Luxottica Retail Australia v Grant & Ors [2009] NSWSC 126 (9 March 2009)

Last Updated: 10 March 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Luxottica Retail Australia v Grant & Ors [2009] NSWSC 126


JURISDICTION:
Equity

FILE NUMBER(S):
4571/08

HEARING DATE(S):
23 & 24/02/09

JUDGMENT DATE:
9 March 2009

PARTIES:
Luxottica Retail Australia Pty Ltd
v
Janet Ruth Grant & 2 Ors

JUDGMENT OF:
White J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff: M J Leeming SC with J Taylor
Defendants: R Cobden SC

SOLICITORS:
Plaintiff: Norton White
Defendants: Minter Ellison


CATCHWORDS:
INTELLECTUAL PROPERTY - copyright – employee emailed employer’s documents to which copyright attached, to her home email address – infringement of copyright under Copyright Act 1968 (Cth) – nominal damages awarded - no additional damages awarded under Copyright Act 1968

LEGISLATION CITED:
Copyright Act 1968 (Cth)
Civil Procedure Act 2005 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Woolworths Ltd v Olson [2004] NSWSC 849; (2004) 184 FLR 121
Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCAFC 40; (2007) 157 FCR 564
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88
Bailey v Namol Pty Ltd (1994) 53 FCR 102
Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788
Autodesk Inc v Yee (1996) 68 FCR 391
Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1
International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd & Anor (No. 2) [2008] FCA 746; (2008) 76 IPR 763
Pollock v J C Williamson Ltd [1923] VLR 225; 29 ALR 133
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2007] FCA 1621
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2
Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565

TEXTS CITED:


DECISION:
Refer to para 53 of judgment.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST


WHITE J

Monday, 9 March 2009


4571/08 Luxottica Retail Australia Pty Ltd v Janet Ruth Grant & 2 Ors

JUDGMENT

1 HIS HONOUR: The only substantial remaining issue in these proceedings, apart from costs, is the plaintiff’s claim under s 115(4) of the Copyright Act 1968 (Cth) for additional damages for infringement of copyright.

2 The plaintiff carries on a business described as retail optometry under a number of names including OPSM. It has about 480 stores in Australia. Its business includes the employment of optometrists to check the eyesight of prospective customers, the writing of prescriptions, and the sale of glasses and contact lenses. Between about March 2005 and 2 September 2008 the first defendant was employed by the plaintiff as an optometrist in a store at Cherrybrook in Sydney. From time to time she worked as an optometrist at other OPSM stores. Between about September 2006 and January 2008 she held a position known as a Cluster Leader to provide support for other optometrists in her region. She worked in this position for one day in four or, later, one day in five. She said that her role was to provide support, leadership and mentorship to optometrists and other team members in her region. She was not involved in recruitment of staff. She attended management meetings on an ad hoc basis. The only financial information she received was information readily available to all Luxottica staff.

3 The first and second defendants are wife and husband. From August 2005 to 29 April 2008 the second defendant was employed by the plaintiff as the OPSM Regional Operations Manager for the Hunter Region. He resigned to take up a position as Regional Development Consultant with the third defendant, Specsavers Pty Ltd. The third defendant is a competitor of the plaintiff.

4 In April 2008 the first defendant made an approach to the third defendant to express interest in taking employment with it. After an interview process she was offered employment by the third defendant. The offer was made orally on 25 August 2008. She accepted the offer the following day. She did not immediately inform the plaintiff of her intention to resign.

5 On 27 August 2008 the first defendant forwarded 23 emails from her work computer to her home email address. Included in the emails she forwarded to her home address were four emails and attachments over which the plaintiff claims copyright. That claim is now conceded. The plaintiff claims that in sending the emails to her home and then later forwarding one of them to her husband at his work, the first defendant infringed its copyright and breached her contract of employment.

6 At 11.51am on 27 August 2008, the first defendant forwarded to her home email address an email which had been copied to her on 23 November 2007. That email was addressed to 12 employees of the plaintiff, including the first defendant, who had been selected to be mentors for graduate optometrists in 2008. Attached to it was a list of the new graduates, the stores at which they would be working, their mobile telephone numbers, their postal and email addresses and their starting dates. Also attached was a 41-page brochure called “Graduate Optometrist Learning Pathway 2008”. This document was a guidebook or procedures manual for new graduate optometrists. This document was provided to the new graduate optometrists of whom there were 13 in 2008. The first defendant said that she had not realised that the brochure entitled “Graduate Optometrist Learning Pathway 2008” had been attached to the email she sent home. She said that she thought she was only sending the list of graduate contact details. I accept that evidence. She said that she sent that list to her home for background knowledge. She said that in her new role at the third defendant, she would be involved in doing stage one interviews for new prospective employees, so that if any of those graduates sought employment with the third defendant she would know who their mentors at Luxottica had been.

