FEDERAL COURT OF AUSTRALIA

Pioneer Electronics Australia Pty Ltd v Lee [2000] FCA 1926

COPYRIGHT – Importation and sale of “Pioneer” Digital Video Disk (DVD) players ‑ Players programmed to receive DVDs from Japan region and set to operate at 100 volts ‑ DVDs, packaging and instruction manual incorporating “Pioneer” trade marks ‑ Whether importation constituted breach of ss 37 and 38 of Copyright Act 1968 (Cth) ‑ DVD players not yet released in Australia by copyright owner ‑ Whether ss 37 and 38 deal only with parallel importation ‑ Whether licence to import ‑ Whether importer had actual or constructive notice that importation and sale of players would constitute infringement of copyright if players had been manufactured by it in Australia ‑ Appropriate test to determine personal liability of director for act of corporation.

TRADE PRACTICES ‑ 100 volt Pioneer DVD players sold with transformer made by another company to enable operation at 240 volts ‑ Whether player and transformer safe for use ‑ Whether a representation that DVD and transformer together were suitable and safe for use ‑ Whether representation that applicant had sponsorship or approval of Pioneer ‑ Whether proof of damage necessary to obtain relief ‑ Passing off ‑ Appropriate test to determine personal liability of director for act of corporation.

Copyright Act 1968 ss 36, 37, 103, 119

Trade Practices Act 1974 (Cth) ss 52 and 53(d)

R A & A Bailey & Co v Boccaccio Pty Ltd (1986) 6 IPR 279 discussed

Roland Corporation v Lorenzo & Sons Pty Ltd (1991) 105 ALR 623 cited

Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88 applied

Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376 cited

Interstate Parcel Express Co Pty Ltd v Time‑Life International (Nederlands) BV (1977) 138 CLR 534 cited

RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 applied

Star Micronics Pty Ltd v Five Star Computers Pty Ltd (1990) 18 IPR 225 cited

Apple Computer Inc v Computer Edge Pty Ltd (1984) 53 ALR 225 cited

Raben Footwear Pty Ltd v Polygram Records Inc (1997) 37 IPR 417 applied

Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1979) ATPR 40‑135 applied

World Series Cricket Pty Ltd v Parish (1977) ATPR 40,040 applied

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 cited

A G Spalding & Bros v A W Gamage Ltd (1915) 84 LJ Ch 449 cited

Baume & Co Ltd v A H Moore Ltd [1958] Ch 907 cited

Millington v Fox (1838) 3 My & Cr 338 cited

Warnink v J Townend & Sons (Hull) Ltd [1979] AC 731 cited

Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 cited

H P Bulmer Ltd and Showerings Ltd v J Bollinger SA [1978] RPC 79 cited

Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1 followed

Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 84 FLR 101 followed

Martin Engineering Co v Nicaro Holdings Pty Ltd (1991) 100 ALR 358 followed

Microsoft Corp v Auschina Polaris Pty Ltd (1996) 142 ALR 111 followed

Lott v JWB & Friends Pty Ltd [2000] SASC 3 followed

Henley Arch Pty Ltd v Clarendon Homes (Aust) Pty Ltd (1998) 41 IPR 443 followed

Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195 considered

White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61 cited

King v Milpurrurru (1996) 136 ALR 327 cited

Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 considered

Said v Butt [1920] 3 KB 497 cited

O’Brien v Dawson (1942) 66 CLR 18 cited

Rutherford v Poole [1953] VLR 130 cited

Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980 cited

PIONEER ELECTRONICS AUSTRALIA PTY LIMITED and PIONEER KABUSHIKI KAISHA v BENJAMIN LEE and ALRICARBEN PTY LIMITED

VG 723 OF 1997

SUNDBERG J

22 DECEMBER 2000

MELBOURNE

THE COURT DECLARES THAT:

1.                  The conduct of the second respondent referred to in the Second Further Amended Statement of Claim constituted:

(a)                in relation to the second applicant, conduct in breach of the provisions of sections 37 and 38 of the Copyright Act 1968 (Cth) (“the Copyright Act”);

(b)               conduct in breach of the provisions of sections 52 and 53(d) of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”); and

(c)                passing off of its business and/or services as and for the business and/or services of the first applicant and/or business and/or services of or endorsed or approved by the first applicant.

2.                  The conduct of the first respondent referred to in the Second Further Amended Statement of Claim constituted:

(a)                counselling or procuring and/or being directly or indirectly knowingly concerned in the passing off referred to in declaration 1(c);

(b)               conduct whereby the first respondent was liable with the second respondent for infringement of copyright; and

(c)                conduct whereby the first respondent was knowingly concerned in the second respondent’s contraventions of sections 52 and 53(d) of the Trade Practices Act.

THE COURT ORDERS THAT:

3.                  Each of the first and second respondents, their servants or agents or any of them howsoever be permanently restrained from:

(a)                selling, letting for hire or by way of trade offering or exposing for sale, distributing or by way of trade exhibiting in public:

(i)                  any of the Pioneer digital video disc players referred to in the annexure hereto (“the Pioneer digital video disc players”), which were imported by the first and/ or second respondents prior to 31 January 2000;

(ii)                any Pioneer DVD players sought to be sold with transformers, plugs, cables and sockets which do not comply with the following Australian Standards:‑ AS 3100 - General Requirements for Electrical Equipment; AS 3250 - Approval and Test Specification - Mains Operated Electronic and Related Equipment for Household and Similar General Use; AS 3000 - Wiring Rules; AS 3112 - Approval and Test Specifications - Plugs and Socket‑Outlets (with regard to the plugs and sockets); and AS 3191 - Supply Flexible Cords (with regard to the cables); and

(iii)               any of the transformers referred to as Exhibits 2, 4A and 4B in this proceeding, or any transformers substantially similar to those transformers.

(b)               distributing any materials or goods, promoting or offering for sale or letting for hire any of the Pioneer digital video disc players;

(c)                representing that he or it is:

(i)                  entitled to or authorised to sell the Pioneer digital video disc players;

(ii)                entitled to or authorised by the applicants to sell the Pioneer digital video disc players;

(iii)               authorised, sponsored or endorsed by the applicants;

(iv)              authorised, sponsored or endorsed by the applicants to provide service or support or warranty repairs in connection with Pioneer digital video disc players;

(v)                entitled to or authorised by the applicants to use the Pioneer trade marks and/or use or distribute the Pioneer documents and/or offer for sale and/or sell goods using the Pioneer packaging; and

(vi)              appointed by the applicants to act as an agent or retailer for the Pioneer digital video disc players.

