Imagine this nightmare scenario: You hire a software developer to build a custom platform for your business. You explicitly tell them, in writing, to build it from scratch and not to steal anyone else’s intellectual property. They nod, agree, and get to work.
Months later, a major competitor sues you. Why? Because your developer secretly copied and pasted code from the competitor's software. You didn't do the copying, and you didn't know about it. But the competitor argues that by hiring the developer and not micromanaging them, you "authorised" the theft.
This isn't a hypothetical. It is the exact story behind a recent High Court of Australia case (Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd).
For business leaders, this case is a must-read lesson on outsourcing, trust, and how a single letter saved a company from a massive copyright liability.
The cast of characters
To understand the story, we need to meet the characters in this case:
The client (Biggin & Scott): A prominent real estate agency. They need software to run their marketing but aren't tech experts themselves.
The developer (Mr. Semmens): A software engineer hired by the Client. He’s talented, but he has a history of taking shortcuts.
The competitor (Campaigntrack): A competing software company that bought the rights to the system the Developer had previously worked on.
The side player (DDPL/Mr. Meissner): A former business partner who let the Developer use his office space and servers.
The Story
The Instruction
Biggin & Scott (The Client) decided they didn't want to use Campaigntrack's expensive system. They wanted their own custom tool, which they called "Toolbox."
They turned to Mr. Semmens (The Developer), whom they knew and trusted. However, Biggin & Scott were smart about one thing. Mr. Stoner, a director at the agency, handed the Developer a formal letter on company letterhead. The instructions were crystal clear:
"You are instructed to build a web to print delivery system that does not breach any other companies IP or ownership*... In simple terms we do not want any thing used that can be claimed as owned by [Campaigntrack]."*
The Developer agreed. The Client trusted him to do his job.
The Breach
Unbeknownst to the Client, the Developer ignored the instructions. Instead of building Toolbox from scratch, he accessed the source code of "DreamDesk" (software now owned by the competitor, Campaigntrack) and copied substantial parts of it.
The competitor, Campaigntrack, soon noticed that Toolbox looked and behaved suspiciously like their own system. They sent legal letters to Biggin & Scott, accusing them of copyright infringement.
This is where it gets tricky for business owners.
Usually, you are only liable for copyright infringement if you do it yourself. However, the law says you can also be liable if you "authorise" someone else to do it.
Campaigntrack argued that Biggin & Scott had "authorised" the theft. Their argument was:
You hired him.
You had the power to stop him.
We sent you warning letters telling you he was stealing our code.
By not shutting down the project immediately, you were "indifferent" to the infringement.
The Verdict
The case went all the way to the High Court of Australia. The Court had to decide: Did the Client authorise the theft just by letting the Developer continue working?
The High Court said No.
Here is why Biggin & Scott won, and why they avoided liability:
1. The letter
The Court placed immense weight on that initial letter where the Client instructed the Developer not to infringe copyright. It proved that the Client did not "sanction, approve, or countenance" the theft. They had expressly forbidden it.
2. Reasonable trust
The judges recognised a commercial reality: business people hire experts because they lack that expertise themselves. The Client didn't know how to read code. They trusted their Developer. The Court said it is reasonable for a business to trust an expert to follow instructions, even without an independent audit.
3. The response to the warning
When the competitor sent the warning letters, the Client didn't just ignore them (which would have been "indifference"). They:
Asked the Developer for an explanation (he lied and said he was innocent).
Provided legal "undertakings" (promises) that they wouldn't use stolen code.
Allowed an independent expert to look at the system.
Because the Client took these steps, they weren't "indifferent." They were just deceived.
3 lessons for business leaders
This High Court judgment is a relief for anyone who outsources work. Here is how to protect yourself:
1. Put your "Don't Steal" instructions in writing
If Biggin & Scott had only given verbal instructions, this case might have gone differently. By having a formal letter (or contract clause) explicitly forbidding IP infringement, they created a shield.
Action: Ensure every contractor agreement explicitly states they must not use third-party IP without a license.
2. Don't ignore Legal threats (but don't panic either)
If a competitor claims your contractor/developer is stealing their IP, you can't throw the letter in the bin. You must investigate. However, this case shows you don't necessarily have to shut down operations immediately just because an allegation is made. If you conduct a reasonable investigation and your contractor provides plausible assurances, you are generally protected.
3. Know who you are hiring
The Court was lenient here because the Client had a long-standing friendship with the Developer. In a strictly commercial arm's-length transaction, the expectation to "verify" the work might be higher. While you don't need to read the code yourself, doing due diligence on a contractor's reputation is always wise.
Key takeaway
You can't control everything your contractors do. If they go rogue and break the law effectively behind your back, the courts generally won't hold you responsible, provided you made your expectations clear and acted reasonably when problems arose.
Biggin & Scott survived this legal battle because they had a paper trail proving they tried to do the right thing. Do you?
