FEDERAL COURT OF AUSTRALIA Motorcycle Aftermarket Spares Pty Ltd v Tamworth Cycle Tune Pty Ltd [2014] FCA 1433 Citation: Motorcycle Aftermarket Spares Pty Ltd v Tamworth Cycle Tune Pty Ltd [2014] FCA 1433 Parties: MOTORCYCLE AFTERMARKET SPARES PTY LTD ACN 165 022 097 v TAMWORTH CYCLE TUNE PTY LTD ACN 166 053 265, MOTORCYCLE PARTS ONLINE AUSTRALIA PTY LTD ACN 166 053 345 and STEPHEN JAMES NAGLE File number(s): QUD 114 of 2014 Judge(s): GREENWOOD J Date of judgment: 23 December 2014 Catchwords: INTELLECTUAL PROPERTY – consideration of an assessment of damages arising out of infringements of copyright in photographs and particular trade text Legislation: Copyright Act 1968 (Cth), ss 115(2) and 115(4) Cases cited: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763 – cited Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd (No 3) (2014) 312 ALR 705 – cited Date of hearing: 22 December 2014 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Solicitor for the Applicant: Mr M T Woodhead, Dundas Lawyers Counsel for the Respondents: The third respondent appeared in person IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 114 of 2014 BETWEEN: MOTORCYCLE AFTERMARKET SPARES PTY LTD ACN 165 022 097 Applicant AND: TAMWORTH CYCLE TUNE PTY LTD ACN 166 053 265 First Respondent MOTORCYCLE PARTS ONLINE AUSTRALIA PTY LTD ACN 166 053 345 Second Respondent STEPHEN JAMES NAGLE Third Respondent JUDGE: GREENWOOD J DATE OF ORDER: 23 DECEMBER 2014 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The third respondent pay the applicant damages awarded pursuant to s 115(2) and s 115(4) of the Copyright Act 1968 (Cth) in an amount of $72,500.00 in the aggregate. 2. The third respondent pay the applicant's costs of and incidental to the proceeding in the period from 8 November 2014. 3. Pursuant to ss 17 and 23 of the Federal Court of Australia Act 1976 (Cth) and r 1.32 of the Federal Court Rules 2011, these orders are made in Chambers and published and pronounced from Chambers together with reasons for judgment in support of the orders, without further convening the parties. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 114 of 2014 BETWEEN: MOTORCYCLE AFTERMARKET SPARES PTY LTD ACN 165 022 097 Applicant AND: TAMWORTH CYCLE TUNE PTY LTD ACN 166 053 265 First Respondent MOTORCYCLE PARTS ONLINE AUSTRALIA PTY LTD ACN 166 053 345 Second Respondent STEPHEN JAMES NAGLE Third Respondent JUDGE: GREENWOOD J DATE: 23 DECEMBER 2014 PLACE: BRISBANE REASONS FOR JUDGMENT 1 These proceedings are concerned with an assessment of damages arising out of infringements of the copyright subsisting in photographs and textual works by the respondents. 2 On 7 November 2014, the Court granted permanent injunctions restraining the respondents from reproducing or causing to be reproduced artistic works owned by the applicant being photographs described in para 8 of the affidavit of Mr Peterson filed on 21 March 2014. The Court also granted an injunction restraining the respondents from reproducing or causing to be reproduced, the literary works described in para 10 of Mr Peterson's affidavit filed on 21 March 2014. 3 The applicant made an election to claim damages rather than an account of profits and by Order 5 of the orders made on 7 November 2014, the third respondent, Mr Stephen James Nagle, was ordered to pay to the applicant such damages as may be assessed under s 115(2) of the Copyright Act 1968 (Cth) (the "Act") and such additional damages as may be assessed under s 115(4) of the Act. 4 These proceedings are concerned with that assessment. 5 Mr Nagle was formerly represented in the proceeding by Mr Mark Daly of Duncan Maclean & Associates, Solicitors. On 11 June 2014, those solicitors filed a notice of ceasing to act on behalf of Mr Nagle. Since then, Mr Nagle has appeared in person in the proceedings. On 7 November 2014, when the applicant sought judgment in the matter, Mr Nagle took the position that he had no objection to the injunctive orders being made or the other orders which he described as "interlocutory orders": Transcript, 7 November 2014, T 13, lns 38-45. 6 As to the assessment of damages, the Court made it plain that a date would be nominated by the Registry for the listing of the matter for the determination of an assessment of damages. A direction was made that day requiring Mr Nagle to file a written statement or affidavit setting out any matter that he would wish to assert relevant to the assessment of damages, at least seven days before the date nominated by the Court for the assessment. Mr Nagle was directed to file such an affidavit in Court and serve it upon the solicitors for the applicant to the attention of Mr Woodhead. 7 Mr Nagle was duly notified of the date for the hearing of the matter, namely, 22 December 2014. Mr Nagle has not filed an affidavit or put forward any material in writing setting out factors he would wish to have considered in the assessment of damages. 