IP Australia announced on 10 May 2012 that changes to official fees for Australian patents, trade marks, designs and plant breeders rights will become effective in most cases from 1 July 2012, although new application filing fees will not change until 1 October 2012. Details of the new fee structures can be found at:

• IP Australia > Patents > Fees
• IP Australia > Trade Marks > Fees
• IP Australia > Designs > Fees
• IP Australia > Plant breeders rights > Fees

A significant change included within the new patent fee schedule is that the first continuation fee payment in respect of patent applications with a date of patent (international application filing date, Australian filing date for non-PCT applications or divisional parent filing date) on or after 1 July 2008 will be due 4 years from the date of patent instead of the current 5 years.

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16

On 20 April, the High Court of Australia delivered a long awaited judgment to finally determine the four year copyright dispute between internet service provider (ISP) iiNet, and 34 Australian and United States movie studios. The High Court unanimously held that iiNet did not authorise the infringement by its customers of the copyright in films and television programmes owned or exclusively licensed by the Australian and United States movie studios. All avenues of appeal are now exhausted.

This decision follows last year’s judgment by the Full Federal Court, which also found in favour of iiNet. The High Court held, as did the Full Federal Court, that iiNet had no direct power to prevent its customers from infringing the copyright in the studios’ films by making the films available online using the BitTorrent file sharing system. Furthermore, the High Court held that it was not reasonable to expect iiNet to take action (such as issuing warnings, suspending or terminating internet accounts) against individual infringers, despite the Australian Federation Against Copyright Theft (AFACT), on behalf of the studios, sending infringement notices to iiNet on a weekly basis for 12 months.

This decision illustrates the difficulty facing copyright holders trying to enforce their rights in the current online environment.

Background: iiNet and AFACT

iiNet provides internet access to its customers under the terms of its Customer Relationship Agreement (CRA) which contains a provision that states that the customer must not use the service to commit an offence or infringe another person’s rights. Furthermore, the CRA provides that where the customer breaches a term of the CRA, or where iiNet suspects illegal conduct by the customer, iiNet can restrict, suspend or cancel the provision of internet access.

In July 2008, the AFACT (an organisation which represents copyright owners and licensees, including the appellants in this case) started to send iiNet letters, notifying iiNet of alleged infringements of the studios’ copyright by its customers and requesting that iiNet take action to prevent further infringements from occurring (“the infringement notices”). From July 2008 to August 2009, AFACT sent infringement notices to iiNet on a weekly basis. The infringement notices included the time and date of the alleged infringements, the films in question, the names of the owners or exclusive licensees of the copyright and the IP addresses of the alleged infringers.

iiNet challenged the infringement notices on the basis that they did not enable iiNet to identify the infringing customers. iiNet claimed that it did not recognise some of the IP addresses, and in any event an IP address was not synonymous with an individual customer, as it might correspond to a shared computer at a school, internet cafè or “wi-fi hotspot”. Furthermore, the infringement notices failed to reveal the methodology which AFACT had employed to obtain the information about the infringements.

iiNet did not take any action in response to the infringement notices against any of its customers, and the movie studios subsequently brought action against iiNet, alleging that its failure to take action constituted authorisation of copyright infringement by its customers.

Authorisation of copyright infringement

Under section 101(1) of the Copyright Act 1968, a party who is found to have authorised copyright infringement is taken to have committed the infringement itself. In determining whether or not a party has authorised copyright infringement the Court takes into account the following matters¹:

• the extent (if any) of the party’s power to prevent the infringing acts;
• the nature of the relationship between the party and the party who carried out the infringing acts; and
• whether the party took reasonable steps to prevent the infringing acts, including whether the party complied with any relevant industry codes of practice.

iiNet found not to have authorised copyright infringement

The High Court’s finding on whether or not iiNet had authorised copyright infringement by its customers turned on two pivotal questions:

1. did iiNet have a power to prevent its customers from infringing the studios’ copyright, and if so, what was the extent of that power? and
2. was it reasonable to require iiNet to take steps to prevent those infringements by issuing warnings, suspending or terminating customers' accounts?

The movie studios relied on the judgment of Justice Gibbs in University of New South Wales v Moorhouse (“Moorhouse”)² and equated “control”³ with the “power to prevent” as referred to in section 101(1A) of the Copyright Act. The studios submitted that iiNet’s technical and contractual relationship with its customers gave it the indirect power to control the use of its service, and therefore prevent the infringements. Upon receiving notice of the infringements by AFACT, the studios contended that the failure of iiNet to take action to prevent the infringements from continuing, and to enforce the terms of the CRA amounted to “authorisation”.⁴

1) Did iiNet have the power to prevent the copyright infringements?

The High Court (consisting of Chief Justice French and Justices Crennan, Kiefel, Gummow and Hayne) found that iiNet had no direct power to prevent the infringing activity as it had no connection with, or control over, the BitTorrent System. Rather, iiNet through the provision of internet access to its customers had an indirect power to prevent the infringements which was limited to suspending or terminating a customer’s account. In emphasising the extent of iiNet’s limited power to prevent further infringements from occurring, Chief Justice French and Justices Crennan and Kiefel noted that upon termination of a customer’s account, the customer could simply engage another ISP and re-commence the infringing conduct.⁵

2) In the circumstances was it reasonable for iiNet to issue warnings, suspend or terminate a customer’s account?

In assessing whether iiNet took reasonable steps to prevent the infringements, given its indirect power to do so, the Court took into account the nature of the internet, the BitTorrent system, and the absence of any industry code of practice adhered to by all of the ISPs.⁶

The High Court found that iiNet’s inactivity after receiving notice from AFACT of its customers’ infringements did not give rise to authorisation of copyright infringement. This was because the information contained in the infringement notices was insufficient to give iiNet a proper basis for sending warning notices to its customers containing threats to suspend or terminate their accounts.⁷

Chief Justice French and Justices Crennan and Kiefel accepted iiNet’s submission that its inactivity was not “indifference” as to the movie studios’ rights but was based on its assessment of the risks involved (i.e. the risk of liability for wrongly terminating a customer’s account) in taking action based on the information provided by AFACT.⁸ Had AFACT provided full disclosure of the methods that it had employed to obtain the information about the infringements contained in the infringement notices (which was only disclosed by the provision of expert evidence during the preparation of the case for trial), the result may have been different.

Similarly, Justices Gummow and Hayne did not consider it unreasonable for iiNet not to act upon the “incomplete allegations” of copyright infringement contained in the infringement notices without first taking investigative action to substantiate the claims. The judges held that iiNet was not required to undertake such investigations at a cost to itself, and nor does the Copyright Act impose such an obligation.

Infringement notices – what is adequate?

Whilst the High Court held that the information provided by AFACT in its infringement notices was insufficient to require iiNet to take action, the Court did not indicate what additional information might have been required in order to support a finding of authorisation. However, in the earlier Full Federal Court decision,¹⁰ Justice Emmett outlined the steps that he considered a copyright owner would need to take before an ISP’s failure to respond to an infringement notice would amount to authorisation. These were:¹¹

• the copyright owner would need to provide unequivocal and cogent evidence of the alleged acts of copyright infringement. Information about the way in which the material supporting the allegations was derived, which would be adequate to enable the ISP to verify the accuracy of the allegations, may suffice; and
• the copyright owner would also have to undertake to:
• reimburse the ISP for the reasonable costs to verify the allegations of infringement and of establishing and maintaining a system to monitor whether further acts of infringement occur; and
• indemnify the ISP in respect of any liability incurred as a result of mistakenly suspending or terminating an internet account on the basis of allegations made by the copyright owner.

As the High Court did not explicitly endorse nor reject this approach, it remains to be seen whether the provision of additional information (specifically, the methodology employed to track the infringements) and the undertakings by a copyright owner to an ISP would be sufficient to support a finding of authorisation, if the ISP failed to act. However, the comments of the High Court Judges seem to suggest that a similar process may be acceptable.

What’s next: legislative reform or an industry code of practice?

In their concluding remarks, Chief Justice French and Justices Crennan and Kiefel emphasised that “the concept and the principles of the statutory tort of authorisation of copyright infringement are not readily suited to enforcing the rights of copyright owners in respect of widespread infringements occasioned by peer-to-peer file sharing, as occurs with the BitTorrent system”.¹² To address the infringements, the High Court noted their preference for a legislative approach that would most likely include an industry code of practice, which may or may not require judicial involvement to terminate an internet account, and which may provide for the sharing of enforcement costs between copyright owners and ISPs.

Given the Judges’ comments, any industry code of practice would presumably include a set of guidelines outlining the information that is to be provided in an infringement notice, and also address who bears the cost (either copyright owners or ISPs or both) of verifying the allegations of infringement and on-going monitoring.

For the past six months, the Commonwealth Attorney-General’s Department has been facilitating discussions between Australian ISPs, copyright owners and organisations such as AFACT and the Communications Alliance, to develop a voluntary industry code of practice to tackle online infringement. Thus far, ISPs and rights holders have failed to reach agreement, and following the High Court’s decision, iiNet CEO, Michael Malone, has threatened to “walk away” from negotiations altogether.

Last year, New Zealand introduced a “three strikes” policy where upon notification from a copyright owner, an ISP will send up to three warnings to an infringer before a possible fine of up to NZ$15,000. An alliance of ISPs proposed a similar “five strikes” policy in Australia late last year, which would have seen infringers being sent a series of education and warning notices, rather than being punished through disconnection from the internet or fines. Rights holders rejected such a scheme.

The High Court’s decision may now serve as a catalyst for further negotiations and compromise. However, if a stalemate continues between Australian ISPs and copyright owners, the Government may need to consider mandating a code of practice through legislation. Notwithstanding this, the Government has expressed its preference for an “industry-led” solution to the problem.

Endnotes

1. Section 101(1A) of the Copyright Act 1968.
2. (1975) 133 CLR 1.
3. Ibid at 13.
4. Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16 at 58.
5. Ibid at 73.
6. Ibid at 71.
7. Ibid at 78.
8. Ibid at 76.
9. Ibid at 146.
10. Roadshow Films Pty Ltd v iiNet Ltd (2011) 194 FCR 285.
11. Ibid at 257.
12. Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16 at 79.

TiVo Inc v Vivo International Corporation Pty Ltd [2012] FCA 252

In a decision that canvasses and helpfully clarifies many important aspects of Australian trade mark law - from deceptive similarity, reputation and honest concurrent use to infringement and removal for non-use - Justice Dodds-Streeton of the Federal Court of Australia has concluded that the Vivo trade mark used by a manufacturer on televisions and other audio visual products was likely to deceive or cause confusion as a result of the prior trade mark registration of well known personal video recorder manufacturer, TiVo, and should therefore be cancelled.

Davies Collison Cave Law acted for TiVo in the proceeding.

The TiVo and Vivo trade marks

In 1999, TiVo filed a trade mark application for the word mark TIVO in respect of computer hardware and software, televisions, and other related products and services.

An application to register the Vivo device (depicted below) as a trade mark in respect of "apparatus for use in audio visual communication" and the service of "transmission of data by audio-visual apparatus" was filed by the second Respondent, Fabio Grassia on behalf of his company, Vivo International Corporation in 2008. The application was made after Mr Grassia decided to import and sell audio visual products under the name "Vivo" in 2006.

The proceedings

In January 2011, TiVo commenced action against Vivo seeking an injunction restraining Vivo from infringing the TiVo trade mark.

As, at the time of TiVo's application, the Vivo mark was registered in Australia, in order to be entitled to injunctive relief, TiVo first had to show that the Vivo mark should be cancelled.

Accordingly, TiVo argued that the Vivo mark should be cancelled because:

1. it was deceptively similar to the TiVo mark (sections 44(1) and 44 (2), 88 (2) (a) and 88 (2) (c) of the Trade Marks Act), and neither honest concurrent use (section 44 (3) (a)) nor other circumstances warranted the maintenance of the mark on the register could be established (section 44 (3) (b)); or
2. TiVo's reputation was such that the use of the Vivo mark would be likely to deceive or cause confusion (sections 60 and 88 (2) (a) of the Trade Marks Act)

In addition to dealing with these questions, the Court was also required to determine whether:

3. The TiVo's trade mark should be removed for non-use in respect of televisions? (section 92 (3) of the Trade Marks Act); and
4. Vivo and / or Mr Grassia would infringe the TiVo trade mark by selling televisions, set top boxes and other audio visual equipment bearing the mark "Vivo" if the Vivo trade mark is removed from the Register of Trade Marks.

1. Should the Vivo mark be cancelled because it is deceptively similar to the TiVo mark?

The Vivo mark would be cancelled if:

• there was a real likelihood that a significant number of ordinary persons would be caused to wonder or to entertain a reasonable doubt as to whether TiVo and Vivo products and services came from the same source (the issue of deceptive similarity); and
• the Vivo mark was registered in respect of similar goods or closely related services as that of the TiVo mark.

The issue of deceptive similarity

The Court identified the following legal principles applicable to this issue:

• all surrounding circumstances must be taken into account, including the fact that people often do not read words carefully and do not pronounce them distinctly, the nature of the goods in question, how the products would be purchased and used in trade and the imperfect recollection of consumers;
• the "legitimate notional scope of the registration"¹ should be considered. Matters such as quality and price differentials between the competing trade mark owners' goods or services are largely irrelevant to the question of deceptive similarity;
• The Court must consider the "first impression of a consumer who has an imperfect recollection of only one mark and who does not know of the other";²
• marks may be deceptively similar even though the confusion is unlikely to persist up to the point of and induce the sale of the products bearing the marks.

The Court's findings on the issue of deceptive similarity

Applying this approach, Justice Dodds-Streeton found that there was a likelihood of confusion as:

• both marks included an essential, dominant and distinguishing –IVO component, which invited "attention to sound as well as sight";³
• there was marked aural similarity between the marks: TiVo would be pronounced "tee voh", and Vivo, "vee voh";
• Vivo did not have any widely understood meaning which, as an "aide memoire", would reduce the likelihood of confusion;
• there was unchallenged evidence of actual confusion among persons selling the relevant products to consumers; and
• the evidence indicated that Mr Grassia adopted the Vivo mark as a result of his awareness of TiVo and his intention to benefit from the reputation of the TiVo mark. In this respect, Justice Dodds-Streeton explained:

whether the applicant adopted the trade mark in order to derive benefit from the reputation of the cited mark is relevant to whether the applicant's trade mark is deceptively similar, because such motivation is like "expert evidence" of that tendency….⁴

Was the Vivo mark registered in respect of similar goods to the TiVo mark?

The Court considered that the goods in respect of which the Vivo mark was registered (audio-visual products) were similar to the goods in respect of which the TiVo mark was registered (which could be generally described as computer hardware or software) as the products:

• are of a similar nature, manufacturing, origin and purpose;
• are sold in close proximity to each other in the same type of retail stores; and
• all fall within the "audio-visual" product category and are known as "brown goods".

The finding was supported by product convergence within the audio-visual product category.

On a similar basis, the Court found that the services in respect of which the Vivo mark was registered were also similar to the services, or closely related to the goods in respect of which the TiVo mark was registered.

Honest concurrent use and the court's discretion

Despite finding that the Vivo mark was deceptively similar to the TiVo mark, and that they were registered in respect of similar goods, the Court noted that it could permit the Vivo mark to remain on the register if the Respondents could establish "honest concurrent use" or "other circumstances" warranting the maintenance of the mark on the register.

