakikes’ conduct in relation to the provision of the DS customer list to SD Digital is not relevant to the award of additional damages in relation to the infringement of the Infringed Films. It can only be relevant to any finding that there has been a breach of copyright of the Literary Works, in respect of which it is submitted there is no basis for any such finding.
(e)There is no justification for the applicants’ contention that Mr Karakikes is in contempt of court in relation to the consent orders made on 22 September 2006 relating to the verification of the Respondents’ List of Documents. The breach of a procedural order, does not, of itself, constitute contempt of the court. Similarly, the criticism directed at Mr Karakikes and the allegations of contempt of court made at the hearings of 6 and 10 August 2007, are not, in all the circumstances, justified and are unsupported.
Quantum of Additional Damages if Awarded
If the court determines to award additional damages, then it is submitted that the quantum of additional damages cannot justifiably be in excess of $28,500 on the being the maximum amount that the producer applicants would be able to derive as gross revenue from the grant of exclusive rights over the 19 titles comprised in the Infringed Films for seven years. The basis of this submission is explained below.
…
Accordingly, it may be said that the producer applicants have been deprived of, as a maximum, a value of US$1500 for each of the 19 films or a total of US$28,500.
It is submitted that the amount that may be appropriately awarded as additional damages should be referable to this maximum amount of fees that the producer applicants would have derived if they had sold exclusive rights under the copyright for each of the 19 titles. In this context, it is submitted that in all the circumstances, the amount of additional damages, if awarded, should not exceed the maximum amount that the producer applicants would have been able to derive as gross revenue, from the grant of such exclusive rights over the 19 titles.
Quantum of Account of Profits
The applicants have elected to claim for Account of Profits in relation to the breach of confidence and, if so determined, the breach of copyright, in respect of the Literary Works.
They contend that the relevant period for which Account of Profits should be applied is from November 2005 to June 2006 when injunctions were granted, being a period of 7 months (“Account of Profits Period”).
The applicants have not been able to point to any direct evidence on the profit generated by the second respondent during the Account of Profits Period.
Instead, the applicants have sought to speculate on what profit the second respondent might have derived for that period by referring to the NAB bank statements tendered at the hearing.
The applicants then proceed on some speculative extrapolation exercise to derive the figure of $914,000 as being the total revenue for the Account of Profits Period. It is submitted that such figure is to be rejected as it is unsupported by evidence and its derivation is entirely arbitrary.
Based on the NAB bank statements, the total amount of turnover for the financial year ending 30 June 2006 after appropriate adjustments is $1,528,611.32, as submitted by the applicants.
The applicants filed submissions in reply on 16 August 2007. I summarise those submissions below.
Since the applicants filed and served their outline of submissions on 25 June 2007, the following events have taken place:
a)the respondents’ have breached their undertaking to the Court on 23 May 2007;
b)the respondents’ failed to file and serve their submissions by the due date;
c)the third respondent responded to the applicants’ statutory demands in respect of his failure to pay the applicants’ costs of the summary judgment, by resolving that day to place the second respondent into voluntary administration;
d)on 26 July 2007 the administrator of the second respondent consented to the continuation of the proceeding against the second respondent;
e)between 26 July 2007 and 6 August 2007 the third respondent’s solicitor would not or could not advise the applicants’ representatives as to whether he was still acting for the third respondent;
f)the third respondent withdrew $18,000.00 from the second respondent’s bank account without the voluntary administrator’s permission;
g)Mareva orders were made by the Court on 6 August 2007, and the third respondent reacted to these orders by declaring himself bankrupt on 7 August 2007;
h)the first and third respondents did not comply with aspects of the Mareva orders, which necessitated the making of further orders on 10 August 2007;
i)the first and second respondents have failed to make any submissions, the third respondent filed and served his submissions on 14 August 2007;
j)the first and second respondents must be taken as having no answer to the outstanding claims made against them. All that can remain in issue is the third respondent’s personal liability for the first and second respondents’ acts, and the question of relief;
k)in light of the fact that Mr Tzovaras says he only acts for the third respondent, such reference in the written submissions (RS) should be read as being confined to the third respondent;
l)the third respondent, by omission from the written submissions (RS), makes it plain that he does not seriously contest many of the factual and legal matters the subject of analysis in the applicant’s submissions.
The transaction involved Digital Sinema selling 2,700 films to PCA at a price of $2.86 per unit.[82] Digital Sinema sold the units at loss. On Mr Karakikes’ own evidence the cost price per unit was around $3.00.[83]
[82] Karakikes XXN at transcript, p.126.34 & exhibit A10 p168
[83] Karakikes XXN at transcript, p.127.24
Mr Karakikes made no express mention of the transaction when he asserted in his affidavit that all films advertised in catalogue 20 had been “disposed of”[84] in accordance with what he said was a practice of the Digital Sinema business to dispose of all stock advertised but not sold in one catalogue “by way of wholesale”.[85]
[84] Karakikes affidavit 2.6.06, para 49
[85] ibid para 48
I draw the inference that Digital Sinema sought to offload counterfeit units of DVDs before its obligation to give them up on discovery in this proceeding arose.
