Aristocrat Technologies Australia Pty Limited (ACN 001 660 715) v D.A.P. Services (Kempsey) Pty Limited (in liquidation) (ACN 055 803 542)

• Jurisdiction: Australia Federal only
• Judgment Date: 29 March 2007
• Neutral Citation: [2007] FCAFC 40
• Court: Full Federal Court (Australia)

FEDERAL COURT OF AUSTRALIA

Aristocrat Technologies Australia Pty Limited (ACN 001 660 715) v D.A.P. Services (Kempsey) Pty Limited (in liquidation) (ACN 055 803 542)

[2007] FCAFC 40

INTELLECTUAL PROPERTY – copyright – assessment of damages – election for compensatory damages – assessment of damages on the basis of a royalty inappropriate – whether loss of sales by the copyright owner could be inferred merely from the fact of sales of infringing product – requirement for evidence of lost sales and value of such sales – additional damages – purpose of awarding additional damages – assessment of additional damages

Copyright Act 1968 (Cth) s 115(2), s 115(4)

Autodesk Australia Pty Limited v Cheung (1990) 94 ALR 472 followed

Autodesk Inc v Yee (1996) 68 FCR 391 followed

Bailey v Namol Pty Limited (1994) 53 FCR 102 applied

Columbia Pictures Industries Inc v Luckins (1996) 34 IPR 504 followed

Dr Martens Australia Pty Limited v Bata Shoe Co of Australia Limited (1997) 75 FCR 230 cited

Enzed Holdings Limited v Wynthea Pty Limited (1984) 57 ALR 167 considered

General Tire and Rubber Co v Firestone Tyre and Rubber Co Limited [1976] RPC 197 applied

Interfirm Comparison (Aust) Pty Limited v Law Society of New South Wales (1975) 6 ALR 445 applied

Lamb v Cotongo (1987) 164 CLR 1 applied

Microsoft Corporation v Goodview (2000) 49 IPR 578 followed

Microsoft Corporation v PC Club of Aust Pty Limited (2005) 148 FCR 310 followed

Mills v Stanway Coaches Ltd [1940] 2 KB 334 discussed

Paramount Pictures Corporation v Hasluck (2006) IRP 293 followed

Placer (Granny Smith) Pty Limited v Theiss Contractors Pty Limited (2003) 196 ALR 257 discussed

Polygram Pty Limited v Golden Editions Pty Limited (1997) 76 FCR 565 followed

Raben Footwear v Polygram Records Inc (1997) 75 FCR 88 followed

The Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 cited

Watson, Laidlaw & Co Ltd v Pott, Cassell and Williamson (1914) 31 RPC 104 discussed

ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715) AND ANOR v D.A.P. SERVICES (KEMPSEY PTY LIMITED (IN LIQUIDATION) (ACN 055 803 542) AND ORS

NSD 712 OF 2006

BLACK CJ, JACOBSON AND RARES JJ

29 March 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 712 of 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715) First Appellant/First Cross-respondent ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 58) Second Appellant/Second Cross-respondent
AND:	D.A.P SERVICES (KEMPSEY) PTY LIMITED (IN LIQUIDATION) (ACN 055 803 542) First Respondent DAVID ALLAN PARRY Second Respondent/First Cross-appellant RHONDA DENISE PARRY Third Respondent/First Cross-appellant

JUDGES:	BLACK CJ, JACOBSON AND RARES JJ
DATE OF ORDER:	29 March 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be allowed in part.

2. Order No 2 made on 22 March 2006 be set aside.

3. The respondents pay the appellants damages under s 115(2) of the Copyright Act 1968 (Cth) in the amount of $1.

4. The first and second respondents pay the appellants additional damages under s 115(4) of the Copyright Act 1968 (Cth) in the amount of $200,000.

5. Costs be reserved for determination after further argument.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 712 of 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715) First Appellant/First Cross-respondent ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 58) Second Appellant/Second Cross-respondent
AND:	D.A.P SERVICES (KEMPSEY) PTY LIMITED (IN LIQUIDATION) (ACN 055 803 542) First Respondent DAVID ALLAN PARRY Second Respondent/First Cross-appellant RHONDA DENISE PARRY Third Respondent/Second Cross-appellant

JUDGES:	BLACK CJ, JACOBSON AND RARES JJ
DATE:	29 march 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

BLACK CJ & JACOBSON J:

Introduction

1 The essential issue raised on this appeal is what degree of certainty is required for an applicant to prove its loss in a claim for damages for infringement of copyright.

