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.

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.

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].

SNF (Australia) Pty Ltd v CIBA Specialty Chemicals Water Treatment Limited [2013] HCATrans 54

In an earlier briefing, we reported that SNF had filed a special leave application in the High Court of Australia in a last-ditch attempt to have Ciba's innovation patents relating to treatment of mine tailings revoked. The special leave application was refused following a hearing held on 15 March 2013 in Melbourne. In refusing to grant special leave to SNF to appeal the Full Federal Court's decision, the High Court rejected SNF's argument that the judges of the lower courts had incorrectly applied the legal principles relevant to claim interpretation and innovative step.

It is particularly noteworthy that the High Court did not accept SNF's submissions that the innovative step test applied previously by the Federal Court – namely, that any difference between the claimed invention and the prior art simply needs to affect the way that the invention works, rather than providing any particular benefit or advance - was not the correct test.

SNF has no further avenues of appeal, so it appears that Ciba's innovation patents are here to stay.

Does innovative step include negative or neutral effects?

The statutory test for innovative step requires that any difference between a claimed invention and the prior art make "a substantial contribution to the working of the invention". The Full Federal Court has previously interpreted the test as essentially requiring that there be a functional difference between the invention as claimed and the prior art. Any such difference, the Court has previously held, need not constitute an advance in the art.

SNF's argument was that the variation between Ciba's claims and previously known tailings treatment processes in fact resulted in a negative, or at best neutral, effect on the known processes. They argued that this could not be a "substantial contribution" for the purposes of innovative step, since a process which worked worse than known processes, or even just as well, could not possibly be an "innovation".

The High Court rejected this argument. Referring to the lower courts' findings that certain differences in Ciba's claimed process had “an important effect” on the process, Chief Justice French commented when handing down the High Court's decision on the special leave application that this was "a statement of an evaluative kind which, taken in context, did not disclose an approach … which was inconsistent with the statutory test."

Was expert evidence in relation to claim construction properly handled by the Federal Court?

SNF submitted that evidence provided by an expert witness had been given undue weight, because the witness was genuinely an expert in the field, rather than a person of ordinary skill in the relevant art. They also submitted that the expert's interpretation of "improved rigidification" was at odds with evidence provided by other experts, and should not have been relied upon by the Federal Court.

The High Court rejected SNF's submissions that the Federal Court (whether at first instance or on appeal) had made an error of legal principle in relation to claim interpretation.

Lessons for innovation patent applicants

Given that the High Court has refused the special leave application, the innovative step test previously applied by the Federal Court will stand. That is, so long as your invention works in a different way than previously known devices or methods – regardless of whether the difference is a beneficial one – it may be patentable.

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.
 

DRH Holdings (Australia) Limited v David Reid Homes Australia Pty Ltd [2012] FCA 1336

In this ever evolving and highly competitive online environment, businesses are pulling out all the stops to get you to their websites. For example, when a domain name (which contains a registered trade mark) is entered into a search engine and you are deliberately redirected to an unrelated or competitor’s website. The person responsible for you being redirected may have just committed trade mark infringement (as well as misleading and deceptive conduct).

The case of DRH Holdings (Australia) Limited v David Reid Homes Australia Pty Ltd¹ is another case in a line of Federal Court decisions which has held that using a trade mark in a domain name which redirects consumers to an unrelated or competitor's website constitutes trade mark infringement.

A finding of infringement in these circumstances demonstrates a widening of the situations in which persons may be liable for trade mark infringement in Australia. It also provides trade mark owners with a broader context in which to enforce their registered trade marks.

The facts of the DRH Holdings trade mark infringement case

The Applicant (DRH Holdings) is a company incorporated in New Zealand, and registered in Australia as a foreign company. At all material times Mr David Reid was the sole director and local agent of DRH Holdings. DRH Holdings develops and owns a business system for the supply, design and construction of houses (“the Business”). It is the registered owner of trade marks numbers 1026582 “David Reid Homes Raising the Standard” and 1026671 “David Reid Homes”, which are used in connection with the Business.

On 1 April 2004 DRH Holdings and David Reid Homes Australia entered into a Master Franchise Agreement pursuant to which DRH Holdings granted David Reid Homes Australia the right to operate the Business in Australia. For various reasons the relationship failed. There was evidence before Justice Collier that after the Agreement was abandoned David Reid Homes Australia took “deliberate actions” which resulted in redirection of the website www.davidreidhomes.com to the website www.davidreidhomes.com.au. As a result of these actions, all website enquiries directed to www.davidreidhomes.com were redirected to the Australian website under the control of David Reid Homes Australia.

There was evidence before the Court that over the course of several days following the abandonment of the Agreement David Reid Homes Australia:

caused the websites with [DRH Holdings'] trade marks to be redirected to prevent their use by DRH Holdings or anyone else associated with the Business, and also to enable David Reid Homes Australia to make disparaging comments concerning DRH Holdings on those websites, all of which was contrary to the terms of the Agreement.

Justice Collier held that this conduct constituted trade mark infringement.

David Reid Homes Australia was ordered to refrain from establishing, maintaining, accessing, redirecting or interfering in any manner with the following domain names or with the data published at the domain names www.davidreidhomes.com.au and www.davidreidhomes.com.

Other cases of website redirection and trade mark infringement

In making his decision, Justice Collier did not refer to the earlier decisions of Solahart Industries Pty Ltd v Solar Shop Pty Ltd² or Edgetec International Pty Ltd v Zippykerb (NSW) Pty Ltd³ where website redirection was held to constitute trade mark infringement.⁴ In the Solahart case the Court found that mere use of a domain name to resolve to a website hosted from a different domain name was infringement even where there is no use of the trade mark on the website or in the url. In the Solahart case the Court considered that the maintenance of the domain name containing the deceptively similar trade was a deliberate act to funnel traffic to the website to which consumers were redirected.

In the Edgetec case the Federal Court held that Zippykerb's (the Respondent’s) use of KWIK KERB (which was considered to be substantially identical to the Applicant Edgetec’s KWIK KERBER mark) in domain names for the purpose of redirecting internet users to Zippykerb’s website constituted trade mark infringement. This was seen to be analogous to using another person's sign or trade mark on the front of a shop to indicate the goods and services sold within. Even though Zippykerb distinguished itself from Edgetec on its website, the Federal Court considered this to be immaterial to the enquiry of whether or not there had been a trade mark infringement.

Similar to the Solahart case, in the DRH Holdings case there were “deliberate actions” by David Reid Homes Australia to direct inquiries intended for the international business to the Australian website and to make disparaging remarks. The registered trade marks in the present case were also used in the domain name to which consumers were redirected and on the offending website.

When redirection constitutes trade mark infringement

These cases demonstrate a broadening of what the Courts consider constitutes infringement under the Trade Marks Act 1995 (Cth).

To infringe a registered trade mark a person must use as a trade mark a sign that is substantially identical with, or deceptively similar to, a registered trade mark in relation to the goods or services in respect of which the trade mark is registered or in relation to similar to similar goods or services to those covered in the registration.

To constitute trade mark infringement, the sign must be “used as a trade mark”, that is it must be used as a badge or indicator of origin of the goods or services offered. A sign that is used ‘as a trade mark’ will generally perform a ‘branding function’. The appropriate question to ask is whether the impugned words would appear to consumers as possessing the character of a brand. The context of the use complained of is all important. One often considers whether the impugned sign is prominently displayed on packaging or in advertising or on a website and not instead used for primarily descriptive or laudatory purposes.

