Marine Engineering & Generator Services Pty Ltd v Queensland (Queensland Emergency Services) [1997] FCA 599 (22 May 1997)

CATCHWORDS

Copyright - use of copyright material for services of the Crown - whether licence was granted - determination of the appropriate licence fee

Copyright Act 1968 : s 183

Re Application by Seven Dimensions Pty Limited (1996) 35 IPR 1

Interfirm Comparison (Australia) Pty Limited v Law Society of New South Wales (1975) 6 ALR 445

MARINE ENGINEERING AND GENERATOR SERVICES PTY LTD v THE STATE OF QUEENSLAND (QUEENSLAND EMERGENCY SERVICES)

CT4 of 1996

Lockhart J

22 May 1997

Sydney

COMMONWEALTH OF AUSTRALIA

COPYRIGHT ACT 1968

IN THE COPYRIGHT TRIBUNAL No. CT4 of 1996

Application by: MARINE ENGINEERING AND

GENERATOR SERVICES PTY LTD

Applicant

THE STATE OF QUEENSLAND (QUEENSLAND EMERGENCY SERVICES)

JUDGE MAKING ORDER: LOCKHART J

DATE ORDER MADE: 22 MAY 1997

PLACE ORDER MADE: SYDNEY

MINUTE OF ORDER

THE TRIBUNAL ORDERS THAT:

1. The terms for the copying of the generator test and maintenance log produced by the applicant and provided to the Queensland Fire Service is fixed at the sum of $3,900 to be paid by the State of Queensland to the applicant within 21 days from today.

2. The applicant and the respondent each file and serve an outline of submissions concerning costs (not to exceed three pages) within 14 days from today.

COMMONWEALTH OF AUSTRALIA

COPYRIGHT ACT 1968

IN THE COPYRIGHT TRIBUNAL No. CT4 of 1996

Application by: MARINE ENGINEERING AND

GENERATOR SERVICES PTY LTD

Applicant

THE STATE OF QUEENSLAND (QUEENSLAND EMERGENCY SERVICES)

Respondent

22 May 1997

REASONS FOR DECISION

LOCKHART J.

This is an application pursuant to s 183(5) of the Copyright Act 1968 (1968) (`the Act') to fix terms between the applicant, Marine Engineering And Generator Services Pty Ltd, and the Crown in right of the State of Queensland for the reproduction of a generator test and maintenance log (`the Log') in a material form by the Queensland Fire Service (`the Fire Service').

John Edward Cavanagh, a director and officer of the applicant (the applicant is a company controlled by him), asserts that on 30 July 1993 the Fire Service requested the applicant to prepare a testing and maintenance schedule (`the Schedule') and the Log for the purpose of providing a check list to be used in the maintenance of generators; that in August 1993 it sent a draft of the Schedule and the Log to the Fire Service which it distributed on its own behalf to other operators in competition with the applicant; and that the Fire Service reproduced the Log (but not the Schedule) in a material form without notifying the applicant and without negotiating an appropriate fee for the use of the applicant's property.

There is no dispute that the Log which is entitled `Generator Test and Maintenance Log' is a literary work within the meaning of s 10(1) of the Copyright Act (`the Act') which section specifically includes a `table'. The Log is not just a mere matter of headings with columns and cross references, it is a comprehensive table, four pages long, which describes the whole testing procedure step by step so that the results of the testing can be easily recorded and checked. It was created by Mr Cavanagh using his engineering skill and expertise acquired from previous clients in similar situations. There is no dispute that Mr Cavanagh prepared the Log and did so in the course of his employment by the applicant; so the owner of the copyright is the applicant (s 35(6)). When creating the Schedule, Mr Cavanagh realised there was a need for a separate document which would record the results of the testing programme being carried out. Consequently he created the Log.

It is an infringement of copyright in a work to do any one of the acts comprised in the copyright without the licence of the copyright owner: s 36. Copyright in a literary work includes the exclusive right to reproduce the work in a material form (s 31). The respondent has admitted that it reproduced the Log and distributed it to at least 240 third parties. There is no dispute that the document distributed by the respondent is a substantial reproduction of the applicant's Log. But for the operation of s 183 the reproduction by the respondent of the Log would have constituted an infringement of copyright entitling the applicant to recover damages under s 115 of the Act.

