2015 . Vol 28 No 9–10
Contents
page 238
50 shades of infringement: fan fiction, culture and
copyright
Paul Kallenbach and Anthony Middleton MINTER
ELLISON
page 246
Patent eligibility of diagnostic methods in Australia
General Editor
versus the United States
Sharon Givoni
Solicitor, Melbourne
Ylva Strandberg Lutzow CULLENS
page 250
Common signs, concealed meanings: Cantarella,
coffee and the inherent adaptability of words
Campbell Thompson BARRISTER
page 258
Copyright law in the fashion world — same old
problems
Catherine Logan LEGAL VISION
page 262
Protecting GUI Designs in Australia: more questions
than answers
Stuart Irvine FREEHILLS PATENTS ATTORNEYS
page 265
Trade marks in business — you’ve gotta fight (for
your naming rights)
Katie Dillon KING & WOOD MALLESONS
page 271
Tax implications of IP transactions: a brief overview
Samin Raihan GRIFFITH HACK LAWYERS
page 277
Breach of confidence in commercial settings:
Australian Medic-Care Co Ltd v Hamilton
Pharmaceutical Pty Ltd
Dr Jenny Ng CHARLES DARWIN UNIVERSITY
page 282
Falling in line with reg 5.9! Exploring what it takes
to be “reasonable”, “prompt”, “diligent” and
“exceptional” during a patent opposition
Donna Meredith WRAYS
page 287
Jeans go West — big time
page 290
Copyright in databases: the spectre of IceTV lives on
Kate Tidbury and Earl Gray SIMPSON GRIERSON
Tim Golder, Adrian Chang and Scott Joblin ALLENS
page 296
Utility models in China: “small” inventions, big
outcomes
Renee White WATERMARK
page 300
Editorial Panel
Competition not to be discounted: Verrocchi v Direct
Chemist Outlet Pty Ltd
Nicholas McConnell BECK LEGAL
Information contained in this newsletter is current as at November/December
2015
Editorial Board
Sue Gilchrist
Partner, Herbert Smith Freehills,
Sydney
Miriam Stiel
Partner, Allens, Sydney
Allison Manvell
Senior Associate, Baker & McKenzie,
Sydney
John Fairbairn
Partner, Minter Ellison, Sydney
David Yates
Partner, Corrs Chambers Westgarth,
Perth
50 shades of infringement: fan fiction, culture
and copyright
Paul Kallenbach and Anthony Middleton MINTER ELLISON
Key points
• Some forms of fan fiction are works which are
protected under Australian copyright law.
• Rights holders may be able to enforce their own
copyright against creators of fan fiction. However,
doing so may not only impede fan fiction creators’
freedom of expression but harm rights holders’
own business interests.
• Moral rights provisions under Australian copyright law provide both individual rights holders
and fan fiction creators with another means of
protecting their respective rights.
• Asserting a liability that a fan fiction creator does
not in fact have can constitute an unjustified threat
under Australian copyright law or misleading and
deceptive conduct under the Australian Consumer
Law.
• The Copyright Amendment (Online Infringement)
Act 2015 (Cth) may further sway the balance of
protection in favour of rights holders of the
underlying works.
Introduction
The internet has unleashed expression and creativity
on an unprecedented scale,1 spurred by the ready access
by billions to a global platform that enables anyone to be
a publisher. Yet despite its facilitation of the further
progress of Science and the useful Arts,2 the internet’s
interface with copyright law continues to be an uneasy
one. This tension — between copyright law on the one
hand, and technology and evolving consumer behaviour
on the other — is exemplified in the realm of fan fiction.
Fan fiction, as we know it, has existed since at least
the 19th century.3 The internet has spurred its growth, as
likeminded fan fiction authors gather in chat rooms and
on internet forums and websites to create, discuss and
disseminate works based on their favourite stories.4 One
of the most popular fan fiction websites, www.fanfiction.net, contains more than 700,000 stories derived from
Harry Potter alone.5 Fan fiction exemplifies the “prosumer”
238
or “semiotic democracy” of Web 2.0, where mash-ups,
parodies, remixes and fan tributes of cultural icons
ranging from Harry Potter to Twilight, from Barbie to
Gone with the Wind, are the norm.6
The growth of fan fiction may be beneficial to rights
holders, as it increases the community’s interest in their
underlying work, and therefore the potential for increased
sales of that work. Nevertheless, some rights holders
perceive it as a commercial threat and an infringement of
the underlying work. To the extent that rights holders
choose to wield the law of copyright against fan fiction
creators, an Australian court may be called upon to
determine the appropriate balance between fan fiction
writers’ creativity and freedom of expression on the one
hand, and rights holders’ legitimate commercial interests
in their underlying works on the other.7
What is fan fiction?
The term “fan fiction” covers a wide range of works.
Rebecca Tushnet defines it as “any kind of written
creativity that is based on an identifiable segment of
popular culture, such as a television show, and is not
produced as ‘professional writing’”.8
However, Tushnet’s definition is arguably too narrow.
Fan fiction’s ambit arguably extends beyond “written
creativity”, and into the realm of video, animation and
video games. An example of this is “machinima”, which
uses existing video game character models and backdrops to create new stories. A popular incarnation of
“machinima” is the animation series Red vs Blue, which
is based on iterations of the video game Halo. The
series, which first aired in 2003, follows two teams of
soldiers (red team and blue team) who are based on
character models that represent the elite “Spartan”
soldiers. In contrast to the Halo video game storyline,
many of the characters in Red vs Blue are depicted as
incompetent and liable to become embroiled in increasingly bizarre scenarios.
Moreover, fan fiction is not necessarily confined to
the realm of amateurs. One of the most popular contemporary works of fiction, 50 Shades of Grey, was initially
conceived as a fan fiction work of the equally popular
intellectual property law bulletin
November/December 2015
Twilight series.9 The author of 50 Shades of Grey, E L
James, created a number of versions of the book,
refining it until it was published under its final title.10
Similarly, Naomi Novik is the published author of the
Temeraire series of novels, which are “a reimagining of
the epic events of the Napoleonic Wars with … an air
force of dragons”.11 Novik began her career as a video
game designer who wrote online fan fiction based on the
historical universe of the Master and Commander books.
The Temeraire series is partly inspired by those books,
and by Novik’s belief that interest in Napoleonic era
settings could be spurred by including fantasy elements
in her work.12 James and Novik, like their amateur fan
fiction counterparts, build on characters, settings, scenes
or other elements of popular existing works. And though
such elements may become woven into the fabric of
cultural discourse, the monopoly that copyright law
confers may nevertheless be wielded against their use.13
The benefits of fan fiction and fan communities
Legal commentator Nathaniel Noda contends that
fan-based works can be categorised according to whether
they “complement” the underlying work or “compete
with” that work.14 Noda’s dichotomy exposes the tension between fan fiction creators and the authors of
underlying works.15 While fan fiction creators would
assert that they are building on and improving previous
works (for example, by creating an extended timeline or
story universe), many rights holders are primarily concerned with the profitability of the underlying work.16
Fan fiction writers point to the commercial benefits
that a permissive attitude towards fan fiction may yield
for rights holders. In the case for Star Trek and Doctor
Who, for example, fan communities sustained interest in
those works for decades after their original airings,
facilitating the subsequent creation of spin-off TV series
and “reboot” films.17
Further, when combined with sanctioned advertising,
fan fiction may assist in promoting the underlying work.
In many cases, print and advertising costs of major
studio released films now account for approximately
half the negative cost of production.18 Rights holders
can seek to mitigate these costs by encouraging less
mainstream (and less expensive) forms of advertising or
promotion — fan fiction among them.
Finally, failing to recognise the benefits of fan fiction
may have adverse public relations consequences. In
2001, for example, Warner Brothers sent a number of
cease and desist letters to online organisers of fan fiction
websites dedicated to Harry Potter.19 Many fans who
ran or contributed to those websites were children, who
intellectual property law bulletin
had little knowledge of their legal rights and obligations.20 When a group of fans subsequently publicised
their strong dissent to the studios’ approach, Warner
Brothers backed down.21
In some countries outside of the US, fan fiction
creators have less fraught relationships with rights
holders. For instance, Japanese authors of a type of fan
fiction called doujinshi (also known as “copycat comics”) take characters and background features from
manga, anime and video games, and use these elements
to create new storylines.22 Japanese rights holders are
usually tolerant of this behaviour and even allow the
authors to earn a profit from their work.23 There are,
however, apparent limits to this permissiveness — such
as where a doujinshi creator took characters from
Pokemon to create a pornographic work.24 Nintendo, as
copyright owner, claimed that this work was “destructive” of the Pokemon image, and the creator was
subsequently arrested and prosecuted for criminal copyright infringement.25
Protecting copyright in fan fiction
The vast majority of fan fiction works will never
enjoy the success of 50 Shades of Grey. From a
copyright perspective, however, there is no requirement
of “literary merit” for copyright to subsist in a work of
fan fiction. The relevant test, rather, is whether work is
one intended to afford “information, instruction, or
pleasure in the form of visual enjoyment”.26 The literary
quality, merit or success of a work (be it fan fiction or
otherwise) is irrelevant from a copyright perspective.
A work also must, however, articulate more than an
idea to be protected by copyright — a distinction known
as the idea-expression dichotomy.27 Copyright does not
protect ideas but the expression of those ideas, and a
work is more likely to be protected by copyright where
the idea of the underlying work can be expressed in a
number of different ways.28 For example, the Federal
Court has held that the phrase “Help-Help-Driver in
Danger call Police Ph 000” does no more than articulate
an idea, and it would be untenable to afford the purported rights holder a monopoly on that idea.29 The
thought underlying the phrase — that a driver needs
assistance and that someone should call the police —
could not be separated from its expression and as a
result, the phrase was, according to the court, not
deserving of copyright protection.30
Although fan fiction creators may appropriate elements from other works, this does not necessarily
invalidate their own claim of copyright protection. Fan
fiction creators will usually add their own expression to
those elements. For example, the creators of Red vs Blue
formulated their own storylines and characters, using the
character models from Halo, rather than adapting or
November/December 2015
239
extending the main storyline. Similarly, in 50 Shades of
Grey, E L James added new characters (Anastasia Steele
and Christian Grey) as proxies for Twilight’s Isabella
Swan and Edward Cullen. In the latter case, it would not
be immediately apparent to someone reading both works
that one is derived from the other, despite the fact that
the story structure and ideas are quite similar.31 Ultimately, whether copyright subsists in fan fiction works
will depend on whether the work is the product of
“independent intellectual effort”.32 This effort must be
directed towards the form of expression of the fan fiction
work so as to distinguish itself from the underlying
work.33
Protecting copyright in the underlying work
There is scant case law on copyright issues involving
fan fiction, as most claims by rights holders against fan
fiction creators are resolved before they reach the courts,
with little reference to the legitimacy of the asserted
rights.34
Under both Australian and US copyright law, the
nature of the underlying work — that is, whether the
work is a literary, musical or artistic work, or falls within
certain other subject matter — determines the bundle of
exclusive rights conferred on authors. Moreover, under
US law, copyright holders have the exclusive right to
prepare “derivative works” which can be asserted against
creators of unsanctioned fan fiction.35 To succeed in
such an action in the US, the copyright holder must
demonstrate that they own a valid copyright in the
underlying work, the alleged infringer actually copied
that work (or a substantial part of it), and the copying
amounted to an improper appropriation.36
The Australian Copyright Act 1968 (Cth) does not
confer on creators of works and other subject matter the
exclusive right to create “derivative works”. Rather, in
the case of literary works, the copyright owner has the
exclusive right to copy, reproduce, publish, perform and
adapt the work, as well as communicate the work to the
public.37 Video games, on the other hand, are considered
to be “cinematograph films”, and rights holders have the
exclusive right to copy and perform such works as well
as communicate them to the public.38 Infringement
depends on whether one of the above acts is done in
relation to the whole or a substantial part of the work.39
In Australia, the closest analogy to the exclusive right
to create “derivative works” is the right to adapt a
literary work. The definition of adaptation relevantly
includes “a version of a literary work in a non-dramatic
form … in a dramatic form”, “a version of a literary
work in a dramatic form … in a non-dramatic form” and
“a version of a literary work … in which a story or
action is conveyed solely or principally by means of
pictures”.40 This definition could arguably cover fan
240
fiction works in the form of dramatic scripts, screenplays, comic books or graphic novels derived from an
underlying literary work.41
There are no bright lines in Australian copyright law
as to what constitutes a “copy” or “adaptation” of an
underlying work.42 It is arguable that many fan fiction
works copy or adapt a substantial part of the underlying
work through their particular expression of characters,
settings and storylines. Infringement will depend on the
extent to which the fan fiction work appropriates these
aspects of the underlying work both individually and in
combination with other elements. By way of example, in
1982, the Victorian Supreme Court granted an interlocutory injunction against the makers of the film Great
White in favour of the copyright holders of the film
Jaws.43 Justice Gray found that the plaintiff had “an
excellent chance at the trial of proving an infringement
of its copyright” and described in detail the extent to
which Great White had copied the main characters,
settings and storyline from Jaws.44 His Honour found
that Great White went beyond copying these basic
elements to faithful reproductions of “singular events”.45
The case provides a somewhat blatant example of
copying. By contrast, fan fiction works will usually
appropriate a smaller number of elements from the
underlying work and, even then, may deliberately distort
those elements as to express something else entirely.
Blatant copying of the underlying work, after all, is
likely to be viewed by the fan community as anathema
to fan fiction’s objective of extending, enhancing or
adding value to the underlying work.
Great White and Jaws fell within a class of films
“based upon the idea of a savage monster menacing a
community”.46 Genre films of this nature often contain
“scènes à faire”. These are scenes which are difficult to
express in another way but are nevertheless “indispensible”.47
US copyright jurisprudence has adopted a doctrine of
“scènes à faire” which arose from the use of stock
characters and features of dramatic works.48 The doctrine now protects stereotyped expression and standard
or common features in a wide variety of works. Copyright law will only intervene where there is a “virtually
identical” copy of the original work that are “scènes à
faire”.49
Similarly, Australian law recognises that “[o]f necessity certain events, incidents or characters are found in
many books and plays” and that where a story is based
on various common incidents, “a claim for copyright
must be confined closely to the story which has been
composed by the author”.50 This gives a broader scope
for fan fiction creators to adopt characters and particular
expression from genre films and other works which have
limited scope for alternative expression. Applying the
Jaws example, such a scene may include where the
intellectual property law bulletin
November/December 2015
protagonist is being chased through the ocean by a
savage monster, since there are a limited number of
ways in which this scene can be expressed but such a
scene may be considered “indispensible” to the overall
work.
Defences for copyright infringement
There are defences available against copyright infringement under both Australian and US copyright law.
However, despite strong briefs to the US federal circuit
courts, these defences do not always protect fan fiction
creators when they have infringed the underlying work.51
Under the US “fair use” doctrine, whether fan fiction is
protected depends on the extent to which:52
• it transforms the underlying work (that is, takes a
part of the underlying work and adds something
new);
• it is expressive rather than informative;
• it has a purpose beyond mere copying; and
• it harms the market for the underlying work and
potential derivative works.
The equivalent defence to “fair use” in Australia is
“fair dealing” but this is narrower in scope than “fair
use”, and covers specific categories of use, namely,
whether the use is for the purpose of research or study,53
criticism or review,54 parody or satire55 or reporting of
news.56 In the case of literary works, there is also a fair
dealing defence in relation to the giving of professional
advice by a legal practitioner, patent attorney or trade
marks attorney.57
While some fan fiction works may fall within the
parody or satire defence, it is unlikely that any of the
other categories of “fair dealing” will apply. As with the
issue of infringement, the scope of the parody or satire
defence in the context of fan fiction works remains
untested in Australia.
Remedies for copyright infringement
In Australia, compensatory damages or account of
profits are available as remedies for copyright infringement.58 As an additional or alternative remedy, rights
holders may seek an injunction to prevent infringement
of the underlying work.59
In addition, the recently enacted Copyright Amendment (Online Infringement) Act 2015 (Cth) (Online
Infringement Act) may enable rights holders to apply to
block access to entire fan fiction websites.
The Online Infringement Act was introduced as a
response to the increase in the use of peer-to-peer file
sharing websites (such as “ThePirateBay”) but its provisions may also cover fan fiction websites (such as
www.fanfiction.net).60 To block a website, a rights holder
intellectual property law bulletin
would need to show that the website in question has the
“primary purpose” of copyright infringement or facilitating copyright infringement.61 Of course, fan fiction
creators do not generally seek to disseminate the underlying works on these websites but rather their own
works. Nevertheless — adverse publicity considerations
aside — an aggressive rights holder that considers a fan
fiction community to constitute a commercial threat may
consider blocking an entire website as a convenient
remedy, and one that circumvents the practical difficulties of identifying and taking action against individual
infringers on the internet.
Moral rights protection
Australian copyright law also protects an author’s
“moral rights”. Moral rights are, however, only conferred on the individual (human) author of the work, and
cannot be transferred or assigned.62 Both the authors of
the underlying work, as well as the fan fiction work,
enjoy moral rights protection. The moral rights conferred on authors are their right of attribution of authorship,63 their right not to have authorship falsely attributed,64
and their right of integrity of authorship in respect of
their works.65 The last right includes their right not to
have the work subjected to derogatory treatment.66
It is the moral right relating to derogatory treatment
that is most relevant to fan fiction works. More particularly, an author concerned about the integrity of their
work may assert that a fan fiction work materially
distorts, alters or otherwise mutilates the underlying
work in a way that is contrary to their moral rights.67 A
key consideration in such an action is whether the fan
fiction work has been created in a manner that is
prejudicial to the author’s honour or reputation.68 Courts
outside of Australia have considered similar provisions.
In Canada, the Ontario High Court held that Christmas
decorations draped around a sculpture were capable of
infringing the sculptor’s moral rights.69 The court considered that the words “prejudicial to his honour or
reputation” (in the equivalent Canadian law) involves “a
certain subjective element or judgment on the part of the
author so long as it is reasonably arrived at”.70 The test
therefore comprises both subjective and objective elements. Subsequent Canadian cases have emphasised the
importance of the objective limb, and have relied on
public or expert opinion.71
There is little by way of Australian case law on moral
rights, and therefore little direction as to how such rights
might be applied in the fan fiction context.72 Nevertheless, one benefit of moral rights protection (insofar as an
author of the underlying work is concerned) is that it
may fall within the jurisdiction of the Federal Circuit
Court of Australia.73 Although this court mostly deals
with family and employment law matters, it is also open
November/December 2015
241
to individual litigants who are not seeking substantial
damages to apply without the need for formal pleadings.74 This lack of formality, and the relatively low cost
of access to the court, may be an attractive avenue for an
author seeking to take action against fan fiction works.
Protection for fan fiction creators
The Australian Federal Court has recently observed
that consumers may be protected from speculative
invoices issued by copyright holders if such claims are
considered to be misleading or deceptive.75 A copyright
claim may be misleading or deceptive where it represents to a consumer a liability that they do not have.76 It
may also be misleading or deceptive to represent to a
consumer that their potential liability is “higher than it
could ever realistically be”.77 The majority of fan fiction
is not created out of a profit motive. Accordingly, it may
be difficult for a rights holder to show that they have
suffered loss for which they should be compensated.
Nevertheless, loss may be proven where a work of fan
fiction has undermined the market for the underlying
work, causing a decrease in sales. This may have been a
relevant consideration for Nintendo in relation to the
creation of the pornographic doujinshi based on Pokemon.
The work could potentially have threatened the family
friendly image of Pokemon, causing parents to avoid
buying Pokemon products for their children. It may also
be easier to obtain damages where the creator of the fan
fiction work sells their work, since that creator may be
liable to account for any profits made.78
Australian copyright law also contains sanctions
against rights holders who make unjustified threats of
litigation.79 A fan fiction creator may seek an injunction
against the continuance of the threats, a declaration to
the effect that the threats are unjustifiable, or recover
damages they have sustained arising from the threat.80
Australian courts have considered similar provisions in
the context of the Patents Act 1990 (Cth), and have held
that a communication constitutes an unjustified threat
where it would convey to any reasonable person “that
the author of the [communication] … intended to bring
proceedings for infringement against the person” and
there is no legal basis for making that assertion.81 Such
a threat may be unjustified even if it is made in good
faith.82
Of course, many fan fiction creators may not have the
resources to enforce these rights in court, or may be
unaware of them, and therefore more likely to submit to
the rights holders’ demands.83 In any event, the presence
in the fan fiction work of elements of the underlying
work — such as characters, settings, scenes or storylines
— may be sufficient to confer on the rights holder an
arguable case that the fan fiction creator has infringed
their copyright.
242
Conclusion
When reflecting on Master and Commander, Naomi
Novik asked herself “How can I add to it? Zombies or
dragons or magic?”84 Fan fiction works, by their nature,
appropriate aspects of other works, and reuse, reappropriate, extend, interpret or enhance them. The internet, with
its global reach and near instantaneous nature, has
facilitated the rapid growth of fan fiction communities.
Unfortunately, copyright law, with its origins firmly
rooted in the idealised conception of the romantic author
— the solitary artist scribbling away in an unheated
garret85 — does not always reflect the way in which
works are created in the Web 2.0 era of mash-ups, cover
versions, remixes, parodies, commentaries and fan tributes.86
It seems unlikely that Australian copyright law’s
current shortcomings in the context of fan fiction — and,
in particular, the lack of a broad based “fair use” defence
— will be addressed by the Australian Parliament, at
least in the short term.87 In the absence of legislative
reform, it will continue to fall to the judiciary to find an
appropriate balance between the legitimate interests of
rights holders, and the contributions of myriad fan
fiction creators to the literary and cultural milieu.
