Adobe Systems Inc & Ors v Stragegic Aviation Group Pty Ltd & Ors [2010] FMCA 879 (4 November 2010)

Last Updated: 15 November 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ADOBE SYSTEMS INC & ORS v STRATEGIC AVIATION GROUP PTY LTD & ORS

[2010] FMCA 879

PRACTICE & PROCEDURE – Strike out of Statement of Claim in copyright proceedings – where applicant failed to respond to request for further and better particulars – application remains on foot.

Federal Magistrates Court Rules 2001, r.13.10 Federal Magistrates Court Act 1999, s.45 Federal Court of Australia Act 1976, s.31A(5) Copyright Act 1968, s.115(4)

First Applicant: Second Applicant: Third Applicant: Fourth Applicant: Fifth Applicant: Sixth Applicant:

ADOBE SYSTEMS INC ADOBE SYSTEMS PTY LIMITED (ABN 72 054 247 835) MICROSOFT CORPORATION MICROSOFT PTY LTD (ACN 002 589 460) SYMANTEC CORPORATION SYMANTEC AUSTRALIA HOLDING PTY LIMITED (ACN 003 967 333)

First Respondent: Second Respondent: Third Respondent: Fourth Respondent:

STRATEGIC AVIATION GROUP PTY LTD (ACN 133 247 800) STRATEGIC AVIATION PTY LTD (ACN 059 547 723) STRATEGIC AIRLINES PTY LTD (ACN 131 128 571) STRATEGIC CREWING RESOURCES PTY LTD (ACN 119 183 050)

File Number:

SYG 1681 of 2010

Judgment of:

Raphael FM

Hearing date:

4 November 2010

Date of Last Submission:

4 November 2010

Delivered at:

Sydney

Delivered on:

4 November 2010

REPRESENTATION

Solicitors for the Applicant:

Mallesons Stephen Jaques

Solicitors for the Respondent:

Rockwell Bates Lawyers

ORDERS

(1) Statement of Claim be struck out.
(2) Respondents’ costs to date be paid by applicant, such costs to be taxed if not agreed at 80% of Federal Court scale.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG 1681 of 2010

ADOBE SYSTEMS INC

First Applicant

ADOBE SYSTEMS PTY LIMITED (ABN 72 054 247 835)

Second Applicant

MICROSOFT CORPORATION

Third Applicant

MICROSOFT PTY LTD (ACN 002 589 460)

Fourth Applicant

SYMANTEC CORPORATION

Fifth Applicant

SYMANTEC AUSTRALIA HOLDING PTY LIMITED (ACN 003 967 333)

Sixth Applicant

And

STRATEGIC AVIATION GROUP PTY LTD (ACN 133 247 800)

First Respondent

STRATEGIC AVIATION PTY LTD (ACN 059 547 723)

Second Respondent

STRATEGIC AIRLINES PTY LTD (ACN 131 128 571)

Third Respondent

STRATEGIC CREWING RESOURCES PTY LTD (ACN 119 183 050)

