FEDERAL COURT OF AUSTRALIA

Allam v Aristocrat Technologies Australia Pty Ltd (No 2) [2012] FCAFC 75

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The cross-appeal be allowed.

3.    The orders of the primary judge made on 15 December 2009 be set aside.

4.    The question of what, if any, declaratory or injunctive relief should be granted in relation to copyright infringement arising under s 36 of the Copyright Act 1968 (Cth) be remitted to the primary judge for his determination.

5.    The trade mark infringement claim be remitted to the primary judge for his determination.

6.    The first to third respondents pay 50% of the appellant’s costs of the appeal and cross-appeal.

7.    The question of the costs of the trial be remitted to the primary judge for his determination.

Note:    Settlement and entry of orders is dealt with in Order 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The cross-appeal be allowed.

3.    The orders of the primary judge made on 15 December 2009 be set aside.

4.    The first to third respondents pay 50% of the appellants’ costs of the appeal and cross-appeal.

5.    The trade mark infringement claim be remitted to the primary judge for his determination.

6.    The question of the costs of the trial be remitted to the primary judge for his determination.

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

REASONS FOR JUDGMENT

THE COURT

1    The Full Court has delivered reasons as to the disposition of these two appeals in Allam v Aristocrat Technologies Australia Pty Ltd [2012] FCAFC 34 (the Reasons). As set out at [445]:

We have concluded that the two appeals succeed. It follows that orders made on 15 December 2009 must be set aside. Each matter should be remitted to the primary judge for determination of the claims of trade mark infringement. The parties should consult and within seven days file draft orders (including as to costs) or if agreement cannot be reached, file and serve proposed orders and written submissions in support thereof.

2    The parties were unable to reach agreement as to the proposed orders and have filed written submissions in support of the orders for which they respectively contend. We do not propose to reiterate the facts, the conclusions or the reasons for those conclusions as set out in the Reasons to which reference can be made as necessary.

3    The submissions advanced by Aristocrat Technologies Australia Pty Limited, Aristocrat International Pty Limited and Aristocrat Technologies Inc (collectively, Aristocrat) are not limited to the orders that follow directly from our reasons.

4    The issues as to the orders can be summarised under the following headings:

    The remittal of the claims of trade mark infringement;

    The remittal of the assessment of damages;

    The extent of findings of infringement of copyright by Mr Allam;

    Findings of infringement of copyright by Tonita Enterprises Pty Ltd (Tonita);

    The exclusion of the email evidence by reason of s 97 of the Evidence Act 1995 (Cth) (the Evidence Act); and

    An alternative case against Global Gaming Supplies Pty Ltd and Anthony Edward Andrews (together, Global) and Impact Gaming Pty Ltd and Francis George Bernard Cragen (together, Impact).

REMITTAL TO THE PRIMARY JUDGE

Trade mark infringement

5    At [439] to [444] of the Reasons we considered, shortly, the claim by Aristocrat of trade mark infringement not determined by the primary judge and concluded that it should be remitted to his Honour for determination. Mr Allam and Tonita submit that there should be no remittal of the trade mark claim to the primary judge but that it should be determined by the Full Court.

6    Mr Allam and Tonita draw attention to written submissions made in the appeal, where it was contended that there were no findings of fact made by the primary judge concerning trade mark infringement or trade mark use, including as to the presence of EPROM labels, and therefore the presence of trade marks, in machines the subject of infringing transactions, or of the use or content of any fake Aristocrat compliance plates. They refer also to the submissions made to the primary judge and repeated here, that the pleaded basis for the contravention of the Trade Marks Act 1995 (Cth) (the Trade Marks Act) was the monopoly protected by s 120(1), not that falling within s 120(2). In addition, they rely on:

    the absence of findings that Mr Allam was a joint tortfeasor for the purposes of the Trade Marks Act;

    the monopoly granted by the Australian trade mark does not relevantly extend to the “manufacturing” of compliance plates, which is not trade mark use;

    the only basis for any use of the trade mark is now confined to compliance plates in relation to transaction 48 and transaction 51; and

    concessions made before the primary judge.