Paul Kallenbach
Partner
Minter Ellison
[email protected]
www.minterellison.com
Anthony Middleton
Graduate
Minter Ellison
[email protected]
www.minterellison.com
Footnotes
1.
By the end of 2015, the total amount of data traffic will amount
to 1 zettabyte. In simple terms, if a 325 ml coffee cup is 1
gigabyte, then 1 zettabyte would have the equivalent volume of
the Great Wall of China; C Gorey “More data to be created in
2019 than in history of the internet” (28 May 2015) Siliconrepublic,
available at www.siliconrepublic.com/comms/2015/05/28/moredata-to-be-created-in-2019-than-history-of-the-internet.
2.
Article I s 8 of the United States Constitution enshrines the
seminal principle of balancing authors’ rights with scienctific
and artistic development. This was also recognised 70 years
prior, in the UK Copyright Act 1709 (Statute of Anne), which
was enacted not only to protect authors’ rights but also for the
“Encouragement of Learning” and composition of “Useful
Books”.
intellectual property law bulletin
November/December 2015
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
J Bay Re-writing publishing: fan fiction and self-publication in
urban fantasy (MA Thesis), The University of Lethbridge,
2014 at p 10.
P McKay “Culture of the future: adapting copyright law to
accommodate fan-made derivative works in the twenty-first
century” (2011) 24(1) Regent University Law Review 117 at
121.
Fanfiction.net, Books, available at www.fanfiction.net/book.
M Wong “‘Transformative’ user-generated content in copyright
law: infringing derivative works or fair use?” (2008) 11(4)
Vanderbilt Journal of Entertainment and Technology Law 1075
at 1077, cited in P Kallenbach and J Childs, “Of kookaburras
and Campbell’s soup cans — copyright and cultural icons in a
sunburnt country” (2011) 23(10) Australian Intellectual Property Law Bulletin 178 at 179.
Although this article focuses on copyright infringement, other
causes of action may be available for the rights holders of
underlying works, such as the tort of passing off, or misleading
or deceptive conduct under s 18 of the Australian Consumer
Law. These causes of action are particularly relevant where the
fan fiction work represents itself as being affiliated with the
underlying work. In general, however, fan fiction works, and
the websites and forums on which they appear, expressly
differentiate themselves from the underlying works, which
means that the risk of a successful claim on these bases is likely
to be low.
R Tushnet “Legal fictions: copyright, fan fiction, and a new
common law” (1997) 17(3) Loyola Los Angeles Entertainment
Law Journal 651 at 655.
N Bertrand “‘Fifty Shades of Grey’ started out as ‘Twilight’ fan
fiction before becoming an international phenomenon” (18 February 2015) Online Business Insider Australia, available at
www.businessinsider.com.au/fifty-shades-of-grey-started-outas-twilight-fan-fiction-2015-2.
Above, n 9.
R Miller “Peter Jackson talks ‘Temeraire’ adaptation” (8 December 2009) Screenrant, available at http://screenrant.com/peterjackson-temeraire-adaptation-ross-36862/. In 2009, Peter Jackson
indicated that he would like to adapt the Temeraire series into
a movie. It is currently still listed as “in development” on the
IMDb website: IMDb, Temeraire, IMDb.com, available at
http://www.imdb.com/title/tt0862850/.
A Newitz “Naomi Novik says fanfic is part of literary history
and reveals what’s next for Temeraire” an interview with
Naomi Novik (Online Interview, 9 September 2010), available
at http://io9.com/5634183/naomi-novik-says-fanfic-is-part-ofliterary-history---and-reveals-whats-next-for-temeraire.
For a discussion on the repurposing of cultural icons, see E
Biggs and P Kallenbach “Intellectual property rights and the
right to freedom of artistic expression: complementary or
contradictory?” (2014) 27(4) Australian Intellectual Property
Law Bulletin 86 at 87–8; Kallenbach and Childs, above, n 6; J
Carlin, “Culture vultures: artistic appropriation and intellectual
property law” (1988–89) 13(1) Columbia VLA Journal of Law
and the Arts 103.
intellectual property law bulletin
14.
N Noda “Copyrights retold: how interpretive rights foster
creativity and justify fan-based activities” (2010) 20(1) Seton
Hall Journal of Sports & Entertainment Law 131 at 139.
15.
The tension between fan fiction creators and authors of the
underlying work is discussed in R Liebler “Copyright and
ownership of fan created works: fanfiction and beyond” in M
David and D Halbert (eds), The Sage Handbook of Intellectual
Property, Sage, 2015 391 at 392.
16.
Liebler, above, n 15, at 392.
17.
Liebler, above, n 15, at 394.
18.
K Bowrey “The new intellectual property celebrity, fans and
the properties of the entertainment franchise” (2010) 20(1)
Griffıth Law Review 188 at 195.
19.
Above, n 3, at p 29.
20.
Above, n 3, at p 29.
21.
Above, n 3, at p 30.
22.
The “What can we learn from Japanese anime industries? The
differences between domestic and overseas copyright protection strategies towards fan activities” (2014) 62(4) American
Journal of Comparative Law 1009 at 1013.
23.
Above, n 22, at 1013.
24.
Above, n 22, at 1014.
25.
Above, n 22, at 1014.
26.
Aristocrat Leisure Industries Pty Ltd v Pacific Gaming Pty Ltd
(2000) 105 FCR 153; 50 IPR 29; [2000] FCA 1273; BC200005306
at [41].
27.
Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2008)
172 FCR 580; 80 IPR 566; [2008] FCAFC 197; BC200811583
at 587.
28.
State of Victoria v Pacific Technologies (Australia) Pty Ltd
(No 2) (2009) 177 FCR 61;
81 IPR 525; [2009] FCA
737; BC200905926 at [17].
29.
Above, n 28, at [22].
30.
Above, n 28, at [23].
31.
Above, n 3, at pp 46–7.
32.
IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239
CLR 458; 254 ALR 386; [2009] HCA 14; BC200902942 at
479 (French CJ, Crennan and Kiefel JJ); CBS Records Australia Ltd v Guy Gross (1989) 15 IPR 385;
(1989) AIPC
90-627; BC8908481. In CBS Records Australia Ltd v Guy
Gross, one issue was whether copyright subsisted in Guy
Gross’ and Collette Roberts’ cover version of the song “Ring
my Bell” by Anita Ward. The court held that copyright did
subsist, as “independent judgment” was applied to the cover
version and original composition was required to match the
instrumental backing to the style of Ms Roberts’ singing.
33.
November/December 2015
IceTV Pty Ltd v Nine Network Australia Pty Ltd above, n 32, at
481 (French CJ, Crennan and Kiefel JJ). Sufficient labour, skill
and capital should be expended “to impart to the product some
quality or character which the raw material did not possess, and
which differentiates the product from the raw material”; this
depends largely upon “the special facts of [the] case, and must
243
in each case be very much a question of degree” (Lord
62.
Above, n 37, at s 190.
Atkinson in Macmillan & Co Ltd v Cooper (1924) 40 TLR
186; 1B IPR 204; 93 LJPC 113 at 190).
For an Australian perspective see above, n 18, at 191. There is
some case law in the US concerning copyright and fan fiction
63.
Above, n 37, at s 193(1).
64.
Above, n 37, at s 195AC(1).
65.
Above, n 37, at s 195AI(1).
66.
Above, n 37, at s 195AI(2).
works: M Chatelain “Harry Potter and the prisoner of copyright
67.
Above, n 37, at ss 195AJ, 195AL.
law: fan fiction, derivative works, and the fair use doctrine”
68.
Above, n 37, at ss 195AJ, 195AL.
(2012) 15 Tulane Journal of Technology & Intellectual Property 199.
69.
Snow v Eaton Centre Ltd (1982) 70 CPR (2d); [1982] OJ No
3645 at 105 (Ontario High Court of Justice).
70.
Above, n 69, at 105.
71.
36.
Chatelain, above, n 34, at 203; Copyright Act of 1976 Title 17
USC s 106 (2011).
Above, n 35, at 203.
37.
Copyright Act 1968 (Cth) s 31(1)(a).
Prise De Parole Inc v Guérin ɉditeur Ltée (1995) 60 ACWS
(3d) 390; 66 CPR (3d) 257; [1995] FCJ No 1583 (Federal
Court of Canada).
38.
Above, n 37, at s 86. As to the categorisation of video games
as cinematograph films see Sega Enterprises Ltd v Galaxy
Electronics Pty Ltd (1996) 69 FCR 268; 139 ALR 518; 35 IPR
72.
One of the few cases in Australia concerning moral rights is
Perez v Fernandez (2012) 260 FLR 1; [2012] FMCA
2; BC201200427. In this case Mr Perez (better known as
“Pitbull”) sued Mr Fernandez for infringement of his right not
to have his work subjected to derogatory treatment (among
other things). Mr Fernandez included a reference to Mr Perez
in his own music making it appear that Mr Fernandez was a
subject of Mr Perez’s song. These actions were considered to
be a material “distortion”, “alteration” or “mutilation” of
Mr Perez’s song. The conduct was also prejudicial to Mr Perez’s
honour or reputation because there were some listeners who
would have presumed that the altered section formed part of
the original work (as it was not yet released in Australia) and
other listeners who understood that Mr Fernandez intended to
mock Mr Perez.
73.
See eg, Meskenas v ACP Publishing Pty Ltd (2006) 70 IPR
172; (2006) AIPC 92-216; [2006] FMCA 1136; BC200606303;
E Adeney “Australia’s First Moral Rights Decision: A Critical
Approach to Meskenas v ACP Publishing” (2008) 19(2)
Australian Intellectual Property Journal at 74.
34.
35.
39.
161; BC9603975.
Above, n 37, at ss 36, 101 and 14(1).
40.
Above, n 37, at s 10(1) (definition of adaptation).
41.
In the case of the latter two categories, even if exact dialogue
is not reproduced because the fan fiction author has used
illustrations instead of words, similarities in “incidents and
situations [will] afford prima facie evidence of copying”:
Harman Pictures NV v Osborne [1967] 1 WLR 723; [1967] 2
42.
All ER 324 at 737.
Above, n 18, at 190.
43.
Zeccola v Universal City Studios Inc (1982) 46 ALR 189; 67
FLR 225; (1982) 90–019 AIPC 38,292 on appeal; (1982) AIPC
44.
90–019.
Above, n 43, (1982) 90–019 AIPC 38,292.
45.
Above, n 44, at 38,299.
46.
Above, n 44, at 38,298.
47.
Apple Computer Inc v Microsoft Corporation (1992) 24 IPR
225; 35 F.3d 1435; 63 USLW 2259, 1994 CoprLDec P 27,301,
32 USPQ 2d 1086 at 236.
74.
Federal Circuit Court of Australia Act 1999 (Cth) s 50; Adeney,
above, n 73, at 75.
48.
Above, n 47, at 236.
75.
49.
Above, n 47, at 236.
Dallas Buyers Club LLC v iiNet Ltd (2015) 112 IPR 1; [2015]
FCA 317; BC201502294 at [82].
50.
Above, n 43, at 192.
76.
Above, n 75, at [82].
51.
Above, n 35, at 212.
77.
Above, n 75, at [82].
52.
Above, n 35, at 203–212; Copyright Act of 1976 Title 17 USC
s 107 (2011).
78.
Above, n 37, at s 115(2).
79.
Above, n 37, at s 202.
53.
Above, n 37, at ss 40, 103C.
80.
54.
Above, n 37, at ss 41, 103A.
Above, n 37, at s 202(1); Bell v Steele (No 3) (2012) 95 IPR
574; [2012] FCA 246; BC201201344 at 579.
55.
Above, n 37, at ss 41A, 103AA.
81.
56.
Above, n 37, at ss 42(1), 103B.
57.
Above, n 37, at s 43(2).
U & I Global Trading (Australia) Pty Ltd v Tasman-Warajay
Pty Ltd (1995) 60 FCR 26; 32 IPR 494; (1995) AIPC
91–188; BC9502790 at 31.
58.
Above, n 37, at s 115(2).
82.
Bell v Steele (No 3), above, n 80, at 579.
59.
Above, n 37, at s 115(2).
83.
Above, n 3, at p 29.
60.
As to the reaction to peer-to-peer file sharing see B Grubb,
“Australian website-blocking laws get green light” The Sydney
84.
Above, n 12.
Morning Herald (online), 11 June 2015, available at www.smh.com.au/
digital-life/digital-life-news/australian-websiteblocking-lawsget-green-light-20150611-ghlr0g.html.
61.
244
Above, n 37, at s 115A(1).
85.
S Scafidi “Intellectual property and cultural products” (2001)
81(4)Boston University Law Review 793 at 795.
86.
Above, n 6, at 1077.
87.
Last year, the Australian Law Reform Commission released a
report on the state of Australian copyright law in the digital
intellectual property law bulletin
November/December 2015
age: Australian Law Reform Commission Copyright and the
Digital Economy (Report No 122), 13 February 2014, available
at www.alrc.gov.au/inquiries/copyright-and-digital-economy. This
year, the Productivity Commission has commenced a 12-month
inquiry into intellectual property protection: Australian Government Productivity Commission, Intellectual Property Arrang-
intellectual property law bulletin
November/December 2015
ments, www.pc.gov.au/inquiries/current/intellectual-property.Although
Parliament has enacted the Copyright Amendment (Online
Infringement) Act 2015 (Cth), it has not yet addressed other
areas of suggested reform, such as incorporating a flexible “fair
use” exception to copyright infringement.
245
Patent eligibility of diagnostic methods in
Australia versus the United States
Ylva Strandberg Lutzow CULLENS
Introduction
Recent advances in genomics and proteomics have
made it possible for scientists and biotechnology companies to develop diagnostic tools and new treatments
for cancer, genetic disorders and infectious diseases that
provide significant benefits to the global population.
Thus, to ensure that there is continued development and
investment in the diagnostics and personalised medicine
areas, it is imperative that patent protection remains
available for new, and potentially life-saving, innovations in these important areas of research.
This article discusses the availability of patent protection for diagnostic methods in Australia and the
United States (US), with a particular focus on three
recently issued US Court decisions that are having an
impact on the biotechnology industry worldwide.
Key points
• The tests for patentable subject matter are different
in Australia and the US. Australian courts rely
upon the “manner of manufacture” principle set
out in National Research Development Corporation (NRDC),1 while US courts use the two stage
test set forth in Mayo Collaborative Services
v Prometheus Laboratories Inc (Mayo)2 to determine whether a diagnostic method claim meets the
subject matter eligibility threshold.
• In Australia, diagnostic methods are, “in general”,
considered to be directed to an “artificially-created
state of affairs for economic benefit” in accordance with the NRDC principles and are therefore
capable of defining patentable subject matter.
• Diagnostic methods are becoming increasingly
difficult to patent in the US and there are now three
separate decisions of the US courts in which
diagnostic method claims have failed to meet the
subject matter eligibility requirement under the
Mayo test.
• In light of these US court decisions, which have
created significant uncertainty in terms of which
US diagnostic patents fall foul of these decisions
and which do not, clients are encouraged to seek
early advice from their patent attorney to ensure
246
that a sound patent strategy can be developed for
each jurisdiction of interest.
Australia
To meet the patentability requirements in Australia
pursuant to s 18(1)(a) of the Patents Act 1990 (Cth)
(Patents Act), a diagnostic claim must be for “a manner
of manufacture” within the meaning of s 6 of the Statute
of Monopolies. In Australia, the general test for patentable subject matter is that an invention is patentable (ie,
a manner of new manufacture) if it provides something
that is industrially useful or provides an “artificiallycreated state of affairs” in a field of economic significance. This test was broadly construed by the High
Court of Australia in the leading Australian NRDC
decision. The NRDC principles have been consistently
applied ever since and there is now a large body of
Australian case law illustrating their operation. In this
regard, it is worth noting that two recent decisions in the
biotechnology field have ruled that methods of medical
treatment and isolated nucleic acids meet the patent
eligible subject matter threshold in Australia.
Specifically, on 4 December 2013 the High Court of
Australia confirmed that methods of medical treatment
constitute patentable subject matter in Apotex Pty Ltd
v Sanofi-Aventis Australia Pty Ltd.3
This decision was followed by the Myriad breast and
ovarian cancer gene patent case D’Arcy v Myriad
Genetics Inc.4 In this Full Federal Court decision, the
five judges applied the decision of the High Court in the
NRDC and unanimously held that the claimed isolated
nucleic acid was, in itself, an artificially created state of
affairs that is associated with economic utility, therefore
satisfying the requirements for patentability under the
Patents Act. This decision made it very clear that the
manner of manufacture test for patent-eligibility under
Australian law is different from the test that applies in
the US under 35 USC 101, and as interpreted in Mayo.
However, the High Court has since granted Yvonne
D’Arcy special leave to appeal (D’Arcy v Myriad
Genetics Inc)5 after which a Full Bench of all seven
judges of the High Court of Australia heard oral arguments on 16 June 2015 and 17 June 2015. A decision is
expected late 2015 and the Australian biotechnology
intellectual property law bulletin
November/December 2015
community is of course hoping that the High Court
judges will uphold the unanimous decision of the Full
Federal Court (and of the judge at first instance) and rule
in favour of Myriad.
While diagnostic methods per se have not been
judicially reviewed, it is clear that “in general”, diagnostic claims are considered to be directed to an “artificiallycreated state of affairs”. That is, they are man-made
processes that produce useful and concrete results of
economic significance, eg, a method that includes physical steps of, for example, isolating a serum sample,
measuring the expression levels of a panel of biomarkers
(eg, proteins and/or nucleic acid sequences) and determining whether an individual has (or is predisposed to)
a specific disease and/or will or will not benefit from a
particular therapy based on the individual’s unique
genetic profile. It is also worth noting that, in contrast to
Myriad’s isolated nucleic acid claims discussed in the
previous paragraph; the diagnostic method claims of
Myriad’s patent were never challenged.
Thus, at least for the foreseeable future, we expect
patent applications to continue to be filed and granted in
respect of many diagnostic inventions in Australia,
subject to the usual requirements of novelty, inventive
step and utility, and so on.
The United States (US)
As alluded to above, unlike in Australia, the patentability of diagnostic methods in the US has been
significantly weakened in light of three recent court
decisions, which are discussed in further detail below.
Mayo
In Mayo, the biomarker of interest was a drug
metabolite6 and the claimed diagnostic test was based on
the discovery of a correlation between the level of the
metabolite in the patient’s blood and optimal drug
dosage. It was in this case that the Supreme Court set
forth a framework for distinguishing patents that claim
laws of nature, natural phenomena, and abstract ideas
from those that claim patent eligible applications of
those concepts. It was determined that the first step is for
the court to determine whether the claims at issue are
directed to a patent ineligible concept, such as a natural
phenomenon. If the answer is yes, the next step is for the
court to consider the elements of each claim, both
individually and “as an ordered combination” to determine whether the additional elements recited in each
claim “transform the nature of the claim”7 into a patent
eligible application. The Supreme Court has described
the second step of this analysis as:8
… a search for an “‘inventive concept’”— i.e., an element
or combination of elements that is “sufficient to ensure that
the patent in practice amounts to significantly more than a
patent upon the [ineligible concept] itself”.
intellectual property law bulletin
Applying this test, the court found the claims at issue
in the Mayo patent ineligible.
University of Utah Research v Ambry Genetics
Corporation9
This decision, which relates to Myriad’s BRCA1 and
BRCA2-based hereditary breast and ovarian cancer test
patent, further emphasised the challenges of obtaining
diagnostic method claims in the US. Based on the
analysis set out in Mayo, the court held that Myriad’s
diagnostic method claims failed to meet the patent
eligibility requirement under the Mayo test because the
first part of the claim merely related to an “abstract idea”
(ie, the comparison of a wild-type/normal BRCA1
sequence with a patient’s BRCA1 sequence), while the
second part of the claim (ie, the hybridisation and
detection techniques used to compare the sequences)
only referred to “well understood, routine and conventional techniques” that failed to add any further inventive concept.
Ariosa Diagnostics Inc v Sequenom Inc10
On 12 June 2015, the US Federal Circuit issued its
decision in Ariosa Diagnostics Inc v Sequenom Inc
finding that Sequenom’s method claims in US Patent
No 6,258,540 for detecting paternally-inherited cell-free
fetal DNA (cffDNA) in maternal plasma or serum were
not directed to patent eligible subject matter, and therefore invalid.
For a bit of background, the technology at issue is a
non-invasive prenatal diagnostic test for sex determination, blood typing, other genetic disorders (including
Down syndrome) and detection of preeclampsia using a
simple blood test that reduces or eliminates the need for
sampling from the fetus or placenta, which incur significant risks to both mother and child. Sequenom Inc is the
exclusive licensee of US Patent No 6,258,540 (the
patent).
The claims of the patent are based on a groundbreaking discovery by the inventors that cffDNA is
present in maternal plasma or serum, that was previously
routinely discarded as medical waste, and their subsequent implementation of a method for detecting a small
fraction of cffDNA in the maternal plasma or serum.