However, applying this well established infringement test to a situation where a trade mark is used in a domain name for purposes of redirection requires one to think a little outside the square. Nonetheless, on the basis of a line of current Federal Court authority this conduct can indeed constitute trade mark infringement under Australian law.

Lessons about domain name use, website redirection and trade mark infringement

For individuals and businesses

• Unless you are authorised by the trade mark owner to do so, do not use another trader’s trade mark in a domain name to redirect a consumer to your website.

For trade mark owners

• mere registration of a domain name that includes a trade mark does not constitute trade mark infringement. Such conduct may constitute common law passing off or misleading and deceptive conduct particularly in circumstances where the trade mark is well and favourably known. Trade mark owners may in these circumstances also have recourse under a domain name Dispute Resolution Policy (such as the UDRP or auDRP);
• mere use of a domain name to resolve to a website hosted from a different domain name may constitute infringement, particularly when there is use of the trade mark in the domain name to which the website resolves and/or on that website (as was the case in DRH Holdings). However, even where there is no use of the trade mark on the website to which the domain name resolves or in the URL, trade mark infringement may be found. This is particularly likely if the responsible party has deliberately taken this action to divert or funnel traffic from the trade mark owner’s website to another website.

Endnotes

1. [2012] FCA 1336
2. [2011] FCA 700 
3. [2012] FCA 281
4. Solahart Industries Pty Ltd v Solar Shop Pty Ltd [2011] FCA 700 or Solahart Industries Pty Ltd v Solar Shop Pty Ltd (No. 3) [2011] FCA 884 and Edgetec International Pty Ltd v Zippykerb (NSW) Pty Ltd [2012] FCA 281 

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)

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 

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.

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

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. 

Winnebago Industries, Inc v Knott Investments Pty Ltd (No 2) [2012] FCA 785

Back in 1985, Winnebago Industries, Inc became aware that Knott Investments Pty Ltd was using its "Winnebago" trade mark in Australia for recreational vehicles (RVs). 25 years later, Winnebago sued Knott and its dealers for passing off, breaches of the Trade Practices Act and Australian Consumer Law and copyright infringement. Winnebago also sought cancellation of Knott's trade mark registration for the Winnebago name.

Justice Foster of the Federal Court found that Winnebago had a sufficient "spill over" reputation in Australia at the time the conduct began (in 1982) to establish passing off and breaches of the TPA/ACL. Knott was found to have intentionally adopted the Winnebago name to trade on that reputation. His Honour rejected the Respondents' defence that Winnebago had consented to the use of the marks, or that it should be estopped, or denied relief on the ground of delay. His Honour also ordered the cancellation of Knott's trade mark registration. However his Honour found that there was insufficient evidence as to the creation of the Winnebago mark to sustain the copyright claim.

Knott and its dealers have appealed Foster J's decision. The appeal will be heard by the Full Federal Court on 26 March 2013.

The use of the Winnebago mark

Winnebago first sold RVs using the name "Winnebago" in the US in the early 1960s, and expanded its operations to the UK, Europe and Canada. In 1963, the director of Knott (Bruce Binns) saw Winnebago RVs overseas and in the late 1970s, Knott began using the Winnebago marks on its RVs in Australia. Winnebago became aware of Knott's conduct in 1985. In 1991, Winnebago demanded that Knott stop using the Winnebago marks in Australia. In 1992, the parties executed a Settlement Agreement which provided, amongst other things, that Knott would not use the Winnebago marks outside Australia.

Key findings of the case

The time to assess whether Knott's conduct was misleading

Justice Foster held that Knott's conduct should be assessed at the time it commenced. His Honour rejected Winnebago's argument that the relevant time was the date the proceedings commenced or the date of the trial.

Winnebago's reputation in Australia

There was no dispute that Winnebago had established a significant reputation in the Winnebago brand overseas since the 1960s. Justice Foster referred to the Full Court decision in ConAgra Inc v McCain Foods and accepted Winnebago's submission that by June 1982, it had a "spillover" reputation amongst a substantial number of persons who would be potential customers if Winnebago's goods or services were marketed in Australia. His Honour found that Australians travelling overseas, and overseas visitors to Australia, had created an awareness of the Winnebago brand. Justice Foster found the most telling evidence to be that of Binns himself who, his Honour found, had "intentionally hijacked" the Winnebago marks to trade off its reputation.

Passing off and breaches of the Trade Practices Act and Australian Consumer Law

His Honour held that a substantial number of potential customers looking to buy or rent RVs in Australia were aware of Winnebago in 1982 and were likely to be deceived into believing that Knott's business was connected with Winnebago. The Respondents had therefore engaged in passing off, and misleading and deceptive conduct and the making of false representations under the TPA (for conduct up to 1 January 2011) and ACL (for conduct thereafter).

No consent or representation by Winnebago that Knott could use the Winnebago name in Australia

Binns gave evidence that in 1991, a Winnebago representative at a trade fair told him that Knott could use the Winnebago marks in Australia. Knott relied on that conversation and the Settlement Agreement to submit that Winnebago had consented to Knott using the Winnebago in Australia, and that Winnebago should be estopped from bringing its claims.

Justice Foster found that Binns had "invented" the conversation. His Honour held that the Settlement Agreement, properly understood, did not make any representation that Knott was permitted to use the Winnebago marks in Australia. The Settlement Agreement simply left matters as they stood in Australia, until such time as Winnebago might wish to exercise its rights in respect of the Winnebago marks.

Delay not sufficient to deny Winnebago relief

The Respondents argued that Winnebago had stood back with full awareness and allowed Knott to develop its business using the Winnebago marks. They submitted that the Court should refuse relief under the TPA and ACL and for passing off. Winnebago relied on World Series Cricket Pty Ltd v Parish¹ as authority for the proposition that mere delay would rarely disentitle an applicant from relief for the statutory causes of action. Justice Foster recognised that there had been "extraordinary delay" on the part of Winnebago in taking action. However his Honour found that Winnebago had taken some steps to protect its position through the Settlement Agreement. Further, Binns and Knott had taken a "calculated risk" to gain as much revenue and advantage as possible from using the Winnebago marks, knowing that they might need to rebrand if Winnebago decided to enter the Australian market. His Honour held that in the "very special circumstances" of this case, the delay did not provide any proper basis for refusing relief.

Insufficient evidence of copyright in the Winnebago mark

Justice Foster found there was insufficient evidence as to the creation of the Winnebago logo to prove its originality for the purposes of copyright subsistence. His Honour also held that there was insufficient originality in the name Winnebago (being the name of a US county) to justify copyright protection.

Cancellation of Knott's registered mark

Section 88(2) of the Trade Marks Act 1995 (Cth) sets out the grounds on which the Court can order the cancellation of a trade mark registration, including that the use of the mark is likely to deceive or cause confusion based on the circumstances existing at the time when the application for rectification was made. Based on the findings as to Winnebago's reputation in Australia, his Honour ordered the cancellation of Knott's trade mark registration.

Knott's dealers also liable

Justice Foster found that the other Respondents, being Knott's dealers, had also committed the tort of passing off and contraventions of the TPA and ACL. Knott was held to be an accessory to the contravening conduct of its dealers.

