Vivid Entertainment LLC v Digital Sinema Australia Pty Ltd
[2007] FMCA 157
•19 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VIVID ENTERTAINMENT LLC & ORS v DIGITAL SINEMA AUSTRALIA PTY LTD & ORS | [2007] FMCA 157 |
| COPYRIGHT – Alleged breaches of copyright in adult films and confidential customer lists – alleged breach of confidence in the lists. PRACTICE AND PROCEDURE – Summary judgment – whether the respondents have a reasonable prospect of successfully defending the claims considered. |
| Copyright Act 1968 (Cth), ss.36, 86, 101, 102, 103, 115, 126A, 126B Federal Court Act 1976 (Cth), s.31A Federal Magistrates Act 1999 (Cth), ss.17A, 50 Federal Magistrates Court Rules 2001 (Cth) |
| Alphapharm Pty Ltd v Merck & Co Inc [2006] FCA 1227 Australian International Pilots Assn v Qantas Airways Ltd [2006] FCA 441 Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88 Balding v Ten Talents Pty Ltd & Anor [2007] FMCA 145 Boston Commercial Services Pty Ltd v GE Capital Finance Australasia [2006] FCA 1352 Cate v International Flavours & Fragrances (Bost) Pty Ltd [2007] FMCA 36 Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) (formerly Stanley Thompson Valuers Pty Ltd) [2006] FCA 1416 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Duncan v Lipscombe Child Care Services Inc [2006] FCA 458 Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Hicks v Ruddock [2007] FCA 299 Hocking v Bell (1945) 71 CLR Howard v Australian Fisheries Management Authority [2006] FMCA 975 Jewiss v Deputy Commissioner of Taxation [2006] FCA 1688 Kervan Trading Pty Ltd v Aktas [1987] AIPC 37 MG Distribution Pty Ltd & Anor v Khan & Anor [2006] FMCA 666 Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Suls & Associates Pty Ltd v Detroit Diesel-Allison Australia Pty Ltd (1997) 39 IPR 328 Vans, Inc v offprice.com.au Pty Ltd [2006] FCA 137 Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors [2006] FMCA 1817 | ||
| 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 IN 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 (A): | MITCHELL SPINELLI Trading ACID RAIN PRODUCTIONS |
| Ninth Applicant (B): | 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 PRODUCTIONS |
| 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 14 February 2007 |
| Delivered at: | Sydney |
| Delivered on: | 19 March 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
Pursuant to s.17A(1) of the Federal Magistrates Act 1999 (Cth) and rule 13.07 of the Federal Magistrates Court Rules 2001 (Cth), there be summary judgment for the applicants against the first and second respondents in relation to the asserted breaches of ss.102 and 103 of the Copyright Act 1968 (Cth).
The Court declares that the first and second respondents have infringed the copyright of the:
(i)first applicant in the Vivid Entertainment Infringed Films;
(ii)second applicant in the Vivid Video Infringed Films;
(iii)third applicant in the Wicked Pictures Infringed Films;
(iv)fifth applicant in the Zero Tolerance Infringed Films;
(v)sixth applicant in the Falcon Infringed Films;
(vi)seventh applicant in the Colossal Infringed Films;
(vii)eighth applicant in the Titan Infringed Films;
(viii)ninth applicant in the Acid Rain Infringed Films; and
(ix)thirteenth applicant in the Manuel Ferrara Production Films.
The first and second respondents whether by themselves, their 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 first and second respondents whether by themselves, their 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.
The first and second respondents deliver up all copies of the Infringed Films (including all cases and boxes relating to such copies) in the possession, custody or control of either of the respondents to the applicants’ representative.
The first and second respondents deliver up to the applicants’ representative all copies of Catalogue Films in the possession custody or control of either of the respondents that have been obtained without the licence of the copyright owner (and its exclusive licensee).
The first and second respondents 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.
There be summary judgment pursuant to s.17A(1) of the Federal Magistrates Act 1999 and rule 13.07 of the Federal Magistrates Court Rules 2001 in favour of the tenth applicant against the first and second respondents in relation to the breach of confidence claim, with damages to be assessed by the Court following a further oral hearing.
The Court declares that the first and second respondents have breached an obligation of confidence owed by them 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 first and second respondents shall pay the applicants’ costs of the summary judgment application.
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, 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 SUTIOS INC
Trading as COLOSSAL ENTERTAINMENT
Seventh Applicant
IO GROUP INC
Trading as TITAN MEDIA
Eighth Applicant
MITCHELL SPINELLI
Trading as ACID RAIN PRODUCTIONS
Ninth Applicant (A)
PW PRODUCTIONS INC
Trading as ACID RAIN PRODUCTIONS
Ninth Applicant (B)
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 PRODUCTIONS
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
This is an application for summary disposal. The applicants seek orders for summary judgment in accordance with s.17A of the Federal Magistrates Act 1999 (Cth) (“the Federal Magistrates Act”) and rule 13.07 of the Federal Magistrates Court Rules 2001 (Cth) (“the Federal Magistrates Court Rules”). The applicants also seek orders excluding affidavit evidence filed by the respondents pursuant to rule 13.03 of the Federal Magistrates Court Rules.
The 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 appear not to be 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 for the purposes of the proceedings generally. 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 and seek the opportunity to further amend those points of defence, at least in part for the purpose of deleting certain admissions. On 3 July 2006 I granted the applicants interim relief, including injunctions and orders for the delivery up of allegedly infringing material. I made other orders of a procedural nature on 19 July 2006 and 22 September 2006.