(d)               passing off their business and/or services as and for the business and/or services of the applicants and/or business and/or services of or endorsed or approved by the applicants.

(e)                in the case of the first respondent:

(i)                  engaging in conduct constituting being knowingly concerned in or party to conduct engaged in by the second respondent referred to in par 3(a) of these Orders; and

(ii)                aiding and abetting, counselling or procuring and/or being directly or indirectly knowingly concerned in or party to the contraventions by the second respondent of the Trade Practices Act.

4.                  At the election of the applicants there be an assessment of damages or an accounting of profits against the first and second respondents.

5.                  By 4 April 2000 there be delivery up to the applicants by each of the first and/or second respondents on oath of all of the Pioneer digital video disc players which were in their possession, custody or control as at 18 December 1997.

6.                  The first and second respondents pay the applicants’ costs of the proceeding (including reserved costs on a party and party basis until 12 September 2000 and thereafter on a solicitor and client basis, such costs to be taxed in the absence of agreement.

7.                  The matter be adjourned to a date to be fixed on 14 days written notice.

ANNEXURE

PIONEER DIGITAL VIDEO DISC PLAYERS

·               Pioneer DVL-7

·               Pioneer DVL-9

·               Pioneer DV 505

·               Pioneer DVD 909

·               Pioneer DVD 101

·               Pioneer DVD 102

·               Pioneer DVD A01

·               Pioneer DVD A02

·               Pioneer DVD 301

·               Pioneer DVD 302

·               Pioneer DVD U01

·               Pioneer DVD U02

·               Pioneer DVRS 101

REASONS FOR JUDGMENT

BACKGROUND

1                     This case concerns the importation and sale of a number of Pioneer brand Digital Video Disk (DVD) players by the second respondent (“Alricarben”).  The DVD players were acquired from retailers in Hong Kong and Japan and were sold to purchasers in Australia between March and November 1997.  The DVD players were manufactured for use in Japan, but those acquired after July 1997 were modified in Hong Kong for use with Australian DVDs, and sold with a transformer for conversion from Australian electricity standards to Japanese electricity standards.  The second applicant (“Pioneer”) claims that the importation and sale breached its copyright.  The applicants also claim that the sales were misleading because they gave the impression that the applicants approved or sponsored them.  The first applicant (“Pioneer Australia”) claims that Alricarben passed off its business as having Pioneer Australia’s approval or sponsorship.  There is also a complaint that the DVD players were unfit for sale in Australia, and that the players, or more precisely the transformers with which they were sold, were dangerous.

FINDINGS OF FACT

2                     In order to regulate the distribution of DVD players around the world, the manufacturers have developed a system whereby the players will only play discs they have been programmed to play.  The discs are programmed in different codes for different geographical regions, and a player is capable of decoding only the DVDs for the region in which it is sold. Japan is region 2 and Australia is region 4.  In order adequately to satisfy demand for new technologies, Pioneer staggered its release of DVD players in different parts of the world.  At the time the importation of Pioneer players the subject of this proceeding took place, Pioneer had not yet released DVD players onto the Australian market.  As a result, Alricarben was bringing into Australia DVD players that had not yet been released here, and would in any case have been inappropriate for any discs that were later sold within the Australian region.

3                     In November 1996 the first respondent (“Lee”), a director of Alricarben, read in an electrical goods magazine an advertisement for Pioneer DVD players inserted by an organisation called “Ramsons” based in Osaka, Japan.  He contacted Ramsons, and on behalf of Alricarben ordered a Pioneer DVD player, branded “DV-7”, to be shipped to him in Sydney.  Lee received the DV‑7 player in December 1996, and after using it for about four weeks decided to sell it.  On behalf of Alricarben, he placed an advertisement in the Sydney Trading Post which ran for eight to ten weeks. The DVD player was sold to Alex Fiedler (“Fiedler”) on 10 March 1997.  Fiedler attended Lee’s home in Epping to inspect the DVD player.  He noted a number of DVD players at the premises, as well as compact disc and laser disc players.  The players were made by various corporations including Pioneer, Sony, Panasonic and Toshiba.  Lee told Fiedler the DV-7 player was a region 2 player.  This meant that when Australian DVD titles were released, the DV-7 player would be unable to play them, unless the player was modified by the installation of a “mod chip”, a chip that would overcome the regional coding referred to in par 2.  Lee told Fiedler that the player and the transformer had 12 month warranties, and that he should return the player to him if he had any problems.  If Lee could not have the player repaired in Australia, he would ship it back to his supplier for repair, and Fiedler would be charged the freight costs.  Fiedler purchased the DV-7 player and a transformer for $1050. The player came in a Pioneer branded box with Japanese writing on it.  A couple of months later Fiedler exchanged the Pioneer player for a Panasonic DVD player manufactured for the American market.  Lee continued to advertise the sale of electrical goods.  These included advertisements published between March and December 1997 for Pioneer DVD players coded to the Japanese region.

4                     Alricarben also sold imported DVDs.  These sales came to the attention of the Australian Film and Video Security Office (AFVSO), which acts on behalf of the Motion Picture Association to prevent film and video piracy in Australia.  AFVSO requested one of its agents, James Slater (“Slater”), to investigate Lee’s conduct, and if necessary put him on notice that his unauthorised importation constituted an infringement of copyright.  After obtaining from Lee a catalogue of the titles Alricarben had for sale, and being informed by him that it was obtaining the DVDs from Japan, Slater was given a demonstration of the DVD players at Lee’s dental surgery on 14 April 1997.  All subsequent sales and contacts regarding the DVD players on which evidence was led took place in a small room in the surgery.  After the demonstration Slater told Lee he worked for AFVSO and had come to warn Lee formally about his parallel importation of film and video products.  Lee was then given a standard letter from AFVSO outlining the relevant sections of the Copyright Act that relate to the parallel importation of products that have copyright material on or about them.  The letter reads in part:

“I therefore formally notify you, that importing members’ or distributors’ films on video cassette and / or video laser disc without the licence of the member or distributor, or dealing with unauthorised imports infringes the rights of the members and / or licensees. Moreover, the AFVSO proposes to rely on this letter as evidence of your “knowledge” within the meaning of the Act.

If it comes to the AFVSO’s attention that you are infringing the rights of members or distributors, the AFSVO is instructed to take such action as may be considered necessary in the circumstances, to protect their position without further notice to you.”

