In the recent case of Rutter v Brookland Valley Estate Pty Ltd  FCA 702, the Federal Court of Australia awarded exemplary damages of $150,000 in addition to compensatory damages for what it found to be flagrant copyright infringement, based predominantly on conduct of in-house counsel that the Court decided was 'imprudent in the extreme'.
In 1999, Jane Rutter, an internationally renowned Australian flautist, contracted with Brookland Valley Estate Pty Ltd (Brookland Valley), the operating company of the Brookland Valley Vineyard in the Margaret River region of Western Australia, for Ms Rutter's provision of a musical composition, sponsorship and licence to use her copyright material in relation to the release of Brookland Valley's range of Verse 1 wines.
Brookland Valley used a pictorial representation of music composed by Ms Rutter on labels and marketing material in relation to its Verse 1 range.
The licence agreement agreed in late 1999, was for a term of one year, with an option for Brookland Valley to extend the term for a further year. The licence terms fixed a limit of 90,000 bottles of Verse 1 wine of only Semillon Blanc and Cabernet Merlot varieties.
After entering the licence agreement, without varying the licence agreement nor seeking Ms Rutter's authorisation or compensating her in any way, Brookland Valley acted in a manner which the Court held to constitute breach of the agreement and infringement of her copyright.
Evidence was led at trial as to the significance of the portion of Ms Rutter's musical composition used in graphic form on the Verse 1 label. An expert musicologist gave evidence that the part of Ms Rutter's composition reproduced on the Verse 1 label was an immediately recognisable excerpt of the composition that was significant, essential and material.
The Court was particularly critical of the conduct of Mr Whelan, the company secretary and in-house legal counsel of Constellation Wines Limited (a joint venture partner in the Brookland Valley winery). His conduct, and that of Brookland Valley, was deemed to be flagrant within the meaning of section 115(4) of the Copyright Act 1968 (Cth) which provides that:
'Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the Court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject matter from hard copy or analogue form into a digital or other electronic machine readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the Court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.'
The Court found that Brookland Valley's conduct was flagrant because it continued to breach Ms Rutter's copyright in disregard of her rights even after they had been expressly brought to its attention. In September 2005, a letter was sent by Ms Rutter's solicitor requesting copies of the licence documentation and a full account of Ms Rutter's entitlements under the contract. Mr Whelan received the letter and searched Brookland Valley vineyard for any documents evidencing the contract but found none. Mr Whelan gave evidence that he 'overlooked' responding to the letter from Ms Rutter's solicitor and that no response was ever made. In the meantime, Brookland Valley changed its Verse 1 label, but retained Ms Rutter's music on it in continued breach of the licence agreement and Ms Rutter's copyright.
In December 2006, Ms Rutter's solicitors again wrote in relation to the reproduction of Ms Rutter's score on the label of Verse 1 wines. This letter also went unanswered. In April 2007, Ms Rutter commenced proceedings against Brookland Valley.
At the commencement of the proceedings, Brookland Valley was still using Ms Rutter's music on the Verse 1 label, without the attribution of her as the author. Although steps were taken to notify wholesalers and retailers to destroy print material and point of purchase material containing images of the previous Verse 1 labels, steps were not taken to prevent ongoing sales of Verse 1 wines bearing the label depicting Ms Rutter's music or even to stop use of the label at the point of production. Evidence was led at trial that Brookland Valley in fact gave work orders for the production of infringing labels after the commencement of the proceedings.
The Court held that Brookland Valley's conduct, and particularly Mr Whelan's conduct, showed a disregard for Ms Rutter's rights and a clear case of a flagrant breach of her copyright. The Court awarded Ms Rutter exemplary damages, in part to deter others from taking the approach adopted by Brookland Valley in this case.
The Court found that the Verse 1 label featuring Ms Rutter's music reproduced her original musical work in substantial part and that it was published in breach of her exclusive rights, except to the extent authorised by her in the licence agreement for the prescribed one year period. The Court awarded Ms Rutter compensatory damages, with interest, as well as additional damages for Brookland Valley's continued flagrant breach of copyright.
The decision is an apt warning that companies without appropriate licence rights to use copyright material can be liable for copyright infringement and ordered to pay not only compensatory damages but also exemplary damages where their conduct displays a flagrant disregard for the rights of the copyright owner. The case is also a pertinent reminder to in-house counsel that ignoring a licensor's rights and demands in relation to any unauthorised use of copyright material can have expensive and professionally embarrassing consequences.
For queries on this case and Intellectual Property issues please contact: Wayne Zappia on (08) 9288 6931/ firstname.lastname@example.org.