The present application for summary judgment, or, in the alternative, orders excluding the respondents’ affidavit evidence by reason of default in compliance with the Court’s earlier orders, arise from the trial of this matter, which commenced on 21 November 2006 and was listed for four days. Those four days of hearing have been completed but the matter remains part heard. At the commencement of the trial the respondents sought an adjournment, which I refused. There was then a delay while counsel for the respondents sought instructions and there followed argument over the admission of the applicants’ evidence. The applicants’ evidence has now been heard and various deponents have been cross-examined. The applicants’ case has closed. No evidence has yet been heard on behalf of the respondents, although a number of affidavits have been filed. The applicants contend that the manner in which the respondents have conducted the proceedings and the content of the evidence upon which the applicants rely (including parts of the respondents’ affidavits which are said to contain admissions) entitles them to summary judgment. In the alternative, the applicants contend that, due to default in compliance with earlier procedural orders of the Court and the manner in which the respondents have conducted themselves, if the trial of this matter is to proceed further, the respondents’ affidavit evidence should be excluded.
The respondents resist the orders sought by the applicants and contend that they should be given the opportunity to introduce additional affidavit evidence, notwithstanding that the applicants have closed their case, and should also be given the opportunity to further amend their pleadings in order to withdraw admissions.
The evidence
For the purposes of the present interlocutory applications, the applicants rely upon the following evidence:
a)all of the applicants’ evidence received at the trial[1];
b)paragraphs 1 to 13 of the affidavit of Jim Karakikes filed on 26 June 2006 by the respondents;
c)the affidavit and oral evidence of Mr Tomaras (solicitor) given in support of the adjournment application on 21 November 2006.
[1] See appendix A
For the purposes of the present applications, the respondents rely upon all of their evidence filed (but not yet read) in the proceedings as well as their proposed further amended points of defence.
The legislation and rules
Section 17A of the Federal Magistrates Act provides as follows:
(1)The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a)the first party is prosecuting the proceeding or that part of the proceeding; and
(b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2)The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a)the first party is defending the proceeding or that part of the proceeding; and
(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4)This section does not limit any powers that the Federal Magistrates Court has apart from this section.
Rule 13.07 of the Federal Magistrates Court Rules is in the following terms:
(1) This rule applies if, in a proceeding:
(a)in relation to the whole or part of a party's claim there is evidence of the facts on which the claim or part is based; and
(b)either:
(i) there is evidence given by a party or by some responsible person that the opposing party has no answer to the claim or part; or
(ii) the Court is satisfied that the opposing party has no reasonable prospect of successfully defending the claim or part.
(2)The Court may give judgment on that claim or part and make any orders or directions that the Court considers appropriate.
(3)If the Court gives judgment against a party who claims relief against the party obtaining the judgment, the Court may stay execution on, or other enforcement of, the judgment until determination of that claim.
Rule 13.03 of the Federal Magistrates Court Rules deals with default. The rule provides:
(1)This rule applies if a party fails to take a step required by these Rules or to comply with an order of the Court.
(2)Subject to any other order or transfer the Court may, on the application of another party in the proceeding or of its own motion, make an order:
(a) that the step be taken within a stated time; or
(b) to end the proceeding or dismiss a response.
(3)The Court may make the order sought or another order that it considers appropriate.
Submissions
Both parties took the opportunity to file lengthy written submissions and I also received oral submissions from them on 14 February 2007. The applicants submit that the procedural history of this matter shows that the respondents have followed a course of desultory or non compliance with the Court’s procedural orders and, when attempts to avoid a trial of the matter failed, an approach of putting the applicants to strict proof of matters that should not be in dispute. The applicants submit that the trial was unnecessarily lengthened by their having to read 36 affidavits, the bulk of which were unreasonably necessitated by the respondents’ approach to the litigation.
The applicants submit that they have proven the subsistence of copyright in the allegedly infringed material and ownership of copyright or the enjoyment of an exclusive license to use that copyright. The applicants submit that it must be accepted that the corporate respondents have infringed s.103 of the Copyright Act 1968 (Cth) (“the Copyright Act”) by selling or by way of trade offering or of exposing for sale or by way of exhibiting counterfeit copies of the infringed films when they knew or ought reasonably to have known that this constituted an infringement of copyright. The applicants submit that, while there is no direct evidence of the respondents copying the infringed material, it is clear on the evidence that they have infringed s.102 of the Copyright Act by importing copies of the infringed films for commercial purposes.
The applicants further submit that it should be accepted as clear that the respondents have been using the tenth applicant’s confidential customer list or lists for the purposes of conducting a mail order business and that, although it is not known how the respondents obtained that list or lists, it is clear that they have breached the applicants’ copyright in it and have also committed a breach of confidence by using the confidential information for the purposes of their business operations.
The applicants submit that the third respondent (Mr Karakikes) is also liable for the infringements of copyright and breach of confidence because he is a director of the two corporate respondents, authorised the infringing acts and shared a common design with the corporate respondents. They submit that Mr Karakikes was knowingly involved in the breach of confidence. The applicants’ submissions also deal with their asserted entitlement to final relief and the quantum of damages that should be awarded.
The respondents submit that the applicants have failed to prove either the ownership of copyright or the subsistence of copyright in the bulk of the allegedly infringed films. The respondents point to inconsistencies in the evidence. The respondents further dispute the standing of the tenth, eleventh and twelfth applicants to bring the proceedings because of the respondents’ interpretation of the copyright licenses those applicants rely upon. The respondents further dispute the standing of the first to ninth and thirteenth applicants to bring the proceedings in the light of issues raised as to the subsistence or ownership of copyright in the various films.
