Section 202 of the Copyright Act states that where a person threatens another person with an action or proceedings in respect of infringement of copyright, a person aggrieved may bring an action against the person making the threats and “may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he or she has sustained, unless the first mentioned person satisfies the court that the acts in respect of which the action or proceedings was threatened constituted, or, if done, would constitute, an infringement of copyright.”
Section 202 recognises that threats of copyright infringement may cause significant harm even when the person making the threats does not have a sound basis for them and has no intention of issuing proceedings. It has never been clear whether Section 202 means that an action for justified threats must succeed unless the person making the threat proves copyright infringement, or whether the person making the threat can defend the case by showing that the threat was not unjustified, even though no copyright infringement was committed. Although s.202 states that the person aggrieved “may” recover damages, this does not necessarily imply that that court has a discretion to refuse this relief; in some cases the use of the word “may” in a statute indicates that a power has been conferred which must be exercised in certain circumstances. Declaration and injunction, unlike damages, are always discretionary remedies.
In Telstra Corporation Ltd v Phone Directories Company Pty Ltd  FCA 568, the Federal Court held that grounds other than infringement could be relied on. Telstra sent its letters of demand to Phone Directories Company in 2006. In 2002, the full Federal Court had held in Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd  55 IPRA 1 that copyright subsisted in Telstra’s Yellow and White Pages directories. However, three years after threats were made, the High Court in Ice TV Pty Ltd v Nine Network Australia Pty Ltd  239 CLR 450 interpreted the law concerning subsistence of copyright in a way inconsistent with the 2002 Telstra case, and indicated that the Telstra case might not be good law. As a result, Telstra’s copyright infringement case against Phone Directories Company failed.
Where did this leave Phone Directories Company’s groundless threats case? Telstra conceded that having acted in good faith in making the threats did not amount to a defence. Murphy J held that because Telstra’s threat of copyright infringement was based on strong Full Court authority, it was not, objectively considered, groundless. He considered that this was consistent with the purpose of s202, which was deterring threats which were “abuse” of the copyright regime or a “threat in the air”, and not deterrence of threats which, despite being objectively reasonable, were ultimately unsuccessful.
This case illustrates a policy dilemma resulting from the retrospective nature of the common law. It is not obvious why the loss resulting from threats made in reliance on case law which is overturned should be borne by the person affected by the threat rather than the person making it, particularly when the loss results from threats made to third parties.
There are similar provisions in the Patents Act 1990 and the Circuit Layouts Act 1989, but the Trade Marks Act 1995, provides an additional defence if a trade mark owner begins and pursues an action against the threatened person for infringement of the trade mark with due diligence.