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Friday, May 29, 2015

House Rules Rule One: Don't copy someone else's plans

By Tracy Lu, Senior Associate

In the recent appeal decision of Tamawood Limited v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2015] FCAFC 65, the Full Federal Court found that a firm of architects had infringed the copyright in construction plans created by another company and also that the directors of the developer which had engaged the architects had authorised the infringement.

Under commercial circumstances which the primary judge described to be 'relatively casual', the applicant Tamawood and the developer Habitare entered discussions relating to the potential development of some 'low-cost, intensive housing projects' in Brisbane. Tamawood created plans for the projects for which it was not paid, but there was common expectation that Tamawood would be appointed as the builders of the projects.

Habitare was able to obtain development approvals on the basis of these plans, but unbeknownst to Tamawood, Habitare had a change of heart about Tamawood's appointment. At the same time, it did not wish to lose the benefit of the approvals. Therefore, Habitare decided to engage architects from Mondo to  prepare plans which would be 'generally in accordance with' the Tamawood plans but without infringing Tamawood's copyright. Unfortunately for Mondo and Habitare, they were nevertheless found to have in fact infringed Tamawood's copyright.

Justices Jagot and Murphy (the majority) agreed with the trial judge that Tamawood had granted a bare licence to Habitare to use the plans, but the licence contained an implied term that that it would automatically terminate once Habitare decided it would not appoint Tamawood as the builder. Alternatively, their Honours held that another way of looking at the issue is that the scope of the licence was limited in that it authorised Habitare to use the plans only for so long as Habitare intended to appoint Tamawood as the builder but not otherwise.

Justices Jagot and Murphy found that there has been substantial reproduction in respect of all of the relevant plans while Justice Greenwood found there was not substantial reproduction in relation to one of them.

Importantly, all three judges agreed that the primary judge had erred in considering, as separate questions, whether there is a sufficient degree of objective similarity and whether there is a causal connection between the original works and the infringing works can be made out (in that the primary judge had failed to go on to consider causal connection once it was held there was insufficient objective similarity). Instead, the correct approach is to accept that causation is relevant to the question of objective similarity.

The Full Court also overturned the primary judge's findings on authorisation. It held that Habitare's developers had the power to prevent the infringements but decided to take the shortcut of using Mondo to re-hash Tamawood's existing plans and that they did nothing to avert the real risk of infringement, of which they were aware.

The Full Court did not agree, however, with Tamawood's submissions that it should be awarded additional damages against Habitare and its directors. As the primary judge had held the conduct in question was not flagrant, Tamawood submitted on appeal that flagrancy was not a pre-condition to the award of additional damages. While this principle was accepted by the Full Court, Tamawood's submissions were rejected on the basis that it had itself chosen to base its case for additional damages mainly on the conduct being flagrant.

The only respondent to escape relatively lightly from the mess (save for legal costs which it was ordered to bear itself) is the construction firm who was later hired by Habitare to carry out the construction. It succeeded on a defence of innocent infringement on the basis that it had no awareness of Tamawood's involvement in the projects and no reason to suspect any copyright infringement.

Another issue of interest is an observation made by the primary judge which was not examined on appeal, that even where the copyright licence is contractual (as opposed to a bare licence as was the case between Tamawood and Habitare) and there is an express agreement not to revoke the licence, the licence may nevertheless be revoked, although the licensor would be exposed to a claim for damages for breach of contract (see Tamawood Ltd v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (No 3) [2013] FCA 410; (2013) 101 IPR 225 at [122]).

This has significant implications for developers who are granted irrevocable licences rather than assignments, since such licences may still be revoked at any time, after which the developers would be precluded from using the relevant copyright works, which would be particularly disastrous if development had already commenced.

So the morals of the story are that:
  1. Taking a shortcut, especially one which involves a real risk of copyright infringement, is really cutting yourself short. When obtaining a copyright licence, it is essential to ensure that the scope of the licence covers all intended uses of the copyright works.
  2. Where the commercial harm which may result from a revocation of a copyright licence is serious and potentially irreparable, it is more advantageous to obtain an assignment instead of a licence, even if the licence was expressly agreed by the parties to be 'irrevocable'.

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