7    Mr Allam and Tonita seem to be asking this Court to consider the evidence and make findings of fact and of law. The factual findings would need to be drawn from the evidence, including findings as to similarities and differences between trade marks. As we said in the Reasons at [444], we see no alternative but to remit Aristocrat’s case for trade mark infringement to the primary judge for determination. The further repetition of submissions made in the appeal does not alter that view.

8    Mr Allam and Tonita also submit that as the only matters for remittal are the two transactions pleaded against Mr Allam, at which time Tonita was not in existence, there is no reason to remit any claim made against Tonita. That submission has an attractive simplicity. However, we do not understand the trade mark claim, insofar as it concerns Mr Allam and Tonita, to be necessarily limited to the two transactions. The factual matrix in this case is complex. The primary judge is the best person to evaluate the facts and the relevance of the date of incorporation of Tonita to the trade mark claim. We do not accept that the remittal of the case of trade mark infringement should be only insofar as it concerns Mr Allam.

Damages

9    Aristocrat submits that the question of damages, including additional damages, needs to be reassessed against Mr Allam by the primary judge. We do not agree.

10    First, no such relief was sought in Aristocrat’s cross-appeal filed in the Allam appeal.

11    Secondly, in its written submissions, Aristocrat stated that its cross-appeals in respect of its copyright claims against Mr Allam and the Global/Impact parties were ‘limited to the primary judge’s decision not to grant Aristocrat declaratory and injunctive relief in connexion with those infringements’: see [16] of Aristocrat’s written submissions dated 13 July 2010 that were filed in support of its cross-appeal in the Allam appeal.

12    Thirdly, during the course of the hearing of the appeals, the only basis on which Aristocrat sought to uphold an award of compensatory damages for copyright infringement was that adopted by the primary judge. In that connection his Honour’s assessment proceeded on the basis of the infringements found under s 38 of the Copyright Act 1968 (Cth) (the Copyright Act) (infringement by dealing), not on any other basis. Thus, as we have described at [99]–[103] of the Reasons, the primary judge calculated compensatory damages for copyright infringement on the basis of lost sales/lost profits by reference to the transactions he found to have been infringing transactions. On appeal, Aristocrat did not seek to contend that compensatory damages should be assessed or awarded in respect of its claims for copyright infringement on any other basis. The award of compensatory damages for copyright infringement must stand or fall on the success or otherwise of the case of infringement by dealing.

13    We have found that the case of copyright infringement by dealing cannot succeed. We have also found that only nominal damages should have been awarded in any event. The occasion does not now arise for Aristocrat to advance a new and additional case for compensatory damages for copyright infringement.

14    Fourthly, it is equally plain that the primary judge’s consideration of the question of additional damages for copyright infringement was limited to the additional damages arising from the infringements by dealing: see the primary judge’s reasons at [906]–[915]. The primary judge did not deal with the question of additional damages by reference to infringement under s 36 of the Copyright Act. Given the way in which the case was conducted at first instance, this is unsurprising. Once again, on the hearing of the appeals, Aristocrat did not seek to contend that additional damages should be awarded on any basis other than by reference to the case of infringement by dealing. We have dealt with the question of additional damages on that basis.

15    In that connection, we have found that the primary judge was not in error in his assessment of additional damages. However, once again, any award of additional damages for copyright infringement must stand or fall on the success or otherwise of the case of infringement by dealing. As that case has failed, so too must Aristocrat’s case for additional damages.

16    There is, therefore, no question to be remitted to the primary judge in relation to compensatory damages or additional damages for copyright infringement.

FINDINGS IN RESPECT OF MR ALLAM AND TONITA

17    Aristocrat contends that declarations and injunctions should be made against Mr Allam in relation to the findings of copyright infringement involving him. It also continues to press its case against Tonita and says that declarations and injunctions should be made against it.

18    In its notice of cross-appeal filed in the Allam appeal, Aristocrat sought declarations and injunctions against Mr Allam and Tonita in relation to infringements said to arise not only in relation to s 38 of the Copyright Act, but also in relation to s 36. As the case based on s 38 of the Copyright Act has failed, the question of declarations and injunctions can only arise in relation to infringements under s 36.

