FEDERAL COURT OF AUSTRALIA TAXATION – application for declaratory relief to the effect that the whole of the digital information embodied in a compact disc digital audio (music CD) is a "tax-advantaged computer program" within the meaning of s 14(1) of the Sales Tax Assessment Act 1992 (Cth) – whether whole (or part) of the digital information embodied on the music CDs constitutes an expression "of a set of instructions … intended … directly to cause a CD player to perform a particular function" amounting to a "computer program" as defined in the Copyright Act 1968 (Cth) Sales Tax Assessment Act 1992 (Cth), ss 14(1), 45 Copyright Act 1968 (Cth), s 10(1) Producers' Co-operative Distributing Society Ltd v Commissioner of Taxation (NSW) (1947) 75 CLR 134, cited Gibb v Federal Commissioner of Taxation (1966)118 CLR 628, cited Dyason & Ors v Autodesk Inc & Anor (1990) 96 ALR 57, cited Autodesk Inc & Anor v Dyason (1992), 173 CLR 337, considered Autodesk Inc & Anor v Dyason [No 2] (1993) 176 CLR 300, considered Pepsi Seven-Up Bottlers v Commission of Taxation (1995) 62 FLR 289, cited K MART AUSTRALIA LIMITED v THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA NG 561 of 1997 O'CONNOR J SYDNEY 6 NOvember 1998 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 561 of 1998 BETWEEN: K MART AUSTRALIA LIMITED Applicant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent JUDGE: O'CONNOR J DATE OF ORDER: 6 november 1998 WHERE MADE: SYDNEY THE COURT ORDERS THAT: NOTE: SETTLEMENT AND ENTRY OF ORDERS IS DEALT WITH IN ORDER 36 OF THE FEDERAL COURT RULES. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 561 of 1998 BETWEEN: K MART AUSTRALIA LIMITED Applicant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent JUDGE: O'CONNOR J DATE: 6 november 1998 PLACE: SYDNEY REASONS FOR JUDGMENT This is an application for declaratory relief to the effect that the whole of the digital information embodied in a compact disc digital audio (music CD) is a "tax-advantaged computer program" within the meaning of section 14(1) of the Sales Tax Assessment Act 1992(Cth) (the"Assessment Act"). The matter was initiated in the High Court of Australia and remitted by consent to the Federal Court for hearing and determination. FACTUAL BACKGROUND AND RELEVANT LEGISLATION The applicant, K-Mart Australia Ltd ("K-Mart")purchased from BMG Australia 47 music CDs and was invoiced for the purchase. The invoice (Ex K-Mart 3) included an amount of $165.39 sales tax which the applicant paid. The applicant claims that the whole of the contents of these particular music CDs are computer programs and as such, are not subject to sales tax. It therefore, seeks the declaratory relief set out above. In the alternative, if successful in only part of its claim, it seeks a direction from the Court to the parties to provide the Court with draft orders, reflecting its reasoning. Section 45 of the Assessment Act provides – "Goods incorporating tax-advantaged computer programs 45. (1) This section applies if a tax-advantaged computer program is embodied in (or in part of) the goods that are the subject of the taxable dealing. (2) The exempt part is so much of the taxable value as is attributable to the computer program." Section 14 provides – "Meaning of 'tax-advantaged computer program' 14. (1) Any computer program that is not embodied in a permanent microchip is a tax-advantaged computer program. (2) A computer program that is embodied in a permanent microchip in a cartridge is a tax-advantaged computer program if both the following conditions are met: (a) the cartridge is marketed as being exclusively for use with: (i) a personal computer; or (ii) a home electronic device that is for use with a computer monitor or with a television screen; or (iii) either a personal computer or such a home electronic device; (b) the program is marketed as being exclusively for educational use, entertainment use or a combination of both. (3) In this section: "home electronic device" does not include a device that consists of, or includes, one or more of the following: (a) a compact disc player; (b) a television; (c) a video camera; (d) a video cassette player; (e) a video cassette recorder; (f) an electronic device prescribed by the regulations for the purposes of this paragraph." The term "computer program" is defined in s 5 of the Assessment Act to have the same meaning as in the Copyright Act 1968 (the "Copyright Act"). Section 10(1) of the Copyright Act provides – "Interpretation 10. (1) In this Act, unless the contrary intention appears: … "computer program" means an expression, in any language, code or notation, of a set of instructions (whether with or without related information) intended, either directly or after either or both of the following: (a) conversion to another language, code or notation; (b) reproduction in a different material form; to cause a device having digital information processing capabilities to