Remedies awarded to Winnebago

On 6 September 2012, his Honour made orders to give effect to his reasons for judgment. The orders included the following suspended orders which will take effect after 3 September 2013:

• that Knott and the dealers be permanently restrained from using the Winnebago marks or any substantially identical or deceptively similar marks;
• that Knott's trade mark registration be cancelled; and
• that Knott and the dealers cancel all business, corporate and domain names containing the Winnebago name or any substantially identical or deceptively similar name.

His Honour also made orders with immediate effect for Knott and the dealers to publish a prominent notice online, at their dealerships and in their promotional material, stating that their RVs are not made by or associated with Winnebago.

The proceeding had been bifurcated and his Honour ordered an inquiry into the quantum of any pecuniary relief.

Finally, Knott and the dealers were given leave to appeal, on condition that:

• the Notice of Appeal be filed within 14 days;
• they apply to the Court for the expedited hearing of the appeal during or before the February-March 2013 Full Court sittings;
• they prosecute any appeal with due diligence.

Appeal to the Full Federal Court

On 19 September 2012, Knott and its dealers filed a Notice of Appeal to Foster J's decision. The appeal has been listed for hearing before the Full Court (Keane CJ, Cowdroy and Jagot JJ) on 26 March 2013.

Lessons for trade mark owners

Justice Foster's decision confirms that mere delay is generally not sufficient to bar relief, and something more is usually required, such as a positive representation that the applicant consents to the infringing activity. This case demonstrates the importance of putting alleged infringers on notice of the trade mark owner's claims, and, if proceedings are not issued shortly thereafter, making it clear that the owner does not consent to the infringing conduct and reserves all right to take action at some later time.

This case is significant for the length of the delay, during which the respondent incurred a considerable sum (more than $6 million) in advertising its products under the infringing mark. In other cases involving delay, such as Mobileworld Communications Pty Ltd v Q&Q Global Enterprise² where the owner of the "Crazy John's" mark took 6.5 years to take action against the user of the "Crazy Ron's" mark, the Court has been willing to order the payment of some sum (in that case $50,000) as some reparation for the delay.

In this decision Foster J emphasised the "special circumstances" of the case, perhaps to indicate (particularly to overseas parties) that they will not necessarily be granted relief on their claims if they sit back and allow the infringing use of their marks to continue until such time as they wish to enter the Australian market. Each case will depend on its facts, and the evidence as to the alleged infringer's adoption of the mark and the circumstances in which it continued to use the mark, will be critical.

Endnotes

1. (1977) 16 ALR 181
2. (2003) 61 IPR 98 

Merck Sharp & Dohme Corp v Apotex Pty Ltd [2012] FCA 928

Justice Jagot of the Federal Court has granted an interlocutory injunction prohibiting the promotion and sale of Apotex's generic versions of Merck's anti-allergic nasal spray, Nasonex. In granting the injunction, Justice Jagot found that Merck had a prima facie case of infringement notwithstanding Apotex's case on patent invalidity. Her Honour accepted as persuasive the "irreparable harm" evidence adduced by Merck, and considered that the "balance of convenience" favoured the granting of the injunction. The decision provides useful guidance as to the evidence required to support an application for interlocutory relief to prevent generics from entering the Australian market during the patent term.

Merck's "Nasonex" patent

Merck is the owner of an Australian standard patent relating to the once-daily intra-nasal use of an anti-allergen nasal spray comprising the active pharmaceutical ingredient, mometasone furoate (MF). The patent covers Merck's inhaled corticosteroid product marketed and sold under the name "Nasonex".

Apotex's alleged infringement of Merck's patent

In June this year, Apotex secured Australian Therapeutic Goods Administration registration of 5 generic versions of Nasonex. Shortly thereafter, Apotex commenced marketing the products with a view to supplying them in Australia from early September 2012.

After learning of Apotex's activities, Merck issued patent infringement proceedings in the Federal Court of Australia in July 2012 seeking, amongst other things, a preliminary injunction to prevent Apotex from offering to sell and selling its generic MF sprays in Australia.

The 3 things Merck had to establish to obtain interlocutory relief

1. there was a serious question to be tried: In patent infringement proceedings, this requires an assessment of the relative strengths of the applicant's infringement case on the one hand, and the alleged infringer's invalidity case on the other;
2. damages would not adequately compensate it if an injunction was not granted and it was ultimately successful at trial; and
3. the balance of convenience favoured the grant of interlocutory relief. That is, Merck would suffer more if the injunction was refused, than Apotex would suffer if the injunction was granted.

1. Was there a serious question to be tried?

Apotex argued that Merck did not have a prima facie case of infringement because the claimed invention was obvious.

Whilst accepting that Apotex was able to point to "real arguments against validity"¹, Justice Jagot was not persuaded that Apotex's case on obviousness was sufficiently strong to deny the existence of Merck's prima facie case of infringement. In reaching this conclusion, Justice Jagot pointed to a number of issues and possible weaknesses in Apotex's invalidity case, including:

• whether Apotex's expert had properly identified the "problem" said to be solved by the invention claimed in the patent, or whether the expert had improperly "assumed away" part of the invention;
• the reliability of the evidence from Apotex's expert as to the common general knowledge relating to MF at the priority date; and
• whether the prior art documents provided clear directions in respect of the use of MF to treat allergic rhinitis without substantial side effects.

2. Would damages adequately compensate Merck?

Merck adduced evidence from its director of sales and marketing in Australia to establish that its loss could not adequately be compensated for in damages if an injunction was refused and it was ultimately successful at trial.

Nasonex is not listed on the PBS and Merck therefore could not rely on the "Pharmaceutical Benefits Scheme (PBS) argument"² that has been highly persuasive in a number of recent interlocutory injunction applications in pharmaceutical patent cases³. That is, Merck could not argue that it would suffer irreparable harm because the entry of a generic would trigger a mandatory and irreversible price reduction under the PBS.

Nonetheless, Justice Jagot was persuaded that damages would be an inadequate remedy for Merck based on its evidence as to the following factors:

• Merck's orders for Nasonex had decreased by 39% as a result of Apotex's marketing and proposed supply of the Apotex products;
• If Apotex entered the market, Merck could not proceed with its planned price increase for Nasonex and it would be forced to reduce the price of Nasonex below the current level;
• Merck would not be able to raise its prices back to the current level if Apotex was ultimately restrained at trial because to do so would involve a loss of goodwill and a potential negative impact on Merck's corporate reputation;⁴ 
• If Apotex was not restrained, Nasonex would become a significantly less profitable product and Merck would be forced to make a number of its experienced Nasonex marketing and sales employees redundant. If Merck was ultimately successful at trial, it would then need to hire and train new marketing and sales staff; and
• The market for these nasal sprays is complex, and it could not be assumed that every sale made by Apotex would have been a sale made by Merck. As such, it would be a very complicated accounting exercise to calculate Merck's loss caused by a refusal to grant an injunction.

Based on these factors her Honour held that Merck would suffer irreparable harm if an interlocutory injunction was not granted. The factors outweighed Apotex's arguments, including that an injunction would cause it to lose the valuable "first mover advantage".⁵ 

3. Did the balance of convenience favour the grant of interlocutory relief?

Justice Jagot was also of the view that the balance of convenience favoured the grant of an interlocutory injunction based on the following factors:

• Apotex had no established position in the market, whereas Merck had a substantial existing market;
• Apotex sought to enter the market knowing of Merck's patent rights;
• The "Nasonex" patent is long standing and has not been the subject of challenge by way of re-examination or revocation; and
• Apotex's entry into the market would cause significant and most likely irreversible change to the intra-nasal corticosteroid spray market.

