How much is that copyright in the power generation system

The Full Federal Court has allowed the Commissioner of Taxation’s appeal from Pagone J’s ruling allowing SPI Powernet a deduction for the value of its copyright in the plans, drawings and manuals for its electricity power generation network.[1]

SPI Powernet bought the assets of the Victorian electricity power generation and transmission line system when the Kennett government privatised the State Electricity Commission in 1997. It paid $2.5 billion. The assets included the intellectual property rights which included the copyright in some 100,000 drawings and plans which were critical to the operation and maintenance of the business and various manuals and software.

The purchase price was not apportioned amongst the various assets. Indeed the sale agreement specified that the purchase price was fixed notwithstanding that the components might be shown “collectively to have a different value.”

SPI Powernet sought to apportion the purchase price among the various asset classes and, in the case of the copyright, claimed depreciation in respect of a “unit of industrial property”. The Commissioner assessed the value of the copyright at “nil”. Pagone J allowed SPI Powernet’s appeal, finding that the value of the copyright was in the order of $171 million using the replacement cost methodology.[2]

The Full Court’s decision involves a number of procedural issues as well as substantive questions including the extent to which the Commissioner’s methodology could be challenged and his Honour’s exclusion of the expert’s written reports at first instance.[3]

The Full Court were agreed that the valuation exercise undertaken by the experts was misdirected. The question was what part of the purchase price should be attributed to the copyright, not what was the market value of the copyright. That caused two problems for the SPI Powernet parties.

One problem was the form of the purchase price: by specifying that it was a fixed price regardless of the value of the component assets, it meant that no cost could be attributed to a particular component. If you are drafting a sale agreement and including intellectual property rights in the assets and not apportioning the purchase price, be careful.

The second problem was that SPI Powernet, as the purchaser of all the assets to run a power generation business, would have a licence implied by necessity to use and reproduce the copyright in conjunction with the business. So, Greenwood J said at [185] and [186]:

…. Let it be assumed that SPI PowerNet had not acquired the copyright subsisting in the 105,410 documents. Could it be reasonably inferred in such a case, having regard to the terms of the Agreement under which SPI PowerNet acquired all of the relevant assets necessary to conduct the electricity transmission undertaking, that Power Net Victoria (the Victorian government owned corporation which formerly owned the copyright in the documents), would have been the source of an implied licence in favour of SPI PowerNet to use all of the documents in connection with that undertaking in a way which included exercising any and all rights falling within the rights comprised in the copyright? The answer to that question seems plainly enough yes, in which event any exercise of any of the rights subsisting in the copyright would have occurred with the licence of the owner of the copyright.

Fourth, in those circumstances, it is not necessary to undertake a timebased analysis of the value of work which would have been necessary to recreate the 105,410 documents in a way which could have expressed the information contained in those documents in a noninfringing form. Such a valuation exercise does not aid or inform the statutory task under s 124R(5). I respectfully disagree with the finding of the primary judge at [33] that had the copyright not been acquired, SPI PowerNet would have had to create the field of documents in which copyright subsisted in a way which conveyed the same information but in a noninfringing way to enable the business to function.

and Edmonds J said at [102]:

If an actual acquisition by SPANT of all of SPI PowerNet’s assets as at 19 October 2005 had not included the copyright, there can be no doubt that by reason of the notion of “necessity”, as explained by McHugh and Gummow JJ in [Byrne v Australian Airlines Limited][byrne] (1995) 185 CLR 410 at 450, SPANT would have enjoyed an implied licence to copy and modify the drawings and documents in any event: see Copyright Agency Limited v State of New South Wales [2008] HCA 35; (2008) 233 CLR 279 at 305–306 [92] per Gleeson CJ, Gummow, Heydon, Crennan and Kiefel JJ, and the other cases there cited (also [81], [82] and the cases cited); see too Acohs Pty Ltd v Ucorp Pty Ltd and Anor [2012] FCAFC 16; (2012) 201 FCR 173 at [145].

Commissioner of Taxation v AusNet Transmission Group Pty Ltd [2015] FCAFC 60 (Kenny, Edmonds and Greenwood JJ)


  1. The case before the courts was actually 2 cases: 1 concerning SPI Powernet’s claim for the depreciation; the second by its parent when the parent adopted consolidated group accounts including SPI Powernet.  ?
  2. The valuation experts agreed there were three accepted methods to value the copyright: an income approach, a market value approach and a cost approach. Because there was nothing income generated from exploiting the copyright nor a market for the copyright, SPI Powernet’s experts applied the “replacement cost” method – what it would cost in time and effort to recreate the drawings etc. from scratch. See e.g. Pagone J at [24].  ?
  3. The latter of which led to the Full Court quashing his Honour’s decision on that part of the case and remitting it for reconsideration by Pagone J on the basis at [85] and [101] that the exclusion of the written reports meant it was impossible for the Full Court to evaluate his Honour’s reasons for accepting the views of SPI Powernet’s experts over the Commssioner’s expert on what all parties considered the fundamental issuel  ?

