Key takeaways and business responsibilities 6 min read
The High Court has delivered judgment in the matter of Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd  HCA 38, overturning the Full Federal Court's decision to find that Real Estate Tool Box and the other appellants did not authorise copyright infringement.
The judgment sets the boundaries of when a person may be liable for authorising copyright infringement where they remain indifferent to another person's infringing conduct, and highlights the kinds of evidence required to make out a claim of this kind. It also serves as a reminder to businesses to ensure that they properly investigate concerns about potential infringement of third-party IP.
- The High Court confirmed that a person can be liable for authorising copyright infringement where they are 'indifferent' to the alleged infringement of a third party. However, such a claim is fact-dependent and requires there to be more than neutrality or inattention – it must be supported by evidence, including about the alleged authoriser's knowledge at the relevant time.
- Although the High Court overturned the Full Court's decision, this was in large part due to evidentiary gaps in this case. Therefore, our takeaway from the Full Court decision still stands: If you are put on notice of a potential infringement of third-party IP, including infringement by a contractor or business partner, ensure that you take steps properly to investigate the claims, and document those steps.
Executives, key operational personnel and in-house counsel.
What was the case about?
Campaigntrack Pty Ltd brought claims against the following parties alleging that they infringed, or authorised the infringement of, copyright in Campaigntrack's 'DreamDesk' real estate software:
- David Semmens, a software developer who was the main developer of the 'Toolbox' software, which was said to reproduce source code in the DreamDesk software;
- Biggin & Scott Corporate Pty Ltd, two of its directors Paul Geoffrey Stoner and Michelle Bartels, and a related corporate trustee Real Estate Tool Box Pty Ltd (together, the Biggin & Scott parties), for whom Mr Semmens had developed the Toolbox software under instructions from Mr Stoner; and
- Dream Desk Pty Ltd and its sole director and shareholder Jonathan Michael Meissner (together, the DDPL parties), who contributed certain resources to Mr Semmens' software development work.
At first instance, the Federal Court found that Mr Semmens infringed copyright in the DreamDesk software, but dismissed claims that the other respondents infringed copyright by authorising Mr Semmens' infringing acts. On appeal, a majority in the Full Court of the Federal Court (Justices McElwaine and Greenwood, with Justice Cheeseman dissenting) found that the Biggin & Scott parties and the DDPL parties each authorised copyright infringement because of their indifference to the development of Toolbox following receipt of a letter from Campaigntrack's solicitors on 29 September 2016 (29 September 2016 Letter). The majority found that the letter put those parties on notice of Campaigntrack's concerns and should have prompted them to investigate Campaigntrack's claims by making inquiries of Mr Semmens. (See our Insights on the first instance decision and the appeal.)
The Biggin & Scott parties and the DDPL parties appealed the Full Court's decision that they infringed copyright by authorising Mr Semmens' infringing acts.
What did the High Court decide?
The five-judge bench of the High Court (Chief Justice Gageler, and Justices Gordon, Edelman, Stewart and Jagot) unanimously decided that neither the Biggin & Scott parties nor the DDPL parties infringed copyright by authorisation, based on the evidence available to the Court.
The Court surveyed the authorities on when indifference may amount to authorisation of copyright infringement and summarised the principles as follows:
… 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): 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.
Regarding the Biggin & Scott parties, the Court confirmed that there was no reason for them to know or have reason to suspect that Mr Semmens was infringing copyright before receiving the 29 September 2016 Letter, since they trusted Mr Semmens, had expressly instructed him not to infringe copyright in developing Toolbox, and 'constantly sought and seemingly obtained' assurances from Mr Semmens that he had complied with those instructions.
...proving an allegation of authorisation by indifference requires factual findings, supported by evidence, that a person 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.
Although the Court found that the Biggin & Scott parties had 'some reason to suspect' that infringing acts might be occurring after receiving the 29 September 2016 Letter, and had power to prevent those infringing acts, the evidence was insufficient to support a finding that the Biggin & Scott parties failed to take reasonable steps after receiving the letter. The Court emphasised that proving an allegation of authorisation by indifference requires factual findings, supported by evidence, that a person 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 – it requires an assessment of the reasonableness of what the person did, by reference to what a person with the same knowledge, at the same time, ought to have done. The way in which Campaigntrack conducted the first-instance trial meant that the evidence necessary to conduct that analysis and support its authorisation argument was not available. For example, the Court observed that Campaigntrack did not put its indifference argument to the relevant witnesses in cross-examination.
Regarding the DDPL parties, the Court found that their conduct fell far short of what was required to establish authorisation of copyright infringement. Although the DDPL parties had some power to avoid or prevent Mr Semmens' infringing acts, and had a contractual relationship with Mr Semmens and other developers, they were not party to the arrangements between the Biggin & Scott parties and Mr Semmens relating to Toolbox and there was no evidence to establish that they had any interest in the Toolbox system. Again, the Court found that because of the manner in which Campaigntrack conducted the trial at first instance, it could not conclude that the DDPL parties omitted to take reasonable steps to prevent or avoid Mr Semmens' infringing acts, even after receiving the 29 September 2016 Letter.
For those reasons, the Court allowed the appeal and ordered Campaigntrack to pay costs.
If you are concerned about potential infringement of third-party IP, take steps to investigate the matter and seek legal advice.