Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Limited [2002] FCAFC 96 Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Limited [2002] FCA 421 NOTE: CHANGES TO THE MEDIUM NEUTRAL CITATION (MNC) The Federal Court adopted a new medium neutral citation (FCAFC) for Full Court judgments effective from 1 January 2002. Single Judge judgments will not be affected and will retain the FCA medium neutral citation. The transitional arrangements are as follows: * All Full Court judgments delivered prior to 1 January 2002 will retain the FCA medium neutral citation. * All Full Court judgments delivered between 1 January 2002 to 30 April 2002 have been assigned parallel medium neutral citations in both the FCA and FCAFC series. * All Full Court judgments delivered from 1 May 2002 will contain the FCAFC medium neutral citation only. FEDERAL COURT OF AUSTRALIA Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Limited [2002] FCA 421 COPYRIGHT – Application to recall and vacate orders made by the Full Court dismissing the appeal – whether the Full Court mistook the manner in which the appellant conducted the appeal Pacific Gaming Pty Limited v Aristocrat Leisure Industries [2002] AIPC 91-759, considered. PACIFIC GAMING PTY LIMITED V ARISTOCRAT LEISURE INDUSTRIES PTY LIMITED N 1204 OF 2000 SACKVILLE, FINN & KENNY JJ SYDNEY 11 APRIL 2002 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1204 OF 2000 BETWEEN: PACIFIC GAMING PTY LIMITED APPELLANT AND: ARISTOCRAT LEISURE INDUSTRIES PTY LIMITED RESPONDENT JUDGES: SACKVILLE, FINN & KENNY JJ DATE OF ORDER: 11 APRIL 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appellant's notice of motion filed 13 December 2001 be dismissed. 2. The appellant pay the respondent's costs of the motion. 3. In the absence of any written submissions relating to the costs of the appeal being filed within fourteen days, there be no order as to the costs of the appeal. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1204 OF 2000 BETWEEN: PACIFIC GAMING PTY LIMITED APPELLANT AND: ARISTOCRAT LEISURE INDUSTRIES PTY LIMITED RESPONDENT JUDGES: SACKVILLE, FINN & KENNY JJ DATE: 11 APRIL 2002 PLACE: SYDNEY REASONS FOR JUDGMENT THE MOTION 1 On 26 November 2001 the Full Court, as presently constituted, delivered judgment in an appeal brought by leave from a judgment of a Judge of this Court. The Full Court allowed the appeal in part but, relevantly for present purposes, dismissed the balance of the appeal: Pacific Gaming Pty Limited v Aristocrat Leisure Industries Pty Ltd [2002] AIPC 91-759; [2001] FCA 1636. The orders made by the Full Court have not yet been entered. 2 The appellant ("Pacific") has applied by motion to recall and vacate the order dismissing the balance of the appeal and consequential relief. Pacific submits that the Court mistook the manner in which Pacific conducted the appeal and, in consequence, failed to address a critical issue. Pacific says that this omission warrants the relief sought in the motion and invites the Court to set a timetable for further submissions on the issue said to have been overlooked. 3 The respondent ("Aristocrat") does not dispute that, as the orders have not been entered, the Full Court has jurisdiction to entertain Pacific's motion. Nor does it dispute that if the Court failed to address a critical issue raised by Pacific, it is appropriate to vacate the order dismissing the balance of the appeal. Aristocrat contends, however, that the Full Court did not misapprehend the position and addressed the arguments advanced by Pacific on the appeal. 4 The primary Judge held that Aristocrat had copyright in four written specifications prepared by it for games to be played on electronic gaming machines. His Honour further found that Pacific had infringed Aristocrat's copyright by reproducing a substantial part of Aristocrat's written specifications in · Pacific's own written specifications for four games, each such specification corresponding in important respects to its Aristocrat counterpart; and · information embodied in electronic form in EPROMs ("EPROM" is an acronym for "Erasable Programmable Read Only Memory"), containing instructions for the operation of each of Pacific's four games. 5 The four pairs of corresponding games identified by Aristocrat are set out in the following chart, adapted from the Full Court's judgment (at 37, 053; [5]): Aristocrat Game Pacific Game Top Gear Diamond in the Sky Enchanted Forest Yellow Brick Road Tequila Sunrise Fortune Turtle White Tiger Lucky Lion 6 Pacific's appeal was limited to a challenge to the primary Judge's findings on infringement. The Full Court upheld the primary Judge's finding that Pacific had copied Aristocrat's written specifications in order to design its own games. The Full Court also upheld his Honour's finding that Pacific's written specifications infringed Aristocrat's copyright in its specifications. It held, however, that the primary Judge's finding that Pacific's EPROMs reproduced Aristocrat's written specifications (in respect of which Aristocrat had copyright) could not stand. In the result, the Full Court made the following orders: "1. The appeal be allowed in part. 2. Orders 1(a)(ii), 1(b)(ii), 2(b), 3(a)(ii), and 3(b) (insofar as Order 3(b) refers to EPROMs), made by the primary Judge on 26 October 2000, be set aside. 