Microsoft Corporation & Ors v CPL Notting Hill Pty Ltd & Ors (No.4) [2018] FCCA 2465 (29 August 2018)

Last Updated: 28 September 2018

2FEDERAL CIRCUIT COURT OF AUSTRALIA

MICROSOFT CORPORATION & ORS v CPL NOTTING HILL PTY LTD (No.4) [2018] FCCA 2465







Catchwords: COPYRIGHT – Infringement of copyright in operating system software programs – licence fee assessment of damages and award of additional damages – declarations, orders and injunction made. TRADE MARKS – Infringement of Windows and Microsoft trade marks – award of damages at large and additional damages. CONSUMER LAW – Misleading and deceptive conduct – declarations made.













First Applicant: MICROSOFT CORPORATION

Second Applicant: MICROSOFT PTY LTD (ACN 002 589 460)

Third Applicant: MICROSOFT REGIONAL SALES CORPORATION

First Respondent: CPL NOTTING HILL PTY LTD

Second Respondent: WEI LI

Third Respondent: CPL DISTRIBUTION PTY LTD

Fourth Respondent: JIN WANG

File Number: SYG 1205 of 2016

Judgment of: Judge Street

Hearing date: 27, 28 and 29 August 2018

Date of Last Submission: 29 August 2018

Delivered at: Melbourne

Delivered on: 29 August 2018





REPRESENTATION

Counsel for the Applicants: Mr A Fox

Solicitors for the Applicants: Harris & Company

Counsel for the Respondents: Mr P Zappia QC, Mr A McRoberts

Solicitors for the Respondents: Ssmith & Associates





ORDERS

(1) A declaration that each of the First to Fourth Respondents has infringed the First Applicant’s copyright in the Microsoft Windows 7 Professional software, the Microsoft Windows 7 Home Premium software and in the Microsoft Certificates of Authenticity affixed to computers on which one or other of the said operating systems software was reproduced by reproducing or authorising the reproduction, using and/or selling of the said software, and/or affixing or authorising the affixing of the said Certificates of Authenticity or a substantial part thereof without the licence of the First Applicant.



(2) An order, pursuant to s 115(2) of the Copyright Act 1968 (Cth) that the First and Third Respondents, whether by themselves, their servants and/or agents be restrained from infringing the First Applicant’s copyright in the Microsoft Windows 7 Professional software, the Microsoft Windows 7 Home Premium software and in the Microsoft Certificates of Authenticity by reproducing or authorising the reproduction, using and/or selling the said software, and/or affixing or authorising the affixing of the said Certificates of Authenticity or a substantial part thereof without the licence of the First Applicant.



(3) An order that the First to Fourth Respondents pay to the First Applicant damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth) in the sum of $256,658.



(4) An order that the First to Fourth Respondents pay to the First Applicant additional damages pursuant to s 115(4) of the Copyright Act 1968 (Cth) in the following separate amounts:-

(a) in respect of the First Respondent, $500,000;

(b) in respect of the Second Respondent, $500,000;

(c) in respect of the Third Respondent, $500,000;

(d) in respect of the Fourth Respondent, $500,000.

(5) A declaration that the First has engaged, in the course of trade or commerce, in conduct in contravention of s 18 of the Australian Consumer Law (Cth).



(6) A declaration that by reason of having been knowingly concerned in the contravening conduct of the First Respondent, the Second, the Third and Fourth Respondents have contravened s 18 of the Australian Consumer Law (Cth).



(7) A declaration that the First Applicant is entitled to damages from the First to Fourth respondents pursuant to s 236 of the Competition and Consumer Act 2010 (Cth) in the same amount the subject of order 3 above.



(8) A declaration that the First Respondent has infringed each of the registered trade marks numbers 371528(9), 377674(16), 576996(9), 733702(9)(16), 788966(9) and 871341(9) (Microsoft Trade Marks).



(9) A declaration that the Second, Third and Fourth Respondents are liable for the acts of the First Respondent, constituting infringement of the Microsoft Trade Marks, as joint tortfeasors.



(10) An order that the First to Fourth Respondents pay to the First Applicant damages pursuant to s 126(1) of the Trade Marks Act 1995 (Cth) in the sum of $25,000.



(11) An order that pursuant to s 126(2) of the Trade Marks Act 1995 (Cth) the First to Fourth Respondents pay the First Applicant additional damages in the following separate amounts:-

(a) in respect of the First Respondent, $75,000 ;

(b) in respect of the Second Respondent, $75,000;

(c) in respect of the Third Respondent, $75,000 ;

(d) in respect of the Fourth Respondent, $75,000 .

(12) An order that the First to Fourth Respondents pay to the First Applicant interest from 13 May 2016 calculated in accordance with the prescribed rate identified in r 39.06 of the Federal Court of Australia Rules 2001 pursuant to s 76 of the Federal Circuit Court of Australia Act 1999 (Cth) on each of the damages identified in orders 3 and 10 above.



(13) That Respondents jointly and severally pay the Applicants’ costs of these proceedings including any reserved costs in amount agreed or as fixed on taxation.



(14) Orders 3, 4, 10, 11, 12 and 13 are stayed for a period of 28 days.

FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE

SYG 1205 of 2016

MICROSOFT CORPORATION

First Applicant





MICROSOFT PTY LTD (ACN 002 589 460)

Second Applicant





MICROSOFT REGIONAL SALES CORPORATION

Third Applicant





And

CPL NOTTING HILL PTY LTD

First Respondent





WEI LI

Second Respondent





CPL DISTRIBUTION PTY LTD

Third Respondent





JIN WANG

Fourth Respondent









REASONS FOR JUDGMENT

Background

This is an application for relief in respect of a matter within the Court’s jurisdiction under s 131D of the Copyright Act 1968 (Cth) (“the Copyright Act”). The matter also includes a cause of action for trade mark infringement within the Court’s jurisdiction under s 191A of the Trade Marks Act 1995 (Cth) (“the Trade Marks Act”), as well as a claim of contravention of s 18 of the Australian Consumer Law (“the ACL”) of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (“the Competition and Consumer Act”) within this Court’s jurisdiction pursuant to s 138A of the ACL. The applicants are the owners of copyright in certain computer operating system software, including a particular Certificate of Authenticity label (“COA Label”) which under the terms of the licence by the applicant, is required to be affixed to the computer on which the relevant software has been downloaded. The COA Label, the subject matter of these proceedings relevantly has an alphanumeric key of 25 digits that permits activation of the downloaded software and certain verification steps, being a form of verification in part of the downloaded software. The first and third respondents carry on business together, relevantly in the acquisition and sale of software and computers. The second respondent, Ms Wei Li, is the sole director and corporate mind of the first respondent. The fourth respondent, Mr Jin Wang, is the director and corporate mind of the third respondent. Only the second respondent has given evidence in the present case on behalf of the respondents. The Court has taken into account the whole of the evidence and also the whole of the written and oral submissions.

