Re Broderbund Software Inc and Dataflow Computer Services Pty Limited v Computermate Products (Australia) Pty Limited; Raymond Firth; Broderbund Software Inc and Dataflow Computer Services Pty Limited [1991] FCA 549 (15 November 1991)

FEDERAL COURT OF AUSTRALIA

Re: BRODERBUND SOFTWARE INC. and DATAFLOW COMPUTER SERVICES PTY LIMITED
And: COMPUTERMATE PRODUCTS (AUSTRALIA) PTY. LIMITED; RAYMOND FIRTH; BRODERBUND
SOFTWARE INC. and DATAFLOW COMPUTER SERVICES PTY. LIMITED
No. G492 of 1990
FED No. 693
Copyright

COURT

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

CATCHWORDS

Copyright - infringement - importation and sale - s.37 Copyright Act 1968 - whether licence given.

HEARING

SYDNEY
15:11:1991

Counsel and Solicitors Mr D.K. Catterns instructed
for Applicants and by Abbott Tout Russell Kennedy
Cross-respondents:

Counsel and Solicitors Mr G. Burton instructed by

for Respondents and Marcus B. Karpin and Co.
Cross-claimants:

ORDER

Direct that the applicants bring in short minutes of orders in accordance with the reasons for judgment.

Costs reserved.

Stand proceedings over to 2 December 1991 at 9.30 a.m. for mention.

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

DECISION

These proceedings are concerned with what is claimed by the applicants to constitute the unlawful parallel importing of computer software. By their amended application, Broderbund Software Inc., ("Broderbund"), the first applicant, and Dataflow Computer Services Pty. Limited, ("Dataflow"), the second applicant, seek an injunction to restrain Computermate Products (Australia) Pty. Limited, ("Computermate"), the first respondent, from importing into Australia a computer software program entitled "Where in the World is Carmen San Diego" ("the program") for the purpose of selling the program, letting it for hire or offering it for sale or hire in the course of trade or exhibiting the program in public in the course of trade. Consequential relief is also sought, but the parties have agreed that, at this stage, only the issue of liability on the parallel importation question be dealt with.
The parties

2. Broderbund, a Delaware corporation carrying on its business in California, manufactures and markets computer software programs for use with personal computers, including the Amiga and IBM standard versions of the program. Dataflow, a New South Wales corporation, markets and distributes computer software, including the program, in this country pursuant to a contractual arrangement with Broderbund.

3. Computermate, another local company, markets and distributes computer software and computer products in New South Wales. Raymond Firth, the second respondent, is its controller and one of its directors.
The allegations in the statement of claim

4. The material allegations in the applicants' statement of claim, omitting allegations under s.52 of the Trade Practices Act no longer pressed, may be summarised as follows: (1) Broderbund is the owner of the copyright in the program. (This is now common ground.) (2) Computermate, without the licence of Broderbund or Dataflow, has imported into Australia articles being reproductions of the program for the purpose, inter alia, of selling them. (3) Alternatively Computermate, without the licence of Broderbund or Dataflow, has, inter alia, sold articles being reproductions of the program where, to its knowledge, the making of such articles would, if the articles had been made in Australia, have constituted an infringement of the copyright in the program. (4) In the premises, Computermate has infringed the copyright of Broderbund in the program.
The facts

5. As has been noted, it is now admitted that (1) the source code of the IBM and Amiga standard versions, or "platforms", of the program is a literary work within the meaning of the Copyright Act 1968 ("the Act"); (2) Broderbund owns, and at all material times, has owned, copyright in both versions of the program. It is also now common ground that Computermate has imported into Australia, and sold in this country, computer discs which are reproductions of a substantial part of the Amiga version and of the IBM version, respectively, of the program. It is accepted by the applicants that what is imported by the respondents are not "pirate" versions but genuine copies of the work produced by Broderbund in America. Many of the other facts in the evidence are contentious, or at least put in issue by the respondents. Before undertaking the exercise of making specific findings of fact in these contentious areas, it will assist if the history of the matters in dispute were described in general terms.
The general history

6. In December 1981, Broderbund and Studio Australia Pty. Ltd., a local company then carrying on business under the name "Imagineering", entered into a written agreement whereby Imagineering was appointed an exclusive distributor of Broderbund products in Australia for a term of one year, "renewable at 12 month intervals by mutual consent of the parties."

