licence

Is there a copyright work and who owns it?

Rees J, sitting in the NSW Supreme Court, had to grapple with some unusual, but basic, issues in finding that Metstech owned copyright in a range of works made by a Mr Chou. However, it did not own copyright in software made by Mr Martin; instead having an exclusive licence over that copyright including the right to access and modify the source code.

Some background[1]

Metstech designs and distributes telecommunications systems for underground mines. (The specific technology was a ‘leaky feeder system’ which allowed two way radios and mobile phones to communicate over long distances underground where ordinarily such radio communications were not possible.[2])

Image of an axial cable layout with a headend controller at one end, bidirectional amplifiers at various intervals and and a splitter adding a branch line
Leaky Feeder System

Metstech was formed by four individuals including Jefferson, Park and Chou. They or their family companies were the shareholders. Jefferson was the CEO and Park the General Manager. Park and Chou had experience in electrical engineering and had ideas about how a new and improved system to replace the poorly functioning existing systems. Jefferson provided the funding, to the tune of $700,000 over time.

In addition to being a founding director, Chou became an employee and was paid a salary after a short initial period when Metstech did not have funds. Part of Chou’s job included placing orders for the manufacture of Metstech’s products which he arranged through a family company and his company was permitted to charge a marked-up price to Metstech over the price charged by the manufacturer.

Although Martin was offered initial shares in Metstech and an employment contract, he did not take up either offer due to legal issues he was experiencing at the time. Nonetheless. in 2018, Martin designed the Raspberry Pi Software controlling the Metstech system. He was not paid for this work. He provided it to Jefferson including access to the source code for use by Metstech including permission to modify it.

Later, in 2019, Martin did become an employee of Metstech and made some further modifications of the Raspberry Pi Software at that time.

In addition to the funding provided by Jefferson, another company, Challenger, eventually contributed a further $750,000 towards funding the product development in return for the promise of a 20% shareholding and a nominee on the board of directors.

The development of Metstech’s products proceeded well and substantial orders were coming in. Jefferson came into dispute with the other directors over repayment of his funding and their demands for increased salaries. Challenger also became frustrated with the delays in issuing its shares.

Park, Chou and some associates “staged a coup” and replaced Jefferson as CEO excluding him from access to the company’s bank accounts. To fend off Jefferson and Challenger, they also engaged in a number of schemes to transfer Metstech’s assets and related IP to a “phoenix” company. In addition, in the process of decamping they deleted from the Metstech Google Drive accounts all the data and documents relating to PCB assemblies, source code, concept designs, PCB schematics and PCB layouts, firmware source code, manufacturing files, bills of materials and test results.

After Jefferson and Challenger got wind of some of the conduct, they initiated a deed of company arrangement and, after regaining control of Metstech, brought these proceedings seeking orders relating to its ownership of the copyright, remedies for breaches of obligations of confidence and tortious conspiracy to injure the plaintiffs by unlawful means.

The plaintiffs largely succeeded on their copyright claims and breach of confidence. The claims for tortious conspiracy to injure by unlawful means failed however.

Copyright in the Metstech “products”

The plaintiffs claimed copyright in various designs for printed circuit board (PCB) assemblies as artistic works[3] and, as either original literary or artistic works, PCB schematics, manufacturing documentation – source code, concept designs, PCB schematics and PCB layouts, firmware source code, manufacturing files, bills of materials and test results – and Metstech “firmware” which was installed in micro-processor units in various components.

A graphical representation of a circuit board layout on the left and on the right a photograph of printed circuit board showing various electrical components interconnected by metal strips

(A graphical representation of a PCB layout (on the left) and the corresponding PCB (on the right))

The plaintiffs also claimed ownership of the copyright in the Raspberry Pi software and later revisions.

Were there copyright works

It will be recalled that the defendants had deleted all the data and documents from their Google Drive accounts when decamping and, it appears, none of them produced anything by way of discovery or otherwise in evidence. According to the defendants, or at least Park and Chou, they did not have any documents because the products had been designed by the third party manufacturer.

The first problem confronting the plaintiffs, therefore, was that they did not have copies of the works over which they claimed ownership. Who was the designer, and hence the author of the works, was the second problem.

Rees J was prepared to infer (at [591] to [603]) that there had been original works made by Chou in which copyright subsisted:

  • Metstech led expert evidence about the process and steps involved in designing and manufacturing products such as the PCB Assemblies including the need to document things such as functional specification, electrical schematic, PCB layout and manufacturing files, firmware code listing and compiled version of the firmware code (if applicable), bill of materials, assembly and testing instructions, troubleshooting guide, service manual, packaging information, data sheets and sales brochures. Much of this documentation would be required by the manufacturer to make such complex products
  • the design and specification of such PCB assemblies also required the use of specialised computer software such as Altium Designer and RhinoCAD. Metstech had bought or reimbursed Chou for purchases of this software and Chou was at all times anxious to ensure he had properly licensed copies of this software
  • Metstech bought or reimbursed Chou for the tools and equipment that would be used in developing and constructing models and prototypes.

Accordingly, at [603] Rees J held:

…. The disputed works must have been created and insofar as they are original literary or artistic works (or both) and that to the extent that they still exist, the employer owns them. ….

I am not sure about her Honour’s limitation “to the extent that they still exist”. Under the Act, the requirement is that the work be made in the sense of reduced to writing or some other material form.[4] The continued existence of the documents, however, would be relevant to orders for delivery up and provision of access.

Who was the author

As noted above, Park and Chou claimed that the PCB assemblies and other products were designed by the manufacturer and so, in the absence of any agreement to the contrary or assignment, any copyright belonged to the manufacturer.

Rees J rejected this claim. A number of factors led her Honour to this conclusion including:

  • Metstech’s products were original and not mere copies of existing products: [585]
  • Chou had the necessary skills to design the products: [583]
  • it was Chou who came up with the idea for the various products: [584]
  • there was voluminous correspondence describing Chou as the designer or in which he claimed to be the designer or attending to the design: [571] – [586]
  • Chou also spent hours explaining the intricacies of the system and the products to others: [586]
  • the purchase of the specialised software and the provision of the tools and equipment such as Altium Designer and RhinoCAD
  • Park and Chou first claimed that the manufacturer was the designer only when Metstech first went into administration. Prior to that, the voluminous contemporaneous correspondence such as emails repeatedly referred to Chou as the designer
  • not a single document was produced identifying the manufacturer as the designer.

Who was the owner

Rees J noted that it was not sufficient for Metstech to establish that Chou was the author and an employee. As the terms of s 35(6) make clear, Metstech also had to establish that Chou made the works in pursuance of his employment and not in the course of some extracurricular activities; at [564] adopting the question posed by Moore J in EdSonic v Cassidy:

did the employee make the work because the contract of employment expressly or impliedly required or least authorised the work to be made.

The volume of material referred to by her Honour in concluding that Chou was the designer left Rees J at [587] in “no doubt” that the answer to that question was “yes”.

There was one qualification to this conclusion at [588] – the work designing a splitter which Chou had done before he became a full-time employee being paid. While Chou was a director, Rees J doubted he qualified as an employee for the purposes of s 35(6) at that time.

However, Rees J held Chou was estopped from denying that Metstech was licensed to use these materials having regard to the circumstances in which he made the design and continued to develop the design for Metstech’s use after he became an employee.

A final issue insofar as the works made by Chou are concerned was whether Metstech or Metstech IP Pty Ltd (one of the defendants) owned the copyright.