5                     Lee was also given a notice from AFVSO that stated in part:

“WE WISH TO MAKE YOU AWARE

It is a criminal offence in Australia to:-

·               Make

·               Offer for Sale or Hire

·               Be in possession for purpose of sale or hire

·               Import for sale or hire

·               Import for distribution for trade

·               Distribute for trade

Any computer game or similar; any film, including video cassette; video laser disc; video compact disc or digital video formats, if you know or suspect the article was a copy of the whole or a substantial part of that game or film, and which has been made or imported without permission of the copyright owner.”

Slater discussed the meaning of the word “trade” with Lee, and how to go about getting a licence to import DVDs. Lee said he was interested in selling DVD players rather than DVDs.  Slater told Lee that Lee may wish to contact some of the manufacturers of DVD players about selling such machines, and that importing them could lead to an infringement of the Copyright Act in the same way as importing DVDs.

6                     Lee, on the other hand, claims Slater said he didn’t know whether copyright law applied to hardware, but he would find out, and that the manufacturers of the DVD players might contact Lee.  Lee said Slater merely handed him the letter which he read, that Slater never used the phrase “parallel importation”, that he was never informed that he needed a licence, that he was not told to contact anyone, and that no discussion took place regarding the importation and sale of DVDs and DVD players.  Having acknowledged that he received the letter, Lee’s account of the conversation that followed involves an exchange so anodyne as to defy credulity.  One is left with the impression that nothing at all was said by either party, and for that reason I prefer Slater’s account of what took place.  On a more general level, Lee’s evidence as a whole was unsatisfactory.  He had a poor recollection of conversations and events.  His records were poorly kept, making it difficult to reconstruct Alricarben’s imports and sales.

7                     In July 1997 Lee attempted to obtain a number of Pioneer DVD players from Japan.  The person with whom he had been dealing at Ramsons in Osaka referred him to Tat Shing Hong (“TSH”), a distributor in Hong Kong.  Following Lee’s conversation with someone named “Ricky” of TSH, Alricarben ordered three Pioneer DVD players.  At least three subsequent purchases of at least eight DVD players took place in August and December 1997.  The players were received in Australia and were either sold to or swapped with various individuals between July and October.

8                     The applicants first became aware of Alricarben’s importation of DVD players some time around October 1997.  On the applicants behalf, Stuart Baker (“Baker”), a sales representative in the employ of Pioneer Australia, contacted Lee on 14 October to discuss the purchase of a Pioneer DVL9 player.  Lee said he would sell the player for $1,850.00 with a surcharge if Baker wished to pay by credit card.  Lee also told Baker the machine was a 110 volt player, and the sale included a transformer that would allow the machine to work at 240 volts.  Baker visited Lee’s business premises and bought the DVL9 player on 24 October.  Lee said the player had a twelve month warranty, and told Baker to bring it back if there were any problems with it, and it would be repaired.  Baker then left with the player.  At no stage did Baker tell Lee that what Lee was doing was contrary to the Copyright Act, nor did Baker tell Lee to desist.

9                     After receiving the DVL9 player and the transformer, Pioneer Australia lodged a complaint with the safety and standards branch of the New South Wales Department of Fair Trading alleging that the transformer did not comply with Australian electrical standards.  It requested an investigation.  Robert Bryant (“Bryant”), a Department investigator, visited Lee’s business premises on 21 November 1997.  Bryant told Lee that Pioneer Australia had informed the Department that Lee had been importing DVD players that were not suitable for direct use in Australia due to their voltage, and selling the players with a transformer that was dangerous.  Lee told Bryant he had no more transformers in stock, and that he had only sold three or four of the transformers.  In cross-examination Lee said that by this he meant he had no more of the transformers for sale.  In fact he had two transformers at home.  Bryant told Lee that by selling the transformers he was in breach of the Electricity Safety Act 1945 (NSW) and asked him to recall the products.  In his Complaint Investigation Report, Bryant recorded the breach as “minor”, but this, he said, was an evaluation of the necessity for legal action and how widespread the problem was rather than a comment on the relative safety of the transformer.

THE PROCEEDING

10                  On 18 December 1997 the applicants commenced the present proceeding.  On that day I enjoined Lee and Alricarben, until the trial of the proceeding, from importing, selling or hiring Pioneer DVD players.  Pioneer claims that Lee’s and Alricarben’s conduct was in breach of ss 37 and 38 of the Copyright Act.  Pioneer and Pioneer Australia claim that the selling of the players constitutes conduct in contravention of ss 52 and 53 (aa), (c) and (d) of the Trade Practices Act 1974 (Cth) and comparable provisions of the Fair Trading Acts of Victoria and New South Wales.  Pioneer Australia claims that Lee and Alricarben passed off of their business as having its endorsement or approval.  The applicants seek declarations, permanent injunctions, damages or an account of profits and delivery up of any Pioneer DVD players that remain in Lee’s and Alricarben’s control.

SPECIFIC FACTUAL ISSUES

The number of players imported and sold

11                  There is some dispute about the number of Pioneer DVD players that Alricarben imported and sold.  Counsel for the respondents claimed that only eleven units were imported, and that the order of the sales was as follows:

·        one unit to Fiedler on 10 March 1997 (ordered in December 1996 from Ramsons)

·        one unit to Doan Buu (“Buu”) on 20 July 1997 (purchased in April or May 1997 from Ramsons) that was exchanged on 11 August 1997 for a unit purchased on 6 August 1997 from TSH

·        three units to Vincent Lam (“Lam”) on 28 July 1997 (purchased on 22 July 1997 from TSH)

·        five units to Khai Tri (“Tri”) on 28 September 1997 (purchased in Vietnam, Taiwan, Hong Kong, Japan or Singapore while Lee was travelling there, between 17 August and 3 September), and

·        one unit to Baker on 24 October 1997 (from the series purchased in August or September).

However, Tri’s receipt from Alricarben is dated 16 August 1997.  There is another receipt for the sale of an extra two units to Lam on 29 July 1997. There are also two invoices from TSH: one for three units dated 17 July 1997 and one for another four units dated 8 August 1997.  Lee claimed that TSH often sent out more than one invoice for the same purchase.  For example, the 8 August 1997 invoice was a repeat of the invoice issued on 6 August 1997.  However, the quantities of goods differ, and the 8 August 1997 invoice includes a number of Panasonic DVD players whilst the 6 August 1997 invoice does not.  Accordingly I do not find this claim credible.  I conclude that the units sold to Tri and Lam were amongst the units imported from TSH.  Thus the disposition of the units purchased in September is not accounted for.  There are also a number of consignment notes from freight companies, one dated 2 November 1997 and another 18 November 1997, that may have recorded shipments of Pioneer DVD players.  Lee accepted that each of the DVD players was sold in the original Pioneer packaging.

