Who’s in control? Liability for copyright infringement by contractors and software developers

The High Court recently delivered its decision in Real Estate Tool Box v Campaigntrack ¹ relating to copyright authorisation.

The High Court held that the appellants, who had engaged a third party software developer to create a real estate marketing system for their use, were not liable for copyright infringement, as they had not authorised the developer’s infringement of Campaigntrack’s copyright when creating the system. Although the appellants in this case successfully avoided a finding of copyright infringement, the High Court has emphasised that each case turns on its facts. The judgment sets out important considerations to keep in mind when engaging contractors to produce work-product in highly competitive fields, such as IT systems, where competitors are highly motivated to disrupt new product launches.

Under s36(1) of the Copyright Act,² a person who is not, and does not have a licence from, the copyright owner, and does not themselves engage in an infringing act, can nevertheless be found to infringe copyright if they authorised the infringing act. This is particularly relevant in third party contractor scenarios.

Matters that must be taken into account are, as set out in s36(1A):

• the extent of the person’s power to prevent the infringing act;
• the nature of any relationship between the first person and the person who did the infringing act; and
• whether the first person took any reasonable steps to prevent or avoid the act.

The High Court confirmed that any finding of authorisation (by indifference or otherwise) is heavily fact dependent and a decision based on a particular set of circumstances may be of no assistance in other cases.³

This question of fact involves an enquiry into whether the conduct of the person amounts to “sufficient involvement” in the infringement.⁴ There must be a close focus upon all the facts of the case and the matters mandated by s36(1A), including whether the person knows or had reason to anticipate or suspect an infringing act is occurring or is likely to occur.⁵

Mere neutrality or inattention will not suffice.⁶

Authorisation by indifference requires the person to be in a position and have knowledge of facts, matters and circumstances sufficient to give rise to a duty to take reasonable steps to avoid or prevent the act.⁷ This involves an assessment of what the person actually did and what a person, in that position with that knowledge, ought to reasonably have done.⁸

Key takeaways include:

• Merely having the power to prevent the act, or an existing relationship with the infringer, does not amount to authorisation. Something more is required. It is not unreasonable to engage a person to complete a technical task (eg software development) and generally not interfere with how that task is undertaken.
• Some reason to suspect (eg a letter of demand from a competitor), without actual knowledge or suspicion (eg in the face of assurances that there has been no infringement), is not sufficient to give rise to a duty to take reasonable steps to prevent or avoid the infringement.
• In a third party contractor scenario (eg for software companies where it is not unusual to engage a contractor to develop certain software), directors of the company and the individuals who engage the contractor must ensure that the contractor is specifically instructed not to infringe copyright, and carefully manage that relationship and any knowledge or suspicion of wrongdoing that may arise. Reasonable steps must be taken in a timely manner to prevent or avoid any infringement. Otherwise, the company, its directors and the individuals who engaged the contractor may also be liable for copyright infringement by authorisation.
• Ultimately, whether a particular set of facts amounts to authorisation by indifference will need to be determined on a case-by-case basis and supported by evidence.