8 Moreover, on 30 September 2014, the Court suggested that Mr Nagle might be referred to the Queensland Public Interest Law Clearing House ("QPILCH") so as to obtain legal advice in relation to the proceedings and, in particular, any matter he might wish to put forward as to any aspect of the matter: Transcript, 30 September 2014, T 5, lns 23-31. Mr Nagle responded by saying, "No, look, I really don't feel the need to talk to these people": T 5, ln 38. On 22 December 2014, Mr Nagle advised the Court that he could see no point in speaking to the lawyers from QPILCH as the entire process taking place of proceeding towards an assessment of damages was, in his view, best characterised as one of "plucking feathers". Mr Nagle was of this view notwithstanding that the QPILCH service is an advisory service which would not engage Mr Nagle in particular cost. 9 Accordingly, Mr Nagle elected not to put forward any material in relation to the question of damages. Mr Nagle appeared before the Court on 22 December 2014 and sought to demonstrate that due to his bankruptcy and his general impecuniosity there seemed to be no point in the applicant pressing its claims. Secondly, Mr Nagle contended that there are, in truth, only approximately six demonstrated infringements and that the claim for damages is exaggerated and unsustainable. It should also be noted that Mr Nagle has not filed an address for service. Moreover, Mr Nagle refuses to identify any residential address. 10 The evidence in relation to the claim is this. 11 The sole director of the applicant is Mr Samuel Peterson. The applicant is a Brisbane-based motorcycle spare parts retailer which has been retailing such goods for over 23 years. The applicant was incorporated on 1 August 2013 and acquired the business formerly conducted by Mr Alan Peterson for approximately 22 of those years. In a pre-incorporation contract made for the benefit of the new entity, Mr Alan Peterson assigned the stock, equipment, trading names and all intellectual property rights in particular photographs and trade text to the applicant. The applicant operates an eBay store from which it sells these goods. The eBay store is called "Motorcycle Recyclers". The applicant offers approximately 9,055 items for sale. 12 The applicant uses photographs and descriptive text to advertise and promote the sale of its product on its eBay store site. Mr Alan Peterson is the person who took the majority of the photographs used by the applicant and is the person who was the author of the descriptive text used to set out the particular features of each particular part. 13 Mr Alan Peterson became an employee of the new entity and at least from the formation of the company, the copyright subsisting in any photographs taken by him and text written by him vested in the applicant by reason of his contract of employment. The first respondent, Tamworth Cycle Tune Pty Ltd ("TCT") is a company incorporated in Australia on 30 September 2013. The second respondent, Motorcycle Parts Online Australia Pty Ltd ("MOA") is a company also incorporated in Australia on 30 September 2013. Mr Nagle is the sole director of both companies. 14 In September 2013, Mr Alan Peterson made Mr Samuel Peterson aware that the applicant's photographs and its trade text was being reproduced on an eBay store operated by TCT. The applicant reported that matter to the operators of the eBay website. On 4 November 2013, Mr Alan Peterson spoke to Mr Nagle and told him that the applicant considered that TCT was infringing the applicant's copyright in the photographs and text. On 19 November 2013, the applicant conducted an online search of the TCT eBay site and identified the use by TCT of 398 of its photographs and related trade text. On 21 November 2013, Dundas Lawyers, on behalf of the applicant, sent by email a letter to Mr Nagle asserting that the applicant owned the copyright subsisting in a wide range of photographs and "item descriptions" relating to those photographs for motorcycle parts. Mr Nagle was personally served with that letter on 26 November 2013. On 27 November 2013, a further search by the applicant revealed that the TCT eBay store site was "using" over 330 of the applicant's photographs and related trade descriptions for the particular parts, and seven "cropped photographs" owned by the applicant. 15 On 28 November 2013, Dundas Lawyers received a letter from Mr Mark Daly of Duncan Maclean & Associates asserting that any breach of copyright was denied and admitting that TCT was the operator of the TCT eBay store. Mr Daly also said that his firm was willing and able to accept any Court documents the applicant might wish to issue in the matter. He also said that the respondents would "vigorously defend" any action pursued by the applicant. Mr Daly also said that he put the applicant "on notice that the $1,000.00 a day is a conservative estimate of the losses incurred by our client and the interest on this will be substantial as well as the costs". Mr Daly seemed to be suggesting that any disruption to the sale, by the respondents, of motorcycle spare parts, would cost the respondents approximately $1,000.00 a day during the period that the respondent's site was offline or, as he put it, "on holiday". That assessment seemed to represent a serious assessment of the lost revenue which would be suffered by the respondents from being deprived of the opportunity to sell motorcycle spare parts by reference to the photographs and text in question on their own respective websites (that is, the TCT and MOA websites). Not surprisingly, the applicant says that having regard to the extensive use of the applicant's photographs, the estimate of lost revenue suffered by the respondents whilst their respective sites were no longer online is a useful analogue of the revenue loss suffered by the applicant through the use by the respondents of the applicant's photographs and text. Nevertheless, I do not propose to assess damages by reference to those matters. 