The payment of a large sum of money to Mr Saturday
On or about 23 May 2006 (shortly after the proceeding had been commenced) Mr Karakikes contacted Mr Saturday and asked him to produce documentation by placing orders with studios. He did so in a manner that was likely to deceive the studios by placing the order in the name of Hustler Video Australia rather than the respondents’ names.
The artificial nature of these transactions by Mr Karakikes may be inferred from the abnormally large invoices placed by AYCE on 25 and 30 May 2006. Mr Karakikes conceded that they were larger-than-usual invoices.[86] The placing of these invoices correspond to a payment on 25 May 2006 to AYCE of $72,761.58.[87]
[86] Karakikes XXN at transcript, p.105.9
[87] exhibit A9 p.161
Mr Karakikes also conceded at the time that he asked for the invoices he was aware of the looming interlocutory hearing on 3 July 2006, including the injunctive relief that the applicant would be seeking on that occasion.[88] The following exchange made the position clear:
Mr Cobden:Despite the fact you had no documents to produce you went about the business of getting some documents on 29 June you say?
Mr Karakikes: Yes, I tried to obtain documents relevant to the Court proceedings.[89]
[88] Karakikes XXN at transcript, p.105.26
[89] Karakikes XXN at transcript, p.106.1
Mr Karakikes was prepared to give self serving evidence in his affidavit[90] by deposing to a conversation he says he had with Mr Saturday in which he requested invoices “which show that I purchased from you and also that you purchased from my (Digital Sinema) behalf.” He stated under cross-examination: “well, Digital Sinema would have been implied in case there were any invoices for Digital Sinema from these companies”.[91] Four of the five invoices he relied upon were not from Mr Saturday to the Digital Sinema Business or even the Hustler business; they were invoices from Wicked Pictures to All You Can Eat Inc and bore no apparent connection to the respondents.[92]
Attempts to dispose of Digital Sinema’s assets after summary judgment
[90] Karakikes affidavit 30.6.06, para 3[2]
[91] Karakikes at XXN at transcript, p.94
[92] Karakikes affidavit 30.6.06 annexure “B”
Mr Karakikes entered into an arrangement to divest the Digital Sinema Business of its principal asset, the mail order business, to a foreign corporation known as SD Digital Limited.[93] Mr Karakikes chose not to inform the applicants or the Court about the transaction.
[93] Karakikes XXN at transcript, p.46-47
The applicants were alerted to the matter by references in catalogue 30 to a different website address (which does not function), different freecall numbers and the name “SD Digital”. Only when those matters were brought to Mr Karakikes’ attention in cross-examination did he acknowledge the transaction.[94] Even then, he was unforthcoming with details about the arrangement, limiting his answers to the barest of information about the acquirer, his involvement in it, his status in the new venture as an employee of the company, the status of the transaction and the terms of the arrangement.[95] He claims that it is an undocumented transaction.
Continuing failure to produce documents
[94] Karakikes XXN at transcript, p.46
[95] Karakikes XXN at transcript, p.47-51
During the course of the resumed hearing the respondents failed to produce fully materials sought by the applicants.
In answer to the applicants’ notice to produce issued on 23 April 2007, which sought: (a) copies of all management accounts, profit and loss statements and balance sheets of Digital Sinema; and (b) tax returns of the respondents for the financial years ending 2004, 2005 and 2006; no management accounts or tax returns were produced by Digital Sinema.[96]
[96] transcript, p.86.24
The excuse proffered by the respondents’ solicitor to the Court was that the principal of the accounting firm engaged by the respondents “has had his own personal problems in the past 6 months or so and that had been the reason for the delay”.[97] That of course does not explain the delay extending back to 2004. It is a dubious explanation even for the last six months.
[97] transcript, p.86.38
The financial statements eventually produced by the respondents in part on 16 May 2007 and further on the first day of hearing of 18 May 2007[98] were not prepared by Mr Karakikes’ accountant until after the issue of the applicants’ notice to produce of 23 April 2007. This was made clear during this passage of the re-examination of Mr Karakikes:
Mr Tzovaras: Your Honour, I can assist your Honour by asking one question for the witness before I respond.
When did you instruct your accountant to prepare the financial statements that are before you, that is for the years ending 30 June 2005 and 30 June 2006?
[98] exhibit R7
Mr Karakikes: It’s been at least six months since I asked him to prepare them.
Mr Tzovaras: When did you instruct your accountant specifically in relation to the figures that are set out in the profit and loss accounts?