12                  Documents obtained from the Australian Customs Service record fifty three shipments being made to Alricarben or Lee in 1996 and 1997.  Four of those shipments are described as being of “video CD players” or “video disc players” (as distinct from “CD players” or “laser disc players”, laser disc being an earlier form of the DVD technology), with a total of fifty machines being imported.  These four shipments arrived between January and June 1997.  Therefore the later purchases of DVD players that Lee accepted occurred have been mis‑described as “Laser Disc Players” or “CD players”.  This means that any of the seventeen other shipments in 1996 or 1997, which have the same description, could have been DVD players.  These shipments involve more than two hundred units.  Obviously, Pioneer would not have manufactured all these units.

13                  It was accepted by Lee in cross-examination that his record keeping was “incomplete”.  He claimed that he may have lost documentation in relation to the sale of DVD machines when he moved house in March 1997 and March 1998.  He said he had been told by his siblings that they threw away several boxes, each containing documents, when moving in March 1998.  However, the lack of documentation regarding the nature of each shipment, as well as the inconsistency between the evidence given by Lee and the invoices and receipts he submitted, has meant that I give his testimony little weight.  Certainly some of the inconsistencies might be explained by Lee’s statement that he gave some of the units to members of his family, but how many of these were given, and the date the gifts were made, was not made clear.  I therefore find that Lee sold significantly more players than the eleven he claims, although I am unable to determine the actual number.

Safety of the transformers

14                  The transformers that were the subject of Pioneer Australia’s complaint to the Department of Fair Trading were blue autotransformers manufactured by the Nissyo Corporation.  They have three parts: an input cord with a two‑pin plug at each end, the transformer itself which is a blue box with metal casing and coils of wiring inside the case, and an output cord with a two‑pin plug at one end, and a “figure-eight” plug, colloquially called a “female” plug, at the other.  One plug of the input cord goes into the electricity socket, the other into the transformer.  The two‑pin plug of the output cord goes into the transformer, and the figure eight plug into the player.

15                  There was some controversy as to whether all these players were sold with the same transformers. Lee claimed he sold only three Pioneer players with Nissyo transformers, the other players being sold with Paltronic transformers.  This claim was not made until after the close of the applicants’ case, and no hint of it appears in the affidavit evidence filed.  There is no evidence as to whom the Paltronic transformers were sold.  In cross‑examination Lee accepted that machines other than Pioneer DVD players were sold with Nissyo transformers.  Three Nissyo transformers were in evidence: one sold to Buu and another to Fiedler.  Lee said he had destroyed a transformer he sold to a Dr Appan, and it is common ground that the transformer that accompanied the player sold to Baker was lost after it was sent to Pioneer Australia.  I note at this point that seven months elapsed between the sales to Fiedler and Baker, and yet the Nissyo transformers were still being used.  It seems therefore that Lee sold at least one transformer more than he claimed, and there was no evidence to corroborate his claim that he sold Pioneer players with other than Nissyo transformers.  Although the Paltronic transformers were sold to Alricarben by TSH, as recorded in the invoices, they were never produced to the court and no reports were commissioned on their safety.  I am thus unable to make any findings on their relative safety.

16                  The Nissyo transformers had a number of unsatisfactory features.  The most serious was that once the input cord (with the two pins) was plugged into the electrical socket and the power turned on, the other end of the cord was live, with exposed pins.  Anyone touching the live pins would receive a potentially lethal electrical shock.  This touching could occur before the cord was plugged in to the transformer, or if the cord came loose from the transformer.  Lee said he sought to overcome this problem by gluing the plug from the first cord into the transformer socket and then covering the area with sticky tape or electrical tape to discourage people from removing the plug.  However, one of the transformers in evidence had no such glue or tape.  Further, there was no evidence about the nature or appropriateness of the particular glue used.  According to the expert evidence, the glue might degrade over time and cease to hold the socket in place, or it might inhibit conduction and cause overheating.  Given that not all plugs were glued into the socket, and that there is no information about the type of glue and its long term effect when used in this manner, I do not consider it an adequate method of dealing with the problem caused by having two plugs on the input cord.

17                  The Nissyo transformers had other problems.  The two‑pin plugs were made for American sockets which accommodate parallel pins, rather than pins that are in opposite diagonal directions, suitable for Australian sockets.  One transformer in evidence had a pin connection placed over the original plug to make the pins sit firmly.  In the other two the pins had been manually twisted into a diagonal position to fit Australian sockets.  This was not done with any amount of precision, leaving open the possibility of damage to the socket in which the plug was placed.  If the twisting was done poorly, the plug would not sit flush with the socket, and might leave enough of the pins exposed to constitute a risk of electrocution.  Children playing with the socket might touch the pins, or a thin metal object such as a tape measure might come into contact with them.  The plugs themselves are smaller than the standard size plug.  When plugged into the wall socket, there is a smaller barrier to prevent contact with the pins, making contact relatively easier than for a standard size plug.

18                  Another electrical hazard lay in the casing of the transformer.  The transformer was not double insulated, which is a mandatory requirement for all metal-enclosed transformers in Australia and in most other countries.  Double insulation involves the separation of the transformer casing from the live parts (which should themselves be insulated) inside the casing in order to prevent the casing becoming alive with electrical current.  If there is no double insulation of the casing, the casing must be connected to an earthing connector, which leads back to the earthing system of the electrical supply, and prevents electrocution if the case is live.  The Nissyo transformers were not earthed.

19                  There was also no distinction between the sockets on the transformer into which the input and output cords were to be plugged.  The Nissyo transformers were autotransformers.  The input power is connected to a wire, along the length of which the potential difference to earth (the voltage) is 240 volts.  The wire runs around a series of coils and back to the socket.  At a certain point along the winding it is “tapped” ‑ an input and output wire are physically attached to the single winding.  The distance between the input and output tapping along the winding determines the voltage of the current that flows from the attached wire.  If the autotransformer is being used to reduce voltage, the distance between positive and negative flows is shorter than for the mains supply, so the potential difference is reduced.  This is how the autotransformer would be used in powering a Japanese DVD player, which is designed for 110 volts.  However, an autotransformer may also be used to increase voltage by making the distance between the positive and negative in the output greater than the distance between positive and negative for the mains.  Thus, if the input cord on the Nissyo autotransformer is placed in the output plug ‑ and as the plugs are identical this might happen ‑ the potential difference of the output current is increased by the same ratio by which it would have been decreased.  This would produce an output of 576 volts that would damage the DVD unit and give rise to the risk of electrical shock.  Another problem is that, because the two pin plugs are symmetrical, they could easily be plugged into the transformer with the plug rotated 180 degrees.  This would result in the transformer having no effect, and the DVD player would be directly connected to the 240 volt mains supply.