In a not uncommon arrangement, the directors of Metstech, including Jefferson, Park and Chou, had set up Metstech IP to hold the intellectual property. The directors and shareholders of both companies were the same. Metstech IP had applied for R & D grants in respect of the development of the Metstech technology and, in the books of the companies, Metstech charged Metstech IP a fee for the development work. While that fee was not paid, Metstech IP had remitted tax rebates to Metstech.

While Metstech IP had been set up to hold the intellectual property, however, there was no formal assignment of intellectual property rights in writing from Metstech to Metstech IP. As Chou had made the works as an employee of Metstech (and not Metstech IP) and in the absence of a signed, written assignment in conformity with s 196(3), Rees J held at [606] that Metstech was the owner of the copyright.

Copyright in the computer software made by Martin

The Raspberry Pi Software was a different case. When Martin wrote it, he was not an employee and had chosen not to become a director or shareholder. Nor was he paid for his work although he believed (at [106]) that “one day I might be compensated by the company if and when it was successful.”

When pressed by Jefferson, Martin transferred a copy of the source code and other documentation into a Metstech account and agreed that Metstech could amend the software as required.

Although Martin had not been engaged for reward to write the software, Rees J found ([231] – [233]) the circumstances gave rise to an implied unlimited and exclusive licence in Metstech’s favour which included the right to alter the software as need. (See also [161 and [623]])

Later, in July 2019, Martin was allotted 5% of the shares in both Metstech and Metstech IP. Jefferson and Park both considered this allocation was to secure the intellectual property in the software. Martin denied this.

As there was no written agreement formally recording the assignment, Rees J considered at [320] that s 196 precluded an assignment under the Act. Rees J also rejected at [324] Metstech’s argument that Martin understood the shares were in compensation for the transfer of ownership in the software. Her Honour appears to have considered the allotment was consistent, or at least equally consistent, with a payment to secure Martin’s continued involvement in the business.

Martin did become a full-time employee of Metstech and, in the course of his employment, he later made some further modifications to the software.

Distinguishing J R Consulting, Rees J held that the computer programs in this amended form were not new copyright works in which copyright subsisted. Martin’s evidence was that the changes were only “bug-fixes and minor enhancements”. Although the change logs showed 21 changes were made to the software in the relevant period, Metstech did not satisfy her Honour that they were more than trivial. At [620], her Honour explained:

The plaintiffs submitted that the changes made by Mr Martin were more than trivial, I am in no position to say one way or the other. I note that 21 changes were made from July 2019 to July 2020. Beyond that, I do not know. I am not satisfied that the changes made to the software after Mr Martin commenced his employment with Metstech were “original” in the requisite sense such that copyright in new versions of the software are a new work in which copyright subsists and is held by his employer, Metstech.

Thus, Metstech was left with its exclusive licence. However, this was enough for her Honour to direct that Martin continue to provide Metstech with access to the source code under the exclusive licence.

Confidential information and Conspiracy to injure

Rees J found misuse of Metstech’s confidential information on conventional grounds.

The plaintiffs alleged that the defendants (other than Metstech IP) had engaged in a tortious conspiracy to injure the plaintiffs and Metstech IP by unlawful means.

Rees J dismissed this claim, however, not as a result of any exoneration of the defendants’ conduct. Rather, damages are the gist of the action. Thus it is necessary for the plaintiff to plead that it has or will suffer pecuniary loss as a result of the conspiracy.

While the alleged conspiracy was pleaded at length, damages were neither alleged nor particularised. Nor did the plaintiffs’ evidence establish any pecuniary loss. Accordingly, at [659] her Honour dismissed the claim.

Her Honour’s decision serves as a useful warning about the risks of not documenting transfers of intellectual property in writing. That is not necessary in the case of an employee if you can prove they did the work in the course of their employment. The decision also provides a range of indications to consider if it becomes necessary to try to prove the existence and authorship of copyright works in the absence of documentary evidence.

Metstech Pty Ltd v Park [2022] NSWSC 1667


  1. As her Honour’s narration of the facts is some 550 paragraphs, this is necessarily a very “potted” outline.  ?
  2. The system consisted of long lengths of coaxial cable (serving as the antenna) strung along the shafts, with a headend controller (a Raspberry Pi computer), a number of bi-directional amplifiers (BDAs) and splitters, the BDAs (at least) including printed circuit boards (PCBs) custom-designed for the system).  ?
  3. At [551], her Honour identified the claim as being to PCB assemblies as artistic works and, at [558], her Honour noted that text and numerals on the a PCB, in engineering drawings and installation instructions could be both artistic works and, “to the extent the figures are deployed”, literary works citing Lumen Australia Pty Ltd v Frontline Australasia Pty Ltd [2018] FCA 1807; (2018) 137 IPR 189 at [206]-[209] (per Moshinsky J); Anacon Corp Ltd v Environmental Research Technology Ltd [1994] FSR 659 (per Jacobs J) (circuit diagram). The parties do not appear to have raised issues about the exclusion of circuit layouts from the definition of artistic work in s 10 of the Copyright Act 1968 or of “corresponding designs” under s 74 and the copyright / design overlap provisions of the Copyright Act or of the effect, if any, of the exclusion by Designs Act 2003 s 43 (but not in reg. 4.06) from registration of integrated circuits as a design although, from the description of the PCB assemblies in the judgment, it would appear they did not constitute “integrated circuits” on the reasoning of Moshinsky J in Lumen Australia Pty Ltd v Frontline Australasia at [298] – [311] and of course, as Moshinsky J found, the copyright / design overlap provisions do not apply to literary works.  ?
  4. Copyright Act 1968 s 32 and s 22(1)  ?

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Do you have to pay for a software licence when you buy the business

It’s not an uncommon scenario: the client has bought a business, but some mission critical software is outdated and the licence is not transferable except on payment of a fee. What do you do: Pay the fee or “save” the money and keep using? Thawley J found that the licensor’s consent to some time to evaluate options meant Shepparton Partners (SPC) had an implied licence but thereafter infringed. Injunctions and $1,162,428.80 damages flowed.

I am guessing pretty much everyone in Australia at some point or another has experienced SPC’s canned fruit, vegetables or maybe fruit juices.

Some facts

To run its business, SPC Ardmona (SaleCo) used QAD’s enterprise resource planning ERP software. It used the ERP software for everything: for sales orders and inventory management, procurement, manufacturing planning and control, service and support project management, distribution and finance. SaleCo had a perpetual licence, but it was not transferable. SaleCo also paid an annual maintenance fee, which was paid up to 31 July 2019.

The version SaleCo used was the 2008 version. In 2018, however, QAD had approached SaleCo with a proposal to upgrade to the new, current 2017 version. SaleCo’s IT personnel agreed with the proposal but the price was sufficiently high that agreement required sign-off by SaleCo’s ultimate owner – Coca-Cola Amatil.

Coca-Cola Amatil had decided to sell the SPC business and didn’t want to spend that money. The sale eventually went through in June 2019 to SPC. Before the purchase went through, QAD had written to SaleCo and SPC stating it would consent to the transfer of the licence provided 3 conditions were met:

  1. Payment of a transfer fee of $424,392 and a maintenance fee for the next year of $177,816;
  2. Execution of an appropriate transfer agreement and a new licence agreement
  3. Satisfaction of conditions 1 and 2 before 30 June 2019, otherwise the offer was automatically withdrawn.

There was also a quote to upgrade to the new, current cloud-based version of $755,000 per annum (although the amount seems to have been negotiable).

