Trumpet Software Pty Ltd & Anr v OzEmail Pty Ltd & Ors
[1996] FCA 560
At a glance
Source factsCourt
Federal Court of Australia
Decision date
1996-07-10
Before
Heerey J
Source
Original judgment source is linked above.
Judgment (6 paragraphs)
ervice Providers (ISP), allow members of the public to connect to the Internet through the provider's computer. The individual user connects to the Internet by using a modem in conjunction with his or her computer. The modem provides the user with a telephone dial-in link to the chosen ISP who will usually charge a fee for providing access in this way. OzEmail is an ISP. Data and software stored on the Internet are available to users anywhere in the world. Once particular information is found, it can be easily retrieved no matter where the user is or where the information is stored. Each of the Internet host computers contains a common set of programs which allow use of the Internet. Probably the most well known program is the World Wide Web which provides a graphical interface to the Internet, allowing users to move around the Internet easily. Trumpet Winsock is a communications program for establishing a connection with an ISP, which in turn allows access to the Internet in the way already discussed. Other Internet based applications, such as World Wide Web browsers, use Trumpet Winsock to conduct communications on the Internet. Since Trumpet Winsock was released in version 1.0A on 1 February 1994 it has achieved remarkable success within Australia and overseas. The American publication "More Internet for Dummies" (claimed sales of 9 million) instructs would-be users of the Internet in terms which assume that Trumpet Winsock is the best available software for obtaining access. Shareware Much of the present case has been concerned with the legal rights and obligations which arise from the marketing of computer software as shareware. I shall discuss the nature of those rights and obligations in more detail at a later stage in this judgment. For the moment, a brief description of the concept of shareware will suffice. Conventional forms of software marketing require users to commit to buying the program before they have tried it. For example, if software is purchased from a retail outlet in diskette format in a sealed package, the user is committed either at the point of purchase or, at the latest, upon opening the package. Shareware on the other hand is a form of software marketing which gives the user an opportunity to evaluate the product; in other words, try before you buy. The owner of the software makes it available to users without charge for the purposes of evaluation. If users wish to acquire the software they must forward a registration fee to the owner. Programs which are being distributed as shareware will usually bear a description as such and will indicate some evaluation period (typically 30 days) after which users must pay a stipulated registration fee if they wish to continue using the software. The success of the shareware concept is thus to a large extent dependent upon the honesty of users, although more recently owners have developed the practical protection of a "timelock". This is a feature built into the program which operates to make it unusable after a given time unless registration is effected. Distribution of shareware can either be in physical form, on diskette or CD-Rom, or through the Internet by installing it on a File Transfer Protocol (FTP) site. In the former case, there are distributors who make shareware available and charge for the diskette or CD-Rom to cover the cost involved in collating, duplicating and distributing the program, together with a profit element. This charge would not ordinarily be understood as including a licence fee for the use of the program. As mentioned, a licence fee is payable to the owner on registration if the user decides to keep the program after evaluation. If the shareware is on an FTP site, a user can simply download it. Again, a licence fee is payable to the owner upon registration. Shareware is to be distinguished from freeware, which means software supplied with no charge and no expectation of remuneration. Negotiations between OzEmail and Trumpet In late 1994 the second respondent Mr Sean Howard, the Managing Director of OzEmail, telephoned Mr Tattam and put to him two proposals for OzEmail to undertake distribution of Trumpet Winsock. The first was a distribution in a forthcoming edition of the magazine Australian Personal Computer and the second a licensed distribution whereby OzEmail would include Trumpet Winsock in a software package diskette to be sold at a total retail price of $50. This was the first business contact Mr Tattam had had with OzEmail. Mr Howard told Mr Tattam that he would send detailed proposals. However Mr Tattam heard nothing further until 8 March 1995 when he received a fax from OzEmail signed by its Project Manager, Mr David Urquhart. The fax was in the following terms: Dear Peter I believe you had a discussion some months ago with Sean Howard, OzEmail's Managing Director, regarding the distribution of your product Trumpet Winsock on the cover of a magazine. I'd appreciate your confirmation of our understanding that we may freely distribute approximately sixty thousand copies of the unregistered version of Trumpet Winsock