Summary

The Federal Court recently handed down its reasons for judgment on the issue of copyright subsistence in Telstra Corporation & Anor v Phone Directories Company Pty Limited & Ors [2010] FCA 44. The Court held that copyright does not subsist in the Yellow Pages Directories or White Pages Directories. The decision has been appealed.

Commercial significance

This decision is important for businesses which:

  • create compilations or databases of information  
  • create a work product primarily through the use of a computer program, especially a computer program which has a high degree of automation and so requires limited human input  
  • create works through the efforts of many individuals in an organisation:  
    • where those individuals include contractors as well as employees, or  
    • where those individuals are working relatively autonomously rather than working together in a collaborative manner.  

The decision means that it will be more difficult for businesses to establish copyright in compilations, databases of information and works produced through the use of computer programs, particularly where the work was produced through the efforts of many individuals.

For businesses seeking to establish copyright in such a work, it will be necessary to identify with precision the relevant authors of the work and their creative or intellectual input. In relation to contractors, it will also be necessary to establish the assignment of any copyright interest from the contractor to the relevant person or entity. In the case of large businesses, it may be difficult to establish the identity of each employee or contractor who contributed to the work, the nature of their contribution and the assignment of any relevant copyright interest. Businesses may need to introduce new procedures and record keeping to address this going forward.

Legal background

The applicants (together, Telstra) brought proceedings against the respondents for infringement of copyright in its directories. The parties agreed that, as a preliminary question, the Court should determine whether copyright subsists in the directories.

Copyright in Telstra’s directories had been considered in 2002 by the Full Federal Court in Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd (2002) 119 FCR 491. The Court held that, on the facts in that case, copyright did subsist in the directories as an original literary work, being a ‘compilation’ under the Copyright Act 1968 (Cth) (Copyright Act). The Court’s reasoning was, in summary, that the anterior effort and expense of producing the directories could be taken into account on the question of originality. Originality is a prerequisite for copyright to subsist in a work. This approach became known as the ‘sweat of the brow’ approach to originality.

However, in 2009 the High Court of Australia in IceTV Pty Limited v Nine Network Australia Pty Limited (2009) ALR 386 took a dramatically different approach to copyright in compilations. The High Court considered the concept of originality in compilations, particularly in the context of infringement. The High Court emphasised the need for human creativity or intellectual endeavour in relation to the expression of the compilation before it would be sufficiently original to attract copyright protection. This can be contrasted with the industrious compilation of information, the expression of which involves little judgement or creativity.

The High Court did not expressly overrule the decision in Desktop Marketing. However, the reasoning of the High Court clearly cast doubt over whether the directories would still be protected under copyright law.

Reasons for judgment

Justice Gordon’s reasons focus on three key issues:

  • the development of the directories  
  • authorship, and  
  • originality.

The development of the directories

Her Honour found that there were two key elements in the production of the directories:

  • specific software for integrated directory production (Genesis). Telstra did not rely upon the software as a separate copyright work. Instead, Telstra led evidence of the creation and customising of this software to show the intellectual effort expended by Telstra’s employees in its creation and customisation. Telstra alleged that this effort was relevant work which went into the creation of the directories; and  
  • the Rules, a set of automated guidelines which governed how every listing in the directories appeared.

Software

The specific directory production software systems (including Genesis) were commissioned by Telstra from various developers in order to produce the directories. The original software was then modified according to Telstra’s needs. The implementation of the Genesis system took more than five years and cost in excess of $300 million.

The relevant IT contracts provided that intellectual property in the generic (original) software was to remain with the developer, while Telstra’s enhancements and modifications were to become Telstra’s property.

However, not all software modifications were recorded and Telstra’s evidence did not clearly disclose which modifications of the original software were made at Telstra’s request. This had the result that it was impossible to determine which parts of the software were Telstra’s intellectual property. Her Honour found that ‘an undefined but not insignificant proportion of the Genesis Computer System was not the intellectual property of [Telstra]’.

Rules

The Rules were:

‘a set of prescriptive guidelines that control, dictate, restrict and / or prohibit the content and presentation of listings in the [White Pages Directories] and [Yellow Pages Directories]. They regulate the font used. They regulate the proper abbreviations of words. They regulate the colour schemes applied. They regulate the spacing between words and individual entries. They regulate the acceptability or otherwise of the use of particular words or phrases. It is unclear who created the Rules. But it is clear that everyone is bound by them.’

The evidence did not disclose who created the Rules, how they had been amended or who was responsible for such amendments. The Rules represented the combined efforts of many unidentified individuals over a number of years.