perform a particular function". It is common ground between the parties that a music CD player is a "device having digital information processing capabilities" and that the digital information on a music CD is "embodied" in that disc. It is also agreed that the following summary, provided by the applicant as part of its written submissions, accurately summarises parts of the affidavit evidence given in the proceedings by expert witnesses, in describing music CDs. "(9) Music CDs are manufactured in accordance with an international standard set out in a document known as the "Red Book", a manufacturing standard jointly developed by Philips and Sony. The publicly available equivalent of this is the International Standards document IEC 908 published by the International Electrotechnical Commission. A copy of IEC 908 and Amendment 1 to that Standard is annexed to the affidavit of Professor Immink. (10) A music CD consists of a transparent plastic disc 120 mm in diameter with a centre hole 15 mm in diameter. One side of the plastic disc is encoded with information. The encoded side is in turn covered with a reflective layer of thin metal and a further thin protective layer of plastic (IEC 908 page 9; Pohlmann, paragraph 11; Littlehales, paragraph 10). (11) The information on the disc is stored in a spiral-shaped track consisting of successive shallow depressions ("pits"). The lengths of the pits and the spaces between them ("lands") have discrete values. The spiral starts near the centre of the disc and finishes near its outer edge (IEC 908 page 9; Pohlmann, paragraph 11). (12) The information encoded on a music CD is in an area between an inner radius of 23.0 mm and a maximum outer radius of 58.5 mm. The area between radii 25.0 mm and 58.5 mm is known as the "program area" of the disc. The area between radii 23.0 mm and 25.0 mm is known as the "lead in area". The area outside radius 58.5 mm, the outer radius of the program area, is known as the "lead out area" Pohlmann, paragraph 11; Immink, paragraph 17). (13) The information encoded on a music CD is read by means of a beam of light which passes through the non-encoded side of the transparent disc to the encoded side where it is reflected and modulated by the encoded information (IEC 908, page 9; Pohlmann, paragraph 12). (14) The information is encoded in digital or binary form: that is, it consists of a series of "0's" and "1's". Each "0" or "1" is known as a "binary digit" or "bit". A combination of bits is known as a "word" or a "symbol" (Pohlmann, paragraph 9). (15) The audio information on the music CD is captured in digital form by a "sampling and quantizing" process whereby the sounds making up the analogue sound recording are periodically converted into a 16 bit digital number (Pohlmann, paragraph 8). (16) During the pre-mastering phase of disc manufacture (i.e. before the digital information is embodied in the disc), the 16 bit audio samples are first broken down into two 8 bit words. These 8 bit words and their corresponding error correction and control and display words (explained further below) are then presented to the Eight to Fourteen Modulator for EFM (or "eight to fourteen") modulation (Immink, paragraph 19; Littlehales, paragraph 12). (17) EFM modulation converts each 8 bit word into a 14 bit word which has a desirable binary pattern (i.e. many 8 bit word patterns have similar combinations of 0's and 1's such that they may be confused during playback. There are many more combinations of 14 bit words, so more unique patterns can be selected) (Pohlmann, paragraph 33; Immink, paragraph 19). (18) EFM modulation enables reliable data storage at very high information densities (Immink, paragraph 10(d)). (19) Once modulated, the digital audio, control and display and error correction information is multiplexed (in the sense that it is interleaved or sequentially arranged) with synchronisation and merging bits (Immink, paragraph 19; Littlehales, paragraph 13). (20) The multiplexed information is encoded on the music CD in a series of "frames", each comprising 588 bits. Each frame has a standard format which is depicted in the diagram on page 46 of IEC 908. The standard format comprises: (a) a unique synchronisation code consisting of 24 bits (plus 3 merging bits); (b) control and display symbol (also referred to as "subcode") consisting of 14 bits (plus 3 merging bits); (c) 12 audio data symbols each of 14 bits (each data symbol appended by 3 merging bits); (d) 4 error correction symbols each of 14 bits (each error correction symbol appended by 3 merging bits); (e) 12 more audio data symbols each of 14 bits (each data symbol appending by 3 merging bits); and (f) 4 more error correction symbols each of 14 bits (each error correction symbol appended by 3 merging bits). (Pohlmann, paragraphs 13 and 36; Immink, paragraphs 18 to 19; Littlehales, paragraphs 13 to 14). (21) The 588 bits in each frame are