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Federal Court of Australia |
Last Updated: 17 February 1999
Copyright Act 1956 (UK)
Copyright Act 1912 (Cth)
Copyright Act 1968 (Cth) ss 10, 32, 35, 78, 115(3)
Smith's Newspapers Ltd v The Labor Daily (1925) 25 SR (NSW) 593 discussed
Hollinrake v Truswell [1894] 3 Ch 420 discussed
Francis Day v Twentieth Century Fox Corporation Limited & Ors [1940] AC 112 discussed
Exxon Corporation v Exxon Insurance Consultants International Ltd [1982] Ch 119 applied
Computer Edge Pty Ltd v Apple Computer Inc [1986] HCA 19; (1986) 161 CLR 171 cited
University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601 cited
Victoria Park Racing and Recreation Grounds Co Ltd v Taylor [1937] HCA 45; (1937) 58 CLR 479 cited
Interlego A.G. v Croner Trading Pty Ltd [1992] FCA 624; (1992) 39 FCR 348 cited
Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 discussed
A-One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 306 cited
Skybase Nominees Pty Ltd v Fortuity Pty Ltd (1996) 36 IPR 529 cited
Cala Homes (South) Limited v Alfred McAlpine Homes East Limited cited
Pollock v J C Williamson Ltd [1923] VLR 225 applied
Finn v Pugliese (1918) 18 SR (NSW) 530 cited
Golden Editions Pty Ltd v Polygram Pty Ltd (1996) 34 IPR 84 discussed
Byrne v Statist Co [1914] 1 KB 622 cited
John Lane The Bodley Head Ltd v Associated Newspapers Ltd [1936] 1 KB 715 cited
Z S Projects Pty Ltd v G & R Investments Pty Ltd (1987) 8 IPR 460 referred to
Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 5 IPR 213 discussed
MILWELL PTY LIMITED v OLYMPIC AMUSEMENTS PTY LIMITED
NG 585 OF 1998
LEE, VON DOUSSA AND HEEREY JJ
SYDNEY
16 FEBRUARY 1999
| IN THE FEDERAL COURT OF AUSTRALIA | |
| NEW SOUTH WALES DISTRICT REGISTRY | NG 585 OF 1998 |
|
BETWEEN: | MILWELL PTY LIMITED
Appellant |
|
AND: | OLYMPIC AMUSEMENTS PTY LIMITED
Respondent |
|
BETWEEN: | OLYMPIC AMUSEMENTS PTY LIMITED
Cross-Appellant |
|
AND: |
MILWELL PTY LIMITED Cross-Respondent |
|
JUDGES: | LEE, VON DOUSSA AND HEEREY JJ |
| DATE OF ORDER: | 16 FEBRUARY 1999 |
| WHERE MADE: | SYDNEY |
THE COURT ORDERS AND DECLARES THAT:
1. The appeal be dismissed.
2. The cross-appeal be allowed.
3. Orders 5 and 8 of the orders made by Wilcox J on 7 April 1998 be set aside and the following inserted in lieu thereof:
"5. The cross-appellant is entitled to, upon its election, an account of any profits made by the appellant or an award of damages (including additional or conversion damages) pursuant to ss 115 and 116 of the Copyright Act 1968 (Cth) in respect of the infringement of the cross-appellant's copyright."
"8. The assessment of damages (including any additional or conversion damages) or an account of profits in respect of the acts of the cross-respondent in infringement of the cross-appellant's copyright is reserved for further determination."
4. The appellant pay the costs of the respondent of the appeal and cross-appeal, including reserved costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA BETWEEN: Appellant AND: Respondent BETWEEN: Cross-Appellant AND: MILWELL PTY LIMITED
Cross-Respondent
NEW SOUTH WALES DISTRICT REGISTRY NG 585 OF 1998
MILWELL PTY LIMITED
OLYMPIC AMUSEMENTS PTY LIMITED
OLYMPIC AMUSEMENTS PTY LIMITED
JUDGES:
LEE, VON DOUSSA AND HEEREY JJ DATE: 16 FEBRUARY 1999 PLACE: SYDNEY
1 This is an appeal and cross-appeal brought by leave from an interlocutory decision of a single Judge of this Court.
2 The appellant, Milwell Pty Limited (Milwell) and the respondent, Olympic Amusements Pty Limited (Olympic) are competitors in the amusement machine industry. Each is a manufacturer and supplier of video gaming machines, referred to in the pleadings as Approved Amusement Devices. The proceedings were brought by Olympic alleging that Olympic's copyright in prize scales for its Wildcard 5 and Wildcard 14 draw poker video games had been infringed by Milwell. Milwell denied infringement. Additional claims pleaded in the amended statement of claim alleging contraventions by Milwell of s 52 of the Trade Practices Act 1974 (Cth) were abandoned at trial. A direction was given that the question of Milwell's liability be heard and determined separately from, and prior to, the question of relief.