Mr Karakikes: That would’ve been two weeks ago now.[99]
[99] Karakikes RXN at transcript, p.139.8
The financial statements cannot be relied upon as an accurate account for the following reasons:
a)they have been compiled from figures provided to his accountant by Mr Karakikes from computer records that have not been discovered;[100]
b)like the invoices obtained from Scott Saturday, they appear to have been created for the purposes of the proceeding;
c)the amount shown by the NAB bank statements to be revenue does not correlate to the amounts set out in the financial statements as sales income;
d)director’s fees paid to Mr Karakikes matched his personal income as declared in his tax returns exactly (despite the alleged losses on his property development business);[101]
e)the figures recorded in the financial statements produced on 16 May 2007 did not match those produced on 18 May 2007 (there being an overlap in the provision of financial statements for the year ending 30 June 2006);[102] and
f)the financial statements were never signed off.
[100] transcript, p.139.17
[101] Karakikes XXN at transcript, p.107.16
[102] In particular “Retained Profits” figures had been inserted into the second set of financial statements produced on 18 May 2006 in relation to prior year’s trading. This may be because the financial statements were prepared in reverse order and are a recent invention.
A further notice to produce was issued on 21 May 2007[103] which sought documents relating to the disposal of Digital Sinema’s business to SD Digital Limited. The respondents produced nothing.[104]
[103] exhibit A4
[104] transcript, p.87.13
Mr Karakikes remains in breach of the 22 September 2006 orders to which he consented and which require him to verify the respondents’ list of documents.
Quantum - additional damages
The applicants have dramatically revised the damages that they seek.
The starting point is that the revenue derived by Digital Sinema from its business between August 2003 and July 2006 was approximately $4m,[105] of which somewhere between approximately eight per cent and 33 per cent was attributable to copyright infringing activities (based on the proportion of the applicant studios’ titles offered for sale in the catalogues and the value of that proportion to the Digital Sinema business).
[105] The precise figure calculated from the NAB statements is $3,960,429.83.
Mr Karakikes conceded that:
a)the average monthly income of Digital Sinema from August 2003 to August 2005 was about $87,000.00 to $90,000.00 without wholesale sales;[106] and
b)there was then a dramatic increase in the average revenue in the period November 2005 to May 2006 from about $90,000.00 to $220,000.00 a month and from July 2006 to April 2007 it dropped down to about $150,000.00.[107]
[106] Karakikes XXN at transcript, p.123.44
[107] Karakikes XXN at transcript, p.124
The Digital Sinema business increased dramatically the number of catalogues sent to customers after October 2005. I draw an inference that a reason catalogue production reduced again was because the respondents were prevented from using the Calvista customer list and the applicant studios’ titles following the granting of an interlocutory injunction.
As a consequence of the above additional considerations and the clearer picture that has now emerged about the scale of the Digital Sinema business, the applicants now revise their particulars of additional damages from $250,000.00 to $1.35m.
I accept that this is a case for the operation of the maxim omnia praesumuntur contra spoliatorem, an approach with a distinguished pedigree in assessing damages for infringement of copyright, and in allied cases: see Infabrics v Jaytex [1985] FSR 75 at 79-80 and the other cases there referred to.
The applicants assert that revenue attributable to DVDs from their studios is approximately $1.3m and that allowable deductible expenses would be approximately $50,000, leaving a total of about $1.25m as an appropriate award of additional damages in respect of infringements of copyright in the films. The third respondent asserts that additional damages are not justified but I reject that submission. The breaches of copyright established by the applicants have been flagrant and persistent and the conduct of the third respondent in particular during the course of proceedings to cloak and conceal his activities and to dispose of and conceal business assets in an effort to frustrate a possible judgment against him are deplorable.
However, a somewhat more cautious approach to the assessment of the proportion of undetected infringements to be included in the quantum of additional damages is, in my view, called for. It is, in my view, unlikely that a third of the respondents’ revenue would be derived from eight per cent of its advertised films. The litigation against the respondents may have had an adverse impact on revenue which extended more generally to its business. I proceed on the cautious basis that about 10 per cent of the respondents’ revenue could be attributed to undetected copyright infringements of the applicants’ films. That would produce a figure of approximately $400,000. To that, however, must be added a substantial sum to express the Court’s extreme disapproval of the manner in which Mr Karakikes has sought to cloak, conceal and transfer his operations and to frustrate the applicants in the pursuit of their rights. In particular, I take into account the following matters addressed in the applicants’ submissions in reply.
Certain conduct of the respondents, relevant to the assessment of additional damages, has only come to light since the filing of the applicants’ submissions. In part, that is because the Mareva orders provided for information to be obtained by the applicants from Telstra Corporation Limited and Australia Post Corporation.[108] In turn, that information shed light on the activities of the respondents, and in particular the third respondent, dating back to immediately before the commencement of the hearing. That material makes plain the third respondent’s efforts to maintain his operation irrespective of the Court’s sanctions, including the interlocutory orders made on 3 July 2006, summary judgment on 19 March 2007 and the Undertakings. The relevant matters are set out below.
