The High Court has unanimously allowed Real Estate Tool Box (RETB) and other parties’ appeals against findings that they had authorised infringements of copyright in Campaigntrack’s “DreamDesk” software.
The High Court made a point of emphasising that whether a person can be found liable for authorising copyright infringement depends on “the proper inference to be drawn from all of the facts of the case.”
I am afraid that, as their Honours said, “It is therefore necessary to set out those facts in some detail.”
Some facts
Real estate agents use web to print software to quickly and efficiently generate promotional materials advertising the properties on their websites, in brochures and other advertisements.
Biggin & Scott is one such real estate agent.
Back in the mists of time, Biggn & Scott licensed software from Campaigntrack for this purpose. However, Biggn & Scott became disenchanted with Campaigntrack for some reason and in 2015 had switched over to software licensed from DreamDesk Pty Ltd (DDPL) imaginatively named “DreamDesk”.
DDPL’s DreamDesk software had been written for it by an one of its “officers”, Mr Semmens.
Before he wrote the DreamDesk software, Mr Semmens had written the Process 55 software that another competitor, Digital Group,[1] was licensing to real estate agents.
Mr Semmens’ fellow directors in Digital Group formed the view that he had stolen Digital Group’s intellectual property in Process 55 in writing DreamDesk. They confronted him about this and on 26 May 2016 he signed documents admitting the infringements.
Shortly after these documents were signed, Digital Group informed Mr Meissner, the princiapl of DDPL who, the trial judge found, was “shocked” by this revelation. Mr Meissner accepted DDPL could not continue with DreamDesk and set about trying to buy the rights to Process 55 or sell DreamDesk.
Meanwhile, Campaigntrack was unhappy about the loss of customers and set about a campaign to buy out its competitors and so corner the market.
In July 2016, CampaignTrack agreed to buy DreamDesk from DDPL, granting DDPL a licence to keep using DreamDesk until 3 October 2016. Shortly after, CampaignTrack also acquired the rights to Process 55.
Not wanting to fall back into the clutches of CampaignTrack, Mr Stoner from Biggn & Scott met with Mr Semmens on 3 August 2016. At Mr Semmens’s suggestion, Mr Stoner commissioned Mr Semmens to start work on the new software which became known as Toolbox. The letter of instruction stated in part:[2]
You are instructed to build a web to print delivery system that does not breach any other companies IP or ownership, in particular Dream Desk or Campaign Track. …. In simple terms we do not want any thing used that can be claimed as owned by the 2 companies above.
Mr Semmens provided assurances that he could do the job in time and would do so without infringing anyone’s copyright.
To undertake the project, Biggn & Scott and Mr Semmens incorporated RETB. Mr Stoner was the sole director and Mr Semmens was doing the design and coding, with some assistance from some of DDPL’s employees and in a workspace borrowed from DDPL.
On 29 September 2016, CampaignTrack’s solicitor, Ms McLean, emailed Mr Meissner and DDPL warning it had discovered improper access and duplication of code which CampaignTrack now owned and expressing concerns about RETB. The email stated CampaignTrack was prepared to grant a one week extension of DDPL’s licence to use DreamDesk provided it was used “in the ordinary course of business” only and demanding undertakings from all involved that there would be no use of the improperly obtained code.
By 6 October 2016, all the Biggn & Scott and DDPL parties had signed and provided the undertakings to Ms McLean – except Mr Semmens.
On 7 October 2016, Ms McLean advised Biggn & Scott and DDPL that the DreamDesk licence would not be extended beyond 10 October 2016 as Mr Semmens had failed to provide the undertakings.
On 10 October 2016, ToolBox became operational and Biggn & Scott switched its users of DreamDesk over to Toolbox.
In the pre-litigation correspondence that followed, the parties agreed to allow CampaignTrack’s expert, a Mr Geri from Ferrier Hodson, to inspect the Toolbox system and prepare a preliminary report.
