FEDERAL COURT OF AUSTRALIA

Dynamic Supplies Pty Limited v Tonnex International Pty Limited (No 3) [2014] FCA 909

THE COURT ORDERS THAT:

1.     Judgment be entered for the applicant against the respondent in the sum of $1.00 for damages under s 115(2) of the Copyright Act 1968 (Cth) (the Copyright Act).

2.    Judgment be entered for the applicant against the respondent in the sum of $150,000.00 for additional damages under s 115(4) of the Copyright Act.

3.    Unless the appropriate order for costs is agreed, the applicant file written submissions with respect to the order for costs its seeks on or before 2 September 2014 and the respondent file any responding written submissions on or before 9 September 2014, such submissions, in each case, not to exceed three pages.

4.    The applicant file any submissions in reply on the question of costs on or before 16 September 2014, such submissions not to exceed two pages.

5.    Subject to further order, the question of costs be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    I have found that the respondent (Tonnex) has infringed the copyright owned by the applicant (Dynamic) in a literary work called the March 2008 CSV file, and that Tonnex has contravened s 52 and s 53(c) and (eb) of the Trade Practices Act 1974 (Cth) (the Trade Practices Act) by making certain representations on its website and in its promotional material: Dynamic Supplies Pty Limited v Tonnex International Pty Limited (2011) 91 IPR 488 (the liability reasons). These findings were made after a hearing (the liability hearing) which was limited to determining all questions of liability other than in respect of damages or other pecuniary relief under the Trade Practices Act and the Copyright Act 1968 (Cth) (the Copyright Act).

2    After hearing argument on what relief should then be granted, in the course of which I received additional affidavit evidence filed by Dynamic and Tonnex respectively, I made certain orders, including declarations: Dynamic Supplies Pty Limited v Tonnex International Pty Limited (No 2) [2011] FCA 675. At that time, I also granted leave to appeal on the question of the subsistence of copyright in the work in suit (referred to in the orders as Dynamic’s Compatibility Chart but otherwise identified in the liability reasons as the March 2008 CSV file) and stayed the operation of other orders (also then made) which provided for, amongst other things, the delivery up and destruction or removal, under supervision, of documents and electronic files which reproduced Dynamic’s Compatibility Chart. Tonnex’s appeal on the question of copyright subsistence was unsuccessful: Tonnex International Pty Limited v Dynamic Supplies Pty Limited (2012) 99 IPR 31.

3    The question now before the Court is the assessment of damages for Tonnex’s infringement of Dynamic’s copyright (the damages hearing). Dynamic does not seek pecuniary relief in relation to Tonnex’s contraventions of the Trade Practices Act.

4    The parties are agreed that compensatory damages under s 115(2) of the Copyright Act should be assessed, nominally, at $1.00. The parties are, however, at issue as to Dynamic’s entitlement to, and Tonnex’s liability for, additional damages under s 115(4) of the Copyright Act.

5    Dynamic submitted that an order for additional damages should be made and that those damages should be assessed at $400,000.00. Tonnex submitted that no order for additional damages should be made. Alternatively, it submitted that, if the Court is persuaded that such an order should be made, the order should be a “modest one” reflected in “the low tens of thousands of dollars”.

6    Additional evidence has been filed and read on this question. Tonnex relied on four affidavits made by George Solomon, Tonnex’s Managing Director. Although Mr Solomon had previously made an affidavit for the purposes of the liability hearing, that affidavit was not read at that hearing. Nevertheless, at the damages hearing, Dynamic tendered that affidavit. I will return to the significance of Mr Solomon making that affidavit and the effect of his cross-examination in that regard. Dynamic relied on an additional affidavit made by Julia Catherine Sorbara. Ms Sorbara is Dynamic’s solicitor. Ms Sorbara’s affidavit dealt with the course of the proceeding to date, including correspondence between the parties before the commencement of the proceeding.

7    Naturally, I already have before me the evidence adduced at the liability hearing and my findings in relation to that evidence so far as relevant to the present question.

8    Before dealing with the parties’ respective submissions, it is necessary for me to make some additional findings of fact and briefly refer to the relevant principles to be applied when assessing additional damages.

Additional EVIDENCE AND findings

9    In a letter to Tonnex dated 3 April 2009, Dynamic’s solicitors drew attention to the fact that Tonnex’s February 2009 price list included links to compatibility charts that appeared to be “an almost identical replication” of material contained in Dynamic’s price list. The letter drew attention to the existence of “some typographical errors and idiosyncrasies in drafting” in Dynamic’s price list which had been “replicated in Tonnex’s price list”. The letter then made certain demands. It appears that, by the time of this letter, Dynamic’s solicitors had already written to Tonnex in relation to its complaint that Tonnex had falsely represented that certain of its products were made in Australia: as to that claim, see [224]-[232] of the liability reasons.

10    Tonnex’s then solicitors responded in a letter dated 9 April 2009 (the responding letter). In the responding letter, Tonnex’s solicitors stated that Tonnex’s February 2009 price list had been sent by email “to our client’s Database”. I understand this to mean that Tonnex had sent the price list to addressees recorded in a database held by it. The responding letter asserted that the price list was “subject to the confidentiality provisions which appear on the covering email”. Tonnex’s solicitors then asserted that Dynamic’s use of the February 2009 price list (ie, to raise and pursue its allegations of copying by Tonnex) “may well constitute a breach of the confidentiality which applies to the document and the information contained in it”. Consequently, the responding letter demanded that Dynamic “deliver up to our office the Price List and any covering letter which was forwarded to your client and/or to your Firm and to which the Price List was attached”. At the damages hearing, Dynamic relied on these assertions as constituting acts taken by Tonnex to conceal its infringement of Dynamic’s copyright. I will return to this contention.

11    The responding letter denied that copyright could subsist in product compatibility charts. It also denied, in any event, that Tonnex had “reproduced or replicated any document compiled or prepared” by Dynamic. In this connection, the responding letter asserted, in effect, that the compatibility chart in Tonnex’s February 2009 price list was compiled by Tonnex using its own resources, and information provided by vendors and its own customers. The responding letter also asserted that vendor compatibility charts were “freely available” from vendors and “easily accessible”. The responding letter then asserted that there would be “no reason for Tonnex to replicate your client’s charts”.

12    The responding letter made clear that Tonnex had no intention of complying with any of the demands made in Dynamic’s solicitors’ letter of 3 April 2009. The responding letter continued in this vein by stating:

Finally, it is quite apparent from this and your earlier correspondence that your client appears to be “obsessed” with our client and is seeking to “distract” our client with a barrage of what are clearly, by and large, baseless and ludicrous allegations.

13    Dynamic commenced this proceeding on 4 August 2009. At the time of the liability hearing, Dynamic alleged that Tonnex had reproduced a substantial part of Dynamic’s Compatibility Chart in the compatibility charts referred to in the Tonnex International 2008 QTR 2 Price List, the Tonnex International February 2009 Price List, and the Tonnex 2010 Price List. For convenience, I referred to these compatibility charts in the liability reasons collectively as Tonnex 2008. I found (at [141]) that Tonnex 2008 infringed the copyright in Dynamic’s Compatibility Chart.

14    Tonnex 2008 was accessible by means of emails sent to addressees in Tonnex’s database. The emails contained a hyperlink. Using the hyperlink, recipients of the emails could “click through” to a price list containing Tonnex 2008, which had been placed on a server.

15    The evidence read at the damages hearing establishes the following:

    In the financial year ended 30 June 2008, Tonnex had sent 2,367 relevant emails to addressees in its database in respect of which there were 398 relevant “click throughs”.

    In the financial year ended 30 June 2009, Tonnex had sent 18,109 relevant emails in respect of which there were 2,889 relevant “click throughs”.

    In the financial year ended 30 June 2010, Tonnex had sent 15,093 relevant emails in respect of which there were 2,797 relevant “click throughs”.

    In the financial year ended 30 June 2011, Tonnex had sent 2,566 relevant emails to addressees in its database in respect of which there were 447 relevant “click throughs”.

16    The same evidence establishes that these emails were sent in the period 9 April 2008 to 2 August 2010. Dynamic relies on the fact that Tonnex only ceased to send these emails approximately one month before the commencement of the liability hearing. Further, Tonnex’s evidence now establishes that, in this period, all price lists issued by it electronically, not just those found at the liability hearing, included a hyperlink to Tonnex 2008.

17    On 14 May 2010, Tonnex filed Mr Solomon’s affidavit to which I have earlier referred (Mr Solomon’s first affidavit). In that affidavit, Mr Solomon deposed that it was made “on the basis of my own knowledge and belief”, save “where otherwise stated”. There is, however, nothing “otherwise stated” in the affidavit which would indicate that Mr Solomon’s statements emanated from anything other than his own knowledge based on his own observations. He did not ascribe his knowledge to information provided by others, such as Tonnex’s employees. Relevantly, Mr Solomon deposed:

3.    The purpose of this affidavit is to describe the method by which the respondent compiled its Compatibility Chart, (“the Tonnex Compatibility Chart”) which is a compilation of separate charts for each vendor of products to Tonnex. A copy of one of the charts comprising the Tonnex Compatibility Chart is now produced at the time of swearing this my affidavit and marked with the letters “GS-1” and exhibited hereto.