7 Another email the first defendant forwarded to herself on 27 August 2008 was one she had received on 30 August 2007 which attached a document called “Optometrist Referrals”. The document provided details of how optometrists should refer patients to other optometrists, general practitioners and opthalmologists. The first defendant said that she wrote most of the document in 2007 based on publicly available information. She said that the document summarised standard procedures used in the industry for the referral of patients and is available on the Luxottica intranet and can be accessed by about 4,500 Luxottica employees. That evidence was not challenged and I accept it. The first defendant said that the reason she forwarded the document to her home email address was that she had put a lot of work into the document and was quite proud of the work she had done. She said “I just wanted to retain a copy of it.” She denied that she thought the document would be useful in her future role. I accept her evidence in relation to this document.

8 A third document forwarded on 27 August was an email which had been sent to the first defendant on 16 May 2007. It included an attachment which was a Powerpoint document entitled “Optometrist Workshop”. This document provided training to optometrists on billing. It referred to differences between the mix of Medicare item codes billed by Luxottica optometrists compared with the rest of the profession. Because the document is a Powerpoint presentation the points sought to be made are not developed. Various case studies posed questions as to how a patient or Medicare might be billed in different circumstances. The focus on the presentation appears to be how revenue can be increased by adopting certain billing practices. The document itself raises questions rather than providing answers. The first defendant said she had had a lot of input into the document and was involved with the committee that reviewed and worked on the document. She said “and again I just wanted to have a copy of the work that had been done.” She admitted that she thought the document might be useful to her personally in her work as an optometrist, not necessarily as an optometrist working for the third defendant, but as an optometrist no matter who she worked for.

9 A fourth document with which the first defendant dealt was an email which had been sent to the managers of various OPSM stores on 24 September 2007 attaching a guide called “Coaching for Conversion Tool Kit”. Part of the document described marketing procedures by which an optometrist and a retail shop assistant, working together, could best persuade a customer to buy new frames or lenses. This was called a “Three-Way Handover”. The manual suggested how the optometrist should shepherd a customer from the consulting room to the shop assistant and how the optometrist should remain involved in the selling process so as to “increase conversion”. The document also described how the employees would be trained and their performance analysed.

10 On 27 August 2008 the first defendant accessed the computer of the manager of the Cherrybrook store and forwarded this document to her own work email address. From there she forwarded the document to her home email address. That evening at 9.03pm she forwarded the attachment and covering email to the second defendant’s email address on his work computer. The second defendant had not asked to be sent the document. There had been no prior discussion between the first and second defendants about it. The document the first defendant forwarded to her husband consisted of the email chain of documents from a Ms Karen Hall to the various store managers of 24 September 2007 which referred to the attachment and noted a dropping of conversion rates in 2007 compared with 2006. The attached document entitled “Coaching for Conversion Tool Kit” was one with which the second defendant was familiar from the time of his employment with the plaintiff. The second defendant did not open the attachment until after the third defendant, by whom he is employed, was served with a subpoena. He then opened the attachment for the purpose of compliance with the subpoena.

11 The first defendant said that the reason she sent the document to her home email address was for her own personal use. She said that she did not believe it was a document which would benefit her in the new job with the third defendant. She had used that and similar documentation when working with Luxottica in running various training sessions for optometrists as to how to improve their conversion rate. She did not accept that that was something she would be doing in her new role with the third defendant. I accept that evidence. However, the first defendant’s plan was that by 2009 or 2010 she would have her own store with the third defendant under a franchise arrangement. She agreed that the document might be of use in training optometrists employed in such a store if the store were large enough.

12 The first defendant said that the reason she forwarded the document to her husband was that he had been looking to her to give him some ideas about how he could improve his ability to coach employees. It occurred to her that this particular document might be of some help to him. She said that:

“I know he had no doubt seen it when he worked for Luxottica and I thought it might be helpful to him as my husband.”

13 27 August 2008 was a Wednesday. On Monday, 1 September 2008 the first defendant gave notice that she was resigning from her employment with the plaintiff. On 2 September, a Ms Cheryl Nichols, the National Optometry Recruitment Manager of the plaintiff, inspected the first defendant’s emails. She looked at the emails the first defendant had sent from her work computer to her home email address, which included the four emails over which the plaintiff claims copyright, along with some further emails. No submissions were made in relation to the further emails.