version 2.0 on the cover of the April, 1995 edition of Australian Personal Computer at no commercial gain to ourselves. The distribution represents a marvellous opportunity to boost registration revenue for Trumpet Winsock at no cost to Trumpet Software International. OzEmail will bear all costs associated with this promotion. Of course we will distribute the Trumpet Winsock package in its entirety. If the above meets with your approval please sign in the space provided below and fax this letter back to me on (02) 437 5888. Or if you require any clarification please call me direct on (02) 438 5909. Authorised: Peter Tattam, Trumpet Software International Best regards, (sgd) David Urquhart DAVID URQUHART Project Manager There were in evidence two earlier drafts of this fax in which Mr Howard (not Mr Urquhart) had made some alterations in handwriting. Relevantly for present purposes they were as follows. The first draft contained the words "I would like your confirmation that you are happy for us to freely distribute ...". To the typed sentence referring to "a marvellous opportunity to boost registration revenue for Trumpet Software" were added in handwriting the words "at no cost to Trumpet!" On the second draft Mr Howard crossed out typed words "I'd appreciate your confirmation of our understanding that we may freely distribute" and wrote above them the words "We'd like to move ahead on this & am writing to request your permission for us to distribute". The words "confirmation" and "permission" also appear separately in handwriting, each with a line drawn through it. The words "OzEmail will bear all costs associated with this promotion" were added in handwriting as were the words "Of course, we will include all relevant Trumpet licensing". The words "Could I trouble you to send your response by fax as we will need to rush to meet Australian Personal Computer's deadline for inclusion" had a line drawn through them. A line for Mr Tattam to sign on and the words "Authorised: Peter T" were added in handwriting. Thus the drafts progressed from "I would like your confirmation" to "writing to request your permission" to "I'd appreciate your confirmation of our understanding". It looks as though Mr Howard toyed with the words "confirmation" and "permission". This was obviously something to which Mr Howard gave careful thought, and not just as to matters of style. I draw the inference that Mr Howard knew that he needed Trumpet's permission for the proposed distribution, altered the draft to reflect that fact, and then made a further alteration in the hope that by treating the distribution as a matter requiring "confirmation" Mr Tattam might be led into the belief that he was merely being asked to formalise and record rights of OzEmail which already existed. I do not accept Mr Howard's explanation in evidence that he at all times believed that OzEmail had permission (as a consequence of the general licence for shareware) and that he merely wanted to ensure Trumpet would not be in a position to withdraw that permission. Mr Howard well knew that, at the very least, this was not a conventional shareware evaluation exercise. Moreover it was common ground Mr Tattam had not given permission in the conversation the previous year. The terms of that conversation were such that Mr Tattam would have naturally expected that the question of permission, having been raised at least implicitly by Mr Howard, remained up in the air pending the provision of further detail by OzEmail. On 10 March Mr Urquhart telephoned Mr Tattam and asked whether he had received the fax. Mr Tattam said that he had, but did not want OzEmail to proceed with the distribution because the current version of Trumpet Winsock did not have a timelock. At the time, Mr Tattam was working on a timelocked version of Trumpet Winsock which was eventually released as version 2.1. He was concerned that the mode of distribution proposed by OzEmail could lead to many people using the software without paying Trumpet the registration fee. However, he believed Trumpet would be substantially protected against that misuse if the distributed version of the software were timelocked. Mr Tattam told Mr Urquhart that he would agree to the distribution in the magazine of the timelocked version. He told Mr Urquhart that he would send OzEmail by electronic mail the timelocked version for this purpose. Mr Urquhart said that OzEmail required his (Mr Tattam's) signed written consent to the distribution. Following this conversation Mr Urquhart sent a fax dated 10 March in the following terms (emphasis added): Dear Peter I'd appreciate your confirmation of our understanding that we may freely distribute approximately sixty thousand copies of the unregistered, timelocked edition of Trumpet Winsock version 2.1 on the cover of the April, 1995 edition of Australian Personal Computer at no commercial gain to ourselves. We're confident that the distribution will result in a tremendous boost to your registration revenue for Trumpet Winsock at [sic] of course this is at no cost to Trumpet Software International! Note that OzEmail will bear all costs associated with this promotion. Of course we will distribute the Trumpet Winsock package in its entirety. If the above meets with your approval please sign in the space provided below and fax this