On 19 January 2017, Mr Geri delivered his preliminary report. His conclusion was that it was “highly probable” there had been an infringement of CampaignTrack’s copyright in DreamDesk in the development of Toolbox. However, to confirm that opinion, he needed to undertake a forensic examination of the servers hosting Toolbox.
Through Ms McLean, CampaignTrack demanded that Biggn & Scott shut down Toolbox and provide Mr Geri with the requested access. Biggn & Scott refused, instead demanding proof of CampaignTrack’s ownership. The litigation followed.
It was not until 17 June 2018 that Biggn & Scott ultimately stopped use of Toolbox, having introduced a new system in April 2018.
At trial
The trial judge found that Mr Semmens had infringed CampaignTrack’s copyright in DreamDesk by reproducing a substantial part in Toolbox. Correspondingly, the users of Toolbox also infringed CampaignTrack’s copyright when they downloaded the software and ran it to generate their advertising collateral. Mr Semmens was also liable for authorising those infringements.
However, the trial judge rejected CampaignTrack’s cases against Biggn & Scott, Mr Stoner, Ms Bartels, DDPL and Mr Meissner alleging they had authorised Mr Semmens’ and the users’ infringements. As a result, his Honour found that CampaignTrack had not established that either the Biggn & Scott or DDPL parties had authorised either Mr Semmens’ or the users’ copyright infringements.
The Full Court
The Full Court (Greenwood and McElwaine JJ, Cheeseman J dissenting) allowed CampaignTrack’s appeal and found the Biggn & Scott and DDPL parties all liable for authorising infringement.
In the Full Court, the majority accepted that, before 29 September 2016, the Biggn & Scott and DDPL parties did not know about Mr Semmens’ infringing conduct and, until that date, were not obliged to take reasonble steps to avoid the infringements by Mr Semmens.
However, Ms McLean’s letter on 29 September 2016 put the Biggn & Scott and DDPL parties on notice of CampaignTrack’s claims. Accordingly, McElwaine and Greenwood JJ found that the Biggn & Scott and DDPL parties knew or had reason to suspect that Mr Semmens had infringed copyright and failed to sufficient steps to prevent infringements after that date.
The law
Section 36 of the Copyright Act 1968 provides:
(1) Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.
So, there is direct infringement by doing one or more of the acts comprised in the copyright (such as reproducing, or communicating to the public, the whole or a substantial part of the work). There is also infringement by someone who “authorises” someone else to do the infringing act(s). In deciding whether there has been authorisation s 36(1A) further provides three considerations that a court must take into account:[3]
In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the owner of the copyright, the matters that must be taken into account include the following:
(a) the extent (if any) of the person’s power to prevent the doing of the act concerned;
(b) the nature of any relationship existing between the person and the person who did the act concerned;
(c) whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.
The High Court
At [63] – [65], the High Court referred to the examination of the concept of ‘authorisation’ by Gummow and Hayne JJ in the Roadshow case and confirmed that ‘authorisation’ for the purposes of copyright law had long extended beyond traditional concepts of agency and could be found where there was ‘indifference’.
The High Court also endorsed Gummow and Hayne JJ’s warning that ‘authorisation’ for copyright infringement purposes “is not to be identified by deconstructing the dictionary definitions of notions such as ‘sanction’, ‘approve’ and ‘countenance’.”
Having reviewed four prior High Court judgments, at [77], their Honours explained:
The foregoing survey of authorities demonstrates that what constitutes indifference amounting to authorisation depends upon a close analysis of the facts of each case. Mere neutrality or inattention will not suffice. The quality of the indifference, and the nature of the relationship between the infringer and the alleged authoriser, must be such as to justify a conclusion that there was sufficient involvement in the infringement as to amount to authorisation of the acts constituting the breach of copyright for the purposes of s 36(1) of the Copyright Act. The central factors to consider will be those matters in s 36(1A):[39] the person’s power to prevent the act of infringement; the relationship between that person and the infringer; and whether the person took any reasonable steps to prevent or avoid the doing of the act, including compliance with any relevant industry codes of practice. That necessarily requires consideration of whether a person knows or has reason to anticipate or suspect an infringing act is occurring or is likely to occur.[40] (citations omitted)
and at [88] their Honours posed the issue as what the particular person in the particular circumstances at the particular time (or times) ought to have done:
Proof of an allegation of authorisation by indifference requires findings, supported by evidence, that the person was in a position and had knowledge of facts, matters and circumstances sufficient to give rise to a duty to take reasonable steps to avoid or prevent the doing of an act by another person, or else be liable for the act of that person. That is not a general inquiry. It is directed to a particular state of affairs at a particular time or times. That inquiry requires an assessment of the reasonableness, again supported by evidence, of what the person did, and what the person, in that position with that knowledge, at that particular time or times, ought to have done.
