Re Ozi-Soft Pty Limited and Others v Michael David Wong; Seok Hian Wong and Computermate Products (Aust) Pty Limited [1988] FCA 7 (22 January 1988)

FEDERAL COURT OF AUSTRALIA

Re: OZI-SOFT PTY. LIMITED and OTHERS
And: MICHAEL DAVID WONG; SEOK HIAN WONG and COMPUTERMATE PRODUCTS
(AUST.) PTY. LIMITED
Nos. G87 and G88 of 1986
Copyright

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Copyright - Importation and sale of diskettes - copyright owners sold diskettes in the United Kingdom - no restriction - no express licence - purchasers imported diskettes into Australia for the purpose of re-sale - whether a licence can be implied.

Copyright Act 1968: s 37(1)

HEARING

SYDNEY
22:1:1988

Counsel and Solicitors for the Applicant: Mr. D.K. Catterns instructed by: Colin J. Cohen Partner

Counsel and Solicitors for the Respondent: Mr. J.M. Ireland instructed by: Marcus B. Karpin & Co.

ORDER

Order that the importation and sale by the respondents of the diskettes referred to in the statement of agreed facts was done without the licence of the respective applicants and is therefore prohibited under the Copyright Act 1968.

NOTE: Settlement and entry of these orders are dealt with in accordance with Order 36 of the Federal Court Rules.

DECISION

On 13 March 1987 Justice Wilcox ordered that the following question be tried separately upon the basis of a statement of agreed facts filed in court on 13 March 1987:

"Whether the importation and sale by the respondents of the

diskettes referred to in the statement of agreed facts was
done with the licence of the respective applicants?"

There are a total of fifteen applicants, the names (and origins) of which are set in Schedule A to this judgment.

2. The relevant agreed facts were:

1.The second to fifteenth applicants inclusive (the applicants)
are the respective owners of the copyright in the computer
programs (the programs) set out in Schedule B hereto.

2.Ozi-Soft Pty. Limited (the first applicant) is the licensee of
the copyright in the programs.

3.The respondents have imported into Australia for the purpose of
sale and have sold diskettes and other articles which reproduce
a substantial part of the programs in a material form.

4.The diskettes containing video games (the diskettes) were
manufactured outside Australia, variously in the United State,
United Kingdom and Canada.

5.They were purchased by the respondents in the United Kingdom
with the authority and consent of the applicants, the copyright
owners.

6.No restriction was placed upon the respondents or any other
person or company from whom the respondents purchased the
diskettes as to the extent to which respondent might deal with
the programs.

3. It is clear from the agreed facts that the importation and sale by the respondents of the diskettes was not done with the express consent of the applicants. If consent cannot be implied, section 37 of the

4. Copyright Act 1968 ("the Act") forbids such importation and sale. Section 37 states:

"37. 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,

where, to his knowledge, the making of the article
would, if the article had been made in Australia by
the importer, have constituted an infringement of
the copyright."

5. The applicants submit that section 37 casts the onus upon the respondent to show that there was licence and not on them to prove that they have or could have imposed a restriction.

6. Legislation, case law and various international conventions have developed in this area favouring exclusivity of ownership for the copyright owner. Under section 13 of the Act, for example, the copyright owner has both the exclusive right to do or to authorize another person to do acts protected by the copyright.

7. There is no argument that the diskettes are encompassed in copyright legislation. A computer program is defined in section 10 of the Act as:

"an expression in any language, code or notation of a set of
instructions intended . . . to cause a device having digital
information processing capabilities to perform a particular
function."

8. By section 10(1)(b), a literary work includes a computer program or compilation of computer programs.

9. The Act distinguishes two subject matters for copyright in Parts III and IV of the Act. Part III deals with copyright in original literary dramatic musical and artistic works and is the relevant part here. Part IV deals with matters such as cinematograph films and sound recordings. It is not relevant here.

10. Copyright is an exclusive right, in the case of a literary work, to reproduce the work in a material form (section 31(1)(a)). Under section 14(1)(b) reproduction is deemed to include reproduction of a substantial part of the work.

