FEDERAL COURT OF AUSTRALIA Microsoft Corp v Business Boost Pty Ltd [2000] FCA 1651 INTELLECTUAL PROPERTY – copyright – meaning of "storage from which the work … can be reproduced" – whether reproducing computer program onto a computer's hard drive infringes copyright in the original program – whether reproducing computer programs into a computer's random access memory (RAM) infringes copyright in the original program Copyright Act 1968 s 10 Copyright Act 17 USC §101 Dyason v Autodesk Inc (1990) 24 FCR 147 discussed Tesco Supermarket Ltd v Nattrass [1972] AC 153 applied MAI Systems Corp v Peak Computer Inc 991 F2d 511 (9th Cir 1993) cited MICROSOFT CORPORATION AND MICROSOFT PTY LIMITED v BUSINESS BOOST PTY LIMITED trading as PERRY TAIT'S and COMPUTER WHOLESALER DIRECT, PERRY TAIT, PASSIONS PTY LIMITED trading as STAR WORKS PROMOTIONS MARKETING, and THERESA MILOSEVIC N 244 OF 1999 TAMBERLIN J SYDNEY 17 NOVEMBER 2000 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N244 OF 1999 BETWEEN: MICROSOFT CORPORATION FIRST APPLICANT MICROSOFT PTY LIMITED SECOND APPLICANT AND: BUSINESS BOOST PTY LIMITED (ACN 070 654 732) trading as PERRY TAIT'S and COMPUTER WHOLESALERS DIRECT FIRST RESPONDENT PERRY TAIT SECOND RESPONDENT PASSIONS PTY LIMITED (ACN 066 213 741) trading as STARWORKS PROMOTIONS MARKETING THIRD RESPONDENT THERESA MILOSEVIC FOURTH RESPONDENT JUDGE: TAMBERLIN J DATE: 17 NOVEMBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This matter was listed for hearing on 7 November 2000 as against the fourth respondent only. As against the third respondent this matter has been finalised, and the proceedings continue against the first and second respondents. When this matter was called on for hearing none of the respondents, including the fourth respondent, appeared. I am satisfied that the fourth respondent was aware that this was a final hearing and having regard to the past history of non-appearance at directions hearings I considered that the matter should proceed in her absence. Having read the material in evidence and after hearing submissions from Counsel for the applicants I made orders on 7 November 2000. I now publish my reasons. 2 At the outset of the hearing I ordered that this matter and N1123 of 1999 be heard together, and that to the extent that the material was relevant the evidence in one be evidence in the other. I also ordered that the question of liability should be heard separately from the question of quantum. These reasons only concern the liability issue. 3 On the material and affidavits before me I am satisfied that the applicants have made out a case for the relief sought against the fourth respondent. In reaching this conclusion I accept the submissions made by the applicants and the facts as set out in the documentary material in the affidavits. I am also prepared to draw the inferences advanced by the applicants in submissions based on the facts alleged in the evidentiary material. 4 In relation to the claim of copyright infringement I am satisfied that the fourth respondent has wrongfully authorised unlicensed reproductions of Microsoft programs onto the hard disk drives of computer systems and onto electronic chips comprising the Random Access Memory ("RAM") of computer systems. The computer systems in question were supplied to customers of the third respondent. I have had regard to and accept the authorities discussing authorisation cited by the applicants in the detailed written submissions. 5 My decision requires the formation of a conclusion as to whether reproduction of information and instructions onto the hard drive of a computer and into RAM amounts to copyright infringement. I make the following observations in relation to these issues. 6 Evidence has been adduced from Dr Jayasooriah of the University of New South Wales which explains the way in which computer programs and data are stored in computer memory. This evidence has not been contradicted or challenged in any way. I accept this witness as well qualified to give this evidence having regard to his curriculum vitae and I accept his evidence. 7 Dr Jayasooriah describes a hard disk as an inflexible magnetic disk on which computer programs and data are encoded as microscopic magnetic patterns on the disk surface. Data is recorded on the disk and it can be erased any number of times just as with a cassette tape. Hard disks are generally sealed in a hard disk drive enclosure to protect them from dust and dirt in the atmosphere and they can store anything up to thousands of millions of bytes. The hard disk drive is a machine which spins the hard disk, enabling the magnetic pattern on the hard disk to be read or written by the computer. The information stored on the hard disk is not extinguished when the computer is switched off but remains in storage until reactivated. 