Copyright Infringement

The central issue in the case is whether the respondents infringed, or authorised the infringement of the applicants’ copyright in Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium software programs and whether the respondents infringed the applicants’ copyright as a result of affixing the particular loose COA Labels to the computers, facilitating activation of the software on the computer following sale. There was only a limited period in which the activation could take place pursuant to the relevant key. The loose COA Labels, the subject matter of the alleged infringement are all ones that had a unique key, which meant that they were certificates for the applicants’ refurbisher program. That is a refurbisher of computers. The respondents were not refurbishers of computers. For the reasons that follow, the central issue should be answered in the affirmative. The Court’s findings are based on the evidence identified below, including the evidence given by Ms Wei Li and the adverse findings on the credit of Ms Wei Li. Those adverse credit findings are based on the evidence analysed below as well as the demeanour of Ms Wei Li in the witness box and includes the findings made in relation to the respondents’ affidavit of discovery. The COA Labels identify the nature of the certificate being a refurbisher certificate via an eight-digit alphanumeric code that appeared under the product key. The COA Labels the subject of these proceedings when originally printed had the words at the top “Windows 7 Pro for refurb (PCs)”. There was a further reference to the refurbisher at the bottom of the COA Label, being for refurbished PCs. At the bottom of the COA Label, there was a term printed “not to be sold separately.” The COA Label also included the word “Microsoft”. The applicants’ case in respect of copyright infringement is based on certain admissions made by the respondents, as well as the evidence and inferences that the applicants ask the Court to draw from the evidence adduced. The respondents admitted that they had 50 loose COA Labels and allegedly other media that were acquired from LDS International Pty Ltd (“LDS”). The loose COA Labels are not ones that were accompanied by other media. The 50 loose COA Labels the subject of the admission, were all ones for refurbisher PCs only. The respondents admitted that Microsoft software had been reproduced on at least 30 computers in their possession to which loose COA Labels had been attached. There was also a test purchase made from the first respondent by Ms Simone Lanyan. That test purchase identified the first respondent as selling a computer to which there was affixed a COA Label which had been tampered with and the reference to “for refurbished PCs” had been removed. It was apparent that these references had been removed from the label on the computer the subject of the test purchase to which a COA Label was affixed. The software had not however been activated on the test purchase computer. The applicants contend that the respondents had purchased further COA Labels that were loose without other media which were in fact for the refurbisher PCs only. The applicants contend that the Court should find that the applicants’ software had been downloaded onto computers sold by the respondents in respect of all of those loose COA Labels the subject of 28 invoices, and that they had been downloaded, or reproduced, onto each computer the subject of that sale, the software of the applicants, constituting an infringement of the copyright of the applicants. The applicants contend that the affixing of the COA Labels was copyright infringement. The applicants contend that respondents infringed their copyright by the sale of the computers on which the software had been downloaded with the COA Labels annexed, providing the product key for activation, and an infringement by reason of authorising, or purporting to authorise, end users to activate the software. The respondents contend that the applicants have failed to prove infringement of the applicants’ copyright as advanced. The respondents contend that pursuant to the history of the respondents downloading software and using System Builder Packs purchased by the applicants, that in relation to the Microsoft products the subject of these proceedings, there was no infringement as alleged by the applicants. The respondents contention has no substance. The definitions on the Microsoft OEM System Builder Licence (“Exhibit E”) relevantly are as follows: 1. Definitions.

a. “ Customer System ” means a fully assembled computer system that includes a CPU, a motherboard, a power supply, an internally mounted NAND or revolving magnetic-based hard drive, and a case. For Server products, a hard drive and separate power supply are not required. A Customer System must meet the system requirements of the Software as posted on http://www.microsoft.com and must be able to run the Software.

b. “ Distribution ” and “distribute” mean the point in time when a Customer System leaves your control.

c. “Hardware” means the Microsoft hardware included in the Pack. A unit of Hardware includes any Software and end user documentation that may be included in the Pack.

d. “OPK” means the OEM preinstallation kit provided by Microsoft that includes installation instructions, utilities and tools for preinstalling the Software.

e. “Pack” means this package of Microsoft Software or Hardware.

f. “Software” means the Microsoft Software inside the Pack. A unit of Hardware includes any Software media, documentation, certificate of authenticity (“COA”) label, end user license terms and security devices.

2. Authorized Distribution and Acceptance. To distribute the Software or Hardware in this Pack, you must be a System Builder and accept this license. “System Builder” means an original equipment manufacturer, an assembler, a refurbisher, or a software pre-installer that sells the Customer System(s) to a third party. You accept this license when you open this Pack. If you choose not to accept this license, promptly return the unopened Pack to your distributor. You many only distribute unopened Pack within your territory. For the territory in which you may distribute, see www.microsoft.com/oem/sblicense/territory. Individual Software or Hardware units may not be returned after the Pack is opened.

4. Limited License. If you comply with the terms of this license, Microsoft grants you a limited license to distribute the Software or Hardware. Except as granted in this license, you may not use, run, copy, modify, display, distribute, repackage or reassemble the Software, Hardware, OPK or any part of them. You may not reverse engineer, decompile, or disassemble the Software, Hardware or OPK, except to the extent expressly permitted by this license or by applicable law notwithstanding this prohibition. All rights not expressly granted are reserved.

5. Distribution.

a. Software Preinstallation.

i. For each unit of Software in the Pack, you must pre-install one copy of the Software on a Customer System prior to distribution. If the Software includes more than one language version you must install only one language version.

ii. For such pre-installation, you must use the OPK provided in the Pack or otherwise made available by us. You may use the information, tools and materials contained in the OPK solely to preinstall the Software in accordance with the OPK. See www.microsoft.com/oem/sbliense/OPK for additional information about the OPK. You may not distribute the OPK to the end user.

iii. See http://oem.microsoft.com/starter for additional hardware requirements when pre-installing Microsoft Windows Starter Editions.

iv. This preinstallation requirement does not apply to server Software. Instead, server Software may be distributed inside the Customer System package.

b. End User License Terms. You must distribute the Software pursuant to the end user license terms (“License Terms”) that accompany it. Under the License Terms, you are the licensor.

c. Hardware. You must distribute each Hardware unit with a Customer System, or another non-Microsoft computer hardware component. If you distribute a Hardware unit with a Customer System, you must preinstall any associated Software drivers and programs provided to you in the Pack. Before you distribute the Hardware, you must test it to ensure that the Hardware functions properly with the Customer System. Microsoft makes no warranty or representation regarding the Hardware’s compliance with any federal, state or local laws or regulations relating to computing devices or products sold to the public.

d. Alternate versions. The Pack may include more than one platform version of the Software such as 32-bit or 64-bit. You may only preinstall one version but must distribute both versions to the end user.

e. Processor versions. For Server products, you may not preinstall or distribute a processor version of the Software on a Customer system that includes more processors than the highest number of processors listed on the Pack.

f. You must distribute the complete unit of Software, including the COA.

6. Certificate of Authenticity (COA) Label. If this Pack contains a Microsoft operating system and you pre-install it, then you must affix the COA on the front, top, side or back of the Customer System case. If the Customer System is a laptop or tablet PC, the OCA must be affixed to the bottom of the Custom System. If a portable Customer System includes a vanity case or “skin” that can be removed and easily replaced with another case or skin by the end user in the normal course of use, then you may affix the COA directly on the bottom of the Customer System under the vanity case or “skin.” In that case, you must print “Microsoft COA and Product Key are located under this removable covering” on the outside of each vanity case or “skin” distributed with the Customer system. You may replace “removable covering” with more specific word or term that clearly references the vanity case or “skin.”

12. Activation. Use of the Software in the Pack may be for a limited time after the end use first launches the Software, unless the end user activates it, as described during the launch of the Software. You must provide the following or substantially similar notice in a clear and conspicuous manner to end users prior to their acquiring this Software: Certain Microsoft® software products included with this computer system may use technological measures for copy protection. If properly licensed, you have the right to use the version of the software installed during the installation process up to the time permitted for activation. Unless the software is activated, you have no right to use it after the time permitted for activation. This is to prevent its unlicensed use. You are not permitted to bypass or circumvent activation. Product activation procedures and Microsoft’s privacy policy will be detailed during initial launch of the software, or upon certain reinstallations of the software or reconfigurations of this computer, and may be completed by internet or telephone (toll charges may apply).