19    In this connection, Aristocrat relies, in its notice of cross-appeal, on a number of findings made by the primary judge that are consistent with infringement by reproduction, specifically at [443]–[446], [496]–[519], [533]–[535], [724]–[725] and [727].

20    The high point of these findings, insofar as they concern copyright infringement, is the primary judge’s finding (at [718]) that ‘the Tonita respondents burned Aristocrat game software onto blank EPROMs using the Dataman software to carry out this exercise’. We have concluded that no error has been established on the part of the primary judge in coming to this conclusion: the Reasons at [127].

21    In that connection the primary judge found (at [443]–[445]) that a large number of EPROMs that had been seized from the Bankstown premises had labels attached to them referring to the Aristocrat game called “Golden Pyramids” . The primary judge also referred to ‘many other seized EPROMs with different games that had labels’. The primary judged accepted that the seized EPROMs contained non-genuine Aristocrat games. His Honour did not, however, identify the other games involved.

22    Further, in making his finding that the “Tonita respondents” burned Aristocrat software, the primary judge did not distinguish between Mr Allam and Tonita itself.

23    In support of its case for declaratory and injunctive relief against Mr Allam for copyright infringement, Aristocrat has also relied on our acceptance that transaction 48 (Invoice 54) and transaction 51 (Invoice 050830) concerned some gaming machines that contained unlicensed reproductions of Aristocrat game software: see, in that connection, [121] and [169] of the Reasons. As these transactions took place before Tonita was incorporated, it follows that the games software had been reproduced by Mr Allam. Those invoices do not, however, identify the games involved.

24    No doubt an important consideration in determining whether declaratory and/or injunctive relief should be granted, is the utility of that relief. An aspect of whether utility would be achieved by the granting of that relief is whether the subject matter of the declaration or injunction (here, relevantly, the specific copyright work or works that have been infringed) can be identified with sufficient precision. So far as we can determine, at the present time, the only infringing game software that has been specifically identified is that relating to the “Golden Pyramids” game.

25    So far as infringement of the copyright in the compliance plates is concerned, we have found that the only infringements that have been proved are those identified by reference to design specification 565875 revision B.

26    It would seem that the primary judge refused to grant declaratory relief and injunctive relief for copyright infringement because he was not satisfied that such relief would have utility. His Honour appeared to consider that the case was really one about damages and that the damages he awarded (particularly that component represented by additional damages) would act as a sufficient deterrent against further copyright infringement.

27    We have found that Aristocrat’s case on damages cannot succeed. Nevertheless, infringements have been found which could justify the granting of declaratory and/or injunctive relief. We consider it appropriate to remit to the primary judge the question of what, if any, declaratory or injunctive relief should be granted against Mr Allam or, indeed, Tonita in relation to copyright infringement arising under s 36 of the Copyright Act, in those changed circumstances.

THE ADMISSIBILITY OF THE EMAILS AGAINST THE GLOBAL AND IMPACT PARTIES

28    We dealt extensively in the Reasons at [171] to [247] with the admissibility of certain emails as against the Global and Impact parties and the effect on the findings by the primary judge. In the Reasons, the Court came to conclusions as to the use that could be made of what Aristocrat now describes as “the impugned emails”. We concluded that the evidence in the emails could show nothing more than a tendency on the part of Global and Impact to engage in infringing transactions and that s 97 of the Evidence Act had not been complied with (at [243]–[244]).

29    Aristocrat submits that as a matter of procedural fairness the Court ought to receive further submissions as to the application of s 97 of the Evidence Act to reject the admissibility of the emails as against the Global and Impact parties on the following bases:

    There was no ground of appeal that relied on s 97.

    There was no ground of appeal that the primary judge erred in relying on any email against a party in circumstances where it was already admitted against that party.

