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Autodesk Inc & Ors v Ginos Engineers Pty Ltd & Anor [2009] FMCA 14 (19 January 2009)

Last Updated: 21 January 2009

FEDERAL MAGISTRATES COURT OF AUSTRALIA

AUTODESK INC & ORS v GINOS ENGINEERS PTY LTD & ANOR

COPYRIGHT – Reproduction of whole or substantial parts of software without licenses and infringement of copyright in contravention of s.36 of the Copyright Act 1968 (Cth) – breaches admitted – liability for infringement – quantum of compensatory damages – application of additional damages.


Adelaide City Corporation v Australasian Performing Right Association Ltd [1928] HCA 10; (1928) 40 CLR 481
Australasian Performing Right Association Ltd v Metro on George Pty Ltd [2004] FCA 1123; (2004) 61 IPR 575
Australasian Performing Right Association Ltd v Jain (1990) 18 IPR 663
Autodesk Australia Pty Ltd & Anor v Cheung (1990) 94 ALR 472
Autodesk Inc v Yee (1996) 68 FCR 391
Blatch v Archer [1774] EngR 2; (1774) 98 ER 969
Browne v Dunn (1893) 6 R 67
Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187
Falcon v Famous Players Film Company [1926] 2 KB 474
Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2007] FMCA 2156
Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051
Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd [1990] 1 Qd R 231
Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231
Microsoft Corporation v Goodview Electronics (2000) 49 IPR 578
Raben Footware Pty Ltd v Polygram Records Inc (1997) 75 FCR 88
SBO Pictures & Ors v Kaos Shops Pty Ltd & Ors [2006] FMCA 82
Sullivan v FNH Investments Pty Ltd t/as Palm Bay Hideaway [2003] FCA 323
Universal Music Australia Pty Ltd v Cooper [2005] FCA 1878
Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242
University of New South Wales v Moorehouse & Angus & Robertson (Publishers) Pty Ltd [1975] HCA 26; (1975) 133 CLR 1
WEA International Inc v Hanimex Corp Ltd (1987) 17 FCR 274

First Applicant:
AUTODESK INC

Second Applicant:
AUTODESK ASIA PTE LTD

Third Applicant:
AUTODESK AUSTRALIA PTY LTD

First Respondent:
GINOS ENGINEERS PTY LTD

Second Respondent:
ZISIS GINOS

File number:
SYG 2536 of 2007

Judgment of:
Lloyd-Jones FM

Hearing dates:
28 and 29 November 2007

Date of last submission:
30 March 2008

Delivered at:
Sydney

Delivered on:
19 January 2009

REPRESENTATION

Counsel for the Applicants:
Mr J. Hennessy

Solicitors for the Applicants:
Gilbert + Tobin

Counsel for the Respondents:
Mr P. Scragg (solicitor)

Solicitors for the Respondents:
Peter Scragg & Associates

ORDERS

(1) Judgment be entered under s.115(2) of the Copyright Act 1968 (Cth) against the respondents for the applicants in the sum of $38,012.22.
(2) Judgment be entered under s.115(4) of the Copyright Act 1968 (Cth) against the respondents for the applicants in the sum of $76,000.00.
(3) The respondents are to pay the applicants’ costs of the proceedings as agreed or, in the absence of an agreement, as taxed.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 2536 of 2007

AUTODESK INC

First Applicant


AUTODESK ASIA PTE LTD

Second Applicant


AUTODESK AUSTRALIA PTY LTD

Third Applicant


And


GINOS ENGINEERS PTY LTD

First Respondent


ZISIS GINOS

Second Respondent


REASONS FOR JUDGMENT

The proceedings

  1. The proceedings concern infringement of copyright in Autodesk software pursuant to the Copyright Act 1968 (Cth) (“the Act”). The Autodesk software includes “AutoCAD” which is a tool for two and three dimensional design and drafting used by architects and engineers in Australia for about a decade.
  2. Michael Kelly of KarelCAD, an authorised reseller of Autodesk software, detected on 22 May 2006 that the first respondent, Ginos Engineers Pty Ltd (“GE”), had reproduced in material form 27 infringed copies of Autodesk software (“infringing copies”). Mr Kelly learnt of the infringing copies in a conversation he had with GE’s information technology consultant. On 5 June 2007, Mr Kelly, who was also a KarelCAD representative, attended GE’s premises to conduct an audit of GE’s computers but were denied access to the computers. On 6 June 2007 an audit was conducted by Mr Kelly with GE’s permission which confirmed the unlicensed reproduction (see Statement of Claim at [12]).
  3. The audit revealed that there were two current, authorised individual stand alone licences in place, one for AutoCAD 2008 and the other for AutoCAD LT 2008 (first affidavit of Mr Ong, para.70(a)). There were three other copies (one copy each of AutoCAD LT 1997, AutoCAD LT 2000 and AutoCAD LT 2004) that had at one time been licensed under single individual stand alone licenses but those licenses were no longer current as the products had subsequently been upgraded.
  4. The infringing copies contained reproductions of the whole or substantial parts of the Autodesk software without licenses and infringed the applicants’ copyright in Autodesk software in contravention of s.36 of the Act.
  5. Between 22 May 2007 and 27 July 2007, correspondence passed between the parties and/or their legal representatives about the respondents’ acts of copyright infringement and the damages suffered by the applicants. However, the parties were unable to agree on the quantum of damages.
  6. The original application and statement of claim were filed by Autodesk Inc and Autodesk Asia Pte Ltd on 17 August 2007. At the first Court date directions hearing of 6 September 2007, I granted leave to join Autodesk Australia Pty Ltd as the third applicant and for the filing of an amended application and amended statement of claim which are set out below.
  7. In the context of negotiations between the parties to resolve the copyright infringement issues, GE filed proceedings against Autodesk Australia Pty Ltd on 6 August 2007 in the Adelaide Registry of the Federal Magistrates Court (ADG 219 of 2007) seeking a declaration as to the amount of damages it was liable to pay Autodesk Australia. The proceedings were dismissed on Autodesk’s application. A separate costs argument was held because GE opposed costs which were awarded to Autodesk Australia and sought payment of its own costs. Federal Magistrate Simpson awarded Autodesk Australia its costs: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2007] FMCA 2156. An appeal against that decision was dismissed by the Federal Court: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051.
  8. On 13 September 2007 the respondents in this matter filed an “Application in the Case” seeking for the matter to be transferred from the Sydney Registry to the Adelaide Registry of the Federal Magistrates Court. That interim application was heard on 29 October 2007 and the decision dismissing the application was handed down on 5 November 2007: Autodesk Inc & Ors v Ginos Engineers Pty Ltd & Anor [2007] FMCA 1848.
  9. I heard evidence from witnesses on 28 and 29 November 2007. The parties had until 10 January 2008 to prepare written submissions. This timetable was subsequently extended to 30 March 2008. The proceedings concern the following issues:
    1. Mr Ginos’ alleged liability for infringement of Autodesk Inc’s copyright in the Autodesk software;
    2. The quantum of Autodesk’s compensatory damages; and
    1. The application of additional damages in all the circumstances Autodesk elected to recover damages as opposed to an account of profits.

Amended statement of claim

  1. In accordance with leave granted on 6 September 2007, an amended statement of claim was filed as follows:

(c) the secretary of GE;

(d) a shareholder of GE; and
(e) involved in the day to day management and operations of GE.
SUBSISTENCE AND OWNERSHIP OF COPYRIGHT
5. The applicants control in Australia suite of computer software, including those listed in Schedule A (the Autodesk Software).
6. Each piece of Autodesk Software is and was at all material times an original literary work within the meaning of the Copyright Act 1968 (Cth) (the Act).
7. Each piece of Autodesk Software was created and made by:
8. By reason of the facts, matters and circumstances set out in paragraphs 6 and 7, each piece of Autodesk Software is a literary work in which copyright subsists.
9. Each of the persons referred to in paragraph 7 above were at all material times:
10. By reason of the facts, matters and circumstances set out in paragraphs 7 to 9 above, Autodesk Inc is and has at all material times been the owner of copyright in each piece of the Autodesk Software.
11. Autodesk Asia is, and was, or alternatively Autodesk Australia was, at all material times, the exclusive licensee within Australia of the copyright in each of the literary works contained in all software released by Autodesk Inc, including the Autodesk Software.
Reproduction of the Autodesk Software
13. The Infringing Copies contained reproductions of the whole or a substantial part of the Autodesk Software.
14. The Infringing Copeis were reproduced without the licence of the applicants.
15. By reason of the facts and circumstances set out in paragraphs 12 to 14 above, GE has infringed the copyright of the applicants in the Autodesk Software, in contravention of s.36 of the Act.
COPYRIGHT CLAIMS AGAINST MR GINOS
16. From a date unknown to the applicants, Mr Ginos:
17. Each of the acts pleaded in paragraph 16 above was undertaken without the licence of the applicants.
18. By reason of the facts, matters and circumstances set out in paragraphs 16 and 17, Mr Ginos has infringed the copyright of the applicants in the Autodesk Software.
RELIEF IN RELATION TO COPYRIGHT CLAIMS
Loss and Damage
19. By reason of the infringements set out in paragraph 15 and 18, the applicants have suffered loss and damage.
Section 115(4) damages
20. The respondents have done the acts alleged against them:
21. By reason of the facts, matters and circumstances set out in paragraph 20, the Court, in awarding damages for infringement of copyright, should award additional damages under s.115(4) of the Act.
The applicants claim the relief specified in the application.

11. In accordance with leave granted on 6 September 2007, an amended application was filed and contains the following attachments:

Amended Application

Attachment A – Final orders sought
1. A declaration that the respondents have infringed the copyright of the applicants in the Autodesk Software.
2. A permanent injunction restraining the respondents and each of them, whether by themselves, their servants, agents or otherwise, from:
the whole or a substantial part of any software released by the applicants including the Autodesk Software, without the licence of the applicants.
3. An order that the respondents destroy or delete all Infringing Copies of the Autodesk Software in the possession, custody or control of the respondents.
4. An order that the second respondent make, file and serve by no later than 2 weeks from the date of these orders an affidavit that confirms with particularity the destruction or deletion of Infringing Copies of the Autodesk Software pursuant to order 3 above specifying:
5. Damages pursuant to s.115(2) of the Copyright Act 1968 (Cth) or in the alternative, at the election of the applicants, an account of profits.
6. Damages pursuant to s.115(4) of the Copyright Act 1968 (Cth).
7. Damages pursuant to s.116(1) of the Copyright Act 1968 (Cth).
8. Interest pursuant to s.76 of the Federal Magistrates Act 1999 (Cth).
9. Such further or other orders or relief as the Court deems fit.
Attachment B – Definitions
Autodesk Software means the following computer software that the applicants control which incorporate literary works within the meaning of the Copyright Act 1968 (Cth).
AutoCAD LT 1997
AutoCAD LT 2000
AutoCAD LT 2004
AutoCAD LT 2008
AutoCAD V12 2005
Infringing Copies means a reproduction of the Autodesk Software being an article (which may be an electronic reproduction or copy of the Autodesk Software) the making of which constituted an infringement of the copyright in the Autodesk Software.