3 On the question of Milwell's liability, the trial Judge held that each of the prize scales was an original literary work capable of giving rise to copyright, that Olympic was an owner of the copyright because, at the least, it was a joint author of the literary work, and that Milwell had infringed Olympic's copyright. His Honour found that Milwell had exactly reproduced the Wildcard 5 on its Five Aces II video draw poker game, and with one change had copied the Wildcard 14 prize scale on its Red Black video draw poker game. However, his Honour held that the infringement was an innocent one within the meaning of s 115(3) of the Copyright Act 1968 (Cth) (the Act).
4 In its grounds of appeal Milwell challenges the findings at trial that the prize scales were original literary works, and further, if the prize scales were capable of giving rise to copyright, that Olympic was a joint author. Broadly stated, Milwell argues that the prize scales were of such a rudimentary nature that they are too unsubstantial and lacking in any creative skill or judgment to amount to original literary works, and in any event that the authors of the prize scales were mathematicians from the Universities of Melbourne and Western Australia.
5 The following factual summary, not challenged on appeal, is taken from the findings of the primary judge. The managing director of Olympic, Nickolas Balagiannis, has had long experience in the amusement machine industry and established Olympic in 1984. At that time Olympic commenced the development of machines containing computer programs for draw poker. The main market for such machines was in New South Wales where gaming machines had to be licensed by a statutory authority, the Liquor Administration Board. Regulations required that any licensed machine provide a return to players, over time, of not less than 85 per cent of all moneys wagered in it. An applicant for a licence of a computer-controlled machine had to demonstrate, mathematically, that the program governing the machine would yield that return. Prize scales had to be constructed having regard to that requirement, and also the commercial desirability of ensuring that the player return would not greatly exceed 85 per cent. This was important as the machine operator (typically a club or hotel), retained the difference between the amount wagered and the amount returned to the players, less tax payable on the amount wagered. In late 1984 or early 1985 Olympic enlisted the assistance of Dr Timothy Brown, then senior lecturer in statistics at the University of Melbourne. Dr Brown was instructed about Olympic's requirements by the then general manager of the company, Mr Wade. Mr Wade offered some views about prize scales, and requested Dr Brown to mathematically analyse possible combinations. Dr Brown produced a report, Report Number 22, which went through three versions as a consequence of consultation with employees of Olympic. The extent of those consultations, and the materiality of them to the production of the prize scales was, and remains, a matter of contention. Dr Brown said in evidence the "revisions were occasioned by requests from Olympic to vary the prize scale". The final revision was completed in February 1986. Its contents were summarised at the commencement of the report as follows:
"1. Introduction
This report details calculations made on the game of Draw Poker played with a pack of 53 cards of which one is a joker or wild card. The aim of the calculations is to determine a prize scale in which the expected return of a player is at least 85% of his input according to common-sense rules for the circumstances in which particular numbers of cards are chosen for replacement after the first draw. These rules, hereafter called the strategy, are outlined in Section 3. Section 2 contains a list of the prizes, and the expected return at the end of the game. The method of calculation is described in Section 4. Details of the calculations are given in Section 5. Section 6 describes the computer program including the checks that have been made on its operation.
2. The Prizes
Table 1 gives the prizes and the probability of attaining them after the second draw, when the strategy of section 3 is adopted.
Table 1
H and
..."
"Coins played 1 2 3 4 57 Wildcard 14 was developed in response to a 1992 announcement by the Liquor Administration Board that the maximum permissible prize would be raised to $500 (2,500 units). By that time, additional variations of the Wildcard 5 program had been developed culminating in the program known as Wildcard 10. Wildcard 14 was similar to Wildcard 10 which had been approved by the Liquor Administration Board in 1989. The main difference, but not the only one, was that the prize for a Royal Flush was multiplied for multiple bets. The variations to produce Wildcard 14 had been selected by Mr Theo Tolkis, an Olympic employee, and approved by Mr Arthur Balayannis, the assistant manufacturing manager of Olympic. Wildcard 10 was based on a variation of one of Dr Brown's prize tables suggested by another mathematician, Dr Thomas Dickson from the University of Western Australia. That suggestion had been adopted by Mr Balayannis subject to him changing one figure, the prize for a Straight Flush (the change being from 50 to 60 for a single coin). As changed and finally adopted by Olympic, the Wildcard 14 prize scale was as follows:
Royal Flush 500 500 500 500 500
5 of a Kind 100 200 300 400 500
Straight Flush 50 100 150 200 250
4 of a Kind 30 60 90 120 150
Full House 5 10 15 20 25
Flush 4 8 12 16 20
Straight 3 6 9 12 15
3 of a Kind 2 4 6 8 10
2 Pair 1 2 3 4 5"
"Coins played 1 2 3 4 58 It will be noted that this scale multiplies the payout for a Royal Flush but in the case of 5 of a Kind, there is a special bonus for a five coin bettor. The payout for a Straight Flush is higher than in Wildcard 5 but the prize for the more probable result of 4 of a Kind is lower.