In making its decision, the court again applied the
two-part test as set forth in Mayo and held that the
method claims in the patent “begins and ends with a
natural phenomenon”,11 and that the additional elements
in the method steps “individually and ‘as an ordered
combination’”12 were not enough “to supply an inventive concept”.13
To add insult to injury, the court also stated:14
November/December 2015
While Drs. Lo and Wainscoat’s discovery regarding cffDNA
may have been a significant contribution to the medical
247
field, that alone does not make it patentable. We do not
disagree that detecting cffDNA in maternal plasma or
serum that before was discarded as waste material is a
positive and valuable contribution to science. But even
such valuable and contributions can fall short of statutory
patentable subject matter, as it does here.
This decision shows the sweeping impact the Supreme
Court’s decision in Mayo has had on the patent eligibility of diagnostic methods and further limits the possibility of securing diagnostic patents in the US. Unfortunately,
this decision is likely to have devastating effects on the
diagnostics and personalised medicine industry.
Not unexpectedly therefore, on 13 August 2015,
Sequenom Inc requested an en banc rehearing,15 hoping
that the Full Court will overturn the prior panel’s ruling.
In making the request, Sequenom cautions that the
Federal Circuit’s panel decision “reads recent Supreme
Court precedent to create an existential threat to patent
protection for an array of meritorious inventions”16
beyond those in the personalised medicine and diagnostics industries.
Sequenom further argues that, instead of promoting
better access to “fundamental discoveries”, the panel’s
decision will encourage inventors to keep their discoveries secret and discourage venture capitalists from
investing in biomedical research. To conclude, Sequenom
urges the full court to “take this opportunity to protect
patent law’s fundamental principles from being eroded
by results neither the Supreme Court nor Congress could
possibly have intended”.17
The biotechnology industry is anxiously waiting to
see if the court grants the petition and reaches a different
decision on the merits.
Conclusion
It is pleasing to see that diagnostic methods continue
to be patentable in Australia. Nevertheless, the manner
in which the US courts have recently applied Mayo to
determine the patentability of molecular diagnostic tests
could threaten the diagnostics and personalised medicine industry worldwide, particularly if applied by other
courts.
Meanwhile, the US Patent and Trademark Office
(USPTO) has been proactive in issuing its own patent
eligibility guidelines,18 though these guidelines have not
been tested in a court of law. In Australia, patent
eligibility guidelines are provided by IP Australia through
the Patent Manual of Practice & Procedure.19
Ylva Strandberg Lutzow
Associate
Cullens Patent and Trade Mark Attorneys
[email protected]
www.cullens.com.au
In a High Court decision that issued on 7 October 2015
(D’Arcy v Myriad Genetics Inc), seven judges unanimously overturned the decision of the Full Federal
Court, holding that isolated nucleic acids are not a
manner of manufacture under Australian law. Only the
claims to isolated nucleic acids were challenged by
Yvonne D’Arcy. No diagnostic method claims were
challenged. In the majority decision, four judges reinterpreted NRDC’s concept of manner of manufacture,
setting a precedent for the courts and Australian Patent
Offıce to apply a new approach when considering
whether a claimed invention is a manner of manufacture. It remains to be seen whether the judgment will
affect the patent eligibility of other types of natural
products and natural phenomena. It is possible that
natural products and natural phenomena could have
further bearing on diagnostic methods but that remains
to be seen. Of note, in the minority decisions the judges
commented, in obiter, that diagnostic methods and
probes were potentially patentable subject matter.
Footnotes
1.
National Research Development Corporation v Commissioner
of Patents (1959) 102 CLR 252; [1960] ALR 114; (1959) 1A
IPR 63; BC5900480.
2.
Mayo Collaborative Services (dba MAYO Medical Laboratories) v Prometheus Laboratories Inc (2012) 97 IPR 252; 182 L
Ed 2d 321; 132 S Ct 1289.
Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (2013) 304
3.
4.
5.
6.
7.
8.
9.
248
ALR 1; 103 IPR 217; [2013] HCA 50; BC201315312.
D’Arcy v Myriad Genetics Inc (2014) 313 ALR 627; 107 IPR
478; [2014] FCAFC 115; BC201407309.
D’Arcy v Myriad Genetics Inc [2015] HCA 35; BC201509675.
By “metabolite” it is meant the physiological breakdown of a
drug in a patient’s blood.
Supreme Court of the United States, Syllabus Alice Corporation Pty Ltd v Cls Bank International et al October 2013,
h t t p : / / w w w. s u p r e m e c o u r t . g o v / o p i n i o n s / 1 3 p d f / 1 3 298_7lh8.pdf.
Above, n 7, p 7.
University of Utah Research Foundation v Ambry Genetics
Corporation (Fed Cir 2014).
intellectual property law bulletin
November/December 2015
10.
11.
12.
13.
14.
15.
16.
Ariosa Diagnostics Inc v Sequenom, Inc, 12 June 2015 (Fed
Cir 2015).
Above, n 10, at p 9.
Above, n 10, at p 8.
Above, n 10, at p 11.
Above, n 10, at p 16.
Petition for rehearing en banc- Ariosa Diagnostics Inc v Sequenom
Inc, 13 August 2015 (Fed Cir 2015).
United States Court of Appeals for the Federal Circuit, Appellants’ Petition For Rehearing En Banc p 1, http://
patentdocs.typepad.com/files/sequenom-petition.pdf.
intellectual property law bulletin
17.
Above, n 13, p 15.
18.
United States Patent and Trademark Office 2014 Interim
Guidance on Subject Matter Eligibility, www.uspto.gov/patent/
laws-and-regulations/examination-policy/2014-interim-guidancesubject-matter-eligibility-0.
19.
November/December 2015
IP Australia, Australian Patent Offıce Manual of Practice and
Procedure,www.ipaustralia.gov.au/pdfs/patentsmanual/WebHelp/
Patent_Examiners Manual.htm.
249
Common signs, concealed meanings: Cantarella,
coffee and the inherent adaptability of words
Campbell Thompson BARRISTER
Key points
1. As restated in Cantarella Bros v Modena Trading
Pty Ltd (Cantarella Bros),1 the assessment of the
inherent distinctiveness of a word mark involves a
threshold enquiry into the “ordinary signification”
of the word, which means how the word is
understood in relation to its designated goods by
the “target audience”.
2. The threshold enquiry constrains the familiar “other
traders” test from Registrar of Trade Marks v W &
G Du Cros (Du Cros),2 relegating that test to a
residual, and largely mechanistic, role.
3. In general, after Cantarella Bros it may be harder
to displace the presumption of distinctiveness, at
least for word marks that cover ordinary consumer
goods.
Introduction
Under the Trade Marks Act 1995 (Cth) (the 1995 Act),
trade marks are signs used by traders to distinguish their
goods3 from those of other traders”,4 and are not
registrable if incapable of distinguishing their designated goods.5 Thus, the 1995 Act reflects the general
policy that statutory property rights should be limited to
distinctive trade marks.6
A trade mark is presumed distinctive, unless proved
otherwise by certain enquiries.7 This article focuses on
the first of these, which concerns whether, and to what
extent, the mark is inherently adapted to distinguish its
designated goods or services at its filing date (inherently
distinctive).
Following the judgment of the majority (French CJ,
Hayne, Crennan & Keifel JJ) of the High Court in
Cantarella Bros, a “crucial part” of the enquiry into
whether a word mark is inherently distinctive involves
examining the word itself, in particular its “ordinary
signification” in relation to the designated goods or
services at the filing date.8 The familiar “other traders”
test from Du Cros follows and is constrained by that
examination.9
This article reflects on two related issues arising from
the majority’s analysis in Cantarella Bros. First, how is
the “ordinary signification” of a word in relation to
250
designated goods to be found? Second, once found, what
work (if any) is there left for the Du Cros test to do? 10
Summary
The text of s 41 of the 1995 Act and the conventional
formulation of the Du Cros test prior to Cantarella Bros
is examined. A brief summary of the decision in Cantarella
Bros, including its restatement of the Du Cros test is
given.
The meaning given to “ordinary signification” by the
majority in Cantarella Bros is addressed, focusing in
particular on the critical concept of the “target audience”. A semiotic perspective is introduced. It is contended that, at least where the designated goods are
ordinary consumer goods, Cantarella Bros is likely to
have made it more difficult to show that a word mark is
non-distinctive.
The “other traders” test after Cantarella Bros is
addressed, and it is contended that the High Court has
relegated that test to a residual, largely mechanistic, role.
Some circumstances in which it may have some substantive work to do are mentioned.
Several Trade Marks Office decisions and Federal
Court cases since Cantarella Bros that have considered
the inherent distinctiveness test are then canvassed.
The enquiry into inherent distinctiveness
Section 41 of the 1995 Act
Section 41(3) and (4) of the 1995 Act set out mutually
exclusive and exhaustive criterion for displacing the
presumption of distinctiveness of a trade mark.11 These
subsections have been in their current form only since
201212 and Cantarella Bros considered the earlier form
of s 41. However, the 2012 amendments almost certainly
did not change the substantive legal tests.13
A trade mark will be held non-distinctive under
s 41(3) if, at its filing date, the mark was not to any
extent inherently distinctive and did not in fact distinguish its designated goods.
Alternatively, a trade mark will be held nondistinctive under s 41(4) if, at its filing date, the mark
was to some extent but not sufficiently, inherently
distinctive of its designated goods, and (having regard to
intellectual property law bulletin
November/December 2015
the extent of the marks’ inherent distinctiveness, use or
intended use of the mark, or other circumstances), it
does not and will not distinguish them.
It follows that the extent (if any) to which a trade
mark is inherently distinctive is critical to the overall
assessment of distinctiveness under s 41.
The Du Cros test before Cantarella Bros
The traditional test of inherent distinctiveness, articulated by Lord Parker in Du Cros, asks whether the
relevant trade mark, if used as such, is likely to become
distinctive. This largely depends on whether, if the mark
were not registered, other traders having no improper
motive would be likely to want to use it, or a mark
“nearly resembling it” in relation to their goods.14 The
Du Cros test was approved by Kitto J in Clark Equipment Co v Registrar of Trade Marks (Clark Equipment),15 a case decided under the Trade Marks Act 1955
(Cth).
An honest trader might, for example, want to use a
word in relation to their goods that is apt to describe one
of its characteristics or qualities. Thus, in Clark Equipment, Kitto J made the (parenthetical) observation that a
trader with no improper motive may wish to exercise the
right of “the public” to use words that are “part of the
common heritage, for the sake of the signification which
they ordinarily possess”.16
The Du Cros test was applied by a five member
Bench of the High Court in F H Faulding & Co
v Imperial Chemical Industries (Faulding).17 In that
case, Kitto J (who wrote the lead judgment) held that by
the filing date “the word Barrier had caught on as a word
peculiarly apt, according to its ordinary signification, for
descriptive use in connexion with skin protective creams”.
The word had “such a place in the vocabulary of persons
concerned with” those goods that honest traders in those
goods would want to use it.18
In particular, the evidence showed that pharmacists
used “barrier cream” descriptively and synonymously
with “protective”, and that this usage was evidenced in
widely circulated journal articles and reference works
aimed at the profession. The use would “show to the
ordinary reader with no technical training” that the word
refers to “a class of protective creams”, not a specific
product.19
Cantarella Bros — the decision
Cantarella Bros raised the issue whether the Italian
words “cinque stelle” and “oro” were inherently adapted
to distinguish coffee.
The majority restated the Du Cros test as requiring
the points of view of both honest traders and the public
must be considered.20 In particular, whether for an
English or foreign word, it is the “ordinary signification”
intellectual property law bulletin
of the word, in Australia, “to persons who will purchase,
consume or trade in the goods”21 that determines whether
other honest traders would want to use it.
The trial judge had found that, although an Italian
speaker would appreciate that “oro” signifies some
connection with gold, and that “cinque stelle” signifies
five stars, these words would not generally be understood in Australia as having those meanings.22 Given
these findings, the words in their ordinary significations
were not shown to have sufficiently tangible meanings in
relation to coffee to be direct references to its character
or quality. On the “other traders” test, they therefore
could not be words other honest traders may want or
need to use.23
Ordinary signification
Origin of the expression
The expression “ordinary signification” is not part of
the operative provisions of s 41,24 but was part of an
earlier legislative test of inherent distinctiveness. Section 16(1)(d) of the Trade Marks Act 1905 (Cth)
provided that a word or words having no direct reference
to the character or quality of the goods, and not being
according to its “ordinary signification” a geographical
name or a surname, was a registrable trade mark.
The “ordinary signification” qualifier in s 16(1)(d)
was initially intended to allow registration of words that
may happen to be place names or surnames, although
this was not their primary sense (eg, “magnolia”).25 It
did not in terms apply to the question whether a word
directly referred to goods. However, the majority considered that cases such as Clark Equipment and Faulding established that the ordinary signification of a word
is a crucial consideration in assessing inherent distinctiveness, whatever the basis on which the word is
alleged not to be registrable.26
How, then, is a court to find the “ordinary signification” of a word, in order to decide whether the word
directly refers to the designated goods?
The “target audience”
According to the majority in Cantarella Bros, the
“ordinary signification” of a word can refer to how the
word is (generally) understood in relation to the relevant
goods by its “target audience”.27 While not explicitly
defining this expression,28 the majority seemed to use it
as a shorthand label for “persons in Australia who
ordinarily purchase, consume or trade in the goods”.29
It is respectfully suggested that the majority’s analysis of “ordinary signification”, while broadly echoing
that of Kitto J in Clark Equipment and Faulding,
represents a subtle shift of emphasis. In those earlier
cases, the context of the enquiry was the motives of
November/December 2015
251
other traders to use the word. Despite Kitto J’s references to “the public” (in Clark Equipment) and the
“ordinary reader” (in Faulding), the test primarily directed
attention to whether other traders had actually used the
word descriptively in relation to the goods or might do
so given its ordinary meanings. In contrast, for the
majority in Cantarella Bros an enquiry into “ordinary
signification” occurs at the threshold, before turning to
consider the motives of traders. In that context, the focus
on the target audience directs attention not just to
whether a trade mark is used descriptively or has
descriptive meanings but to whether those meanings are
widely understood, including by consumers.
Mark Foy’s
The majority’s approach seems to owe much to
Dixon CJ’s judgment in Mark Foy’s Ltd v Davies Coop
(Mark Foy’s)30 under s 16(1)(d) of the 1905 Act. In
Mark Foy’s, Dixon CJ was not called on to consider the
notion of “ordinary signification” as such. The ratio in
that case was that the words “Tub Happy” did not have
a direct reference to the designated goods (ie, clothing)
as it was not likely that ordinary persons would understand the words applied to those goods, as “calling to
mind either their nature or some attribute they possess”.
The words, in Dixon CJ’s view, conveyed no sufficiently
tangible meaning or idea but merely had an “emotive
tendency”.31
His Honour in Mark Foy’s also observed that a search
for exact meaning, based on an assumption that words
convey a meaning, could be misconceived, as the fact a
meaning needs to be sought out may imply that no
sufficiently definite descriptive connotation of the words
exists “in ordinary English speech”. Crucially, in his
Honour’s view, language is “not always used to convey
an idea” and words can instead be used in advertising
simply “to evoke in the reader or hearer some feeling,
some mood, some mental attitude”.32
A semiotic perspective
It is considered that a semiotic perspective is helpful
to elucidate the potential issues with the majority’s
approach. Here semiotics is only used as a convenient
analytic model.
In a basic semiotic model, a “sign”, such as a word,
can be conceived as having two parts: namely the
“signifier” and the “signified”. The perceptible impression of the word, especially in its aural and visual
aspects is a signifier. The idea or concept that the word
represents (if any), which is created in the mind of the
interpreter is the signified.33
A semiotic perspective reveals, first, that it would be
fruitless to search for “objective” meanings of a sign as
distinct from meanings created in the minds of those
252
who perceive the signifier. This seems to suggest that a
focus on a “target audience” is sound.
A semiotic model also acknowledges that words may
be used purely emotively and therefore, may have a
signified that is vague, highly variable or even nonexistent. In semiotic terms, the signifier is said to be
“empty” or “floating” if it does not point to an agreed
upon meaning.34 In the language of semiotics, “Tub
Happy”, used for clothing, could be seen as an empty or
floating signifier. In contrast, at least by its filing date, it
was plain that “Barrier” had a stable and fixed descriptive meaning in relation to protective cream.
However, it is respectfully suggested that a semiotic
perspective shows that the Italian words in Cantarella
Bros do not fit comfortably within the dichotomy described
in Mark Foy’s.
Coffee is “a commodity and a familiar beverage
consumed by many”.35 The evidence in Cantarella Bros
showed that at the filing date the words “oro” and
“cinque stelle” did not evoke a generally shared idea or
concept among the general public in Australia. However,
for non-Italian speakers, it is not that the words signified
various allusive or metaphorical ideas in respect of
coffee. They simply were not generally understood at
all.36 Conversely, for those who did know that “oro”
means “gold” and “cinque stelle” means “five stars”,
these expressions had stable meanings and no doubt
evoked the ideas and concepts with which they are
commonly associated. Used in relation to coffee, the
proper inference was not that Italian speakers understood the words “allusively” or “metaphorically” but
rather that for them the words signified quality. This
reflects that, had the English translations of those words
appeared on the coffee packaging, they would have been
generally understood as descriptive (or laudatory) in that
sense.37
The Italian words in Cantarella Bros are but two
examples of words that, used in relation to designated
goods, would correctly be understood in their ordinary
and stable descriptive sense by part of the target audience, while having no “generally understood” meaning
within the target audience considered as a whole. Further examples, it is suggested, could include a great
many words that are ordinarily (that is, in their usual
sense) used to indicate the quality or characteristics of
goods or services, or their origin, and that were conventionally thought not to be inherently distinctive.38
It has been observed, for example, that wholly
descriptive words written in European languages other
than English or non-Roman scripts, as well as many
English words that are technical (or archaic) and many
place names would not be generally understood by a
target audience consisting of ordinary Australian consumers.39 Indeed, it would seem that even if a word is
intellectual property law bulletin
November/December 2015
contained in a general or specialist dictionary, atlas,
encyclopedia or public register (eg, of geographical
indications or variety names) and its use in the defined
sense would be apt to directly refer to a characteristic of
goods, it will be inherently distinctive if the evidence
does not show the word was “generally understood” by
a target audience that includes consumers.
A more narrow reading of Cantarella Bros?
One possibility is that, in appropriate cases, the
“target audience” would be understood in a more confined way? Alternatively, it might be enough to show an
established and stable descriptive meaning that is understood by part of the target audience, although not one
generally understood by the target audience?
The practical scope to define a target audience
narrowly, at least for ordinary consumer goods, seems
limited. There ought be no rational reason to infer,
merely from a trade mark’s intrinsic characteristics (eg,
the use of a foreign or technical word, or non-Roman
script), that the target audience for the designated goods
is limited to those who can correctly interpret the word
or script, rather than those who ordinarily purchase,
consume or trade in goods of the kind described in the
trade mark application.
A second possibility, that a meaning not generally
understood by the target audience could be enough to
give a mark a descriptive ordinary signification, was
moot in Cantarella Bros, as the majority held that the
evidence did not support the submission that coffee
traders at the filing date understood and used the words
“oro” and “cinque stelle” descriptively.40 However, this
possibility is supported by the fact the majority referred
disjunctively (when defining ordinary signification) to
“persons who will purchase, consume or trade in the
goods”(emphasis added),41 and explicitly considered the
position of traders in answering the threshold question.42
Nonetheless, it seems difficult to reconcile this possibility with the majority’s insistence on the need to
consider, in the test of inherent distinctiveness, the wider
interests of the public and not merely the interests of
traders.43 Further, as a practical matter, once a conclusion has been reached that a word (used in relation to a
consumer good) does not have a descriptive ordinary
signification to consumers generally, it seems inevitable
that this view would infect a court’s analysis of the use
and understanding of the word by those in the trade. This
is illustrated by the majority’s analysis in Cantarella
Bros of the evidence of use of the word “oro”. The
evidence showed that the mark was used by several
producers of Italian coffee as a common sub-component
of different composite marks on coffee labels. Given
that, to each of those competing producers, “oro” plainly
meant “gold”, it is respectfully suggested that the more
intellectual property law bulletin
obvious inference is that they were using “oro” as a
descriptive or laudatory word. Yet the majority would
not draw that inference.44
Whither Du Cros?
The majority held that the Du Cros “other traders”
test follows after the inquiry into ordinary signification.45 However, on one view of their Honour’s analysis,
there may be little or no work remaining to be done as
the initial enquiry results in a simple dichotomy. Once a
word mark has been classified according to its ordinary
signification, that classification leads to a conclusion as
to whether honest traders may legitimately desire to use
it. Either the word is directly descriptive and is not
prima facie registrable,46 or it conveys only an allusive
or metaphorical meaning and is prima facie registrable.47
If so, this seems to relegate the “other traders” test
not just to a residual but to a mechanistic role in the
enquiry into inherent distinctiveness.
However, Du Cros may yet have further work to do.
First, if a word is, for example, held to contain a direct
reference to the quality of the goods, there may (if the
word has been used as a trade mark) need to be a broader
distinctiveness enquiry. In that context, a court would, in
accordance with the scheme of s 41, need to assess the
extent (if any) to which the word is inherently distinctive.48 In other words, the inquiry into inherent distinctiveness would not end merely because it is concluded
that the word is not prima facie registrable.