SPC, however, considered the QAD 2008 version was not “fit for purpose” although not “useless” and persuaded QAD it needed more time to consider its options. By letter dated 27 June 2019, QAD extended the time for acceptance initially to 31 July. There were further meetings, discussions and email so that ultimately the time for acceptance was extended until November 2019.

In November 2019, QAD suspected that SPC was likely to go with a different vendor. It wrote to SPC pointing out it had had 5 months to make a decision and decision was required. SPC wrote back saying that responsibility for paying the transfer/licence fee was the responsibility of Coca-Cola Amatil or SaleCo.

SPC continued to use the QAD 2008 software until 28 September 2020 when it implemented Microsoft Dynamic 365 as its ERP software.

Even after 28 September 2020, however, SPC continued to use the QAD 2008 software for “non-production purposes” such as extracting historical information for quality control or financial reasons. Amongst other things:

  • before the changeover to Microsoft, SPC used the software in “day to day” use;[1]
  • SPC made modified or customised copies of the QAD 2008 software including “test and development reproductions”;
  • after the changeover to Microsoft, it made an ‘historical copy’ of the QAD 2008 software on a different server;
  • it also made “back-up” copies on its servers.

It appears that SPC expected it would need to keep using the QAD 2008 software for “non-production purposes” for another seven years.

An implied licence

Thawley J held (one would think largely uncontroversially) that the various ways SPC continued to use the QAD 2008 software involved reproductions of the whole or substantial parts of the software.

However, in the period from 27 June 2019 to SPC’s November letter,[2] SPC had an implied licence to use the software so use in that period was not infringing. The implied licence arose from the 27 June 2019 letter and the course of conduct between the parties until November.

Infringement and damages

Use after that period was not licensed and therefore infringed.

Thawley J awarded QAD $662,428.80 in compensatory damages and an additional $500,000 by way of additional damages.

The $662,428.80 amount was the transfer fee plus a maintenance fee for one year plus GST. Given the compensatory nature of damages under s 115(2), that was the loss QAD suffered.

Additional damages were appropriate as SPC at all times knew it needed QAD’s consent to the transfer of the licence and that it was its responsibility to obtain that consent. Consequently, its infringement was flagrant. Also there was a need for deterrence.

Cross-claim against the vendors

SPC did run a cross-claim against Coca-Cola Amatil and SaleCo arguing that they had breached the business purchase agreement by failing to pay QAD the transfer and licence fees.

These claims were said to arise essentially from the vendors’ obligations to use “best endeavours” to obtain a transfer of the licence and do whatever they lawfully could, including rendering all reasonable assistance, to permit SPC to have the benefit of the licence of the QAD 2008 software. There were also obligations on SaleCo to hold its rights in the assets of the business on trust for SPC.

The wording of the business purchase agreement was perhaps not as clear as it could be: it did make specific provision that the vendors did not have an obligation to pay fees and charges for certain key assets.

In the result, however, Thawley J concluded there had been no breach of their obligations by the vendors. At all times, the managing director of SPC knew that payment of the transfer and maintenance fees would be SPC’s responsibility. A key indicator of this had been the fact that all negotiations with QAD were undertaken throughout the enitre period by SPC. Coca-Cola Amatil and SaleCo were never involved.

If you are a software vendor in this sort of situation, you may need to be careful about the terms you let the new owner evaluate your software. In the end, it wasn’t a financial problem for QAD because it only intended to charge a one-off fee. If the fee had been time based, say annual, it could have lost out. Purchasers and vendors also need to be clear about whose responsibility it is to pay the fees. Even if it were the vendor’s responsibility, the purchaser in SPC’s position was the one directly liable for infringement. An indemnity, or claim for breach of contract, would not be much help if the vendor has disappeared or distributed its assets after completion.

QAD Inc v Shepparton Partners Collective Operations Pty Ltd [2021] FCA 615 (Thawley J)


  1. Day to day use involved users connecting to the software using a user name and password. The QAD 2008 object code on SPC’s application software was then loaded into the server’s RAM and the code stayed in RAM until the server was shut down or (more likely) the user logged off: [79]  ?
  2. Or possibly 10 December 2019 when QAD formally notified SPC the licence was terminated.  ?

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Love was not in the air – Part 2

In a previous post, we looked at why Perram J held that Glass Candy’s “Warm in the Winter” and Air France’s “France is in the Air” reproduced a substantial part of the musical work in Love is in the Air, but not the literary work comprising the lyrics.

A further set of issues his Honour had to untangle was which acts involving the streaming and downloading of Warm or France infringed and who owned those rights.

You will recall that Glass Candy are an American electronic duo based in America who, in 2011, released “Warm in the Winter”. Glass Candy wrote and recorded “Warm in the Winter” in the USA. They made it available for streaming and download on, first, the Big Cartel website and then the IDIB website.[1] They or their rights management agent, Kobalt, also made the recording available through iTunes / Apple Music, Google Play, Youtube, Spotify etc.

Subsequently, Glass Candy provided a version of “Warm in the Winter” to Air France for use by the latter in its Air France: France is in the Air promotional campaign. Until this litigation started, Air France used “France is in the Air” in TVCs and radio advertisements in 114 countries (but not Australia), posted the advertisments on its Youtube channel (which could be downloaded from Australia) and, if you rang up its office from Australia and all its customer service operators were tied up, for its “music on hold” service.

Infringement, or not

Having found that Warm and France reproduced a substantial part of Love, Perram J turned to determing which conduct engaged in by Glass Candy, Kobalt and Air France actually infringed any copyright in Australia and who owned those rights.

In summary, Perram J held that:

(1) the streaming and downloading of Warm from the Big Cartel and IDIB websites infringed the copyright in Love;

(2) the streaming and downloading of Warm from the streaming services iTunes/Apple Music, Google, Play, Spotify and Youtube did not infringe copyright as it was licensed; and

(3) the playing of France to Australians via Air France’s music on hold service did infringe, but the streaming and downloading via Youtube did not.

The infringing acts

The streaming of Warm to Australia and its downloading by subscribers in Australia entailed a number of acts:[2]

(1) the making and recording of Warm;

(2) the uploading of a copy of Warm on to the servers of each streaming service;

(3) the making available of that copy to be accessed by end-users in Australia;

(4) the streaming of the recording to someone located in Australia; and

(5) in the case of downloads, the downloading of a copy of Warm on to the end user’s computer (or smart device) in Australia.

Making and recording – the reproduction right

The making and recording of Warm and France did reproduce a substantial part of Love but, having taken place in the USA (or the USA and France), were not infringements of the copyright in Australia.[3]

There does not appear to have been evidence about where the servers of the streaming services such as iTunes / Apple Music, Google Play, Spotify or Youtube were located, but Perram J was not prepared to assume they were in Australia. So loading the copy on to the streaming service’s server was not an infringing activity either.

Making the recording available to be accessed – the communication right[4]

Although storing the copies on the streaming services’ servers was not a reproduction implicating Australian copyright, Perram J considered that Glass Candy’s acts of communicating the copies of Warm to the streaming services (uploading them) could infringe copyright in Australia and the acts of streaming and downloading in Australia would be damage suffered by the copyright owner in Australia. At [376], his Honour said:

…. That act of infringement seems to me to occur by communicating Warm to iTunes (and if it had been proven the other online music services). That was the infringement. Each time thereafter that the streaming service raised revenue by streaming or downloading Warm that was evidence of the damage suffered by the Applicants or the profits made by Glass Candy. Viewed that way, whether the streaming and downloading of Warm from the online music services is a contravention is irrelevant.