Royal Flush 500 1000 1500 2000 2500
5 of a Kind 100 200 300 400 1000
Straight Flush 60 120 180 240 300
4 of a Kind 25 50 75 100 125
Full House 5 10 15 20 25
Flush 4 8 12 16 20
Straight 3 6 9 12 15
3 of a Kind 2 4 6 8 10
2 Pair 1 2 3 4 5"
9 The Wildcard 5 prize scale was intended to produce a player return at about 88 per cent, and the intended return under the Wildcard 14 prize scale was about 87 per cent.
10 The wild card draw poker games were novel in that they utilised a fifty-three card pack including a joker. The introduction of a joker gave rise to the possibility of five of a kind. The Wildcard 5 prize scale proved very successful. Mr Balagiannis gave evidence that there were up to 1,000 conversion sales, and twenty to thirty new sales each week following the introduction in February 1987. Milwell put on to the market its computer-operated video draw poker machine Five Aces II in early 1987. Olympic introduced the Wildcard 14 prize scale shortly after its approval by the Liquor Administration Board in January 1993. On 28 April 1993 Milwell obtained approval for its Red Black draw poker game.
Subsistence of copyright
11 Copyright subsists in an original literary work that is unpublished and of which the author was a qualified person at the time when the work was made: s 32 of the Act. There is no dispute that each of the people said to be concerned with the authorship of the prize scales of Wildcard 5 and Wildcard 14 was a "qualified person" at the time the scales were devised, and that the scales had not previously been published. The dispute between the parties is whether each of the prize scales is an "original literary work".
12 The term "literary work" is defined in s 10 of the Act to include "a table, or compilation, expressed in words, figures or symbols...".
13 The Wildcard 5 and Wildcard 14 prize scales are tables or compilations expressed in words and figures, but Milwell contended that they lack originality. Milwell contends that they lacked skill and labour on the part of the authors (regardless of whether the authors are the mathematicians alone or jointly with Olympic).
14 It is argued that the only part of the prize scale that could conceivably contain original literary work is the first column of prize figures, that which applies to a one coin wager. It is argued that the list of poker hands and column headings are common place and in traditional or numerical order. The second to fifth columns were simply derived by multiplying the first column by the headings - save in the case Wildcard 5 where the row for Royal Flush remained the same because of the regulatory limits on prize money, not because of literary selection, and save in the case of the bonus for a five coin wager on 5 of a Kind in Wildcard 14 where the change is said to be inconsequential. Milwell contended that a list of nine numbers --the first column of prize figures - is too unsubstantial to attract the protection of copyright and relied on Smith's Newspapers Ltd v The Labor Daily (1925) 25 SR (NSW) 593, Hollinrake v Truswell [1894] 3 Ch 420; Francis Day v Twentieth Century Fox Corporation Limited [1940] AC 112 and Exxon Corporation v Exxon Insurance Consultants International Ltd [1982] Ch 119.
15 Furthermore, Milwell contends that even if skill and labour went into the selection of the nine numbers, that skill and labour was not undertaken in the task of devising the way in which the chosen prizes are expressed and presented. Rather, the presentation followed inevitably - without any literary skill and labour - from the selection of the prizes.
16 Milwell contends that the work of the mathematicians, which the evidence shows was extensive and complex, was directed to testing whether the prize scales met the requirements of the Liquor Administration Board. It is contended that the work of the mathematicians was quite separate from the first reduction into writing of the first column of figures in each prize scale. The nature of the mathematicians' work is discussed below. Milwell contends that the mathematicians settled on strategies likely to be followed by players and from those strategies worked out the probabilities of each hand being achieved. Those probabilities, it is said, are standard and provide a means by which the prize scales, and variations to them, could be tested to ascertain the percentage return to players. The probabilities worked out by the mathematicians, so it is argued, did not affect the prize scale which, in substance, is merely a set of nine numbers the authorship of which is distinct from the authorship of the mathematicians Reports which determined the probabilities. It is contended that a mere set of nine numbers divorced from the effort of creating the testing tool embodied in the mathematicians' work does not attract copyright.
17 In Hollinrake v Truswell at 428 Davey LJ said that a literary work is a work "intended to afford either information and instruction, or pleasure, in the form of literary enjoyment". That observation was adopted by the Court of Appeal in Exxon Corporation v Exxon Insurance Consultants International Ltd at 143-144 and applied by the High Court in Computer Edge Pty Ltd v Apple Computer Inc [1986] HCA 19; (1986) 161 CLR 171 at 182, 192-193, 201. The prize scales were plainly intended to convey information and instruction about the prizes available for each of the listed combinations of cards, and as already observed, the prize scales were a table or compilation within the definition of literary work. The requirement that a literary work be "original" is directed not to originality of ideas but to their expression: University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601 at 608-609 and Victoria Park Racing and Recreation Grounds Co Ltd v Taylor [1937] HCA 45; (1937) 58 CLR 479 at 498. The work need not be the expression of original or inventive thought: Computer Edge Pty Ltd v Apple Computer Inc at 182, and Interlego A.G. v Croner Trading Pty Ltd [1992] FCA 624; (1992) 39 FCR 348 at 378-379. However, if the literary work does state ideas that are novel or inventive their expression is likely to fulfil the requirement of originality. Originality is a matter of degree depending on the amount of skill, judgment or labour that has been involved in making the work: Computer Edge Pty Ltd v Apple Computer Inc at 182-183, and Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 at 277-278, 282, 285 and 289.
18 In the present case the prize scales contain the expression of some ideas that are not novel or inventive together with some that are. Milwell's contention that the possible poker hands listed in the prize scale is common place or traditional is not correct. Traditional poker hands are supplemented in the prize scale by the addition of 5 of a Kind. It is also not correct to assert, as Milwell did at one point in argument, that the possible hands are simply listed in descending order of probability, as there is a slightly higher probability with a 53 card pack of a player getting three of a kind than two pairs, yet two pairs has been placed at the foot of the list. In considering originality, that part of the prize scale which lists the possible winning hands cannot be disregarded on the ground that it is merely a copy of common place information.
19 Milwell's submission that originality should be judged by having regard only to part of the literary work, namely the column of prize amounts from a single coin wager is contrary to authority and must be rejected. In Ladbroke the House of Lords held that in deciding whether a betting coupon, which included in parts compilations of well known data, should be treated as a single compilation. Lord Reid at 276 said that he had no doubt that under the provisions of the Copyright Act 1956 (UK), which relevantly correspond with ss 32 and 10 of the Act, the coupon must be treated as a single compilation, and at 277 said:
"A wrong result can easily be reached if one begins by dissecting the plaintiffs' work and asking, could section A be the subject of copyright if it stood by itself, could section B be protected if it stood by itself, and so on. To my mind, it does not follow that, because the fragments taken separately would not be copyright, therefore the whole cannot be. Indeed, it has often been recognised that if sufficient skill and judgment have been exercised in devising the arrangements of the whole work, that can be an important or even decisive element in deciding whether the work as a whole is protected by copyright."20 Lord Hodson at 285 said that the defendant's submission that the coupons should be dissected and component parts separately analysed was wrong and that the coupons should be looked at as a whole because, under the provisions corresponding to s 32 of the Act copyright "is a statutory right which ... would appear to subsist, if at all, in the literary or other work as one entity". See also Lord Devlin at 290, and Lord Pearce at 291, and A-One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 306 at 316 and Skybase Nominees Pty Ltd v Fortuity Pty Ltd (1996) 36 IPR 529 at 536-537.
21 Submissions by Milwell that a distinction should be drawn between the considerable input of work and skill by the mathematicians in producing their Reports and complex strategy and probability calculations on the one hand, and the written expression of the prizes which constitute the prize scales on the other hand, should also be rejected. A similar argument was rejected in relation to the betting coupons under consideration in Ladbroke. Lord Devlin dealt with the argument at length at 289-290. He summarised the argument as follows:
"The appellants argue that the skill, industry and experience admittedly employed by the respondents was not employed in the production of the coupon. It was employed, they say, in the selection of types of wager. These wagers were, so to speak, the articles which the respondents offered for sale to the public. Like other salesmen, the respondents had as a matter of business to decide what sort of wares they were going to offer. The making of that choice is a matter of business which, it is argued, is irrelevant for the purposes of copyright. So the skill and labour devoted to the work of selection must be exercised. What is left, that is, the skill and labour required to express in writing a business decision, is negligible; and so there is no originality."22 His Lordship said that both in principle and authority the argument was unsound, and went on:
"I do not think it necessary in this type of case that the work done should have as its sole, or even as its main, object the preparation of a document such as a list or catalogue or race card. It is sufficient that the preparation of the document is an object of the work done. If that be so, the work cannot be split up and parts allotted to the several objects. The value of the work as a whole must be assessed when the claim to originality is being considered. If, when the work of selection is being done, there is no intention of listing results, the matter might well be different. A line could then be drawn between the work of selecting and the work of recording a selection independently made. No such line can be drawn in the present case which is, to my mind, much stronger than the ordinary case in which goods are being catalogued. The whole object of the work done was the production of the coupon."See also Lord Evershed at 282, Lord Hodson at 287 and Lord Pearce at 292-293.