Second, a word that, in its “ordinary signification”,
contains no directly descriptive meaning may closely
resemble a word that is wholly descriptive. If honest
traders are likely to desire to use the descriptive word
and that word is deceptively similar to the word for
which registration is sought (such that the use of the
descriptive word might infringe), this would seem to
provide a rational basis to refuse registration of the
(non-descriptive) word based on the Du Cros test.49
Finally, the ratio in Cantarella Bros could perhaps be
read as not subordinating the “other traders” test to the
threshold test of “ordinary signification”. One finding of
the majority was that the evidence did not demonstrate
that rival traders desired to use “oro” or “cinque stelle”
to directly describe their coffee goods, and on this basis
held that criticisms that the trial judge had insufficiently
considered those desires were misconceived.50 This
seems to leave open the possibility that, on appropriate
facts, the “other traders” test could displace the apparent
outcome of the “ordinary signification” test.51
The landscape post-Cantarella
Trade Marks Office cases
Given the relatively brief time that has elapsed since
Cantarella Bros, it is too early to conclude whether it is
November/December 2015
253
likely to materially impact on the practice of the Trade
Marks Office. However, recent decisions indicate that its
reasoning may be causing some practical difficulties.
For example, in Garrett Electronics Inc52 the word
GARRETT was held to be inherently distinctive for
metal detectors. The registrar’s delegate held that, following Cantarella Bros, the question is not whether a
trader with the surname GARRETT might wish to deal
in the goods under his or her own name but whether it is
likely that, for those who purchase, use or trade in the
relevant goods, the ordinary signification of the word is
“a surname that is common to the trade or part of the
common heritage” or “an indicator of trade source”. It
was held that the word was not, in its ordinary signification, a surname that is part of the common heritage
because a relatively small number of people have the
surname in Australia (about 2000), the manufacture of
metal detectors is not a common business, and there is
no common practice of persons in the industry using
their surname as a trade mark.53
This decision indicates that the Trade Marks Office
may be relatively more lenient with respect to the
registration of marks, such as surnames, that previously
would not have been considered inherently distinctive.54
However, with respect, the reasoning seems questionable. The surname GARRETT does not seem so obscure
that persons seeing the name used in relation to goods
would not appreciate it to be a surname. The question of
whether it also has a secondary meaning as indicating
the source of metal detectors would not seem to be
relevant to the question of inherent distinctiveness.
Conversely, in Australian College of Natural Medicine Pty Ltd,55 in finding that WELLNATION was
inherently distinctive of beauty products and related
services, the registrar’s delegate did not cite Cantarella
Bros but merely applied the test from Clark Equipment.
Although the reasoning seems consistent with Cantarella
Bros,56 this also suggests that there is not yet a consistent practice about how to apply the case.
Federal Court decisions
Only a few Federal Court cases have considered the
question of inherent distinctiveness under s 41 of the
1995 Act since Cantarella Bros.57
In Verrocchi v Direct Chemist Outlets Pty Ltd,58
Middleton J, while citing Cantarella Bros, appeared to
consider that the Du Cros test was applicable without
modification.59 However, his Honour was not required
to make any detailed analysis of this issue, as the
applicant had accepted that at the filing date its trade
mark was only to some extent inherently distinctive of
pharmacy retailing and related services.60
In Accor Australia & New Zealand Hospitality Pty
Ltd v Liv Pty Ltd (Accor),61 Rangiah J held that the word
254
mark HARBOUR LIGHTS but not the word mark
CAIRNS HARBOUR LIGHTS, was inherently distinctive of accommodation letting services. Applying Cantarella
Bros, his Honour’s analysis began by considering “the
ordinary signification of the trade marks to persons who
will trade in or use” the relevant services “namely lot
owners, travel agents and potential guests”. His Honour
noted that the words HARBOUR LIGHTS were:62
… a well-known combination of ordinary English words …
used in ordinary language to refer to the collection of lights
around a harbour and the lights on boats or structures in a
harbour.
However, while the words were held to “allude to” a
characteristic of the accommodation (ie, namely the
views the accommodation provides of a harbour) they
were held not to “directly describe a characteristic of the
accommodation”.63 On this basis, his Honour held that
the mark was inherently distinctive, and did not in terms
apply the Du Cros test.
However, his Honour reached a different view in
relation to CAIRNS HARBOUR LIGHTS, on the basis
that the mark would be understood as referring to
“Cairns Harbour”, which is a direct reference to the
location of the accommodation offered.64 His Honour
went on to apply the Du Cros test holding that other
honest traders would be likely to want to use “Cairns
Harbour”, a word closely resembling CAIRNS HARBOUR
LIGHTS, for their own services. However, the presence
in the mark of the element “lights” meant that the mark
was to some extent inherently distinctive.65
His Honour’s analysis in Accor is not inconsistent
with Cantarella Bros having a broad scope and is
consistent with the view that the Du Cros test while
residual and largely mechanistic has some work to do.
Sir Walter
A broad reading of Cantarella Bros would seem
inconsistent with the approach taken by Yates J in
Buchanan Turf Supplies Pty Ltd v Registrar of Trade
Marks (the Sir Walter case).66 In that case, his Honour
held that the word mark SIR WALTER did not meet the
requirements for registration in s 41 in respect of a
variety of buffalo grass that was already registered under
the same name under the Plant Breeder’s Rights Act 1994
(Cth) (PBR Act).
On a conventional pre-Cantarella Bros understanding
of s 41, it is suggested that the judgment is unremarkable. The mark SIR WALTER is a paradigm instance of
a mark that should be caught by the Du Cros test, being
“the name of the very grass variety for which registration of SIR WALTER is sought”.67
intellectual property law bulletin
November/December 2015
However, his Honour, while citing Cantarella Bros,
appears to apply a conventional Du Cros test, rather than
following the injunction of the majority in Cantarella
Bros to start by identifying the “ordinary signification”
of the relevant words.
Respectfully, the initial question in the light of
Cantarella Bros, is not whether SIR WALTER is the
“proper name” for a new variety of grass and thus “part
of the common stock of language that denotes this
particular variety”.68 It is instead whether SIR WALTER,
in its “ordinary signification”, is generally understood by
its target audience, namely those who purchase, consume or trade in buffalo grass of the “Sir Walter” variety,
as being the name of a grass variety and hence, directly
descriptive of those goods. The Du Cros test is only to
be applied once the ordinary understanding of the words
in this sense is ascertained.
It may be thought very likely that Yates J would have
reached the same ultimate conclusion from the Cantarella
Bros starting point. Notably, his Honour explicitly rejected
a submission that “most members of the public would
not even be aware that Sir Walter is the name of a plant
variety distinct from the name of a soft leaf buffalo grass
associated with, and supplied by, the appellant”.69 His
Honour refused to draw this inference in circumstances
in which there was “no direct evidence as to what ‘most
members of the public’ think when they see the name Sir
Walter”, and there was promotional material that his
Honour concluded was suggestive of the descriptive use
of the words.70
Nonetheless, with respect, his Honour’s analysis
seems to have as its predicate that SIR WALTER is a
variety name that other notional traders would legitimately want to use (once the relevant registration under
the PBR Act expired) and that it followed that the mark
was prima facie descriptive. It is difficult to assess to
what extent this predicate may have influenced his
Honour’s views as to the nature of the uses actually
made of SIR WALTER and how these were likely to
have been perceived by consumers. However, what the
Trade Marks Office initially had to prove was that SIR
WALTER has an “ordinary signification” among members of the “target audience”, being those who purchase,
consume or trade in buffalo grass of the “Sir Walter”
variety. Whatever may be the legitimate desires of other
traders would not seem to be part of the analysis at the
initial stage. Further, given the presumption of registrability under the 1995 Act, it is suggested that the lack of
direct evidence as to what consumers think when they
see the name SIR WALTER could tend against any
finding that the mark had a meaning that was “sufficiently tangible” to the “target audience”.
In the light of the Sir Walter case, it may be
appropriate to conclude with a question: will Sir Walter
intellectual property law bulletin
stand as an island, applying a pre-Cantarella Bros
approach to the enquiry of inherent distinctiveness of
word marks, or is the better view that Cantarella Bros
will come to be read narrowly, as merely putting a
different emphasis on the familiar Du Cros test?
Campbell Thompson
Barrister, Victorian Bar
Young’s List
[email protected]
www.youngslist.com.au
Campbell is a barrister who specialises in intellectual
property law and related matters, including trade marks.
Footnotes
1.
Cantarella Bros v Modena Trading Pty Ltd (2014) 315 AR 4;
(2014) 109 IPR 154; [2014] HCA 48; BC201410159.
2.
Registrar of Trade Marks v W & G Du Cros [1913] AC 624 at
634–5 per Lord Parker of Waddington.
This article refers to goods and services compendiously, as
goods.
3.
4.
5.
6.
Trade Marks Act 1995 (Cth), s 17.
Trade Marks Act 1995 (Cth), ss 41(1), 57 and 88.
See E & J Gallo Winery v Lion Nathan Aust Pty Ltd (2010) 241
CLR 144 at 162–163; (2010) 265 ALR 645; (2010) 86 IPR
224; [2010] HCA 15; BC201003137 at [41]–[42] per French
CJ, Gummow, Crennan and Bell JJ, and above, n 1, at [17] per
French CJ, Hayne, Crennan and Kiefel JJ.
7.
8.
9.
10.
Trade Marks Act 1995 (Cth) ss 41(2)–(4).
Above, n 1, at [59], [70] and [71] per the majority.
Above, n 1, at [71].
The author is indebted to the recent article on inherent
distinctiveness post-Cantarella by M Handler “All That Glitters
is Not Gold: A Critical Assessment of Trade Mark Distinctiveness under Australian Law, Part 1” June 2015 Intellectual
Property Forum.
11.
12.
Trade Marks Act 1995 (Cth) ss 41(2)–(4).
Intellectual Property Laws Amendment (Raising the Bar)
Act 2012 (Cth).
13.
The amendments merely reframe the prior substantive requirements in terms of what needs to be proved to establish that a
mark is not capable of distinguishing. See Acts Interpretation
Act 1901 (Cth) s 15AC.
14.
15.
Above, n 2, at 634–5 per Lord Parker of Waddington.
Clark Equipment Co v Registrar of Trade Marks (1964) 111
CLR 511; BC6400500.
Above, n 15, at 513–14.
F H Faulding & Co v Imperial Chemical Industries of
Australia & New Zealand (1965) 112 CLR 537; BC6500260.
Above, n 17, at 556–7 per Kitto J with whom Barwick CJ (at
16.
17.
18.
November/December 2015
551), Taylor J (at 562) and Windeyer J (at 563) agreed. See also
255
Burger King Corporation v Registrar of Trade Marks (Burger
the Spanish word QUESO for cheese, the technical English
King) (1973) 128 CLR 417; [1972] ALR 1361; (1973) 47
ALJR 237; 1A IPR 504 at 425 where Gibbs J held that the word
word EUTECTIC (see Eutectic Corporation v Registrar of
WHOPPER was one other honest traders may wish to use for
obscure place names like SOLIGA (Himalaya Global Holdings
sandwiches, as it was an “ordinary English word” whose
Ltd [2012] ATMO 19) and HARBIN (Harbin Brewing Co Ltd
Trade Marks (1980) 32 ALR 211; (1980) 1A IPR 550), and
meaning would clearly be descriptive of a characteristic of the
19.
goods, and would probably be laudatory of them.
Above, n 17, at 556–7 per Kitto J with whom Barwick CJ (at
551), Taylor J (at 562) and Windeyer J (at 563) agreed.
(2012) 97 IPR 38); [2012] ATMO 48.
40.
Above, n 1, at [75]–[77].
41.
Above, n 1, at [59].
Above, n 1, at [75]–[77].
20.
Above, n 1, at [59].
42.
21.
Above, n 1, at [59].
43.
Above, n 1, at [44].
22.
Above, n 1, at [4] and [61], citing Cantarella Bros Pty Ltd
v Modena Trading Pty Ltd (2013) 299 ALR 752; (2013) 99
44.
Above, n 1, at [75]–[77].
45.
Above, n 1, at [71].
IPR 492; [2013] FCA 8; BC201300487 at 776 [117].
46.
Above, n 1, at [75]–[77].
23.
Above, n 1,at [73].
47.
Above, n 1, at [73].
24.
Trade Marks Act 1995 (Cth) s 41 Note 1 (which is not part of
the statutory text) refers to marks that are not inherently
distinctive as including those consisting wholly of a sign
“ordinary used to indicate” some characteristic of goods or
services.
48.
Although the majority’s analysis could be read as indicative of
a dichotomy between inherently distinctive and inherently
non-distinctive marks, s 41 does not permit such a dichotomy
49.
Indeed, in Du Cros itself there were two applications for W &
Above, n 1, at [35], citing In re Magnolia Metal Company’s
Trade Marks [1897] 2 Ch 371.
G, one in block letters and one in stylized form. Lord Parker
26.
Above, n 1, at [71]. And see also at [39], [40], [44] and [56],
citing Kitto J in Faulding at 556–57.
would plainly be infringed by use of W & G in block letters,
27.
Above, n 1, at [71].
50.
28.
Compare with above, n 1, at [28] which contains the appellant’s definition.
51.
25.
29.
30.
31.
32.
33.
34.
the registrability of both marks had to stand or fall together.
Above, n 1, at [77].
It is possible, as Professor Handler (above, n 26) acknowledges, that Cantarella Bros will be seen to have turned on its
Above, n 1, at [59]. The majority also use variant formulations
specific facts, and especially upon the lack of convincing
at [73] (“anyone in Australia concerned with coffee goods”)
and [75] (“persons concerned with coffee goods”). It is
suggested these all refer to the same idea.
evidence, first, as to the “ordinary signification” of the words in
Mark Foy’s Ltd v Davies Co-op & Co Ltd (Tub happy case)
(1956) 95 CLR 190; (1956) 1A IPR 470; BC5600300.
Above, n 30, at 195 per Dixon CJ. Williams J (at 202) also
distinguished between words directly referring “in an ordinary
sense” to the designated goods, and words skilfully alluding to
their quality.
question, and second, as to the desire of other traders to use
them for their descriptive qualities.
52.
Re Garrett Electronics Inc (2015) 114 IPR 155; [2015] ATMO
48; BC201506210.
53.
54.
Above, n 52, at [23]–[30].
Compare with Re Abalner Pty Ltd (2015) 114 IPR 171; [2015]
ATMO 51; BC201506143, where a more conventional analysis
Above, n 30, at 195.
See U Maunsbach and G Schneider The semiotics of descrip-
was applied to find that the surname BLAIR lacked sufficient
tiveness — An analysis of the registrability of neologisms as
trade marks in the European Union, Lund University, 2011, at
pp 11–12. Accessed on 28 August 2015 at http://lup.lub.lu.se/
luur/download?func=downloadFile&recordOId=2026986&
fileOId=2173725.
Chandler, D Semiotics for beginners, 1994, accessed on 28August 2015
at http://visual-memory.co.uk/daniel/Documents/S4B/.
Ltd [2015] ATMO 68; BC201509449, in which the acronym
35.
Above, n 1, at [72].
36.
Above, n 1, at [61], citing Cantarella Bros Pty Ltd v Modena
Trading Pty Ltd (2013) 299 ALR 752; 99 IPR 492; [2013]
FCA 8; BC201300487 at 776 [117].
inherent distinctiveness. See also McMullen Nolan Group Pty
MNG was held registrable for software design and related
services. The Registrar’s delegate held that the test of inherent
distinctiveness requires consideration of both the ordinary
signification of a word and the legitimate desire of other traders
to use it in relation to the same or similar services. Although
some consumers and traders would recognise MNG as being
short for a file format named “Multiple-image Network Graphics”, this did not mean that it would be understood, by persons
concerned in the relevant services, as directly descriptive of
their character or quality.
37.
Above, n 1, at [112] per Gageler J.
38.
See Note 1 to s 41 of the Trade Marks Act 1995 (Cth).
39.
See M Handler, above, n 12, at p 25, which cites, as examples
of words that could be registrable under the majority’s approach,
256
noted that as the application for W & G in a stylized form,
55.
Australian College of Natural Medicine Pty Ltd [2015] ATMO
15; BC201501346. The case was argued before Canteralla
Bros. But see also Re Apple Inc (2015) 112 IPR 43; [2015]
intellectual property law bulletin
November/December 2015
ATMO 25; BC201503073, argued post-Cantarella Bros, where
56.
57.
58.
59.
60.
the Registrar’s delegate also did not mention Cantarella Bros
(in the context of a device registration) but merely applied
Clark Equipment.
Above, n 57, at [16]–[22].
Re Apple Inc (2015) 112 IPR 43; [2015] ATMO 25; BC201503073
was handed down on the same day as the High Court’s
judgment in Cantarella Bros.
Verrocchi v Direct Chemist Outlet Pty Ltd (2015) 112 IPR
200; [2015] FCA 234; BC201502395.
Above, n 58, at [105]–[107].
Above, n 58, at [294]. The mark was for the words IS THIS
AUSTRALIA’S CHEAPEST CHEMIST? in a stylised format
on a blue banner.
intellectual property law bulletin
61.
Accor Australia & New Zealand Hospitality Pty Ltd v Liv Pty
Ltd (2015) 112 IPR 494; [2015] FCA 554; BC201505256.
62.
Above, n 61, at [228].
63.
Above, n 61, at [227]–[229].
64.
Above, n 61, at [241].
65.
Above, n 61, at [243].
66.
Buchanan Turf Supplies Pty Ltd v Registrar of Trade Marks
(2015) 114 IPR 81; [2015] FCA 756; BC201506899.
67.
Above, n 66, at [31].
68.
Above, n 66, at [55].
69.
Above, n 66, at [48].
70.
Above, n 66, at [52], [130] and [133].
November/December 2015
257
Copyright law in the fashion world — same old
problems
Catherine Logan LEGAL VISION
Takeaway tips:
• Fashion designers whose distinctiveness is carried
in their two dimensional fabric designs should be
able to use copyright to uphold their rights but
problems can arise if there is no “smoking gun”
evidence of copying.
• Those who wish to protect three dimensional
aspects of a fashion design that they propose to
industrially apply should consider applying for
design registration as copiers will have a defence
to copyright infringement.
• A fall back for all designers is to consider the
breadth of protection for many other aspects of
their designs and brand (including colour) which
may be available through trade mark registration.
• Finally, if the conduct engaged in by the infringer
misleads or is likely to mislead consumers as to
the origin of the designs, this may be the claim that
is most likely to succeed whether in Australia or
the US, that is, if the wronged designer can afford
the uncertainty and expense of the legal action
required.
When after wearing a DI$COUNT UNIVER$E t-shirt
in photographs publicizing her Bangerz world tour last
year and publishing them to her 17 million or so Twitter
followers and using images of the shirt on some of the
tour merchandise, Cyrus presented the young label with
very valuable global publicity worth millions of dollars.
The relationship seems to have recently soured since
Cyrus’s costume designer for the 2015 VMAs, Brad
“BCalla” Callahan, who is based in the US, presented
Cyrus and dozens of drag queens in her musical performance at the VMAs wearing outfits prominently displaying the Third Eye motif and other indicia recognisable as
hallmarks of DI$COUNT UNIVER$E designs. These
outfits were sufficiently derivative and redolent of the
DI$COUNT UNIVER$E oeuvre that they apparently
prompted floods of congratulations to be sent to the
designers from fashion watchers who had assumed that
the costumes were DI$COUNT UNIVER$E designs.
Introduction
This article uses the current MVA fashion scandal
surrounding the stage outfits of Miley Cyrus and her
dancers as a case study to illustrate the issue of fashion
designers imitating another’s eye-catching motifs and to
discuss IP protection in the world of fashion more
generally.
Miley Cyrus has for the last year or so been patronising a Melbourne fashion label called DI$COUNT UNIVER$E
whose designers, Nadia Napreychikov and Cami James,
have been for the last 6 years or so selling their
flamboyant streetwear and stagewear to big names and
ordinary Australians and others alike.
DI$COUNT UNIVER$E have adopted a number of
motifs in their designs including a Third Eye and Rolling
Stone style lips. There is a pop art sensibility and
irreverence to their work in the manner of older Australian labels such as Mambo, Wheels and Doll Baby, and
Romance was Born.
258
BCalla’s reported position is that he was inspired not
by DI$COUNT UNIVER$E but by Salvador Dali and
Kansai Yamamoto.1 The Sydney Morning Herald added
that he did not mention Jean-Charles de Castelbajac who
under his label JC/DC designed a dress for Katy Perry to
wear to the MTV music awards back in 2008 that
featured a bodice comprised of two large eyes which
look quite similar to those being debated now.
intellectual property law bulletin
November/December 2015
BCalla stated:2
Discount Universe is a major brand anyone with a slight
interest in fashion would know. I have only respect for
them. I am well aware of the challenges of being an
independent designer in this industry, but it would be a
disservice to my creative inspiration in this case to say
Discount Universe was a reference point.
As many others have pointed out, fashion is essentially about recycling old ideas and passing them off as
new. Sometimes this is done by reinterpreting previous
designs and sometimes it is done by just copying them.3
I have known rag traders who go on business trips with
an extra empty suitcase to fill with “inspirations” for
their new ranges that they intend to pick up offshore.
The current MVA fashion scandal is an opportune
lens through which to view the various ways in which
fashion designers can protect their creations, albeit this
case is complicated by the fact that the alleged infringement of the DI$COUNT UNIVER$E designers rights
occurred in the US, not here in Australia. This article
does not propose to examine the US law in any detail but
will focus on the relevant Australian law.