Evidence

  1. The matter proceeded as against the respondents on the basis of a draft Statement of Agreed Facts which was filed with the Court on 28 November 2007. Mr Scragg disagrees with a number of entries in this document and I have dealt with this in “Consideration” below. That Statement is attached to this decision at “Appendix A”.
  2. The applicants in these proceedings tendered the following affidavits:
    1. Affidavit of Michael Patrick Kelly sworn 28 September 2007 (first affidavit of Mr Kelly);
    2. Affidavit of Weng Kee Stuart Ong sworn 28 September 2007 (first affidavit of Mr Ong);
    1. Affidavit of Rebecca Mary Dunn sworn 4 October 2007;
    1. Affidavit of Siabon Seet sworn 9 October 2007 (first affidavit of Ms Seet);
    2. Affidavit of Siabon Seet sworn 11 October 2007 (second affidavit of Ms Seet);
    3. Affidavit of Siabon Seet sworn 26 October 2007 (third affidavit of Ms Seet);
    4. Affidavit of Michael Patrick Kelly sworn 9 November 2007 (second affidavit of Mr Kelly);
    5. Affidavit of Siabon Seet sworn 14 November 2007 (fourth affidavit of Ms Seet);
    6. Affidavit of Michael Patrick Kelly sworn 22 November 2007 (third affidavit of Mr Kelly);
    7. Affidavit of Weng Ki Stuart Ong sworn 23 November 2007 (second affidavit of Mr Ong).
    8. Affidavit of Jean Pierre Du Plessis sworn 21 November 2007; and
    1. Affidavit of Siabon Seet sworn 22 November 2007 (fifth affidavit of Ms Seet).
  3. The respondents filed the following affidavits:
    1. Affidavit of Dulcie Mitrovich affirmed and declared 26 October 2007;
    2. Affidavit of Zisis Ginos affirmed and declared on 29 October 2007 (first affidavit of Mr Ginos);
    1. Affidavit of Zisis Ginos affirmed and declared 14 November 2007 (second affidavit of Mr Ginos);
    1. Affidavit of Zisis Ginos affirmed and declared 16 November 2007 (third affidavit of Mr Ginos).
  4. The applicants tendered the following exhibits:
    1. JAB1: Exhibit to the first affidavit of Mr Biviano;
    2. JAB2: Exhibit to second affidavit of Mr Biviano;
    1. JDP: Exhibit to the affidavit of Mr Du Plessis;
    1. WKSO1: Exhibit to the first affidavit of Mr Ong;
    2. WKSO2: Confidential exhibit to the first affidavit of Mr Ong;
    3. WKSO3: Exhibit to the second affidavit of Mr Ong;
    4. WKSO4: Exhibit to second affidavit of Mr Ong;
    5. SS1: Exhibit to Ms Seet’s affidavit;
    6. SS2: Exhibit to Ms Seet’s affidavit;
    7. SS3: Exhibit to Ms Seet’s affidavit;
    8. SS4: Exhibit to Ms Seet’s affidavit; and
    1. SS5: Exhibit to Ms Seet’s affidavit.
  5. The respondent tendered the following exhibits:
    1. R1: Autodesk Trial Software 2005-V12;
    2. R2: Photograph;
    1. R3: Photograph
    1. R4: Photograph;
    2. R5: Photograph;
    3. R6: Trial Software Autodesk Civil 3D 2006;
    4. R7: Autodesk Trial Software Civil 3D 2006;
    5. R8: Autodesk Trial Software;
    6. R9: Autodesk Roster Design Trial 2005;
    7. R10: Autodesk Civil 3D Quick Start Training Disc;
    8. R11: Ginos Engineers- Employee’s details;
    1. R12: Autodesk Autocad Authorisation Request form;
    1. MF16: Press release/newspaper articles re Autodesk (bundle); and
    2. MF17: Bundle of calculations.

Licenses granted by Autodesk

  1. Autodesk software supplied to the Australian public is on compact discs and/or digital video discs with the following packaging and/or labelling:
    1. The letter “C” in a circle together with the year of release of the software and the name of the copyright owner is marked on all material. For example “© 2004 Autodesk, Inc. All rights reserved”
    2. When an Autodesk software product is first installed on any computer, the user is shown a document entitled “Autodesk Software Licence Agreement Worldwide” and is notified that the supply of Autodesk Software to the end user is subject to the End User License Agreement (“EULA”).
  2. The EULA must be accepted by the user before the Autodesk software can be installed. Each EULA provides a non-transferable, non-exclusive license to the end user to use the program, its manual and accompanying documentation. The opening paragraphs of the EULA are set out in the Statement of Agreed Facts at [29] and [30].

Submissions

Claims against Mr Ginos

  1. Mr Hennessy, for the applicants, submitted in closing submissions that accessorial liability can arise in relation to an infringement of copyright in one of three ways:
    1. If a person is a director of a small company under his direct control and commits an infringement of copyright: Australasian Performing Right Association Ltd v Jain (1990) 18 IPR 663; Australasian Performing Right Association Ltd v Metro on George Pty Ltd [2004] FCA 1123; (2004) 61 IPR 575;
    2. If a person “authorises” the infringement acts; or
    1. If a person shares a common design with the other infringer of copyright thereby rendering him a joint tortfeasor in that infringement.

It is submitted that there is sufficient evidence to support a finding against Mr Ginos on each of these three grounds.

  1. Mr Hennessy contends that there is no requirement that a director be “guilty of gross negligence, fraud or serious misconduct before being liable for copyright infringements committed by his company.” Certain Australian copyright infringement cases have found directors of companies liable when they “directed or procured” the acts, or the course of conduct by the relevant company gave rise to acts of infringement: Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 at [245] per Lindgren J.
  2. Mr Hennessy submits that Mr Ginos’ liability arises as a director of GE, which is the present corporate vehicle through which he runs his engineering firm for reasons of personal convenience. It is submitted that while Mr Ginos’ liability for GE’s infringement should not properly be in issue, the matters set out below show a number of factors that individually and collectively make him liable. Mr Hennessy further submits that GE is structured in a manner consistent with Mr Ginos being able to control the company’s activities, in that:
    1. Mr Ginos is one of three (equal) shareholders;
    2. Mr Ginos’ wife (who does not work in the firm) is the second shareholder;
    1. Jeman Pty Ltd is the third shareholder and Mr Ginos is the director and secretary of that company. The other two shareholders are his daughters (neither of whom work in the firm) (Transcript of 29 November 2007, pp.66-67).
  3. Mr Scragg, for the respondents, submits that Mr Ginos is computer illiterate and consequently had to delegate computer generation of engineering documents to other staff members, who procured the software in question (the 1997 version). That software was procured to replace previous software produced by the applicants, which had a mechanical lock key (Exhibit “R14” also called “R13”). Mr Scragg submits that there does not appear to be any software constraint on the ability to copy the 1997 program, which occurred over a period of time as various staff members were added to GE’s practice.
  4. Mr Scragg submits that it is not possible, through examining the installation of software on a particular computer, to determine whether or not it complies with a license. Mr Scragg argues that ambiguity in the wording of the licensing agreement supplied with the software contemplated the possibility of a network situation allowed by portable licenses. Further that portable and network licences do exist and there is nothing in the licensing agreement which imposes the restrictions as suggested by Messrs Ong, Kelly and Biviano in their evidence. The licence agreement had been put forward as the basis of the applicant’s entitlements. Mr Scragg submits that the ambiguity of the document is to cover a range of situations and that it is impossible to interpret it without additional information. If the restrictions claimed do exist, to the extent that the evidence is inconsistent with a licensing agreement, it is submitted that the licensing agreement (being the document adopted by the end user) is the document that applies. Mr Scragg further submits that there is nothing in any other licence agreement to suggest that it is not possible to copy and install the software on other computers as asserted by Mr Kelly prior to 2004. He submits that the 1997 licence agreement contemplates the possibility of doing that (Exhibit “WKSO1” to the first affidavit of Mr Ong, p.37.5).
  5. Mr Scragg argues that the only way this issue can be determined is by specialist knowledge of the applicant’s product. The applicants held a special registry, the “Siebel Database” which contained the necessary details (first affidavit of Mr Ong, para.71) but access to that database was not provided to Mr Ginos, nor was he aware of it. Its existence was only identified in Mr Ong’s affidavit. Mr Scragg argues that, consequently, there is nothing in the installation of the program on a particular computer that suggests the copies are illegal.
  6. Mr Kelly’s evidence was that he relied on serial numbers (first affidavit of Mr Kelly at [44]-[45]) but Mr Scragg submits that there is no suggestion that Mr Ginos could access the serial numbers let alone understand their significance. In support of this contention, Mr Scragg referred to the fact that the applicants appear to have conceded that the VIZ 2005 programme was legal. Mr Scragg submits that the applicants operated a portable licence system (Exhibit “ZG3”) and that there were special circumstances on which licenses were issued but none of that would have been apparent to Mr Ginos.
  7. Mr Scragg submits that GE purchased copies of the applicant’s product at various times and that salespersons retained by the applicants (such as Mr Kelly), visited GE’s offices in connection with those sales. He argues that this would have made a person in Mr Kelly’s position aware of whether or not there was an issue of compliance. Mr Kelly, as a retailer of the applicants’ product, was able to access sales and Siebel data which would have enabled him to assess whether or not GE’s operation was complaint with licenses.
  8. Mr Scragg submits that Mr Kelly determined how many computers were being used and how many licenses were held by GE. However, as it was not possible for Mr Ginos to do so, he was at a considerable disadvantage when it came to assessing compliance.

Claims against Mr Ginos – size and control of Ginos Engineers

  1. Mr Hennessy submits that GE is a small company and Mr Ginos conducts the business from one office. In 1997 when the first unauthorised copies of the Autodesk Software were made by GE, there were only two employees using computers (Transcript of 29 November 2007, p.67.34). The organisation now employs 15 professional staff (12 engineers and three draftsman, two receptionists, an office manager and a part time accountant) all located in an open plan office. (Transcript of 29 November 2007, pp.69.10, 68.11)
  2. Mr Hennessy submits that Mr Ginos is the controlling mind and body of GE and has the day to day management of its business. In cross-examination Mr Ginos confirmed:
    1. He is the principal of GE (Transcript of 29 November 2007, p.66.31);
    2. He is in control of GE (Transcript of 29 November 2007, p.67.17);
    1. He is the face of GE (Transcript of 29 November 2007, p.69.30);
    1. He is the person in charge and its “top dog” (Transcript of 29 November 2007, p.70.16);
    2. The “buck stops with him” (Transcript of 29 November 2007, p.70.26);
    3. He established the firm in May 1980 and continues to run it (Transcript of 29 November 2007, p.67.28);
    4. He is responsible for the financial and administrative management of GE (Transcript of 29 November 2007, p.70.39);
    5. The part time accountant and office manager report to him (Transcript of 29 November 2007, p.70.41);
    6. He keeps an eye on GE’s outgoing and revenue (Transcript of 29 November 2007, p.72.1);
    7. He formulates and decides on GE’s policies and activities (Transcript of 29 November 2007, p.70.35);
    8. He makes the final decisions on things like GE’s location (Transcript of 29 November 2007, p.71.9);
    1. He makes the final decisions on procurement of significant capital items (Transcript of 29 November 2007, p.71.21); and
    1. He authorises the acquisition of computers (Transcript of 29 November 2007, p.72.6).
  3. Mr Hennessy submits that it would seem that other than in respect of the subject matter of this litigation, Mr Ginos accepts responsibility for GE’s conduct. In dealing with GE’s clients, he accepts responsibility, where appropriate, for errors committed on behalf of GE (Transcript of 29 November 2007, p.70.23). Mr Hennessy submits that given the size of GE and Mr Ginos’ involvement in it, he must have an appropriate level of responsibility and control over GE’s actions or conduct.
  4. Mr Scragg submits that Mr Ginos’ management style is to delegate tasks to different people in the company. Those individuals possess a high degree of autonomy. Although Mr Ginos accepts responsibility for their actions, this does not mean that he is complicit in any infringement of the applicants’ copyright. Mr Scragg submits further that GE is a corporation and is solely responsible for its activities whereas the director is only liable when he/she been guilty of gross negligence, fraud or serious misconduct, none of which apply here.