Thus, there are only two issues: first, whether a verbal licence was granted by the applicant to the respondent to use the Log in the way it did; and secondly, if there was no such licence, what is the appropriate quantum of the licence fee?

Both questions turn on the facts of the case. Four witnesses gave evidence: John Edward Cavanagh for the applicant; and Robert Allen Gribble, Anthony William Walsh and Douglas McGuinness who were called by the respondent. Mr Gribble is a District Commander of the Fire Service and until October 1996 was in overall charge of the Fire Service of the Gold Coast District. Until he retired in 1996, Mr Walsh was employed by the Fire Service, Gold Coast District working as a fire prevention officer reporting to Mr Gribble, as his District Commander. Mr McGuinness is a fire safety officer with the Fire Service at Toowoomba. At material times he was stationed in the Gold Coast District of the Fire Service.

The applicant relied on a report from Dr Duncan B Gilmore of Gilmore Engineers, consulting engineering specialists. Dr Gilmore's report was tendered as evidence of an expert concerning the appropriate charges to be made for undertaking the preparation of the Log. He was not called or cross-examined. The report was admitted over the objection of the respondent on the ground of relevance.

I shall state my findings of fact and in doing so shall refer to the evidence of the various witnesses. Much of the evidence is uncontentious. I should say at the outset that there was, until the commencement of the hearing, a misconception held by the respondent about the applicant's case. I was informed by counsel for the respondent that the respondent had assumed that copyright was claimed by the applicant, not only in the Log, but also in the Schedule. The Schedule is a document which sets out the specifications and requirements for the testing and maintenance of emergency generators in high rise buildings. It is a specification. The Log is a means of recording that the requirements under the Schedule have been carried out. It is a form of checklist document. The applicant does not contest that the Fire Service was entitled to use the Schedule; but the applicant asserts that permission was not given by it to the Fire Service to use the Log, so it is the Log which is the subject of the dispute between the parties. I have some sympathy for the respondent in its dilemma about what was claimed by the applicant concerning the Log because the relevant documents filed by the applicant are somewhat ambiguous.

The primary business of the applicant is the testing and maintenance of emergency stand-by generators in high rise buildings. Its business is conducted in the Gold Coast.

In about 1983 Mr Cavanagh wrote a specification for the testing and maintenance of stand-by generators and entered into contracts with clients for the performance of the work required under the specification. There was not any Australian standard for testing and maintaining emergency generators in buildings. The only Australian standard which covered generators (AS3009) was concerned only with electrical generators in hospitals.

Mr Cavanagh seems to have been the first person to recognise the requirement for a specialized service to maintain a specific standard to ensure the reliability of emergency power sources; and the recognition of this formed the basis of his business. He has, through his company, the applicant, built up a small but profitable business and he is its mainstay.

In 1993 the Fire Service, through Mr Gribble, introduced into the Gold Coast district a building inspection procedure for fire crews to carry out inspection of buildings in which there were special fire safety features and fire protection equipment. Mr Cavanagh was at that time seeking to find out what was required by the Fire Service concerning the testing of electrical generators in buildings on the Gold Coast.

Mr Cavanagh was asked to attend a meeting with officers of the Fire Service at Southport. The meeting was held in July 1993. Present were Mr Cavanagh, Mr Gribble, Mr McGuinness and other Fire Safety Officers; and they discussed maintenance testing and recording requirements of electrical generators in high rise buildings. It was admitted by the people representing the Fire Service at the meeting that the fire officers' expertise did not extend to engineering, and Mr Cavanagh's assistance was requested in the formulation of a specification which would suit the special needs and requirements envisaged by the officers of the Fire Service. Mr Cavanagh was asked to present a draft testing, maintenance and log system and bring the draft back to another meeting some time later. He agreed to do this. The question of copyright in the Log was not specifically discussed at the meeting of 30 July 1993 by any person present.

Mr Cavanagh spent considerable time in discussions with Fire Service officers and in arranging and rearranging the work he was doing; and he finally produced the Log. The Schedule was also produced by him. The Log was reduced to a material form and a hard copy of the Log was forwarded by facsimile by Mr Cavanagh to the respondent on 1 August 1993. In creating the Log Mr Cavanagh referred to the Schedule which he had already prepared and sent to the respondent; but mostly he used his own skill and experience as an engineer to create the Log. The Log was created by him without reference to the respondent and I am not persuaded that the respondent had any input in the creation of the Log.