When it comes to intellectual property protection of
apparel, accessories and the like, the stage can be
divided into three distinct areas:
1. Copyright
Copyright protection is applicable to designs that
are printed or otherwise reproduced in two dimensions — like prints on fabric. The DI$COUNT
UNIVER$E t-shirt that started all this is an example
of a fabric print that would enjoy copyright
protection, as did the t-shirt design created by
Elwood that the Full Federal Court agreed on
appeal had been substantially copied by Cotton
On.4 There are many examples of two dimensional
fabric prints in the DI$COUNT UNIVER$E universe that would also qualify for this type of
protection, such as their prints incorporating large
scattered letters of their brand name, and those
consisting of images of large eyes combined with
mouths dripping with blood.5
As readers would appreciate, infringement is not
measured based on a percentage approach as is
often assumed but rather on whether the element
that is copied is a substantial part of the overall
work, a question that is answered by reference to
the quality of what has been copied, rather than the
quantity.
Difficulty may arise though, in relation to the
designs that are the subject of this article, as some
intellectual property law bulletin
November/December 2015
of them appear to be somewhat raised or three
dimensional, for example many are created using
sequins sewn onto the fabric. In essence, it is
certainly the law in Australia that if the article has
a raised or textured surface and this is not a feature
which has been applied to the fabric after the
underlying fabric has been manufactured,6 but is
rather a part of the original manufacturing process,
then the design for the article will be considered a
“corresponding design” and if “industrially applied”
will be unable to be protected using copyright as
discussed below.
In the US the current position is similar in that
while fabric designs are copyrightable, dress designs
are generally not, unless the design elements can
be separated from the overall function of the
article as clothing. This may well be the case in
relation to costumes such as the ones under
consideration, as opposed to other articles of
clothing.
2. Registered designs
In Australia, designers are encouraged to register
their designs7 for an article (that is not a two
dimensional design as discussed above) under the
Designs Act 2003 (Cth) for a 5–year term, with a
maximum of 10 years, if the design is going to be
“industrially applied”,8 as these designs will lose
their copyright protection under the design/
copyright overlap provisions of the Copyright
Act,9 except if the work can be considered a work
of “artistic craftsmanship” (essentially, having an
aesthetic quality and handmade with skill). The
equivalent registration under US law is known as
a Design Patent.
The expense involved in registration and the fickle
nature of fashion when compared to the relative
longevity of industrial designs has meant that this
type of protection is not often sought by fashion
houses. This is particularly the case with start-ups
who are generally not well capitalised.
3. Registered trade marks
This is the type of protection one first thinks about
when talking about a fashion house’s brand name
or logo itself. However, it also deserves serious
consideration when what is sought to be protected
is a prominent motif or element associated with
the brand, such as the motifs in the DI$COUNT
259
UNIVER$E range (or the red colour used on the
soles of Louboutin shoes,10 the cartoon dog image
of Mambo11 or the buckle on Louis Vuitton
satchels, which is registered as a shape trade
mark12).
A vital distinction in the application of trade mark
law (in Australia as opposed to the US) is the
requirement for the alleged infringer to have been
using the image “as a trade mark”.13 Louis Vuitton
Malletier was successful in overcoming this hurdle
in Australia in claiming infringement of its flower
logo trade mark by the defendant’s use of a
deceptively similar mark on the arms of its sunglasses. Use of the relevant motifs “as a trade
mark” is however, less clear when one considers
the use by BCalla in the current case.
This is particularly so when the designs may have
been a one off for that particular performance and
if translated to more mass market products would
no doubt be accompanied by clear labelling making it obvious from which fashion house they
originate. It should also be noted that had the
motifs been registered as trade marks, the relevant
infringement took place in the US so the trade
marks would need to have been registered there as
well as in Australia.
Under the US Lanham Act there is a two stage test
for trade mark infringement:
• first, whether the trade mark itself “merits
protection”; and,
• second, whether the alleged infringing mark is
likely to cause consumer confusion.
the number of misplaced congratulations the designers
apparently received in this case its seems there were
quite a number of people who were actually misled by
BCalla’s conduct as to the origin of the designs he
presented at the MVAs.
It is unlikely however that the designers who feel
they were wronged will seek civil remedies against him.
The costs of litigation in Australia let alone the US
would be prohibitive for such a small plaintiff as
DI$COUNT UNIVER$E. Maybe it was just a good way
to cause a stir and get some extra publicity for all
concerned, Cyrus and both sets of designers included.
Until recently the author of this article was completely unaware of DI$COUNT UNIVER$E and their
designs, and unless this scandal had broken out still
would be, and it is suspected many others would be too.
Catherine Logan
Principal
Legal Vision
[email protected]
www.legalvision.com.au
Footnotes
1.
Clarke J “Discount Universe ‘distraught’ after Miley Cyrus’
VMA costume rip off” The Sydney Morning Herald 1 September 2015, www.smh.com.au/lifestyle/fashion/discount-universedistraught-after-miley-cyrus-vma-costume-rip-off-20150901gjcwv0.html.
2.
Anderson S “Miley Cyrus accused of wearing copycat designs
at VMAs” The Guardian 1 September 2015, www.theguardian.com/
music/2015/sep/01/miley-cyrus-accused-copycat-designsvmas.
3.
So Bad So Good “A shocking look at how contemporary
fashion blatantly rips off the past” http://sobadsogood.com/
2015/06/22/a-shocking-look-at-how-contemporary-fashionblatantly-rips-off-the-past/.
4.
Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2008)
80 IPR 566; [2008] FCAFC 197; BC200811583, in which it is
noted the defendant’s employee designers admitted having had
While the second test would likely be passed, it is
not clear whether a trade mark case on these facts
would have passed the first hurdle. As the Louboutin
cases showed, the US courts are fairly ready to
accord the fashion industry a low or thin level of
protection where trade marks are concerned and
will fairly readily find that they do not merit the
same level of protection as their owners assume
they will.
Other fashion cases have been founded on misleading
and deceptive conduct14 and passing off, and judging by
260
“reference” to the plaintiff’s design, and see also the more
recent Seafolly cases, Seafolly Pty Ltd v Madden (2012) 279
ALR 337; (2012) 98 IPR 389; [2012] FCA 1346; BC201209325
and Seafolly Pty Ltd v Fewstone Pty Ltd (2014) 313 ALR 41;
(2014) 106 IPR 85; [2014] FCA 321; BC201402337, but
compare with Ladakh Pty Ltd v Quick Fashion Pty Ltd [2012]
FCA 389; BC201202324, where Ladakh was unsuccessful
(including on appeal) in prosecuting an alleged infringement of
a butterfly motif printed on fabric owing to lack of any direct
evidence of copying by the defendant.
5.
See www.discountuniverse.com.au/blog/.
intellectual property law bulletin
November/December 2015
6.
7.
8.
9.
10.
As in Polo/Lauren Company LP v Ziliani Holdings Pty Ltd
(2008) 173 FCR 266; (2008) 80 IPR 531; [2008] FCAFC
195; BC200811419, where the polo player logo embroidered
onto the fabric of the t-shirts, even though raised above the
fabric, was held on appeal not to have been merely applied to
and not “embodied” in the garments in the sense that the term
is used in ss 74–7 of the Copyright Act 1968 (Cth).
For an example of where the designers successfully prosecuted
an infringement of their registered design for a dress, see
Review Australia Pty Ltd v Innovative Lifestyle Investments Pty
Ltd (2008) 166 FCR 358; (2008) 246 ALR 119; [2008] FCA
74; BC200800601.
That is, applied to more than 50 articles or to one or more
articles manufactured in lengths or pieces (Copyright Act,
s 77).
Refer to Div 8 (Designs) ss 74–77A of the Copyright Act.
Australian Registered Trade Mark 1352410 and see also C
Logan “Louboutin sees rouge: can other traders colour the
soles of their shoes red?” (2011) 24(3) Australian Intellectual
intellectual property law bulletin
Property Law Bulletin, and C Logan and W Liu “Louboutin
v YSL - Single-colour trade marks in the fashion industry: are
there any lessons for us?” (2012) 25(5) Australian Intellectual
Property Law Bulletin.
11.
Registered Australian Trade Mark 1483074.
12.
Registered Australian Trade Marks 1025638 and 984027.
13.
Louis Vuitton Malletier v Sonya Valentine Pty Ltd (2013) 106
IPR 203; [2013] FCA 933; BC201312983, discussed in C
Logan “Fur flying in fashion cases: a roundup of last year’s
trade mark disputes involving fashion brands” (2014) 27(3)
Australian Intellectual Property Law Bulletin.
14.
November/December 2015
For example, while the court in the Louis Vuitton case did not
find that the trade marks “Louis Vuitton” and “Louis V” were
deceptively similar for the purpose of the plaintiff’s claim of
trade mark infringement, it did find that the use of the brand
name “Louis V” and the flower motif by the defendant
constituted misleading and deceptive conduct by the defendant
for the purposes of s 18 of the Australian Consumer Law.
261
Protecting GUI Designs in Australia: more
questions than answers
Stuart Irvine FREEHILLS PATENTS ATTORNEYS
Many countries allow graphical user interface (GUI)
features to be protected by registered designs.
The current position in Australia is not clear.
The position of the Australian Designs Office, which
is responsible for handling design applications, is that
GUI features should not be protectable by registered
designs.1 The legitimacy of this position — or at the
very least, the manner in which it is implemented by the
Designs Office — has been questioned.2
At this stage the issues are not resolved and there are
more questions than answers.
At a high level, though, a recent review of the
Australian Designs system by Australia’s Advisory Council on Intellectual Property (ACIP) suggests that at some
point — if not already — GUI features may be protectable by registered designs in Australia.
Summary
The current view of the Australian Designs Office is
that GUI or screen display designs should not be
protectable by registered designs. This view appears to
be primarily based on a recommendation put forward by
the Australian Law Reform Commission (ALRC) in its
1995 Report on the Australian designs system.3
At a policy level, the rationale for denying protection
of a graphic displayed on a display screen by software/
hardware but allowing protection for the same graphic
when “painted” on that display screen (or printed on an
alternative material) is unclear.
Despite the view of the Designs Office, the nature of
the Australian designs system is such that it is possible
to obtain a registered design for a “display screen” or
“electronic device” or the like which is represented as
displaying GUI features.
In order to enforce a design, however, it must be
examined and certified. Under its current approach, if a
GUI design is examined the Designs Office will typically find it invalid. This approach has not been consistently applied and has recently been criticised by ACIP.
More generally, ACIP has also recommended that the
treatment of GUI designs should be reconsidered suggesting that further change in this area can be expected.
262
What are graphical user interface designs?
The focus of this article is GUI designs. In this article
the term “GUI designs” is used to refer to graphics (such
as user interfaces and icons) that are displayed on a
screen due to the operation of software and/or hardware.
In its recent Review of the Designs System, ACIP
referred to such designs as “virtual or non-physical
designs”.4 In its 1995 Report the ALRC referred to these
as “screen display” designs.5
The policy
The 1995 ALRC Report
The current Designs Act was drafted following a
1995 Report by the ALRC.6 In that report the ALRC
recommended that screen display designs should not be
protectable: “Screen displays should not be able to be
protected as designs. It is not necessary to include any
special provision in the new designs legislation to
confirm this”.7
This recommendation was based on the views that a
“screen display” — eg, an icon, GUI or other GUI
element:
• cannot adequately distinguish a computer screen
as it is not always displayed on the screen;8
• is not a product itself but rather a use of a product
(eg, a computer monitor).9
When considered against the broader rationale behind
the designs system, however, the relevance of these
views (even if correct) is not entirely clear.
In its 1995 Report the ALRC summarised the “main
objective” of Australia’s designs law to be:10
… to encourage innovation in Australian industry to
Australia’s net economic benefit. Designs law can do this
by preventing competitors free riding on design innovations
and by providing investors in design with security for their
investment.
The ALRC went on to state the following (which was
also referenced in ACIP’s Final Report on the Review of
the Designs System):11
Design protection is intended to encourage innovation in
industrial design in two main ways: by preventing competitors free riding on design innovations and by providing
intellectual property law bulletin
November/December 2015
investors in design innovation with security for their
investment. Both are important elements in innovation
policy.
Why this broad rationale for design protection should
not apply to design of a graphic which is intended to be
displayed on a screen by software, hardware or firmware
is not clear.
This is particularly the case when design protection
could be secured if the same graphic was permanently
displayed on the screen (eg, by being painted on the
screen12) or printed on a label, a textile, a bumper
sticker, a sheet material, a flag, a banner, a colour chart,
or a card (all of which are examples of products in
respect of which designs have been certified).13
The 2015 ACIP Report
GUI designs were more recently considered by ACIP
in its review of the designs system.
In its Final Report, published in March 2015, ACIP
noted that the majority of submissions received supported some protection being provided for GUI designs.14
This led to ACIP recommending that the treatment of
GUI designs should be reconsidered15 — the context
indicating that this reconsideration should be with a
view to providing some form of protection for GUI
designs.
In addition, and as discussed further below, ACIP
criticised the current practice of the Designs Office with
respect to GUI designs. Specifically, ACIP viewed the
approach of considering a product in a “resting” state to
be outdated and to lack any legislative basis.16
GUI designs and the Australian Designs Office
In Australia design applications are initially subjected
to a formalities check and, if the formalities are satisfied,
the design is registered. Substantive examination of a
registered design is only performed if specifically requested.
If the registered design successfully passes examination
it is certified and becomes enforceable. If not it is
revoked.
The Designs Office view that GUIs should not be
afforded design protection has implications at both the
formalities check and substantive examination stages of
a design.
Formalities check
During the formalities check one question considered
by the Designs Office is whether or not an application is
for a design “in relation to a product”.
If a design application specifies the product to be a
“graphical user interface” (or “icon” or other similar
product) the Designs Office will object that this is not a
legitimate product as it is not a “thing that is manufactured or hand made”17 as required by the Designs
Act 2003 (the Act).
intellectual property law bulletin
A typical approach for forestalling such an objection
is to file GUI designs in respect of “display screens”,
“electronic devices” or like devices which are considered “products”.
Taking this approach, a design in respect of, for
example, a “display screen with a graphical user interface”18 can pass the formalities check and be registered.
Conversely, an application naming the product as a
“graphical user interface” (potentially having identical
representations of the design) would not pass formalities.
A search of the Designs Office Database19 for designs
with product names including “display” and “screen”
yields over 1000 results. Not all of these results are
necessarily for GUI designs but a cursory review indicates that a very large percentage is. This was noted by
ACIP in its Options Paper where ACIP observed that:
“there are large numbers of registered designs that relate
to graphical user interfaces and other non-physical
designs, although very few of these registrations are
certified”.20
The requirement for a design to be in respect of a
physical product is not, in an international sense, that
unusual. The US, for example, imposes a similar restriction that design patents (analogous to Australia’s registered designs) must be in respect of an “article of
manufacture”.21 This leads to US applications seeking to
protect GUIs also being filed for “display screens” (or
other articles of manufacture).
Substantive examination
A registered design is only subjected to substantive
examination if a request is made (by the design owner or
a third party) or the Designs Office itself initiates
examination.
Substantive examination involves the Designs Office
assessing whether the design is new and distinctive
when compared against the prior art base. This in turn
involves a consideration of the “visual features” of the
design, “visual features” being inclusively defined in the
Act to include “the shape, configuration, pattern and
ornamentation of the product”.22
When assessing a design the approach of the Designs
Office is that the product in question must be imagined
in an “at rest” state: “The visual features of the product
must be assessed in the context of the product ‘at rest’,
as opposed to ‘in use’”.23
It should be noted that there is no apparent statutory
basis for drawing a distinction between a product “at
rest” and a product “in use”. This was raised by ACIP in
its Final Report:24
November/December 2015
There is nothing in the legislation which requires that visual
features to be observable in the ‘resting’ state or when
263
unconnected to electricity. IP Australia should reconsider,
and abandon, this aspect of its practice in assessing the
validity of designs.
Nonetheless, when examining a design in respect of a
“display screen with graphical user interface” or similar
the Designs Office imagines the display screen in a
switched off state: “Visual features that are displayed on,
for example, the screen of a computer monitor through
the operation of software do not exist when the computer is switched off”.25
The consequence is that when examined, a GUI
design ends up with only the device itself being treated
as a “visual feature”. Other features included in the
representations — but which the Designs Office believes
would not be displayed in an unpowered state — are
simply ignored.
As the device in GUI design registrations is often
depicted by a simple broken outline rectangle, it is not
considered to be distinctive over prior art display screens
and the design is revoked.
Despite their “normal” approach, the Designs Office
can be convinced to consider the features depicted on a
display screen as “visual features”. This involves, however, asserting that the features depicted exist as permanent markings — eg, “paint on the surface of the
screen”26 — and would therefore exist when the screen/
device was powered off.
It should also be noted that the treatment of GUI
designs by the Designs Office does not (on the face of it)
appear to be consistent. Certified Australian designs in
respect of a “display screen with graphical user interface”27 do exist.
Infringement/enforceability of certified GUI designs
also raises questions, though this is beyond the scope of
this article.
Where to from here
ACIP’s Final Report suggests that GUI designs in
respect of “products” (things that are manufactured or
hand made) should already be able to be certified —
irrespective of whether the GUI features are permanently or transiently displayed.
Whether this will impact the current approach of the
Designs Office to GUI designs is not certain.
More generally, though, ACIP’s Final Report recommends that the treatment of GUI designs should be
reconsidered.28 This provides some cause for optimism
that even if the Designs Office does maintain its current
approach change is on the horizon.
Taken together these factors suggest that where a
commercially important GUI design is developed serious consideration should be given to filing for registered
design protection.
Stuart Irvine
Senior Associate
Freehills Patents Attorneys
[email protected]
www.freehillspatents.com
Footnotes
1.
IP Australia, Designs Examiners’ Manual of Practice and
Procedure, s D04.4.3.1, as at 9 July 2015.
2.
Advisory Council on Intellectual Property, Review of the
Designs System Final Report, March 2015 at 31.
3.
Australian Law Reform Commission (ALRC) Report 74,
Recommendation 20.
4.
Above, n 2, at 31.
5.
ALRC Report 74, at s 4.30.
6.
ALRC Report 74.
7.
ALRC Report 74, Recommendation 20.
8.
ALRC Report 74, at 4.31.
9.
ALRC Report 74, at 4.32.
10.
ALRC 74, Overview.
11.
ALRC 74, s 3.2. Cited in ACIP Review of the Designs System
— Final Report at 14.
12.
Above, n 1.
13.
These are all examples of products in respect of which designs
have been certified.
14.
15.
Above, n 2.
ACIP Review of the Design System, Final Report, Recommendation 14.
16.
Above, n 2, at 31.
17.
Designs Act 2003 (Cth), s 6.
18.
For example Australian registered design 352615.
19.
IP Australia, Search for a Design available at http://
p e r i c l e s . i p a u s t r a l i a . g o v. a u / a d d s 2 /
adds.adds_simple_search.paint_simple_search.
20.
Australian Council on Intellectual Property, Review of the
Design System, Options Paper, December 2014 at 49.
21.
Cornell University Law School, Legal Information Institute,
Patents for Design 35 US Code 171.
22.
Designs Act, s 7.
23.
Above, n 1.
24.
Above, n 2, at 31.
25.
Above, n 1.
26.
Above, n 1.
27.
See for example, Australian certified designs AU 351253, AU
350879, AU 350878.
28.
ACIP Review of the Design System, Final Report, above, n 2,
at 33.
264
intellectual property law bulletin
November/December 2015
Trade marks in business — you’ve gotta fight
(for your naming rights)
Katie Dillon KING & WOOD MALLESONS
Takeaway tips
When acting for a client who is considering using
their name as a branding or marketing tool, there are a
number of points worth considering:
• Who will be involved in the business? Are other
family members likely to want to be involved in
the same industry? If so, it may be preferable to
use branding not associated with the family name.
• Is it possible to register an acronym, or a shortening of your client’s full name? This could be a
good mid-way point to allow your client to personalise
their brand as well as to safeguard against any
potential disputes with family members.
• What is your client’s vision for the company, and
how long will your client be involved? If their
business strategy is short-term, using their name
may not be a wise investment.
• What happens if, for some reason, your client is no
longer associated with the company or brand that
is tied to their name? If your client does not own
the rights to their name, will they be able to afford
to purchase or to licence it back (if that is even an
option)?
• Is your client in an industry which relies on names
as identifiers, or which places a lot of goodwill in
them (for example, fashion)? If so, consider the
fact that if your client is not associated with the
owner of the trade mark rights to their name it may
be difficult to begin again.
• Consider the potential pitfalls at the outset — who
will own what? Remember that there are trade
marks, domain names, business names and internet
search keywords to consider.
• If your client intends to lease the rights to use their
name from a third party owner, ensure you draft
the relevant contracts so that they effectively deal
with ownership rights on termination. This may
cost your client more upfront but may prove
invaluable in the future.
We share our lives with our families — we learn,
communicate, socialise and build our identities through
intellectual property law bulletin
them. The significance of family can be seen in cultural
practices worldwide — names are passed from generation to generation as a means of identifying where we
come from and who we belong to.