14 On the same day the first defendant was advised that her employment was terminated and she was escorted from the Cherrybrook store. These proceedings were commenced on 4 September 2008. The plaintiff obtained ex parte orders against the first defendant including an order restraining her from altering, deleting or disposing of any computer file which contained, or was derived from, non-public information about the business or affairs of the plaintiff. Subsequently various orders were made by consent and without admissions restraining the first defendant from dealing with computer files containing non-public information about the business or affairs of the plaintiff, and providing for the plaintiff to have access to her computer. The injunctive relief was continued up to 29 September 2008. No application was made for the continuance of that relief after 29 September 2008. In an affidavit sworn on 11 September 2008 the first defendant deposed that in respect of each of the documents which the plaintiff had identified as containing non-public information relating to its business or affairs, she had not been told that the document was confidential and that she was prepared to delete it from her computer. Except in relation to the fourth document referred to above which had been forwarded to her husband, the first defendant deposed that she had not disclosed the document to anyone since sending it to her home email address.

15 On 1 October 2008 Minter Ellison, who act for the defendants in these proceedings, advised the plaintiff’s solicitors that:

“Without making any admission, our client puts the plaintiff on notice that all property belonging to the plaintiff that was in the first defendant’s possession or control at the time her employment was terminated was either:

(a) left at the premises of the plaintiff; or

(b) delivered to Minter Ellison and remains in our custody.

Our client anticipates that the material in (b) will be returned to the plaintiff only if and required by the orders of the Court in these proceedings.

Given the nature of the proceedings and the surrounding circumstances, our client considers that this approach is in accordance with the terms of her contract of employment, including clause 24.7.”

16 The first defendant’s contract of employment with the plaintiff included the following terms:

“21 Confidential Information

21.1 As an Optometrist you occupy a senior and responsible position. Consequently you have access to information confidential to the business of the Employer.

21.2 You must use your best endeavours to preserve the confidentiality of information to which you have access.

21.3 You must:

(a) ensure secure custody of any document containing Confidential Information in your possession or control; and

(b) use your best endeavours to prevent any person using or disclosing Confidential Information in an improper or unauthorised manner.

21.4 Both during and after your employment, you must not:

(a) directly use or disclose (or attempt to use or disclose) any Confidential Information for your own benefit or the benefit of any Person;

(b) indirectly use or disclose (or attempt to use or disclose) any Confidential Information for your own benefit or the benefit of any Person.

21.5 The restriction in this clause does not apply to:

(a) information that is used or disclosed in the proper course of performing your duties for the Employer;

(b) information that is used or disclosed with the Employer’s prior written consent;

(c) information that is required by law to be disclosed; or

(d) information that is in the public domain, other than through your breach of this contract.

21.6 If you are uncertain about whether information is Confidential Information, you must immediately ask your manager. Until you receive an answer, you must treat that information as Confidential Information.

In this contract -

‘Confidential Information’ means:

(a) trade secrets of the Employer such as pricing formulae;

(b) non-public information about the business and affairs of the Employer such as:

(i) pricing information;

(ii) special supplier information;

(iii) marketing or strategy plans;

(iv) strategic alliance agreements;

(v) commission structures;

(vi) commercial and business plans;

(vii) contractual arrangements with third parties;

(viii) tender policies and arrangements;

(ix) loyalty programs and mailing strategies;

(x) financial information and data;

(xi) sales and training materials;

(xii) policies and procedures documents;

(xiii) salary structures and remuneration schemes;

(xiv) staff incentive programs;

(xv) supply chain details;

(xvi) recruitment strategies and liaison with potential employees;

(xvii) locum network arrangements; and

(xviii) operational information and methods.

(c) Information about patients of the Employer, such as prescription requirements, arrangements and past dealings with the Employer;

(d) Personal Information of patients, patient lists, business cards and diaries, calendars or schedulers; and

(e) all other information obtained from the Employer or obtained in the course of your employment, that is by its nature confidential.

In this clause:

‘Person’ means any natural person, company, partnership, association, business, or other organisation of any description.

...

24.7 At the time your employment terminates, you must immediately return to the Employer all property belonging to the Employer that is in your possession or control such as any:

(a) Document containing Confidential Information;

(b) Document containing Personal Information of any client;

(c) equipment;

(d) mobile phone;

(e) computer;

(f) keys;

(g) disks;

(h) cards;

(i) documents;

(j) records; and

(k) papers.”

17 On 28 November 2008 the first defendant gave discovery of documents. The first defendant’s list of documents included numerous documents which she had emailed to her home email address well before her resignation. Minter Ellison advised the plaintiff’s solicitors, Norton White, that:

“At the time that our client was escorted from the OPSM store premises at Cherrybrook on 2 September 2008, Ms Grant had a large amount of documentation at her home address and on her personal email account. That material was in her possession as she regularly worked on Luxottica business from home. Further, until November 2006 our client did not have her own Luxottica email address. Consequently, in her role as Cluster Leader she communicated with her employer via her own personal email account. Additionally, as you know, Ms Grant had been an independent contractor for many years prior to commencing her employment. Accordingly, Ms Grant had documents in her possession which related to your client’s business which had been accumulated during that time.