7. In May 1987, Broderbund and Imagineering entered into a fresh written agreement whereby, for the term of the agreement, Imagineering was appointed sole distributor of Broderbund Products for several territories, including Australia. Imagineering was also granted, for the term of the agreement, an exclusive licence in the territories to use Broderbund's copyright in the distribution and sale of Broderbund's software products. The term of the agreement was one year and thereafter for periods of one year unless either party gave 90 days' notice of termination.

8. By letter dated 5 February 1988, Studio Australia, then carrying on business under the name Questor Computer Entertainment Products, wrote to Mr Firth confirming that Questor held exclusive Australian distribution rights and exclusive licence rights in respect of copyright for several software manufacturers then specified, including Broderbund. Questor requested Mr Firth to "discontinue advertising, promotion or offering for sale any titles from the abovementioned licensors."

9. Shortly after receiving this letter, Mr Firth telephoned the offices of Broderbund in California and asked to speak with whomever was in charge of international sales. He was put through to Steven Dunphy. In many respects, the terms of this conversation are contentious, the versions of it given by Mr Firth and Mr Dunphy in their evidence being different in significant respects. It will be necessary to return to the detail of their evidence later. For immediate purposes it will suffice to note that, although this is disputed by Mr Firth, Mr Dunphy's evidence was that he then informed Mr Firth that Broderbund had an exclusive distributor in Australia and that he requested Mr Firth not to "go around" that agreement.

10. On 26 February 1988, acting on the instructions of Mr Firth, Messrs. Schwartz and Freeman, Chicago attornies, wrote to several American software manufacturers, including Broderbund, saying that they had a client, not then identified, "interested in purchasing your computer software products from established U.S. distributors for export and resale to retailers in Australia". In their letter, Messrs. Schwartz and Freeman went on to inquire whether Broderbund had exclusive distribution arrangements in Australia and, if so, details were sought.

11. By letter dated 1 March 1988, Mr Dunphy replied to Messrs. Schwartz and Freeman, informing them that he would "turn (it) over" to Broderbund's corporate attorney, who was then out of the country but was expected to return soon. In fact, Broderbund made no further reply.

12. It appears that later in 1988 (as will be seen, Mr Firth's evidence suggests that this occurred in June 1989) Mr Firth again telephoned Mr Dunphy and enquired whether Imagineering held an exclusive licence from Broderbund. Although the timing of the conversation is disputed, it is common ground that, in October 1988, Broderbund and Dataflow executed an agreement, as of 1 January 1989, appointing Dataflow as Broderbund's exclusive distributor for a territory, which included Australia, for a term of one year and thereafter from year to year unless determined by one month's notice. Dataflow was also licensed, exclusively in the territory, to use Broderbund's copyright.

13. From May 1989 and thereafter, Computermate purchased supplies of software products, including the program, from several American distributors, principally American Software Distributors, Inc. ("ASD") and Micro-Pace, Inc., both based in Illinois.

14. (As has been said, according to the evidence of Mr Firth, in early June 1989, he telephoned Mr Dunphy and enquired whether Broderbund had granted an exclusive licence to Imagineering; Mr Dunphy replied that Imagineering was an exclusive distributor but did not have copyright in any of Broderbund's products; Mr Dunphy added that Broderbund had been talking to Dataflow and that, although nothing was finalised, it was expected that an arrangement similar to that with Imagineering would be entered into. Mr Dunphy agrees that a discussion along these lines took place, but says that it occurred at an earlier point of time. For the reasons I give later, I have concluded that Mr Dunphy's evidence on this point ought to be accepted.)

15. By letters dated 25 July and 9 August 1989, Mr Firth wrote to Broderbund enquiring, inter alia, whether, apart from granting exclusive distributorship rights, Broderbund had assigned or licensed its copyright to an individual or corporation in Australia. No reply appears to have been received to these letters.

16. In October and November 1989, Broderbund and Dataflow executed a memorandum dated 10 November 1989, referring to the agreement made as of 1 January 1989, confirming that insofar as that agreement did not already do so, Dataflow was appointed exclusive licensee of the copyright in the software.