Not only do we give our names to our families but
commonly our business, products or services too. From
Dick Smith to Dior, a name can be a valuable tool to
indicate product quality or simply a point of origin. As
with any other brand, trade mark applications are often
lodged to protect the value of these names. However this
can have interesting, and sometimes unexpected, outcomes for those involved. Where a name is used as a
trade mark it is of course sensible (and recommended) to
protect that mark. Entrepreneurs should consider at the
outset what they can do to protect that name against the
uncertainties that the future holds. A common example
of this is where a small family business becomes a
significant operation — trade mark issues can seem
insignificant while a company is in its infancy but can
very quickly become a major issue if not properly
considered at the outset.
This is not to say that family names should not be
used as trade marks — they are often a logical branding
choice, and can be a highly effective tool — however,
there are a number of considerations that should be
taken into account in order to preserve the value of that
name in business.
This article considers the value of making a name for
yourself and the basic principles of trade marking a
name, what we can learn from examples of trade mark
protections “gone wrong” and how the good faith
defence operates to keep the application of the law
practical.
The value of the name game
“What’s in a name? A rose by any other name would
smell as sweet”
— the musings of Juliet in Shakespeare’s
Romeo & Juliet
Names can be particularly powerful and valuable —
simply look at how lucrative celebrity endorsements are.
A celebrity endorsement can significantly spike product
sales, and merchandise tied to a celebrity can take
November/December 2015
265
something like a fragrance from a consumable to a
collector’s item. Just ask Britney Spears — in 2013, her
perfume line brought in an estimated US$30 million.1
Even the names of celebrities who have passed away are
valuable to their estates. Think of Marilyn Monroe, who
was worth US$370,000 alive and US$27 million (and
counting) after her death.2 Other jaw-dropping celebrity
endorsements include Beyonce’s US$50 million deal
with Pepsi, Usain Bolt’s annual US$19 million endorsement and sponsorship paycheck and Brad Pitt’s US$6.7
million deal to become the face of Chanel No 5.3
So, to answer Juliet’s question, “what’s in a name”:
potentially, quite a lot of money.
Each of these celebrities (and many more) likely use
trade marks to protect the value of their personal brands.
After all, Beyonce, Usain and Co will want to ensure
that their names or their likenesses are not used by just
anyone. This seems a sensible approach — until you
consider the possibility of becoming divorced from the
right to use your name.
Common names, uncommon value
Celebrity names are one thing but what about the
value in a common family name? Australian law acknowledges that celebrities should be able to utilise their
reputation to endorse and sponsor other products for a
fee — but for common folk the rules are slightly
different.
Common surnames are usually not considered capable
of distinguishing goods or services (even where an
uncommon spelling of a common surname is involved)
due to their popularity. Additionally, granting exclusive
rights to common surnames is considered problematic
because of the number of people who may be deprived
of their legitimate right to use those names in connection
with their goods and services.
That said, there are exceptions to the rule. Australian
consumers will be familiar with retail giants Myer and
David Jones, and with iconic Australian food products
like Smith’s potato crisps, Paul’s dairy products and
Allen’s confectionary — all of these are registered trade
marks, and all are very common surnames. So common,
in fact, that at the time of writing this article, there were
several hundred Myer’s, Smith’s and Allen’s listed in the
telephone directory. There are likely a number of factors
which will have weighed in favour of these marks being
registered (despite the fact that they are common names),
some of which we will discuss later in this article.
Generally, words used in trade marks should be
considered in their “ordinary signification”, and where
words are common to a particular trade or indicate a
common heritage, they will not be registered as trade
marks as they are not capable of distinguishing goods or
services.4 This will not apply to names as trade marks,
266
however, as the “ordinary signification” of a surname
will not be descriptive of goods and services. In the
recent case of Garrett Electronics Inc,5 it was held that
the surname GARRETT was capable of distinguishing
metal detectors because it was highly unlikely that a
person manufacturing metal detectors in Australia would
have the surname Garrett — that is, the name Garrett
was not common to, or descriptive of, that particular
trade — and so the “ordinary signification” of the name
Garrett in this context would be a specific supplier of
those goods.
Outside Australia, the European Court of Justice
(ECJ) has taken a different approach to trade marking
common surnames. The ECJ considers that common
surnames are to be examined exactly the same way as
any other trade mark would be, and that strict criteria,
such as establishing a distinctiveness threshold of a
predetermined number of people who may have the
same name, must not be applied to these marks.6
It seems safe to assume that in Australia (unless your
name is very common) you will probably be able to
register your surname as a trade mark in relation to
particular goods or services (except where the same or a
substantially similar mark has been registered in the
same class of goods or services).
First (names) first
Although it is more common for individuals to seek
to trade mark their surnames, it is not unheard of for
protection to be sought for first names. Generally, the
same rules that apply to surnames will apply to first
names — that is, the mark must be capable of distinguishing goods or services, and must not deprive others
of a legitimate use of their name.
A well-known illustration of trade marking first
names is Kylie Minogue, who has trade marked KYLIE
in relation to perfumery and cosmetics.7 Perhaps it is a
Kylie thing — Kardashian step-sibling Kylie Jenner has
also applied to the US Patents and Trade Marks Office to
trade mark KYLIE. The difference between the two is
that while Kylie Minogue’s application is fairly specific,
Kylie Jenner’s are very broad — they are in relation to
“entertainment in the nature of providing information by
means of a global computer network in the fields of
entertainment, fashion, and pop culture; entertainment
services, namely, personal appearances by a celebrity,
actress and model”8 and “advertising services, namely,
promoting the brands, goods and services of others;
endorsement services, namely, promoting the goods and
services of others”.9 The potential issue is that while
there are not many perfumes branded with KYLIE,
given the popularity of social media and the number of
people called KYLIE, it seems difficult to imagine how
Ms Jenner will be able to establish that the mark will
intellectual property law bulletin
November/December 2015
distinguish her entertainment and advertising services
from those of any other Kylie out there. Ms Jenner’s
application for “advertising services” will be published
for opposition on 25 August 2015 — undoubtedly there
will be a few people interested in the outcome.
Having briefly addressed the process and requirements for trade marking a name, we can now turn to
consider the downsides, if any, to using a name (first or
last) as a trade mark.
Bob Jane then went on to establish a number of new
companies, including “JANE TYRES” and “BOB JANE
GLOBAL TYRE CORPORATION”, all of which were
competitors to Bob Jane T-Mart. Bob Jane also used a
variety of marks which were very similar to Bob Jane
T-Mart’s to promote his new companies, including the
image below:
That is not your name
We take for granted the ability to use our own name
(and image). For individuals who start companies or
create brands using their personal or family name, the
ability to use that name carries even more significance.
Not only is your name part of your identity, it is also part
of your livelihood. However, trade mark protections can
be quite problematic when there is a fallout within a
business — particularly between family members, where
emotion tends to run high — and the right to use a
protected name comes into question. There are a number
of prominent examples of these cases where individuals
have actually lost the right to use their names (or have
had to licence them back at significant expense) in these
circumstances.
Take Bob Jane, for example. The former racing driver
established the Bob Jane T-Mart business in 1981, and
registered a number of trade marks to Bob Jane Corporation Pty Ltd, including BOB JANE and the below
image:
The mark BOB JANE and the above image were used
extensively over a significant period of time to promote
the Bob Jane T-Mart business.
Bob Jane was director and CEO of Bob Jane Corporation until a bitter (and very public) family dispute,
which saw him sell out of the business. Rodney Jane,
Bob’s son, took over as CEO of Bob Jane Corporation.
intellectual property law bulletin
Things got nasty when Bob Jane began approaching
Bob Jane T-Mart franchisees and suppliers about his
new businesses (apparently in an attempt to divert their
custom). When Bob Jane Corporation asked Bob Jane to
stop, Bob Jane’s response was “Rodney, I will contact
who I like, when I like, about what I like. You are a liar
and a thief. Sue me”.
Bob Jane Corporation did exactly that, and brought
proceedings against Bob Jane’s newly formed companies for trade mark infringement, misleading and deceptive conduct and passing off. The Federal Court of
Australia found for Bob Jane Corporation on all grounds.10
In particular, the court found that Bob Jane’s behaviour
was antagonistic and displayed a lack of regard for the
consequences of his conduct. Not only was he found to
have breached Bob Jane Corporation’s trade mark rights,
Bob Jane’s behaviour meant that he was unable to rely
on any “good faith” defence he might have sought under
the Trade Marks Act 1995 (Cth) (Trade Marks Act).
While Bob Jane’s behaviour was perhaps not ideal, it is
easy to appreciate the immense frustration Bob Jane
must have felt, having built a business in his name, in his
field of expertise, to then be in a position where he was
unable to use that name or the goodwill he had built in
it. Comfortingly (or perhaps not) Bob Jane is not alone
in this position.
Australian fashion designer Alannah Hill found herself in a similarly frustrating situation in 2013. The trade
mark rights to ALANNAH HILL and the stylised AH
November/December 2015
267
mark synonymous with the brand are owned by Factory
X. This arrangement seemed to suit all parties involved,
until Ms Hill’s “monumental decision” to leave the
business in 2013. Media reports indicate that Ms Hill did
not leave on the best of terms, with both Factory X and
Ms Hill publicly stating that they were disappointed
with how the events unfolded. Ms Hill is now in the
unfortunate situation of having a company she is not
affiliated with selling clothes under her personal name,
while she is unable to apply that same name (which has
built up a significant following) to any future clothing
lines she designs. The extent of this likely hit home for
Ms Hill when Factory X filed a trade mark application to
use ALANNAH HILL in connection with alcoholic
beverages. For another designer, this might have been
acceptable, however, Ms Hill is a non-drinker. It is
difficult to imagine the shock and frustration of seeing
your name used in a manner which so publicly and
directly conflicts with your personal values, however
these examples serve to illustrate the true value of
intellectual property rights — particularly where your
name is on the front door.
There are many more examples of individuals who
have found themselves on the wrong side of the (trade
mark) law — luxury shoemaker Jimmy Choo had to
licence back the rights to use the mark JIMMY CHOO
from Jimmy Choo Ltd (with whom he has no connection), and Peter Morrissey had to buy back the MORRISSEY trade marks after a number of trade mark
applications for PETER MORRISSEY were opposed on
the basis that they were likely to deceive or cause
confusion.11
In each of these cases, the individuals whose names
were the subject of trade mark applications did not own
the rights to use those marks. However, they were
fortunate enough to be able to purchase back the rights
to use their names. While this may be an option for high
net worth individuals, for those who are less financially
able, or where the owners of the naming rights refuse to
sell, a work-around may be more difficult (or even
impossible).
An interesting exercise is to compare the outcome in
the cases of Bob Jane and Alannah Hill to the example
of Elsa Peretti, jewellery designer at Tiffany & Co.
Peretti’s designs are amongst Tiffany’s best sellers,
accounting for 10% of Tiffany’s sales between 2009 and
2011. The difference here is that Peretti owns the trade
mark registrations for her brand, so when Tiffany and
Peretti were renegotiating the terms of her licensing
agreement Peretti had negotiating power. The parties
finally agreed to extend the licensing contract allowing
Tiffany’s to sell products under Peretti’s name for a
268
further 20 years at a cool US$47.2 million (plus royalty
fee and a percentage cut of net sales). Although US law
applied in this case, the outcome is clearly illustrative
for our purposes.
It seems clear that individuals who retain the rights to
use their names are much better-placed moving forward
where a parting of the ways or a dispute occurs — but
what if it is already too late? What if you find yourself
in a position where someone else owns your naming
rights? Can you use your name at all?
Good faith — on the fringe of infringement?
Section 120 of the Trade Marks Act provides that a
trade mark will be infringed if:
… [a] person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade
mark in relation to goods or services in respect of which the
trade mark is registered.
A trade mark will not be infringed where the mark is
used in good faith to indicate a characteristic of the
goods; for example, intended purpose, value or geographical origin.12 Good faith has been interpreted to
mean an honest use, in the absence of an ulterior
motive,13 such as to deceive consumers or to make use
of the goodwill of another.14
The rationale behind this exception is to preserve the
free use of the English language as the common property
of society. The courts have recognised that it is fundamental to trade mark law that registration should not
interfere with the right of another person to honestly
describe his or her product.15 After all, it would be
manifestly unfair to prevent people from using certain
words which are merely descriptors. This principle is
reflected in IP Australia’s Trade Marks Application
Guide in the reasoning around the general prohibition of
trade marking common surnames.
So how might this affect individuals who do not own
the intellectual property rights to their own names? Can
they use them at all? Or will any subsequent use be
considered passing off — an attempt to misrepresent the
source of a product or service?
Section 122(1)(a)(i) of the Trade Marks Act provides
that a person does not infringe a registered trade mark if
the person uses, in good faith, that person’s name or the
name of that person’s place of business. In other words,
when a person uses a sign (that is, their name) to
distinguish their goods and services from the goods and
services of others, and the sign is substantially or
deceptively similar to a registered trade mark, the use
will not be an infringement if the person is using the sign
in good faith.
The defence is, however, subject to a number of
qualifications; for example, the defence cannot be relied
on if the mark in question is only part of a company or
intellectual property law bulletin
November/December 2015
a person’s name. This played out in a case where the
registered trade mark was SWEETHEART, and a company called Sweetheart Plastics Inc was unable to use
that mark in reliance on s 122(1)(a)(i) as it was not
characterised as a use of the company’s name (which
would have to have been Sweetheart Plastics or Sweetheart Plastics Inc).16 It goes without saying that the
“good faith” defence is called that for a reason — if the
mark is being wrongly used to divert business, even
where the mark is the company or the individual’s name,
the defence will not be available.17
It is also worth noting that using your name as a trade
mark may also constitute misleading and deceptive
conduct where the name is protected and that use results
in consumer confusion about the origin of a product or
service.18
A slightly different take on the same issue is where a
person wants to use their name in business but the name
is already in use by someone else. In these cases, timing
of use and registration (as well as the category of goods
or services concerned) and use in good faith will be key.
were ultimately able to settle on COLETTE BY COLETTE
HAYMAN and COLETTE BY COLLETTE DINNIGAN to distinguish between the two, which was also
acceptable to the Trade Marks Office.
The importance of timing of use and registration, and
the ability to prove that use, is also evident in the case of
Time Warner Entertainment Company, LP v Stepsam
Investments Pty Ltd.19 In that case, a small clothing
retailer was allowed to register HARRY POTTER in
relation to clothing, despite the existence of JK Rowling’s
character of the same name, because (among other
reasons) the retailer was using the mark, and had built a
reputation based on it, before the book series became
widely known. Additionally, the clothing retailer was not
using any images associated with the book series, which
the court found served to minimise the likelihood of any
confusion.
Although these cases illustrate the possibility of
positive outcomes where a name is in concurrent use,
prevention (that is, conducting proper market research
before launching your business or product to ensure
your name is not already in use) is absolutely the best
cure here.
While there are examples of practical and legal
“work-arounds” to address scenarios where individuals
lose the right to use their names in business, generally it
seems a difficult and expensive exercise. However, if
addressed at the outset of establishing a business or
brand, many of these “name game” issues can be
avoided.
Katie Dillon
Solicitor
King & Wood Mallesons
[email protected]
www.kwm.com
Footnotes
1.
This was the case for accessories designer Colette
Hayman, who ended up in dispute with fashion designer
Collette Dinnigan, over the use of the mark COLETTE/
COLLETTE. Ms Dinnigan’s brand launched in 1990
while Ms Hayman began opening stores in 2010. Each
designer clearly wanted to be able to use their own name
in relation to their own products but Ms Dinnigan was
concerned that consumers would confuse Ms Hayman’s
accessories as being part of her clothing label, and
Ms Hayman felt that Ms Dinnigan was attempting to
monoplise the market by taking out trade mark protections that were subsequently not used. The designers
intellectual property law bulletin
Kafkaesque, Celebrities, Best-Selling Fragrances, Sales Figures & The Perfume Industry, 17 November 2013,
www.kafkaesqueblog.com/2013/11/17/celebrities-best-sellingfragrances-sales-figures-the-perfume-industry/ and Eriq Gardner,
‘The 10 Best-Selling Celebrity Perfumes’, Hollywood Reporter
13 March 2013 www.hollywoodreporter.com/news
2.
/jennifer-lopez-britney-spears-best-427374.
J Glor Marilyn Monroe still lucrative 50 years after her death
3 August 2012, CBS News, www.cbsnews.com/news/marilynmonroe-still-lucrative-50-years-after-her-death/.
3.
November/December 2015
News.com.au, Most outrageous celebrity endorsement deals
11 December 2012, www.news.com.au/entertainment/celebritylife/beyonce-signs-50m-pepsi-deal-to-become-global-brandambassador/story-e6frfmqi-1226534213626.
269
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
270
Cantarella Bros Pty Ltd v Modena Trading Pty Ltd (2014) 315
ALR 4; (2014) 109 IPR 154; [2014] HCA 48; BC201410159.
Re Garret Electronics Inc (2015) 114 IPR 155; [2015] ATMO
48; BC201506210.
Nichols plc v Registrar of Trade Marks [2005] All ER (EC) 1;
[2005] 1 WLR 1418; [2005] RPC 243.
IP Australia, Australian Trade Mark On-line Search System,
KYLIE 868867, http://pericles.ipaustralia.gov.au/atmoss/
Falcon_Details.Print_TM_Details?p_tm_number=868867=D=DETAILED=
3=FALSE=F.
United States Patent and Trademark Office, KYLIE 86584756,
1 April 2015 Kylie Jenner, www.uspto.gov/trademark.
United States Patent and Trademark Office, KYLIE 86584742,
25 August 2015 Kylie Jenner, www.uspto.gov/trademark.
Bob Jane Corp Pty Ltd v ACN 149 801 141 Pty Ltd (2013) 97
ACSR 127; [2013] FCA 1255; BC201315063.
M Webster Holdings Pty Ltd v Peter Morrissey Pty Ltd (2011)
91 IPR 624; [2011] ATMO 23.
Section 122(1)(b) of the Trade Marks Act 1995 (Cth).
Cantarella Bros Pty Ltd v Kona Coffee Roastery & Equipment
Supplies Pty Ltd (1993) 28 IPR 176; BC9305216; Johnson &
Johnson (Aust) Pty Ltd v Sterling Pharmaceuticals Pty Ltd
(1991) 30 FCR 326; (1991) 101 ALR 700; (1991) 21 IPR
1; BC9103278 at 353; Angoves Pty Ltd v Johnson (1982) 43
ALR 349; 66 FLR 216; (1982) AIPC 90-007.
14.
Baume & Co Ltd v AH Moore Ltd [1958] Ch 137; [1957] 3 All
416; [1957] 3 WLR 870; [1957] RPC 459 at 463.
15.
Woodward Ltd v Boulton Macro Ltd (1915) 32 RPC 173.
16.
Smith & Nephew Plastics (Australia) Pty Ltd v Sweetheart
Holding Corporation (1987) 8 IPR 285; BC8700579.
17.
See Anheuser-Busch Inc v Budejovicky Budvar (2002) 56 IPR
182; [2002] FCA 390; BC200201323; Baume & Co Ltd v AH
Moore Ltd [1958] Ch 907; [1958] 2 All ER 113; [1958] 2
WLR 797; [1958] RPC 226 at 921 and Australian Postal
Corporation v Digital Post Australia Pty Ltd (2013) 308 ALR
1; (2013) 105 IPR 1; [2013] FCAFC 153; BC201315501 at
[74].
18.
Bob Jane Corp Pty Ltd v Bob Jane Global Tyres Corp
(Australia) Pty Ltd [2011] FCA 739; BC201104668 at [23].
19.
Time Warner Entertainment Company, LP v Stepsam Investments Pty Ltd (2003) 59 IPR 343; [2003] FCA 1502; BC200307818.
intellectual property law bulletin
November/December 2015
Tax implications of IP transactions: a brief
overview
Samin Raihan GRIFFITH HACK LAWYERS
Key practice points
• familiarise readers with the key tax issues that can
arise in connection with transactions involving the
development, assignment and licensing of IP; and
Transactions concerning intellectual property (IP)
rights often involve a complex overlap between tax and
IP law. Specific steps which IP lawyers may need to take
to adequately address the tax implications of IP transactions and ensure the advice presented to clients is
commercially holistic, may include:
• being conscious of the commonly encountered tax
implications of various IP transactions and the
potential need to collaborate with other specialists
including tax, research and development (R&D)
and valuation specialists;
• informing clients of the potential to offset the cost
of their IP development through the general deductions, deprecation, or capital gains tax (CGT) cost
base provisions of the tax legislation. Such costs
can include overheads, purchases, salaries, annual
fees and potentially even the cost of litigation;
• recognising when the R&D tax incentive or other
government grants may be of relevance to clients
as a valuable source of funds including for further
research, development and commercialisation;
• ensuring assignment or licence agreements clearly
specify which party is liable for any applicable
goods and services tax (GST), stamp duty or other
taxes, and checking clients have obtained advice
on the more complex tax implications of entering
into such transactions; and
• recognising that transfer pricing rules and valuation of IP is likely to present as issues requiring
specialist tax advice when there is a cross-border
licence or assignment between associated entities.
Introduction
When IP and tax law collide it pays to be aware of the
important issues. This is particularly true in the current
economic environment in which clients are increasingly
expecting their legal advisers to be acutely aware of
broader commercial issues, particularly those issues
which, like tax, can directly impact profitability.
This article aims to:
intellectual property law bulletin
• provide guidance on how these tax issues can be
adequately addressed in the course of providing IP
law advice.
Fundamental tax classifications for IP
Before exploring the tax implications of IP transactions, it is necessary to explore two fundamental distinctions under tax law which are relevant to these transactions.