3. The appeal otherwise be dismissed. 4. Any written submissions as to the costs of the appeal and the costs orders made by the primary Judge be filed and served within fourteen days." Pacific's motion seeks an order recalling and vacating orders 1, 3 and 4. submissions on the motion 7 In support of its motion, Pacific contended that the Full Court was required to undertake a direct comparison of each of Aristocrat's written specifications with the corresponding Pacific specification. Mr Ireland QC, who appeared with Mr Webb on Pacific's behalf, said that Pacific's written submissions on the appeal had made this point. Moreover, he asserted that the point had been reinforced in oral argument when he had taken the Court to the written specifications relating to Aristocrat's Tequila Sunrise and its alleged counterpart, Pacific's Fortune Turtle (Ts 31-45). 8 Mr Ireland identified a number of passages in the transcript of argument on the appeal that, so he argued, supported the proposition that the Court had been invited to undertake its own examination of the four pairs of written specifications. Early in his submissions on the appeal, Mr Ireland said this (Ts 7): "I'm coming to identify with a little more precision than the judge did, I hope, the steps by which the LAB specifications came into being, that through a series of documents produced by various witnesses. I was going to just take your Honours to the sequence of documents as they came into existence to note their form and the differences between them and ultimately come to the question of comparison between the LAB specifications asserted to be the copyright works and the appellant's LAB specifications which the case required should be treated as reproductions if not in whole at least in substantial part." The following exchange occurred later (Ts 45): "SACKVILLE J: May we take it, Mr Ireland, that what you say about the particular comparison that you have been making, Tequila Sunrise, and so forth, applies to the other three[?] MR IRELAND: It does, there are differences, but I think the worst case against us is Diamond in the Sky. SACKVILLE J: You mean the best from Mr Franklin's point of view? MR IRELAND: Yes. Well, looking at it from either direction. The similarities in [reel] length, for example, are at their zenith in Diamond in the Sky, but we would say that – I wasn't going to take your Honour through every single one. I just wanted to give your Honour the form of the document, the constituents of the document, and the reasons why we say differences of principle should be observed. SACKVILLE J: Just pardon me a moment. Mr Ireland, I think the position of the court at the moment is that we don't want to be taken through the other three comparisons in detail. If it's necessary for you to address that in reply having regard to what Mr Franklin says of course you may do that but I think the court follows the point that you are making." 9 During the oral submissions of Mr Franklin, who appeared on the appeal and on the motion with Mr Cobden for Aristocrat, the following exchange occurred (Ts 58-59): "SACKVILLE J: Mr Franklin, might I just ask you this question? The relevant comparison and I think it is common ground is in accordance with the chart that appears in paragraph 5 of the appellant's submissions…. Do you say that there is any difference between any of those four comparisons? In other words, do you say, that you can win on one, two or three of them rather than all four, or is it all or nothing? MR FRANKLIN: No, some are stronger than others. SACKVILLE J: Which is your strongest? MR FRANKLIN: I think, as my learned friend put it, our strongest is probably Top Gear and Diamonds in the Sky and I'm not sure what the weakest is, your Honour, but I think that is probably the strongest. SACKVILLE J: All right, you continue. MR FRANKLIN: There are in each case similarities and differences between the two sets of specifications." Later in Mr Franklin's argument, the following was said (Ts 113-114): "SACKVILLE J: This goes back to the question of whether there are, in fact, differences between the four sets of comparisons. That's why I remarked that Top Gear and Diamond in the Sky, to me, looked a much stronger case for you than say, Enchanted Forest and Yellow Brick Road, but his Honour never addresses the question as to whether there might be differences in the comparisons. When you look at Enchanted Forest and Yellow Brick Road you see what may be important differences in relation to the feature, through the reels. There may be important differences in feature frequency and feature frequency in maximum lines. The number of symbols is different. Top Gear and Diamond in the Sky, on the other hand, has a much closer set of features that match. MR FRANKLIN: I wouldn't necessarily agree with the word much. It's probably closer but there are, even just on a straight tabulation of the features in Enchanted Forest and Yellow Brick road, in this tabulation, there is, we say, a very substantial degree of similarity. SACKVILLE J: I understand you say that. I am just thinking about the difficulty that arises from the fact that his Honour doesn't separately address each of the alleged matches…when in fact Ms Oldfield's analysis of these demonstrated there are significant differences between the various games." 