In the recent decision of Microsoft Corporation v Liu 1, the Federal Court granted Microsoft’s application in part, finding that the respondent, Mr. Liu, had infringed Microsoft’s copyright in five of its computer programs. Given the circumstances of the case, including the respondent’s prior infringing activities, the Court awarded statutory damages of $10,000 per infringement and punitive damages of $50,000, for a total of $100,000.

Background

In this proceeding, Microsoft asserted that Mr. Liu had personally infringed its copyright in a number of computer programs by selling unlicensed copies to an investigator employed by Microsoft. Microsoft further asserted that Mr. Liu was also liable for infringement as he had authorized infringement by his co-worker, “Henry”.

It is of note that the parties had settled prior copyright infringement disputes regarding infringement of Microsoft’s programs, and that as part of an earlier settlement in 2012, an Order was granted on consent enjoining the respondent from any future infringement of Microsoft’s computer programs.

Direct Copyright Infringement, But No Authorization of Infringement

Dealing first with Mr. Liu’s own acts, the Court held that there was convincing evidence that established that Mr. Liu had personally sold and installed unlicensed copies of Microsoft’s computer programs to an investigator hired by Microsoft.

In that regard, Justice Boswell held, “Mr. Liu sold to Mr. McCullough unlicensed copies of the applicant’s programs; he personally handled and loaded the programs from a USB memory stick onto the IBM computer purchased by Mr. McCullough.” As a result, the Court had “no hesitation in finding on a balance of probabilities that,… Mr. Liu reproduced and copied the applicant’s computer programs and sold unlicensed copies of them to Mr. McCullough” and that, “Mr. Liu clearly infringed the applicant’s copyright in its computer programs on this occasion.”

The Court was unable to arrive at the same conclusion in respect of the allegation that Mr. Liu had authorized his co-worker’s infringing acts.

Relying on the Supreme Court of Canada’s decision in CCH Canadian Ltd. v. Law Society of Upper Canada 2, Microsoft contended that Mr. Liu authorized and was responsible for the infringing acts of his co-worker as “he was personally present and involved by providing the external hard drive from which the unlicensed programs were copied onto the computer.”

However, in considering the issue, the Court noted that Microsoft had not provided clear evidence as to the nature and extent of the relationship between Mr. Liu and Henry so as to demonstrate that Mr. Liu had “sufficient control or direction” over the actions of his co-worker to establish vicarious liability or joint liability. In the result, the Court held Mr. Liu not liable as merely “providing the equipment that could be used to infringe copyright” does not give rise to liability if someone else subsequently uses that equipment to infringe a copyrighted work.

Statutory Damages

Having determined the issues of liability, the Court addressed the appropriate level of damages to be awarded, noting that reasonableness and a “just result” should be the “over-arching mandate” in the assessment.

In that regard, the Court balanced the fact the infringement in this proceeding arose from a single transaction, and that there was no evidence of other sales or profits from other infringing acts, with the need to deter future infringement, particularly given Mr. Liu’s prior infringement and his failure to adhere to the prior consent order enjoining his infringement of Microsoft’s programs.

Balancing these factors led the Court to conclude that the maximum amount of statutory damages would be “out of proportion with any profit [the respondent] may have made from the infringing activity […]” but that the necessity for deterrence warranted an amount “substantially more than the minimum amount of statutory damages.”

Ultimately, the Court awarded statutory damages in the amount of $10,000 for each of the five instances of infringement.

Punitive Damages

In addition to statutory damages, the Court awarded Microsoft $50,000 in punitive damages on the basis that Mr. Liu had knowingly and deliberately infringed copyright in the computer programs in spite of a prior consent order enjoining such conduct, and that such conduct constituted “disrespect and contempt for this Court and its processes and cannot be tolerated.”

Take Away

The Court’s decision in this case serves as a reminder that when proceeding by way of Notice of Application, parties must be prepared to provide positive evidence of all the facts necessary to establish infringement as the Court may not be willing to make inferences or assumptions to bridge any evidentiary gaps. The decision also serves as a warning to would be infringers that in the appropriate circumstances the Court will be willing to award statutory damages that far exceed any profits made or direct damages suffered as a result of infringing acts.