20                  The Nissyo transformer is to be contrasted with the type of compliant domestic transformer used in Australia: a double wound transformer.  In these transformers the input circuit is not in direct electrical contact with the output circuit.  Both circuits are attached to coiled wires, which are placed next to one another.  The mains power induces an electric current to circulate in the primary coil, which in turn induces the current in the secondary coil attached to the output circuit.

21                  The Nissyo transformers breached Electrical Safety regulations in the following respects:

·        they were used for reducing the voltage to portable appliances or other appliances that are liable to “handling in normal use” (breaching cl 1.2.5.3 of Australian Standard 3000 issued in 1991).  The phrase “handling in normal use” would include moving the appliance, turning it on and off, and placing a disc in the appliance

·        the input cord contained a plug at each end, rather than a plug and a socket (breaching cl 4 of  Australian Standard 3109.1 issued in 1996)

·        the common terminal of the autotransformer was not always connected to the neutral conductor of the supply circuit because of the possibility of rotating the plug when inserting it into the transformer (breaching cl 4.28.4.1 of Australian Standard 3000 issued in 1991)

·        the autotransformer was not earthed (breaching cl 4.5.3.2 of  Australian Standard 3000 issued in 1996)

·        the plugs were too small (breaching cl 2.8 of Australian Standard 3112 issued in 1993).

It is true that any piece of electrical equipment has the potential for harm if it is used incorrectly.  It is also true that there was no evidence that anyone was injured in the course of using the Nissyo transformers.  However, I find that the potential for harm arsing from incorrect use of the Nissyo transformers is significantly higher than is acceptable, that in the above respects the transformers did not conform with Australian regulations, and were not safe.

COPYRIGHT CLAIM

The legislation

22                  The applicable provisions of the Copyright Act are ss 37 and 38 in the form they took prior to their amendment in 1998.  Section 37 dealt with infringement by importation for sale or hire.  Sub‑section (1) was as follows:

“Subject to section 44A, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of:

(a)               selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article;

(b)               distributing the article:

(i)                 for the purpose of trade; or

(ii)               for any other purpose to an extent that will affect prejudicially the owner of the copyright; or

(c)        by way of trade exhibiting the article in public;

if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright.”

Section 38 dealt with infringement by sale and other dealings.  Sub‑section (1) was as follows:

“Subject to section 44A, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, in Australia, and without the licence of the owner of the copyright

(a)               sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or

(b)               by way of trade exhibits an article in public,

if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted such an infringement.”

Alricarben’s defence ‑ no parallel importation

23                  As I understood it, Alricarben’s argument was that while Australian law recognises that there can be copyright in a trademark, this particular form of copyright may only be availed of in the parallel importation situation with which cases such as R A & A Bailey & Co v Boccaccio Pty Ltd (1986) 6 IPR 279 were concerned.  In Bailey the plaintiff manufactured a liqueur in the Republic of Ireland known as Bailey’s Original Irish Cream.  The product was imported into Australia by a distributor licensed by the plaintiff.  The product was sold in bottles with a distinctive label.  The plaintiff had registered a trade mark that closely resembled the label on the bottles.  The plaintiff had licensed distributors in other parts of the world including the Netherlands.  The defendants imported Baileys Irish Cream from the Netherlands.  These bottles bore a label similar to that on the bottles imported by the Australian distributor.  Young J rejected the defendants’ argument that when an artistic work is created for the purpose of use as a trade mark, there is an implied surrender of any copyright protection inconsistent with liberties provided under trade mark law, and held that the plaintiff’s copyright had been infringed.  See also Roland Corporation v Lorenzo & Sons Pty Ltd (1991) 105 ALR 623 at 627‑629.  In both cases the copyright owner’s exclusive distributor and the alleged infringer imported the same product.  The argument continued that Pioneer’s pleaded case was that the respondents were engaging in parallel importation.  That case had to fail on the facts, for it was common ground that neither Pioneer nor anyone on its behalf imported Pioneer DVD players during the time Alricarben imported them.  Pioneer did not import them until March/April 1998.

24                  The pleading aspect of this submission is unsound.  So far as concerns Pioneer the pleading sequence is as follows:

·               Pioneer is the proprietor of the registered trade mark “Pioneer” in relevant classes in the register

·               Pioneer is the proprietor of the registered “Tuning Fork in Omega Graphic” trade mark in relevant classes in the register

·               Pioneer is owner of copyright in the artistic work constituted by the above trade marks

·               Pioneer has manufactured an extensive range of consumer electronic goods for sale throughout the world under the trade marks, which have been sold in Australia since the 1960s

·               Pioneer has a substantial reputation by reference to the trade marks and the Pioneer name in connection with the sale, service and repair of Pioneer brand goods in Australia

·               Pioneer is the owner of copyright in

·                 the literary works being the instruction manuals concerning the use of Pioneer brand DVD players, warranty information for the players and a document giving information about authorised distributors of Pioneer products, and

·                 the artistic work constituted by the graphic design on the packaging of the DVD players.

Then paragraph 17 alleges:

“At various times since at least May 1997, the Respondents have each without permission of the Applicants, imported for sale, and/or exposed for sale and/or distributed for purposes of trade or otherwise in a manner which prejudicially affected the Applicants; and/or sold or by way of trade offered or exposed for sale DVD players under and by reference to, inter alia, the Pioneer Trade Marks, and packaged in the Pioneer packaging together with the Pioneer documents, where they each knew or ought reasonably to have known that the making of the DVD players bearing the Pioneer Trade Marks and/or the Pioneer packaging and/or the Pioneer documents by them in Australia would constitute an infringement of the copyright therein of the Second Applicant.”

Save for Pioneer’s claim to a substantial reputation and the claim in paragraph 17, Alricarben admits the above allegations.  Paragraph 17 of the pleading merely recites the content of ss 37 and 38 of the Act.  It contains no plea of parallel importation.

25                  Putting the pleading point aside, I do not accept the submission that ss 37 and 38 only apply to a case of parallel importation.  Their verbiage is not so restricted.  Section 38 is not even restricted to imported articles.  Without the aid of the Copyright (International Protection) Regulations 1969 Pioneer, as a foreign company, would not satisfy the copyright subsistence requirements of s 32, and could not sue for breach of copyright.  But reg 4 provides in part that

“the provisions of the Act apply in relation to literary, dramatic, musical and artistic works and editions first published … in a country that constitutes, or forms part of, the territory of a Country specified in Part I, Part II, or Part V of Schedule 1 in like manner as those provisions apply in relation to literary, dramatic, musical and artistic works and editions first published … in Australia.”