In support of his case of honest concurrent use, Mr Grassia vehemently maintained that when he decided on the name Vivo in around May 2006, he had not heard of the TiVo brand name or its products.

Justice Dodds-Streeton did not accept this evidence, finding that the Respondents failed to establish honest concurrent use of the Vivo trade mark as:

• Mr Grassia's various accounts of the selection of the name "Vivo" were "remarkably inconsistent";⁵
• the list of possible names for Mr Grassia's company included the name "Vivolution". TiVo had marketed its products with reference to the word "TiVolution" and had previously filed a trade mark application for that mark. Mr Grassia did not adequately explain the presence of this word in his list of possible brand names which he filed as evidence.
• Mr Grassia's website contained the phrase "vivo the revolution" at around the same time that advertisements for "TiVo the revolution" were published or broadcast; and
• it was implausible that Mr Grassia had not heard of TiVo in circumstances where he had dealt with audio visual products for over 20 years, and prior to the filing of the Vivo trade mark in 2008, hundreds of references to TiVo were made in Australian print media, on television and in movies.

The Court also found that there were no "other circumstances" that warranted it exercising its discretion to allow the Vivo trade mark to remain on the trade marks register.

2. Should the Vivo mark be removed because the reputation of the TiVo mark was such that the use of Vivo would cause confusion?

TiVo argued that the Vivo trade mark should be removed because the TiVo mark had acquired a reputation in Australia before the filing date of the application to register the Vivo mark and, because of its reputation, the use of the Vivo mark would be likely to deceive or cause confusion.

The Court acknowledged that this ground of opposition required a comparison between use of the Vivo mark on the one hand, and the TiVo mark's reputation on the other.

Reputation – Legal Principles

• The nature and extent of the reputation required in the context of an opposition under section 60 is unclear.
• The Full Court in Austin Nichols recently described reputation as "recognition of the mark by the public generally".
• In obiter, Justice Dodds-Streeton helpfully provided the following guidance:⁶

I observe…that the requirement under s 60 that the reputation be such as to cause a likelihood of deception or confusion appears implicitly, at least, to require its existence amongst members of the public sufficient, or with characteristics apt to achieve that effect in a particular case. If, for example, the mark’s reputation is confined to a narrow group of sophisticated users…but the class of consumers of the relevant goods is wide, it may be difficult to show a likelihood that the reputation is such that the use of the opposed mark will cause confusion, either because only a minimal number of persons might be confused, or because the character of the group is such that confusion is, in any event, unlikely. On the other hand, if the trade mark in question were used in relation to goods or services commonly consumed only by specialised groups, it would be inappropriate to require a reputation amongst a substantial number of members of the Australian public generally.

• Reputation may be established in a number of different ways, most commonly, by evidence of sales of products bearing the mark and direct advertising featuring the mark.
• However, it may also be established through indirect advertising, and exposure of the mark in radio, film, newspapers, magazines and television.
• Evidence of a brand's reputation outside Australia will only be relevant if it is demonstrated that the overseas reputation is recognised in Australia.

TiVo's reputation

To establish its mark's reputation in Australia prior to the filing date of the Vivo trade mark application, TiVo relied upon:

• references to TiVo in widely circulated newspapers and magazines together with evidence showing the sales of each relevant publication (this evidence showed that close to 86 million copies of newspapers and magazines featuring at least one reference to TiVo were sold prior to the filing of the Vivo trade mark application);
• references to TiVo in popular television shows and movies, including viewership details from OzTAM (the official source of Australian television ratings);
• reference to TiVo in Australian online technology news websites and communities; and
• use of the TiVo products by Australian "TiVo enthusiasts".

Based upon this evidence, Her Honour concluded that the TiVo mark had the level of reputation required for the purposes of section 60, concluding that:

the cumulative circulation of references, descriptions and expositions of TiVo in the various media increasingly over the course of the last decade amounted to a total exposure on an enormous scale.⁷

For the reasons discussed in part 1, Her Honour found that the nature of the TiVo mark's reputation was such that it was likely that the use of the Vivo trade mark in respect of its registered goods was likely to deceive or cause confusion.

3. Removal of the TiVo mark in respect of TVs for non-use

TiVo conceded that it had not used its mark in respect of TVs for the relevant three year period prescribed by section 92(4)(b) of the Trade Marks Act, and asked the court to exercise its discretion under section 101(3) to not excise televisions from its trade mark registration.

Justice Dodds-Streeton was prepared to exercise her discretion because:

• TiVo had used its mark in respect of goods which are similar to TVs (such as DVRs and remotes) and services which are closely related to TVs (such as television electronic programming guides);
• public confusion was likely to ensue if the mark was removed in respect of televisions, and an unrelated company commenced selling a "TiVo" branded TV. Her Honour explained:

whilst TiVo has not used the TiVo trade mark for the requisite period, the excision of televisions from TiVo's registration would, particularly in the context of converging functionality, create a potential for fragmented ownership of deceptively similar goods, with a concomitant likelihood of confusion.⁸

• TiVo had not abandoned the mark in respect of TVs – as of 31 July 2011, TiVo started to sell a TV integrating the TiVo interface in the USA, and planned to bring the TV to Australia in the future; and
• Vivo entered the market without taking sufficient steps to ascertain whether anyone else was using a deceptively similar mark.

4. Infringement of the TiVo mark

Justice Dodds-Streeton found that it flowed from her findings in relation to deceptive similarity and confusion referred to above that once the Vivo mark was removed, use of the name Vivo in respect of televisions, home theatre systems, computer monitors, digital photo frames, portable DVD players, remote controls and set top boxes would infringe the TiVo trade mark.

Lessons for brand owners

1. Always check the Trade Marks Register for prior registered marks and conduct broad searches before developing a new brand name, logo, slogan or other mark.
2. The aural similarity of two trade marks can play a key role in an assessment of deceptive similarity.
3. In assessing the aural similarity of two words, it must be kept in mind that consumers have an imperfect recollection, and do not always pronounce words precisely.
4. Product convergence (especially in the audio-visual product category) must be considered in assessing whether goods are similar for the purposes of the Trade Marks Act.
5. The fact that a person has chosen a mark to trade off the reputation of another mark might suggest that the marks in question are deceptively similar.
6. A trade mark's reputation may be legitimately proven in a number of ways, including by adducing evidence of indirect references to the trade mark in print media, on television and in movies.
7. A court will be reluctant to remove a trade mark for non-use in respect of a particular good, if it can be shown that the mark has been used in relation to closely related goods, such that the removal would be likely to cause confusion.

On 5 April 2012, Vivo filed appeal papers.

Endnotes

1. Vivo v Tivo at [107]
2. Tivo v Vivo at [178]
3. Tivo v Vivo at [118]
4. Tivo v Vivo at [242]
5. Tivo v Vivo at [252]
6. Tivo v Vivo at [324]
7. Tivo v Vivo at [440]
8. Tivo v Vivo at [498]

ACCC v Google Inc [2012] FCAFC 49

The Full Federal Court has unanimously held that search giant Google engaged in ‘misleading and deceptive conduct’ in contravention of Australian consumer protection laws by publishing advertisements headlined with the name or trade mark of an advertiser's competitor, in circumstances where users clicking on the advertisement were taken to the advertiser’s website which contained no information about the competitor.

The Full Court has held that consumers would think that Google (in addition to the advertiser) was in some way responsible for the misleading “sponsored link” advertisements appearing in the search result, not that Google was just a mere conduit for the information supplied by the advertiser. This was despite Google's attempts to limit its liability in the terms and conditions for its AdWords advertising program.

As a result aggrieved brand owners now have recourse against an advertiser and in certain circumstances, directly against Google.

At first instance: Google was considered a "mere conduit" of the misrepresentations

The Full Federal Court was considering whether Google was liable for making misleading and deceptive representations contained in four sponsored links. Under section 52 of the Trade Practices Act 1974 (Cth) (now section 18 of the Australian Consumer Law) a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. It is also a contravention of s53 of the Trade Practices Act (now section 29 of the Australian Consumer Law) to make false or misleading representations regarding commercial association or affiliation.

An example of one of the sponsored links at issue, and which was returned in response to searches for "Harvey World Travel" or "Harvey Travel" is below:.

Harvey World Travel
www.statravel.com.au
Unbeatable deals on flights, Hotels & Pkg’s Search, Book & Pack Now!

When the users clicked on the URL or the headline they were taken to the STA Travel website (a competitor of Harvey World Travel) at which there was no information available regarding Harvey World Travel.

At first instance Justice Nicholas held that the advertisers responsible for the four sponsored links had each misrepresented that they had some commercial association or affiliation with the competitor whose trading name was featured in the headline of the sponsored link. However, he held that in each instance, the advertiser and not Google had made the misrepresentation contained in the sponsored link.

Although Google provided the technical facilities (including the keyword insertion facility whereby the competitor’s name was automatically inserted into the headline of the sponsored link) and Google staff had some involvement and input in creating the sponsored links, Justice Nicholas held that Google had merely communicated the advertisement and had not endorsed or adopted the information conveyed in the advertisement.

On appeal: was Google directly responsible for the misrepresentations?

However, on appeal the Full Federal Court unanimously held that Google had made the misrepresentations contained in four sponsored links and hence engaged in misleading and deceptive conduct. According to the Full Court:

87. No user of Google’s search engine presented by Google with a sponsored link in response to a search query would regard the sponsored link displayed by Google with a clickable link to the sponsor’s URL as conveying the message that the sponsored link is a statement by an advertiser which Google is merely passing on. What appears on Google’s webpage is Google’s response to the user’s query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google’s response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google. Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth. In those circumstances, it is an error to conclude that Google has not engaged in the conduct of publishing the sponsored links because it has not adopted or endorsed the message conveyed by its response to the user’s query. (Emphasis added).

The specific conduct that was said to be misleading and deceptive was Google’s:

88…. display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL. (Emphasis added).

The Full Court concluded that “an ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search. Even if all these circumstances would not be apparent to ordinary and reasonable users, so that Google could not be “seen” by them to be more than a mere conduit, these circumstances show that Google is, in fact, much more than a mere conduit” (emphasis added).

Thus Google (as well as the advertisers) was held directly liable for the misrepresentation made as to commercial association between the advertiser and the competitor whose name featured in the headline of the sponsored link. In each case the intermediary’s conduct, in this case that of Google, needs to be considered as a whole to determine if the intermediary is merely a conduit passing on information. The Full Federal Court’s decision does not disturb Justice Nicholas’ findings that the advertisers themselves were directly liable for the misrepresentations.

Google was ordered to implement a trade practices compliance program and ordered to pay the costs of trial in relation to the four sponsored links the subject of the appeal and the costs of the appeal.

Special leave to appeal to High Court

According to media reports, Google is seeking special leave to appeal to the High Court. Leave to the High Court is not automatically granted.

Google's liability in Europe and the United States

The Full Court’s finding that Google is liable for the content of advertiser’s sponsored links in Australia is to be contrasted with the position in Europe and the United States where Google has not been held liable (under the trade mark laws in those jurisdictions).

Lessons for brand owners

As a result of the decision, brand owners now have the option of taking action against the sponsored link advertiser or directly against Google.

1-800-FlowersCom, Inc v Registrar of Trade Marks [2012] FCA 209

A recent Federal Court decision has confirmed that the Registrar of Trade Marks has broad powers under the Trade Marks Act 1995 (the TMA) to revoke acceptance of a trade mark application and provides guidance on what factors are relevant in exercising that power. The case also demonstrates reluctance on the part of the Federal Court to intervene with the Registrar's power under the relevant section (section 38) of the TMA.

In this case, the Registrar ordered that acceptance of two applications for registration filed by the Applicant, 1-800-FlowersCom, Inc ("1-800-Flowers") be revoked and re-examined. There is no right of Appeal from the decision of a Registrar to revoke acceptance under section 38 but rather than abide by the outcome of the re-examination, 1-800-Flowers applied to the Federal Court under the Administrative Decisions (Judicial Review) Act 1997 (Cth) ("the ADJA Act") seeking orders quashing the Registrar's decision and directing the Registrar to refrain from taking any steps to implement it.

Complaint by Flowerscorp Pty Ltd

In early December 2010, 1-800-Flowers applied to register two composite marks consisting of the numerals and words 1-800-FLOWERS.COM and incorporating a stylised image of a tulip:

(the "1800 FLOWERS.COM Marks")

Via the Trade Mark Headstart service, the Registrar confirmed that the 1800 FLOWERS.COM Marks would be accepted. However, in February 2011, after the 1800 FLOWERS.COM Marks had been accepted, the solicitors for a third party, Flowerscorp Pty Ltd wrote to the Registrar complaining that the applications had been accepted without raising any citations based on earlier filed trade marks owned by Flowerscorp which included the numerals and words 1300 FLOWERS, examples of which include:

Flowerscorp's main complaint was that acceptance of the 1800 FLOWERS.COM Marks was inconsistent with examination of its own recently filed applications. 1-800-Flowers was the owner of a prior registration for the composite mark 1-800-FLOWERS.COM & tulip logo (the Prior Tulip Mark) (for a narrower range of goods than the current application). Between November 2008 and February 2010, Flowerscorp had applied to register nine trade marks bearing the name 1300 FLOWERS ("the 1300 FLOWERS marks") and Flowerscorp's Prior Tulip Mark had been cited against acceptance of all of these applications.

As a result of Flowercorp's complaint, a Hearing was conducted before a delegate of the Registrar and at the Hearing the delegate decided to revoke acceptance of the 1800 FLOWERS.COM Marks under section 38 of the TMA. Section 38 provides the Registrar with power to revoke acceptance for registration of a trade mark application when satisfied it is reasonable to do so, taking into account of all the circumstances. The primary reason for revoking acceptance was that the Examiner failed to identify the 1300 FLOWERS marks.

Grounds for judicial review of the Registrar’s decision to revoke acceptance

1-800-Flowers claimed that the Registrar's decision was an improper exercise of its power because:

1. The Registrar failed to take into account relevant considerations.
2. The decision was unreasonable.

1-800-Flowers also claimed that the Registrar identified a wrong issue which affected the purported exercise of power under section 38 and amounted to an error of law.

1. Was there a failure to take into account relevant considerations?

1-800-Flowers argued that the delegate had failed to take into account the Prior Tulip Mark and another prior registration (which also featured 1-800-FLOWERS), which were substantially identical or deceptively similar to the 1800 FLOWERS.COM Marks. However, the Federal Court found that an administrative decision maker was not required to consider every piece of relevant evidence. Moreover, the delegate did refer to the two prior marks (albeit not as the basis for finding that the applications should not have been accepted).

1-800-Flowers also argued that the delegate fell into error because once he formed the view that the 1800 FLOWERS.COM Marks were deceptively similar with the 1300 FLOWERS marks, he should have notified 1-800-Flowers and asked for evidence or submissions going to the issues under section 44(3) and (4) of the TMA. However, the Federal Court found it was not appropriate for the Examiner to consider matters under section 44 in determining whether to revoke acceptance of an application under section 38. The delegate's focus was with error in the examination process. That is, "the delegate was not considering whether or not the applications for registration should be rejected, but whether there was an error in accepting them." Interestingly, the Federal Court also found in evidence that at the Hearing, the representative for 1-800-Flowers made a forensic choice not to address the delegate on the question of section 44.