17. By letter to Mr Firth dated 15 January 1990, Dr. Jeffrey Tobias, the managing director of Dataflow, said that he was extremely concerned to find on Computermate's latest price list products from, inter alia, Broderbund. Dr. Tobias said that he had understood from a conversation with Mr Firth that Computermate "would cease selling products from publishers with whom Dataflow has exclusive Australian distribution." Mr Firth was asked to clarify his intentions.

18. In a long reply to Dataflow dated 18 January 1989, Mr Firth denied that he had agreed with Mr Tobias not to import Broderbund products. Mr Firth went on to complain at length about the parallel importation provisions in the Act.

19. On 18 January 1990, Mr Firth also spoke to Dr. Tobias along the lines of his written reply. At the end of the conversation, which is not now disputed, Dr. Tobias informed Mr Firth that if Computermate continued to sell Dataflow's products, Dataflow would take legal action.

20. On 19 January 1990, Mr Firth had a discussion on the telephone, which is not now disputed, with Mr Dunphy in which the legal issues which now arise were further debated.

21. On 15 May 1990, Mr Firth wrote to Broderbund restating his arguments against the existing legal restraints on parallel importation. He again enquired whether Broderbund had granted exclusive distributorship or licensing rights in Australia. Mr Dunphy replied by letter dated 29 May 1990 stating, in effect, that Broderbund had granted both kinds of rights to Dataflow.

22. These proceedings were commenced in August 1990.
Findings with respect to the two contentious discussions between Mr Firth and Mr Dunphy

23. As has been said, there is a dispute with respect to two of the discussions, in one case with respect to content, and in the other in regard to timing.
The content of the conversation in February 1988

24. Although it is common ground that a discussion took place at this time, there is a conflict in the evidence with respect to its terms. It is convenient, in the first instance, to set out the respective versions of the conversation.

25. Mr Firth's affidavit evidence was as follows:

"3. (1) Shortly after receiving the said letter (i.e. the
letter dated 5 February 1988 from Questor
Studio Australia), telephoned the first applicant at
17 Paul Drive, San Rafael, California, U.S.A. and asked to
speak with whomever was in charge of international sales.
I was told that the person's name was Steven Dunphy and was
connected through to his office.
Mr Dunphy and I had a conversation during which words to
the following effect were spoken:
(2) Firth: 'I have recently received a letter from
Questor/Imagineering stating that they are the
exclusive distributor of Broderbund products in
Australia and that they also have the exclusive
licence in Australia for all Broderbund products. Is
this correct."
(3) Dunphy: 'We do not deal direct with anyone in
Australia but it could be that they have some
arrangement with Activision, who distribute all
Broderbund products.'
(4) Firth: 'Are you aware of the copyright laws in
Australia?'
(5) Dunphy: 'Not as such.'
(6) Firth: 'Well, it appears that under Australian
copyright law, if a party in Australia has been
granted the exclusive licence to your products then
because of that licence they in fact become the
copyright owners for Australia and because of this
some of these companies are now attempting to stop
independent distributors like ourselves from importing
these products into Australia from legitimate
distributors in the U.S. and Europe, claiming that we
are breaching their copyright.'
(7) Dunphy: 'Who are you buying from in the U.S.'
(8) Firth: 'CSS (Computer Software Service) in Chicago.'
(9) Dunphy: 'Well all I can say is that we have an
affiliation with Activision and can state that neither
Questor nor any other party have exclusive rights to
our products. There is nothing I can do to stop you
from buying our products from CSS or anyone else and
selling them in Australia.'
(10) Firth: 'Okay, well we'll just keep going the way we
are and when you decide to deal direct, don't forget
to get in touch with us, because we would be
interested in dealing direct with Broderbund.'"
Mr Dunphy's affidavit evidence was as follows:
"4. As to the ninth sub-paragraph of paragraph 3 of
Firth's Affidavit I deny making any remarks to the
effect alleged in the first sentence. I did say words
to the effect set out in the second sentence of that
paragraph but I also said words to this effect:
'However, we have an agreement with a distributor in
Australia which I would like to honour and I would
appreciate it if you would not go around that
Agreement.'
5. As to the tenth sub-paragraph of paragraph 3 of
Firth's Affidavit I deny saying anything to the effect
that Broderbund did not have any direct dealings with
an Australian distributor at that time. Throughout
the period referred to in paragraph 3 of Firth's
Affidavit Broderbund had a distributor in Australia."

