To the extent necessary, the requirements of the Federal Court (Corporations) Rules with regard to the filing and service of the application for reinstatement of the registration of the Second Respondent and supporting documents be dispensed with.
[2]
2(a) The Sixth Respondent reinstate the registration of the Second Respondent pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) for the purposes of enabling the Applicant to obtain and enforce any judgment in these proceedings as against the Second Respondent.
[3]
(b) The damages awards made herein shall take effect against the Second Respondent upon the reinstatement of its registration.
[4]
(c) The Applicant is to inform the Sixth Respondent when no further steps remain to be taken in relation to enforcement of the judgment against the Second Respondent.
[5]
(d) Liberty to the Sixth Respondent to apply for further directions if necessary.
[6]
All DVDs containing the images of the Respondents' computer hard drives as held by Blake Dawson Waldron pursuant to paragraph 4 of the Orders of 26 September 2003 and paragraph 4 of the Orders of 24 December 2003 be delivered up to Allens Arthur Robinson for destruction.
[7]
Damages are awarded in favour of the Applicant against the first, second, third and fourth respondents jointly and severally:
[8]
(a) in the sum of $810,953 being damages for infringement of copyright pursuant to s 115(2) of the Copyright Act 1968 (Cth).
[9]
(b) in the sum of $500,000, being additional damages for infringement of copyright pursuant to s 115(4) of the Copyright Act 1968 (Cth).
[10]
5(a) The Respondents are to pay the Applicant's costs of the proceedings for which they shall be liable jointly and severally other than the costs of the hearing as to liability which shall be borne by the Third Respondent alone.
[11]
(b) The costs are to be taxed as one set provided that a supplementary bill may be prepared against the Third Respondent in respect of the hearing as to liability.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
[12]
WESTERN AUSTRALIA DISTRICT REGISTRY NSD1040 OF 2003
[13]
REASONS FOR JUDGMENT
ON DAMAGES AND COSTS
Introduction
1 Nominet UK, a company incorporated in the United Kingdom and limited by guarantee, provides a central registry for UK-based Internet domain names. It keeps a Register of persons and organisations who use domain names with the UK country code and certain sub-domains with codes such as .co.uk and .org.uk. It provides a search function with a Database which is derived from its Register and which is known as the WHOIS Database.
2 On 20 August 2003 Nominet UK commenced proceedings against two Australian companies, Diverse Internet Pty Ltd (Diverse Internet) and Internet Payments Pty Ltd (Internet Payments) and against Bradley Norrish and Chesley Rafferty who controlled those companies. The company also instituted proceedings against (UK) Internet Registry Ltd ((UK) Internet Registry) incorporated in the Republic of the Seychelles and controlled by Mr Rafferty.
3 The two Australian companies had used data mining search techniques to extract and collate names and other details of registrants on the Nominet UK WHOIS Database. The Seychelles company had sent notices from Western Australia to some 50,000 registrants in the United Kingdom offering registration of domain names ending in the code .com.
4 Nominet UK alleged that the Australian companies and Messrs Norrish and Rafferty had infringed its copyright in the Registry Database and the WHOIS database. It also alleged that the notices which were sent to its registrants were misleading and deceptive in various respects. They were said to have conveyed the false impression, inter alia, that (UK) Internet Registry was affiliated with or had some sponsorship or approval from Nominet UK. The proceedings went to trial on 21 June 2004 having been settled as to liability against all respondents other than Mr Norrish. Declaratory and injunctive orders were made against the other respondents by consent and damages stood over for assessment. Mr Norrish contested his personal liability. For reasons published on 22 September 2004, I found that he infringed the copyright of Nominet UK in its databases by authorising their infringement by an employee of Diverse Internet, the company which he controls. I also found that the notices sent by (UK) Internet Registry to registrants in the United Kingdom were misleading and deceptive and that he was knowingly concerned in their preparation and dispatch - Nominet UK v Diverse Internet Pty Ltd (2004) 63 IPR 543.
5 The hearing for the assessment of damages and orders as to costs was stood over ultimately to 23 June 2005. Notwithstanding notice of those proceedings none of the respondents attended or provided any evidence or made any submissions in relation to the question of assessment of damages and costs.