The respondents further submit that there is no evidence of copying of the films by the first or second respondents and dispute the evidence pointing to those respondents trading in infringing copies. The fact of the trade is not disputed but the issues of whether the copies traded are infringing copies is disputed. The respondents further submit that no copyright exists in the tenth applicant’s customer lists. As to the confidential information claim, the respondents submit that the evidence does not establish either the confidentiality of the customer lists or any breach of any such confidence by the respondents. The respondents also make submissions in relation to the relief that should be granted if summary judgment is given.
The applicants responded to the respondents’ submissions both orally and in writing.
Reasoning
Rule 13.07 of the Federal Magistrates Court Rules has been considered on a number of occasions and it had been accepted that the general law in relation to summary judgment applied. The rule[2] was, however, amended in 2005 to ensure consistency with s.17A of the Federal Magistrates Act. That section has received only limited judicial consideration in this Court. Following the amendments, Lindsay FM in Howard v Australian Fisheries Management Authority [2006] FMCA 975 (decided on 7 July 2006) considered the section and rule 13.10 in the light of the general law principles at [33]-[35]. His Honour recognised, however, that the enactment of s.17A had the effect of moving away from the rigour of the approach taken by the courts to summary dismissal under the general law. His Honour stated that henceforth, an application need not be hopeless or bound to fail for it to have no reasonable prospect of success.
[2] and rule 13.10 dealing with summary dismissal
McInnis FM considered the section in MG Distribution Pty Ltd & Anor v Khan & Anor [2006] FMCA 666 (decided on 12 May 2006). His Honour noted[3] that s.17A sought to modify the general law test set out in Dey v Victorian Railways Commissioners (1949) 78 CLR 62. At [38]-[39] His Honour said:
The new provision clearly provides in s.17A(2) that this court may give judgment for the Respondents against the first Applicant for the whole or any part of the proceeding if the court were to be satisfied that the Respondents are defending the proceeding or part of the proceeding and the court is further satisfied that the first Applicant in this case has "no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding".
However, the new statutory provision in my view does not necessarily detract entirely from the principles in relation to summary dismissal which were described by Dixon J in Dey as being "well settled". It is relevant in my view to have regard to the following passage from the decision of Dixon J in Dey as follows:
“The principles upon which that jurisdiction is exercisable are well settled. A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.”
[3] At [37]
In Cate v International Flavours & Fragrances (Bost) Pty Ltd [2007] FMCA 36 (decided on 24 January 2007), McInnis FM adopted his earlier reasoning in MG Distribution[4].
[4] Cate at [66]-[72]
Section 17A is in the same terms as s.31A of the Federal Court Act 1976 (Cth) (“the Federal Court Act”). That section has not been considered by the Full Court of the Federal Court but has been considered on several occasions by single judges, whose decisions should be followed by this Court unless they are clearly wrong. Two approaches are discernable from the authorities. Under the first approach, the section is seen as imposing a less stringent test than the test imposed under the general law in cases such as Dey v Victorian Railway Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. In Vans, Inc v offprice.com.au Pty Ltd [2006] FCA 137 at [10]-[12] Wilcox J said:
I have sympathy with the view expressed by Finkelstein J. There is much to be said for the principle that a party, against whom proceedings are taken, is entitled to its/his/her day in court to test that evidence. The principles in force before the enactment of s 31A would, I think, have required the rejection of a summary judgment application in this case. It is sufficient for me to refer to authorities such as Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125.
The strength of the application for leave to appeal is, in my view, the recent enactment of s 31A. There is a real question as to the effect of the formula, ‘the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding’. It can rarely be said there is no prospect of a party successfully defending a proceeding. There is almost always a possibility that the case of the party bearing the onus of proof will break down at trial. If s 31A is to be construed so as to exclude summary judgment where there is only this possibility, then, as Mr Shavin says, it is difficult to see the point of its enactment. Also, it should be borne in mind that subs (3) of s 31A goes on to say that:
‘For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.’
It seems to me it is, at least, arguable that the effect of s 31A is that there can be summary judgment for an applicant, notwithstanding the possibility that the applicant’s case will break down at trial; in other words, it is now not enough for a party resisting a summary judgment application to seek merely to put the other side to proof. If that view is correct, there is a firm basis for believing that Finkelstein J may have overlooked the significance of the new section.
The alternative approach taken in the Federal Court is to apply the section on a basis consistent with general law principles. In Boston Commercial Services Pty Ltd v GE Capital Finance Australasia [2006] FCA 1352 (decided on 16 October 2006) Rares J considered the available authorities to that point and, at [42], said:
I am of opinion that properly construed, s 31A(2)(b) requires a person moving a motion for summary disposal (‘the moving party’) to satisfy the Court that there is no reasonable prospect of the party claiming relief (‘the plaintiff’) successfully prosecuting the proceeding or the part of the proceeding in question. Experience shows that there are cases which appear to be almost bound to fail yet they succeed. As Dixon CJ once said (Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 20):
‘Experience of forensic contests should confirm the truth of the common saying that one story is good until another is told...’
His Honour continued at [44]-[48]:
In a case to which s 31A applies, where there is a real issue of fact to be decided in the sense identified in the above principle, and, possibly, where there is a real issue of law of a similar kind, it is obviously appropriate that the matter goes to trial. And, one must be mindful that in Hocking v Bell (1945) 71 CLR at 487, Dixon J said that in effect, every judge who had heard the matter (through four trials, two Full Court appeals and, to that point, the appeal to the High Court) would have formed the view that the plaintiff should have failed had they been able to decide the facts, yet the Privy Council restored the second jury verdict in her favour and so concluded the litigation. This raises a very real question, as to what reasonable prospects are for present purposes.
