FEDERAL COURT OF AUSTRALIA

Microsoft Corporation v TYN Electronics Pty Limited (In Liquidation)

[2004] FCA 1307

MICROSOFT CORPORATION & ORS v TYN ELECTRONICS PTY LIMITED (IN LIQUIDATION) & ANOR

N 925 OF 2002

STONE J

8 OCTOBER 2004

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 925 OF 2002

BETWEEN:	MICROSOFT CORPORATION FIRST APPLICANT
	MICROSOFT PTY LIMITED SECOND APPLICANT
	MICROSOFT LICENSING, INC THIRD APPLICANT
	MICROSOFT LICENSING, GP FOURTH APPLICANT
AND:	TYN ELECTRONICS PTY LIMITED (IN LIQUIDATION) FIRST RESPONDENT
	NGAT DOAN SECOND RESPONDENT
JUDGE:	STONE J
DATE OF ORDER:	8 OCTOBER 2004
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. In these orders, capitalized terms have the meaning set out in the Annexure to these orders.

2. The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from:

(a) reproducing or authorising the reproduction of the whole or a substantial part of any of the Microsoft Programs without the licence of the first applicant;

(b) importing, selling, offering for sale, supplying, offering to supply or distributing any Infringing Microsoft Program;

(c) importing, selling, offering for sale, supplying, offering to supply or distributing any Incomplete Microsoft Program;

(d) importing, selling, offering for sale, supplying, offering to supply or distributing any Unaffixed Certificate of Authenticity labels; and

(e) authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by the orders in subparagraphs (a), (b), (c) and (d) of this order.

3. The respondents and each of them deliver up to the solicitors for the applicants on oath within 7 days of the date of service of this order upon them:

(a) each Infringing Microsoft Program and any equipment used to make any such infringing copy in the possession, power, custody or control of the respondents or either of them;

(b) all Unaffixed Certificate of Authenticity labels in the possession, power;, custody or control of the Respondents or either of them.

4. Judgment be entered for the fourth applicant against the first and second respondents jointly and severally in the sum of $386,000 being damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth).

5. Judgment be entered for the fourth applicant against the first respondent in the sum of $300,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

6. Judgment be entered for the fourth applicant against the second respondent in the sum of $400,000 for additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).

7. The respondents and each of them, whether by their servants, agents or otherwise, be permanently restrained from infringing the Microsoft Trade Marks by:

(a) manufacturing, procuring the manufacture of, importing, purchasing, selling, offering to sell, supplying, offering to supply or distributing any Infringing Microsoft Product; and

(b) authorising, directing or procuring any other company or person to engage in any of the conduct sought to be restrained by sub-paragraph (a) above.

8. The respondents and each of them deliver up to the solicitors for the applicants on oath within 7 days of the date of service of this order upon them:

(a) All infringing Microsoft Products in the possession, custody or control of the respondents or either of them; and

(b) Any equipment used or intended to be used for making Infringing Microsoft Products in the possession, custody or control of the respondents or either of them.

9. The first respondent, whether by its servants, agents or otherwise, be permanently restrained from representing in trade or commerce to persons to whom the first respondent supplies or offers to supply any Infringing Microsoft Programs, Incomplete Microsoft Programs, or Infringing Microsoft Products:

(a) that the first respondent is lawfully entitled to supply any such product; or

(b) in the case of Infringing Microsoft Programs and Infringing Microsoft Products, that any such product has been made with the licence of the first applicant.

10. The second respondent be permanently restrained from aiding, abetting, counselling, procuring or being in any way directly or indirectly a party to or concerned in the conduct sought to be restrained by order 9.

11. The first and second respondents pay the applicants’ taxed costs of the proceedings incurred up to and including 7 September 2004 (including any reserved costs).

12. The second respondent pay the applicants’ taxed costs of the proceedings incurred on or after 8 September 2004 (including any reserved costs).

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ANNEXURE to the orders of Stone J -

8 October 2004

‘Incomplete Microsoft Program’ means a copy of the whole or a substantial part of any of the Microsoft Programs which is not accompanied by the associated media, product manual, certificate of authenticity and end-user licence agreement for the relevant Microsoft Program;

‘Infringing Microsoft Products’ means any Microsoft Class 9 Products or Microsoft Class 16 Products to which the mark ‘MICROSOFT’ or the mark ‘WINDOWS’ or a mark substantially identical with, or deceptively similar to, the mark ‘MICROSOFT’ or the mark ‘WINDOWS’ has been applied without the consent of the first applicant;

‘Infringing Microsoft Program’ means a copy of the whole or a substantial part of any of the Microsoft Programs which has not been made by or with the licence of the first applicant or which has been imported into Australia without the licence of the first applicant;

‘Microsoft Class 9 Products’ means computer programs, magnetic discs and tapes containing computer programs, computer software, computer hardware, memory boards for use with computers, programmed chips, cartridges embodying computer programs and computer software and firmware embodied in computers or designed to be used therewith;

‘Microsoft Class 16 Products’ means printed instructional and teaching material related to computers and computer software, books, paper and printed matter for use with computer equipment, computer hardware and software manuals, newsletters featuring information about computer hardware and software, paper, paper tape and cards for the recordal of computer programs;

‘Microsoft Programs’ means the computer programs, associated documentation and works identified in the Schedule hereto; and

‘Microsoft Trade Marks’ means any or all of the first applicant’s registered trade marks comprising the mark ‘MICROSOFT’ and numbered 371528(9) and 377674(16) or comprising the mark ‘WINDOWS’ and numbered 576996(9) and 576997(16).