Interlocutory relief granted to Merck

In these circumstances, Justice Jagot considered that Apotex should be enjoined from infringing the Nasonex patent (including by supplying, selling or offering to sell its generic MF sprays) until the final determination of the proceeding.

Lessons for pharmaceutical companies seeking interlocutory (preliminary) relief in Australia

There have been a number of recent cases in which the Federal Court has granted an interlocutory injunction to an originator pharmaceutical company who can rely on the "PBS argument" to show irreversible damage if an injunction is not granted. Justice Jagot's decision suggests that interlocutory relief may also be granted to originators who are unable to rely upon the PBS argument, in circumstances where:

• The originator has a strong prima facie case of patent infringement and can file rational and persuasive evidence to cast doubt on the allegations of invalidity;
• The originator is able to adduce substantial probative evidence of the irreversible damage it has and/or will suffer as a result of the entry of generics in the market, including the difficulty in quantifying its loss; and
• The injunction will preserve the status quo and avoid significant and most likely irreparable upheaval in the existing market.

Endnotes

1. [2012] FCA 928 at [19]
2. Discussed in: Pharma patent litigation in Australia: good news for originators
3. See example: AstraZeneca successfully protects Crestor patents against generic attack in the Australian Pharmaceutical market
4. [2012] FCA 928 at [22]
5. [2012] FCA 928 at [24]

Apotex Pty Ltd v Sanofi -Aventis Australia Pty Ltd (No 2) [2012] FCAFC 10

The Full Court of the Federal Court of Australia has recently confirmed that Apotex did not have an implied licence to copy the Product Information (PI) for trade rival Sanofi's anti-arthritis drug, Arava (active ingredient leflunomide) for the purposes of obtaining TGA approval of Apotex's generic leflunomide products. The Court held that Apotex had therefore infringed Sanofi's copyright.

Sanofi's allegations of copyright infringement

As previously reported, in 2008, Sanofi issued Federal Court proceedings against Apotex alleging that, amongst other things, Apotex had infringed the copyright subsisting in the PI for its anti-arthritis drug "Arava" (leflunomide) by submitting PI for Apotex's generic leflunomide products that reproduced a substantial part of the Arava PI.¹

Apotex's initial response

In response, Apotex contended that copyright did not subsist in the Arava PI and that, in any event, it had an implied licence to copy the Arava PI for the purposes of TGA approval, which arose either out of customary practices in the pharmaceutical industry or the conduct and acquiescence of Sanofi.

The copyright findings at first instance

In July 2011, Justice Jagot found that, despite Apotex's assertions to the contrary, copyright subsisted in the Arava PI as original literary works, and that Apotex was not an implied licensee of that copyright.
In relation to the latter finding, Justice Jagot considered that Apotex had failed to show a proper foundation for the existence of an implied licence in circumstances where:

1. the evidence was insufficient to establish the existence of an industry wide practice of PI copying;
2. it was not necessary for drug companies seeking to register a generic version of the drug to copy originator PI; and
3. there was no mutuality as between originator and generic pharmaceutical companies, in the sense that generic companies rarely contributed original PI to the pool of approved PI.

Full Court confirms that Apotex did not have an implied licence

In December 2011, Apotex appealed Jutice Jagot's decision to the Full Court of the Federal Court of Australia contending that her Honour wrongfully rejected its claim to an implied licence. Apotex did not seek to disturb her Honour's copyright subsistence findings.

On appeal, the Full Court dismissed Apotex's assertions, finding that Justice Jagot's views were "amply justified".² Chief Justice Keane considered that Justice Jagot's findings were also consistent with "the common law's disapproval of horizontal arrangements between traders which might tend to blunt the edge of competition between them".³

New PI exemptions to copyright infringement

Sanofi was entitled to relief in respect of copyright infringement by Apotex that occurred before the commencement of new PI exemptions in the Australian Copyright Act on 28 May 2011⁴. However, as a result of those new exemptions, Sanofi was not entitled to any relief for copyright infringement occurring on or after 28 May 2011. This means that as of 28 May 2011, generic pharmaceutical companies can copy originators' PI documents without liability for copyright infringement in certain circumstances, but they may still be held liable for any copying that occurred prior to 28 May 2011.

A detailed discussion of the new copyright infringement exemptions is available here.

Endnotes

1. Sanofi-Aventis v Apotex: method of treatment claim found valid and infringed
2. [2012] FCAFC 102 at [75] per Keane CJ
3. [2012] FCAFC 102 at [79] per Keane CJ
4. TGA pharmaceutical product information loses copyright protection in Australia

The Advertising Standards Bureau has recently determined that brand owners are responsible for ensuring that user generated content appearing on their Facebook® pages complies with advertising codes. The determination follows an earlier Federal Court decision which suggests that brand owners may also be held liable for user generated social media content that contravenes Australian consumer laws. These decisions place a heavy onus on brand owners to closely monitor and moderate their social media pages.

Advertising code compliance on Facebook

Advertising regulation in Australia

Advertising in Australia is self-regulated by a set of codes that are administered by the Advertising Standards Bureau (ASB).

The codes apply to "Advertising or Marketing Communications", which are generally defined as:

broadcast or published material and activities over which
the advertiser has a "reasonable degree of control" and that "draws the attention of the public in a manner calculated to promote or oppose directly, indirectly a product, service, person, or organisation".¹

General advertising standards are set out in the Australian Association of National Advertisers Code (the AANA Code). The AANA Code provides that, amongst other things, advertising must not:

1. mislead or deceive or be likely to mislead or deceive;
2. be discriminatory;
3. use inappropriate language; or
4. be contrary to prevailing community standards on health and safety.

The AANA Code is complemented by other guidelines directed at particular types of advertising, such as advertising to children, and the advertisement of food, beverages and alcohol.

Enforcement of advertisement standards

Whilst compliance with the codes is voluntary, the ASB may refer advertising that contravenes enforceable regulations and laws to other government bodies (such as the ACCC), which have the power to issue fines, and order the cessation and correction of illegal advertisements.

The ASB may also unilaterally release its adverse determinations to the public and liaise with industry and media bodies to procure the removal of noncompliant advertisements.

Recent complaint in relation to Smirnoff Vodka's Facebook page

Earlier this year, the ASB received a complaint asserting that the brand owner of Smirnoff Vodka, Diageo Australia Ltd, had contravened the AANA Code by instigating, allowing or facilitating the posting of discriminatory and obscene comments on the official Smirnoff Facebook page.²

In response, Smirnoff contended that:

1. the Code did not apply to its Facebook page, as the page was simply used as a networking tool for existing product consumers, and did not meet the definition of "Advertising or Marking Communications" (set out above);
2. the statements published by users did not represent the opinion of Smirnoff; and
3. it wanted to try and allow its Facebook page to be an "honest open channel for discussion" and to that end, did not keenly control user generated content. Smirnoff described this practice as "a universal strategy recommended by Facebook and applied by many successful global brands".

User generated content on social media is "advertising"

Whilst the ASB ultimately concluded that the advertising complained of did not contravene advertising codes, it determined that the codes applied to content generated by advertisers as well as the material or comments posted by users on brand owner Facebook pages, and that, as a result, brand owners are responsible for ensuring that such content complies with advertising standards.