I am of [the] opinion that in assessing what reasonable prospects of success are for the purposes of s 31A, the Court must be very cautious not to do a party an injustice by summarily dismissing the proceedings where, in accordance with the principles in Hocking v Bell (1947) 75 CLR 125, contested evidence might reasonably be believed one way or the other so as to enable one side or the other to succeed. As soon as the evidence may have such an ambivalent character prior to a final determination, I am of opinion that then, as a matter of law, at that point there are reasonable prospects of success within the meaning of s 31A. Unless only one conclusion can be said to be reasonable, the moving party will not have discharged its onus to enliven the discretion to authorize a summary termination of the proceedings which s 31A envisages. In moving the second reading of the bill introducing s 31A (the Migration Litigation Reform Bill 2005) the Attorney-General said that it strengthened ‘... the power of the courts to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases’.
In Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 154-155, Dawson, Gaudron and McHugh JJ said that a party should not be shut out from litigating an issue which was fairly arguable and that the power to grant leave to amend should be exercised with that in mind. They observed (189 CLR at 154) that ‘...the ultimate aim of a court is the attainment of justice’. Obviously, s 31A regulates the attainment of justice by creating an entitlement in a party to be protected from claims or defences which fail to meet the threshold prescribed in the section. In granting leave to appeal on a decision involving the application of s 31A, Wilcox J observed in Vans, Inc v Offprice.Com.Au Pty Ltd [2006] FCA 137 at [12] that it was arguable that the effect of s 31A was that there could be summary judgment for an applicant ‘... notwithstanding the possibility that the applicant’s case will break down at trial; in other words, it is now not enough for a party resisting a summary judgment application to seek merely to put the other side to proof’ (his Honour’s emphasis).
GE Capital also argued that s 31A required the Court to dismiss a claim or defence based on a predictive assessment of its prospects, even though it may be possible that had the matter gone to trial it would have succeeded. I am of opinion that this is not how the section operates. It is engaged only to determine summarily a claim or defence which has no reasonable prospect of success. The purpose of the enactment is to enable the Court to deal with matters which should not be litigated because there is no reasonable prospect of any outcome but one. If there is a reasonable danger that a claim or defence could be dismissed under s 31A, which could succeed at a trial, the provision would create miscarriages of justice. It is a key feature of the judicial power under Ch III of the Constitution that the Court be in a position to, and in fact does, quell a controversy. The exercise of the judicial power to prevent the substantive agitation of a controversy in which each side has a reasonable prospect of success would defeat, not advance, the ends of justice.
It could not have been the intention of the Parliament in introducing s 31A to the Federal Court Act to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purpose of determining whether or not a proceeding had no reasonable prospects of success. Obviously, there will be cases in which, because of their nature, it is necessary to undergo detailed analysis. However, the assessment of whether there is a reasonable prospect of successfully prosecuting the proceeding must depend upon the evidence and pleading the subject of the application.
In Jewiss v Deputy Commissioner of Taxation [2006] FCA 1688 at [26]-[29] (decided on 5 December 2006) Mansfield J appeared to support the more liberal approach taken by Wilcox J, although the case was essentially decided on the basis of Anshun estoppel[5]. Further support for the approach taken by Wilcox J can be found in Alphapharm Pty Ltd v Merck & Co Inc [2006] FCA 1227 (decided on 15 September 2006) at [9]-[11] per Moore J and Duncan v Lipscombe Child Care Services Inc [2006] FCA 458 (decided 28 April 2006) at [6] per Heerey J.
[5] see [50]
Conversely, support for the approach taken by Rares J can be found in Australian Inernational Pilots Assn v Qantas Airways Ltd [2006] FCA 441 at [23] (decided on 9 November 2006) per Tracey J.
The authorities were reviewed by Jacobson J in Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) (formerly Stanley Thompson Valuers Pty Ltd) [2006] FCA 1416 (decided 2 November 2006) at [30]-[33] where His Honour said:
… The authorities relating to the proper construction and effect of s 31A of the Federal Court of Australia Act were exhaustively reviewed by Rares J in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352 at [31] – [48]. His Honour stated the relevant principles at [45] and they may be summarised as follows:
•In assessing whether there are reasonable prospects of success, the Court must be cautious not to do an injustice by summary dismissal.
•There will be reasonable prospects of success if there is evidence which may be reasonably believed so as to enable the party against whom summary judgment is sought to succeed at the final hearing.
•Evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects.
•Unless only one conclusion can be said to be reasonable, the discretion under s 31A cannot be enlivened.
I do not think that this approach conflicts with the provisions of s 31A(3).
It is true that summary dismissal applications are to be determined on the pleadings and any evidence before the Court; but at the heart of the exercise is the assessment on incomplete materials, of the prospects of success if the matter proceeds to a final hearing; Boston Commercial at [38], [48].
It would be wrong to determine the application on a narrow approach to the pleadings where, as here, there is evidence, albeit incomplete, and perhaps at this early stage, ambivalent, which may at a final hearing, and with amended pleadings, produce a verdict for the applicant.