SCHEDULE to the orders of Stone J

8 October 2004

MICROSOFT PROGRAMS

All versions of the following computer programs and associated manuals and documentation (including versions created or released subsequent to the date hereof):

Microsoft Access

Microsoft Access Developers Toolkit for Windows

Microsoft Access Distribution Kit

Microsoft Access Solution Pack for Windows

Microsoft Access Upsizing Tools for Windows

Microsoft Age of Empires

Microsoft Age of Empires Expansion: The Rise of Rome

Microsoft Age of Empires II: The Age of Kings

Microsoft Allegiance

Microsoft Ancient Lands

Microsoft Arcade for Windows

Microsoft Asheron’s Call

Microsoft BackOffice

Microsoft Beethoven for Windows: The Ninth Symphony

Microsoft Best of Entertainment Pack

Microsoft Biz Talk Server

Microsoft Biz Talk Server Enterprise

Microsoft Bookshelf

Microsoft Caribbean Scenery

Microsoft Casino

CD-ROM Fun and Fact Pack for Windows

Microsoft Cinemania

Microsoft Close Combat

Microsoft Close Combat Russian Front

Microsoft Combat Flight Simulator

Microsoft Commerce

Microsoft Complete Baseball 1995 for Windows

Microsoft Complete NBA Basketball 1995 for Windows

Microsoft Cordless Wheel Mouse

Microsoft Crimson Skies

Microsoft Creative Writer

Microsoft Dangerous Creatures

Microsoft Dinosaurs

Microsoft Dogs

Microsoft Encarta

Microsoft Entertainment Pak

Microsoft Entertainment Pak: The Puzzle Collection

Microsoft Excel

Microsoft Exchange

Microsoft Explorapedia: World of Nature

Microsoft Explorapedia: World of People

Microsoft Fine Artist

Microsoft Flight Simulator

Microsoft FORTRAN Compiler

Microsoft FORTRAN PowerStation

Microsoft FoxPro

Microsoft FrontPage 2000

Microsoft FrontPage 1.0 Macintosh Edition

Microsoft Golf 2001 Edition

Microsoft Greetings 2001

Microsoft Host Integration Server

Microsoft Intellimouse Explorer

Microsoft Intellimouse Optical

Microsoft Intellimouse Trackball

Microsoft Interix

Microsoft International Soccer 2000

Microsoft Internet Explorer

Microsoft Internet Keyboard

Microsoft Internet Keyboard Pro

Microsoft ISA Server

Microsoft ISA Server Enterprise Edition

Microsoft Japan Scenery

Microsoft LAN Manager

Microsoft LAN Manager Resource Kit

Microsoft Links 2000 LS

Microsoft Links 2001

Microsoft Links Courses

Microsoft Macro Assembler

Microsoft Mastering Enterprise

Microsoft Mastering MFC

Microsoft Mastering Visual Basic

Microsoft Mastering Visual Studio Ent

Microsoft Mastering Web Development

Microsoft Mail

Microsoft Mechwarrier

Microsoft Metal Gear Solid

Microsoft Midtown Madness

Microsoft Money 2001

Microsoft Money for Windows

Microsoft Monster Truck Madness

Microsoft Motocross Madness 3D Version 2

Microsoft Mozart for Windows – The Dissonant Quartet

Microsoft MSDN Library

Microsoft MSDN Professional

Microsoft MSDN Universal

Microsoft MS-DOS

Microsoft Multimedia Composer Collection

Microsoft Musical Instruments

Microsoft My Personal Tutor Pre-K

Microsoft Natural Keyboard Pro

Microsoft New York Scenery

Microsoft NT Server Enterprise

Microsoft Office

Microsoft Outlook

Microsoft Pandoras Box

Microsoft Paris Scenery

Microsoft PhotoDraw 2000

Microsoft Picture It! Premium

Microsoft Picture It! Publishing Gold Edition

Microsoft Picture It! Publishing Silver

Microsoft Pinball Arcade

Microsoft PowerPoint

Microsoft PowerPoint 2000

Microsoft Plus Entertainment Pack

Microsoft Project

Microsoft Proofing Tools

Microsoft Proxy Server

Microsoft Publisher

Microsoft Rabbit Ears for Windows: How The Leopard Got His Spots

Microsoft Racing Madness

Microsoft Return of Arcade

Microsoft Scenes – Brain Twister Collection

Microsoft Scenes – Flight Collection

Microsoft Scenes – Hollywood Collection

Microsoft Scenes – Impressionists

Microsoft Scenes – Sierra

Microsoft Scenes – Sierra Club Nature Collection

Microsoft Scenes – Sierra Club Wildlife Collection

Microsoft Scenes – Sports Extremes Collection

Microsoft Scenes – Stereogram Collection

Microsoft Scenes – Undersea Collection

Microsoft Scholastics’ Magic School Bus

Microsoft Schubert for Windows: The ‘Trout’ Quintet

Microsoft Services for Netware

Microsoft Services for Unix

Microsoft SGML Author for Word

Microsoft Sidewinder Dual Strike

Microsoft Sidewinder Force Feedback Pro

Microsoft Sidewinder Force Feedback Steering Wheel

Microsoft Sidewinder Freestyle Pro

Microsoft Sidewinder Gamepad Pro

Microsoft Sidewinder Game Voice

Microsoft Sidewinder Joystick

Microsoft Sidewinder Plug & Play Game Pad

Microsoft Sidewinder Precision Pro 2

Microsoft Sidewinder Precision Racing Wheel

Microsoft Sidewinder Strategic Commander

Microsoft Sidewinder Site Server

Microsoft Sidewinder Site Server Internet Connector

Microsoft Small Business Server

Microsoft Small Business Server Client Add On

Microsoft Smart Cards

Microsoft SNA

Microsoft SoundBits – Classic Cartoons from Hanna Barbera

Microsoft SoundBits – Classic Hollywood Movies

Microsoft SoundBits – Musical Sounds from Around the World

Microsoft SourceSafe

Microsoft Space Simulator

Microsoft SQL Server

Microsoft Starlancer

Microsoft Strauss for Windows

Microsoft Stravinsky for Windows: The Rite of Spring

Microsoft Systems Management Server

Microsoft Systems Management CAL

Microsoft Systems Management Server

Microsoft Test for Windows

Microsoft TrueType Font Pack

Microsoft Visio

Microsoft Visual Basic

Microsoft Visual Basic Enterprise

Microsoft Visual Basic Pro

Microsoft Visual Basic Standard

Microsoft Visual C++

Microsoft Visual C++ Enterprise

Microsoft Visual C++ Professional

Microsoft Visual C++ Standard

Microsoft Visual FoxPro

Microsoft Visual FoxPro Professional

Microsoft Visual InterDev

Microsoft Visual J++ Pro

Microsoft Visual J++ Standard

Microsoft Visual SourceSafe

Microsoft Visual Studio Enterprise Edtn

Microsoft Visual Studio Professional

Microsoft Wheel Mouse

Microsoft Wheel Optical

Microsoft WinCE Took Kit for VB

Microsoft WinCE Took Kit for VC++

Microsoft Windows

Microsoft Windows 95

Microsoft Windows 98

Microsoft Windows 2000 Advanced Server

Microsoft Windows CAL

Microsoft Windows 2000 Internet Connector

Microsoft Windows 2000 Professional

Microsoft Windows 2000 Server

Microsoft Windows Trmnl Services CAL

Microsoft Windows for Workgroups

Microsoft Windows CAL

Microsoft Windows Millennium Edition

Microsoft Windows NT

Microsoft Windows NT CAL

Microsoft Windows NT Server

Microsoft Windows NT Workstation

Microsoft Wine Guide

Microsoft Word

Microsoft Works

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 925 OF 2002

BETWEEN:	MICROSOFT CORPORATION FIRST APPLICANT
	MICROSOFT PTY LIMITED SECOND APPLICANT
	MICROSOFT LICENSING, INC THIRD APPLICANT
	MICROSOFT LICENSING, GP FOURTH RESPONDENT
AND:	TYN ELECTRONICS PTY LIMITED (IN LIQUIDATION) FIRST RESPONDENT
	NGAT DOAN SECOND RESPONDENT

JUDGE:	STONE J
DATE:	8 OCTOBER 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Background

1 This proceeding concerns alleged breach of copyright in computer programs contrary to the Copyright Act 1968 (Cth) (‘Copyright Act’), infringement of registered trademarks contrary to the Trade Marks Act 1995 (Cth) (‘Trade Marks Act’) and contravention of the Trade Practices Act 1974 (Cth) (‘Trade Practices Act’). The applicants commenced this proceeding in 2002. At that time the first respondent’s name was APD International Pty Limited. By special resolution made on 11 October 2002 the name was changed to TYN Electronics Pty Ltd and the change registered on 24 October 2002. The current amended application and amended statement of claim were filed on 27 May 2004. The respondents filed an amended defence on 28 June 2004.

2 The applicants claim that, in relation to the alleged copyright and trade mark infringements, the second respondent, Mr Doan, is a joint tortfeasor with the first respondent (‘TYN’) because Mr Doan ‘authorised, directed and procured’ the acts of TYN. They also claim, for the same reason, that Mr Doan is liable under s 75B of the Trade Practices Act as a person involved in the contravention of that Act. Mr Doan’s liability is discussed below at [32]-[34] below.

3 At a directions hearing on 14 July 2004 detailed orders to finalise preparation of the matter for hearing were made and it was set down for hearing over four days commencing 27 September 2004. The respondents were represented at that hearing by their solicitor, Mr Voy Ilic. When the matter was called on for hearing on 27 September there was no appearance by either of the respondents. This was not entirely unexpected for reasons that are explained below.