From the context, however, it appears that that act of communicating the copy to the streaming service(s) was not an infringement alleged against Glass Candy. I am not sure how that “infringement” would work, however, given his Honour’s further findings.

The alleged infringements the subject of the proceeding

That left as infringing acts being pursued by the Applicants:

(1) the streaming of Warm to Australians from the Big Cartel and IDIB websites – an exercise of the communication right;

(2) the making of the copies of Warm by users in Australia from the Big Cartel and IDIB websites – an exercise of the reproduction right; and

(3) the streaming of Warm to Australians from the streaming services – also an exercise of the communication right;

(4) the making of the copies of Warm by users in Australia from the streaming services – (at [276]) an exercise of both the communication right (by the streamng service) and the reproduction right (by the end-user); and

(5) in the case of France, the playing of “music on hold” to callers from Australia.

These allegations gave rise two problems: (a) who was the owner of the relevant right and (b) what licences of these copyrights had been granted. The issues that arose are a good illustration of the kind of tracing the chain of title fun the long term of copyright requires you to engage in to make sure you have identified the right person as the copyright owner.

In summary, Perram J found that Boomerang had no standing to sue anyone for infringing the communication right as it was not the owner of the relevant copyright; APRA was. Boomerang was the owner of the copyright in respect of the reproduction right, but its interest was partial or concurrent with AMCOS’ interest as the exclusive licensee of that right.

However, the streaming and downloading from the streaming services, iTunes / Apple Music, Youtube, Google Play and Spotify did not not infringe as those services held licences from APRA and AMCOS for those acts.

The copyright and ownership – a chain of title history

Harry Vanda and the late George Young – the Easybeats, Flash in the Pan – composed Love is in the Air in 1977.

In 1978, they assigned all their copyright in the literary and musical works comprised in Love to Alberts.

Subsequently, in 2016, when Alberts sold its business to BMG, it excluded from the sale the back catalogue of songs written by Vanda, Young and a third member of the Easybeats, Stevie Wright. Alberts instead assigned these rights to Boomerang – a new company owned by members of the Albert family.

However, in 1972 Vanda and Young had become members of the Australasian Performing Right Society (APRA), the collecting society for public performance rights and, as it was before the introduction of the broadly based communication right[5] by the Copyright Amendment (Digital Agenda) Act 2000, the cable diffusion right.

When Vanda and George Young became members of APRA, like everyone else who becomes a member, they assigned to APRA the exclusive rights:

(a) to perform in public; and

(b) to transmit via a diffusion service,

in all of their existing copyrights and any copyright works made in the future while still a member of APRA.[6]

So, the rights in Love is in the Air assigned by Vanda and Young to Alberts did not include the public performance or diffusion rights, as they had already been assigned to APRA.

An interesting point to note here is that the assignment to APRA in 1972 was not an assignment of the broad communication right, as there was no such right under Australian law at that time. Further, the repeal of the diffusion right and its replacement with the broad communication right did not affect that earlier assignment. The earlier assignment did not catch, however, the broader rights encompassed in the communication right, apart from the diffusion service, when the broader right came into force as the terms of the assignment were limited just to the diffusion right.

After the assignments from Vanda and Young, Alberts had also entered into agreements which affected the rights of reproduction and communication.

In 1986, Alberts had entered into a licence with AMCOS granting AMCOS the exclusive rights to authorise the making of records from the Alberts catalogue, including Love. Over time this was amended so as to include the making of digital records. The exclusive licence included the right to authorise the making of reproductions for the purposes of broadcasting in Australia. There were, however, three exclusions from these exclusive rights: they did not extend to making reproductions for inclusion in advertisements, or cinematographic films for the purpose of being broadcast in Australia. They also did not extend to licensing a number of named record companies.

In 1992 and again in 2005, Alberts had also entered into assignments with APRA. The 2005 assignment included an assignment of the right of communication to the public (introduced by the Digital Agenda Act in 2001).

Finally in 2016, after the assignment from Alberts of its copyright in Vanda, Young and Wright works, Boomerang also granted an exclusive licence over its copyright to AMCOS and assigned its public performance and communication rights to APRA.

At [299], Perram J found Boomerang and AMCOS had mutually abandoned the earlier licence granted by Alberts and replaced it with the 2016 licence.[7] The 2016 licence granted AMCOS exclusive rights to authorise reproduction of Love to make records, for digital downloading and communication to the public. AMCOS was not licensed to authorise use of Love in advertisements or synchronisation into a film.

A summary

So, at [326] and [342] Boomerang had no standing to sue Glass Candy or Air France in respect of any streaming or the playing of ‘music-on-hold’ as APRA was the owner of the relevant rights.

Boomerang was the owner of the reproduction right (at [334] – [335], [342]), but its interest was concurrent with AMCOS as the exclusive licensee under s 119 and s 120. AMCOS of course also had concurrent rights under those sections.

Which acts of streaming / downloading infringed?

The straightforward case on infringement was the streaming and downloading from the Big Cartel and IDIB websites. The position of iTunes / Apple Music, Google Play, Spotify, Youtube was complicated by licences those entities had from APRA and AMCOS.

iTunes / Apple Music, Spotify et al.

The evidence showed that sales of Warm through Apple’s services amount to $85.41 (although some of these were probably to the Applicants’ solicitors).

Perram J held that the streaming and downloading of Warm from these services did not infringe as they held licences from APRA and AMCOS which permitted these acts.

In January 2010, Apple Pty Ltd had entered into a licence agreement with APRA and AMCOS. By cl. 9.1, the licence was a non-exclusive licence to:

(a) reproduce AMCOS Works;

(b) authorise the reproduction of AMCOS Works;

(c) communicate in the Territory the APRA Works (including authorising their electronic transmission from Your Digital Music Service to Your customers);

(d) authorise Your Affiliates to communicate the APRA Works to customers in the Territory as necessary in the course of providing the Digital Music Service,

in the form of Downloads (whether by You, or Your customers in the Territory, onto storage devices) for the purpose of Sale or to complete a Sale, including in the form of Clips provided at no charge for the sole purpose of demonstrating the Clip to customers and potential customers of Your Digital Music Service …

Love was included in the APRA and AMCOS Works.

Perram J held that the rights to reproduce and communicate to the public included the rights, not just to reproduce or communicate the whole of Love, but also a substantial part of it through the operation of Copyright Act 1968 s 14. As Warm and France reproduced a substantial part of Love, they were covered by the licences. At [352], his Honour explained:

Because Love is in the AMCOS and APRA catalogues it follows that since 2010 Apple has been fully licensed to provide digital streaming and downloading of Love. And because the doing of an act in relation to a work is taken by s 14 of the Copyright Act to include a reference to the doing of that act in relation to a substantial part of the work, it also follows that Apple has at all material times been licensed by APRA and AMCOS to make available for streaming or digital download a substantial part of Love. Of course, the Applicants’ principal contention in this case is that making Warm available for streaming or digital downloading involves the communication or reproduction of a substantial part of Love. However, it would appear that iTunes is lawfully entitled to make Warm available for streaming or downloading even if it does involve a communication or reproduction of a substantial part of Love. Consequently, the Applicants can have no possible case against Apple for making available Warm for streaming or downloading from iTunes.

Similar conclusions followed in respect of the other streaming services which also had licences with APRA and AMCOS.

As Apple did not infringe by streaming or authorising the downloading of Warm, so also Glass Candy could not be liable for authorising the (non-)infringement.