8 In relation to the storage of RAM the evidence of Dr Jayasooriah is as follows: "OVERVIEW OF COMPUTER SYSTEM … 5 The central processing unit ("CPU") is the location at which most of the instructions are carried out by computer. On a personal computer or workstation, the CPU is housed in a single computer chip called a microprocessor. … COMPUTER MEMORY 12 Computer memory is the part of the computer where computer programs and data are stored. It generally refers to actual electronic chips on the computer that are used to hold the information comprising the computer programs and other data. 13 The two forms of memory commonly use din personal computer systems are Random Access Memory ("RAM") and Read Only memory ("ROM"). 14 RAM can be conceived as an array of boxes or locations, each location capable of holding one byte (or character) of information. … 15 The term RAM is used to refer to "read and write" memory as it is possible to write instructions and data (including computer programs) into RAM and read data from RAM. RAM can be described as volatile, as it requires power to maintain its contents. When power is turned off, any instructions or data which have been written into RAM are lost. … SYSTEM BOOT PROCESS 27 The initial starting-up process of a computer is referred to as the boot process. 28 When the computer is turned on from the off position, its RAM is empty and it needs to find instructions to tell it what to do to start up the computer. The CPU is designed so that each time the computer is switched on, the CPU will look at the same place in the system ROM for the start of the boot program. These instructions which comprise the start of the boot program are stored in ROM because the contents of ROM memory are not lost when power is turned off and thus the CPU will always be able to execute the boot program whenever the computer is turned on. 29 The first sequence of instructions executed by the CPU in a personal computer is the Power-On Self-Test ("POST") program. … 30. Following execution of the POST program, The CPU executes the Basic Input-Output System ("BIOS") program. 31 The BIOS program then begins the search for a disk drive containing the operating system and when this is found, it causes the contents of the boot sector on this hard disk to be copied into RAM. The boot sector is the first block (containing 512 bytes of instructions and data) on the hard disk. 32 An operating system such as Microsoft Windows comprises a number of different computer programs which are stored as separate files on hard disk. Once it has been copied into RAM, the program in the boot sector retrieves these files in the right order, and copies the files into RAM. It then instructs the CPU to execute them by transferring control to this program in RAM." 9 The question whether copying to a hard disk or into RAM constitutes a reproduction in a material form has not been conclusively determined. In Dyason v Autodesk Inc (1990) 24 FCR 147 at 177-178 Sheppard J expressed the tentative view that the transfer of a program to a hard disk in a computer would amount to a reproduction or adaptation but expressed doubt as to whether the transfer of a program into RAM could amount to such a reproduction. In so concluding his Honour gave weight to the fact that the transfer of a program to a hard disk involved a form of permanent storage and was therefore more akin to making a copy of a book whereas the position with respect to RAM was different. Also in the Dyason case Beaumont J stated that he saw some force in a submission that a transfer of a program into RAM did not constitute a reproduction or adaptation: at 201. Lockhart J, at 156-157, agreed with the reasons for judgment given by Sheppard and Beaumont JJ but preferred to leave open the question whether "the operation" of a program on a computer, which would involve transfer into RAM, resulted in the coming into existence of a reproduction or adaptation of that program. 10 The issue whether transfer of information and instructions to a hard disk or into RAM constitutes a "reproduction of the work in a material form" requires consideration of the expression "material form" in s 10 of the Copyright Act (1968) ("the Act") which provides: "material form, in relation to a work or an adaptation of a work, includes any form (whether visible or not) of storage from which the work or adaptation, or a substantial part of the work or adaptation, can be reproduced." 11 Having regard to Dr Jayasooriah's evidence, I am satisfied that the loading of computer programs into a hard disk is a form of storage from which a copyright work or adaptation can be reproduced. This conclusion is in accordance with the observations made by Sheppard J with respect to loading onto a hard disk drive which Lockhart J generally agreed with in the Dyason case. Accordingly, unauthorised copying of computer programs onto a hard disk does amount to copyright infringement. 