The Rules were directly and indirectly automated through their integration into the computer software. Direct automation meant that the information could be entered by a Telstra’s employees into databases by only choosing from limited options (for example, from drop-down lists) and then this information was automatically checked for compliance against the Rules, which ultimately also dictated the format and arrangement of the information. Although there was some human intervention (for example, artists drawing logos and editors ensuring advertisements complied with the Rules), the human discretion involved was limited to ensure compliance with the Rules and was not a ‘true’ discretion, ‘unfettered’ discretion or ‘discretion at large’.

The Court’s conclusion

The ultimate production of the directories was, therefore, caused by an automated process governed by the Rules which informed the operational software. Directory databases produced under the Rules were rolled-over from year to year with minor amendments and Telstra was unable to present evidence as to who had provided the necessary authorial contribution for these entries from previous editions of the directories.

Authorship

Presumption in section 128

Telstra sought to rely on the presumption as to authorship contained in section 128 of the Copyright Act. Section 128 provides, in summary, that where a name purporting to be that of the publisher appears on copies of the work as first published, then copyright shall be presumed to subsist and the person whose name appeared on the work shall be presumed to have been the owner of copyright at the time of the publication.

Telstra submitted that this presumption applied in its favour because each of the directories submitted bore notations to the effect of ‘ã Telstra Corporation Limited’ and ‘this directory is produced by Sensis Pty Ltd for Telstra Corporation Limited’.

However, Telstra also filed affidavit evidence to establish subsistence of copyright in the directories, which evidence covered the issues of authorship (see ‘Findings’ below). Telstra’s position was that if it could establish that the directories were original literary works, then it was not necessary to identify the name of every author of those works.

The Court held that section 128 is directed to a situation where the identity of the author or authors cannot be ascertained, as opposed to a situation where an author or authors cannot be identified at all.

The Court found that the evidence filed by Telstra rebutted the presumption that copyright subsisted in the directories as a result of the ‘ã Telstra Corporation Limited’ notation, because it illustrated Telstra’s failure (or inability) to identify at all an author or authors of the works. Therefore, Telstra could not rely on the presumption in section 128 as to authorship.

Findings

The Court found that, when asked to identify the authors of the directories, Telstra:

  • provided evidence as to the sample directories only and the list of authors contained a caveat that the list of authors ‘included, but was not limited to the individuals identified.’ In other words, Telstra was unable to identify each and every author of the directories;  
  • filed 91 affidavits from individuals, who were said to be ‘authors’. Some of the 91 ‘authors’ had a limited or non-existent role in contributing to the sample directories, and their respective contributions were not such as to be described as ‘independent intellectual effort’ or ‘sufficient effort of a literary nature’;  
  • substantial parts of the directories were produced without any human authors as a result of an automated process; and  
  • some potential authors who were Telstra’s contractors were not joined to the proceedings. These authors remained unidentified, and the ownership of intellectual property in their work had not been established (as agreements for assignment of intellectual property rights were provided for only some of the contractors).  

For these reasons, her Honour held that Telstra could not establish its authorship of the directories within the meaning of the Copyright Act.

Originality

The Court held that the definition of ‘originality’ under the Copyright Act requires ‘some independent intellectual effort’ and/or the exercise of ‘sufficient effort of literary nature.’ Substantial labour and/or substantial expense to create a work will not be sufficient for copyright to be held to subsist in a work.

It is not the commercial value of information arranged into a compilation that attracts copyright, but the originality of expression of that compilation. Where the expression of the work is dictated by the nature of the information itself, this will militate against a finding of originality.

The Court found that:

  • the evidence established that the system by which the directories were produced had been designed to limit originality, not provide for it;  
  • where it was open to automate the process, this had been done;  
  • human intervention seemed to occur only in relation to inconsistencies or discrepancies rendered by the automated processes;  
  • it was difficult to find that there had been the ‘independent intellectual effort’ or ‘sufficient effort of a literary nature’ applied to the alphabetical arrangement of listings;  
  • the organisation of the Yellow Pages Directories in order to prevent duplicative listings was predictable; and  
  • the list of acceptable and unacceptable phrases in Product Standards required little effort to navigate or understand.  

The Court held that copyright did not subsist in the directories and stated:

‘It is not sufficient to demonstrate the subsistence of copyright by asserting that someone (and I do not accept that such a person has been found in this matter), who may in certain broad circumstances, in an unspecified number of relevant instances, have done an act that constitutes some unknown contribution to a work in question ‘no matter how unimpressive’ will be enough to make good the Applicants’ claim.’  

Legislative intervention

Her Honour noted that other jurisdictions such as the EU have developed specific protections to deal with what is known as a ‘relational database’, and that there is no counterpart in Australian law. Her Honour recommended that Parliament address this issue ‘without delay’.

Appeal

On 12 of February 2009 the Court made orders granting Telstra leave to appeal against its decision on subsistence of copyright. The remainder of the proceedings (concerning infringement and remedies) has been stood over pending the determination of the appeal.