Further guidance was provided by French J in Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 (decided on 27 October 2006) at [19]-[21]. His Honour said:
The question which has to be answered in an application for judgment under s 31A is whether the party against whom the application is made has any "reasonable prospect" of successfully prosecuting or defending "the proceeding" or the "part of the proceeding" in issue. That question is not to be answered by a finding that a party’s statement of claim or defence fails to disclose a reasonable cause of action or defence. A pleading may be rectified by amendment so as to raise a reasonable cause of action or defence. It follows that a finding that a pleading should be struck out under O 20 does not mean there must be judgment against the party whose pleading it is. There may yet, by amendment, be a reasonable prospect of successfully prosecuting or defending that proceeding.
In order to secure judgment under s 31A it must be shown that the party prosecuting or defending the proceeding has no reasonable prospect of success. This judgment can be made, by reference to pleadings, where there is a defect in the pleadings which cannot be cured. Alternatively, it may be a judgment made by reference to evidence put on in support of an application under s 31A which reasonably excludes the possibility that facts essential to the success of the claim or defence will be able to be established. For example, if a cause of action depends critically for its success upon the presence of the defendant at a particular place, at a particular time and the defendant is able to show, on affidavit, that he or she was not at that place at the particular time and there is no evidence to contradict that "alibi" then the judgment may be made that the proceeding has no reasonable prospect of success. In such a case judgment may be given for the defendant. Alternatively, if a defence is pleaded which depends critically for its success upon the defendant’s denial that it was a party to a contract, then an affidavit by the applicant exhibiting the contract with the defendant’s signature on it, supported by affidavits from witnesses to the execution of the contract by the defendant may be sufficient to support a judgment under s 31A. Of course, if the defendant were to file an affidavit in reply indicating that the material in the applicant’s affidavit evidence was disputed, then it is unlikely that a finding could be made that the defendant had no reasonable prospect of success.
Section 31A is not a vehicle for simply striking out parts of pleadings that are deficient. Section 31A allows for "judgment" or nothing. Alternative remedies with respect to deficient pleadings must be found in the rules of Court. In this connection I respectfully disagree with the approach taken by Heerey J in Duncan v Lipscombe Child Care Services Inc [2006] FCA 458 in which his Honour said (at [6]):
‘Plainly s 31A was introduced to establish a lower standard for strikeouts (either of claims or defences) than that previously laid down by the High Court’s decisions in Dey v Victorian Railways Commissioners (1948) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130, namely that the allegations are "so clearly untenable that [they] cannot possibly succeed".’
Finally, in Hicks v Ruddock [2007] FCA 299, Tamerlin J considered the meaning of the phrase “no reasonable prospects of success” at [12]-[13] in the following terms, which appear to me to build a bridge between the two strands of opinion in the Federal Court:
Section 31A of the Federal Court Act 1976 (Cth) was introduced to impose a lower requirement to dismiss an action by way of summary judgment than that which was imposed in General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125. In that case, the requirement was expressed in terms of "manifestly groundless" or "obviously untenable".
In a case where evidence can give colour and content to allegations and where questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading: see Boston Commercial Services Pty Ltd v G E Capital Finance Australia Pty Ltd [2006] FCA 1352 at [45]. The underlying principle is that the need for a summary judgment must be clear before the court will intervene to prevent a plaintiff submitting a case for determination in the usual way. Once it appears that there is a real issue to be determined, whether it be of fact or law, and that the rights of the parties depend on it, the court should not terminate the action by way of summary judgment. As Barwick CJ said in General Steel at 129-130, great care must be exercised to be sure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of the opportunity to have his or her case tried by the appointed tribunal. The general principle that a person should not lightly be shut out from a hearing is cogent – the onus on the party applying for summary judgment is heavy.
I agree with French J that s.17A, like s.31A, has nothing to do with striking out pleadings[6]. The section, and the Court rules which amplify it, deal with summary judgment and summary dismissal. Pleadings may be relevant in order to determine whether a party should receive summary judgment or suffer summary dismissal but the section, and the rules, are not vehicles for dealing with deficient pleadings. That is, if anything, more clear in this Court, which is not a court of pleadings[7]. Further, in considering whether an apparently hopeless case can be saved by amendment, or further evidence, it may be necessary to consider the conduct of the party who would benefit from that indulgence, and the other circumstances of the proceedings, and determine whether that party is entitled to it, or whether the party should be denied that indulgence.
[6] In the course of finalising this judgment I became aware of the judgment of Lucev FM in Balding v Ten Talents Pty Ltd & Anor [2007] FMCA 145. His Honour reviewed the same authorities as me at [15]-[31] and came to the same conclusion as me at [32].
[7] see s.50 of the Federal Magistrates Act
Otherwise, in the absence of guidance from the Full Federal Court on the interpretation of s.31A, I will follow the cautious approach of Rares J and Jacobson J. In particular, I agree with and will apply the principles summarised by Jacobson J, in the following slightly amended terms:
·In assessing whether there are reasonable prospects of success on an application or a response, the Court must be cautious not to do an injustice by summary judgment or summary dismissal.
·There will be reasonable prospects of success if there is evidence which may be reasonably believed so as to enable the party against whom summary judgment or summary dismissal is sought to succeed at the final hearing.
·Evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects.
·Unless only one conclusion can be said to be reasonable, the discretion under s.17A cannot be enlivened.
·The Court should have regard to the possibility of amendment and additional evidence in considering whether only one conclusion can be said to be reasonable. In that consideration, the conduct of the parties and the other circumstances of the case may be relevant.
In order to determine whether the respondents in this case have any reasonable prospect of successfully defending the action, it is necessary to consider what the elements of the cause of action are to which they are responding and pleadings and evidence.