Conduct designed to avoid the consequences of litigation, including the Court’s sanctions
[108] orders 6-13
The information from Telstra and Australia Post demonstrates that, from the outset, the third respondent had regard to milestones in this litigation and set about transferring assets of the Digital Sinema business, the subject of the litigation and relief sought in it, to avoid the consequences of an adverse judgment. In particular:
a)on 6 November 2006, i.e. two weeks prior to the commencement of the hearing, the third respondent caused mail orders to be re-directed from Digital Sinema’s PO Box to some other address;[109]
b)on about 28 March 2007, i.e. one week after the initial hearing and summary judgment application, the third respondent caused Digital Sinema’s free-call numbers to be re-directed to fixed line numbers at 149 Canterbury Road, Canterbury, being an address that he seems to operate from;[110] and
c)on 3 May 2007, i.e. two weeks before the resumption of the hearing and after summary judgment, the third respondent established an account for free-call numbers under the alias “Jime Kime” which numbers were to appear in the DS Digital catalogue.[111]
Breach of Undertaking
[109] Williams affidavit 9.8.07, para 10(a) & annexure “F” at pp.24-25
[110] Williams affidavit 9.8.07, paras 8-9 & annexures “D”–“E”
[111] ibid para 8 & annexure “D”
Shortly before 18 May 2007 the applicants became aware that the respondents had apparently transferred their mail order business to a person or entity operating a business as “SD Digital”.[112] Amongst other things, that information prompted the applicants to obtain a written interim undertaking by the third respondent not to deal with the assets of the first and second respondents until the close of hearing.[113]
[112] see Dunne affidavit 1.8.07, paras 3-4 & exhibit GED-56 & 57
[113] That undertaking was provided on 18 May 2007 (see Williams affidavit 9.8.07 at annexure “C”).
Further information about “SD Digital” came to light during the course of the cross-examination of the third respondent on 18 May 2007, including his contention that there was an asset and business sale between the second respondent and “SD Digital”, a company incorporated overseas.[114] For the record, it now seems that was false evidence; the evidence adduced by the applicants in their application for the Mareva orders makes it tolerably clear that “Digital Sinema”, “SD Digital”, “ADI Adult-DVD Importers” and the third respondent are one and the same.
[114] The evidence is conveniently collected in Williams affidavit 3.8.07, para 8 and otherwise at transcript, pp.45-51
On 23 May 2007 the applicants sought Mareva orders but the respondents vigorously opposed the making of those orders and provided the Undertaking, which had the effect of defeating the applicants’ application. The Undertaking, through the third respondent, was to the effect that the respondents would not take any further steps to “advance, progress, execute or conclude any transaction in respect of the shares and assets of the corporate respondents” until the determination of the proceeding.[115]
[115] transcript, p.151.35
The third respondent set about breaching the Undertaking almost immediately. By 3 July 2007 Mr Dunne had received a catalogue from “ADI Adult-DVD Importers”.[116] He placed an order in response to the catalogue on 4 July and on 12 July his bank account was debited by “Digital Sinema”.[117]
[116] Dunne affidavit 1.8.07, paras 7-8 & exhibit - 58
[117] ibid paras 10 & 12 & exhibit GED-59
On 13 July 2007 the third respondent obtained a new PO Box which was to be used for the mail order business, branded “ADI Adult-DVD Importers”, rather than “SD Digital”.[118] The third respondent requested that the account date details to be kept the same as the account operated by Digital Sinema.[119] Digital Sinema even paid the fees for the operation of that account.
[118] Williams affidavit 9.8.07, para 10(a)and (c) & “F”pp21 & 29
[119] ibid at annexure “F” p.29
When these matters were brought to the attention of the Court on 6 August 2007 the third respondent’s solicitor, who had already been served with the affidavits relied upon by the applicants proffered no explanation.
In his submissions, the third respondent makes the bold assertion that there is no evidence he attempted to dispose of the second respondent’s assets after the summary judgment.[120] Again, this is symptomatic of reluctance on the part of third respondent to concede any issue irrespective of his obligations to sensibly confine the dispute.[121] On his own evidence the third respondent asserts that he disposed of computers belonging to the corporate respondents by dumping them at a public tip.
Non-compliance with Mareva orders
[120] para 42(d)
[121] See for instance the remarks of Allsop J in Visible Results Properties Inc v Sushi Train (Australia) Pty Ltd [2005] FCA 1159; Universal City Studios LLP v Hoey Trading as DVD Kingdom [2006] FCA 727 in relation to the duty of solicitors to the court to focus on such matters in dispute which are matters of substance.
The third respondent’s response to being served with the Mareva orders was to go into voluntary bankruptcy on 7 August 2007, the day before he was required to comply with the delivery up orders. He may have been under the misapprehension that the simple act of placing himself in bankruptcy would suffice to effectively vacate the Mareva orders.[122] That was not so.