Having been escorted from the premises without warning, our client was not provided with any opportunity to identify, collate and return material to your client. Following service of the ex parte orders on the evening of 7 September 2008, Ms Grant began identifying and collating the Luxottica related materials she had at her home. Those materials together with 3 computers were delivered into our custody in the days immediately following service of the ex parte orders.

In this regard, we refer to our letter to you of 1 October 2008 in which we informed you that our client had delivered the documents into our custody.

In due course, our client will file evidence in relation to this issue, however, we did not want your client to be unduly concerned in the interim.”

18 It appeared from affidavits served by the plaintiff, from an outline of submissions delivered prior to the hearing, and from seven volumes of a tender bundle which the plaintiff prepared for the hearing, that one of the issues the plaintiff proposed to raise at the hearing was the first defendant’s right to retain these further documents. However, at the commencement of the hearing, it was immediately apparent that there was no issue between the parties in relation to the documents which the first defendant held relating to the affairs of the plaintiff, or to the document which she had sent to the second defendant referred to in paras [9] and [10] above. Without admissions, the defendants readily indicated their consent to orders that all such documents, and all copies of such documents would be delivered to the plaintiff, and that all electronic copies of such documents would be deleted. For its part, the plaintiff accepted that it did not press any claim for an injunction to restrain the use of information derived from such documents. As a practical matter, given that the documents had been put into the possession of Minter Ellison in September 2008 and would be delivered up to the plaintiff, there was no perceived risk that the defendants would make improper use of the contents of such documents.

19 I am concerned that this sensible accommodation was only reached on the first day of the hearing. From a reading of the affidavits served by each party it seemed to be an obvious resolution of the main issues. This is likely to be a matter relevant to questions of costs and I will say nothing more about it for the time being, except to observe that all parties and their legal advisers are required by s 56 of the Civil Procedure Act 2005 (NSW) to conduct the proceedings so as to ensure that the real issues between the parties are resolved with minimum cost.

20 The plaintiff does not seek to maintain any claim for damages (other than nominal damages), equitable compensation, or an account of profits. The plaintiff accepts that it has suffered no loss and that the defendants have received no profit. The plaintiff attributes this state of affairs to the fact that it was able to nip matters in the bud by moving swiftly to obtain appropriate injunctions.

21 As a result of these concessions, only two issues remained outstanding apart from costs. Only one of these is a substantial issue. The non-substantial issue is whether the plaintiff is entitled to nominal damages for breach of contract. I assume that this question is maintained because it is thought that it might be relevant on questions of costs. I do not know that that is so because the plaintiff would maintain that it was entitled to bring the proceedings to seek quia timet injunctive relief for an apprehended breach of contract, whether or not an actual breach had occurred. Nonetheless, as the question is raised it should be determined.

Nominal Damages for Breach of Contract

22 As matters were presented at the hearing, the plaintiff alleged that the first defendant breached her contract of employment by forwarding emails on 27 August 2008 to her home email address and by sending the email to the second defendant at 9.03pm attaching the document entitled “Coaching for Conversion Tool Kit”. The plaintiff alleged that this was a breach of clauses 21.2, 21.3 and 21.4.

23 By forwarding the emails to her own home computer at a time she was still employed by the plaintiff, the first defendant did not use or disclose, or attempt to use or disclose, “Confidential Information” as defined. She may have sent those documents with a view to their later use or disclosure, but there was nothing in her forwarding of those documents to her home email address which amounted to an attempt to use or disclose the documents. Nor did that conduct breach any confidentiality in the information contained in those documents. However, her forwarding of the fourth document to the second defendant was either a disclosure of the document or an attempt to disclose the document to him. If the document contained “Confidential Information” as defined, then that step was a breach of clause 21.4 of her contract of employment.

24 Mr R Cobden SC who appeared for the defendants submitted that the plaintiff had not established that the document in question contained non-public information about the business and affairs of the plaintiff. He rightly submitted that the question was not whether the document itself was a non-public document but whether the information in it, insofar as it concerned the business and affairs of the plaintiff, was “non-public”. In my view, that inference can be drawn from the contents of the document and from the fact that the first defendant thought it worth her while to extract the document from the Cherrybrook store manager’s email inbox to send it to herself and then to forward it to her husband with a view to its potential use by him as an aide in training. If the information in the document was all in the public domain there would be no need for her to have taken those steps. She and the second defendant readily acknowledged in cross-examination that the information in the document was proprietary information belonging to the plaintiff and not in the public domain. The document deals with what it calls “conversion breaking points” i.e. the points at which a customer can be persuaded to make a purchase. Part of the document involved the description of a “three-way handover”. Ms Nichols, who gave evidence for the plaintiff, gave evidence that she had worked for several optical outlets and had been involved in the industry for 30 years. She had worked for independent outlets and other optical chains. She gave the following evidence:

“Q. You'll agree with me, would you not, three way handover is now and was last year well known throughout the optometry industry?

