IP at Ashurst update implied terms

What you need to know

• The High Court of Australia has provided further guidance on the ascertainment of implied terms, including for the use of copyright material such as maps and photographs.
• It is important to remember that the initial inquiry is to identify what a reasonable person would conclude were the terms of the bargain based on what the parties said and did, understood in light of what they knew.
• The parties' mutual understanding may also be inferred from a party's silence, as this may be consistent with an acceptance of the other party's practices. 

What you need to do

• Where possible, ensure that important terms are clearly expressed in a formal contract. 
• Consider whether your silence or actions may amount to an acceptance of ongoing practice.  

Background

The facts

Mr Hardingham is a professional photographer and the sole director of Real Estate Marketing Australia Pty Ltd (REMA).  REMA supplies photographs and floor plans of residential properties to real estate agencies, for use in the marketing of those properties for sale or lease.  There was no written agreement between Mr Hardingham and REMA and the agencies. 

Upon receipt of the photographs and floor plans, the real estate agencies would upload them to the realestate.com.au platform operated by Realestate.com.au (REA).  REA then provided the images to RP Data Pty Ltd (RP Data), which provides a service called RP Data Professional.  The images would appear on RP Data Professional within a few days of upload and remain on REA's platform and RP Data Professional after the completion of the sale or lease, including as part of the historical information about completed transactions.  

Mr Hardingham and REMA brought proceedings in the Federal Court, claiming copyright infringement under s 36 of the Copyright Act 1968 (Cth) against RP Data. 

Proceedings

The Trial Judge

The primary judge found that there was an implied term that that the agencies were authorised to sub-licence the works to REA on REA's usual terms and conditions.  This included an authorisation for REA to grant a sub-licence to RP Data.  Accordingly, the primary judge held that Mr Hardingham and REMA's copyright was not infringed.  Read our article on the first instance decision in the 30 March 2020 edition of IP@Ashurst.

The Full Court

The majority of the Full Court allowed Mr Hardingham and REMA's appeal and found that there was no implied term.  The Full Court found that actual knowledge of the precise scope of the term was required because of the gravity of REA's terms and conditions.  

The extent of the licence  

The key issue in this case was whether the contract between REMA and the agencies authorised the agencies to agree to REA's standard terms and conditions and provide the relevant sub-licence to REA.  Mr Hardingham and REMA contended that the licence granted to the real estate agencies permitted the agencies to grant a sub-licence that was subject to a limitation: it would come to an end once the marketing of the property had ended ie. a sale or lease of the property had been completed.  

The High Court determined that there was an implied term in the licence permitting the agencies to sub-licence the photographs and floor plans to REA.

Ascertainment of terms

In this case, the terms of the agreement had not been articulated.  According to Chief Justice Kiefel and Justice Gageler, the ultimate question when determining what the relevant agreement was is "what reasonable people with knowledge of the background circumstances then known to both parties would be taken by their words and conduct to have agreed."  They provided useful guidance on the relevant considerations when implying terms and determining the scope of a licence:

• The relevant intention is determined objectively, and is not a search for the uncommunicated subjective motives or intentions of the parties.
• The criteria in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 are necessary to ground the implication of a term.  The term must be reasonable and equitable, capable of clear expression, non contradictory of the express terms of the contract, give business efficacy to the contract, and it must be so obvious that "it goes without saying".  This criteria must not be rigidly applied.
• The rules for implying terms in formal contracts are no different to those in informal contracts.  However, the rules may apply differently and the usual focus in informal contracts is on reasonableness and equity, and business efficacy. 
• An implied term may arise from a trade or industry customer, or from a past course of dealing between the parties.
• The court will consider the full range of circumstances that existed at the time of the contract.  This includes the evidence of witnesses (in relation to words written or spoken and the relevant matters at the time), objective surrounding facts, and the apparent logic of events.
• Relevant considerations included what was said and not said, what was done, and what the parties reasonably knew or ought reasonably to have known, including the evident commercial aims and expectations of the parties.  This included what Mr Hardingham and REMA knew about the intended use of the works. 

Mr Hardingham, REMA and the agencies dealt with each other in an industry where the marketing for sale or lease of residential properties were done in a particular way.  Chief Justice Kiefel and Justice Gageler found that the following industry practices were relevant to the question of the parties' mutual understanding:

• Most agencies in Australia conducted their marketing using the REA platform. 
• Mr Hardingham, REMA, and the agencies knew that REA uploaded photographs and floor plans of a property to be marketed to its platform and that it then maintained them there after the completion of the sale or lease as available to its subscribers as historical transactions.
• REA had used this practice since the REA platform came into existence in 2003 and over the course of the dealings between the parties.
• Within a few days of REA uploading the images they appeared on RP Data's service and remained there post sale or lease.  This was apparent to Mr Hardingham and REMA.
• Prior to entry into the relevant transactions, Mr Hardingham and REMA understood that RP Data had a contractual relationship with REA by which REA licensed it not only to use the data but in terms which allowed RP Data to keep the data in its service.

Chief Justice Kiefel and Justice Gageler also emphasised that terms of the agreement may be inferred from the silence of the parties as this may evidence a tacit understanding.  Mr Hardingham and REMA's silence when they knew what REA and RP Data did with the images, and for how long they continued to use them, is consistent with an acceptance of what was necessary to achieve the intended marketing.  This conduct led the agencies to believe that Mr Hardingham and REMA knew and accepted the usage of the images and that it could only be achieved if the agencies submitted to REA's terms to upload the images to its platform. 

What does it all mean?

This case highlights the importance of applying the "proper" inquiry when inferring implied terms.  The initial inquiry is to identify what a reasonable person would conclude were the terms of the bargain based on what the parties said and did, understood in light of what they knew.  Relevant considerations can include industry practice, a party's silence over the course of dealings, and the parties' commercial aims and expectations. It is important to first identify the terms, before applying the criteria in BP Refinery.