Pioneer’s literary and artistic works were first published in Japan.  Japan is specified in Parts I and V of Schedule 1.  Thus ss 37 and 38 apply to Pioneer’s literary and artistic works as they would apply to those works if first published in Australia.  For the purposes of s 37, Pioneer’s copyright is infringed by a person who, without its licence, imports an article for the purpose of selling it, if the importer had the relevant knowledge.  For the purposes of s 38 Pioneer’s copyright is infringed by a person who in Australia and without its licence sells an imported article, if the person had the relevant knowledge.  I can discern no implication in either section that the “owner of the copyright” must itself import the same article into Australia or must have licensed someone else to import it.

26                  The Copyright Law Review Committee, reporting in 1988 on the importation provisions of the Act, was clearly of the view that ss 37 and 38 were not limited to cases of parallel importation.  Sheppard J was chairman of the Committee.  The Committee said (at 12‑13):

“It is to be observed that the sections, in prescribing when the importation of a work will constitute an infringement, select as the test for determining infringement the fulfilment of the three conditions set out, namely, (a) the absence of a licence from the owner of the copyright in respect of Australia (b) the importation of the article for one of the prohibited purposes, and, (c) the knowledge that the making of the article, if it had been made in Australia by the importer, would have constituted an infringement.  Thus, for there to be an infringement the importer must be shown to have had no licence from the owner of the copyright in respect of Australia and also to have known that the making of the article in Australia by the importer would have infringed that copyright.  It may be possible to have an implied licence but it is clear that such an implication would not be lightly drawn by the courts; cf Interstate Parcel Express Co Pty Limited v Time‑Life International (Nederlands) B V (1977) 138 CLR 534.  Thus the fact that non‑pirated goods, eg books or records, are for sale by wholesale in an overseas country will not assist an importer for sale unless he or she is licensed to sell or deal in the goods in Australia.  If the importer is not licensed, there will, subject to proof of knowledge, be an infringement, no matter that the owner of the copyright may not have determined one way or the other whether to market the goods in Australia.”

27                  Alricarben imported Pioneer DVD players into Australia.  It is not clear how many were imported.  There were at least ten, and there may have been many more.  They were imported for the purpose of sale.  The products were branded “Pioneer” and were received in boxes that bore the trade marks “Pioneer” and the “Tuning Fork in Omega” graphic, with accompanying Pioneer branded documentation, including instruction books.  At least eleven sales of Pioneer labelled products by Alricarben were conceded by Lee.  Accordingly, unless Pioneer licensed Alricarben to import and sell the players, the first limb of each of ss 37 and 38 will be made out.

Licence by Pioneer

28                  Under ss 37 and 38 the onus of proving the absence of the licence of the owner of the copyright lies on the applicant: Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88.  The licence need not be contractual.  In the absence of an express licence, it is necessary to determine whether there are circumstances from which the existence of the copyright owner’s consent to importation or sale might be inferred.  A licence will not be inferred from the mere fact that the copyright owner made sales in its own country without expressly imposing on purchasers a restriction on importation into Australia: Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376 at 381; Interstate Parcel Express Co Pty Ltd v Time‑Life International (Nederlands) BV (1977) 138 CLR 534 at 556‑557 per Jacobs J.  Whilst indifference may reach a stage from which authorisation or permission may be inferred, a failure to object, or even an intention not to take any action to object to the importation of articles, does not necessarily constitute a licence for the purposes of ss 37 or 38: Time‑Life at 123 per McHugh J.

29                  In support of the submission that Pioneer had not discharged the onus of proving the absence of a licence, the respondents pointed to six matters:

·               Pioneer knew the players purchased from its Asian retail outlets were being sold in Australia

·               Pioneer knew the players were being modified to play in the Australian region and tolerated it

·               Pioneer knew that a transformer was required to operate the players in Australia

·               Pioneer permitted the Baker purchase to take place

·               Pioneer took no action to stop Lee’s activities until 22 December 1997 despite being aware of them before October 1997

·               Pioneer took no action at all to stop Alricarben, even though aware of its importing and selling activity.

30                  I do not regard these factors as pointing towards the grant of a licence.  Mr Barelli, Pioneer Australia’s managing director, said that while Pioneer knew that players purchased in Asia were being sold in Australia, once an Asian sale had taken place, there was little Pioneer could do to control the way in which the purchaser thereafter dealt with the player.  Nevertheless, when Pioneer Australia discovered that imported products were being sold in Australia, it contacted Pioneer, which reprimanded the Asian seller and pointed out that a sale to someone other than a bona fide consumer was a breach of the seller’s contract with Pioneer.  In those circumstances, Pioneer’s knowledge of the sales into Australia cannot found the implication of a licence to import and sell.

31                  Mr Barelli also pointed out that once the goods had been sold in Asia, there was little Pioneer could do to prevent the purchaser modifying them so they could be used in the Australian region.  The means of effecting the modification could be discovered on the Internet, and anyone could work out how to make the modification.  Pioneer did not approve of purchasers making the modifications, and had taken action against such purchasers in Europe.  In the circumstances, Pioneer’s awareness of the making of modifications does not point to the grant of a licence to Alricarben to import and sell the players.

32                  Pioneer’s awareness that a transformer was required to operate imported players in Australia does not point to a licence.  The Baker purchase was a trap purchase, preparing the ground for action against Alricarben and Lee.  It does not suggest a licence.  Given that action was taken against both Lee and Alricarben in late December 1997, the two months’ delay in doing so does not point to a licence.  See Time‑Life per McHugh J at 123.  In the circumstances in which Lee/Alricarben traded, it is unrealistic to draw a distinction between them, so as to suggest that while there was a belated objection to Lee’s conduct, there was no objection to Alricarben’s.

33                  In my view Pioneer has established that it did not licence Alricarben to import and sell DVD players.  There was no express licence.  Pioneer’s evidence was that it did not authorise Alricarben’s importation and sales activity.  That evidence was not challenged in cross‑examination.  No such licence should be implied.  It is not to be implied from the matters dealt with in pars 29 to 32.   Further, Pioneer was proposing to release DVD players onto the Australian market through Pioneer Australia in March/April 1998.  The players would be specific to the Australian market, would be 240 volt models and would comply with Australian safety regulations.  There was every reason why Pioneer would not want modified DVD players on the market prior to then, and absolutely no reason why it would licence someone like Alricarben to import and sell the inferior products.  Pioneer has satisfied the first limb of each of ss 37 and 38.

