Nintendo Co Ltd v Centronics Systems Pty Ltd

Nintendo Co Ltd v Centronics Systems Pty Ltd - [1994] HCA 27 - HCA 1994 case summary — Zoe

[27]

During the period between the commencement of the substantive provisions of the Act and the institution of the present proceedings on 5 December 1990, Centronics sold (and offered and exposed for sale) in Australia video game machines, known as Spica Entertainment Units, which contained a silicon R.O.M. chip incorporating an integrated circuit ("the Spica circuit"). The trial judge found, and it is now common ground, that the Spica circuit was made in accordance with the whole or a substantial part of the Nintendo layout. The effect of s. 8(1) of the Act in those circumstances is that the sale and the offering or exposing for sale of the Spica Entertainment Units containing the Spica circuit constituted commercial exploitation of Nintendo's layout in Australia by Centronics. By its amended statement of defence, Centronics admitted that it was not licensed by Nintendo. It follows that the prima facie effect of formal admissions and the substance of what is now common ground is that the sale and the offering or exposing for sale of the Spica Entertainment Units constituted infringement of Nintendo's EL rights in the Nintendo layout under s. 19(3) of the Act if, but only if, that sub-section's requirement of actual or constructive knowledge was satisfied. Centronics contends that the question whether that requirement was satisfied has never been properly addressed in the courts below and, when properly addressed, should be answered in the negative. Centronics also contends that the effect of other provisions of the Act is to preclude infringement in the circumstances of the present case. It is also submitted on its behalf that the present action for infringement of Nintendo's EL rights in the Nintendo layout, even if otherwise well founded, is barred by s. 7 of the Act. Finally, Centronics calls in aid the requirement of "just terms" which is contained in s. 51(xxxi) of the Constitution. The submission based on s. 7 of the Act was not raised before the trial judge. It emerged in the course of argument in the Full Court of the Federal Court where it was upheld by Beaumont and Burchett JJ. in their joint judgment. It is convenient to turn at once to a consideration of it.

[41]

Moreover, the reasons advanced for that expansive construction of the words of s. 7 are, upon closer analysis, far from compelling. For one thing, as has been indicated, the Act removed, as from the commencement of its substantive provisions, whatever protection the Copyright Act or the Designs Act respectively afforded a "circuit layout" or "an integrated circuit, or part of an integrated circuit" [18] . It is unlikely that it would have been the legislature's intent to preclude an action for infringement under Pt III of the Act in respect of subsequent conduct in relation to already imported goods regardless of whether that subsequent conduct would have founded proceedings under those other Acts. For another thing, the argument that such a forced construction of the words of s. 7 is necessary to avoid an unjust "sterilisation" of property which had been lawfully imported into Australia prior to the commencement of the Act would, to be consistent, require that the words of s. 7 be somehow construed as precluding an action under Pt III in respect of any dealing with any goods at all which were lawfully owned at that date since there is no reason in justice or common sense why the person who lawfully imported goods should be placed in a privileged position vis-a-vis the person who lawfully acquired them locally. Such a construction of s. 7 would effectively involve a judicial reframing of the section. Even so, it would be ineffective to completely avoid "sterilisation" of such goods since any subsequent purchaser of them would be unable to deal commercially with them in Australia unless he or she obtained a licence from the owner of the EL rights in the layout or came within one of the Act's other protective provisions. Finally, the fact that a period of more than sixteen months was permitted to expire between the enactment of the Act and the commencement of its substantive provisions goes a long way towards removing the consideration of practical injustice to which their Honours adverted. In that regard, the fact that the subject goods were imported more than six months after the enactment of the Act would seem to us to be as significant as the fact that they were imported some ten months before the Act's practical commencement.

[49]