therefore made up of a total of 24 synchronisation bits, 14 subcode bits, 336 audio bits, 112 error correction bits and 102 merging bits (Immink, paragraph 19(f); Littlehales, paragraph 15). (22) The frames are read at the rate of 7,350 frames per second. In other words, 7,350 frames together produce one second of music (Pohlmann, paragraph 36). … (24) The digital information embodied in a music CD is converted into music by a CD player which is a digital processor dedicated to that task. Once the information is read from the music CD by optical means (Pohlmann, paragraph 12; Littlehales, paragraph 18), the audio data is decoded and demodulated by the CD player, errors are detected and corrected and the digital signal is converted to analogue sound (Pohlmann, paragraph 38; Littlehales, pargraphs 24 to 30)." ISSUES The central issue in these proceedings is whether the whole (or part) of the digital information embodied on the 47 music CDs constitutes an expression "… of a set of instructions … intended … directly to cause a CD player to perform a particular function" and this amounts to a computer program, as defined in the Copyright Act. The key elements of the definition of computer program are: (a) An expression (in any language, code or notation) (b) of a set of instructions (whether with or without related information) (c) intended to cause (d) a device to perform a particular function. (my emphasis) The applicant, from the affidavit evidence of the computer experts called on its behalf, describes the nature and function of the non audio components on each "frame" of the music CD in the following way: "(23) The nature and functions of the non-audio components of each frame are as follows: a) The synchronisation code is a specific sequence of "0's" and "1's" which direct the Turntable Motor Control circuits on the CD player where to find the start of each frame. The synchronisation code also generates digital pulses which cause the CD player to regulate the speed of the Turntable Motor so as to maintain the proper speed of rotation of the disc and therefore to determine the proper output rate of the digital information on the disc (Pohlmann, paragraph 32; Littlehales, paragraph 22). b) The merging bits serve a dual purpose. First they separate the other codes and symbols, and secondly they aid the playback of the audio information by maintaining the average digital sum variation of the incoming 0's and 1's from the disc at zero (i.e. an equal number of 0's and 1's). If the number of 1's exceeds the number of 0's over time, the decoding circuits of the CD player adjust voltage levels and severely affect the decoding circuit's ability to decode incoming information from the disc (voltage levels are constant when the digital sum variation is set to 0). The merging bits accordingly cause the electronic circuits in the CD player to stay in synchronisation with the incoming information from the disc so as to enable the next component of the information to be correctly decoded (Pohlmann, paragraph 35; Immink, paragraph 19(d); Jayasooriah, paragraph 33(e)). c) The error correction code facilitates the correction of errors in the audio data. It is essential for the successful storage of digital audio; without it a music CD would sound like a badly scratched LP at best and, at worst, would simply be unplayable. Without error correction, digital audio would be impossible. The errors may be caused, for example, by dust or scratches on the disc. Error correction allows up to 200 errors per second to be completely corrected. The method of correction is known as the Cross Interleave Reed Solomon Code ("CIRC"). This code is present throughout the disc and causes the CD player's error correcting circuitry to detect and correct errors in the audio information encoded on the music CD (Pohlmann, paragraphs 26 to 31; Littlehales, paragraphs 25 to 28). d) The control and display system (which is also referred to as subcode) allows for 8 information carrying bits ("channels") of which two channels, "P" and "Q" are regularly used. The subcode is extracted from each frame by the Signal Processing Assembly and fed to the Subcode Processor circuitry in the CD player. The subcode, when interpreted by the Subcode Processor circuitry, causes the CD player to carry out certain functions (Littlehales, paragraph 30). The "P subcode" indicates the beginning of each track. The "Q subcode" is much more complex. It contains 4 different kinds of information, as follows: (i) Control bits – These bits of the Q subcode instruct the CD player as to whether the music is to be played in two audio channels ("stereo") or four audio channels ("quadraphonic"); whether or not pre-emphasis (a noise suppression method) is to be applied; and whether or not digital copying is prohibited (Pohlmann, paragraph 20; Immink, paragraph 23; Littlehales, paragraphs 30 and 33). (ii) Address bits – These bits of the Q subcode