    It was not until the Reasons were delivered that there was any indication that s 97 would preclude reliance on any email already in evidence against Global or Impact for the purpose of establishing any knowledge or belief or state of mind of Global or Impact which might be relevant to whether either of them ‘knew or ought reasonably to have known’ that the relevant transactions involved machines which infringe Aristocrat’s copyright.

    If it had been “squarely raised”, Aristocrat would have submitted that conclusions as to Global’s and Impact’s awareness or state of mind about its own business were not precluded by s 97 of the Evidence Act. In other words, Aristocrat says that it would have put to the Court submissions as to alternative uses of the emails and alternative bases for the factual findings necessary for its case under s 38 of the Copyright Act.

    If it had been “squarely raised”, Aristocrat would have submitted that s 97 of the Evidence Act has no application in the determination of the s 38 of the Copyright Act question because whether a person knew or ought reasonably to have known that the machines were infringing is not susceptible to being described as ‘a tendency … to have a particular state of mind’ within s 97(1) of the Evidence Act. Further, even if it were susceptible to being so described, Aristocrat says that s 97 could not apply because of s 94(3)(b) of the Evidence Act, as the s 38 question of whether a person ‘knew or ought reasonably to have known’ that the machines were infringing would be a fact in issue in the proceeding.

    Aristocrat would have submitted that s 97 of the Evidence Act does not prevent the adducing of evidence of a person’s tendency to engage in conduct in order to establish another person’s knowledge or belief as to that tendency where that knowledge or belief is relevant to a fact in issue, relying on R v Preston (unreported, NSW Court of Criminal Appeal, Handley JA, Smart and Dunford JJ, 9 April 1997); Kaifoto v R [2006] NSWCCA 186. As Global’s and Impact’s knowledge or belief was a relevant issue in the case, s 97 would not apply, either because there is no tendency purpose or because of s 94(3)(b). Aristocrat points out that Mr Andrews and Mr Cragen of the Global/Impact parties put in issue their state of mind in relation to the whole of their business dealings in relation to machines generally, not just by reference to these transactions.

30    The response of the Global/Impact parties and Mr Allam and Tonita to Aristocrat’s submissions are straightforward. They say that there is no application before the Court to reopen the appeal or to stay the judgment. They also point out that there is no order of the Court permitting further submissions generally; the only submissions permitted were those in respect of the orders to be made giving effect to the Reasons. The appellants say that they do not propose to respond to the Aristocrat submissions without first hearing from the Court.

31    Aristocrat complains that the question of the admissibility of the emails and the application of s 97 of the Evidence Act was not a matter that it was able to address in the appeal as it was a matter raised during the hearing of the appeal. The appeal was heard over a period of eight days separated by some months. The appeal commenced on 9 August 2010 and continued to 13 August 2010, and then recommenced on 6 December 2010 and concluded on 8 December 2010. The issue of tendency evidence and s 97 of the Evidence Act was raised on 10, 11 and 12 August 2010 (see T 107.35, 121.7, 226.24, 238.16, 296.38 and 303.11). To the extent that Aristocrat felt unable to respond to the Court on the admissibility of the emails during the course of the appeal in August 2010, it had the opportunity to seek to address the issue during the continuance of the appeal in December 2010 or even by written submissions after the appeal was heard. It did not do so.

32    Aristocrat seems to have misunderstood the relevance of s 97 of the Evidence Act. The primary judge necessarily had to connect the particularised infringing transactions with the joint venture. The emails themselves did not relate to the particularised infringing transactions. The only way to make the connection was to ‘draw the inference from the contents of the emails that the respondents had the tendency to act in a particular way, that is, engage in the alleged infringing transactions’ at [241] of the Reasons (cf R v Preston and R v Kaifoto where the evidence was not tendered to prove a tendency but to prove a state of mind at a particular time, the time of the offence).

33    Section 94(3) of the Evidence Act does not preclude the application of s 97. A “fact in issue”, for the purposes of s 94(3), should be understood to mean “ultimate fact in issue”: see the commentary in Odgers S, Uniform Evidence Law (9th ed, Thomson Reuters, 2010) at [1.3.4460] and in Australian Law Reform Commission, Uniform Evidence Law, Report No 102 (2005) at 307–311.