The High Court than concluded that, in the circumstances of this case, the Biggin & Scott parties could not be said to have omitted to take reasonable steps they ought to have taken to prevent infringement. At [45], the High Court identified the primary judge’s unchallenged findings in relation to the Biggn & Scott parties:
(a) Mr Stoner and Ms Bartels trusted Mr Semmens not to infringe the intellectual property rights of DDPL or Campaigntrack P/L in developing Toolbox and they did not want Mr Semmens to misuse intellectual property belonging to others in developing it.
(b) Mr Stoner and Ms Bartels considered Mr Semmens to be a person who had the relevant expertise in building a software system and he could build the system in sufficient time given his expertise. They left the development of Toolbox to Mr Semmens and that was not unusual or surprising.
(c) Biggin & Scott was in a contractual relationship with, and could instruct, Mr Semmens. Its instruction to him was relevantly to build Toolbox without infringing any person’s intellectual property rights.
(d) Given the instructions to Mr Semmens, and that Mr Stoner and Ms Bartels trusted him, there was no independent audit of Toolbox or verification that Mr Semmens had not infringed another person’s intellectual property rights. In all likelihood, neither Mr Stoner nor Ms Bartels turned their mind to consider this.
(e) Mr Stoner did not instruct Mr Semmens to “tamper” with the commit log file.
(f) Mr Stoner, Ms Bartels and Mr Semmens were friends. The payment of Mr Semmens’ legal bills in this matter did not indicate any authorisation of the infringement of copyright.
(g) It had not been established that any of the Biggin & Scott parties knew, or should reasonably have known, that Campaigntrack P/L’s intellectual property had been used to develop Toolbox.
Accordingly, up to the sending of Ms McLean’s letter of 29 September, both the trial judge and all members of the Full Court accepted the Biggin & Scott parties did not know or have reason to suspect Semmens had infringed copyright in making ToolBox. Ms McLean’s letter of 29 September, or subsequent developments, did not change the result.
89 It was not established that the Biggin & Scott parties knew of or suspected Mr Semmens’ infringing acts at any relevant time. Although, following the letter of 29 September 2016, the Biggin & Scott parties had some reason to suspect that the infringing acts might be occurring, and although they had the necessary means to prevent these infringing acts, this Court cannot conclude that they defaulted in some duty of control by failing to take any further action. Given the manner in which the case was conducted at first instance, the Court cannot conclude that the Biggin & Scott parties omitted to take reasonable steps after 29 September 2016, being steps that they ought to have taken to prevent or avoid the infringing acts.
A similar conclusion was reached in relation to Mr Meissner and DDPL even though they made personnel available to Mr Semmens to write the infringing code and provided infrastracture necessary for him to undertake the work.
Some comments
From the outside, it is difficult to assess some aspects of the High Court’s reasoning.
For example, in both [77] and [88], their Honours referred to liability arising where the alleged authoriser knew or had reason to suspect there was an infringer. And, in [89], their Honours accepted that the Biggin & Scott parties had some reason to suspect infringements on receipt of Ms McLean’s 29 September letter. But, the High Court rejected reliance on the letter in this case.
In practice, such letters are typically relied on to fix the alleged infringer with knowledge. In this case, however, the letter immediately led to all the parties, except Mr Semmens, unreservedly giving the undertakings demanded by CampaignTrack. In addition, Mr Stoner and Ms Bartel were friends with Mr Semmens, he had the expertise which they did not, they had repeatedly sought assurances from him that he had complied with his instructions and they were entitled to trust him to carry out their genuine concern not to infringe.
Even so, in many situations, you might very well expect the alleged infringer to be put on inquiry when they learned, as the Biggin & Scott parties did within a few days, that Mr Semmens refused to give the underakings – according to his evidence, because he was concerned it would restrict him from working in his industry.
Likewise, one would often expect a preliminary report from a forensic IT expert would provide a sufficient basis to infer authorisation. The High Court held that it did not in this case:
84 As to the Geri investigation, it is notable that the Biggin & Scott parties permitted it to take place and co-operated with Mr Geri. That is entirely consistent with the Biggin & Scott parties continuing to trust Mr Semmens. Moreover, Cheeseman J was correct to characterise the Geri report as “inconclusive”.[44] Indeed, the “preliminary” conclusion that there was a “high probability” that Campaigntrack P/L’s intellectual property had been used to develop Toolbox was confined to matters already known to the Biggin & Scott parties: namely, that both DreamDesk and Toolbox had been developed by the same person, who had access to both systems during the production of Toolbox. Because Mr Geri could also not confirm his conclusion, there is no sensible basis for concluding that the ongoing faith in Mr Semmens’ compliance with his express instructions had now become unreasonable. …
The forensic IT expert’s opinion, however, was qualified. It acknowledged that many similarities were the sorts of things one would expect anyone in the industry to require and requested further access. Indeed, in the Full Court at [157], Cheeseman J had described the conclusion of a high probability of infringement as “no more than a speculative assumption” – in effect based on the fact that the same person wrote both programs.
As to the Biggin & Scott parties’ refusal to allow the further inspection of Biggin & Scott’s servers, the High Court continued at [84]:
…. it will be recalled that the relationship between the Biggin & Scott parties and Campaigntrack P/L had soured considerably since the refusal to extend the licence for DreamDesk. The Campaigntrack system was a competitor product with Toolbox. No doubt the Biggin & Scott parties saw the attack on them in that light. As such, in defence of Toolbox, they were entitled to insist upon proper proof of Campaigntrack P/L’s claims and to reject what appeared to them to be a fishing exercise. Such conduct is unremarkable in the tousled field of commercial disputation.
This might suggest that an alleged infringer may be entitled to take a robust position in the face of allegations, especially from a competitor with whom there is bad blood. However, in addition to the matters already canvassed, it is important to remember that the High Court’s conclusions are also predicated on references to how the case was run at first instance. On the High Court’s analysis, this meant the conclusions reached by the majority in the Full Court were not open on the evidence.
Finally, it is interesting to note that, in four of the five cases the High Court has considered liability for copyright infringement by authorisation, the High Court has ruled there was no authorisation.[4]
Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd [2023] HCA 38 Gageler CJ, Gordon, Edelman, Steward and Jagot JJ)
- Mr Semmens was, with his brother-in-law Mr Farrugia, a founder Digital Group. By the time of the events relevant to this proceeding, Mr Semmens, Mr Farrugia and a third person, Mr Stewart, were the three directors of Digital Group. ?
- The letter is set out in full in paragraph 17 of the judgment. ?
- As the High Court noted in footnote 39, these matters have been derived from Gibbs J’s judgment in University of New South Wales v Moorhouse (1975) 133 CLR 1. ?
- In this case, the High Court considered Adelaide Corporation v Australasian Performing Right Association Ltd (1928) 40 CLR 481; University of New South Wales v Moorhouse (1975) 133 CLR 1 and Roadshow Films Pty Ltd v iiNet Ltd (No 2) (2012) 248 CLR 42. The fifth case, Australian Tape Manufacturers Association Ltd v The Commonwealth [1993] HCA 10; 176 CLR 480, was directly concerned with the constitutional validity of the blank tapes levy which turned on whether or not the suppliers of blank cassette tapes on whom the levy was imposed ‘authorised’ the unlicensed copying of recorded music on to those tapes by purchasers. ?