instruct the CD player whether the "Q data" which follows is "Mode 1", "Mode 2" or "Mode 3" (Pohlmann, paragraph 21; Immink, paragraph 24; Littlehales, paragraph 34). (iii) Q Data – Mode 1 Q data comprises information for the front display panel of the CD player including information as to the number of music tracks, their index numbers, their starting points, the total disc running time, the track number, index number, running time of the track and the absolute time (in frames, seconds and minutes) elapsed since the beginning of the track (displayed on the front panel of the CD player ) (Pohlmann, paragraph 22; Immink, paragraph 25). Mode 2 Q data includes information such as the catalogue number or universal product code of the disc. Mode 3 Q data identifies the recording by country, owner, year of recording and serial number (Pohlmann, paragraphs 21 to 24; Immink, paragraphs 24 to 27; Littlehales, paragraphs 33 to 36). (iv) CRCC bits – these bits of the Q subcode are an error detection code which allow checking for errors in the Q subcode. (Pohlmann, paragraph 25)". It relies upon this description of the non-audio components in each frame and their function to support its argument that these amount to a set of instructions, expressed in code. The respondent however does not accept this description of process and function of the non-audio components of each frame because the words "code", "instruct", "cause" and "direct" are used to describe the respective processes and functions. The respondent says that these are inappropriate words to describe a machine's (CD player's) access to passive data stored on the music CD which is received by the player but is not "instructed" by it in the relevant sense. CONSTRUCTION OF THE STATUTORY DEFINITION The applicant submits that the definition under consideration, although found in the Copyright Act, must be interpreted for the purposes of the Assessment Act as if the words of the definition were incorporated into the Assessment Act without reference to the substantive parts of the Copyright Act. In making this submission it refers on the authority of Producers' Co-operative Distributing Society Ltd v Commissioner of Taxation (NSW) (1947) 75 CLR 134 at 137, where the Privy Council, affirming a decision of the High Court of Australia, said – "To interpret the incorporated definition in the second Act by an analysis of its exact meaning in the substantive provisions of the first Act, where that definition applies only unless the context or subject matter otherwise indicates or requires, is not a rational procedure." The respondent sought to distinguish this principle by reference to the actual words in s 5 of the Assessment Act which state "computer program has the same meaning as in the Copyright Act 1968", which it contends is different to "as defined in" the expression with which the Privy Council was dealing. The difficulty with this distinction (if it is any more than a semantic one) is that the "meaning" of the definition in the Copyright Act is not, according to general principles of construction, determined by the substantive parts of the Act in which it occurs but the other way around. In Gibb v Federal Commissioner of Taxation (1966)118 CLR 628 at 635, the majority of the court, Barwick CJ, McTiernan and Taylor JJ, said relevantly – "The function of a definition clause in a statute is merely to indicate that when particular words or expressions the subject of definition, are found in the substantive part of the statute under consideration, they are to be understood in the defined sense – or are to be taken to include certain things which, but for the definition, they would not include. Such clauses are, therefore, no more than an aid to the construction of the statute and do not operate in any other way. As was said by Sutherland (Statutes and Statutory Construction, 2nd ed., vol. 2, p. 687), "Such definitions can, in the nature of things, have no effect except in the construction of the statutes themselves"." Further the applicant submits that the courts have confirmed that the words of this definition must be given their ordinary meanings and that these will be found in ordinary usage or even dictionaries, none amounting to terms of art. (Dyason & Ors v Autodesk Inc & Anor (1990) 96 ALR 57 at 102 per Beaumont J and Autodesk Inc & Anor v Dyason [No 2] (1993) 176 CLR 300 at 329 per Gaudron J). Both the applicant and the respondent called a number of witnesses who were experts of various sorts in the computer industry to give evidence both as to the way in which the technology of CD players and music CD's work but also to address the question of what they understood a "code" and an "instruction" or "set of instructions" to be in the context of the computer industry. They also expressed views on what a computer program is understood to be within their industry (albeit not specifically within this statutory