[122] see an email from Tzovaras Legal to Gilbert + Tobin
The applicants’ solicitors wrote to the third respondent’s solicitor on 7 August 2007 disabusing the third respondent and those acting for him of the notion that the third respondent would not have to comply with the Mareva orders because of his new status.[123] Further, the third respondent’s trustee in bankruptcy indicated a desire for the third respondent to comply with the Mareva orders and that fact was communicated to the third respondent by the applicants’ solicitors on 8 August 2007.[124]
Delivery up
[123] Williams affidavit 9.8.07, annexure “J”
[124] ibid para 16 & 18-19 and annexure “K”
The third respondent failed to deliver up any copies of the Literary Works. Further, he maintains that there are no computers in his possession so none could be accessed by the applicants for the purposes of complying with the Mareva orders.[125]
[125] Karakikes affidavit, 9.8.07 paras 4-5 & 10
The third respondent disclosed that in March 2007 he supplied a copy of the DS Customer List to SD Digital.[126] The third respondent’s submission on this point is wholly unpersuasive. He suggests that “there is no evidence” the list was provided after the summary judgment.[127] When the third respondent’s disclosure affidavit was being reviewed before the Court on 10 August 2007 the lack of candour, including by use of approximate dates to avoid precise placement vis a vis certain milestones (in this instance the summary judgment on 19 March 2007 and the provision of the list “in about March”) the third respondent’s solicitor submitted, by way of excuse about the appearance of brevity and lack of frankness with the affidavit, that he had advised his client about matters such as claiming privilege against self-incrimination, but (so it was submitted) the third respondent insisted on swearing the affidavit. It is open to me to infer that the third respondent transferred the list after summary judgment and I do so.
[126] ibid para 9
[127] respondents’ submissions, para 42(d)
Further, the third respondent contended that that copies of the DS Customer List had been stored on a computer owned by the second respondent and that in April 2007 (i.e. after he had been aware of the reasons for summary judgment and one month prior to the re-commencement of the hearing) he had, so he says, deleted the DS Customer List from the data base of the computer and disposed of all Digital Sinema’s computers.[128] Had this been true, it would represent previous misconduct. The third respondent would have destroyed any documents which would have shed light on his business activities (while refusing to produce documents by way of discovery in breach of Court orders).
[128] Karakikes affidavit 9.8.07, paras 6-8
I reject this evidence of the third respondent. To begin with, it is plain that the third respondent, through his latest guise as “ADI Adult-DVD Importers”, is operating a mail order business and therefore he must be using a mailing list.[129] That mailing list must have on it fictional names used by Mr Dunne in the course of his anti-piracy activities,[130] because he received both the “Digital Sinema” catalogues containing some of the works in suit in this proceeding,[131] a SD Digital catalogue[132] and an ADI catalogue.[133] The mailing list must be maintained, developed and operated on a computer.
[129] see Dunne affidavit 1.8.07, paras 2-12
[130] Dunne affidavit 1.8.07, para 2
[131] ibid para 2; Dunne affidavit 9.5.06, para 27
[132] Dunne affidavit 1.8.07, para 4
[133] ibid para 7
It is as well to remember that in the course of the cross-examination of the third respondent, when asked questions about the Digital Sinema business’ database, in which he spoke of accessing the database connecting to the internet and reviewing titles, Mr Karakikes made no mention of having in fact disposed of the computers in the previous month.[134]
[134] Karakikes XXN at transcript, pp.75, 89 & 112
In addition, the third respondent failed to cause the copy of literary works, being the “DS Customer List” in the possession of the third respondent’s solicitor, to be delivered to the applicants’ representative. It was therefore necessary to obtain an order to that effect on 10 August 2007.
I find that the third respondent continues to possess mailing lists, on computer hardware, but is concealing their existence and fails to comply with the Court’s orders.
Dealings with ADI
The third respondent was supposed to disclose his involvement with ADI Adult-DVD Importers. The evidence he gave (in his affidavit of 9 August 2007) provided a bare minimum of information.[135]
[135] ibid para 12
It is in my view clear that the third respondent is operating a mail order business through “ADI Adult-DVD importers”.
Asset Disclosure
The third respondent contended, by way of legal submission rather than evidence, that because he had become a bankrupt he had no assets and therefore declined to provide the information sought in the Mareva orders.[136] The Court made further directions on 10 August 2007 to compel the third respondent to disclose his assets as at 6 August 2007.
