Ong Seow Pheng and Others v Lotus Development Corp and Another

• Judge: Karthigesu JA
• Judgment Date: 29 May 1997
• Neutral Citation: [1997] SGCA 23
• Citation: [1997] SGCA 23
• Defendant Counsel: Prithpal Singh (Khattar Wong & Partners),Sundaresh Menon (Rajah & Tann) as amicus curiae
• Published date: 19 September 2003
• Plaintiff Counsel: Lim Yee Kai (YK Lim & Partners)
• Date: 29 May 1997
• Docket Number: Civil Appeal No 32 of 1996
• Court: Court of Appeal (Singapore)
• Subject Matter: Authorising infringement,Whether appellants authorised infringement by third party,Pleadings,Third party making unauthorised copies of programmes and selling them with manuals,Civil Procedure,Infringement,Whether damages to be assessed on basis of number of manuals sold or number of complete packages of programmes and manuals,s 31(1) Copyright Act (Cap 63, 1988 Ed),Whether damages could be assessed on basis of losses suffered as a result of third party's acts,Appellants not pleaded as joint tortfeasors with third parties in infringement of respondents' copyright in programs,Copyright,Findings on matters not pleaded,Appellants selling multiple copies of infringing manuals for computer programmes to third party with copy of programmes

This appeal concerns the assessment of damages for copyright infringement of computer software programmes and instruction manuals.

The facts

The first and second appellants are husband and wife and the third appellant is the brother of the first appellant.

The respondents are related companies: the second respondent is a wholly owned subsidiary of the first respondent company. Both of them produce computer software packages for use with various types of computers. Such software packages typically consist of one or more computer diskettes containing the respondents` computer software programme and an accompanying set of instruction manuals.

On 28 October 1991 the respondents` private investigators and the police carried out a raid on the first and second appellants` home and a number of unlicensed copies of the respondents` software programmes and manuals were recovered. After the raid, the respondents on 7 November 1991, instituted the present action against the appellants claiming, inter alia, injunction and damages for infringement of their copyright in their computer programmes and manuals. Following the commencement of the action various interlocutory orders were obtained by the respondents against the appellants, such as interlocutory injunction and order for discovery.

Eventually on 16 September 1992 the respondents applied for summary judgment against the appellants. The application was resisted, and was heard before Punch Coomaraswamy J. On 16 April 1993 the learned judge gave summary judgment for the respondents against the appellants. He ordered, among other things, an inquiry as to damages, or at the respondents` option, an account of profits, and payment of all sums found to be owing, and also an inquiry as to additional damages under ss 119 and 120 of the Copyright Act (Cap 63, 1988 Ed) (the Act). In his grounds of decision (reported in Novell Inc v Ong Seow Pheng & Ors and other actions [1993] 3 SLR 700 ) the learned judge said (at p 707) that the evidence adduced before him convinced him that the appellants were in the business of making unlicensed copies of software programmes and manuals for sale on an organized large scale basis. However, he did not make any other finding of infringement by the appellants of the respondents` copyright.

Pursuant to the order made by the learned judge an inquiry was conducted by the assistant registrar, Mr Phang Hsiao Chung. It was apparent by then that the respondents elected to have an inquiry as to damages rather than an account of profits, and accordingly the inquiry proceeded on that basis and lasted for a number of days.

The main witness who gave evidence for the respondents was one Lur Leong Soon (Lur), a self-admitted dealer in pirated computer products, and one of the customers of the appellants. His evidence was that he bought and sold pirated computer software programmes and manuals and his dealings with the first appellant (Ong) was along this line. Ong would sell to him various pirated copies of the manuals for the software programmes and one pirated copy of the software programme itself which Ong told him to make as many copies he would require. He would then make whatever copies of the programmes he needed and sold the programmes together with the pirated manuals which he bought from Ong as complete packages. In other words, for every variety of manual he bought from Ong - and he bought many copies of each variety - he bought only one copy of the accompanying software, and in every instance he made sufficient number of copies of the programmes to match the manuals he bought from Ong and then sold the pirated packages consisting of the programmes and the manuals.

Lur paid a nominal rate of $1 or $3 for each software programme he bought from the appellants; that presumably covered only the cost of a diskette. Thus the appellants` business with Lur was principally the sale of the manuals, although according to Lur the relevant programmes were available on request upon payment of further sum at the nominal rate.