A. No, I'm sorry, I would have to disagree. I have only ever heard it within OPSM and Luxottica. I've never heard of it with anyone else I have worked for.”

25 The detailed advice in the document shows that it is unlikely that the information is in the public domain. By way of example, one of the pieces of advice in the document is that those implementing the program should focus on stores who had achieved a certain percentage drop in their conversion rate, or on graduate optometrists who had failed to achieve a certain percentage conversion rate in their first six months of employment. By its nature, that kind of recommendation would not be public.

26 There was ultimately no dispute that the four documents in question were of a kind which could validly be the subject of a contractual restraint against disclosure.

27 Accordingly, the plaintiff is entitled to nominal damages against the first defendant for breach of her contract of employment.

28 I should add that the attachments to the first email referred to at para [6] and the third email referred to at para [8] also contained non-public information that came within the definition of Confidential Information in the employment agreement. Although the plaintiff did not use or disclose, or attempt to use or disclose, that information, the plaintiff was entitled to quia timet relief in respect of those documents.

Infringement of Copyright

29 Ultimately, there was no dispute that the plaintiff has copyright in the documents which were the subject of the four emails sent by the first defendant from her work computer to her home email address. There is no dispute her acts of forwarding the emails was done without the consent of the plaintiff. There is no dispute that the first defendant thereby infringed the plaintiff’s copyright. There is no dispute that by forwarding the fourth email to her husband’s email address, the first defendant further infringed the plaintiff’s copyright. There were thus five infringements in respect of four documents. There is no dispute that the plaintiff is entitled to nominal damages for these infringements of copyright. It was common ground that the documents in question were a literary work.

30 The relevant copyright claimed in the works was the exclusive right of the plaintiff to reproduce the work in a material form (Copyright Act, s 31(1)(a)(i)). “Material form” is defined to include any form of storage of the work (s 10). The alleged infringement of copyright was that the first defendant, without the licence of the plaintiff, reproduced the relevant works, or substantial part thereof, in a material form and thereby infringed the plaintiff’s copyright in those works. Section 36(1) of the Copyright Act provides that, subject to the Act, the copyright in a literary work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia, of any act comprised in the copyright. The infringement by reproduction of the work in a material form, as that expression is defined, is admitted. (See Woolworths Ltd v Olson [2004] NSWSC 849; (2004) 184 FLR 121 at 215 [326]-[330]). There was a reproduction of the works in a material form by the first defendant sending the relevant documents to her home email address, irrespective of whether or not she opened the documents, and there was a reproduction of the work comprised in the fourth email and its attachment by its being sent to her husband’s email address prior to his opening the attachment.

Additional Damages for Infringement of Copyright

31 Section 115(1)-(4) of the Copyright Act provides as follows:

“115 Actions for infringement

(1) Subject to this Act, the owner of a copyright may bring an action for an infringement of the copyright.

(2) Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.

(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.

(4) Where, in an action under this section:

(a) an infringement of copyright is established; and

(b) the court is satisfied that it is proper to do so, having regard to:

(i) the flagrancy of the infringement; and

(ia) the need to deter similar infringements of copyright; and

(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and

(ii) whether the infringement involved the conversion of a work or other subject matter from hardcopy or analog form into a digital or other electronic machine readable form; and

(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and

(iv) all other relevant matters;

the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.”

32 The first defendant did not raise a defence under subs 115(3).

33 I accept the first defendant’s evidence that she was not aware that, in taking the steps she did, she breached the plaintiff’s copyright. The more difficult question is whether she appreciated that what she was doing was wrong. She denied appreciating at the time that she was acting wrongly. I accept her denial. Naturally enough, she was asked in cross-examination why she sent each document to her home email address. Counsel for the plaintiff rightly submitted that in her affidavits she had not answered that question. I accept that on 27 August she did not turn her mind to the propriety of her conduct. In respect of all but the fourth document, she simply went through her email inbox and chose documents to forward to her home email address to keep. In the course of the litigation attention has been focused on why she dealt with particular documents, but the first defendant did not then attach the same importance to that question as it has assumed in the litigation. In cross-examination the first defendant appeared as a frank and truthful witness. She readily made concessions against her interest.