On no view were the respondents entitled to engage in the steps of downloading the software of the applicants the subject of these proceedings, by reason of having otherwise acquired the System Builder Licence for particular computers. The System Builder Licence made clear that it was concerned with the distribution of the Software “in this Pack”. It did not authorise the doing of the steps that occurred by the respondents in the present proceedings. The evidence is that the respondents, over a substantial period of time, purchased System Builder Licences which were specific for a particular computer and provided a COA Label that had to be affixed in respect of that particular computer. I find the respondents were well aware of the terms relating to the System Builder Licence given the duration of the period over which they were running their business and given the size and nature of the business, which was identified as having an annual turnover of $20 million. The respondents contended that they had over 60,000 products, and Ms Wei Li gave evidence suggesting she was unaware of the terms and conditions until the commencement of the proceedings. For reasons that the Court will come to in due course, the Court does not accept the second respondent’s evidence. The other contention advanced by the respondents in support of there being no infringement was by reference to the end user licence agreement. On no view were the respondents capable of falling within the meaning of the licence the subject of end user licence terms. The respondents sought to contend in the circumstances of the present case, that an implied licence should be found. No such implied licence was pleaded. The steps taken by the respondents infringing the copyright of the applicants, are not a basis upon which there could be implied a licence. The applicants have proved copyright in the software and in the COA Labels the subject of these proceedings. The applicants have proved that the respondents have engaged in the infringing acts of the applicants’ copyright without a licence. The respondents have purported to authorise purchasers or end users to use the copyright of the applicants without authorisation or licence by the applicant. Each of the primary acts of copyright infringement alleged by the applicants are proved. The Court finds that the respondents knew of the acts that constituted the infringement of the applicants’ copyright without licence. These findings are based on the evidence of Ms Wei Li and the affidavit of discovery as explained below. There was no substance in the contention that a defence arose under s 15 of the Copyright Act, and it was lacking in merit. There is no substance in the contention that a defence arose by reason of the provisions in s 43B and s 47B of the Copyright Act. Section 43B of the Copyright Act provides as follows: (1) Subject to subsection (2), the copyright in a work is not infringed by the making of a temporary reproduction of the work if the reproduction is incidentally made as a necessary part of a technical process of using a copy of the work.

(2) Subsection (1) does not apply to: (a) the making of a temporary reproduction of a work if the reproduction is made from: (i) an infringing copy of the work; or (ii) a copy of the work where the copy is made in another country and would be an infringing copy of the work if the person who made the copy had done so in Australia; or (b) the making of a temporary reproduction of a work as a necessary part of a technical process of using a copy of the work if that use constitutes an infringement of the copyright in the work.

(3) Subsection (1) does not apply to any subsequent use of a temporary reproduction of a work other than as a part of the technical process in which the temporary reproduction was made. There was no temporary reproduction of the applicants work falling within s 43B of the Copyright Act, and the reproduction could not be described as being incidental. The Court finds that the defence has no substance and had no merit. Section 47B of the Copyright Act provides as follows: (1) Subject to subsection (2), the copyright in a literary work that is a computer program is not infringed by the making of a reproduction of the work if: (a) the reproduction is incidentally and automatically made as part of the technical process of running a copy of the program for the purposes for which the program was designed; and (b) the running of the copy is done by, or on behalf of, the owner or licensee of the copy.

(2) Subsection (1) does not apply to the making of a reproduction of a computer program: (a) from an infringing copy of the computer program; or (b) contrary to an express direction or licence given by, or on behalf of, the owner of the copyright in the computer program to the owner or licensee of the copy from which the reproduction is made when the owner or licensee of that copy acquired it.

(3) Subject to subsection (4), the copyright in a literary work that is a computer program is not infringed by the making of a reproduction of the work if: (a) the reproduction is incidentally and automatically made as part of the technical process of running a copy of the program for the purpose of studying the ideas behind the program and the way in which it functions; and (b) the running of the copy is done by, or on behalf of, the owner or licensee of the copy.

(4) Subsection (3) does not apply to the making of a reproduction of a computer program from an infringing copy of the computer program.

(5) In this section:

"reproduction" , in relation to a computer program, does not include a version of the program of the kind referred to in paragraph 21(5)(b). In relation to s 47B of the Copyright Act, there was no incidental reproduction that was part of a technical process falling within that provision, and that defence has no substance and had no merit. Section 15 of the Copyright Act provides as follows: For the purposes of this Act, an act shall be deemed to have been done with the licence of the owner of a copyright if the doing of the act was authorized by a licence binding the owner of the copyright. Section 15 of the Copyright Act is one in respect of which an act shall be deemed to have been done with the licence of the owner if the doing of the act was authorized by a licence binding the owner of the copyright. On no view in the present case were the acts of the respondents, the subject of these proceedings, an act that was authorised by a licence binding the owner of the copyright. That defence has no substance and had no merit. The respondents also contend that if there was found to be an infringement, they are entitled to the defence of being the subject of an innocent infringement. Section 115(3) of the Copyright Act provides as follows: (3) Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not. In relation to s 115(3) of the Copyright Act, the respondents must establish, that at the time of the infringement, the respondents were not aware of, and had no reasonable grounds for suspecting the acts constituting the infringement, were an infringement of the copyright. The Court will address the evidence by the respondents further shortly. The Court, however, finds that the respondents were aware of the terms and conditions of the applicants licences in respect of the software operating system programs the subject of these proceedings and of the System Builder Licence, and that the applicants did not licence or authorise the doing of the steps the subject of these proceedings by the respondents. The Courts finds the respondents were aware that they were not so licenced under the end user agreement to engage in the steps the subject of these proceedings. The Court finds that the respondents were aware that reproducing the applicants’ software the subject of the COA Labels for refurbished computers on the computers sold by the respondents were done without a licence. The Court finds the respondents had no reasonable grounds for not suspecting and being aware of the acts constituting the infringement of the copyright of the applicants. The Court accepts the evidence of the applicants that the respondents purchased thousands of System Builder Packs over the years through authorised channels. The Court finds the respondents were well aware that the applicants did not sell loose COA Labels in Australia without media and discs. The Court finds that the respondents were aware that the loose COA Labels the subject of these proceedings were for use on refurbished computers only and that the respondents had no licence to use the loose COA Labels. The terms of the COA Label contains the wording in a System Builder Pack “Label not to be sold separately” and the System Builder Packs also make clear that the COA Label, in respect of the particular Pack, related to the particular Pack. The Court finds the respondents were aware due to those terms that COA Labels were not sold separately in Australia to System Builders such as the respondents. The Court does not accept the contention advanced by the respondents that they were unaware that the loose COA Labels were ones available only for refurbishers. The respondents took no step to identify any basis upon which the respondents could say they believed loose COA Labels were ones the respondents were entitled to affix and use for computers sold by the respondents. There was a suggestion by the respondents that they asked the seller of the loose COA labels whether they could use the same. That falls well short of establishing any reasonable basis upon which the respondents, given the history of using System Builder Packs, could form any reasonable belief that they were entitled to use the loose COA Labels. Further, the Court finds that the loose COA Labels in the present case were purchased by the respondents by cash for a significantly reduced price. That of itself, was a clear flag that would have put any reasonable System Builder on notice that the software being purchased was one not authorised for use by the System Builder. Further, for the reasons I have given, the terms of the COA Labels put the respondents on notice of the want of any licence. The Court finds the respondents were aware that they held no licence to use the loose COA Labels. No evidence was adduced to suggest that the loose COA Labels had been purchased from any genuine supplier of Microsoft products in Australia. The respondents contended that the COA Labels had all been tampered with, so it was not discernible by reference to the words that these were Software for the Refurbisher Program. Whilst it is the case that it is apparent that some of the COA Labels have had all references to the Refurbisher Program removed, that is not the case in respect of all of the COA Labels. Evidence was adduced in respect of the Test Purchase that showed a reference remaining to the Refurbisher Program with a particular key. That is the same specific key as was referrable to use of the software for refurbishers only on the other COA Labels. In all the circumstances, including the following findings as to the evidence of Ms Wei Li, the Court finds that the respondents were aware that the COA Labels were ones only to be used for refurbishing computers, and the respondents were aware they were not computer refurbishers. The respondents were also on notice of a want of licence by reason of the reference to “Label not to be sold separately” that appeared on the loose COA Labels. No innocent infringement can be made out pursuant to s 115(3) of the Copyright Act. The Court does not accept the evidence of Ms Wei Li that she was unaware of the terms in respect of the applicants’ copyright in respect of the System Builder Licence or in relation to the terms on the loose COA Labels that were purchased by payment of cash from the person who in fact, has been identified as a fraudster using the entity LDS and the fake entity Ever Success. That fraudster defrauded his own employer LDS by using his employer’s invoices as well as another fake entity Ever Success to sell products for cash which included at least in part, the software the subject of these proceedings brought by the applicants for copyright infringement by the respondents. The Court in light of the evidence as to the existence of the fraudster, who has been prosecuted, and the production of some loose COA Labels upon which there has been tampering and deletion of the reference for use of “Refurbished PCs”, accepts that the Court should not find that the respondents themselves tampered with and altered the reference to the Refurbisher Program. However, for the reasons already given, it is apparent that there were COA Labels in the possession of the respondents on which the reference to the Refurbisher Program remained. Further, given the refurbisher key, the Court rejects the respondents’ evidence that the respondents were unaware that loose COA Labels were for use of the Refurbisher Program only. The respondents knew that their use of the loose COA Labels and sale of computers with the downloaded software and affixed COA Label were not authorised or licenced by the applicants under the Refurbisher Program. The Court finds that the respondents were aware the COA Labels were in fact, the subject of altering and tampering and, whilst the respondents did not themselves alter or tamper the COA Labels they were nonetheless prepared to use the COA Labels that had been tampered and altered. The Court accepts the applicants’ case that the first respondent purchased a very large number of loose COA Labels from the fraudster by cash. The Court finds that the first respondent had a stock list that identified the loose COA Labels purchased separately by the respondents. Evidence was adduced by the respondents seeming to suggest that the stock list had been merged for innocent reasons due to duplication. The Court does not accept the respondents’ evidence in that regard. The Court finds that the first respondent’s records were the subject of a deliberate deletion of records identifying stock entries in respect of the loose COA Labels in order to mask the volume and extent of copyright infringement that has occurred by the respondents in the present case. The Court accepts the applicants’ evidence that there have been identified 500 loose COA Labels for Microsoft Windows 7 Home Premium and 967 loose COA Labels for Microsoft Windows 7 Professional acquired and used by the respondents without licence. Taken together with the admitted acquisition of 50 loose COA Labels by the respondents in respect of which 20 loose COA Labels were returned, the Stock column record on the first respondent’s invoice to Alpine Tech Computing and the invoices referred to below, the Court finds that the respondents have proved that at least 1,617 loose COA Labels have been acquired by the respondents. The Court finds the applicants have proved the use of 1,617 loose COA Labels affixed by the respondents on which computers have been sold with the applicants operating system software and without any authorisation or licence by the applicants. The Court takes into account that the respondents also had different invoices that the respondents issued. An invoice issued to a particular purchaser identified a stock number in respect of the loose COA Labels. That stock number did not appear on other invoices generated by the respondents. The Court does not accept the respondents’ evidence that the merger was because there was no difference between the stock. The Court finds the respondents were aware that the loose COA Labels identified in their stock records were ones in respect of which the respondents held no licence or authorisation from the applicants to use the same. The Court finds the respondents used the applicants’ software, the subject of these proceedings, without a licence to download the same onto computers to which the loose COA Labels were then affixed. The Court finds that those computers were the subject of sale by the respondents in the volume of the Microsoft Windows 7 Home Premium and Microsoft Windows 7 Professional referred to above totals 1,617 computers. The Court finds that the respondents purported to authorise the end users to activate the software that had been so downloaded without a licence to do so. The respondents sought to place much weight on the contention that the fraudster had generated false invoices in the name of his employer, LDS as well as an entity Ever Success and that the invoices were not business records of the employer or the entity whose name appeared on the invoice. The Court finds that the 28 invoices were generated by the fraudster were issued to the third respondent in the present case for the provision of loose COA Labels, were ones in respect of which the third respondent purchased those loose COA Labels identified in the invoices from the fraudster for cash, and the first and third respondent received the fraudulent records as a genuine record of purchase, and kept the records of purchase in the course of the first and third respondent’s business. There was a contention advanced by the second respondent, Ms Wei Li, that the fraudster provided fabricated invoices in a yellow folder to the respondents and that by error, Ms Wei Li forwarded the fabricated invoices to a police sergeant conducting a criminal investigation. The email sent by Ms Wei Li to the investigating police officer was in response to a request for records from the respondents. The Court finds Ms Wei Li was a wholly unsatisfactory witness, and her evidence in this regard was untrue. The invoices that were provided were invoices from the respondents’ records signed by the fraudster in respect of the acquisition by the