10 Mr Ireland, in support of the motion, submitted that the transcript of argument on the appeal showed that Mr Franklin, on behalf of Aristocrat, had never attempted to compare the four sets of specifications. According to Mr Ireland, Mr Franklin confined himself to a comparison between the specifications for Aristocrat's Top Gear and Pacific's Diamond in the Sky, a comparison which all parties acknowledged was the least favourable to Pacific. That explains, so Mr Ireland argued, why he had handed up a document in the course of reply on the appeal which compared only Top Gear and Diamond in the Sky. The transcript records Mr Ireland saying this in reply (Ts 145): "I've got just two other points. One is please look at the differences, and I'm not shy in taking Top Gear and Diamond In The Sky as the example. Could I hand up a document. The first part of the document which I'm handing up says no more than what I've already said and gives your Honours the page references in case they haven't been recorded for the last six points I've made in reply. Annexed to the document is a table which shows from the [direct] comparison of the documents the differences textually and otherwise." 11 In his submissions on the motion, Mr Ireland said that, on the appeal, he had focussed on the comparisons between Top Gear and Diamond in the Sky because the Court had suggested it and also because Aristocrat had never compared the other three sets of specifications. It was therefore unnecessary for Pacific to reply to anything said by Aristocrat on the appeal in relation to those three sets of specifications: simply nothing had been said about them that required or even justified a reply. It perhaps should be pointed out that Mr Ireland did not make this point in his reply. Any misunderstanding that may have occurred might well have been avoided had Mr Ireland explained his reasoning process. 12 Not surprisingly, Mr Franklin offered a very different perspective as to the issues arising on the appeal. In opposing the motion, he submitted that Pacific had made a forensic decision to attack the reasoning of the primary Judge on a particular basis. The basis was that the only permissible comparison was between the text of each Aristocrat specification and the text of the allegedly corresponding Pacific specification, unaided by evidence of expert witnesses. 13 Mr Franklin pointed out that Mr Ireland had said this in oral argument (Ts 18-19): "His Honour, it is submitted erroneously acted on the witness' views of what were described as feel and balance and what one of the witnesses for the respondent called, design weaknesses. Properly viewed, what the respondent was offering by way of evidence, which the primary judge accepted, was suggested similarities in the games themselves. This would be akin to assessing a question of copyright infringement with regard to two plays by pointing to comparable emotional weaknesses, demonstrated by the leading characters, or by the length and timing of individual scenes or acts. In fact, the identification of such matters as feel or balance in the performance of a play, tells virtually nothing about the literal correspondence between the dramatic scripts. … A fortiori, in the case of a compilation, it is the literal similarity of words, and particularly the lay out of the document, which provides the answer to the question whether one substantially reproduces the other." Mr Ireland had later submitted that the question of literal correspondence between each pair of specifications was critical (Ts 36): "I think at one point of my learned friend's submission, they say this is just a paraphrase. They get over the textual differences that way. In our submission, your Honour[s], paraphrase avoids copyright infringement. That's the whole point. Unless it is of a paraphrase of a tiny insubstantial part…". (Emphasis added.) In his reply on the appeal, Mr Ireland had reiterated that what the case was "really about" was the failure of the primary Judge to undertake the appropriate comparison, except vicariously through expert witnesses who had asked themselves the wrong legal questions. 