6 Nominet UK seeks damages for infringement of its copyright, including additional damages, against each of the first to fourth respondents pursuant to s 115 of the Copyright Act 1968 (Cth). It also seeks damages against the third, fourth and fifth respondents for misleading or deceptive conduct pursuant to the provisions of the Trade Practices Act 1974 (Cth) (TPA) and the Fair Trading Acts of Western Australia and/or Victoria.
7 The first respondent, Diverse Internet, was the subject of a winding up order made on 9 March 2005. The second respondent, Internet Payments, was deregistered by the Australian Securities and Investments Commission (ASIC) on 12 July 2004 under s 601AB of the Corporations Act 2001 for non-compliance with the requirements of the Act. Nominet UK filed an amended application on 1 June 2005, by leave, joining ASIC as sixth respondent for the purpose of seeking an order against ASIC for the reinstatement of Internet Payments pursuant to s 601AH of the Corporations Act. The fourth respondent, Chesley Paul Rafferty became a bankrupt on 14 October 2005. The Official Trustee in Bankruptcy is trustee of his estate. On 19 May 2005 Nicholson J made an order giving leave to Nominet UK, pursuant to s 471B of the Corporations Act to proceed against Diverse Internet and (UK) Internet. Those respondents were excused by order made on 20 June 2005 from attending the hearing.
8 For the reasons that follow I propose to order the reinstatement of Internet Payments, damages against the first to fourth respondents in the sum of $810,953 and additional damages in the sum of $500,000. I also propose to order that all respondents pay and be jointly and severally liable to pay the applicant's costs of the proceedings provided that the cost of the hearing as to liability shall be borne by the third respondent alone.
Statutory Framework - Reinstatement under the Corporations Act
9 Section 601AB(1) provides for ASIC to deregister a company if:
'(a) the company's annual return is at least 6 months late; and
(b) the company has not lodged any other documents under this Act in the last 18 months; and
(c) ASIC has no reason to believe that the company is carrying on business.'
Section 601AB(2) provides for deregistration of companies being wound up and s 601AB(3) for the deregistration procedure. The effect of deregistration is that the company ceases to exist (s 601AD(1)). Its property vests in ASIC (s 601AD(2)).
10 Section 601AH of the Corporations Act provides for reinstatement in the following terms:
'(1) Reinstatement by ASIC
ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.
(2) Reinstatement by Court
The Court may make an order that ASIC reinstate the registration of a company if:
(a) an application for reinstatement is made to the Court by:
(i) a person aggrieved by the deregistration; or
(ii) a former liquidator of the company; and
(b) the Court is satisfied that it is just that the company's registration be reinstated.
(3) [Validation by Court]
If the Court makes an order under subsection (2,) it may:
(a) validate anything done between the deregistration of the company and its reinstatement; and
(b) make any other order it considers appropriate.
(4) ASIC to give notice of reinstatement
ASIC must give notice of a reinstatement in the Gazette. If ASIC exercises its power under subsection (1) in response to an application by a person, ASIC must also give notice of the reinstatement to the applicant.
(5) Effect of reinstatement
If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.'
11 The Federal Court (Corporations) Rules 2000 provide that applications under the Corporations Act, where made in proceedings already commenced in the Court, must be made by filing an interlocutory process (r 2.2(1)(b)). The form of interlocutory process is prescribed by r 2.2(4). Unless otherwise directed by the Court the application is to be supported by an affidavit stating the relevant facts and annexing a recent company search (r 2.4). Copies of the application and supporting affidavits are to be served on each respondent to the application. They are also to be served on ASIC a reasonable time before the hearing unless the Court otherwise orders.
Whether Internet Payments Pty Ltd should be reinstated
12 I am satisfied that the substantive requirements of the Corporations Rules have been met in that:
The application was made by filing a further amended application in these proceedings setting out the reinstatement order sought. It was supported by the affidavit of Jacqueline Ruth O'Brien sworn 22 June 2005.
The further amended application and the correspondence exhibited to the affidavit of Ms O'Brien were served on the respondents.
