Suspect your supplier is infringing copyright? Take action or Biggin trouble might be coming your way

James Neil, Emina Besirevic
18 Aug 2022
Time to read: 4 minutes

Copyright owners can sue intermediaries who have authorised the primary infringement, whether by act or omission.

A recent Full Federal Court decision is a useful reminder that where a potential breach of copyright is bought to your attention, it is imperative to take it seriously and act proactively, whether you are the copyright owner, or someone who could be held responsible for that infringement (Campaigntrack Pty Ltd v Real Estate Tool Box [2022] FCAFC 112).

What happened in Campaigntrack Pty Ltd v Real Estate Tool Box?

Australian marketing platform, Campaigntrack, owned the copyright in a cloud-based real estate marketing system known as "DreamDesk". After DreamDesk was sold and shut down, software developer David Semmens created a second real estate marketing platform named “Real Estate Toolbox”. The development of Toolbox was supported by real estate agency, Biggin & Scott, which was involved in the creation of Toolbox and also used the software platform as a customer. Campaigntrack claimed that Toolbox reproduced parts of the DreamDesk code, thereby infringing its copyright. It issued proceedings against Real Estate Tool Box Pty Ltd, Biggin & Scott and Semmens.

At first instance, Campaigntrack was partially successful. The court found that Semmens, the primary developer of Toolbox, had directly infringed copyright in the DreamDesk system. However, the court held that the other respondents (referred to collectively below as Biggin & Scott) were not liable for copyright infringement, whether by way of primary infringement or as having authorised the reproduction of the DreamDesk source code in any way. As to authorisation, the Court held that Biggin & Scott could not have relevantly authorised the reproduction as it could not have reasonably known that Semmens had reproduced the source code belonging to DreamDesk.

Campaigntrack appealed the decision in the Full Federal Court. It alleged that the primary judge failed to attribute sufficient weight to a letter sent by Campaigntrack’s solicitor to Biggin & Scott which alleged “improper access and duplication” of the DreamDesk code.

The appeal was successful. The Court held that because Biggin & Scott received specific notice of the primary infringement, and had the power to prevent continued infringement, it authorised Semmens’ misconduct and was therefore liable for copyright infringement.

Authorisation as an infringement

The Copyright Act grants copyright owners the exclusive right to do certain acts with regard to copyright material, including the exclusive right to “authorise” another person to do such acts. Therefore, copyright owners can sue intermediaries who have authorised the primary infringement. Whether someone has authorised (ie. sanctioned, approved or countenanced) an infringement is considered based on the facts of the case and in light of the following factors:

  • the extent (if any) of the person’s power to prevent the infringing act;
  • the nature of any relationship between the infringer and the alleged authoriser; and
  • whether the alleged authoriser took any reasonable steps to prevent or avoid the infringing act, including whether they complied with any relevant industry codes of practice.

The copyright owner needs to both clearly identify the infringing acts and clearly identify the acts or omissions that are claimed in order to succeed in a claim of authorisation as infringement.

How did Biggin & Scott authorise the infringement?

One of the key issues that the Court considered was whether Biggin & Scott took sufficient “steps to prevent or avoid” the infringing acts. Ultimately, the court found that it did not.

After being put on notice of a claim of copyright infringement by Campaigntrack’s lawyers, the Court held that Biggin & Scott was “unreasonable and indifferent” based on the following:

  • it took no steps to independently verify whether Toolbox infringed another company’s IP rights;
  • when it did engage an independent forensic IT expert, it was deemed to be “taken at too late a point in time”;
  • when the forensic report revealed a “high probability” of copyright infringement, Biggin & Scott continued to use the Toolbox software;
  • the Toolbox system continued to be used “clearly for commercial purposes”; and
  • Biggin & Scott continued engagement with the primary infringer and did not put an end to the joint venture with Semmens which could have disrupted his primary infringements.

Biggin & Scott argued that it “trusted” Semmens and was assured by him that he had not copied material the subject of copyright claims. However, the Court noted that this was not enough. Rather, Biggin & Scott should have made specific inquiries of Semmens in order to be satisfied that he had not copied, and was not intending to copy, any of Campaigntrack’s IP.

But I didn’t know they were infringing copyright!

Campaigntrack also argued that the authorisation of infringement does not require specific knowledge of infringement, especially where implied “permission or invitation” is established.

In considering the role that knowledge may have in determining whether someone has authorised infringement, the Court detailed three possible states of knowledge:

  • actual knowledge of the doing of an act;
  • constructive knowledge of the act (because the person had reasonable grounds to suspect the doing of an act); and
  • wilful blindness to the doing of an act.

The Court held that Biggin & Scott either knew, or had reason to suspect, that Semmens either had or would likely copy aspects of the DreamDesk source code. It does not matter, said the Court, that Biggin & Scott was not the author and was not in a position to know from its own direct knowledge whether the claim was in fact true or false. Rather, Biggin & Scott had notice of the infringement and it had the control to address it. Here, the parties were in a contractual relationship and had the power to either change their instructions or terminate it.

Therefore, even if you do not know for certain that infringement is occurring, if you have reason to suspect that it might be occurring and do not to take any action where you had the power to do so, this case makes very clear that you are putting yourself at risk of authorising infringement.

Managing the risk of copyright infringement

The law does not make everyone liable for failing to proactively protect the copyright of others. Liability only arises where you have sufficient involvement to justify being held responsible. Where there is a reasonable basis to suspect copyright infringement by some other person, and you may be in a position to prevent the continued infringement by that person, it is imperative to be prompt and deliberate in taking reasonable action.

Rights holders, on the other hand, should consider whether it may be possible to pursue intermediaries where their copyright has been infringed. That is particularly so where the “primary” infringer is of limited means and may not be able to satisfy any damages award or costs order.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.