Claims against Mr Ginos – Infringement by authorisation

  1. Infringement by an “authorisation” under s.36 of the Act is a separate statutory test. In WEA International Inc v Hanimex Corp Ltd (1987) 17 FCR 274 at [47], Gummow J states:
  2. Consequently it is not necessary to also proceed against the person who infringes copyright by doing the act: University of New South Wales v Moorehouse & Angus & Robertson (Publishers) Pty Ltd [1975] HCA 26; (1975) 133 CLR 1. The term “authorise” is to be given the ordinary dictionary meaning of “sanction, approve or countenance” as accepted by Banks LJ in Falcon v Famous Players Film Company [1926] 2 KB 474 and adopted in Moorehouse at [12] and [20] and Australasian Performing Right Association Ltd v Jain at 667.30.
  3. Section 36 of the Act states:
  4. Mr Hennessy submits that Mr Ginos clearly had the power to prevent the doing of the infringing acts as is required to be taken into account pursuant to s.36(1)(A) of the Act. Mr Hennessy submits that Autodesk does not understand that fact to be an issue. However, to be abundantly cautious he submits that the following matters support Autodesk’s position:
    1. Mr Ginos was and is in control of GE and therefore its employees, premises and business. That in turn gave him a measure of control over the equipment on which he knew there was software operating and which must be licensed: Australian Performing Lights Association Lights Association Ltd v Metro on George Pty Ltd at [63]-[73].
    2. Directors of small companies are responsible for the acts of their employees and for making sure that the copyright laws are not breached by them.
    1. Even if, despite all the evidence, Mr Ginos were to ask the Court to believe that he exercised virtual control and allowed the business to run in an almost anarchic fashion, it does not absolve him of liability for the acts of GE.
  5. Mr Hennessy submits that in respect of s.36(1A)(b) of the Act, the respondents have chosen not to identify the person or persons of GE who reproduced the Autodesk software which should count against them: Blatch v Archer [1774] EngR 2; (1774) 98 ER 969. However, Mr Hennessy submits that it is plain that the relevant person or persons was or were employed by GE, thus rendering GE liable for the infringement. Mr Ginos’ control over the responsibility of GE and the acts of its employees makes plain the nature of the relationship and his authorisation of those acts.
  6. Mr Hennessy submits in respect of s.36(1A)(c) of the Act that Mr Ginos took no steps, let alone reasonable steps, to prevent or avoid GE’s act of infringement. He submits that that there was no positive evidence put forward by the respondents as to their “best practice” in relation to copyright protection. Where a director actively involved in the control of a corporation allows a situation where he must have known that it was likely that the subject matter was used without a license, he will be found personally liable for authorising infringement of copyright: Australasian Performing Right Association Ltd v Jain.
  7. Mr Hennessy submits that this is so even when the day to day operations of the business are not conducted by that director, including the use of copyright protection words. In some cases “inactivity” or “indifference”, exhibited by acts of omission, may reach a degree from which an authorisation or permission may be inferred: University of New South Wales v Morehead at [12] cited in the Adelaide City Corporation v Australasian Performing Right Association Ltd [1928] HCA 10; (1928) 40 CLR 481 at 504; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242 at [402].
  8. Mr Hennessy submits that by reason of the infringing activities, Mr Ginos and GE were joint tortfeasors in the acts of infringement committed by GE. Mr Ginos as the person responsible for GE’s activities, which necessarily include the operation of computers on which there was software he knew had to be licensed, participated in the furtherance of the common design. Mr Scragg contends that the infringer of copyright was GE which is a separate legal entity and Mr Ginos is only liable for GE’s actions if he is guilty of gross negligence, fraud or serious misconduct in the course of discharging his duties as its director.

Claims against Mr Ginos’ knowledge of copyright

  1. Mr Hennessy submits that Mr Ginos was, at all relevant times, possessed of a degree of knowledge about copyright that makes it impossible for him to avoid liability for the infringements of GE under s.36 of the Act. Mr Ginos eventually conceded, in cross-examination, that at all relevant times since 1997, as a person responsible for GE’s office, he knew that the software programs run on GE’s computers, including the Autodesk software, were subject to terms and conditions of use (Transcript of 29 November 2007, p.81.1). Mr Ginos conceded that if he had taken the trouble to do so, he would have been able to acquaint himself with the terms and conditions of use for the various programs run on his computers (Transcript of 29 November 2007, p.81.27). Mr Hennessy submits that he could also have checked with his employees as to whether the programs were operating pursuant to their terms and conditions of use (Transcript of 29 November 2007, p.81.33). It is submitted that he simply did not take the trouble to undertake any of these steps (Transcript of 29 November 2007, p.88.41). Mr Ginos also conceded that as an educated professional he understood, and he expected his professional staff to have understood, the significance of copyright warnings on the Autodesk software packages and EULAs (Transcript of 29 November 2007, pp.73-80).
  2. The principles applicable to liability for authorisation apply to a director of a company who is its “controlling mind” and which renders him liable for acts of infringement by the company: Australasian Performing Right Association Ltd v Jain; Australasian Performing Right Association Ltd v Metro on George Pty Ltd; Universal Music Australia Pty Ltd v Cooper [2005] FCA 1878. All these cases concerned directors who were found liable for failing to prevent infringements of copyright being carried out by employees of the companies. For the liability to be established, the director had to know knew of the acts himself and that it was likely that the acts had occurred. It is not necessary that the director knew also that the acts would infringe copyright. Mr Hennessy argues that Mr Ginos knew that copies of the software were being made by employees of the company, a situation similar to the directors in Australasian Performing Right Association Ltd v Jain, Australasian Performing Right Association Ltd v Metro on George Pty Ltd and Universal Music Australia Pty Ltd v Cooper.
  3. Mr Hennessy contends that even if Mr Ginos had not known that other copies of the software were being made because he generally left the licensing of software issue to his employees, this too would amount to authorisation. It is submitted that in Australasian Performing Right Association Ltd v Jain the director had a similar management philosophy to Mr Ginos and was liable even though he did not concern himself with the actual items of music which were being played. In that case at 671:

In Universal Music Australia Pty Ltd v Cooper the director denied such knowledge but was nevertheless found liable for turning “a blind eye” to the activities on the website. That finding was affirmed on appeal: Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187 (an application for special leave to the High Court by Mr Cooper was refused). In Australasian Performing Right Association Ltd v Metro on George Pty Ltd the director claimed that he was unaware and of a decision to obtain a license to permit the performance of a musical work but failed to avoid liability for authorisation.

  1. Mr Scragg argues that knowledge of copyright is not conclusive as there must also be actual knowledge of the infringement or recklessness. Mr Scragg relies on his argument ventilated in his submissions. There is nothing to suggest that GE’s other employees were in a better position to make that assessment.
  2. Mr Scragg contends that Mr Ginos’ evidence is believable as it was possible for a person to subjectively form the view, given the ease with which programs could be copied, to believe that they were entitled to make as many copies as were needed. This was exceptional in comparison to later products issued by the applicants and other products in the industry. It does not follow that this belief authorised the infringing activity. He submits that it is reasonable to infer this occurred as new staff were engaged from time to time and given computers and copies of relevant software used by the firm. Mr Scragg drew the Court’s attention to the fact that most of the software was out of date by the time of the last infringing activities.

Claims against Mr Ginos’ credit

  1. Mr Hennessy submits that Mr Ginos cannot be accepted as a witness of truth. He submits that Mr Ginos gave what evidence he thought would assist the respondents’ case and/or exonerate him. His evidence reinforced the perception that the respondents were determined not to shed light on the nature and extent of their infringement activities and recent misconduct despite the obvious and serious nature of their recent recalcitrance.
  2. In support of this contention, Mr Hennessy relied on the following:
    1. Mr Ginos did not concede that he knew that the software program running on GE’s computers was subject to terms and conditions of use (Transcript of 29 November 2007, p.72).
    2. Mr Ginos’ initial position was that he was not aware of whether Microsoft Word programs ran pursuant to terms and conditions of use (Transcript of 29 November 2007, p.72.2).
    1. It was not until after he had been taken to Autodesk’s software package (copyright warnings and EULAs) that his false evidence became clear and he conceded that he probably appreciated at all relevant times that the software programs run on GE’s computers, including Autodesk software, were subject to terms and conditions of use (Transcript of 29 November 2007, p.81.1).
    1. Mr Ginos gave affidavit evidence that he understood that it was not necessary to purchase additional licenses in respect of each computer but that it was possible to install the Autodesk software on various computers without restriction (first affidavit of Mr Ginos, para.3).
    2. In cross-examination Mr Ginos conceded that in fact he did not know whether or not Autodesk software could be used on multiple sites without restriction (Transcript of 29 November 2007, p.82.10).
    3. Mr Ginos was determined not to properly explain or provide any sensible explanation for what occurred in respect of Mr Du Plessis’ attempts to inspect 13 computers that Mr Kelly had audited. Mr Du Plessis was the Director of Forensic Technology in the South Australian Forensic Division of Ferrier Hodgson and was retained by the applicants. He was required to visit GE’s premises on three separate occasions to carry out inspections on the 13 computers which contained the infringing copies:
      1. First inspection – only five computers available to inspect, one in parts. Mr Ginos asked Mr Du Plessis to leave after three hours (affidavit of Mr Du Plessis, paras.23-24);
      2. Second inspection – Mr Du Plessis’ attempt to complete the inspection was further frustrated in that seven machines were shown to him but only four were switched on with passwords provided.
      3. Third inspection – directed to computers not relevant to the inspection.
    4. Mr Ginos was not prepared to sensibly engage when it came to the subject of the respondents’ non production of documents on discovery. He gave no explanation for the failure to answer to categories 2, 3 and 9 of Autodesk’s list of categories. These categories were critical as they contained information about the number of infringing copies. There was also no production of income tax returns for the 1996, 1997, 1998 and 1999 financial years.
    5. The deliberate removal of at least eight of the relevant computers and the important data in them so that the representatives of Autodesk were unable to determine the extent of GE’s infringing activities. At various times the whereabouts and availability of those computers was provided as Autodesk pursued this issue.
  3. Specifically in reference to Mr Du Plessis’ attempt to inspect the 13 computers, when his affidavit was served on the respondents it made plain his finding that he had been given substitute computers to inspect. The respondents did not meet that evidence with a supplementary affidavit (Transcript of 29 November 2007, p.99.1). Mr Ginos contends that one of his professional staff, Rob Gainer, had misconstrued which of the computers Mr Du Plessis was to inspect. Mr Ginos said that he had read Mr Du Plessis’ affidavit but had not asked Mr Gainer to put on an affidavit nor did he address the issue in a supplementary affidavit (Transcript of 29 November 2007, p.95.29). Mr Ginos conceded that Mr Gainer was able to give evidence (Transcript of 29 November 2007, p.99.23). Although the respondents knew the purpose of Mr Du Plessis’ third visit, Mr Ginos asserted that it was Mr Du Plessis’ fault for not informing them that he had been shown the wrong computers (Transcript of 29 November 2007, p.33.45).
  4. Mr Hennessy submits that it is Mr Du Plessis’ unchallenged evidence that no-one in the GE office told him that there were any more computers to inspect. Therefore, Mr Du Plessis was perfectly entitled to assume (which he did) in relation to the third inspection that he was going to be shown the relevant computers which was why he did not say he was not provided with the proper computers. Mr Hennessy argues that it is noteworthy that the respondents had never sought to explain where the thirteenth computer was. Nor have they filed any evidence to explain the whereabouts of the eight computers. Mr Ginos also had no explanation of why one of the computers shown to Mr Du Plessis on the first visit was produced in bits and pieces and could not be meaningfully inspected (Transcript of 29 November 2007, p.35.31). It is submitted that Mr Ginos was unforthcoming in identifying the person who had deleted the Autodesk software from five of the inspected computers. He simply accepted that Mr Du Plessis had made the finding about the deleted software. One of the seven new computers that Mr Du Plessis was shown contained traces of a version of Autodesk software, which had been installed at some stage on that machine (Transcript of 29 November 2007, p.104.24).

Compensatory damages – Release pursuant to s.115(2) of the Copyright Act

  1. Mr Hennessy indicated that Autodesk elected to claim damages and the fee that it, as copyright owner, might otherwise have fairly charged GE for the use of the Autodesk software. The proper measure of damages is the retail price that would have been paid by the respondents had they obtained the licenses they were required to. It is submitted that this is the only price supported by the evidence. When the respondents purchased valid licenses, they purchased them at the retail price as GE was not a wholesaler entitled to a wholesale price. The evidence indicates that had Autodesk been approached to validate the copies that had been made, it would have charged GE the prevailing retail price (Transcript of 29 November 2007, p.5.30). It is submitted that there is no evidence to suggest that any other price would have been charged.
  2. Mr Scragg challenged this approach on the basis of Autodesk Australia Pty Ltd & Anor v Cheung (1990) 94 ALR 472. However, Mr Hennessy submits that case involved a totally different situation which supports the contention of the applicant. He distinguishes Cheung from this case because he submits Mr Cheung supplied copies of programs free of charge to purchasers of his computers. Autodesk arranged for a consultant to contact Mr Cheung in the guise of an interested buyer. A demonstration of certain computer hardware included AutoCAD software.
  3. When Mr Cheung’s premises were searched, 14 AutoCAD computer discs were found and a claim for compensatory damages was made for all 14 programs on a “license fee” approach. Justice Wilcox stated at [15]:
  4. Mr Hennessy also referred to Autodesk Inc v Yee (1996) 68 FCR 391 which he says supports the applicants’ contentions although it involved a different situation. He submits that the Court in Yee was required to determine the amount of damages under s.116(1) of the Act and not s.115(2). The issue in Yee was whether the value of the software that was converted was the actual value of all the software that had been copied onto compact discs by the respondents, or whether it was the sale price charged by the respondents for their compilation compact discs. Justice Burchett decided that the latter on the basis that:
  5. Mr Hennessy contends that even if the applicants claimed damages under s.116 of the Act, there was still a “legitimate market for copies” of the AutoCAD software. He submits that this leads to the conclusion that the proper measure of damages according to Cheung is the “prices at which legitimate copies of programs in question might be sold”, namely the retail price.
  6. Mr Scragg submits that there has not been, nor was there expected to be, mass copying of all of the infringing copies, the 1997 and other software. The basis for the gradual copying of programs is set out in Mr Ginos’ second affidavit at [13]:
  7. Mr Scragg contends that Mr Ginos’ explanation is reasonable and consistent with the gradual growth of GE’s engineering practice and the information in Exhibit “R11”. That means that the applicants’ interest calculation has to be adjusted accordingly.
  8. Mr Hennessy submits that Autodesk seeks compensatory damages in the amount of $26,623 (second affidavit of Mr Ong, para.14; Transcript of 29 November 2007, p.3.36). He submits that there has been no challenge to Mr Ong’s methodology or the accuracy of his calculations. Clearly, the nature of the respondents’ infringement was such that ongoing infringing acts occured from 1997 to 2006. The lowest retail price rather than the higher recommended retail price was the basis for Mr Ong’s loss calculation. Mr Ong’s evidence makes plain that the amount that Autodesk Asia receives for sale of a product depends on the identity of the purchaser. Mr Ong stated that an engineering firm (for example GE) which orders a product directly from Autodesk Asia has to pay the recommended retail price (the figure greater than the lower retail price at which the calculation was performed: Transcript of 28 November 2007 , p.5.3).
  9. Mr Hennessy further submits that the respondents’ argument that another rate is appropriate must fail because:
    1. Mr Ong’s calculations were not challenged and the principle in Browne v Dunn (1893) 6 R 67 applies;
    2. The respondents failed to call evidence putting forth any alternative proposition and the principle in Blatch v Archer applies;
    1. If the Court considered another rate to be appropriate there would be no net effect because the difference between it and the lowest retail price relied upon by Autodesk would be added to the additional damages that should be ordered. Any difference in the applicants’ favour would represent a financial benefit for the purposes of s.115(4)(b)(iii) of the Act.
  10. Mr Hennessy submits that the respondents have advanced a number of arguments in an attempt to reduce the amount payable by GE under the licence fee approach, all of which are without merit and unsupported by authorities. Mr Hennessy submits that each proposal should be dealt with in the following manner.
    1. Upgrade for unauthorised copies – The respondents contend that the loss license fee should be determined on the basis that only one full fee should be payable for each initial infringing copy of the Autodesk software, and that each additional infringing copy should be assessed at a lesser amount and charged as an upgrade (second affidavit of Mr Ginos, para.3; Transcript of 28 November 2007, p.11). Mr Hennessy submits that this argument is fallacious because:
      1. It is based on an incorrect assumption that the relevant user is the physical computer terminal rather than the unauthorised copy of the copyright work. There is no authority to support the proposition that the Court should depart from basing its calculation on the number of unauthorised copies the infringer made.
      2. Of the suggestion that compensatory damages can be calculated on the basis that the copyright owner, as grantor of the licence, would countenance the upgrading of pirated versions of the software. The upgrade of earlier versions can only be performed if the user complies with the terms of Autodesk’s EULA (evidence of Mr Ong, Transcript of 29 November 2007, pp.11.29-12.14).
      3. GE has failed to establish that such a licence would be granted and what the licence fee would be.
    2. 10 sites – GE has maintained that the relevant calculation should be based on the number of computers that they say are required in the course of their business. They have given this number as 10, in addition to the two computers on which authorised Autodesk software resides (second affidavit of Mr Ginos, para.3; Transcript of 28 November 2007, pp.15-17). Mr Hennessy submits that the number of computers is irrelevant, as it is the number of unauthorised copies of the copyright work (being the actual number of infringements) which determines the number of fictional licence fees upon which the calculation for compensatory damages is performed.
    1. The notion of “credit” for not continuing to infringe after detection –GE has argued that it is entitled to a “credit” for its corrective action after detection. It argues that money paid to Mr Kelly of KarelCAD (local agent for Autodesk) for authorised copies of Autodesk software in 2006 should be subtracted from the amount of compensatory damages. Mr Hennessy submits that there is no authority which states that compensatory damages for past infringements, determined on a lost licence fee approach, are to reduce the amount paid by an infringer for the right or future use of the same copyright work.
    1. Portable licence – The respondents submit that an allowance should be made for the possibility that GE might have obtained a “portable licence” from Mr Kelly of KarelCAD rather than 10 new licences. This would reduce the number of licences GE requires to operate Autodesk programs in the course of its business (second affidavit of Mr Ginos, paras.19, 21; Transcript of 28 November 2007, pp.19-20).
      1. Mr Hennessy submits this has nothing to do with the calculation of compensatory damages and appears to be relying on the notion of “credit”.
      2. Mr Hennessy further submits it is based on an incorrect assumption that portable licences are available (Transcript of 28 November 2007, p.20). Mr Biviano had described the portable license as one that permitted home usage but did not give multiple copying rights pursuant to a single copy licence (Transcript of 28 November 2007, p.31.3). Mr Kelly observed that the AutoCAD LT portable licence were not available before 2004 (third affidavit of Mr Kelly, paras.9-12; Transcript of 28 November 2007, p.26).
    2. Network licence – The ‘network licence” is a variant of the “portable licence” argument which was rejected by Mr Ong (T1, p.26.1). Network licences are not available for AutoCAD LT software in Australia (second affidavit of Mr Ong, paragraph 35).
    3. Autodesk VIZ – A “trial version”. The respondents suggest that no licence fees should be taken into account in the compensatory damage calculation for the Autodesk VIZ 2005 program located on their computers as the program was supplied as a “trial version” (second affidavit of Mr Ginos, para.14). This argument is unsupported by evidence:
      1. Mr Hennessy submits that GE failed to prove that the version of Autodesk VIZ located during the audit is the same as the “trial version” tendered in evidence (Exhibit “R1”).
      2. That GE failed to prove that the trial version does not operate.
      3. That GE produced no evidence to explain why the “trial version” remains installed on GE’s computers.
  11. Autodesk also seeks interest. There is no dispute between the parties in respect of the calculation of interest. However, a dispute does arise as to the appropriate date from which the interest is calculated. In the case of AutoCAD LT 1997, Mr Scragg contends that the calculation should commence from November 1997, rather than June 1997, because that was the month in which GE purchased that product. The respondents contend that thereafter the interest should be calculated from the date when further computer terminals were introduced into GE’s office. This approach relies upon the unproved assumption that each infringing copy, other than the two Mr Ginos admits were on GE’s computers in November 1997, was made as and when employees joined GE (second affidavit of Mr Ginos, para.13). Mr Hennessy submits that GE has declined to explain how and when the unauthorised reproductions occurred. Nor have the respondents adduced any evidence as to when the relevant computers were acquired by GE.
  12. In support of this contention, Mr Scragg submits that the program would have been copied at the time when each additional staff member was engaged. Exhibit “R11” shows that the number of GE staff employed who would operate the program had increased over 10 years. Mr Scragg submits that it is a reasonable factual assumption that the program would be copied as and when each computer was commissioned, to be operated by the additional staff as and when they were employed.
  13. Mr Hennessy argues that it is well within the respondents’ capacity to make good the alternate calculation by adducing evidence of the date when each infringing copy was made, so that a more accurate calculation could be performed. GE staff kept seven of the relevant computers away from Autodesk’s representatives so that they could not inspect and determine how long versions had been installed on those computers. The respondents’ approach repeats the fallacy that it is the number of computers, not the infringing copies, that is relevant.
  14. Mr Scragg submits that GE staff are unable to provide details of when the infringing copies were made. This includes the independent expert, Mr Du Plessis, who could not give GE this information when he examined the decommissioned computers (affidavit of Mr Du Plessis, para.37(h)). Mr Scragg argues that it is reasonable to assume that the copying occurred when the need arose, which was upon the engagement of each new operator.

Additional damages pursuant to s.115(4) of the Copyright Act

  1. Mr Hennessy argues that, in the absence of any evidence from GE to explain its infringing activities, it is open to infer that GE took a deliberate and flagrant course of conduct by making the infringing copies and using them for the purposes of its business. The relevant aspect of GE’s flagrant conduct that would justify an award of damages under s.115(4)(b)(i) includes:
    1. Causing a significant number of infringing copies to be made (at least 28). However the true number cannot be determined because of GE’s removal of a number of earlier models of computers.

Mr Scragg concedes the infringement but disputes the seriousness. He argues that there are other examples of a much more serious nature than this infringement but there is nothing comparable with this breach so additional damages would not arise.

  1. Awareness of copyright protection (concession made by Mr Ginos in cross examination)

Mr Scragg agrees that copyright infringement needs to be discouraged and this is being achieved by the issuing of media circulars warning of this issue. Any need to make a public statement of deterrence has more than adequately been met by Autodesk’s publishing of media circulars which inform Exhibit “MFI-6”.

  1. GE made no attempt to obtain licences from Autodesk for the 28 copies, even though it knew this was necessary and had obtained licences for other Autodesk programs.

Mr Scragg argues that GE’s conduct is unlikely to influence others in the engineering or construction industry to breach the applicant’s copyright.

  1. It should be inferred from the above that GE was well aware of copyright, and the difference between legitimate and illegitimate computer programs. Yet GE, by virtue of its experience and modus operandi, should have been aware of the risks but sought to gain an entirely undeserved cost saving, notwithstanding those risks.

Mr Scragg contends that Autodesk should have placed hardware or software locks, or “time bombs” in each of its products to prevent unauthorised copying.

  1. GE obtained a financial benefit at the expense of Autodesk over a significant period of time.

Mr Scragg submits that GE will potentially incur significant costs and expenses as well as use its own time and expenses in dealing with this matter.

  1. The respondents’ conduct in these proceedings, both in terms of the matters they placed in issue, and the absence of any evidence of real regret, remorse or explanation for the conduct.

Mr Scragg denies this allegation.

  1. The lack of contrition shown by the respondents.
  2. The respondents failed to give proper discovery (discussed below at []). Mr Hennessy submits that the number of infringing copies made is in question and there may have been more based on Mr Du Plessis’ findings of traces of unauthorised versions of Autodesk software on the new computers he inspected (affidavit of Mr Du Plessis, para.37(c)).

Mr Scragg submits that there are no additional unidentified copies and this is not a factor relevant to the issue of deterrence.

  1. The respondents’ behaviour throughout the case has meant that Autodesk has been obliged to incur substantially more costs in this action than should have been necessary and the respondents should not benefit from their failure to keep or produce proper records.

Mr Scragg denies this allegation and submits that it is not a basis for deterrence.

Breach of discovery orders

  1. Mr Hennessy submits that there has been ineffective discovery provided by the respondents and that such limited material prevents a precise determination of damages. In support of this contention are the following:
    1. The irrefutable evidence of Ms Seet (fourth affidavit of Ms Seet paras.19-27). The respondents did not file any affidavit evidence in answer to this claim. Mr Scragg contends that the respondents made full discovery on all matters relevant to the issues between the parties.