Fourth Respondent

REASONS FOR JUDGMENT

1. There comes before me today an application by the several respondents to these proceedings to strike out the Statement of Claim and dismiss the application of 4 August 2010. There is provision in the rules of the Federal Magistrates Court Rules 2001 (the “Rules”) for summary dismissal under Part 13 Division 13.3 Rule 13.10, but those Rules, particularly 13.10, which is the relevant Rule, relates to staying or dismissing proceedings where the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim. To my mind the application that is being made here, as articulated by Mr Watson-Jones who appears for the respondents, is more a request that particular parts of the Statement of Claim be struck out. He does not appear to me to have addressed the requirements of Rule 13.10, which mirror those found in Federal Court Order 20, Rule 5 that was inserted into the Federal Court Rules, and the rules of the Federal Magistrates Court, as a result of amendments to the Federal Court Act and Federal Magistrates Court Act 1999. Whilst the intention of these amendments was to make such an application somewhat more effective, there is still a requirement that the court be satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding, or that kind of proceeding; s.31A(5) Federal Court of Australia Act 1976.
2. This is a claim by a number of well known developers and suppliers of software systems against a number of respondents who, it is alleged, were utilising the programs of the copyright holders without a licence. I am advised by Mr Smith, who appears for the applicants, that the information that his clients have concerning the under-licensing and therefore breach of copyright was obtained from two former employees of the respondents. I am also told that, at some stage prior to the commencement of proceedings, the applicants contacted the respondents indicating their concerns and as a result of this contact there was produced a document by the respondents. The applicants argue that this document satisfied them that the respondents, or some of them had been utilising their programs on their computers without licences. The respondents deny that this was done in the document. But no one has shown me it.
3. On 4 August 2010 the applicants issued an application under the Copyright Act 1968 (the Act), which is an application in respect of which this court has jurisdiction. When a party in this court commences proceedings it has the alternative of providing a Statement of Claim or proceeding by way of affidavits. In less complex matters the commencement by way of affidavits is usually preferable but in complex matters, of which copyright cases form a large part, a Statement of Claim is always very useful because it should indicate to a defendant the nature of the claim being made against it and the particular breaches relied upon.
4. In this case a Statement of Claim was filed. The respondents filed a defence on 19 August admitting some of the allegations made in the Statement of Claim, albeit mainly those relating to the subsistence of copyright in three named United States corporations. The defence made objections to certain parts of the Statement of Claim and indicated that the defendants were unable to plead properly to that Statement of Claim because it did not sufficiently particularise the alleged breaches of copyright. For example, although this is not expressed in the defence, they argue that they do not know which programs are alleged to have been unlicensed, on used by which computers, or which of their various companies.
5. The respondents therefore made a request for further and better particulars. It was a request with which those practicing in more sophisticated litigation would be familiar. It sets out a plethora of what I will describe as “usual particulars” and then requires the applicant to provide those particulars in response to a series of matters originating from the Statement of Claim. In this particular case the usual particulars cover one and a half pages and the request covered a further nine.
6. The applicants objected to these particulars and the matter came before me. The court takes seriously its mandate to provide “justice” in a manner that is quicker, simpler, and cheaper than the courts of Supreme Court status within the Australian legal system. One of the vices of current litigation is this type of prolix request. In that spirit the court made orders requiring the respondents to refine their requested particulars and they did this by way of a second request for further and better particulars filed on 7 October and presumably served around the same time. I am satisfied that this second request for particulars was a refinement of the first and that the respondents have made an effort to obtain from the applicants the information that they believe they are entitled to before defending. (I believe it is accepted by all parties that the defence that has currently been raised is not a true defence to the claim, rather a defence to the document that constitutes the claim.) In paragraph 4 of the request the respondents say the following:
   • “In the event that the applicants consider it necessary to refer to or cite some document conversational circumstance, thus giving arise to the allegations of unlicensed reproduction, the respondents request that any such reference articulate the dates and times of such conversations, the persons between whom such conversations transpired, or in relation to a document, please specify the part or parts of the document, and the fact or facts in the document that give rise to the allegation of unlicensed reproduction, or on which the allegations of unlicensed reproduction are based.”
7. In paragraph 1 of the request the respondents say:
   • “The respondents request that the applicants clearly articulate:
     • (a) which of the respondents allegedly reproduced Adobe Acrobat without the licence of the first applicant
     • (b) the material facts giving rise to the allegation that the respondents reproduced Adobe Acrobat without the licence of the first applicant
     • (c) when the alleged unlicensed reproduction occurred
     • (d) The material facts giving rise to the allegation that any reproduction that occurred was without the licence of the first applicant.”
8. In paragraph 3 the respondents repeat that request in respect of the Microsoft companies. On 15 October 2010 the applicants responded to the request. The response is quite lengthy but it is repetitious and one example may well suffice:
   • “The best particulars that the applicants can currently provide of the reproduction of Adobe Acrobat without the licence of the first applicant are contained in the audit report provided to the applicants’ solicitors by the respondents of 11 June 2010. Additional particulars are within the knowledge of the respondents. The applicants reserve the right to provide further or amended particulars following discovery and interrogatory.”
9. The audit report is the document that I previously referred to that I have not seen. The response does not answer the request made by the respondents and it certainly does not clearly articulate the matters that I have also extracted from paragraph 1 of the request. I am of the view that it should have done. Mr Smith says that the document was produced by the respondents, that they know what is in it, that it provides sufficient information to allow them to understand the claim being made. I cannot make a decision upon that because I have not seen the document but I am of the view that the administration of justice requires that an applicant give the type of particulars that are requested in paragraph 1 especially when it is suing a number of different companies which own a number of different computers.