Another copyright in project homes case

Some 5 years after it went hunting, Tamawood[1] has successfully sued Habitare (now with administrators and receivers and managers appointed) for infringing copyright in house plans.

Copyright in some plans was infringed (Torrington v Duplex 1 & Duplex B); but not in others (Conondale / Dunkeld v Duplex 2 & Duplex A).

One point of interest: Habitare commissioned Tamawood to develop plans for 2 new houses for it. These plans were submitted to the Brisbane City Council to obtain development approvals. The relationship with Tamawood broke down, however, and Habitare continued to use the plans. Collier J found that the “usual” (i.e. Beck v Montana)[2] implied licence did not apply here. It did not apply because Tamawood did not get paid the “usual” fee for doing the job: rather, it agreed to prepare the drawings at no cost on the basis that it would build the houses once development approval had been obtained. Once the deal fell through and Habitare decided not to proceed with Tamawood as the builder, therefore, its rights to use the plans terminated.

Continuing with the licensing theme, Mondo (which Habitare eventually used to design the houses in dispute) did infringe copyright by creating the infringing plans Duplex 1 and Duplex B plans. It did not infringe Tamawood’s copyright, however, when it downloaded the Torrington plans from Tamawood’s website. Tamawood made the plans available on its website for the whole world to see and download so Collier J considered Mondo’s purpose in using the downloaded plans to design competing houses was not relevant.[3]

(Mondo did succeed in its cross-claim against Habitare and 2 of its principals for misleading or deceptive conduct: they told Mondo that the copyright issues with Tamawood had been sorted out or resolved.)

A second point of interest is that the builder of Habitare’s infringing houses, Bloomer Constructions, successfully made out the “innocent infringer” defence provided by s 115(3). Cases where this defence has been relied on successfully are as rare as the proverbial hen’s teeth. It seems to have been because the builder became involved very late in the day: it had no knowledge of Tamawood’s involvement in the earlier stages and the plans it was provided with had Mondo’s name or title block.

Finally, a curiosity: the reasoning on authorisation liability manages not to refer to Roadshow v iiNet at all, but refers extensively to University of NSW v Moorhouse. In the event, Habitare apparently conceded it would be liable for authorising the infringements of the others. Two of its principal officers, Mr Peter O’Mara and a David Johnson, managed to escape liability, however. While they were heavily involved in the business, their involvement was mainly on the finance side rather than sales and marketing. Collier J seems to have found that, within Habitare, responsibility for the conduct that infringed had devolved on to 2 other officers, Shane O’Mara – Peter O’Mara’s son – and a Mr Speer. Her Honour also considered that, by engaging Mondo as architects, Peter O’Mara and Johnson took “reasonable steps to prevent or avoid the doing of the infringing act”.[4]

Tamawood Limited v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (No 3) [2013] FCA 410


  1. Yes, it is that Tamawood.  ?
  2. See _e.g. Concrete Constructions_ at [71] – [75] per Kirby and Crennan JJ).  ?
  3. There is no discussion in the judgment of whether Tamawood’s website included a notice purporting to limit the use of the site, for example, to “personal use” or “private and non-commercial use” (whatever either of those may mean) or in any other way.  ?
  4. See s 36(1A)(c). No claim for authorisation or procurement appears to have been pursued against Shane O’Mara or Speer.  ?

Apotex v Sanofi: the (un)implied licence

In addition to finding Sanofi’s patent infringed, the Full Court affirmed Jagot J’s conclusion that Apotex had no implied licence to reproduce the copyright in Sanofi’s product information documents (PID).

Before a (medicinal) drug can be offered for sale in Australia, it must be registered in the Australian Register of Therapeutic Goods by the Therapeutic Goods Administration. One of the requirements for registration is the submission of a PID, describing the drug, what it can be used for and how and providing warnings about potential problems and risks.

Apotex argued that it was industry custom or usage for the suppliers of generic drugs simply to provide PID for their generic drugs in substantially the same terms as the originator’s PID. It provided evidence of many cases where this had happened, including a number of cases in which Sanofi’s generic arm had simply re-used a competitor’s original PID itself. This included:

13 drugs of which Sanofi-Aventis was the innovator and 22 generic versions of the same drug,
the top 10 drugs by value on the PBS and 62 generic versions of the same drug,
some eight drugs of which companies other than Sanofi-Aventis were the innovators and generic versions of those drugs of which Sanofi-Aventis was the issuer.