Mr Scragg contends that GE made full discovery on all matters relevant to the issue between the parties. It is suggested that GE provided complete pre-action discovery by permitting Mr Kelly and his associate to inspect all of its computers. Mr Scragg submits that there was no suggestion by Mr Kelly that the inspection process was incomplete. The inspection occurred in June 2007 and the following month GE placed an order for the purchase of 10 additional programs which were ultimately supplied on 29 August 2007. Mr Scragg submits that the delay in supplying the programs was because of Autodesk, as stated by Mr Kelly in his oral evidence. A second inspection was arranged at the request of Autodesk’s solicitors, seeking to verify the accuracy of the information contained in Exhibit “ZG-1” (fourth affidavit of Ms Seet, para.28).

  1. The cross examination of Mr Ginos demonstrated that he had no explanation for why the respondents had not produced any documents in answer to categories 2, 3 and 9 of Autodesk’s lists of categories (Transcript of 29 November 2007, pp.83-86). Nor did he have any explanation for why he had not produced his income tax returns for the financial years 1996, 1997, 1998 and 1999 pursuant to category 10 of Autodesk’s list of categories (Transcript of 29 November 2007, p.84.10). There was also no explanation why GE had not produced its profit and loss statements for the year 2000 (Transcript of 29 November 2007, p.84.26).

Mr Scragg submits that GE has discovered documents in relation to categories 2 and 3. However category 9 did not exist except for the information residing in the computers themselves, which had been inspected by an Autodesk representative.

  1. Mr Hennessy submits that the respondents’ non-production of documents, in answer to critical categories within Autodesk’s list of categories, is consistent with their general approach in this litigation of not producing evidence which has the potential to adversely affect its defence. Critically, categories 2 and 3 were directed at information about the number of infringing copies and the length of time they resided on the relevant computers.

Mr Scragg argues that Mr Ginos’ financial accounts are not relevant, especially given Autodesk’s late concession not to seek an account of profits. Before this concession was made, the respondents had sought a concession from Autodesk with respect to these documents. He submits that Autodesk’s refusal to accept the position put by the respondents was unreasonable and is not a basis for additional damages. Similarly, Mr Ginos’ tax returns are not relevant to the issues in dispute between the parties.

Removal of evidence

  1. Mr Hennessy submits that the respondents deliberately removed at least eight of the relevant computers (and important data residing on them) from their premises in order to mask the extent of their infringing activities. He submits that they adopted varied and inconsistent positions in respect of the whereabouts and availability of the relevant computers as follows:
    1. The respondents appreciated the importance to these proceedings of the relevant computers and the data on them. Mr Ginos knew from 23 May 2006 that the 13 relevant computers were the subject of the dispute and these proceedings (Transcript of 29 November 2007, p.86.24). By 20 June 2007, Mr Ginos was aware that Autodesk had engaged Gilbert + Tobin because he received a letter from the firm setting out the issues. From the time of that letter there was a distinct possibility that unless a suitable outcome could be achieved, legal proceedings were likely to commence, specifically involving 33 copies of the Autodesk software found on the relevant computers.
    2. At the end of August 2007, GE replaced some of the relevant computers and its server despite the importance of the computers and the data contained in them. Mr Ginos’ evidence indicated that the change was instigated by Ms Mitrovich, yet she gave no evidence on this issue. Consequently the principle in Blatch v Archer applies. Mr Scragg contends that Mr Du Plessis would have become aware during his inspection that he was looking at the wrong computers but did not say so. Even on the second inspection day when presumably would have become aware of this he said nothing (Transcript, pp.33.40, 35.30).
    1. On 12 October 2007, Mr Scragg advised Autodesk that it could inspect the relevant computers. However on 27 October 2007, Mr Scragg advised Gilbert + Tobin that the respondents did not have the relevant computers (fourth affidavit of Ms Seet, para.29(b); Exhibit “SS4”, pp.45-46). Mr Ginos’ explanation for the inconsistency was that there had been a misunderstanding and that in fact GE did have the relevant computers at that time.
    1. On 29 October 2007, Mr Scragg advised Gilbert + Tobin that the respondents could not say what had happened to the relevant computers because Ms Mitrovich would be overseas for three weeks. On 5 November 2007, I made an order requiring Mr Ginos to file an affidavit by 7 November 2007 on the whereabouts of the relevant computers. Mr Scragg advised Gilbert + Tobin on 6 November 2007 that the computers had been located and were in the respondents’ possession (Transcript of 29 November 2007, p.90; fourth affidavit of Ms Seet, para.29(e); Exhibit “SS-4”, pp.16-21). Mr Ginos filed his affidavit explaining the whereabouts of the relevant computers on 16 November 2007.
  2. Mr Scragg submits that the computers were made available for inspection at short notice although there appears to have been an unfortunate mix up during Mr Du Plessis’ third visit when the computers which were not to be inspected were marked. Mr Du Plessis did not express any difficulty in relation to that issue and the inspection appeared to proceed without concern. Mr Du Plessis’ complaint took place subsequent to the inspection. Mr Scragg contends that if the concerns had been raised during the inspection they could have been promptly rectified.
  3. Mr Scragg contends that Autodesk’s representative’s claim of having insufficient time to carry out the initial inspection is unsustainable when he initially indicated that no more than “some hours” would be required. It is reasonable to expect that the inspection concluded by 8.00pm and that “some hours” equated to approximately three hours. Mr Scragg submits that the respondents made their computers available for inspection the following day and the days thereafter.
  4. Mr Scragg argues that the assertion that the respondents should have known that there was a duty on them at all times to preserve the computers was unreasonable, given the inspection by Mr Kelly and the fact that those results were not contested.
  5. Mr Scragg contends that at all material times, representatives of Autodesk were aware that GE was upgrading its computer system. That fact was made known to Mr Kelly and given as the reason why it urgently required the new programs (affidavit of Ms Mitrovich, para.6). Once the new computers were installed, GE intended to insure that it was fully compliant. Autodesk supplied the software at the end of August 2007 being fully aware of the circumstances. Mr Kelly had been in contact with GE at this time (transcript p.20.25). Mr Scragg argues that if Autodesk had concerns about the status of the computers that could have been stipulated at that time but the issue was not raised. At the time the computers were decommissioned GE was not aware of Autodesk’s requirement to further investigate the computers.
  6. Mr Scragg points out that the offer in relation to the second inspection of the computers was made in the context of the discussion before Raphael FM that GE did not have the capacity to document what was contained within its computer system. He submits that the discussion related to GE’s technical inability to comply with certain categories of Autodesk’s request for discovery.

Additional submissions made on behalf of the respondents
Inspections of relevant computers

  1. Mr Hennessy submits that the respondents deprived Autodesk of valuable information in the way access to the relevant computers was granted:
    1. On first inspection, only five of the relevant computers were made available, one of which could not practically be inspected as it had been broken into pieces (affidavit of Mr Du Plessis, paras.16-24). Further Mr Du Plessis was asked to leave the premises after three hours (affidavit of Mr Du Plessis, paras.23-24). Mr Ginos concedes that as at 12 November 2007 when Mr Du Plessis arrived to conduct the inspection, the subject matter of that inspection was all the relevant computers (Transcript of 29 November 2007, p.93.11). Inconsistent with Mr Ginos’ evidence in cross examination was his affidavit evidence. When Mr Du Plessis arrived Mr Ginos had assumed he was only there to inspect five of the relevant computers (third affidavit of Mr Ginos, para.6). When faced with the inconsistencies between his oral and affidavit evidence, Mr Ginos indicated that he relied on his affidavit (Transcript of 29 November 2007, p.94.1), despite having known since June 2006 that the 13 relevant computers were in issue. It was made clear to the respondents in advance of the first inspection that the inspection would take “a number of hours” (fourth affidavit of Ms Seet, Exhibit “SS-4”, p.35). Mr Du Plessis had a legitimate expectation that he would have unimpeded access to all relevant computers for as long as it took to complete the inspection, especially since this hearing was imminent (Transcript of 28 November 2007, p.31.43).

Mr Scragg on the other hand submits that Autodesk was aware that GE was upgrading its computer system and could have requested that that not occur. The fact that GE made the obsolete computers available shows that they were bona fide. Mr Scragg further submits that Mr Ginos’ evidence is consistent in that he made available to Mr Du Plessis the computers he believed Mr Du Plessis sought to inspect. It is claimed that Mr Ginos had not known since 2006 that 13 computers were in issue, as this only became apparent in June 2007 when Autodesk carried out inspections to identify breaches of its copyright. Mr Scragg submits that it was never suggested in any correspondence by Autodesk from June 2007, until the time of this hearing, that GE was guilty of breaches of copyright other than those contained in the schedule prepared by Mr Kelly in June 2007.

  1. A further inspection was arranged but Mr Du Plessis was prevented from carrying it out properly. He was shown seven machines but only four were switched on and operating (affidavit of Mr Du Plessis, paras.29-32; Transcript of 28 November 2007, p.27). It was made clear to the respondents in advance that the second inspection by Mr Du Plessis required GE to provide access to the relevant computers including any passwords or access codes (fourth affidavit of Ms Seet, Exhibit SS4, pp.35,43).

Mr Scragg contends that Mr Du Plessis would have become aware during his inspection that he was looking at the wrong computers but did not say so. Even on the second inspection day when presumably would have become aware of this he said nothing (Transcript, pp.33.40, 35.30).

  1. The third inspection by Mr Du Plessis was arranged to inspect the remaining eight relevant computers. However, Mr Du Plessis was directed to computers other than those identified as “relevant computers”.
  1. Despite the respondents’ knowledge as to the purpose of the third inspection, they have attempted to assert that Mr Du Plessis was at fault for not informing them that he had been shown the wrong computers (Transcript of 28 November 2007, p.33.45). Mr Du Plessis’ evidence on this issue is unchallenged. Mr Du Plessis was perfectly entitled to assume that there was an arrangement for him to be shown the remaining relevant computers at the third inspection. The respondents have failed to:
    1. explain the location of the 13th relevant computer;
    2. file any evidence to explain the whereabouts of the missing eight relevant computers;
    1. explain why one of the five relevant computers shown to Mr Du Plessis on the first visit was produced to him in bits and pieces and could not be meaningfully inspected;
    1. identify the person who removed the Autodesk software from the five inspected relevant computers; and
    2. explain why one of the seven new computers had traces of earlier versions of Autodesk software.

The principle in Blatch v Archer applies.

Mr Scragg submits that there was no statement that the computers inspected by Mr Du Plessis were the wrong ones. It is acknowledged that there was an error in the identification of the computers to be inspected. However, Mr Scragg contends that Autodesk is estopped from complaining about the computers being the wrong ones on account of their silence. All 15 computers are still in GE’s position and available for inspection should Autodesk elect to do so. GE also consents to a further inspection if one is requested.

  1. Mr Scragg submits that Mr Ginos filed an affidavit seeking to deal with the complaints as he understood them at that time (third affidavit of Mr Ginos). Mr Du Plessis’ affidavit raised new grounds of complaint which had not been foreshadowed in correspondence from Gilbert + Tobin. Mr Du Plessis’ affidavit was not served until 22 November 2007, being four business days prior to the commencement of the hearing and the respondents were consumed in pre hearing issues. Mr Scragg therefore complains that the respondents were procedurally disadvantaged.
  2. Mr Scragg contends that if the wrong computers were marked and Mr Du Plessis should have inspected the other eight computers, then there are 13 relevant computers. Mr Du Plessis’ complaint in relation to the computer that was in pieces was not made until his affidavit was published on 22 November 2007 and not significant anyhow as he was able to make an assessment of it in his report (para.94). GE had 20 computers relevant to the matter – 15 in operation and five which were decommissioned. All 20 computers were or have been using the Autodesk’s product and all are relevant to these proceedings. Mr Scragg submits that the misunderstanding that has arisen should not entitle Autodesk to additional damages.
  3. Mr Scragg contends that the circumstances in these proceedings should be distinguished from an infringement of copyright where each infringing event confers a direct commercial gain. He concedes that GE received a benefit by using the program as a means by which it was able to produce drawings in the course of carrying out its business, but it did not receive exceptional benefits from each infringement.
  4. Mr Scragg submits that the individuals who made the original copies of the licence software are no longer employees of GE. Mr Ginos delegated the task to those individuals. It is clear that copies of the original purchased program were made. Mr Ginos was not able to say whether or not that was authorised but has proceeded on the basis that the allegations made against GE are correct. Mr Scragg contends that the explanation as to why the conduct occurred is not relevant to the issue of benefit, other than the acknowledged fact that copies of the software were used by most of the employees whose computers contained them and in the course of their duties at GE.
  5. The affidavit filed by Mr Du Plessis in these proceedings clearly states that he was given substituted computers to inspect, which was not challenged. In cross examination Mr Ginos stated that one of his professional staff, Robert Gainer, had misconstrued his directions as to which of the computers Mr Du Plessis was to inspect (Transcript of 29 November 2007, p.95.29). Mr Ginos conceded that he had read Mr Du Plessis’ affidavit but had not asked Mr Gainer to address this issue in a supplementary affidavit. Mr Gainer was available to give evidence but was not called and consequently the principle in Blatch v Archer applies.