I am satisfied by reference to the facts set out in the affidavit evidence referred to in supplementary submissions lodged by Nominet UK on 30 June 2005 that the application has adequately been drawn to the attention of the sole former director of Internet Payments
13 In the circumstances compliance with any other aspects of the relevant Corporations Rules is dispensed with.
14 ASIC wrote to the solicitors for Nominet UK on 8 June 2005 acknowledging receipt of a copy of the amended application. ASIC indicated that it would not oppose the application for reinstatement if the following conditions were satisfied:
The order sought for reinstatement is cast in terms of s 601AH(2) of the Corporations Act requiring ASIC to reinstate the registration of the company for the limited purpose disclosed.
Nominet UK notifies the former office holders of the company of the application.
Nominet UK pays ASIC's costs of $434 prior to the determination of the matter.
The Court order is lodged with ASIC so that the company may be reinstated.
Nominet UK notifies ASIC upon conclusion of the Federal Court proceedings in order that the company may be deregistered.
15 Nominet UK pointed out in its submissions that Internet Payments was deregistered shortly after Nominet's claims against it were resolved on issues of liability by the orders made on 21 June 2004. By those orders, which were made by consent, the Court declared that Internet Payments had infringed Nominet UK's copyright in the database and the WHOIS Database as defined in pars 6 and 7(a) of the further amended statement of claim. The Court also granted injunctive relief against Internet Payments and ordered that damages against the company and other respondents be assessed in such manner as the Court thinks fit. In these circumstances Nominet UK as the party seeking assessment of damages against Internet Payments is a person aggrieved by the deregistration.
16 As found in the principal judgment, Internet Payments was incorporated on 28 June 2001 under the name CPR Marketing Australia Pty Ltd. Its original registered office was in Inglewood in Western Australia. On 21 March 2002 it changed its name to Internet Payments Australia Pty Ltd and six days later to Internet Payments. Mr Chesley Rafferty has been its sole director since its incorporation in June 2001. He lives in Victoria. The registered office of the company was changed to an address in Collins Street, Melbourne on 8 November 2002.
17 I am satisfied that it is just that for the purposes of this assessment of damages the company's registration be reinstated. The orders I propose will be substantially in the terms of a minute prepared by Nominet UK subject to the requirement that Nominet UK inform ASIC when no further steps remain to be taken in relation to the enforcement of the judgment. I will also allow liberty to ASIC to apply for such further directions as may be necessary.
Statutory Framework - Damages for infringement of copyright
18 Section 115 of the Copyright Act 1968 provides, inter alia:
'(1) Subject to this Act, the owner of a copyright may bring an action for an infringement of the copyright.
(2) Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit), and either damages or an account of profits.
(3) [This relates to innocent infringement which is not relevant for present purpose.]
(4) Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.'
19 In this case Nominet UK elects damages rather than an account of profits. It seeks damages against the first, second, third and fourth respondents pursuant to s 115(2) of the Copyright Act and additional damages against the same respondents pursuant to s 115(4).
The evidence relating to damages for infringement of copyright
20 Nominet UK relied upon the following affidavits at the hearing in relation to damages in addition to evidence already admitted in the proceedings. These were:
[14]
Counsel for the Applicant: Mr DK Catterns QC with Mr C Dimitriadis
[15]
Solicitor for the Applicant: Allens Arthur Robinson
The affidavit of Antony Samuel affirmed on 17 January 2005. Mr Samuel, who is a chartered accountant provided expert evidence on, inter alia, the appropriate method for determining a notional licence fee as a basis for the assessment of damages and gave his opinion as to what that fee should be given the nature of Nominet UK's business and the circumstances of the case.
The affidavit of Dr Sion Huw Lloyd affirmed on 13 January 2005. Dr Lloyd is an employee of Nominet UK whose evidence establishes some of the assumptions made by Mr Samuel.
The affidavit of Emily Elizabeth Gemma Taylor sworn on 13 January 2005. Ms Taylor is Nominet UK's company secretary. Her evidence also establishes some of the assumptions made by Mr Samuel and matters relating to damage to Nominet UK's reputation as a result of the misleading and deceptive conduct of the respondents. She also describes the business of persons known as 'drop catchers' and their interest in detagged domain names.