4.    The Tonnex Compatibility Chart is a compilation of charts which have been compiled entirely as a result of the efforts of Tonnex staff. Some four persons in the marketing department have included in their duties the updating of the Compatibility Charts. The Charts are in fact constantly in a state of revision and continually being updated.

5.    The process by which the Charts were compiled may be described as follows. In the case of vendors with whom Tonnex has a business relationship, the relevant compatibility information is derived directly from the vendors. In the case of other vendors, information in relation to a product, and the machines with which that product is compatible, is derived from the vendor’s website. In many cases, comprehensive information, in PDF format, is obtainable through links found at those vendors’ websites. Finally, in many cases information is gathered as a result of a particular enquiry from a customer, to which enquiry an answer is given, which then leads to revision or addition to the Tonnex Compatibility Chart.

18    Mr Solomon then purported to give an example of the way that information had been accessed and then recorded “in the Tonnex Compatibility Chart”.

19    It can be seen that this affidavit is consistent with the thrust of the responding letter, which was that Tonnex’s compatibility chart was a work of independent creation carried out by its employees, relying on information provided by individual vendors and Tonnex’s customers. It should be noted that, right up until the time of the liability hearing, this affidavit was the only affidavit filed by Tonnex seeking to explain how its compatibility chart was created.

20    As I have noted, Tonnex chose not to read Mr Solomon’s first affidavit at the liability hearing, even though Mr Solomon was present throughout that hearing. Rather, it relied on evidence given by its National Marketing Manager, James Rendell, as to the process by which Tonnex 2008 was compiled. In the liability reasons, I recorded the following evidence given by Mr Rendell:

99    Mr Rendell said that multiple sources were involved in compiling Tonnex 2008, including Tonnex’s inventory management system, information stored on Tonnex’s “network” and “various other information compiled by internal staff across our purchasing, sales and marketing departments”. Mr Rendell said that the task of compiling the information was shared between himself and a marketing officer, Nigel Furtado. Mr Furtado worked under Mr Rendell’s general supervision. Mr Furtado did not make an affidavit in this proceeding relating to the work that he did in that regard. Mr Rendell said that Mr Furtado was no longer employed by Tonnex, having moved overseas earlier in 2010.

100    Mr Rendell said that online searches were also conducted to obtain information “where we could not establish sufficient information from our existing sources”. Mr Rendell said that he and Mr Furtado “resorted to a simple web search as it allowed an easy copy and paste of required data in our Excel file”. In cross-examination he said that the “cut and paste” operation involved, on occasions, selecting multiple products and relevant compatibility information in relation to those products, in the one step, and then incorporating selections of that kind into the Excel file, thereby allowing the information to be “cleaned up” into a format that matched the style guide he had created. In his affidavit Mr Rendell referred to the creation of this file as “a work in progress over many weeks until its completion in early April 2008”, involving feedback from internal sales and purchasing staff. In short, his evidence was that Tonnex 2008 was a work that was created independently of whatever information could be accessed from searching Dynamic’s (and, indeed, any other competitor’s) website.

21    Once again, this evidence is consistent with the thrust of the assertions made in the responding letter. Ultimately, however, I did not accept Mr Rendell’s evidence. I made the following findings:

132    On the objective evidence, the similarities between Tonnex 2008 and the March 2008 CSV file, as to layout and format and the expression of information and its arrangement, are so numerous that I am satisfied, on the balance of probabilities, that large parts of Tonnex 2008 have been copied indirectly from the March 2008 CSV file. This copying occurred by a process which involved “cutting and pasting” from the compatibility chart on Dynamic’s website. This took place relatively shortly after the March 2008 CSV file had been uploaded to Dynamic’s website on 7 March 2008.

133    Although Mr Rendell gave his evidence in a careful and considered manner, and responded directly to questions put to him, his evidence in relation to the process that was undertaken in compiling Tonnex 2008 simply cannot stand with the overall and compelling picture presented by the detailed objective evidence adduced by Dynamic on the issue of copying. In the circumstances, I prefer the objective evidence. It follows from this conclusion that I reject Mr Rendell’s explanation that Tonnex 2008 was compiled only from information that was sourced from Tonnex’s own database and computer system or otherwise from websites that did not include competitors’ websites (particularly Dynamic’s website).

134    Tonnex submitted that, in light of all the evidence, Dynamic has not shown, on the balance of probabilities, that Tonnex had reproduced a substantial part of the March 2008 CSV file in Tonnex 2008. It submitted that the question of infringement overlapped the question of copyright subsistence and that it was necessary to show that Tonnex had appropriated the expression of the author’s (in this case, Mr Campbell’s) creative and intellectual effort, not merely individual items of information that were in the public domain. Tonnex stated the question for resolution as follows: Has, therefore, the respondent appropriated the selection and ordering of items which originated with the author?

135    Having considered and reflected on the objective evidence, I am satisfied that that question must be answered affirmatively. For the reasons I have given, I am satisfied that copying of the March 2008 CSV file has taken place. I am satisfied that, considered quantitatively and qualitatively, a substantial part of the March 2008 CSV file has been reproduced in Tonnex 2008.

22    On 13 August 2010, approximately one month before the commencement of the liability hearing, but after Mr Solomon’s first affidavit had been filed, Dynamic provided detailed particulars (56 pages) of 471 instances of what it described as indicia of copying by Tonnex. At the liability hearing, it submitted that the copying indicia represented idiosyncratic features of Dynamic’s Compatibility Chart that had found their way into Tonnex 2008. Dynamic submitted that the presence of these idiosyncrasies in Tonnex 2008 was only consistent with the wholesale copying by Mr Rendell and Mr Furtardo of Dynamic’s Compatibility Chart from Dynamic’s website. By reference to these particulars, I made the following findings:

107    When one works through all instances of the copying indicia (as I have done), the following matters become abundantly clear.

108    First, in relation to the March 2008 CSV file there are a great many examples of the use of idiosyncratic expressions, including multiple idiosyncratic expressions present within and across columns in relation to the one product line entry. Given the evidence that data was entered into the Navision database manually, rather than by a “cut and paste” operation, and given that the particularised examples of these indicia are so numerous, I am satisfied that these idiosyncrasies arise from either data entry errors or decisions deliberately but inconsistently made by Dynamic’s employees as to how the data should be entered in the Navision database.

109    Secondly, one cannot help but be struck by the sheer number of instances of precisely the same expression used within and across columns in relation to the very same products itemised in Tonnex 2008. It is inconceivable, in my view, that the same idiosyncrasies, in the same number and combination, and in relation to the same products, found their way into Tonnex 2008 by chance.

23    In an affidavit made on 15 February 2013, which was read at the damages hearing, Mr Solomon said that, when deposing to the matters set out in his first affidavit, which I have quoted at [17] above, it was his belief that “Mr Rendell and his team” had not copied Dynamic’s Compatibility Chart. He said that at no time did any employee of Tonnex tell him that the information in Tonnex 2008 was “sourced or copied from the Applicant”. However, Mr Solomon did not then seek to identify how he came to make the statements in his first affidavit concerning the asserted independent creation of Tonnex 2008. The statements quoted from his first affidavit are plainly inconsistent with the facts as I have found them to be. As I have noted above, there is nothing in Mr Solomon’s first affidavit to indicate that these statements were based on anything other than his own observation. He did not ascribe his knowledge to information provided by others, such as Tonnex’s employees. In a further affidavit made on 11 April 2013, which was also read at the damages hearing, Mr Solomon disclosed that he was not personally involved in obtaining “the compatibility information” that had been included in Tonnex 2008 and that his first affidavit outlined his understanding of where Tonnex had obtained that information, based on his discussions with “Tonnex staff”.

24    In his affidavit of 15 February 2013, Mr Solomon sought to explain the tone of the responding letter to which I have referred: see [9]-[11] above. Apart from his belief that “Mr Rendell and his team” had not copied Dynamic’s Compatibility Chart, he said that the advice he received from his then solicitors was that “Dynamic’s claim is baseless”. He also said that he regarded the demands in the letter of 3 April 2009 to be “an attempt by a much larger competitor to distract Tonnex from its real business focus and to cause Tonnex to incur legal fees”.

25    Further, Mr Solomon said that the present proceeding stands as the only occasion on which findings of intellectual property infringement or contravention of trade practices legislation have been made against Tonnex. He said that no other claims of copyright infringement have been made against Tonnex, whether as part of court proceedings or otherwise.

