With a Little Help From My Friends: Copyright Infringement by Authorisation

Software is protected as a literary work under the Copyright Act 1968 (Cth) (Copyright Act).

Therefore, certain unauthorised use of a software product may constitute an actionable infringement.

To be liable, one does not necessarily need to engage in the infringement directly. Rather, merely authorising another to infringe may land you in the firing line for litigation.

The grounds upon which one may “authorise” infringement were considered by the Full Court of the Federal Court of Australia in Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd.

The facts¹

The case involved a dispute over a software product for use in the real estate industry.

Biggin & Scott Corporate Pty Ltd (B&S) wanted to develop a competitor to software products currently on the market, and engaged Mr David Semmens to develop the software within a constrained period of time.

Mr Paul Stoner and Ms Michelle Bartels, both directors of B&S, were also friends with Mr Semmens. However, both were aware of Mr Semmens having infringed upon the copyright in a software product on a previous occasion. Accordingly, Mr Stoner presented Mr Semmens with a letter stating:

• “You are instructed to build a web to print delivery system that does not breach any other companies IP or ownership…In simple terms, we do not want any things [sic] used that can be claimed as owned by [DreamDesk or Campaign Track].”

Although Mr Semmens never signed the letter, he gave evidence that he was aware of it and had discussed same with Mr Stoner.

Mr Semmens subsequently developed a new software product named “Toolbox”. Toolbox borrowed extensively from a similar product named “DreamDesk”, including by copying substantial parts of its source code. Mr Semmens’ infringement of the copyright subsisting in DreamDesk was clear. However, the issue before the Full Court was whether various parties, including B&S, Mr Stoner and Ms Bartels, had authorised Mr Semmens’ blatant copyright infringement.

Infringement by authorisation

The Copyright Act provides that the following must be taken into account when determining whether a person has authorised an infringement:

• the extent of the person’s power to prevent the doing of the act concerned;
• the nature of any relationship existing between the person and the person who did the act concerned; and
• whether the person took any reasonable steps to prevent or avoid the doing of the act.

These provisions have been interpreted rather broadly by Australian courts.

The decision

Ultimately, B&S, Mr Stoner and Ms Bartel were found to have authorised Mr Semmens’ infringement during a specific period of time.

Of critical importance was a letter received alleging that Toolbox infringed upon the copyright subsisting in the DreamDesk product. Upon becoming aware of these allegations, Mr Stoner and Ms Bartels ought to have investigated the matter further, given their knowledge of Mr Semmens’ past indiscretions. They failed to do so, rather employing a strategy to deny infringement and put the owner’s of DreamDesk to the task of proving infringement through litigation. Further, they continued to allow the infringing Toolbox product to be used and prevented an IT forensic expert from having reasonable access to the product in order to assess the veracity of the allegations. Ultimately, B&S, Mr Stoner and Ms Bartel were in a position to:

• investigate the alleged infringement; and
• stop the continued use of the infringing software product, given their relationship with Mr Semmens and the control they wielded over the software itself,

but chose not to do.

Although they did not, in fact, undertake the infringing conduct, they were found liable due to their knowledge of the allegations (after receipt of the letter) and their control to prevent further infringing conduct (which they elected not to wield). These parties are now exposed to potential damages and costs orders.

Lavan comment

B&S, Mr Stoner and Ms Bartels took action in order to protect themselves by presenting the letter to Mr Semmens in which he would agree specifically not to infringe on prior works. Although this action was prudent and ultimately did protect them from liability for a period of time, once they became aware of the infringement allegations, it was incumbent upon them to take additional steps. They did not do so, and now are exposed for the sins of Mr Semmens.

This case is a critical reminder of the potential exposure one may have when engaging a contractor to develop software (or any other work) on your behalf. Further, once allegations come to light of infringing conduct, it is not enough to take a purely passive role.

Copyright is a complex area. If you require advice in relation to copyright law, do not hesitate to contact Iain Freeman or Andrew Sutton.

¹The factual matrix of this case has been simplified for the purpose of this article