A recent decision by the High Court of Australia has affirmed that companies that are 'indifferent' to copyright infringement can be held liable for authorising the infringement, but that specific evidence is needed to prove this.

The case  involved the development of real estate marketing software called 'Toolbox'.  The owner of another real estate marketing software product called 'DreamDesk' sued, claiming the developer of Toolbox had infringed copyright subsisting in the source code of its product.

The High Court's decision in Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd [2023] HCA 38, delivered in December 2023, reinforces the importance of taking notice of any potential infringement (particularly after being notified of this) and making sure that any agreements entered into with software developers contain provisions that address potential copyright infringement.

What happened

The dispute concerned real estate marketing software called 'Toolbox'.  The primary judge in the Federal Court found that the developer of Toolbox had infringed copyright subsisting in the source code of another real estate marketing software product called 'DreamDesk', owned by Campaigntrack (the applicant in the original proceeding).  

However, his Honour did not find that the other respondents, including the real estate agency that commissioned the software, had authorised the infringement, and therefore they were not held to be indirectly liable for the infringement.

Appeal to the Full Court of the Federal Court

On appeal, a majority in the Full Court found that two groups of parties were, in fact, indirectly liable for the developer's copyright infringement, as they had authorised it.

The first group were the Biggin & Scott parties, who were:

• the franchisor of the real estate agency that commissioned the development of Toolbox; and
• its directors, namely Mr Stoner and Ms Bartels.

The second group were the DreamDesk parties, who were:

• the software company that owned the DreamDesk software before it was sold to Campaigntrack and that provided premises and staff to the developer of Toolbox; and
• its sole director and shareholder, Mr Meissner.

What was particularly convincing for the Full Federal Court was a letter sent by Campaigntrack's lawyers to the DreamDesk parties on 29 September 2016.  The letter asserted that Campaigntrack had "become aware of improper access and duplication of code" owned by it ¹ and requested that the relevant parties provide undertakings to Campaigntrack.  Therefore, the DreamDesk and Biggin & Scott parties were on notice from that date "… of a serious contention that use by users involved an act of infringement as Toolbox was run copying and replicating the DreamDesk source code and other works." ²  Hence, the parties should have been put on notice that copyright was being infringed and their "indifference" to this fact amounted to authorisation of the infringement.

These groups then appealed the Full Court's decision to the High Court.

Decision of the High Court

The High Court unanimously overturned the Full Court's decision and found that the DreamDesk and Biggin & Scott parties did not authorise the copyright infringement.  In their decision, the High Court said that care must be taken when describing authorisation as "indifference" and noted that ultimately, authorisation is determining by assessing the facts of the case and applying the following factors in s 36(1A) of the Copyright Act 1968 (Cth):

1. the extent of the person's power to prevent the infringement;
2. the nature of the relationship with the infringer; and
3. whether the person took any reasonable steps to prevent or avoid the infringement.

The High Court emphasised that the relationship between the Biggin & Scott parties and the developer was one of trust where the Biggin & Scott parties had no expertise in software development.  Therefore, even though the Biggin & Scott parties did have the power to stop the developer from infringing copyright, they trusted that he would not do this (and they had freely given the undertakings sought by Campaigntrack).  Additionally, by seeking assurances from the developer that no copyright was being infringed, the Biggin & Scott parties took reasonable steps to prevent infringement.

Similarly in relation to the DreamDesk parties, the High Court found that authorisation was not likely.  The DreamDesk parties gained nothing from the development of Toolbox and it was unlikely that Mr Meissner (who promptly provided the undertakings sought by Campaigntrack) would have allowed the infringement if he knew about it.  So it was ultimately immaterial that the DreamDesk parties provided staff and premises to the developer because the underlying relationship with the developer was not one where they should have known about the infringement.

A key difference between the reasoning of the Full Federal Court and the High Court was how they interpreted the fact that the two groups did not follow up the developer after he failed to provide an undertaking following receipt of the letter dated 29 September 2016.  The Full Federal Court found it highly indicative of authorisation.  However, the High Court found that this interpretation was not open to the Court, as the parties gave an innocent explanation at the first trial and were not cross examined.  

Key takeaways

Companies who are 'indifferent' to copyright infringement can be held indirectly liable for authorising the infringement, particularly when notice of the infringement has been provided.  

However, the High Court's decision makes it clear that whether authorisation has occurred depends upon the facts of each case, applying the factors set out in s 36(1A) of the Copyright Act 1968 (Cth).

It is important to make sure that any agreements entered into with software developers contain provisions disclaiming any liability for copyright infringement and/or expressly stating that any software developed must not infringe the intellectual property of third parties.

In addition, detailed inquiries should be made upon receipt of any infringement notice, to ensure that any allegations of potential infringement are properly investigated.

If you have any queries about copyright law, please contact a member of Thomson Geer’s Intellectual Property Team.

¹ Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2022] FCAFC 112 [64].

² Campaigntrack Pty Ltd v Real Estate Tool Box Pty Ltd [2022] FCAFC 112 [117].

Authors

Ben Coogan | Partner | +61 7 3338 7503 | bcoogan@tglaw.com.au

Georgia Campbell | Senior Associate | +61 7 3338 7541 | gecampbell@tglaw.com.au

William Cook | Summer Clerk

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