NUDGMENT No. 78 /@27 "NOT FOR GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW G.507 of 1987 ) ) GENERAL DIVISION BETWEEN: GAMMA TECHNOLOGY INC First Applicant SYSTEM SOLUTIONS PTY LTD Second Applicant AND: KOHJINSHA SOTEC AUSTRALIA PTY LTD First Respondent GEORGE HANZALEK Second Respondent CORAM: WILCOX J PLACE: SYDNEY / DATE: 1 DECEMBER 1987 r ": . Mosely MINUTES OF ORDER A THE COURT NOTES: ~— A. The undertaking to the Court contained in para.2 of the short minutes of orders filed today. AND THE COURT ORDERS THAT: 1. Orders be made in accordance with paras.1, 3 and 4 of the said short minutes. 2. The respondents pay the costs of the proceeding, including the motion to set aside the "Anton Pillar" orders. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. NOT FOR GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSW G.507 of 1987 GENERAL DIVISION BETWEEN: GAMMA TECHNOLOGY INC First Applicant SYSTEM SOLUTIONS PTY LTD Second Applicant AND: KOHJINSHA SOTEC AUSTRALIA PTY LTD First Respondent GEORGE HANZALEK Second Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 1 DECEMBER 1987 EXTEMPORE REASONS FOR JUDGMENT This matter has been resolved as between the parties by their agreement to the giving of a particular undertaking and the making of certain orders. However, the parties have not been able to resolve the question of the costs of the proceeding. On behalf of the applicants, the submission 1s put that the ordinary course should be followed and that the respondents should be ordered to pay their costs; relief, although not so complete as the relief sought in the Application, having been obtained. For their part the respondents contend that there ought to be no order for costs. The essential point made by the counsel for the respondents is that the applicants were over zealous in commencing the proceeding when they did and, in particular, in seeking an "Anton Pillar" order. He says that a letter of demand prior to the institution of the proceeding would have eliminated the necessity for the proceeding at all. In a case where a person believes that another is reproducing and distributing copyright material, there is often a dilemma as to the appropriate course to be taken. On the one hand it 1s advisable, wherever possible, for there to be some contact between the parties prior to the institution of proceedings; a letter of demand often leads to the resolution of litigation before it begins. On the other hand, to give warning to a suspected breacher of copyright of the state of the information available to a person who believes that his or her copyright has been breached may result in the person believed to be breaching the copyright making additional copies and/or scattering the relevant material into a number of locations where it is difficult to trace. Consideration has to be given by an applicant, and by a court on an application for an "Anton Pillar" order, as to whether there is reason to believe that, alerted, a respondent will take steps which will involve loss of evidence. In the present case, the applicants had in their possession prior to commencing proceedings, and at the time of seeking the "Anton Pillar" order, a printout of a computer program which was being used by the respondents. That printout was in identical form to a program in relation to which the applicants claimed copyright; save for the substitution, in a number of positions, of the word "HomsaFax" for the word "GammaFax". It is obvious that one or the other of the programs had been copied from the other. But for one matter, it would have been possible for the respondents, who apparently imported the program from overseas, to be quite unaware of the possibility that the imported material breached the copyright of some other party, and in particular the applicants. However, that one matter, in my view, is significant. In para.F7 of the document reproducing the program in the possession of the respondents, the word "GammaFax" has been inadvertently retained, instead of being substituted with the word "HomsaFax". I must assume that the respondents read this document and I would have thought that the reference to "GammaFax" would have alerted them to the possibility that the program which they had received had been copied from a program produced by the applicants, whom they already knew. I do not reach any finding that there was deliberate action by the respondents to breach the applicants' copyright. I think that this would be inconsistent with their subsequent behaviour. But I do think that there was material in their possession which, had they acted with proper care, would have caused them to realise that the program was suspect and which would have caused them to take some steps to check the position before dealing with the program in any way. However, they did deal with the program by offering it for purchase to various clients; although, so the evidence indicates, they did not, in fact, succeed in making any sales prior to this litigation commencing. It must be said, as counsel for the respondents has submitted, that the respondents fully co-operated at the time of the execution of the "Anton Pillar" order. It must also be said that they were prepared to give details of their overseas supplier, which details have enabled the applicants to take up the matter with the Hong Kong supplier and reach what appears to be a satisfactory solution so far as the supplier is concerned. The matter has been before the Court on several occasions, and I wondered why the respondents had maintained a position of resistance to the proceeding. I think that this is explained by the fact that only last Friday they were shown the version of the applicants' program which was copied by the Hong Kong supplier and which gave rise to the material in their possession. Up to that date, they had been looking at a later version of the applicants' program which 1s apparently quite different. So, it must be said that, at this time also, they acted reasonably and that they have promptly compromised the matter on terms which appear to reflect the true position. I have some sympathy for the position in which the respondents find themselves. It appears that the value of the business which they were attempting to undertake was not very great, and that, in the event, they have not been able to undertake any business. On the other hand, I think that it would be wrong for me to determine the question of costs by reference either to sympathy or to hindsight. The question I have to ask is whether the applicants acted reasonably in instituting the proceeding when they did, having regard to the information which was then in their hands, and whether they have acted reasonably at subsequent stages. I see no reason to hold that the applicants have acted unreasonably in either respect. As I have said, they had before them material which suggested that the respondents were dealing in programs of which they had the copyright and, because of the error to which I have referred, which suggested that the respondents must have known of that fact. Certainly, this was a matter to which I attached considerable significance in regarding this as being a proper case for the making of "Anton Pillar" orders. I think that the applicants were entitled to attach the same weight to that factor, and to take the view that this was a case of a deliberate breach of copyright so that it would be unwise to give warning to the respondents by sending a letter of demand. So far as the execution of the "Anton Pillar" order is concerned there is some dispute as to precisely what happened but I see no reason to think that there was any extravagance in regard to costs in the manner in which the order was executed. It was plainly appropriate for a Sydney solicitor to go down to Melbourne, having regard to his knowledge of the facts of the matter. So far as subsequent proceedings are concerned, they have been conducted sensibly and without any waste of costs. It does not appear that the applicants have held back on supplying a copy of the earlier program. Had they done so, then any costs which had been incurred after a request would have been at risk; but this does not appear to be the case. In short, notwithstanding my sympathy for the position in which the respondents find themselves, I can see no reason of principle which would support my taking the course of depriving the applicants of the costs which they have incurred. The orders which I make are: I note the undertaking of the Court contained ih para.2 of the short minutes of orders filed today. I make orders in accordance with paras.1, 3 and 4 of those orders. I order that the respondent pay the costs of the proceeding, including the motion to set aside the "Anton Pillar" orders. I certify this and the five (5) preceding pages to be a true copy of the Reasons for Judgment of his Honour Justice Wilcox. Associate: eenre foc: Date: 14 December 1987 Appearance for the Applicant: Mr P Brereton (solicitor) Solicitors for the Applicant: Duncan Barron & Co Counsel for the Respondent: Mr J S Wheelhouse Solicitors for the Respondent: Gorman and Storer Date(s) of hearing: 1 December 1987