Australian consumer law compliance on Facebook and Twitter

A 2011 decision of the Federal Court also suggests that brand owners may be held liable for false or misleading statements posted on their Facebook and Twitter pages by users or subscribers.³

In the decision, (which was referred to in the advertising complaint against Smirnoff) the Court found that an allergy treatment company, Allergy Pathway, and its sole director had breached certain undertakings previously given to the Court by knowingly allowing false and misleading user generated testimonials to remain on its official Facebook site.

The Court's decision was supported by English defamation case law standing for the proposition that publishers assume liability for the defamatory comments of others in circumstances where the publisher is "aware of the material being published and has accepted general responsibility for its publication".⁴

Whilst the undertakings were couched in different terms to Australia's misleading and deceptive conduct statutory provisions⁵, the Courts findings are likely to influence future determinations of liability under these consumer laws in Australia.

In this regard, the ACCC has recently indicated its support of the ASB's Smirnoff Vodka decision, and has explained that the ACCC is committed to pursuing brand owners in respect of misleading and deceptive comments posted by third parties on official brand social media pages.⁶

Lessons for brand owners using social media

• Recent Australian decisions suggest that brand owners are responsible for ensuring that user generated content appearing on their social media pages complies with advertising codes and consumer laws.
• The decisions place a heavy onus on brand owners to closely monitor and moderate their social media content for compliance.
• Brand owners should familiarise themselves with Australian advertising and consumer laws and review their social networking policies to ensure a correct balance is reached between the censorship of user views on the one hand, and the risks of advertising and consumer law non-compliance on the other.

Endnotes

1. The codes do not apply to certain specified materials such as product labelling.
2. A similar complaint has been lodged against Australian beer brand "VB", however this complaint is yet to be determined.
3. ACCC v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74
4. ACCC v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74 at [30]
5. See, for example section 18 and 29 of the Australian Consumer Law

Recently we reported on the proposed ALRC Review of Australian copyright law to be led by Professor Jill McKeough.

The final Terms of Reference for the proposed ALRC review have now been published and set a deadline of November, 2013 for a final report from the ALRC with recommendations for reform. It is anticipated that the ALRC will release an issues paper in August, 2012 which will then call for submissions from interested parties.

Are current copyright exceptions adequate in the digital environment?

The primary focus of the ALRC review is to consider whether the exceptions and statutory licences in the Copyright Act 1968 (Cth) are adequate and appropriate in the digital environment. The ALRC will consider whether there should be additional exceptions which:

1. cover "fair use"¹ of copyright material;
2. "allow transformative, innovative and collaborative use of copyright materials to create and deliver new products and services of public benefit"; and
3. "allow appropriate access [to] use, interaction and production of copyright material online for social, private or domestic purposes".

Limitations on scope of ALRC review

Reining in what could otherwise be described as broad Terms of Reference, the ALRC has been specifically directed to consider:

1. the impact of any proposed legislative solutions on other areas of law and their consistency with Australia's international obligations; and
2. recommendations from related reviews, specifically the Government's Convergence Review.²

The Terms of Reference also expressly direct the ALRC not to deal with the issues of:

1. unauthorised distribution of copyright materials using peer to peer networks;
2. the scope of the safe harbour scheme for ISPs;
3. the exceptions applicable to technological protection measures; and
4. increased access to copyright works for persons with a print disability.

Digital technologies create new opportunities for innovation

The Terms of Reference affirm that the objective of copyright law remains an incentive to create and disseminate copyright materials, but equally recognise the importance of the digital economy and the opportunities for innovation created by new digital technologies leading to national economic and cultural development.

Davies Collison Cave Law will continue to monitor and report on the progress of the ALRC review and invites stakeholders interested in discussing any of the issues or topics likely to be covered by the review or who might be considering a potential submission to the ALRC to contact us.

Endnotes

1. Curiously the Terms of Reference use the U.S. term, in contrast to the term "fair dealing" which applies in Australia.
2. Australian Government Report released on 30 April, 2012, proposing fundamental change to the regulatory frameworks applying to the converged media and communications landscape in Australia.

Australian Health & Nutrition Association Limited (t/as Sanitarium Health Food Company) v Irrewarra Estate Pty Limited (t/as Irrewarra Sourdough) [2012] FCA 592

The Federal Court of Australia has dismissed an application by Sanitarium Health Food Company alleging infringement by Irrewarra Sourdough of the trade mark “granola”. Justice Jagot found that Irrewarra did not use the word “granola” as a trade mark to distinguish its goods from other traders. Instead, the Court found that Irrewarra’s use of the word “granola” on its packaging was purely descriptive of its cereal product.

This case emphasises the importance of considering the context in which a word appears on a product label when determining whether or not that word has been used as a trade mark. It also illustrates the dangers when trade mark owners are not diligent in preventing their trade mark from becoming descriptive.

Irrewarra’s granola product

Irrewarra manufactures and distributes breads, baked goods and a cereal product which was the subject of the trade mark infringement proceedings. Since August 2004, Irrewarra has been making and distributing the cereal product which is sold in a clear plastic bag and has a front and rear label. At issue was the front label which featured the word “granola” as part of the phrase “all natural handmade granola”. The label has taken three slightly different forms since 2004. The front labels appeared as follows ordered from the earliest (left) to the latest (right):

 Sanitarium’s trade mark “granola” 

Sanitarium is an authorised user of the trade mark “granola”, which has been registered since 1921 in respect of goods in class 30 which includes preparations made from cereals. The registered owner of the “granola” trade mark is Australasian Conference Association Limited who was also a party to the proceedings.

Did Irrewarra use the word “granola” as a trade mark?

Sanitarium contended that Irrewarra had used the “granola” mark in contravention of section 120 of the Trade Marks Act 1995 (Cth). Irrewarra argued that it had not used the word “granola” as a trade mark, rather its use of the word was purely descriptive to describe its cereal product.

In determining whether or not Irrewarra had used the word “granola” as a trade mark, Justice Jagot posed the following question:

Did the words GRANOLA, Granola or granola in the context of the packaging as a whole distinguish Irrewarra’s product from other cereal food products in the course of trade? Alternatively, did Irrewarra use the word “granola” as a “badge of origin”?

“Granola” not used as a trade mark

Justice Jagot agreed with Irrewarra and held that Irrewarra had not used the word “granola” as a trade mark on its packaging. Her Honour found that the word “granola”, in the context in which it appeared on the label, did not indicate a connection between Irrewarra and its cereal product, but rather described the contents of the package.¹ Her Honour reached this finding based on the following factors:

• Whilst the word “granola” is an invented word (it was invented in 1876 in the United States to refer to a wheat and oat breakfast cereal), the word is now inherently suggestive of meaning. In the context of the clear packaging and the size of the package (500g) it would be obvious to consumers that the phrase “all natural handmade granola” describes the contents of the package, that being a grain, fruit and nut breakfast cereal.²
• Justice Jagot was also unpersuaded by Sanitarium’s argument that the word “granola” has meaning only in the United States. Her Honour noted that “the modern world is characterised by rapid communication and extensive cultural exchanges” and through films, television programs, music, books and travel, Australians are routinely exposed to many words which are commonplace in the United States.³
• The word “granola” does not appear in isolation on the package and reads as part of the phrase “all natural handmade granola”. The words “all natural handmade” are descriptive of the product, and in the context, the word “granola” also reads as part of the product description.⁴
• Her Honour was of the view that in the context of the packaging as a whole, the word “granola” as used on Irrewarra’s packaging lacked the necessary prominence to be a trade mark. In reaching this conclusion, Justice Jagot considered:⁵

1. Irrewarra’s prominent use of its own “Irrewarra Sourdough” trade mark;
2. the phrase “all natural handmade granola” is in a plain font style located below Irrewarra’s “Irrewarra Sourdough” trade mark; and
3. the absence of the word “granola” on the rear label.