There was an additional wrinkle on this part of the case. Kobalt admitted there had been streaming from Google Play, Spotify and Youtube, but Glass Candy did not. Perram J considered the evidence did not actually establish there had been streaming or downloading from these services so, if the licences did not cover these activities, Kobalt alone would have been liable by reason of its admissions.

The Big Cartel and IDIB websites

The evidence showed that Warm had been downloaded 12 times for $11.50 in revenue from Big Cartel and only once from IDIB. There were also payments to Kobalt Australia of $266.60 from AMCOS and $366.43 from APRA. Warm was still being advertised for sale for $1 from the IDIB website.

The position of downloads from the websites Big Cartel and IDIB was straightforward. The evidence showed Padgett uploaded Warm or caused it to be uploaded and Ida No received payments from time to time from the sites. Therefore, at [348] they were liable for authorising the communications to the public and downloading from those websites.

The position of streaming was more complicated. Padgett and Ida No had licensed their distribution / streaming rights to BMI in 2010. APRA’s own records recorded BMI as the owner of copyright in Warm for the public performance and communication rights. IDIB had also licensed streaming rights in relation to its website to Kobalt US. At [390], this meant that the person liable for authorising the streaming from the idib website was either BMI or Kobalt US, neither of which was a party. The receipt of royalties by Kobalt Australia from APRA was not sufficient to find it liable for authorising the streaming.

I am not sure why, if Padgett and Ida No had licensed their rights to BMI or Kobalt USA, they were nonetheless not liable for authorising infringing conduct by those entities or authorised by them.

Air France

The case against Air France for streaming promotional videos from Youtube failed because of Youtube’s licence from APRA for the reasons Apple’s licences protected streaming and downloading. There was still liability for the music-on-hold, however, as Air France did not hold a licence from APRA.

Remedies

Glass Candy contended that any damages would be de minimis and so relief should be withheld.

At [432] Perram J rejected this argument. First, his Honour found that the copying of Love had been deliberate so the infringements were flagrant. That meant additional damages may well be awarded. In addition, his Honour anticipated that the compensatory damages award might not be so modest:

Further, whilst it is tempting to think that the damages might be limited by the apparently modest infringements I have found, the Respondents (other than Kobalt) will no doubt have to deal with a contention by the Applicants that their damages should be assessed on a foregone licence basis. Without wishing to lend colour to that contention, damages on that basis may not be so modest.

[Boomerang Investments Pty Ltd v Padgett (Liability)][2020] FCA 535[8]


  1. Italians Do It Better – a record label jointly owned by Padgett (aka Johhny Jewel) and a DJ, Mike Simonetti.  ?
  2. Similar analysis applies to the uses of France by Air France which, additionally involved the transmission of France via a diffusion service to callers on hold.  ?
  3. As noted in my previous post, Perram J may have been interested in exploring whether or not an Australian court could hear and determine questions of infringement under US law.  ?
  4. Copyright Act 1968 s 31(1)(a)(iv): the exclusive right to communicate the work to the public.  ?
  5. Copyright Act 1968 s 31(1)(a)(iv): the exclusive right to communicate the work to the public.  ?
  6. Of course, that would not apply to copyright which had been assigned to someone else before becoming a member of APRA.  ?
  7. As Alberts successor in title, Boomerang was bound by the terms of the 1986 licence granted to AMCOS: Copyright Act 1968 s 196(4).  ?
  8. The applicants’ subsequent attempt to have the Reasons revised or to re-open their case was given short shrift.  ?

Love was not in the air – Part 2 Read More »

Cartel conduct and IP licences and assignments

Will your assignments and licences of intellectual property, such as in a typical franchise agreement, expose your client to liability for cartel conduct or will you be ready to apply for an authorisation?

One of the bills pending before Parliament contains the long pursued (by the ACCC) repeal of s 51(3) of the Competition and Consumer Act 2010.

Section 51(3) exempts from most of the prohibitions in Pt IV of the Competition and Consumer Act terms and conditions in assignments and licences of intellectual property which most of us take for granted.

The rationale for repeal is that most transactions involving IP do not have anti-competitive effects or purposes and, if they do, they should not be exempt from the competition laws.

Rodney De Boos, a consultant at DCC with many years’ experience in licensing and commercialisation of IP, however, points out that this explanation was developed before the provisions banning cartel conduct were introduced into the Act. And, he contends, typical arrangements in IP agreements which allocate, for example, territories or customers will constitute cartel conduct and so need authorisation if the parties are not to be in breach of the cartel provisions.

As Rodney explains, a cartel provision are certain types of specified provisions between competitors.

Now, it may well be that an assignor and assignee, or a licensor and licensee, will not be competitors. There are many types of arrangements, however, where the Competition and Consumer Act will deem them to be competitors. An obvious example is the case of a franchisor who has retail outlets (either itself or through a related body corporate) as well as retail franchisees. Other arrangements involving IP could also be similarly problematical.

You can read Rodney’s concerns in more detail here.

The bill repealing s 51(3) has already passed the House of Representatives and is due to be debated by the Senate in the sittings coming up.

Cartel conduct and IP licences and assignments Read More »

The Federal Circuit Court can grant Mareva injunctions

The Federal Circuit Court can issue mareva injunctions[1] under s 14 and s 15 of the Federal Circuit Court Act 1999.

Mr Vartzokas is an architect. Through his company he agreed to provide architectural services in connection with the development of a 5 storey apartment block in Prospect Rd Adelaide to the developer, Nazero Contructions Pty Ltd.

He provided the services and sent in his bill for $48,100.

Mr Younan seems to have been the principal of Nazero Constructions and was the person with whom Mr Vartzokas dealt.

With some difficulty, Mr Vartzokas managed to extract payments totalling $25,000 from Mr Younan. When Mr Vartzokas sent in his final bill for the remaining $23,100 with the final drawings, the drawings were endorsed with the statement:[2]

These drawings are the copyright property of the architect and are not to be reproduced or copied without prior written license of the architect.

Needless to say (this is a court case afterall), Mr Vartzokas was not paid his outstanding $23,100.

Instead, he was contacted by a Mr Chen on behalf of Yi Hong Pty Ltd, which was about to purchase the Prospect Rd property and wanted to engage Mr Vartzokas to provide further architectural services in relation to it.

Mr Chen provided Mr Vartzokas with copies of the working drawings for the property which Mr Chen had obtained from Mr Younan in connection with the proposed purchase and wanted Mr Vartzokas to work on.

Mr Vartzokas recognised the drawings as being the ones he had prepared for Mr Younan and Nacero Constructions. Only the authorship was attributed to “JB Archi-Build”!

Unbeknownst to Mr Vartzokas, around the time Mr Vartzokas was having trouble extracting his initial payments from Mr Younan, Mr Younan caused a new company, Nazero Group SA Pty Ltd to be incorporated. Nazero Constructions sold the Prospect Rd property to Nacero Group for $1,017,500. Nacero Constructions then changed its name to Zeecat Constructions.

When Mr Chen provided the “JB Archi-Build” drawings to Mr Vartzokas, Mr Vartzokas discovered the existence of Nacero Group and that it was in the process of selling the Prospect Rd property to Yi Hong for $1,190,000. Settlement on the contract was due the next day following the hearing.

Mr Vartzokas sued seeking a mareva injunction to require the proceeds from the sale (after paying out the bank holding a registered mortgage over the property) be paid into the Federal Circuit Court pending trial of Mr Vartzokas’ copyright infringement claims.