26    Mr Solomon also gave evidence about purchasing decisions at the wholesale level in respect of printer consumables. Mr Solomon said that in more than 25 years’ experience “in the industry”, he has never (as a buyer) been influenced to purchase a product because a supplier has provided a compatibility chart in its price list or on its website. He said that equally, as a seller, he has never been told directly by a customer, or had reported to him, that the customer made a decision to purchase printer consumables because the seller provided a compatibility chart.

27    Finally, Mr Solomon said that Tonnex acknowledges and accepts the decision that has been made against it and that, since delivery of the liability reasons, Tonnex has instituted “a strict approvals process for all material published by our business, whether that material is to remain internal to Tonnex or is to be distributed outside Tonnex”.

28     Mr Solomon was cross-examined at the damages hearing on these and other matters. He was asked about how he came to make the statements in his first affidavit concerning the asserted independent creation of Tonnex 2008. Mr Solomon said that, in his first affidavit, he was merely explaining or describing “the process I instructed people to follow”. He also said that the statements in his first affidavit were based on what he was told by the “marketing team”. Mr Solomon said that he would have spoken to Mr Rendell about the matter, after receiving the letter of 3 April 2009.

29    The following exchange took place:

Now, the reason why, I suggest to you, that you swore that you had personal knowledge of what happened in the preparation of the compatibility chart was that you knew precisely what had happened in the preparation of the compatibility chart; that’s the case, isn’t it?---I knew the prices that I had to follow that is for sure.

And you knew, and you were swearing to the court on 12 November 2009, that you had personal knowledge of what was happening in the preparation of the compatibility chart?---I certainly was advised, yes.

It was more than advice, Mr Solomon; you actually knew that Mr Rendell was [compiling] the compatibility chart in a certain way, didn’t you?---I knew that – in the discussions I had with Mr Rendell, how the compatibility chart should look. We had discussions about what fields should be in that compatibility chart, and certainly I knew where the data was coming from there, and I’ve explained that in the previous paragraph 5.

And, Mr Solomon, you knew that Mr Rendell was copying from the Dynamic’s website and pasting information for the creation of the Tonnex compatibility chart, didn’t you?---At that time, no way.

And you knew that as early as 2008, when the compatibility chart was being prepared, didn’t you?---Certainly not.

30    If, in his first affidavit, Mr Solomon was seeking to recount instructions he had given and information he had received, then that is certainly not apparent from the affidavit itself. Indeed, the affidavit presents Mr Solomon as speaking from direct knowledge of how Tonnex 2008 was compiled.

31    However, Mr Solomon’s affidavit of 11 April 2013, and the oral evidence I have quoted above, puts quite a different slant on the matter. Mr Solomon moved from a position in his first affidavit of apparent direct or actual knowledge about how Tonnex 2008 had been compiled, to a position at the damages hearing that he did not have any personal knowledge of how Tonnex 2008 had been compiled and was relying faithfully on what he told others to do and what he had been told by others that they had done.

32    Later in cross-examination, the following exchange took place:

I suggest, Mr Solomon, that as at April 2009 you had a very good knowledge of how Mr Rendell had in fact prepared the compatibility chart?---I had very good knowledge and I’ve stated that on my affidavit.

You had very good knowledge of how Mr Rendell actually prepared the compatibility chart by copying the Dynamic website?---Certainly at that time, no.

And I suggest to you that you had that knowledge back in 2008 when Mr Rendell was preparing the Tonnex 2008 compatibility chart?---No.

And I suggest to you that you made no steps to verify that the Dynamic compatibility chart as being copied because you already knew that that was the case. But nevertheless, you proceeded in the proceedings?---No, that’s not correct.

33    Counsel for the applicant returned to this topic towards the end of Mr Solomon’s cross-examination, when the following exchange took place:

… Now I’m going to suggest to you that the fact that Mr Rendell remains employed by Tonnex indicates that you always understood that the Tonnex compatibility chart 2008 was copied from Dynamic and its compatibility chart?---More or less.

And I’m going to suggest to you that if that’s not the case, that Tonnex or you as a director simply didn’t care whether or not the compatibility chart had been copied from Dynamic, and you were prepared to allow Mr Rendell to remain an employee because of that fact?---That’s not correct. I took – I take anything that comes from my competitor very seriously; in particular, Dynamic.

34    Taken literally, the first answer quoted immediately above signifies an acceptance by Mr Solomon that, at all times – even at the time that Tonnex 2008 was compiled – he knew that it was copied from Dynamic’s Compatibility Chart. However, at the time that this answer was given, I did not gain the impression that Mr Solomon was intending to agree with so broad a proposition. Rather, I understood him to be accepting that, notwithstanding that Tonnex 2008 has been found to have infringed Dynamic’s copyright, Mr Rendell – who along with Mr Furtado was responsible for compiling Tonnex 2008 – remains employed by Tonnex. The second answer, quoted immediately above, supports that alternative interpretation of Mr Solomon’s evidence.

35    The following exchange in re-examination also assists in understanding Mr Solomon’s evidence in this regard:

... You understand it was put to you that Mr Rendell had been inaccurate in what he told you, as you recounted it, about whether there had been copying from Dynamic’s website?---Yes. That has been put to me.

Yes. And you were then asked, against that background, [why] he’s still the national marketing manager; do you recall that?---Correct.

And in a position of trust?---Yes.

And you answered to both of those questions “yes”?---I did.

Could you tell his Honour why he is still the national marketing manager in a position of trust?---Well, he is a young man and I believe that he has been quite responsible for, I guess, creating the Tonnex brand in the market as well, very successful man through his academic, and basically he was found to have made a mistake. Hard people to come by in our industry. He has certainly been a responsible man and I was not going to sack him over a mistake. I believe that we make mistakes daily.

36    Tonnex did not seek to call Mr Rendell at the damages hearing to give his own version of conversations or other communications between himself and Mr Solomon on these matters. There is, however, some evidence given by Mr Rendell in cross-examination at the liability hearing that supports the proposition that Mr Rendell represented to Mr Solomon that there had been no copying of Dynamic’s Compatibility Chart. At the liability hearing, Mr Rendell was asked whether he had had a conversation with Mr Solomon about how he (Mr Rendell) had gone about compiling Tonnex 2008. Mr Rendell replied that he had had such a conversation. He accepted that this conversation had been one to inform Mr Solomon of “precisely the steps” that he (Mr Rendell) had taken to compile Tonnex 2008. It was put to Mr Rendell that, at that time, he did not inform Mr Solomon that he (Mr Rendell) had drawn information from “e-commerce websites” (ie, websites other than Dynamic’s website). Mr Rendell’s reply was: “Yes, I did”. This evidence must be considered with Mr Solomon’s positive statement in his affidavit of 15 February 2013 that no employee of Tonnex had told him that the information in Tonnex 2008 “was sourced or copied from the Applicant”. Cumulatively, it supports Tonnex’s case that Mr Rendell informed Mr Solomon that there had been no copying of Dynamic’s Compatibility Chart.

Relevant principles

37    Section 115(4) of the Copyright Act provides:

Where, in an action under this section:

(a)    an infringement of copyright is established; and

(b)    the court is satisfied that it is proper to do so, having regard to:

    (i)    the flagrancy of the infringement; and

    (ia)    the need to deter similar infringements of copyright; and

(ib)    the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and

(ii)    whether the infringement involved the conversion of a work or other subject matter from hardcopy or analog form into a digital or other electronic machine readable form; and

(iii)    any benefit shown to have accrued to the defendant by reason of the infringement; and

(iv)    all other relevant matters;

the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

38    Additional damages may be given on principles corresponding to those governing awards of aggravated and exemplary damages at common law: Bailey v Namol Pty Limited (1994) 53 FCR 102 at 113-114; Autodesk Inc v Yee (1996) 68 FCR 391 at 394; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [42]; Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569 at [33]-[36]. The distinction between aggravated damages and exemplary damages was described by Windeyer J in Uren v John Fairfax & Sons Pty Limited (1966) 117 CLR 118 at 149, as follows:

… The formal distinction is … that aggravated damages are given to compensate the plaintiff when the harm done to him by a wrongful act was aggravated by the manner in which the act was done: exemplary damages, on the other hand, are intended to punish the defendant, and presumably to serve one or more of the objects of punishment – moral retribution or deterrence.

39    In Lamb v Cotogno (1987) 164 CLR 1, the High Court discussed the nature of deterrence in an award of exemplary damages, noting (at 9-10) that deterrence extends beyond the wrongdoer to “other like-minded persons” and to “conduct of the same reprehensible kind”. It can be seen, therefore, that aspects of both specific deterrence and general deterrence may be reflected in an award of exemplary damages. Moreover, the High Court observed that such damages may also serve to mark a court’s condemnation of a wrongdoer’s behaviour.

40    In XL Petroleum (NSW) Pty Ltd v Caltex Oil (1985) 155 CLR 448, Brennan J (at 471) observed:

As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff’s rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of the compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v. Harvey … substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs C.J. saying:

‘I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages?

