FEDERAL COURT OF AUSTRALIA

Career Step, LLC v TalentMed Pty Ltd (No 2) [2018] FCA 132

ORDERS

THE COURT ORDERS THAT:

1.    The parties bring in, within 14 days, agreed minutes of order to give effect to these reasons.

2.    Those minutes of order are also to deal with the question of costs and with the conduct of the balance of these proceedings.

3.    If the parties are unable to agree on the orders to be made, each side should file and serve their competing versions within the same period, that is, within 14 days.

4.    The proceedings are listed for case management at 9:30 AM on 28 March 2018.

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

REASONS FOR JUDGMENT

ROBERTSON J:

Introduction

1    These proceedings involve a dispute about an educational course for students wishing to become medical transcriptionists: that is, a set of educational materials for students who wish to learn the skills necessary to become a medical transcriptionist, converting physician-dictated reports about their treatment of patients into text.

2    The applicant, Career Step, LLC (Career Step), is a limited liability company incorporated in the United States of America and based in Utah. It claims, and the respondents deny, that TalentMed Pty Ltd (TalentMed), an Australian company, copied and used its course materials and did so for the purpose of developing a competing course.

3    Career Step brings its case under the Copyright Act 1968 (Cth). It also claims breach of contract.

4    Career Step’s central contentions were as follows. The first respondent, TalentMed, a licensee of Career Step, copied parts of Career Step’s course, provided under licence, to create its own competing course materials. (Later in these reasons it will be necessary to refer to two versions of TalentMed’s course: the first version (TalentMed v1) and the second version (TalentMed v2)). Career Step’s course was a copyright work and Career Step its owner. The amount taken was a “substantial part” of Career Step’s course. The second and third respondents, Ms Lyndie Arkell and Mr Tim Arkell, as directors of TalentMed, were aware of the copying and allowed it to occur (I note that Mr Tim Arkell is Ms Lyndie Arkell’s son). Their subsequent attempts to excise the copied material from TalentMed v1 were unsuccessful. In those circumstances, each of the respondents, Career Step contended, infringed its copyright. Further, the same actions breached the Academic Partner Agreement (the Agreement) between Career Step and what is now TalentMed.

5    The respondents submitted that Career Step’s claims must fail because:

(a)    Career Step had failed to prove subsistence or ownership of copyright in the work relied upon;

(b)    TalentMed had not infringed copyright in any alleged work and each of Mr and Ms Arkell did not authorise infringement and was not accessorially liable; and

(c)    the terms of the Agreement were not to be construed in the manner in which Career Step contended: (i) there was no term (express or implied) preventing TalentMed from “using” the work in suit as alleged; and (ii) the pleaded allegation of “disclosure” of the work had not been proven. TalentMed had not breached the Agreement.

6    Career Step seeks declarations, injunctions and damages against the respondents.

7    By order made on 23 May 2017, the hearing has not so far included the allegations raised in paragraphs 19-21 of the statement of claim; the question of pecuniary relief (including additional damages); and the determination of any matter raised in TalentMed’s cross-claim. The matters in paragraphs 19-21 of the statement of claim concern an alleged breach of the Agreement causing Career Step to suffer loss and damage and involve a claim of some US$640,000 plus interest. The cross-claim, filed in July 2017, claims declarations and damages for alleged breaches by Career Step of the Agreement, a later Memorandum of Understanding and a Discount Agreement.

The agreements

8    The Agreement was “effectively entered into on the 1st day of September 2006, by and between Career Step and OzeTrainer Pty Ltd,” located at Malvern East, Victoria. OzeTrainer Pty Ltd subsequently became TalentMed and I shall refer to it by that later name. By that Agreement Career Step provided certain products and services to TalentMed.

9    By cl 2.2.2, TalentMed agreed to abide by all restrictions and/or procedures required by Career Step “with respect to the use of the Course or the Products or the Products and Services.”

10    The Course was defined in Appendix B to mean:

Course: The medical transcription training course provided by Career Step, whether by the use of text, tape materials, through the Internet, or other media, whether in the form of Independent Study, Cohort-based classes, or otherwise. The Appendices contains (sic) an outline of the current Course.

11    The Products and Services were set out in Appendix C. Under the heading ‘The Course’, the Online Curriculum Content (provided online only) had 23 headings as follows:

Course Orientation

Keyboard Kinetics: Techniques for Building Speed & Efficiency on the Keyboard

Medical Word Building

Grammar & Style Essentials

Using Resources

Human Anatomy, Physiology and Disease Processes

Medical Plurals

Pharmacology

Slang/Jargon

Foreign Terms

How to Look Up Words

Word Differentiation

Formatting

Focus on Medical Specialties (18 Sections)

Abbreviations

Midterm

Perfect the Text: Editing and Proofreading

Transcription Tips

Beginning Transcription: Clinic Notes

Intermediate Transcription

Advanced Transcription

Technology and Employment

Final Examination

12    Also within Products and Services in Appendix C, the Agreement stated “Reference materials with option of a PC transcription foot pedal are to be provided to OzeTrainer by Career Step.” It was stated that “Materials should be comparable to the following:”

Stedman’s or Dorland’s Medical Dictionary

Saunders Pharmaceutical Word Book

Career Step Medical/Surgical Word List

Medical Word Building Flash Cards

Anatomy Flash Cards

13    Appendix C also set out the prices: “Career Step Gross Retail Pricing: Fee per student enrolled” and “Net Pricing: Fee per student enrolled”.

14    Clause 4 of the Agreement was in the following terms:

4    CONFIDENTIALITY

4.1    Software and Instructional Materials. In order to facilitate the successful implementation of the Course and the products and Services, Career Step shall provide proprietary software and instructional materials to OzeTrainer and its students enrolled in the Course. OzeTrainer recognizes that such software and instructional materials are proprietary and confidential in nature and constitute trade secrets of Career Step. OzeTrainer shall not disclose, copy, transfer, licence, decompile or otherwise use such confidential information for any purpose other than the sales and marketing of the Course and the Products and Services unless they obtain the prior written consent of Career Step. OzeTrainer will use its best endeavours to ensure that its students will not disclose, de-compile or otherwise use such confidential information for any purpose unless they obtain the prior written consent of Career Step.

4.2    Non-Disclosure. By its acceptance of the Course and the Products and Services made available to it by Career Step pursuant to this Agreement, whether disclosed or communicated to OzeTrainer concurrently with the execution of the Agreement or in the future, OzeTrainer acknowledges the confidential and proprietary nature of the Course and the Products and Services and further acknowledges Career Step as the originator and owner thereof. OzeTrainer agrees that it, including its employees, agents and independent contractors, shall not disclose the Course and the Product and Services, or information with respect thereto, which is not in the public domain, to third parties with our (sic) the prior written consent of Career Step.

15    By its amended statement of claim, Career Step also pleaded, in the alternative, an implied term that TalentMed was not to copy or otherwise use the Course materials for any purpose other than the Course unless TalentMed obtained the prior written consent of Career Step. It was pleaded that such a term was reasonable and equitable, necessary to give business efficacy to the Agreement, so obvious it went without saying, capable of clear expression and did not contradict any express term of the Agreement.

16    There was also a Memorandum of Understanding executed in September 2008 between TalentMed and Career Step, having an effective date of 1 August 2008.

17    Appendix A to that Memorandum of Understanding stated:

Intellectual Property

Intellectual Property pertaining to the Career Step curriculum is owned by Career Step. Intellectual property pertaining to the support of Ozetrainer students is owned by Ozetrainer.

Career Step and Ozetrainer agree to share intellectual property to mutual advantage.

18    In January 2011, a Contract Addendum was entered into between Career Step and TalentMed. It concerned pricing and was to the effect that the prices applicable to the courses offered by Career Step to TalentMed under the agreements between the parties were to be as set out in Schedule A and that, for future pricing amendments, Schedule A could be amended from time to time as specified in cl 2 of the Contract Addendum.

The witnesses

19    The following affidavits were read in Career Step’s case.

20    Mr Ryan Ewer, Chief Marketing Officer of Career Step swore two affidavits, dated 2 June 2017 and 21 June 2017. Mr Ewer was cross-examined.

21    Ms Jerolyn Robertson, Vice President of Academics, Career Step, swore one affidavit, dated 6 June 2017. Ms Robertson was cross-examined.

22    Mr Scott Andrew Harris, solicitor, swore an affidavit dated 27 June 2017. This affidavit went to the question of prejudice to Career Step said to arise from Mr Gray’s second affidavit and report (referred to at [39]-[41] below). I will take it that that affidavit was objected to by the respondents. As will be seen, I do not find it necessary to refer to the contents of that affidavit but I admit it as relevant to the respondents’ application for leave to file and rely on Mr Gray’s second affidavit and report.

23    The following affidavits were read in the respondents’ case.

24    Ms Lyndie Ellen Arkell, Director of TalentMed, affirmed an affidavit dated 21 June 2017. She was cross-examined.

25    Mr Timothy Arkell, Director of TalentMed, affirmed an affidavit dated 4 May 2017. He affirmed a further affidavit dated 17 June 2017. Mr Arkell was cross-examined.

26    Ms Ann-Marie Spouge, medical transcriptionist, trainer and assessor, swore an affidavit dated 17 June 2017. Ms Spouge was cross-examined.

27    Mr Michael James Lincoln Gray, Senior Manager of Technology Advisory and Forensic at McGrathNicol, affirmed an affidavit dated 16 June 2017. The substance of his evidence was in his exhibit MG3, being an expert report dated 16 June 2016. Mr Gray was not required for cross-examination.

28    The respondents sought to read a second affidavit and report of Mr Gray, that affidavit being affirmed on 23 June 2017 and served on Saturday 24 June 2017, which was opposed by Career Step. The competing submissions as to its admissibility were made in writing.

Rulings on evidence

29    Exhibits JR1 and JR2 to the affidavit of Ms Robertson were admitted provisionally.

30    The content of most of Ex JR1 was not specifically identified in Ms Robertson’s affidavit at [5]. The provisional exhibit falls into two parts, the second part, pages D472-D1387, being a comparison document. Ms Robertson agreed, in cross-examination, that the result of what was to be seen in Ex JR1 was basically Career Step’s best case on the comparisons.

31    Career Step’s submissions were that Ex JR1 summarised the verbatim and near verbatim copying of the copyright work (Ex JR3) carried out by Ms Spouge on behalf of the respondents and should be admitted into evidence. The respondents submitted that Ex JR1 was not a useful document as it was unreliable, misleading, confusing, and had caused and would result in undue waste of time and was unfairly prejudicial. It was submitted that the result was that the alleged infringement by either TalentMed v1 or TalentMed v2 could not be readily assessed in the light of, or against, Ex JR3.

32    In my opinion, given the contents and the use made of the contents of Ex JR1 by the parties in the proceedings and the explanation given by Ms Robertson as to how it was made, it should be admitted into evidence although it will be necessary to use it with care. It provides a point of reference for the process of comparison necessary to be undertaken in relation to the alleged copying. Mr Gray’s first report was produced with reference to it. I take into account that the respondents have summarised what they contend are instances of the unreliability of Ex JR1 in the Response Schedule annexed to their written submissions. I also take into account that some of the screenshots in Ex JR1 are no longer relied on by Career Step: see MFI 4. I admit Ex JR1. The respondents submitted that Ex JR1 is an admixture of extracts from TalentMed v1 and TalentMed v2 and that: “It is impermissible to combine works to determine infringement.” The respondents submitted “That some material was formerly in v1 is irrelevant to the determination of infringement by v2, save to note that there is even less copying alleged present in v 2.” What this means, in my opinion, is that care must be taken with Ex JR1 and it is necessary first to compare the work (Ex JR3) and TalentMed v1 and then to compare the work and TalentMed v2.