Judge Brown granted the mareva injunction ex parte. On the question whether Mr Vartzokas had demonstrated a real risk that the assets would be dissipated and the Court’s process frustrated, his Honour pointed to the sneaky swap in ownership of the Prospect Rd property between Mr Younan’s companies, his failure to pay all Mr Vartzokas’ bills and continued use of the drawings without payment or recognition:

[35] I am also satisfied that the applicant has established a prima facie case that there is a real risk of assets being dissipated, if the relief sought is not granted. In my view, the significant evidence in this regard arises as a consequence of the change of name of Nazero Constructions Pty Ltd, which coincided with that entity not honouring the invoices submitted to it by the applicant. This failure to pay its debt, to the applicant, ultimately led to the winding up of the company concerned.

[36] More significantly, after the company had been liquidated, Mr Younan incorporated an entity with a similar name and transferred the land at Prospect to it. At the same time, Mr Younan appears to have been intent on developing the land in a similar manner to that which envisaged the intellectual input of Mr Vartzokas, but without either payment or recognition to him.

[37] In all these circumstances, I am satisfied that there is a significant risk that, if the injunction sought is not made, the proceeds of sale of the Prospect property will not be available to the applicant to either satisfy any award of damages to which he is entitled or to provide any accounting for the profits made on the sale of the land concerned, which, at least on a prima facie basis, seems to have included his architectural designs to be utilised on the property’s development.

His Honour also noted there was no prejudice to third parties as the bank mortgagee would get paid its due before money’s were paid into court.

Vartzokas Architects Pty Ltd v Nacero Group SA Pty Ltd [2017] FCCA 849


  1. Yes, I know we are supposed to call them an asset preservation order, but really ….  ?
  2. The usual implied licence can be excluded by an express written term to the contrary: Devefi v Mateffy Perl Nagy  ?

The Federal Circuit Court can grant Mareva injunctions Read More »

Broadcast does not include internet streaming

The (NSW) Court of Appeal has rejected WIN’s argument that its exclusive licence to broadcast Nine Network’s content extended to “live streaming” over the internet.

Those of you who have emulated Burke and Wills and wandered out of the CBD of your state’s capital city may have discovered that free-to-air television is (a little bit) different. There are regional broadcasters who arrange at least some local news and advertising, but also carry a lot of the programming of the “big” broadcasters.

WIN Corporation is one such regional broadcaster. For many years, it had a “programming supply agreement” through which it took much of the Nine Network’s programming. Thereby bringing the joys of A Current Affair and the Block to those lucky enough to live in a place where WIN was a broadcaster.

The relevant clause (clause 2.1) said:

“Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as ‘Nine’, ‘NineHD’, ‘9Go’, ‘9Gem’, ‘Extra’ and ‘9Life’ (the ‘Nine Channels’), to be picked up by WIN at Nine’s NPC.”

The Court and the parties all agred that “exclusive” in this context meant that Nine could not license anyone else to broadcast its content in WIN’s territory. Nor could it “broadcast” its content in WIN’S territory itself.[1]

WIN’s case was that this clause also meant Nine could not allow people in WIN’s territory to access the content through Nine’s website too. (You may already be perceiving some practical difficulties with WIN’s argument, if right.)

The evidence showed that the scope of the grant had been the subject of some negotiation, with Nine contending for a narrow definition and WIN arguing for a broader definition. The trial judge had found this evidence of pre-contactual negotiations did not assist the interpretation exercise. Apart from anything else, it was inconclusive and incomplete.[2]

Barrett AJA pointed out that a playwright could grant an exclusive licence to perform his or her play at a particular time or place, but that did not prevent the playwright from granting someone else a licence to show the play as a film or to perform the play some other place or time. This was important because it meant (you will be surprised to read) that the scope of exclusivity depended on the terms of the grant. His Honour explained at [34]:

The important point is that a person who has a collection of rights and grants an exclusive licence in respect of only some of those rights does not, through the exclusivity undertaking, promise the grantee not to exercise (or allow others to exercise) the remainder of the rights that is not the subject of the grant. The exclusivity undertaking restricts the grantor only as regards the rights granted. Preclusion of the grantor in relation to the whole or any part of the remainder of the grantor’s rights could come only from some contractual stipulation over and above that which is implied by the exclusive quality of the grant.

Applying this, his Honour considered that WIN’s licence to broadcast was limited to the kinds of broadcasting it was licensed to engage in under the Broadcasting Services Act and only within the territories it held a commercial broadcasting licence for. So this meant its exclusivity related only to free-to-air broadcasting in its territory. In the judgment under appeal, Hammerschlag J had explained at [82]:

Where clause 2.1 refers to broadcasting on and in the licence areas covered by the WIN Stations this is, and can only be, a reference to free-to-air. The licence areas are the geographical delimitations imposed on WIN by its licences under the BSA. These licences cover only free-to-air. Unsurprisingly, it is common cause that the WIN Stations have only ever broadcasted free-to-air and under such licences. They are traditional television stations. They do not deliver by internet. Internet delivery is not geographically based in the same way as is free-to-air.

Barrett AJA also rejected WIN’s argument that exclusivity over internet streaming followed from the implied term not to do anything that would deprive the other party of the benefit of the contract. WIN argued it was necessary for the exclusivity to extend to internet streaming as the promise of exclusivity meant it was to be free from competition.

Judging from the number of people watching TV on the train, tram and buses these days, you might think WIN had something of a point.

Barrett AJA, however, considered the benefit for which WIN had contracted was exclusivity from competition in free-to-air broadcasting. Nine was not under a duty to maximise WIN’s return under the contract, but to ensure that WIN had exclusive rights to broadcast Nine’s programming by free-to-air transmissions. His Honour said at [73]:

In the present case, the PSA, according to its correct construction, required Nine to desist from engaging in free-to-air transmission of Nine programs in the WIN licence areas and from enabling persons other than WIN to undertake free-to-air transmission of those programs in those areas. The “benefit” of the contract, from WIN’s perspective, was the right to transmit the Nine programs free-to-air in the WIN areas without free-to-air competition by Nine or anyone to whom Nine had given transmission rights. Extension of the negative stipulation binding on Nine so as to forbid live-streaming would entail a restriction on Nine and a corresponding “benefit” to WIN over and above those created by the contract and, in that way, enlarge rather than support and underwrite WIN’s contracted benefit. The value of the benefit of the contract to WIN was, as in the Queensland case, dependent on many contingencies, some of which were in Nine’s control. But Nine was not obliged to maximise WIN’s return from the contract.

At one level, the result is not too surprising. “We” have been generally aware at least from the Optus Now here and here controversies several years back that the major sporting organisations were generating very substantial revenues from internet streaming in addition to the broadcast (pay and/or free-to-air) rights. If you are drafting an exclusive licence relating to the right to communicate to the public, therefore, you will need to pay careful attention to what exactly is intended to be included: the whole right to communicate to the public, broadcasting (in some one or many of its multifarious forms), internet streaming etc.

WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 (McColl JA, Sackville and Barrett AJJA)


  1. Barrett AJA conveniently collected the well-established propositions at footnote 15: “15. As a matter of general principle, an “exclusive” licence confers relevant rights upon the licensee to the exclusion of the whole world, including the licensor: Carr v Benson (1868) 3 Ch. App. 524 at 532; Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1; [1946] HCA 48 at 5 (Latham CJ) and 15 (McTiernan J applying Heap v Hartley (1889) 42 Ch. D. 461). A “sole” licence resembles an “exclusive” licence but does not operate to exclude the grantor: see, for example, Black & Decker Inc v GMCA Pty Ltd (No 2) [2008] FCA 504; (2008) 76 IPR 99 at [131] (Heerey J).”  ?
  2. WIN Corporation Pty Ltd -v- Nine Network Australia Pty Limited [2016] NSWSC 523 at [71] – [80].  ?