2 It is almost trite to say that, in such a case, an applicant bears the onus of proof. But as Bowen LJ said over a century ago, as much certainty is required as is reasonable, having regard to all the circumstances; to require more “would be the vainest pedantry”; Ratcliffe v Evans [1892] 2 QB 524at 532-533; see also Placer (Granny Smith) Pty Limited v Theiss Contractors Pty Limited (2003) 196 ALR 257 at [37].

3 This appeal does not arise because of any pedantry on the part of the respondents. Rather, it arises because the primary judge found, in our view correctly, that he lacked the evidence necessary for him to calculate the value of lost sales, if any; see Aristocrat Technologies Australia Pty Ltd v Vidtech Gaming Services Pty Ltd (2006) 68 IPR 229at [118]. His Honour then said that the “only feasible course” was to calculate damages on an accounting for profit approach. He proceeded on that basis to award $80,000 damages against Vidtech, Mr Parry and Mrs Parry and $40,000 (ie 50%) additional damages against Vidtech and Mr Parry. Both sides agree that his Honour was in error in adopting this approach because the applicants had elected to claim damages rather than an account of profits.

4 Error having been conceded by the personal respondents (they being the only respondents to appear on the hearing of the appeal), and it appearing that the concession was correctly made and that the appeal should be allowed, ordinarily we might have remitted the case to the primary judge. However, since his Honour has now retired from the Court we should, as the parties accept, determine for ourselves the appropriate measure of loss under s 115(2) of the Copyright Act 1968 (Cth).

5 This course requires us to consider afresh the quantification of additional damages under s 115(4) of the Act.

6 We also have before us a cross-appeal in which Mr and Mrs Parry seek to challenge two factual findings made by the primary judge. These are that:

· the corporate respondent, Vidtech, routinely copied Aristocrat’s copyright software “whenever it needed to do so” in order to enable it to make a sale of a refurbished machine; see at [86].

· Mrs Parry was aware that Vidtech’s products included software which infringed Aristocrat’s copyright; see at [87].

The primary judge’s findings of infringement

7 It was agreed between the parties that the first appellant, Aristocrat, was the owner of the copyright in two species of intellectual property in components of its electronic gaming machines. These were, first, artistic works comprising illustrations of the games to be played on the machines and, second, the literary works comprising the computer software that operated the machines (contained within ‘EPROMs’); see [7].

8 The artistic works comprised perspex artwork panels displayed on the gaming machines. Upon the basis of documents made available to Aristocrat, it was agreed between the parties that 615 artwork panels were produced by a contractor on behalf of Vidtech. The parties also agreed that 615 panels would have supplied the artwork for about 400 gaming machines; [11].

9 The artwork was commissioned by Mr or Mrs Parry. Mr Parry conceded that he knew by January 2005 that the artwork infringed Aristocrat’s copyright. Despite Mr Parry’s assertions to the contrary, his Honour found that Mr Parry knew “from the outset” that the artwork infringed copyright. Mrs Parry did not give evidence but his Honour inferred that she also knew of the copyright infringement; [57], [60], [68], [70].

10 Mr Parry vigorously denied extensive copying of the software but his Honour rejected that evidence. He considered that, whilst the evidence was sparse, he was satisfied that Vidtech copied Aristocrat’s software whenever it needed to do so in order to make up an item known as a “conversion kit” to change one type of game to another, or to provide appropriate software to a refurbished machine that was being converted from one game to another; [86].

11 The evidence to which his Honour referred to support that finding is summarised in the judgment of Rares J at [67] – [78]. The evidence included Vidtech’s extensive software library and emails which indicated Vidtech’s willingness and ability to engage in copying on a very large scale.

12 His Honour’s finding also took into account the evidence of a trap purchase in which Mr Parry made statements which demonstrated that Vidtech and Mr Parry knowingly engaged in large scale copying. His Honour observed at [82]:

“All of these statements are inconsistent with Mr Parry’s assertion that Vidtech only copied EPROMs in order to replace the odd damaged or defective original EPROM. Importantly, Mr Ireland did not challenge Mr Papas’ evidence, and Mr Parry did not deny, that the statements were made. Moreover, the alleged statements are consistent with the contents of the quotation faxed to Mr Papas on the afternoon of the visit, which included 24 conversion sets for four specified Aristocrat games. Mr Parry acknowledged in cross-examination that ‘mere artwork wouldn’t convert a machine’, EPROMs would also be needed. …”

The primary judge’s calculation of compensatory damages

13 Aristocrat’s claim for damages was supported by evidence from its Group Financial Controller and an expert’s report from a chartered accountant.

14 The accountant’s report...