33    Provisional exhibit Ex JR2 was identified as “a copy of a PDF version of Career Step’s Course generated from the online Career Step Course for the purposes of these Proceedings on 30 May 2017 (“PDF Version”). The PDF Version does not contain the multimedia files, tests and quizzes which cannot (or cannot easily) be converted into a PDF format.” I admitted these exhibits provisionally, that is, for the purpose of the hearing and without prejudice to submissions later as to what their status should be. This was because it was too early, in the course of the trial, to deal with the exhibits on a final basis.

34    It was said that this exhibit was on the USB key in folder 7.

35    The high point in relation to this exhibit, indeed the only point, was that it was referred to in opening by counsel for Career Step as being “the 2017 publication, which we just put for completeness.” It does not appear to have been referred to subsequently by either side. On that basis, I reject Ex JR2 as irrelevant.

MFI5

36    MFI5 was a document put to Ms Robertson in chief. It was constituted by agreements between Career Step and certain contractors who were involved in drafting the content of the Course. Career Step submitted that those contracts should be admitted into evidence. The witness, Ms Robertson, was aware of each document through her employment with Career Step. There could not be any serious dispute about authenticity or relevance. Each contract contained a term assigning copyright in the contractor’s work product to Career Step, satisfying s 196 of the Copyright Act.

37    The respondents submitted that none of the contractors and the contracts in MFI5 were relevant. The respondents also submitted that Career Step’s evidence of ownership was “threadbare and insufficient.” It was submitted that the evidence adduced through Ms Robertson (MFI5) fell far short, not least because MFI5 did not include any employment contracts in relation to the alleged employee-authors and Career Step’s evidence did not include any employment contract for Ms Robertson, the only alleged author who gave evidence.

38    In my opinion, MFI5 is sufficiently relevant to be admitted into evidence and I so admit it.

Mr Gray’s second affidavit and report

39    The respondents submitted that Mr Gray’s second affidavit and report should be admitted into evidence. It was submitted that, first, it was of the same character as Mr Gray’s first report which was in evidence. Secondly, it was submitted that the report was highly relevant as it identified where the alleged copied and used content appeared in context in TalentMed v2. Thirdly it was submitted that Career Step would suffer no real prejudice such as would exclude the admission of Mr Gray’s second affidavit and report. The respondents noted that Career Step did not file evidence in response to Mr Gray’s first report and did not require him for cross-examination.

40    Career Step submitted that Mr Gray’s second affidavit and report should be rejected. It was submitted that it was served on the weekend before the Monday on which the trial began, after the timetable for evidence had closed and the parties’ written outlines of submissions were filed. The second report had many thousands of pages of annexures and it would be highly prejudicial to Career Step for it to be admitted, given that Career Step did not have the opportunity to undertake a review of it nor to prepare evidence in response. The opportunity to cross-examine Mr Gray, which opportunity was illusory as there was no time to do so, did not lessen the prejudice.

41    I reject Mr Gray’s second affidavit and report. The hearing commenced on Monday, 26 June 2017. Supplementary instructions were given to Mr Gray on Friday, 23 June 2017. Although the supplementary report of Mr Gray is itself relatively short, some 5 pages, it is complex. Further, the appendices are contained in four arch lever folders, the first volume of which has pages numbering up to 898, the second 899-1803, the third is not sequentially numbered but is of the same size as the first and second volumes and the fourth is similar to the third in size. In my opinion it would be unreasonably and unfairly prejudicial to Career Step to have to deal in the course of the trial with material of this volume and character, served as it was on the eve of the trial.

The work

42    It is essential for the applicant to identify precisely the work or works in which copyright is said to subsist and to have been infringed: IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14; 239 CLR 458 per French CJ, Crennan and Kiefel JJ at [15].

43    In [5] of the Amended Statement of Claim, the infringement of copyright is pleaded by reference to the “Career Step Course Materials”. It is then pleaded that the authors of the Career Step Course Materials created the Career Step Course Materials in the course of their employment by Career Step; and/or pursuant to a contract with Career Step by which copyright vested in or was assigned to Career Step: Amended Statement of Claim at [25]-[29].

44    Returning to [5] of the pleading, it is in the following terms:

In the period between 1992 and the present time, Career Step has created a set of educational materials for students who wish to learn the skills necessary to become a medical transcriptionist (that is, converting physician dictated reports into text format). The current version of the educational materials include (sic) text containing information, case studies, graphs, diagrams, quizzes and exams (Career Step Course Materials).

PARTICULARS

(i)    The applicant will provide the Career Step Course Materials to the respondents pursuant to the directions made by Robertson J on 8 May 2017.

45    The order of 8 May 2017 required that: “The applicant provide … a paper copy of its course materials the subject of its claim for breach of copyright/breach of contract.” As particularised and as so provided, the work the subject of the suit is Ex JR3.

46    Career Step submitted that the literary work the subject of the suit was as particularised and provided in Ex JR3. It submitted that it was not possible to print out all aspects of the Career Step Course Materials, given that it is a natively online course. Reference was made to the affidavit of Ms Robertson of 6 June 2017 at [15]. That paragraph stated that Ex JR3 was a USB stick, exhibited as a confidential exhibit, “containing an earlier PDF version of Career Step's Course generated on 12 February 2015.”

47    That reference is to Ex JR2 which I have rejected as irrelevant. The work in which copyright is said to subsist is Ex JR3.

48    The respondents contend that Career Step has failed to evidence the pleaded copyright work and that it follows that in the absence of the whole of the work in suit the Court is not able to determine:

(a)    the originality and copyright subsistence of the subpart or extracted portions in evidence as Ex JR3 could not be considered in context in relation to the pleaded work as a whole. Claims of making and authorship of individual or discrete elements (even were they to be established) could not substitute for or make good claims of originality of and copyright subsistence in the work as a whole;

(b)    the relationship that Ex JR3 bore to the pleaded work in suit, and thus whether or not Ex JR3 was a substantial part of the pleaded work in suit, within the meaning of s 14;

(c)    whether or not the slivers of the content identified in MFI3 as present in TalentMed v1 or v2 comprised in either case a qualitatively substantial reproduction of the (unascertained) work in suit, or of Ex JR3 (as the relationship Ex JR3 bore to the whole cannot be determined).

49    Career Step submitted in response that Ex JR3 included the items referred to in [5] of the Amended Statement of Claim, but did not include the audio recordings or webinars containing information. Career Step submitted it was incorrect to equate, as the respondents had done, all material provided to students with the literary work the subject of the suit.

50    Career Step submitted there was nothing unusual about a pleaded literary copyright work being something less than the whole of a particular piece of material which was published, or consumed by the reader: Fairfax Media Publications Pty Ltd v Reed International Books Australia Pty Ltd [2010] FCA 984; 189 FCR 109 at [66]-[70]. Similarly in this case, the literary work the subject of suit was distinct from, and less than, the educational course as a whole because the educational course as a whole contained elements which were created by clearly different processes: i.e. the written course content, quizzes and images were created by different creative processes to the practicum component consisting of sound recordings and the webinars (cinematograph films). (The “Practicum” component was explained by Mr Ewer as the students listening to the recordings and completing practice transcriptions which were assessed against the transcripts themselves.) It was not sensible to consider the literary works underlying practicum audio recordings, which were created by many different unidentified third party medical professionals in the course of their practice, as being included in the same literary work as course content created by employees and contractors of Career Step operating together.

51    Career Step submitted that the webinars (cinematograph films) and the practicum (sound recordings) components were consumed by the person interacting with the course in that separate form and thus were not the same “literary” work as the text content; they were produced separately from the literary content of the course; and in the case of the sound recordings were not original because they originated from third party medical professionals, not the authors of Career Step’s copyright work.

52    In my opinion, the pleaded copyright work is in evidence as Ex JR3 and the Court is able to determine the originality and copyright subsistence of Ex JR3 as a whole: Fairfax Media at [66]-[70]. The Court is also able to make the required comparison with the part of that work said to be taken by TalentMed and decide the question of substantial reproduction. It follows that the respondents’ other contentions put on the basis that Career Step had failed to evidence the pleaded copyright work also fail.

Subsistence of copyright

53    In order to show that copyright subsists in Ex JR3, it is necessary for Career Step to prove that that work is an original literary work: see s 32 of the Copyright Act. It is Career Step’s case that Ex JR3 is a work of joint ownership within the meaning of s 10 of the Copyright Act.

54    As to the work being prepared as a work of joint authorship, the relevant evidence was given by Mr Ewer and by Ms Robertson: see [20] and [21] above.

55    At [15] of his 2 June 2017 affidavit, Mr Ewer referred to an overhauled course being published in the United States on 15 March 2010. He said that between late 2007/early 2008 through to March 2010, Career Step overhauled and rewrote its original medical transcription training program. He said the overhauled course was renamed the “Medical Transcription Editor” course. The course was named with reference to the greater prominence of editing existing transcripts generated via speech recognition technology, rather than drafting transcripts from scratch, though the course still covered that aspect of the role. It was first offered to paying students in 2010.

56    By the time of the publication of the Medical Transcription Editor course on 15 March 2010, the first version of that course, the medical transcription course was up to its seventh version.

57    Mr Ewer said this course remained in its first version. He exhibited to that affidavit an extract from the United States Copyright Office which referred to the copyright registration for that work.

58    Mr Ewer said that Career Step’s course, the Medical Transcription Editor course published on 15 March 2010, took over two years and over 20,000 man-hours to develop, create and produce, particularly in relation to the editing component of the course. I accept this evidence.

59    At [18], Mr Ewer deposed, and I find, that the content was drafted by subject matter experts. Those experts were either employees or contractors.

60    Mr Ewer prepared a table, as follows, identifying the names of the employees or contractors who were the subject matter experts and the production staff responsible for creating and updating the course published on 15 March 2010 and the various versions of the medical transcription course.

EMPLOYEES OF CAREER STEP INVOLVED IN THE CREATION OF THE ‘MEDICAL TRANSCRIPTION’ AND ‘MEDICAL TRANSCRIPTION EDITOR’ TRAINING PROGRAM

(CONTRIBUTORS)

61    The experts had worked in the medical transcription field and had job specific experience, or had taught in the field and had specific expertise in fields such as pharmacology, anatomy, pathophysiology and medical terminology. Those experts were responsible for drafting the substantive content, including the quizzes. Save for audio (sound) recordings, transcriptions of audio (sound) recordings and patient records, the content was drafted by these subject matter experts. The content was usually drafted in a Microsoft Word document. This was then converted into the appropriate digital format by the production staff so that it could be put online where it was accessible by students undertaking the course. Subject to what I say at [108] below, preferring Ms Robertson’s more specific evidence to Mr Ewer’s, I accept this evidence.

62    At [24] of that affidavit, Mr Ewer deposed, and I find, that the sound recordings, the transcripts of those sound recordings and the written patient records were created by employees of Career Step or contractors based on material which was provided to Career Step by third party partners. The sound recordings stemmed from recordings made by medical professionals in the course of their job. The patient records stemmed from patient records produced by medical professionals in the course of their job. Both arose from real world patients and problems. The material which was provided to Career Step had to be altered by Career Step before it could be used in the course, to protect the identity of the patients the subject of the recordings and records.