41    These considerations are evident in the language of s 115(4) of the Copyright Act and in its specification of the considerations to which a court must have regard in determining whether an award of additional damages should be made. Even so, it is to be recognised that additional damages under s 115(4) are “of a type sui generis”: Facton at [36].

42    The significance of this last observation is not merely taxonomical. As White J noted in Luxottica Retail Australia Pty Ltd v Grant (2009) 81 IPR 26 at [39], additional damages for copyright infringement are not limited to the circumstances in which aggravated and exemplary damages are recoverable in tort. His Honour observed that aggravated damages are not recoverable by a corporate plaintiff, and exemplary damages are an exceptional remedy: Gray v Motor Accident Commission (1998) 196 CLR 1 at [12] and [20].

43    By contrast, s 115(4) is indifferent to the personality of the copyright owner. Further, rather than being exceptional, “an element of penalty is an accepted feature of copyright legislation”: Autodesk at 394. That said, courts have nevertheless approached the award of additional damages under s 115(4) cautiously: Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 at 577.

44    The various matters in s 115(4)(b)(i)-(iv) are not preconditions to an award of additional damages, although they are matters to which a court must have regard: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763 at [17]. For example, the requirement that the court have regard to the flagrancy of the infringement does not mean that flagrancy must be present in order to justify a claim for additional damages: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93; MJA Scientifics International Pty Ltd v SC Johnson & Son Pty Ltd (1998) 43 IPR 275 at 282; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [41]. In all cases, the abiding question in considering an award of additional damages is the statutory question “whether the court is satisfied that it is appropriate to do so”. Significantly in that regard, s 115(4)(b)(iv) directs attention to “all other relevant matters”.

45    Flagrancy is not established simply by proving copying. As Lockhart J observed in International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250 at 255, if that were so, every instance of infringement under ss 37 and 38 of the Copyright Act would attract additional damages because knowledge of copying is an element of each form of secondary or indirect infringement there referred to. Moreover, broadly speaking, the notion of flagrancy does not comprehend mere mistakes or carelessness: Polygram at 575. Something more, in the nature of reprehensible conduct, is required.

46    For example, in Ravenscroft v Herbert & New English Library Ltd [1980] RPC 193, Brightman J (at 208) said that flagrancy “implie[s] the assistance of scandalous conduct, deceit and such like; it include[s] deliberate and calculated infringements…”. See also Autodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 at 76.

47    The notion of flagrancy will extend to conduct that exhibits a consciousness of wrongdoing, whether or not it also exhibits a consciousness of copyright infringement. In Futuretronics, Besanko J awarded additional damages for infringement constituted by the production and distribution of a brochure. The second respondent in that case was a former employee of the applicant copyright owner, who was responsible for producing the infringing brochure. He knew that the artworks reproduced in the brochure belonged to the applicant. Despite this knowledge, he nevertheless proceeded to use them in the infringing brochure, which was then used to promote the first respondent’s products. Besanko J said with respect to the second respondent:

20    … Whether he actually knew that the use of the applicant’s artworks was an infringement of copyright is immaterial…; the important point is that he knew the artworks were the applicant’s artworks or, put a different way, that they belonged to the applicant. Although he attempted to say that he did not know he could not use the applicant’s artworks because he was a “bit vague as to how all this worked” and he had used samples with the brands of third parties before, I think he knew that he should not be using the artworks or, at least, was wilfully blind to that fact…

48    With respect to any “benefit” that might have accrued to an infringer, Lockhart J in Polygram noted (at 576) that the “benefit” referred to in s 115(4)(b)(iii) is not limited to pecuniary advantage. His Honour referred to the fact that an advantage might be seen to have accrued to an infringer even though no tangible financial benefit is established.

49    With respect to post-notification conduct (s 115(4)(b)(ib)), Goldberg J in Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191 distinguished an infringer’s conduct of its defence in relation to procedural matters and the like, including putting a copyright owner to proof of its allegations of infringement, from conduct attending the infringement itself.

50    In that case, his Honour considered a submission that an infringer’s failure to comply with procedural directions and his failure to admit authorship and copyright ownership of the work in suit were “other relevant matters” within the meaning of s 115(4)(b)(iv) of the Copyright Act. His Honour said:

40    I do not consider the manner in which [the infringer] approached the trial of the proceeding and conducted his defence is “a relevant matter” for the purposes of s 115(4)(b)(iv) of the Act. The context in which the “relevant matters” appear in s 115(4) demonstrates that the matters must be relevant to the nature of the infringement and the consequences of the infringement in relation to the subject-matter of the copyright. If there be matters which have had an aggravating consequence on the incurring of costs by the applicants in proving their case, I consider that such matters should be taken into account in any order for costs but not in relation to the quantification of additional damages under s 115(4).

51    His Honour also considered whether these matters were captured by s 115(4)(b)(ib) of the Copyright Act. His Honour said:

45    The applicants submitted that the insertion of subparas (ia) and (ib) was declaratory of the position which had existed prior to the amendments. There is substance in that submission as can be seen from cases such as Carson v John Fairfax & Sons (1992) 178 CLR 44 at 71; 113 ALR 577 at 597 and Microsoft Corp v Goodview Electronics Pty Ltd (2000) 49 IPR 578. However, the conduct taken into account in those cases was conduct which was relevant to the substantive allegations made against the respondents. For example, in the Microsoft case the respondent filed a defence which proved to be false. Branson J took that fact into account in conjunction with other evidence which showed an intention on behalf of the respondent to conceal the identity of their suppliers to find “a deliberate pattern of conduct by the respondents in which they recognised the illegality of the enterprise they are engaged in and actively sought to conceal it”.

46    I do not consider that the conduct of the respondent contemplated by subpara (ib) of s 115(4)(b) is referable to conduct of the defence in so far as it relates to procedural matters and matters whereby the applicants are put to the proof of their case, albeit unreasonably. I consider that these are matters more appropriately dealt with by an appropriate order for costs.

52    There need not be proportionality between the amount of additional damages awarded under s 115(4) and the amount of compensatory damages awarded under s 115(2). Additional damages may be awarded even though the copyright owner might only be entitled to nominal compensatory damages: see Aristocrat at [54] and the cases there cited; see also Futuretronics at [17] and the cases there cited. However, in Facton, Lander and Gordon JJ observed (at [32]) that an owner of copyright will not be entitled to additional damages under s 115(4) without first making out an entitlement to some damages under s 115(2): cf the provisional observations of Lockhart J in Polygram at 575 to the contrary, discussed in MJA at 283. It would seem that for this purpose, nominal damages will suffice.

53    When an award of additional damages includes a punitive component, the individual circumstances of the infringer must be taken into account, and the award tailored accordingly. These circumstances include the burden that additional damages will visit on the infringer: Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269 at 286-287; Facton at [46].

The parties’ submissions

Dynamic’s submissions

54    Dynamic advanced submissions directed to all paragraphs of s 115(4)(b) of the Copyright Act, other than s 115(4)(b)(ii).

55    With respect to flagrancy of the infringement (s 115(4)(b)(i)), Dynamic submitted that Tonnex, either through Mr Rendell alone or, additionally, through Mr Solomon and his co-director Mr Kozman, knew that Tonnex 2008 had been created by deliberately copying Dynamic’s Compatibility Chart, but nevertheless:

    advanced a case up to and including the liability hearing that was “wholly inconsistent with that awareness”;

    actively concealed the facts that “underpinned” the infringing conduct by “providing affidavit evidence that was inconsistent with the true state of affairs”;

    after notification of the alleged infringement of copyright, continued to infringe that copyright, and

    copied Dynamic’s Compatibility Chart for its own commercial gain and “thereby sought to recover from a commercial disadvantage suffered by not possessing the right to distribute the Applicant’s compatibility chart”.

56    Dynamic pointed to the affidavits made by Mr Solomon, Mr Kozman and Mr Rendell through which Tonnex advanced or supported a case that Tonnex 2008 had not been compiled by copying Dynamic’s Compatibility Chart. Dynamic also pointed to aspects of the oral evidence given by Mr Kozman and Mr Rendell at the liability hearing. It submitted that, in this way, Tonnex deliberately concealed the copying that had, in fact, taken place. It submitted that this conduct “reflects an active consciousness that the copying of the Applicant’s compatibility chart was wrong and could not be admitted”.

57    Dynamic submitted that Mr Rendell was actively engaged in this copying and that his “knowledge and intentions” in that regard are to be taken as Tonnex’s conduct, especially given that he was Tonnex’s National Marketing Manager and the senior manager with responsibility for the production of Tonnex’s price lists, including Tonnex 2008. Dynamic submitted that this alone fixed Tonnex with conduct that was flagrant.