34    Aristocrat submits that the issue of fact is whether Global or Impact knew, or through Mr Andrews or otherwise knew or ought reasonably to have known, that the machines were infringing. Aristocrat submits that it is not susceptible of being described as ‘a tendency ... to have a particular state of mind” within s 97(1) of the Evidence Act. However, other than by reason of this tendency, to support by inference the necessary findings of fact, Aristocrat failed to provide a link between the content of the emails and the particularised infringing transactions.

35    As set out in the Reasons, the steps to be taken from the emails to the ultimate conclusion was that the emails demonstrated a tendency on the part of the Global/Impact parties to participate in infringing transactions, leading to the inference that they did engage in particularised transactions. That is, the contents of the emails were used to demonstrate a connection between the particularised infringing transactions and the joint venture.

36    It follows from the Reasons that the ultimate fact was the relevant participation of the Global/Impact parties in the particular transactions. The emails did not relate to those transactions. Reliance on tendency evidence relating to different transactions imported the requirements of s 97 of the Evidence Act. Without reliance on tendency evidence, the primary judge could not have concluded as he did in finding the relevant participation in the particular transactions.

AN ALTERNATIVE CASE AGAINST THE GLOBAL/IMPACT PARTIES

Use of the emails

37    At [246] of the Reasons we noted that no attempt was made by the Aristocrat parties before the primary judge or on appeal to prove “the essential propositions” proposed by the primary judge without reference to the emails. Aristocrat says that it did not submit to the primary judge that its case of infringement of copyright by dealing depended on the “essential propositions” or at any time conceded that this part of its case could fail depending on the outcome of the debate in relation to those propositions.

38    Whether or not Aristocrat linked its case before the primary judge or its submissions on appeal to the “essential propositions”, the fact remains that Aristocrat’s case of dealing by the Global/Impact parties both before his Honour and on appeal was based on those emails. Aristocrat now submits that if it had been asked in the appeal what should happen if the emails could not be relied upon against the Global/Impact parties against whom they had been admitted, it would have submitted that if the Court were not prepared to find infringements by dealing absent the emails, the matter ought to be remitted to the primary judge ‘to reconsider the matter consistently with the Full Court’s reasons on the evidentiary ruling’. That proposal is opposed by the Global/Impact parties, as it was when the matter was raised during the hearing of the appeal.

39    There are a number of problems with that proposal.

40    First, Aristocrat had the opportunity of dealing with that alternative in the appeal. It did not point to findings of fact in the reasons of the primary judge upon which it relied, other than by reference to the emails. Upon a reading of the primary judge’s reasons, we do not see that the suggested course of remitting the matter to the primary judge will assist. In the Reasons, we concluded that the emails should not have been admitted into evidence as against the Global/Impact parties. We did not make alternative findings or reach alternative conclusions upon which the primary judge could rely on remittal.

41    Secondly, and importantly, Aristocrat was fully aware that the admission into evidence of the emails had been a matter hotly contested before the primary judge. The admissibility of the emails was a matter squarely raised in the appeal. Aristocrat did not file a notice of contention dealing with a case as against the Global/Impact parties absent the emails. It pressed for acceptance of its case based upon findings of the primary judge and the evidence before his Honour, which included the emails.

42    Aristocrat now invites the Court to reassess the evidence in order to support findings that all of the elements of s 38 of the Copyright Act are established. Aristocrat seeks to re-characterise the evidence apart from the “essential propositions” that formed the basis of the primary judge’s reasons. This Court is not in a position to conduct a further hearing to make findings not made by the primary judge. Nor would it be appropriate to do so with respect to a case that involved what was described as ‘a mass of material’ in the primary judge’s reasons at [34], as cited on appeal at [43] of the Reasons.