26. Each witness was cross-examined vigorously but each affirmed his evidence in chief. Having regard to all the surrounding circumstances, I have come to the conclusion that, to the extent that there is a conflict, Mr Dunphy's version is to be preferred, for the following reasons.

27. Earlier in his affidavit, Mr Dunphy gave evidence, which was not challenged, that, to his knowledge, Activision had never been authorised to distribute Broderbund products any where in the world. At the same time it is clear that in February 1988, Broderbund had a formal relationship with Studio Australia, i.e. Questor or Imagineering. Since the agreement with Studio Australia had only recently been renewed, it is unlikely that Mr Dunphy, as the executive in charge of these matters, would have mistakenly referred to Activision instead. In fact, Mr Dunphy was a witness to the execution of the renewed agreement with Studio Australia dated May 1987. The objective circumstances support Mr Dunphy's version and are quite inconsistent with Mr Firth's evidence.

28. On behalf of the respondents, reliance is placed upon a typed note prepared by Mr Firth in March 1988 from information collected by him and his attornies as a result of extensive inquiries carried out by Mr Firth and Schwartz and Freeman with respect to the Australian distribution arrangements made by many overseas software producers. The note, under the heading "Imagineering claims", is in these terms:

"Broderbund. Affiliated to Activision but Broderbund state that
Questor nor any other party have exclusive rights to
any of their products in Australia."

29. Later in the note there is a reference to Activision U.K. Ltd., but in another context.

30. In Questor's letter dated 5 February 1988, as has been said, several licensors were mentioned, including Broderbund. Activision was another licensor then referred to.

31. It will be seen that the note now relied on by the respondents suggests that Broderbund and Activision were "affiliated". Usually this would suggest a corporate association or connection as distinct from an arms' length distribution or licensing arrangement.

32. At this time, Mr Firth and his attornies were pursuing many inquiries from a wide range of sources. The note now relied on is a composite work, endeavouring to summarise the investigations of several persons. Mr Firth's original or source material used, in part, for this note have now been destroyed. On the whole, I think that Mr Firth has been confused by the amount of research he has carried out in his campaign to reform the copyright laws. To the extent that, in this context, his evidence conflicts with the version of Mr Dunphy, I prefer the evidence of Mr Dunphy and I so find.
The timing of the conversation alleged by Mr Firth to have taken place in June 1989

33. In his affidavit, Mr Firth gave the following evidence:

"9. In early June 1989 I telephoned Steven Dunphy. During
our conversation words to the following effect were used:
Firth: 'Steven, have you now granted exclusive
licence to Imagineering as they claim?'
Dunphy: 'What I can say is that Imagineering is our
exclusive distributor and purchase fully finished
products only. They do not have the copyright to any
of our products.
Firth: 'And what about this new distributor also
claiming to have copyright in your products.
Dunphy: 'Yes we have been talking to Dataflow but
nothing is finalised. If things should change I'll
let you know but it will be a similar arrangement to
what we have now with Imagineering.'

34. In his affidavit, Mr Dunphy said that although the substance of the conversation given by Mr Firth was true, the discussion did not take place in June 1989.

35. Again the objective facts support Mr Dunphy. It is clear that by October 1988, Broderbund had terminated its relationship with Imagineering and, instead, Broderbund had entered a formal relationship with Dataflow. Here also, to the extent that the evidence in this respect is in conflict, I prefer the version given by Mr Dunphy.
The applicants' case

36. In its essential ingredients, the applicants' case may be summarised as follows:

(1) Copyrights subsists in the program. (This is admitted.)
(2) Broderbund owns the copyright in the program. (This is admitted.)
(3) Since January 1989, or at the latest, November 1989, Dataflow has
been Broderbund's exclusive licensee in Australia. (This is disputed.)
(4) Since at least May 1989, Computermate has imported into Australia,
and sold in this country, copies of the program. Computermate has
acquired the program from several American distributors, including ASD
and Micro-Pace. (These facts are common ground.)
(5) The respondents' defence pleads no facts amounting to an express or
implied licence to this importation and sale. In particular, no licence
should be implied from the undisputed facts that Broderbund sold the
program to American distributors without imposing any restriction on
resale. There is no evidence that Broderbund gave any formal
permission to Computermate to import the program. (The respondents say
that, in all the circumstances of the case, the giving of a licence by
Broderbund should be inferred.)
(6) Importation and sale, without licence, of goods (even if genuine)
which are copies of copyright works, is an infringement of copyright.
Reliance is placed by the applicants upon ss.37 and 38 of the Act and
upon the reasoning in the Time-Life case and the Ozi-Soft case.