definition). This evidence provided, at one level, great assistance to the Court in explaining the context in which the legislation operateswithout amounting to a control or distortion of the meaning of ordinary English words. As Hill J said in Pepsi Seven-Up Bottlers v Commission of Taxation (1995) 62 FLR 289 at 299: "It is unquestionable that the meaning of an ordinary English word is a question of fact not law". However, the construction of a statute containing "ordinary English words" is a matter of law and remains for determination by the courts. The difficulty in this case is that the experts in the computer industry, whose evidence was provided in order to assist the Court, fundamentally disagreed as to the meaning of some "ordinary English words" when used in their industry. The most problematic example of this is the experts' answer to the key question: DOES THE DISK "INSTRUCT" THE CD PLAYER? At Transcript p 50 Professor Immink, Professor of Information and Technology at the University of Essen, Germany, said: "Essentially a CD player is a computer and as such a binary string of information coming from a disc is, as I see it, is partly instructing that particular computer, or a CD player, to perform certain tasks." and at Transcript p 52 said: " … well, it's a matter of words of course but it is an instruction because it has to comply with that instruction from a CD. There is no such thing as interpretation because the instruction given from – derives from a CD is quite clear for that particular program and it just has to do what it has been told to do…" Another witness, CJ Littlehales, was asked in cross-examination the following: "You would regard that rudimentary information on the CD as being an instruction and a command?" (Transcript p 66) and answered "In that sense it would have to be a command." Dr Dr Jaysooriah said at Transcript p 75: "In a computer sense when we say "interpret" it means carry out exactly what's given by the instructions, carry out the instructions. So it's a command." Professor Rigby said at Transcript p 93: "… Writing a set of instructions to me involves some process of design or creativity and it may be the result of that has commercial value or intellectual value which is why it has been brought within the ambit of the Copyright Act … and that is why I want to assert that for something to be really called a computer programme it has to have this element of design or creation put into its creation." He was asked at Transcript p 94: "…Is it the case that the distinction which you think is critical is that data cannot control a computer and therefore is not a computer programme?" and he agreed with it. Professor Rosenberg at Transcript p 107 was asked this question: "… your approach to whether something is or is not a computer program is whether it controls the computer?" and agreed. At Transcript p 108 the following exchange took place: "And the qualification that you have put on the definition of a computer program does not find expression in that definition, does it?---No, but the key point I see of that definition is that it mentions a set of instructions and computer terminology that has a particular meaning. … And then CD player itself simply, without the synchronisation symbol, is totally incapable of knowing what is the beginning of the instruction?---True. " These responses reveal a fundamental dispute between these experts as to what the word "instruct" means. On the one hand, the word is understood as meaning a command which must be followed, on the other hand it is taken as meaning the control of the device which it instructs. While informative, this semantic dispute throws back to the Court the task of giving meaning to this word in the definition. This proved to be the case with all the key parts of the definition. IS THE EMBEDDED INFORMATION A 'CODE'? The applicant relies on the Macquarie Dictionary definition of the word "code" which states that a code is "a system of symbols for conveying information or instructions to a computer" and that "notation" means "1. a system of graphic symbols for a specialised use, other than ordinary writing: 2. the process of noting or setting down by means of a special system of signs or symbols". It submits that the bit series embedded in the form of electrical impulses was held to be an "expression in binary notation" in the Autodesk Inc & Anor v Dyason (1992) 173 CLR 330 at 335-336 ("Autodesk Case") and the same approach applied in this case would lead to the conclusion that all this information would answer the description of an "expression" in "binary notation". At page 11 of Annexure "B" to his affidavit, Professor Rigby who gave evidence for the respondent, said: "In the case of an audio CD, there is no question that the codes being read in sequence by the player cause it to carry out its planned function. But the point made by the above examples is that this is not a