21 Mr Samuel has been a partner at PricewaterhouseCoopers, Sydney since October 2004. Between July 1998 and September 2004 he was a partner in PricewaterhouseCoopers, London in Forensic Services. There he led the Intellectual Property and Licence Disputes Team. He has been consistently involved with intellectual property valuations and disputes since 1992. He has testified in the UK Copyright Tribunal on two occasions and in the Chancery Division of the UK High Court. In PricewaterhouseCoopers, London, prior to his admission as a partner, he was a Senior Manager in the Forensic Services section. He led teams working on damages valuations, inter alia, general commercial disputes and intellectual property disputes. He holds a Bachelor of Commerce degree from the University of Western Australia and is a member of the Institute of Chartered Accountants in Australia. The assumptions upon which Mr Samuel based his opinions were matters which emerged from the reasons for judgment or were supported by later affidavit material filed in the case.
22 Mr Samuel sought to demonstrate in his report that an appropriate notional licence fee for the use of Nominet UK's records could be quantified under a hypothetical 'willing licensee and willing licensor' arrangement. He valued those parts of Nominet UK's Database and WHOIS Database copied by the first to fourth respondents on the basis of its utility as a customer database for direct marketing or similar purposes. As was pointed out by Nominet UK in its submissions, this was the context in which those respondents actually used the material.
23 The important information fields included in the copied material were the domain name, the registrant and address fields. However not all of the copied records contained information in the address field. Many records included other information in additional fields. The first to fourth respondents copied records which contained information in the domain name, registrant and address fields and other records which contained information in the former two fields but not in the address field.
24 For records which contained information in the address field, Mr Samuel proposed a minimum notional licence fee of 25p assuming a single direct marketing use. He applied a maximum rate of 50p per record on the assumption of multiple uses of it for any purpose. He discounted the amounts for the records without addresses to reflect the absence of those details and the impact of this on the utility of the information obtained.
25 On the basis that the respondents had acquired 783,214 records with addresses, royalties notionally payable for single use of each of those records would be £195,803. On the assumption of multiple uses for any purpose the royalties payable would be £391,607.
26 Mr Samuel applied a discount of 33.3% to records without addresses in instances where a street address or email address could readily be determined. Where neither could readily be determined there would be little or no value in the remaining data for the licensee. On the basis that the respondents acquired 1,471,950 records without addresses and assuming that 30% of these records were not connected to either an operational website or an email address, he calculated total further royalties payable of £171,813 for single use and £343,627 for multiple use.
27 Mr Samuel defined a 'reasonable royalty' as '… that sum which would be agreed between a willing licensor and willing licensee in a hypothetical arm's length negotiation conducted in advance of infringement'. This approach required consideration of the hypothesis that the two parties in dispute, neither of whom may in fact have been willing to enter into a licence or had never in fact entered into licences, were nevertheless deemed to be willing to enter into such a licence. It was also necessary to assume that the hypothetical willing licensor and willing licensee were the actual licensor and actual licensee assumed to be willing to negotiate with each other. They would bargain as they were, with strengths and weaknesses in the market, as it existed. Mr Samuel referred to General Tyre & Rubber Co v Firestone and Rubber Company Ltd[1976] RPC 117.
28 Mr Samuel observed that although Nominet is a not-for-profit company, it operates on a commercial basis. He was also instructed to assume that it would charge a commercial rate. In this respect the Court was referred in supplementary submissions filed by Nominet UK, to the terms of its Memorandum and Articles of Association. The not-for-profit status of the company is reflected in cl 6 of the Memorandum of Association, which provides:
'6. The income and capital of the Company shall be applied solely towards the promotion of the objects of the Company; and no part of the income or capital shall be paid or transferred, directly or indirectly, to the members of the Company whether by way of dividend or bonus or otherwise in the form of profit. This shall not prevent the payment of:
6.1 reasonable and proper remuneration to any officer, employee, or member of the Company in return for any services provided to the Company;
6.2 a reasonable rate of interest on money lent to the Company;
6.3 reasonable rent for property let to the Company;
6.4 expenses to members of the Council of Management and the Steering Committee; or
6.5 premiums on the indemnity insurance referred to in clause 5.2.'