4 On 8 September 2004 Mr Ilic advised the applicants’ solicitors that he no longer represents either of the respondents. On the same day, following a meeting of the first respondent’s creditors, Mr M J Smith of Smith Hancock Chartered Accountants was appointed as liquidator of the first respondent. In a letter dated on 16 September 2004 to the solicitors for the applicants, Mr Smith stated that he had no objection to this proceeding continuing although he did not consent to it. On 27 September Mr Ilic forwarded to the applicants and to the Court a notice, apparently signed by Mr Doan, stating that Mr Doan now represents himself. The applicants have served both Mr Doan and, for greater caution, Mr Ilic with copies of all documents that, in accordance with directions made on 14 July, they have prepared for the hearing.

5 When there was no appearance for the respondents at the hearing the applicants requested me to order, pursuant O 32 r 2(1)(d) of the Federal Court Rules, that the trial continue generally in the absence of the respondents and also that, pursuant to s 500(2) of the Corporations Act 2001 (Cth),I give leave under for the proceeding to continue despite the first respondent being in liquidation. In the circumstances described above I was satisfied that both orders were appropriate and they were duly made.

Trial in the absence of the respondent

6 An election to proceed with the trial generally under O 32 r 2(1)(d) imposes a particular burden on the Court in ensuring that justice is done to both parties. The Court must investigate the merits of the claims made; Applicant A184 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1076 at [89]. However, the Court is not required to act as advocate for the absent party; Re Jorgenson; ex parte HG & R Nominees Pty Ltd [1999] FCA 1023 at [2].

7 In the absence of the respondent, an applicant has the burden of proving the claims made in so far as they are not admitted, for example, on the pleadings or by a failure to dispute a fact specified in a notice to admit facts issued under O 18 r 2 of the Federal Court Rules. In doing so it is necessary for the applicant to call sufficient admissible evidence to discharge the evidentiary burden raised by the pleadings; MY Distributors Pty Ltd v Omaq Pty Ltd (1992) 36 FCR 578. In making its case, the applicant must be confined strictly to the claims made in the pleadings; Barker v Furlong [1891] 2 Ch 172 at 179. An applicant who has proved those claims is entitled to the relief claimed (so long as it is appropriate to the claims) and ‘to such other relief as is incidental thereto’; Stone v Smith (1887) 35 Ch D 188 at 189. It follows that an applicant whose evidence does not support the claims made, either in whole or in part, will to that extent be unsuccessful.

The respondents’ admissions

8 In the absence of the respondents no evidence on their behalf was put before the Court. In their amended defence filed on 28 July 2004 and by virtue of their failure to object to three notices to admit facts served on them by the applicants, the respondents have made certain admissions that include all of the facts contained in the following paragraphs under the heading ‘Statement of admitted facts’. I should add that much, if not all, of the of the information concerning the applicants set out in [9] below, was independently supported by affidavit evidence submitted by the applicants. In particular I refer to two affidavits of Ms Sarah Kaisser, Intellectual Property Manager for the second applicant.

Statement of admitted facts

9 The first applicant (‘Microsoft’) manufactures, markets and distributes all versions of the computer programs identified in the schedule to the amended statement of claim (‘Microsoft Programs’) and is the owner of copyright in those programs. The second applicant (‘MPL’) is a subsidiary of Microsoft and provides marketing and technical support in Australia in relation to the Microsoft Programs. From 31 December 1997 to 1 September 2003 the third applicant (‘MLI’) had an exclusive licence in respect of the copyright and distribution of ‘OEM’ versions of Microsoft Programs (including Microsoft Windows Millennium Edition), being versions supplied to and by original equipment manufacturers and assemblers for distribution as part of a computer hardware package. From 1 September 2003 the licensing rights in respect of OEM versions were transferred to the fourth applicant (‘MLGP’). Those rights included the rights in respect of infringements of copyright in the OEM versions of Microsoft Programs. Microsoft is also is the registered owner of trade marks ‘MICROSOFT’ and ‘WINDOWS’ in classes 9 (computer programs) being trade marks 371528 and 576996, as well as 16 (printed material etc) being trade marks 377674 and 576997 (the ‘Microsoft Trade Marks’). MPL is an authorised user of those trade marks.

10 TYN has carried on business as a wholesaler of computer hardware and software since at least 1999. At all material times Mr Doan has been the sole director of TYN and has controlled its day to day activities. In 1997 the applicants filed proceedings in this Court against Beam 2000 Systems Pty Ltd (‘Beam Proceedings’) of which Mr Doan was a director and against Mr Doan in relation to their supply of counterfeit Microsoft software. On 18 November 1997 a judge of this Court made orders restraining Mr Doan and Beam from infringing Microsoft’s copyright and trademarks. In March 2000 Mr Doan and TYN executed an undertaking not to infringe Microsoft’s copyright and trade mark rights.

11 The respondents’ admissions also included facts about licence fees and prices payable in respect of certain Microsoft Programs and about the net revenue of Microsoft and MPI in respect of these Programs; see [40] below.

copyright claims

12 Computer programs and compilations of computer programs are literary works within the definition of that term in s 10 of the Copyright Act. It is an infringement of the copyright in a literary work for a person to reproduce or authorise the reproduction of a literary work in a material form without the licence of the copyright owner; Copyright Act ss 13, 14, 31 and 36.