The TGA did not require PID submitted by generics to be in the same terms as the originator’s PID. If a generic’s PID was different in substance or terms, however, the TGA may require the generic to submit additional safety or efficacy data to support registration of its own formulation.

On the last day of trial, Sanofi was also allowed to introduce evidence showing that some generics did in fact prepare and register their own PIDs rather than just copy the originator’s PID.

In this state of affairs, the Full Court unanimously upheld Jagot J’s conclusion that the evidence of an implied licence was at best equivocal and so rejected the implication. (Keane CJ [80]-[81], Bennett and Nicholas JJ [98]-[208])

It is difficult to resist the impression that, if instead of being sober judges their Honours (at least Bennett and Nicholas JJ) were teenagers, the suggestion that a licence could be implied between parties who were not in any type of contractual or consensual relationship would have been met with:

rofl.

As to the public interest, Parliament was forced to intervene (at the legislative equivalent of the speed of light) and create yet another specific defence and, in due course, Jagot J found that Apotex could rely on it as a defence (for acts done after the amendment came into force).

So far, 2012 is not proving an easy year for those trying to claim they have an implied licence to protect themselves from infringement allegations.

Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 2) [2012] FCAFC 102

Acohs v Ucorp or the limits of implied licences

The Full Federal Court (Jacobson, Nicholas and Yates JJ) has largely upheld Jessup J’s ruling, but with a noteworthy limitation on the scope of implied licences.

Acohs and Ucorp both provide in competition with each other Material Safety Data Sheets (MSDSs) which are required by law to identify the properties, uses and hazards of dangerous chemicals.

At first instance, Jessup J found Acohs owned copyright in the MSDSs which had been written by its employees, but not by employees of third parties. His Honour also held that copyright did not subsist in the HTML source code of the MSDSs in its collection: the employees who prepared the software to generate the source code were not collaborating with those who subsequently entered the data in the sense necessary to constitute a work of joint authorship.

The Full Court has upheld these conclusions.

Jessup J also held that Ucorp could claim the benefit of an implied licence which permitted it to reproduce the MSDSs in which Acohs held copyright.

Acohs did not challenge the existence of an implied licence on appeal (after all, it has the benefit of a similar implied licence arising from the earlier litigation against Bashford). There was, however, an important difference in this case.

Ucorp copied several thousand MSDSs each week. At least some of these were made in response to requests from customers who had the benefit of an implied licence from Acohs. The copies made by Ucorp in response to such requests were protected by the implied licence.

However, Ucorp also “trawled” the internet looking for any other MSDSs and, when it found ones it did not already have stored, it downloaded them so as to have them available if a customer came along with a request for one. As these were not made in response to a request, but rather in anticipation of a request (which might never be made), they fell outside the scope of the implied licence. The Full Court reasoned that the licence that would be implied could be the bare minimum necessary and it was only necessary that a licence be implied in favour of customers who placed a request with Ucorp for a copy. The “trawling” could not be sanctioned.

Thus, Ucorp will be found liable for infringing the copyright in all those MSDSs which it reproduced without a specific request from a customer before the copy was made.

Two additional points:

First, Bennett J has adopted a similarly strict approach to the scope of the “interoperability” defence for infringement of copyright in computer programs. ISI made software that enabled users of CA’s Datacom database system to convert to IBM’s DB2 system. Section 47D protects reproductions made (for the relevant interoperability purpose) by the owner or licensee of copyright in a computer program or someone acting on their behalf. Bennett J found that ISI was not acting “on behalf” of such licensees when it made reproductions of “macros” used in the Datacom system for its commercial 2BDDB2 program as they were not made in response to specific requests from customers before the reproduction was made: CA Inc v ISI (starts around [334]).

Secondly, the Full Court does not appear to have been too happy with the licence Merkel J implied in the original Acohs v RA Bashford litigation at [108]:

The apparent acceptance by the parties of the correctness of Bashford has important ramifications for this appeal. As the parties conducted both the trial before the primary judge and the present appeal on that basis, the occasion does not arise for us to proceed otherwise than in accordance with, and to the extent of, that acceptance. In so proceeding, we do not wish to be taken as endorsing the correctness of all aspects of that decision.

Perhaps, the new reference to the ALRC cannot come soon enough.

Acohs Pty Ltd v Ucorp Pty Ltd [2012] FCAFC 16