Case: Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCAFC 40 ; (2007) 157 FCR 564
Outcome: referred to
principles applicable to the assessment of damages under s 115(2) of the Copyright Act were set out by Black CJ and Jacobson J in Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCAFC 40 ; (2007) 157 FCR 564 at [23] ff. It is unnecessary to repeat what was said in that case, save for two relevant observations. First, in DAP Services , the Aristocrat companies claimed damages only upon one basis, namely, the value of lost sales calculated by reference to the report of a chartered accountant who attempted to calculate the loss of profits for each lost sale: see DAP Services at [30]. However, the claim for compensatory damages failed in DAP Services because the evidence did not establish that each sale by the respondents was at the expense of a new Aristocrat machine: see DAP Services at [31]. Second, it was suggested in DAP Services at [34]ff that there may have been other bases upon which damages could have been assessed. These included the possibility of finding that Aristocrat had lost some proportion of the sales made by the infringing respondents: see Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [8] per Emmett J. However, these alternatives were not open in DAP Services because there was no evidence to support the assessment of damages on those bases. In the present case, the Aristocrat companies contend that the appropriate measure of compensatory damages is the loss of profit that would have been made from the sale of second-hand or refurbished Aristocrat gaming machines by the Aristocrat companies, or the loss of profits on the sale of conversion kits. The evidence in support of that assessment was contained in the affidavits of Mr Irarrazaval and Mr Graham Ward, the Group Financial Controller of Aristocrat. Mr Irarrazaval's evidence dealt in some detail with the market for the sale of Aristocrat new and refurbished gaming machines to countries in South America. Evidence was given as to the volume of second-hand or refurbished gaming machines supplied by the Aristocrat companies to companies in South America during 2002 to 2007, and the prices at which Aristocrat second-hand or refurbished gaming machines were supplied in the South American market. Mr Irarrazaval gave evidence in relation to the market in a number of South American countries. In relation to Peru, Mr Irarrazaval said that notwithstanding the significant size of the gaming machine market, and the large number of Aristocrat gaming machines installed and operating across the various venues in Peru, the relevant member of the Aristocrat group of companies had difficulties selling Aristocrat gaming machines to customers between 2002 and 2006. Mr Irarrazaval attributed that difficulty to the high number of counterfeit gaming machines being sold in Peru at prices significantly below the prices at which the Aristocrat companies were able to offer genuine refurbished gaming machines. Mr Irarrazaval gave evidence as to the prices that were obtained by the respondents for sales in South America covering the period from 2002 to 2004 in respect of gaming machines recorded on "seized invoice spreadsheets". Whilst it is true that the Aristocrat companies have not established that all of those gaming machines were counterfeit, it is relevant to record that, as Mr Irarrazaval says, the amount obtained for those machines was around $US1000 to $US1500 per machine. He observed that this is lower than the price at which the Aristocrat companies sold their refurbished gaming machines into South America at that time, which was put at between $US3500 and $US4500 per unit. The principles upon which additional damages are awarded were discussed in DAP Services at [40]ff. It is not necessary to set out the principles in any detail. It is sufficient to say that the objectives include deterrence, and that an element of penalty is an accepted factor in the remedy. Also, the assessment of the amount to be rewarded is a somewhat imprecise exercise and the Court is to have regard, amongst other things, to the flagrancy of the infringement and the need to mark the Court's disapproval of the conduct. In the present case, as in DAP Services, the actions of the respondents demonstrate a cynical and flagrant exploitation of the Aristocrat companies' copyright. Although the number of infringing transactions was ultimately proved to be far less than the number claimed by the Aristocrat companies, it is plain that the respondents were engaged in a commercial exercise. Their actions were plainly flagrant and undertaken for commercial gain. The Aristocrat companies claimed that the true nature of the respondents' business was a large scale counterfeiting operation. They failed to make this good. But the statements made in the emails when considered with much of the materials seized on the Anton Piller raids show the willingness of the respondents to engage in counterfeiting when it suits their commercial purposes. There is no need for any proportionality between the amount of compensatory damages under s 115(2) and the amount of additional damages under s 115(4): DAP Services at [45]. I am also entitled to take into account the conduct of the respondents after the acts constituting the infringement. Accordingly, I am entitled to include in my calculation of additional damages the attitude of the respondents to this litigation, in which they vehemently denied any involvement in counterfeiting. For the reasons mentioned above, additional damages cannot be maintained against Tonita as it has not been established that Tonita was involved in any of the 54 impugned transactions. The amount of additional damages awarded in DAP Services was $200,000 against Vidtech and Mr Parry: see DAP Services at [53] and [116]. Here, the activities were on a scale which seems to me to be larger than that which existed in DAP Services. In addition, there are three groups of respondents. I have come to the view that I ought to award an amount of $450,000 for additional damages under s 115(4) against the Global respondents, the Impact respondents and Mr Allam, jointly and severally. Although Mr Allam was an independent contractor, he was intimately involved in the venture and there is no basis for awarding a lesser sum of additional damages against him. Damages were also sought for infringement of trade marks, breach of the provisions of the Trade Practices Act and passing off. However, these claims were pressed only to the extent that damages awarded for copyright infringement were inadequate.