[136] ibid para 17
The most noteworthy aspect of that evidence is the omission of assets which are known to exist as a result of this proceeding including:
a)shares in companies – he is the sole shareholder of each of the first and second respondents;
b)tools of trade – his evidence in cross-examination was that his principal activity is property development which occupation he has pursued in his own name rather than through a corporate vehicle, yet he asserts he has no tools of trade;[137]
c)bank accounts – he asserts that he has no bank account yet disclosed records demonstrate that he holds two accounts with the National Australia Bank;
d)shares/other items of value – he asserts he holds one real property despite there being a freeze on two other properties in the Mareva orders; and
e)shares/other items of value – he makes no reference to the retail outlet for adult products in Kogarah that he allegedly owns with three others and which was supplied with DVDs by the second respondent.[138]
[137] Karakikes XN at transcript, p.14.29; Karakikes affidavit 26.6.06, para 18. See also applicants’ submissions paras 55-57
[138] Karakikes XXN at transcript, p.39.10
The breaches of copyright have been flagrant and persistent and the respondents’ conduct, which in reality is the conduct of the third respondent, has been deplorable, especially since these proceedings were commenced. There have been substantial undetected infringements of copyright in the applicants’ films and continuing breaches of copyright in the Literary Works. The Court must condemn this conduct in the strongest terms. In all the circumstances, I have decided to award additional damages of $500,000.
I will not award any damages for the breach of copyright in the Calvista customer list or lists. The appropriate remedy is an account of profits as sought by the applicants. I accept the applicants’ submissions in relation to that remedy and incorporate their submissions in amended form in this judgment.
Account of profits
An account of profits for breach of confidence reflects the principle that no one should be permitted to gain from her or his wrongdoing. Its availability also serves a useful purpose in lessening the temptation for recipients of confidential information to misuse it for financial gain.[139]
[139] See Attorney-General v Guardian Newspapers Ltd [No 2] [1988] 3 All ER 545 at 644 per Lord Keith of Kinkel
The role of the Court is to ensure that the defendant disgorges, and the plaintiff receives, an amount which truly represents the profit obtained by the infringement. As Windeyer J explained in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd:[140]
If one man makes profit by the use or sale of some thing, and that whole thing come into existence by reason of his wrongful use of another man’s property in a patent, design or copyright…infringer must account for all the profits which he thus made. This is so too in the case of a sale of an article which could only be made by the use of confidential information.
Where profits are the result of both the infringement of the plaintiff’s right and the produce and/or effort of the defendant, it is generally only the profits properly attributable to the former which are subject to the account. There must be an apportionment.
In the application of apportionment principles, mathematical precision is impossible, so a reasonable approximation may suffice.[141]
[140](1970) 122 CLR 25 at 43
[141] see Colbeam at 46; Dart Industries Inc. v Décor Corporation Pty Ltd at 119-120 and 134-135
Windeyer J explained the distinction between an account of profits and damages in Colbeam Palmer[142] as follows:
The distinction between an account of profits and damages is it by the form of the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed; by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations obviously yield different results, for a plaintiff’s loss is not to be measured by the defendant’s gain, nor a defendant’s gain by the plaintiff’s loss. Either may be greater, or less, than the other.
See also Dart Industries[143]
[142] at 32
[143] (1993) 179 CLR 101 at 110-111 per Mason CJ, Deane, Dawson & Toohey JJ
In Peter Pan Manufacturing Corp v Corsets Silhouette Ltd[144] it was held that the account was to be calculated according to the following principle:
Where the confidant or third party gains a profit from the unauthorised use of confidential information, the confider is entitled to an account of these profits.
An account of profits is restitutionary. It is particularly apt in circumstances where the confidant has profited more greatly from the use of confidential information than the confider would have been situated to. It is also useful in circumstances where the profit so gained is easily identifiable.
Where a plaintiff who elects in favour of an account of profits is entitled to is simply an account of profits … that is, what has the [defendant] expended on manufacturing these goods? What is the price which he has received on their sale? and the difference is profit.[145]
[144] [1963] 3A llER 402
[145] ibid at 412. See also Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 48-49; O Mustad & Son v Dosen (1928) [1964] 1 WLR 109; Fractionated Cane Technology Ltd v Ruiz – Avilla [1988] 13 IPR 609
It is appropriate, depending on the facts of the particular case, to deduct general overhead costs from the profit accounted for. In Décor the High Court made the following observations:[146]
Whether [the defendants] should succeed in their contentions depends upon whether, as a matter of fact and substance, the overheads which they seek to have deducted are attributable to the manufacture and sale of the infringing product. In arriving at an answer, the Court must consider such questions as whether the overheads in any particular category were increased by the manufacture or sale of the product, whether they represent costs which would have been reduced or would have been incurred in any event, and whether they were surplus capacity or would, in the absence of the infringing product, have been used in the manufacture or sale of other products. Dealing with the last of these questions may require the use of the concept of opportunity cost.
[146] at 119 per Mason CJ, Deane, Dawson & Toohey JJ
The combination of seed names appearing on the respondents’ list and the corresponding increase in revenues and significant increase in print runs of the catalogues are all attributable to the use and high yield of the Calvista customer list.