63    The process for the sound recordings, transcriptions of those sound recordings and written patient records, as I find, was as follows. As to the sound recordings provided by the third parties, they were first transcribed by Career Step employees/contractors. Those transcriptions underwent a thorough and rigorous screening process by subject matter experts and/or production staff to remove and/or alter information which could allow the patient the subject of the recording to be identified. Those transcriptions, as so amended, became the transcripts of those sound recordings. The recordings themselves underwent a similar screening process and were edited by production staff to disguise or remove content which could reveal the identity of the patients to which they related. Those amended sound recordings became the sound recordings. In relation to the written patient records, those were similarly reviewed and amended by subject matter experts and/or production staff to remove identifying information. Those amended patient record became the records and they were integrated into the content of Career Step’s course content.

64    I find there were some 21 subject matter experts employed by Career Step and involved in the creation of the Career Step course. The periods of their employment varied. The persons Career Step contended were the authors of Ex JR3 were those subject matter experts, being those who drafted the content of Ex JR3. Career Step did not claim that others involved in the creation of the course were authors.

65    Mr Ewer was cross-examined. In relation to the table set out at [60] above, he said that the Medical Transcription Editor course published on 15 March 2010 and the medical transcription course shared certain course content: with the same developer in both courses. He said there were specific modules related to the Medical Transcription Editor course that were developed by those specific individuals. The content for the Medical Transcription Editor course was what was listed. What was specifically listed in the Court Book was the Medical Transcription Editor course authors and the modules specific to that course.

66    Mr Ewer accepted in cross-examination that the shared content meant that there was an identical copy between the editor course published on 15 March 2010 and the Medical Transcription Editor.

67    In relation to medical records, sourced from medical professionals, Career Step identified them and removed certain sections of them and the resultant file was Career Step property. In most cases Career Step did not simplify what was sourced. In some cases, where the record was too long or contained information the student was not ready for at that point, Career Step would simplify it, but generally Career Step tried to give the students real-world experience.

68    Mr Ewer accepted that the paper copy of the course materials which Career Step had put into evidence did not represent the whole of those materials: the paper copy did not include the audio transcriptions or all of the online quizzes and did not have the webinars. He said there was no reasonable way to reproduce the webinars or images of the webinars in the paper copy that had been produced.

69    In terms of alterations or revisions to the material, Mr Ewer said that there had been adjustments such as updates to misspellings and grammar and where students struggle in certain sections. He said, by way of contrast, that the first major revision or update was “in discovery”, meaning that Career Step were just discovering what needed to be changed. I accept Mr Ewer’s evidence.

70    Ms Robertson was one of Career Step’s subject matter experts and was involved in drafting some of the material. She prepared a table summarising the contribution of employees or contractors who were involved in drafting each of the modules. That table was as follows:

DEVELOPMENT OF CAREER STEP’S MEDICAL TRANSCRIPTION EDITOR COURSE

MModal is a speech recognition engine.

71    Ms Robertson deposed that she was not the only person involved in drafting the modules just outlined. She collaborated with a number of other subject matter experts who were also responsible for drafting each module with her. It was her practice, and in her experience the practice of the other subject matter experts, to meet and/or communicate with other subject matter expert contributors to discuss what subject matter ought to be included in an entirely new module, or how an existing module from earlier versions of the material should be altered for the current version. The drafting of the content in each module also occurred on a similarly corroborative basis. Ms Robertson and other contributors used Microsoft Word documents to draft the content of each module, which was then circulated to other collaborating subject matter experts for their input. Each collaborator had input into the content of the document, either by means of directly drafting content, or by marking up other contributors’ contributions. In Ms Robertson’s experience, no contributor to a module worked in isolation from other contributors. I accept this evidence.

72    Ms Robertson deposed, and I find, that once the content of a module was finalised, it was passed to Career Step production staff who were responsible for editing and reviewing the content for consistency and style. The production staff marked up the Word Documents and returned them to the subject matter experts to ensure that the changes made were not of a substantive nature. The input of the production staff was in the nature of editorial changes, not changes to the substantive content.

73    Once the content of the modules was finalised, it was provided to other production staff and designers so that they could upload the content of the online platform through which the course was delivered. It was at that stage that the content was laid out in an attractive and digestible fashion and pictures and diagrams were inserted. The same staff created online quizzes from the quiz questions and answers provided by the subject matter experts as part of the course content. I accept this evidence.

74    In cross-examination, Ms Robertson said that her drafting involvement varied on “how we divide up the assignments.” Her evidence was that they were given sections to write and the material went through two other sets of eyes, which were both editorial passes. Within one module, Ms Robertson would write some of the material and edit, as a first or second editor, other parts of the material within that module. She wrote, that is, she was the first set of eyes for, the entirety of the Program Orientation module 1. She used some of the content from the existing course for that module, which she had written. For module 3, she was the third pass. For module 16 she played all three roles. That module was 300 medical reports: some of those she transcribed, some of them she did a first pass on and some of them she did a second pass on. Module 16 was part of the Practicum. Her role was the same for modules 17, 18, 21 and 22.

75    Career Step submitted that it was not the case that each and every author must be individually identified for there to be a work of joint ownership and more evidence than it had provided was not necessary: Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) [2011] FCA 846; 196 FCR 1 at [353].

76    The respondents referred to IceTV, particularly at [99], and submitted that the role of joint authors applied to the present case. No such person or persons whose literary effort was directed to the fixing in material form the particular form of expression that is Ex JR3 was identified by either Mr Ewer or Ms Robertson. The respondents submitted that authorship of predecessor components or separate inputs into that work, such as any module or component of an individual module did not establish joint authorship in Ex JR3. The respondents referred to Telstra Corp Ltd v Phone Directories Co Pty Ltd [2010] FCAFC 149; 194 FCR 142 per Keane CJ at [92] and to IceTV at [146]-[150].

77    In IceTV, at [99], Gummow, Hayne and Heydon JJ said:

Where a literary work is brought into such existence by the efforts of more than one individual, it will be a question of fact and degree which one or more of them have expended sufficient effort of a literary nature to be considered an author of that work within the meaning of the Act. If the work be protected as a “compilation”, the author or authors will be those who gather or organise the collection of material and who select, order or arrange its fixation in material form. May there be joint authors of the one original work, rather than several authors each of a distinct work?

(Footnote omitted.)

Their Honours then referred, at [100] to the definition of “work of joint authorship” in s 10(1) of the Copyright Act, as follows:

“a work that has been produced by the collaboration of two or more authors and in which the contribution of each author is not separate from the contribution of the other author or the contributions of the other authors.”

78    In Telstra Corp, Keane CJ said, at [92]:

The contributions of individuals discussed in her Honour’s findings may have been precursors to the compilation of the directories but they were not part of the actual compilation. Moreover, the work of these individuals was not collaborative. It was, no doubt, organised to facilitate the production of the directories but this organisation was not collaboration of the kind contemplated by the definition of joint authorship, and the contribution of each of the groups of individuals referred to earlier was made quite separately.

79    The respondents submitted that Career Step’s claim to joint authorship failed. Its evidence did not address the making of the work in suit, but of separate modules; there was no evidence of the joint authorship of the single literary work claimed to be Ex JR3. Even at the level of the individual modules, the evidence did not establish authorship of each module. Different contributors were named for individual modules. No contributor was named for all 23 modules comprising the work. Some modules had a single contributor. Self-evidently, the respondents submitted, if the work was not jointly authored, it was not a single work. That persons “were involved in drafting” and “had input” into modules was too vague a description for the Court to conclude whether or not they made an authorial contribution even to a single module.

80    The respondents referred to the evidence Ms Robertson gave in cross-examination. I have set out the essence of this at [74] above.

81    The respondents submitted that editorial review was not authorial contribution.

82    The respondents referred to the evidence of Mr Ewer and submitted that he did not distinguish between contributions to one course or another, the claims as to contributors were not coextensive; the periods of engagement/employment of the listed subject matter experts in his table were not coextensive; and no distinction was made between the various activities undertaken by any subject matter expert who “worked on” a module. The respondents submitted that Mr Ewer’s generalised statement that the “content” was “drafted” by subject matter experts did not establish authorship of Ex JR3.

83    The respondents submitted that the non-specific generalities in Ms Robertson’s affidavit suggested nothing more than the possibility of some contributors’ general awareness of some of the individual activities of others and did not advance authorial collaboration in the form of expression of the work. Ms Robertson’s evidence that no one contributor had specific input into all of the modules further demonstrated that it was not a work of joint authorship. The respondents submitted that Sanofi was concerned with a very different work, circumstances of making and where detailed evidence of responsible personnel was before the Court.

84    In reply, Career Step submitted that the work in suit, a document constituting 489,053 words, was a detailed, comprehensive and interrelated educational course, which with great skill and clarity taught students a range of different skills and knowledge. The text of the course was clearly drafted by human authors who cooperated and interacted with each other. The respondents’ proposition that the work in suit was a single literary copyright work but that it had no joint authorship despite being drafted by multiple persons should be rejected. Career Step submitted that IceTV, Telstra and Primary Health Care Ltd v Commissioner of Taxation [2010] FCA 419; 186 FCR 301 were not analogous cases.

85    Career Step submitted that it had put on detailed evidence of the process by which the material was created and all of the individuals who were involved in its creation. This was more than was necessary to prove authorship. Even if not all of the individuals identified were in fact authors of the copyright work, some portion of them clearly were. The processes by which they interacted and created the written content were set out in detail in the affidavit evidence and were more than sufficient to make out a claim of joint authorship.

Consideration

86    In relation to subsistence of copyright, it is necessary to apply the definition of “work of joint authorship” in s 10(1) of the Copyright Act (“a work that has been produced by the collaboration of two or more authors and in which the contribution of each author is not separate from the contribution of the other author or the contributions of the other authors”) to the operative provisions in that Act.

87    Sections 78 and 79 provided as follows:

78 References to all of joint authors

Subject to this Division, a reference in this Act to the author of a work shall, unless otherwise expressly provided by this Act, be read, in relation to a work of joint authorship, as a reference to all the authors of the work.

79 References to any one or more of joint authors

The references in section 32, and in subsection 34(2) to the author of a work shall, in relation to a work of joint authorship, be read as references to any one or more of the authors of the work.

88    Section 32 provided:

32 Original works in which copyright subsists

(1)    Subject to this Act, copyright subsists in an original literary, dramatic, musical or artistic work that is unpublished and of which the author:

(a)    was a qualified person at the time when the work was made; or

(b)    if the making of the work extended over a period—was a qualified person for a substantial part of that period.

(2)    Subject to this Act, where an original literary, dramatic, musical or artistic work has been published:

(a)    copyright subsists in the work; or

(b)    if copyright in the work subsisted immediately before its first publication—copyright continues to subsist in the work;

if, but only if:

(c)    the first publication of the work took place in Australia;

(d)    the author of the work was a qualified person at the time when the work was first published; or

(e)    the author died before that time but was a qualified person immediately before his or her death.

89    By s 248U of the Copyright Act and the Copyright (International Protection) Regulations 1969 (Cth), the provisions of the Copyright Act apply to a literary work first published in the United States and to a person who was a citizen or national of or resident in the United States.

90    Section 82 provided:

Copyright to subsist in joint works without regard to any author who is an unqualified person

(1)    Subsection 35(2) has effect, in relation to a work of joint authorship of which one of the authors is an unqualified person, or 2 or more (but not all) of the authors are unqualified persons, as if the author or authors, other than unqualified persons, had alone been the author or authors, as the case may be, of the work.

(2)    For the purposes of the last preceding subsection, a person is an unqualified person in relation to a work where, if he or she had alone been the author of the work, copyright would not have subsisted in the work by virtue of this Part.

91    For the following reasons, I find that Career Step’s claim of joint authorship succeeds and that TalentMed’s contentions to the contrary fail.

92    First, I do not accept that, because the work consists of modules, it is not a single work. I note what is stated in the respondents’ written submissions that: “It is not in issue that that work-in-suit - the Career Step Course Materials - is, as a whole, one literary work.”

93    Next, it is clear from Ms Robertson’s evidence, which I accept, that the nominated subject matter experts, in the aggregate, wrote the material. Who did the writing and who did the editing depended on the module. With some modules, all the writing was done by one subject matter expert. In other modules the writing was done by more than one subject matter expert. I do not construe Ms Robertson’s answer “Yes” to the question “And who - so in other words, what the employers wanted?” as derogating from who wrote the material. That question and answer went to the information from employers as to the new technologies in terms of speech recognition.

94    In my view, it is not necessary that each of the writers is required to contribute to each of the modules in order for joint authorship to be established. The authors, as members of the group constituted for a common purpose, have been identified: see Sanofi at [353]. I do not accept the submission that the claim must fail because: “No contributor is named for all 23 modules comprising the work…”. In my opinion the identification of the persons who wrote the material establishes joint authorship.

95    Secondly, it is not necessary to distinguish between contributions to the medical transcription course and the editor course because the content was relevantly the same, as Mr Ewer explained in his evidence, which I accept.

96    Thirdly, in my opinion the respondents mistake the different purposes of Mr Ewer’s table and Ms Robertson’s table. I accept Ms Robertson’s evidence as to the process by which the Medical Transcription Editor course was written and her evidence in relation to who wrote the material in the modules, as set out at [70]-[74] above.

97    Fourthly, I do not accept that it is necessary for this purpose to establish authorial collaboration in the entirety of the work, in the sense that it is necessary that there be one contributor with specific input into all of the modules, as contended for by the respondents.

98    As to the authorities on which the parties relied, in Sanofi the relevant issue was the authorship of a product information document. At [353] and [355] of the judgment, Jagot J said:

… It is true that it is not possible to identify, with precision, the team member who suggested or wrote every sentence of each of the Arava works. But the authors, as members of a group constituted for a common purpose, have been identified. Moreover, the authors, in the sense of the people who wrote each document, were all employees of Sanofi-Aventis at the relevant time. As in Milwell, it was those employees who first reduced each of the Arava works to material form.

Nor can it be said that the preparation of the product information documents involved the kind of separate and individual contributions that led to the conclusion that the alleged works in Primary Health Care and Acohs were not works of joint authorship.… But it cannot be said that the documents are the result of individual and separate efforts rather than collaboration as required by the definition of “work of joint authorship”. The works in question are the result of a collaborative effort. They are not analogous to a series of individual patient notes written by different healthcare professionals as in Primary Health Care. Nor are they analogous to the individual contributions of programmers necessary to create material safety data sheets in Acohs. Apotex’s submissions to the contrary are not persuasive and seek to recast the evidence of Dr Bruand, Dr Fontaine and Ms Deane about the process of preparing the Arava works in a manner which does not accurately reflect the import of that evidence. The evidence does not support Apotex’s characterisation of the process as people simply “plugging in various materials from various sources”. The work involved was iterative and collaborative.

99    Her Honour also held, at [352], that the present case arose in a context very different from the circumstances considered in Telstra: her Honour said there was no useful analogy between a telephone directory created by a computer program from information collated by various disparate processes, and a product information document created by a group of professional people attempting to convey product information consistent with the requirements of the Therapeutic Goods Act and the Regulatory Guidelines.

100    Primary Health Care concerned the question of copyright in patient records acquired as part of the purchase of various medical and dental practices. The claim failed. One of the reasons the claim failed, at [122], was that in relation to each patient record the entries by individual medical practitioners were separate and distinct and not the result of collaboration between the doctors. There was no evidence of collaboration in the production of the patient records. On the assumption, at [125], that each individual entry in the consultation notes and summary sheets was an identified work, the author of each work had not been identified. In addition, at [132], Stone J said that even entries that contained some comment were not sufficiently substantial to qualify as works the product of independent intellectual effort directed to expression.

101    In my opinion, the respondents’ contentions stand or fall by reference to whether or not the work in suit, Ex JR3, is a single work or whether each of the modules is a single work. In my view, the work in suit is a single work notwithstanding that one writer or author did not contribute to every module of that work and in most instances there was not a single writer for each module. If an analogy be necessary, Sanofi is closer to the present case than is Primary Health Care. Unlike Fairfax Media, particularly at [97], Career Step has adduced evidence of the process of creation of the work (Ex JR3) to demonstrate that there was the requisite inability to separate the individual contributions.

102    As noted above at [92], TalentMed has accepted that Ex JR3 is a literary work. I find that Ex JR3 is an original literary work and that copyright subsists in that work.

103    Career Step also submitted that TalentMed should be estopped from refusing to admit subsistence and ownership. It was submitted that the relationship between the two companies was formed on the basis that it was accepted that Career Step’s course originated from Career Step and that Career Step was the owner of that course. The parties conducted themselves on that basis for a period of eight years and the agreements contained clauses to that effect. Reference was made to cl 4 of the Agreement and to the Memorandum of Understanding: see [14] and [16]-[17] above. It was submitted that but for TalentMed’s conduct, copyright would be presumed under s 126 of the Copyright Act. It is not necessary to decide the estoppel issue.

Ownership

104    The owner of the copyright in a work is the author of the work, or if the author made the work pursuant to the terms of their employment, the employer of the author: s 35(2) and s 35(6) of the Copyright Act. The effect of s 78 of the Copyright Act (extracted above at [87]) is that, where a work is a work of joint authorship, references to the author are to be read as references to all the authors unless otherwise expressly provided.

105    Career Step submitted that the vast majority of the authors were employees of Career Step. As employees, by virtue of s 35(6) of the Copyright Act, Career Step, their employer, was the owner of copyright in their work product. In relation to the remainder, and six persons were identified, these were contractors for at least some of the period in which they contributed to Career Step’s course and each of their contractor agreements had been tendered. Each contract contained a term assigning copyright in the contractor’s work product to Career Step, satisfying s 196 of the Copyright Act.

106    Section 35(6) of the Copyright Act was in the following terms, so far as relevant:

Where a literary… work… is made by the author in pursuance of the terms of his or her employment by another person under a contract of service…, that other person is the owner of any copyright subsisting in the work by virtue of this Part.

107    I have admitted MFI5 into evidence, see [38] above, and now assess its cogency.

108    Career Step submitted that the vast majority of the authors were employees and referred to Mr Ewer’s table, reproduced at [60] above. In my view, Ms Robertson’s table, reproduced at [70] above, is more specific to the copyright work and I proceed on that basis. Mr Ewer accepted that Ms Robertson was much more familiar with the course itself.

109    The employees of Career Step who were subject matter experts and, therefore, authors were, according to Ms Robertson’s list, Monica Ervin, Andrea Anaya, JoJean Loflin, Celeste Harjehausen, (all of whom left in 2009) Nicoel Jackson and Marcela Alonso, (both of whom left in 2010) Shallee McArthur, (who left in 2013) (she was also a contractor) Jerolyn Robertson, Jill McNitt, (who left in 2016) Susan Tuckett, Sue Sawyer, Mary Louise Arango, Heather Garrett (she was also a contractor), Shawn Sperry, Tyler Hinton and Randy Johnson. Mr Sperry does not appear in Mr Ewer’s list set out at [60] above and it is not made clear by Ms Robertson’s evidence whether Mr Sperry was an employee or contractor. Nothing turns on this as he was a co-author of the five modules on which he worked: see [70] above.

110    The following study matter experts were contractors: Shallee McArthur, Heather Garrett (both of whom were also listed as employees) and Carol Bryant.

111    So far as concerns contractors, there are agreements with consultants showing that intellectual property created, written, developed or produced as a result of the consultant’s performance of the services is and shall be the sole property of Career Step or is irrevocably and exclusively assigned to Career Step: with Heather Garrett (agreements made 1 January 2010 and 1 January 2014), with Carol Bryant made 17 December 2007, and with Shallee McArthur effective 6 September 2010. Section 196 of the Copyright Act applies. Although Mr Ewer’s list contains the names of Melanie Shockley, Jessica Rodriguez and Barbara Porterfield, Ms Robertson’s list does not, so I treat as irrelevant the independent contractor agreement with Melanie Shockley, commencing 16 February 2009 at MFI5 and the independent contractor agreement with Jessica Rodriguez commencing 1 October 2008 and the agreement with Barbara Porterfield dated 26 January 2010. These three people are not listed as subject matter experts and, therefore, authors in Ms Robertson’s list.

112    The respondents submitted in this respect that Career Step had not established that it had the benefit of s 35(6) in relation to all relevant employees and written assignments of copyright from all relevant contractors. I do not accept this submission.

113    It was submitted that the mere fact of employment was insufficient as the mere description of the person as an “employee” was insufficient to prove that they were employed under a contract of service or that the authoring of relevant content was in pursuance of the terms of such contract. I do not accept the submission because the evidence went well beyond the mere description of the person as an employee. I refer, by way of example, to the evidence of Mr Ewer and the table prepared by him and to the evidence of Ms Robertson and the table prepared by her. Ms Robertson’s evidence was that she was involved in the drafting of Career Step’s overhauled editor course, the Medical Transcription Editor course, and she exhibited to her affidavit a table which summarised “the contribution of employees or contractors who were involved in drafting each of the modules in Career Step’s Course”, referring to the transcription editor course. It is clear from the evidence of Mr Ewer and Ms Robertson that the authorial work done by the employees of Career Step was done in the course of their employment and it was not put to Mr Ewer or Ms Robertson that the subject matter experts who were employees of Career Step were not writing the material pursuant to the terms of their employment.

114    It was submitted that Career Step’s evidence of ownership was threadbare and insufficient, not least because it had not put into evidence any employment contracts in relation to the alleged employee-authors. I do not accept this submission in light of the evidence which I have referred to in [108]-[109] and [113] above. It is not, in my view, necessary to put the employees’ employment contracts into evidence.

115    It was submitted that the Court should infer that Ms Robertson’s employment contract with Career Step would not assist Career Step in proving ownership through Ms Robertson. For the reasons I have given, I do not draw that inference. It was submitted that Ms Robertson was not employed to write content at the relevant time. I do not accept that submission. Ms Robertson said in her affidavit, at [9], with reference to her table, that she was involved in drafting: Program Orientation, Technology and the Medical Professional, Transcription Clinic Notes, Transcription Basic Acute Care, Transcription Advanced Acute Care, Editing Clinic Notes, Editing Acute Care and Final Exam preparation. It was not put to her in cross-examination that she was not involved in drafting those modules. Her evidence in cross-examination was that her day-to-day work was presently (June 2017) about 5% writing content and it had decreased 12 months ago.

116    It was submitted that none of the contractors and the contracts in MFI5 were relevant. I do not accept that submission: see [110]-[111] above.

117    In my opinion, by virtue of s 35(6) of the Copyright Act, Career Step as employer is the owner of copyright in the work product of the employees and by virtue of s 196, Career Step is the owner of copyright in the work product of the contractors by virtue of the assignments. It follows that Career Step is the sole owner of the copyright in Ex JR3.

Copyright infringement

118    To establish that its copyright in Ex JR3 has been infringed, Career Step must prove that TalentMed has done an act comprised in the copyright of that work: s 36 of the Copyright Act. By s 14 of the Copyright Act, it is sufficient in that respect for Career Step to establish that TalentMed has copied and communicated at least a “substantial part” of the work in suit. Whether an alleged infringer has copied a substantial part depends very much more on the quality than on the quantity of what has been taken, accepting that matters of fact and degree are involved: Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2008] FCAFC 197; 172 FCR 580 at [66]. Further, the taken part need not form a substantial part of the alleged infringing work: the importance of the part must be to the copyright work, not to the alleged infringing work: see EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Limited [2011] FCAFC 47; 191 FCR 444 at [52]-[57]. In IceTV, French CJ, Crennan and Kiefel JJ said, at [30]:

... in order to assess whether material copied is a substantial part of an original literary work, it is necessary to consider not only the extent of what is copied: the quality of what is copied is critical.

119    In the present case, Career Step relied upon: verbatim copying of Career Step’s copyright work; near verbatim copying, where copying had clearly occurred but colourable changes had been made to the content to disguise this; and copying of essential features of the work. Career Step accepted that there was less material copied in TalentMed v2 as compared to TalentMed v1.

120    Although there must be sufficient objective similarity to give rise to an inference of copying, it is appropriate first to set out the evidence as to the source of TalentMed’s courses.

121    Ms Spouge in her affidavit said that during 2015 and 2016 her role at TalentMed expanded to include developing new course materials. Prior to the development and deployment of TalentMed’s own course and course materials, she said, TalentMed used course materials that she knew of as the Career Step online medical transcription and medical transcription editor courses. I accept this evidence.

122    Ms Spouge said, and I find, that in about October 2015, Mr Tim Arkell and Ms Lyndie Arkell approached her by telephone and asked to assist in writing and developing course content for students to undertake TalentMed’s diploma qualification, and she agreed to do so. She deposed that between October 2015 and July 2016 she spent some 800 hours in the development of the TalentMed course. It took her about 11 months to complete TalentMed v1. Initially she worked as an independent contractor but from July 2016 and continuing to date she had been employed by TalentMed.

123    Ms Spouge said, and I find, that the TalentMed v1 course was completed by 6 September 2016. Development of a revised version, TalentMed v2, was commenced when TalentMed v1 was made available to students. TalentMed v2 was completed and first made available to students on 24 February 2017.

124    Ms Spouge described the process she followed in drafting the content for the various topics comprising the TalentMed course. She said she referred to multiple resources, including online resources. Ms Spouge set out the resources in two confidential exhibits.

125    Later in her affidavit, Ms Spouge said the following:

56    As outlined above, I had reference to a large number of resources when writing TalentMed’s Course. One of the many resources to which I had some reference was Career Step’s Course.

57    Tim Arkell and Lyndie Arkell instructed me that time was of the essence in drafting TalentMed’s Course…

58    In drafting Version 1 of the TalentMed Course Materials under time pressure, I used some material from Career Step’s course. This was largely medical reports which had been sourced from third parties and I understood was therefore “generic”. I also believed that the quantum of material used was only a small percentage of the Career Step material.

59    I also understood that Version 1 of the TalentMed Course would only be temporary to enable TalentMed to provide a compliant course to students as soon as possible. Once Version 1 went live in September 2016, Tim and Lyndie Arkell asked me to continue revising and drafting the TalentMed Course materials having regard to student feedback and to exclude content from the Career Step Course, as it was TalentMed’s intention to have its own compliant and quality course. This revised version became Version 2.

126    In cross-examination, Ms Spouge said that the time pressure she referred to in [58] was that about a month to six weeks before 6 September 2015 Tim and Lyndie Arkell told her to have the course developed by that date. She also agreed that from the very beginning, Tim Arkell told her that he wanted it done as soon as possible. She also agreed that it would have taken her significantly longer to develop TalentMed’s course if she had not used Career Step’s course materials.

127    In re-examination, Ms Spouge said that by “generic” she meant commonplace language, commonplace information and commonplace terms that were widely used and accepted in the industry.

128    In answer to a question how she said that Mr Arkell and Ms Arkell knew that Career Step course material was in the TalentMed course she said:

I believe – my recollection of the meetings were that there was content of Career Step course used as guidelines. This information was highlighted for later review, and therefore when it was under time pressure for the Career Step course – sorry, for the TalentMed course to be released on 6 September, there was information still that I had not completed in the version 1, which I highlighted to them at that time and they said that we will immediately work on that in version 2 to rectify that.

129    She agreed that she had taken parts of Career Step’s course materials and put them in TalentMed v1 on what she thought to be a temporary basis.

130    Ms Spouge agreed that on 5 October 2015 Tim Arkell sent her an email setting out her initial instructions for developing the TalentMed syllabus and that email gave her the login details and passwords to Career Step’s course. She agreed that she used that account to review the Career Step course.

131    Ms Spouge was asked the following questions and gave the following answers:

And the position is that you – that when you were writing the TalentMed course, you weren’t starting with a blank slate, were you? --- No, absolutely not.

You were taking the Career Step course and contextualising it for Australian conditions?---I was using my experience and my resources from numerous areas, not just Career Step.

And just to be clear, Ms Spouge, I don’t wish to suggest you only were using Career Steps course. The – what I’m suggesting to you is Career Steps was one of the materials you relied upon; do you agree with that? --- It was one of many that I resourced, yes.

132    She said that some materials she used she deemed to be generic, factual, common to the medical industry and therefore, in the very small percentage that was used, not problematic.

133    She accepted that because of time pressure she did not have time to rewrite the course in her own words. When she was given six weeks to complete the course that came as a bit of a surprise to her. In response to that she placed Career Step’s material into TalentMed’s course.

134    Ms Spouge agreed that not all of Career Step’s material was removed from TalentMed v2. She said this was as a result of her not having notes about what exactly was copied. She told Tim Arkell and Lyndie Arkell that it would take a number of months to remove the Career Step course material from the TalentMed course.

135    Ms Lyndie Arkell denied in cross-examination that when TalentMed published its course in September 2016 she knew that it contained parts which had been copied from Career Step’s course materials.

136    Ms Arkell was asked the following questions and gave the following answers:

And in August 2016, Ms Spouge told you that she was copying part of Career Step’s course materials into TalentMed’s course?---There were generic parts from Career Step that I understood. That means that there’s a lot in every course that if you – that’s – like, the list of abbreviations, that would be used in every course; it’s generic.

Right. And you understood that Ms Spouge was copying those generic parts from Career Step’s course; is that right?---Not particularly. I didn’t focus on that at all. She told me that she would have to cut corners, which could mean anything, from instead of – it could just mean anything, from going online and using Quizlet to get your quizzes instead of making your own. It could mean anything. There was never a discussion about using Career Step material as such. Cutting corners could mean anything.

137    Ms Arkell’s evidence was that Ms Spouge told her that she had taken Career Step content and put it in the TalentMed course some time in September 2016. She was asked the following questions and gave the following answers:

And – you accept now, don’t you, that both versions 1 and versions 2 of TalentMed course contain some parts of Career Step’s course materials?---I accept that.

And before version 2 was published in February 2017, you knew that TalentMed’s version 2 course still contained material which had been copied from Career Step’s course?---I believed it was generic-type material such as the – such as abbreviations or – or lists or – or things that are generic to every sort of training package.

You didn’t take any steps to verify that for yourself, though, did you?---No, I did not.

138    Mr Tim Arkell deposed in his two affidavits as follows. He said that from about May 2007 until about 15 January 2017, TalentMed used Career Step’s online course to deliver training and assessment in its Diploma to students who enrolled in the Diploma between about May 2007 and July 2016. From about September 2016 to date, TalentMed had used its own online course developed by it to deliver training and assessment to students who enrolled in the diploma from about September 2016. He said that from about August 2014 to 15 January 2017, TalentMed used Career Step’s online “Medical Transcription Editor” course for the purpose of providing training and assessment to students.

139    Mr Arkell described that Career Step course and also described v1 and v2 of the TalentMed course. He then described the development of v1 and v2 from about 18 September 2015. He said that TalentMed v1 was finalised on 6 September 2016 and made available to students who enrolled in the Diploma after that date up until 24 February 2017 when TalentMed v1 was taken down and TalentMed v2 was made available to students.

140    Mr Arkell said that the text, images and artwork that appeared in the TalentMed course materials were sourced commercially or taken from publicly available resources.

141    Mr Arkell said that TalentMed v1 consisted of 320 pdf documents totalling 1,441 pages. Block 1 consisted of 83 pdf documents totalling 339 pages, being 23.52% of the whole TalentMed course material. Turning to TalentMed v2, it consisted of 265 pdf documents totalling 1,157 pages. Block 1 (TalentMed v2) consisted of 61 pdf documents totalling 243 pages which, in terms of page numbers, was 21% of the whole TalentMed course material. Block 3 was the largest component and consisted of the Practical Transcription module, comprising over half (52.3%) of the overall estimated duration of the TalentMed course, being 450 hours out of a total of 850 hours. He included a table to demonstrate the comparison between the size of the TalentMed Block 1 v2 and the size of what Mr Ewer alleged was the Career Step equivalent of the TalentMed Block 1. He also said that the modules in the Career Step course alleged by Mr Ewer to be analogous to the TalentMed course modules entitled “Healthcare Documentation and the Law” and “Evolution of the Medical Record” represented only a small fraction of the overall Career Step course. Mr Arkell also identified what he described as key differences between the Career Step course and the TalentMed course: structural format and delivery; assessment; course content on a word by word comparison; interactive media; and learning management system.

142    In his 17 June 2017 affidavit, Mr Arkell referred, relevantly, to TalentMed’s course developers. He said that Ms Spouge wrote and developed most of the written content of the TalentMed course. She also wrote the content for the webinars and assisted in the preparation of the transcription files. He said there was some urgency for the TalentMed course materials to be completed and he told Ms Spouge that she needed to complete the TalentMed v1 course materials as quickly as practicable “and that we could improve the materials in a further version (which became Version 2) once Version 1 was available as a compliant course for students.”

143    In cross-examination, Mr Arkell agreed that from the beginning he said to Ms Spouge that given the urgency it was okay to use Career Step’s material and that it was okay to copy parts of Career Step’s material. He agreed that he told Ms Spouge that she should not ask for permission to use Career Step’s material as, if the material was generic, publicly available knowledge, there was no need to ask. He did not tell Ms Spouge that she should seek permission from Career Step to use its material.

144    Mr Arkell’s evidence was that at the time TalentMed published its course in September 2016 he knew that it “contained minuscule, very small, insignificant similarity with the Career Step course.”

Consideration

145    For the reasons I next give, I find that there has been copying.

146    Career Step submitted that a finding of copying can add significance to objective similarity. In Eagle Homes Pty Ltd v Austec Homes Pty Ltd [1999] FCA 138; 87 FCR 415 at [98]-[99] Lindgren J, with whom Finkelstein and Weinberg JJ agreed, said as follows:

The two elements of “causal link” and “sufficient objective similarity” are not referred to in the Act and are but aspects of “reproduction”. The two are interrelated and it can be artificial to consider them separately, at least in a case like the present one where actual copying is found to have occurred. A finding of copying can add significance to objective similarity; cf Ancher, Mortlock Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [[1971] 2 NSWLR 278 (Street J)] at 289 (set out below); S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466 at 474 (Wilson J). There was no evidence before her Honour that, for example, Mr Panetta copied aspects of the front half of the Kookaburra but that he drew the rear half without reference to the Kookaburra. The primary judge specifically rejected Mr Panetta's claim that he created his sketch by piecing together elements of existing plans of Austec, that is, without reference to the Kookaburra at all. Rather, the effect of her Honour’s finding is that Mr Panetta copied the Kookaburra as a whole and that Mr Zappia unsuccessfully sought to “minimise [the] visual similarities” between it and Mr Panetta's sketch.

It is often suggested that once a copyright owner has established subjective copying, that makes easier the task of proving that what was taken was a “substantial part” of the protected work. For example, in Ancher Mortlock, above, Street J said (at 289):

“I have already … inferred that the defendant did engage in unfair copying of the plaintiff’s plans and houses. This adds significance to the similarities that do exist and diminishes significance from the dissimilarities.”

