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"Culture of Contempt" costs copyright infringers a bundle |
In Sony Entertainment (Australia) Limited -v- Smith [2005] FCA 228 (11 March 2005) the Federal Court of Australia handed down a stern warning for those taking a cavalier approach to copyright infringement. Judge Jacobson awarded:
- an account of profits
- additional damages totalling $500,000 payable by:
- The record company, Tower Records - $150,000,
- Tower's Director, Mr Smith - $300,000;
- The DJ, Mr Ferris, - $50,000.
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In the first judgment ([2004] FCA 1315) the Court held that 17 compilation sound recordings distributed by Tower were in breach of copyright. Interestingly, very few albums were produced for sale and in each instance the majority of tracks on the album had been licensed. It most cases just a couple of the fifteen or more tracks on each CD were held to be in breach of copyright.Under s115(3) of the Copyright Act a party can recover profits but not additional damages where it is established that a defendant was unaware of the copyright infringement. |
However under s115(4), the Court may award additional damages where a party flagrantly breaches copyright and such award would serve as a deterrent. |
Account of Profits |
The Applicants contended that in determining account of profits they were entitled to claim the full wholesale cost for each infringing CD (less manufacturing costs). The reasoning was that profits were not severable, as each CD constituted an infringing article. |
The Court rejected this argument, relying on s116(1)(E) of the Copyright Act that provides criteria to assess damages where the infringing material forms only part of an article. Factors to be considered are the market value of the article, the proportion of the infringing material to the article, and the extent the infringing material may be separated. |
Jacobson J referred in his judgment to the explanatory notes contained in the 1997 Copyright Amendment Act. Section 116 was introduced following recommendations from the Copyright Law Review Committee identifying inequity in the previous position established in Australia. In WH Brine v Whitton (1981) 37 ALR 190) it was held any copyright infringement in an article would give rise to account of all profits based on the full wholesale price. |
The Court arrived at its assessment by identifying the wholesale price, the proportion of infringing tracks to the total article, then increasing this number by 100% in recognition of the legal impossibility of severing infringing material. The Court acknowledged that factoring an increase represented a "punitive aspect" but stressed further punitive damages could still be claimed under Section 115(4). |
Additional Damages |
In coming to the assessment the Court noted the Respondent's flagrant disregard for the copyright infringement and conduct during the proceedings. |
In particular the Court noted the Respondents failure to admit uncontested issues of fact that the Applicants were forced to prove, costing time and money. The Respondents also failed to give proper discovery of their records, made confusing contrary claims to their licence rights for the infringing materials, and refused to follow numerous directions during the course of the two-year proceedings. However the most damning evidence before the Court was that Mr Smith had made numerous threats to the Applicants via text messages and e-mails. |
Jacobson J referred to the case of Universal Music Australia Pty Limited v Miyamoto [2004] FCA 982 where additional damages in the way of $10,000 were awarded for breach of copyright. He noted while the similarities could be drawn in both cases regarding the initial blatant breaches, the infringing parties in Miyamoto sought an early resolution and acknowledged culpability |
The Court viewed an award of additional damages was more comparable to recent software infringement cases such as Microsoft v Easy Loans Pty Limited [2004] FCA 1135 which involved deliberate concealment of illegal conduct. Additional damages had ranged from $300,000 to $500,000. |
In awarding $500,000 in additional damages between three Respondents the Court singled out the continued threats as the greatest factor. |
The lesson for those in the recording industry is to always respect copyright and comply strictly with licence conditions. If asserted breaches result in litigation, there is a real risk of additional damages against your company and against you personally if you ignore court directions and threaten your opponent. |
chris.wilde@cmlawyers.com.au
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