respondents for cash from the fraudster of the unauthorised software identified in those invoices including the COA Labels the subject of these proceedings. Ms Wei Li advanced the suggestion that an email sent from her computer identifying invoices from the fraudster’s company were ones that the fraudster must have sent by accessing her computer in the sales department. The Court takes into account, in respect of each of the findings the Court is making, the seriousness of the findings in relation to the respondents and the need for clear satisfaction in respect of those adverse findings. The Court is satisfied that the evidence of Ms Wei Li in this regard is false. It is completely implausible that, in response to a request for records by an investigating police officer from the respondents, that what would be provided to the police officer are records not of the respondents but provided by the fraudster. The email did not refer to the records being those provided by the fraudster and the Court finds that the records provided to the police officer were records from the first and third respondents’ business. Ms Wei Li gave evidence, to which the Court will return in more detail, suggesting that she was not involved in the day to day management of the respondents. The Court rejects that evidence. The Court finds that Ms Wei Li was being evasive and seeking to advance a limited involvement in the business of the first respondent which was not true. Ms Wei Li identified both the attendance of herself and Mr Jin Wang at the business that was conducted from the same premises by the respondents. The Court finds the businesses were jointly conducted. Ms Wei Li gave evidence that she had access to the financial records of the third respondent. The evidence was that the third respondent provided the products to the first respondent only and not to any other entities. The Court finds Ms Wei Li’s evidence in response to cross-examination as to her responsibility for the company, was deliberately evasive. Ms Wei Li feigned a limited understanding of the accounting records when, in fact, she is a qualified accountant. Ms Wei Li advanced a suggestion of a first language difficulty that is not in any way supported by the affidavits filed by Ms Wei Li in these proceedings, and is not a basis upon which the Court finds could adequately explain the unsatisfactory evidence given by Ms Wei Li expanded upon below. The Court finds that Ms Wei Li and Mr Jin Wang were both involved in the management of the first and third respondents and in the acquisition of and sale of the software being the loose COA Labels and the computer to which they were affixed the subject of these proceedings. Whilst the Court accepts that the second and fourth respondents may not individually have been physically present in each acquisition and sale the subject of the infringement or the reproduction the subject of each infringement, the existence of the stock column in respect of loose COA Labels means the second and fourth respondents were well aware of having acquired and in their possession software that was downloaded without licence and that the respondents used the unauthorised software without a licence, affixed the loose COA Labels without licence to computers that were sold to purchasers. The Court finds the respondents were aware the unauthorised software was being reproduced on computers being sold by the respondents without a licence. The role played by the third respondent was such that an employee of the first respondent, Mr Alwyn Pan, was able to engage in the ordering of products on the invoice of the first respondent or the third respondent. The Court finds that the second, third, and fourth respondents all authorised the infringement by the first respondent in the primary acts as alleged by the applicants. This finding is based on the evidence of Ms Wei Li addressed below, the false affidavit as to discovery addressed below and the failure of the fourth respondent to give evidence. In relation to the Court’s finding that the respondents authorised the infringements, the Court finds that the respondents were aware of the existence of the unauthorised loose COA Labels and were aware of the steps that were being taken to reproduce that software without a licence onto computers and were aware of the affixing of the COA Labels without a licence. The Court finds the respondents were aware of the sale of the computers upon which the loose COA Labels were affixed. The Court finds the second, third and fourth respondents had the requisite knowledge of the acts of infringement of the applicants’ copyright in the present case in respect of the subject matter of these proceedings so as to have each personally authorised the copyright infringement by the first respondent. The Court finds that the second, third, and fourth respondents sanctioned, approved, and countenanced the doing of the infringement by the first respondent as alleged by the applicants as referred to above. The Court finds the applicants have established an infringement of their copyright by the respondents in respect of the 1,117 Microsoft Windows 7 Professional loose COA Labels acquired from the fraudster through LDS and Ever Success identified in 20 invoices dating from 17 July 2014 to 17 August 2015. Further, the Court finds that the applicants have established that an infringement of their copyright by the respondents in respect of Microsoft Windows 7 Home Premium loose COA Labels acquired from the fraudster to LDS and Ever Success identified in 8 invoices from 31 July 2014 to 17 August 2015. This constitutes infringements in respect of 1,617 computers to which the loose COA Labels were affixed without licence and which the Court finds were sold without licence. The Court finds that the applicants have proved that they have lost licence fees that would otherwise have been payable had the respondents purchased the System Builder Pack licence for each computer in respect of the computers that were the subject of sale from the first respondent and to which were affixed the loose COA Labels. The Court finds that the respondents would have had to purchase the System Builder Packs to sell the computers lawfully with the applicants’ Microsoft Windows 7 operating system software. The Court finds that the respondents would have lawfully purchased the System Builder Packs but for the unlawful use of the loose COA Labels and that the licence fee approach correctly reflects the damages suffered by the applicants. Accordingly, the Court accepts the applicants’ contention that the licence fee approach is appropriate for determining and quantifying the damage suffered by the applicants in the present case. The Court rejects the contention that there should be brought to account royalties, or that there should be brought to account the cost of production of System Builder Packs. The Court is satisfied that the methodology adopted by use of the licence fee properly and reasonably reflects the damages suffered by the applicants by reason of the infringement of the applicants’ copyright, the subject matter of these proceedings. The Court finds the applicants are entitled to damages under s 115(2) of the Copyright Act from each of the respondents in the amount of $256,658.00. There was an issue in the proceedings as to what conversion rate should be adopted, and when for the conversion of the licence fee from US currency to Australian currency. The Court accepts the applicants’ contention that the current exchange rate best reflects the loss suffered by the applicants. The respondents sought to argue that a different exchange rate over the period of infringements should be used. The Court does not accept that such a rate would fairly or correctly reflect the loss that has been suffered by the applicants in the present case. Before dealing with damages under s 115(4) of the Copyright Act in support of the findings made, the Court will deal further with the evidence that was adduced, and in particular the evidence of Ms Li. Not all the applicants’ witnesses were required for cross-examination and what the Court finds was a false affidavit of discovery on behalf of the respondents. There was a brief cross-examination of Mr Clayton Noble, Ms Stephanie Yip, Mr Alvin Ng and Mr Anthony Purcell. At the commencement of cross-examination, Ms Wei Li was asked the question as to there being no other person responsible for the day-to-day management of the company, and Ms Wei Li maintained that she was not involved with the day-to-day operation. Ms Wei Li suggested that she only dealt with external parties like the ATO and banks. This evidence was deliberately evasive by Ms Wei Li and is not accepted. In making this finding and the further adverse findings, the Court has taken into account Ms Wei Li’s demeanour in the witness box as well as the unsatisfactory and false evidence and what the Court finds was a false affidavit of discovery. Ms Wei Li gave evidence that she went to work every day, although she suggested she was not in the premises every day at the business premises. In answer to questions about Ms Wei Li’s responsibility for the first respondent, Ms Wei Li sought to maintain that she was the director but not involved in the daily operation. That evidence was deliberately evasive for reasons expanded upon below. Ms Wei Li sought to suggest that she worked a distance away from the sales office, and that even in relation to who the company employs, that it was not her sole decision and that she and the managers decide together. The Court finds Ms Wei Li’s evidence in this regard was seeking to distance herself from the extent of her involvement in the management of the company. The Court finds Ms Wei Li’s evidence that she was not involved with daily operations untrue. In response to a question about who had the greater level of responsibility in the day-to-day management of the company, Ms Wei Li responded as to what she was doing last week. The Court finds this was a deliberately unresponsive answer. When that question was repeated, Ms Wei Li maintained that she was not involved with day-to-day management in the operation of the business from 1 January 2014 to 31 December 2015. The Court does not accept that evidence as being truthful. The Court asked Ms Wei Li a question about monitoring the cash flow and expenditure, and Ms Wei Li responded that she has accounting personnel. That was a deliberate untruthful response. Ms Wei Li is a qualified accountant and the Court finds that Ms Wei Li was seeking to distance herself from her role and knowledge of the financial affairs and management of the first respondent. When asked a question about the cash flow and expenditure, Ms Wei Li again maintained unresponsively that she did not manage the day-to-day but she did know the whole picture. When asked whether Ms Wei Li knew the financial position of the company day-to-day of the first respondent and responded that she did not. When asked why not, Ms Wei Li said that she was focusing on all the external things, and that for the day-to-day things if she wanted to know she could ask, that she can either check herself or can ask the relevant department person. That evidence again was deliberate evidence by Ms Wei Li seeking to downplay the level of her involvement in the first respondent. When asked by the Court as to what records Ms Wei Li would look at if trying to ascertain the financial position, Ms Wei Li gave an answer referring to, “how many income we receive and also the expenses”. The answer was deliberately evasive given that Ms Wei Li was an accountant and fully understood the nature of the question asking for what records she looked at. The Courts finds that Ms Wei Li was again trying to downplay her level of knowledge of the company and her involvement in the company. When asked whether these records were on a computer that Ms Wei Li could access, Ms Wei Li said she could check the cash flow situation by checking the bank statement and made reference to also the accounting records and said: “with regard to the profit, then I have to ask accounting personnel or myself do some paperwork so I can find out.”

