FEDERAL COURT OF AUSTRALIA

Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd (No 2) [2021] FCA 1053

ORDERS

In these orders:

DreamDesk Source Code Works means the literary works in the source code of the DreamDesk system and includes the three PHP files named “src\Functions\edms.php”, “views.adhoc-edit.php” and “views\adhoc-edit2.php”;

DreamDesk Database and Table Works means the literary works in the DreamDesk database and 18 tables within the database;

PDF Works means the literary or artistic works in the PDF templates in the “client_data” folder in the DreamDesk system;

Toolbox system means the “Real Estate Tool Box” software system.

THE COURT DECLARES THAT:

1.    The third respondent has infringed copyright:

(a)    in the DreamDesk Source Code Works, by:

(i)    reproducing the whole or a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;

(ii)    authorising other developers and users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;

(iii)    authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in using the Toolbox system;

(b)    in the DreamDesk Database and Table Works, by reproducing a substantial part of the structure of the DreamDesk Database and Table Works;

(c)    in the PDF works, by reproducing the whole of the PDF Works in material form;

without the licence of the applicant or New Litho Pty Ltd.

2.    The third respondent has, to the extent declared above, misused the confidential information of the applicant or New Litho Pty Ltd constituted in the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works.

THE COURT ORDERS THAT:

Injunctions and verified destruction

3.    The third respondent, whether by himself, his servants, agents or otherwise, be permanently restrained from:

(a)    reproducing in material form or authorising the reproduction in material form; and

(b)    communicating or authorising the communication to the public;

of the whole or a substantial part of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works, without the licence of the copyright owner.

4.    Within 28 days of the date of these orders, the third respondent permanently destroy or erase, on oath or affirmation, all reproductions of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works in his possession, custody, power or control, such verification to set out steps undertaken to give effect to the destruction or erasure.

5.    Until the third respondent fully complies with order 4 above, the third respondent be restrained from disposing of, or otherwise parting with his possession, custody, power or control of any of the reproductions referred to in order 4 which presently remain in existence.

Dismissal of unsuccessful claims

6.    The proceeding against the first, second, fourth, fifth, sixth and seventh respondents be dismissed.

Costs

7.    The third respondent pay the applicant’s costs of the proceeding up to and including the date of the making of these orders in a lump sum in an amount determined by the Registrar in accordance with GPN-COSTS and such directions as the Registrar considers appropriate.

8.    The applicant pay the costs of each of the first, second, fourth, fifth, sixth and seventh respondents of the proceeding in a lump sum in an amount determined by the Registrar in accordance with GPN-COSTS and such directions as the Registrar considers appropriate.

Inquiry

9.    There be an inquiry as to:

(a)    damages or profits in respect of copyright infringement;

(b)    equitable damages or compensation or profits in respect of misuse of confidential information, if the applicant contends such a pecuniary remedy should also be awarded;

such inquiry to be listed for case management before Justice Thawley at 9am on 5 October 2021.

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

REASONS FOR JUDGMENT

THAWLEY J:

1    Reasons for judgment in these proceedings were delivered on 19 July 2021 and an order was made requiring the parties to confer with a view to providing agreed orders to give effect to the reasons for judgment: Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2021] FCA 809. Unfortunately, the parties were unable to agree the appropriate orders. Accordingly, orders were made for the filing of brief submissions and the proceedings were listed for argument.

2    These reasons address the principal issues which divided the parties and the reasons for making the orders now made. Familiarity with the reasons for judgment is assumed and I have adopted the abbreviations used in those reasons. A reference in these reasons to the “represented respondents” is a reference to the first, second and fourth to seventh respondents. The third respondent, Mr David Semmens, was self-represented at trial and remains self-represented.

3    The proceedings were commenced on 18 May 2017, with RETB (the first respondent), Biggin & Scott (the second respondent) and Mr Semmens as the respondents. Campaigntrack alleged infringement of Campaigntrack’s copyright in the source code of the “DreamDesk” software system, a cloud-based real estate marketing system originally created by the third respondent, Mr Semmens, an experienced software developer. Campaigntrack’s claim of infringement was rejected, except as against Mr Semmens who was principally responsible for developing RETB’s Toolbox system. RETB ceased to trade, and ceased to use the Toolbox system, in about June 2018.

4    In addition to asserting infringement of copyright, Campaigntrack made claims for breach of contract, breach of undertakings given to Campaigntrack by some of the represented respondents and, in equity, for breach of confidence. Many of these claims were introduced in December 2018 when the fourth to seventh respondents were joined to the proceedings. None of these claims succeeded.