Mr Cavanagh realised that the Fire Service proposed to use the Schedule after the meeting on 30 July; but he said (and I accept his evidence) that there was no discussion as to whether or not the Log was to be used; and that he assumed it was not to be used without appropriate payment to him. I am also satisfied that the Fire Service laboured under the misapprehension that it was entitled to, in essence, do what it liked with both the Schedule and the Log.

The Fire Service circulated the Log to many building managers and bodies corporate, being the persons responsible for the emergency stand-by generators in high rise buildings in the Gold Coast.

Mr Cavanagh never gave permission to the Fire Service to use the Log by distribution to others. Nor was he told that the Fire Service intended to circulate it to other people, including building owners in the Gold Coast area.

I am satisfied that the Fire Service acted as it did because it thought it was entitled to do so. I am also satisfied that it was not entitled to do so because the applicant's licence for the Fire Service to do as it wished with the Schedule did not extend to the Log. The two are quite distinct documents; the Log having been produced by Mr Cavanagh with a great deal of his own work and effort and expertise embodied in it. Also when Mr Cavanagh made the Log available to the Service he placed upon it the notation `Copyright - J. Cavanagh'.

It is for the respondent to establish to the Tribunal's satisfaction that a licence was granted by the applicant to it. The civil standard of proof must be applied. The only relevant case of which counsel had knowledge and which is revealed by my own research is Re Application by Seven Dimensions Pty Limited (1996) 35 IPR 1, a decision of the Copyright Tribunal's President, Sheppard J. His Honour held that in determining issues of fact under matters arising under s 183, the Tribunal should apply the civil standard of proof. I respectfully agree with his Honour. The respondent has not established that a licence to do what it did in fact do with the Log, was granted by the applicant to it.

The right of the applicant to establish the terms on which the respondent can use the Log (including the assessment of a licence fee) has been established. The parties did not reach an agreement on the terms of any licence, so the condition precedent to the exercise by the Tribunal of its jurisdiction under s 183(5) has been satisfied.

It should be noted, however, that once the applicant became aware that the respondent had used its log and informed the respondent that in the applicant's view such use constituted an infringement of the applicant's copyright, the respondent ceased to use the Log.

Accordingly, I answer the first issue in favour of the applicant.

I turn to the second issue, namely, the determination of the appropriate licence fee.

In Seven Dimensions Sheppard J said at 18-19:

`Then the question arises how does one approach the question of assessment. As will be seen in a moment, the evidence gives one little guidance. Ordinarily the Tribunal would have regard to the going or market rate for the use of material. Seven Dimensions says that there is evidence of a going or market rate here, but the difficulty in its maintaining that submission will be revealed in a moment. What has to be done is to assume that the two parties were in an arm's length bargaining situation. One has to assume they would have done business. Neither can be heard to say that they would not have done business on any terms. Nor, I think, could either say that they would only have done business for a sum which was grossly excessive or grossly inadequate. The exercise involves the two parties being placed in a hypothetical situation which will be artificial and unreal to them. ... `

Like Sheppard J in Seven Dimension, I must do the best I can on the basis of the material before me to reach a conclusion on:

`what the parties themselves would have agreed upon if they had intended to reach a bargain along the lines of that which would have been reached. They must be deemed to act reasonably and treated as willing but not anxious parties to the bargain which has to be constructed.' (at 19)

See also Interfirm Comparison (Australia) Pty Limited v Law Society of New South Wales (1975) 6 ALR 445 per Bowen CJ in Eq at 446-7.

I assume therefore that the respondent would have agreed with the applicant for the preparation by the applicant of the Log and that the applicant would have agreed to prepare it on the basis that it would be adequately paid for its work in commercial terms.

It was submitted by counsel for the applicant that the applicant could have either asked for a one-off payment together with a royalty for each time the Log was reproduced by the respondent; or, the applicant might have negotiated a slightly higher one-off payment with no further royalty.

In my opinion the licence fee must be equivalent to the amount which the applicant would have required the respondent to pay to it for permission to use the Log in the manner in which the respondent did use it: Interfirm at 447.

