It’s none of my business – when indifference won’t amount to authorisation of copyright infringement

The High Court of Australia has set a higher bar for establishing infringement of copyright by authorisation.  In its decision in Real Estate Tool Box v Campaigntrack^[1], the Court overturned the Full Federal Court’s finding that a real estate agency had authorised the infringement of copyright subsisting in source code by its indifference to the infringing activity.

Under Australian law, in addition to direct infringement, a person will also infringe the copyright in certain works if they “authorise” another person to do any acts comprised in the copyright. For example, in relation to literary and musical works, the copyright includes these acts: the right to reproduce, publish and perform the work in public.

While the issue of whether authorisation has occurred is a fact intensive inquiry – this case provides guidance on where indifference will not constitute “authorisation” – generally speaking, neutrality or inattention will not be sufficient to attract liability. 

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 Court said.

We explore the decision in more detail below.

Background

Campaigntrack provides online marketing and sales services to the real estate industry using the “Campaigntrack” online software system (Campaigntrack Software).

In an effort to shut down competing software systems and to persuade customers to use the Campaigntrack Software, Campaigntrack acquired the rights to the copyright subsisting in a cloud-based real estate marketing system, known as DreamDesk. DreamDesk was developed by Mr Semmens and used by a real estate agency, Biggin & Scott under a licence granted by DreamDesk Pty Ltd (DDPL). The terms of the acquisition included that Campaigntrack granted DDPL a licence to use DreamDesk for the purpose of operating its business until 3 October 2016 (3 October Deadline).

Following the acquisition, one of the directors of Biggin & Scott instructed Mr Semmens to build a new software system with similar functionality to the DreamDesk Software and Campaigntrack Software, stipulating that it “does not breach any other companies (sic) IP or ownership”. The project resulted in the creation of the “Real Estate Tool Box” software (Tool Box Software) and incorporation of Real Estate Tool Box Pty Ltd (RETB).

Campaigntrack claimed that Tool Box Software reproduced parts of the DreamDesk source code, and alleged that:

1. Mr Semmons had directly infringed its copyright in the source code; and
2. RETB, Biggin & Scott, DDPL and their directors (together, the Biggin & Scott Parties) had indirectly infringed the copyright in the source code.

In relation to direct infringement pursuant to Australian law, section 31 of the Copyright Act 1968 (Cth) (Act), gives the copyright owner the exclusive right to, depending on the type of work, reproduce in a material form, publish, perform, communicate to the public and make an adaptation of the work.

Under section 36(1) of the Act, a person will infringe the copyright in a work if they do any act comprised in the copyright. (‘direct infringement’) or authorise the doing of any of those acts (‘indirect infringement’).

In considering authorisation, the Court will have regard to factors including (i) the person's power to prevent the act of infringement; (ii) the relationship between that person and the infringer; and (iii) whether the person took any reasonable steps to prevent or avoid the doing of the act.

Proceedings in the Federal Court and Full Court

At first instance, the primary judge, Thawley J, found that Mr Semmons had infringed the copyright subsisting in the DreamDesk source code by reproducing the whole or a substantial part of the code, and misused Campaigntrack’s confidential information. However, his Honour was not satisfied that the Biggin & Scott Parties authorised the infringement, finding that they did not have actual or constructive knowledge of the infringement.

On appeal to the Full Court, the decision of the primary judge was overturned.  In this regard, Campaigntrack successfully argued that the primary judge erred in failing to consider a letter sent from Campaigntrack’s solicitors to DDPL on 29 September 2016 (29 September Letter), and the events that followed that letter.

The 29 September Letter, which had been sent in response to DDPL’s request to extend the 3 October Deadline, informed DDPL that Campaigntrack had “become aware of improper access and duplication of code” which it now owned and of the incorporation and “involvement” of RETB.

On this basis, the majority was of the view that, as a result of this correspondence and after this date, the Biggin & Scott Parties had authorised the infringement by Mr Semmons by their indifference to the development of the Tool Box Software.  However, Cheeseman J, in dissent, found that the primary judge had not erred, but had rather considered the 29 September Letter to be immaterial in context of a continuing relationship of trust between the Biggin & Scott Parties and Mr Semmens. Her Honour found that after the 29 September Letter, the Biggin & Scott Parties took active steps to co-operate with Campaigntrack, for example, by giving undertakings sought by Campaigntrack and granting access to an independent expert whose preliminary report contained nothing that was capable of displacing the continuing relationship of trust.

The Biggin & Scott Parties appealed to the High Court in relation to the finding that they were liable for indirect infringement of copyright.

Had the Biggin & Scott Parties been sufficiently indifferent so as to amount to authorisation?

The High Court unanimously allowed the appeal.

In doing so, the High Court reiterated that the sufficiency of involvement in the infringement so as to amount to authorisation requires a close focus upon the facts. In this regard, “indifference” will amount to authorisation where the party has reason to anticipate or suspect that the infringing act will likely be done, and has the power to prevent it, but defaults in some duty of control by failing to take reasonable steps to prevent or avoid the infringing act.

The issue on appeal was whether the 29 September Letter altered the landscape – such that the Biggin & Scott parties should have been proactive.  Of note, Campaigntrack was hamstrung by the forensic choices it had made at first instance – including not cross-examining witnesses.

The High Court considered the conduct of the Biggin & Scott Parties from the perspective that they had engaged Mr Semmons as a third party developer with specific expertise that they lacked, and specifically instructed him not to infringe copyright.  The High Court found that it was reasonable for them to do nothing further — the Biggin & Scott Parties “simply and reasonably, did not consider it their business to interfere any further” whilst Mr Semmons completed the task that he was instructed to do.

The High Court agreed with Cheeseman J’s findings, namely that the actions by the Biggin & Scott Parties following receipt of the 29 September Letter were consistent with them continuing to trust Mr Semmons, and that Campaigntrack had not established that the Biggin & Scott Parties knew that or suspected Mr Semmens was engaging in infringing acts at any relevant time.  This was so, even though they might have had some reason to suspect Mr Semmen’s actions after receipt of the 29 September Letter.

Key takeaways

Although this decision may come as a relief to businesses that use or are otherwise involved with the intellectual property rights of third parties, businesses cannot be ignorant as indifference may amount to authorisation of infringement. Rights holders should be aware of the importance of putting all parties involved on notice of any alleged infringements.