37. (By s.37 of the Act, it is relevantly provided that the copyright in a literary 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 selling the article 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. By s.38 of the Act, it is relevantly provided that the copyright in a literary work is infringed by a person who, in Australia, and without the licence of the owner of the copyright, sells an article where, to his knowledge, in the case of an imported article, would if the article had been made in Australia by the importer, have constituted such an infringement.

38. With respect to the authorities relied on by the applicants, it will be necessary later to consider some of the reasoning but, for the moment, it will suffice to mention the head-note of the report of the Time-Life case [1977] HCA 52; (1977) 138 CLR 534, as follows: The owner of copyright in a series of books in the United States and Australia granted to an affiliated company an exclusive licence to publish and sell the books anywhere in the world except the United States and Canada; an American wholesaler bought a quantity of the books from the copyright owner's general distributor in the United States and sold them to an Australian bookseller; neither the copyright owner nor the distributor imposed any restriction on the resale of the books by the American wholesaler; the bookseller did not seek the consent of any person to import or sell the books. It was held by the High Court that the bookseller did not have the licence of the copyright owner to import the books into Australia, or to sell them in Australia, within ss.37 or 38.

39. Again it will be necessary to look at the actual reasoning later, but according to the head-note in the Ozi-Soft case (1988) 20 FCR 46, diskettes embodying computer programs, copyright in which was owned by the respondents, were purchased by the appellant in the United Kingdom, the diskettes having been manufactured in that country and in America; the respondents, as the American manufacturers, had consented to their sale in the U.K.; no restriction was imposed on the appellant, as purchaser of the articles in the U.K., as to the way in which it might deal with the program; the appellant imported the articles into Australia for sale. It was held by the Full Federal Court, upholding a first instance finding of infringement, that: (i) s.37 places upon the applicant for relief the burden of showing, inter alia, absence of licence, rather than placing upon the other side the burden of showing a licence; (ii) even though an importer did not have a contractual licence, it may be a defence to a claim under s.37 if positive permission or consent can be implied from the circumstances of the particular case; (iii) the giving of a licence to permit importation could not be inferred from the absence of any restriction upon use of the articles, whether on a label or otherwise.)
(7) No implied licence arises from the sale of genuine goods without restriction. The applicants rely on the Time-Life and the Ozi-Soft cases.
(8) The making of copies of the program in Australia without licence would have constituted an infringement of copyright in the work. Reference is made by the applicants to the reasoning in Dyason v Autodesk Inc. [1990] FCA 469; (1990) 24 FCR 147 and Star Micronics Pty. Ltd. v Five Star Computers Pty. Ltd. (1990) 18 IPR 225.
(9) Although the knowledge required under ss.37 or 38 is actual, and not merely constructive, knowledge, it is knowledge of the material facts that is required and the existence of this knowledge on the part of a particular person may be inferred 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, the court is convinced otherwise. The applicants rely on RCA Corporation v Custom Cleared Sales Pty. Ltd. (1978) 19 ALR 123.
(10) The licence granted to Dataflow is an exclusive licence within the meaning of the definition of "exclusive licence" in s.10(1) of the Act as that definition was explained in Avel Pty. Ltd. v Multicoin Amusements Pty. Ltd. [1990] HCA 58; (1990) 171 CLR 88.

40. By that definition, such a licence means -

"A licence in writing, signed by or on behalf of the
owner...of copyright, authorising the licensee, to the
exclusion of all other persons, to do an act that, by virtue
of this act, the owner of the copyright would, but for the
licence, have the exclusive right to do..."

41. By s.31(1)(a) of the Act, copyright, in relation to a work, is the exclusive right, inter alia, to reproduce the work in a material form.

