Lotus Development Corporation and Another v Ong Seow Pheng and Others

JurisdictionSingapore
JudgeJudith Prakash J
Judgment Date24 July 1996
Neutral Citation[1996] SGHC 145
Date24 July 1996
Subject MatterWhether damages should be based on net profits from sale of entire software packages or separate diskettes and manuals,Defendants and customers acting in concert in selling infringing packages,Defendants supplying pirated copies of manuals to customers who duplicated diskettes,ss 119 & 120 Copyright Act (Cap 63),Loss of profits,Copyright in computer programmes and manuals,s 31(1) Copyright Act (Cap 63),'Authorises',Infringement,Joint tortfeasors,Words and Phrases,Additional damages,Whether defendants liable in damages in relation to packages,Damages,Copyright
Docket NumberSuit No 2311 of 1991
Published date19 September 2003
Defendant CounselLim Yee Kai (KK Yap & Partners)
CourtHigh Court (Singapore)
Plaintiff CounselPrithipal Singh and Stuart Ong (Khattar Wong & Partners)

Judgment:

GROUNDS OF DECISION

Introduction

1. This matter came before me on an appeal by the plaintiffs against an assessment of damages order made in their favour by the Assistant Registrar. The defendants cross appealed. I allowed the plaintiffs' appeal. At the same time, I dismissed the defendants' cross appeal. The defendants have now appealed to the Court of Appeal against my decision to increase the damages payable by them but they are no longer pursuing their original cross appeal against the Assistant Registrar's order. Accordingly, I will in these grounds deal only with the matters which are still in dispute.

2. The plaintiffs are computer software companies which produce computer software packages for use with various types of computers. Such software packages typically consist of one or more computer diskettes containing the plaintiffs' computer programme and an accompanying set of instruction manuals.

3. In 1991, the plaintiffs commenced this action against the defendants for breach of their copyright in their computer programmes and manuals. Prior to the start of the action, a raid had been conducted on the defendants' home and unlicensed copies of the plaintiffs' programmes and manuals, bearing copies of the plaintiffs' trademark, were seized from the premises.

4. On 21 September 1993, judgment was given for the plaintiffs against the defendants on a summary judgment application. The learned judge, whose decision is reported as Novell Inc v Ong Seow Pheng & Ors and other actions < 1993 > 3 SLR 700, in finding for the plaintiffs, made the following orders:

(a) that there be an inquiry as to damages, or at the plaintiffs' option, an account of profits and payment of all sums found to be owing; and

(b) that there be an inquiry as to the additional damages payable by the defendants under ss 119 and 120 of the Copyright Act (Cap 63) ('the Act').

5. The assessment of damages took place in April and June 1995 before the Assistant Registrar. On the evidence presented, he found that the defendants had dealt with 6,720 infringing copies of various titles of the plaintiffs' manuals and 31 infringing copies of various programme titles and that the plaintiffs had to be compensated for these infringements. He then went on to calculate damages on the basis of the net profit the plaintiffs would have obtained had they sold these software packages of the infringing programmes and manuals found. This was arrived at by deducting the cost of the goods sold from their sale prices. At the appeal before me, the plaintiffs accepted the Assistant Registrar's calculation of the net profit of each package.

6. The Assistant Registrar then attributed 10% of the net profit of each package to the value of the manuals for the same and 90% thereof to the programmes themselves. Using these percentages he calculated the amounts which the plaintiffs would have lost had they been able to sell, separately, 6,720 manuals and 31 diskettes containing the programmes and awarded damages on this basis. The total amount awarded under this head was US$173,157.35. The plaintiffs were dissatisfied with this award because they contended that the damages should have been based on the net profit which they would have earned on the complete software package ie the programme diskette and instruction manual. They said that they should have been treated as having lost the profit on approximately 6,720 such packages.

7. The second head of damages in respect of which an award was made was under s 119(4) of the Act. This provides that a court may award additional damages in an action for copyright infringement where the infringement is established and the court is satisfied that it is proper to do so, having regard to (i) the flagrance of the infringement; (ii) any benefit shown to have accrued to the defendant by reason of the infringement; and (iii) all other relevant matters. The learned judge specifically ordered that this was an appropriate case for such additional damages to be awarded and the Assistant Registrar accordingly made an award of $20,000 under this head. The plaintiffs contended that that amount was far too low and that a more appropriate figure would have been $750,000.

The evidence
8. The main witness for the plaintiffs as regards quantification of loss was one Mr Lur, a self admitted dealer in pirated computer products. According to Mr Lur, he had started selling pirated software programmes and pirated manuals in the 1980s and in 1987 he established a business called Xenix Trading for the purpose of supplying computer software programmes and manuals to retail customers.

9. In late 1988, Mr Lur was referred to the first defendant, Mr Ong Seow Pheng, as a source of supply of pirated software programmes and manuals. Mr Lur and the first defendant had business dealings thereafter and Mr Lur came to realise that the first defendant was one of the main suppliers of such pirated material in this region. In fact, the first defendant himself boasted to Mr Lur that he was the largest supplier of these goods. Mr Lur produced a bundle of invoices in respect of goods which he had purchased from the defendants. He stated that these purchases had been made from either late 1988 or early 1989 onwards until late 1991.