There are three causes of action. The first is an asserted infringement by the respondents of the applicants’ copyright in identfied infringed films, by copying, importing and/or selling and offering for sale counterfeit copies of them. This is detailed in paragraphs 11-12B and 14-16 of the applicants’ further amended points of claim. The second cause of action is the asserted infringement by the respondents of copyright in the tenth applicant’s (Calvista’s) customer lists, as detailed in paragraphs 13-16 of the further amended points of claim. The third cause of action is the asserted breach of confidence by the respondents in using Calvista’s customer lists and/or the Calvista customer database (referred in general terms as confidential information) in the course of compiling or facilitating the compilation of mailing lists for the Digital Sinema business, as detailed in paragraphs 21-26 of the further amended points of claim.
No claim is made in relation to the literary or artistic works comprised in the material appearing on the inactive side of the DVDs in issue or in the slicks inserted into the DVD covers.
The further amended points of claim detail the legal status of the applicants and their capacity to sue. The points of claim assert subsistence of copyright in all of the infringed films and ownership of the copyright by the identified applicants. The assertion is supported by the affidavit of Graeme Edward Dunne, sworn on 9 May 2006. The points of claim assert exclusive licences in favour of the tenth to twelfth applicants and the assertion is supported by the affidavit of David Hugh Newnham, sworn on 9 May 2006. Mr Newnham’s affidavit is also employed in support of the copyright claim in respect of the customer mailing lists as orginal literary works of which Calvista is the copyright owner. The points of claim assert breaches of ss.36, 101, 102 and 103 of the Copyright Act by the first and second respondents and liability by the third respondent, having authorised the acts of the first and second respondents, by entering into a common design with or participation with or inducing or procuring such conduct or by directing or procuring the infringements by the first and second respondents.
Nominal damages are sought pursuant to s.115(2) of the Copyright Act and modest damages are sought pursuant to s.116. Substantial additional damages are sought pursuant to s.115(4) on the basis that the respondents have done the acts alleged against them flagarantly, in knowledge of the subsistence of copyright and the infringements or in reckless disregard thereof and by intending that substantial financial benefit would accrue to them.
In relation to the confidential information claim, the points of claim are supported again by the affidavit of Mr Newnham. The confidential information is asserted to be embodied in the Calvista customer database and customer lists. By some process unknown, the applicants assert that the confidential information was obtained without Calvista’s authorisation by some unknown third party and that the respondents received the information in a manner unknown to Calvista and knowing the same to be confidential. The points of claim assert that the respondents came under and remain under a duty of trust and confidence towards Calvista in respect of the confidential information such that they were not entitled to use it or any part of it for any purpose. The points of claim assert that in breach of this duty the respondents have used the confidential information to make their own customer lists and forward cataglogues to Calvista’s customers.
In their amended points of defence, the respondents admit the legal status of the first and second applicants and their capacity to sue and admit that the first, sixth and eighth applicants are the owners of copyright in certain identified films. The respondents admit that they have imported for sale copies of four films into Australia and that they have sold in Australia copies of all of the allegedly infringed films. The respondents otherwise make unparticularised denials or non admissions of every part of the points of claim. Should the respondents be given leave to rely upon their proposed further amended points of defence, they would resile from the admissions of the legal status and capacity of the first and second applicants and substitute admission of the corporate status and capacity to sue of the first to ninth applicants and the thirteenth applicant. They would resile from the admissions concerning copyright ownership in all but one of the allegedly infringed films and would introduce a general defence to the further amended points of claim in respect of additional damages pursuant to s.115(4) of the Copyright Act upon the basis that it was illegal to sell “X” classified films in all states of Australia and that the alleged infringing films were so classified. The claim for conversion damages would likewise be resisted.
The procedural history of this matter is not a happy one. That fact was commented on by Raphael FM in his interlocutory judgment in this matter: Vivid Entertainment LLC & Ors v Digital Sinema Australia Pty Ltd & Ors [2006] FMCA 1817 at [5]. The respondents were uncooperative in attempts by the applicants to limit the scope of the dispute between the parties. It became apparent, on the hearing of the adjournment application on the first day of the trial of the matter, that the solicitors for the respondents had been unable to secure instructions from Mr Karakikes beyond what was barely necessary to continue to act and that there was no satisfactory explanation for the respondents’ unreadiness for trial, or extent of compliance with procedural orders, including, significantly, a suspiciously paltry effort at verified discovery in accordance with my orders made on 19 July 2006. Mr Karakikes failed to verify the respondents’ list of documents in accordance with orders made by me on 22 September 2006. Now, having heard all of the applicants’ evidence and having tested some of it by cross-examination, the respondents seek the opportunity to re‑plead and to introduce an affidavit by Mr Karakikes filed on 12 December 2006, which appear to me to have been drafted with the benefit of hindsight in respect of all of the applicants’ evidence and claims.
The approach taken by the respondents is most unsatisfactory. There can be no serious dispute about the subsistence of copyright in the infringed films and either the ownership of copyright in those films by the applicant producers or the enjoyment of exclusive licences by the distributor applicants. The respondents contend that there is reasonable doubt about the subsistence of copyright, given certain inconsistencies in the indicia of copyright on the DVDs and slicks and in the applicants’ affidavit material. The respondents are unable to say that there is no copyright in the films or that there is no copyright ownerhsip or licences but, rather, they seek to sow seeds of doubt about those matters.