13 Section 38 of the Copyright Act provides that it is also an infringement of copyright if a person, without licence from 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 …’

14 The applicants claim breaches of both s 36 and s 38. The burden of proof in respect of those claims is on the applicants both in respect of the ownership of copyright, the alleged conduct and the absence of licence; Avel Proprietary Limited v Multicoin Amusements Pty Ltd (1990) 171 CLR 88. As can be seen from the statement of admitted facts (see [9]-[10] above) Microsoft’s ownership of the relevant copyright is not in dispute however the applicants must prove the infringing conduct and the absence of licence.

Microsoft Licensing

15 Evidence concerning Microsoft Programs and the licensing procedures followed by the applicants was given in two affidavits of Sarah Kaisser, Intellectual Property Manager for MPL. At that time of making her affidavits in this proceeding Ms Kaisser was responsible for administering the enforcement of the intellectual property rights of Microsoft in Australia and for detecting unlicensed Microsoft products including counterfeit copies. Ms Kaisser also outlined the various forms of licensing followed by Microsoft. She stated:

‘Every copy of a Microsoft Program published by Microsoft bears a copyright notice on each component item of that copy including within the program itself, on the CD-ROM, on the product manual and on the packaging. This practice has been adhered to consistently since Microsoft commenced publishing computer programs.’

16 She described the training that she had received at Microsoft Head Office in Seattle USA and in a regional office in Singapore in relation to the identification of authorised and unauthorised copies of Microsoft programs.

17 Ms Kaisser described in some detail the licensing procedures for manufacturing and distributing Microsoft Programs as well as Microsoft’s end user licensing arrangements. She stated that Microsoft does not permit persons to reproduce the Microsoft Programs other than as part of those manufacturing and distribution processes or pursuant to its end user licensing arrangements. Ms Kaisser described how she is able to search the applicants’ records to ascertain if a person or company is licensed to reproduce Microsoft Programs under any of the various forms of licence. She stated that she had performed searches in the various categories of licences and that, as a result of those searches, she was able to say that neither respondent was licensed in any category of licence.

18 Ms Kaisser also described the distinctive packaging of Microsoft Programs and the various ways in which Microsoft Certificates of Authenticity are or have been incorporated in the packaging, affixed to the exterior of the relevant computer system or otherwise integrated in the relevant CD-ROM program. She also described the ‘Source Identification Codes’ that Microsoft requires its licensees to use and stated that, since January 1996 ‘all compact discs containing genuine copies of Microsoft Programs’ have been stamped with the relevant Source Identification Code.

Backup CD infringements

19 The applicants allege, pursuant to s 36 of the Copyright Act, that the respondents breached Microsoft’s copyright by reproducing without licence the Microsoft Program known as Microsoft Windows Millennium Edition (‘Windows ME’) onto 100 recordable compact discs which were sold to L&P Net Solutions Pty Ltd (‘L&P’) on or about 11 December 2001 and onto a further 200 compact discs sold to L&P on about 14 December 2001. Alternatively, pursuant to s 38 of the Copyright Act, they allege that the respondents have infringed Microsoft’s copyright by selling these compact discs in circumstances where they knew or ought to have known that making the compact discs or offering them for sale was an infringement of Microsoft’s copyright.

20 In addition to the evidence given by Ms Kaisser (see [15]-[18] above), affidavit evidence in support of this claim was also given by Peter Lai, company secretary of L&P, Emily Tan, who was responsible for managing the receipt and despatch of L&P’s stock and Imran Shakoor, a technical support analyst employed by Datacom Customer Contact Pty Ltd. The evidence shows that in December 2001, in response to an order from a customer, L&P had ordered from TYN and TYN had supplied, 300 copies of Windows ME and 70 hard disk drives.[1] Covering the face of each of the compact discs that TYN supplied to L&P was a white label marked with the words ‘BACKUP CD’. Those compact discs (the ‘backup CDs’) were supplied to L&P’s customer, Natcomp Technology Australia Pty Ltd (‘Natcomp’). Both L&P and Natcomp were duly invoiced for the backup CDs respectively by TYN and L&P.

21 In March 2002 Natcomp contacted L&P and complained that the backup CDs and some Microsoft Certificate of Authenticity labels also supplied by TYN were illegal copies. In due course L&P returned 45 of the backup CDs and 45 Certificate of Authenticity labels to TYN and received a credit in respect of those discs. In April 2002, TYN gave L&P a tax credit note in relation to the 300 copies of Windows ME supplied by TYN in December 2001. In May 2002 Natcomp returned to L&P two backup CDs and one Certificate of Authenticity label which were exhibited to the affidavit of Mr Lai.

22 Ms Kaisser described her examination of one of the compact discs supplied to L&P. She noted that the discs did not contain a Source Identification Code and concluded that the copies of Windows ME contained on the discs were counterfeit. In the absence of any rebutting evidence from the respondents it is not necessary to recount Ms Kaisser’s evidence here; it is sufficient that I accept both Ms Kaiser’s evidence and her conclusion that the copies of Windows ME contained on the Backup CDs supplied to L&P by TYN had been made without the licence from the copyright owner.