23 In the present case the work undertaken by the mathematicians had as an object, indeed its main object, the production of a prize scale that would, over time, return a percentage to players that exceeded 85 per cent, but only by a known small amount so that the game remained commercially attractive to potential operators. The nature of the task undertaken by the mathematicians was described by Dr Brown in his affidavit evidence:
"The preparation of the report was very complex because the percentage return depends on the strategy adopted by the player. A strategy for Draw Poker consists of a listing of the decisions of what cards the player will discard for each type of hand on the first draw. Each type of hand has a probability of occurring on the first draw which can be determined mathematically, given that the electronic poker machine draws completely at random from the pack of cards. Given a particular type of hand after the first draw, and given a particular strategy for discarding cards, the probability of achieving each of the prizes after the second draw can be calculated mathematically. The two sets of probability calculations can be combined to give, for a particular strategy, the probability of achieving each of the prizes. The return of the machine can then be computed for this strategy. The best strategy is that which achieves the highest overall return for a particular prize scale. The work done was to determine reasonable overall strategies, using the probability calculations, and then to generate prize scales which would produce specified returns to the player from the machines, assuming the player used the reasonable overall strategy.24 The originality of each prize scale should be assessed by considering it in its entirety, and as an expression of ideas to which the considerable work and skill of the mathematicians contributed.
One particular strategy for working out the percentage returns is to simply let our computers run for a 100,000 or 1,000,000 games to find out empirically what happens. However, this approach, at that time, was not acceptable to Olympic as there was a concern that the empirical approach might not lead to an acceptable strategy for the purpose of the Liquor Administration Board. Accordingly, we had to write formulas for the whole process. That is to say, we had to write programs to implement those formulas which involves a massive amount of creative mathematical work in that we had to work out what the chances were for every situation."
25 We consider that his Honour's conclusion that the prize scales constituted original literary works was undoubtedly correct.
26 The four cases relied on by Milwell as establishing that the prize scales were too unsubstantial to attract copyright protection were distinguished by his Honour, in our opinion correctly so.
27 In Smith's Newspapers Ltd v The Labor Daily the plaintiff complained that the defendant was publishing in its newspaper, as part of a compilation of racing tips contained in a number of other papers, racing tips which the plaintiff had published the previous day. Harvey CJ in Eq held that the publication by the plaintiff of the names of the several horses it had selected was not in the nature of a literary work within the meaning of the Copyright Act 1912 (Cth). The Chief Justice held that what the plaintiff was trying to protect was the opinion expressed, not the form of words in which the opinion was expressed. In the present case the question is not whether the prize scale constitutes a literary work, but whether as a literary work it has the requisite degree of originality.
28 In Hollinrake v Truswell a cardboard pattern sleeve containing upon it scales, figures, and descriptive words was held not to be capable of copyright protection as a "map, chart or plan". The Court of Appeal held that pattern was not a literary production but a tool or measuring apparatus for use in dressmaking: see at 424, 425, 428. The facts and issue in the case bear no relationship to those presently in question.
29 Francis Day v Twentieth Century Fox Corporation Ltd concerned a claim, by the owners of the copyright in the song "The Man Who Broke the Bank at Monte Carlo", that their copyright had been infringed by the performance in public of a motion picture bearing the same title. The various claims made by the plaintiff failed before the Privy Council. The claim based on literary copyright failed because it was held at 123-124 that the mere use of the title of the song in connection with the motion picture was too unsubstantial a matter to constitute an infringement. The Board did not hold that there was no copyright in the song title, on the contrary, that was assumed for the purpose of deciding that no infringement had occurred. Whilst an issue of substantiality may arise when considering if copyright has been infringed, that is not an issue which is determinative of the existence of copyright: see Ladbroke at 276-277 per Lord Reid.
30 In Exxon Corporation v Exxon Insurance Ltd the plaintiffs failed in an action to restrain the defendant from using the invented word "Exxon" in its name on the ground that the use infringed the plaintiff's literary copyright. The Court of Appeal upheld the conclusion of the trial Judge (Graham J) that "Exxon" was not an original literary work because it failed to meet the test formulated by Davey LJ in Hollinrake v Truswell, namely that a literary work is one "intended to afford either information and instruction, or pleasure, in the form of literary enjoyment". In the present case the prize scales are compilations which pass that test.
31 For these reasons, Milwell's contention that the prize scales for Wildcard 5 and Wildcard 14 were not original literary works fails.
Joint authorship
32 Section 10(1) of the Act provides that "work of joint authorship" means a work that has been produced by the collaboration of two or more authors and in which the contribution of each author is not separate from the contribution of the other author or the contributions of the other authors. Division 9 of Part III of the Act deals with works of joint authorship. That Division includes s 78 which provides that a reference in the Act to the author of a work shall, unless otherwise provided, be read, in relation to a work of joint authorship, as a reference to all the authors of the work. Thus, under s 35(2) each author of a work of joint authorship is conferred with ownership of the copyright subsisting in the work.