The Court finds that answer was deliberately evasive by Ms Wei Li seeking to downplay her knowledge of accounting records and minimise her involvement in the activities of the company.

Ms Wei Li was asked as to whether there was a ledger and a cashbook, and responded unresponsively at a high general level “some Excel sheets.” Ms Wei Li, as an accountant, was capable of answering the question truthfully and she did not do so. Ms Wei Li was asked what other financial records there were on the computer, by the Court and responded: “Something in the MYOB.... cash flow in and cash flow out, all the expenses and payment to suppliers.”

The Court finds Ms Wei Li’s response was evasive and an unresponsive answer by a person who was a qualified accountant and patently highly intelligent.

When asked as to whether the company was in her control, Ms Wei Li indicated that she had difficulty with the question “because the definition of control is too broad for me” and that Ms Wei Li did not know specifically what was meant by control. That answer reflects both a clear command of English language and a level of intellect analysing the questions being asked and giving what was an unresponsive answer. When asked by the Court whether Ms Wei Li was responsible for the running of the company she responded in the affirmative, and Ms Li also responded in the affirmative when asked if she was responsible for ensuring the business was run lawfully. Ms Wei Li’s answers do not sit neatly with the earlier volunteered answers suggesting a narrower day-to-day role. Ms Wei Li identified herself as assisting the fourth respondent in the running of the business of the third respondent. Ms Wei Li confirmed that she had access to the financial records of the third respondent. Ms Wei Li was asked questions specifically about Exhibit E being the System Builder Pack, and acknowledged that she had seen a similar one. Ms Wei Li contended that she did not read the terms on those documents to understand what they meant. When asked why not, Ms Wei Li responded: “Because I don’t know anything about software, don’t know anything about the hardware and these terms.” That was a deliberately evasive answer and untrue. Ms Wei Li acknowledged in response to a question, that it was important for her to understand what terms there were on agreements relating to the use of copyright or trademarks that might be used in her business. Ms Wei Li however, suggested that she would consult with a lawyer in that regard. When asked whether she was telling the Court that she did not take steps herself to bother to read the licenses or information relating to other peoples’ property and whether the first respondent was entitled to use the property, Ms Wei Li’s response was that: “On all these copies we have purchased from legitimate Microsoft authorised distributors or sub-distributors.” That answer is an answer that rings with admission, in relation to the knowledge of the respondents in the circumstances of the present case where the acquisition of the loose COA Labels occurred by cash from a fraudster who could not, on any view, be described as a legitimate Microsoft authorised distributor or sub-distributor. Further, the answer was not responsive to the question of whether Ms Wei Li took steps to read the licences or information relating to other peoples’ property and whether she was entitled to use the Software. This again, was an evasive endeavour by Ms Wei Li to explain away the conduct of the respondents. Ms Wei Li acknowledged that her staff installed the Windows 7 operating system onto the computers that were sold. Ms Wei Li acknowledged that it was her staff that affixed the loose COA Labels onto the computers. In response to the question as to whether Ms Wei Li took any steps to check whether the respondents were entitled to use that operating software and download it onto the computers that were being sold, Ms Wei Li maintained that before the letter of demand which lead to the initiation of these proceedings, that she did not check whether she was entitled to use the operating software and download it onto the computers she was selling. Ms Wei Li was then asked: “Did you take any steps to ascertain whether you were entitled to put the certificate of authenticity onto the computers that you were selling?” Ms Wei Li again responded: “Before the letter, I did not check.” The Court does not accept Ms Wei Li’s evidence. The Court finds Ms Wei Li was aware of the steps being taken to download the Software in circumstances where the loose COA Labels had been acquired at approximately half the price of the cost of the COA Labels that would have been applied with the System Builder Pack. The difference in price was a further factor putting the applicants on notice in respect of the authorised software and being the loose COA Labels that were the subject of infringing acts by the respondents in the present case. Even if the Court were to have accepted the evidence of Ms Wei Li in relation to not checking, that not checking in this case the Court finds reflects a deliberate step that would constitute the authorising of infringement in the circumstances of the present case. Ms Wei Li was asked the question in cross-examination about the letter of demand that was sent and the response sent on her behalf to the applicant’s lawyer. The cross-examiner put to Ms Wei Li that the response conveyed that she was aware that at the time, Microsoft had terms and conditions which related to its products, and Ms Wei Li responded: “Yes, I think – yes, as Microsoft a big – a worldwide big company must, have terms and conditions.”

The question was put whether it was correct that that related to their products and Ms Wei Lei responded:



“Terms, conditions related to their products. Yes”

In response to the question “you knew that?”, Ms Wei Li responded: “I’m not involved with – with purchasing all these. I – just common sense to me.”

That answer was unresponsive. It is clear that Ms Wei Li was aware of the existence of terms and conditions as the Court has found in respect of the infringement in the circumstances of the present case. Following that reference to common sense, the cross-examiner sought to further press Ms Wei Li in relation to the terms and conditions which related to the products. Ms Wei Li then responded saying:



“Probably, your Honour, because English is not my first language; it is my second language. Probably I didn’t – I – my understanding of terms and conditions might not be what Mr Fox meant. I – I’m not quite sure.”



That response was deliberately evasive in circumstances where the Court found Ms Wei Li had already earlier referred to terms and conditions. Further, being a qualified accountant, the suggestion that there was a language problem and that Ms Wei Li had a lack of understanding in relation to terms and conditions was a disingenuous endeavour to try and explain away the admission that she realised she had made in respect of knowledge of the terms and conditions. The proof of that proposition followed from the question then asked by the Court, that:



“a person who has done a professional accounting qualification would well understand the meaning of terms and conditions.”



Ms Wei Li responded, “Yes”.

Ms Wei Li was also asked whether it was correct that: “a person who has done an accounting qualification would well understand the terms and conditions relating to software products would be ones that would dictate whether or not you could use the products or sell them or install them. You would have been aware of that in 2014/2015?”

Ms Wei Li’s response was “For as a general knowledge”. That response was clearly one in the affirmative, and one acknowledging the knowledge of the first respondent and Ms Wei Li as the Court has earlier found.

Ms Wei Li was asked questions about the fourth respondent Mr Jin Wang and his role in the day-to-day management of the third respondent. Ms Wei Li suggested he was not involved in the day-to-day management of the third respondent. The Court does not accept that answer. The Court finds Ms Wei Li was again seeking to downplay the role of the fourth respondent in relation to the business run by the two corporate entities together. Ms Wei Li responded to a question put as to whether there was any other person than Mr Jin Wang who has more responsibility in the day-to-day management of the third respondent, and the unresponsive answer was: “what you mean by day-to-day management?” I do not accept that the witness, Ms Wei Li, did not fully understand the meaning of what was being asked. The Court finds the answer was deliberately unresponsive. Ms Wei Li explained in her evidence that the third respondent only received warehouse goods and suggested it had their own warehouse personnel. Ms Wei Li was taken to an ASIC search in relation to a company called LHX Pty Limited in respect of which the shareholder interest was that of Mr Jin Wang. The principal place of business was identified as being the same principal place of business as that of the first respondent. It was pointed out in evidence that LHX Pty Limited was the sole shareholder of the company being the first respondent of which the second applicant was the director. The Court sought to explore the business relationship between the second respondent and the fourth respondent, and was informed by Ms Wei Li that she was assisting Mr Jin Wang in his job. Ms Wei Li was asked, that as Mr Jin Wang could not carry on business at the premises of the first respondent unless Ms Wei Lei let him, whether there was a relationship in which they were running business together and Ms Wei Li responded that the third respondent sells goods to the first respondent. The Court then put to Ms Wei Li that both Ms Wei Li and Mr Jin Wang carry on business of the first respondent and third respondent and Ms Wei Li responded: “Yes. I’m his personal assistant.”

That evidence supports the Court’s findings in relation to authorisation and in relation to knowledge of the respondents in respect of the infringements.