Benefits accruing to the respondents (s.115(4)(b)(iii) of the Copyright Act)

  1. In this matter GE, as the infringer, derived profits to the detriment of Autodesk by reducing its cost of sales. The licence fees for software used in the course of providing professional services are an essential component of the cost of sales. Mr Hennessy submits that in the absence of any witness to explain the reproduction of the Autodesk software, it can be inferred that it was a cost saving exercise (the principle in Blatch v Archer applies). GE received a benefit from the use of each of the infringing copies.

Delivery up and destruction of infringing copies

  1. The acquisition of licences from Autodesk’s agent, Mr Kelly of KarelCAD, by GE in 2007 for future use does not relieve GE of the obligation to deliver up the infringing copies. The respondents have admitted in their pleadings that a delivery up or destruction order should be made, but appear to have moved away from this position during the course of the hearing.
  2. Mr Scragg contends that the request by GE to purchase additional copies of the licensed software in July 2007 is relevant as it shows contrition and a desire to be compliant. This action was initiated by GE and over the objection of Autodesk who initially refused to supply the programs. Mr Scragg argues that this is a mitigating factor which is relevant to the assessment of additional damages.
  3. Mr Scragg further submits that further evidence of contrition is established by GE’s willingness to make a reasonable settlement offer. However, GE was unable to present evidence of the offer made at the meeting between Mr Kelly and Mr Ginos in July 2007 because of the “without prejudice” claim over the offer. Mr Scragg contends that the respondents have not been accorded procedural fairness in relation to this issue. He referred to s.121(3) and s.131(2)(g) and (i) of the Evidence Act which he says omits evidence being adduced from settlement negotiations where the communication “affects a right of a person”. In this matter, the respondents are affected by Autodesk’s claim for additional damages because of the alleged lack of contrition. Mr Scragg submits that the terms of the offer made in the meeting in July 2007 demonstrate, in a practical way, the respondents’ contrition.
  4. Mr Scragg further contends that the incomplete computer programs simply record that GE deleted prior software before installing later releases in accordance with its licensing obligation (first affidavit of Mr Ong, Exhibit “EULA”). As an incomplete program cannot operate, there is no breach of the license.

Consideration

  1. Mr Scragg contends that the respondents have been put to additional expense by Autodesk’s failure to accept a reasonable offer through their preparation and appearance at the hearing.
  2. Further, that the claim by Autodesk for additional damages is excessive. Mr Scragg contends that while it is not necessary that additional damages be apportioned under s.115(2) of the Act, in this type of matter it is appropriate that they are. The amount of additional damages claimed by Autodesk is 10 times greater than the statement of their losses and 20 times GE’s calculation of the same. Mr Scragg submits that the fact that Autodesk has adopted an unrealistic assessment of its losses and put the parties to the expense of litigation, are mitigating factors in the assessment of additional damages.
  3. Mr Scragg contends that a further mitigating factor in denying Autodesk’s entitlement to additional damages, or to reduce its entitlement, arises from the defamatory correspondence and publication (Exhibit “MFI-6”): s.115(4)(iv) of the Act. He claims that the statements in the news release were intended to infer that GE was intransient, defiant and deliberately continued its infringing behaviour but took no steps to rectify this.
  4. Autodesk Inc and its subsidiaries are the suppliers of CAD software and have supplied this software in Australia for over a decade. The software was supplied under licence and every lease requires the user to accept a set of standard terms and conditions (the relevant EULA) before installation is permitted. Each new release can only be activated with a valid license key purchased with it. Once installed, the software displays prominent copyright notices. If the user of the software is uncertain about rights governing the use of the software, appropriate information is contained in the program’s menu. Significantly, that information clearly states that the making of copies of the software without Autodesk’s authority is forbidden.
  5. Ginos Engineers is an Adelaide based firm of consulting engineers established by Mr Ginos in May 1980. Since then, the firm has been run under various guises and is presently run as a proprietary limited company. Mr Ginos was relevantly the controlling mind of the business, responsible for the financial advancement of the company and any substantial outlays of the business. The firm used the Autodesk AutoCAD program by procuring the software licence in 1997. The firm also made infringing copies of a number of different versions of Autodesk AutoCAD software over at least eight years without purchasing additional licences or paying additional licence fees to AutoCAD.
  6. Mr Ginos is a sophisticated and well-educated professional engineer who owns GE and asserts that he relies upon copyright in GE’s work. He acknowledged that he understood that the software was protected by copyright and that rights needed to be obtained before it was used.
  7. In March 2006 Ms Mitrovich (nominated CAD Software Manger for GE) was approached by Mr Kelly (Sales Manager employed by KarelCAD, the South Australian representative of Autodesk) to obtain a quotation for two new AutoCAD products. These products were subsequently purchased by GE and the product was shipped and received. On 22 May 2006, Mr Kelly made a courtesy visit to GE to follow up the new licences purchased by GE from KarelCAD. During that visit Mr Kelly together with a KarelCAD technician, David Willis, had discussions with an information technology consultant, Brett Letts, who had been engaged by GE to carry out certain technical assessments of its computer systems. During those discussions and the review of information which was displayed on 13 different computer systems in GE’s premises, it was revealed that Autodesk’s AutoCAD software had been copied in breach of the licensing agreement
  8. Mr Kelly arranged to meet with Mr Ginos on 27 June 2006 to discuss the company’s compliance with Autodesk’s licensing requirements for the AutoCAD and AutoCAD LT products, but that meeting was rescheduled for a week later. Mr Kelly conveyed to Mr Ginos that licenses were required in respect of each copy used by GE and that licence fees were payable. Rather than offering an apology and an undertaking to pay the amounts due, Mr Ginos’ initial response was to do nothing. However, he subsequently blamed unnamed employees who have not been called to give evidence despite that relevant information being in GE’s possession.
  9. The first affidavit of Mr Ginos states at [3]:

This evidence is difficult to accept in light of Mr Ginos’ oral evidence that his company seeks to protect its own copyright in the engineering design that they produce. The authorities make clear that in this case, Mr Ginos has authorised or procured the making of infringed copies of the Autodesk licence software. The implications of this are considered in more detail below.

  1. Despite the initial efforts of Mr Kelly and subsequent correspondence from Autodesk’s legal representatives, GE declined to apologise or undertake to pay the amounts due. GE acknowledges that members of its staff procured a software licence from Autodesk, being the 1997 version of the AutoCAD LT program. That was to replace previous software produced by AutoCAD, which had a mechanical lock-out key (Exhibit “R14”). GE concedes that there was no software constraint on the ability to copy the 1997 program and that this occurred over a period of time as various staff members joined the company. GE maintains it is not possible by an examination of installation of the software on a particular computer to determine whether or not the installation complied with the licence requirements. GE expressed the view that the licensing agreement with the software contemplated the possibility of a network licence situation.
  2. When it became apparent that Autodesk intended to file infringement proceedings against GE, GE elected to initiate its own proceedings against Autodesk. Mr Ginos claims that he delegated the administration of computers and the associated software to various staff members because of his lack of computer literacy. However, there has been no evidence tendered by any of these employees (past or present), who Mr Ginos blames for making the infringing copies. Similarly, Mr Ginos and GE appear to have decided to delete copies of the software, which is the subject of these proceedings, before the commencement of this hearing and thereby precluding any further investigation into the extent of infringement and when the copies were made.
  3. The parties have provided the Court with a Statement of Agreed Facts for the purposes of these proceedings. A number of issues arise from the Statement – the applicants submit that they rely on that Statement while the respondents object to substantial parts of that document. The initial objections concern the following paragraphs of the Statement: 2(b) and (c), 3(b), 7, 17, 18, 19, 21, 22, 27, 29, 30, 31, 35, 38(e), 39, 46(a), 49, 50, 51, 52, 53, 54, 55, 56 and 59(c) and (d). By agreement the following paragraphs have been removed from the agreed Statement: 40, 41, 42, 43, 47 and 48.
  4. Prior to the final hearing, GE alleged that Autodesk Asia Pte Ltd carried on business in Australia in contravention of the Corporations Act 2001 (Cth) (Points of Defence, para.5), despite Autodesk’s evidence and written advice to the contrary and despite the respondents’ failure to file any evidence in support of that challenge. At the commencement of the hearing, the respondents informed the Court and the applicants that they would not continue to agitate the issue. It is also noted that the respondents initially agreed that the relief sought would extend to a destruction or deletion order and the filing of an affidavit to confirm actual deletion or destruction (Statement of Agreed Facts, para.59(c) and (d)). At the hearing the respondents contended that they opposed the making of such orders despite agreeing to them in their Response and in the absence of any formal application to withdraw that admission. I find the respondents’ submissions in respect of this issue to be inappropriate and the application is denied.
  5. In the Response to the applicants’ submissions filed in chambers on 7 January 2008, the respondents raised concerns that they were unable to give evidence about the offer they made at the meeting between Mr Kelly and Mr Ginos in July 2007 because of the claim that the offer made at that time was during a “without prejudice” meeting. The applicants deny the status of that meeting and claim that this is a matter about which Mr Ginos is unable to give evidence. Mr Scragg submits that the making of a reasonable offer negates the allegation of a lack of contrition on the part of the respondents and he seeks to include the offer as part of their evidence. He submits that ss.121(3) and 131(2)(g) and (i) of the Evidence Act permits evidence to be adduced from settlement negotiations where the communication “affects a right of a person”. The claim is that the rights of the respondents are affected as the applicants claim additional damages because of the alleged lack of contrition. It is submitted that the terms of the offer made in the meeting in July 2007 demonstrate, in a practical way, the respondent’s contrition. I am of the view that this issue was fully ventilated during the hearing and I found that the meeting was conducted “without prejudice” (Transcript of 29 November 2007, p.19.29).
  6. I note that the Statement of Agreed Facts is in fact a draft and that are still a number of issues which remain in dispute between the parties in respect of its contents. I accept the document in broad terms but note the areas of dispute and will make specific reference to any aspect that concerns the outcome of these proceedings. I also note that the Court need not accept all that is contained in the Statement particularly where a consideration of other evidence, or the totality of the evidence requires factual findings contrary to, or requiring some modification of the agreed facts: Kowalski v Domestic Violence Crisis Service Inc (No. 1) [2003] FMCA 99.
  7. The complaint that the Statement failed to reproduce all of the relevant parts of the license agreement, being the sections which were claimed by the respondents to be favourable to their position, carries little weight as there have been no submissions or supplementary documents containing those parts presented to the Court. Further I am satisfied that the entire licence agreement is before the Court (first affidavit of Mr Ong, Exhibit “WKSO-1”, pp.29-51). Consequently, I am not satisfied that this complaint carries any weight.