sufficient test of whether a code sequence is a computer program." This statement seems to concede that the material being read is a code though not amounting to an expression of a set of instructions. IS THE MATERIAL EMBEDDED ON A MUSIC CD A "SET OF INSTRUCTIONS"? The essential notion of an "instruction" is that it conveys a command. This was accepted by both parties (see Gaudron J in Autodesk Inc & Anor v Dyason [No 2] (1993) 176 CLR 300 at 329-330) ("Autodesk [No. 2] "). Professor Rosenberg (Transcript p 111) described an instruction as "a code which defines some active operation to be performed by a computer". Those who gave evidence for the respondent would not describe the non-audio data on the disc as a "set of instructions" because – (1) It is trivial (in a non-perjorative sense). (2) It needs the CD player's microprocessor before any instruction is carried out and is therefore "indirect" and does not amount to control of the CD player. The characterisation of this non-audio data function as a purely mechanistic action "requiring no design or creativity" was a key factor in the rejection by the respondent's witnesses of this function as a computer program. It was, however, conceded in cross-examination by one of the witnesses for the respondent Professor Rosenberg, that a function, performed on instruction, can be a "step on the way" to performing another function, it not being essential that there be ultimate control exercised by the set of instructions for it to amount to a computer program. The doubt being expressed by these computing experts as to whether something which requires nothing more than a mechanistic response can amount to a computer program has had judicial consideration. In the Autodesk Case at 343-344 Dawson J said the following: "It may be doubted whether the AutoCAD lock can be said to constitute a set of instructions at all, but not because it is hard-wired. Rather it is because the simple, mechanical responses of the AutoCAD lock (and perhaps even the Auto Key lock) cannot happily, even by way of metaphor, be described as responses to, or the giving of, instructions, particularly instructions in a "language, code or notation". It may be possible at a certain level of discourse to speak, for example, of the operation of an electric light switch as the giving of an instruction to the mechanism to turn on the light, but it is an unusual use of language. The steps taken in the operation of the AutoCAD lock involve no more than the steps taken in the operation of an ordinary household electric light switch and so may be thought not to amount to the embodiment of any logical process requiring the use of a language, code or notation such as is required for the expression of a computer program in a more conventional sense." The respondents rely, particularly, on these obiter remarks to support their submissions. They say that the meaning of the term "set of instructions" must involve more than a small sequence in a frame which requires a simple mechanical response by the machine. They put their submissions on two bases – firstly, the non-audio data is not instructional, however, if it could be seen as such it does not amount to a "set" of instructions of the kind necessary to amount to a computer program. The respondent says the non-audio data would be more accurately described as a "collection of discrete instructions" which does not amount to a "set". Nor, says the respondents, does the repetition of these bits constitute a "set". The applicant submits that because the facts of the Autodesk Case being considered by his Honour were quite different to the present case this passage has no bearing on the facts of this case. Further, the small sequences in this case do not rob them of their characteristics as sets of instructions. Mere "simplicity of instruction" had been conceded by Professor Rosenberg in cross-examination as not being relevant to its importance as to the function of the computer. The applicant says these instructions or "commands" constitute a set because they combine together to achieve the common purpose of causing the CD player to function so as to generate music from the audio bits on the CD and they are expressed together in 588 bit frames (as described above) according to a standard protocol found in the Red Book. WHAT COMPRISES THE "SET OF INSTRUCTIONS"? The applicant concedes that the audio data, if it stood alone, is not a computer program. However, it argues that this data is part of the computer program on the music CD, because part of that program is a set of instructions (the non-audio data) and part of it is information related to those sets of instructions (the audio data). The applicant relies for this submission on the decision of Gaudron J in Autodesk [No. 2] (at p 329) where she concluded that explanation of instructional data can be part of a computer program. Her Honour considered that explanatory information which is not a command is able to be part of a computer program because it is attached in some way, or necessary to explain the program. The applicant submits that it is sufficient to become part of the program that the two kinds of data (audio and non-audio) are inextricably coded together. The example given to support this conclusion is that one command causes the circuitry in the CD player to alter so that its voltage number achieves parity. If this command is not obeyed in any particular instance, it means that the CD player plays the audio data in a distorted fashion. The applicant characterises the information on the disc as a "stream of bits", which in the course of being decoded, separate out again but being part of the one entity or program. However, in paragraph 9 of his affidavit, Dr Jaysooriah giving evidence for the applicant expressed the following opinion: "(a) The subcode, synchronisation and merging bits stored on music CDs comprise sets of instructions that define how the audio information is to be processed. These instructions are expressed using the code or notation as set out in the International Standard IEC 908 document. (b) The error detection and correction bits are instructions in the sense that they cause the data detection functional components on the CD player to recover from errors in recording and/or extraction of digital information contained on the music CD. (c) The direct audio bits are passive data as they are merely translated from analogue sound to digital representation to analogue sound without having an effect on the way it is processed." This characterisation and the distinction between (a) and (b) on the one hand and (c) on the other is based on the use made of the material in the carrying out of functions. He describes computer systems in terms of a "layered model" where something classified as data, at one programming level, can be instructions at a higher programming level. He considers that the music CD player is an example of a computer which is programmed at different levels. At paragraphs 33-34 of his affidavit he expressed this concept in this way: "33. The Music CD player ("CD player") is an example of a computer that is programmed at different levels: a) At the lowest (machine language) level, the program is contained in some part of the computer's permanent memory. This program is usually loaded at the time the CD player is manufactured. b) At a higher level (control subcode) level, the program is contained in the non-audio information component of the music CD. For example, the Q subcodes comprise a set of instructions to turn quadraphonic mode, signal pre-emphasis and copy protection, on or off. c) At another level (address subcode) level, a set of instructions (with associated data) provide information that is either displayed on the front panel, or used by the control functions in the CD player. d) Up to six synchronisation words are contained in music CDs that cause the electronic circuits in the CD player to carry the functions necessary to synchronise the timings of data extraction circuits with the information contained in the music CD. e) Music CDs also contain merging bits that cause the electronic circuits in the CD player to adjust voltage levels so that the next component of information can be correctly decoded. 34. In the context of a music CD player, the primary task is to produce music from the audio information on the music CDs. To allow the player to function correctly even when there are errors in the data extraction process, additional control information, namely the error detection and correction bits, are added. These are instructions in the sense that they direct the data recovery circuits to detect and correct errors." He disagrees with the analyses of the computer programs given by Professors Rosenberg and Rigby, saying that these experts are expressing views which might be valid in the context of general purpose computers but not special purpose computers. The constraints imposed on what might be defined as a computer program for general purpose computers are not he considers applicable or consistent with the meaning of the term "computer program", as understood in the computer field, in the context of special purpose computers which is being dealt with here. Indeed in cross-examination, both Professors Rosenberg and Rigby conceded that characteristics of a computer program they had said were essential, viz sequence, repetition and conditional execution were not theoretically essential. The respondents also argue that the definition required instructions to operate directly on the player, and the fact that the player's microprocessor facilitates the instructions after receiving them deprives them of their "directness". The applicants say that the word "directly" does not refer to the phrase "to cause a device having digital information processing capabilities to perform a particular function" but to the form of the instructions allowed in the definition which can be either original language code or by conversion to another form. Also, that using the "layered model" for analysis, the instructions command, directly, the CD microprocessor which, using its own facilities, carries them out. As Professor Immink explains it, if the player did otherwise, it would, by definition, cease to be a CD player as defined by the Red Book protocol. DECISION As stated previously, based upon the opinions of the six experts who gave evidence in this matter, there is no consensus in the computer industry in relation to the general question of "what is a computer program?" as it applies to special purpose computers. Nor is there any consensus in relation to the particular technical functions involved in the music CD and the music CD player and their relationship to each other. The CD player, it is agreed, is a special purpose computer. I accept the opinion of Dr Jaysooriah that it must be analysed and understood as to its functions in a somewhat different way to general purpose computers. The "layered model" postulated by Dr Jaysooriah does allow the different encoded materials on both disc and player to have independent functions without requiring an overall control of all functions by one device or the other. Applying this model, however, it follows that not all the encoded material on the music CD is instructional and thus, by virtue of the definition, a computer program. As stated previously, whatever the value of these various conflicting opinions, the question to be answered here is governed by a statutory definition the meaning of which is a question of law. As the applicant correctly submits, the definition says nothing about the complexity of the instructions required, their substance or triviality, originality or design – although these might be relevant to copyright in a computer program. I agree with the applicant's submission that much of what the respondent's witnesses said about defining a computer program was influenced by ideas about and experience in this industry which are not expressed in the plain words of the definition. These also seemed to influence the approach taken by Dawson J in the Autodesk Case, referred to above. I consider that the non-audio data on the music CD is a code. That was conceded by the respondent's witnesses and it was not seriously pressed by the respondents. I also consider that, in the context of special purpose computers, the analysis of the process and function of this non-audio data is best explained by what Dr Jaysooriah calls the "layered model". I do not accept the respondent's submission that this "layered model" is unable to be applied in a case such as this. Indeed, it may be that if evidence of the difference of approach required for special purpose computers as opposed to general purpose computers when considering the meaning of the definition here, had been available to the Court in the Autodesk Case, it may have been that the "conventional sense" of computer program more relevant to general purpose computers would have been seen as less useful. The instructions given to the CD player, while simple and in a small sequence, amount to commands which the player must follow. They are, in my view, sets of instructions because they combine together in the frame, according to their 'Red Book' protocol to achieve the common purpose of causing the CD player to function effectively. I do not consider, however, that the audio data is part of this set of instructions. Certainly, it is ultimately affected by the non-audio commands but it is not in my view carrying out the same function as the "non command" data in the way referred to by Gaudron J in Autodesk [No. 2]. The audio data does not, merely by being in the same frames as the non-audio data and part of a stream of bits, become an explanation of a command. It remains therefore passive data without any instructional function. The word "directly" in the definition, refers, in my view, to the phrases which follow it. The comma after the word "intended" supports this conclusion. The definition, then merely requires that that set of instructions is "intended to cause a device". Whether this is done directly or indirectly is therefore not relevant. Because of my conclusion in this matter, the declaration sought by the applicant is refused and I direct the parties to provide draft orders reflecting the conclusions I have reached that the non-audio data embodied in a music CD is a tax-advantaged computer program. I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Connor Associate: Dated: 6 November 1998 Counsel for the Applicant: D Yates SC with S Gageler Solicitor for the Applicant: Firmstone & Feil Counsel for the Respondent: I V Gzell QC with K Connor Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 24-25 September 1998 Date of Judgment: 6 November 1998