The two main pieces of tax legislation are the Income
Tax Assessment Act 1997 (Cth) (ITAA 97) and the
Income Tax Assessment Act 1936 (Cth) (ITAA 36). No
IP legislation directly applies.
Type of IP right: depreciating assets versus CGT
assets
Under tax law, the various forms of IP rights which
exist can broadly be classified as either depreciating
assets or CGT assets. This distinction is important as the
tax treatment for each asset is different, as explored
below.
Depreciating assets are defined as assets that have a
limited effective life and are reasonably expected to
decline in value.1 The ITAA 97 deems items of intellectual property to constitute depreciating assets. However,
the tax definition of intellectual property is limited to the
rights held by the owner and any licensee of a patent,
design or copyright.2 Other intangible assets such as
in-house software and spectrum licenses are also classified as depreciating assets.3
A CGT asset is any kind of property or a legal or
equitable right that is not property4. Broadly stated,
assets which exist until disposed of and are expected to
grow in value are classified as CGT assets. Forms of IP
which constitute CGT assets include registered and
unregistered trade marks, goodwill, plant breeder’s rights,
circuit layout rights, business names and domain names.
Information by itself, such as trade secrets, knowhow and confidential information, is neither property nor
a right and therefore does not constitute a CGT or
November/December 2015
271
depreciating asset.5 However, a licence to use such
information or a right to compel such information to be
disclosed constitutes a CGT asset.6
Nature of amounts received or paid — capital
vs revenue
Tax law classifies amounts paid or received by an
entity in the course of earning its income as having been
received/paid either on revenue or capital account. This
classification determines when and how that amount is
taxed as income earned (for amounts received) or offset
as a deduction against any income earned (for amounts
paid).
Amounts received on revenue account are usually
taxable in the same financial year, whereas the taxation
of amounts received on capital account is deferred.
Similarly, amounts paid on revenue account can generally be deducted immediately against any income earned,
whereas amounts paid on capital account can only be
deducted gradually over a certain period (for depreciating assets) or on the occurrence of a subsequent event
(for CGT assets), as discussed later.
This distinction ensures that the tax treatment of an
amount reflects its commercial nature. For example, it
ensures that an increase in the value of a capital asset is
not unfairly taxed prior to the gain being derived upon
sale, or that an advantage is not granted by allowing a
full upfront deduction for capital expenditure that would
normally produce a benefit over an extended period
(such as the purchase of factory equipment).
The correct classification will depend on the particular facts and there is no single definitive test that can be
applied. However, it is generally accepted that where the
relevant expenditure is directed at establishing, replacing and enlarging the profit yielding structure of a
business, it is likely to be of capital nature. This is to be
contrasted with working or operating expenses incurred
to operate that business or profit yielding structure,
which are of a revenue nature.7 This is often expressed
as the “tree/fruits” analogy in which capital amounts are
compared to a tree and revenue amounts to the fruits of
that tree.
In practical terms, if an amount paid or received is
one-off or non-periodic and is in respect of an enduring
benefit, it is likely to be capital in nature.8 For example,
the purchase of an office space is likely to be capital
expenditure, whereas the payment of rent for an office is
likely to be revenue in nature.
The capital versus revenue and depreciating versus
CGT asset distinctions are central to navigating through
the tax implications of the development, assignment and
licensing of IP.
272
Development of IP
Clients that have developed IP will almost certainly
be eager to find ways to recover their development costs.
This represents a unique opportunity for IP lawyers to
add value to their clients’ business by not only helping to
protect their IP but also directing them to several tax
mechanisms which allow recovery of part of the development costs.
These tax mechanisms include:
•
•
•
•
general deductions;9
depreciation;10
CGT cost base;11 and
R&D tax incentive provisions.12
General deductions
The simplest tax mechanism for recovering the cost
of developing IP is through the general deduction
provision, s 8.1 of the ITAA 97. This is available only
where the expenditure was incurred on revenue account
for the purposes of generating assessable income or in
carrying on a business for the purpose of generating
assessable income.13 The provisions allow the expenditure to be immediately offset against any income earned
just like an ordinary tax deduction.
Expenditure on the development or creation of IP will
be classified as capital in the majority of cases. However, examples of development related expenditure that
could fall within the general deduction provisions include
recurring expenses for short term benefits such as annual
renewal fees for IP rights, search fees or licence fees for
short term licences.
Legal expenses incurred in connection with litigation
involving IP can also potentially be deducted, depending
on the purpose of the litigation and regardless of
whether a successful outcome is achieved. Examples of
IP related litigation costs which have been allowed by
the courts under the general deductions provisions
include the costs of defending trade mark infringement
proceedings;14 conducting patent infringement proceedings;15 protecting trade secrets;16 and opposing the
extension of a patent.17
However, such expenses can equally be capital in
nature if in the circumstances they relate to the profit
yielding structure of the business. As stated above, the
revenue versus capital distinction is complex and the tax
treatment of any item of expenditure will be entirely
dependent on the particular facts.
Although no immediate deduction is available where
the relevant expenditure is incurred on capital account,18
it may be offset against income either over the life of the
asset (for depreciating assets) or on the disposal of the
asset (for CGT assets), as outlined below.
intellectual property law bulletin
November/December 2015
Depreciation
Where capital expenditure has been incurred to develop
a depreciating asset (such as copyright, patents or
designs), the holder of that asset can deduct (or “depreciate”) the cost of that asset (including its development
or acquisition costs) gradually over the “effective life” of
that asset to the extent that asset was used to generate
assessable income.19
The “effective life” differs for each type of asset.
Presently it is 20 years for a standard patent; 8 years for
an innovation patent; 15 years for a registered design;
and the lesser of 25 years or the period until expiry for
copyright other than a film.20 In most cases, the cost is
to be deducted proportionately over the effective life of
the asset (called the prime cost method).21
There are two elements that can form part of the cost
of a depreciating asset that can be depreciated in
accordance with this process. The first element of the
cost is the amount paid or taken to have been paid to
acquire or develop the asset. For instance in relation to
a patent, this would include the cost of acquiring the
patent, or alternatively, the cost of salaries, wages22 and
materials incurred to develop the patented technology.
The second element of the cost comprises amounts paid
to bring the asset to its present condition and location.
Such costs would cover a number of post-development
expenses, such as for capital improvements, modifications, transport, and certain maintenance costs.
CGT assets
Where capital expenditure has been incurred to develop
IP which constitutes a CGT asset (such as a trade mark,
goodwill, plant breeder’s right, business or domain
name), the cost of development only becomes recoverable when a CGT event occurs in respect of that asset.
The most common CGT event in respect of IP classified
as a CGT asset is CGT event A1,23 which occurs when
there is a disposal of the asset (such as through sale or
assignment). Prior to such a CGT event occurring, any
costs of development of that asset are recorded as part of
the CGT asset “cost base”, rather than immediately
offset against income earned.
Only certain items of expenditure can be included in
the cost base of a CGT asset, and these are broadly
divided into the following five categories:24
• money paid or received to acquire the asset (or the
market value of the asset when certain exceptions
apply, including when the asset was developed by
the taxpayer);
• incidental costs of acquiring the asset (such as the
marketing costs, search fees and the cost of
lawyers, patent attorneys or accountants to name a
few);
intellectual property law bulletin
• costs of owning the asset (such as interest and
insurance premiums);
• capital expenditure incurred to increase or preserve the asset’s value; and
• expenditure incurred to defend or preserve the
asset.
Once a CGT event such as disposal occurs, it
becomes necessary to determine whether a capital gain
or a loss has been made. A capital gain is made where
the proceeds received from the disposal are greater than
the cost base. Conversely a capital loss is made where
the proceeds are less than cost base.
Where a capital gain is made on the disposal of a
CGT asset that was held for 12 months or more by an
individual (including partners in partnerships) or a trust,
they will be entitled to a 50% discount on the capital
gain.25 In addition, there are a number of concessions
and exemptions, including certain concessions for small
business.
R&D tax incentive
Perhaps the most exciting tax issue relevant to a
client that has developed IP is the R&D tax incentive.
The R&D tax incentive is a government funding program which aims to increase investment in research and
development activities in Australia and deliver wider
economic benefits.
Claimants eligible for the R&D tax incentive receive
what ultimately amounts to a net benefit of either 15% or
10% of the eligible expenditure (depending on the
claimant’s turnover) as a tax offset. This can be applied
to reduce their tax payable, and for some clients, may
even lead to the rare occurrence of receiving a cheque in
the mail from the Australian Taxation Office (ATO).
Entities eligible to apply include Australian companies and certain foreign companies but not partnerships
or individuals. The eligibility criteria for the R&D tax
incentive aims to capture activities which, broadly
stated, involve the development of new knowledge and
the resolution of technical uncertainties through an
experimental process. This captures a wide range of
activities, and is certainly broader than what the typical
lay observer would consider to be R&D, namely the
“white lab-coat” type of R&D.
Accordingly, the R&D tax incentive should certainly
be suggested to clients that have developed new or
improved technology including those seeking to register
a patent or design, regardless of whether such clients
consider themselves as typically conducting R&D. Given
the broad nature of the legislative requirements such
clients may not necessarily need not to be successful in
obtaining a patent, design or other IP right to be eligible
for the R&D tax incentive.
November/December 2015
273
Eligible claimants have 10 months from the end of
their income year to register eligible R&D activities
conducted in that income year. This provides IP lawyers
a substantial window of opportunity to notify their
clients of the potential to secure significant tax savings
through the R&D tax incentive.
Assignment of IP
The tax implications of the assignment of IP can be
complex. Fortunately however, the tax implications that
are likely to be most relevant to IP lawyers in connection
with the preparation of an assignment agreement will
generally be limited to GST and stamp duty. These
issues are most likely to be impacted directly by the
wording of the relevant agreement. Of course, these
issues are of less significance where these amounts
payable under the relevant agreement are merely nominal. A number of more complex tax issues which can
arise from assignments are also explored briefly below.
Goods and services tax
GST is a tax imposed on businesses which make
taxable supplies to their customers. The rate of GST is
10% and the amount is usually passed on to the recipient
of the supply through a corresponding increase in the
purchase price. The supplier must remit this amount to
the ATO (calculated as 1/11 of the purchase price if
using GST-inclusive amount or 10% if using the GST
exclusive amount). This liability can normally be offset
by the supplier using credits (input tax credits) it will
have received for GST paid on goods and services it has
purchased.
Unless certain exceptions apply, GST is payable
where there is a supply:26
•
•
•
•
•
of goods or services;
connected with Australia;
made for consideration;
in the course of an enterprise; and
where the supplier is registered or required to be
registered for GST.
Most assignments and licences of IP with the necessary connection to Australia (such as assignments between
Australian entities or for use of the IP in Australia) will
be subject to GST.
Most commonly the assignor/supplier will pass on
the burden of GST by including it in the consideration
payable by the assignee/purchaser; however, this can be
varied by the assignment agreement. To ensure there are
no surprises at the time of payment or at tax time
(particularly where large sums are involved), it is critical
that the assignment agreements clearly address GST,
including by stipulating whether amounts payable are
GST-inclusive.
274
Stamp duty
As a state tax, the rules for stamp duty vary between
the different states and territories.27 When IP is assigned,
the relevant jurisdiction will usually be determined
according to where the IP will be exploited or where the
agreement is executed. The value of the IP may need to
be apportioned across two or more jurisdictions using
methods prescribed in the legislation, such as by reference to the extent the IP is exploited in a particular
location as determined by volume of sales.
Generally, stamp duty is not imposed on any dealings
in IP in Victoria, Tasmania and the ACT. In NSW,
Queensland and WA, stamp duty is generally only
imposed on dealings in IP where the transaction also
involves other property (such as the sale of a business).
Stamp duty is imposed on all dealings in IP in SA and
the NT. It is important to note that several states and
territories are due to abolish stamp duty, although in
most cases the abolition dates have been deferred.
Where duty is payable, a rate of up to 5.75%
(depending on the relevant jurisdiction) of the greater of
the consideration paid or the unencumbered value of the
IP will apply. The amount is payable by the assignee.
However, as with GST this can be varied by agreement
hence, the key concern is to ensure the assignment
agreement clearly states whether amounts payable are
inclusive of applicable duties and/or which party is to
bear the cost.
Other tax implications
There are other more complex tax implications of
assignments. For the assignor, such implications can
include:
• tax being payable on the consideration received, if
received on revenue account. For instance, if the
fee for an assignment of a trade mark is received
on revenue account, it would result in an increase
in the assignor’s assessable income for that financial year;
• an increase or reduction in assessable income
where a depreciating asset (such as a patent,
design or copyright) is assigned, to correct any
under or over depreciation of the asset (this is
referred to as a balancing adjustment). For instance
the sale of a patent for $4,000 after the patent had
been depreciated to a tax written down value of
$5,000 would give rise to a deduction of $1,000 to
reflect the actual decline in value of the patent; and
• a capital gain or loss where a CGT asset (such as
a trade mark, goodwill, plant breeder’s right,
business or domain name) is assigned (as discussed above).
intellectual property law bulletin
November/December 2015
For the assignee such implications can include, as
discussed above:
• entitlement to claim the consideration paid as a
deduction under the general deduction provisions
if paid on revenue account;
• entitlement to depreciate the consideration paid
where a depreciating asset is assigned; and
• entitlement to record the consideration paid as part
of the CGT cost base where a CGT asset is
assigned.
Ideally, clients should be made aware of the need to
obtain specialist tax advice in respect of these more
complex tax issues if they have not done so prior to
entering into the transaction.
Transfer pricing
Another issue that will require specialist tax advice,
and one that has recently been the subject of vigorous
public debate and the focus of increasing attention from
revenue authorities, is transfer pricing.
Transfer pricing is the price paid and/or received for
the supply of goods or services (including intellectual
property rights) between related entities operating in
different tax jurisdictions. Transfer pricing can be used
by multinational companies to shift profits from high to
low tax jurisdictions. For instance, an Australian entity
could increase its allowable deductions in Australia by
acquiring a licence of intellectual property from its
overseas associate for a royalty rate that is much higher
than the rate that would be applicable for a third party.
Conversely, the Australian entity could reduce its Australian income by licensing its intellectual property or
selling products to its associated entity at a lower price
than the price that would be applicable for a third party.
The transfer pricing rules of the ITAA 3628 seek to
prevent such profit shifting. The rules require cross
border transfers (or licences) of IP between associated
entities to be on arm’s length commercial terms, to
ensure profits are taxed in the correct tax jurisdiction. A
number of adverse tax consequences can be imposed by
the ATO where these rules have been breached, including the imposition of a higher tax bill through a
reduction in deductions or an increase in assessable
income.
Accordingly, clients entering into such transactions
should be made aware of the need to obtain specialist
advice on the transfer pricing rules, including IP valuation advice to determine appropriate arms-length pricing.
Licensing of IP
The licensing of IP is treated under tax law as the
disposal of the part of the IP asset which corresponds to
the rights being licensed, and the simultaneous acquisi-
intellectual property law bulletin
tion of a new asset by the licensor corresponding to the
rights which remain. Licensing of IP therefore raises
issues similar to those which arise in assignments.
Accordingly, the main tax issues to bear in mind
when drafting the licence agreement are GST and stamp
duty, as explored above. The more complex tax implications for licensors and licensees are largely the same
as that for assignors and assignees, and these are likely
to require specialist tax advice.
Another issue to take note of is that amounts ultimately received by the licensor under the licence agreement can be subject to several tax mechanisms which
should be borne in mind when deciding amounts payable. For instance, consideration received under the
licence agreement is likely to be categorised as a royalty
payment under common law principles or specific statutory provisions in the hands of the licensor, upon which
tax is calculated.29
In addition, a licensee may be liable for royalty
withholding tax where royalty payments are payable to
a non-resident licensor. This requires the licensee to
withhold a portion (usually 30%) of the payment for
remittance to the ATO before paying the licensor.30
Conclusion
Evidently there is a considerable and often complex
overlap between tax and IP law in the context of the
development, assignment and licensing of IP. While this
presents inherent challenges for IP lawyers, it also
presents a unique opportunity for them to provide clients
with a service offering that is highly valuable and
commercially holistic.
This requires a basic familiarity with the common tax
implications of IP transactions, along with a willingness
to collaborate with other specialists including tax, R&D
and valuation specialists to ensure clients fully capture
tax benefits and avoid the tax pitfalls on the path to
developing, protecting and exploiting their IP.
Samin Raihan
Lawyer
Griffıth Hack Lawyers
samin.raihan@griffıthhack.com.au
www.griffıthhack.com.au
Footnotes
1.
2.
3.
4.
5.
November/December 2015
Income Tax Assessment Act 1997 (Cth) (ITAA 97) s 40–30(1).
ITAA 97, s 40–30(2)(c) and s 995.1.
ITAA 97, ss 40–30(2)(d) and 40–30(2)(e).
ITAA 97, s 108–5.
Australian Taxation Office, Taxation Determination,TD 2000/
33.
275
6.
Above, n 5.
7.
Associated Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; BC900038.
8.
British Insulated & Helsby Cables Ltd v Atherton [1926] AC
19.
20.
21.
22.
205; (1925) 4 ATC 47; [1925] All ER Rep 623; (1925) 95
LJKB 336; Vallambrosa Rubber Co Ltd v Farmer (Surveyor of
Taxes) (1910) SC 519.
9.
ITAA 97, s 8–1.
10.
ITAA 97, subdiv 40–B.
11.
ITAA 97, Div–100.
12.
ITAA 97, Div–355.
13.
ITAA 97, s 8–1(1).
14.
Pech v Federal Commissioner of Taxation 2001 ATC 2210;
23.
24.
25.
26.
27.
(2001) 47 ATR 1215; [2001] AATA 573.
15.
(1963) 13 TBRD Case N78.
16.
Consolidated Fertilizers Ltd v Federal Commissioner of Taxation (2001) ATC 4677.
17.
Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946)
72 CLR 634; [1946] ALR 434; (1946) 20 ALJR 277; BC4600017.
18.
276
ITAA 97, s 8.1(2).
28.
29.
30.
ITAA 97, Div 40.
ITAA 97, s 40.95(7).
ITAA 97, s 40.70(2).
Australian Taxation Office, Interpretative Decision, ATO ID
2011/42.
ITAA 97, s 104–10.
ITAA 97, s 110–25.
ITAA 97, subdiv 115–A.
A New Tax System (Goods and Services Tax) Act 1999 (Cth),
s 9.5. Currently a supplier is required to be registered if their
annual turnover is, or is projected to be, over $75,000 A New
Tax System (Goods and Services Tax) Regulations 1999
reg 23.15.01.
Duties Act 1997 (NSW); Duties Act 2000 (VIC); Duties
Act 2001 (QLD); Duties Act 2008 (WA); Stamp Duties
Act 1923 (SA); Duties Act 2001 (TAS); Duties Act 1999
(ACT); and Stamp Duties Act 1978 (NT).
Income Tax Assessment Act 1936 (Cth) (ITAA 36) Pt III
Div 13.
ITAA 36, s 6(2) and ITAA 97, ss 995–1 and 15–20.
ITAA 36, Div 11A.
intellectual property law bulletin
November/December 2015
Breach of confidence in commercial settings:
Australian Medic-Care Co Ltd v Hamilton
Pharmaceutical Pty Ltd
Dr Jenny Ng CHARLES DARWIN UNIVERSITY
Key takeaway points
The case of Australian Medic-Care Co Ltd v Hamilton
Pharmaceutical Pty Ltd1 (Australian Medic-Care) involved
a contractual relationship that was terminated due to a
breach of mutual trust and confidence, where the trust
and confidence is extremely important to the contractual
relationship. The case highlighted the following:
confidence to Hamilton and another relating to a breach
of cl 28 of the distribution agreement. Clause 28 of the
distribution agreement provides:4
28. Confidential Information
During and after the Term, Distributor may not use
or disclose confidential information (including the
contents of this agreement) about:
28.1 Supplier;
28.2 the business of the Supplier;
28.3 the Products;
• the equitable duty of confidence can co-exist with
the contractual duty of confidence when the contractual duty is “parasitic upon the equitable duty
of confidence”;2 and
• the two tests to apply in commercial settings when
ascertaining whether there is an equitable duty of
confidence are the “reasonable person” test and
the “purpose” test.3
The Australian Medic-Care case:
background facts
In February1996, Hamilton sent Dr Keung three
documents which included a production formula which
listed the ingredients and their proportions, the manufacturing method and a product specification for the
production of Urederm. The documents were sent to
Dr Keung to enable Australian Medic-Care Co Ltd
(AMC) to procure the registration of Urederm products
in Vietnam under a distribution agreement. This agreement was terminated on 15 September 2006. Thereafter,
Dr Keung discussed the possibility of producing “the
same product” with Roger Shahani of Sphere Healthcare
Pty Ltd. On 27 October, Dr Keung sent Mr Shahani the
production formula and the manufacturing method document which he had received from Hamilton so that
Mr Shahani could try to “produce the same product”.
Mr Shahani used the production formula to produce the
urea cream that is similar to the Urederm cream.
Hamilton made claims against AMC and Dr Keung
personally for the disclosures and use of the documents
which were sent to Dr Keung. Two claims were made
against AMC, one for the breach of its equitable duty of
intellectual property law bulletin
except as required by law or this agreement.
Claims were made against Dr Keung for breach of
confidence in his own right and for directing and
procuring AMC’s breach of confidence. Hamilton sought
an account of profits against AMC and Dr Keung for the
profits earned by selling products containing Sphere’s
urea cream, and an order for the delivery up and/or
destruction of the originals and copies of the production
formula and manufacturing method.