Liability of Mr Ginos

  1. In respect of Mr Ginos’ liability, I note the submissions of Mr Hennessy which are set out above (see [19]-[21]; [28]-[30]; [32]-[39]; [40]-[43]; [45]-[48]). The evidence of Mr Ginos under cross-examination was that he was relevantly the controlling mind of Ginos Engineers Pty Ltd (Transcript of 29 November 2007, pp.69.30-70.37) responsible for the financial management of the company and any substantial outlays of the business (Transcript of 29 November 2007, pp.70.40, 71-72). Mr Ginos, without hesitation or qualification, accepted that he was responsible for all aspects of the business (Transcript of 29 November 2007, pp.69.30-70.37).
  2. I find it difficult to accept Mr Ginos’ denial of any knowledge or appreciation of the consequences of using infringing copies of licensed software which was the property of Autodesk. I make this statement in the context of Mr Ginos asserting that his professional engineering practice relied upon copyright in its own works. He also conceded that he understood that licensed software was protected by copyright and that rights needed to be obtained before they could be used (Transcript of 29 November 2007, p.81.10).
  3. When Mr Kelly of KarelCAD became aware of the infringing copies, this was immediately brought to the attention of Mr Ginos. Subsequently Mr Kelly notified Mr Ginos that the licence conditions attached to the Autodesk software did not permit copying and that an individual licence had to be purchased for each individual computer using that software. Further correspondence on this specific issue was forwarded by Autodesk’s solicitors to the respondents. Despite the unambiguous ventilation of this issue, Mr Ginos in his first affidavit maintained his claim of ignorance and stated that GE was entitled to “make as many copies as it needed to”. Paragraph three of his affidavit states:
  4. The principles applicable to liability for authorisation render a director, who is the “controlling mind” of a company, liable for acts of infringement by that company: Australasian Performing Right Association Ltd v Jain; Australasian Performing Rights Association Ltd v Metro on George Pty Ltd; Universal Music Australia Pty Ltd v Cooper [2005] FCA 1878. The authorities establish that as long as the director knew of the acts himself or that it would be likely that the acts occurred, he can be liable for authorisation. It is not necessary that the director knew that the acts would infringe copyright. It is not in dispute that Mr Ginos knew that copies of the Autodesk software were being made by his employees. However, if Mr Ginos had not known that other copies of the software were being made because he had delegated this task to his employees, this would amount to authorisation and liability is created.
  5. Mr Scragg advances the argument that “the first respondent is a corporation and is solely responsible for its activities. A director is only liable where they have been guilty of gross negligence, fraud or serious misconduct, none of which apply here”. This is without reference to any authorities. Further Mr Scragg, in his “Respondents’ Response to Applicants’ Reply Submissions”, advances the submission that the effect of copyright decisions which lift the corporate veil is to catch infringers who seek to exclude personal liability by establishing a corporation, for the specific purpose of conducting the infringing activities through it. He submits that those circumstances do not apply in this case. The first respondent is a corporation that has been established for a considerable period of time and has conducted an engineering practice as its business at all material times. Mr Scragg submits that GE was not established as a sham in order to avoid responsibility for infringing behaviour and, for that reason, the veil should not be lifted.
  6. This is also advanced in the absence of any authorities or indication that it qualifies or distinguishes any of the authorities relied upon by Mr Hennessy in his submissions.
  7. I accept the submission made by Mr Hennessy in which he identifies a number of copyright infringement cases in which directors of companies have been found liable when they “directed or procured” the acts or the course of conduct by the company which gave rise to acts of infringement: Microsoft Corporation v Auschina Polaris (1996) 71 FCR 231 at [245]; Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd [1990] 1 Qd R 231 at [258]; Microsoft Corporation v Goodview Electronics (2000) 49 IPR 578 at [587]; Australasian Performing Rights Association Ltd v Metro on George Pty Ltd. On the material before the Court I am satisfied that Mr Ginos was, at all relevant times, possessed a degree of knowledge about copyright to be liable for the infringements of GE under s.36 of the Act. In cross examination Mr Ginos made the following admissions:
  8. The cross examination then moved onto what steps Mr Ginos could have taken to inform himself of the terms and conditions governing the use of Autodesk software:
  9. In the sophisticated atmosphere of a professional engineering practice which expanded from an environment with two computers operating a complex two and three dimensional design and drafting tool, to 13 professionals, resource planning for an essential production tool must have been a significant consideration. The purchase of 11 new computers must have triggered consideration of what software to use on each of them. Mr Ginos gave evidence to the effect that he oversaw and approved all major purchases made for the practice. Even if Mr Ginos had adopted the management philosophy discussed in Australasian Performing Rights Association Ltd v Jain or, alternatively, in Universal Music Australia Pty Ltd v Cooper, he is unable to avoid liability for authorisation (see submissions above at [40]-[42]). Consequently I find Mr Ginos liable for infringing Autodesk’s copyright in the Autodesk software.

Compensatory damages

  1. I rely on the detailed submissions made by both parties in respect to this issue which are set out above (see [49]-[62]). I am satisfied that the proper measure of damages is the retail price that would have been paid by the respondents had they obtained the licences they were required to. If the respondents had purchased valid licences, they would have purchased them at the retail, not the wholesale, price. The evidence indicates that had Autodesk been approached to validate the copies that had been made but not obtained through an Autodesk reseller, it would have charged the prevailing retail price. Mr Ong confirmed this approach in cross examination (Transcript of 29 November 2007, p.5.30).
  2. The argument advanced by the respondents – that they were entitled to an upgrade at a discounted rate – cannot be sustained. The argument is that as the first program purchased in 1997 was compliant, GE would have been entitled to purchase each upgrade at a discounted rate (the normal market discount) which was given for all upgrades. All the evidence does not support this argument as GE never attempted to obtain upgrades of any of the software it had copied. The unchallenged evidence of Mr Ong rules out any possibility of an upgrade, given that upgrades were available to purchasers if (and only if) they had an authorised copy of the software and submitted proof of purchase (Transcript of 29 November 2007, pp.11.37, 12.17). Even if GE had purchased upgrades it would only ever have a single version of the Autodesk software. The effect of upgrading a licensed copy of Autodesk software is that the copy is replaced by a newer version. As GE had purchased only one copy of the 1997 version and the upgrading process had been pursued at the time of the 2007 audit, there would still be only one legitimate version of the Autodesk software. The regime did not permit GE to continue to use the 1997 version of the software, as well as a later version, on another machine simultaneously. This proposal must fail.
  3. Mr Scragg contends that Autodesk operated a portable licence system (second affidavit of Mr Ginos, Exhibit “ZG3”). He also contends that Autodesk maintains that there were special circumstances under which portable licences were issued but none of this would have been apparent to Mr Ginos at any material time. The evidence of Mr Ong (Transcript of 29 November 2007, p.20), Mr Bivano (Transcript of 28 November 2007, p.31.3) and Mr Kelly (third affidavit of Mr Kelly, para.9-12; Transcript of 29 November 2007, p.26) make clear that portable licences are only available in limited circumstances and would never be available in circumstances which are the subject of this litigation. The portable licences permit only one copy of the program to be used and moved between computers in different locations by a single user. This type of licence was not issued to GE either in 1997, or when it subsequently purchased 10 licences in August 2007. This type of licence is not relevant to the circumstances in these proceedings.
  4. I note the detailed submissions made by Mr Scragg claiming that GE had effectively paid all the compensation required when it purchased the 10 AutoCAD LT 2008 licences from KarelCAD. Paragraph 15 of the second affidavit of Mr Kelly clearly states that the purchase of the current versions of AutoCAD LT software did not in any way address GE’s past use of different versions of that software licence over the previous 10 years. As KarelCAD is not the owner of the copyright or the exclusive licensee, its employee Mr Kelly has no power to compromise past claims of infringement. This proposal has no merit and should be dismissed.
  5. Based on the additional information in the Response linking employee records to computer terminals on which the infringing software was found, I accept the schedule in Annexure “D” to the Applicants’ Reply Submissions which calculates compensatory damages. This schedule is attached as Annexure “B” to this judgment. Consequently, the principle amount of compensatory damages, together with interest, amounts to $38,012.22.

Additional damages

  1. Section 115(4) of the Act empowers the Court to award additional damages where infringement of copyright is established and the Court is satisfied that it is proper to make such an award having regard to the following:
    1. The flagrancy of the infringement (s.115(4)(b)(i));
    2. The need for deterrence of similar infringements of copyright (s.115(4)(b)(ia));
    1. The conduct by a defendant subsequent to infringement or after an allegation of copyright infringement (s.115(4)(b)(ib));
    1. Whether the infringement involves the conversion of work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form (s.115(4)(b)(ii));
    2. Any benefit shown to have accrued to the defendant by reason of the infringement (s.115(4)(b)(iii)); and
    3. All other relevant matters (s.115(4)(b)(iv)).
  2. It is not necessary that the Court be satisfied of each of the above as a precondition for the award of additional damages but the Court must have regard to these six points. I rely on the submissions made by Mr Hennessy set out above in [63]-[71] and the responses to those claims provided on behalf of GE by Mr Scragg. I note that GE does not challenge that it received a benefit by using the infringing software, but does attempt to distinguish its situation from a situation where each act of infringement of copyright confers direct commercial gain. GE does not challenge that it received the benefit of using the program, as that was the means by which it was able to produce certain drawings which were necessary in the course of carrying out its business. Mr Scragg submits that the purpose of s.115(4) is to deal with exceptional or abnormal benefits and circumstances where each infringement confers a direct (as opposed to an indirect) commercial or other benefit. This interpretation is not supported by any authorities and should be dismissed.
  3. In breaching copyright, an infringer gains an entirely undeserved profit. I am obliged to have regard to any profit or other gain derived by the infringer. In SBO Pictures & Ors v Kaos Shops Pty Ltd & Ors [2006] FMCA 82, I observed that the legislation does not seem to import any particular quantitative or qualitative requirement in relation to the benefit that is received. This is evident by the use of the adjective “any” in s.115(4)(b)(iii). The respondents have acknowledged their breach of the applicants’ copyright. It follows that a respondent benefits from an infringement when it does not pay for the work in suit but rather copies it. I do not hesitate in rejecting the respondents’ claim that the infringement was innocent and accept that the respondents did carry out their activities with the intention of obtaining a financial benefit. In this instance, that profit was to the detriment of Autodesk by GE reducing its costs of sales. The software was needed for GE to operate the business in the course of it providing professional services. The infringing copies were also essential for GE to expand its business and, again, Autodesk was entitled to benefit from that expansion by the provision of additional copies of the licensed software. The clear inference that is available is that GE’s business received a benefit from use of each of the infringing copies.
  4. The power to award damages under s.115(4) of the Act is discretionary and the Full Federal Court has emphasised this, noting that this may be done when a Court is satisfied that any one or more of the circumstances set out in s.115(4)(b) are present: Raben Footware Pty Ltd v Polygram Records Inc (1997) 75 FCR 88.
  5. Sullivan v FNH Investments Pty Ltd t/as Palm Bay Hideaway [2003] FCA 323 (following Raben Footware Pty Ltd) states that there need not be any proportionality between the amount of damages awarded under s.115(2) and the amount awarded under s.115(4). I award the amount of $76,000 in additional damages under s.115(4).

I certify that the preceding one hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.


Associate:


Date: 19 January 2009


Annexure “A”

A. AGREED FACTS

The parties
The applicants

  1. The first applicant (Autodesk Inc) is and was at all material times:
  2. The second applicant (Autodesk Asia) is and was at all material times:
    1. a corporation incorporated under the laws of Singapore;
    2. engaged in the business of:
      1. manufacturing copies of Autodesk Inc’s software, including Autodesk software, for sale and distribution in the Asia Pacific region; and
      2. licensing Autodesk Inc’s software, including Autodesk software, in Australia through Autodesk Australia; and
    1. a corporation able to sue in its corporate name and style.
  3. Autodesk Australia is and was at all material times:
    1. a corporation incorporated under the laws of the Commonwealth;
    2. engaged in the business marketing and distributing Autodesk Inc’s software, including Autodesk Software, services and support in Australia; and
    1. s corporation able to sue in its corporate name and style.

The respondents

  1. The first respondent (GE) is and was at all material times:
    1. a company incorporated under the laws of Australia;
    2. engaged in the business of providing civil engineering services in Australia; and
    1. a company able to be sued.
  2. The second respondent (Mr Ginos) is and was at all material times:
    1. a natural person able to be sued;
    2. the sole director of GE;
    1. the secretary of GE;
    1. one of three shareholders in GE;
    2. involved in the day to day management and operations of GE; and
    3. is in control of GE.