10. According to Mr Lur, what the first defendant sold him were various pirated copies of the manuals for the software programmes and one pirated copy of the software programme itself. The first defendant told Mr Lur to make enough copies of the programme to enable him to sell each set of the manuals with the corresponding programme diskette as a package. After his purchase Mr Lur would make whatever copies he needed of the relevant programmes and sell the copies together with the manuals he had bought from the defendants. Thus, Mr Lur was in the business of supplying total software packages and not simply individual diskettes or individual instruction manuals.

11. Mr Lur confirmed that, in the course of his dealings with the defendants, he had bought numerous copies of pirated programmes and manuals of various brands, including pirated copies of software programmes and manuals published by the plaintiffs. He stated that originally he had printed his own pirated products for sale but after the first defendant started producing such products, the first defendant's supply was so fast and so up-to-date that Mr Lur was unable to compete and had to buy from the first defendant.

12. Mr Lur was subjected to extensive cross-examination by the defendants' counsel but, at the end of the day, the Assistant Registrar found him to be a credible and reliable witness. During the hearing before me, there was some contention on behalf of the defendants that the first defendant's evidence should be accepted in preference to Mr Lur's. I did not accept that contention and as the cross appeal has now been dropped, the truth of Mr Lur's evidence is no longer in issue.

Basis of assessment below
13.
The reason given by Assistant Registrar for assessing the damages as he did was that the defendants' modus operandi was that only one set of programme diskettes would accompany the sale of multiple copies of manuals. For example, the defendants would sell a customer 100 manuals with one set of corresponding programme diskettes and therefore, the damages should be based on the profit that could have been earned from 100 manuals and one computer programme.

14. The plaintiffs' contention was that in the example used, the damages should be based on the profits earned from 100 software packages. They based their position on the following submissions:

(a) authorising infringement: that by selling multiple infringing copies of the manuals with one accompanying programme, the defendants had 'authorised' the persons to whom they sold these items to infringe the whole of the plaintiffs' package; and/or

(b) joint tortfeasor: by conducting their operations in this manner, the defendants became joint tortfeasors with the customers who duplicated the diskettes and on-sold them together with the manuals supplied by the defendants as a package and therefore should be jointly liable for the damages sustained in relation to both the manuals and the programmes.

Authorising infringement
15.
Under s 31(1) of the Act, the copyright in a work is infringed by a person who, not being the owner of the copyright, and without the licence of such owner does in Singapore, or 'authorises the doing in Singapore' of, any act comprised in the copyright. One of the acts comprised in the copyright is the reproduction of the work concerned. In this case, there was no doubt that the defendants had infringed the plaintiffs' copyright by copying and dealing in 6,720 manuals and 31 programmes. On the face of it, what this meant was that the defendants' customers would be able to sell 31 complete packages and a further 6,689 individual manuals and that the plaintiffs would have been deprived of the profits of those sales.

16. What the plaintiffs sought to contend was that in fact they had been deprived of the profits from 6,720 complete packages because the defendants had authorised their customers, like Mr Lur, to copy the programmes supplied so that they would have as many programmes as manuals and would be able to sell complete packages instead of manuals simpliciter. As such 'authorisers' the defendants were responsible for the total loss sustained by the plaintiffs and could not limit their liability to compensate the plaintiffs to the individual items actually sold by the defendants themselves. The evidence in this respect was that the plaintiffs did not sell the programmes and manuals separately save in three exceptional circumstances. Further, the manual alone without the programme did not have a useful purpose (except to replace mislaid manuals or as a spare where the package had been bought by an organisation) and in the normal course no computer user would want to...

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4 books & journal articles
  • REVISITING AUTHORISATION LIABILITY IN COPYRIGHT LAW
    • Singapore
    • Singapore Academy of Law Journal No. 2012, December 2012
    • 1 December 2012
    ...220 ALR 1 at [402]; CCH Canadian Ltd v Law Society of Upper Canada[2004] 1 SCR 339 at [38]; and Lotus Development Corp v Ong Seow Pheng[1996] 2 SLR(R) 514 (HC) at [28]. 18Falcon v Famous Players Film Co[1926] 2 KB 474 at 491. 19[2000] RPC 249 at 277. 20 See also CCH Canadian Ltd v Law Socie......
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    • Singapore
    • Singapore Academy of Law Journal No. 2016, December 2016
    • 1 December 2016
    ...right, although it must be noted that when awarding additional damages in the High Court in Lotus Development Corp v Ong Seow Pheng[1996] 2 SLR(R) 514, Judith Prakash J said (at [45]) that the award was intended to be “a penalty … The aim of the award is punishment and deterrence”. On the o......
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    • Singapore
    • Singapore Academy of Law Journal No. 2004, December 2004
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    ...quite small, considering the egregious nature of the defendants’ conduct. Similarly, in Lotus Development Corporation v Ong Seow Pheng[1997] 1 SLR 484, the Registrar and High Court awarded punitive damages equivalent to 11 and 12% of the compensation respectively. Although the Court of Appe......

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