The respondents are jointly and severally liable for that account of profits. As a starting point it is open the Court to find the amount of $914,000 less costs in profits is attributable to the misuse of Calvista’s confidential information. This represents the increase in business attributable to Digital Sinema’s acquisition of Calvista’s customer list. The sharp increase in revenues and increase in catalogue print-runs supports the inference that this occurred in October/November 2005. The lift in revenue from November 2005 to June 2006 (being 7 months) can be calculated as follows:
Total revenue $1,528,611.32[147] less expected[148] average revenue (of 7 x $87,792.79 = $614,549.53) = $914,061.79
[147] Being $218,373.05 per month as recorded in exhibit A10
[148] i.e. revenue levels prior to the acquisition of Calvista’s customer list recorded in exhibit A10
I reject the evidence of Mr Karakikes that there is a link between the increase in revenue and the Digital Sinema website. Revenue increased dramatically well before the website was operational, and the asserted impact of the website was never quantified.
The amount, if any, to be deducted from the figure of $914,000 is the sum of the direct expenses that can be proved by the respondents and such proper share of overheads[149] as can be proved by them against the background of their inadequate discovery and failure to comply with notices to produce. There may be a limited capacity on their part to identify and prove expenditures that are properly deductible from that amount of money. That is not an exercise that the Court needs to go into immediately but an account has to be taken. It can be undertaken by a registrar.
[149] Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179 CLR 101
The appropriate course is for a direction to be made for the taking of an account with the starting point being the estimation of the increased revenue for the period November 2005 to June 2006 of $914,061.79.
The process of taking the account of profits can be undertaken by a registrar of this Court in accordance with the Federal Magistrates Court Rules 2001 (Cth).
I will not grant the other relief sought by the applicants. I see no point in ordering further delivery up from the third respondent given his attitude to these proceedings. In any event, the infringing films should have already been delivered up in accordance with the orders in my summary judgment. I will also not award interest up to judgment. The very substantial award of additional damages includes an assessment of the conduct of the respondents from the time the cause of action arose until judgment.
I will hear the parties as to costs.
I certify that the preceding one hundred and fifty-six (156) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 24 August 2007
APPENDIX A
| Applicants’ Affidavits | ||
| 9 May 06 | Affidavit of Graeme Edward Dunne · Exhibit GED-1 (documentary exhibits, including: AICO newletters; orders and packaging; and company search records) · Exhibit GED-2 (Catalogue no. 20) · Exhibits GED-3 to Exhibits GED-11 (trap purchase DVDs) · Exhibits GED-12 to GED-30 (authentic DVDs received from Applicants) · Exhibits GED-31 (Catalogue no. 21) · Exhibits GED-32 (Web capture on data CD) · Exhibits GED-33 to GED-38 (trap purchase DVDs) | |
| 26 May 06 | Second Affidavit of Graeme Edward Dunne · Exhibits GED-39 to GED-40 (authentic DVDs) | |
| 30 May 06 | Third Affidavit of Graeme Edward Dunne | |
| 9 Jun 06 | Fourth Affidavit of Graeme Edward Dunne · Exhibits GED-47 to GED-49 (Web captures on data CDs) · Exhibit GED-50 (Catalogue no. 22) | |
| 29 Jun 06 | Fifth Affidavit of Graeme Edward Dunne · Exhibit GED-50 (records from California Secretary of State’s website) · Exhibit GED-51 (Copyright Registration Certificates) · Confidential Exhibit GED-52 (Agreement between Manuel Ferrara Productions and Red Light) · Exhibits GED-53 to GED-54 (Web captures on data CDs) · Exhibit GED-55 (Copyright Registration Certificates) | |