Justice Jagot went further and considered what the case would have been if Sanitarium established that Irrewarra had used the word “granola” as a trade mark (which it did not). If Her Honour had to determine the issues of substantial identity and deceptive similarity, Justice Jagot considered that the mark used by Irrewarra on its product was the phrase “all natural handmade granola” (and not the word “granola” by itself). Her Honour also found that the phrase was not substantially identical with or deceptively similar to Sanitarium’s trade mark “granola”.⁶

Lessons for brand owners: when is a word used as a trade mark?

• This case emphasises the importance of considering the context in which a word appears on a product label in determining whether or not that word has been used as a trade mark. A word is used as a trade mark if it is used as a “badge of origin” to indicate the source of that particular product. It is not enough for the word or words in issue to simply appear on the product label, they must also possess the character of a “brand”, in that they are capable of distinguishing those products from similar products from other traders.
• In determining the context in which a word is used on a product label, the Court will consider the packaging as a whole. This includes consideration of whether the trader has prominently used its own trade mark on the goods to show “commercial origin”, the font style of the word in issue and whether the word has been used descriptively. This case confirms that a trader may still use a registered trade mark descriptively. This is consistent with previous decisions by the Federal Court including Nature’s Blend Pty Ltd v Nestlé Australia Ltd [2010] FCA 198.
• Whilst a word might originate or have common meaning in an overseas country, that does not mean that the word cannot also have meaning in Australia. Through “rapid communication and cultural exchanges”, the word can also acquire meaning in Australia.
• An invented word which starts its life as a trade mark can become descriptive over time if the use of the mark is not carefully monitored and controlled. Once a trade mark becomes generic or descriptive, the ability of the trade mark owner to prevent others from using that word is greatly diminished.
• Justice Jagot considered the sign used by Irrewarra to be the phrase “all natural handmade granola”. Her Honour was not willing to isolate or separate the word “granola” from the phrase for the purpose of determining substantial identity and deceptive similarity (which the Court did not have to do because the Court ultimately found that Irrewarra had not used the word “granola” as a trade mark).

Endnotes

1. Australian Health & Nutrition Association Limited (t/as Sanitarium Health Food Company) v Irrewarra Estate Pty Limited (t/as Irrewarra Sourdough) [2012] FCA 592 at [31].
2. Ibid at [28].
3. Ibid at [34].
4. Ibid at [29].
5. Ibid at [30].
6. Ibid at [38].

Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584

The Federal Court of Australia has found Paul’s Retail Pty Ltd guilty of trade mark infringement for a second time this year when it imported into Australia “Lonsdale” branded products without the consent of the owner of the Australian registered “Lonsdale” trade marks, Lonsdale Australia Limited.

The Federal Court held that this was not a case of parallel importation in the strict sense of the term, because Lonsdale Australia had not consented to the application of its trade marks to the goods in question and as such Paul’s Retail could not rely upon the defence to trade mark infringement under section 123 of the Trade Marks Act 1995 (Cth).

This case further clarifies the position under Australian law with respect to parallel importing, and is of relevance to trade mark owners when considering strategies to protect against infringement by parallel imports.

Paul’s Retail acquired “Lonsdale” products from European licensee

Lonsdale Australia is the current owner of various Australian registered “Lonsdale” trade marks (the Australian Lonsdale Marks). In 2011, its parent company, Lonsdale Sports Limited (LSL) transferred ownership of the Australian registered trade marks to Lonsdale Australia, who then licensed a distributor of Lonsdale products in Australia (the Australian distributor). At the same time, LSL licensed an unrelated German company to manufacture, distribute and sell Lonsdale products within Europe (the European licensee).

Paul’s Retail had previously sold through its retail outlets “Lonsdale” branded products which it had acquired from the Australian distributor. Around April 2011, the Australian distributor ceased supplying Paul’s Retail, and in August 2011, Paul’s Retail ordered 293,329 “Lonsdale” branded products manufactured by the European licensee for Lonsdale products (who was licensed by LSL).

In April 2012, the first shipment of the “Lonsdale” branded products which Paul’s Retail had acquired from the European licensee arrived in Australia (the European Lonsdale goods). Paul’s Retail sold $344,838.50 worth of those goods in its stores. However, another shipment of goods valued at $1,736,613 destined for Paul’s Retail’s stores was seized by Customs pursuant to a Customs Seizure Notice, which Lonsdale Australia had lodged with Customs.

In May 2012, Lonsdale Australia commenced trade mark infringement proceedings against Paul’s Retail under section 120 of the Trade Marks Act seeking amongst other things an interim injunction to prevent Paul’s Retail from importing, promoting, distributing, offering for sale and selling the European Lonsdale goods. On 23 May, the Federal Court granted the interim injunction, partly on the basis that the seized goods that were being held by Customs would be released before the date of the hearing and judgment. The case subsequently went before Justice Gordon on 31 May.

Trade mark infringement and parallel importation

Section 123 of the Trade Marks Act provides a defence to trade mark infringement in the following circumstance:

“…a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.”

Parallel importation refers to when a third party imports “genuine” branded goods (in the sense that the registered trade mark owner (or its authorised licensee) has applied the mark to the goods in an overseas country) into Australia without the consent of the trade mark owner. Parallel importation does not usually constitute trade mark infringement, as the trade mark on the imported goods is usually applied with the consent of the trade mark owner, and as such the section 123 defence will apply.

Section 123 of the Trade Marks Act did not apply to the European Lonsdale goods

Paul’s Retail sought to rely on the section 123 defence to the trade mark infringement allegations made against it. It submitted that it did not infringe the Australian Lonsdale Marks in contravention of section 120 because the marks were legitimately applied by LSL’s European licensee and as such they were “genuine” Lonsdale goods.¹

Even though the goods were sourced from the European licensee, Justice Gordon held that Paul’s Retail had infringed the Australian Lonsdale Marks and that section 123 of the Trade Marks Act did not apply. In reaching this conclusion, Her Honour found that:

1. the trade marks applied to the European Lonsdale goods were substantially identical with and/or deceptively similar to the Australian Lonsdale Marks² (this was not in issue and was conceded by both parties);
2. Paul’s Retail “used” the trade marks for the purposes of section 120 of the Trade Marks Act when it imported, offered for sale and sold the European Lonsdale goods³ (confirming previous decisions that importation alone can constitute “use” of a trade mark by the importer); and
3. section 123 of the Trade Marks Act did not apply because the registered owner of the Australian Lonsdale marks, Lonsdale Australia, had not consented to the application of the trade marks to the European Lonsdale goods by the European licensee (the European licensee was a German company that was unrelated to the Lonsdale corporate group). Justice Gordon based this finding on the following factors:⁴

• the chain of title or the supply chain did not show that Lonsdale Australia played any role in the European licensee’s application of the trade marks to the goods;
• the European licensee that applied the marks did not belong to the same corporate group as Lonsdale Australia; and
• there was no evidence to suggest that Lonsdale took any step, or failed to take any step, that could be considered “consent” in relation to the European licensee’s activities.