34 The first defendant said that as at 27 August 2008 she was aware of the contents of a code of conduct which she had signed on 24 March 2005 and was aware of the contents of the plaintiff’s internet access and email policy which she had acknowledged by signing it on 21 September 2005. The former document said that

“Disclosure of Company information without appropriate authorisation is prohibited. All information pertaining to OPSM groups operation is to be treated as confidential, unless such information is made public by the Company. Information encompasses, although is not confined to, the following:

...

* Information relating to internal systems and procedures.”

35 The internet access and email policy acknowledgment form included an acknowledgment that private access was deemed to be acceptable only when 11 criteria were satisfied including that the use comply with all copyright laws and not breach any company policy. The first defendant acknowledged that she had read these documents when she signed them and was familiar with these matters whilst employed. However, she said that she did not think about the internet access policy and code of conduct at the time. I accept that evidence.

36 There is stronger reason for concluding that the first defendant was guilty of a conscious impropriety in relation to the fourth email and the attachment referred to in paras [9] and [10] above which she forwarded to her own work email address from the computer of her store manager before sending it to her home email address and later emailing it to her husband. Her evidence that she had access to the store manager’s computer in the ordinary course of her employment was not challenged. She was asked why she sent the email to her own work email address and did not send it directly to her home email address. She denied that her reason in dealing with the document in a two-stage process was because she appreciated that had she done so, the store manager would learn that she had sent the document to her home email address. I accept that denial. The first defendant had difficulty giving a rational reason as to why she first sent the document to her own work email address. She said that she was in a frame of mind of cleaning out her inbox, which is hardly a reason for sending the document to her inbox. But sometimes people act for no particular reason, or for a reason which cannot be subsequently identified. The most telling consideration going to the lack of conscious impropriety is that the first defendant did not take any steps to cover her tracks. When Ms Nichols inspected her computer on 1 or 2 September 2008 she saw the emails the first defendant had sent to her home. No attempt had been made to delete the emails. No forensic examination of the computer was necessary. This applies equally to the document extracted from the store manager’s computer as it does to the documents which had been stored in the first defendant’s own work email inbox.

37 The question then is whether having regard to these findings I should be satisfied that it is proper to make an order for the payment of additional damages pursuant to s 115(4). Certain propositions concerning s 115(4) are clearly established. First, additional damages may be awarded under subs (4), even though only nominal damages are awarded under s 115(2) (Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCAFC 40; (2007) 157 FCR 564). Secondly, whilst each of the matters in sub paras (4)(b)(i)-(iv) must be considered, it is not essential that all be established (Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93, 103). Thirdly, the flagrancy of conduct to be considered under sub para 115(4)(b)(i) is flagrancy of the infringement of copyright, not the flagrancy of another wrong committed by the defendant, for example, breach of conduct or fiduciary duty (Woolworths Ltd v Olsen at 220-221 [345]-[348]). However, the courts have taken into account as relevant matters under s 115(4)(b)(iv) reprehensible conduct of the defendant associated with, but separate from, the infringement of copyright such as a defendant’s secret plan to steal work away from the company of which he was a director (Bailey v Namol Pty Ltd (1994) 53 FCR 102 at 114), and threats of physical violence (Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 215 ALR 788 at 810 [165]-[172]).

38 In Autodesk Inc v Yee (1996) 68 FCR 391, Burchett J said (at 394) that additional damages under s 115(4) “may be given upon principles corresponding to those governing awards of aggregated and also exemplary damages at common law.” This is to be understood in the sense that:

“In an appropriate case, it will be proper to take into account in considering an award under s 115(4) the aggravation of the harm done as a result of the infringement by the manner in which the act was done and also the need to mark the disapproval of that conduct.”

(Bailey v Namol Pty Ltd at 113-114; Aristocrat Technologies (Australia) Pty Ltd v DAP Services (Kempsey) Pty Ltd at 570 [42], 584 [114]).

39 It does not follow that additional damages under s 115(4) are only recoverable if aggravated or exemplary damages would be recoverable if the action were treated as a claim in tort. Aggravated damages would not be recoverable by the corporate plaintiff and exemplary damages are an exceptional remedy (Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1 at [20]) and are awarded only where the conduct of the defendant merits punishment because the defendant has acted in contumelious disregard of the plaintiff’s rights, and usually has been guilty of conscious wrongdoing. The section does not require proof that the defendant has acted in contumelious disregard of the plaintiff’s rights. This must necessarily follow from the fact that it is not a prerequisite to the making of an award of additional damages under s 115(4) that the plaintiff establish that the infringement of copyright was flagrant.

40 In International Writing Institute Inc v Rimila Pty Ltd (1994) 30 IPR 250 Lockhart J said (at 255):

“The term ‘flagrancy’ has been variously defined in the reported cases. It was described in Prior v Lansdowne Press Pty Ltd (1975) 29 FLR 59 at 65 as ‘calculated disregard of the plaintiff's rights, or cynical pursuit of benefit’. In Ravenscroft v Herbert & New English Library Ltd [1980] RPC 193 it was described at 208 as ‘the existence of scandalous conduct, deceit and such like; it includes deliberate and calculated copyright infringement’.”

41 Counsel for the plaintiff referred to Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd & Anor (No. 2) [2008] FCA 746; (2008) 76 IPR 763 at 768 [20] where Besanko J said that the second respondent in that case:

“... was responsible for producing the brochure on behalf of the first respondent and he knew the artworks on the brochure belonged to the applicant. Despite this knowledge, he went ahead and used them in a brochure designed to promote the first respondent’s products. Whether he actually knew that the use of the applicant’s artworks was an infringement of copyright is immaterial (Pollock v JC Williamson Ltd [1923] VLR 225 ; 29 ALR 133); the important point is that he knew the artworks were the applicant’s artworks or, put a different way, that they belonged to the applicant. Although he attempted to say that he did not know he could not use the applicant’s artworks because he was a ‘bit vague as to how all this worked’ and that he had used samples with the brands of third parties before, I think he knew that he should not be using the artworks or, at least, was wilfully blind to that fact. ...”

42 With respect, whether a defendant has actual knowledge that his or her conduct constitutes an infringement of copyright cannot be immaterial to s 115(4)(b), although it may not be decisive. Pollock v J C Williamson Ltd [1923] VLR 225; 29 ALR 133 was concerned with a provision in a form similar to s 115(3), not with a provision equivalent to s 115(4). In the present case, I have found that not only did the first defendant not intend to infringe the plaintiff’s copyright, but that she was not conscious of doing wrong. She did not deliberately close her eyes to the question of whether she was improperly using the plaintiff’s property.

43 Counsel for the plaintiff placed particular stress on s 115(4)(b)(ia). Counsel submitted that a modest award of additional damages was warranted to deter employees of the plaintiff from treating the plaintiff’s property as their own, especially when they leave to enter into competition with the plaintiff. Counsel submitted that there was more general need to deter employees from such conduct. These are relevant considerations. However, the very institution of the proceedings with the attendant costs, time and anxiety that such proceedings must entail, together with orders for the delivery up of the documents, would itself in all probability have a deterrent effect in respect of any other employees of the plaintiff who might be minded to copy the plaintiff’s documents other than for the purposes of their employment. Nonetheless, I accept that an award of additional damages is likely to enhance that deterrent effect. This is one factor to go in the scales in assessing whether it is proper to order additional damages.

44 The plaintiff submitted that the first defendant’s conduct after the act constituting the infringement also pointed to making an award of additional damages. Counsel for the plaintiff submitted that until the trial the first defendant did not explain why she had forwarded the documents that she did. There was no apology and the first defendant’s instructions were that the documents would only be returned pursuant to a court order. However, with the exception of what has been called the fourth document, the first defendant did not have any dealing with the document after she sent it to her home email address. She did not disclose such documents to anyone else. She offered to delete the documents from her home computer and then swear an affidavit confirming the deletion. All of the documents were passed to her solicitor. So far as the document entitled “Coaching for Conversion Tool Kit” is concerned, she also offered to delete that document from her computer and swear an affidavit that that had been done. She did not use that document or disclose it to any person other than by sending it to her husband. Her husband did not deal with the document except to comply with the subpoena. Nothing done after the relevant acts of infringement exacerbated the infringement.

45 Nor did any benefit accrue to the first defendant or to anyone else as a result of the infringement of copyright. The plaintiff says that this was due to its having moved swiftly to obtain injunctive relief. It is true that it moved swiftly and pre-empted any use of the documents, but it is noteworthy that no use was made of the documents in the week after 27 August 2008. Nor do I think it likely that any significant benefit would have been derived in the future had the infringement of copyright not been detected. Whilst the documents in question are proprietary documents of the plaintiff, they contain no trade secrets. They contain no important financial information. They might be of some general use to an optometrist in the exercise of his or her profession, but I think the plaintiff exaggerates their likely utility to the first or second defendants. The possible exception to this is the third document referred to in para [8]. The first defendant said that some of the case studies in that document highlighted particular areas which could be of assistance to an optometrist who wished to bill Medicare correctly. In that respect the document might have been of assistance to the first defendant in her future work as an optometrist. Any such benefit would not be detrimental to the plaintiff.