23 The applicants invite the Court to infer that TYN reproduced the Windows ME software on the backup CDs from the fact that TYN supplied them to L&P and from their appearance, which indicates the discs were not professionally made. Alternatively they submit that it is a reasonable inference that the first respondent knew that the reproduction of Windows ME on these backup CDs was an infringement of Microsoft copyright. On the former view there is a primary infringement of copyright pursuant to s 36 of the Copyright Act. On the latter view there is a secondary infringement of copyright pursuant to s 38 of the Copyright Act arising from the respondents dealings with the backup CDs. In support of the latter inference they submit that:

a) licensed copies of Microsoft Windows ME are not and have not ever been supplied either in Australia or anywhere else in the world in the form of backup CDs supplied to L&P on 11 and 14 December 2001;

b) the evidence shows that both the respondents have extensive experience in the computer industry and for that reason would have been aware that the backup CDs supplied to L&P were counterfeit; and

c) when L&P told the first respondent that its customers had complained that the copies were not legal copies the first respondent gave L&P a full refund of the amount paid in respect of the 300 backup CDs supplied on 11 and 14 December although L&P was able to return only 45 of those backup CDs to the first respondent.

24 I am not satisfied that the applicants have proved to the requisite standard that the either or both of respondents produced the backup CDs in breach of s 36 of the Copyright Act. In my view is equally likely that the respondents obtained the backup CDs from an unidentified third party as that they produced them themselves. However, on the basis of Ms Kaisser’s evidence I accept that neither respondent was licensed by Microsoft and I am satisfied, for the reasons submitted by the applicants, that the respondents were both aware the backup CDs constituted an infringement of Microsoft’s copyright and that their supply to L&P was in breach of s 38.

The ‘Restore CD’ infringements

25 The applicants also claim breach of copyright in relation to 3,400 compact discs that TYN ordered from NECE Pty Ltd, trading as Compact Disk Media (‘CD Media’). In her affidavit of 23 July 2003, Ms Jennifer Stones gave evidence of this transaction and the processes by which CD Media meets orders for the replication of compact discs, as well as the details of the particular order placed by the first respondent. At the time of making her affidavit Ms Stones was employed by CD Media as a production co-ordinator and I accept that, as such, Ms Stones was in a position to give accurate evidence about those matters.

26 According to Ms Stones, in September 2001 TYN provided CD Media with two master discs, each labelled ‘Restore CD’, that together contained a copy of each of the programs, Windows ME, Microsoft Works 6.0 and Microsoft Money 2001. At the request of TYN, CD Media replicated those programs onto 3,400 compact discs (the ‘Restore CDs’) in the process making 1,700 copies of the programs referred above.

27 The first step in manufacturing such discs is to create glass master discs from the discs supplied by the customer. The discs requested by a customer are printed from those glass master discs. After replication of the master discs the disc labels are added to the compact discs using filmed positives and a screen-printing process. The glass master discs and the filmed positives used in making the Restore CDs were exhibited to Ms Stones’ affidavit. Ms Stones also provided a copy of the invoice issued to TYN, a copy of the delivery docket that accompanied the delivery of the compact discs ordered by TYN as well as evidence of payment of CD Media’s invoice by TYN.

28 Ms Stones also described how when CD Media is fulfilling such an order it creates a certain number of surplus compact discs that it retains at its premises for use if the customer experiences a problem with its order. A number of the surplus Restore CDs were also exhibited to Ms Stones’ affidavit. Mr Shakoor’s technical analysis confirmed Ms Stones’ account in so far as the content of the master discs and the Restore CDs are concerned. On the basis of this evidence and Ms Kaisser’s evidence referred to in [17]-[18] above, I am satisfied that the copies of program that are on the Restore CDs are infringing copies made by CD Media on the authorisation of the respondents and that, pursuant to s 36 of the Copyright Act, there has been an infringement of Microsoft’s copyright.

trade Mark infringement claim

29 I am able to deal briefly with the applicants’ claims of infringement of the Microsoft Trade Marks. The evidence that satisfies me that the applicants have infringed Microsoft’s copyright also supports the claims of infringement of the Microsoft Trade Mark. The evidence of Ms Kaisser and Mr Shakoor shows that the copies of Windows ME, Microsoft Works 6.0 and Microsoft Money 2001 on the Backup CDs and the Restore CDs all bore the Microsoft Trade Marks. These copies fall within the categories of goods for which the Microsoft Trade Marks are registered and the evidence of Ms Kaisser is sufficient to establish that the respondents were not licensed to use these trade marks. Accordingly I accept that the applicants have made out their claim for trade mark infringement under s 120 of the Trade Marks Act.

Trade Practices Act Claim

30 I accept, as the applicants allege in their statement of claim, that by reason of the respondents’ conduct in selling and offering to sell the Backup CDs and the Restore CDs the respondents have,

‘expressly or impliedly represented to purchasers of those products, contrary to fact, that:

(a) such items were made by or with the licence of [Microsoft];

(b) the respondents were lawfully entitled to sell such items; and

31 It follows from the findings I have made in relation to the copyright and trade mark claims of the applicants that the representations of the respondents are false and misleading and contrary to s 52 and ss 53(a), (c) and (d) of the Trade Practices Act.