This case also confirmed that the onus of establishing consent for the purposes of section 123 lies with the parallel importer, and in this case the Judge held that Paul’s Retail had failed to discharge its evidentiary burden.⁵

Another important consideration was that the European licensee had breached its own license agreement with LSL, as some of the marks that it had applied to the goods were not actually covered by the European license agreement. The Judge held that these goods were clearly “counterfeit” goods (as the marks had not even been applied with LSL’s consent) to which the section 123 defence could not apply regardless.⁶

Justice Gordon also noted that in these types of cases, where there are elements of parallel importation, “it is important to focus upon the trade marks registered in Australia, the identity of the parties involved and the transactions preceding the arrival of the goods bearing the allegedly infringing marks.”⁷

Lessons for trade mark owners

This was a case in which different corporate entities within the same global group owned the trade mark registrations in different countries. Had the “Lonsdale” trade marks been owned by one global entity, the outcome of this case might have been different. It is important to bear in mind that although this corporate arrangement may have assisted Lonsdale Australia in this case to prevent the sale of parallel imports, this arrangement might not be appropriate in all cases. In particular, under the Australian Trade Marks Act a trade mark owner must “use” its registered trade mark (so that the mark is not vulnerable to removal or cancellation) by exercising some degree of quality and/or financial control over the goods to which the mark is applied.⁸ In this case, the evidence showed that Lonsdale Australia designed and arranged the manufacture of goods that bore the Australian Lonsdale Marks which were different in terms of design, composition and quality compared to their European counterparts.⁹

This case also highlights the importance of putting in place enforcement procedures with Australian Customs (through the lodgment of Notices of Objection which may cover registered trade marks and copyright material) to protect against intellectual property infringement. These procedures (which will be strengthened next year as a result of recent reforms to Australian intellectual property legislation) can result in the identification and detainment of infringing (or potentially infringing) goods at the Australian border, before the goods enter the Australian market.

Paul’s Retail has recently been granted leave to appeal Justice Gordon’s decision to the Full Federal Court. The appeal is set to be heard in August, and we will keep you updated of the outcome.

Endnotes

1. Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584 at [23].
2. Ibid at [20].
3. Ibid at [22].
4. Ibid at [50] to [52].
5. Ibid at [48].
6. Ibid at [27].
7. Ibid at [9].
8. Section 8 of the Trade Marks Act 1995 (Cth).
9. Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584 at [50].

Search engine giant Google has been granted special leave to appeal a decision of the Full Federal Court which held it liable for misleading and deceptive "AdWords" sponsored links appearing in its search results.

The principle issues on appeal are:

• whether the Full Court was correct in finding that because Google published the advertisers' links it was responsible for them; and
• whether the decision of Universal Telecasters (QLD) v Guthrie¹ relating to the liability of a television broadcaster (and relied on by the ACCC before the Full Federal Court) is relevant to determining liability for misleading and deceptive conduct in the online environment, particularly in the search engine context.

According to the ACCC's press release, "the ACCC looks forward to the High Court considering the issue of the role and responsibility of searching engine providers in online search advertising".

We will keep you updated on developments as they unfold.

Endnotes

1. [1978] 18 ALR 531

Britax Childcare Pty Ltd v Infa-Secure Pty Ltd [2012] FCA 467

A recent judgment of the Federal Court of Australia has shown a willingness to hear and decide upon patent infringement cases in a phased manner—first ruling on the manner in which patent claims should be constructed and only then (if the parties choose to continue) hearing and deciding upon resultant issues of patent infringement or validity. This approach is a common practice in US patent litigation (and where it is referred to as a Markman hearing) but until now has been largely absent from Australian patent litigation.

Britax’s claims of patent infringement

In 2009, child accessories manufacturer Britax Childcare Pty Ltd sought relief from a competitor, Infa-Secure Pty Ltd, for infringement of nine innovation patents and one Australian standard patent concerning child safety seats. Infa subsequently sought revocation of patents upon various grounds of validity.

Interpretation of the claims

Due to the number of patents, the Federal Court decided to hand down an initial decision specifically concerning the claim construction only. Issues regarding validity and infringement are to be considered by the Court later should the parties wish to continue litigation. This appears to be the first time an Australian Court has issued a decision specifically with regard to claim construction without also considering issues such as validity or infringement.

Due to a significant amount of patent litigation turning on the interpretation of the language in the claims, the practice of handing down a decision specifically in relation to the claim construction provides insight for both parties regarding the likely outcome of the litigation should the Court be required to continue hearing the matter. As a result, this practice, which the Federal Court of Australia now appears willing to apply, at least in some circumstances, encourages a cost effective and timely process to promote settlement between parties in response to the Court’s interpretation of the claims.

Inventiveness of experts

In this decision, the Federal Court also shed light upon the level of inventiveness which an expert can possess for assisting the Court with the claim construction. Specifically, Justice Middleton acknowledged that traditionally, for issues such as inventive step, the person skilled in the relevant art is a non-inventive worker in the relevant field of technology in Australia. However, His Honour concluded that the same qualities were not necessary for an expert who provides evidence for the purposes of assisting the Court with matters of claim construction.

Thus, potentially an expert whom may be considered too inventive for assisting the Court with issues such as inventive step, may still provide assistance in relation to interpretation of the claims. This is particularly important to litigants as this decision potentially broadens the range of experts that can be utilised for the purposes of assisting the Court with interpretation of the claims.

Mesoblast, Inc v UCP Gen Pharma AG [2012] FCA 509

The Federal Court has recently refused Mesoblast's application for leave to appeal against Justice Jessup's decision to allow, on discretionary grounds, UCP Gen Pharma's "Revasc" pharmaceutical trade mark to remain on the Register of Trade Marks, despite Mesoblast Inc's, opposition, and the fact that the mark had not been used in Australia during the statutory three year "non use" period.

As a result, Mesoblast is precluded from bringing an appeal against Justice Jessup's decision, and UCP's "Revasc" trade mark will remain on the Australian Register of Trade Marks.

In refusing leave to appeal, Justice Middleton has once again confirmed that private commercial interests are relevant to and indeed "the very point of" the discretion to allow "unused" marks to remain on the Register under section 101 (3) of the Trade Marks Act.

Why did Mesoblast require "leave to appeal"?

Leave, or permission to appeal against Justice Jessup's decision was required under the Trade Marks Act¹ (the Act), as the matter had previously been the subject of proceedings before the Trade Marks Office (where UCP was unsuccessful) and the Federal Court of Australia (where UCP succeeded).

When will leave to appeal be granted? – the test

In general, leave to appeal will be granted if:

• in all the circumstances, the decision appealed from is attended by sufficient doubt to warrant its reconsideration by the Appeal Court; and
• substantial injustice would result if leave were refused, supposing the decision to be wrong.

Was Justice Jessup's decision attended by sufficient doubt?

Justice Middleton concluded that Justice Jessup's decision was "attended by no doubt to warrant any reconsideration by the Full Court" for the following reasons:

• the key issue in dispute, namely the proper exercise of the Court's discretion to allow "unused" trade marks to remain on the Register under section 101 (3) of the Act was recently authoritatively considered by the Full Court in Austin, Nichols & Co Inc v Lodestar Anstalt³;
• in Austin Nichols, the Full Court confirmed that the Court's discretion under section 101 (3) of the Act was "broad" and limited only be the subject matter, scope and purpose of the Act (and, in particular, the non-use sections of the Act);
• contrary to Mesoblast's submissions, Justice Jessup:
  • clearly analysed the principles approved by the Full Court in Austin Nichols, and applied them to the specific and peculiar facts before him;
  • clearly considered and balanced the competing public and private interests relevant to the circumstances of the case before him; and
  • was not wrong to take into account the fact that Mesoblast (or any other person) could apply to have the "Revasc" mark removed from the Register in the future, should it transpire that the "Revasc" mark is not ultimately used in Australia; and
• there was no principle of law that needed to be determined by a Full Court.

