In brief

The decision offers substantial guidance on when an award of additional damages will be appropriate and some guidance on factors to be considered in deciding the quantum to be awarded. Additional damages were awarded to act as a deterrent against copying, the amount awarded was substantial and significantly larger than the nominal ordinary damages recovered.

Introduction

In Dynamic Supplies Limited v Tonnex International Pty Limited (No 3) [2014] FCA 909, Justice Yates, of the Federal Court of Australia considered the principles applicable to an award of additional damages under s115(4) of the Copyright Act 1968 (Act). The decision offers substantial guidance on when an award of additional damages will be appropriate and some guidance on factors to be considered in deciding the quantum to be awarded.

Additional damages were awarded to act as a deterrent against copying, the amount awarded was substantial and significantly larger than the nominal ordinary damages recovered.

The facts

In his earlier decision on liability1(upheld on appeal to the Full Court)2 Justice Yates had found that Tonnex had infringed the copyright in Dynamic’s printer product compatibility chart known as 'March 2008 CSV file'. His Honour had found that, despite Tonnex’s affidavit evidence that it had created its own compatibility chart using publically accessible information for multiple sources, the objective evidence pointed to deliberate copying.

The parties agreed that Dynamic was entitled to only nominal compensatory damages under s 115(2) of the Act but disagreed over whether Tonnex should be required to pay additional damages under s 115(4).

Principles governing the award of additional damages

The Court gave the following guidance in relation to awards of additional damages under s 115(4) of the Act:

  • additional damages may be given on principles corresponding to those governing awards of aggravated and exemplary damages at common law,
  • an award of exemplary damages at common law is intended 'to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff’s rights and to deter',
  • deterring repeat infringement by the specific infringer and general deterrence of similar behaviour by others can be considered by the court,
  • additional damages are not limited to the circumstances in which aggravated or exemplary damages would be available in relation to common law tort,
  • an element of penalty is an accepted feature of copyright law,
  • the various specific matters mentioned in s 115(4)(b)(i)-(iii) being (i) the flagrancy of the offending, (ia) the need for deterrence of similar conduct, (ib) any conduct after the infringer is made aware of the infringement, (ii) any conversion to digital form and (iii) any benefit gained by the infringer, are not preconditions to ordering additional damages but are matters to which a court must have regard,
  • flagrancy requires reprehensible conduct, not mere copying involving mistake or carelessness,
  • flagrancy extends to conduct that exhibits a consciousness of guilt,
  • benefits accruing to the infringer do not have to be of a financial nature,
  • the procedural conduct of an infringer’s defence is not relevant to the question of additional damages but should be considered in relation to costs,
  • there need be no proportionality between the award of compensatory damages under s 115(2) and additional damages under s 115(4) of the Act, and
  • the financial circumstances of the infringer should be considered when deciding on the quantum of the award.

Knowledge of Tonnex

A key point of contention between the parties was whether the knowledge of the employee who created Tonnex’s compatibility chart, its National Marketing Manager, was knowledge of the company for the purposes of deciding whether the company’s conduct was flagrant.

Dynamic urged the Court to find that the directors of Tonnex were aware that the National Marketing Manager had created the chart by a process of wrongful copying. The Court was not prepared to make that finding but was nonetheless prepared to find that, as the National Marketing Manager held a senior position in the company his conduct should be attributed to the company. Accordingly, the Court was satisfied that the copying was deliberate and done with knowledge of wrongdoing and accordingly sufficiently flagrant to warrant an award of additional damages.

Quantum of award

Tonnex had used the copied compatibility chart from 2008 through to 2011. During that period Tonnex’s gross sales were approximately $1 billion and its pre-tax profit was approximately $86 million. Dynamic sought an amount of $400,000 representing what it described as 'little more than 1% of Tonnex’s gross annual revenue and clearly less than 1% of Tonnex’s revenue over the period'. Tonnex argued that an infringer’s means were not relevant to an award of additional damages and that even if it means were relevant the appropriate consideration was net profit and not gross sales for the period.

His Honour accepted that specific deterrence of Tonnex was appropriate and that, accordingly Tonnex’s means were relevant to the quantum of the award. His Honour was not satisfied that an award of $400,000 was appropriate however and he instead awarded Dynamic $150,000. The amount recovered as additional damages thus made up the vast majority of the $150,001 in damages recovered by Dynamic.