46 Mr Cobden for the first defendant submitted that the infringement of copyright was not in a commercial context. It was not like what counsel characterised as “the repeated and determined commercial infringements found in the cases”. Counsel submitted that the infringements were isolated acts, that the first defendant had not been told that the documents were the subject of copyright and that she had not attempted to cover her tracks. I accept that submission. Counsel submitted that there was no reported case of which he was aware where an award of additional damages had been made against an individual employee who had privately made single, or in one case two, copies of documents. No such case was referred to by counsel for the plaintiff. Counsel for the plaintiff submitted that the case with the closest factual analogy was Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd. However there, the second respondent used the applicant’s artworks on a brochure which he produced for his new employer knowing that he should not be using the artworks or being at least wilfully blind to that fact. It appears that the brochure was produced as part of the employer’s business and distributed to three potential customers (Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd & Anor (No. 2) at [2], [20] and Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2007] FCA 1621 at [143]). (An appeal by the applicant against the alleged inadequacy of the award of additional damages was dismissed by the Full Court of the Federal Court, Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2 at [47]-[53]).

47 In some respects a closer factual analogy is with Woolworths Ltd v Olsen where additional damages under s 115(4) were refused although the defendant’s overall conduct was significantly more egregious than that of the first defendant in the present case. Additional damages were refused because the flagrant wrongs committed by the defendant were in respect of the plaintiff’s contractual and equitable rights, other than its copyright (at [344]-[348]). Einstein J said (at [348]):

“But while any deliberate breach of copyright warrants the Court’s opprobrium, the making of one reproduction of copyright material — from which no benefit was gained and in respect of which no precise intention to further reproduce has been established- cannot by any measure be said to constitute such a contumelious disregard of Woolworths’s copyright rights such as to justify the imposition of punitive damages, whether corresponding to the particular breach in issue or as a means of deterring similar conduct by others. At the risk of repetition, the intractable difficulty for Woolworths is that the greater part of its claim to additional damages is founded on an egregious breach of a right that copyright does not protect.”

48 These words bring to mind the observation of Lockhart J in Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 at 577 that:

“Courts traditionally approach an award of additional damages under s 115(4) cautiously, as they do the award of exemplary damages generally.”

49 Having regard in particular to my finding that the first defendant was not conscious of any wrongdoing, that she did not attempt to cover her tracks, and that she did not derive any benefit from the infringement of the plaintiff’s copyright, I do not consider that interests of deterrence warrant the award of additional damages. I should add that I do not consider that additional damages should be awarded to reflect the fact that a reason no benefit was derived by the first defendant from the infringement was that the plaintiff moved promptly for an injunction. I do not consider that the plaintiff’s submission in that respect gains support from Aristocrat Technologies (Australia) Pty Ltd v DAP Services (Kempsey) Pty Ltd.

50 In final submissions, the plaintiff submitted that “a relatively modest award, in the order of $5,000-$10,000 would be appropriate”. I have concluded that no award of additional damages should be made. I am concerned about the considerable resources that both sides have evidently deployed in this case where the sole remaining substantial issue is a claim for damages of $10,000 or less. The procedures and costs appear to be out of proportion to the amount at stake. However, as Mr Leeming SC and Ms Taylor submitted, one of the purposes of s 115(4) is to provide a general deterrence against copyright infringement and that may be done even though the award sought is modest. I accept that it would not be a correct exercise of discretion under the section to refuse an award of damages because the amount which might responsibly be sought is insignificant compared with the costs likely to be incurred in pursuing the remedy. However, those considerations may be relevant on questions of costs.

51 No submissions were made on costs because I was told that there have been “without prejudice” negotiations which could be relevant.

52 For these reasons there will be an award of nominal damages against the first defendant in the sum of $10. The plaintiff’s claim for additional damages will be dismissed. The parties are agreed on the terms for delivery up of documents. The defendants consented to the orders without admissions. The formal order will not be prefaced in that way. It is sufficient to note that the defendants make no admissions. However, in my view, at least in relation to three of the four documents which have been the subject of dispute at the hearing, the plaintiff would have been entitled to quia timet injunctive relief for breach of contact in the nature of orders for delivery up, had such orders not been consented to.

53 For these reasons I make the following orders.

1. Subject to order 2, within seven days the defendants deliver up to the plaintiff the original and all hard copies of the documents listed in the schedule annexed hereto and marked “A”, and, to the extent that there are any electronic copies of such documents, delete such electronic copies.

2. The defendants and their legal advisers may retain copies of any documents listed in the schedule marked “A” which are exhibits to affidavits or exhibits in the proceedings, until seven days after the expiration of the time limited for the filing of an appeal or application for leave to appeal, and, if any appeal or application for leave to appeal is filed, until seven days after the final determination of any such appeal or application for leave, or any subsequent appeal or application for special leave to appeal: provided that such documents are dealt with in accordance with the undertakings or orders as to confidentiality already given or made in respect of such documents.

3. Judgment for the plaintiff against the first defendant in the sum of $10.

4. Otherwise order that the plaintiff’s claims for relief be dismissed.

54 I will hear the parties on costs.

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LAST UPDATED:
9 March 2009