Having found that Mesoblast failed to establish that Justice Jessup's decision was attended by sufficient doubt to warrant reconsideration, it was not necessary for Justice Middleton to consider the potential for substantial injustice.

Lessons for trade mark owners and applicants: the relevance of private commercial interests

The Full Court's explicit confirmation of the relevance of private interests to the exercise of the discretion under section 101 (3) of the Act in Austin Nichols, means that the private interests of the parties must be taken into account. In fact, in the UCP and Mesoblast proceedings:

1. both Justices Jessup and Middleton confirmed that private commercial interests are relevant to and indeed "the very point of" the discretion arising under section 101 (3) of the Trade Marks Act.⁴; and
2. the presence or absence of evidence relating to the private commercial interests of the parties clearly influenced the Court's decision to allow the "Revasc" mark to remain on the Register.

Accordingly, parties to trade mark removal proceedings should seek to adduce evidence of their respective private interests. Such evidence may include evidence of:

1. the financial losses the trade mark owner may suffer if the mark is removed (including the additional promotional, re-branding and regulatory expenses the owner will be forced to incur if the mark is removed, and any unwarranted derogation from obtaining world-wide "trade mark unity");
2. the benefits the trade mark owner stands to gain should the mark be retained on the Register (including the ability to bring products or services bearing the mark into the market sooner);
3. the fact that the trade mark owner's "unused" mark is impeding or adversely affecting the commercial activities of the applicant for removal (including evidence establishing that the unused mark is preventing the applicant for removal from using the same or a similar trade mark in respect of its products and / or services); and
4. the efforts made by the trade mark owner or its agents to use the mark, including such efforts up to the time of the hearing of the removal action.

Davies Collison Cave Law acted for UCP Gen Pharma AG in the proceedings

Endnotes

1. Section 195 (2) of the Trade Marks Act 1995 (Cth) provides that "Except with the leave of the Federal Court, an appeal does not lie to the Full Court of the Federal Court against a judgment or order of a single judge of the Federal Court in the exercise of its jurisdiction to hear and determine appeals from decisions or directions of the Registrar".
2. Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655
3. [2012] FCAFC 8
4. See, for example, Mesoblast, Inc v UCP Gen Pharma AG [2012] FCA 509 at [15].

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

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

Davies Collison Cave Law acted for TiVo in the proceeding.

The TiVo and Vivo trade marks

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

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

The proceedings

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

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

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

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

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

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

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

The Vivo mark would be cancelled if:

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

The issue of deceptive similarity

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

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

The Court's findings on the issue of deceptive similarity

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

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

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

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

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

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

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

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

Honest concurrent use and the court's discretion

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

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

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

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

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

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

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

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

Reputation – Legal Principles

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

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

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

TiVo's reputation

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

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

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

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

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

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

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

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

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

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

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

4. Infringement of the TiVo mark

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

Lessons for brand owners

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

On 5 April 2012, Vivo filed appeal papers.

Endnotes

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

ACCC v Google Inc [2012] FCAFC 49

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

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

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

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

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

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

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

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

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

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

On appeal: was Google directly responsible for the misrepresentations?

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

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

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

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

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

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

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

Special leave to appeal to High Court

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

Google's liability in Europe and the United States

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

Lessons for brand owners

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

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

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

The decision at first instance

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

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

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

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

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

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

The key issues on appeal to the Full Court

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

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

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

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

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

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

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

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

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

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

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

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

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

3. Did Justice Cowdroy mistake a determinative fact?

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

The exercise of the discretion by the Full Court

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

The Full Court concluded that:

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

This conclusion was supported by the fact that:

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

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

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

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

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

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

The importance of reputation evidence

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

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

Footnotes

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

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

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

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

Andrew Demetriou's statements: Optus "lifted content" 

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

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

Statements "honestly held" and not misleading

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

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

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

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

Footnotes

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

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

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

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

A history of non-compliance

The history of the case is as follows:

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

Two ways to deal with non-compliance with Court orders

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

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

Sydney restaurateurs ordered to pay costs

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

Adidas AG v Pacific Brands Footwear Pty Ltd [2011] FCA 1205

The Federal Court of Australia has dismissed an application by Pacific Brands Footwear to prevent Adidas from relying upon survey evidence in a trade mark infringement case, because Pacific Brands did not first raise its objections to the survey with Adidas, as required by the Court’s published procedures. This case highlights the importance of following such procedures and, in the case of Practice Note CM 13, ensuring that issues of survey methodology are raised with the other party before objecting to the Court.

The Federal Court’s Practice Note on survey evidence

Practice Note CM 13 sets out the procedure which is to be followed when a party seeks to have a survey conducted. This requires a party seeking to carry out a survey to give notice to the other party of:

• the purpose of the proposed survey;
• the issue to which it is to be directed;
• the proposed form and methodology;
• the particular questions that will be asked;
• the introductory statements or instructions that will be given to the persons conducting the survey;
• other controls to be used in the interrogation process.

The parties should attempt to resolve any disagreement about the manner in which the survey is to be conducted, and only after these steps have been taken should the matter of the survey be raised with the Court at a directions hearing.

Pacific Brands objection to Adidas' survey

Adidas brought proceedings against Pacific Brands for infringement of its 3-stripe trade marks. Adidas proposed to carry out a survey to address the issue of deceptive similarity, and in accordance with Practice Note CM 13, provided notice of their proposed survey to Pacific Brands. Pacific Brands objected to the survey as they considered it unnecessary and inadmissible, and filed an application to prevent Adidas from conducting the survey and from using the resultant evidence.

Pacific Brands challenged the admissibility of Adidas' survey on the grounds that:

1. the question of deceptive similarity is a matter for the judge alone; and
2. the proposed survey was flawed.

Deceptive similarity is a question of law

In its application, Pacific Brands submitted that the proposed survey evidence would not be admissible because the issue of deceptive similarity is a question of law to be determined by the judge alone.
Justice Robertson agreed with this proposition but went on to say that this does not mean that evidence going to that question will be impermissible.

The relevant question is whether it is sufficiently clear at this time that the proposed survey could not produce relevant or admissible or sufficiently probative evidence.¹

Issues with Adidas’ survey methodology

Pacific Brands also claimed that the methodology and questions of the survey were flawed. Justice Robertson found that these matters should have been dealt with under the Practice Direction and directed Pacific Brands to raise these issues with Adidas, as envisaged by Practice Note CM 13.

Justice Robertson held that the relief sought by Pacific Brands in its application was premature and that the process set out in Practice Note CM 13 had not been completed.
Pacific Brands' application was dismissed with costs.

Implications for trade mark litigants

Whilst the admissibility of survey evidence is often disputed and ultimately remains at the discretion of the trial judge, the risk that it will be rejected or given little, if any, weight at the trial is reduced if the procedure set out in Practice Note CM 13 is followed. Objections to the form and substance of the survey should only be raised with the Court once that procedure has been carried out.

Endnotes

1. A & E Television Networks LLC v Discovery Communications Europe Ltd [2011] EWHC 1038 (Ch)