Declarations

5    The first area of dispute concerns what declarations should be made. There was no dispute that a declaration as to infringement on the part of Mr Semmens was appropriate. The parties proposed different forms of the declaration. The declaration made is the one I consider best reflects the nature of the infringement as found in the reasons for judgment.

6    Campaigntrack also sought declarations that copyright subsisted in various original works and that Campaigntrack and New Litho were co-owners of copyright in the various works the subject of infringement. These declarations had not been claimed as relief in the proceedings.

7    The parties are bound by the findings made. The remedy of declaration should not be used to record in summary form the conclusions reached by the Court in the reasons for judgment: Warramunda Village Inc v Pryde (2001) 105 FCR 437 at [8]. I am not persuaded that there is real utility in making the declarations sought.

Constructive trust

8    Campaigntrack submitted that the Court should declare that a constructive trust exists over the copyrights in the various works and all versions of the Toolbox system. No such relief was either claimed or suggested at any point during the hearing or in extensive written closing submissions or in oral closing submissions. It was not considered in the reasons for judgment.

9    Campaigntrack’s argument in support of declaring a constructive trust was that the Toolbox system has been made in circumstances which involved “the invasion of [Campaigntrack’s] copyrights in the Source Code Works, Database Work, Table Works and PDF Works” and that it was “inequitable and against good conscience for any of the respondents to assert ownership of copyright in Toolbox and to market the system”.

10    It was submitted that the Court should declare the subsistence of the trust and make a mandatory order requiring assignment of the legal title to those copyrights to Campaigntrack and New Litho. Campaigntrack referred to Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [102] (Gummow & Hayne JJ; Callinan J agreeing at [309]); Smethurst v Commissioner of Police (2020) 376 ALR 575 at [84] (Kiefel CJ, Bell & Keane JJ). Campaigntrack submitted that the constructive trust should not be limited to any specific version of Toolbox but should extend to all versions.

11    No remedy of constructive trust was sought by way of relief in the proceedings. The proceedings were not conducted on the basis that the remedy was sought. RETB ceased to trade, and ceased to use the Toolbox system, in about June 2018. It was not suggested that any of the respondents have, since that time, been either using or marketing the Toolbox system. An order imposing a constructive trust does not give effect to the reasons for judgment and is not necessary to do justice between the parties – see: John Alexander’s Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1 at [128].

12    Indeed, the imposition of a constructive trust would work an injustice in circumstances where a claim for a constructive trust was not advanced at any stage of the proceedings before judgment and was not apparently considered by the parties in choosing how to run their cases or what evidence to adduce.

Injunctions

13    Campaigntrack submitted that injunctions should be made against each respondent, despite the fact that the infringement case only succeeded against Mr Semmens and that RETB ceased to trade or use the Toolbox system some years ago.

14    Campaigntrack submitted that an injunction should be made notwithstanding that RETB has ceased to use the Toolbox system because:

(a)    “the respondents have transitioned to another system (REDHQ) developed by … Mr Semmens” and “there is evidence REDHQ is based on Toolbox”;

(b)    none of the respondents have undertaken to cease using the infringing Toolbox system;

(c)    it is easy to resume use of the Toolbox system; and

(d)    the Court made adverse findings as to Mr Stoner’s credibility and Mr Semmens’ destruction and withholding of material.

15    As to these matters:

(a)    I do not accept that the evidence permits an inference to be drawn that the REDHQ software was based on Toolbox. The one item of evidence referred to in support of this submission is more consistent with a view on the part of Ms Bartels that the use of the word “Toolbox” in connection with REDHQ might attract the attention of Campaigntrack and cause further dispute in a context where there was subsisting litigation which was being vigorously pursued, amongst other things – I infer – for the legitimate commercial objective of reducing competition.

(b)    I do not regard as persuasive the absence of an undertaking by the represented respondents to cease using the Toolbox system in circumstances where RETB ceased to trade or use the Toolbox system over three years ago and there is no apparent risk of it being used.

(c)    The ease of using the Toolbox system is not persuasive. It is difficult to see who would want to use that system in circumstances where a new system has been developed.

(d)    The Court considered that one aspect of Mr Stoner’s evidence was incorrect and took that matter into account in assessing Mr Stoner’s credibility. Mr Stoner’s evidence as a whole, including on the matters of most importance, was accepted. Thus, at [42] and [43] it was stated:

Campaigntrack submitted that “Mr Stoner knew there was a real risk that, in developing the new system, Mr Semmens might infringe the intellectual property rights of DDPL or Campaigntrack”. Campaigntrack also submitted that “Mr Stoner’s denials that he did not appreciate the risk of infringement, and that he was not seeking to address that risk by the instructions in [his letter], are simply not credible in light of his answers in cross-examination, and should be rejected”.

In the context of the events which had occurred, including the fact that – to Mr Stoner’s knowledge – Mr Semmens had admitted to using Process 55 in developing DreamDesk, it was hardly surprising that Mr Stoner would seek an assurance from Mr Semmens that he would not infringe the intellectual property rights of others in building a web to print delivery system. I am satisfied that Mr Stoner trusted Mr Semmens not to infringe the intellectual property rights of DDPL or Campaigntrack in developing the new system. I conclude that Mr Stoner did not want Mr Semmens to misuse intellectual property belonging to others in developing the new system.

16    I consider it appropriate for an injunction to issue against Mr Semmens, but not against any of the other respondents.

Delivery up and destruction

17    Campaigntrack submitted that delivery up orders should be made against each respondent, together with orders that each prepare an affidavit explaining what each did to comply with the order and that, in the meantime, each be restrained from disposing of any reproductions.

18    Mr Semmens’ position was that he had no infringing code and that he would state that by way of affidavit if required. In my view, it is appropriate to make an order for verified destruction as against Mr Semmens. I am not satisfied that it is appropriate to make delivery up or destruction orders against any of the represented respondents.

Costs – represented respondents

19    Campaigntrack argued that the represented respondents should pay 90% of Campaigntrack’s costs, despite the fact it failed on every claim for relief made against them. This was said to be appropriate because, in so far as its claims were for infringement of copyright, it had established subsistence and ownership, albeit failing on the issue of infringement.

20    Campaigntrack submitted that costs should be awarded on the basis of the issues won and that it won on 90% of the issues in the proceedings as against the represented respondents.

21    Ordinarily, costs follow the event. The relevant event is that Campaigntrack failed to obtain any of the relief it sought against the represented respondents.

22    In so far as the case concerned copyright infringement, Campaigntrack had to prove infringement on the part of Mr Semmens in order to prove authorisation against the represented respondents. Mr Semmens, by his defence, disputed subsistence in, and ownership of, copyright, with the result that the benefit of the presumptions in s 126 of the Copyright Act 1968 (Cth) was lost. Those matters were put in issue by Mr Semmens at a time when he was represented. It is true that the represented respondents also put subsistence and ownership in issue, but that did not add in any way to what Campaigntrack had to prove given those matters were disputed by Mr Semmens.

23    In any event, the submission that Campaigntrack was successful in respect of issues which reflected 90% of the time and cost involved in the proceedings cannot be accepted. As noted earlier, the copyright infringement case was only part of the case. Extensive claims were made for breach of contract, for example. Lengthy opening and closing submissions addressed these issues. Substantial cross-examination was directed to parts of the case other than copyright infringement. The respondents were justified in directing resources to all of the various claims made against them. Any perception on the part of Campaigntrack that its main case was one of copyright infringement does not detract from the fact that it chose also to make claims for breach of contract, breach of undertakings and for breach of confidence. All of these issues which Campaigntrack chose to introduce had to be addressed.

24    Campaigntrack relied on an offer of compromise served a month before the hearing, which would have taken subsistence and ownership out of play, but this required a concession of infringement on the part of RETB. RETB was successful, as was each represented respondent. It was reasonable on the part of each of the respondents to reject the proposal contained in the offer of compromise in light of its terms and the time at which it was made. I observe that there were no notices to admit facts.

25    Campaigntrack should pay the costs of each of the represented respondents. They each successfully defended the claims made against them in a way which was not shown to be such as to warrant departure from the usual order that costs follow the event.

Costs in respect of Mr Taylor’s report

26    Campaigntrack submitted that the respondents should pay forthwith the costs of the court-appointed expert, Mr Taylor. It was submitted that the appointment of Mr Taylor was done at the respondents’ instigation and that the parties (including Mr Semmens while represented) jointly prepared the instructions to Mr Taylor. Mr Taylor’s findings supported Campaigntrack’s case, particularly in establishing that DreamDesk source code was contained in Toolbox.

27    Mr Taylor first became involved in connection with a dispute as to whether there had been adequate production of documents. It was considered that this issue should be decided with the assistance of an independent expert. Campaigntrack proposed Mr Taylor. When consideration was later given to the scope of Mr Taylor’s task, the respondents (including Mr Semmens, who was then represented) suggested that Mr Taylor could also examine the similarities, if any, between relevant software. Ultimately, that occurred. The evidence furnished by Mr Taylor assisted Campaigntrack’s case, but it was a necessary part of its case against Mr Semmens. There is no reason to make a special order for costs visiting the costs of Mr Taylor’s report on the represented respondents.

28    Campaigntrack’s costs in relation to Mr Taylor will ultimately fall on Mr Semmens given that he should be ordered to pay Campaigntrack’s costs.

Costs – Mr Semmens

29    There was no dispute that Mr Semmens should pay Campaigntrack’s costs.

30    Campaigntrack, however, argued that a Sanderson order should be made requiring Mr Semmens to pay the costs of the represented respondents to the extent Campaigntrack was ordered to pay those costs. This is not, in my view, an appropriate case for a Sanderson order. The proceedings were commenced on 18 May 2017 against RETB, Biggin & Scott and Mr Semmens. DDPL, Mr Meissner, Mr Stoner and Ms Bartels were joined over a year later, shortly before Christmas 2018. The joinder of these new respondents was accompanied by an extensively amended statement of claim raising new causes of action, including ones which were quite distinct from the existing copyright case. I do not consider it reasonable, as between Campaigntrack and Mr Semmens, that Mr Semmens be liable for Campaigntrack’s pursuit of liability on the part of any of the represented respondents.

31    If I had thought it appropriate to require Mr Semmens to pay the costs incurred by the represented respondents in their successful defence of Campaigntrack’s claim (which I do not), I would in any event have made a Bullock order requiring Mr Semmens to reimburse Campaigntrack in respect of those costs. I would not have regarded it as appropriate for the represented respondents to bear the risk in relation to Mr Semmens’ capacity to pay those costs.

Conclusion

32    For those reasons, I make the following orders:

(1)    The third respondent has infringed copyright:

(a)    in the DreamDesk Source Code Works, by:

(i)    reproducing the whole or a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;

(ii)    authorising other developers and users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in developing the Toolbox system;

(iii)    authorising users of the Toolbox system to reproduce a substantial part of the DreamDesk Source Code Works in material form in using the Toolbox system;

(b)    in the DreamDesk Database and Table Works, by reproducing a substantial part of the structure of the DreamDesk Database and Table Works;

(c)    in the PDF works, by reproducing the whole of the PDF Works in material form;

without the licence of the applicant or New Litho Pty Ltd.

(2)    The third respondent has, to the extent declared above, misused the confidential information of the applicant or New Litho Pty Ltd constituted in the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works.

(3)    The third respondent, whether by himself, his servants, agents or otherwise, be permanently restrained from:

(a)    reproducing in material form or authorising the reproduction in material form;

(b)    communicating or authorising the communication to the public;

of the whole or a substantial part of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works, without the licence of the copyright owner.

(4)    Within 28 days of the date of these orders, the third respondent permanently destroy or erase, on oath or affirmation, all reproductions of the DreamDesk Source Code Works, the DreamDesk Database and Table Works and the PDF Works in his possession, custody, power or control, such verification to set out steps undertaken to give effect to the destruction or erasure.

(5)    Until the third respondent fully complies with order 4 above, the third respondent be restrained from disposing of, or otherwise parting with his possession, custody, power or control of any of the reproductions referred to in order 4 which presently remain in existence.

(6)    The proceeding against the first, second, fourth, fifth, sixth and seventh respondents be dismissed.

(7)    The third respondent pay the applicant’s costs of the proceeding up to and including the date of the making of these orders in a lump sum in an amount determined by the Registrar in accordance with GPN-COSTS and such directions as the Registrar considers appropriate.

(8)    The applicant pay the costs of each of the first, second, fourth, fifth, sixth and seventh respondents of the proceeding in a lump sum in an amount determined by the Registrar in accordance with GPN-COSTS and such directions as the Registrar considers appropriate.

(9)    There be an inquiry as to:

(a)    damages or profits in respect of copyright infringement;

(b)    equitable damages or compensation or profits in respect of misuse of confidential information, if the applicant contends such a pecuniary remedy should also be awarded;

such inquiry to be listed for case management before Justice Thawley at 9am on 5 October 2021.

Associate:

Dated:    31 August 2021

SCHEDULE OF PARTIES