The other witness who gave material evidence for the respondents was the respondents` cost accounting manager, Ms Lim Chay Bee. Her evidence was that the respondents were not in the business of selling manuals only and that they sold their manuals as part of the packages with the accompanying software programmes. They sold their manuals separately as independent products only in 3 circumstances, namely: (i). where a large customer purchases `a large number of licences for a number of personal computers under a volume purchase programme`, and in such case to save cost the respondents suppy only a small number of manuals, but on request additional copies of the manuals would be supplied to the customer;

(ii). where a licensed user who has acquired a licensed package misplaced his manual and requires a replacement; and

(iii). where an arrangement is entered into with the hardware manufacturer to pre-load the respondents` programme into the hard disc of the computers sold by such manufacturer, and in such case the purchaser of such a computer would be issued a coupon with which he could then obtain the relevant set of manuals from the respondents.

Documents in the form of invoices and sale summaries were produced to prove the volume of sales made by the appellants. Apart from this, it was in evidence that during the raid on the first and second appellants` home, the following infringing copies of the respondents` works were seized and recovered: (a). 20 sets of software programmes on diskettes, and

(b). three copies of manual relating to software programmes and containing instructions for the use of the programmes.

The learned assistant registrar in a very careful judgment dealt meticulously with the evidence before him and made the following key findings: (i). that the appellants were in the business of supplying on a wholesale basis infringing copies of the works of the respondents to retail dealers in such infringing works;

(ii). that Lur was one such retail dealer;

(iii). that 6,717 infringing copies of various types of the respondents` manuals were sold by the appellants to their retailers; and

(iv). that 11 infringing copies of the respondents` software programmes were sold to Lur.

Together with the 20 infringing copies of software programmes and three infringing copies of the manuals found in the possession of the first and second appellants` home, the appellants had dealt with 6720 infringing copies of manuals and 31 infringing copies of the software programmes.

However, the learned assistant registrar noted that no evidence was adduced before him to show that the appellants had sold pirated copies of the respondents` software programmes to any of the appellants` customers other than Lur. Nor was there any evidence that the modus operandi described by Lur in relation to his dealings with the appellants applied to any of the appellants` other retailers. Thus in relation to other retailers, the sole evidence was that the appellants only sold infringing copies of the manuals. The learned assistant registrar also noted that there was no precise co-relation between the types of manuals which were found in the raid or found to have been sold and the types of programmes found or sold. There were various types of manuals in respect of which there was no evidence of the appellants having owned or sold the accompanying programmes.

It emerged in the evidence that there was available in the market legitimate reference manuals prepared by parties other than the respondents giving instructions on the use of the respondents` software programmes. This tended to show that the respondents` original manuals were not an indispensable requirement for the use of the respondents` software programmes. The learned assistant registrar invited the parties to adduce evidence as to the pricing of manuals relating to the respondents` software sold by a third party, because he thought that evidence would be relevant. Indeed, as it would be apparent shortly, it was relevant. However, both sides declined.

Thus, on the evidence, the learned assistant registrar found that the appellants had dealt with only 6,720 infringing copies of various titles of the respondents` manuals and 31 infringing copies of various software programmes. He held that the appellants could only be made to compensate the respondents for the loss caused by the infringements which had been committed by the appellants and which were proved. He rejected the argument advanced on behalf of the respondents that the appellants should be held liable for infringement of the respondents` copyright in 6,720 complete packages as opposed to that number of manuals only on the ground that the appellants had authorised Lur and their other retail customers to make as many infringing copies of the programmes as were needed to make up complete packages.

The learned assistant registrar also rejected the alternative argument by the respondents that the appellants were joint tortfeasors with their customers. His reason was that while the appellants might have provided Lur - and possibly the other customers - with an infringing copy of the programme from which Lur could make further infringing copies, the choice whether to do so lay with Lur alone. The appellants had no control over Lur`s actions, whatever he might have told Lur. Lur clearly knew that the appellants were in no position to grant them the right to make infringing copies. The learned assistant registrar held that it was not sufficient to constitute authorisation that the appellants had given Lur the ability to copy or even encouraged him to do so.

In the circumstances, doing the best he could, the learned assistant registrar in assessing damages used as a starting point the net profit the appellants would have obtained, had they sold these software packages and manuals. This was arrived at by deducting the cost of packages...