14 In opposition to the motion, Mr Franklin said that Aristocrat, on the appeal, had supported the approach of the primary Judge. That approach required Pacific's specifications to be considered in context through the informed eyes of the experts, before determining whether each specification reproduced a substantial part of the corresponding Aristocrat specification. In other words, the question of objective similarity between the works had to be determined not merely by a literal comparison of the two texts, but after consideration of evidence explaining the similarities and differences between the four pairs of specifications. Such an approach was predicated on the assumption that a court is not limited to a literal comparison of the text and layout of the copyright work and the allegedly infringing work. 15 Further, according to Mr Franklin, at no time in the appeal did Pacific suggest that it had not made all the submissions it wished to advance comparing the four pairs of specifications. The Full Court had invited senior counsel for Pacific to revisit the comparisons, if he wished, in reply. He did not avail himself of that opportunity. 16 Mr Franklin also submitted, in opposition to the motion, that far from Aristocrat not addressing the contents of the four pairs of written specifications, it had in fact taken the Full Court in some detail to each of the four pairs of specifications. It had done so by means of a careful examination of the evidence of Ms Oldfield and Mr Olive, which (subject to a minor exception) had been accepted by the primary Judge. In particular, Mr Franklin pointed out that he had taken the Full Court to a tabulation prepared by Ms Oldfield which compared each of the four pairs of specifications and had drawn attention to similarities that were not necessarily apparent from a mere textual or visual inspection of the written specifications themselves. 17 Aristocrat summarised its submissions on the motion as follows: "Once the Full Court accepted (para [95]) that the primary Judge had asked the correct question and applied the correct principles, it followed, unless Pacific argued for an alternative way for the Full Court to deal with the issue, that infringement would be found in relation to all four Pacific specifications. However, Pacific offered the Full Court no assistance on how, if the Full Court took that view, the Full Court could do anything other than accept the views of Aristocrat's experts that had been accepted by the Primary Judge. That was the outcome of the forensic decision taken to base the appeal on the allegedly erroneous approach in principle taken by the primary Judge." reasoning 18 Ideally, by the time a case reaches the stage of an appeal being heard, the issues should be identified with precision, and there should be little opportunity for misunderstanding between counsel, or between counsel and the bench. Unfortunately, this is not always so. 19 It is fair to say that the conduct of the present appeal was not altogether free from difficulty. For example, the Full Court's judgment notes that the Court was uncertain whether, assuming that Pacific's contention that the primary Judge had failed to compare each pair of written submissions was rejected, Pacific intended to argue that each pair of written specifications was not objectively similar. The Court proceeded on the assumption that Pacific did intend to press that submission, but it did so on the basis that Pacific had put its argument in a particular way. We shall return to the manner in which the argument was put shortly. 20 Another difficulty arose in relation to Pacific's argument that the data embodied in each of its EPROMs did not infringe Aristocrat's copyright in its written specifications. As the judgment indicates (37,067; [61]), the parties were asked to make supplementary submissions on this issue because the Court had formed the view that not all relevant questions had been identified and canvassed. These difficulties would seem to reflect the fact that the parties were by no means ad idem in identifying the issues arising on the appeal. The arguments on the motion reflect continuing disagreement as to the issues presented for determination. 21 We have reviewed the written submissions and oral argument on the appeal. This review has reinforced the basis upon which the judgment was prepared, namely that Pacific's argument on the question of infringement rested on two interrelated propositions. These were the following: · first, the primary Judge had never undertaken the task he was required to perform, that is, a comparison of the text and layout of each pair of written specifications; and · secondly, his Honour's reliance on the evidence of Ms Oldfield and Mr Olive was misplaced because they had compared the characteristics or functions of each pair of games rather than the text and visual appearance of each pair of written specifications. 