10. I think that the respondents are entitled to know which of them are alleged to have committed which breaches of copyright. I think that the request made in paragraph 4, extracted in these reasons, concerning the documents or discussions, is a reasonable one and that if the applicant seeks to rely on this unseen document then it should have extracted from it the particulars requested so that the respondent could see whether, in its defence, it should admit or deny that those particulars constituted breaches of the applicant’s various copyrights. Another answer that the applicants gave to the request for particulars is in the following form:
    • “5(a): Details supporting the fact that the respondents are aware that they were under-licensed for Microsoft programs are a matter for evidence rather than particulars. Nevertheless, we are instructed to advise that the applicants will rely inter alia on the following facts:
      • (i) Brian von Oven, the IT manager for the respondents, received emails from Paul Burgess, Senior Systems Engineer [of the respondents] between September 2009 and January 2010, stating that the respondents did not have sufficient licences for the number of copies of software issued used by the respondents.
      • (ii) Brian von Oven, the IT manager for the respondents, held discussions with Paul Burgess, Senior Systems Engineer [of the respondents] in January 2010, in which Paul Burgess had informed him that the respondents did not have sufficient licences for the number of copies of software used by the respondents.”
11. This paragraph, as stated, has all the hallmarks of hearsay but it is very possible that the applicants will produce Mr von Oven and Mr Burgess and they will give evidence as to what they said to one another and what they knew. They may well be the former employees who gave information to the applicants in the first place. The respondents have serious concerns about this paragraph. It seems to me that it is, at the moment, no more than an indication of evidence to be produced going not so much to particulars of breach rather to an element of damages or additional damages.
12. When the matter came before me previously I made orders about the provision of a refined request and responses and then ordered that the matter proceed speedily to mediation. Because of the nature of the responses and the concerns raised by the respondent to them the mediation has been adjourned and the parties were of one mind that they would like the court’s views about this strikeout application before proceeding to mediation. The court is sensible of the fact that obtaining evidence of copyright breaches of this type is not easy and that sometimes a copyright owner is obliged to act upon the unsubstantiated evidence of disgruntled former employees.
13. This evidence may be sufficient to raise suspicions in the mind of an applicant that breaches have taken place. They may not be enough to allow the commencement of proceedings with sufficient particulars that would satisfy a court that a defendant has enough information to file an effective defence. The rules of this court and of the Federal Court make provision for this type of problem. Although by s.45 of the Federal Magistrates Court Act, discovery is not to be permitted without leave, there is also provision under Rule 1.05(2) for the court to apply Federal Court Rules where its own rules are insufficient and this will include the application of Federal Court Rules relating to discovery before suit; Order 15A, Federal Court Rules. These rules are extensive and the powers substantial. In addition, persons in the position of the applicants might well be able to persuade a court prior to the commencement of proceedings that it is appropriate that orders are made which would have the effect of allowing it to search the computers of the respondents. Regrettably, none of these things were done and the matter has come to this sorry impasse.
14. It seems to me that the court has three alternatives. The first is to accede to the request of the respondents that the whole Statement of Claim be struck out. The second is to strike out individual paragraphs of the Statement of Claim, in effect, those paragraphs containing allegations other than allegations relating to the subsistence of copyright. And the third is to order that the applicants actually answer the request made by the respondents in the manner in which it was made and not in the manner in which it was answered. When I say “strike out the Statement of Claim” I distinguish between the Statement of Claim and the Application.
15. The application seeks orders under s.115(4) Copyright Act. It makes no allegations. It is the document which commences proceedings. I would note here that in the Statement of Claim copyright is claimed by the American corporations but not by the Australian corporations. Mr Smith described to me the nature of their right to damages which I do not see as having been articulated in the Statement of Claim. It is a pure economic loss claim based upon the Australian company’s relationship with the American copyright holders and amounts to a possible loss of income from providing services to licensees. The respondents object to the inclusion of these parties within the proceedings.
16. As indicated earlier from the information I have from the pleadings and from the representations made ably by the representatives of both sides I cannot be satisfied that this is a case to which summary judgment rules should be applied. Clearly the applicants are in possession of some information which satisfies them, at least, that there has been a serious breach of their copyright and that is all that the application itself alleges. On the other hand the Statement of Claim, as particularised at present, is a document which does not, to my mind, provide the respondents with sufficient indication of the manner in which alleged copyright has been breached, by whom it was breached, when it was breached, nor does it provide a sufficient indication of the legal basis upon which the Australian companies are bringing their claim.
17. Without wishing to be more than mildly pejorative I am of the view that the Statement of Claim, as currently drafted and as has currently been particularised, is misconceived. I am of the view that the best course of action will be for the whole of the Statement of Claim to be struck out leaving the application on foot. This will leave the applicants with the option to proceed by way of affidavit or by way of Statement of Claim, leave them with the option of seeking discovery at this early stage, and leave them with the option of reconsidering the claim being made by the Australian companies. That is the order that the court would propose to make and it would seem to me to follow from it that the applicants should also be responsible for the costs incurred by the respondents until the date of this order.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Raphael FM

Date: 11 November 2010