33 In Cala Homes (South) Limited v Alfred McAlpine Homes East Limited [1995] FSR 818, at 835-836 Laddie J said:
"In my view, to have regard merely to who pushed the pen is too narrow a view of authorship. What is protected by copyright in a drawing or a literary work is more than just the skill of making marks on paper or some other medium. It is both the words or lines and the skill and effort involved in creating, selecting or gathering together the detailed concepts, data or emotions which those words or lines have fixed in some tangible form which is protected. It is wrong to think that only the person who carries out the mechanical act of fixation is an author. There may well be skill and expertise in drawing clearly and well but that does not mean that it is only that skill and expertise which is relevant. As Mr Howe has said, where two or more people collaborate in the creation of a work and each contributes a significant part of the skill and labour protected by the copyright, then they are joint authors."34 The trial Judge held that the selection of numbers for both Wildcard 5 and Wildcard 14 was a collaborative exercise involving both the mathematicians and employees of Olympic. Milwell challenges this finding.
35 It is contended that the evidence failed to establish that any of the numbers in the Wildcard 5 prize scale were derived from a person at Olympic, and that in the case of Wildcard 14 there was no evidence that Olympic employees had any input into the creation of the prize scale save for the changing of one number by Mr Balayannis.
36 This challenge was made at trial, and it was rejected by the trial Judge. His Honour accepted evidence from Dr Brown that the prize scales were the product of the efforts both of the mathematicians and the employees of Olympic. Dr Brown was the mathematician most closely involved in the work required to produce the relevant Reports on which the prize scales were based and it was open to his Honour to accept his evidence - indeed it would have been strange had he not done so as the credit of Dr Brown was not under attack, and Dr Brown maintained throughout his evidence that the prize scales were derived from the joint efforts both of the mathematicians and the Olympic employees. Dr Brown said that in Wildcard 5 an Olympic employee would have specified the maximum prize as 500 units, and that the lower order prizes of 1, 2, 3, 4 and 5 units, and indeed even the particular round figures chosen from some of the higher order prizes, were determined in consultation with Olympic employees. The prizes selected differed in a number of respects from earlier versions of the Wildcard game. Dr Brown said:
"After we had arrived at those calculations based on that strategy there would then be a detailed discussion with Olympic which would go to matters like how appealing a particular price [sic] scale might be thought to be to players and so on and at that point we would be able to settle on a price [sic] scale in consultation with people from Olympic."37 It was the decision of Olympic that the descending order of prizes would depart from the order of probability, so that 3 of a Kind was placed ahead of Two Pairs.
38 Dr Brown was asked whether he regarded the determination of the prize scale as a joint effort. He said:
"...there's a test for academic authorship along the following lines which I think is relevant: would this particular piece of academic paper have been created without the input of any of those people involved and if the answer is yes [sic] they should all be joint authors to it and I would regard that as the situation in this particular case, namely that the prize scales would not have arisen either by our efforts alone or by the efforts of people in Olympic alone."39 The Wildcard 14 prize scale was developed in response to the change in the Liquor Administration Board's regulations. It was developed by employees of Olympic by reference to the prize scale in Wildcard 10 and a report from Dr Dickson. To argue that only one number was changed is an over-simplification. There were in fact a number of changes in the prizes. Moreover, no single number, or column, can be looked at in isolation. What was created was a whole new prize scale which continued to work, as a whole, within the regulatory and commercial constraints which governed the amusement machine industry.
40 The evidence amply demonstrated that a change of one prize in the table could significantly alter the return to players and the operator's margin. In Wildcard 14, the bonus prize for 5 of a Kind for a five coin wager, and other changes from Wildcard 10 to prizes for Straight Flush and 4 of a Kind, were decided upon after considerable calculation by Mr Toklis and Mr Balayannis and consultation with Mr Balagiannis, as an incentive to encourage players to wager five coins.
41 In our opinion the evidence amply supports the finding of his Honour that the prize scales were works of joint authorship, and that Olympic, through its employees, was one of the authors. The appeal against this finding fails.
42 Milwell advanced an alternative argument that Olympic did not identify the copyright work in its evidence of authorship. Plainly by its pleadings and a statement by its Senior Counsel, Olympic asserted that the copyright work in each case was the "whole prize scale", but Milwell contends that the evidence failed to prove the reduction to a material form of either of the "whole prize scales" by any particular author. The evidence, it must be said, does not expressly or with clarity identify the precise person, place or time when each of the prize scales was first written down, but plainly each was brought into existence and on the evidence no-one other than the mathematicians or employees of Olympic could have been the authors. In the case of Wildcard 5 the evidence established the collaboration of employees of Olympic with Dr Brown in settling on the numbers to be included in the prize scale. Those numbers, and the prize scale as a whole, reflected the work and skill contributed from both sources, and it was not critical to know whether it was an employee of Olympic who ultimately acted as the scribe to record the result of their collaboration. In the case of Wildcard 14, however, the evidence leaves little room for doubt that it was employees from Olympic who first reduced it to a material form. This alternative submission does not assist Milwell.