22 There can be little doubt that Mr Ireland invited the Full Court to undertake a literal comparison of the text of each pair of specifications. But a re-reading of the submissions on appeal and the transcript of oral argument confirms that the invitation was extended on a particular basis. The Full Court was asked to make the comparisons if it accepted that · the primary Judge, in determining whether Pacific's written specifications reproduced a substantial part of Aristocrat's written specifications, was required to concentrate, in Mr Ireland's words (Ts 19) on the "literal similarity of words and particularly the layout of the document[s]"; and · the primary Judge had failed to undertake that task. 23 The thrust of Pacific's argument appears, for example, from a passage in its written submissions in reply (filed before the hearing of the appeal): "Pursuing the example of 'Enchanted Forest', the compilation which [Aristocrat] asserts as the protected literary work comprises the matter shown at AB.4 1548-1551 [that is, the LAB specification] – nothing more and nothing less. The comparison which has to be made for the purpose of evaluating infringement is between those pages and [Pacific's] specification for the game 'Yellow Brick Road' which appears at AB.4. 1586-1591. That is the comparison which the primary judge did not undertake and it is the comparison which this Court itself must consider. There is a concession in [Aristocrat's] submissions [par.59] that the primary judge did not set out the copyright works or identify the matters of difference or similarity. [Aristocrat] continues to rely upon the erroneous exercise undertaken by the primary judge of accepting 'opinion' evidence as to what was important and what was not. The judge relied on the opinion evidence of [Aristocrat's] witnesses, Oldfield and Olive…. Their opinions were about the 'games', their theory, their operation, their 'feel' and their 'balance'. They were not opinions expressed about the documents which constituted the protected copyright works namely the LAB specifications. This erroneous approach to the matter was no doubt induced by the ambiguity in [Aristocrat's] pleading, in which the notion of the parties 'games' and the LAB specifications for those games was merged." This is consistent with what was said by Mr Ireland in reply at the hearing of the appeal (see [10] above), when he handed up a document which identified differences in text and layout between the specifications for Aristocrat's Top Gear and Pacific's Diamond in the Sky. 24 The Full Court's judgment, on this aspect of the case, first considered whether the primary Judge had failed to carry out the required comparison of the four pairs of written specifications. The Full Court recognised (at 37,070; [79]) that Pacific's submission was not without force, since some of the language used by Ms Oldfield and by the primary Judge, if read in isolation, suggested that the comparison being made concerned the functioning of the four sets of games rather than the written specifications themselves. Nonetheless, the Court concluded that an assessment of the evidence of Ms Oldfield and Mr Olive showed that they had made a detailed and careful comparison of each of the four pairs of written specifications. They had not expressed their opinions on the basis of an assessment of the functioning of each game, as distinct from the terms of the written specifications themselves. On the contrary, the experts whose evidence the primary Judge accepted had based their comparisons on the written specifications themselves. The Full Court also concluded that the primary Judge had appreciated that he was obliged to compare each pair of written specifications. He had undertaken that task, with the assistance of the expert evidence, and had determined that each of Pacific's written specifications was objectively similar to the corresponding Aristocrat specification (at 37,071; [84]-[85]). 25 The Full Court then addressed what it understood to be Pacific's alternative argument that, if the question of objective similarity had been approached correctly, the only available finding was that Pacific's written specifications did not reproduce a substantial part of the corresponding Aristocrat specification (at 37,071; [86]). The Full Court pointed out that this argument depended upon the proposition that a finding of objective similarity could only be made if the similarity appeared from a literal comparison of the text and a visual comparison of the two documents. 26 The Full Court rejected this proposition. It held that changes, for example, in the form in which concepts are expressed or the order in which prizes are stated in written specifications are not necessarily a bar to a finding that the alleged infringer has indeed reproduced a substantial part of the copyright owner's written specification (at 37,072-37,073; [92]-[93]). In other words, the foundation for Pacific's alternative argument was wanting. The primary Judge was entitled to find that each of Pacific's written specifications reproduced a substantial part of the corresponding Aristocrat specification even though there were differences between the text and layout of each pair of documents. 