Clause 9 provides that if Nominet UK were to be wound up or dissolved and any surplus property remained after satisfaction of the company's debts and liabilities, the surplus would not be paid to members of the company but would either be given or transferred to some other institution or institutions with similar objects or to organisations formed to conduct research for the public benefit into electronic networking or related areas or otherwise applied to a charitable object.
29 The limitations in clauses 6 and 9 would prevent the company from charging a royalty for the use of records on its Database. The fact that it does not, and is not likely to, is neither here nor there. It is constitutionally capable of so doing. Under cl 5 of the Memorandum, the company has power to 'do all things incidental or conducive' to the attainment of its objects. Its objects include the operation of a domain name service on a commercial basis (cl 3.7).
30 It was submitted on behalf of Nominet UK that the 'notional licence fee' approach to the assessment of damages embodied in Mr Samuel's report is an appropriate approach to adopt in this case. It was submitted that there is no need for a finding that the company could or would in fact seek to implement such a licence. Alternatively, the company submitted that if the 'notional licence fee' approach were not adopted then Mr Samuel's evidence would provide a useful guide to the assessment of damages 'at large'. Reliance was placed upon LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24 at 74.
31 In the LED Builders' case there was evidence that the copyright owner of building floor plans, namely LED, had not licensed any other company to use its floor plans and wished to retain the profits from building houses in the Sydney region rather than sharing them with a licensee. Lindgren J observed (at [188]):
'In Autodesk Australia Pty Ltd v Cheung (1990) 94 ALR 472 at 474-7; Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269 at 286 and Columbia Pictures Industries Inc v Luckins (1996) 34 IPR 504 at 509-10 it was considered that while a notional licence fee approach offered guidance, it was not straightforwardly applicable in cases such as the present one, where the copyright owner would not have granted a licence or where the infringer would not have taken one. However, in the absence of a more appropriate measure of damages and in light of Eagle's acceptance of the notional licence fee approach, I think it appropriate in the first instance to determine what the amount of damages assessed on that basis would be and then to review that amount in the light of all the circumstances and of the fact that the damages are at large.'
In this case the notional royalty approach propounded by Mr Samuel offers a foundation upon which damages can be assessed under s 115 of the Copyright Act.
32 Mr Samuel described the most frequently used approaches for determining a reasonable royalty as:
(a) Comparable licences, agreements or transactions. There was, of course, no comparative material of that kind available from Nominet UK itself as it has never entered into any such licences, agreements or transactions. Nor was there any evidence that the respondents had ever done so. Accordingly, he searched publicly available data to find relevant comparisons. This is a usual step in valuing intellectual property or in the determination of a reasonable royalty rate.
(b) Economic or financial analysis. This approach relies on the theory that a licensee would be willing to give up some of the profit it would make from use of the rights in order to make the remaining profit. Mr Samuel had no evidence concerning the respondents' financial affairs other than a copy of a registration advice in the name of UK Internet Registry. This was of no use in isolation for assessing profitability. With Nominet UK operating on a not-for-profit basis and never having licensed its rights, Mr Samuel was unable to analyse the profit for licensed use from its records.
(c) Cost, sometimes known as 'design around'. This approach looks at the cost of creating the rights and alternatively the cost to the licensee of designing around the IP in order to avoid infringement. This would, in theory, place a cap on the royalty as a willing licensee would not pay more, or not much more, than the amount it would otherwise incur to avoid infringement. The Register and the WHOIS Database that represent the relevant rights have been in the process of creation, development and maintenance for many years prior to infringement at considerable cost. That is some £8.775 million in 2003 alone. That level of cost would be uneconomic for the licensee and Mr Samuel concluded that there is no 'design around' cap to be considered in this case.
(d) Rule of thumb. In some industries where licensing is common, general rules of thumb may be developed usually being expressed as a percentage of revenue.
33 In assessing royalties for the use of IP rights, Mr Samuel pointed out that a royalty is usually linked to the benefits derived from its use. Where a licence is granted the amount payable is typically determined by one or a combination of the following bases:
(a) a percentage of revenue;
(b) a price per unit sold or made;
(c) a fixed amount;
(d) a minimum amount plus one of (a) or (b) above.
Mr Samuel observed that, being the only source of the entire population of .co.uk domain name information, Nominet UK's negotiating power would have been substantially enhanced and would have affected the value of its copyright.
34 In assessing comparable licences or agreements, Mr Samuel set out a table of licensing information which he had obtained by search of public records. It is not necessary to replicate that table here. He considered royalties charged for the use of marketing lists. He noted that:
(a) lists for direct marketing purposes are generally acquired, for one or more uses, at a price based on each 1,000 records;
(b) the price for multiple use is higher than the price for single use, and in some cases more than twice as high;
(c) the prices for available lists vary considerably;
(d) marketing list businesses license on a non-exclusive basis.
35 Mr Samuel expressed the opinion that a notional licensor would have been seeking a royalty at the high end of the ranges indicated in the comparable examples he had extracted because:
(a) the hypothetical licence under consideration was for rights that could not have been wholly or readily sourced elsewhere. The licensee would not have obtained them from a competitor to Nominet UK. So Nominet UK would be in a stronger bargaining position;
(b) the rights being licensed would not have been licensed to competing businesses. The license being granted was exclusive. This would generally lead to a substantial increase in price;
(c) the information acquired was of direct relevance to the licensee, providing the names, and in some cases addresses, of customers who had previously acquired a very similar product to that being offered by the licensee and were therefore likely to have an interest in the licensee's products;
(d) the information acquired was in a form capable of manipulation.
36 Having regard to these matters, Mr Samuel concluded that the royalty payable for licensing the relevant part of Nominet UK's WHOIS Database would be 25p per record acquired for single use direct marketing purposes where the record contained an address, and 50p per record acquired for multiple use. He assessed a discount of 33.3% for records without addresses which contained information from which a street address or email address could readily be obtained. He was instructed to assume that 30% of the records without addresses were not connected to an operational website or email address. He recognised that some of the records within this 30% might nevertheless be readily connected to a street address and conversely that records within the remaining 70% might not be readily connected to an email or street address.
37 Mr Samuel also referred to a report entitled 'The DMA Census of the UK Direct Marketing Industry 2000-2001'. It reported on the types of business lists available, the number on the market and the average cost per 1,000 contacts. The table showed that in 2000/2001 the average price for the acquisition of customer lists was 15p per record for business lists and 10p per list for customer lists. He said that while slightly out of date and with no detailed explanation in the report as to the basis for the numbers, it indicated that the figures uncovered from his own research were not unusual. He was unable to find comparable and more up to date data from the DMA's subsequent reports.
38 On the economic analysis approach for assessing a notional royalty, Mr Samuel said that this typically required an analysis of the profits made or expected to be made by the licensee from use of the licensed rights and allocated a portion of them to the licensor by way of royalty. However he had no accounting records for the respondents and could not analyse their profitability in appropriate detail.
39 So far as the cost or 'design around' approach was concerned, Mr Samuel observed that in order to substantially reproduce the information obtained from the WHOIS Database and the Register other than through Nominet UK, the respondents would be required to negotiate licences with a very substantial number of Tag Holders who would have made it impractical to recreate that database. He had therefore not sought to estimate a 'design around' cost. He observed, however, that Nominet UK's own records and annual report indicated that it incurred very substantial costs in maintaining its databases. He calculated, on the basis of Nominet UK's records, that the cost for two years of registration and maintenance was £4.28 per record. He took that figure because each registration was effective for two years. He considered it relevant because:
(a) a licensor would generally seek to recover its costs of development and maintenance of the asset licensed;
(b) the licensee in this particular case was seeking to generate revenue from two year registrations of a domain name.
40 A figure of £4.28 provided a useful benchmark for checking the royalty rates of 25p and 50p which he had determined on the comparable valuation basis mentioned earlier. Those royalty rates represented approximately 5.8% and 11.7% of two years' registration and maintenance costs per record. This range of return was low but not unreasonable, indicating that his proposed royalty rates were conservative.