In its reasoning, the Federal Court reviewed the explanatory memorandum for the Intellectual Property Laws Amendment Act 2006 (Cth) (which amended section 38) and found that Parliament did not intend to require the Registrar to take into account the matters relied upon by 1-800-Flowers or the matters referred to in subsections 44(3) and (4). The Court found support in this view on the basis that the effect of the delegate's decision was to trigger a whole new examination process where all of these relevant circumstances can be considered.

2. Was a decision so unreasonable that no reasonable person could make it?

1-800-Flowers argued that the delegate's decision under section 38 was on the premise that the 1300 FLOWERS marks were deceptively similar to the 1800 FLOWERS.COM Marks. As a matter of logic, all of the 1300 FLOWERS marks should not be registered in the face of the Prior Tulip Mark. In this case, there would be no obstacles to registration of the 1800 FLOWERS.COM Marks. However, the Federal Court noted that a trade mark may be accepted for registration even if it is substantially identical with or deceptively similar to a registered trade mark and in any case, the delegate did not make any findings about whether or not Flowerscorp's marks should be registered. Moreover, it was reasonable for the delegate to consider the prior 1300 FLOWERS marks. The delegate's task "was to inquire into the decision of the Examiner to accept for registration the two 1800 FLOWERS.COM Marks."

Did the delegate identify the wrong issue?

1-800-Flowers argued that the delegate had found its Prior Tulip Mark had been registered in error and that it was irrelevant for him to take into account this error. However, the Federal Court found there was nothing to indicate the delegate had come to this view and even if it did, it wasn't an irrelevant consideration. The Court noted that the discretion under section 38 "is unconfined in its terms."

Reluctance to intervene in Registrar's power

Section 16(1) of the ADJA Act gives the Federal Court the discretion to make no order at all, even if the grounds of review are made out. Whilst it was strictly unnecessary for the Federal Court to deal with this question, in passing comment, the Federal Court nevertheless said it would have exercised the discretion to refuse relief. This was because the Federal Court considered a decision made by the Registrar was not determinative of the Applicant's rights. The effect of the Registrar's decision was to require the applications to be examined afresh. At this point, the Applicant's concerns could be put before the Examiner. If the application was rejected, the Applicant still then had the right to an appeal which in its nature was a hearing de novo.

Lessons for trade mark owners

This case confirms that the Registrar has a wide power to revoke acceptance under section 38 of the TMA but that there are some matters which are not appropriate to be considered in the exercise of this discretion, notably matters relevant to determining acceptance of applications under sections 44(3) and (4). On the one hand, the comments of the Federal Court indicate a clear unwillingness to intervene in the Registrar's discretion. However, this is probably because the power to revoke is not determinative of substantive issues surrounding acceptance of a trade mark. From a practical perspective, the decision confirms that requesting the Registrar exercise its discretion and revoke acceptance under section 38 can be a valuable tactical tool employed by a potential opponent.

The Therapeutic Goods Administration has released a draft report which seeks to clarify the evidence required to support claimed therapeutic indications of listed medicines in Australia.

TGA evidence requirements clarified

The draft report entitled "Evidence required to support indications for listed medicines", seeks to clarify the types, quality and quantity of evidence required to support claimed therapeutic indications of low risk non-registrable therapeutic goods (including most over-the-counter medicines and complementary medicines). Pursuant to the proposals, to secure an indication for a listed medicine in Australia, a sponsor must, amongst other things, substantiate the claimed indication by providing the TGA with an objective expert report that "contains a comprehensive analysis of the data relating to the proposed listable indication".

Submissions due by 25 May

The TGA's proposals are open for public consultation until 25 May 2012. Following this initial consultation period, the TGA will review submissions made by interested parties, and post its responses to the submissions on its website, with a view to publishing a revised report by July 2012.

The proposed reforms have arisen from recent reviews of the therapeutic goods regulatory regime in Australia, and the Australian Government's response paper which was released in December 2011. The TGA intends that the revised report will replace the current "Guidelines for Levels and Kinds of Evidence to Support Indications and Claims for Non-Registrable Medicines, including Complementary Medicines and other Listable Medicines", and be given legal effect through inclusion in the Therapeutic Goods Regulations.

National Rugby League Investments Pty Limited v Singtel Optus Pty Ltd [2012] FCAFC 59

The Federal Court of Australia has this morning handed down an eagerly awaited judgment concerning Optus’ cloud-based recording service, TV Now. The Full Federal Court has unanimously overturned Justice Rares’ decision, and found in favour of the National Rugby League (NRL), the Australian Football League (AFL) and Telstra. The Court held that Optus’ TV Now service infringed the copyright in the live broadcasts of NRL and AFL games, by finding that Optus was jointly responsible for making the recordings, and that the section 111 “time-shifting” exception to copyright infringement did not apply.

Sporting leagues have welcomed this morning’s decision by the Full Federal Court, following concerns that Justice Rares’ earlier decision might have impacted upon the value of online and mobile phone broadcast rights for major sporting events.

Optus TV Now won at first instance

In February this year, Justice Rares of the Federal Court found that Optus TV Now did not infringe the copyright in the live NRL and AFL broadcasts. In coming to this conclusion, His Honour considered the TV Now service to be “substantively no different from a VCR or DVR”¹, and found that the subscriber to the service, and not Optus, was responsible for making the recording of the broadcast. Accordingly, the permitted exception to copyright infringement contained in section 111 of the Copyright Act 1968 applied to the subscriber’s conduct. Section 111 of the Copyright Act permits a person to make a recording of a broadcast if it is for their private and domestic use, for the purpose of watching it at a more convenient time (this is known as the “time-shifting” exception).

On appeal: Optus TV was found to have infringed copyright

Optus and the subscriber made the recordings

The fundamental issue of the case was who was responsible for making the recording of the broadcast: Optus, the subscriber or both.

The Full Federal Court (consisting of Justices Finn, Emmett and Bennett) rejected Justice Rares’ finding that the subscriber made the recording, and preferred the view that both Optus and the subscriber, acting in concert, were the makers of the recording.²   The subscriber was found to have instigated the copying by pressing the “record” button, but Optus gave effect to it.

The Court considered Optus to be “manifestly involved” in the copying process as it designed and maintained the system to make the recordings. In its judgment, the Court noted that “Optus [was] not merely making available its system to another who uses it to copy a broadcast. Rather it captures, copies, stores and makes available for reward, a programme for later viewing by another”.³

The section 111 “time shifting” exception did not apply to Optus

Section 111 of the Copyright Act applies to private and domestic use, and encompasses recording broadcasts, and watching recorded broadcasts inside and outside of a person’s home. However, the Court found that “there is nothing in the language ... of s 111 to suggest that it was intended to cover commercial copying on behalf of individuals”.⁴   The Court held that Optus made the recordings for a commercial purpose to make a profit and as such it could not rely on section 111.

What’s next for Optus?

In light of this decision, Optus has suspended the provision of its TV Now service. It now has 21 days to decide whether it will apply for special leave to appeal to the High Court.

The effectiveness of the Copyright Act in the current online environment (including the effectiveness of the “time-shifting” exception) is also currently under review by the Australian Law Reform Commission (ALRC). Submissions and comments on the draft terms of reference closed today, 27 April 2012.

Endnotes

1. Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No.2) [2012] FCA 34 at [63].
2. National Rugby League Investments Pty Limited v Singtel Optus Pty Ltd [2012] FCAFC 59 at [78].
3. Ibid, at [68].
4. Ibid, at [89].

The Victorian Government provides several programs and funding assistance for Victorian-based companies and organisations looking to commercialise biotechnology in Victoria.

• The Collaborative Network's Pilot Program
  This program is for service providers and industry-led consortia interested in working with industry and the Government to build strategic partnerships to commercialise existing and emerging technologies and to accelerate the use of new technologies by Victorian companies, particularly SMEs.
   
• Smart SMEs Innovation Commercialisation Program (ICP)
  ICP aims to assist Victorian micro and nanotechnology companies progress along the commercialisation pathway towards establishing global markets. The program is delivered through contracted partner organisations specialising in technology commercialisation, who provide a suite of targeted programs to assist SMEs to use and develop science and technology for export, growth and profit. The program focuses on building commercialisation skills and capabilities, facilitating access to finance and boosting the adoption of technology by industry.
   
• Small Technologies Industry Uptake Program (STIUP)
  

  We are pleased to advise that Davies Collison Cave is an approved supplier for the STIUP program. Vouchers can therefore be redeemed for services that our firm provides.

  STIUP is a $6.5 million Victorian Government initiative developed to give Victorian businesses the opportunity to increase their competitiveness by making use of small technologies (micro and nanotechnologies). The program aims to provide support through a voucher system (3 categories of (i) up to $10,000, (ii) up to $50,000, and (iii) up to $250,000)), whereby vouchers can be exchanged for access to facilities, goods, services, advice and expertise available in the small technologies sector.
   
• Smart SMEs Market Validation Program (MPV)
  MPV is a $28 million competitive grants program that aims to support small to medium enterprises to develop innovative products, processes and/or services. The MPV targets the development of new technologies or the significant advancement of existing technologies.

In a recent seminar held at the Victorian Investment Centre in Melbourne, Mr Randall Straw, Deputy Secretary, Innovation and Technology, emphasised that the Victorian Government regards innovation as integral to the State's future and an important contributor to the global market as it moves from a resource-based to a knowledge-based economy.

In an era where support and investment is scarce, particularly for early biotechnology start- ups, access to State Government programs and grants, together with Federal funding, is most welcome.

For more information on the Victorian Government programs and grants, please visit the Business Victoria website.

Roadshow Films Pty Ltd v iiNet Limited [2012] HCA 16

In an historic judgment handed down on 20 April, the High Court of Australia has unanimously held that internet service provider (ISP) iiNet did not authorise the infringement by its customers of the copyright in films and television programmes owned or exclusively licensed by 34 Australian and United States movie studios.

This decision follows last year’s judgment by the Full Federal Court which also found in favour of iiNet. The High Court found, as did the Full Federal Court, that iiNet had no direct power to prevent its customers from infringing copyright, and furthermore it was not reasonable to expect iiNet to take action against individual infringers.

This decision illustrates the difficulty facing copyright holders trying to enforce their rights in the current online environment where infringement by file sharing through the BitTorrent system is widespread.

iiNet found not to have authorised infringement

The High Court’s finding on whether iiNet had authorised copyright infringement turned on two pivotal questions:

1. Did iiNet have a power to prevent its customers from infringing the studios' copyright, and if so, what was the extent of that power?
2. Was it reasonable to require iiNet to take steps to prevent those infringements, including via warnings, suspension or termination of customers' accounts?

The studios argued that iiNet had the power to prevent its customers from infringing copyright by issuing warnings, or suspending or terminating customers' accounts upon receiving notice of their infringing activity from the Australian Federation Against Copyright Theft (AFACT).

1. Did iiNet have the power to prevent the infringements?

The High Court found that iiNet had no direct power to prevent the infringing activity as it had no control over the BitTorrent System. Rather, iiNet through the provision of internet access to its customers, had an indirect power to prevent the infringements which was limited to suspending or terminating a customer's account. In emphasising iiNet’s limited power, Chief Justice French and Justices Crennan and Kiefel noted that upon termination of a customer's account, the customer could simply engage another ISP.

2. Was it reasonable for iiNet to issue warnings, suspend or terminate a customer's account?

The High Court found that iiNet’s inactivity after receiving notice from AFACT of its customers’ infringements did not constitute authorisation of copyright infringement. This was because the information provided by AFACT was insufficient to give iiNet a proper basis for sending warning notices to its customers. Chief Justice French, Justice Crennan and Justice Kiefel accepted that iiNet’s inactivity was not “indifference” as to the studios' rights but was based on its assessment of the risks involved (i.e. the risk of liability for wrongly terminating a customer's account) in taking action based on the information provided by AFACT.

Legislative reform or an industry code on the agenda

Along with other recent cases, such as the current appeal before the High Court regarding Optus’ TV Now television recording service, this decision demonstrates the challenges copyright holders face in protecting their rights online. The Government has sought to address these challenges with a combination of legislative review and industry consultation: comments are currently being sought on the terms of reference for an Australian Law Reform Commission review of the Copyright Act 1968 and the Commonwealth Attorney-General’s Department has been conducting talks with content owners and internet service providers on a voluntary industry code to deal with online infringement. While the Attorney General, Hon Nicola Roxon MP, on Friday confirmed that the talks would continue in the wake of the High Court decision, iiNet CEO Michael Malone has now threatened to “walk away” from these negotiations.

Whether adopted voluntarily or mandated by legislation, there is a real possibility that Australia may follow other jurisdictions such as Canada and New Zealand, and implement a code of practice in which ISPs and copyright holders work together to tackle infringement. Last year, New Zealand introduced a “three strikes” policy where upon notification from a copyright holder, an ISP will send up to three warnings to an infringer before possible disconnection from the internet or a NZ$15,000 fine. Although a similar “five strikes” policy proposed earlier this year by an alliance of ISPs was rejected as “fall[ing] well short” by rights holders, today’s decision will undoubtedly serve as a catalyst for further negotiations.

We will keep you posted with any developments.

In an unusual case before the Australian Trade Marks Office, a Tasmanian amateur historian, Mr Ross Smith, has opposed the Australian Football League's Trade Mark Application for the Melbourne Football Club logo on the grounds that the prominent date of establishment, 1858, is one year too early.

The logo is featured prominently on a range of AFL merchandise including tops, jackets, scarves, stubby holders, cooler bags, drink bottes, shot glasses, travel mugs and rugs.

Trade mark opposition grounds

The Application was opposed on the basis that use of the mark would be contrary to law (Section 42(b) of the Trade Marks Act 1995) and that use of the mark would be likely to deceive or cause confusion (Section 43 of the Trade Marks Act 1995), based on Mr Smith's contention that the words "EST 1858" are factually inaccurate because the Melbourne Football Club was established in 1859.

Newspaper articles evidence

In support of this contention, Mr Smith filed extensive evidence from primary sources (primarily contemporaneous newspaper articles) gathered in the course of detailed and methodical historical research showing that the Club was established on 14 May 1859. On that date a meeting was held at the Parade Hotel, East Melbourne for the purposes of forming a football club and a committee was appointed. The meeting was held after a game of football in the Richmond paddock, in which some engaged in "the practice of catching and holding the ball, while others strenuously objected to it". Rules of the Melbourne Football Club were drawn up by the committee a few days later on 17 May 1859. A watermark of the handwritten Rules showing the date "May 1859" appears on the background in the crest of the logo.

Decision

A decision issued on 13 February 2012¹. The Delegate of the Registrar of Trade Marks found that on the balance of probabilities the Club formally incorporated as an association with office bearers elected by enrolled members in 1859, and that football played to rules formulated by the committee of that association was first played in 1859. Notwithstanding the evidence filed on behalf of Mr Smith, the Delegate was not persuaded that the AFL's claim to the Club having been established in 1858 is factually wrong because there was evidence that Melbourne men gathered to play football in the Winter of 1858. This follows a letter from TW Wills to "Bell's Life in Victoria" newspaper on 10 July 1858 calling for the formation of a football or rifle club. A short extract from the somewhat amusing letter is set out below:-

WINTER PRACTICE

Sir, Now that cricket has been put aside for some few months to come, and cricketers have assumed somewhat of the chrysalis nature (for a time only 'tis true), but at length will again burst forth in all their varied hues, rather than allow this state of torpor to creep over them, and stifle their new supple limbs, why can they not, I say, form a foot-ball club, and form a committee of three or more to draw up a code of laws? If a club of this sort were got up, it would be of vast benefit to any cricket-ground to be trampled upon, and would make the turf quite firm and durable; besides which it would keep those who are inclined to become stout from having their joints encased in useless superabundant flesh.

The Delegate stated as follows:

While the Club arguably did not achieve legal personality until May 1859, I am satisfied that it began its existence as a club in 1858. I do not consider that the dead hand of legalism should deny the fact that a group of men met for the purpose of playing football in 1858.

In reaching his decision, the Delegate gave great weight to the belief of both the Club and the AFL that the Club was established in 1858. The Delegate did not state why he gave great weight to this belief.

In relation to references to the formation of the Club in 1858 contained in football history books, the Delegate stated that the opinions of eminent historians are not to be lightly ignored by a government functionary. It was argued by Mr Smith that the incorrect date reference had been perpetuated in various publications, and that it was the Delegate's responsibility to ensure that registered trade marks did not contain misleading statements. This argument was not accepted.

On the basis of the above, the Delegate was not persuaded that use of the Melbourne Football Club logo would be contrary to law or likely to deceive or cause confusion. Accordingly, it was determined that the grounds of opposition had not been established on the balance of probabilities.

Lessons for trade mark owners

It is important to ensure that any statement or representation contained in your trade mark is accurate and that you are capable of substantiating its accuracy. The consequences of failing to do this may be very costly if the trade mark has been applied to an extensive range of merchandise.

Davies Collison Cave acted on behalf of Mr Ross Smith in the Trade Mark Opposition Proceeding.

Endnotes

1. Ross Smith v. Australian Football League 2012 ATMO 20

Koninklijke Philips Electronics NV v Lucheung Meijing Industrial Company Ltd (C-446/09)
Nokia Corporation v Her Majesty's Commissioners of Revenue and Customs (C-495/09).

The Court of Justice, the EU's highest court, has confirmed that counterfeit goods travelling via the EU from one non-EU country to another cannot automatically be seized by EU Customs authorities unless the brand owner provides sufficient evidence to suspect that the counterfeit goods will enter the EU market. This constitutes a serious blow to EU brand owners in their fight against potentially dangerous counterfeit goods.

Seizing EU goods in transit: the requirements

The EU allows Customs authorities to seize suspected counterfeit goods at their borders at the request of brand owners if certain conditions are met.

Goods in transit are not regarded as "counterfeit" and liable to seizure in the EU unless they are intended to be put on sale in the EU.

Based on guidance given by the Court of Justice, brand owners should look for the following kinds of evidence as a basis to seize counterfeit goods in transit in the EU:

• The fact that the destination of the goods is not declared;
• The lack of precise or reliable information regarding the identity or address of the manufacturer or consignor of the goods;
• A lack of cooperation with Customs authorities;
• The discovery of documents or correspondence concerning the goods in question, suggesting that there is liable to be a diversion of those goods to EU consumers.

This decision will make it more difficult for brand owners to fight counterfeit goods generally, to the potential detriment and danger of consumers.

The Australian position

Customs authorities in Australia do not have power to seize goods in transit that are suspected of infringing a registered trade mark. However, if the goods are intended for the Australian market or the goods are being transhipped through Australia (ie. the goods are imported into Australia and are loaded onto a different container for export), infringing goods can potentially be seized.

The most effective way for brand owners to be in a position to obtain seizures is for the brand owner to provide appropriate notice of its registered rights to Customs. We can assist with preparing the relevant documentation for the recordal of your rights with Australian Customs authorities.

The Intellectual Property Laws Amendment (Raising the Bar) Act 2011 received Royal Assent on 15 April 2012, and as such most provisions will take effect from 15 April 2013. This is the most significant amendment to Australia's intellectual property laws since the commencement of the Patents Act 1990.

New experimental use exemptions to take immediate effect

One of the few provisions to take effect immediately is the experimental use exemption which allows researchers in Australia to carry out experiments relating to the subject matter of patented inventions without infringing the patent. Although some commentary in relation to this exemption has suggested that it only applies to non-commercial experimentation, there is nothing in the wording of the provision which excludes experiments conducted for commercial purposes.

New requirements for patent applications

The Act raises the requirements for patentability, and the requirements for patent specifications, for all applications filed after 15 April 2013, and for patent applications filed prior to that date for which an examination request has not been filed prior to 15 April 2013. A number of actions are available to patent applicants to ensure that the current, more lenient, patentability and specification requirements apply to their applications. Some of these actions, and other actions to be taken before commencement, are set out below.

12 ways patent applicants and practitioners can prepare for Raising the Bar commencement

Patent applicants and patent practitioners should consider taking the following actions prior to the commencement date of 15 April 2013.

1. Request examination of all pending patent applications prior to commencement. If acceptance is to be deferred this should be requested at the time of filing the examination request, because after commencement the Commissioner will have the discretion to refuse a request for deferment of acceptance.
2. Enter National phase in Australia and file an examination request prior to commencement for all International applications pending prior to that date.
3. Consider filing a Convention application in Australia and filing an examination request prior to commencement if a PCT application has not been filed.
4. Instead of filing an Australian provisional application as a means of setting a priority date, consider filing a complete application and filing an examination request prior to commencement.
5. Where a unity objection has been raised, or where there is an intention to file a divisional application, file the divisional application with an examination request prior to commencement.
6. Where an application is under opposition it will no longer be possible to file a divisional application after commencement. Consider filing a divisional application with an examination request prior to commencement.
7. Any pending applications which are intended to be made divisionals of earlier applications will need to be converted to divisional status prior to commencement if the deadline for filing a new divisional application has already passed. After commencement it will not be possible to convert an application to become a divisional after the deadline for filing a new divisional has passed.
8. If it is intended to withdraw an opposed application in favour of a divisional application which has been filed, or will be filed prior to commencement, it will be advantageous to withdraw that opposed application prior to commencement. After commencement an opposed application can only be withdrawn with the consent of the Commissioner and it is possible that such consent will only be given if the divisional application is also withdrawn.
9. Any request for modified examination will need to be filed prior to commencement because modified examination will not be available after commencement.
10. Australian provisional applications intended for completion after commencement should include sufficient description to provide the necessary level of "support" for claims in the complete application.
11. Consider amending pending applications to include additional description, examples or the like prior to commencement because after commencement it will not be possible to add matter to a patent application.
12. In order to ensure a new application to be examined under the new law meets the new utility requirement, consider amending the specifications of pending applications prior to commencement to clearly describe the utility of the invention. As mentioned above, it is advisable to file an examination request prior to commencement.

Changes to the acceptance and examination request periods

There are a number of additional changes to the patent system which will be introduced with the new law, although these additional changes will be the subject of regulations which have not yet been drafted. Of particular note is the stated intention of IP Australia to reduce the 21 month acceptance period to 12 months, and to reduce the period for requesting examination following the issuance of a Direction to Request examination from 6 months to 2 months. Under the current law when acceptance is not secured within the 21 month acceptance period it is common to refile the application as a divisional application of itself to maintain pendency. After commencement any divisional filed to maintain pendency will be subject to the new law. Accordingly, it is anticipated that applicants will be more inclined to request hearings to secure acceptance of the parent application rather than resort to the filing of divisional applications to maintain pendency.

Changes to trade marks and other IP laws

The Act also makes a number of changes to the trade mark system including significant changes to opposition case management, custom seizure provisions, the addition of punitive damages for infringement, introduction of summary offences with lower fault requirements and penalties and a rewording of section 41 to deal with the presumption of registrability. A summary of these changes may be found in an earlier publication on our website.

This week Melbourne has the privilege of hosting the World Congress for the Bureau of the Fédération Internationale des Conseils en Propriété Intellectuelle (International Federation of Intellectual Property Attorneys - FICPI). The congress provides members from all over the world with the opportunity to observe and participate in discussions with leading professionals, the Judiciary and IP Authorities, and to influence the future direction of intellectual property law worldwide.

For Peter Huntsman, a Partner of Davies Collison Cave and International President of FICPI, this will be a busy time as he hosts the congress and steps down to become a President of Honour. Peter took the position of International President for a three year term in 2009. Prior to this Peter was the President of the Australian Federation of Intellectual Property Attorneys (FICPI Australia) for six years.

In his role as International President Peter was at the forefront of activities involving intellectual property and regularly met with senior officials from a variety of IP bodies, including the United States Patent & Trade Mark Office, the European Patent Office, the Japanese Patent Office, the Indian Patent Office, IP Australia, the World Intellectual Property Office, the World Trade Organisation and the European Commission.

Peter states that during his busy time as International President he has “enjoyed the involvement at a high level in the IP world and the people and strangely even the pressure”. He is looking forward to taking on his new position of President of the Training and Education Commission.

Davies Collison Cave would like to take this opportunity to acknowledge Peter’s commitment and dedication as International President of FICPI, through which he has made a major contribution to the IP field internationally.

For more information on FICPI visit www.ficpi.org

Mayo Collaborative Services v. Prometheus Laboratories, Inc. (20 March 2012)

In a recent decision of the US Supreme Court Prometheus' claims relating to methods of optimising the dosage of a drug were held to be invalid because they claim 'laws of nature' and the additional steps in the claimed methods added “nothing of significance to the natural laws themselves.”

The decision indicates that the US Federal Circuit’s “machine-or-transformation” test for assessing patent-eligibility may not be useful when the “transformation” flows from “entirely natural processes.” It appears that in order to satisfy Section 101 of the US Patents Act relating to patentability¹, method claims that are based on a law of nature must recite an additional element that is not “routine” or “conventional” in the art.

Prometheus' claims originally held patentable using "machine-or-transformation" test

The claims from Prometheus's patents related to methods for calibrating the proper dosage of thiopurine drugs which are used for treating both gastrointestinal and non-gastrointestinal autoimmune diseases. The way in which people metabolise thiopurine compounds varies and the same dose of a thiopurine drug affects different people differently. Because of this, although scientists at the time already understood that certain thiopurine metabolites correlated with the likelihood that if a particular dose was too high it could cause harmful side effects, or too low it could cause the treatment to be ineffective, those in the field did not know the precise correlations between metabolite levels and likely harm or ineffectiveness. The methods described in the patents were designed to enable the identification of these correlations with greater precision.

The Supreme Court focused on Claim 1 as representative of the claims at issue. Claim 1 recites:

A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject . . and

(b) determining a level of 6-thioguanine in the subject . . .

wherein the level of 6-thioguanine less than about 230 pmol per 8×10⁸ red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and wherein the level of 6-thioguanine greater than about 400 pmol per 8×10⁸ red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

It is important to note that the administration step (a) and determination step (b) were already known techniques in the art and the claim therefore relied on the 'wherein' clauses to provide the inventive concept.

Mayo originally purchased and used diagnostic tests based on Prometheus's patents. However, the dispute began when Mayo decided to try to develop and market its own version of the test. Prometheus sued, and in the district court the claims were held invalid under Section 101 as unpatentable laws of nature.

In 2009, the Federal Circuit found the disputed claims patentable by applying the "machine-or-transformation" test and reversed the original district court decision. Following the “Bilski” decision where it was held that the “machine-or-transformation test”, while an important and useful clue in determining patent eligibility, was not the only way to evaluate patentability², the case was returned to the Federal Circuit for reconsideration. On remand, the Federal Circuit again held that the process claims constituted patent-eligible subject matter because "[t]he steps recite specific treatment steps, not just the correlations themselves".³ This second appeal to the Supreme Court followed.

Supreme Court decision finds Prometheus' claims purely conventional and encompass 'laws of nature'

In reaching their decision, the Court began by noting that its prior decisions in Diamond v. Diehr⁴ and Parker v. Flook⁵ concerning the patentability of natural correlations or mathematical formulae were particularly relevant to the case.

With these decisions in mind the Court stated that, "a process is not unpatentable simply because it contains a law of nature or a mathematical algorithm". However, the Court also noted that, "to transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words to apply it".

The Court concluded that to transform a process that focuses upon the use of a natural law into a patent-eligible application of such a law, the process must also contain other elements or a combination of elements, sometimes referred to as an ‘inventive concept,’ sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.

In applying this conclusion to Prometheus’ claims, the Court reasoned that while it takes human action to trigger the occurrence of the relationship between the concentration in the blood of certain thiopurine metabolites and the likelihood that the drug dosage would be ineffective or would induce harmful side-effects, "the relationship itself exists in principle apart from any human action”.

Claim analysis

1. Step of administration – the court held that the "administering" step simply referred to the “relevant audience”, i.e. doctors treating patients. It was noted that this audience was a pre-existing audience because doctors already knew how to use thiopurine drugs to treat the recited conditions. However, the possibility of directing the claims to a new audience was discounted by the suggestion that “prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of the formula to a particular technological environment”.
2. Step of "determining" - greater consideration was given to the "determining step" that required doctors to determine the level of relevant metabolites in the blood. However, the Court also found this step insufficient to make the claims patent-eligible because the techniques were so well known.
3. Wherein clauses – these describe the likely consequences of certain high or low concentrations of the metabolites. The Court found these limitations were at most a suggestion to take the relevant natural laws into account when treating a patient. The Court noted that purely conventional or obvious pre-solution activity "is normally not sufficient to transform an unpatentable law of nature into a patent-eligible application of such a law”.

Following this analysis the Court concluded that the steps involved in the claim were purely "conventional" and monopolised a law of nature.

When the claim was considered as a whole the Court also came to the conclusion that “the three steps as an ordered combination add nothing to the laws of nature that is not already present when the steps are considered separately".

From the decision it appears that the US Court will not give much weight to “conventional” steps recited within a claim, even if they are concrete or physically transformative, i.e. steps that are well-understood, routine and considered conventional activities by those working in the field. The Court did not rule out the possibility that claims to diagnostic processes with less conventional steps would be considered patentable.

However, while noting the importance of reciting “additional features” to transform claims beyond a “law of nature”, no real guidance has been given as to what level of post-solution activity is necessary to render a claim patentable. What is clear is that transformation of a patient's body by "administering" a drug does not satisfy the “transformation” component of the test.

It also appears that the Court considers that if a law of nature has a particular application, any claims based on that law must be narrow enough so as not to preclude others from exploiting or innovating around the law of nature on which the claim is based.

Implications of the decision extend beyond personalised medicine claims

The decision reinforces that while it remains a useful tool in determining patent eligibility of biomedical diagnostic claims the “Machine-or-transformation” test will not be the only test which is used to evaluate whether a claim is patent-eligible. It appears that significant weight will be given to the ‘law of nature' exclusion to Section 101 which has long held that “Laws of nature, natural phenomena, and abstract ideas” are not patentable.

The decision most particularly impacts the patentability of methods of conducting personalised medicine in the US, for example, where treatment regimens for a subject are tailored based on the presence, absence or amount of one or more biomarkers that correlate with treatment efficacy.

However, in stating their position the Court noted that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas". The Court acknowledged that not all inventions are unpatentable simply because they have some relationship with a law of nature. The observation also indicates that the impact of Prometheus will not be limited to one class of invention or one field of technology.

Confirming its potential significance, almost immediately following the decision, the US Patent & Trademark Office (USPTO) distributed a short memorandum to examiners. The memorandum indicates that while examiners will in the short term continue to use the existing Bilski Guidance, they will be taking the Mayo decision into account when examining patent applications for compliance with section 101. It remains to be seen how the USPTO will apply the Mayo decision moving forward.

It is possible that the Mayo decision appears broad enough to encompass claims directed to isolated gene sequences as they exist in nature. Therefore, it also remains to be seen if the decision will have an impact on the Association for Molecular Pathology v USPTO (Myriad) case.

Lessons for Patentees

It is possible that biomedical diagnostic claims of US Patents may be prone to challenges on the basis that they claim non-patentable ‘laws of nature’, not only by examiners in the course of prosecution but also by accused infringers or potential and existing licensees of issued patents. This issue could be raised particularly where the claims relate to observation of a correlation tied to a biological process.

For the US it appears that even claims involving a machine or a transformation will have to be carefully drafted to keep the "law of nature" exclusion in mind. This consideration also extends to non-biomedical patents

For those concerned that their granted US claims are 'similar' to Prometheus' claims, there are mechanisms available under US law to strengthen the validity of such claims. In relation to pending applications, it is clear that careful consideration should be given to either amend or add claims to more directly focus on specific applications of any underlying laws of nature.

It is important to bear in mind that although the decision may mean that the validity of certain patent claims is uncertain, the Supreme Court did not announce a general rule that undermines the validity of all personalised medicine patents in the US. The validity of such claims must be assessed on a fact-specific, case-by-case basis.

Endnotes

1. Section 101 outlines the scope of patent-eligible subject matter and states:-
   "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."
2. Bilski v. Kappos, 561 U. S. __, __ (2010); Patents for abstract ideas are out, but not patents for business methods
3. Prometheus Labs., Inc. v. Mayo Collaborative Services., 628 F.3d 1347, 1355 (Fed. Cir. 2010).
4. Diamond v. Diehr, 450 U. S. 175, 185 (1981).
5. 437 U.S. (1978).

If you are an employee proposing to set up in competition with your employer, you should not use or take with you records relating to your employer's business or use any sensitive information such as costs, formulae, processing or financial information taken from your employer. All such information should be obtained from public sources or independently from suppliers.

If you are an employer, you should:

• remind departing employees of their contractual, general law and statutory obligations and ensure that employees deliver up or destroy all documents (including electronic records) that contain the employer's confidential information. You should also check departing employees' emails and company computer files; and
• impose post-employment restraints on employees to prevent them from developing a business in competition with their former employer for a specified period of time as part of their employment contracts.

In Australia, it is well-settled law that employees owe certain duties to their employer, not least of which is their duty not to disclose or use their employer’s confidential information inappropriately.

In 2011, the Federal Court of Australia considered a number of applications brought by employers against former employees where those employees were alleged to have misused their employers’ confidential information when transitioning from their former employment to their new. These cases demonstrate that employees’ duties are a powerful tool for employers, particularly where the employee can use knowledge confidential to the employer in pursuing competitive activity. The recent cases of Spotless Group Ltd v Blanco Catering Pty Ltd,¹ Blackmagic Design Pty Ltd v Overliese² and RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd³ provide a salutary lesson to employees of the inherent dangers in striking out on their own when in possession of their former employer’s confidential information.

Employees’ obligations to their employer

Employees' obligations to their employer are grounded in numerous sources of law in Australia. Primarily, employees have a duty of loyalty, fidelity and good faith arising from the employee-employer relationship.⁴ Employees are also often under express contractual obligations not to disclose or misuse their employer’s confidential information and equitable principles oblige an employee not to misuse confidential information of an employer. Finally, legislation, principally the Corporations Act 2001 (Cth),⁵ prohibits directors and officers from misusing confidential information for their own benefit.

While these obligations derive from different sources, the content and requirements for making out a breach are fundamentally the same:⁶ identification of the confidential information and unauthorised use or disclosure. However, the remedies available for breach of these obligations will differ depending on the source of obligation.⁷

Spotless v Blanco Catering and other recent decisions

The following cases all concerned the misuse of a former employer’s confidential information by employees transitioning to new employment or self-employment.

Spotless v Blanco Catering

In this case, Spotless' highest ranking manager in South Australia and Western Australia, Mr Paul Reynolds, passed on information acquired during the course of his employment with Spotless to his wife and a company established for the purpose of investing in a third party competitor, information which was ultimately passed on to that competitor, before ceasing his employment with Spotless. That information, including information about how Spotless’ business operated, customer and supplier information, financial models and information concerning Spotless’ bid for new work, was subsequently used in a bid for specific projects in competition with Spotless.

In deciding that Mr Reynolds should be restrained from using that information, the Court made it clear that an employee may use “know-how” acquired during the course of his employment for the benefit of another employer but may not use of confidential information or information which, even though not confidential, was deliberately obtained during employment for use after the employment relationship ceased.⁸ According to the Court, the information Mr Reynolds acquired and passed on was not “know-how” but was information he used as a starting point for revenue projections ultimately relied upon by the third party competitor in developing its bid in competition with Spotless.

While the Court was satisfied that Spotless did not suffer any loss or damage as a result of Mr Reynolds' misuse of its information, finding that Spotless would not ultimately have been awarded the tender for which the information was used by Mr Reynolds, it nevertheless fined Mr Reynolds $100,000 in general damages for breach of his duties.

Blackmagic Design Pty Ltd v Overliese

In Blackmagic, it was alleged that two former employees, Mr Overliese and Mr Young, had misused confidential information (the prices paid for parts and Blackmagic's profit margins) in the process of setting up a business in competition to Blackmagic in breach of contractual and equitable obligations of confidence. Blackmagic also argued that they had developed an idea for a new product during the course of their employment to which Blackmagic was entitled.

At trial, Jessup J found in favour of Blackmagic and ordered that the former employees be permanently restrained from using or disclosing Blackmagic's confidential information. However, the Court declined to award damages based on the opportunity Blackmagic "lost" in being denied the opportunity to exploit the new product.

On appeal, Blackmagic argued (unsuccessfully) that Jessup J should have ordered a broader injunction restraining the former employees not only from using that information but from producing a product in competition with Blackmagic (on the basis of the employees’ breach of their fiduciary duties, not solely on the basis of their misuse of confidential information).

Interestingly, the appeal Court found that despite the far-reaching nature of employees’ obligations to their employers, those obligations did not include a positive obligation to disclose to their employers ideas for new products which would compete with products sold by their employers. However, the permanent injunctions otherwise stood.

RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd

Similar to Blackmagic, this case concerned allegations by a former employer, RLA, that its former employees and their company, Nexus, had misused RLA’s confidential information (the selection and specification of quantities of particular raw materials, the order of mixing components and equipment settings including timing and speed parameters for the manufacture of adhesives) to speed up the development of a rival product. The Court agreed with RLA, rejecting the former employees’ argument that the information was part of their “stock of knowledge” which they could legitimately draw upon when working with their new business.

The Court ordered Nexus to account to RLA for the profit Nexus made from sales of its adhesive products developed by reference to RLA’s confidential information for a period equal to the period it would have taken Nexus to independently develop that product without reference to that information.

Lessons

These cases demonstrate the likely difficulties employees face when attempting to divine what information they can and cannot legitimately use for the benefit of a new employer or as part of their self-employment activities, and the significant consequences misuse of an employer's information can have (including awards of damages). Whether information acquired forms part of an employee’s "stock of knowledge" which he or she is entitled to use after employment comes to an end or is an employer’s confidential information is often a difficult distinction to draw. However, specific detailed information relating to the former employer's specific business activities is likely to be regarded as the "property" of the employer; even if it is publicly available in a general context. It is also apparent that courts are more willing to uphold allegations of misuse of confidential information where a former employee has been covertly and actively planning future activities prior to termination with the intention of using that information for his or her own benefit or the benefit of his or her new employer, as demonstrated by these cases.

This article was first published in the April edition of the Intellectual Property Law Bulletin and is republished here with permission.

Endnotes

1. (2011) 93 IPR 235.
2. [2010] FCA 13; [2011] FCAFC 24.
3. [2011] FCA 423.
4. See, for example, Mason J’s list of recognised fiduciary relationships in Hospital Products Limited v United States Surgical Corp (1984) 156 CLR 41 at 96-97.
5. Section 183 of the Corporations Act 2001 (Cth).
6. Of course, express obligations of confidence may be narrower than the obligations in equity. See for example Woolworths Ltd v Olsen [2004] NSWSC 849.
7. For example, equitable remedies such as an account of profits, equitable damages, injunctions and delivery up are only available for breach of the equitable obligation. Damages are the principal remedy in an action for breach of the common law contractual duty.
8. At [27], citing Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 136.

LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3

LED Technologies Pty Ltd has appealed findings adverse to them at trial. This case provides further clarification on the assessment of whether or not a registered design is "substantially similar in overall impression to another design", which must be considered when determining infringement and validity of an Australian registered design.

Facts of the case

LED Technologies Pty Ltd ("LED Tech") is the owner of Australian Registered Design Nos. 302359 and 302360 ("the registered designs") in respect of "Rear Combination Lights". Lights of this type are typically used on trailers and caravans for providing combinations of stop, park, indicator and reverse lights.

In the trial decision (LED Technologies Pty Ltd v Roadvision Pty Ltd [2011] FCA 146), Justice Finkelstein found that the registered designs were valid in spite of similarities with a prior art light, but that Baxters Pty Ltd and Roadvision Pty Ltd had not infringed the registered designs by the sale of their rear combination lights ("the Baxters lights"). LED Tech appealed the finding of non-infringement.

Decision

Infringement of the registered designs

In the trial decision, Justice Finkelstein identified four "key" features that differentiated the registered designs from the Baxters lights. On this basis, Justice Finkelstein concluded that the Baxters lights were not substantially similar in overall impression to the registered designs. One of these key features was described as the "prominent cut-out pattern on the underside of the registered designs". In contrast, the Baxters lights had a flat, closed back. The remaining three features were visible on the front of the registered designs.

In the appeal, LED Tech argued that the trial judge had erred in placing emphasis on this feature. While it is not explicitly stated in the appeal decision, it appears that LED Tech's contention is that discounting the under/back side in the comparison of the registered designs and Baxters lights would increase the emphasis to be placed on the features of the front side such that there would be sufficient level of similarity for a finding of infringement.

LED Tech argued that there was substantial similarity between the front of the registered designs and the Baxters lights, and that little weight should be given to the differences between the back sides. There were two limbs to LED Tech's argument in support of this position:

1. that "the informed user would concentrate on the appearance of the lights in situ", in which the features of the back side of the lights were not visible; and
2. section 19(2)(c) of the Designs Act 2004 operates to give less weight to features that are of low quality and importance in the context of the design as a whole.

Justice Besanko noted that this is a "particularly crowded field", meaning that there are many designs to the same or similar products in the prior art, and further, that many features of similarity between the registered designs and the Baxters lights were common in the prior art. Justice Besanko concluded that the features of the under/back sides cannot be ignored, and that even if less weight were afforded to these features, with the extent of differences in the remaining three features the finding of non-infringement by the trial judge was correct. The other two appellant judges agreed with the findings of Justice Besanko in their entirety.

Commentary

Australian designs law does not have requirements on the number or nature of the views that are included in a design registration. The findings of the trial and appellant judges serve as a reminder that inclusion of views that show "non-essential features" of a design can have the effect of narrowing the scope of protection. Had the rear views been excluded from the registered designs, the cut-out pattern on the underside of the registered designs would not have been available to distinguish the Baxters lights from LED Tech's designs of LED lights. The corollary of this is that leaving features of a design out of the registration has the effect of increasing the chance of the registration being invalid.

In this case, the evidence demonstrated that the shape of the back side of the registered designs was important for functional reasons, but was of no significance to the aesthetic elements of the designs when mounted to a vehicle, such as a caravan. Australian designs law does not distinguish explicitly between functional and aesthetic value of features. In some cases, such as this, the underside features are predominantly functional but were given equal weight to the aesthetic features.

Over recent years, the Australian Trade Marks Office has had to consider a handful of potentially "scandalous" trade marks under section 42(a) of the Trade Marks Act 1995, ("the Act") which states that an application for registration of a trade mark must be rejected if the trade mark "contains or consists of scandalous matter".

There are relatively few decisions of the Trade Marks Office and the Australian Courts in relation to the interpretation of section 42(a). However, in 2003 in Cosmetic, Toiletry and Fragrances Association Foundation v Fanni Barns Pty Ltd¹ , the Trade Marks Office had to consider whether the trade mark "Look Good+Feel Good=Root Good", in relation to cosmetics and sexual hygiene products and clothing, was scandalous. In the decision, the Delegate of the Registrar of Trade Marks took into account the fact that contemporary language is evolving and that spoken and written language is more robust than it was 10 years prior to the decision. Therefore, it was determined that the trade mark was not likely to cause a significant degree of shock, despite being crude in sentiment and grammatical construction. On this basis, it was decided that, on balance, the trade mark did not transgress section 42(a).

Another matter where the Trade Marks Office considered section 42(a) was the 2008 application for the mark "Pommiebasher". Peter Hanlon (who was self-represented) filed a trade mark application for the "Pommiebasher" mark in relation to clothing and beverages (including beer). The Examiner took the view that the mark was not registrable on the basis of section 42(a). In the 2011 Trade Mark Office decision² , the Delegate found that the mark "Pommiebasher" suggested a person who was "markedly and stridently biased in his/her view of the English". He found that the term did not go so far as to suggest a person engaging in racial vilification or prone to verbal abuse or one who literally bashes or assaults English people.

The Delegate concluded that the mark was not scandalous (or even in bad taste) on the basis that the term is "part of ordinary and acceptable, if colourful and colloquial, language".

In his reasoning the Delegate referred to an example of use of the term "Pommiebasher" in a light-hearted article relating to cricket in an English newspaper, concluding that the term was in regular use in the media (although there did not appear to be any evidence to support this finding). Interestingly, the Delegate found that the term was in a different category to similar "_______ basher" names that promoted violence against people on the basis of their race or sexual orientation.

In the course of reaching the above conclusions, the Delegate outlined the history of section 42, noting that the concept of morality was dispensed with under Australian law in 1955, but had remained a part of the equivalent UK legislation as a bar to the registration of marks which are "contrary to public policy or to accepted principles of morality".³

The Delegate also made reference to a 1993 article⁴ by US author Stephen R Baird in which he categorised scandalous and immoral marks into seven discrete categories as follows:

1. Those with a religious nexus⁵;
2. Those consisting of or comprising racial slurs or epithets;
3. Those consisting of or comprising profane matter (A US example is "Bullshit"⁶. An Australian example is "Fuct", although "Fcuk" has been found to be merely suggestive. A UK example is "Bollox");
4. Those consisting of or comprising vulgar matter;
5. Those relating to sexuality (Australian examples are "Kunt"⁷ and "Look Good+Feel Good=Root Good" as referred to above);
6. Those involving innuendo;
7. Those suggesting or promoting illegal activity (A US example is "Wife Beater").

Despite referring to the above categories, the Delegate expressed the view that codification of the relevant principles is inappropriate as each case should be considered on the basis of its own facts.

The Delegate reiterated the reasoning in the "Look Good" decision that community standards are changing. This view is supported by the Delegate's discussion of the 1947 UK decision⁸ relating to the "Oomphies" mark, which was refused registration at first instance on the basis that it meant sex appeal. Clearly this mark would not be refused registration in Australia today.

Although section 42(a) does not explicitly refer to use of a mark which contains or consists of scandalous matter, in the view of the Delegate the concept of notional fair use is nevertheless imparted by the definition of a trade mark in section 17 of the Act. On that basis, it is necessary to consider the applicability of section 42(a) by reference to the goods or services covered by the trade mark application. The Delegate's conclusion that the mark did not consist of scandalous matter was reached despite the fact that the goods in respect of which the applicant sought to register the mark could theoretically extend to infant clothing, lawn bowler's attire or church choir robes.

Accordingly, the Delegate concluded that the "Pommiebasher" mark should be registered subject to any applicable grounds being raised by a third party in the usual opposition process.

In contrast, in the 2010 decision in Home Box Office, Inc v. Isaias Florenca⁹ it is apparent that the original version of a trade mark in relation to clothing was amended to "Absofcukinglutely" in order to overcome a section 42(a) objection raised by the Examiner that the original mark was scandalous.

Finally, a further example of a potentially scandalous trade mark, "Nuckin Futs"¹⁰ was filed on 10 February 2011 in relation to nut products. The Trade Marks Office allowed the application to proceed to acceptance in January 2012, despite an initial objection that the mark was scandalous. On this basis, it appears that the mark may fall into the category of marks incorporating obscene or coarse language which has the requisite degree of invention or imagination for registrability purposes.

However, it is of particular interest that the application for "Nuckin Futs" was accepted subject to the following endorsement:

It is a condition of registration that the trade mark will not be marketed to children

It is unclear exactly what is meant by the above endorsement as the terms "marketed" and "children" are not defined.

As a practical matter, it seems that the endorsement may be difficult to comply with unless the owner of the trade mark uses and licences the mark for use, in adult-only venues only and advertises and promotes the brand in a very restricted manner. Failure to comply with the condition of registration may make the registration vulnerable to cancellation.

A review of Australian registered trade marks comprising f…. derivatives and euphemisms does not reveal any registrations which are subject to similar endorsements. Such marks include:

• Far Kew
• Fork'n L
• Farken Orsum
• Unfknblvble
• Focca
• Farkut
• Farkoff

In determining whether a trade mark is unregistrable because it is scandalous, consideration will be given to the sensibilities of ordinary potential customers, judged by reference to the manner in which such word is being used as part of our ordinary language. In this regard, it is necessary to consider that community standards are constantly evolving and so what may be "scandalous" at a particular time may be merely in bad taste at a later time.

Notwithstanding reference to the seven categories of scandalous and immoral marks, the position of the Australian Trade Marks Office is that it is inappropriate to seek to codify such marks in light of the changing community standards and the necessity to consider the context of use of such marks.

It appears that the prospects of obtaining acceptance of a potentially scandalous mark may be enhanced if the applicant consents to the entry of an endorsement restricting the manner of use of the trade mark, for example, stating that the trade mark will not be marketed to children.

Footnotes

1. [2003] ATMO 10
2. [2011] ATMO 45
3. Trade Marks Act 1994 (UK), s3(3)(a)
4. Stephen R Baird, "Moral Intervention in the Trademark Arena: Barring the Registration of Scandalous and Immoral Trade Marks" (1993) 83 Trade Mark Reports 661
5. Mercy's Application (1955) 25 AOJP 938 (MECCA), Maglificio Calizificio Torinese SpA's Application (1982) 37 AOJP 1764 (Reg) (JESUS), "Hallelujah" Trade Mark [199] RPC 605 (UK Ref)
6. In Re Red Bull GmbH, Serial No. 75/788830 (TTAB 15 February 2006)
7. Kuntstreet Wear Pty Ltd's Trade Mark Application (2007) 73 IPR 438 (Reg)
8. Le Marquise Footwear Inc's Application (1947) 64 RPC 27
9. [2010] ATMO 99
10. Application No. 1408134 in the name of Universal Trading Australia Pty Ltd as trustee for Basil and Groovy Trust

Australia’s Attorney-General, the Hon Nicola Roxon MP, has appointed Professor Jill McKeough to lead an upcoming inquiry into Australia’s copyright laws¹. Although the terms of reference for the Australian Law Reform Commission inquiry are yet to be finalised, it is understood that a focus will be on the adequacy and appropriateness of the current exceptions to copyright infringement, in particular in the digital environment. These current exceptions include the exception relating to the “time shifting” of television broadcasts, which was the basis of the defence raised in the recent high-profile Federal Court ruling about Optus’ TV Now personal video recording service.

Copyright exceptions in Australia and overseas

The copyright laws of many countries provide a range of exceptions to what would otherwise amount to copyright infringement. In many cases, these exceptions are founded in the interests of public policy, consumer convenience or the fostering of competition. Examples of such exceptions include allowances for the reproduction of copyright material when reporting the news or the reproduction of copyright material in the course of a technical process, such as the temporary reproduction of an MP3 song in a computer’s memory during the course of playback. Jurisdictions differ, however, between the form and expresssion of the exceptions contained in their copyright statutes.

Exceptions and fair use in the United States

In jurisdictions such as the US, comparatively few exceptions or limits on copyright protection are codified in legislation. Instead, US copyright law² lists a non-exhaustive set of “fair uses” of copyright material that will not infringe copyright, such as reproduction for the purposes of satire, review or reporting the news. Importantly the fair use provision also nominates four factors—the purpose and character (commercial, educational or otherwise) of the use, the nature of the copyright work used, the size and significance of the reproduced portion of the work and the effect of the use on the commercial value of the copyright work—to be considered when determining whether any other use of a copyright work is “fair”. The open-ended nature of this provision has led to the evolution of a rich body of case law in which US courts have applied the policy foundations enshrined within US copyright legislation when determining whether the use of a particular new technology is “fair” or infringing.

Exceptions and fair dealing in Australia

By contrast, the Australian Parliament has opted for a more prescriptive approach, inserting into the Copyright Act various specific exceptions to infringement on a piecemeal basis. These exceptions include a finite range of permitted “fair dealings” such as those for the purpose of:

• research or study;
• criticism, review, parody or satire; or
• reporting news.

Other exceptions to copyright infringement include:

• the “format shifting” of videotaped films, photographs or CDs for private use;
• the parallel importation in certain circumstances of books, computer programs and sound recordings; and
• the recording of television broadcasts for viewing at a more convenient time (“time shifting”).

This prescriptive approach to copyright limitations provides greater certainty to copyright owners regarding the extent of their rights, however difficulties can arise when new technologies challenge the fundamental assumptions upon which the relevant provisions were drafted. This was demonstrated in the recent decision of Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No.2)³, in which Justice Rares of the Federal Court ruled that an internet-based TV recording service provided by telecommunications company Optus did not infringe the copyright subsisting in live sports broadcasts, effectively because there was no real difference between a user of this service and someone who uses a personal video recorders in the home which is not an infringement.

The ALRC copyright review

Former Attorney-General, the Hon Robert McClelland MP, first announced an Australian Law Reform Commission review into Australia’s copyright law in February 2011, and subsequently clarified that the inquiry would examine:⁴

whether the exceptions in the Copyright Act are adequate and appropriate in the digital environment … In a fast changing, technologically driven world it is vital for us to see whether the existing statute is appropriate and whether [the Act] can be improved.

The terms of reference are expected to be released this quarter for public consultation, and it remains to be seen whether they contemplate a move to a more generalised open-ended US-style fair use provision or, more narrowly, the modification of existing exceptions to copyright law to encompass recent technological developments.

Footnotes

1. The full press release announcing Professor McKeogh’s appointment can be found here
2. 17 USC § 107.
3. [2012] FCA 34.
4. The full transcript of the Former Attorney General’s speech can be found here

Foreword

Welcome to the first edition of the IP Update for 2012.

In this edition of the IP Update we discuss a number of important intellectual property cases that have been handed down over the last couple of months. We look at the Optus v NRL case and the timing of the decision as it coincides with the announcement that there will be a review of Australian copyright legislation. The Full Federal Court recently handed down a decision regarding design infringement involving LED Technologies v Roadvision which we will also discuss.

We explore some recent changes to IP practice including the Personal Property Securities Act which came into force on 30 January 2012 and the availability of new gTLD domain names which became available on 12 January 2012.

DCC News looks at some of the awards and rankings achieved this year as well as giving you a brief insight into the highlights of our industry involvement over the last three months.

In this Issue

Case Studies

• Australian registered designs: “non-essential” features can be significant.
  LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3
• Ownership of employee inventions: is the test for inventive step relevant?
  The Royal Children’s Hospital v Robert Alexander [2011] APO 94 (10 November 2011)
• How scandalous is too scandalous for the Australian trade marks office?
• Optus’ online DVR found not to infringe copyright; AFL and NRL set to appeal
  Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No.2) [2012] FCA 34

Practice Updates

• Prof. Jill Mckeough to lead Australian Law Reform Commission review of copyright law and exceptions
• New Personal Property Securities Register now up and running, but what do I do now?
• New generic top level domain names (gTLDs)

 Office Information 

• DCC News
• DCC Out and About
• Articles on davies.com.au

Ron Englehart Pty Ltd v Enterprise Constructions (Aust) Pty Ltd [2012] FCAFC 4

As a general proposition, people do not commence legal proceedings lightly. Litigation is expensive and in the vast majority of cases, there is a risk that the evidence will not fall your way. Thus, when Ron Englehart Pty Ltd ("Englehart") decided to issue copyright infringement proceedings against Enterprise Constructions Pty Ltd ("Enterprise"), it is highly likely that the Englehart camp believed that Enterprise had deliberately copied its plans for a display home and that it would be able to establish this on the evidence. Unfortunately for the Englehart camp, this was not to be.   

The effect of delay on evidence in the proceedings

The case was also affected by two ancillary factors. The first was that the proceeding was issued some nine years after the alleged copying took place and the second was that the proceeding was issued in the "Fast Track List" of the Federal Court. These factors had the combined effect that recollections were less clear than if the proceeding had been issued earlier and that the documents which might have been available at a point in time were not now available or there was insufficient time to locate them in view of the fast track nature of the proceeding. This led the trial Court to comment that efforts to locate the documents regarding the development of the Enterprise house plans "…were not as successful as is normally regarded as ideal in contested commercial litigation." However, the Court did not criticise Enterprise for these shortcomings in light of these two factors.

The Englehart house designs and allegedly infringing Enterprise designs

The background to the case is quite straightforward. In 1997, Englehart completed construction of and opened a display home in Doncaster East, a suburb of Melbourne. The plans for the house were also featured on page 64 of a display homes magazine published by a Melbourne newspaper and which ran to 186 pages. The plans were also available in Englehart display material. The plans for this particular display home were notated with an instruction that for a variation of the design represented, one could reposition the garage, master bedroom, ensuite and powder room. It was this revised version of the plans which was the basis of the copyright infringement allegation ("the Englehart Design").

In mid 2000, Enterprise completed construction in an adjacent Melbourne suburb, Bundoora, of a display home which was a mirror image of the Englehart Design ("the Enterprise Design"). In simple terms, the question was whether the Enterprise Design and the plans were an infringing copy of the plans for the Englehart Design or an independent work.

Enterprise's allegedly infringing conduct

The evidence was that Enterprise instructed an architect to design a house for an asymmetrical block of land. The design of the house proceeded through several iterations between the architect and the owner of Enterprise (Dervish). On several occasions, Dervish responded to the architect with changes made to the architect's drawings which ultimately resulted in the preparation of plans for a layout quite similar to the Englehart Design. Dervish denied that he had visited the Englehart display home or had seen the plans for the Englehart Design.

The key issue at first instance: objective similarity between the house designs

In order to succeed in the action, Englehart had to show that there was a sufficient degree of objective similarity between the Englehart Design and the Enterprise Design and that this objective similarity was the result of copying. Englehart accepted that the architect had not had access to its plans or visited the display home. This meant that Englehart had to establish as a matter of fact or inference that a person from Enterprise had either visited the Englehart display home or had access to the Englehart plans and, in either case, had sufficient familiarity with the Englehart Design as a result, to direct the architect to, in effect, reproduce the Englehart Design or a substantial part of it. In effect, the case revolved around whether Dervish had such access.

Did Dervish have sufficient access to the Englehart Design to copy it?

The Court found Dervish's evidence unsatisfactory in a number of respects and placed little weight on it. This was partially because Dervish had provided in his affidavit photographs of house facades which he deposed had been sent by him to the architect as an indication of what the architect was to produce. However, under cross-examination Dervish admitted that the photographs were taken in 2009 for the purposes of the proceeding. He also sent the architect the floor plan for another house design. Whilst these matters could be said to cast doubt on Dervish's denial that he had visited the Englehart home or had access to its plans, there was still no direct evidence that Dervish had done either. In fact, the analysis by the Court of the events leading up to the completion of the Enterprise Design did not show a communication from Dervish to the architect in the detail which the Court said would have been required for Dervish to have instructed the architect to reproduce the Englehart Design. In other respects, the similarities in the designs were regarded as unremarkable and insufficient to establish an inference of copying. If Dervish had had access to the Englehart Design and wanted the architect to reproduce that design, the Court considered the most likely scenario would have been that Dervish would have sent a copy of the Englehart Design to the architect. Thus, the Court refused to draw an inference of indirect use of the Englehart Design.

Englehart’s appeal: findings of coincidental similarity were erroneous

The decision of the Court that infringement had not been proven was particularly fact driven. This was not a case in which there were difficult principles of law or even any doubt as to what the law required. Notwithstanding this, Englehart appealed on the basis that a finding that the similarities in the designs were coincidental was not open on the evidence. This was a brave move given that the primary Judge had found as a fact that there was no evidence that Dervish had visited the Englehart Display home or had had access to the Englehart Design and that the evidence was not strong enough for a contrary inference to be drawn.

The Appeal Court: design similarities were coincidental

As the Appeal Court noted, even where there is evidence of objective similarity, there remains with the copyright owner the legal burden of proving that the necessary causal connection exists. Furthermore, where there are similarities, it is a matter of impression and degree as to whether those similarities are so strong as to justify a finding of an inference of access to the original work. As a matter of logic, where the similarities are of unusual or distinctive features, the inference will be stronger. In this case, the similarities were not unusual or distinctive and in many areas there were differences. Thus, whilst there were clearly common elements between the two houses, these were explicable as coincidences borne out of the demands of the marketplace; a general proposition with which the experts from both sides agreed.

Lessons for copyright owners

The case illustrates the importance which the "other side" of the story plays in copyright infringement cases. What no doubt seemed like a strong case of infringement to Englehart and its advisors at the start of the proceeding was irretrievably weakened when the evidentiary trail did not reflect what the Court believed would have been the most likely scenario if there had been copying; that Dervish would have given its architect the Englehart drawings or been specific in his communications that he wanted to copy the Englehart Design. Furthermore, as the similarities were explicable by reference to market demands and were not of unusual elements, the case put by Englehart could not raise an inference that Dervish must have had access to the Englehart Designs; notwithstanding that the Court could not rely on Dervish's evidence.

Perez v Fernandez [2012] FMCA 2

In an Australian first, the Federal Magistrates Court of Australia has ordered an award of damages to an internationally renowned rap/hip-hop artist known as “Pitbull” (aka, Mr Armando Perez) for infringement of his moral right of integrity of authorship by a Perth DJ known as “DJ Suave” (aka, Mr Jaime Fernandez). This case is one of very few decisions to consider infringement of moral rights in Australia.

Author’s moral right of integrity

Part IX of the Copyright Act 1968 (Cth) gives authors of certain copyright works (including musical works) moral rights in relation to those works, one of which is the right not to have his or her work subjected to derogatory treatment (known as the right of integrity of authorship). Under the Copyright Act, a “derogatory treatment” means:

• doing something to a work which results in a material distortion of, mutilation of, or material alteration to, that work that is prejudicial to the honour or reputation of the author; or
• doing anything else in relation to a work that is prejudicial to the author’s honour or reputation.

"Sampling" of the Bon, Bon song

In 2008, Mr Fernandez arranged for Mr Perez to tour Australia and Mr Fernandez was to promote him. As part of that arrangement, Mr Perez gave Mr Fernandez an “audio drop” sound file of Mr Perez performing the words “Mr 305 [a self-reference to Mr Perez] and I am putting it right down with DJ Suave” to use to promote the tour. The tour was later cancelled.

In November 2010, Mr Perez released a song known as “Bon, Bon” in the United States. Mr Perez was the author of the musical work of that song. Sometime after receiving a copy of the Bon, Bon song, Mr Fernandez created an MP3 file of the song and deleted a prominent part of the lyrics from it, replacing it with the audio drop. He then uploaded the modified MP3 to his website where it was automatically streamed to users browsing the homepage. Mr Perez argued that those actions infringed copyright in the Bon, Bon song (owned by Mr Perez’s record label companies) and infringed Mr Perez’s moral rights.

Derogatory treatment of the song

On the issue of moral rights, Federal Magistrate Driver found that inserting the audio drop into the song made it appear as though Mr Fernandez was the subject of the song such that:

• new listeners of the song would have presumed that the altered section formed part of the original song; and
• repeat listeners would be left with the impression that Mr Perez had authorised the altered content of the song or that Mr Fernandez was mocking Mr Perez.

His Honour concluded that Mr Fernandez’s treatment of the song was “prejudicial to the author’s honour or reputation”. On the evidence, his Honour was persuaded that hip-hop artists go to great lengths to choose with whom they associate, those associations forming a central part of their reputation. Altering the song so as to (falsely) suggest that Mr Fernandez had an association with Mr Perez was therefore prejudicial to Mr Perez’s reputation. Consequently, Federal Magistrate Driver awarded damages to Mr Perez, including damages for injured feelings arising from the infringement, of $10,000.

Lessons for artists and other creative samplers

This decision serves as a warning to those in the music industry and the general public alike that mixing or sampling songs, adding or removing parts of songs, or even using a song in a context not authorised by the author of that song, might amount to a derogatory treatment of that song and therefore an infringement of the author’s moral rights. 

Celgene Corporation [2012] APO 12.

In a recent decision relating to an innovation patent, the Australian Patent Office has held that claims directed to a method of dispensing the drug thalidomide do not define a “manner of manufacture” and are therefore not capable of patent protection. The method was also found to lack novelty and an innovative step.

The decision provides clarification in relation to the scope of patentable subject matter and highlights the importance of selecting features for inclusion in dependent claims of innovation patents that provide a contribution to the working of the invention.

The thalidomide distribution patent

The patent at issue was innovation patent number 2011100687, which related to an improved method for dispensing drugs such as thalidomide to patients in order to reduce the risk of known adverse side effects. The method improved the monitoring and control of drug distribution by requiring a “prescription approval code” to be communicated to pharmacies by a risk management centre before prescriptions are filled.

The essential features of the method are:

• the registration of the prescriber, pharmacist and patient in a computer readable storage medium;
• the assessment of acceptable risk; and
• communication of a prescription approval code.

When examination of the patent ultimately reached an impasse an oral hearing was held.

Key issues of patentability, novelty and sufficient innovation

Based on examination of the patent the Hearing Officer identified the following key issues for determination:

1. whether reference to a method of treatment in the claims could render the method patentable subject matter;
2. whether the manner of manufacture objection could be overcome by including reference to an explicit treatment step in the claims;
3. whether there is any difference between a prescription approval and a prescription approval code; and
4. whether selection of a prescription approval code from a stored list amounts to an innovative step.

Did reference to a method of treatment in the claims render the method patentable subject matter?

Under Australian patent law the manner of manufacture requirement necessitates that an invention be a proper subject matter for the grant of a patent.

During examination the Examiner contended that the method merely represented a scheme for dispensing a drug and could not therefore be considered patentable subject matter. In response the patentee amended the first claim of its patent so that the preamble of the claim referred to a method of treating a patient with thalidomide. The patentee asserted that the claim was not a scheme, but rather a specific series of steps which define an improved treatment method, the outcome of which is a tangible product to treat patients with a serious disease.

The Hearing Officer noted that the first claim does not include an explicit step requiring administration of thalidomide to a patient, and as a result is more properly construed as a method of dispensing thalidomide as opposed to a method of actually treating a patient. The Hearing Officer went on to state that the method of dispensing thalidomide represents mere possession or non-possession of the drug by a patient that causes no change in the patient. Having regard to an earlier decision of the Full Federal Court¹ it was held that possession and transfer of property is not an effect that is capable of patent protection. The claims were therefore found to define non-patentable subject matter.

Could the manner of manufacture objection be overcome by including reference to an explicit treatment step in the claims?

The Hearing Officer recognised that the patentee could amend the first claim so as to include an explicit method of treatment step, and with this in mind considered whether such an amendment would overcome the manner of manufacture objection.

The Hearing Officer noted that the hypothetical claimed method relates to checking risk during the dispensing of thalidomide, which is analogous to a process of treating a patient whereby the patient double checks the instructions on the container prior to taking a tablet. It was found that whilst this was a sensible approach, "the essence of the method does not lie in the useful arts, or the field of economic endeavour". On this basis it was held that the addition of an explicit treatment step would not be sufficient to render the method a manner of manufacture.

Novelty - Is there any difference between a prescription approval and a prescription approval code?

During examination the Examiner alleged that four of the patent’s claims lacked novelty in light of a pre-existing US patent application ("the Maetzold patent"). The question of whether the Maetzold patent was novelty-defeating turned primarily on whether the prescription approval disclosed therein was the same as the prescription approval code required by the first claim of the thalidomide distribution patent. The patentee submitted that a "prescription approval" could be a simple YES or NO, whereas a "prescription approval code" is something different. The Hearing Officer understood this submission to mean "that a code is a symbol or sign that represents a message, whereas the word YES is the message".

In noting that the specification does not contain a definition of the term "prescription approval code", the Hearing Officer expressed difficulty in accepting that a word such as YES is not properly viewed as a code, and thus held that a YES or NO response could be regarded as a prescription approval code.

Does selection of a prescription approval code from a stored list amount to an innovative step?

Having dealt with novelty, the Hearing Officer considered whether the patent’s second claim involved an “innovative step”. A claim will involve an innovative step unless the invention defined therein would only vary from the prior art information in ways that make no substantial contribution to the working of the invention.

The patent’s second claim requires that the prescription approval code is generated from a list stored in the computer readable storage medium. Whilst the specification did not provide any explanation in relation to the contribution made by this feature, the patentee submitted that the use of a list to generate the prescription approval code can promote record keeping and tracking, and in view of the consequences of improper administration of the drugs, such benefits are important contributions to the working of the method.

The Hearing Officer did not accept this submission and stated that the benefit of promoting record keeping and tracking flows from the use of the prescription approval code itself. In deciding that the patent’s second claim lacks an innovative step the Hearing Officer remarked that locating a list in the computer storage medium is merely a matter of convenience that does not make a substantial contribution to the working of the invention. 

Implications of the decision

In cases where a specification considered as a whole discloses subject matter that does not meet the manner of manufacture requirement, it may not be possible to convert the subject matter into a manner of manufacture by insertion of a feature into a claim which in itself would be regarded as patentable subject matter. In the present case, the feature was the actual taking of thalidomide by the patient.

As it relates to innovative step, patentees would be well served by giving careful consideration to the features included in the dependent claims (of which only four may be included – innovation patents may only have five claims). In order to provide the best chance of surviving an attack on validity each dependent claim should ideally include a feature that makes a substantial contribution to the working of the invention.

On 6 February 2012 the patentee lodged an appeal against the decision in the Federal Court of Australia.

Endnotes

1. Grant v Commissioner of Patents [2006] FCAFC 120.

A bill which substantially reforms Australia's intellectual property laws was passed unamended by the House of Representatives on 20 March 2012. The Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 has now passed through both Houses of Parliament and is expected to receive Royal Assent within the next two weeks, after which it will become law.

Most provisions to take effect in 12 months

While the new experimental use exemption to patent infringement will commence the day after Royal Assent, the substantive provisions of the Bill will commence 12 months after that date. This 12 month lead time will provide the time necessary for the accompanying Regulations to be drafted and finalised, and for IP Australia to change its systems and train its personnel to process and examine applications according to the new provisions. It will also allow users of Australia's IP system time to prepare for the new regime.

New requirements for patentability

Of particular note are the "raised" requirements for patentability and for patent specifications, as these have the potential to apply to applications filed before the 12 month commencement date if an examination request is not filed prior to this date. It is likely that many applicants will take steps to request early examination to rely on the current, more lenient patentability and specification requirements, and this might also involve early national phase entry of international applications into Australia, and the early filing of divisional applications.

For more information about the impending changes to Australia's IP landscape, please see our comprehensive review of the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011.

UCP Gen Pharma AG v Mesoblast Inc [2012] FCA 210

On 15 March 2012, Justice Jessup of the Federal Court of Australia exercised his discretion to allow UCP Gen Pharma's "Revasc" pharmaceutical trade mark—indicated for use in the prophylaxis and treatment of venous thrombosis for hip and knee operations—to remain on the Register of Trade Marks, notwithstanding the fact that the mark had not been used in Australia during the statutory three year "non use" period.

In reaching this decision, Justice Jessup referred to and applied the principles relevant to the exercise of the court's discretion as recently clarified by the Full Court in Austin, Nichols & Co Inc v Lodestar Anstalt.

An in-depth analysis of this case will be published on our website shortly.

Davies Collision Cave Law acted for UCP Gen Pharma in the proceedings.

Austin, Nichols & Co Inc v Lodestar Anstalt [2012] FCAFC 8 ("Austin Nichols v Lodestar")

The Full Court of the Federal Court of Australia has recently overturned a decision to allow Lodestar's "Wild Geese" trade mark to remain on the Register of Trade Marks on discretionary grounds, despite the fact it had not been used during the statutory 3 year period. The Full Court's decision helpfully explains the considerations that a court may take into account in exercising its discretion to allow an "unused" mark to remain on the register, and identifies the qualities of probative evidence of a mark's reputation in Australia.

The decision at first instance

In June 2009, Austin Nichols appealed against a decision of the Trade Marks Office declining to remove Lodestar's Wild Geese trade mark for non-use. In the appeal, on 4 February 2011 Justice Cowdroy:

• accepted that the Wild Geese mark had not been used in Australia within the relevant non-use period (2002 to 2005); and
• found that there were no obstacles that prevented Lodestar from using its mark during the non-use period; but
• decided to exercise his discretion under s. 101 (3) of the Trade Marks Act to allow the unused mark to remain on the register, primarily because the reputation of the Wild Geese mark in Australia was such that removal had the potential to cause a degree of public confusion.

The Court's discretion to allow an 'unused' mark to remain on the register of trade marks

Part 9 of the Trade Marks Act sets out the circumstances in which a registered trade mark may be removed for non-use.

Section 92 (4) (b) of the Trade Marks Act provides that a person may apply to have a trade mark removed from the Register if the mark is not used for a specified 3 year period.

However, even if the applicant establishes the mark was not used in Australia during the relevant period, pursuant to s. 101 (3), the court retains a discretion to allow the unused mark to remain on the Register.

The key issues on appeal to the Full Court

On 25 February 2011, Austin Nichols sought leave to appeal Justice Cowdroy's decision, contending that his Honour had erred in exercising his discretion in favour of Lodestar. Leave to appeal was granted in March 2011.
On Appeal, the Full Court recognised that in order to succeed, Austin Nichols had to demonstrate that Justice Cowdroy:

1. acted on a wrong legal principle;
2. took into account irrelevant considerations and failed to consider relevant considerations; or
3. mistook a fact upon which he relied in reaching his conclusion.

For the reasons that follow, the Full Court concluded that Justice Cowdroy had mistaken a fact upon which he relied in deciding that the Wild Geese mark should remain on the Register, and therefore had erred in the exercise of his discretion.

1. Did Justice Cowdroy act on a wrong legal principle?

The Full Court held that in exercising the discretion under s.101 (3) of the Trade Marks Act, a court is not to determine whether there is "any reason" (the standard allegedly adopted by Justice Cowdroy) or "sufficient justification" (the standard proffered by Austin Nichols) to allow a mark to remain on the Register. Rather, the court must be positively satisfied that at the time it is called to make its decision, it is reasonable not to remove the mark from the Register.
The Full Court considered that Justice Cowdroy applied this test correctly in the exercise of his discretion, and declined to overturn the primary judge's decision on this ground.

2. Did Justice Cowdroy take into account irrelevant considerations or fail to consider relevant considerations?

The Full Court noted that the discretion under s. 101(3) is broad and limited only by:

• the subject matter, scope and purpose of the Trade Marks Act, which seeks to strike a balance between "various disparate interests" (including private commercial interests); and
• the subject matter, scope and purpose of the non-use provisions of the Trade Marks Act, which also seeks to balance public or consumer interests on the one hand, and the private commercial interests of rights holders on the other. In this respect, the Full Court explained:

The purpose of Part 9 is to provide for the removal of unused trade marks from the Register. In that regard it is plainly designed to protect the integrity of the Register, and in this way, the interests of the consumer. At the same time, however, it seeks to accommodate, where reasonable, the interests of the registered trade mark owners. Otherwise, there would be no need for the discretion.¹

Drawing upon these underlying policies, the following considerations were found to be relevant to the exercise of the discretion:

• the public interest in the integrity of the Register (described as the "guiding principle behind the discretion");
• use of the trade mark at the time the non-use application is filed;
• use of the trade mark after the relevant non-use period (provided that such use "is in good faith and not colourable"²);
• the trade mark owners' intention to use the mark, together with any evidence of abandonment (such matters may provide evidence to support a finding that the mark would not simply clutter the Register and have no practical use, a factor which is undoubtedly relevant to the key consideration of the purity or integrity of the Register);
• the private commercial interests of the owner of the trade mark;
• the presence or absence of obstacles to use facing the trade mark owner;
• the length of the period of non-use; and
• the likelihood of public confusion that would flow from the removal of the unused mark.

The Full Court found that Justice Cowdroy had taken these relevant factors into account, and had not allowed his decision to be influenced by irrelevant considerations.

The Full Court also recognised that the weight attributed to each of the above relevant factors was purely a matter for the primary judge, and could not be challenged on appeal.