11. The only issue to be determined here is whether there was an implied unrestricted licence to import and sell these diskettes.

12. Counsel for the applicants argued that the decision Interstate Parcel Express Co. Pty. Limited (Ipec) v Time Life International (Nederlands) B.V. and Another [1977] HCA 52; (1977) 138 CLR 534 (the Time-Life case) is a most profound statement by the High Court on facts alleged to be indistinguishable for present purposes. The proposition relied on is that in copyright law a licence cannot be implied from the mere fact that the copyright owner had sold the goods without any express restriction on their subsequent disposal.

13. It is necessary to consider this case in some detail as the success of either party in this matter depends on an understanding of the decision.

14. The Time-Life Case was an appeal from a judgment of the New South Wales Supreme Court making certain declarations and orders in respect of copyright infringement, in favour of Time-Life against Ipec, which was then operating the Angus & Robertson Bookshops. Time-Life, a Dutch company, was at the time the exclusive licensee of Time Incorporated, a New York company (Time Inc.), in respect of certain books of which Time Inc. was the copyright owner. The proceedings were originally instituted by both these companies but Time Inc. discontinued fearing that to proceed might involve advancing an argument that could be construed as an infringement of the anti-trust legislation of the United States of America.

15. Time-Life's distributor, Little Brown & Company, sold books to an American company, Raymar Incorporated without restriction. Raymar sold them to Ipec which imported the books to Australia and sold them. There was no express licence from Time-Life or Time Inc. to do so, nor were there any restrictions placed on the sales to Raymar or Ipec.

16. The issue was whether Ipec imported the books into and sold them in Australia without the licence of the owner of the copyright. The High Court was of the view that the word licence as it appears in section 31 means no more than consent; and that a licence in this context may be given orally or be implied by conduct. As in the present case, there was no question in the Time-Life case of an express licence or of consent to the importation and sale.

17. Reliance was placed on a line of authorities in patent cases, the principle there being that when a patented article is bought, control is implied unless there is explicit indication by the vendor that the buyer cannot sell it. The High Court distinguished the patent cases from copyright because under patent law, the patentee has the exclusive right to make, exercise and vend the product. Therefore to avoid a licence being implied, an express restriction needs to be placed on resale.

18. Copyright differs. Gibbs J at 542 said:

"The owner of copyright has not the exclusive right to use
or sell the work in which copyright subsists. The buyer of
a book in which copyright subsists does not need the consent
of the owner of the copyright to read the book. The
necessity to imply a term in the contract which exists when
a patented article is sold does not arise on the sale of a
book the subject of copyright. It was not, and could not
be, suggested that the sale of a copy of a book is a licence
to do the acts comprised in the copyright . . . "

19. His Honour continued that in some circumstances when the owner of copyright sells a book, his consent to a particular use may be implied. He said that in the Time-Life case, there were only the bare facts of a sale without restriction and no evidence put forward of the copyright owner knowing who the identity of the purchaser is.

At 544, Gibbs J continued:

"It would therefore appear that in the United States, as in
Australia, it is not necessary, in order to give business
efficacy to the sale of a book in which copyright subsists,
to imply a term of vendor's consent."

Gibbs J at 544 held that a licence

"means the consent of the owner to the importation of the
articles into Australia for the purpose of selling them, or
to their sale after importation, and such a licence cannot
be inferred from the mere fact that the owner of the
copyright has sold the goods without any express restriction
on their subsequent disposal."

Stephen J at 555 said:

"There is, then, no novelty in the view that indirect
infringement of copyright may result from the importation of
material which until imported infringed no copyright . . . Any
undesirable economic or cultural effects which some may
discern as flowing from this aspect of copyright protection
are a matter for the legislature."

Jacobs J at 556 said:

"The purpose of s 37 is to make it clear that a positive
licence is required. But the section does not say that
importation for sale is allowed unless a restriction is
given."

20. It is thus obviously easier to argue an implied licence, Jacobs J said, if the copyright owner is selling the goods in commercial quantities direct to a purchaser in another country and does not impose any restriction on importation.

21. In this case, counsel for the respondent sought to confine Time-Life to its facts and relied on two matters to dictate a different result. The first was the absence of any self imposed or agreed restriction falling upon the copyright owner in Australia. The second was that Time-Life was decided against the background that it would have been illegal under the Sherman Anti - Trust Act for an American company to impose a restriction on end use and export when it granted Time-Life its licence.

22. Counsel for the respondents by contrast placed reliance on Polydor Ltd. & Anor v Harlequin Record Shop & Anor. (1980) FSR 362.

23. This case involved an argument about whether there was an implied licence to import a recording into the UK. Polydor Limited was the exclusive licensee in the UK from the copyright owner of a certain recording. The licensee in Portugal was a Polydor company. The records were bought legally in Portugal by Harlequin but imported into the UK without the consent of Polydor.

24. Harlequin argued that the sale in Porgual implied a licence by every member of the Polydor group for the importing of records into the UK.

25. This argument was rejected and the English Court of Appeal, following the High Court in the Time-Life Case, held at 366:

"The sale of records by the Portugese licensees conferred
ownership and possession on the defendants (Harlequin), but
did not not constitute a licence from anyone to import those
records into the United Kingdom."

26. This was relied on by the respondents for the proposition that just as it was not permissible to exercise territorial or national rights in the nature of copyright so as to delimit markets as between England and Portugal, arising from a prohibition of that type in the Treaty of Rome affecting the States in the European Community, so it should be in Australia.

27. Counsel submitted that the effect of Article 30 of the Treaty of Rome is that in a member state of the European Community, no contractual right or copyright can be exercised that has the effect of limiting the trade use in the UK of a copyright item.

28. Nowithstanding the earnest submissions of counsel in this regard, I cannot see how this case assists the interpretation of the Copyright Act in Australia.

29. The High Court in Time-Life expressly recognised that it is a question of fact as to the nature of the contract as to whether any licence is to be implied. Nevertheless, the Court made substantial pronouncements of law, and I must seek to apply them here.

30. The respondent argued that the fact that in Time-Life the US parent company did not have the legal freedom to impose any restrictions forced the High Court to find a solution in the interests of commercial efficacy against a licence employing importation into Australia.

31. Despite developing thought that it is or may be impermissible to impose restrictions upon the resale of goods because they infringe European Community law or the Sherman Anti-Trust legislation, the result surely cannot be that there is necessarily a licence by implication.

32. However, as Murphy J observed in the Time-Life Case, there is an element of public interest in copyright enforcement cases and should the facts show a reasonable possibility of serious breach of the Trade Practices Act or injury to the public, the Court can and should require the offending party to negate this before upholding its copyright.

33. In Enzed Holdings v Wynthea [1984] FCA 373; (1984-85) 57 ALR 167 the Full Federal Court repeated at 181 the well established principle that any uncertainty or ambiguity in the provisions of the Copyright Act would be resolved with regard to the Berne Convention 1886. As already mentioned, this supports what has become known as the Doctrine of National Treatment, which means that foreign authors should have in Australia that which is granted to Australian nationals.

34. As both counsel conceded, this was regarded by both parties as a test case because other than Time-Life case, there is no apparently substantive authority directly in point.

35. It may be that some other mechanism needs to be developed to resolve these issues, because the interests of the Australian people in having free access to literary, musical and artistic works, even computer video entertainment, are adversely affected if oppressive restrictions on importation and sale may be imposed by copyright owners who are not themselves importing or intending to import the works in question. Nevertheless, despite the force of the respondents' argument, they have failed to persuade me that I ought not to follow the principles enunciated in Time-Life and its result.

36. There is no evidence of any serious breach of trade practices legislation, nor any allegations of grave injury being caused to the public if the diskettes cannot be marketed here at this time. Adapting the comments of Stephen J in Time-Life (supra at 555), any undesirable community or societal consequences which may flow from this aspect of copyright protection are matters for the Legislature. I do not think that I am able to shape the result of this case to counter any that may appear to flow if the respondents fail here.

37. I answer the question posed by Justice Wilcox on 13 March 1987 in the negative.