The advantage of the Log is that all persons who use it (including the owners or persons otherwise having the control of high rise buildings and inspectors) can easily see the maintenance routines which have been done, the intervals in which the work has been accomplished, who is responsible for the work which was done, and who signed for it.

The skill and knowledge that is used to produce the Log is the result of Mr Cavanagh's engineering training with respect to specialized equipment and many years of practical experience in writing specifications in this area of discourse to suit the specialized requirements of clients.

Although Mr Cavanagh agreed that the Log is another way of setting out the information that is in the Schedule in order to record the results of carrying out maintenance programmes, and that its purpose is to show that the work has been done; nevertheless there is considerable expertise in the preparation of the Log.

Mr Cavanagh gave evidence that the main advantages to a contractor using the Log are as follows:

(i) The serviceman knows precisely from the Log:-

(a) the previous history of the machine;

(b) whether the building manager has ordered the repair work which is necessary; and

(c) whether the problems are recurring.

(ii) The contractor has documented proof that faults which have been found during the course of inspection of the equipment have, in fact, been reported.

(iii) The contractor's copy of the document is part of the contractor's quality assurance programme.

(iv) In a nicely bound form the Log book forms part of the sales presentation to new clients.

Mr Cavanagh gave evidence that it took about 16 to 18 hours of his time to prepare both the Schedule and Log, and that as between the two the time was roughly even. Hence he spent to 8 to 9 hours on the work involved in preparing the Log. He also gave evidence that the rate which he charged for his work is $45 per hour; but where the work involves a total of more than $500 his quote would depend upon the risk involved and the amount of analysis he had to do. In that event an amount of $45 per hour `goes straight out the window'.

This is a case where I shall assume that the applicant's remuneration should not be determined on the basis of $45 per hour, but it is a useful starting point to multiply $45 per hour by 9 hours. However, in my opinion it is likely that the applicant would have asked for a one-off payment together with a royalty for each time the Log was reproduced by the respondent; and the figure (with which one starts for the one-off payment) would be in excess of $405 to reach an appropriate global figure that would have been charged by the applicant to the respondent. To that, one adds a figure by way of royalty for each time the Log was reproduced by the respondent. The Tribunal must do the best it can on the material before it to work out the appropriate amount of the one-off payment.

I do not find the report of Dr Gilmore helpful on the question of assessment. I say nothing disrespectful of the report at all, but what Gilmore Engineers may charge for doing work of the general kind which was performed by Mr Cavanagh does not seem to me to assist; because the question is what would the parties themselves have agreed upon if they had intended to reach a bargain. The bargain has to be constructed as Sheppard J observed in Seven Dimensions at 19; but the parties to the constructed agreement are the very parties in this litigation. If the applicant would have charged a particular figure for the work done embodied in the Log then I do not find it helpful to know what would be charged by an independent firm of engineers for doing the same job.

Starting with a base figure of approximately $400 and then coming to a round figure to represent the agreement likely to have been reached between the parties, in my opinion a figure of approximately $1,500 would be appropriate; to which I would add a component of royalty for each time the Log was reproduced by the respondent. A maximum of 240 copies of the Log were distributed by the respondent and no fee was charged by it for the copies of the Log which were distributed. I would add an additional figure of $2,400 making a total of $3,900.

The Tribunal orders that the terms for the copying of the Log produced by the applicant is fixed at the sum of $3,900 to be paid within 21 days by the State of Queensland to the applicant.

I was asked by counsel for the parties to defer dealing with costs until they have had an opportunity to consider these reasons. Accordingly I shall make no order for costs at this stage.

I direct the applicant and the respondent to file and serve an outline of submissions concerning costs (not to exceed three pages in each case) within 14 days of today. I will then peruse the submissions; and if I find it necessary to hear oral argument, I will arrange for the legal advisers of the parties to be notified. If I do not find it necessary to hear oral argument, I will give my decision on costs based on the written submissions.

I hereby certify that this and

the preceding fifteen (15)

pages are a true copy of the

reasons for judgment herein of

the Honourable Justice Lockhart.

Associate

Dated: 22 May 1997

Counsel for the Applicant: Mr C Moore

Solicitors for the Applicant: Cleary & Lee

Counsel for the Respondent: Mrs D Mullins

Solicitors for the Respondent: Crown Law

Date of Hearing: 7 March 1997

Date of Judgment: 22 May 1997