See also Bradbury v Hotten (1872) 8 LR Ex 1 and Chappell & Co Ltd v DC Thompson & Co Ltd [1934] MacG Cop Cas 467 (Ch D).

147    Next it is necessary to compare the materials.

148    A comparison of Ex JR3 and TalentMed v1 demonstrates that a substantial part of Ex JR3 has been copied, bearing in mind what I find to be the originality of what has been taken by TalentMed: see IceTV, per French CJ, Crennan and Kiefel JJ at [52]. This is demonstrated by the process of writing by Career Step’s employees and contractors and by the directness of the taking and copying by TalentMed. I refer also to the volume of material, bearing in mind that quality is much more important than quantity (Elwood Clothing at [66]); how much of the material taken is the subject matter of copyright and how much is not; and the extent to which Career Step’s and TalentMed’s works are competing works: see Milpurrurru, Marika, Payunka & Public Trustee for the Northern Territory v Indofurn Pty Ltd, Bethune, King & Rylands (1994) 54 FCR 240 at 265 per von Doussa J, applying Ravenscroft v Herbert and New English Library Ltd [1980] RPC 193 at 203. I also find that TalentMed took for the purpose of saving itself labour (animus furandi), this being unnecessary to but fortifying my conclusion that TalentMed took a substantial part of Career Step’s copyright in the work. As I have noted at [126] above, Ms Spouge accepted that it would have taken her significantly longer to develop TalentMed’s course if she had not used Career Step’s course materials. She also accepted that she had to cut corners because of the time frames she was restricted by.

149    In this respect I refer particularly to the following parts of Ex JR3, copied in TalentMed v1, the references in each case being to the pages in the Court Book:

150    I do not accept the submission on behalf of the respondents that any of these copyings is generic, in the sense of commonplace language and commonplace terms widely used and accepted in the industry: see [127] above. As to commonplace information, it is the form of expression that is significant not the information itself. As Ms Spouge accepted, it requires real skill to explain complex medical concepts in simple terms. In the present case, unlike IceTV, I find that the form of expression was not dictated by the information itself.

151    In reaching my conclusions about TalentMed v1 I have considered, but not been assisted by, Mr Gray’s affidavit affirmed 16 June 2017 and his accompanying report. His instructions were to conduct a word count and he did so primarily using Optical Character Recognition products for the purposes of optically recognising text from images such as screenshots. However, the present is a quantitative exercise and I have instead considered the copying on the basis that quality is much more important than quantity: see [148] above.

152    It is next necessary to make a comparison of Ex JR3 and TalentMed v2 to see whether it also demonstrates that a substantial part of Ex JR3 has been copied. Career Step’s submission is that much of Career Step’s content remains in this version of TalentMed’s course.

153    In this respect I refer particularly to the following parts of Ex JR3, copied in TalentMed v2, the references in each case being to the pages in the Court Book:

154    I find that these remaining instances of copying do not constitute a substantial part of Ex JR3 but are no more than a small number of individual words and an even smaller number of sentences. As with the comparison of JR3 and TalentMed v1, I have taken into account the volume of material, particularly its quality.

Contract claim

155    Career Step submitted that in the Agreement TalentMed represented that it would abide by all restrictions required by Career Step regarding the use of its courses (cl 2.2.2). Career Step also relied on cll 4.1 and 4.2 of the Agreement, set out at [14] above.

156    Career Step submitted that cl 4.1 restricted the use of the “proprietary software” and “instructional materials” provided by Career Step to TalentMed. In ascertaining the meaning of those undefined terms, the Court should give cl 4.1 a businesslike interpretation, and avoid uncommercial nonsense or commercial inconvenience. This required consideration of the surrounding circumstances and the commercial purpose of the contract: Electricity Trading Corporation v Woodside Energy [2014] HCA 7; 251 CLR 640 at [35].

157    The term “instructional materials” should be read to mean the educational materials comprising the Course. Career Step provided those materials both to TalentMed and its students by giving them access to Career Step’s website. The interpretation of “instructional materials” as the Course material was consistent with other parts of the Agreement where reference is made to “materials”.

158    The term “proprietary software” should be read to mean the software operating the Course and its content. The Contract Addendum referred to the underlying software operating the Course. Career Step provided students with access to that underlying software by giving them online access to it. The Course was and is an online course and was not able to be delivered completely in any other format.

159    That interpretation, it was submitted, was consistent with the purpose and context of the Agreement and avoided commercial inconvenience. The purpose of cl 4 was to protect Career Step’s intellectual property from misuse. That was necessary because Career Step was required to give TalentMed and its students access to its intellectual property for the purpose of completing the Course. Career Step’s most valuable intellectual property was the Course materials. It made no commercial sense for the extensive protections provided in cl 4.1 not to apply to Career Step’s most valuable information. This interpretation was also consistent with the opening words of cl 4.1. Career Step had no relationship with the students other than through its online course. The only materials that Career Step provided to the students were the Course materials.

160    Career Step submitted that TalentMed’s contentions on the proper interpretation of cl 4.1 should be rejected. TalentMed submitted that because Career’s Step Course materials were not confidential, cl 4.1 could not be read to apply to them. However, cl 4.1 did not restrict the copying or use of confidential information per se, it noted TalentMed’s agreement that the “proprietary software and instructional materials” were confidential in nature and then restricted the use of them. That is, the materials the subject of the provision were deemed to be confidential by agreement (whether they were, as a matter of fact, confidential). Therefore, it did not matter if the Course was confidential. TalentMed submitted that Career Step’s interpretation of cl 4.1 would not allow TalentMed to provide the Course to its students. This was not a sensible reading of the terms “sales and marketing” in cl 4.1. Clearly such terms would encompass TalentMed using the Course in relation to a support or administrative role for students, referring to cll 1.1, 1.4 and 1.5 and the position was confirmed by the Memorandum of Understanding. Further, even if that were not the case, TalentMed was clearly provided with written permission to use the Course in this matter, for example Mr Arkell was provided the Arkell Account for precisely that purpose. TalentMed argued that Career Step’s interpretation of cl 4.1 would not allow students enrolled in the Course to undertake it. That ignored the crucial words “unless they obtain the prior written consent of Career Step” at the end of cl 4.1. By means of the End User License Agreement, students were given written permission in cl 2.a to use the Course for their own personal use - ie to undertake the course.

161    Issues relevant to copyright infringement, such as subsistence, ownership and “substantial part”, Career Step submitted, were not relevant for the purposes of the breach of contract claim. Any copying or use of the Course (or part of it) was sufficient to give rise to a breach of the terms. Whatever the precise nature of the extent of the copying or use, Career Step had established that TalentMed used and copied at least part of the Course to create TalentMed v1 and v2.

162    In the alternative, Career Step submitted, the Court should imply a term into the Agreement in the following terms: “TalentMed shall not copy or use the Course materials for any purpose other than the Course, unless TalentMed obtains the prior written consent of Career Step”. Such a term would be (a) reasonable and equitable (in that there was no reason for TalentMed to have such a right to copy and use the course other than for the purposes of marking and provision of the course to TalentMed’s students), (b) obvious and necessary to give business efficacy to the Agreement (for the reasons already provided) (c) capable of clear expression and (d) not contrary to any existing provision of the Agreement: Codelfa Construction v State Rail Authority [1982] HCA 24; 149 CLR 337 at 347.

163    As to breach of cl 4.2, Career Step submitted there was no ambiguity with respect to the interpretation of cl 4.2. “Products and Services” were defined in Appendix C to include the Course. The error “with our [sic] written consent” was obviously meant to mean “without the written consent” and should be read that way: eg NSW Land and Housing Corporation v ANZ Banking Group [2015] NSWSC 176 at [59]-[61]. The result was that under cl 4.2, TalentMed and its agents were not permitted to disclose the Course to third parties without Career Step’s written consent. Clause 4.2 was an additional restriction on the use of the Course material. It extended the restriction to TalentMed’s employees, agents and independent contractors.

164    Career Step submitted that despite suggestions otherwise by the respondents, the Course materials were not in the public domain. Those submissions elided the distinction between the knowledge of particular facts referred to in the Course, and the expression of those facts in the Course. The only means by which a person could gain access to the Course was to pay to access them, and access was only then provided pursuant to the End User License Agreement.

165    TalentMed has disclosed the whole of the Course to Innova Training and Development and Azimuth by the provision of the CSTRIAL Account to those third parties. TalentMed had disclosed parts of the Course by means of the inclusion of them in TalentMed v1 and v2 and provision of those courses to its students. Those actions constituted a breach of cl 4.2 of the Agreement.

166    The respondents submitted that Career Step’s claim for breach of cl 4.1 depended upon either or both of the terms “software” and “instructional materials” meaning or including the Course. That claim must fail, because neither term could sensibly be construed to be referring to the Course. The “instructional materials” referred to in cl 4.1 were not, and did not include or comprise, Ex JR3. The clause could not sensibly be construed in the way Career Step contended.

167    First, cl 4.1 said that Career Step shall provide to TalentMed “proprietary software and instructional materials” in order “to facilitate the successful implementation of the Course and the products and Services …”. The term “Products and Services” was defined to include the “online curriculum content” of “THE COURSE”. That content clearly included (or was) the Work. The terms “instructional materials” and “Products and Services” could not both be referring to the Work, or else cl 4.1 would have the absurd result of saying that “in order to facilitate the successful implementation of the Course and [the Work], Career Step shall provide proprietary software and [the Work] to TalentMed”.

168    On the construction propounded by Career Step there was no warrant for any use of the term “instructional materials”, it was merely repetitive of the terms “the Course”/ “the Products and Services”. The term was clearly referring to something additional to the “Course” and the “Products and Services” that it was contemplated Career Step would provide to TalentMed in order to facilitate the successful implementation of the Course and the Products and Services.

169    Secondly, there were in evidence documents of the type of “instructional materials” referred to in cl 4.1. An example of “instructional materials” provided to Academic Partners was Career Step’s “Marketing Kit - Academic Partners - Online Medical Transcription and Coding Programs”, provided to TalentMed by Career Step and which bore on its back cover the date 2006. Examples of instructional materials provided to students were the “Medical Transcription Student Support Guide” (and documents referred to in the guide) and the “New Student Editor” document. Career Step’s submission that “[t]he only materials that Career Step can and does provide to the students are the MTE Course materials” was incorrect. While the particular student documents relating to the MTE Course were provided to TalentMed after it started providing that course in 2014, the documents nevertheless served as examples of the type of “instructional materials” which Career Step had produced for its students, contemplated by cl 4.1.

170    Thirdly, Career Step’s distinction between “materials” and “promotional materials” did not advance its argument. The argument appeared to be that since “materials” in the context in which it was used on p 4 of Appendix C to the Agreement could not be referring to “promotional materials”, then the term “instructional materials” in cl 4.1 must be referring to the same thing as “materials” on p 4 of Appendix C. That proposition did not follow. The “materials” referred to by Career Step in support of its construction were the hard copy reference books and materials and, optionally, the PC foot pedal, to be provided by Career Step to TalentMed and by TalentMed to its students. It was those materials that were “shipped materials” that must be returned by a student when withdrawing from enrolment within the permitted 10 days.

171    Fourthly, cl 4 was headed “Confidentiality”, and the subject matter to which cl 4.1 was directed was “software and instructional materials” that were said to be “proprietary and confidential in nature and [to] constitute trade secrets of Career Step”. The Work was clearly neither confidential nor a trade secret: it comprised factual information which was not confidential, it had been provided to many if not all of the 100,000 students that Career Step had educated. The more likely explanation, on an objective reading of the Agreement, was that the confidential “instructional materials” in cl 4.1 were different from the non-confidential “course materials” referred to elsewhere in the Agreement. Thus, the need for cl 4.1.