Knowledge ‑ actual or constructive

34                  The second limb of ss 37 and 38 is that the importer knew or ought reasonably to have known that if it had made the Pioneer DVD players in Australia that would have constituted an infringement of Pioneer’s copyright.  In RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 at 126 the Court of Appeal of New South Wales said of the words “to his knowledge” in s 103 of the Copyright Act, at a time when the section did not extend to the infringer’s constructive knowledge:

“A judge is entitled in inferring knowledge to use his assessment of the person with whom he is concerned; facts from which knowledge would readily be inferred in the case of an adult may well not be sufficient in the case of a child.  It seems to us that the principle is more accurately put by saying that a court is entitled to infer knowledge on the part of a particular person on the assumption that such a person has the ordinary understanding expected of persons in his line of business, unless by his or other evidence it is convinced otherwise.  In other words, the true position is that the court is not concerned with the knowledge of a reasonable man but is concerned with reasonable inferences to be drawn from a concrete situation as disclosed in the evidence as it affects the particular person whose knowledge is in issue.  In inferring knowledge, a court is entitled to approach the matter in two stages; where opportunities for knowledge on the part of the particular person are proved and there is nothing to indicate that there are obstacles to the particular person acquiring the relevant knowledge, there is some evidence from which the court can conclude that such a person has the knowledge.  However, this conclusion may be easily overturned by a denial on his part of the knowledge which the court accepts, or by a demonstration that he is properly excused from giving evidence of his actual knowledge.”

See also Star Micronics Pty Ltd v Five Star Computers Pty Ltd (1990) 18 IPR 225 at 235‑238 and Apple Computer Inc v Computer Edge Pty Ltd (1984) 53 ALR 225 at 238.  The infringer need not have knowledge of the law of copyright or of the precise nature of the intellectual property rights that would be infringed: Star Micronics at 236.

35                  Lee understood that he could not make copies of the materials claimed to be protected by Pioneer’s copyright.  He knew he could not photocopy the instruction manual, and that the “C” in the circle on the instruction book was a reference to copyright.  He was aware of copyright warnings at the commencement of videos.  He understood that “piracy” meant making an unauthorised copy of a video.  He was aware that he could not copy or reproduce the packaging used by a manufacturer of DVD players, and that the brand markings on DVD units could not be copied.  Further, after Slater’s warning in April 1997 Lee had notice of a claim of right by other owners in relation to the parallel importing of video discs and cassettes.  Slater advised Lee that he should check the importation of DVD hardware with hardware manufacturers.  Lee described Slater’s letter as “very unpleasant”, but did not, as he said he would, contact his solicitors and have them get in touch with Slater.  There is no evidence that Lee contacted hardware manufacturers.  The letter disclosed that copyright existed to prevent exactly the type of importation that Alricarben was engaging in with respect to DVD players.  A reasonable person would have asked what the prohibition of the importation of video discs and cassettes meant for the importation of players.  The effect of the conversation that followed was to put Lee on notice that the importation and sale of DVD players would be an infringement of copyright.

36                  In those circumstances I find that Alricarben, through Lee, knew that if it were to make Pioneer DVD players in Australia it would infringe Pioneer’s copyright.  Lee’s evidence was that he didn’t know that what he was doing was a breach of copyright.  I accept that that was so before Slater’s warning in April 1997.  But I am satisfied that as a result of the warning Lee knew that there was at least a risk that what he was doing was a breach of copyright.  But even accepting his evidence, it does not satisfy the test posed by ss 37 and 38, which is not whether the importer knew that what it was doing was a breach of copyright, but whether it knew that the manufacture by it of the product in Australia would be a breach.  If I am wrong about actual knowledge (in the sense described in par 34), there is a clear case of constructive knowledge.  Constructive knowledge (“ought reasonably to have known”) goes beyond notice of facts.  It focuses on the reasonableness of the conduct of the alleged infringer, and is concerned with whether, acting reasonably, the infringer ought to have made further inquiries that would have led to it acquiring the relevant knowledge.  See Raben Footwear Pty Ltd v Polygram Records Inc (1997) 37 IPR 417 at 426 per Tamberlin J.  In view of what he had been told by Slater, Lee should have made inquiries as to the lawfulness of his importation and sale of DVD players.  He should have contacted his solicitors, as he said he would, and he should have contacted the hardware manufacturers.  It was unreasonable for him to remain passive as he did.  Had he made these inquiries he would have discovered the true position.

MISLEADING AND DECEPTIVE CONDUCT

37                  The applicants seek declarations that Alricarben’s conduct constitutes a contravention of ss 52 and 53 of the Act, injunctions restraining the making of representations alleged to constitute contraventions of those sections and damages.  It was submitted for Alricarben that even if it had engaged in misleading and deceptive conduct, the applicants’ trade practices claims had to fail for want of proof of reliance and damage.  But this confuses proof of breach of ss 52 and 53 with the relief that may be granted in respect of the breach.  There is no need to show reliance or loss in order to obtain a declaration that someone has engaged in contravening conduct or an injunction restraining that conduct.  See Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1979) ATPR 40‑135 at 18,474 and World Series Cricket Pty Ltd v Parish (1977) ATPR 40,040 at 17,426.  It is certainly necessary to prove that loss was suffered in consequence of contravening conduct in order to recover damages under s 82.  That follows from the words of the section ‑ “A person who suffers loss or damage by conduct of another person that was done in contravention of” a provision of Part V.  See Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525.  But loss and damage are not in issue at this stage, questions of liability and quantum having been separated.  What is in issue before me is whether the declarations and injunctions I have mentioned should be made or granted.

38                  The applicants case under s 52 of the Trade Practices Act was that Alricarben represented that the DVD players and the transformers supplied with them were suitable for use and/or approved for use by the applicants in Australia.  In my view by advertising, offering for sale and selling the players, Alricarben represented that they were suitable and safe for use in Australia.  That was misleading and deceptive, or likely to mislead or deceive.  For the reasons given in pars 16 to 21, the DVD players as sold were not suitable and safe for use in Australia.  Counsel for the respondents made no attempt to answer this part of the applicants’ case, though at one stage he said he would return to it later.