The applicants rely upon the presumptions in ss.126A and 126B of the Copyright Act. Even if the respondents were to be successful in creating sufficient doubt about the indicia of copyright appearing on the discs and slicks themselves, so as to disentitle the applicants’ reliance upon the statutory presumptions in respect of that material, the substantial affidavit evidence produced by the applicants to support the assertions of copyright subsistence, ownership and the respective licences has not been seriously challenged[8]. Indeed, Ms Hirsch, Mr Vlottes, Ms See, Mr Modde, Mr Baer, Mr Sperlein and Mr Weston, who deposed as to these matters when it became clear that the issue was disputed, were not cross-examined and their evidence is undisputed. The respondents have no evidence of their own as to the non subsistence of copyright or copyright ownership by anyone other than the applicants.
[8] see the affidavits of Messrs and Mesdames Dunne, Newnham, Ellis, Hirsch, Vlottes, See, Modde, Baer, Sperlein and Weston.
Likewise, the respondents’ attack upon the exclusive licences by reference to the text of those licences cannot succeed. I accept, in that regard, paragraphs 46-55 of the applicants’ submissions in reply as follows:
The respondents take issue with each Distributor Applicant’s standing to bring this proceeding as an exclusive licensee because, so the respondents say, the relevant licences do not entitle the Distributor Applicants to do any of the specific acts set out in s. 86 of the Act.[9]
The respondents’ contention is that the exclusive rights granted by the licensors in each instance relate to non-copyright acts (i.e. importation, supply and distribution) rather than acts within the scope of the copyright. The respondents rely on Avel Pty Ltd v Multicoin Amusements Pty Ltd[10] in support of that proposition. There are at least three reasons why the respondents’ argument should, with respect, fail.
First, it is necessary to construe the licence agreements as a whole and in doing so it is to be inferred, in each instance, that in order for the licence to be commercially efficacious it must include the copyright acts.[11]
Secondly, the acts within the copyright in cinematograph films are not limited to acts falling within the exclusive rights listed in s. 86 of the Act. They extend to all those rights which the copyright owner has which are otherwise exercisable exclusively by the copyright owner under the Act.[12] That includes the acts of importation and sale of copies referred to in ss. 102-103 which can be the subject of exclusive licence agreements.[13]
Thirdly, and in any event, even if the Distributor Applicants’ rights were to be circumscribed in the manner suggested by the respondents, that does not prevent them from being proper parties to the proceeding.
Further, it should, with respect, be borne in mind that the respondents did not deny the applicants’ claim and then positively assert a defence of the kind now propounded by them. Rather, in answer to the applicants’ claims that the Distributor Applicants are exclusively licensed to make copies of the Infringed Films and distribute them in Australia, and that they are the exclusive licensees of the copyright in Australia in the Infringed Films, the respondents chose merely to “not admit” the allegations.[14]
The respondents also argue that the evidence of the tenth applicant’s (Calvista) licence with the first applicant (Vivid Entertainment LLC), ie the licence agreement, did not attach the schedule referred to therein which defined the films included in the licence.[15] The respondents did not raise this matter with Mr Newnham during their lengthy cross-examination of him. In particular, they did not challenge Mr Newnham about his affidavit evidence that Calvista holds the exclusive license to distribute the Vivid film The New Devil in Miss Jones and Calvista’s assertion that the Vivid licence covers “Devil in Miss Jones and all subsequently released Vivid titles”.[16] Rather, the respondents confined their challenge to his failure to verify in each instance that Vivid had the rights it purported to licence to Calvista.[17] The respondents’ submissions are silent as to that matter which plainly has no relevance to Calvista’s status and standing as an exclusive licensee.[18]
The respondents also submit, in respect of the tenth applicant, that its licence agreements through the international film rights agents Berkana Media Inc. and Maskinterntional.com do not establish licence arrangements with the relevant owners of copyright because there is no evidence to prove the capacity of the agents to grant the rights therein.[19] That submission is, with respect, only noteworthy for its desperation. It is fanciful and offensive to the good sense of the Court.
In any event, in respect of the seventh applicant, Mr Baer makes it plain that it distributes its films through Maskinternational.[20] In respect of the ninth applicant, Mr Weston makes it plain that it distributes its films through Berkana Media.[21] These witnesses were not required for cross-examination.
It can otherwise be readily inferred that the licence arrangements secured by Calvista through the international agents are legitimate. The respondents did not suggest to the contrary in the course of their cross-examination of Mr Newnham.
[9] RS paras 67-76
[10] (1990) 171 CLR 88 at 103-104
[11] See Kervan Trading Pty Ltd v Aktas [1987] AIPC 37, 395; Suls & Associates Pty Ltd v Detroit Diesel-Allison Australia Pty Ltd (1997) 39 IPR 328 at 332-333
[12] See S Ricketson & C Creswell, The Law of Intellectual Property: Copyright, Designs & Confidential Information, [14.355]
[13] Ibid including the authorities referred to therein
[14] Amended Points of Defence paras 7 & 8 (CD vol 1 tab 6)
[15] RS para 70(a)
[16] Newnham #1 para 82 & Exhibit DHN-3 p3
[17] T 107-108
[18] The line of questioning is of no relevance given the evidence of the copyright owner, in addition to the evidence of Mr Newnham himself. It cannot seriously be suggested that Vivid was not in a position to grant an executive licence to Calvista.
[19] RS para 70(b)-(c)
[20] Baer paras 10-11 (CD vol 3 tab 37)
[21] Weston paras 17-18 (CD vol 4 tab 44)
Once again, the exclusive licences have been proved on the balance of probabilities on the basis of evidence which is not disputed.