172    Fifthly, Career Step’s closing submissions did not answer to TalentMed’s submission that cl 4.1 addressed different subject matter than the “MTE Course” and its content. The additional, facilitative proprietary software and instructional materials provided to aid implementation of the course was what must not be disclosed or used for any non-facilitative purpose. Further, the course content and teachings were what every student used every time they logged in, and every graduate who worked as a medical transcriptionist/editor used and disclosed each time they transcribed or edited a medical report. The logical result of Career Step’s construction of the clause was that students and graduates could not use the very information and skills taught. It was that absurdity to which TalentMed’s opening submission was directed. If the terms were construed as TalentMed submitted, no such absurdity arose.

173    The click-through licence to use the Program did not give permission to use co-extensively with the greater, continuing reach of cl 4.1. The “use” of the Program contemplated in the End User License Agreement cl 2 was a not untypical shrink-wrap copyright licence, “use” there meaning reproduction of a copy of the Program on the students’ computer and display on their monitor whilst undertaking the Course. Further, it could not reasonably be intended that every student would have imposed upon them an obligation of confidentiality through the operation of cl 4.1 which would then have to be removed by further express licence by Career Step, namely some form of express student licence such as the later published End User License Agreement.

174    The respondents submitted that Career Step’s contentions regarding “software” should be given short shrift. “Software” meant “programs which enable a computer to perform a desired operation or series of operations”. That an online course relies for its operation on computer programs did not mean that the course materials (i.e. content) were themselves “software”, or that viewing the course materials online or undertaking the course (as all its students will have done) somehow was an impermissible use of software. A website was not software, nor were text, images and other content displayed on a website.

175    Even if it was considered that the website host management system DAIS was “software” to which cl 4.1 related, it did not follow that the term “software” meant or included the content that could be accessed or viewed using that software, such as a document, an email, images, sound recording or a webpage. The term “software” would not objectively be construed to be or include any content accessed or viewed using that software. It was expressly recognised at cl 2 that the documentation, written materials, audio cassettes and video-tapes forming part of the Program were non-software portions of the Program.

176    As to the claimed implied term, the respondents submitted the alleged term did not meet the requirements of a term to be implied into a contract. The alleged implied term was not necessary to give business efficacy to the contract. The Agreement concerned the right of TalentMed to market and sell Career Step’s course in Australia and elsewhere. What TalentMed would or would not do with respect to the Work outside of selling and marketing the course was a collateral matter that did not affect the efficacy of the Agreement. Such a term did not support such marketing and sales activity and was not necessary to effect it. The alleged implied term was not so obvious that it “goes without saying”.

177    Turning to cl 4.2, the respondents submitted that Career Step’s pleaded case regarding “disclosure” of the Work in breach of cl 4.2 alleged indirect disclosure by reproduction of Career Step content in TalentMed’s course and distribution of that new course material.

178    The respondents submitted that in closing, Career Step made additional submissions regarding a non-pleaded case of direct disclosure through provision of the CSTRIAL Account to Mr Gomes and Azimuth. Career Step proffered no explanation why it had not sought to amend its pleadings to allege such a case, nor why it did not do so in its proposed Amended Statement of Claim served on 20 June 2017. It had been aware of the provision of the CSTRIAL Account to Mr Gomes since at least the date of service of Ms Spouge’s affidavit dated 17 June 2017. Further, Career Step had records of every login using the CSTRIAL Account (although those records had not been made available to the Court).

179    TalentMed had not breached any obligation in the Agreement not to disclose (a) “the Course and the Products and Services”, or (b) “information with respect [to the Course and the Products and Services], which is not in the public domain” (cl. 4.2):

(a)    First, the reproduction of a small number of disconnected slivers of Ex JR3 in TalentMed’s course did not constitute disclosure of ‘the Course [or] the Products and Services’. An obligation not to disclose the Work would not be construed to include disclosure of any part of the Work, irrespective of how small the part;

(b)    Secondly, cl 4 concerned ‘Confidentiality’, and, consistent with that, the obligation in cl 4.2 was for TalentMed not to disclose information ‘which is not in the public domain’. Whether or not the whole of Career Step’s course materials was in the public domain through the provision to 100,000 students, the small parts of Ex JR-3/ the Work present in either TalentMed v1 or v2, and on which the indirect disclosure case was based, comprised information which was in the public domain (i.e. factual medical/ anatomical information). Disclosure of that information did not breach cl 4.2.

180    To illustrate the above, the respondents submitted, the appearance of the sentence “The operating system is often called the platform” in TalentMed v1 was not a disclosure of the Work, or any information in relation to the Work which was not in the public domain.

181    As to the not-pleaded direct disclosure claim, the respondents submitted:

(a)    First, Mr Gomes was an independent contractor engaged by TalentMed. Clause 4.2 provided that “[TalentMed] …including its … independent contractors” will not disclose the Course and the Products and Services to “third parties”. Mr Gomes was not a “third party” for the purposes of cl 4.2; as an independent contractor of TalentMed he shared TalentMed’s obligation not to disclose the MTEWork to third parties;

(b)    Secondly, even if provision of the CSTRIAL Account login details to Mr Gomes and/or Azimuth were found to be a breach of cl 4.2, such breaches would not have caused any damage connected with the relief which Career Step sought. Mr Gomes’ engagement went nowhere – the material he produced was not used by TalentMed. Azimuth provided its own materials to TalentMed – it was simply provided with the CSTRIAL Account details so that it could understand the nature of the material which TalentMed was seeking. Any breach of cl 4.2 of the type contended for in the not-pleaded direct disclosure claim was not the cause of any damage of which Career Step complained.

182    In reply, Career Step submitted that the breach of contract case was founded upon any use and/or disclosure of the Course as a whole. Considerations relevant to copyright law, such as authorship, originality and the definition of literary work which, in the context of a copyright claim, define the scope of the work in suit, were irrelevant to a contract claim. What was relevant were the terms of the Agreement, and the Course as a whole was the subject of that Agreement. Having said that, nothing turned on the issue because the material alleged to have been used/disclosed was in Ex JR3.

183    Turning first to cl 4.1: there was nothing absurd or unusual about Career Step’s interpretation of cl 4.1. It was mundane for a party licensing material such as the Course to another to restrict the use to which that material could be put by the licensee. What would be surprising was the respondents’ interpretation of cl 4.1 which would provide a high level of protection for Career Step’s marketing documents, but not the Course itself. The respondents submitted there was no warrant to read “instructional materials” to include the Course, because the Course would be included in the phrase “Products and Services” (or “products and Services”). The respondents adopted a strict approach to interpretation which was at odds with the requirements that an agreement such as this be interpreted in a sensible commercial manner and the drafting of the Agreement itself, which was often less precise than might be wished. For example, cl 4.1 also used both the terms “Course” and “Products and Services”, which both referred to the same thing, or at least the “Course” was also a “Product and Service”. Therefore, the mere fact that the Course may fall into both the terms “instructional materials” and “Products and Services” was no reason not to adopt Career Step’s interpretation.

184    In contrast, the respondents’ interpretation would have cl 4.1 potentially read “In order to facilitate the successful implementation of the Course and the products and Services, Career Step shall provide proprietary software and [marketing materials] to TalentMed and its students enrolled in the course…”, given that the respondents asserted that the “Marketing Kit – Academic Partners – Online Marketing Transcription and Coding Programs” document was one of these “instructional materials”. Further, by excluding the Course from the phrase “instructional materials”, the respondents’ interpretation would have Career Step facilitate the successful implementation of the Course without providing the Course to TalentMed and its students. That was not a sensible interpretation of the clause.

185    Finally, the respondents repeatedly called the End User License Agreement in aid of their interpretation of the Agreement. The Agreement was executed in 2008. The version of the End User License Agreement in evidence was created in 2011. One could not interpret the Agreement on the basis of a different licence, drafted years later.

186    Turning to cl 4.2: regarding indirect disclosure of the Course, the respondents’ submission regarding the minimal amount of disclosure of the Course in TalentMed v1 and v2 should be rejected. If Career Step proved infringement, it would be disclosure of a substantial part of Career Step’s Course which clearly ought to satisfy the provision. Even if Career Step did not make out its case on infringement, the disclosure was hardly de minimis and thus was sufficient to breach the clause.

187    Regarding direct disclosure: Career Step could not have alleged direct disclosure of the Course to Azimuth in its pleading because it did not know about that disclosure until Mr Arkell provided oral evidence in chief in relation to such disclosure on the afternoon of the last day of the trial. The disclosure of the Course to Azimuth, a competitor of Career Step in the provision of medical transcription training materials, was relevant to any declaratory and injunctive relief. Quantum had been split from liability and thus damages were not relevant at this stage.

Consideration

188    I turn now to consider these submissions. In my view the questions of construction are not as complex as the parties’ submissions suggest.

189    As to cl 4.1, it is ultimately necessary to consider TalentMed v1 and v2 separately, but the following issues of construction apply to both v1 and v2.

190    I consider that the phrase “instructional materials” refers to the Course, including the Products and Services. This means that “instructional materials” refers to the educational materials comprising the Course.

191    I also find that the term “proprietary software” means the software operating the Course and its content.

192    Next, I find that TalentMed used those instructional materials for a purpose other than the sales and marketing of the Course and the Products and Services and did so without obtaining the prior written consent of Career Step. The purpose was to supply content to TalentMed’s own course materials to replace Career Step’s.

193    TalentMed used the “proprietary software” in order to use the instructional materials in the manner which I have just described.

194    In my opinion, the expression “such confidential information” does not impose a superadded requirement that the proprietary software and instructional materials be confidential, but is descriptive of the proprietary software and instructional materials the subject of the clause. In any event, I find that the proprietary software and instructional materials answer the description of confidential material as the students were granted access only through payment and if the proprietary software and instructional materials had been in the public domain TalentMed would not have entered into the agreement to be supplied with them.

195    I do not accept the respondent’s submissions as to the meaning of the terms “software” and “instructional materials” in cl 4.1. In my opinion those submissions seek unduly to parse and analyse the terms and do not give them a businesslike interpretation having regard to the surrounding circumstances and the commercial purpose of the contract. I accept however that the content itself, the instructional materials, is not software. In particular, I do not accept the respondents’ submission that “instructional materials” refers to something additional to the Course and the Products and Services.

196    I do not accept the respondents’ submission that the Work is not confidential as it comprises factual information. Plainly there is factual material in it but the form or expression of those facts is confidential. I also reject the related submission that the material is not confidential because it has been provided to many or all of the students that Career Step has educated. The provision of the material to the students was for a limited (confidential) purpose and through payment. In any event, as I have said in [194] above, I regard the reference to “confidential information” in cl 4.1 as descriptive.

197    It is not necessary to consider Career Step’s submission that a term should be implied into the Agreement.

198    Returning to consider TalentMed v1, in my opinion the extent of the copying and use of the proprietary software and instructional materials means that TalentMed breached cl 4.1 as it used the “confidential information” for a purpose other than the sales and marketing of the Course and the Products and Services.

199    In relation to TalentMed v2, in my opinion the extent of the copying and use was minimal and did not involve a breach of cl 4.1 by TalentMed.

200    As to cl 4.2, there is no difficulty reading the words “with our” as “without”. This is an obvious typographical error.