43 The appeal by Milwell will be dismissed.
Cross-Appeal
44 His Honour upheld Milwell's claim for the protection of s 115(3) of the Act. Olympic cross-appeals against that finding.
45 Section 115(3) provides:
"(3) Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not."46 In reaching his conclusion his Honour found that Mr Garry Macdougall, the Managing Director of Milwell, and his son, Mr Scott Macdougall, the General Manager, "did not realise copying of Olympic's prize scales would be a breach of copyright". But his Honour explicitly disavowed reliance on their evidence. In particular his Honour did not regard Mr Garry Macdougall as a truthful witness. On the issue of whether or not Mr Garry Macdougall had copied Olympic's scales, his Honour described him as having embarked "on a course of explanation that became almost engaging in its increasingly fanciful mendacity".
47 However his Honour upheld Milwell's case under s 115(3) for the following reasons. First, both the Macdougalls would, his Honour thought, be unlikely to have any knowledge of copyright. Mr Garry Macdougall was "an unsophisticated person" who struck his Honour as a "rough and ready" type of businessman, "not well informed about the law relevant to his business and not curious about it". Mr Scott Macdougall seemed better educated and more commercially sophisticated but his previous experience as a builder/carpenter "would have been unlikely to equip him with knowledge of copyright".
48 Secondly, his Honour relied on absence of complaint of infringement. Milwell first infringed an Olympic copyright in November 1986 when its Five Aces I program exactly reproduced the Olympic Wildcard 3 prize scale. Five Aces I was replaced in 1988 by Five Aces II which used the Wildcard 5 prize scale. Since the evidence established that all machine manufacturers kept a close watch on their competitor's products, his Honour said that if the Messrs Macdougall:
"...had thought about copyright for a moment, [they] would almost certainly have regarded the absence of complaint as an indication that Olympic did not claim copyright in its prize scales."49 There was in fact no complaint before the institution of the current proceedings in September 1995.
50 His Honour considered that a more difficult question was whether Milwell had reason to suspect its actions amounted to infringement of copyright. His Honour considered that although the Olympic machines displayed a copyright symbol, the symbol was not large and could easily have been missed. If an observer did notice the symbol it would not be clear it related to the prize scale as distinct from the artwork, which Milwell did not copy. Finally, his Honour considered that another relevant circumstance was the "nature of the work". He thought it might not really occur to a person who was unaware of the statutory definition of "literary work" in s 10 that an agglomeration of numbers might be a work protected by copyright.
51 In our respectful opinion, his Honour erred.
52 To obtain the protection of s 115(3) a defendant must establish (i) an active subjective lack of awareness that the act constituting the infringement was an infringement of the copyright, and (ii) that, objectively considered, he or she had no reasonable grounds for suspecting that the act constituted an infringement.
53 Milwell failed to satisfy either limb. There was simply no positive case advanced at all as to Messrs Macdougalls' awareness of the quality of their act. On the contrary, their case was that the act simply did not occur. They denied any copying. Having opted for this bold course they can hardly claim to be credited with a state of mind, as to which they gave no evidence, relevant to an act, which they denied committing.
54 As to the second limb, it is not in our opinion valid to draw a distinction between some categories of copyright which are, as counsel for Milwell put it, "natural", such as novels or plays, and other categories of copyright such as numerical tables which could be seen as an artificial extension of the concept of copyright and not likely to be considered by reasonable lay people as possibly subject to copyright.
55 Guidance is provided by the decision of Mann J in Pollock v J C Williamson Ltd [1923] VLR 225. That case was decided under the predecessor to s 115(3), s 8 of the Copyright Act 1911 (Imp), made applicable by s 8 of the Copyright Act 1912 (Cth). This provision enabled an infringer to avoid liability for damages where there was lack of awareness and no reasonable grounds for suspecting that "copyright subsisted in the work". The plaintiff held the copyright to the English translation of a French play which the defendant produced. Mann J noted (at 234) that the manager of the defendant had sworn that when they produced the play they did not think they were infringing anyone's rights. However, his Honour noted the witness did not make it clear whether the defendant assumed that the publisher had given them permission, or the original French author had given them permission, or whether they believed that no performing rights existed in translations as such, or whether they acted in mere inadvertence. His Honour continued at 234-235:
"... I cannot say that there was no reasonable ground for suspecting that copyright subsisted in the plaintiff's work.Pollock was cited with approval in Laddie, Prescott and Vitoria "The Modern Law of Copyright and Designs" (2nd ed, 1995) at 930.
...
The copies supplied to [the defendant] bore a very conspicuous statement that the play was translated by the plaintiff, but the question of the plaintiff's performing rights never seems to have presented itself at all to the minds of those acting for the defendant company. I do not think I could admit a mere belief that the law was otherwise than I have stated it to be, as a `reasonable ground' within the section, even if such a belief had been proved. It is a branch of the law directly affecting the defendant's business, and where there is shown no reasonable ground of ignorance of the relevant facts, I do not think that the section can be applied by reference to the varying degrees of legal obscurity which may be thought to surround particular questions."