41 There were no relevant useful rules of thumb.
The Assessment of Damages for Infringement of Copyright and Misleading or Deceptive Conduct
42 I accept Mr Samuel's opinion that the figures at which he arrived are reasonably based assessments of notional licence fees for the records taken by the respondents.
43 There is undoubtedly a degree of unreality in assessing damages on a notional licensing arrangement which is never likely to have occurred. Nevertheless, as in the LED Builders' case, the fee so assessed may provide a useful basis for determining the damages at large under s 115(2). See also CAJ Amadio Constructions Pty Ltd v Kitchen (1992) 23 IPR 284 at 287 (Debelle J).
44 It was submitted for Nominet UK that the most appropriate method for the assessment of damages is the notional licence fee approach. This is notwithstanding the fact that no inference could be drawn that Nominet UK would have licensed its copyright to the respondents for the use to which they put it. It was submitted that there is no other reasonable alternative to quantify the damage suffered by Nominet UK due to the respondents' infringement of copyright.
45 It was submitted, in the alternative, that if it be inappropriate to use the notional licence fee approach damages must nevertheless be assessed. In that event the issue of damages is left as a 'jury' question and it is often said that the court awards 'damages at large'. Such damages are those which are not capable of precise proof and calculation but which could be expected to result, in the normal course of things, from a particular type of conduct. They may be awarded even though the applicant has not produced evidence of particular losses from particular transactions. Analogously, in the context of s 82 of the TPA, which allows recovery of damages for misleading or deceptive conduct, Beaumont J said in Prince Manufacturing Inc v Abac Corp Australia Pty Ltd (1984) 4 IPR 104 (at 111):
'… general damages for loss of business profits may, in a proper case, be recovered under s 82. By general damages is meant damages which are not capable of precise proof and calculation but which could be expected to result in the normal course of things from a particular type of conduct. Damages of this kind may be awarded even though a claimant does not produce evidence of particular losses from particular transactions…'
46 It was submitted for Nominet UK that through their data mining activities the respondents copied in excess of 2.2 million domain name records which contained useful information in a variety of fields. This was a substantial part of the Database which lay at the heart of Nominet UK's business. The significance of the Database was illustrated by the lengths to which Nominet UK had gone to keep it confidential and to prevent it from being copied. It was submitted that on that basis the damages should be very substantial.
47 The notional licence fee, it was submitted, should be determined by reference to all items which had been copied by the respondents and not merely those which had been used by them. They had used the records to mail out some 50,000 UKIR invoices to recipients. If the respondents had obtained a licence to copy the Database or the WHOIS Database they would have been required to pay a licence fee whether they used the information or not. I accept this approach. I accept also that on a notional licence fee basis, the figures assessed by Mr Samuel for minima and maxima in relation to records with and without addresses are reasonable.
48 I will make the assumption, in favour of the respondents, that the relevant records were taken for single use only. Had any of the persons contacted by the respondents maintained a continuing relationship with the respondents following that contact, then further approaches could be assumed to have been done from the respondents' records based on those initial contacts.
49 I will round off the minimum amount proposed by Mr Samuel to £350,000. At 6 December 2005 the exchange rate for United Kingdom pounds and Australian dollars was 2.31701 Australian dollars for every United Kingdom pound. The damages to be awarded under s 115(2) therefore comes to $810,953.
50 Nominet UK also claims additional damages under s 115(4). As may be seen from the factors to which the Court is required to have regard in deciding whether to award such damages, they are punitive in character. Indeed they may be regarded as a statutory species of exemplary damages - Sullivan v FNH Investments Pty Ltd (2003) 57 IPR 63. As Jacobson J said in that case (at [95]):
'Additional damages are awarded under s 115(4) on principles which correspond to those which govern awards of aggravated and exemplary damages at common law: see Autodesk Inc v Yee (1996) 68 FCR 391 at 394 (Burchett J).'
In that case his Honour also observed that the Court need only be satisfied that one or more of the circumstances set out in s 115(4) exists in order to enliven the discretion - at [91] citing Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93 (Burchett J) and 103 (Tamberlin J).