SPONSORSHIP/APPROVAL

39                  Fiedler’s evidence was that Lee told him at the time of purchase that the warranty he was receiving was “a Pioneer warranty that the Pioneer people will fix it up”, and that if the machine could not be fixed locally, it would be sent to be fixed by the manufacturer overseas. Baker observed brochures depicting Pioneer and Panasonic equipment on display in the surgery.  Alricarben supplied the Pioneer players with a twelve month warranty.  The Fiedler warranty contained the words ‑ “12 Months Warranty.  If no local warranty, then freight to Japan borne by customer”.  The box in which the DVD player was sold to Baker was supplied by the manufacturer.  It contained an instruction manual and other materials.  Both the exterior features of the box and the manual and other material would suggest an association between Alricarben and the manufacturer.  On the basis of the foregoing I find that Alricarben falsely represented that it had the approval of the applicants to sell Pioneer brand goods, and that it was authorised by the applicants to use the Pioneer trade marks, documents and packaging.  That was a contravention of s 53(d).  I do not consider the other pleaded sponsorship/approval representations have been made out.

PASSING OFF

40                  Pioneer Australia’s case on passing‑off was that Alricarben’s conduct conveyed a misrepresentation that it was associated with Pioneer Australia or was sponsored by it, and that this was potentially damaging to its goodwill.  Alricarben was selling Pioneer goods which were not approved or fit for sale.  This had the potential to cause a loss of sales when Pioneer players were released in Australia in March/April 1998.  These products were to be manufactured specifically to comply with Australian standards.

41                  Pioneer Australia has a substantial reputation by reference to the Pioneer trade marks and name in connection with the sale, service and repair of Pioneer brand goods in Australia.  It has imported for sale, and promoted and sold throughout Australia, very substantial quantities of Pioneer brand goods to a value of approximately $67 million to $83 million per year over the years 1995 to 1999.  Its expenditure on advertising between 1994 and 1999 was at least $3 million per annum.  Since 1973 it has been responsible for the provision of authorised service and repair for all Pioneer brand goods in Australia, and for the appointment of authorised service and repair agents throughout Australia.

42                  In my view Alricarben’s conduct conveyed a representation that it was associated with Pioneer Australia.  The representation was false, and was reasonably likely to cause confusion in the trade and in the minds of the public.  That is to say, there was a reasonable likelihood that consumers would be confused or deceived.  See A G Spalding & Bros v A W Gamage Ltd (1915) 84 LJ Ch 449 at 452 and Baume & Co Ltd v A H Moore Ltd [1958] Ch 907 at 915, 917‑919.

43                  The respondents submitted that the tort required proof of deceit, which was neither pleaded nor proved.  An applicant does not have to prove deceit in order to establish passing off.  An intention to deceive has not been a necessary ingredient of the tort since Millington v Fox (1838) 3 My & Cr 338; 40 ER 956 decided that equity concerned itself with the protection of a plaintiff’s property rights.  The modern basis of the tort is injury to an applicant’s reputation, business or goodwill by the respondent’s conduct irrespective of any intention to deceive.  See Warnink v J Townend & Sons (Hull) Ltd [1979] AC 731 and Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at 344.

44                  The misrepresentation was likely to damage Pioneer Australia’s goodwill because the goods that were being sold by Alricarben were not suitable or safe for sale in Australia.  By the time of the planned release of Pioneer DVD players and products in March/April 1998, it was likely that such products would have acquired a bad name because of Alricarben’s sale of the imported Pioneer players.  Passing off does not require proof of actual damage; the probability of damage is sufficient: H P Bulmer Ltd and Showerings Ltd v J Bollinger SA [1978] RPC 79.

LEE’S LIABILITY

45                  The law on the personal liability of a director for corporate torts is in an uncertain state.  There seem to be at least four views having judicial support.

1.                  A director will be liable along with the company when he has procured or directed it to commit the tort: Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1 at 14; Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 84 FLR 101 at 127; Martin Engineering Co v Nicaro Holdings Pty Ltd (1991) 100 ALR 358; Microsoft Corp v Auschina Polaris Pty Ltd (1996) 142 ALR 111; Lott v JWB & Friends Pty Ltd [2000] SASC 3; Henley Arch Pty Ltd v Clarendon Homes (Aust) Pty Ltd (1998) 41 IPR 443 at 464.

2.                  A director will be liable only if he has made the wrongful act his own as distinct from it being an act of the company: Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195; White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61 at 91; King v Milpurrurru (1996) 136 ALR 327 at 346‑351.

3.                  A director will be liable if he has assumed responsibility for the company’s acts: Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517.

4.                  A director is not liable for procuring the company to infringe the rights of others: Said v Butt [1920] 3 KB 497; O’Brien v Dawson (1942) 66 CLR 18 at 32, 34; Rutherford v Poole [1953] VLR 130; Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980.

For the purpose of the second approach, making the wrongful act the director’s own involves “a knowing, deliberate, wilful quality to the participation”: Mentmore at 203.  In King v Milpurrurru at 351 Beazley J said a director will be liable if he commits or directs the commission of the tort “deliberately or recklessly, so as to make the tortious conduct his own”.  For the purposes of the third approach, assumption of responsibility may be actual or imputed.  It may be imputed where the director exercises particular control or control over a particular operation or activity: Trevor Ivory at 527 per Hardy Boys J.  His Honour thought assumption of responsibility was more likely to be imputed in the case of a large company, where there are clear allocations of responsibility, than in a small one.  McGechan J, while not accepting that a director of a one‑man company is to be regarded as automatically accepting responsibility, said there may well be an assumption of responsibility where the director is highly prominent and the company barely visible.  He stressed that all will depend on the facts of the particular case.

46                  The clear preponderance of authority, especially in this Court, favours the first approach.  The fourth approach is supported by Starke and McTiernan JJ in O’Brien v Dawson.  However the other members of the Court (Rich and Williams JJ) did not deal with the point, and it is not a decision that binds me to apply that approach.  Although there has been some criticism of the first approach (see eg Farrar, Personal Liability of Directors for Corporate Torts (1997) 9 Bond LR 102 at 111), I should apply it unless convinced that it is clearly wrong.  I do not think it is.  That was the view taken by Lindgren J in Microsoft and Mullighan J in Lott.  See also Henley Arch at 464 per Merkel J.  Lee was Alricarben’s moving spirit.  He directed and promoted its infringements of copyright and passing off.  In these circumstances, Lee is liable along with Alricarben.

47                  For the foregoing reasons Lee is liable with Alricarben for infringement of copyright and passing off.  Lee was knowingly concerned in Alricarben’s contravention of s 52 and s 53(d) of the Trade Practices Act.  See s 75B.  In view of these conclusions, I need not deal with the claims that comparable provisions of the Fair Trading Acts of Victoria and New South Wales were also contravened.

48                  I will hear counsel as to the relief that should be granted, and as to costs.

Associate:

Dated:              22 December 2000