The Autodesk Software

  1. AutoCAD is a tool for two and three-dimensional design and drafting. It is the leading design drafting tool used by architects and engineers in Australia.
  2. AutoCAD is Autodesk Inc’s flagship product.
  3. AutoCAD LT is a less expensive variant of AutoCAD.
  4. Autodesk VIZ is a three-dimensional visualisation software tool.

Subsistence and ownership of copyright

  1. Each piece of Autodesk Software is and was at all material times an original literary work within the meaning of the Copyright Act 1968 (Cth) (the Act).
  2. Each piece of Autodesk Software was created and made by:
    1. Autodesk Inc; or
    2. other persons who were, at the time when the literary works were created and made, qualified persons within the meaning of section 32 of the Act.
  3. Each piece of Autodesk Software is a literary work in which copyright subsists.
  4. Each of the persons referred to in paragraph 11 above were at all material times:
    1. an employee of Autodesk Inc under a contract of service acting in pursuance of the terms of that employment; or
    2. a contractor under a contract that vested all copyright in any work created by them in Autodesk Inc.
  5. Autodesk Inc is and has at all material times been the owner of copyright in each piece of the Autodesk Software.

Licenses and agreements
Autodesk group of companies and Authorised Resellers

  1. Between 1 February 1994 and 1 May 2001, Autodesk Inc had an exclusive licence and distribution agreement with Autodesk Australia for the sale and distribution of Autodesk Software within Australia.
  2. Since May 2001, pursuant to an exclusive licence and distribution agreement with Autodesk Inc, Autodesk Asia has manufactured copies of Autodesk Software for sale and distribution in the Asia Pacific region, including Australia.
  3. Autodesk Australia currently markets and distributes Autodesk Software in Australia pursuant to a non-exclusive marketing and distribution agreement with Autodesk Asia.
  4. Autodesk Australia provides software products, services and software support in Australia through a network of Authorised Resellers.
  5. One of Autodesk Australia’s Authorised Resellers in Adelaide is KarelCAD.

End users

  1. The three main types of licences granted by Autodesk Inc to end users are:
    1. an individual stand alone licence;
    2. a multi-ear stand alone licence;
    1. a network licence.
  2. The stand alone licence grants a single licence for one copy, at one time and in one location for a program.
  3. By the time the audit (discussed at paragraphs 37 to 38 below) was conducted, the respondents had only ever held 5 licences (each of which was a stand alone licence) of which only 2 were current (see paragraphs 39 to 40 below) (each and together the Licensed Autodesk Software).
  4. When Autodesk Software is supplied to the public in Australia it is supplied on packaged compact discs and or digital video discs. It is standard practice to include on the packaging and / or labelling of software including the letter “C” in a circle together with the year of release of the software and the name of the copyright owner. For example “© 2004 Autodesk Inc. All rights reserved”.
  5. When the Licensed Autodesk Software was supplied to GE its packaging and / or labelling included text with the letter “C” in a circle together with the year of release of the software and Autodesk Inc as the copyright owner.
  6. At the time that an Autodesk Software product is first installed on any computer, the user is presented with a document entitled “Autodesk Software Licence Agreement Worldwide” and is notified that the supply of the Autodesk Software to the end user is subject to this end user licence agreement (EULA).
  7. The EULA must be accepted by the user before the Autodesk Software can be installed.
  8. Each EULA provides a non-transferrable, non-exclusive licence to the ends user to use the program, its manual and accompanying documentation.
  9. GE accepted the terms of the EULA before it installed the Licensed Autodesk Software.
  10. Extracted below are the opening paragraphs of the EULA which governed the relationship between Autodesk Inc and GE.
  11. Further, extracted below are a number of other clauses relevant to the parties’ relationship:
  12. The above licenses permitted GE to run one copy only of each of the Licensed Software on a single computer subject to the terms of the licence.
  13. GE agreed to the terms of the EULA before it installed the Licensed Autodesk Software.

Copyright infringement by GE
Reproduction of the Autodesk Software

  1. From a date unknown to the applicants, but from at least 1997, GE reproduced in a material form, 27 copies (note Autodesk says 28) of the Autodesk Software (Infringing Copies).
  2. The Infringing Copies were detected on 22 May 2006 when Mr Kelly, a representative of Autodesk Inc’s Authorised Reseller, KarelCAD, was at GE’s premises.
  3. Mr Kelly learned of the Infringing Copies in a conversation he had with GE’s information technology consultant.
  4. On 5 June 2007 KarelCAD representatives attended GE’s premises to conduct an audit of GE’s computers. They were not permitted access to GE’s computers.
  5. On 6 June 2007 the KarelCAD representatives were permitted by GE to perform the proposed audit (the Audit).
  6. The Audit revealed the following information about the 28 Infringing Copies on 13 of GE’s computers:
    1. 12 copies of AutoCAD®LT 1997;
    2. 12 copies of AutoCAD®LT 2000;
    1. 1 copy of AutoCAD®LT 2004; and
    1. 2 copies of AutoCAD®LT 2008;
    2. [Note Autodesk says] 1 copy of Autodesk® VIZ 2005.
  7. There were two current, authorised individual stand alone licences in place, one for AutoCAD 2008 and the other for AutoCAD LT 2008.
  8. There were three other copies (one copy of each of AutoCAD LT 1997, AutoCAD LT 2000 and AutoCAD LT 2004) that had at one time been licensed under single individual stand alone licences but those licences were no longer current as the products had subsequently been upgraded. Despite that, the applicants do not sue on those copyright works.
  9. The Infringing Copies contained reproductions of the whole or a substantial part of the Autodesk Software.
  10. The Infringing Copies were reproduced without the licence of the applicants.
  11. GE has infringed the copyright of the applicants in the Autodesk Software, in contravention of s.36 of the Copyright Act 1968 (Cth) (the Act).

Conduct after the respondents were informed of the acts of copyright infringement
Correspondence

  1. Between 22 May 2007 and 27 July 2007 correspondence passed between the parties and / or their legal representatives about, inter alia, the respondents’ acts of copyright infringement and the damages suffered by the applicants. The parties were unable to agree on the quantum of damages.

The Adelaide Proceeding

  1. The respondents decided to “bring matters to a head” by having GE commence a proceeding in the Court’s Adelaide registry (ADG 219 of 2007) on 6 August 2007 against Autodesk Australia (the Adelaide Proceeding). GE stated in its application that the Court’s jurisdiction was attracted by the Act.
  2. On 17 August 2007 the applicants:
    1. (through their solicitors) wrote to the respondents’ solicitors putting them on notice that it was Autodesk Australia’s position that the Adelaide Proceeding was hopelessly flawed, including for the reasons that it disclosed no cause of action under the Act.
    2. commenced this proceeding.
  3. Not pressed
  4. Not pressed

The Court’s orders and directions

  1. This matter came before Lloyd-Jones FM for directions on 6 September 2007. His Honour made orders for the future conduct of the litigation. The respondents did not comply with orders 2 (response and defence by 10 September) and 4 (give discovery by 24 September).
  2. The applicants had the matter re-listed before Raphael FM on 12 October 2007. His Honour made orders including the following:
    1. the respondents’ defence to be filed by 15 October (it was filed on 26 October)
    2. documents caught by the applicants’ categories for discovery 1-9 and 12-14 were to be discovered by the respondents by 19 October 2007 with inspection by 26 October 2007 (a first list of documents for discovery was provided on 28 October 2007 and a second list of documents for discovery was provided on 6 November 2007. Copies of the documents in the lists were produced by facsimile for inspection on 2 November 2007 and 16 November 2007 respectively).
    1. documents caught by categories for discovery 10-11 were to be served by the respondents by 19 October 2007 (two sets of documents were served on 6 November 2007); and
    1. the respondents were given an extension of time, until 25 October, to file their affidavits in answer (initial affidavits were served on 26 October 2007, while a further affidavits by Mr Ginos was served on 14 November 2007).
  3. The matter came back before Lloyd-Jones FM for pre-trial directions on 5 November 2007. His Honour’s orders included the following:
    1. the respondents serve copies of their filed affidavits on the applicants by 6 November (filed copies of all of the respondents affidavits have not been provided);
    2. the respondents file an affidavit by Mr Ginos as to the whereabouts of the computers on which the Infringing Copies had resided by 7 November (they did so on 16 November 2007); and
    1. the respondents were to notify the applicants as to the affidavits they intend to rely upon by 16 November (they did not do so).

The relevant computers

  1. On 28 October 2007 the respondents informed the applicants that the computers on which the Infringing Copies had resided had been “replaced” and could not, therefore, be discovered.
  2. On 2 November 2007 the respondents advised the applicants that the whereabouts of the computers could not be accurately stated until the relevant officer of GE returned to work in 3 weeks’ time.
  3. On 6 November 2007 the respondents advised the applicants that the computers could now be inspected.
  4. The applicants made an appointment with the respondents for the applicants’ computer expert, Mr Du Plessis, to visit GE’s premises on 12 November 2007 to review the infringing copies on GE’s computers. The respondents only made 5 computers available for Mr Du Plessis to inspect, one of which was in pieces.
  5. When Mr Du Plessis returned on 14 November 2007 only 4 further computers were made available and Mr Du Plessis had to make a third visit to GE’s premises on 15 November 2007 to complete the inspection.

Relief consented to by the respondents
Loss and damage

  1. By reason of GE’s infringement of the copyright of the applicants in the Autodesk Software, in contravention of s.36 of the Act, the applicants have suffered loss and damage.
  2. The recommended retail price of each Infringed Copy and the interest thereon is set out in the table below.
  3. The Court should grant the following relief:
    1. a declaration that GE has infringed the copyright of the applicants in the Autodesk Software;
    2. a permanent injunction restraining the respondents, and each of them, whether by themselves, their servants, agents or otherwise, from:
      1. reproducing; or
      2. authorising, directing or procuring the reproduction of,

the whole or a substantial part of any software released by the applicants including the Autodesk Software, without the licence of the applicants;

  1. an order that the respondents destroy or delete all Infringing Copies (as that term is defined in the Amended Application) of the Autodesk Software in the possession, custody or control of the respondents;
  1. an order that Mr Ginos make, file and serve by no later than 2 weeks from the date of the Court’s final orders an affidavit that confirms with particularity the destructing or deletion of Infringing Copies of the Autodesk Software pursuant to Order (c) above specifying:
    1. the number of Infringing Copies destroyed or deleted;
    2. the type of software destroyed or deleted;
    3. how the infringing copies were destroyed or deleted;
    4. the computers on which the Infringing Copies were located;
  2. damages pursuant to s.115(2) of the Act; and
  3. interest pursuant to s.76 of the Federal Magistrates Act 1999 (Cth).

Annexure “B”

Employee

Computer

Start Date

Versions

Price ($)

Interest until 28 November 2007 ($)

Umer Alsatullin

UMER

30/5/2001

1997

715

488.30



2000

759

518.35

John Savic

JOHN

17/1/2004

1997

715

290.43



2000

759

308.30



2007

1850

176.69



VIZ 2005

3285

1003.59

Robert John Gainer

ROB

12/10/1999

1997

715

610.88



2000

759

630.79

Sam Kostanidis

SAM

8/02/2001

1997

715

511.13



2000

759

542.58

Chernlon Sia

CHERHLON

14/09/2006

1997

715

90.71



2000

759

96.29

Betty Tcherveniakova

BETTY

6/9/2004

1997

715

242.50



2000

759

257.43



2007

1850

176.69

Efsthatios Tsoukalas

STATHI1

28/6/2001

1997

715

482.33



2000

759

512.01

Perjman Sobhi

STAHI2

5/1/2006

1997

715

142.54



2000

759

151.31

Melody Kwan Wei Wong

MELODY

14/02/2001

1997

715

509.89



2000

759

541.27

Margaret Langman

MARGARRET

23/8/1999

1997

715

621.17



2000

759

630.79

Jerzy Kawecki

JERZY

1/8/1986

1997

715

819.45



2000

759

630.79

Teck Leong

LEO

26/10/2006

1997

715

82.07



2000

759

87.12



2004

1950

233.82

TOTAL INTEREST

11389.22

PRINCIPAL

26623.00

TOTAL AMOUNT

38012.22

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