43    We are not in a position to make findings on the case against the Global/Impact parties in the absence of the emails. That would involve this Court in effect conducting a new trial and making new findings of fact. It is apparent that Aristocrat is asking the Court to make findings of fact on the basis of a case that was not apparently advanced before the primary judge, nor on appeal. This is not a case where the primary judge gave weight to the email evidence in the context of the evidence as a whole (as in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 at [101]–[110]). It is apparent that the emails constituted the very basis of Aristocrat’s case on the alleged infringements by dealing by the Global/Impact parties and Aristocrat accepts that this Court has not, in the course of the appeal, received arguments as to how it should weigh the evidence in the absence of consideration of the emails.

44    Aristocrat now seeks to draw from the evidence, the primary judge’s reasons and the Reasons a submission as to facts that may be established or inferences that may be drawn as to the Global/Impact parties’ knowledge and state of mind. Aristocrat makes submissions on alternative uses that may be made of the emails and the information in them, which were not advanced in the appeal. This Court is now being asked to address a case that was not apparently advanced before, or at least not dealt with by, the primary judge. Aristocrat is seeking to establish an alternative basis for the primary judge’s conclusions without filing a notice of contention. Further, Aristocrat draws upon the Reasons for support and then seeks to address concerns there raised by way of further reference to evidence and further submissions, in effect seeking to reopen the appeal.

45    We see no reason to remit this aspect to the primary judge for further determination. Aristocrat made choices as to the way in which it conducted its case before the primary judge. The Global/Impact parties’ success on appeal is not a reason to enable a further hearing at first instance.

Authorisation by the Global/Impact parties of Mr Allam’s conduct

46    Accepting for the purposes of this next submission the Court’s characterisation of the role that the emails played in the primary judge’s finding of authorisation by the Global/Impact parties of Mr Allam’s conduct, Aristocrat submits that a further question arises as to what, if any, role the other matters of fact played in the primary judge’s conclusion as to authorisation. Aristocrat seeks to have the matter remitted to the primary judge to enable his Honour to make findings of authorisation by the Global/Impact parties of the direct infringements found. It seizes upon the observation in the Reasons at [92] that the findings of authorisation in joint tortfeasance were based “substantially” on the facts that the primary judge found to have been revealed by the email correspondence.

47    Aristocrat submits that the Court has not, in the course of the appeal, received specific argument as to how it should itself weigh the evidence of authorisation in the absence of the emails and that this matter should be referred to the primary judge who obviously had the benefit of receiving all of the evidence during the course of the trial.

48    It is readily apparent from the primary judge’s reasons that his Honour’s findings of authorisation were based on the emails. The opportunity for advancing the proposition that the evidence before the primary judge was sufficient to establish authorisation and joint tortfeasance in the absence of the emails was by way of a notice of contention. It is too late to put to this Court the evidence that was before his Honour to support such a conclusion. Again, no notice of contention was filed. Aristocrat has not demonstrated that such an alternative case was advanced before the primary judge. It was not advanced on appeal. The case for remittal of this issue has not been made out.

COSTS

49    Ultimately the Global/Impact parties and Mr Allam have been successful in their respective appeals, but not on all issues that were raised. As we observed in [111] of the Reasons, the appellants effectively challenged every adverse finding made by the primary judge. There was a substantial number of issues raised on appeal by them on which they did not succeed.

50    Aristocrat has succeeded on its cross-appeals, at least to the extent of having matters remitted for determination or further determination by the primary judge. However, the argument on the cross-appeals was limited and occupied only a small part of the hearing before us.

51    In a case where the evidence and submissions in respect of the issues were interrelated, it is not appropriate to apportion costs based on the issues on which the parties succeeded or by separating the appeal and the cross-appeal. We are of the view that the appropriate order is that Aristocrat pay 50% of the appellants’ costs of the appeal and cross-appeal in the Global/Impact appeal and 50% of the appellant’s costs of the appeal and cross-appeal in the Allam appeal.

52    As each matter is to be remitted to the primary judge to determine the case of trade mark infringement, as well as whether declaratory and/or injunctive relief should be granted in relation to infringements found under s 36 of the Copyright Act, we consider it appropriate that the question of costs of the hearing before the primary judge be also remitted to him.

Associate:

Dated:    25 May 2012