Broadcast does not include internet streaming Read More »

Are you carrying on business in Australia by registering a trade mark here

If you need authority for the proposition that registering a trade mark, or enforcing the rights under the registration, does not necessarily mean you are carrying on business in Australia, Besanko J may help you out.

The ACCC sued Nexans SA and others alleging they were engaged in price fixing cartel.

Nexans SA is the global parent of the Nexans group. It had registered NEXANS in Australia as a trade mark. It had also licensed the trade mark to Nexans Australia, which was a member of the group, but not a direct subsidiary.

Besanko J rather sensibly stated at [282]:

…. I do not think the fact that the ultimate holding company of a large worldwide Group, insures all of the directors and officers of the companies comprising the Group means that the ultimate holding company is carrying on business within all the jurisdictions where companies in the Group are operating or is even a reasonably strong indication of that fact. The registration of trade marks in Australia by an overseas company could be an indication that the company is carrying on business in Australia, but, of course, it is only the beginning of the inquiry. The fact is that here there is a licence to Nexans Australia which (depending on the precise circumstances) may be considered to be an authorised user of the registered trade marks under s 8 of the Trade Marks Act. Nor do I think the fact that Nexans SA took action in this Court to protect its rights as owner of the registered trade marks indicates that it was carrying on business within Australia.

His Honour then explored other factors which in the end did lead to Nexans SA being held to carry on business in Australia. Ultimately, however, Besanko J did not consider it had engaged in the cartel behaviour, but another company, Prysmian, had.

Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi S.R.L. (No 12) [2016] FCA 82

Are you carrying on business in Australia by registering a trade mark here Read More »

A trade mark licence requires actual control

The Full Federal Court has held that the licensor must actually exercise control over the licensee for a trade mark licence to be a valid licence.

The decision is part of a long running global battle between WILD TURKEY and WILD GEESE. The WILD TURKEY interests own and use WILD TURKEY around the world for bourbon whiskey; the WILD GEESE interests use, or want to use, WILD GEESE around the world for Irish whiskey. Instead of the usual battle about who was first to file and whether or not WILD TURKEY was confusingly similar to WILD GEESE or vice versa, there was an unusual twist in this fight: WILD TURKEY tried an end run, tacking on to a registration for WILD GEESE WINES.

Some background

A Mr O’Sullivan QC (and his partners) had established a winery in South Australia under the name WILD GEESE WINES (WGW) in 2000. In due course, WGW set out to register their trade mark. However, the WILD GEESE interests had already registered their trade mark in Australia for whiskey. It was cited against the WGW application and in 2005, WGW brought an application against the WILD GEESE interests’ registration to remove it for non-use. The WILD TURKEY interests had also brought a non-use action against the WILD GEESE interests’ registration.

Mr O’Sullivan (and partners) quickly came to the realisation that they did not to become embroiled in the intergalactic war being waged between WILD TURKEY and WILD GEESE whiskey. Instead, in 2007 WGW assigned its trade mark application and the benefit of its non-use application to the WILD TURKEY interests in return for an exclusive licence to use the trade mark in Australia for wine.

The non-use applications against the WILD GEESE interests’ trade mark was successful and the (now) WILD TURKEY interests registered the WILD GEESE WINES trade mark for wine and spirits that WGW had assigned to them.

In a case of sauce for the goose potentially being sauce also for the turkey, the WILD GEESE interests then brought an application to remove the WGW trade mark for non-use. The WILD TURKEY interests sought to defend that claim on the basis that the use of the trade mark by WGW was authorised use under the Act and so constituted use in the relevant period by the WILD TURKEY interests[1] as registered owner sufficient to defeat the non-use application.

As the removal application by the WILD GEESE interests was filed on 27 September 2010, the three year period in which the WILD TURKEY interests had to show use as a trade mark in good faith ran from 27 August 2007 to 27 August 2010.

Unfortunately for the WILD TURKEY interests, there were a few wrinkles.

WGW produced a merlot under its trade mark in 2004. Due to adverse climate conditions, it did not produce another vintage until 2011. However, wine from the 2004 vintage was for sale (and was sold) in relatively small batches during the non-use period.

Mr O’Sullivan (and his partners) realised that a valid trade mark licence required that the licensee’s use be under the licensor’s control. To that end, Mr O’Sullivan proposed quality control ‘conditions’ for inclusion in the licence:

  • WGW’s wines had to be of sufficient quality to qualify for an export licence from the Australian Wine and Brandy Corporation;
  • WGW had to supply samples of their wine to the WILD TURKEY interests if requested to do so.

Notwithstanding this, the licence arrangements did not have any practical effect on WGW’s operations and the WILD TURKEY interests never requested samples until after the WILD GEESE interests brought their non-use application.

The Registrar upheld the removal application. On appeal, Perram J considered that the Full Court’s decision in Yau Entertainment bound him to find that the possibility of control being exercised was sufficient for a valid licence and so, very reluctantly, allowed WILD TURKEY’s appeal.

The Full Court’s decision

All five judges considered that Yau Entertainment did not rule that the potential for the exercise of control by the licensor was sufficient for authorised use under the Act.

Control

Besanko J gave the leading judgment with which Allsop CJ and Nicholas J agreed.

After a detailed review of the legislative history and the case law, Besanko J concluded at [95] – [98] that “control” for the purposes of s 8 meant actual control. At [95]:

The meaning of “under the control of” in s 8 is informed by the principle stated by Aickin J in Pioneer, that is to say, that the trade mark must indicate a connection in the course of trade with the registered owner. The connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. It is the connection which may be slight. Aickin J was not saying the selection or quality control or financial control which may be slight. I think the principle stated by Aickin J informs the meaning of “under the control of” ….

His Honour acknowledged at [98] that whether there was actual control was a question of fact and degree, but “there must be control as a matter of substance.”

His Honour recognised that this conclusion was different to the conclusion reached under the Trade Marks Act 1994 by the House of Lords in Scandecor. That however was because UK law had taken a different course under the influence of EU law. Similarly, the CJEU’s decision in Ideal-Standard [2] was directed to a very different issue: exhaustion of rights.

WILD TURKEY did not actually exercise control

Besanko J went on to find that the WILD TURKEY interests did not actually exercise control over WGW’s use of the trade mark. Bearing in mind that it was a question of fact and degree, his Honour considered the most significant factor was that the licence arrangement had no practical effect on how WGW conducted itself.

At [107]:

The quality control provision in the Licence Agreement is that the wine be of a sufficient standard to obtain the approval for export of the AWBC. There was no evidence of the precise content of that standard. It was not an exacting standard as the approval rate shows (at [51] above).[3] The primary judge considered that the standard involved no more than a rejection of what he called truly undrinkable wine (at [55]). It is plain that the standard had no effect on Mr O’Sullivan’s wine making practices. He was interested in making good to high quality wine. At no time during the relevant period did [WILD TURKEY] contact Mr O’Sullivan about the wine he was making or selling or both. There was never any request by [WILD TURKEY] for samples under cl 3.1 or for the product to be supplied to the Australian Wine Research Institute under cl 3.2. [WILD TURKEY] never asked Mr O’Sullivan for any information about the use of the trade marks or Mr O’Sullivan’s wine making operations generally. There was no monitoring by [WILD TURKEY] and nothing to suggest that [WILD TURKEY] took steps to ascertain whether the terms in cl 3 were being complied with. I do not think s 8(3) was satisfied by the existence of cl 3 in the Licence Agreement.

