Case: Bailey v Namol Pty Ltd [1994] FCA 1401 ; (1994) 53 FCR 102
Outcome: followed
Damages under s 115(2) of the Copyright Act are to compensate for the loss suffered as a result of the infringement: Bailey v Namol Pty Ltd [1994] FCA 1401 ; (1994) 53 FCR 102 , 110-111. The measure of damages is to be, so far as is possible, that sum which will put Krueger in the same position as it would have been in if it had not suffered the wrong: Bailey 53 FCR 110-111. 29 In valuing Krueger's damages claim, there are some essential principles: First, Krueger has the burden of proving its loss; secondly, the object is to compensate Krueger and not to punish Vawdrey; and, finally, although reported cases may be of assistance, each case must be decided on its own particular facts: Bailey 53 FCR at 111. 31 One method for assessing damages is the licence fee or royalty method. Under this approach, the owner of the copyright recovers "a sum equal to the fee that would fairly be charged for use of the copyright work": TS&amp;B at [206]. As Vawdrey properly conceded, such a method is often rejected if the court takes the view that the applicant would not have granted such a licence to the respondent because, for example, the parties are competitors or the copyright work was devised for a particular purpose and that purpose was frustrated or destroyed by the infringing use of the work by the respondent: see Bailey v Namol 53 FCR at 112 (concluding that lost profits is the better measure of damages where the copyright work was created for a specific purposes which has been frustrated by the infringement) and TS&amp;B at [206] (stating that the a lost profits approach is preferable to a licence fee approach where the plaintiff and infringer are "in actual or potential competition in relation to the copyright work"). See also Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564 at [27]-[29]; Norm Engineering Pty Ltd v Digga Australia Pty Ltd (2007) 162 FCR 1 at [257], appeal allowed in part on other grounds at 166 FCR 268. 34 The appropriate measure of damage in circumstances such as these (ie where the plaintiff and defendant are in actual or potential competition in relation to the copyright work) was described by Finkelstein J in TS&amp;B at [207] as follows: ... Then lost profit is usually the best measure of damage. The plaintiff must show that he has lost sales to the defendant as a result of the infringement and quantify the loss suffered. This requires the court to explore the counterfactual hypothesis of the contracts the plaintiff would have obtained absent the infringement and the costs associated with them . Necessarily the process will involve a degree of speculation, but that is no bar to recovery. The claim is not for loss of revenue but for loss of profits. The profits to be calculated are the lost net profits. By net profits I mean revenue less all costs including variable and indirect costs, but not including income tax. Care must be taken to ensure that costs savings are brought to account. If a plaintiff sells less of his products he will have less costs and that should be treated as a gain to be offset against the lost revenue which forms the basis of the computation of lost profits. The plaintiff is also entitled to recover indirect losses (such as damage to goodwill) as long as the cause is the infringement, the loss is foreseeable and is not unduly speculative. It will often be impossible to be precise in the calculation of lost profit. If needs be, the calculation can be rough and ready, with the benefit of any doubt favouring the plaintiff. (Emphasis added.) See also Bailey 53 FCR at 111-112 (acknowledging that the lost profits assessment depends upon a counterfactual). 58 I come now to Krueger's claim for additional damages. In a claim for additional damages under s 115(4) of the Copyright Act , some general observations were made by Besanko J in Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746 at [17] : First, there is no need ... to consider if an award of additional damages can be made under s 115(4) [even where] no damages are awarded under s 115(2) because I have awarded ... damages under s 115(2) ( Polygram Pty Ltd v Golden Editions Pty Ltd (No 2) 38 IPR 451 at 459-461 per Lockhart J; MJA Scientifics [International Pty Ltd v S C Johnson and Son Pty Ltd (1998) 43 IPR 275] at 283-284 per Sundberg J). Secondly, it is not necessary that there be a proportionate relationship between the additional damages awarded under subs (4) and the damages awarded under subs (2): Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191 at 198 per Goldberg J. An award of additional damages under subs (4) is not dependent upon the adequacy or inadequacy of an award of damages under subs (2). Thirdly, the matters in subs (4)(b)(i)-(iv) inclusive are not preconditions to an award of additional damages. In other words, and using the flagrancy of the infringement as an example, the Court must have regard to the flagrancy of the infringement in determining whether to award additional damages, but is not the case that additional damages can be awarded only if the breach involves a particular degree of flagrancy. Fourthly, ...there is a distinction between conduct of a defendant after an infringement (or after being informed that he has allegedly infringed the plaintiff's copyright) and relevant to the substantive allegations against him on the one hand, and the defendant's conduct of his defence to an action for an infringement of copyright in relation to procedural matters on the other. The former matter is within the terms of s 115(4)(b)(ib) of the [Copyright] Act, whereas ... the latter matter is a matter to be taken into account in determining the appropriate order as to costs. ... Fifthly, an award under s 115(4) of the [Copyright] Act can encompass damages which at common law would be aggravated damages and exemplary damages: Bailey 53 FCR at 113-114.