27 It may have been open to Pacific to advance a further alternative argument. It might have argued, for example, that even accepting that the expert witnesses had addressed the correct question and had based their analyses on the text of the four sets of written specifications, his Honour's findings should nonetheless have been set aside. Such an argument would have required a detailed examination by Pacific of the evidence of Ms Oldfield and Mr Olive in order to demonstrate that his Honour was in error in relying on their evidence to find that each of Pacific's written specifications reproduced a substantial part of its Aristocrat counterpart. Perhaps it might have been argued that the experts' evidence, properly understood, fell short of supporting the conclusions reached by the primary judgment in respect of each pair of specifications. 28 Pacific's submissions on the appeal did not address the evidence of Ms Oldfield or Mr Olive, except for the purpose of contending that they had not addressed the right question and, in particular, had not compared each pair of written specifications, but the functioning of each pair of games. Mr Ireland in his oral submissions in reply, for example, did not take issue with Mr Franklin's analysis of the particular comparisons undertaken by the experts. In short, the argument referred to in the previous paragraph was not advanced on the appeal. Once the submissions put by Pacific had been rejected, there was no basis for the Full Court holding that the primary Judge had erred in accepting and relying upon the expert evidence to make the findings he did. 29 Having said this, we acknowledge that pars [94] and [95] (both at 37,073) of the Full Court's judgment, particularly the latter, are not as well expressed as they might have been. Those paragraphs appear in a section of the judgment headed "A Literal Comparison?". Paragraph [94] was intended to make the point that a comparison between the Top Gear and Diamond in the Sky specifications, having regard to the evidence given by Ms Oldfield and Mr Olive, suggests that Pacific used essential portions of the Top Gear specifications and that the differences in expression were changes in form only. Paragraph [95] was intended to convey that Pacific had not contended that the Full Court should undertake anything other than a literal comparison of the text of each set of specifications, a comparison which the Court regarded as inappropriate in the circumstances of the case. On reflection, it would have been better to have omitted any reference to the specifications for Top Gear and Diamond in the Sky in par [95]. The critical point is not that the Full Court was invited to compare only one pair of specifications, but that it was not invited to compare each pair of specifications separately by reference to the expert evidence accepted by the primary Judge. Pacific invited the Full Court to make a comparison between the four sets of specifications on a basis that the Full Court held was inappropriate or, at least, that the primary Judge was entitled not to accept. 30 Nothing in the previous paragraph changes the way in which the issues were presented for determination on the appeal. The Court was asked to undertake a "literal" comparison between the four pairs of specifications, but it held that the primary Judge was correct in undertaking a broader comparison (that is, one that took account of the expert evidence and was not confined to a comparison of text and layout). The Court was not asked to revisit the primary Judge's findings on each pair of specifications, once the Court had determined that his Honour was entitled to approach the comparison on a broader basis than that suggested by Pacific. 31 We should add this comment. In identifying an argument that perhaps might have been made but was not, we are not suggesting that the argument is likely to have been successful. The primary Judge accepted the evidence of Ms Oldfield and Mr Olive in preference to that of the expert called by Pacific. Ms Oldfield's evidence, in particular, identified significant common features between each set of written specifications, notwithstanding the textual and layout differences. It is not at all clear that an assessment of each pair of written specifications in the light of Ms Oldfield's evidence, would lead to the conclusion that one or more of the Pacific specifications did not reproduce a substantial part of the corresponding Aristocrat specification. 32 For the reasons we have given, we think that Pacific's motion should be dismissed, with costs. The parties have yet to file written submissions on costs in relation to the appeal. If no written submissions are received within fourteen days, there will be no order as to the costs of the appeal. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices SACKVILLE, FINN & KENNY. Associate: Dated: 11 April 2002 Counsel for the Appellant: Mr J M Ireland QC with Mr R J Webb Solicitor for the Appellant: McCabe Terrill Counsel for the Respondent: Mr A Franklin with Mr R Cobden Solicitor for the Respondent: Clayton Utz Date of Hearing: 22 March 2002 Date of Judgment: 11 April 2002