Mr Doan’s liability

32 I am satisfied that that Mr Doan’s relationship with and control of TYN is such that he is jointly liable with TYN for the copyright and trade mark infringements discussed above. The applicants alleged and the respondents admitted (see [10] above) that at all material times Mr Doan has been the sole director of TYN and has controlled its day to day activities. In that position he has authorised the offending actions of TYN. Moreover Section 36(1) of the Copyright Act specifically includes in its description of persons who infringe copyright, a person who ‘authorizes the doing in Australia of, any act comprised in the copyright’. Section 36(1A) states that in determining whether a person has authorised such conduct, the following matters must be taken into account:

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

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

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

33 I recently discussed the concept of authorisation and the liability of a director for infringement by the corporation in Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135 at [73]-[77]. Those principles and the authorities mentioned there are equally applicable here and on that basis I am satisfied that Mr Doan authorised the infringement of Microsoft’s copyright and is personally liable for this infringement.

34 Similarly I accept that Mr Doan is liable under s 75B of the Trade Practices Act as a person involved in the contravention of that Act. That section extends liability for, inter alia, breaches of ss 52 and 53 to a person who ‘has aided, abetted, counselled or procured the contravention’ or the Trade Practices Act or ‘has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention’. As the sole director and person in charge of TYN on a daily basis Mr Doan falls within both these descriptions and on that basis he is liable under s 75B; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 at 209.

Relief sought by the applicants

35 The applicants claim injunctive relief in respect of their claims under the Copyright Act, the Trade Marks Act and the Trade Practices Act. They also claim damages under each of those statutes but, acknowledging that they are not entitled to ‘double count’, they say that they are content to proceed on the assumption that damages under the Copyright Act will overlap damages on the other counts and accordingly restrict their claims to damages for infringement of copyright under ss 115(2) and 115(4) of the Copyright Act.

Injunctive relief

36 I am satisfied that injunctive relief is appropriate in respect of the respondents’ infringement of copyright and trade marks as well as their contravention of the Trade Practices Act. The applicants seek broad forms of injunction submitting that the evidence shows that Mr Doan is a ‘repeat infringer’ and that they have a reasonable apprehension of further infringements. In my view their apprehension is justified.

37 The respondents have admitted the facts admitted set out in [9]-[10] above and these facts have been independently proved by the applicants. Those facts, together with other evidence before me suggest that the respondents, and in particular Mr Doan, have a cavalier approach to the applicants’ rights. There is ample precedent for such comprehensive injunctions; Microsoft Corporation v Plato Technology Limited [1999] FSR 834, Microsoft Corporation v Blanch [2002] FCA 895, TS & B Retail Systems Pty Ltd v 3fold Resources Pty Ltd [2003] FCA 371, Microsoft Corporation v Goodview Electronics Pty Ltd (2000) 49 IPR 578.In my view they arewarranted in this case.

Compensatory damages under s 115(2) of the Copyright Act

38 In my view the appropriate approach to the measure of compensatory damages under s 115(2) in this case is the ‘licence fee’ approach for which the applicants have argued; see General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 2 All ER 173. In Autodesk Australia Pty Ltd v Cheung (1990) 17 IPR 69 at 75 Wilcox J said:

‘The [licence fee] approach has the attraction of precision. In a case where the court may infer that, presented with a choice between paying the licence fee and not using the work, the infringer would have paid the licence fee, the approach is also a logical one. Ex hypothesi the copyright owner has been deprived of a licence fee.’

39 I accept the applicants’ submission that in this case the inference to which Wilcox J referred may be drawn. TYN was a dealer in personal computers, which necessarily require operating systems. Without operating systems such as Windows ME, TYN would not have had a saleable product and could not have continued its business. I am prepared to extend this inference to Microsoft Money and Microsoft Works as both programs are standard applications for personal computers and here were bundled with the personal computer systems sold by TYN.

40 The applicants contend that the admissions of the respondents provide the necessary basis for the calculation of compensatory damages. Those admissions are that:

(a) During the period 1 January 1999 to October 2002, the licence fee or price payable by retailers and wholesalers such as the respondents for a single licensed copy of the Microsoft Program known as Microsoft Windows (including Microsoft Windows ME), and the net revenue of Microsoft for each supply in Australia, was in excess of $A125;

(b) During the period January 1999 to October 2002, the licence fee or price payable by retailers and wholesalers such as the respondents for a single licensed copy of the Microsoft Program known as Microsoft Works 6.0, and the net revenue of the MLI for each supply in Australia, was in excess of $A30; and

(c) During the period January 1999 to October 2002, the licence fee or price payable by retailers and wholesalers such as the respondents for a single licensed copy of the Microsoft Program known as Microsoft Money 2001, and the net revenue of Microsoft for each supply in Australia, was in excess of $A50.

41 On the basis of the above, the applicants claim the following amounts:

1. Microsoft Windows ME: $125.00 x 2000 copies supplied (includes 300 copies supplied to L&N and 1700 copies TYN authorised CD Media to make), a sum of $250,000.00.