42. Broadly speaking, by s.119 of the Act, except against the owner of the copyright, the exclusive licensee has the same rights of action and remedies for infringement as if the licence had been an assignment. By virtue of s.120(1), it is necessary, in proceedings for infringement, to join as parties both the owner of the copyright and the exclusive licensee.)

43. I propose now to consider the matters which remain in contest.
The nature of the relationship between Broderbund and Dataflow

44. In the Avel case, where an agreement between an overseas manufacturer of amusement machines and a local distributor conferred on the local company exclusive selling and distribution rights in Australia, the High Court held that a distinction should be drawn between an exclusive distributor of goods on the one hand and an exclusive licensee of copyright on the other. Mason C.J., Deane and Gaudron JJ. said (at 93-4):

"(iii) The distribution agreement did not make the
distributor an 'exclusive licensee' of the copyright in the
artwork or the computer programmes of the particular models.
The exclusive rights of local sale conferred upon the
distributor in respect of machines of those models did not
encompass exclusive rights of first or other publication.
In particular, Williams, as owner of the copyright, remained
entitled to publish, and to authorize another to publish,
the artwork and computer programmes incorporated in machines
of those models. It could, for example, have authorized
another to publish that artwork or those computer programmes
as part of another product. It could have authorized
another to exhibit them as part of the particular models for
promotional purposes. Nor did the distribution agreement
confer upon the distributor the exclusive authority to do
within the copyright territory any other act comprised in
the copyright. It follows that the distribution agreement
did not authorize the distributor, 'to the exclusion of all
other persons', to do an act that, by virtue of the Act, the
owner of the copyright would, but for the agreement, have
the exclusive right to do (see the Act, s.10 (definition of
'exclusive licensee') and s.31(1).
(iv) The distributor, not being an 'exclusive licensee' (or
the legal or equitable owner of the copyright), could not
itself bring proceedings for infringement of copyright."

45. See also per Dawson J. at 103-4; per McHugh J. at 117-8.

46. In the present case, the terms of the material provisions of the agreements between Broderbund and Dataflow are as follows.

47. In the agreement entered into as of 1 January 1989, Dataflow was appointed a distributor on these terms:

"2. Appointment of Dataflow as Distributor
2.1 For the duration of this Agreement and subject to all
conditions contained in this Agreement, Broderbund appoints
Dataflow as its sole and exclusive distributor for software
products in the Territory. Broderbund's sole obligation
pertaining to this exclusivity is that it will not ship
goods directly into the territory except for those shipments
going to Dataflow. Broderbund shall be under no obligation
to prevent customers from transshipping goods into the
territory. Dataflow acknowledges that Broderbund will also
be engaged in the marketing and sale of products not being
Software Products, and such products are not the subject of
this Agreement."

48. Copyright was dealt with in this agreement as follows:

"4. Copyright, Trademarks and Tradenames
4.1 Broderbund hereby grants to Dataflow during the Term of
this Agreement, an exclusive license in the Territory to use
Broderbund's copyright in the distribution and sale of
Broderbund's software products and all Trademarks, designs
and logos.
4.2 For the better protection of Broderbund, its
trademarks, its copyright and its proprietary information
relating to the Software Products, Broderbund hereby grants
to Dataflow the rights, should Dataflow so desire to
exercise it, to request the ultimate user of the Software
Products to enter into license Agreements for the use of the
Software Products. Furthermore, Dataflow shall be entitled
to place a label on any of the Software Products to the
following effect:
'Distributed by Dataflow under licence from
Broderbund Software.'
4.3 In order to protect Broderbund with respect to the
Software Products distributed in the Territory, Dataflow
shall hold this name in trust for the benefit of
Broderbund."

49. In the supplementary agreement executed in November 1989, it was provided as follows:

"RE: Agreement of 1 January 1989 between Broderbund and
Dataflow
We refer to the above mentioned Agreement ('the Agreement').
In order to clarify and confirm the rights granted under the
Agreement the parties hereby agree and confirm as follows:
1. Insofar as the Agreement does not already grant
from Broderbund to Dataflow the rights of an Exclusive
Licencee, Broderbund, in consideration of Dataflow
continuing to develop the market for Broderbund
products in the Territory and for Dataflow taking such
steps as are necessary to protect the intellectual
property rights of Broderbund in the Territory, hereby
appoints Dataflow as its Exclusive Licencee for the
Software in the Territory.
2. For the purposes of this letter 'Exclusive
Licencee' shall have the same meaning as is ascribed
to that term in Section 10 of the Copyright Act of the
Commonwealth of Australia 1968."