201    Turning to the substance of cl 4.2, considering TalentMed v1 and v2, in my opinion it is plain that TalentMed disclosed the “Course and the Product and Services” and that that material was not in the public domain. I reject TalentMed’s submissions to the contrary. However I would not regard the students as “third parties” within the meaning of the clause. I reach this conclusion from the context: the Agreement had as its essence the supply of the Course and the “Products and Services” to the students, albeit for the limited purpose of the students undertaking the Course. It was essential that the students have access to the material, that is, the Products and Services which included the Content.

202    I find that the Course and the Products and Services were not in the public domain as the means by which the students were granted access to them was through payment. If the Course and the Product and Services had been in the public domain TalentMed would not have entered into the Agreement to be supplied with them.

203    However, in relation to cl 4.2, I do not accept Career Step’s submission that TalentMed had breached this clause by including parts of Career Step’s material in TalentMed’s v1 and v2 courses and provision of those courses to its students since, as I have said, I do not regard the students as “third parties” within the meaning of the clause. I therefore find that TalentMed has not breached cl 4.2 in relation to either TalentMed v1 or TalentMed v2.

204    In my view, although I would find that Innova Training and Development and Azimuth were third parties within the meaning of the clause, it is not appropriate to consider Career Step’s unpleaded case of disclosure to those entities. There has been no application to amend to include those claims.

Liability of directors – Mr Tim Arkell and Ms Lyndie Arkell

205    Career Step submitted that there were two potential bases of liability for infringement in respect of Mr Arkell and Ms Arkell: the first was that they themselves infringed copyright by means of authorising the infringement of copyright which occurred. This was confirmed by s 13(2) of the Act. It was clear that directors of a company may be held liable for infringement by means of authorisation, as well as joint tortfeasorship: Cooper v Universal Music Australia [2006] FCAFC 187; 156 FCR 380 at [164]. The second basis of liability for infringement in respect of Mr Arkell and Ms Arkell was that they should be held responsible for the infringing acts of TalentMed as joint tortfeasors. Career Step did not merely rely on Mr Arkell’s and Ms Arkell’s role as directors of TalentMed to give rise to liability.

206    As to the first of these two bases, Career Step referred to s 36(1) of the Copyright Act and submitted that a person infringes if that person authorises an infringing act undertaken by another. The task of the Court was to construe the following provisions:

36    Infringement by doing acts comprised in the copyright

(1)    Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

(1A)    In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the owner of the copyright, the matters that must be taken into account include the following:

(a)    the extent (if any) of the person’s power to prevent the doing of the act concerned;

(b)    the nature of any relationship existing between the person and the person who did the act concerned;

(c)    whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

…

207    Reference was also made to s 101 as follows:

101    Infringement by doing acts comprised in copyright

(1)    Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.

(1A)    In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in a copyright subsisting by virtue of this Part without the licence of the owner of the copyright, the matters that must be taken into account include the following:

(a)    the extent (if any) of the person’s power to prevent the doing of the act concerned;

(b)    the nature of any relationship existing between the person and the person who did the act concerned;

(c)    whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

Again, this list is mandatory but did not purport to be exhaustive.

208    Career Step referred by way of example to Tamawood Ltd v Habitare Developments Pty Ltd (Admin Apptd) (Recs and Mgrs Apptd) [2015] FCAFC 65; 112 IPR 439. In that case, Career Step submitted, the Full Court found, at [192]-[196], that the directors had authorised the infringement because, first, they were aware that the requirement for the houses to be constructed in accordance with the DAs would be likely to lead to a copying of the plans in the DAs; secondly, they could have avoided infringement by seeking new DAs on the basis of new plans but that did not suit their commercial interests; and, thirdly, the directors had endorsed and approved the shortcut approach of using the existing DAs.

209    In the present case, Career Step submitted that Mr and Ms Arkell created the circumstances in which infringement was bound to occur; explicitly giving Ms Spouge access to Career Step’s Course, instructing her to review it and asking her to draft a new course in an impossible timeframe, because that was what suited TalentMed’s commercial imperatives. Career Step submitted that Mr and Ms Arkell positively knew of the infringements which occurred and, having the power to prevent such infringements, given that Ms Spouge was their agent, they did not do so. They knowingly allowed TalentMed v1 to go live and to be communicated to students despite it including material copied from Career Step’s work. Mr and Ms Arkell’s belated action, after TalentMed v1 went live, to ask Ms Spouge to remove content was wholly insufficient, given that large amounts of copied material remained in TalentMed v2. Given their awareness of the copying, anything less than a wholesale review to determine copied material and to remove it pointed to a continued authorisation of the copying which was not properly excised.

210    The respondents submitted that there was no proper evidentiary foundation for a finding that Mr Arkell or Ms Arkell authorised TalentMed’s conduct, or that they were liable as joint tortfeasors, should the Court find that TalentMed was liable for copyright infringement.

211    The respondents submitted that, conceptually, “authorise” was a narrower test than “sanction, approve, countenance”; that mere inactivity or failure to take some steps to prevent an infringing act did not necessarily establish authorisation; and that a person does not authorise infringement merely because he or she knows that another person might infringe the copyright and takes no step to prevent the infringement. Knowledge that a breach of copyright is likely to occur did not necessarily amount to authorisation even if the person having that knowledge could take steps to prevent the infringement: Nationwide News Pty Ltd v Copyright Agency Ltd [1996] FCA 1395; 65 FCR 399 at 422 and 424. The respondents submitted that the question whether the authorisation ground was established turned on a close analysis of the facts of each case.

212    As to the second of these two bases, joint tortfeasors, Career Step submitted that it was not necessary to show, for the purpose of establishing joint tortfeasorship, an intention or “common design” to infringe a statutory intellectual property right but that “it is enough if the parties combine to secure the doing of acts which in the event proved to be infringements”: Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2016] FCAFC 22; 329 ALR 522 at [141]-[142].

213    The respondents submitted that the Full Court sought to synthesise the tests in JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20; 329 ALR 625 at [350]-[351]:

[350]    We suspect that there is ultimately not a great deal of difference between these lines of authority as the director must be shown to have directed or procured the tort and the conduct must, clearly enough, go beyond causing the company to take a commercial or business course of action or directing the company’s decision-making where both steps are the good faith and reasonable expression of the discharge of the duties and obligations of the director, as a director. The additional component required is a “close personal involvement” in the infringing conduct of the company and inevitably the quality or degree of that closeness will require careful examination on a case by case basis. That examination might show engagement by the director of the kind or at the threshold described by Finkelstein J in Root Quality at [146] (as earlier discussed) which would undoubtedly establish personal liability in the director or a less stringent degree of closeness (perhaps described as “reckless indifference” to the company’s unlawful civil wrong causing harm), yet sufficiently close to demonstrate conduct of the director going beyond simply guiding or directing a commercial course and engaging in (perhaps vigorously) decision-making within the company as a director.

[351]    Ultimately, the question, on the facts, is what was the conduct of the director said to go beyond the proper role of director so as to descend into the realm of “close personal involvement”?

214    In relation to Mr Arkell, the respondents submitted that he was not aware of nor permitted substantial amounts of copying of Career Step’s course materials in infringement of copyright and s 36 of the Copyright Act did not operate to make him personally liable. The respondents submitted that it was not disputed Mr Arkell was aware that Ms Spouge had used some parts of Career Step course materials in TalentMed v1. This did not mean, they submitted, that he authorised infringement or became a joint tortfeasor. His evidence was that from viewing the TalentMed course materials as they were uploaded into the learning management system, he believed the amount of material concerned was “very small”, “minuscule” and that any such material was “generic information” and was “publicly available”. The respondents submitted that this was supported by Mr Gray’s analysis of the competing course materials, Mr Gray being the expert called by TalentMed. Mr Gray calculated the amount of alleged copying in both TalentMed v1 and v2 was approximately 3.71%. The respondents submitted Mr Arkell did not believe that v2 contained any Career Step course materials. It could not be said that Mr Arkell sanctioned, approved or countenanced, or was even indifferent to, the risk of infringement.

215    In relation to Ms Arkell, the respondents submitted that the principal difficulty for Career Step’s case against her was that it could not point to any conduct on her part where she expressly (or otherwise) sanctioned, countenanced or approved the taking (by Ms Spouge) of sufficient parts of Career Step’s course materials (in the development of TalentMed’s course) which constituted the reproduction of a substantial part of the copyright work in suit. Her evidence was that she did not become aware that the TalentMed course contained content obtained from the Career Step course until after TalentMed v1 was published and that she told Ms Spouge to remove that content from the TalentMed course materials “the minute” she found out.

216    In reply, Career Step submitted that the respondents’ submissions elided the fact that Mr Arkell could authorise infringement, or be a tortfeasor in relation to any of the reproduction of Career Step’s course material and TalentMed v1 or v2, or both, and/or the communication of either of those courses. In relation to the reproduction in TalentMeds v1, the respondents admitted Mr Arkell’s awareness of sections of Career Step’s course being copied into TalentMed’s course. It was irrelevant whether or not Mr Arkell thought there was much copying or that what was covered was “generic material”. Copyright infringement was not an intentional tort. Mr Arkell created the conditions in which copying was bound to occur, knew it was occurring and allowed it. He allowed it to occur because it suited his, and TalentMed’s, commercial interests. Further, Career Step submitted, Mr Arkell also allowed TalentMed v1 to go live between September 2016 and February 2017 knowing it contained copied material from Career Step’s course, meaning that he authorised the communication of the infringing material for many months. His instruction to remove Career Step’s material leading to TalentMed v2 was not a reasonable step to prevent infringement given that he did not check whether the task was successful: there was still copied material in TalentMed v2.

217    In relation to Ms Arkell, Career Step submitted it had not ignored Ms Arkell’s oral evidence; it submitted the Court should reject it because it was inconsistent and evasive. Ms Spouge gave evidence she told both Mr Arkell and Ms Arkell about the copied material. Ms Arkell said she did not “recall” being told by Ms Spouge that Ms Spouge was copying Career Step’s material; she did not deny it. She then appeared to admit she was aware of the copying of so called “generic” material but later denied she knew. Ms Arkell said she was aware that Ms Spouge was “cutting corners” but was apparently unaware of what that meant. Ms Arkell admitted to telling Ms Spouge to remove copied material (implying knowledge of copied material), then claimed she would have done so, but did not actually do so, then again admitted she had done so. She then gave self-serving evidence that claimed that “around” the time she became aware of copied material she told Ms Spouge to remove it. The Court should not accept Ms Arkell’s evidence.

218    Given her role, Career Step submitted, Ms Arkell was just as aware as Mr Arkell about the copying and just as culpable. Even if Ms Arkell was not aware as early as Mr Arkell, at some point Ms Arkell was aware that TalentMed v1 contained copied material and she allowed it to be communicated to the public over a six month period and thus authorised the communication, if not the reproduction. Like Mr Arkell, she took no steps to establish whether the copied material was removed in TalentMed v2, and thus authorised the infringement in relation to that course. Finally, the Court should reject the respondents’ submissions that Ms Arkell did not have the power to prevent the infringements because she was “far removed” from the process. She met with Ms Spouge once a fortnight throughout the process, was contacted regarding use of third party materials and finalised units of the course. The submission that Ms Arkell was “far removed” was also inconsistent with the submission that Ms Arkell did in fact take reasonable steps to prevent the infringement by telling Ms Spouge to remove the copied material.

Consideration

219    I turn to consider this issue. I do not accept the respondents’ submission that in JR Consulting & Drafting Pty Ltd at [350]-[351] the Court was seeking to synthesise the tests for the liability of a director as a joint tortfeasor and whether a director authorised an infringement of copyright. At those paragraphs the Court was considering the question of whether a director may be a joint tortfeasor and thereafter the Court considered the question of a person infringing the copyright by authorising infringement by another: see in particular at [353].