16 On 29 November 2013, the applicant, by conducting searches of the TCT eBay site, became satisfied that TCT had "taken down" from the website its eBay store. The applicant, by searches, established that on 30 November 2013 an eBay store site was "back online" operating under the name Motorcycle Parts Online Australia. That site was being operated by MOA. On 1 January 2014, the applicant conducted searches of the site which led Mr Samuel Peterson to believe that none of the applicant's photographs nor any of its text was being used on MOA's eBay store site. On 6 January 2014, however, a search by the applicant of MOA's eBay store site revealed that more than 330 of its photographs and an "equal number" of its item descriptions, and what it describes as "forty-nine (49) derivatives of [its] photographs were being used". 17 I return to that factual matter later in these reasons at [25]. 18 The applicant puts in evidence seven photographs in which it says it owns the copyright and immediately below each of those photographs is a copy of a photograph appearing on TCT's eBay site. The photographs are set out at pp 58 to 64 at Annexure SP-11 to the affidavit of Mr Samuel Peterson sworn 21 March 2014. Each photograph is an exact reproduction of the applicant's photograph. 19 On 13 January 2014, Mr Darryl Graham purchased an item from MOA's eBay store. The receipt for the item was issued by "Tamworth Cycle Tune" which recited a particular ABN. That ABN is registered in the name of Mr Nagle. 20 Annexure SP-14 to Mr Peterson's affidavit is a comparative table which sets out examples of the applicant's photographs and related trade text which the applicant claims TCT has been using without its authority. The table sets out 21 photographs with the applicant's web address where those photographs appeared as at 18 March 2014; 10 photographs with the applicant's web address where those photographs appeared as at 13 March 2014; four photographs together with the web address where those photographs appeared as at 8 November 2013; 17 "item descriptions" together with the applicant's web address where those textual descriptions appeared as at 18 March 2014; 11 examples of item descriptions together with the applicant's web address where that text appeared as at 13 March 2014; and one further example of descriptive text and the applicant's web address where that text appeared as at 4 March 2014. 21 These examples are all put forward as a "sampling" of the images and text used and reproduced by the respondents. As to the particular respondent, Column 3 of the comparative table shows true copies of photographs and trade descriptions used by MOA on its online eBay store in relation to the products and text set out in the sampling, together with the web address where those reproductions appeared as at 18 March 2014, 13 March 2014, 4 March 2014 and 8 November 2014. 22 In almost all cases the photographs are identical reproductions and the text is either reproduced exactly or substantially. 23 On 31 March 2014, Mr Samuel Peterson swore a further affidavit in which he seeks to correct some aspects of his principal affidavit. 24 The first matter to be corrected is that in relation to Annexure SP-11 which contained examples of seven photographs reproduced by the respondents, Mr Peterson says that five of those images (at pp 59, 61, 62, 63 and 64) are photographs in which the copyright is not owned by the applicant but is used under a non-exclusive licence granted to the applicant by the owner of the copyright in those images, namely, Motorcycle Specialities (Australia) Pty Ltd ("MSAPL"). Similarly, in relation to Annexure SP-14 (the comparative table), Mr Peterson observes that of the 21 photographs which appeared on the applicant's website as at 18 March 2014, eight of those images are photographs in respect of which the copyright is owned by MSAPL and used by the applicant under a non-exclusive licence granted by MSAPL. 25 In his affidavit of 31 March 2014, Mr Peterson makes further reference to the results of searches conducted on or about 6 January 2014 which revealed 330 of the applicant's photographs in use on MOA's eBay store site. Mr Peterson says that it is now impossible to provide an exact number of how many photographs were being used on MOA's eBay store site as at 6 January 2014 although Mr Peterson makes an estimate that the number of photographs reproduced on that site as at that date "would [be] three quarters of the originally stated 330 [applicant] Photographs". That assessment places the number of photographs on MOA's eBay store site as at 6 January 2014 at 247 photographs. Mr Peterson also says at para 17 of his affidavit sworn 31 March 2014 that taking into account the correction to the first 21 photographs in the comparative table (so as to eliminate the eight photographs used under a non-exclusive licence), a search he has undertaken shows that as at 28 March 2014 the MOA eBay store was using 213 of the applicant's photographs. 