Not surprisingly, the legislative policy to be discerned in s. 19(3) with respect to cases involving commercial dealing with an existing original or copy layout or an existing integrated circuit is somewhat different. Under the Act, ownership of the EL rights in an eligible layout is acquired by the maker without any need to observe the requirements of a registration process (s. 16). A person who deals commercially with an original layout which he or she has acquired in good faith from another may neither know nor have the means of ascertaining that the person from whom he or she acquired it did not have the EL rights in it. A fortiori, a person who deals commercially with an existing copy of a protected layout [21] or an existing integrated circuit made in accordance with the layout may do so in circumstances where he or she neither knows nor has the means of ascertaining that the original layout either exists or is protected by the Act. Generally speaking, the Commonwealth intellectual property legislation in force at the time when the Act was enacted specified some significant requirement of actual or constructive knowledge as a condition of either infringement or liability in cases of alleged infringement by mere commercial dealing [22] . Clearly enough, it was the legislative intent that s. 19(3)'s requirement of actual or constructive knowledge should provide a significant degree of protection of the alleged infringer in such cases. The specific designation construction of the requirement would go a long way towards defeating that legislative intent and rendering the protection of the requirement illusory. Thus, its effect would be that, provided the alleged infringer knew or ought reasonably to have known that he or she was not licensed by X, the requirement of actual or constructive knowledge would afford no protection at all if X happened to be the owner of the EL right to exploit the relevant layout commercially in Australia notwithstanding that the alleged infringer by commercial dealing neither knew nor could reasonably be expected to have known that there was any connexion at all between X and the layout.

[64]

If s. 20 in its current form had been applicable to the present case, there would be an unresolved issue of fact which would need to be resolved before it could be determined whether the section provided a defence to Nintendo's claim that Centronics had infringed its EL rights in the Nintendo layout. At the time Centronics acquired the Spica Entertainment Units, the substantive provisions of the Act had not come into operation. This means that, at that time, there was no owner of "the EL rights in an eligible layout". Obviously, Centronics did not know and could not reasonably be expected to have known, at that time, that the Units contained an integrated circuit "made in accordance with an eligible layout without the licence of the owner of [that right]" [24] . The case accordingly would come within sub-s. (1) of the current s. 20 unless sub-s. (2)'s requirement of actual or constructive knowledge had become satisfied by the time of the alleged acts of infringement with the consequence that, in the words of sub-s. (2), sub-s. (1) had "cease[d] to apply". In circumstances where the expert evidence led by Centronics at the trial supported a negative answer to the question whether the Spica integrated circuit had been made in accordance with the Nintendo layout, it may well be arguable that Centronics neither became aware nor could reasonably be expected to have become aware that the integrated circuit in the Spica Entertainment Unit was "unauthorised" until some time after the institution of the proceedings. It is true that Sweeney J., at first instance, found that Centronics "could reasonably be expected to have known that the circuit was unauthorised from the date on which the Act came into operation, 1 October 1990". That finding was, however, flawed by an apparent failure to appreciate that actual or constructive knowledge that the Spica circuit was "unauthorised" involved more than actual or constructive knowledge that Nintendo was the owner of the EL rights in the Nintendo layout and that Centronics was not licensed by Nintendo. It also involved actual or constructive knowledge of a further matter, namely, that the Spica circuit had been made in accordance with Nintendo's layout. Careful reading of Sweeney J.'s judgment indicates that his Honour did not address the question whether, at the time of the alleged acts of infringement, Centronics had actual or constructive knowledge of that further matter.

[85]

In the closing minutes of argument in this Court, senior counsel for Centronics stated that a document produced by Nintendo in the Full Court of the Federal Court, but apparently not introduced into evidence, indicated that Centronics' express admission in the pleadings that Nintendo had, at relevant times, been the owner of EL rights in the Nintendo layout was mistaken and that those EL rights had in fact been held by some associated company and not been transferred to Nintendo until some days after the institution of the proceedings. It was, however, as senior counsel recognized, far too late for Centronics to withdraw the formal admission on the basis of which the case had been fought and determined in the courts below. Quite apart from the question of the authority of this Court to receive fresh evidence [31] , the point, if soundly based (which is not conceded by Nintendo) and raised at an appropriate time, might well have been overcome by amendment of pleadings and addition or joinder of the associated company as a party. In that regard, it is relevant to note that it is common ground that the evidence at first instance established "that the layout was created for, and on the instructions of, Nintendo". It is unnecessary to determine whether, as senior counsel suggested, it would have been permissible for Centronics to rely on the point and lead evidence about it if we had been of the view that the case should be remitted to the Federal Court for further consideration in relation to the questions of actual or constructive knowledge under s. 19(3) or s. 20(2). However, since the matter has been raised, it may be arguable that account should be taken of it in the framing of any order for damages or an account of profits to eliminate any possibility that Centronics might be required to make a double payment in the event that proceedings are initiated by the associated company in respect of the relevant acts of infringement of the EL rights in the Nintendo layout.

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Judgment (123 paragraphs)

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Legislation Cited (10)