2. Microsoft Works 6.0: $30.00 x 1700 copies, a sum of $51,000.00

3. Microsoft Money 2001: $50.00 x 1700,a sum of $85,000.00

The total of the compensatory damages claimed from TYN and Mr Doan, jointly and severally, is $386,000.00. I am satisfied that these amounts are appropriate and propose to order damages accordingly. For reasons given in [9] above these damages will be ordered in favour of MLGP.

Additional damages under s 115(4) of the Copyright Act

42 In addition to compensatory damages the applicants also seek additional damages under s 115(4) of the Copyright Act. This proceeding commenced in September 2002 at which time s 115(4) relevantly provided:

‘Where, in an action under this section –

(a) an infringement of copyright is established; and

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

(i) the flagrancy of the infringement; and

….

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

(iv) all other relevant matters;

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

43 Section 115(4) makes clear that the conduct of the infringing parties must be taken into account in deciding whether to award additional damages. The flagrancy of the infringement is an important but not an essential factor; Raben Footware Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93. The decision the Court must make is whether, taking into account all relevant matters including those referred to in the subsection, the award of additional damages is appropriate.

44 On 27 February 2004, the respondents filed an affidavit made by Mr Doan on 25 February 2004. The applicants tendered part of that affidavit as exhibit 1 in this proceeding. In that affidavit Mr Doan admitted that he has been in business as a wholesale computer distributor since 1986; that before that he had worked on microcode design with a US company, Prime Computers for two years. It is clear from this experience and his involvement in the Beam proceedings referred to in [10] above that Mr Doan was aware, at least in general terms, of the restrictions that Microsoft imposes to protect its copyright. The Beam proceedings were settled by agreement between the parties. By consent on 18 November 1997, Lockhart J made orders restraining, relevantly, Mr Doan from infringing Microsoft’s copyright in the Microsoft Programs and in certain Microsoft trade marks. In February 2000 the solicitors for Microsoft wrote to Mr Doan alleging further breach of copyright by him and by TYN in contravention of the orders of Lockhart J. Pursuant to the demands made in that letter, both respondents executed a deed by which they undertook, jointly and severally, not to infringe Microsoft’s copyright.

45 The respondents’ conduct in this proceeding also justifies the inference that they were aware that their conduct constituted infringement of copyright and tried to conceal it. I am satisfied by the applicants’ evidence that the respondents initially failed to discover any documents relating to their dealings with CD Media despite such documents being captured by the categories of documents they were required to discover. These documents were not disclosed until the applicants, having independently obtained information of these transactions, made specific enquiries.

46 The above account shows that the respondents’ conduct has involved deliberate and calculated infringement of copyright and disregard of the applicants’ rights. Moreover their conduct, and in particular Mr Doan’s conduct, has been such that it is undeniable that they would have been acutely aware of the implications of their conduct. Mr Doan disregard of the orders of Lockhart J warrants particular condemnation.

47 Although the applicants have requested injunctive relief, they have also submitted that Mr Doan’s conduct does not inspire confidence in its deterrent value. For this reason they submit that an award of substantial additional damages is appropriate. The role of deterrence was not mentioned in s 115(4) as it was at the time these proceedings commenced. From 13 May 2003, however, subsection (4)(b)(ia) was added to the section and provides, as a matter to be taken into account, ‘the need to deter similar infringements of copyright’. In my view this amendment makes express what was always implicit as a matter that the Court should consider; Bailey v Namol Pty Limited (1994) 53 FCR 102 at 113-114.

48 I am satisfied by the flagrancy of the respondents’ conduct, the benefit that must have accrued to them (given the commercial context in which the infringements occurred) and the need to deter such conduct in the future that substantial additional damages are warranted here. In their written submissions the applicants have drawn my attention to the awards made in a number of previous cases including most recently, Microsoft Corporation v Goodview Electronics Pty Ltd (2000) 49 IPR 578, Microsoft Corporation v Glostar Pty Ltd [2003] FCA 210 and Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135. Ultimately, however, the amount depends on the circumstances of the individual case. The applicants have submitted that a separate award in respect of each respondent is appropriate and have suggested an amount of damages that is the same for each respondent. Although both respondents are culpable, in my view, the greater responsibility and culpability must lie with Mr Doan. I propose to order additional damages in favour of MGLP in the amount of $300,000 against TYN and in the amount of $400,000 against Mr Doan.

49 The first and second respondents must also pay the applicants’ taxed costs of the proceedings incurred up to and including 7 September 2004 (including any reserved costs). The second respondent must pay the applicants’ taxed costs of the proceedings incurred on or after 8 September 2004 (including any reserved costs).

I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate:

Dated: 8 October 2004

Counsel for the Applicant:	Mr R Cobden

Solicitor for the Applicant:	Mallesons Stephen Jacques

Counsel for the First and Second Respondents:	The First and Second Respondents did not appear

Date of Hearing:	27 and 28 September 2004

Date of Judgment:	8 October 2004

[1] In a number of places Mr Lai’s affidavit refers to these transactions occurring in December 2002 but it is clear from the invoices annexed to his affidavit that this is a typographical error and that the correct year is 2001.

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