50. The agreement made as of January 1989 proceeds on the footing that there is a difference between an exclusive distributor of products and an exclusive licensee of copyright in a work. As has been seen, cl.2.1 deals with the former aspect of the relationship by Broderbund's promise not to ship goods directly into the territory except to Dataflow; it is then noted that Broderbund has no obligation to prevent its customers from transshipping goods into the territory. It appears that the latter provision was added, for more abundant caution, to avoid a suggestion of any implied duty on Broderbund to take positive action to police the possibility of transshipment. At the same time, it is clear, I think, that it is not open to infer from it that Broderbund is, by implication, consenting to an infringement of its copyright.

51. With respect to copyright by cl.4.1, Broderbund grants to Dataflow an "exclusive licence in the Territory to use Broderbund's copyright in the distribution and sale of Broderbund's software." The language of the definition of "exclusive licensee" in s.10 of the Act is somewhat different. The Act speaks of a licence to do any act which, by virtue of the Act, the owner has the exclusive right to do, including, for instance, the act of reproduction of the work in a material form (s.31(1)(a)(i)).

52. Reference should also be made to the definition, in cl.1.2 of the 1988 agreement, of "Software Products" so as to include any software for microcomputers designed or developed by Broderbund. Notice should also be taken of the definition, in cl.1.3, of "documentation" so as to include instructional material, manuals or books published or distributed by Broderbund, and any material into which copy disks, cassettes or cartridges suitable for use in microcomputers are placed for the purposes of distribution.

53. In a recent article entitled "The Scope of Copyright Protection for Computer Programs" published in the Modern Law Review (1991) 54 MLR 643 at 645, David I. Bainbridge writes:

"The owner of a copyright can deal with that copyright, he
can assign the copyright or grant licences in respect of it.
It should be noted that the great bulk of computer software
is dealt with by means of a licence agreement. The licence
will set out the scope of the acts which the licensee can do
without infringing the copyright in the computer software,
for example, it might allow the licensee to make a single
copy of the programs for back-up purposes."
In a footnote to this, Mr Bainbridge says:
"'Software' is a term with no precise definition but it is
usually taken to include computer programs and associated
documentation and manuals. Persons acquiring computer
software may think that they are buying the software rather
than obtaining a licence to use the software. Licensing of
software brings into doubt the applicability of implied
terms, for example under the Sale of Goods Act...In some
cases, a hybrid contract may arise, the documentation and
disks being brought outright whilst the programs are
licensed."

54. Against that background, it appears that the intended operation of cl.4 of the 1988 agreement was as follows: (1) Dataflfow was licensed to distribute and sell the program in Australia pursuant to cl.4.1. (2) Dataflow was empowered, pursuant to cl.4.2, to require an ultimate user to enter into a licence agreement for the use of the program.

55. Although it appears that, under the 1987 agreement, Dataflow was not expressly licenced to make or reproduce the work in a material form (see s.31(1)(a)(i) of the Act), it is necessary, in this connection, to have regard to the operation of the supplementary agreement made in 1989 which, in express terms, appointed Dataflow an "exclusive licensee" as that term is understood in the Act. Prima facie, this would mean that it was intended that Dataflow have the exclusive right in Australia to do at least some of the acts specified in s.31(1)(a) of the Act, including the right to reproduce the work in a material form. There being no contrary indication in the other terms of the 1989 variation, in my opinion, this prima facie meaning should be adopted.

56. It follows, in my view, that from at least November 1989, Dataflow had the right conferred on it by Broderbund, to the exclusion of all other persons, to reproduce the program in Australia. As well, as has been noted, from at least 1 January 1989, Dataflow had the exclusive right to sell the program in Australia.
Was the program imported into Australia without the licence of Broderbund?