26 In these proceedings, the applicant has not sought to demonstrate any actual loss of profit deriving from lost sales referable to the use by the respondents of its photographs and/or its descriptive text. Rather, the applicant seeks a nominal award of damages in respect of each photograph and seeks an award of additional damages under s 115(4) of the Act having regard to the conduct of the respondents. 27 Mr Nagle says that there are only six examples of infringement. He says that there is simply no point to these proceedings because he remains an undischarged bankrupt; he has no assets; he has no capacity to pay any award of damages; and, in any event, the profit in respect of each part is relatively small (and by reference to one example, the profit is $4.00 on a particular part). Nevertheless, the assessment of damages must proceed on the basis of evidence. The evidence clearly demonstrates a substantial number of reproductions of the applicant's photographs and reproductions of its textual descriptions for products. Mr Nagle chose not to create his own database of photographs by reference to which he might seek to sell the relevant part. Rather, he sought to use the photographs and trade text of the applicant. Mr Nagle also says that the items are utilitarian motorcycle spare parts and there is nothing "creative" or special about the photographs. Nevertheless, the photographs are just that: photographs of motorcycle spare parts taken by a photographer. Copyright subsists in the photographs, on the evidence, and the ownership of the copyright has vested, on the evidence, in the applicant. Moreover, the sequence of events shows that Mr Nagle was put on notice of the applicant's claims on 4 November 2013 by Mr Alan Peterson and put on notice in writing by the applicant's lawyers on 26 November 2013. On 28 November 2013, Mr Nagle's lawyers sent the letter earlier mentioned to the applicant's lawyers denying infringement but conceding that TCT was the operator of the TCT eBay store site. On 29 November 2013, Mr Nagle then took immediate steps to cause TCT to cease operating the eBay website store which utilised the applicant's photographs and text. However, by 6 January 2014, Mr Nagle had begun using MOA to operate an eBay store site using approximately 247 of the applicant's photographs and related text. In other words, Mr Nagle had moved from using TCT for the relevant purpose having been put on notice, to using MOA for the same purpose. In January, a trap purchase showed that product ordered through the MOA eBay store was being supplied under the name of Tamworth Cycle Tune (not Tamworth Cycle Tune Pty Ltd) under an ABN reference registered in the name of Mr Nagle. 28 I am satisfied on the evidence that a substantial number of the applicant's photographs have been reproduced. I am also satisfied that much of the trade text used to describe particular parts has been either reproduced or substantially reproduced on the TCT and MOA eBay store sites at the direction and under the control of Mr Nagle. 29 As to the principles to be applied in making an assessment of damages under s 115(2) and s 115(4) of the Act, I respectfully adopt and apply the principles identified by Besanko J in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763 at [17] and the observations of Yates J in Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd (No 3) (2014) 312 ALR 705 at [37] to [53]. 30 I am satisfied that the number of reproductions amount to approximately 200 images. I award damages in respect of those reproductions under s 115(2) of the Act of $7,500.00. It seems to me that the body of reproductions should be taken as a whole and an award of damages assessed in respect of the totality of the images. I am satisfied that Mr Nagle has caused and authorised TCT and MOA to make substantial use of the applicant's photographs in the promotion and sale of motorcycle spare parts from the TCT and MOA websites. I award additional damages under s 115(4) of the Act of $65,000.00. I do so having regard to the large number of photographs involved and the circumstance that these reproductions continued notwithstanding the attempts by the applicant to draw the conduct to the attention of Mr Nagle. In addition, having had the matters drawn to his attention, he continued to resist the claims of the applicant and then transposed the conduct from TCT to MOA so as to keep engaging in the conduct under the device of a different entity. Having regard to the circumstances just mentioned and the additional circumstance that the applicant and Mr Nagle, through the entities he controlled, were direct competitors and, in addition, that Mr Nagle was seeking to win sales through the use of the applicant's photographs, an award of additional damages under s 115(4) of the Act is designed, in part at least, to discourage in both a particular and a general sense, Mr Nagle from engaging in such conduct again. 31 The total award of damages will be $72,500.00. 32 The respondents will be ordered to pay the costs of and incidental to the proceeding in the period from 8 November 2014. I certify that the preceding thirty-two (32) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 23 December 2014