letter back to me on (02) 437 5888. Or if you require any clarification please call me direct on (02) 438 5909. Authorised: Peter Tattam, Trumpet Software International Best regards (sgd) David Urquhart DAVID URQUHART Project Manager However Mr Tattam did not reply to this fax and did not send the timelocked version of Trumpet Winsock. Mr Urquhart tried on a number of occasions to contact Mr Tattam by telephone during the day but without success. On the evening of 10 March Mr Urquhart reported to Mr Howard that Mr Tattam had not sent the timelocked version of Trumpet Winsock. In his affidavit Mr Urquhart deposed Sean and I had previously agreed that the licence provisions in INSTALL.DOC [part of the Trumpet Winsock program] entitled OzEmail to distribute Trumpet Winsock 2.0 in the manner we intended. Sean asked me to recheck the licence provisions. I did so. I remained of the view that OzEmail was entitled to distribute Trumpet Winsock 2.0 in the manner intended. (I interpolate the comment that as far as this case is concerned there is no practical difference between Trumpet Winsock versions 2.0 and 2.0B.) Mr Howard claimed in evidence that Mr Urquhart, in passing on the substance of his telephone conversation with Mr Tattam, did not say that Mr Tattam had refused permission to distribute version 2.0B, but only that Mr Tattam was agreeable to the distribution of the timelocked version 2.1. I do not accept this. Mr Urquhart's evidence as to Mr Tattam's refusal was quite unequivocal. It was not a concession extracted in cross-examination. In his affidavit Mr Urquhart attributes to Mr Tattam the words, in reference to the proposed distribution of the existing version 2.0B, "No, I don't want you to do it". Mr Urquhart and Mr Howard were working together closely on this project. There was no motive for Mr Urquhart to conceal from Mr Howard any part of his dealings with Mr Tattam and every reason for him to report accurately, as of course Mr Urquhart said he did. A revealing insight into Mr Howard's true state of mind at the time is provided by the following passage in cross-examination: Q. Now, had you known that Mr Tattam had said "I don't want you to do it" would you have gone ahead and done it? Would you have gone ahead and distributed version 2.0B in April? A. I wouldn't have gone ahead without endeavouring to get in touch with Mr Tattam pretty urgently myself to explain that 2.1 wasn't forthcoming and we'd now committed to Australian Personal Computer because of the agreement and the permission he'd given us over the telephone. At the end of the day I suspect we would have gone ahead with 2.0B to mitigate our losses in any damages claim from Australian Personal Computer magazine. Q. And you would have done that in the face of an objection from Mr Tattam? A. Well, the alternative was - the answer is yes. Mr Howard had got himself into a position where he was determined to go ahead with the distribution regardless of what Mr Tattam said. That attitude was to emerge even more clearly in relation to the August distribution. At the time Mr Tattam received the fax of 10 March he had not finished work on the timelocked version of Trumpet Winsock. Over the following period of ten days he was aware from messages conveyed by his staff that Mr Urquhart was chasing him for a response to the fax and for the timelocked version. Mr Tattam was told that Mr Urquhart was annoyed that OzEmail had not received a written response, or the timelocked version, and that OzEmail was now running up against very tight publishing deadlines. Mr Tattam did not reply, partly because the timelocked version was not completed, partly because he was distracted by ill-health and other pressures, and also because he was still unsure as to whether he should deal commercially with OzEmail. By about 24 March Mr Tattam believed that the software might be sufficiently timelocked to be distributed in the way requested by OzEmail. (As it turned out, this belief was premature; the final de-bugged timelocked version - Trumpet Winsock 2.1 - was not released until July.) So Mr Tattam signed the OzEmail fax of 10 March and requested a member of his staff to fax it back to OzEmail. But before the fax could be successfully transmitted an e-mail from a Mr Chris Howells, the Managing Director of a company called NetComm, came to Mr Tattam's attention. In this e-mail Mr Howells said that OzEmail was making Trumpet Winsock 2.0B available at one of its FTP sites. Mr Tattam was distressed at this. He had recently adopted a policy that there should be no future distributions of Trumpet Winsock permitted until the timelocked version was ready. In addition, Mr Tattam misread Mr Howells' e-mail and took it as saying that OzEmail was reproducing Trumpet Winsock without a disclaimer notice. As a result of Mr Howells' e-mail the reservations which Mr Tattam had about dealing with OzEmail, because of what he considered to be a high-handed manner adopted by Mr Howard and Mr Urquhart, all resurfaced. He decided to terminate all negotiations with OzEmail. He retrieved the fax from his staff who had unsuccessfully attempted to send it to OzEmail earlier in the day. On 3 April, after brief discussions with his Melbourne solicitors Arthur Robinson and Hedderwicks (ARH), Mr Tattam sent a letter to OzEmail in the following terms: