On 15 April 2013, some important (and positive) changes came into force regarding the Australian Customs seizure provisions in the Trade Marks Act 1995 and Copyright Act 1968, as a result of the Raising the Bar reforms to Australian intellectual property legislation.

The three major changes to Customs seizure provisions

There are three major changes to customs seizure procedures which will affect trade mark and copyright owners who have Notices of Objection in place. These are:

1. The initial onus will shift from the rights holder to the importer in relation to goods seized by Australian Customs pursuant to a Notice of Objection. The seized goods will now be forfeited to Customs unless the importer makes a claim for them.
2. Rights holders may now be able to obtain additional information about the importer of the seized goods (and possibly also the exporter) from Customs.
3. Rights holders may now be able to inspect samples of the seized goods in some circumstances, rather than just relying on photographs to determine whether the goods are genuine or counterfeit.

In practice, these changes mean that in the majority of cases, rights holders will not need to take steps, such as sending a letter of demand, to ensure counterfeit goods being imported into Australia are forfeited to, and destroyed by, Customs.

It appears that Australia may be one of the first jurisdictions in the world to adopt this new "reverse onus" procedure for forfeiture of goods. The other changes to the Customs provisions (regarding the provision of additional information about the importer and exporter and the right to inspect samples) bring Australia into line with practices that are already occurring in other jurisdictions, including the European Union.

The new Australian customs seizure procedure – in practice:

Here is how the new procedure works:

1. The rights holder lodges a Notice of Objection with Australian Customs listing the registered Australian trade marks or copyright works that it would like to protect. The Notice remains in force for 4 years.
2. Customs seizes the goods (which bear a trade mark or contain a copyright work that is listed on the Notice of Objection) if it suspects they are counterfeit and provides the importer and rights holder with a Seizure Notice. The Seizure Notice will set out the claim and action periods (explained below), and the name and address – of the rights holder (if the notice is given to the importer), or the importer (if the notice is given to the rights holder);
3. The importer has 10 working days ("the claim period") after the Seizure Notice is given to lodge a Claim for Release with Customs. In the Claim for Release, the importer must provide their name, address and telephone number and the grounds for seeking the release of the seized goods;
4. If no Claim for Release is lodged, the goods are automatically forfeited to Customs (and eventually destroyed). (There is some provision for late claims to be filed by the importer and therefore Customs must hold onto forfeited goods for 30 days in case a late claim is lodged);
5. If a Claim for Release is lodged, then the rights holder has 10 working days ("the action period") to institute court proceedings against the importer, or persuade them to forfeit the goods, failing which the goods will be released to the importer.

It is likely that in many cases an importer of counterfeit goods will not lodge a Claim for Release at all and the goods will be automatically forfeited to Customs.

The only potential downside to the new procedure is that a rights holder's 10-day action period cannot be extended (unlike the previous system, which allowed for a 10-day extension). This provides a rights holder with a very tight timeframe to reach agreement with the importer to forfeit the goods or to institute legal proceedings against the importer to prevent the release of the goods, if the importer lodges a Claim for Release.

In most cases, under the new system, rights holders who have a Customs Notice in place need not do anything to ensure counterfeit goods detected by Australian Customs are forfeited and destroyed. Of course, rights holders can still choose to send a letter of demand or take other action against importers of counterfeit goods, but in the majority of cases, it will not be necessary to send a letter to persuade an importer to forfeit goods.

These are positive changes which should result in better cost-effective mechanisms for rights holders to prevent counterfeit goods from entering Australia.

Next steps for rights holders

If a rights holder already has a Customs Notice in place:

These changes automatically took effect from 15 April 2013. There is no need for current holders of an Australian Notice of Objection to do anything to avail themselves of the new procedure.

If a rights holder does not have a Customs Notice in place:

Rights holders who have not lodged a Notice of Objection with Customs should contemplate lodging such a notice as it now provides a simpler and more effective means of identifying potentially counterfeit goods entering Australia.

Should you wish to lodge a Notice of Objection with Customs, or if you have any questions about the new Australian Customs seizure procedures, please contact us.

From 23 April 2013, Google’s Trademark Adwords policy will be updated so that Google will no longer restrict advertisers purchasing and using trade marks as keywords in Google Ads (previously known as sponsored links). These changes affect Australia, China, Hong Kong, Macau, Taiwan, New Zealand, South Korea and Brazil and bring the Australian Google Adwords policy into line with the rest of the world.

This policy change follows the High Court's finding that Google was not responsible for the content of third party Adword advertisements (formerly sponsored links) displayed on Google search result pages (see http://www.davies.com.au/pub/detail/683/google-not-responsible-for-misleading-and-deceptive-adword-advertisements-high-court).

How will the change to the Google keyword policy affect trade mark owners?

Below is an example to illustrate the change:

Company A and Company B are competitors.  Company A has purchased and is using Company B’s trade mark as a keyword to trigger its Google Ad. When a user enters the trade mark into the Google search engine, an ad appears in the Google Ads section (previously the Sponsored Links section).

Regime before 23 April 2013: Company B could file a Trademark Complaint with Google complaining about use of its trade mark as a keyword and Google would restrict Company A from bidding on the trade mark as a keyword.

Regime after 23 April 2013: Google will no longer intervene to restrict Company A using Company B’s trade mark as a keyword.  In addition, if Company B had previously filed a Trademark Complaint, Google will no longer restrict that use.

What can trade mark owners do to prevent use of their trade marks in Google Ads?

Despite this policy change, trade mark owners still have the following options:

1. to complain to Google about unauthorised use of their trade mark in Ad text.  In other words, trade mark owners can still complain if their trade mark is being used in the text of the Google Ad.  Google will restrict this use;
2. depending on the circumstances, to take action under the Australian Consumer Law 2010 (Cth) directly against the advertiser (in the above example, Company A) if the advertiser's use of the trade mark is likely to mislead or deceive the public into believing that when they click on the Ad they will be taken to the trade mark owner's website or into believing that the advertiser or its goods/ services are somehow associated with the trade mark owner or its goods and/or services.

Implications for trade mark owners in relation to Google Adwords

All is not lost!  Based on the material before the High Court, the public understands the difference between Google Ads (formerly sponsored links) and organic search results.  As such, consumers appreciate that the Google Ads that appear at the top or to the right hand side of organic search results are just that, paid advertisements and that the organic search results are those of the trade mark owner.  Now that Google has avoided responsibility in the High Court of Australia, it would appear that Google is taking a more relaxed approach to its Adwords policy.  Trade marks owners can still take advantage of other avenues for recourse against advertisers.

The new policy is already in effect in all other regions throughout world.

To learn more about this trademark policy revision, visit :
http://support.google.com/adwordspolicy/answer/177578?hl=en&rd=1

Delnorth Pty Ltd v Commissioner of Patents [2013] FCA 165 (6 March 2013)

This decision concerns an appeal to the Federal Court of Australia following re-examination of an Australian standard patent directed to roadside posts (the patent) in the name of Delnorth Pty Ltd (Delnorth) by the Commissioner of patents.  Re-examination resulted in a number of claims of the patent being considered to lack an inventive step and being revoked.

Background - Delnorth and Dura-Post

Delnorth operates in the field of highway, traffic and roadside products. Delnorth has previously been involved in other litigation with Dura-Post (Australia) Pty Ltd (Dura-Post) in respect of other related patents which are also directed to roadside posts.

Prior to the re-examination process, grant of the patent was successfully opposed by Dura-Post¹, and the Commissioner’s delegate considered that claims 1 to 36 lacked an inventive step.  Delnorth appealed the delegate’s decision to the Federal Court but an administrator was appointed to Dura-Post before the matter was heard. The administrator advised the court that he withdrew Dura-Post’s objection to the patent and as Dura-Post bore the onus of proving that the claims would be invalid if granted, the patent proceeded to grant. 

Re-examination and the decision of the Commissioner's delegate

Following grant the patent was re-examined on the basis of evidence filed in the opposition proceedings, resulting in a number of claims of the patent being considered by the delegate to lack an inventive step so that they were subsequently revoked.  The delegate’s decision is the subject of this appeal.

The delegate considered that certain claims of the patent did not involve an inventive step in light of two prior US patents² (the Pellowski patents).  In reaching this decision, the delegate appreciated that the claims of the patent would only lack an inventive step in light of the Pellowski patents if either document could be considered a piece of information which a person skilled in the art could be “reasonably expected to have ascertained, understood and regarded as relevant”, so as to satisfy section 7(3) of the Patents Act 1990 (the Act).

Lack of evidence that discussed the Pellowski patents

The expert evidence that was filed in the opposition discussed a number of prior art documents and upon consideration of the evidence, the delegate considered that roadside posts have a reasonable level of associated patenting activity and that a person skilled in the art could have been reasonably expected to review patent literature at the priority date of the invention.

Although the evidence suggested that the skilled addressee could be expected to conduct patent searches, there was no evidence that specifically discussed the Pellowski patents and showed that patent searches would have extended to these documents, which were published in the 1960’s and well before the other documents addressed in the evidence. 

The decision - the evidence did not support a finding of lack of inventive step of the claims of Delnorth's patent

Justice Nichols found that the evidence did not justify a finding that the Pellowski patents could be considered information which a person skilled in the art could be “reasonably expected to have ascertained, understood and regarded as relevant”, so as to satisfy section 7(3) of the Act and render any of the claims as lacking an inventive step.  Accordingly, Justice Nichols set aside the delegate’s decision to revoke claims of the patent.

It was noted by Justice Nichols that a “peculiar” position exists in which claims of the patent which were “in substance, the same” as claims of a related innovation patent which were considered in a separate decision³ to not involve an innovative step.  In this regard, Justice Nichols commented that a claim lacking an innovation step “might not be invalid on the basis that it lacked any inventive step”.

In summary, although claims 1 and 2 of the related innovation patent were found to lack an innovative step in light of the Pellowski patents, the evidence failed to show that these same patents were pieces of prior art information that could render the claims of the patent as lacking an inventive step.

Considering Raising the Bar

With the terms "ascertained, understood and regarded as relevant" being removed from the Act under the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, were the same facts considered under the new provisions a different outcome may have been likely.

Endnotes:

1. Delnorth Pty Ltd v Dura-Post (Australia) Pty Ltd (2009) 81 IPR 396
2. US patent nos. 3,312,156 and 3,362,305
3. Delnorth Pty Ltd (ACN 051 954 977) v Dura-Post (Australia) Pty Ltd (ACN 101 287 512) [2008] FCA 1225

On 12 April 2013, the Federal Magistrates Court of Australia changed its name to the Federal Circuit Court of Australia. The change comes about as a result of legislation passed last year which aims to better reflect the court's role as a federal court, and to emphasise the Court's extensive circuit work. In addition to the Court's new name, Federal Magistrates also became known as Judges from 12 April.

The name change came into force just prior to the new Raising the Bar legislation coming into effect on 15 April 2013. From 15 April, the Federal Circuit Court has increased intellectual property jurisdiction, namely in trade mark and design matters.

The new website for the Federal Circuit Court is www.federalcircuitcourt.gov.au.

Today marks the commencement of The Intellectual Property Laws Amendment Act 2012. This is the most significant amendment to Australia's intellectual property laws since the Patents Act 1990 was enacted. As of today the Act raises the requirement for patentability (particularly inventive step) and the description requirements for patent specifications, it changes trade mark opposition case management, enforcement and customs siezure provisions. Below is a summary of the key changes now enacted.

Key changes for patents

There will be shortened time periods for requesting examination and for securing acceptance of a patent application. The period for requesting examination following the issuance of a Direction to Request Examination will be reduced from 6 months to 2 months and the previous 21 month period within which an application must be accepted (following issuance of the first examination report) is now 12 months. As patent examiners will have greater scope to maintain objections under the new law it is likely to be necessary for examination issues to be argued at a hearing more often than previously. Due to the shortened acceptance period it will be important for applicants to progress examination quickly to allow for time for objections to be resolved and for hearings to take place.

Key changes for trade mark opposition case management

Timeframes

The period to file a Notice of Opposition and the period to file evidence in reply has been shortened from 3 months to 2 months. It is no longer possible to obtain an extension of time to file a Notice of Opposition on the basis that further time is required to undertake genuine research or on the basis of negotiations with the applicant. It will now be more difficult to obtain extensions of time to file evidence and extensions will only be allowed if a party has acted promptly and diligently at all times throughout the period.

Notice of opposition

A Notice of Opposition now comprise two documents:

• A Notice of Intention to Oppose; and
• A Statement of Ground of Particulars due one month from the filing of the Notice.

If grounds are not sufficiently particularised then the Registrar has the power to amend the Statement to remove certain grounds or to dismiss the opposition outright. Amendments to the Statement will only be allowed if the Registrar is satisfied that the amendment relates to information which the opponent could not have reasonably have known at the time of filing the Statement.

In a positive development, once the Statement of Ground of Particulars is filed, deemed adequate, then the applicant must file a Notice of Intention to Defend the opposition otherwise the application will lapse.

Once the Statement of Ground of Particulars is filed, it will be open to the parties to request a cooling off period of six months which may be extended once by six months.

Key changes to enforcement

The Act introduces new summary offences which have lower thresholds of fault and lower penalties. The maximum penalty for indictable offences is increased and falls more in line with other IP legislation. In addition, it will now possible to obtain additional damages in trade mark infringement proceedings. It is also now possible to appeal a decision of the Registrar to the Federal Circuit Court.

Key changes to customs seizure provisions

The onus is now on the importers of seized goods to make a claim for the release of the goods if they wish to have them returned. This is a significant change as under the previous system it was often difficult to track down counterfeit importers. It is hoped importers of counterfeit product will now simply allow the product to be impounded by customs. This will mean that trade mark owners will often not have to do anything to ensure counterfeit goods never get on the market (thus cutting enforcement costs). The Act also gives Customs increased powers to provide contact details for the importer and exporter of the seized goods and allows for inspection of the goods.

For more details on the Raising of the Bar Act 2012 please visit www.davies.com.au/raisingthebar

Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135

On 23 November 2012, Justice Foster of the Federal Court dismissed an application for injunctive relief by Snack Foods Limited against its competitor, Premier 1st. Snack Foods was planning to launch a proposed new corn chip product under the mark "Popped Corners". In its application for injunctive relief, it sought to restrain Premier 1st from importing and selling a similarly named popped corn chip product in Australia called "Popcorners". In his reasons, handed down on 25 February 2013, Justice Foster held that despite finding that a prima facie case of infringement had been established, the balance of convenience and justice favoured refusing Snack Foods' application for injunctive relief.

Snack Foods' "Popped Corners" trade mark

Snack Foods claimed that in late 2010, it began to develop a popped corn chip product for Australian consumers to be marketed under the trade mark "Popped Corners". In June 2011, it filed an application to register the "Popped Corners" mark, which was subsequently registered in January 2012. According to Snack Foods, in late November 2012, the product was at an advanced stage and ready for release to the Australian market in March 2013.

According to Premier 1st, it started negotiating a distribution agreement in or about March 2011 and subsequently entered into an arrangement with Medora Snacks (also a respondent in the proceeding), to import and distribute a popped corn product manufactured in the United States by Medora and sold under the name "Popcorners". Medora owns the trade mark for "Popcorners", which was registered in the United States in March 2010.

After learning of Premier 1st's plans, Snack Foods sought to restrain Premier 1st from importing, selling, offering for sale, distributing, advertising or promoting the "Popcorners" product in Australia on the basis that the "Popcorners" mark was substantially identical or deceptively similar to the "Popped Corners" registered mark.

General principles regarding interlocutory injunctions

In deciding whether to grant an interlocutory injunction, Justice Foster referred extensively to the Samsung Electrics Co Ltd v Apple Inc case.¹ In that case, the Federal Court set down some general questions to consider, which were:

1. is there a serious question to be tried (or has the applicant made out a prima facie case)?;
2. does the balance of convenience favour the granting of an injunction? One of the matters a Court must consider in assessing the balance of convenience is whether the applicant would suffer irreparable harm (for which damages would not be an adequate remedy), if an injunction were not granted.²

Was there a serious question to be tried?

Premier 1st accepted that Snack Foods had established a prima facie case of infringement of its "Popped Corners" trade mark due to the similarity of the trade marks.³ However, Justice Foster held that Premier 1st also had reasonable prospects of defending the infringement action and of securing the cancellation of the "Popped Corners" mark⁴ on the basis of its arguments that:

1. Snack Foods was not the true owner of the trade mark when it applied in June 2011 for registration in Australia; and/or
2. the use of the "Popped Corners" trade mark in Australia was likely to mislead or deceive and cause confusion on the basis of Medora and Premier 1st's prior reputation in Australia; and/or
3. Premier 1st had a defence of honest concurrent use.⁵

The balance of convenience and justice

Justice Foster referred extensively to the Samsung v Apple case.⁶ In considering where the balance of convenience lay, the court in that case said that:

The assessment of harm to the plaintiff, if there is no injunction, and the assessment of prejudice or harm to the defendant, if an injunction is granted, is at the heart of the basket of discretionary considerations which must be weighed as part of the court's consideration of the balance of convenience and justice.⁷

Justice Foster considered a range of discretionary factors, most of which were in Premier 1st's favour. His Honour took into account the following:

• Whereas the potential harm to Snack Foods if the injunction was not granted was almost entirely speculative,⁸ for Premier 1st, there was a real and significant potential loss that would be caused if an injunction were granted. In this regard, Premier 1st put forward evidence regarding its extensive marketing campaign of the "Popcorners" products, the potential damage to its supply relationship with Woolworths if it were not able to supply the product, and the potential risk of liquidation to the company if it were unable to sell its "Popcorners" stock. In reviewing this information, Justice Foster held that there would be almost certain prejudice to Premier 1st if the injunction was granted.⁹
• It appeared that Snack Foods was aware of Medora's registered trade mark as early as February 2011 and it could be reasonably inferred that Snack Foods made the trade mark application for "Popped Corners" in circumstances where it was well aware of Premier 1st's and Medora's businesses and the "Popcorners" registration in the United States.¹⁰
• Snack Foods' delay in bringing the application after hearing of the intentions of Premier 1st to import and sell in Australia the "Popcorners" products.¹¹ His Honour noted that Snack Foods could have pressed for an early final hearing but instead chose to pursue interlocutory relief on a contested basis.¹²
• Since at least January 2012, a third party, Dainty Food Australia Pty Ltd, had imported into Australia and supplied to retailers such as Coles and Woolworths, kosher popped corn products bearing the "Popcorners" trade mark, yet Snack Foods had made no contact with Dainty until 1 November 2012.¹³ This further highlighted Snack Foods' delay in acting.

After considering all these matters, Justice Foster concluded that the balance of convenience and justice favoured the refusal of interlocutory relief to Snack Foods.¹⁴

Issues to consider in applications for interlocutory relief

Snack Foods is yet another case where an intellectual property rights holder has been refused interlocutory relief, even though it has established that it has a prima facie case of infringement. This case highlights the difficulties of obtaining an interlocutory injunction and matters that a court will take into account when assessing the discretionary considerations going to the issue of the balance of convenience, including whether:

• a respondent has a good defence to infringement and any prospects of having the trade mark(s) which it has allegedly infringed cancelled;
• an applicant has delayed in applying for interlocutory relief;
• an applicant has "clean hands" when making the application (for example, whether the applicant knew of any pre-existing trade marks, any similar products or any other rights of third parties and had done nothing); and
• a respondent has established the likelihood of irreparable or certain damage should the injunction be granted.

Lessons for trade mark owners

• This case serves as a reminder that trade mark owners should regularly monitor their competitors' products, and act quickly when potentially infringing products are discovered in the marketplace. This may assist rights holders in successfully obtaining interlocutory relief to restrain the sale of those products, pending a full trial.
• In addition, when applying for urgent injunctive relief, trade mark owners should ensure that the validity of their mark is likely to withstand an attack by an infringing party.

Endnotes

1. Samsung Electronics Co Ltd v Apple Inc (2011) 286 ALR 257.
2. Ibid at [57], [61]-62].
3. Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [25]. At [31], Justice Foster also accepted that a prima facie case had been established by the Applicants.
4. Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [61].
5. Ibid [26] – [28].
6. Samsung Electronics Co Ltd v Apple Inc (2011) 286 ALR 257.
7. Ibid [62].
8. On the question of damages, his Honour considered that any potential harm to Snack Foods was almost entirely speculative as its "Popped Corners" product was not yet on the market, and any comparisons of the impact of the "Popcorners" products on Snack Foods' products were purely hypothetical (Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [52], [62]).
9. Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [63].
10. Ibid [53] – [55].
11. Ibid [65] – [66].
12. Ibid [66].
13. After which Dainty gave an undertaking not to supply the kosher "Popcorners" products pending the determination of the proceeding (Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [11] – [12]).
14. Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135, [67].

As is reasonably well known now, intellectual property (IP) rights can represent powerful business tools that can be used to help secure market position.

An IP right, in the form of a registered patent, trade mark, or design can be used to establish an absolute market monopoly around new innovations important for your business growth and development.

Many local businesses now use the IP rights regime in Australia and overseas but are those businesses getting the most effective use out their IP rights?

What many businesses don't realise is their rights don't need to be at the heavy end of a contentious and expensive infringement action – their rights can be working quietly in the background 24/7, pre-emptively protecting market position.

This passive protection role can be achieved through simple and effective marking practices, to convey details of the IP rights to the public and competitors in particular.

Rights can prevent infringement

Many business owners may not be aware, but from an IP practitioners perspective, the passive force of IP rights is very evident.

We regularly see clients who seek non-infringement advice before initiating a business plan, even before they enter a market, concerned that there are no relevant IP rights to interfere with their freedom to operate. If IP rights are found, such clients will often elect not to proceed with a particular project, adopt an alternative product, or possibly enter negotiations for a licence.

So the trick is to make your competitors aware of your rights. Often this is done after the event, when instances of infringement become apparent and the matter can be resolved with a simple 'cease and desist' letter. But there is a risk that, by that stage, your competitor is too financially committed to stop the infringement, and will then seek to defend their position.

If your competitors are not aware of your rights there is also a chance they might innocently infringe your IP rights. Innocent infringement provides an infringer with a defence that will allow them to escape paying financial penalties, even if infringement is established in Court.

As such, it again comes down providing effective notification to competitors of the existance of any relevant IP rights, to act as a pre-emptive deterrent and to remove access to the innocent infringer defence.

Conventional Marking

Traditionally, relevant notification has been provided by marking products directly with product specific registration numbers or wording. Many people would be aware of the "Patent Pending", "Patent Applied For" or "Registered Design" wording.

This practice still has relevance for products with few associated IP rights. However, today, any one company can have a multitude of IP rights across multiple jurisdictions. A single product such as a computer tablet may, for example, have rights relating to individual components, a manufacturing technique, a method of use, various registered designs or the like, or a combination of all of those forms of protection. Those various forms of protection may also apply across an entire range of products and business divisions.

The scope of the IP rights may also differ across different jurisdictions.

With different products, and different types of IP rights and jurisdictions, traditional marking practices can become unmanageable and, in some case, impractical.

The distance between a competitor being aware of your product and them being able to clearly identify the relevant IP rights needs to be a short as possible for your IP rights to work in their pre-emptive capacity.

So how is it possible to accurately convey to competitors the particular IP rights they should be aware of, where multiple rights exist?

Virtual Marking

Like many other modern day business practices, traditional marking techniques are migrating online. "Virtual marking" is a new and growing trend for IP rights marking practices.

Virtual marking allows all information relating to IP rights to be easily and readily stored online.

So instead of having to mark all goods independently with individual numbers and details, only a single website address or URL needs to be identified, with all relevant rights details then stored online.

Imagine the comparative ease with which a competitor can now be taken to a menu list where the relevant rights can be located by company name, product name or brand name. Background IP rights that may not be readily apparent from the product itself can also be readily identified, such as patents directed to manufacturing techniques and the like.

Not only does this improve the efficiency and effectiveness of information transfer, to satisfy conventional marking requirements, virtual marking also provides the rights holder with a tool to keep track of their own IP rights and portfolios.

Virtual marking has potentially significant cost advantages too. Only a single address or URL is needed for an entire product range, so multiple and individual printing and tooling is not required for each product.

The ultimate cost saving, however, comes from your IP rights being allowed to fulfill their passive role in protecting market share by notifying competitors of those rights.

It should be noted that virtual marking is a relatively recent development. In the USA, the America Invents Act recently introduced new patent laws and officially sanctioned the use of virtual marking as a legitimate means of providing patent rights information. However at this point, Australia has not yet officially recognised the practice, and there has been no judicial comment on the role of virtual marking in removing an innocent infringer defence.

This article was originally published in the Western Sydney Business Access and has been republished here with permission
 

Sebel Furniture Limited v Furnware Limited [2013] APO 19 (26 February 2013)

Successfully overcoming an inventive step objection raised by an Examiner at the Australian Patent Office has historically been relatively straightforward. In recent years, the Patent Office has endeavoured to be tougher in the application of the inventive step tests. A recent decision includes comments from the Delegate of the Commissioner of Patents that provide guidance on the current position taken by the Patent Office, and this is valuable for responding to objections raised in Examiner's Reports on patent applications.

Nature of the dispute

Furnware Limited is the applicant of Australian Patent Application No. 2004283634, which relates to recline mechanisms for seat backs and bases. Sebel Furniture Limited opposed grant of a patent on the application. In addition to a challenge of the inventive step, Sebel raised lack of novelty and lack of clarity grounds.

The lack of inventive step challenge

Before comparing the documents and claims in detail, the Delegate of the Commissioner of Patents addressed two preliminary requirements to the inventive step assessment as follows:
The identity of the person skilled in the art: the Delegate considered that this would be a furniture designer with possession of "all the engineering competencies relevant to the art of furniture design, and tilting mechanisms in particular".

The common general knowledge in the art: acknowledging the very limited declaratory evidence, the Delegate considered that it could only be said with confidence that the common general knowledge in this art included providing "tilting mechanisms for seats and/or back rests in all their manifestations".

The Delegate then considered whether the claimed invention lacked inventive step (in other words, was obvious) from two different approaches:

1. Was the invention obvious in light of a first prior art document (US Patent No. 2,796,920) when combined with a second prior art document (US Patent No. 4,890,886)?
2. Was the invention obvious in light of the second prior art document?

First approach in assessing inventive step

In order for the first approach to succeed in finding the claimed invention lacking inventive step, two separate enquiries were required. The first enquiry is whether "the person skilled in the art could reasonably be expected to have combined" the first and second documents. If the documents can be combined, then the second enquiry is whether the claimed invention would have been obvious in light of the combined disclosure of the first and second documents.

The Delegate recognized that the first document described a mechanism that possessed all but one of the features defined in the relevant claim, and indicated that this represented a fundamental difference. The Delegate found that the omitted feature was disclosed in the second prior art document. Therefore, all the features of the claimed invention were present in the two documents. In the first approach it was necessary that the first and second documents be combined to find lack of inventive step.

In addressing the first enquiry, the Delegate concluded that there was sufficient similarity in technology of the first and second documents that this requirement was satisfied. In other words, the Delegate's opinion is that the person skilled in the art could reasonably be expected to have combined the disclosures of the documents.

Key Point 1 – Combining prior art documents in inventive step assessment: 
The similarity or disparity in the technology of two (or more) prior art documents is relevant to the issue of whether the person skilled in the art could reasonably be expected to have combined the disclosures of prior art documents.

To address the second enquiry, the Delegate then asked whether it would have been obvious to fundamentally alter the mechanism disclosed in the first document to arrive at the claimed invention. This, the Delegate concluded, was not something that the person skilled in the art would be directly led to try. Consequently, the first approach failed to render the claimed invention lacking inventive step.

Key Point 2 – Fundamental alteration of prior art is unlikely to render invention obvious:
An inventive step objection may be overcome on the basis that the disclosure of a prior art document must be fundamentally altered to arrive at the claimed invention if the person skilled in the art would not be directly led to try the alteration. One example of a fundamental alteration is the incorporation of a feature into the prior art document's disclosure.

Second approach in assessing inventive step

In the second approach, the Delegate observed that the second document disclosed the mechanism defined in the relevant claim, but that the claim was directed to a different application. In this case, the claim was to the tilting mechanism of the seat back, whereas the document only disclosed the mechanism used in tilting the seat base. The question then was: would it be obvious to deploy the disclosure of the second document in a new application? In answering this question, the Delegate observed that the second document indicated that other potential applications were envisaged, but were not explicitly stated. Consequently, the Delegate held that a person skilled in the art would be directly led to utilize the mechanism disclosed in the second document in the tilting mechanism for a seat back, and that the claimed invention lacked inventive step in light of the second document alone.

This finding of lack of inventive step is essentially implementing the principle that there is no invention in a new use for a known product. However, the Delegate's comments suggest that in application of this principle, the language in the prior art document under consideration is relevant to the issue. It seems possible that a different conclusion may have been made had the second document not contemplated alternative applications, such that the person skilled in the art would not be directly led to the new application of the known product.

Key Point 3 – Inventive step in a new use for a known product: 
A new use for a known product is unlikely to be inventive, but an exception may be if the person skilled in the art would not be directly led to try the new use with the expectation of success 

Further comments on the decision

The Delegate's analysis of inventive step is based on the question of whether the person skilled in the art would, in the circumstances, be directly led to try the claimed invention in the expectation that it might well produce the desired result. This test was set out in Olin Mathieson Chemical Corporation v Biorex Laboratories Ltd¹, and has subsequently been approved by the High Court of Australia.

This decision provides some guidance on how inventive step may be judged in examination before the Patent Office, in which there is often very limited evidence regarding the common general knowledge in the relevant art. The key points listed above can assist practitioners in formulating arguments to challenge inventive step (obviousness) objections raised by Examiners. However, it is important to recognize that this is the decision of a Delegate, and it is possible that Australian Courts will take a different view on these issues.

The Intellectual Property Laws Amendment (Raising the Bar) Act 2012 will remove from the legislation the requirements that documents must satisfy in order to qualify as part of the prior art for inventive step. These requirements are that the person skilled in the art must reasonably be expected to have ascertained, understood and regarded as relevant each document. The Explanatory Memorandum for this Act states that some of the current requirements will remain relevant to inventive step assessments for cases considered under the amended patent laws, and on this basis it appears that the conclusions that can be drawn from the decision will remain relevant. 

Endnotes

1. Olin Mathieson Chemical Corporation v Biorex Laboratories Ltd [1970] RPC 157

It is not long before commencement on 15 April 2013 of most provisions of The Intellectual Property Laws Amendment (Raising the Bar) Act 2012. This is the most significant amendment to Australia’s intellectual property laws since the Patents Act 1990 was enacted and now is the time to ensure you are ready to deal with the impact of the new law.

New requirements for patent applications

The Act raises the requirements for patentability (particularly inventive step), and the description requirements for patent specifications, for all applications filed from 15 April 2013, and for patent applications filed prior to that date if an examination request has not been filed by 12 April 2013.

Preparing for raising the bar commencement

To ensure that patent applications are subject to the current, more lenient patentability and description requirements, patent applicants can take the following actions by no later than Friday, 12 April 2013.

1. Request examination of any pending patent applications.
2. Enter the national phase or file a complete patent application (as opposed to a provisional application) in Australia with an examination request.
3. File any divisional applications required in view of lack of unity objections or to cover separately disclosed inventions with a request for examination.
4. If examination will not be requested, consider amending pending applications to include additional description or examples, or to recite a specific, substantial or credible use, as required under the new law.

Changes to examination request and acceptance periods

You will need to ensure that you are ready to deal with shortened time periods for requesting examination and for securing acceptance of a patent application after commencement of the new law. From 15 April 2013 the period for requesting examination following the issuance of a Direction to Request Examination will be reduced from 6 months to 2 months and the current 21 month period within which an application must be accepted (following issuance of the first examination report) will be reduced to 12 months.

As patent examiners will have an improved ability to maintain objections under the new law it is likely to be necessary for examination issues to be argued at a hearing more often than is currently the case. In view of the shortened acceptance period it will be important for applicants to progress examination quickly to allow time for objections to be resolved and for hearings to take place.

Changes to Trade Mark oppostion case management

There are significant changes to opposition procedures, the most significant of which are:

Timeframes

The period to file a Notice of Opposition and the period to file evidence-in-reply have been shortened from three months to two months. The ability to obtain an extension of time to file Notice of Opposition on the basis that further time is required to undertake genuine research or on the basis of negotiations with the applicant, has been removed. Moreover, it will be more difficult to obtain extensions of time to file evidence and this will only be allowed if a party has acted promptly and diligently at all times throughout the period.

Notice of opposition

A Notice of Opposition will now comprise two documents:

• A Notice of Intention to Defend; and
• A Statement of Ground of Particulars due one month from the filing of the Notice.

If grounds are not sufficiently particularised then the Registrar has the power to amend the Statement to remove certain grounds or to dismiss the opposition outright. The ability to later amend the Statement is limited and amendments will only be allowed if the Registrar is satisfied that it relates to information which the opponent could not have reasonably have known at the time of filing the Statement.

In a positive development, once the Statement of Ground of Particulars is filed then the applicant must file a Notice of Intention to Defend the opposition otherwise the application will lapse.

Once the Statement of Ground of Particulars is filed, it will be open to the parties to request a cooling off period of six months which may be extended once more by six months.

Enforcement

The Act introduces new summary offences which have lower thresholds of fault and lower penalties. The maximum penalty for indictable offences has also been increased to fall more in line with other IP legislation. In addition, it will now be possible to obtain additional damages in trade mark infringement proceedings.

Customs changes

The onus has shifted to the importers of seizured goods to make a claim for the release of the goods if they wish to have them returned. This is a significant change as under the current system it is often difficult to track down counterfeit importers . As a result of the changes it is hoped importers of counterfeit product will simply allow product to be impounded by customs. This will mean that trade mark owners will often not have to do anything to ensure counterfeit goods never get on the market (thus cutting enforcement costs) The Act also gives Customs increased powers to provide contact details for the importer and exporter of the seizured goods and allows for inspection of seized goods.

On the minus size time limits for taking action have been reduced (so they are no longer TRIPS compliant).

We have previously reported on the 1930 new gTLD proposals which were submitted to ICANN in June 2012. Two important deadlines in this process occur this month:

1. 13 March 2013 – End of the New gTLD Objection Filing Period
2. 26 March 2013 – Trade Mark Clearinghouse is scheduled to open for business.

What brand owners need to do:

• Ensure there are no gTLD applications of concern prior to 13 March 2013; and
• Begin preparations for lodging trade mark claims in the Clearinghouse.

13 March 2013 – End of the new gTLD Objection Filing period

This is the last day brand owners can object to applications for a new gTLD. There are currently 1,916 applications being considered. Brand owners should review this list for gTLDs which may violate their legal rights, such as its trade mark rights (both registered and unregistered). A gTLD is considered to violate a brand owner's trade mark rights if it:

• takes unfair advantage of the distinctive character or the reputation of the opponent's registered or unregistered trade mark or service mark; or
• unjustifiably impairs the distinctive character or the reputation of the opponent’s mark; or
• otherwise creates an impermissible likelihood of confusion between the applied-for gTLD and the opponent’s mark..

There have been few legal rights objections lodged and most clients have elected to protect their brands through defensive measures such as the Trade Mark Clearinghouse.

26 March 2013 – Trade Mark Clearinghouse is scheduled to open for business

This is the intended date for the launch of the Trade Mark Clearinghouse. The Clearinghouse will be a central trade mark repository whereby owners of registered brands can authenticate their marks in order to better monitor and police use of their marks as second level domain names in new gTLDs. The benefit of authenticating trade marks with the Clearinghouse include:

• Trade mark reservation: Each time a new gTLD goes live, its operator is obliged to offer a Sunrise period of at least 30 days during which brand owners may request registration of their authenticated trade marks as domain names.
• Notice of conflicting domain names: Owners of authenticated trade marks will be notified if a third party seeks Sunrise registration for a domain name that is identical to the mark.
• Domain name complaints: The Clearinghouse provides brand owners with a convenient way of establishing their trade mark rights in any future domain name complaints.

The Clearinghouse will remain open throughout the delegation of new gTLDs which, on current estimates, could be as early as June 2013, and possibly stretch into early 2015. The Clearinghouse will be operated by Deloitte Enterprise Risk Services, who has published a Fee Structure of US$150 for a 1 year listing, US$435 for a 3 year listing and US$725 for a 5 year listing. Submission may be made either through an Agent such as DCC or direct via the Trade Mark Clearinghouse website.
 

The Federal Government has released the explanatory statement and final draft version of the Regulations implementing the changes to Australia's intellectual property laws brought about by the Raising The Bar reforms.

The Regulations, which are still awaiting approval by the Australian Governor-General, will come into force on 15 April 2013.

The Raising the Bar reforms are the most significant reforms to Australia's intellectual property laws in over 20 years. The reforms extend across Australian patent, trade mark, copyright and design laws.

The draft Explanatory Statement and Regulations are available for download from IP Australia's website.

Please continue to refer back to our website regularly for further updates and more detailed comment on the draft Regulations.

On Monday 25 February 2013, Apple and Samsung returned to the Federal Court of Australia to resume their long-running patent dispute relating to each other’s smartphone and tablet products. However, for the first time in the history of the Federal Court, a two-judge panel has now been appointed to hear the trial at first instance. Justice David Yates has now joined Justice Annabelle Bennett who has been presiding over the case since its commencement in July 2011.

The complexity of the case and the sheer volume of material likely to be considered by the Court may be the reason behind the appointment of a second judge. Apple is alleging that Samsung has infringed 19 of its patents. In return, Samsung has launched a cross-claim seeking to revoke some of those patents. Samsung has also alleged that Apple has infringed some of its patents. It is quite unusual for patent infringement litigation in Australia to involve more than a handful of claims, and the large number of patents generally applicable to a tablet or smartphone may go some way to explaining the size of the case.

Typically in Federal Court cases in Australia, a single judge hears a trial at first instance and if that decision is subsequently appealed, a panel comprising an odd number of judges (usually three) is appointed to hear the appeal. Having two judges hear the initial case raises the interesting question of what the overall verdict will be if the two judges reach different conclusions. The Court may also divide the issues to be determined, so that each judge decides different parts of the case, thereby reducing the possibility of inconsistent judgments.

The trial is currently expected to run until at least the end of 2013.
 

In April this year, the most significant changes to Australian intellectual property (IP) laws in over 18 years will come into effect. For many business owners, inventors and researchers, this is good news. After all, the last major IP law changes came with the Trade Mark Act in 1995, when the world wide web was in its infancy and an app was just an abbreviation, not a social necessity. A lot has changed.

In 2008, the Federal Government reviewed Australia’s national innovation strategy for the 21st century , which highlighted concerns around the strength of our IP laws. The current Intellectual Property Laws Amendment Act 2012 – aptly tagged the “Raising the Bar” Act – addresses many of these.

The amendments affect all the major IP Acts – for patents, trade marks, designs and copyright. Some of the changes will effectively raise the standard and quality of patents to align closely with international standards. Others alter the Customs seizure process, making it easier for trade mark and copyright owners to enforce their rights against illegal imports.

While the most significant changes are outlined briefly here, for comprehensive advice on the changes and their long-term impact, you should consult an IP professional.

Patents and Inventions

A word of timely advice for those out there with an invention or innovation that requires protection; now is the best time to ensure a complete patent application is in place and a request for examination is filed by 12 April 2013.

After this date, patents will be harder to obtain as the changes will raise the requirements of ‘inventiveness’ and how the invention is specified. The standards for assessing patent applications will also be stepped up.

This is not a bad thing at the end of the day, and changes to simplify procedures and reduce delays in processing have also been introduced, which will benefit applicants.

For a useful list of ways to prepare for the changes see 12 ways patent applicants should prepare.

Manufacturing and Research

The good news continues for manufacturers, universities and research facilities, like Westmead Millenium Institute, with the introduction of an ‘experimental use’ exemption for patents.

Currently, a patent owner has a monopoly right to prevent unauthorised use of the invention, including for research.

The ‘experimental use’ exemption will formally provide certainty for researchers and manufacturers across all fields of technology including genetic, biotech and pharmaceutical research, allowing them to operate free from fear of delay or infringement.

Customs seizure of counterfeit goods

For business owners dealing with imported goods that infringe on their registered copyrights or trade marks, changes will come into effect in April 2013 that make identifying and enforcing their rights easier.

Providing the importer wants the seized goods back, these IP rights owners will have access to information about the importer without the need to apply for a court order. This should make it considerably easier and faster to commence legal proceedings and defend IP rights.

Opposition to a trade mark application

The current timing and procedure requirements surrounding an opposition to a trade mark application will also be stepped up with the new laws.

If you apply for a particular trade mark but registration is opposed by a third party, the opposing party has to submit a detailed statement to outline the grounds of their opposition within 1 month, otherwise the opposition will be dismissed.
Other timelines have also been tightened up to speed up the opposition process considerably.

There are, of course, many other changes included in the Raising the Bar Act, and overall those changes will bring a more robust framework to support and encourage innovation of local business owners by providing higher quality IP protection in a more timely manner.

The Federal Court today handed down it's much anticipated decision on the patentability of genes. The BRCA patents, which claim both breast cancer diagnostic methods and BRCA DNA molecules, have courted significant controversy in Australia. Specifically, the Australian licensee's attempt to centralise BRCA diagnostic testing in-house caused great public concern and triggered the establishment of two Senate enquiries into the impact of granting gene patents. Federal Court litigation was subsequently commenced by Cancer Voices Australia to formally challenge the patentability of the claims to the isolated BRCA nucleic acid molecules. Ironically, the claims to the diagnostic methods, which were in fact the trigger for this controversy, were not challenged by the Applicants.

 In a well reasoned decision, the Court has held that an isolated nucleic acid molecule is patentable, even where the sequence of this molecule is the same as the sequence of the native molecule which is present in the body. This Decision is based on the Court's view that the removal of nucleic acid material from its natural environment, and its separation from other cellular components, can give rise to the "artificial state of affairs" which is the threshold that must be met in Australia for subject matter to be patentable. The Court has more specifically stated that without human intervention, a naturally occurring nucleic acid molecule does not exist outside the cell while isolated nucleic acid molecules do not exist inside the cell. The significant research, expense and intellectual effort required to achieve the isolation of nucleic acid molecules was also considered relevant and the court noted that it would be an odd result if a person whose skill and effort culminated in the isolation of such a molecule could not be rewarded by the grant of a patent. It is important to remember, however, that although this decision confirms the patentability of nucleic acid molecules, patents directed to these molecules will not be granted unless the molecules meet a significant number of other thresholds, including novelty and inventiveness.

This decision is entirely consistent with the positions taken by the Government, Senate Committees, Australian Law Reform Commission and the Advisory Council on Intellectual Property in the context of their gene patent reviews. It is also entirely consistent with Australia's patenting practice to date and the patenting practices of our major trading partners. This decision now provides certainty, both domestically and internationally, in relation to a controversial issue and is a welcome outcome for our scientific researchers, biotechnology industry and the public who benefit from the diagnostic and therapeutic technologies which are brought to market. When this decision is considered together with the recent changes to Australian patent law which have significantly increased the patentability standards required to be met for the grant of a patent, and which have also introduced a formal research use exemption into our law, it is clear that the Australian patent system provides both the certainty and robustness which the healthcare industry requires in order to continue to support the transition of research from the laboratory to the clinic.

View detailed case summary here.

Bristol-Myers Squibb Company v Apotex Pty Ltd (No 4) [2012] FCA 1433

The issue: use of the specification as proof of experimental work referred to in it.

An important issue in the conduct of patent litigation is the use to which statements in the patent specification in suit can be put. In Bristol-Myers Squibb Company v Apotex Pty Ltd (No 4)¹, the issue was whether the patent specification in suit could be used as proof of certain experimental work referred to in it.

More particularly, in this case, the applicants, Bristol-Myers Squibb Company (BMS) and Otsuka Pharmaceutical Co., Ltd, sought to rely on Reference Examples 1 and 2 in the specification to prove that the steps referred to in each example had been carried out and that the results referred to were indeed obtained. The respondent, Apotex Pty Ltd, objected to the admissibility of the specification for that purpose, as well as to a passage in an affidavit made by one of the inventors (Mr Aoki) that asserted what Reference Example 2 demonstrated, on the basis that there had been no compliance with rule 34.50 of the Federal Court Rules 2011.

Rule 34.50 of the Federal Court Rules 2011

Rule 34.50 of the Federal Court Rules 2011 is in the following terms:

(1).  If a party (the proponent) proposes to tender, as evidence in a proceeding, experimental proof of a fact, the proponent must apply for orders in relation to the experimental proof, including orders about any of the following:

• (a) the service on other parties of particulars of the experiment and of each fact that the proponent asserts is, will or may be proved by the experiment;
• (b) any persons who must be permitted to attend the conduct of the experiment;
• (c) the time when, and the place where, the experiment must be conducted;
• (d) the means by which the conduct and results of the experiment must be recorded;
• (e) the time by which any other party (the opponent) must notify the proponent of any grounds on which the opponent will contend that the experiment does not prove a fact that the proponent asserts is, will or may be proved by the experiment.

(2).  Evidence of the conduct and results of the experiment is admissible in the proceeding, only:

• (a) if the proponent has complied with subrule (1) and any orders given under that subrule; or
• (b) with the leave of the Court.

(3). If an order mentioned in paragraph (1) (e) has been made, and the opponent has not complied with the order in relation to a ground, the opponent may rely on the ground only with the leave of the Court.

BMS and Otsuka submitted that, to the extent that leave was required to enable them to rely on Reference Examples 1 and 2 as evidence of experiments carried out and results obtained, leave should be granted.

The Judge (Justice Yates) found that r 34.50 did apply to Reference Examples 1 and 2 and granted leave to BMS and Otsuka to rely on those examples to prove the existence of the facts in them.

Application of r 34.50 to experiments conducted before the litigation commenced

In deciding to grant leave, Justice Yates cited Lucent Technologies Inc v Krone Aktiengesellschaft (No 2)². In that case, Justice Lindgren held that Order 58 rule 31, the predecessor rule to rule 34.50, applied to experimental proof whether the experiments had been carried out before or after commencement of the relevant proceeding. Justice Yates found that even though rule 34.50(1) refers to prospective steps, that rule is expressed in inclusive terms and thus it also applies to experiments conducted before the commencement of the proceeding.

Matters relevant to the grant of leave

The Judge found that the following factors supported the granting of leave.

• Importantly, the experiments to which Reference Examples 1 and 2 referred were carried out many years ago and in circumstances unrelated to the conduct of the present litigation.
• Apotex's objection was unusual in that parties usually proceed on the basis of the asserted truth of the matters stated in the specification, including the conduct and results recorded in the specification, unless those statements are specifically challenged. The Judge noted that, even then, there is normally no challenge to the admissibility and use of the specification.
• It was open to Apotex to allege that the Reference Examples contained a false suggestion or misrepresentation in relation to the steps that were carried out or the results obtained (a basis for revocation of the patent) but it did not do so.
• If any issue was expected to arise out of tender of the specification, and the use to which it would be put, that matter should have been raised at the case management conference before the hearing, if not earlier.
• Discovery had already been given in relation to reproductions of prior art methods carried out by Otsuka, which the parties seemed to accept included discovery in respect of the Reference Examples.

Apotex alleged that it was unable to test the evidence of the experiments in the Reference Examples without access to supporting documentation. In response to this, Justice Yates said that “it was always within its (Apotex's) power to seek specific discovery on that issue or, perhaps, to endeavour to obtain documents by issuing a notice to produce.”

The Judge also pointed out that as Apotex had elected to test the evidence of the experiments described in the discovered prior art documents by cross-examining Mr Aoki, it was equally able to test the evidence of the experiments referred to in the Reference Examples by cross-examining him.

Earlier in the proceedings, Apotex applied under Order 58 rule 31 (the predecessor to rule 34.50) to tender its own experimental evidence. The Judge noted that had Apotex wished to challenge Reference Examples 1 and 2, it could have conducted its own experiments and applied under Order 58 rule 31 or rule 34.50 to tender proof of those experiments.

The Judge concluded by noting that any disadvantage which Apotex perceived it had suffered could have been remedied by Apotex itself. Apotex must have known that the specification (including a description of the invention and the best method of performing it) would be tendered.

Other objections to admissibility: hearsay and unfairly prejudicial evidence

The Judge noted that the specification was admissible as evidence in the proceeding, and for a variety of purposes. He also noted that the statements in the specification concerning Reference Examples 1 and 2 were hearsay. However, he found that the hearsay rule did not apply to those statements because section 60 (1) of the Evidence Act provides that the hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of an asserted fact.

Section 136 of the Evidence Act provides:

The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might:

• (a) be unfairly prejudicial to a party; or
• (b) be misleading or confusing.

The Judge found that there was no danger that the evidence would be misleading or confusing or that use of the Reference Examples as experimental proof would be unfairly prejudicial to Apotex.

Section 135 of the Evidence Act provides that the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party, or be misleading or confusing, or cause or result in undue waste of time. The Judge also found that the conditions for the exercise of the discretion under s 135 of the Evidence Act to reject the evidence of the Reference Examples as experimental proof were not present.

Admissibility of the contested passage in Mr Aoki's affidavit

The Judge did not consider the particular contested passage in Mr Aoki's affidavit to be experimental proof. When taken together with another passage in his affidavit (to which no objection had been taken), he found that it merely identified the type of crystals referred to in Reference Example 2, about which much evidence had already been given in the proceeding. He accordingly admitted the contested passage into evidence.

Matters to consider in patent litigation

The case illustrates some of the matters that the parties to patent litigation (involving issues of infringement and revocation) should consider at an early stage in the proceeding. These include:

1. in the case of the patentee

• what use may or will be made of the Examples in the specification in suit
• whether it is necessary to obtain leave under r 34.50 of the Federal Court Rules 2011 in respect of any of those Examples
• discovery may have to be given in respect of the Examples

2. in the case of the respondent

• whether any statement in the specification in suit should be specifically challenged and/or whether there is a basis for asserting that it contains a false suggestion or representation
• whether specific discovery in respect of any of the Examples should be sought
• whether it should itself conduct its own experiments, and make relevant application under rule 34.50 of the Federal Court Rules 2011
• whether, and if so when, there should be an objection to tender of the specification

Endnotes

1. [2012] FCA 1433
2. (1999) 94 FCR 124

Seafolly Pty Ltd v Madden [2012] FCA 1346

On 29 November 2012, the Federal Court held that comments posted by an individual on her personal Facebook page, and the page of her business, were misleading and deceptive and constituted false representations in contravention of the (then applicable) Trade Practices Act 1974 (Cth).¹ Despite the statements only being posted for a short time, the comments made by Leah Madden were found to have been erroneous and made recklessly.

This case highlights the importance of exercising caution and ensuring that you are fully informed of all the relevant facts before posting statements on social media sites such as Facebook, especially where those statements could be construed as allegations that another party has infringed your rights. This is particularly so in relation to competitors. It also serves as a reminder that individuals may be liable for misleading and deceptive conduct for comments posted on social media sites, where such comments are in fact made "in trade or commerce".

Statements about Seafolly published on Facebook and sent to media outlets

In September 2010, Leah Madden, the principal of White Sands, an Australian swimwear label, posted statements and comments on her personal Facebook page implying that Seafolly Pty Ltd, a competitor of White Sands, had copied some of her swimwear designs. Specifically, Ms Madden:

• posted 7 photos of Seafolly garments on her personal Facebook page under the heading "The most sincere form of flattery?", with the name of one of her product designs and a question mark under each photo;
• later updated her personal Facebook photo album, adding photos of White Sands garments next to each of the Seafolly garments and including the words "White Sands as seen at RAFW in May – Seafolly September 2010" or "White Sands 2009 – Seafolly 2010" under the photographs. She also posted the comment "Why allowing 'buyers' to photograph your collection at RAFW can be a bad idea"; and
• sent an email to various media outlets with the subject line "The most sincere form of flattery?" followed by the words "Is it just us, or has Seafolly taken a little to (sic) much 'inspiration' from White Sands?" and the photos of both the Seafolly garments and the White Sands garments that had been posted on her personal Facebook page.

Ms Madden argued that she had made her statements as a result of a buying appointment that occurred on 6 May 2010 in which a buyer for Sunburn (a company 68% owned by Seafolly) had taken photographs of samples of White Sands swimwear.

Seafolly's argument

As a result of Ms Madden's conduct, Seafolly sued Ms Madden, arguing that she had:

• made statements that were misleading and deceptive;
• infringed Seafolly's copyright by reproducing and communicating the photographs of Seafolly garments; and
• committed the tort of injurious falsehood.

Madden's statements amounted to representation of copying and were misleading and deceptive against Seafolly

Justice Tracey held that the statements and content posted by Ms Madden, and further comments posted on her personal page and the White Sands Facebook page, constituted representations that, among other things;

• Seafolly had copied Ms Madden's designs and;
• used underhanded means to do so.²

In his Honour's opinion, this representation was reinforced by the comments posted by users of the Facebook pages which indicated they had interpreted Ms Madden's comments as allegations of copyright infringement.

Justice Tracey held that none of these representations were true. He found that in fact, most of the Seafolly garments were already on the market before the buying appointment took place.³

Ms Madden's defence of genuinely held opinion

Ms Madden, in defending the claims by Seafolly of misleading and deceptive conduct, argued that her comments could not be understood as allegations that Seafolly had copied garments which she had created. Justice Tracey held that in publishing her statements, Ms Madden's "choice of language was intended to and did convey to her readers that such copying had, as a matter of fact, occurred".⁴

She further contended that her statements amounted to no more than an expression of her genuinely held opinion as distinct from statements of fact, submitting that a statement of opinion could not be held to be misleading or deceptive if it were honestly held by her. According to Justice Tracey, "the statements would not have been understood by the class of persons to whom they were directed as mere expressions of Ms Madden's opinions".⁵ Further, if Ms Madden had done some further research, she would have realised that:⁶

• most of the Seafolly designs had been on the market prior to May 2010 and the other designs were in the later stages of design and were released in July 2010;
• the dates placed under the various photos were wrong; and
• a comparison of the actual garments would have disclosed varying degrees of design difference.

Lack of preliminary research led Madden to be misleading and deceptive

By posting the comments without doing preliminary research, Justice Tracey concluded that Ms Madden's resolve was to make the statements not caring if they were true or false, she was "reckless in giving public expression [to her statements] and there was no adequate foundation for any of them".⁷ Consequently, her statements were misleading and deceptive.

Seafolly entitled to an injunction

Despite the comments on Ms Madden’s Facebook page being posted in late 2010, and removed shortly after, Justice Tracey nevertheless held that Seafolly was entitled to an injunction to protect itself from Ms Madden reproducing Seafolly's photographs or making further statements alleging that Seafolly had copied Ms Madden's garment designs.

Seafolly unable to establish claim of injurious falsehood and copyright infringement allegations

In addition to its allegations of contraventions of the Trade Practices Act, Seafolly also claimed that Ms Madden had infringed its copyright (by reproducing and communicating its photos) and committed the tort of injurious falsehood.

Though Justice Tracey held that Ms Madden had falsely stated that Seafolly had copied her designs, published the statements to a number of third parties, and acted maliciously, Seafolly was unable to establish its claim of injurious falsehood on the basis that it could not adduce evidence which established that its business had sustained actual damage as a result of Ms Madden's statements.

In relation to the copyright claim, his Honour found that although the right to sue for past infringement had been assigned to Seafolly by the photographer who took the photos (an assignment which took place after Ms Madden posted her comments); this right did not entitle Seafolly to pursue a damages claim by it.

3 key things to remember before posting statements on Facebook or other social media platforms

1. Do your research before you think about making comments about someone else on Facebook or any other social media site, especially a competitor, because they may turn out to be unfounded or incorrect.
2. Obtain legal advice before posting comments of possible claims of copyright infringement (or infringement of other rights) on Facebook or other social media sites or before sending comments to media outlets, even if you think that your opinion is correctly and justly held.
3. Be aware that even if statements and related comments are posted on personal Facebook accounts, this can be considered to be "in trade or commerce" where the statements have a connection with your own business or the business of others, so individuals may also be liable under the Australian Consumer Law.

Endnotes

1. New sections 19 and 29 of the Australian Consumer Law.
2. Seafolly Pty Ltd v Madden [2012] FCA 1346, [1], [34].
3. Ibid [69].
4. Ibid [60].
5. Ibid [67].
6. Ibid [69].
7. Ibid [69] – [73].

SMA Solar Technology AG v Beyond Building Systems Pty Ltd (No 5) [2012] FCA 1483

In a trade mark dispute having its origins in the Federal government's solar panel subsidy scheme, the Federal Court in SMA Solar Technology AG v Beyond Building Systems Pty Ltd¹ found that use by Beyond Building Systems Pty Ltd (BBS) of the mark Sunny Roo constituted passing off and misleading and deceptive conduct, and was an infringement of SMA's registered trade mark Sunny Boy in respect of inverters and inverter installation services.

By the time of the trial BBS was in liquidation. The applicant, SMA Solar Technology AG (SMA), also alleged that a company related to BBS, Ipevo Pty Ltd (Ipevo) was jointly liable for BBS' infringing activities. Ipevo's joint liability was established by the terms of a trade mark licence Ipevo had granted BBS and, separately, because Ipevo and BBS both would have known that BBS' use of the Sunny Roo mark on its inverters was likely to mislead consumers into believing the goods were connected with SMA.

Solar products in trade mark infringement dispute

Before the Federal government introduced a subsidy scheme for solar panels, SMA was the main player in Australian solar inverter market: it had an 80-85% market share. SMA sold its inverters under the mark Sunny Boy and a number of other "Sunny" marks. Solar inverters convert the direct current of electricity generated by sunlight collected on solar panels into alternating current.

BBS was an installer and supplier of solar panel systems, and initially purchased its solar inverters from SMA. Due to the boom in the solar panel market following the government subsidy, and subsequent inverter supply shortages, BBS began manufacturing its own inverters. BBS began selling those, and other items including solar panels, under marks such as Sunny Roo, Sunny Roo Products and a Sunny Roo logo featuring a kangaroo in sunglasses.

Actual confusion between Sunny Roo and Sunny Boy; demonstrated infringing conduct

Evidence was given by SMA's employees that SMA was frequently contacted by people complaining about BBS' Sunny Roo solar inverters. The court accepted that SMA had a strong reputation in the mark Sunny Boy and that consumers actually mistakenly thought that Sunny Roo products were SMA's Sunny Boy products. The court found damage to SMA's goodwill had occurred² and BBS had engaged in passing off and misleading and deceptive conduct in contravention of the Australian Consumer Law.

Trade mark infringement – goods not of the same description

SMA's Sunny Boy trade mark registration specified inverters but not energy generators such as solar panels. The court found that the marks Sunny Roo, Sunny Roo Products and the Sunny Roo logo were deceptively similar to Sunny Boy. Thus, BBS' use of these various Sunny Roo marks in respect of inverters and inverter installation services infringed SMA's registration. Interestingly, the court considered that solar panels were not goods of the same description as solar inverters, on the basis of the technical difference between an energy generator and an energy converter, and that one was not substitutable for the other. This led to the finding that use of the Sunny Roo marks on solar panels did not infringe SMA's registration. On the other hand, installation services for inverters were held to be services closely related to inverters and therefore there was infringement.

Joint liability of Ipevo - scope of trade mark licence

A director of BBS obtained a trade mark registration for the Sunny Roo logo. The BBS director (who was also a director of Ipevo) assigned his trade mark registration to Ipevo, who then licensed the use of the registered mark to BBS. The court found that if Ipevo had licensed BBS to use the Sunny Roo mark and the Sunny Roo logo, that was sufficient to establish Ipevo's joint liability. It was therefore necessary to consider the scope of the trade mark licence.

Interestingly, the trade mark licence did not expressly identify which trade marks Ipevo had licensed to BBS. Nevertheless, the parties agreed that a licence to use the Sunny Roo logo had been granted to BBS. Ipevo argued that it had not granted BBS a licence to use Sunny Roo "without more", so Ipevo could not be jointly liable for contraventions arising from BBS' uses of Sunny Roo without the logo.

The court rejected Ipevo's interpretation of the licence because:

• Ipevo had granted BBS a licence to use its "intellectual property";
• "intellectual property" included improvements to the intellectual property, and the improvements included modifications or derivatives of the intellectual property made during the licence term. This covered modifications or derivations of the Sunny Roo logo; and
• Sunny Roo "without more" was a derivative of the licensed Sunny Roo logo registration, so Ipevo had granted BBS a licence to use Sunny Roo without the logo.

Given the scope of the licence, and the involvement of common directors, the court found Ipevo was jointly liable for and was knowingly involved in, all BBS' infringing uses of Sunny Roo.

Key lessons for trade mark owners arising from this case

1. Keep good records of any instances of consumers being confused between your and your competitor's products, as they might be invaluable in any action fending off a competitor coming too close to your trade marks.
2. In a licensing dispute, a party's actions are likely to be more closely scrutinised where the parties are in a non-arms' length relationship.
3. Draft trade mark and other IP licences carefully to ensure the IP being licensed is clear to avoid unintended consequences, such as joint liability for a licensee's infringing activities.

Endnotes

1. (No 5) [2012] FCA 1483.
2. Issues of liability and quantum were split, so the court did not need to determine the amount of this damage.

Google v ACCC [2013] HCA 1

On 6 February 2013, in a much anticipated judgment, the High Court of Australia unanimously allowed Google's appeal from a decision of the Full Court and found that Google was not responsible for the content of third party "Adword" advertisements (formerly sponsored links) displayed on Google search result pages.

The ACCC's case against Google

In July 2007, the Australian Competition and Consumer Commission ("ACCC") issued proceedings against Google in the Federal Court of Australia alleging that Google had engaged in misleading and deceptive conduct within the meaning of the Trade Practices Act 1974 ("TPA") (Cth) (now the Australian Consumer Law ("ACL")) by "making" misrepresentations contained in sponsored links (now Google Adwords) that had been purchased from Google by a number of Australian advertisers.

Interestingly, the ACCC did not allege that Google had contravened the TPA by aiding, abetting, counselling or procuring the misleading conduct of the advertisers¹ or by publishing the impugned sponsored links.²

The First Chapter: The Federal Court's findings at first instance

At first instance, Justice Nicholas found that the advertisers sponsoring the links were guilty of misleading or deceptive conduct but held that Google was not responsible for the content of such links as it had merely communicated them and had not endorsed or adopted their contents.

The Second Chapter: The Full Federal Court unanimously allows the ACCC's appeal

On appeal by the ACCC, in April 2012, the Full Federal Court unanimously reversed Justice Nicholas' findings and held that Google had in fact engaged in misleading and deceptive conduct. 

According to the Full Court:

"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"

"Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response."

The final chapter: The High Court unanimously allows Google's appeal and reverses the Full Court's decision

On 6 February 2013, the High Court unanimously found that Google did not engage in misleading and deceptive conduct, and accordingly set aside the Full Court's decision.

The High Court relevantly held that Google did not "make" the misrepresentations contained in the sponsored links in issue.

In reaching this conclusion, the High Court had regard to the following facts:

• Google does not control the Google search terms entered by Internet users or the material available on the Internet;
• The sponsored links were created by, or at the direction of the third party advertisers;
• Advertisers (and not Google) specify the content of Google Adword Ads and also specify the Google search "keywords" which trigger the appearance of the Ad on Google's results pages;
• Google's automated generation of Adword Ads in response to a user's search query is wholly determined by the Adword keywords and content chosen by advertisers;
• Google's proprietary algorithms which display Adword Ads merely assemble information entered by Internet users and advertisers;
• Google may encounter difficulties determining whether a particular Ad is in fact misleading or deceptive;
• Whilst there was evidence that Google employees had been actively involved in the selection of keywords for some of the Adwords in issue, the evidence "never rose so high as to prove that Google personnel, as distinct from the advertisers, had chosen the relevant keywords, or otherwise created, endorsed or adopted the sponsored links".³ This is in stark contrast to the view taken by the Full Federal Court; and
• In light of the above, ordinary and reasonable internet users would be unlikely to have understood any information contained in the sponsored links in issue as being endorsed or adopted by Google. Rather, those persons would have understood that the message conveyed was a message from the advertiser which Google was "passing on for what it was worth."⁴

Publication of misleading and deceptive advertisements

As explained above, the ACCC identified Google's contravening conduct as being the "making" of the misleading representations contained in the sponsored links in issue. The ACCC did not allege that Google had engaged in misleading and deceptive conduct by merely publishing the ads.

The majority of the High Court (Chief Justice French, and Justices Crennan, Kiefel and Heydon) considered that publication of a misleading advertisement will, in general, only constitute misleading or deceptive conduct if the publisher can be said to have adopted or endorsed the misleading statements contained in the advertisement.

On the other hand, Justice Hayne was of the opinion that the mere publication of a misleading and deceptive third party advertisement may constitute misleading and deceptive conduct.

Justice Hayne noted that publishers who engage in such conduct may, however, seek to rely on the defence afforded by s. 85 (3) of the TPA (now s. 251 of the ACL).

Section 85 (3) will apply if a person establishes that:

• he or she is a person whose business it is to publish or arrange for the publication of advertisements;
• the advertisement in issue was received for publication in the ordinary course of business; and
• he or she did not know and had no reason to suspect that the publication of the advertisement would constitute misleading and deceptive conduct.

Whilst the weight of judicial opinion favours the view that the mere act of publication will not constitute misleading and deceptive conduct within the meaning of the ACL, final resolution of the matter will require careful examination of a number of difficult policy considerations.

The fall out from the High Court's decision

The High Court's decision brings the Australian position in relation to Google's responsibility for its sponsored links or Adword Ads into line with the position in the United States and elsewhere (where Google has not been held liable under the trade mark laws in those jurisdictions). Australian Courts have not yet considered whether Google or the advertiser's use of competitor's names in sponsored links constitutes trade mark infringement in Australia. To do so would require a finding that Google's use of the Adwords was "use as a trade mark".⁵

As a result of the High Court's decision, it is clear that Google cannot be held liable for "making" misrepresentations contained in Google Adword Ads unless it can be shown that it expressly or impliedly adopted or endorsed them. However, the High Court did not conclusively consider whether Google had engaged in misleading and deceptive conduct by "publishing" or aiding, abetting counselling or procuring the misleading conduct of the advertisers, and persons who are aggrieved by such conduct may still legitimately seek to take action against Google on these bases.

Endnotes

1. See section 75B of the Competition or Consumer Act 2010 (Cth)
2. At [117] per Hayne J
3. At [71] per French CJ, Crennan and Kiefel JJ
4. At [70] per French CJ, Crennan and Kiefel JJ
5. Section 120 of the Trade Marks Act 1995 (Cth)

In April this year, the most significant changes to Australian intellectual property (IP) laws in over 18 years will come into effect. For many business owners, inventors and researchers, this is good news. After all, the last major IP law changes came with the Trade Mark Act in 1995, when the internet was in its infancy and an app was just an abbreviation. A lot has changed.

In 2008, the Federal Government reviewed Australia’s national innovation strategy for the 21st century , which highlighted concerns around the strength of our IP laws. The current Intellectual Property Laws Amendment Act 2012 – aptly tagged the “Raising the Bar” Act – addresses many of these.

The amendments affect all the major IP Acts – for patents, trade marks, designs and copyright. Some of the changes will effectively raise the standard and quality of patents to align closely with international standards. Others alter the Customs seizure process, making it easier for trade mark and copyright owners to enforce their rights against illegal imports.

While the most significant changes are outlined briefly here, for comprehensive advice on the changes and their long-term impact, you should consult an IP professional.

Patents and Inventions

A word of timely advice for those out there with an invention or innovation that requires protection; now is the best time to ensure a complete patent application is in place and a request for examination is filed by 12 April 2013.

After this date, patents will be harder to obtain as the changes will raise the requirements of ‘inventiveness’ and how the invention is specified. The standards for assessing patent applications will also be stepped up.

This is not a bad thing at the end of the day, and changes to simplify procedures and reduce delays in processing have also been introduced, which will benefit applicants.

For a useful list of ways to prepare for the changes, see 12 ways patent applicants should prepare.

Manufacturing and Research

The good news continues for manufacturers, universities and research facilities, like Westmead Millenium Institute, with the introduction of an ‘experimental use’ exemption for patents.

Currently, a patent owner has a monopoly right to prevent unauthorised use of the invention, including for research.

The ‘experimental use’ exemption will formally provide certainty for researchers and manufacturers across all fields of technology including genetic, biotech and pharmaceutical research, allowing them to operate free from fear of delay or infringement.

Customs seizure of counterfeit goods

For business owners dealing with imported goods that infringe on their registered copyrights or trade marks, changes will come into effect in April 2014 that make identifying and enforcing their rights easier.

Providing the importer wants the seized goods back, these IP rights owners will have access to information about the importer without the need to apply for a court order. This should make it considerably easier and faster to commence legal proceedings and defend IP rights.

Opposition to a trade mark application

The current timing and procedure requirements surrounding an opposition to a trade mark application will also be stepped up with the new laws.

If you apply for a particular trade mark but registration is opposed by a third party, the opposing party has to submit a detailed statement to outline the grounds of their opposition within 1 month, otherwise the opposition will be dismissed.

Other timelines have also been tightened up to speed up the opposition process considerably.

There are, of course, many other changes included in the Raising the Bar Act, and overall those changes will bring a more robust framework to support and encourage innovation of local business owners by providing higher quality IP protection in a more timely manner.

This article was originally published in the Western Sydney Business Access Magazine and is republished here with permission. 

Tonnex International Pty Ltd v Dynamic Supplies Pty Ltd [2012] FCAFC 162

In a continuation of a battle between two printer cartridge resellers, the Full Federal Court has affirmed the legal principles pronounced by the High Court in Ice TV v Nine Network Australia which govern the nature and level of skill, judgement and human effort required for copyright to subsist in a compilation as an original literary work. It is clear from the Full Court's decision that:

• For a work to be original it must originate from the author as opposed to having been copied;
• An original work must be the product of human intellectual effort, but need not have literary merit;
• Copyright protects the form of expression of information, not the information itself; and
• When determining whether copyright subsists in a work, the work should be examined as a whole rather than as individual elements.

The Federal Court's decision at first instance

Background

Printer consumable company Dynamic Supplies Pty Ltd had, since 2007, maintained a database, called the ‘Navision database’, which stored data on each of the cartridge products it manufactured and sold.

In 2008, Mr Campbell, a Dynamic employee, extracted part of this data and arranged it into a printer cartridge compatibility chart. This involved selecting which information was relevant to customers and setting out the information in columns for ease of use, which was then published on Dynamic’s website.

Tonnex, a trade rival of Dynamic, later produced its own compatibility chart containing parts of the Dynamic chart.

Initial decision of the Federal Court

As previously reported¹, in April 2011, Justice Yates of the Federal Court relevantly found that in producing its chart, Tonnex had infringed the copyright subsisting in Dynamic's printer cartridge compatibility chart.

Tonnex appealed Justice Yates' decision to the Full Court of the Federal Court of Australia.

The Full Court's decision

In November 2012, the Full Court unanimously affirmed Justice Yates' decision and dismissed Tonnex's appeal, finding that copyright subsisted in Dynamic's compatibility chart and that therefore Tonnex had infringed Dynamic’s copyright.

Tonnex’s arguments on appeal regarding "intellectual effort"

Broadly speaking, Tonnex’s appeal challenged that there was sufficient intellectual effort exerted in the production of the compatibility chart by Dynamic to render it an original literary work.

In support of this contention, Tonnex relied upon two main grounds:

1. That the formatting and selection of data to be included in the compatibility chart had principally occurred at the time the data was entered into the Navision database, and that Mr Campbell had exerted negligible human intellectual effort in transferring this information into the compatibility chart; and
2. That Mr Campbell’s written evidence in support of his intellectual effort was contradicted by his oral evidence given during the trial, and that the trial judge was therefore wrong to accept that earlier written evidence.

Subsequent to the hearing of the appeal, Tonnex made a further application seeking to have the issue remitted to trial in light of further evidence. Tonnex did not dispute the finding that, should copyright exist, it had infringed that right.

Mr Campbell’s "intellectual effort" evidence

Regarding Mr Campbell’s evidence, Tonnex argued that it was contradictory and that part of it was incorrect. In essence, Tonnex sought to show that the real work had been done in creating the Navision database, rather than the compatibility chart and that Mr Campbell’s evidence in support of the latter was flawed.

The Court disagreed and held that there was no inconsistency, and that since it had not been put to Mr Campbell at trial that his evidence was incorrect, it was impermissible to pursue the issue on appeal.

Was Dynamic's printer cartridge compatibility chart "original"?

In dismissing the appeal, the Full Court found that Mr Campbell’s evidence had established that the compatibility chart was original and thus protected by copyright.

Importantly, the court focused on the fact that Mr Campbell had made an assessment of what information from the Navision database would be included in the compatibility chart and how that information would be arranged.

In fact, the Full Court stated that these factors were “critical” to the outcome of the case.

There was significantly more information stored in the Navision database than that which was included in the compatibility chart, which reflected the selection process undertaken. Additionally, reference was made to the trial judge’s findings that some material had been deliberately duplicated in the ‘product description’ fields to aid customer searching. Simplicity in the layout, it was also said, can be a virtue and does not deprive a work of originality unless it reflects the fact that there is only a limited number of ways the work could be expressed, such as the TV Schedules in Ice TV.

The court emphasized that the fact the information had been extracted from the database did not prevent copyright subsisting in the compatibility chart.

Tonnex’s late application to have the copyright subsistence issue remitted in light of further evidence:

A final submission was made by Tonnex subsequent to the hearing of the appeal, based on a list produced by Mr Campbell called the ‘tab delimited price list’. This was an earlier list, produced from material on the Navision database and Tonnex sought to argue that the compatibility chart in issue was copied from this list.

The application was fraught with procedural issues and was said to be inconsistent with fundamental case management principles. The application raised another point that should have been pursued at trial, or during the appeal hearing at the very latest.

The court noted that copyright would have subsisted in the tab delimited price list, the compatibility chart or both, and that Tonnex would therefore be guilty of infringement regardless. To add insult to injury, costs of this application were awarded on an indemnity basis due to the lateness of its filling and the fact it did not reveal any error in the trial judge’s reasoning.

Lessons for copyright litigators in Australia

This case provides guidance as to the considerations that an Australian court will have regard to when determining whether copyright subsists in a work that is sourced or derived from an earlier work:

1. The fact the compiled information is taken from an earlier source does not prevent copyright subsisting in the compilation;
2. Whether copyright subsists in a literary work will depend on whether sufficient human intellectual effort has been exerted in its reduction to a material form;
3. In determining whether sufficient human intellectual effort has been exerted, the extent to which the information has been selected and filtered, as opposed to merely copied in its entirety, will be highly relevant; and
4. The way in which that information is then arranged and the thought that has gone into the arrangement is also relevant to the issue of copyright subsistence.

Finally, the case illustrates the importance of raising all relevant arguments at trial and of ensuring that important points are not left until the appeal (or later). Failure to follow this approach may result in claims being compromised by procedural issues and harsh adverse costs orders being made by the court.

Endnotes

1. Federal Court: Cartridge reseller copied compilation of printer compatibility and misled with ‘Australian product’ claims 

The Australian Competition and Consumer Commission (ACCC) has recently commenced proceedings against 11 Harvey Norman franchisees for allegedly misrepresenting consumer rights under the Australian Consumer Law.

Consumer guarantees under the Australian Consumer Law

The Australian Consumer Law (ACL) sets out certain guarantees in connection with the supply of goods and services in Australia which have been sold for less than $40,000 or are otherwise ordinarily acquired for private, domestic or household use or consumption. If the goods or services fall short of those guarantees, consumers are entitled to certain remedies which cannot be excluded, restricted or modified by businesses supplying those goods and services. For example, if a consumer purchases a toaster and it stops working shortly after the date of purchase, the consumer may be entitled to a refund of the purchase price or a replacement toaster.

Proceedings against Harvey Norman franchisees

The ACCC commenced proceedings against the Harvey Norman franchisees in the Federal Court of Australia, alleging they misled consumers about their rights under the ACL by representing that:

• they did not have to provide remedies for damaged goods unless they were notified by the consumer within a specified period of time (eg, 24 hours or 14 days);
• they did not have to provide remedies for goods still covered by the manufacturer's warranty;
• they did not have to refund or replace particular items such as large appliances or items below a certain price; and
• consumers must pay a fee for the return and repair of faulty products.

ACCC's warfare on industry

The proceeding against the Harvey Norman franchisees have been filed in the context of the ACCC's national consumer awareness campaign to educate consumers and industry about consumers' rights under the ACL. As part of that campaign, the ACCC has targeted some other large manufacturers and retailers, including Hewlett-Packard Australia Pty Ltd, for statements which were alleged to have falsely and misleadingly represented that consumers were not entitled to remedies under the ACL. The ACCC, in conjunction with the International Consumer Protection Enforcement Network, also recently conducted a one day sweep (part of an annual event by ICPEN) of business websites in Australia targeting businesses which use fine print in website terms and conditions to seek to avoid obligations to consumers.

The ACCC is also cracking down on false and misleading conduct by industry more generally, most recently having obtained court enforceable undertakings from Nissan Motor Co (Australia) Pty Ltd in relation to its Nissan DUALIS "paintball" advertisements (which depicted a base model Nissan DUALIS and more superior model which included optional extras, but only advertised the "drive away" price for the base model vehicle), which Nissan acknowledged were likely to mislead consumers.

Under legislation passed by Parliament in November 2012, the Federal Magistrates Court is soon to be renamed the Federal Circuit Court of Australia. These changes follow on from other reforms passed earlier this year, which will see the expansion of the Court's jurisdiction to include more intellectual property matters.

New name for the Federal Magistrates Court

The Federal Magistrates Court of Australia will be renamed the 'Federal Circuit Court of Australia, under legislation passed by the Senate on 19 November 2012. According to Attorney-General Nicola Roxon, the proposed change is designed to more accurately reflect the Federal Magistrates Court's 'modern role and its accessibility for all court users'.¹ It will also reflect the 'prominence of its [the Court's] circuit work to regional areas and the federal nature of its jurisdiction'.² Federal Magistrates will also be renamed Judges under the legislation, to better reflect their important role in the judicial system.³

Expansion of the Federal Magistrates Court's intellectual property jurisdiction

The court's name changes, expected to come into force in the first half of 2013, will supplement the Raising the Bar legislative reforms, which expand the jurisdiction of the Federal Magistrates Court as of 15 April 2013 to include more intellectual property cases, including:

• matters arising under the Trade Marks Act, including trade mark infringement and rectification matters and appeals from decisions of the Registrar of Trade Marks.
• matters arising under the Designs Act, including design infringement and revocation matters. This means that the Federal Circuit Court will have substantially the same jurisdiction as the Federal Court of Australia for design matters, subject to one exception in relation to hearing appeals.⁴

Prior to this change, the Federal Magistrates Court could only hear civil copyright matters.

The government's court reform agenda

Both pieces of legislation are part of the government's current court reform agenda, which is designed to provide greater certainty around the roles and responsibilities of the federal courts. The broader court reform agenda, which commenced in 2009, aims to improve judicial transparency, accessibility and timely resolution of disputes.

Endnotes

1. Attorney-General for Australia, '"Federal Circuit Court of Australia" established in law' (Media Release, 21 November 2012). 
2. Ibid.
3. Attorney-General for Australia, 'Introducing the Federal Circuit Court of Australia' (Media Release, 13 September 2012). 
4. The Federal Circuit Court will not be able to hear an appeal from another court under section 87 of the Designs Act: Explanatory Memorandum to the Raising the Bar legislative reforms, page 115.

Several landmark intellectual property disputes have hit the press recently. The Apple Vs Samsung case is one that almost everyone heard of. Why? Because it brought intellectual property law into the home: the case dealt with the iPhone. People gained a sense there had been some misappropriation of Apple’s property and, of course, there was big money involved.

This is exactly what intellectual property is all about – the ability to secure the legal rights to innovations that have commercial value. Fundamentally, the entire IP rights system is intended to encourage innovators and enhance economic activity. It provides limited monopoly rights to protect the work and investment made by the innovators.

IP rights are everywhere, from brands on supermarket shelves, domain names, and unique product designs, to software and engineering innovations.

Businesses are increasingly factoring intellectual property into their business strategy. By running an IP rights protection program parallel to their business plan and market objectives, these companies can achieve significant financial outcomes and business growth.

What is intellectual property?

Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.

All businesses have intellectual property, be it in the form of a registered business name, a registered trade mark, copyright in signage, a domain name, website content, client lists, apps, system software, innovations and inventions, know how, trade secrets.

All of these forms of intellectual property are important and can play a role in the running of a business, but the most valuable form of IP rights are the monopoly rights that can be used to put a protective fence around your company’s assets.

These IP rights are patent, trade mark and design registrations.

Design registration

A design registration protects the appearance of a product – the way it looks to the naked eye – so the scope of registration is very specific.

The humble design registration is often discredited as being too limited to be of much value. However, if a design is distinctive, a design registration can provide one of the simplest mechanisms for stopping competitors selling imitation products. Obviously, if sufficient changes are made to alter the overall appearance of the product, then the design registration may not cover such variations.

A good example of a well known design that is registered is the Dyson vacuum cleaner. An ideal design registration is one that covers a particular product that, by its design, must have a particular shape.

Trade mark registration

A trade mark can be a brand, a non-descriptive word or phrase, a colour, scent or sound – basically, it must distinguish your goods or services from those of other traders.
There are thousands of visual trade marks that are instantly recognisable, from the golden arches to the Nike tick, but other types of trade marks include the O'Brien glass jingle and the Cadbury's purple for chocolates.
A trade mark registration gives its owner the exclusive right to use the mark in relation to a particular class of goods and services. It can be used to stop other people from using substantially identical or deceptively similar trade marks for the same class of goods or services.

Patent registration

Patents are used to protect inventive or innovative subject matter. Patents can cover products, manufacturing processes, software, chemical compositions – essentially anything embodying a non-trivial improvement.

There are two types of patents in Australia, an innovation patent and a standard patent. A standard patent lasts 20 years and has a fairly high inventiveness requirement.

Innovation patents have a lower inventiveness requirement and are faster and cheaper to secure, which makes them a valuable business tool in stopping infringers. They only have an 8-year term, but can run parallel with a standard patent application until the full 20 year term patent is granted.

To satisfy the innovative requirements, the invention simply needs to have a feature of difference over what has been done before, and that feature needs to substantially contribute to the way the invention operates.

The triple threat

A product can embody one or more of the above types of protection, or possibly all three. Both the iPhone and Samsung products, for example, represent a triple threat where trade marks are apparent, where patents protect the functionality of the products, and design registrations protect distinctive aspects of the visual appearance of the phones.

This represents a comprehensive style of protection that covers all aspects of the product.

From a business point of view, it may not always be practical to cover all possible aspects of any particular product. A decision needs to be made at an early stage as to which form of protection is most suitable.

An important issue to remember is that patent and design applications generally need to be filed before any public disclosure, so the decision should be made around the time of prototyping, if not before.

If you are interested in protecting the IP assets of your business, a professional patent and trade mark attorney should be engaged to advise and assist with the development of an IP strategy to suit your business. 

This article was first published by Western Sydney Business Access, December 2012

Centor Australia Pty Ltd v RMD Industries Pty Ltd [2012] FCA 1135

On 19 October 2012, Justice Dowsett of the Federal Court handed down his decision finding that RMD did not infringe Centor's patent entitled "Floating Pivot Mount for a Folding Panel". The patent is directed to the mounting of folding doors and windows. In particular, the claimed invention involves the door or window panel being adjustably mounted to the frame to compensate for shifts that may occur over time, resulting in the misalignment of the frame and folding door/window panel.

Justice Dowsett found that on the proper construction of the patent claims in issue, the claims required the panel assembly to be moveable or capable of adjustment whilst the panels were mounted. The RMD products did not infringe because the RMD pivot mount could only be adjusted manually following the partial dismantling of the assembly.

The alleged infringement by RMD Industries

Centor alleged that by selling particular items of window hardware, RMD infringed claims 1 and 2 of the patent.

Claim 1 is for a folding panel assembly including "a pivot mount for adjustably mounting an end panel of the hinged panels to the jamb". One of the required features of the claimed pivot mount is that it has an arm that is "moveable axially" within a bore to "accommodate movement" parallel to the door or window opening.

Claim 2 is dependent on claim 1 but requires the additional feature that there is "biasing means within the bore for biasing the arm axially to a rest position".

The relevant RMD product was a pivot mount which included an arm that was screwed into a bore. RMD argued that its product did not infringe because the arm could not be moved unless the pivot mount assembly was partially dismantled to allow manual adjustment of the screw in the bore. The product therefore did not provide for the automatic adjustment of the panel which was required by the claims.

Patent construction – claims 1 and 2

Centor and RMD each relied on expert evidence relating to the proper construction of the claims. Justice Dowsett found that each of the experts was appropriately qualified to give evidence as an expert, but their evidence was of little assistance because the witnesses merely expressed an opinion about the meaning of plain English words. His Honour noted that their evidence simply explained the context in which the patent should be read.

In his Honour's view, the words "adjustably mounting" and "moveable" in claim 1 require that the panel assembly is capable of adjustment whilst it is mounted. That is, the arm needs to be moveable whilst the panel is in place. Because adjustment in the RMD products was made by partially dismantling the panel assembly and manually adjusting the screw, there was no infringement of claim 1. His Honour noted that his conclusion was reinforced by reference to the body of the specification which referred to the object of the invention being to overcome the inconvenience of property owners having to manually adjust the known pivot mounts.

In relation to claim 2, his Honour also found that RMD did not infringe because "biasing means" again required the arm to be moveable in the bore, unlike the manually adjustable screw threaded mechanism in the RMD product.

Costs of proceeding to be ordered

After dismissing Centor's application, Justice Dowsett stated that he would make orders dealing with the costs of the proceeding after receiving submissions from the parties.

Lesson for patent owners

Construction of patent claims is a question of law and therefore a matter for the Court, not an expert. In this case, Justice Dowsett found that the words in the claims were to be interpreted according to their plain English meaning and his Honour was not assisted by the expert evidence as to the meaning of particular words. However, when approaching the task of construction, his Honour nevertheless found the expert evidence of use in "explaining the context in which the patent should be read". For the purposes of construing patent claims, expert evidence can be used to assist the Court to place itself in the position of the hypothetical person skilled in the art with the common general knowledge at the priority date.

Davies Collison Cave Law acted for RMD in the proceeding.

Vivo International Corporation Pty Ltd & Anor v TiVo Inc. & Anor [2012] FCAFC 159.

On 14 November 2012, the Full Federal Court unanimously dismissed Vivo’s appeal from a finding by Justice Dodds-Streeton that its VIVO mark was deceptively similar to TiVo’s TIVO mark.¹ In a split decision, Chief Justice Keane and Justices Nicholas and Dowsett found that, on an aural comparison, the VIVO mark was phonetically similar to the TIVO mark notwithstanding the different first consonants, such that it might be confused with TIVO. The Court therefore upheld the trial Judge’s decision to revoke the VIVO registration and her Honour’s finding that use of the VIVO mark would infringe the prior TIVO registration.

The trial decision: TIVO v VIVO

At trial, the primary Judge found that VIVO was deceptively similar to TIVO, taking into account:

• the aural similarity between the marks, despite the lack of visual similarity. In this regard, the trial Judge relied on evidence from retailers that, in 80% of the cases, customers would purchase televisions and DVRs (goods covered by both the TIVO and VIVO registrations) by reference to the marks aurally;
• her finding that Vivo’s managing director, Mr Fabio Grassia, dishonestly adopted the VIVO mark with a view to seeking to trade off TiVo’s reputation in the TIVO mark; and
• evidence of actual confusion of retail sales staff.²

Issues on appeal

The Full Court was asked by Vivo to consider whether the trial Judge erred in finding that the two marks were deceptively similar:

1. by comparing only the aural similarity between the –IVO components of the two marks and not the marks as a whole, and by not considering the evidence of a phonetician on this issue;
2. as a result of her Honour’s finding of actual dishonesty on the part of Mr Grassia in his adoption of the VIVO mark, when TiVo did not rely on Mr Grassia’s evidence to establish positive dishonesty; and
3. by giving weight to the uncontested evidence of confusion of retailers, when (in Vivo’s submission) that evidence was unreliable and contradicted more reliable evidence.

Full Court’s decision

In two separate judgments, the Full Court concluded that the VIVO mark was deceptively similar to the TIVO mark on a fresh analysis of that issue.

All three Judges were of the view that the trial Judge had erred in concluding that Mr Grassia had dishonestly adopted the VIVO mark and, consequently, had erred in applying a well-settled presumption that if a mark is adopted for the purpose of appropriating part of the trade or reputation of a rival, that it is presumed to be likely to mislead or deceive consumers and therefore to be deceptively similar. Having found the trial Judge to be in error, the Court then considered the question of deceptive similarity afresh.

In the Chief Justice's view, the uncontested evidence of actual confusion (which his Honour accepted was honestly given) was of great weight, which led him to infer that if retailers are confused, there is a reasonable probability that consumers will be confused. His Honour rejected Vivo’s submission that the trial Judge improperly compared only the marks aurally and ignored the evidence of the phonetician, referring to numerous passages where her Honour had considered that evidence and concluded that, while it established the marks were phonetically different, nevertheless similar sounds characterised their pronunciation.

Justice Nicholas (with whom Justice Dowsett agreed) concluded the phonetician's evidence was important evidence on the question of aural similarity, but found that it failed to take into account the effects of imperfect recollection of the marks on consumers. His Honour disregarded the uncontested evidence of actual confusion as “improbable”, concluding that it was unlikely that sales staff would believe that goods branded with the two marks were from the same source. Even absent that evidence, his Honour still concluded that the two marks "exhibit[ed] a strong phonetic similarity such that consumers of ordinary intelligence who had an imperfect recollection of one or other of the marks might not appreciate that the brand name referred to in the course of discussions taking place prior to sale was different to that which the consumer had previously seen or heard".

Davies Collison Cave Law acted for TiVo in the proceeding.

Endnotes

1. [2012] FCAFC 159.
2. [2012] FCA 252.

Novartis AG v Hospira Pty Limited [2012] FCA 1055

Novartis AG v Hospira Pty Limited (No 2) [2012] FCA 1113

The Federal Court has recently made orders restraining Hospira from promoting, supplying and obtaining PBS listing of products containing zoledronic acid until its final determination of Novartis’ allegations of patent infringement and Hospira’s cross-claims for invalidity. Interestingly, for the purposes of the interlocutory dispute, Hospira conceded that Novartis had a prima facie case of patent infringement, but contended that the strength of its own case of invalidity was such that Novartis' likelihood of success did not justify the grant of an interlocutory injunction. Justice Yates did not accept Hospira’s contentions, ultimately finding that the overall balance of convenience and justice favoured the grant of interlocutory relief. Justice Yates’ decision serves as yet another illustration of the difficulties pharmaceutical companies have in entering a market in which a competing product has patent protection and is listed under the PBS.

Novartis' "zoledronic acid" patents and commercial embodiments

Novartis AG is the owner of two Australian patents which relevantly include claims to methods of treating various malignancy related bone disorders¹  and osteoporosis²  involving the use of zoledronic acid (a third generation bisphosphonate which inhibits bone resorption) (together, the method of treatment claims).

Novartis Pharmaceuticals Australia Pty Limited is the exclusive licensee of each of the patents, and exploits them by marketing and supplying ZOMETA® (a concentrated injection vial indicated for the treatment of malignancy related bone conditions) and ACLASTA® (a intravenous infusion solution indicated for osteoporosis and other related conditions) in Australia.

Both products are listed under the Australian Pharmaceutical Benefits Scheme (PBS).

Hospira's threatened infringement of the patents

In February 2012, Hospira Pty Limited (Hospira) informed Novartis that it intended to launch two oncology products and an osteoporosis product containing zoledronic acid after 20 November 2012. In connection with its proposed launch, Hospira had secured registration on the Australian Register of Therapeutic Goods (ARTG) and applied for, but not yet obtained, PBS listing for one of the oncology products, and had applied to register the other two zoledronic acid products on the ARTG.

Novartis sought interlocutory orders to force Hospira to withdraw its PBS application and to restrain it from taking any further steps to launch products containing zoledronic acid in Australia, arguing that Hospira’s conduct constituted threatened infringement of the method of treatment claims of its osteoporosis and bone disorder patents.

General legal principles governing the grant of interlocutory injunctive relief

Justice Yates confirmed that to succeed on its application for interlocutory relief, Novartis was required to establish:

• a prima facie case, serious issue to be tried, or triable issue; and
• that the balance of convenience favoured the grant of an injunction in the sense that it would do more harm to Novartis not to have the injunction than it would do to Hospira to be enjoined.

Hospira concedes that Novartis has prima facie case of infringement

Hospira did not dispute that Novartis had a prima facie case of threatened contributory infringement pursuant to section 117 of the Patents Act for the purposes of Novartis' application for interlocutory relief. Justice Yates observed that Hospira's "concession was justified and appropriate"³  in the circumstances.

The balance of convenience: Hospira's case on invalidity

Whilst conceding that Novartis had a prima facie case, Hospira contended that the strength of its own case of invalidity was such that there was not a sufficient likelihood of success to justify the grant of injunctive relief in the circumstances.

In support of its invalidity case, Hospira argued that the method of treatment claims were not new or inventive.

Was the invention claimed in the method of treatment claims new?

Central to Hospira's attack on the bone disorder patent's lack of novelty was its argument that the relevant claims of the patent were not "fairly based" on the matter disclosed in a UK patent application from which the bone disorder patent claimed priority. Justice Yates accepted that if Hospira's argument was successful, the priority date of the bone disorder patent would be deferred to a date after the publication of the ZOMETA® Product Information sheet – a prior art document which arguably disclosed all of the features of the asserted claims of the bone disorder patent.

Whilst Justice Yates refrained from expressing a concluded opinion on the issue, his Honour was satisfied that there "is a strongly arguable case"⁴  that the priority document contained a real and reasonably clear disclosure of the invention, such that the bone disorder patent could legitimately claim priority from the document, with the effect that the ZOMETA® Product Information sheet would not be relevant for novelty purposes.

Justice Yates was also not persuaded that, on the evidence before him, other prior art publications relied upon by Hospira anticipated the method of treatment claims in issue.

Was the invention claimed in the method of treatment claims "inventive"?

Whilst his Honour acknowledged that the present state of the evidence in relation to the question of inventive step "clearly disclose[d] a substantial legal and factual dispute between the parties which is inconclusive"⁵, his Honour was not persuaded that Hospira's inventive step arguments meant that Novartis' prima facie case of infringement was weak.⁶

The balance of convenience: other relevant considerations

Novartis argued that other considerations that should be weighed in its favour on the balance of convenience included:

• ZOMETA® and ACLASTA® had an established position in the Australian market, whereas Hospira's oncology and osteoporosis products had not yet been launched;
• Hospira sought to launch its products with its "eyes wide open" as to the consequences (i.e. it knew of Novartis' patent rights);
• Novartis would suffer significant, unquantifiable and irreversible damage if Hospira entered the market, as, amongst other things, the entry would:

• trigger a compulsory statutory and likely irreversible 16% reduction to the price of ZOMETA® and ACLASTA® and the operation of the PBS's mandatory price disclosure regime; and
• force Novartis to further reduce the price of ZOMETA® and ACLASTA® in order to compete with the Hospira products. Any such reductions could reduce Novarts’ brand equity and would have to be disclosed to the PBS under its compulsory price disclosure regime, which could cause the PBS to irreversibly set the reimbursement price at an even lower level.

Justice Yates was of the view that these considerations outweighed those proffered by Hospira (including the loss of its "first mover advantage" and the apparent difficulties that would be experienced in connection with calculating its loss of sales), and was accordingly satisfied that "overall, the balance of convenience and justice weighed in favour of the granting of interlocutory injunctive relief".⁷

Interlocutory orders made against Hospira

On 12 October, Justice Yates gave effect to the above findings by making orders, which, amongst other things, prevent Hospira from taking steps to obtain listing under the PBS of any pharmaceutical products containing zoledronic acid as an active ingredient.

Notably, Hospira asked Justice Yates to make an order that would allow it to file applications for PBS listing but requiring it to withdraw it, if need be, in time to prevent the actual listing, so that it could have the benefit of a pending application should it be found at the final hearing that Novartis was not entitled to final injunctive relief.

In rejecting the proposal, Justice Yates explained that such an order would expose Novartis “to the risk of an irreversible statutory price reduction” for its own PBS listed products, which was precisely what Novartis had sought to avoid by prosecuting its application for interlocutory relief.⁸

Lessons for pharmaceutical patent litigants

Justice Yates’ decision illustrates the difficulties generic pharmaceutical companies face in entering a market in which a competing product has patent protection and is listed under the PBS.⁹ Indeed, a number of cases over the last 12 months have resulted in Australian courts holding that the likely irreversible and unquantifiable damage to the value of a PBS listed product upon the listing of a bioequivalent drug warrants steps being taken to prevent such loss until patent infringement and invalidity claims are finally heard and determined.

Sponsors seeking to launch generic or biosimilar versions of PBS listed patent-protected drugs should consider trying to “clear the way” (by, for example, seeking revocation of relevant patents) prior to taking any steps which would accord the pharmaceutical patentee with a clear and imminent threat of patent infringement, entitling it to seek interlocutory injunctive relief.

Endnotes

1. Australian Patent No. 2001261283 entitled “Use of Zolendronate [sic] for the manufacture of a medicament for the treatment of bone metabolism diseases” (the bone disorder patent)
2. Australian Patent No. 2001274109 entitled “Method of administering bisphosphonates” (the osteoporosis patent)
3. [2012] FCA 1055 at [37]
4. [2012] FCA 1055 at [66]
5. [2012] FCA 1055 at [88]
6. [2012] FCA 1055 at [91]
7. [2012] FCA 1055 at [140]
8. [2012] FCA 1113 at [6]
9. See also: Merck granted interlocutory relief to stop the alleged infringement of "Nasonex" patent

Effective enforcement of patents and other intellectual property rights (IPRs) in China has been a real concern for both Australian and overseas manufacturers over the last 25 years. Low production costs were enticing, yet China also carried the potential risk of unchecked copying, and subsequent downstream damage to markets infiltrated by those counterfeit products.

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Protecting products and innovation through patent ownership is a fairly standard business development strategy for manufacturers. Intellectual property (IP) rights can be used to protect products and maintain market share, as well as block cheap imports.

Traditionally, an international patent filing strategy would firstly focus on the target market jurisdictions where IPRs are respected, and can be reliably enforced. This would regularly include Japan, USA and Europe - on the basis that those jurisdictions represent significant markets with reliable enforcement systems.

As little as 10 years ago, with its relatively weak IPR enforcement regime, China was often left off the list.

IPR enforcement in China

Yet while China certainly used to be a safe haven for infringers and counterfeiters, an overhaul of the IPR enforcement system, and an increasingly affluent population – now becoming a major consumer market itself – means that China is now emerging as an important destination for protecting intellectual property.

A clear trend indicator is the number of new patent filings. In 2011, for the first time, more patent applications were filed in the Chinese patent office than in any other country in the world, even outstripping the USA.

The filing numbers have undoubtedly been inflated by government incentives, and a large number of applications may not pass muster under the scrutiny of Chinese patent office examination. However, the figures reflect a significant shift in the economy and the importance of IPRs in China.

In parallel with the surge in new filings, China has also made substantial progress with their enforcement regime. IP cases accepted by the courts in 2010 reached a staggering 42,931, with verdicts rendered in 97% of those cases. In 2011, a further 40% increase lifted the number of new IP-related Court cases to almost 60,000.

By comparison, around 1,200 cases were handled by Australian Courts in 2011.

To handle these cases, China has established special IP divisions and IP panels throughout its court structure, from the Supreme People’s Court, through People’s High Courts and in about 70 intermediate People’s Courts. The sheer scale of China’s current commitment to IP enforcement is breathtaking.

Improvements continue

Until recently, damage awards for IPR violations in China were considered low, compared to the US, for example. However, even this is changing. In a recently reported case, a Chinese Court awarded an unprecedented sum of RMB 334 million (US$ 53.4 million) damages for infringement of a utility model patent. It would appear the Chinese Courts are now closing the damages gap.

This award of damages represents another stage in the evolution of the IPRs protection regime where, not only are rights available and enforceable to stop infringers, they are also given proper financial weight by the Courts. This sends a strong signal to infringers and brings enhanced value and credibility to IPRs in China.

Many foreign companies have already started to engage the Chinese IP system, yet interestingly, foreign companies only represent about 60% of the plaintiffs in reported cases. The other 40% are Chinese; demonstrating significant adoption of the IPRs enforcement regime locally as well.

Should domestic businesses continue to embrace the IP enforcement regime, this will ultimately strengthen the system of rights and foster greater investment and development in innovation.

In the past, stronger enforcement in China was a major demand from foreign businesses and governments alike. It seems that demand is now being addressed.

Although pirating and copying will continue to exist for some time, the intellectual property rights regime will continue to improve in China. The days of rampant counterfeiting appear to be passing.

Australian manufacturers doing business in, or with, China should seriously consider China as an integral part of their IP protection strategy, if they haven’t already. Effective enforcement of IP Rights, coupled with an increasingly consumer driven population of 1.3 billion; the Chinese market cannot be ignored.

This article was first published by Manufacturers Monthly magazine, November 2012.

In September, the High Court consisting of Justices Gummow, Bell and Hayne refused to grant Optus special leave to appeal the decision of the Full Federal Court of Australia in the Optus TV Now case.¹ The High Court found that there was insufficient prospect of success in overturning the Full Federal Court’s decision, and that further consideration of the particular facts of the case would fail to provide any guidance (outside of the specific facts of the Optus TV Now case) as to the general application and scope of section 111 of the Copyright Act 1968.

“Time-shifting” exception to copyright infringement

Section 111 provides an exception to copyright infringement and applies where a person makes a recording of a broadcast for their “private and domestic use” by watching it at a time more convenient than when the broadcast is aired (this is also known as “time-shifting”).

History of the Optus TV Now case

The High Court’s decision to refuse to grant Optus special leave marks the end of the Optus TV Now case which was first heard by Justice Rares of the Federal Court in February this year. In April, the Full Federal Court overturned Justice Rares’ decision and found in favour of the National Rugby League (NRL), Australian Football League (AFL) and Telstra (the rights holders) when it held that Optus was at least partly responsible for making the recordings through its TV Now service, and that the section 111 exception did not apply to it.

Australian Law Reform Commission copyright review

The Full Federal Court’s decision indicates cloud computing service providers could be held liable for copyright infringement in storing and streaming data originally uploaded by their customers under the current legislation. This is one area that is specifically being addressed by the Australian Law Reform Commission (ALRC) in their upcoming review of the adequacy of the current Copyright Act in the digital environment. The first issues paper was released on 20 August and invites submissions on whether the current Copyright Act is impeding the development of cloud computing technology in Australia, and whether the Act should be amended to create exceptions for cloud computing services.

We will keep you updated on any changes to the Australian Copyright Act, or developments, as a result of the ALRC review.

Endnotes

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

On Friday, 21 September 2012 IP Australia invited public comment in relation to draft amendments to Australia's intellectual property law regulations which have been necessitated by the Intellectual Property Laws Amendment ("Raising the bar") Act 2012. The draft regulations are to be published in two stages to maximise the time for public comment, with those released on Friday relating to the following three schedules of the Raising the Bar Act:

Schedule 1 – raising the quality of granted patents,

Schedule 4 – improving mechanisms for trade mark and copyright enforcement, and

Schedule 5 – assisting in the operations of the IP profession.

The regulations published in relation to Schedules 4 and 5 do not appear to include any surprises, with the various regulations relating to customs seizure of goods subject to copyright or trade mark rights, and the incorporation of patent attorney firms being largely as foreshadowed in the Explanatory Memorandum accompanying the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011. The same can be said for the amended regulations proposed under Schedule 1, with the exception of the provisions relating to priority entitlement for patents.

Under Section 43(2) of the Patents Act 1990, as amended by the Raising the Bar Act, a claim can derive a priority date from an earlier application which "discloses the invention in the claim in a manner that is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art". Accordingly, for applications and patents subject to the provisions of the Raising the Bar Act, priority will only be acknowledged if the relevant priority document provides an enabling disclosure of the claimed invention. Also, under the Raising the Bar Act, the requirement for a claim to be "fairly based" on a disclosure was replaced with a new requirement that a claim must be "supported by matter disclosed".

Regulation 3.12 currently stipulates that a claim must be "fairly based on matter disclosed in one or more priority documents" for priority entitlement to be recognised, and for this reason it was anticipated that the new regulations would require a claim to be "supported by" the disclosure in the priority document. However, the new regulations relating to the calculation of priority dates do not require a claim to be supported by the disclosure of the priority application. Instead, the new regulations simply mirror the requirement of new Section 43(2); that the priority document must disclose the invention "in a manner that it clear enough, and complete enough, for the invention to be performed by a person skilled in the relevant art". Accordingly, the test for a priority entitlement is an enablement test, not a support/fair basis test.

The deadline for providing comments on the draft regulations is 21 November 2012. The draft regulations are available on IP Australia's website, which also provides information in relation to the filing of comments.
 

Optimising visibility on search engines’ result pages has become a core component of any online marketing strategy. But how can brand owners protect themselves when competitors are using their trade marks, business names and domain names as AdWords or keywords to increase their ranking on search engines such as Google? Equally what checks and balances can advertisers using the Google AdWords program and search engine providers, put in place to avoid allegations of misleading and deceptive conduct?

Subject to a pending appeal to the High Court, a recent Full Federal Court decision in Australian Competition and Consumer Commission v Google Inc¹ has significant ramifications for Google’s AdWord’s program and clarifies the advertising practices of search engine providers in Australia. As a result of this decision aggrieved brand owners may have recourse not only against the advertisers responsible for the advertisements but directly against Google. The High Court is likely to revisit the issue of Google’s liability later this year.

The Full Court’s finding that Google is liable for the content of advertiser’s sponsored links in Australia (under our consumer protection laws)² 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)³. Australian Courts are yet to consider whether Google/the advertiser's use of competitor's names in headlines of sponsored links constitutes a breach of our trade mark laws. To do so would require a finding that Google's use of the AdWord was "use as a trade mark".⁴

The Google decision at first instance and two recent Federal Court decisions also provide guidance as to how advertisers should tailor their AdWord programs.

Key points

For trade mark owners:

1. The first avenue for trade mark owners is to file a Google AdWord Complaint regarding use of its mark as an AdWord or in the text of a sponsored link.⁵
2. If the Google AdWord Complaint is not successful or a satisfactory outcome cannot be negotiated, there is now a further avenue of issuing proceedings in the Federal Court not only against the advertiser responsible for the Google ad but also, in certain circumstances, directly against Google.
3. If the Full Federal Court's decision is maintained, Google should be more responsive to AdWord Complaints.

For advertisers:

1. Advertisers should not use a competitor’s trade mark, trading, product or domain name as the headline of its sponsored link when the ad text links to a website which does not contain any information about the competitor or its products/services.
2. Advertisers should consider excluding competitor's names when buying generic AdWords and featuring hanging representations in their ads, for example “Buy online and save up to 70%”, when the advertiser knows that the word is likely to be searched with a competitor’s name.

For search engine providers:

1. Search engine provider’s staff should be instructed not to encourage advertiser to create advertisements which contain trade marks / domain names of known competitors which will be returned in response to an inquiry of the search engine provider.
2. Merely having terms and conditions attempting to limit the search engine’s liability is unlikely to avoid liability.⁶

What are “Sponsored links” in Google search results?

Google's search result pages typically present users with “organic search results” that comprise web pages containing the user’s search query (and which are ordered by relevance), and “sponsored links” (now called “ads”) which are advertisements that advertisers have paid to have included on particular search result pages. These sponsored links include a headline, short text and the address of the advertiser’s website (also known as its ‘URL’), as shown below:

The AdWords advertising service

Google offers a program whereby advertisers purchase "AdWords” or keywords; which, when entered by the Google user, cause the advertiser's sponsored link to appear in the search results for that word. The AdWord may be the name or trade mark of another trader unless and until Google receives a complaint under its Google AdWord Complaint Policy from the owner of the name or mark. Advertisers pay Google a fee if its sponsored link is clicked by a user.

ACCC v Trading Post Australia Pty Ltd and Google, Inc⁷ and ACCC v Google Inc⁸

Advertiser's liability

The first instance Federal Court decision concerned eleven sponsored links, including:

A consumer who searched Google for example, for the terms "Harvey World Travel", was presented with a sponsored link to a rival website which contained no information regarding the competitor who featured in the headline of the sponsored link. The ACCC alleged that each of these sponsored links were misleading or deceptive or likely to mislead or deceive.

These advertisements were created using the Google AdWord program. After the keyword/s had been selected, the advertiser provided Google with the text of an advertisement into which a keyword/s was inserted. Each advertiser opted to use Google’s keyword insertion facility such that keywords selected by the advertiser were automatically inserted in the sponsored link headline as it appeared on the results page.

Three of the eleven advertisements were published by Trading Post Australia Pty Ltd (“Trading Post”)⁹. Trading Post had published the sponsored link below which included competitor's name (Kloster Ford, a NSW car dealer) in the headline. When users clicked on the headline they were taken to the Trading Post website which did not contain any information regarding Kloster Ford or its car sales.

Kloster Ford
www.tradingpost.com.au
New/Used Fords – Search 90,000 + auto ads online. Great finds daily!

At first instance Nicholas J declared that such conduct constituted misleading and deceptive conduct and false or misleading representations as to a commercial association or affiliation between the Trading Post and Kloster Ford when none existed.¹⁰

Nicholas J considered ten other sponsored links¹¹. However, to the extent that any of the sponsored links were held to be misleading and deceptive the advertiser, and not Google, was held liable.

Google's liability

Although Google provided the technical facilities (including the keyword insertion facility) and Google staff had some input in creating the sponsored links, at first instance Nicholas J held that Google had merely communicated the advertisement and had not endorsed or adopted the information conveyed in the advertisement. His Honour concluded that ordinary and reasonable users would understand that Google was a commercial enterprise separate and distinct from the advertisers who make use of it.

On appeal by the ACCC, the Full Federal Court unanimously held that Google had made the misrepresentations contained in four sponsored links. 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 … Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth.¹²

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.¹³

The Full Court found that Google was "in fact, much more than a mere conduit".¹⁴

The Full Court observed that whether a corporation has engaged in misleading conduct or has merely acted as a conduit for another will be a question of fact in each case.¹⁵  According to the Full Court "the intermediary’s conduct must be considered as a whole to determine whether the intermediary was merely passing on the information. Whether or not there is an implied disclaimer or an implied adoption or endorsement is a conclusion of fact which follows from a determination based on all the circumstances of the case.”¹⁶

Was the “publisher’s defence” available?

In its defence Google sought to rely on the so-called “publisher’s defence” under section 85(3) of the Trade Practices Act 1974 (Cth)¹⁷, which protects publishers (such as magazine and newspaper publishers) from liability for misleading claims made by its advertisers.

To rely on this defence, Google needed to establish that its business was to publish or arrange publication of advertisements, that it received the advertisements for publication in the ordinary course of business, and that it did not know and had no reason to suspect that its publication was misleading or deceptive. At first instance, Nicholas J concluded that if Google had been liable for the misrepresentations made in the four advertisements, the publisher’s defence would not have been available because Google (via its employees) should have known or had reason to believe that its publication of the advertisements would mislead or deceive consumers.

The Full Court agreed with the conclusion of Nicholas J and held that Google could not rely on the publisher’s defence on appeal.¹⁸

With respect to the Harvey World Travel advertisements, for example, the Full Federal Court considered Google ought reasonably to have suspected that the use by STA Travel of Harvey World Travel’s name as a keyword triggering an advertisement for STA Travel was likely to mislead or deceive a consumer searching for information on Harvey World Travel. Indeed, Harvey World Travel was also a client of Google.¹⁹

As such Google had engaged in conduct that was misleading or deceptive having misrepresented that there was an association or affiliation between the competitor and the advertiser.

Google was ordered to pay costs²⁰ and to establish and implement a trade practices compliance program.

Google's application for special leave to Appeal to the High Court granted

On 22 June 2012 Google was granted special leave to appeal to the High Court²¹. The principal issues on appeal are:

• whether the Full Federal Court was correct in finding that because Google published the advertiser's links it was responsible for them; and
• whether the decision of Universal Telecasters (QLD) v Guthrie²²  (relating to the liability of a television broadcaster relied on by the ACCC and the Full Federal Court) is relevant to determining liability for misleading and deceptive conduct in the online environment, particularly in the search engine context.

Recent interlocutory decisions involving AdWords

Recent interlocutory decisions involving AdWords, but which did not involve findings against Google, include Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd²³ and Specsavers Pty Ltd v Buyinvite Pty Ltd.²⁴

In the first case a competitor of Specsavers, Coastal Contacts (Aus) Pty Ltd purchased the Google AdWord “contacts” but had not excluded the word “Specsavers” from its AdWord program. Someone entering the search terms “contacts” and “Specsavers” would see Coastal Contact’s sponsored link which included the statement “Buy Online and Save Up to 70%". Specsavers did not allege that the representation itself was false but that consumers who searched the terms "contacts" and "Specsavers" would ask ‘70% of what?’ and assume that the comparison was made with Specsavers.²⁵

Jacobson J held that “it is (or was) the failure of Coastal Contacts to exclude from the keywords the name Specsavers and the knowledge … that the name Specsavers will be combined with the common descriptive terms “contacts” which brings about the misleading conduct”²⁶. The interlocutory injunction was granted. However, the example of misleading and deceptive conduct involving Google Adwords was but one of multiple examples of misleading and deceptive conduct engaged in by Coastal Contacts.

In the second case, Specsavers obtained an undefended interim injunction against Buyinvite regarding the following ad:

80% off Alex Perry frames.
www.buyinvite.com.au
As seen on Today Tonight!
Alex Perry frames at irresistible prices.

As Specsavers has the exclusive right to offer Alex Perry branded glasses for retail sale in Australia, Foster J held that Buyinvite's advertisement was "misleading and deceptive and false because it suggested that [Buyrite] has the capacity to supply Alex Perry branded glasses when it clearly does not.”

While the Specsavers cases are worth noting, they arguably have no precedential value - the AdWords aspect of the first decision was one of many instances of misleading and deceptive conduct which tipped the balance of convenience in favour of Specsavers and the second case was undefended. Both cases have now been finalised.

Australian Courts are yet to consider whether Google’s or an advertiser's use of competitor's names in headlines of sponsored links constitutes trade mark infringement. To do so would require a finding that Google's or advertiser’s use of the AdWord was "use as a trade mark"²⁷. Nonetheless, there is a body of case law developing in Australia concerning Google AdWords with which IP practitioners need to be familiar.

This article by Elizabeth Godfey first appeared in the Internet Law Bulletin, in September 2012

Endnotes

1. [2012] FCAFC 49.
2. Namely, under the former section 52 of the Trade Practices Act 1974 (Cth) (now section 18 of the Australian Consumer Law 2010 (Cth) which prohibits, in trade or commerce, conduct that is misleading or deceptive or is likely to mislead or deceive and under the former section 53 of the Trade Practices Act 1974 (Cth) (now section 29 of the Australian Consumer Law 2010 (Cth)) further prohibits the making, in trade or commerce, of false or misleading representations regarding commercial association or affiliation.
3. See Rosetta Stone Ltd v Google Inc (732 F Supp 2d 628 (ED Va 2010)); Google France SARL, Google Inc v Vaiticum SA, Lutectel SARL and Google France SARL v Centre national de recherché en relations humains CHRRH SARL and ors (C-236/08) to C-238/08) 23 March 2010.
4. Under section 120 of the Trade Marks Act 1995 (Cth).
5. Bear in mind, Google only investigates and takes action regarding complaints concerning exact matches to word trade marks (see https://services.google.com/inquiry/aw_tmcomplaint - Google AdWords Complaint form. Google does “not investigate trademarks that incorporate a design or formatting element”). Google does not investigate trade marks which are substantially identical with or deceptively similar to a trade mark.
6. ACCC v Google Inc [2012] FCAFC 49 at [97].
7. [2011] FCA 1086.
8. [2012] FCAFC 49.
9. The advertisers responsible for the eight remaining sponsored links were not parties to the proceeding.
10. In 2008 the Trading Post provided Court enforceable undertakings that, broadly speaking, it would not permit publication of sponsored links where the headline of the sponsored link contained a known competitor's name and the user was directed to the Trading Post website, in circumstances where no information regarding, or advertised by, that competitor were contained on the website. The Trading Post also undertook to implement a trade practices compliance program.
11. Some of the sponsored links were not considered misleading and deceptive because Nicholas J considered that either (a) there was insufficient evidence filed by the ACCC to establish the competitor the subject of the sponsored link did not in fact advertise with the advertisers; or (b) to establish that the competitor had the requisite reputation to substantiate an allegation that consumers would be mislead or deceived.
12. ACCC v Google Inc [2012] FCAFC 49 at [87].
13. Ibid at [88].
14. Ibid at [89].
15. Ibid at [80].
16. Ibid at [81].
17. Now section 213(4) of the Australian Consumer Law 2010 (Cth).
18. ACCC v Google Inc [2012] FCAFC 49 at [115].
19. Ibid at [112].
20. Costs of trial in relation to the four sponsored links the subject of the appeal and the costs of the appeal.
21. Google Inc v Australian Competition and Consumer Commission [2012] HCATrans 160 (22 June 2012).
22. [1978] 18 ALR 531.
23. [2012] FCA 102 (17 February 2012).
24. [2012] FCA 230 (13 March 2012).
25. Indeed, Jacobson J acknowledged that in those circumstances “it is the action taken by the consumer which brings about the misleading impression.” at [18].
26. Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012).
27. Section 120 of the Trade Practices Act 1995 (Cth).