57. In the Time-Life case, Gibbs J. said (at 539) that the word "licence" in s.37 meant "consent" and, for this purpose, a licence need not result from a formal grant, but may be given orally or be implied by conduct. He gave (at 543), an example of a possible indication of consent in the case of an owner of copyright selling in America a commercial quantity of books for delivery to a buyer in Australia, whom he knew to be a bookseller in Australia. Having rejected (at 544) a submission that s.37 applied only to the importation and sale of (1) articles which already infringed ("piratical" copies) and (2) articles sold subject to an express restriction on subsequent importation and sale, Gibbs J. went on to hold (at 545) that a licence cannot be inferred from the mere fact that the owner has sold the goods without any express restriction on their subsequent disposal. Stephen J. (with the agreement of Barwick C.J.) also concluded (at 554) that there was no basis for making an implication of consent. Jacobs J. was of similar view, saying (at 557) that the purpose of s.37 is to deal with the case where no positive licence has been given; this purpose would be defeated if mere absence of restriction were held to import a licence.

58. (It should be noted, for the record, that on behalf of the respondents it is now submitted that some of the reasoning of Gibbs J. and of Jacobs J. in Time-Life cannot stand in the light of the decision in Avel.)

59. In Ozi-Soft, Sheppard, Spender and Gummow JJ. said (at 49) that a claim under s.37 against an importer will fail if the importer has a bare licence not supported by consideration and non-exclusive in character. They went on (at 52) to agree with a submission that, whilst a bare consent or permission might constitute a licence for our purposes, nevertheless there must be evidence of the necessary facts from which one can properly infer the giving of that consent or permission by the copyright owner.

60. In Avel, Mason C.J., Deane and Gaudron JJ. said (at 94) that the onus of proving the absence of the licence of the owner of the copyright in relation to an issue of infringement under s.37 lies on the party who asserts infringement. On the question of onus, Dawson J. was of the same opinion (at 105), as was McHugh J. (at 119) who approved Ozi-Soft (at 48) on the point (at 119-120). The further question, whether in all circumstances of that case, it was proper to infer the permission of the owner of the copyright, naturally turned on the evidence before the court at first instance. Because there was a division of opinion in the High Court in the way the evidence could be analysed, it is not proposed now to refer to the reasoning there employed.

61. Accepting, as the settled course of authority establishes, that the onus is on the applicants to show that the respondents imported the program without the permission of Broderbund, what does the evidence show? In the first place, it indicates that Broderbund gave no formal consent. But did it give its permission informally? Are there circumstances present here from which the existence of consent may be inferred?

62. In my opinion, these questions must be answered in the negative. At all material times, the conduct of Broderbund has been consistent only with the stance that it wished Dataflow to be its sole importer of the program. Broderbund implemented its policy in this regard by its entry into the exclusive distributorship and exclusive licencing arrangements with Dataflow in 1988 and 1989. The entry into such arrangements was inconsistent with an intention to consent to another trader importing the program.

63. For the respondents, it is said that the fact that the program was sold by Broderbund to American distributors without any express restriction is a basis for drawing an inference of consent. But, for the reasons given in Time-Life and Ozi-Soft, those circumstances, standing alone, cannot justify such an inference. Nor, in my view, is there anything that was said or written by Mr Dunphy or Dr. Tobias that is now in evidence which could be said to lay the foundation for the drawing of an inference that, thereby, Broderbund gave its permission, informally, to the importation by Computermate.
Did the respondents "know" that the making of the program would, if the program had been made in Australia, have constituted an infringement?

64. From the findings already made, it follows that from February 1988, Mr Firth was put on notice, by Questor's letter and Mr Dunphy's remarks, that Broderbund had appointed an exclusive distributor in Australia. On receipt of Dr. Tobias' letter dated 15 January 1990, at the latest, Mr Firth must have known that Dataflow was by then the exclusive distributor. From the evidence given by Mr Firth and from the tone of his lengthy and argumentative correspondence throughout this period (which is in evidence) Mr Firth, as the controller of Computermate, was aware of the following: (a) that copyright subsisted in the program; (b) that the respondents did not own the program; (c) that making copies of the program in Australia would infringe the copyright; (d) that the respondents had no permission to make copies of the program in Australia.

65. It follows, in my view, that the applicants have established their claim under s.37.
Form of relief

66. In the circumstances, the applicants have made out a case for the grant of appropriate declaratory relief. I propose to direct that the applicants bring in short minutes of orders accordingly.