56 See also Finn v Pugliese (1918) 18 SR (NSW) 530 at 536 where Street CJ in Eq said of a defendant seeking to rely on s 8, "... if he asserts his innocence in the matter the onus lies upon him to prove it". His Honour's judgment was upheld by the Full Court (at 542).
57 The change in the legislation which substituted for an awareness that "copyright subsisted in the work" an awareness that "the act constituting the infringement was an infringement of the copyright" was considered by a Full Court of this Court in Golden Editions Pty Ltd v Polygram Pty Ltd (1996) 34 IPR 84. Kiefel J (with whom Burchett and Tamberlin JJ were in general agreement) pointed out (at 88) that s 115(3) arose from the recommendations of the Copyright Law Review Committee 1959 (the Spicer Committee). The Committee drew attention to the fact that no protection was afforded to an innocent person who, for example, had obtained a licence from a person who was believed to be the true owner of copyright but turned out not to be. Examples of such cases are Byrne v Statist Co [1914] 1 KB 622 and John Lane The Bodley Head Ltd v Associated Newspapers Ltd [1936] 1 KB 715.
58 The Full Court in Golden Editions upheld the trial judge's finding that the infringer had not made out an absence of grounds for suspecting that a purported licensor was not the owner of the relevant master sound recordings for certain recorded music. Burchett and Tamberlin JJ (at 86) added the observation:
"But in general the question is not whether the defendant knew the identity of the owner of the copyright, but whether the defendant has established a lack of awareness, and of reasonable grounds for suspecting, that the relevant act was an infringement of the copyright which was infringed, in whomsoever that copyright might be vested."59 Their Honours did not think the defence was available to a defendant who could show no more than a lack of awareness that the copyright was owned by the plaintiff.
60 The Full Court in Golden Editions would appear to have implicitly rejected the view of Needham J in Z S Projects Pty Ltd v G & R Investments Pty Ltd (1987) 8 IPR 460. In an application for summary judgment Needham J gave leave to the defendant to raise a s 115(3) defence where a builder claimed that he did not know who was the owner of the copyright in certain building plans. His Honour said (at 463):
"In the present case there is no issue that the work, that is the building plans, is copyrighted. The only issue is whether the second defendant was aware that his act in putting up the building was an infringement of the copyright which, as I have said, I construe to mean the plaintiff's copyright. It is a clear factual issue to determine whether the defendant was aware, or had reasonable grounds for suspecting that its conduct was in breach of the plaintiff's copyright." (Emphasis added)61 To turn to another point, a literal reading of s 115(3) might suggest that, rather than extending the old s 8 defence, it had established a different one. It might be argued that the reference to "the act constituting an infringement" being an infringement of "the copyright" meant that the section was directed only at the infringing act and did not apply where the lack of awareness was related to the existence of copyright.
62 However we think that, given the intention displayed in the Spicer Committee's report, the section should not be regarded as giving with the one hand and taking away with the other. The expression "the act constituting an infringement was an infringement of the copyright" should be read as covering any exculpatory belief which otherwise satisfies the section. For example, if an old work were on its face likely to be outside its copyright term, a defendant might have reasonable grounds for suspecting that there was no copyright at all. This approach is consistent with the decision of Thomas J in Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 5 IPR 213 at 243. The primary issue in that case was whether the plaintiff's accounting forms were capable of being the subject of copyright. Thomas J (at 244) concluded on the evidence that up to a certain date (presumably when demands were made by the plaintiffs) it was "unrealistic to expect the defendants to have ascertained the correct legal position before the plaintiffs did so, ad [sic] they should not be regarded as having failed to make reasonable inquiries". Thomas J referred to Pollock but we would with respect not necessarily agree with his Honour's view (at 243) that Pollock decided that a "mistake of law has not been regarded as being sufficient unless that mistake was made after reasonable inquiry and investigation". The passage from Mann J's judgment quoted above rather suggests that any mistake of law would be of no avail, and this seems to be the view of Laddie, Prescott and Vitoria, loc cit, see also n 10, at 931.
63 But in any event s 115(3) has no application to a belief that, as a matter of law, copyright could not subsist in a particular form of work.
64 The cross-appeal will be allowed and his Honour's order varied in the terms sought by Olympic in the cross-appeal.
65 Milwell must pay Olympic's costs of the appeal and cross-appeal.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Dated: 16 February 1999
Counsel for the Appellant:
Mr R Cobden Solicitors for the Appellant: Cropper Parkhill Counsel for the Respondent: Mr A J L Bannon SC and Ms S C Dowling Solicitors for the Respondent: Cutler Hughes & Harris Date of Hearing: 7 September 1998 Date of Judgment: 16 February 1999
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