The conditions in the licence that WGW could use the trade mark only for wine it manufactured and only on wines sold in Australia were restrictions, but they were not restrictions that went to the quality of what was produced necessary to maintain the connection in the course of trade with the (putative) licensor. At [108], his Honour explained:

…. These are restrictions but not ones like controls on quality or manufacturing process which might suggest a connection between the registered owner and the use of the trade marks in connection with the provision or dealing with goods in the course of trade. There is no evidence that [WILD TURKEY] monitored or informed itself as to whether WGW was only selling Australian wine in Australia. These requirements do not give rise to control. WGW was not permitted to amend or abbreviate the trade marks or use them in a scandalous fashion. These provisions seem to me to be standard provisions to be expected in a licence agreement for trade marks. There is no evidence of monitoring by [WILD TURKEY] of these provisions and they do not amount to control within s 8. Finally, the provision about standard liability insurance and [WILD TURKEY]’ ability to terminate the Licence Agreement for a material breach is not sufficient to constitute control under s 8 of the Act.

Thus, the use by WGW was not authorised use and the registrations for WILD GEESE for wines should be removed for non-use.

Some other points

Nicholas J agreed with Besanko J’s reasons. Nicholas J also pointed out that the use which would defeat a non-use application under s 92 had to be use as a trade mark in good faith. His Honour considered that the failure by the WILD TURKEY interests to exercise actual control over WGW would be a factor disqualifying that use from being use in good faith. As this line of attack was not actually argued by the WILD GEESE interests, his Honour did not decide the case on this basis. nonetheless at [132], his Honour said:

However, in considering whether or not the registered owner has exercised sufficient control over another person’s use of a mark so as to defeat an attack on the grounds of non-use, it is important to recognise that the boundary between “use” and “use in good faith” by the registered owner cannot be defined by a bright line. This is because the question whether there has been any use by the registered owner may itself depend on whether the control it is said to have exercised was real or genuine control as opposed to something that was merely token or colourable.

Allsop CJ agreed with both Besanko J and Nicholas J.

Katzmann J also found that authorised use required the licensor actually to exercise control over the licensee. That had plainly not happened in this case. Her Honour did accept that the WILD TURKEY interests’ request for samples in 2011 (after the non-use period and after the WILD GEESE interests had filed their non-use application) could lead to ‘a “‘retrospectant’ circumstantial inference”’[4] that control was actually exercised. But the inference that control had not been exercised was also open and, as the WILD TURKEY interests had not shown the inference they contended for was more probable than not, they would still lose. Her Honour pointed out that the wine show medals that the WILD TURKEY interests relied on to support the good quality of the wines did not survive scrutiny. The judges’ comments at the wine shows included:

Very disappointing class with no highlights. From this class it would appear to be unsuited to the region. No wines showed any varietal character or even just brightness of fruit and character.

Perhaps more importantly, there was no evidence that the WILD TURKEY interests had any idea that WGW’s wines had won any medals or whether the wine was of good, bad or indifferent quality.

Greenwood J also concurred in the result, but was not prepared to condemn the licensing arrangements between the WILD TURKEY interests and WGW in the strong terms used by the trial judge.

Wrap up

So, if you are acting for a trade mark licensor, make sure that it actually exercises control over its licensee(s). And, at least when the control relied on is quality control, make sure the control goes to the quality of the goods or services provided under the licence. The use won’t be authorised use otherwise. In that case, the licensor won’t be able to rely on it to defeat a non-use application as in this case. Even if that is not a risk, there will also be the danger that use which is not authorised use may render the trade mark deceptive and liable to cancellation.

If you have a comment or a question, please feel free to post it in the comments section. Or, if you would prefer, email me.

Lodestar Anstalt v Campari America LLC [2016] FCAFC 92 reversing Skyy Spirits LLC v Lodestar Anstalt [2015] FCA 509


  1. Section 7(3).  ?
  2. IHT Internationale Heitztechnik GmbH & Anor v Ideal-Standard GmbH & Anor [1994] 1 ECR 2789.  ?
  3. In the year ending 30 June 2010, only 40 wines out of 18,019 wines tested ultimately failed to receive export approval, and the figure in the following year was 43 wines out of 14,569 wines tested.  ?
  4. Referring to Heydon J at [76] in Gallo.  ?

A trade mark licence requires actual control Read More »

Project home appeals

The Full Court has partially allowed Tamawood’s appeal, and denied Habitare’s appeal from Collier J’s findings about copyright infringement.

Tamawood designs and builds homes; Habitare is (or was) a developer. Habitare arranged for Tamawood to design some houses for a development it was working on. The plans were submitted to the local authority for, and received, planning approval. Tamawood and Habitare were unable to agree the basis on which they would go forward. Habitare decided to get Mondo Architects to draw up the building plans to carry the project forward and used Bloomer to build the houses. At first instance, Collier J found some of Mondo’s plans infringed, but others did not.

On appeal, the Full Court upheld Collier J’s ruling that Habitare’s licence to use the plans with planning approval terminated when Habitare decided not to proceed with Tamawood. This was because the basis of the licence was that Tamawood would not charge for preparing the drawings on the understanding it would build the houses. Use (ie., reproduction) of the plans outside those terms was unlicensed.

On appeal, Tamawood also successfully challenged Collier J’s conclusion that its copyright in “Stad 939 Conondale/Dunkeld”:

Stad 939 Conondale/Dunkeld
Stad 939 Conondale/Dunkeld

was not infringed by Mondo Duplex 1:

Mondo 1 Duplex with patio
Mondo 1 Duplex with patio

Two points of interest here. First, the Full Court was unanimous in holding that Collier J had erred by ascertaining whether Mondo Duplex 1 sufficiently resembled Stad 939 Conondale/Dunkeld and then considering whether or not there had been copying. The question of copying needs to be resolved first although, in doing so, the degree of resemblance may lead to an inference of copying.

Secondly, for Jagot and Murphy JJ, the degree of resemblance, Mondo’s access to Tamawood’s plans and the significant difference between Mondo’s plans before that access and after all contributed to a conclusion of copying. Their Honour’s then applied Eagle Homes v Austec to find reproduction of a substantial part on the basis that the copyright work could still be seen in the accused plans. For Jagot and Murphy J the changes in the floor plan were minor. At [168]:

The footprints of the duplexes are identical but for the addition of the patio at the rear of the Mondo Duplex 1 plans. The internal and other external differences all result from two changes – swapping the position of bedroom 1 with bedroom 2 and swapping the position of bedroom 3 with the living/entry space. All changes appear consequential on these two basic changes in location. The changes, however, are minor, in the sense that the overall relationship between the internal spaces and the exterior remain the same. ….

Greenwood J dissented on this point at [89] – [90], considering that the layout and traffic flows, shapes and proportions and relationships of the rooms and other spaces were sufficiently different. His Honour considered that the common placement of Beds 1 and 2 and associated wet areas along the external walls of the duplex rather than the party wall was rational and for obvious reason.

Otherwise, the Full Court affirmed her Honour’s ruling at first instance.

Tamawood Limited v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2015] FCAFC 65

 

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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  ?

How much is that copyright in the power generation system Read More »