| 9 May 06 | Affidavit of David Hugh Newnham · Exhibit DHN-1 (AdultShop’s Annual Report for the year ending 30 June 2005) · Confidential Exhibit DHN-2 (Confidential documentary exhibits, including: copy of the Sale and Purchase Agreement between AdultShop and AXIS dated 4 August 2000; and exclusive film licences) · Exhibit DHN-3 (Documentary exhibits, including: Calvista’s listing of sole and exclusive licences as at 27 April 2006; DVD slicks; AICO hologram; Dynamic Direct statement of credentials; email dated 17.2.06; and copies of packaging from Digital Sinema ) · Exhibit DHN-4 (Example of a typical Calvista “AXIS” catalogue dated March 2006) · Confidential Exhibit DHN-5 (Password protected zipped Excel file on data CD named “maillist17.3.06.zip”) · Exhibit DHN-6 (Original envelope and catalogue received from Digital Sinema) · Exhibit DHN-7 (DVD – The New Devil in Miss Jones) · Exhibit DHN-8 (Digital Sinema Gay Catalogue No.1) · Exhibit DHN-9 (Digital Sinema Catalogue No. 19) · Exhibit DHN-10 (Digital Sinema Gay Catalogue No.2) · Exhibits DHN-11 to DHN-28 (DVDs trap purchased form Digital Sinema) | |
| 13 Jun 06 | Second Affidavit of David Hugh Newnham · Exhibit DHN-29 (Digital Sinema Catalogue No. 22) · Confidential Exhibit DHN-30 (Envelopes received addressed to seed names that contained copies of Catalogue No. 22) · Confidential Exhibit DHN-31 (Copies of Calvista’s exclusive licenses for certain Acid Rain DVD titles) | |
| 29 Jun 06 | Third Affidavit of David Hugh Newnham · Confidential Exhibit DHN-32 (Further Schedule describing particulars of the names in the confidential schedule exhibited as Confidential Exhibit DHN-2) | |
| 30 Jun 06 | Fourth Affidavit of David Hugh Newnham · Exhibit DHN-33 (Digital Sinema Catalogue No. 23) · Confidential Exhibit DHN-34 (Copies of Calvista’s exclusive license agreements for four certain Acid Rain DVD titles) · Confidential Exhibit DHN-35 (Copies of Calvista’s exclusive licenses for a certain Venom Digital Media Inc DVD title) · Exhibit DHN-36 (Copy of an email from Mary Beth Crockett of Berkana Media Inc to David Newnham dated 28 June 2006) | |
| 13 Jun 06 | Affidavit of Brett Robert Allen · Confidential Exhibit BRA-1 (Sale receipt) | |
| 14 Sep 06 | Second Affidavit of Brett Robert Allen · Exhibit BRA-2 (Fax 1.5.06) | |
| 13 Jun 06 | Affidavit of Craig Anthony Ellis · Exhibit CAE-1 (Film licence agreements with Vivid and Zero Tolerance) | |
| 29 Jun 06 | Affidavit of Marci Hirsch | |
| 12 Sept 06 | Second Affidavit of Marci Hirsch | |
| 18 Aug 06 | Affidavit of Steven Vlottes · Exhibit SV-1 (Certificate of Status) · Exhibit SV-2 (Email 10.3.06) · Exhibit SV-3 (Certificates of Registration from US Copyright Office ) · Exhibit SV-4 (Invoices from Wicked Pictures) · Exhibit SV-5 (Scanned disc art) · Exhibit SV-6 (Letter from 30.5.06) | |
| 23 Aug 06 | Affidavit of D. Gill Sperlein · Exhibit DGS-1 (Certificate of Status) · Exhibit DGS-2 (Certificate of Registration from US Copyright Office ) · Exhibit DGS-3 (Sales Records) · Exhbit DGS-4 (Website Notice) · Exhibit DGS-5 (Who:is search record) | |
| 23 Aug 06 | Affidavit of Valerie See | |
| 24 Aug 06 | Affidavit of Stephen Paul Modde | |
| 8 Sep 06 | Affidavit of Ray Tamaddon · Exhibit RT-1 (Certificate of Status) · Confidential Exhibit RT-2 (Agreement with Manuel Ferrara Productions) · Exhibit RT-3 (Purchase Order ) · Exhibit RT-4 (Sales Records) | |
| 8 Sep 06 | Affidavit of Sheldon Baer | |
| 8 Sep 06 | Affidavit of Michael Koretsky | |
| 15 Sep 06 | Affidavit of Konrad Jakszuk | |
| 22 Sept 06 | Affidavit of Christopher Edmund Duvall Williams | |
| 16 Nov 06 | Second Affidavit of Christopher Edmund Duvall Williams · Exhibit CEW-1 (Bundle of Correspondence) | |
| 26 Sep 06 | Affidavit of Sheridan Seth Brown | |
| 26 Sep 06 | Affidavit of Amanda Jane Musgrave · Confidential Exhibit AJM-1 (Confidential schedule re name on AXIS mailing list) | |
| 26 Sept 06 | Affidavit of Malcolm Raymond Day | |
| 28 Sept 06 | Affidavit of Mitchell Weston | |
| 18 Oct 06 | Affidavit of Matthew Philip White · Exhbit MPW-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of David Sebastian Rametta · Annexure “A” (Original Packaging) | |
| 18 Oct 06 | Affidavit of Rohan John Gray · Exhbit RGJ-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of Andrew Richard Coutts Sleath · Exhbit ARCS-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of Jessmine-Rose Rossel · Exhbit JRR-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of Chris Paul Touhy · Exhbit CPT-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of Emma Louise Rakonic · Exhbit ELR-1 (Original Packaging) | |
| 18 Oct 06 | Affidavit of Ange Pam Hopkins · Exhbit APH-1 (Original Packaging) | |
| 20 Oct 06 | Affidavit of Samantha Jayne Caffin · Exhibit SJC-1 (Spreadsheet re trap purchase program) · Exhibit SJC-2 (Payment records from trap purchases) | |
| 25 Oct 06 | Affidavit of Nigel John Carson · Exhibit NJC-1 (Carson CV) · Exhibit NJC -2 (Orders of 10.7.06) · Exhibit NJC-3 (Data CD with matching entries from database comparison) · Exhibit NJC-4 (Schedule with sample of matches) | |
10
4
3