Ms Wei Li was asked questions about an email that she sent on 4 November 2015 to the fraudster. Ms Wei Li’s evidence was to the effect that the email, as referred to earlier, was sent by the fraudster somehow accessing her computer records. The Court does not accept that explanation. Ms Wei Li was asked why the fraudster would do that and said she did not know why he would do that. No rational or logical explanation was advanced for why the fraudster would send himself an email using Ms Wei Li’s computer or accessing Ms Wei Li’s computer. The Court finds that Ms Wei Li sought to mask the extent of her relationship with the fraudster in the circumstances of the present case. The Court is not able to make findings in relation to the extent of the dealing by Ms Wei Li with the fraudster however it is apparent that she cooperated with him by forwarding him invoices in response to his email. This was conduct by Ms Wei Li on behalf of the respondents that assisted the fraudster by forwarding him the email sent on 4 November 2015 attaching invoices in respect of the fraudster’s fake entity sent to the first respondent. The affidavit of Ms Wei Li sought to limit the extent of her involvement and knowledge and role with the fraudster by referring to being known around the office as “Mabel”. That was in the context of seeking to explain away the first name use on the email sent to the fraudster. Ms Wei Li then gave evidence that she had in fact had other dealings with the fraudster. A third party that was the subject of an affidavit by Mr Anthony Purcell put on invoices that were received from the first respondent which referred to the sale of COA Labels only no media and referring to a stock number. The records on that invoice further support the Court’s finding in respect of the knowledge of the respondents in terms of the use of unauthorised loose COA Labels intended only for the Refurbisher Program that were being affixed to computers by the respondents without licence and in respect of which there was being downloaded the applicant’s software without licence, onto computers sold by the respondents. When asked questions about the absence of any issue being raised in Ms Wei Li’s affidavit in respect of the invoices attached to the affidavit of Mr Anthony Purcell, Ms Wei Li responded, “Sorry. I still not get your point – your question.” Ms Wei Li’s response is informative in that it conveys both a sharp intellect in understanding the questions being put and also an endeavour by her, rather than to understand the question, to understand the impact of the question in answering the same. Ms Wei Li gave evidence in relation to the merging of the stock codes and suggested it was not to conceal the unauthorised sale of loose COA Labels. Ms Wei Li contended that she did not do so but that: “Alwyn (Mr Alwyn Pan) merged the codes but he – because the – what he explained to me was they are double codes for the same item. That’s why he has merged those two codes. Ms Wei Li contended that this was done before Mr Alwyn Pan gave any explanation for the merging of the codes. It is not credible that the employee would have taken steps to merge the codes as contended by Ms Wei Li in the circumstances and at the time identified. I do not accept Ms Wei Li’s proposition that Mr Alwyn Pan had authority to merge the stock items without instruction from Ms Wei Li. The Court rejects that evidence of Ms Wei Li and finds Ms Wei Li was aware of and was involved in the merger of the stock items and that the merger of the stock items was to conceal the extent of the unauthorised infringement of the applicant’s copyright. When asked questions about the staff having installed the Microsoft Software onto the computers, Ms Wei Li responded: “I assume they did because in the system builder pack I saw something – I – I – did not look at word to word but I had a quick look. They said that we have to pre-install.”

Ms Wei Li was asked when she had a quick look at the System Builder Pack and Ms Wei Li responded:



“After the case went on then they gave me the – our builder pack which is much thinner than the one you just showed me.”

The quick look is informative in two respects. First, it is apparent that if Ms Wei Li had sought to look at the System Builder pack, she was able to understand it and secondly, that the only basis upon which the respondents could contend they would be entitled to do so would have been on the basis of the System Builder Pack and that there was no other licence of which she was aware which would have authorised the doing of the acts that occurred by the respondents in the present case. In response to the proposition that she had only had a quick look after the start of the case, Ms Wei Li was asked why she had not looked at it before when they were actually selling the products in 2014 and 2015. Ms Wei Li responded: “Because too many products. I cannot have a look one by one. I am not computer person. I’m not interested in these products.” At its lowest level, the answer reflects a deliberate decision not to make herself aware of the terms and conditions in respect of other peoples’ property that her company was purporting to perform acts or authorise acts in relation to. The Court does not accept, given the duration of the business and the circumstances that have been earlier referred to, that Ms Wei Li was not aware that what was occurring in relation to the loose COA Labels and downloading of software on the computers to which the loose COA Labels were affixed, were acts that were not permitted by the System Builder Pack or any other licence from the applicants. When asked whether Ms Wei Li was interested in whether or not she was carrying on the business lawfully, she responded that she did care about this and that she had not had any issues. The Court asked whether Ms Wei Li had made a deliberate decision not to inform herself as to the terms and conditions on which the software packages had been received from Microsoft and Ms Wei Li made reference to her employee being the technical person who had authority to buy from all these distributors and that Microsoft had authorised these computers for the company and that Mr Alwyn Pan had looked through the terms and conditions from Microsoft to ensure that what he was doing was legitimate. The answer is consistent with Ms Wei Li being well aware of the terms and conditions. I do not accept that the answer is truthful. The Court finds that Ms Wei Li was aware at the time that the software was being downloaded and the loose COA Labels for refurbishers were being affixed, that there was no licence from the applicants to do so. When being pressed further as to whether there was a deliberate decision not to inform herself about the terms and conditions, Ms Wei Li suggested that she trusted her employee and that she did the best she could to try always to comply with all the terms and conditions. That answer was both false and evasive. There was no step taken by Ms Wei Li to do the best she could to comply with all terms and conditions. Materially, in response to the question as to what steps she had taken to do her best, no meaningful answer was given. Turning to the quantification of calculated damages under s 115(4) of the Copyright Act, the Court finds that the infringements alleged by the applicants have been established. The Court is satisfied that the infringements in the present case were flagrant and deliberate. That flagrancy is supported by the adverse findings the Court has made in relation to the second respondent, Ms Wei Li. The fourth respondent, Mr Jin Wang did not give evidence. In those circumstances, it is appropriate to draw any adverse inference that is open on the evidence before the Court in respect of Mr Jin Wang’s authorisation in respect of the infringements that is open on the evidence. The Court infers that Mr Jin Wang was aware of the primary acts of infringement, was aware of the acquisition of the loose COA Labels for cash, was aware the loose COA Labels were for the refurbisher program, was aware of the merger of the stock codes, was aware of the destruction of records, was aware of the sale of computers to end users to which the COA Labels had been affixed without licence and on which the software had been downloaded without licence and that the respondents purported to authorise the end users to use the COA Labels and software without licence. For the reasons I have given, it is apparent that the businesses of the first and third respondents were run together. For the reasons I have given, by reference to the stock records and the use of the third respondent to invoice the acquisition from the fraudster of the COA Labels for cash payments, the Court finds that Mr Jin Wang and the third respondent participated in, consented to and authorised infringements that occurred by the first respondent in the present case. The Court finds that the infringement by all four respondents were flagrant and deliberate. The Court takes into account the need to deter, both the parties to these proceedings, as well as others from engaging in similar infringement of copyright. The purpose of s 115(4) of the Copyright Act plays an important part in the scheme of the Copyright Act to discourage the destruction or infringement of copyright. The Court takes into account the conduct of the respondents after the acts constituting the infringement. The conduct in that regard is one which the Court has found involved the destruction of records relating to stock numbers to conceal the full extent of the infringement of the applicants’ copyright by the respondents. The Court also takes into account that there has been a further destruction of records which Ms Wei Li sought to explain by affidavit sworn 21 December 2017 was due to an electricity supply outage, allegedly destroying customer invoices of the first respondent from the period January 2014 to August 2017, allegedly destroying the sales ledger of Microsoft Windows 7 Professional for the period 8 September 2016 to 7 August 2017, and allegedly destroying the sales ledger of Microsoft Windows 7 Home Premium for the period January 2014 to August 2017. Ms Wei Li was cross-examined in relation to that affidavit. The contention advanced that there had been an outage on 21 November 2017 is not supported by the subpoenaed records from the electricity supplier. The Court finds that the explanation advanced by Ms Wei Li in this regard is untrue. The Court finds that records identified in Schedule 2 which was an affidavit made on behalf of the respondents, was the subject of a false explanation in relation to the non-production of those records. This is further serious and aggravating conduct in relation to the additional damages that should be awarded. Further, in the conduct of the case, it is apparent that the respondents have raised issues having little or no merit and have failed to make admissions that might have otherwise diminished the extent of the additional damages that this Court should order. The giving of the false evidence by Ms Wei Li is a further aggravating matter in relation to the conduct of the respondents. The Court infers that Mr Jin Wang was aware of this false affidavit discovery evidence. The Court takes into account the nature of the infringements that the Court has found. The Court finds the respondents obtained a benefit in not having to pay the full fee that would otherwise have been payable under the System Builder Pack for the computers being sold by the respondents. The Court also takes into account the amount that has been already allowed in relation to damages to avoid any duplication. In relation to the award of additional damages the Court is entitled to take into account other relevant matters. The Court regards the turnover of the first respondent, being in the order of $20 million a year as being another relevant factor to take into account, in the context of the infringements that have occurred in the present case. The Court is satisfied that, in the present case, it is appropriate to award additional damages against each respondent, in the sum of $500,000.00 separately.