12 In relation to RAM, it is possible for a computer program to remain stored in RAM indefinitely until the computer system is shut down or otherwise powered down. Accordingly, in my opinion, it follows from this evidence that the period of time during which the instructions or data are stored in RAM can be substantial. For example, it is not infrequently the case that computers are left on for a considerable period of time with one or more programs running. The RAM storage continues over this period. The fact that that memory is vacated when power is extinguished does not necessarily mean that there has not been a substantial period of storage of the instructions and data comprised in the RAM memory. 13 It is to be noted that the definition of "material form" in the Act makes no reference to the duration of the storage and is consistent with storage being either for a short or long period. The crucial concept is "storage". The present case is one where I consider regard can be had to the Explanatory Memorandumdirected to the Copyright Amendment Bill 1984 introducing the present definition. That relevantly reads: "28. The definition of 'material form' is new and makes it clear that the material form includes such methods as storage or reproduction on magnetic tape, read only or random access computer memory, magnetic or laser disks, bubble memories and other forms of storage which will doubtless be developed." (Emphasis added) 14 It is evident from this that the definition was intended to be far-reaching and to cover not only ROM and RAM but also other types of storage to be developed in the future. 15 Some general guidance can be obtained from United States authority. In MAI Systems Corp v Peak Computer Inc 991 F2d 511 (9th Cir 1993) the United States Federal Court of Appeal for the Ninth Circuit held that "copying" for the purposes of US copyright law occurs when a computer program is transferred from a permanent storage device to a computer's RAM. At 518 of its reasons the Court said: "After reviewing the record we find no specific facts … which indicate that the copy created in the RAM is not fixed. … The law also supports the conclusion that [the defendant's] loading of copyrighted software into RAM creates a 'copy' of that software in violation of the Copyright Act." 16 In considering this decision it needs to be borne in mind that the Copyright Act 17 USC §101 under consideration provided that: "A work is 'fixed' in a tangible medium of expression when its embodiment in a copy or phono record, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." (Emphasis added) 17 The term "fixed" indicates something more permanent than "storage" but on the other hand the US provision covers any period of time provided it can be said to be more than "transitory". 18 The Court's reasoning in Peak's case has been followed in numerous subsequent United States cases: see Advanced Computer Services of Michigan, Inc v MAI Systems Corp 845 F Supp 356 (Ed Va 1994) at 363-364; Triad Systems Corp v Southeastern Express Co 64 F3d 1330 (9th Cir 1995); Marobie-Fl, Inc d/b/a Galactic Software v National Association of Fire Equipment Distributors 983 FSupp 1167 (ND I11 1997); Stenograpgh L.L.C. v Bossard Associates Inc 144 F3d 96 (DC Cir 1998). In my view the United States decisions lend support to the submissions made by Microsoft. 19 Having regard to the above matters I am satisfied on the material presently before me that the applicant has made out its case in relation to both the reproduction to and from the hard disk drive storage and the RAM storage infringements. 20 It is apparent from the evidence in this case that there has been an infringement of the trade marks of the first applicant by the third respondent. I am also satisfied that the fourth respondent was at all material times the controlling mind and will of the third respondent within the principles enunciated in Tesco Supermarket Ltd v Nattrass [1972] AC 153 and authorised the infringement. The trade marks were not applied by or with the consent of the registered owner. 21 I am satisfied that the fourth respondent has contravened s 52 of the Trade Practices Act 1974 as a consequence of which the applicants have suffered loss. I certify that the preceding twenty one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 17 November 2000 Counsel for the Applicant: R Cobden Solicitor for the Applicant: Mallesons Stephen Jaques Counsel for the Fourth Respondent: No appearance Date of Hearing: 7 November 2000 Date of Judgment: 17 November 2000