51 On the facts as found at trial, the conduct of the first to fourth respondents in infringing the copyright of Nominet UK in the Database and the WHOIS Database was flagrant. It was conducted using a very high volume of automated and systematic data mining queries. The pattern of the queries changed in order to avoid blocking action by Nominet UK. Nominet UK had to disable the WHOIS service in its entirety on 23 January 2003. This was described as 'a drastic and unprecedented step for Nominet'. It had never suspended the WHOIS service for that reason previously. The availability of the data mining programs suggests that there is a need to deter similar infringements in the future.
52 It was submitted for Nominet UK that the award of additional damages as a deterrent would be appropriate in these proceedings given:
(a) the electronic nature of the WHOIS Database appropriated by the first to fourth respondents which makes prevention of copyright infringement difficult;
(b) that the WHOIS Database is offered free of charge and for the benefit of the public so long as use is in accordance with the terms and conditions;
(c) that the WHOIS Database and other electronic databases are liable to be infringed in a similar way by others unless a strong deterrent exists for potential infringers; and
(d) that if no deterrent exists and such infringement continues to incur, the W HOIS Database generally may become inaccurate as a result of registrants providing false information to avoid their personal information being used by copyright infringers for direct marketing or otherwise.
I accept these as relevant to and establishing the need to deter similar infringements of copyright.
53 Nominet UK pointed to the conduct of the respondents after infringement. After obtaining a substantial copy of its Database and WHOIS Database, the third, fourth and fifth respondents took further action prejudicial to Nominet UK when they organised the distribution of 50,000 invoices which were of a misleading or deceptive character, as found in the principal judgment. The company also referred to the respondents' conduct in the initial stages of the present proceedings when defences were filed requiring the preparation of extensive evidence by Nominet UK.
54 In my opinion, these considerations are sufficient, taken together, to justify a substantial award of additional damages against the first to fourth respondents inclusive. In so concluding, I give particular weight to the need to deter similar infringements of copyright in the future.
55 The assessment of the quantum of additional damages is necessarily in part an intuitive process. However the quantum of compensatory damages assessed can, I think, be taken as some guide to the order of magnitude of punitive damages albeit that must in the end be determined by reference to the punitive purposes of additional damages and in particular the need to deter similar infringements in the future.
56 Having regard to the scale of the operation undertaken by the first to fourth respondents and the objective for which it was undertaken which involved in itself misleading or deceptive conduct, it is appropriate that additional damages be fixed at $500,000.
57 In relation to the TPA and Fair Trading Acts claims, Nominet UK has not demonstrated that it has suffered any loss flowing from the misleading or deceptive conduct which was found to have occurred. In particular, it did not establish that the misrepresentations involved in the sending of misleading and deceptive UKIR invoices to the domain name registrants have had any quantifiable impact upon its reputation. I decline to award damages under either the TPA or Fair Trading Acts.
Costs
58 Nominet UK seeks a single order for costs against all respondents to be assessed as a lump sum up to and including the hearing on 22 June 2004. It seeks an ordinary order for costs thereafter. A claim for indemnity costs is not pressed.
59 The only one of the respondents to contest liability at trial was Mr Norrish. The other respondents conceded liability, albeit they did so at the last moment. In my opinion it would be inappropriate to order the costs of the trial against those respondents. The trial proceeded in effect against Mr Norrish only.
60 In my opinion all respondents are liable for the costs of the proceedings up to but not including the hearing of the action. The costs of the hearing as to liability should be borne by Mr Norrish. All parties will be liable for the costs associated with the assessment of damages.
61 I do not consider that the material placed before me allows me to estimate a lump sum costs figure which would segregate out, in respect of Mr Norrish, the costs associated with the hearing. I will however make an order that, with the exception of the costs of the hearing, the costs should be awarded and taxed as one set against all respondents jointly and severally. There will therefore be a need for only two bills of costs. One should cover all respondents in respect of all costs other than the costs of the hearing as to liability. The other, which may be a supplementary bill of costs, should cover the costs of the hearing against Mr Norrish.
Conclusion
62 Subject to the alterations foreshadowed in respect of the costs award, I will make orders substantially in terms of the minute prepared by Nominet UK.
I certify that the preceding sixty two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French .