3. Did Justice Cowdroy mistake a determinative fact?

To support its contention that the Wild Geese mark had a reputation (defined in this context as the recognition of the mark by the public generally) in Australia and such that its removal would cause public confusion, Lodestar submitted evidence of its domestic and international promotion and sale of Wild Geese products.

The exercise of the discretion by the Full Court

Following this analysis, the Full Court concluded that although the evidence showed that there was some brand recognition in Australia, the reputation was limited "to a select few individuals".³ In the absence of evidence of deceptive similarity between the Wild Geese mark and other unregistered marks, or evidence of actual confusion, the Full Court considered that this limited reputation was insufficient to found an inference that public confusion would result if the Wild Geese mark were to be removed from the Register. On this basis, the Full Court concluded that Justice Cowdroy's discretion had miscarried.

The Full Court concluded that:

The onus was on Lodestar to show that confusion would or, at least, could result from removal of the WG mark from the Register. In the absence of such evidence, there is no good reason why the WG mark should remain on the Register.⁴

This conclusion was supported by the fact that:

• Lodestar "did not use its mark for nearly eight years after it had been registered, and then not until three years after the non-use applications had been filed"⁵; and
• use of the mark in Australia after the non-use period was limited.

Consequently, the Full Court concluded that Austin Nichols' appeal should be allowed, and ordered removal of the Wild Geese mark from the Register.

Lessons: How to improve the prospects of resisting a removal action 

When faced with a non-use removal action, reliance upon the Court's discretion to allow a mark to remain on the Register under s.101 (3) of the Trade Marks Act is usually the last port of call for trade mark owners. Favourably, the Court's discretion is broad, and offers trade mark owners an opportunity to raise private commercial considerations in support of their case. 

However, when arguing the case for the exercise of the court's discretion, public interest considerations must also be addressed, typically with evidence showing:

1. the trade mark owner's intention to use its trade mark in Australia (to support a finding that it has not abandoned the registered mark); and
2. that confusion would, or at least could, result from the removal of the subject trade mark from the Register.

The importance of reputation evidence

In order to establish that removal could cause confusion, evidence of the mark's reputation in Australia is usually required. From the Full Court's criticisms of the reputation evidence in Austin Nichols v Lodestar, it is clear that the best reputation evidence is direct evidence of extensive use and awareness of the mark in Australia.

Reputation evidence based upon material bearing the mark (promotional or otherwise) must not only establish that the material bearing the mark is available in Australia, but that Australians have seen the mark in such material, such that the mark can be said to have entered the consciousness of the Australian public. 

Footnotes

1.  Austin Nichols v Lodestar at [38]
2. Austin Nichols v Lodestar at [41]
3. Austin Nichols v Lodestar at [66]
4. Austin Nichols v Lodestar at [73]
5. Austin Nichols v Lodestar at [70]

New generic top level domains (gTLDs) deadline looms

On 12 January 2012, Internet Corporation for Assigned Names and Numbers (ICANN) began accepting applications for new gTLDs. New applications will be accepted until 29 March 2012 to meet the 12 April 2012 application deadline. Unofficial lists show applications have been filed for a wide range of generic terms including .music, .bank, .dental and .food as well as applications for well known brands such as .canon, .deloitte, .motorola, .hitachi, .afl and .unicef.

The application fee of US $185,000 and the ongoing annual fees to be paid by a Registry Operator to ICANN, together with the intensive and onerous application process, have deterred some trade mark owners from applying. However, all trade mark owners should be ready for "Reveal Day" on 1 May 2012, when ICANN will publicly post details of all gTLD applications. After this, an Objection Period commences whereby anyone can submit a formal objection to a new gTLD application.

Importantly for trade mark owners, a formal objection can be filed on the grounds that the applied-for gTLD infringes the existing legal rights of a trade mark owner. A panel of experts will determine whether the potential use of the applied-for gTLD by the applicant takes unfair advantage of the distinctive character or reputation of the objector's registered or unregistered trade mark or service mark. The objection period will last for approximately 7 months. A formal objection must be accompanied with the dispute resolution filing fee which ICANN currently estimates could range from approximately US $1,000 to US $5,000 per party per proceeding. Further costs will then be incurred during the adjudication process. Trade mark owners should begin to familiarise themselves with ICANN's process for lodging a legal rights objection and begin coordinating with their attorneys to prepare a strategy for addressing new gTLD applications of concern.

ICANN begins cancellations of defensive .XXX gTLDs

ICANN registry, responsible for .XXX domain name registrations has begun cancelling .XXX registrations that were secured as blocking registrations during the Sunrise B period. In many cases, the registry has simply informed the owner that the domain name has been "cancelled" with no further information. However, a notification of cancellation does not necessarily mean the domain name will be offered for sale. Many of the domain names which have been "cancelled" by the ICANN registry have been withdrawn from the list for sale on the basis they correspond to names of political candidates, celebrity names and certain corporate brand names.

Trade mark owners who did not apply during the Sunrise B period can still take steps to protect their brand by filing an application in the current general availability period as a "blocking" registration. Trade mark owners can still also have recourse to the two main dispute resolution processed available to attack abusive .XXX domain name registration, being the Rapid Evaluation Service Policy (RES) and the Uniform Domain-Name Dispute Resolution Policy (UDRP). Trade mark owners could also challenge the eligibility of an .XXX domain name owner under the Charter Eligibility Dispute Resolution Policy (CEDRP). Unlike the UDRP however, a successful RES or CEDRP will only result in cancellation of a domain name.

Liberalisation of .pt Country Code Top Level Domain (ccTLD)

The entity responsible for the .pt ccTLD has recently announced that the eligibility criteria will be liberalised after 1 May 2012. In particular, after this date domain names in the .pt ccTLD will no longer need to be based on a corresponding trade mark registration. A two month Sunrise period launched on 1 March 2012 to allow trade mark owners to register their trade marks as domain names before the land rush period. 

Davies Collison Cave is proud to have been awarded ‘Australia Prosecution IP Firm of the Year 2012' by Managing Intellectual Property, the leading global resource for IP news and analysis. On Thursday 15th March, Brett Lewis, a partner of DCC attended the global awards ceremony, in London on behalf of the firm.

The Managing IP Global Awards are presented to leading firms in Europe, Africa, Asia and Latin America, in recognition of their success and achievements during the year. The Asia-Pacific shortlists are compiled by a team of researchers in Hong Kong based on information gathered over the past 12 months, including material obtained for the MIP Handbook.

Davies Collison Cave is proud to have won this global and prestigious award in 2006, 2007, 2008, 2010, 2011 and now in 2012.

In the lead up to winning this award Davies Collison Cave have been ranked by Managing Intellectual Property in the global 2012 patent survey as a top tier firm in both patent prosecution and patent contentious; and as a top tier firm in trade mark prosecution in Australia.

We thank our staff and our clients for contributing towards this great achievement.

SingTel Optus Pty Limited v Australian Football League [2012] FCA 138

The copyright dispute involving Australian telecommunications provider Optus and Australian digital sports broadcasting rights holders recently took on a new twist as Optus and the Australian Football League (AFL) returned to Court to ventilate fresh allegations against each other.

This latest case concerned comments made by the AFL's Chief Executive Officer, Andrew Demetriou, in the aftermath of the Federal Court's decision on 1 February 2012 that Optus had not engaged in copyright infringement by offering its TV Now service to individual subscribers for the purpose of recording free-to-air digital television (including AFL and other sporting broadcasts). Optus was held not to have infringed copyright in the sports broadcasts because the Court held that TV Now subscribers could rely on the "time-shifting" exception under section 111 of the Copyright Act, even though in some cases the delay between the live and recorded broadcasts was as little as two minutes.

Andrew Demetriou's statements: Optus "lifted content" 

On the weekend of 18 and 19 February 2012, the Herald Sun newspaper published an interview with Mr Demetriou. The published article included comments from Mr Demetriou that Optus' conduct in offering the TV Now Service was "akin to stealing" and that Optus was "lifting content" owned by the AFL and other sporting bodies. 

Optus immediately instituted proceedings against the AFL and Mr Demetriou, claiming that they had engaged in misleading and deceptive conduct in breach of section 18 of the Australian Consumer Law, and seeking to restrain the AFL and Mr Demetriou from making any further public statements about the case or about Optus.

Statements "honestly held" and not misleading

On 28 February 2012 Justice Edmonds dismissed Optus' case against the AFL and Mr Demetriou, holding that:

1. Mr Demetriou's statements were not made "in trade or commerce" because they were made as part of an interview about a wide range of topics, not all of which were related to the AFL or Mr Demetriou's position as CEO of that organisation, and not all of which were part of the AFL's usual trading activities; and
2. Mr Demetriou's statements, when viewed in context, were not misleading or deceptive, (notwithstanding that the Federal Court had previously held that Optus had not infringed copyright) because:

• they were statements of Mr Demetriou's "honestly held opinion", not statements of fact; and  
• alternatively, Mr Demetriou's statements were "a vernacular or shorthand description of what Optus is incontrovertibly doing", namely providing "equipment [that] records and … streams to its customers, the broadcast of games in which AFL holds the copyright", without paying any money to the AFL for that content.¹

The parties will again return to Court on 14 and 15 March 2012, when the Full Court hears the appeal of the original Federal Court decision dismissing the copyright infringement claims.

Footnotes

1. At paragraphs [19] and [20] of the judgment.

SL6 Limited v Fat Duck Pty Ltd [2012] FCA 71

A recent decision by the Federal Court of Australia involving the owners of renowned international chef Heston Blumenthal's UK restaurant "The Fat Duck" reinforces the importance of complying with Court orders.

On 7 February, 2012, the Federal Court confirmed and extended orders it made previously against the proprietors of a Sydney restaurant restraining them from using the "Fat Duck" trade mark.

A history of non-compliance

The history of the case is as follows:

1. The Fat Duck restaurant, specialising in French cuisine, opened its doors in Sydney's Darling Quarter in around September, 2011.
2. The Blumenthal companies issued a proceeding in the Federal Court against the Sydney restaurateurs on 3 November, 2011, seeking to restrain them from using the "Fat Duck" name.
3. On 30 November, 2011, the Court made orders in the original proceeding by consent. In general terms, these orders included an order that the Sydney restaurateurs be restrained from using the words or marks "Fat Duck", "Fat Duck Rotissoire Kitchen" and/or "Fat Duck Catering" or any other words or marks which are substantially identical or deceptively similar to them.
4. Despite changing their name to names including the words "The Naked Duck" after the original orders were made, the Sydney Restaurateurs continued to use the "Fat Duck" trade mark in the form of "Vive Le Fat Duck" and "Fat Duck Rotissoire Kitchen" on business cards and on signage at their Darling Quarter restaurant.
5. The Sydney restaurateurs ignored the further demands made on them by the Blumenthal companies' lawyers to comply with the Court orders and the matter came on before the Federal Court on 7 February, 2012 pursuant to the liberty to apply granted to the Blumenthal companies in the original orders.
6. On 25 January, 2012 the Blumenthal companies filed a further interlocutory application to enforce the orders made by the Court in the original proceeding on 30 November, 2011.

Two ways to deal with non-compliance with Court orders

In making the orders by consent pursuant to the liberty to apply provision in the original orders, Justice noted that it would have been equally open to the Blumenthal companies to pursue the Sydney restaurateurs for contempt of court. The orders made on 7 February effectively compel the Sydney restaurateurs to comply with the orders made on 30 November, 2011 and extend those orders to include references to the words and marks "Vive Le Fat Duck" and "Le Fat Duck Bakery". (Interestingly, the only reference to "Le Fat Duck Bakery" is in the orders; it does not appear in the reasons for judgment.)

Curiously, despite the Blumenthal companies' objection to the Sydney restaurateurs' adoption of the name "The Naked Duck" in the correspondence issued by their lawyers, this was not pursued before the Court in the subsequent application.

Sydney restaurateurs ordered to pay costs

The Court also ordered the Sydney restaurateurs to pay costs to the Blumenthal companies on a party/party basis. (The Blumenthal companies had made a claim for costs on an indemnity basis, but the Court rejected that argument.)

Epoch Company Ltd v Flowil International Lighting (Holding) B V [2011] NZIPOTM 38

This recent New Zealand trade mark opposition decision confirms that there must be exceptional circumstances in order to justify an extension of time to serve evidence in trade mark opposition proceedings. As the deadlines to serve evidence in a New Zealand trade mark opposition are reasonably short, the decision reinforces the importance of moving swiftly in New Zealand opposition proceedings.

Flowil International Lighting (Holding) B V ("Flowil") opposed registration of Epoch Company Ltd's ("Epoch") application No. 829490 for "Sylvanian Families". After obtaining one extension and serving part of its evidence in support of the opposition, Flowil applied for a further two week extension of time. The Intellectual Property Office of NZ proposed to grant the extension and to allow a further extension on its own initiative. Epoch objected to these extensions and requested a hearing.

The law in New Zealand relating to extensions

Regulation 32 of the NZ Trade Mark Regulations states that:

The Commissioner may, if satisfied in a particular case that there are genuine and exceptional circumstances that justify an extension of time, extend the time specified by these regulations for a step to be taken, except where these regulations stipulate that time must not be extended.

In applying that regulation to Epoch's objection, the Assistant Commissioner of Trade Marks referred to the judgment of Justice Hammond in Awa v Independent News Auckland Limited¹ and agreed that the term "exceptional circumstances" is "usually construed as meaning something like 'quite out of the ordinary' and obviously the onus must be on the applicant to establish entitlement in face of the statutory language".

The Assistant Commissioner held that a party seeking an extension of time must establish that there are genuine and exceptional circumstances, which are to be assessed as a matter of fact, not a matter of judicial discretion. The circumstances must also establish a causal link between the circumstances and the need for an extension of time.

The grounds relied upon for the extension to serve evidence

In this case the specific grounds which Flowil's attorney relied upon for its contested objections were as follows:

We are still awaiting further evidence from the opponent [Flowil] concerning their international operations. At this point the extent of this evidence is uncertain and therefore we are requesting a short extension of time of two weeks from 8 August until we have further information.

The grounds set out below are reiterated, as is the offer to reciprocate consent to additional time sought by the applicant in due course. We do note, however, that Europe is currently in the middle of the traditional summer holiday period akin to NZ’s Christmas/New Year break and this no doubt will effect [sic] the turnaround times in supplying information.

Epoch objected on the basis that these circumstances were not exceptional. The Assistant Commissioner noted that if the relevant regulations required only "genuine and reasonable circumstances" then Flowil would have satisfied the requisite criteria. However the Assistant Commissioner concluded that the facts relied upon by Flowil fell short of "exceptional circumstances." As such, the Assistant Commissioner did not go on to consider whether or not to exercise her discretion under regulation 32.

Lessons for trade mark opponents in New Zealand

The case demonstrates that New Zealand opposition deadlines will be strictly enforced, and that extensions of time may only be available in exceptional circumstances. This contrasts sharply with Australian trade mark opposition proceedings, in which extensions of time of up to six months are easily obtained.

In practice, parties to New Zealand opposition proceedings should consider agreeing to suspend the proceedings if they are genuinely involved in negotiations to attempt to resolve the matter. If one party decides to play "hardball" and not consent to the opposite party's request for an extension of time then it will need to be prepared to meet its own tight evidentiary deadlines, as any extension request may otherwise be contested successfully.

Endnotes

1. Awa v Independent News Auckland Limited [1996] 2 NZLR 184 at 186.