58    However, Dynamic also submitted that Mr Kozman was aware of the copying, and condoned it. In this connection, it referred to my findings at [124] of the liability reasons where I did not accept certain evidence given by Mr Kozman concerning the duplication of particular entries in Tonnex 2008, which were included in Dynamic’s Compatibility Chart with respect to generic products that were compatible with OEM products. It was significant, in this regard, that Tonnex consistently advertised the fact that it was only a supplier of OEM products, not compatible generic products. But if this were so, how did it come to pass that Tonnex 2008 contained entries for compatible generic products, particularly those expressed in the same way in Dynamic’s Compatibility Chart? Mr Kozman sought to proffer an explanation that defied a commonsense reading of the relevant entries in Tonnex 2008.

59    In support of its submissions concerning Mr Kozman’s knowledge, Dynamic also pointed to evidence given by Mr Kozman that, although, predominantly, he looked after the financial and distribution aspects of Tonnex’s business, he kept “a handle on every aspect of the business” and “would like to think that as the owner of the business I know what’s going on in every department”. This view was supported by Mr Rendell’s evidence that both Mr Kozman and Mr Solomon were aware of how he and Mr Furtado went about compiling Tonnex 2008. Mr Rendell said that he, Mr Solomon and Mr Kozman were “working in a relatively small office and in regular contact” and “were aware of what projects we were doing throughout”.

60    Dynamic submitted that Mr Solomon’s state of knowledge was “inconsistent”. It referred to Mr Solomon’s first affidavit which I have discussed above, and Mr Solomon’s later acknowledgement that he was not personally involved in obtaining the compatibility information included in Tonnex 2008.

61    Dynamic submitted that, if Messrs Solomon and Kozman had not been aware of the extent of copying of Dynamic’s Compatibility Chart, they had been grossly misled by Mr Rendell and had been led into “swearing affidavits attesting to a false version of the process of creation” of Tonnex 2008. However, based on the fact that Mr Rendell continues to be employed by Tonnex in the senior position of National Marketing Manager, and thus continues to enjoy Messrs Solomon’s and Kozman’s trust and confidence, Dynamic submitted that:

…the only inference to be drawn from the conduct of the Respondent’s directors is that they were at all times aware of and condoned the flagrant and deliberate copying of the Applicant’s Compatibility Chart.

62    With respect to Tonnex’s conduct after notification of its alleged infringement (s 115(4)(b)(ib)), Dynamic pointed to its letter of 3 April 2009 and to the responding letter, which I have discussed above: see [9]-[12]. It pointed to the fact that, notwithstanding the letter of 3 April 2009, Tonnex continued to issue new price lists that included links to Tonnex 2008. I refer, in that regard, to the evidence I have summarised at [14]-[16] above.

63    Dynamic also submitted that, given Tonnex’s continued assertion that Tonnex 2008 had not been compiled by copying Dynamic’s Compatibility Chart, including in affidavits that Tonnex had filed in the proceeding, Dynamic was “put to significant cost” to prove that copying had in fact taken place. By reference to the detailed particulars described in [105] of the liability reasons, Dynamic submitted that Tonnex had placed upon it “a time-consuming, painstaking and expensive task”. Dynamic submitted that, in this context, it was significant that there has been no acknowledgement by anyone on Tonnex’s behalf that Dynamic’s Compatibility Chart had been copied, and certainly no expression by Tonnex of contrition. Dynamic submitted that the absence of contrition was a matter that demonstrated that “the award of significant additional damages is necessary to bring home to Tonnex the seriousness of its conduct and the disapproval of the Court”.

64    Further, Dynamic submitted that Mr Solomon’s affidavit of 15 February 2013, when dealing with Tonnex’s implementation of an approval process for all material to be published, was couched in language which suggested that Tonnex’s copying of Dynamic’s Compatibility Chart was inadvertent. Dynamic submitted that, in circumstances where the Court should accept that Tonnex’s copying was deliberate and flagrant, it was “disingenuous to suggest that the institution of an approval process is likely to avoid further occurrences of the deliberate conduct the subject of these proceedings”.

65    Dynamic also submitted that, upon receipt of the detailed particulars to which I have referred, Messrs Solomon and Kozman must have become aware of Tonnex’s copying, if not previously aware of that fact. Dynamic submitted:

… To have failed to recognise that fact would have required a remarkable lack of interest, amounting, in the Applicant’s submission to recklessness and wilful blindness. Yet the directors continued to deny that the Applicant’s Compatibility Chart had been copied.

66    When dealing with Tonnex’s post-notification conduct, Dynamic advanced a number of submissions concerning what it said was Tonnex’s failure to comply with the Court’s orders made on 16 June 2011, which required the supervised destruction of documents. In the published reasons for making that order, I said:

21    As to the question of delivery up and destruction or removal, Tonnex has expressed its preparedness to destroy (under the supervision and to the satisfaction of its solicitor, Mr Szmerling) all copies of the infringing compatibility charts in its possession. The real issue between the parties is whether that process should be undertaken informally, as Tonnex contends it should be, or whether an order should be made, as Dynamic seeks. I am persuaded that I should make the order substantially in the form that Dynamic seeks, providing, as it will, the particular sanction of proceedings for contempt should there be non-compliance. In my view this will also serve to reinforce, for Tonnex, the significance of its infringing acts and the need for those acts to be completely remedied. I have, however, modified the drafting of the order to remove some aspects of apparent duplication in its terms and to make clear that its requirements are to take place under the supervision of its solicitor.

67    Dynamic complained that, contrary to the order made, no documents were delivered to Mr Szmerling (Tonnex’s then solicitor) and the removal or destruction of electronic files did not take place under Mr Szmerling’s supervision. Dynamic submitted that as the need to reinforce, to Tonnex, the significance of Tonnex’s infringing acts, and the need for those infringements to be completely remedied were elements of the order for delivery up, Tonnex’s failure to comply “demonstrates that the message has not been received” and that this fact stood as “further justification for a significant award of additional damages”.

68    With respect to the benefit that has accrued to Tonnex by reason of its infringement (s 115(4)(b)(iii)), Dynamic submitted that, by reproducing Dynamic’s Compatibility Chart, Tonnex “obtained the benefit of a useful business tool for which it did not have to expend any effort in the development or creation”.

69    In this connection, Dynamic pointed to the evidence of its own time and effort in compiling its compatibility chart and contrasted this with Tonnex’s copying, and hence avoidance of similar time and effort, which, Dynamic submitted, was itself a benefit to Tonnex. It is not necessary for me to summarise the evidence here. Some of it is the subject of findings I made at [15]-[45] of the liability reasons. There is no doubt that, expressed generally, Dynamic went to considerable ends, and I infer incurred significant expense, to compile its own compatibility chart.

70    Dynamic also pointed to the findings I made at [32]-[45] and [76] of the liability reasons concerning the usefulness of Dynamic’s Compatibility Chart and the favourable way in which that chart had been received by Dynamic’s customers. On the other hand, evidence given by Mr Rendell at the liability hearing made clear that Tonnex’s earlier compatibility charts (ie, before Tonnex 2008) were considered by its customers to be cumbersome. In short, the charts were not user-friendly. Dynamic submitted that the fact that Tonnex copied Dynamic’s Compatibility Chart showed that Tonnex believed that its possession of a similar chart would be of benefit to its business. Dynamic submitted that this was also illustrated by the fact that Tonnex included a link to Tonnex 2008 in the price lists sent to its customers in over 38,000 emails in the period 9 April 2008 to 2 August 2010.

71    With respect to “other relevant matters” (s 115(4)(b)(iv)), Dynamic relied on the following.

72    First, Dynamic submitted that Tonnex sought to conceal its conduct in reproducing a substantial part of Dynamic’s Compatibility Chart by publishing Tonnex 2008 through emails to its customers (rather than more publicly on its website) and then, when confronted with that conduct, by threatening Dynamic, in the responding letter, with a claim of misuse of confidential information, should Dynamic seek to use the materials in its possession to advance its claims against Tonnex.

73    Secondly, as I found at [172] of the liability reasons, Tonnex considers Dynamic to be a fierce competitor. Dynamic submitted that it should be inferred that, by copying Dynamic’s Compatibility Chart shortly after it was published on Dynamic’s website, Tonnex did not wish to be disadvantaged by not having a similar tool available to its customers and that Tonnex “sought to avoid ceding to Dynamic the competitive advantage”.

74    Thirdly, Dynamic pointed to the evidence of the size of Tonnex’s business in terms of its gross sales, staffing and infrastructure. Part of the evidence tendered in the present hearing concerning Tonnex’s financial position is the subject of limited confidentiality orders. However, no confidentiality was claimed in respect of the following evidence given by Mr Solomon concerning Tonnex’s sales and profitability for the 2007-2011 financial years:

75    Dynamic submitted:

If an award of additional damages is to have an appropriate deterrent and retributive effect it is necessary that the amount awarded reflect the financial resources of the Respondent. In the Applicant’s submission, an award of less than $400,000 would not have adequate deterrent and retributive effect upon Tonnex. The sum sought by the Applicant is little more than 1% of Tonnex’s gross annual revenue and clearly less than 1% of Tonnex’s revenue over the period during which Tonnex continued to publish the infringing price list.

76    With respect to the question of deterrence (s 115(4)(b)(ii)), Dynamic placed considerable emphasis on what it described as Tonnex’s active concealment and denial of copying. It submitted that the fulfilment of the policy objective of deterrence requires substantially greater additional damages to be awarded where infringement is concealed or denied, and that such an award must be of a quantum that makes even the chance of being caught unattractive to a putative infringer. It submitted that the present case “presents a particularly acute example of a commercial entity with very significant resources possibly seeking to conceal its infringing conduct for its own commercial benefit”. Dynamic submitted that only a very substantial award of additional damages would have the necessary deterrent effect in the present case.

Tonnex’s submissions

77    As I have noted, Tonnex disputes Dynamic’s entitlement to additional damages. Tonnex submitted that its infringing conduct must be seen in context. It submitted that its conduct did not involve the supply of counterfeit goods, only the sending of emails to its customers by means of which those customers could “click through” to a price list containing Tonnex 2008. Tonnex submitted that it did not sell Tonnex 2008 or derive any appreciable benefit from it. It said that Tonnex 2008 was supplied for guidance to customers. Tonnex submitted it was not a factor in customers choosing Tonnex as a supplier and that these customers were only motivated by price and the availability of product.

78    With respect to flagrancy of the infringement, Tonnex made three submissions.

79    First, Tonnex submitted that it did not know that its employees had copied Dynamic’s Compatibility Chart. Tonnex submitted that its directors had no such knowledge. Tonnex developed this submission by arguing that, even though Mr Rendell was delegated the “administrative task” of compiling Tonnex 2008, he was not the directing mind and will of Tonnex, even in respect of that task. Tonnex submitted, therefore, that Mr Rendell’s knowledge should not be attributed to it. Further, Tonnex submitted that there was no direct evidence, and otherwise no sufficiently persuasive evidence, that Mr Solomon or Mr Kozman had been involved in the copying I have found or had knowledge of that copying. Tonnex submitted that Mr Kozman’s evidence that he “would like to think” that he knew “what’s going on in every department” was not enough to support an inference of knowledge on his part. Tonnex submitted that Mr Solomon had given evidence that he had not been told by any employee that, in the compilation of Tonnex 2008, information had been sourced or copied from Dynamic. In this connection, Tonnex also referred to Mr Rendell’s evidence at the liability hearing, which I have noted at [36] above.

80    Secondly, Tonnex submitted that mere knowledge of copying is not enough to establish flagrant conduct for the purposes of s 115(4)(b)(i) of the Copyright Act. It submitted that there must be “something more”, such as an awareness that this copying was “wrong” or constituted an infringement of copyright. In this connection, Tonnex referred to some of the cases I have noted at [45]-[47] above.

81    Thirdly and relatedly, Tonnex submitted that its denials of copying in the responding letter were not made with a consciousness that such copying was an infringement of copyright. Rather, it was doing no more than denying an allegation of fact, based on information provided by its employees, including Mr Rendell. In this connection, Tonnex pointed to Mr Solomon’s evidence of his acceptance, on legal advice, that Dynamic’s claims were baseless. Tonnex submitted that Mr Solomon’s evidence in this regard was “inherently plausible” because “copyright in compilations is a notoriously difficult area of copyright law” and “it is understandable that lay persons would doubt that copyright existed with respect to the compilation of publicly available data, such as Dynamic’s compatibility chart”.

82    With respect to its conduct after notification of its alleged infringement, Tonnex submitted that a distinction should be drawn between conduct which is relevant to the substantive allegations against an alleged infringer and conduct related to the procedural aspects of an infringement proceeding, including the need for a copyright owner to discharge its onus of proof when an alleged infringer puts the copyright owner to that proof: Flags 2000 at [44]-[47]; Futuretronics.com.au at [17] and [30]-[31]. The latter conduct is appropriately dealt with by way of costs, not an award of additional damages. Tonnex submitted that Dynamic’s complaints that it was put to significant cost to prove that copying had in fact taken place was conduct of the latter kind.

83    Further, Tonnex submitted that its alleged failure to comply with the Court’s orders for the supervised destruction of documents, is not a matter that should be dealt with in the context of a damages hearing. Tonnex submitted that the alleged breach of the Court’s orders is a serious matter and that Dynamic has not commenced any proceeding for contempt. In any event, Tonnex submitted, this complaint is one, once again, related to the conduct of the litigation rather than one related to the substantive claim of infringement brought against it. It thus falls into the category discussed in Flags 2000 and Futuretronics as having a bearing on costs, and not having a bearing on the award of additional damages.

84    As to its conduct in continuing to send emails with links to Tonnex 2008, Tonnex submitted that its directors were not aware that Mr Rendell had copied Dynamic’s Compatibility Chart and also did not believe that copyright subsisted in that chart. Tonnex submitted that, as its directors had the conduct of the litigation, and believed that it had an arguable defence, it should not suffer additional damages by reason of its further infringements post-notification.

85    With respect to the benefit that has accrued to Tonnex by reason of its infringement, Tonnex submitted that its conduct delivered no appreciable benefit to it at all. It submitted that, at best, Tonnex 2008 provided some useful guidance to its customers, which they could have obtained elsewhere. It submitted that its customers were not more likely to buy its products by reason of Tonnex 2008. Indeed, it submitted that Tonnex 2008 was irrelevant to its customers’ purchasing decisions. It submitted that resellers generally choose a wholesaler on the basis of agreed pricing for a defined period and that purchasing decisions are influenced by price and product availability. Resellers could “readily obtain compatibility and yield information from one source and then purchase the relevant product from another supplier”.

86    Tonnex submitted that its sales did not increase as a result of its use of Tonnex 2008. In this connection, it pointed to evidence given by Mr Solomon of fluctuating sales revenue for the period covered by the 2008-2012 financial years, including modest sales growth for the 2009 financial year, and a decline in sales for the 2010 financial year.

87    Tonnex seemed to argue that Dynamic’s submission that it (Tonnex) received the benefit of not expending its own time and effort to create a compatibility chart, was illusory because Tonnex already had a compatibility chart and, further, it could readily purchase compatibility data. Tonnex submitted that, in those circumstances, “it is far more likely that Tonnex would have continued using its existing compatibility chart or purchased compatibility data from a third party data supplier as it in fact did in 2010”. I should say at once that I do not understand the significance of that submission, given that Tonnex did not continue to use its existing compatibility chart, and given that copying of Dynamic’s Compatibility Chart has been established.

88    Tonnex submitted that it would be wrong to proceed on the basis that, as Dynamic contended, it (Tonnex) obtained the benefit of information in Dynamic’s Compatibility Chart. This is because copyright protects forms of expression, not mere information. Tonnex submitted that, in any event, there is no evidence that the information contained in Dynamic’s Compatibility Chart was only available from Dynamic and not from other sources.

89    Finally in this connection, Tonnex submitted that Dynamic’s reliance on the favourable feedback it received from customers in relation to Dynamic’s Compatibility Chart was really directed to Dynamic’s website which featured an intelligent dynamic interface allowing users to search online for information about Dynamic’s products. Thus, according to Tonnex, Dynamic’s customers were really commenting on a sophisticated research tool. Tonnex did not have that tool or any similar facility on its website. Thus, it submitted, the benefit seen in Dynamic’s research tool should not be attributed to Tonnex 2008 and thereby be seen as a benefit that Tonnex derived from its infringing conduct.

90    With respect to “other relevant matters”, Tonnex made the following submissions.

91    First, contrary to Dynamic’s contention, Tonnex submitted that it did not conceal Tonnex 2008 by sending emails to its customers rather than putting its price lists on its website. By sending emails, Tonnex was simply continuing its previous practice with respect to the dissemination of its price lists: see [97]-[98] of the liability reasons.

92    Secondly, Tonnex submitted that although Dynamic and Tonnex are fierce competitors, they are not competitors of equal size. In terms of sales revenue, Dynamic is approximately six times larger than Tonnex.

93    Thirdly, Tonnex submitted that it would be wrong to assess additional damages by reference to its gross sales. It submitted that this would be so for a number of reasons. Additional damages should reflect the infringing conduct and its consequences, not the financial means of the infringer. It submitted that there is no known precedent for assessing additional damages as a percentage of gross sales and that even if an infringer’s means are relevant, Tonnex’s net profit, not its gross sales, should be examined. So examined, Tonnex submitted that its financial position “does not justify a high additional damages order”.

94    With respect to deterrence, Tonnex submitted that there is no need for additional damages to produce a deterrent effect, given the declarations and orders for delivery up that have been made, and given that certain undertakings have been given to the Court by Messrs Solomon and Kozman. Tonnex submitted that this “long, distracting and very expensive litigation will have a greater deterrent effect than even the maximum additional damages order sought by Dynamic”. Tonnex pointed to the fact that it has now instituted an approvals process for all materials published in the course of its business and that its compatibility data is now supplied by a third party supplier on commercial terms.

95    Tonnex also submitted that the present case is not one involving counterfeiting, where additional damages are awarded to deter a commercial counterfeiter’s secret operations. Here, Tonnex’s conduct has not been secret. Tonnex submitted that, in all the circumstances, there is no reason to think that it will, in future, engage in similar infringements.

96    Overall, Tonnex submitted that no additional damages should be awarded. But if, contrary to that submission, the Court decides that additional damages should be awarded, the following matters should be taken into account. First, no other claims of copyright infringement have ever been made against Tonnex, whether as part of court proceedings or otherwise. Secondly, the copyright work infringed was a compilation of publicly available data. Tonnex submitted that “this is a difficult area of copyright law” and that it should not be condemned for defending the claim against it. Thirdly, Tonnex reiterated a number of submissions it had already made. It submitted that Dynamic suffered no loss and Tonnex enjoyed no appreciable benefit from the infringing conduct. Tonnex also repeated its submission that the present case should not be one equated with the selling of counterfeit goods. In this regard, it submitted that the case is not one where the Court will rightly suspect that the infringer may have engaged in further infringements for additional financial benefit.

Consideration

97    As will be apparent from the above summary, the parties’ submissions contained a number of recurring themes. I do not propose to analyse, in detail, every argument advanced by the parties. Rather, I will focus on what I consider to be the main elements of their submissions that have informed the conclusions and decision I have reached.

98    I am satisfied that this is a case in which additional damages should be awarded. Notwithstanding Tonnex’s arguments to the contrary, I am persuaded that the case is one of flagrant infringement. I am also persuaded that there are other factors which support the awarding of such damages.

99    Based on the evidence presented to the Court, I can only conclude that the reproduction of a substantial part of Dynamic’s Compatibility Chart was the result of copying that had been consciously and deliberately undertaken. Although, at the liability hearing, Mr Rendell gave evidence as to how Tonnex 2008 was compiled, I could not accept that evidence in the face of the overwhelming objective evidence that copying of Dynamic’s Compatibility Chart had taken place on a substantial scale.

100    There are, however, other dimensions to that copying. Based on the evidence I have summarised at [22]-[36] above, it would seem that, for the purposes of considering the imposition of additional damages, Tonnex asks the Court to accept that Tonnex 2008 was compiled in a way that was contrary to Mr Solomon’s direct instructions as to how it should have been compiled and that, when challenged on or about 3 April 2009 or thereafter with the claim that a substantial part of Tonnex 2008 had been copied from Dynamic’s Compatibility Chart, Mr Rendell, in his position as National Marketing Manager, represented to Mr Solomon that no such copying had taken place. In short, Tonnex places the blame for copying on Mr Rendell but apparently asks the Court to accept that these significant acts are not properly attributable to Tonnex and are, in any event, to be viewed as something of a mistake.

101    I do not accept that submission. I am satisfied that Mr Rendell’s knowledge and acts and, to the extent that it is also necessary to decide, Mr Furtado’s knowledge and acts, were Tonnex’s knowledge and acts. Mr Rendell held a senior position within Tonnex as its National Marketing Manager and was the person responsible for compiling Tonnex 2008. Not only was he responsible for compiling Tonnex 2008, he had a “hands on” role in compiling it and in sourcing the data used in it. He also supervised Mr Furtado’s work. Mr Rendell and Mr Furtado appear to have worked alongside each other in undertaking this task. Their acts – certainly Mr Rendell’s acts – cannot be explained away as a mistake or mere inadvertence. As I have said, they can only be seen as acts of conscious and deliberate copying.

102    I have doubts about the reliability of Mr Solomon’s evidence. The matters to which he deposed confidently in his first affidavit about the creation of Tonnex 2008 bear a completely different complexion when viewed against the evidence he gave at the damages hearing as to his true state of knowledge. His evidence suggests a cavalier approach to placing matters of fact before the Court. I gained the impression that he was more concerned to put before the Court a version of the facts that he wished the Court to accept, rather than to give evidence of facts about which he had actual knowledge. I therefore treat his evidence with considerable caution. However, notwithstanding these doubts, I am not persuaded that I should find, on balance, that Mr Solomon knew that, at the time it was compiled, Tonnex 2008 reproduced a substantial part of Dynamic’s Compatibility Chart. I am prepared to accept that Mr Solomon acted on Mr Rendell’s assurance that, in compiling Tonnex 2008, no copying of Dynamic’s Compatibility Chart had taken place. I am prepared to accept that he acted on that basis up to 13 August 2010, when Dynamic provided its detailed particulars of the 471 instances of copying from Dynamic’s Compatibility Chart.

103    I also have concerns about the way in which Mr Kozman gave his evidence at the liability hearing. I identified some of those concerns in the liability reasons. I refer in particular to Mr Kozman’s evidence summarised at [124] of the liability reasons. Once again, I gained the impression that, on occasion, Mr Kozman was more concerned to put before the Court a version of the facts that he wished the Court to accept, even though, in relation to the matters summarised at [124] of the liability reasons, that evidence defied a commonsense reading of the relevant entries in Tonnex 2008. However, notwithstanding Dynamic’s submissions to the contrary, I am not persuaded that I should find, on balance, that Mr Kozman knew that, at the time that it was compiled, Tonnex 2008 reproduced a substantial part of Dynamic’s Compatibility Chart or that Mr Kozman condoned the copying of that chart. I am prepared to accept that, up to 13 August 2010, when Dynamic provided its detailed particulars, Mr Kozman likewise acted on the basis of the assurances that had been given that the compilation of Tonnex 2008 did not involve any copying of Dynamic’s Compatibility Chart. I do not accept Dynamic’s submission that I should infer that Mr Kozman had knowledge of the copying I have found, simply because he was working in a relatively small office with Mr Rendell and Mr Furtado, and was in regular contact with them.

104    With respect to Mr Solomon and Mr Kozman, I am not prepared to infer, as Dynamic contended, that they had actual knowledge of the copying I have found, and condoned that copying, because, as directors of Tonnex, and in light of the findings of copying I have made, they have since permitted Mr Rendell to remain in his position of National Marketing Manager.

105    I should nevertheless record that, in my view, the receipt by Tonnex of Dynamic’s detailed particulars marked a change in circumstances. A conscientious consideration of the particulars should have alerted Mr Solomon and Mr Kozman to the fact that, despite what they might have been told by Mr Rendell, or indeed other employees, the prospect that a substantial part of Dynamic’s Compatibility Chart had been copied was real and that former assurances to the contrary might well be unreliable. There is nothing in the evidence to suggest that, armed with the information provided by the detailed particulars, Mr Solomon and Mr Kozman sought to review Tonnex’s position, or were even motivated to do so. They seem to have simply adhered to the their previous view, without further reflection, that Dynamic’s claims were no more than a manifestation of an “obsession” with Tonnex and that Dynamic was seeking to “distract” it. That said, by the time the particulars were provided, Tonnex, for its own reasons, had stopped providing a link to Tonnex 2008 when sending price lists to its customers by email.

106    My findings concerning Mr Solomon’s and Mr Kozman’s state of knowledge in the period up to 13 August 2010 do not mean that the conscious and deliberate copying I have found to be attributable to Tonnex was not also flagrant. As I have found, Mr Rendell’s knowledge and acts are to be taken as Tonnex’s knowledge and acts. On the basis of Mr Solomon’s evidence, I am left to conclude that Mr Rendell’s involvement in the compilation of Tonnex 2008 involved the copying of Dynamic’s Compatibility Chart in a way that was not only conscious and deliberate, but also disobedient. If Mr Solomon gave instructions as to how Tonnex 2008 was to be compiled (which included an instruction not to copy competitors’ compatibility charts), then Mr Rendell must have understood that those instructions were given for good reason and that such copying should not take place. He and Mr Furtado nevertheless did so. In addition, I can only conclude that, by giving such an instruction, Mr Solomon himself had an understanding that competitors’ compatibility charts should not be copied.

107    Further, on the basis of Mr Solomon’s evidence, I am left to conclude that these conscious, deliberate and disobedient acts were intentionally concealed when the matter was raised with Mr Rendell following the claims made in Dynamic’s solicitors’ letter of 3 April 2009. On the case advanced by Tonnex, no explanation, otherwise consistent with Mr Solomon’s and Mr Kozman’s “innocent” state of mind, is likely. Tonnex has not sought to provide an alternative explanation. As I have noted, the most that Mr Solomon could say was that Mr Rendell’s conduct was a mistake. In my view, it is impossible to characterise, in any sensible way, the conduct involved, as presented by Tonnex’s own evidence, as a mistake. This deliberate concealment reveals a case of conscious wrongdoing.

108    Therefore, based on the findings of copying made in the liability reasons, and based on Mr Rendell’s knowledge and acts as revealed through Mr Solomon’s evidence, I am satisfied that Tonnex’s infringement of copyright was flagrant.

109    I turn to consider Tonnex’s conduct after receipt of the letter of 3 April 2009, when it was put on notice of Dynamic’s copyright claims. This conduct also exhibits elements of flagrancy.

110    In the responding letter, Tonnex rejected Dynamic’s claims in a somewhat high-handed fashion. Regardless of whatever legal advice it had obtained concerning the subsistence of copyright in literary works that are compilations, Tonnex maintained, vehemently, that no copying of Dynamic’s Compatibility Chart had taken place. It continued to refer its customers to Tonnex 2008 when sending price lists by email. The evidence shows that over 38,000 emails were sent. This resulted in a large number of “click throughs” to Tonnex 2008 by Tonnex’s customers. Tonnex stopped using Tonnex 2008 on 2 August 2010, about 10 days before receipt of the detailed particulars, and relatively shortly before the commencement of the liability hearing. The cessation of Tonnex’s conduct was taken at a time of its own choosing, without regard to Dynamic’s rights. Regardless of Mr Solomon’s and Mr Kozman’s state of knowledge in that period, by reason of Mr Rendell’s knowledge, Tonnex must be taken to have known the true position regarding its copying of Dynamic’s Compatibility Chart. With that knowledge, it undoubtedly took commercial advantage of its wrongful conduct.

111    With respect to Dynamic’s submission that Tonnex’s denial of the alleged copying put it to considerable expense in proving that copying, I think that, in the present case, this is properly a matter for costs, not a matter going to the award of additional damages. Further, with respect to Dynamic’s allegation that Tonnex has failed to comply with the Court’s orders for supervised destruction, I am not prepared to deal with such an important matter as a side-wind to a damages hearing. If Dynamic wishes to pursue that allegation, then it should do so formally.

112    Finally, I am not persuaded that, by claiming confidentiality in the responding letter, Tonnex was seeking to conceal its infringement of Dynamic’s copyright: see [10] above. I do accept, however, that Tonnex’s false denial that it had “reproduced or replicated any document compiled or prepared by Dynamic”, was an attempted concealment of Tonnex’s copying, even if the true position was not then known by Mr Solomon and Mr Kozman. As I have noted above, based on Mr Rendell’s knowledge alone, Tonnex must be taken to have known the true position at the time the responding letter was sent.

113    Turning to the question of benefit, I do not accept Tonnex’s submission that it did not derive any appreciable benefit from its conduct or that Tonnex 2008 was supplied merely for the guidance of customers. Undoubtedly, Tonnex considered Tonnex 2008 to be of benefit to its customers, otherwise there would be no point in providing links to Tonnex 2008 in its price lists. But in seeking to provide that benefit, Tonnex was surely seeking to advance its own commercial interests with a view to enhancing its sales.

114    The extent to which its position was enhanced in that regard will never be known. For example, it will never be known what Tonnex’s actual level of sales would have been absent Tonnex 2008. It is clear, however, that the compilation of Tonnex 2008 was undertaken as part of what Mr Rendell described as Tonnex’s “determined approach to improve all marketing communications”. Mr Rendell said that, following the introduction of Tonnex’s price list in October 2007, he received feedback from Tonnex’s sales staff that customers wanted a user-friendly compatibility chart. It is clear from Mr Rendell’s evidence that, at that time, Tonnex did not have a user-friendly compatibility chart. In furtherance of their sales function, Tonnex’s sales staff obviously saw value in such a chart. Tonnex 2008 was the answer to that need. In these circumstances, any benefit to Tonnex’s customers by the provision of Tonnex 2008 can be seen to have resulted in a related benefit to Tonnex itself. I am satisfied that this related benefit was real and of substance. The perceptions of Tonnex’s sales staff provide a sure indication of that fact, even though that benefit is not readily quantifiable in money terms.

115    Turning to the “other matters” raised by Dynamic, I am not persuaded that Tonnex concealed or sought to conceal its conduct by publishing Tonnex 2008 through emails rather than, more publicly, on its website. Further, I am not persuaded, on the evidence before me, that I should infer that the publication of Dynamic’s Compatibility Chart, on Dynamic’s website, was the impetus for Tonnex creating Tonnex 2008.

116    As to Tonnex’s size, measured by its sales or its profits, I am not persuaded that mere size alone is a factor that warrants an award of additional damages or any relative level of additional damages. I accept, however, that, where specific deterrence is an issue, an infringer’s financial standing and resources may well be a relevant matter to be considered. I turn, therefore, to consider that question.

117    As I have noted, Tonnex submitted that there is no need for additional damages to produce a deterrent effect, given the relief already granted and the fact that it has lost what has been long and, no doubt, expensive litigation.

118    The last-mentioned matter seems to assume a liability on the part of Tonnex for costs, even though, by agreement between the parties, I have made an order reserving the question of costs, and even though at the damages hearing the parties requested an opportunity to address me on the question of costs following my decision on the present question.

119    I have no doubt that the experience of this litigation has had some deterrent effect on Tonnex. Similarly, when considering the question of additional damages, I accept that it is appropriate to have regard to the relief that has already been granted. I include, in that connection, the fact that Mr Solomon and Mr Kozman have given personal undertakings to the Court in respect of Tonnex’s future conduct.

120    Tonnex has also pointed to the fact that it has implemented an approvals process for material that is to be published as part of Tonnex’s business. I take that matter into account but, in so doing, I think that recognition of this apparent change in Tonnex’s business management should be tempered by an acknowledgment that the steps that it has put in place appear to be no more than good business practice and are not specifically directed to addressing the risk of copyright infringement. I also observe that, so far as the new approvals process might extend in practice to copyright matters, its efficacy will depend, in any event, on the candour of Tonnex’s employees participating in that process. Tonnex’s evidence at the damages hearing indicates that, even at a relatively high level of management, a culture of candour does not apparently exist.

121    In his affidavit of 15 February 2013, Mr Solomon said that Tonnex acknowledges and accepts the Court’s decision reflected in the liability reasons. Mr Solomon, in substance, repeated that statement in the course of his cross-examination. I am not confident, however, that this acknowledgement represents a complete acceptance of Tonnex’s wrongdoing. I think it stands as no more than an acknowledgement by Tonnex of what is, by now, the inevitable. I cannot help but feel that the hubris reflected in the responding letter remains to a considerable extent; that Tonnex sees this litigation in terms of commercial posturing by Dynamic rather than as a proper vindication of Dynamic’s legitimate legal rights, which Tonnex has clearly infringed by its acts of copying. Tonnex’s conduct exhibits a degree of intransigence, even after delivery of Dynamic’s detailed particulars which, as I have said, should have indicated to Mr Solomon and Mr Kozman, albeit at an advanced stage of the litigation, that something was amiss in their camp. Further, at the damages hearing, Mr Solomon appeared to downplay Tonnex’s conduct, undertaken through Mr Rendell, as a mistake. In my view, specific deterrence remains an element of my consideration of the question of additional damages in the present case.

122    General deterrence is also an element of my consideration. If, as Tonnex’s own response to Dynamic’s claims suggests, there is a perception in the community that copyright cannot subsist in compilations of publicly-available data as a form of literary expression, and if, correspondingly, there is a perception that works of that kind can, with impunity, be pilfered by reproducing, without authority, a substantial part of such forms of expression, then those perceptions should be corrected. That task will be assisted by the award of additional damages I propose to make in the present case.

123    Moreover, the additional damages to be awarded in the present case should mark the Court’s disapproval of the specific conduct that has taken place.

124    As I have noted, Dynamic submitted that additional damages should be awarded in the sum of $400,000.00. I think that this sum is excessive, in all the circumstances. By the same token, I am unable to accept that it would be sufficient to award additional damages in the “modest” range to which Tonnex has alluded.

125    An evaluative judgment is required. Considering the various matters I have discussed above, I am of the view that additional damages in the sum of $150,000.00 should be awarded.

disposition

126    There will be judgment for Dynamic in the sum of $1.00, for damages under s 115(2), and judgment in the sum of $150,000.00, for damages under s 115(4), of the Copyright Act.

127    As requested by the parties, the question of costs has been deferred. If the appropriate order for costs cannot now be agreed, I will give the parties an opportunity to address me on that question. Unless persuaded otherwise, I am of the view that this can be done by short written submissions, without the need for an additional hearing. There should be no dispute about the relevant facts.

128    Dynamic should file its written submissions on the question of costs by no later than 2 September 2014. Tonnex should file responding submissions by no later than 9 September 2014. In each case, the submissions must be limited to three pages. If there is a need to reply, Dynamic is to file its reply submissions by no later than 16 September 2014. The reply submissions, if any, must be limited to two pages. Once these steps are taken, I propose to determine the question of costs on the papers.

Associate:

Dated:    26 August 2014