Contravention of s 18 of Australian Consumer Law

A case was also advanced of a contravention of s 18 of the ACL. The representations were not taken issue with, but it was asserted that by reason of the other grounds advanced by the respondents, that there was no contravention or misleading conduct. The Court finds that the first respondent, by selling computers which contained reproductions of the Microsoft Windows 7 operating systems and to which were affixed loose COA Labels expressly represented to purchasers being the end users of those computer systems that:- The Microsoft Windows 7 operating systems were installed on computer systems made with the licence of the first applicant; The purchasers of the computer systems were licenced by the first applicant to use the Microsoft Windows 7 operating systems installed on the computer systems; The first respondent was licenced by the first applicant to supply and affix the loose COA Labels; and The purchasers of the computers to which the loose COA Labels were affixed were licenced by the first applicant to use the COA Label to activate and use the associated Microsoft Windows 7 operating system. The Court finds the representations made by the first respondent were misleading and deceptive and were in trade and commerce. The Court finds that the representations were misleading and deceptive. The Court finds that there was misleading conduct as alleged by the applicants in the present case in contravention of s 18 of the ACL of Schedule 2 to the Competition and Consumer Act. In relation to the findings in respect of the ACL, the Court finds that the second, third and fourth respondents were knowingly involved in the contravention of s 18 of the ACL of Schedule 2 to the Competition and Consumer Act. These findings are based on the evidence of Ms Wei Li, the false discovery affidavit and the adverse inferences drawn in respect of Mr Jin Wang. It was suggested that no damage had been suffered within the meaning of s 236 of the ACL of Schedule 2 to the Competition and Consumer Act because it was not the case that the end users had suffered damage. Section 236 of the ACL of Schedule 2 to the Competition and Consumer Act is not to be read so narrowly. The applicants did not contend for an additional or different amount to that which was advanced in relation to the damages sought for breach of copyright in respect of the ACL claim. The end users were without licence and were purportedly authorised by the respondents to use the applicants’ copyright. The costs of that licence if lawfully granted, reflects the loss suffered by the applicants by reason of the contraventions. For the reasons earlier given I find that the loss suffered under s 236 of the ACL of Schedule 2 to the Competition and Consumer Act by the respondents can be quantified by reference to the lost licence fee as earlier referred to and the Court will make a declaration that there has been a contravention by the respondents which would have entitled the applicants to damages in a similar amount but for the orders made under the Copyright Act.

Trade mark infringement

The next issue that arises in the proceedings is the cause of action under the Trade Marks Act. The respondents advanced a case under s 123 of the Trade Marks Act. That section relevantly provides as follows: (1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

Note: For similar goods see subsection 14(1).

(2) In spite of section 120, a person who uses a registered trade mark in relation to services that are similar to services in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied in relation to the services by, or with the consent of, the registered owner of the trade mark.

Note: For similar services see subsection 14(2). The Court finds the applicants’ trade marks “Windows” and “Microsoft” as identified in the statement of claim have been used (with goods being computers), by reason of the downloading of the Software onto computers the subject of sale with a loose COA Label affixed that would permit activation, by displaying the software as well as displaying the trade marks on those goods as well as in respect of the COA Label that also bore the applicants’ trade marks. The trade marks were in that regard, applied to the computer without the consent of the registered owner of the trade marks being the applicants. No defence as alleged under s 123 of the Trade Marks Act is made out. The Court finds there has been an infringement as alleged under s 120(1) of the Trade Marks Act of the applicants’ trade marks by the respondents. The Court rejects the respondents’ submissions that no damages should be awarded. Prayers for relief in the pleading clearly sought such relief, the want of particulars or quantification by reference to reputational evidence does not mean that no damages should be awarded. The Court finds that the applicants are entitled to damages for infringement of their trade marks. In the present case, the Court finds that the damages should be assessed at large as would be done by a jury in a tort case. The damages are for diminution in value of the applicant’s trade marks by reason of the infringements. The quantification of the damages at large in respect of trade mark infringement is an intrinsic assessment. The Court must be astute to avoid duplication in light of the damages and the additional damages that the Court has awarded in the circumstances of the present case under the Copyright Act. The applicants’ property the subject of the Trade Mark Act is different to the property the subject of the Copyright Act. The Trade Marks Act performs an important legislative purpose in protecting property rights in trade marks. Whilst it may be difficult to quantify the damages in the present case for infringement and diminution of the value of the trade marks, the Court must do the best it can. The Court takes into account that the infringements have occurred arising from use of the loose COA Labels and downloading Software in respect of each of the computers that the Court has found have been the subject of sale over a substantial period by the respondents. The unauthorised use of the applicants’ trade marks, inevitably must damage the reputation and value of the applicants’ trade marks. Nominal damages are not adequate given the extent of the infringements in the present case that involve the sale without licence of 1,617 computers purportedly authorising use of the applicants’ trade marks “Windows” and “Microsoft” over a substantial period as reflected in the 28 invoices starting from 17 July 2014 up to 17 August 2015. The Court finds the applicants have suffered damages in the circumstances of the present case, that diminished the value of the applicant’s trade marks and the Court finds that at large, it is reasonable and appropriate to award damages under s 126(1) of the Trade Mark Act in the sum of $25,000.00 against the respondents. The Court finds that each of the respondents authorised and was aware of the infringement of the trade marks. The Court finds that the respondents knew that they were engaging in unauthorised acts in respect of the applicants trade marks by the use of the loose COA Labels affixing the same to the computers sold to end users, the downloading of unauthorised software onto those computers and the purported authorisation for end users to use the said trade marks and to activate the software without licence or authorisation from the applicants. The Court finds that each of the respondents knew the acts were unauthorised and concurred and authorised the infringements both as to be liable for general damages as well as for being liable to additional damages. These findings are based on the evidence of Ms Wei Li and the findings made above in respect of her evidence and the adverse inferences drawn by the Court in respect of Mr Jin Wang. The Court has considered whether or not it is appropriate to award additional damages under s 126(2) of the Trade Mark Act. The Court is mindful of the fact that substantial damages and additional damages have been awarded under the Copyright Act. Nonetheless, the property the subject of the Trade Marks Act is separate property and for the reasons earlier given, the respondents infringement of the applicants’ trade marks was flagrant. The Court also takes into account the important need to deter the respondents as well as others from similar infringements of trademark. The Court takes into account the conduct of the parties that have taken place. It is important in this regard not to punish the respondents twice in respect of that conduct. The applicants’ trademarks are well-known and financial benefit has been obtained in effecting sales by the respondents in the use of those trademarks. The Court again takes into account the size of the business in terms of the annual turnover earlier referred to above. But for the other damages that have been awarded and additional damages under the Copyright Act, the Court would have imposed almost double the separate amount under s 126(2) of the Copyright Act that the Court proposes to impose on each respondent. The Court awards additional damages in the sum of $75,000.00 against each respondent as additional damages for infringement of the Trade Marks Act.

Injunctive relief

An issue arises as to whether injunctive relief is appropriate. The Court is satisfied that it is appropriate because of the finding of the conduct that has occurred in the present case which can be fairly described as dishonest by the respondents given the destruction of records and the false evidence that the court has referred to. It is appropriate under s 115 of the Copyright Act to grant an injunction under s 115(2) of the Copyright Act to prevent repetition of copyright infringement. The Court is not satisfied that it is necessary to grant an injunction other than against the first and third respondents as that will catch the second and fourth respondents being servants or agents.

Conclusion

The Court makes declarations, injunction and orders as set out above.

I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of Judge Street







Date: 27 September 2018