There is no direct evidence that the respondents have themselves infringed copyright in the films by copying them. However, it is indisputable that the respondents have been dealing in infringing copies of the films. This is established by the first, second and fourth affidavits by Mr Newnham, the first affidavit of Mr Dunne and the affidavits of Messrs White, Rametta, Gray, Sleath, Rossel, Touhy, Rakonic, Hopkins and Caffin, including evidence about trap purchases at the respondents’ business premises and the indicia of counterfeit copies obviously apparent. Almost all of the trap purchase DVDs were obviously counterfeit by reference to the “blue back” colour of the active side of the disc. The respondents seek to advance the proposition that they were not to know that the films were counterfeit because the visible slick material was not obviously counterfeit and the DVD covers were sealed prior to sale. However, if the respondents, as vendors of films, choose not to check even a single copy of DVDs offered for sale, they should, in my view, be taken to have been recklessly indifferent as to copyright infringement. The respondents may not have known they were dealing in infringing copies but they should have known. That is sufficient for the purposes of ss.102 and 103 of the Copyright Act. The respondents admit selling copies of all of the infringing films and importing for sale of some of them.
As to the copyright claim in the confidential information, it cannot be seriously contended that these are not original literary works. The evidence of Mr Newnham establishes that. The respondents seek to raise the possibility that the customer lists they employ came not from the applicants but from another source. However, they had no plausible explanation as to how “seed names”[22] placed on the applicants’ lists recently appeared in the respondents own. Nor is there a plausible explanation as to how over half of the names on the respective lists of up to half a million names were common[23]. It is indisputable that the respondents have never had the authority of Calvista to use its customer lists and that the respondents have been using an infringing copy or copies of the list for commercial gain. However, there is no direct evidence that the respondents have themselves copied any of Calvista’s lists. Accordingly, the respondents may be able to successfully resist that copyright claim, which is based upon inferences said to be available on the evidence. Nevertheless, the elements of a cause of action for breach of confidence have been established in that the available evidence shows that the information in question has been received or obtained in circumstances importing an obligation of confidence on the part of the recipient. Direct communication is not essential. The material may have come via a third party but its commercial value, and hence its confidentiality, was obvious.
[22] That is, the names of fictitious people at genuine addresses of employees of the applicants.
[23] see the affidavits of Messrs Newnham, Day and Carson
Even if the respondents were permitted to re-plead and to introduce all of the affidavit evidence they have filed, I see no possibility of them successfully resisting the applicants’ claims as to the subsistence of copyright in the allegedly infringed films, and the customer lists and database, and the claims as to the ownership of that copyright and the exclusive licences. Neither is there any serious prospect of the respondents being able to resist the applicants’ claims of infringing conduct by way of selling the infringing films and importing the infringing films into Australia and trading in them in Australia. Likewise, the respondents have no serious prospect of resisting the breach of confidence claim. They could, however, successfully resist the claim of breach of copyright in the customer lists and database. Further, until such time as evidence from Mr Karakikes is tested, it cannot be said that he could not resist the claim of personal liability against him. In an affidavit filed on 26 June 2006 Mr Karakikes sought to explain his conduct. I cannot rule out the possibility that that evidence, augmented possibly by cross-examination, might enable him to successfully resist the order sought against him personally. Accordingly, the applicants should only have summary judgment in relation to a copyright claim in respect of the films and the breach of confidence claim against the first and second respondents.
As to relief, I will make orders 1, 3, 5, 6, 9(i) and 10 sought in the further amended application. The question of whether orders 2, 4, 7, 8 and 9(ii) should be made must await the completion of the trial of the matter. Final orders as to costs of the proceedings generally and interest should also await the completion of the trial.
The question then arises what damages the applicants should receive in consequence of their obtaining summary judgment. They seek only nominal damages of $1 pursuant to s.115(2) of the Copyright Act and that could not be seriously resisted. They seek actual damages, pursuant to s.116 of the Copyright Act of between $500 and $600, based on 18 trap purchases at amounts between $25 and $29 per unit, allowing $1 per unit for cost. That is a modest claim and it could not be seriously resisted. The respondents seek to resist it upon the basis that trade in the films outside the ACT and the Northern Territory is unlawful. However, that is not strictly correct. The applicants are free to trade in the films anywhere in Australia from either the ACT or the Northern Territory. In other words, the market is national, although the lawful source of supply is geographically limited.
There are more substantial questions to resolve in relation to the claim of $250,000 as additional damages pursuant to s.115(4) in respect of the films and $100,000 in respect of the breach of confidence. It cannot be said that the amounts sought under those heads are appropriate without hearing and testing the evidence of the respondents as to their conduct. In saying that, I disregard the attempt by the respondents to rely upon the illegality of the trade in X rated films outside the ACT and the Northern Territory in the proposed amended points of claim for the purpose of resisting the claim for additional damages. That defence is untenable in the light of the Full Federal Court judgment in Venus Adult Shops Pty Ltd v Fraserside Holdings Ltd [2006] FCAFC 188 at [114].
Having regard to the conduct of the respondents up to the trial of this matter and the current state of the proceedings, I will refuse leave for the respondents to rely upon their proposed further amended defence and the affidavit of Mr Karakikes filed on 12 December 2006. Both were prepared following the closure of the applicants’ case and it would be unfair, and unnecessarily add to the length and cost of the proceedings, to permit that additional material to be introduced.
I will give summary judgment in the limited terms indicated above and I will hear the parties as to what directions should now be made for the future conduct of the balance of the proceedings. I will further order that the first and second respondents bear the costs of the summary judgment application, and I will hear the parties as to the quantum of costs that should be awarded.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 19 March 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) | |
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