Overview of the applicable principles
The principles in relation to the confidentiality of
preparatory works which were used to produce a product
that is in the public domain were explained in the
judgment of Lord Greene MR in Saltman Engineering
Co Ltd v Campbell Engineering Co Ltd,5 where he
stated:6
November/December 2015
The information, to be confidential, must, I apprehend,
apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is
public property and public knowledge. On the other hand,
it is perfectly possible to have a confidential document, be
it a formula, a plan, a sketch, or something of that kind,
which is the result of work done by the maker on materials
which may be available for the use of anybody; but what
makes it confidential is the fact that the maker of the
document has used his brain and thus produced a result
which can only be produced by somebody who goes
through the same process.
277
However, a product that has been made purely from
materials in the public domain may also be confidential
in nature. Megarry J in Coco v AN Clark (Engineers)
Ltd7 (Coco) observed:8
confidence action.15 Furthermore, confidential information has been described as information that is of “relative secrecy”.16 This is a matter of degree and is
dependent on a range of criteria such as:
First, the information must be of a confidential nature. As
Lord Greene said in the Saltman case at page 215,
“something which is public property and public knowledge” cannot per se provide any foundation for proceedings
for breach of confidence. However confidential the circumstances of communication, there can be no breach of
confidence in revealing to others something which is
already common knowledge. But this must not be taken too
far. Something that has been constructed solely from
materials in the public domain may possess the necessary
quality of confidentiality: for something new and confidential may have been brought into being by the application of
the skill and [ingenuity] of the human brain. Novelty
depends on the thing itself, and not upon the quality of its
[constituent] parts. Indeed, often the more striking the
novelty, the more commonplace its components. … But
whether it is described as originality or novelty or ingenuity
or otherwise, I think there must be some product of the
human brain which suffices to confer a confidential nature
upon the information …
• whether the information is known widely or is
publicly available in the relevant industry;17
• whether the information was made public or
whether the process of reverse engineering or any
other method of ascertaining the information would
require the expenditure of time, effort, money or
experimentation;18
• whether the information was produced only after
the expenditure of time and/or money in research
or in by applying some skill and ingenuity19 and
whether another person could obtain the information in a similar process;20
• what measures were taken to ensure that the
information is kept confidential;21
• whether the information has a quality which makes
it valuable or it is valuable to other parties;22 and
• whether a reasonable person would in all the
circumstances regard the information as the confider’s “property”.23
The basis for an equitable action for breach of
confidence lies “… in the notion of an obligation of
conscience arising from the circumstances in or through
which the information was communicated or obtained”.9
According to Finn J in the Australian Medic-Care case,
to establish such a breach, the following key elements
must be proven:10
• the information must have “the necessary quality
of confidence about it”;11
• the information must have been conveyed in
circumstances that impose an obligation of confidence;12 and
• there must have been an actual breach of confidence or a threatened unconscionable use or disclosure of the information.13
The key elements above were elaborated in Gummows J’s dissenting judgment in Coors Pavey Whiting
& Byrne v Collector of Customs (Vic),14 which stated:
It is now settled that in order to make out a case for
protection in equity of allegedly confidential information, a
plaintiff must satisfy certain criteria. The plaintiff (i) must
be able to identify with specificity, and not merely in global
terms, that which is said to be the information in question,
and must also be able to show that (ii) the information has
the necessary quality of confidentiality (and is not, for
example, common or public knowledge), (iii) the information was received by the defendant in such circumstances as
to import an obligation of confidence, and (iv) there is
actual or threatened misuse of the information. … It may
also be necessary… that unauthorised use would be to the
detriment of the plaintiff.
Gummows J’s dissenting judgment has been accepted
in several cases as defining the elements of a breach of
278
The two tests in commercial settings: when
does an obligation of confidence arise?
Generally, there is no single test to ascertain when the
communication of confidential information will result in
an obligation of confidence. Gowans J said in Ansell
Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd:24
That obligation may come into existence by reason of the
terms of an agreement, or what is implicit in them, by
reason of the nature of the relationship between persons or
by reason of the subject-matter and the circumstances in
which the subject-matter has come into the hands of the
person charged with the breach.
However, where commercial settings are concerned,
Finn J in the Australian Medic-Care case, suggested that
there are two tests when ascertaining whether there is an
obligation of confidence in commercial settings — the
“reasonable person” test and the “purpose” test.25 The
“reasonable person” test is derived from Megarry J’s
judgment in Coco:26
… if the circumstances are such that any reasonable man
standing in the shoes of the recipient of the information
would have realised that upon reasonable grounds the
information was being given to him in confidence, then this
should suffice to impose upon him the equitable obligation
of confidence.27
Whereas the “purpose” test asks:28
Has confidential information been imparted for what was
known, or ought reasonably to have been known, to be only
for a particular purpose? If it has, its use must be limited to
that purpose.
intellectual property law bulletin
November/December 2015
The co-existence of contractual and equitable
principles in an action of breach of confidence
Trade secrets are protected in equity by way of an
action for breach of confidence or through the enforcement of express or implied contractual terms. Generally,
express contractual provisions are referred to when
protecting trade secrets. Reference can be made to
implied contractual terms or equity in certain situations
such as when there is an absence of any express
contractual provision creating an obligation of confidentiality, when the alleged breach of confidence does not
fall within the ambits of the express contractual provision or when it is not possible to enforce the express
provision.29
However, in certain circumstances, the equitable
action for a breach of confidence can still apply even
where an express contractual obligation of confidence is
in place and enforceable. This co-existence of equitable
and contractual principles was illustrated in the Australian Medic-Care case,30 as well as the later case of
Optus Networks Ltd v Telstra Corporation Ltd.31 In the
Australian Medic-Care case, the contractual duty of
confidence was found to be dependent upon the existence of the equitable duty of confidence.32
The possibility of the co-existence of equitable and
contractual principles in an action of a breach of
confidence also depends on whether the contractual
terms expressly exclude the application of equity. If no
exclusion exists then, the equitable duty of breach of
confidence can co-exist with the contractual duty of
confidence.
The judgment
It was held that there was a breach of confidence for
the disclosure of the production formula and manufacturing method document as the information in both
documents was confidential information in contractual
terms and in equity, and was imparted in circumstances
importing a duty of confidence. Mr Shahani had forwarded the production formula and the manufacturing
method document to Mr Wait, the product development
chemist of Sphere Healthcare Pty Ltd. He was asked to
use the documents for analysis and pricing if they were
able to produce the urea cream. Mr Wait had not used the
manufacturing method document. However, he had used
the production formula in his attempt to produce the
urea cream. Mr Wait was also aware that the product
Sphere Healthcare Pty Ltd was being asked to replicate
was a product that was produced by Hamilton.
In ascertaining whether there was “relative secrecy”
in the documents, a few factors were noted. The 1996
intellectual property law bulletin
production formula and the manufacturing method was
no longer being used by Hamilton. It was also noted that
Hamilton’s urea cream could not be easily reverse
engineered. Mr Wait did not produce any evidence on
the reverse engineering of Hamilton’s products. Furthermore, the information regarding the formula’s ingredients were in the public domain. However, the proportions
of the ingredients used in the formula was not known to
the public and thus, the information amounted to confidential information. In addition, Hamilton had not provided any evidence to show that any procedures or
measures had been put in place to protect the confidentiality of the information. However, this lack of procedures cannot be construed to mean that Hamilton had
allowed or invited AMC to use the information.
In determining the question of whether there was an
obligation of confidence, Finn J applied the two tests to
be employed in commercial settings — the “reasonable
person” test and the “purpose” test. The application of
both tests derived the same outcome, that the confidential information was imparted in circumstances importing a duty of confidence upon both AMC and Dr Keung.
Dr Keung would have appreciated the sensitive character of the documents and the fact that the documents
were supposed to be used for a specific purpose only,
and any reasonable man in Dr Keung’s shoes would
have perceived that the information was given to him in
confidence. Hence, it follows that AMC received the
information from Dr Keung in confidence.
Furthermore, in certain circumstances, the equitable
action for a breach of confidence can still apply even
where an express contractual obligation of confidence is
in place and enforceable. This was so in the Australian
Medic-Care case as the contractual duty of confidence
was found to be “parasitic upon the equitable duty of
confidence”.33
With regards the action for a breach of confidence for
the disclosure of the production formula, Hamilton’s
claims for account of profits against AMC was successful as AMC had sold the product for a profit. However,
Hamilton’s claims for account of profits against Dr Keung
were dismissed as Dr Keung did not make any profits
from the sale of the product in his personal capacity. The
profit was solely derived by AMC. With regards the
disclosure of the manufacturing method document, no
loss resulted from the breach of cl 28 of the distribution
agreement and the equitable duty of confidence as
Mr Wait had not used the manufacturing method document. There were only nominal damages arising from
the breach of contract.
November/December 2015
279
In relation to the claim for the order for the delivery
up and/or destruction of the originals and copies of the
production formula and manufacturing method document, Finn J invited for further submissions as the
evidence had revealed that AMC had converted the
documents into electronic form.
10.
11.
12.
Above,
Above,
Above,
Rubber
13.
Smith Kline & French Laboratories (Australia) Ltd & AlphaPharm
Pty Ltd v Department of Community Services (1990) 22 FCR
73 at 87 and 111–12; (1990) 95 ALR 87 at 102–2 and 125–7;
(1990) 17 IPR 545; Prince Jefri Bolkiah v KPMG (a firm)
[1999] 2 AC 222; [2000] ANZ ConvR 260; [1999] 1 All ER
517; [1999] 2 WLR 215.
Concluding remarks
The Australian Medic-Care case illustrated the co-existence
of the equitable and contractual principles in an action of
breach of confidence, in circumstances where the contractual obligation of confidence is dependent on the
equitable obligation of confidence. Thus, both contractual and equitable principles can co-exist as long as the
express contractual terms do not exclude the equitable
obligation of confidence from arising. As Dean stated,
“Equitable protection … may be used in preference to an
existing contractual obligation or alongside a contractual
obligation”.34 Furthermore, commentators have noted
that different tests have been applied in various situations when determining whether there is an equitable
obligation of confidence.35 The Australian Medic-Care
case is helpful as it clarified the type of tests that apply
in commercial settings.
Dr Jenny Ng
Solicitor, Lecturer
Charles Darwin University
[email protected]
[email protected]
www.cdu.edu.au
n 1, at [632].
n 5, at 215.
n 7, at IPR 590; Ansell Rubber Co Pty Ltd v Allied
Industries Pty Ltd [1967] VR 37 at 40.
14.
Coors Pavey Whiting & Byrne v Collector of Customs (Vic)
(1987) 74 ALR 428; 74 ALR 428; 10 IPR 53 at 262–263.
15.
Rapid Metal Developments (Australia) Pty Ltd v Anderson
Formrite Pty Ltd [2005] WASC 255; BC200510321; Ekaton
Corporation Pty Ltd v Chapman (2010) 273 LSJS 453; [2010]
SADC 150 at [17] per Brebner J.
16.
Franchi v Franchi [1967] RPC 149 at 153; Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales [1975] 2
NSWLR 104 at 119; (1975) 5 ALR 527 at 542; 45 FLR 21;
[1977] RPC 137 (Interfirm Comparison).
17.
Above, n 7, at IPR 594; RPC 51; compare with Ansell Rubber
Co at 50; Titan Group Pty Ltd v Steriline Manufacturing Pty
Ltd (1990) 19 IPR 353 at 381; BC9003677.
18.
See for example Ackroyds (London) Ltd v Islington Plastics Ltd
19.
[1962] RPC 97; Aquaculture Corporation v New Zealand
Green Mussel Co Ltd (1985) 5 IPR 353 at 379.
Above, n 5, Saltman Engineering; compare with United
Sterling Corporation v Felton [1974] RPC 162; Interfirm
Comparison above, n 16, at NSWLR 117; ALR 540.
20.
Cranleigh Precision Engineering Ltd v Bryant [1964] 3 All ER
289; [1965] 1 WLR 1293; [1966] RPC 81 at 89–90; Ansell
Rubber Co at 49.
21.
Footnotes
22.
1.
Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty
2.
Ltd (2009) 261 ALR 501; [2009] FCA 1220; BC200909776.
Above, n 1, at [629]. See generally, R Dean The Law of Trade
Secrets and Personal Secrets (2nd edn) Lawbook, Pyrmont
Amber Size & Chemical Co Ltd v Menzel [1913] 2 Ch 239;
(1913) 30 RPC 433 at 438; R Dean, above, n 2, at [3.165]–[3.175].
Surveys & Mining Ltd v Morrison [1969] Qd R 470; Measures
Brothers Ltd v Measures [1910] 1 Ch 336.
23.
2002 at [2.55]; see also T Aplin, L Bently, P Johnson and S
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd
[1979] VR 167 at 191; Printers & Finishers Ltd v Holloway
(No 2) [1964] 3 All ER 731; [1965] 1 WLR 1; [1965] RPC
239 at 255.
Malynicz Gurry on Breach of Confidence: The Protection of
Confidential Information (2nd edn) Oxford University Press,
Oxford 2012, p 113 at [4.55].
24.
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd
[1967] VR 37 at 40.
25.
Above, n 1, at [640].
3.
Above, n 1, at [636].
26.
Above, n 7, at IPR 591; RPC 48.
4.
Above, n 1, at [658].
27.
5.
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd
[1963] 3 All ER 413; (1948) 65 RPC 203.
R Dean, above, n 2, at [3.275]; see also Toulson and Phipps,
3–007–3–010.
28.
Above, n 1, at [637].
6.
Above, n 5, at 215.
29.
7.
Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587; [1969]
RPC 41.
AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464;
(2002) 58 IPR 268; [2002] NSWSC 170; BC200202299.
30.
Above, n 1.
8.
Above, n 7, at RPC 47 per Megarry J.
31.
9.
Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984)
Optus Networks Pty Ltd v Telstra Corp Ltd (2010) 265 ALR
281; [2010] FCAFC 21; BC201001116.
See generally, above, n 2, The Law of Trade Secrets and
Personal Secrets.
156 CLR 414 at 438; (1984) 56 ALR 193 at 208–9; (1984) 3
IPR 545 at 560–61; BC8400490.
280
32.
intellectual property law bulletin
November/December 2015
33.
Above, n 32.
dence” (2003) 119 LQR 193, 198; H Carty “An analysis of the
34.
Above, n 32. See also above, n 2, Breach of Confidence at pp
39–46.
Above, n 2, Breach of Confidence, p 240 at [7.02]. See also R
Arnold “Circumstances Importing on Obligation of Confi-
Modern Action for breach of Commercial Confidence: When is
35.
intellectual property law bulletin
November/December 2015
Protection Merited?” (2008) IPQ 416, 442–43.
281
Falling in line with reg 5.9! Exploring what it
takes to be “reasonable”, “prompt”, “diligent”
and “exceptional” during a patent opposition
Donna Meredith WRAYS
“Go, hence with diligence!”1
Key points
With the implementation of the Raising the Bar Act2
in 2013, IP Australia tightened the reins on granting
extensions of time to file evidence during patent oppositions. The purported aim of the tougher restrictions is
to minimise unnecessary delays, resulting in faster
decisions and reduced uncertainty.3
As the dust of the second anniversary of the amendments settles, we glance back and review how IP
Australia has interpreted the new regulations and learn
from the successes and disappointments of cases past.
Upon a review of over 20 Australia Patent Office
(APO) decisions, things initially appeared grim, with
five of the first six applications refused. While still
strictly adhering to the new restrictions, the situation
appears to be improving, with the trend in recent
decisions being towards a favourable outcome for the
extension applicant. A central theme intertwining all
cases has emerged; that convincing support is imperative
if the Commissioner is to be persuaded that the extension is justified. Crucial to this support is a comprehensive narrative detailing:
• the opposition strategy being followed;
• how every event fits into that strategy;
• the issues which triggered the extension request;
and
• how the strategy was modified as necessary.
Despite the upward trend in successful extensions,
the most prudent course, however, appears to be to crack
the opposition whip and avoid the need for them
altogether.
Introduction
An application for an extension of time during a
patent opposition can be made under reg 5.9 of the
Patents Regulations 1991. This regulation specifies that
the party requesting an extension will need to convince
the Commissioner that:
282
• despite having acted promptly and diligently at all
times, and despite having made all reasonable
efforts, they were unable to meet the filing deadline; or
• that there are exceptional circumstances that warrant the extension.
Exceptional circumstances according to reg 5.9(5)
include:
• circumstances beyond the control of the party;
• errors by the Commissioner; or
• a stay in proceedings.
Generally only the most contentious cases go to a
hearing. Thus, a genuinely worthy case would usually
warrant an extension without fanfare. Some of the more
newsworthy decisions are discussed below.
Tred Design Pty Ltd v McCarthy4 (TRED) was the
first decision under the new restrictions.
The opponent (TRED) was twice requested to provide further and better particulars by the applicant,
which TRED claimed distracted it from preparing evidence. TRED also claimed it had difficulty locating a
declarant. TRED requested an extension of time, providing little specific detail of its actions and furnishing
its application with “[b]road assertions about the public
interest”;5 namely that the “public interest will always
favour the filing of evidence in support”.6
In his decision, the delegate said that:7
An attorney does not need to account for every minute of
their day, but they must provide enough information to
enable a delegate of the commissioner to form their own
opinion on whether the party has acted reasonably, promptly
and diligently. The kind of information that could be
provided is a brief account of actions taken (for instance, an
outline of what was done, when it was done, how it was
done, by whom it was done, as appropriate to the case)
covering the period in question.
The delegate noted that providing further and better
particulars, because the first were inadequate, might
intellectual property law bulletin
November/December 2015
imply that TRED had not acted reasonably in providing
adequate particulars in the first instance. However, the
delegate declined to make a conclusion on that issue.8
The delegate ultimately determined that TRED had
not provided sufficient information to convince him that
TRED (and its attorneys) had acted reasonably, promptly
and diligently in preparing its evidence at all times but
merely made unsupported assertions of that diligence.9
Since the delegate identified no exceptional circumstances, the extension was refused.
In Merial Ltd v Novartis AG10 (Merial), Novartis
sought a second extension of time, claiming that its
expert was temporarily unavailable but provided no
evidence of:11
• a strategy for obtaining the evidence by the
deadline;
• the reasons for choosing (and persisting with) that
particular expert;
• the difficulties encountered in obtaining the evidence; or
• a management plan to accommodate the expert’s
absence.
The delegate concluded that it would have been
“reasonable” to consider another expert (or at least to
have made better use of their time).12
In light of the above factors, and given Novartis knew
the expert would be absent, the delegate concluded that
without a clear indication of why it persisted with the
expert and without “sufficient information about the
steps taken to accommodate his extended leave”13 he
could not be satisfied that Novartis had acted promptly
or diligently at all times. The extension was refused.
Conversely, in Innovia Security Pty Ltd v Visual
Physics LLC14 (Innovia), the absence of the opponent’s
expert during the evidence in reply stage was considered
more tolerable because it was considered reasonable to
use the same expert as for the earlier evidence in support
and that this warranted some consideration of the
circumstances.15 However, the delegate still refused the
extension, asserting that, despite the absence, it “is
reasonable to expect that a diligent party could have
made significant progress … in the remaining time”.16
Thus, the delegate was not convinced that Innovia had
acted promptly and diligently at all times17 and the
extension was refused.
In Sportingbet Australia v Tabcorp International Pty
Ltd18 (Tabcorp), the applicant (Tabcorp) supported its
extension application with a week-by-week chronology
of its activities which omitted specific details on the
basis that disclosing those details would have waived
privilege.
The delegate, in referring to TRED,19 commented
that the “commissioner does not expect a party to
intellectual property law bulletin
perform beyond what is humanly possible” but rather
“… a party must provide enough information to justify
its request”,20 and concluded that a party may not use
privilege to avoid providing adequate support.21
Consequently, due to insufficient detail, the delegate
was not convinced that Tabcorp had acted promptly and
diligently22 and the extension was refused.
In Quaker Chemical Corp v T & T Global Solutions
Pty Ltd23 (T&T), with 7 weeks until the deadline, the
applicant (T&T) changed attorneys. It did not file
evidence and requested an extension but provided no
“cogent account of what was done, when it was done,
how long it took and who was involved”,24 in relation to
its first attorney’s inaction; instead relying on “vague
statements alluding to ‘obtaining advice and considering
all available options’”.25
The delegate determined that the second attorney had
acted reasonably, promptly and diligently at all times but
that, collectively, the attorneys for T&T appeared to
have not done so, due to the lack of support for the
actions of the first attorney.26
As there were no exceptional circumstances identified27 to explain the delay the extension was refused.
In Mineral Technologies Pty Ltd v Orekinetics Investments Pty Ltd28 (Orekinetics), the extension was allowed,
which provides an intriguing contrast with the refusal of
an extension in T&T above.
The patent applicant (Orekinetics) was a small company of four employees. A single employee managed all
the IP matters but he became temporarily unavailable
when attending to his farm during a drought.
Orekinetics was not informed by its attorney of the
evidence deadline until a month before the due date,
despite being provided with the opponent’s evidence in
support prior to its employee’s absence. Concerned that
the attorney did not have sufficient opposition experience or technical expertise to handle the matter29 Orekinetics transferred the case back to an attorney who previously
handled the matter but who had since changed firms.
In its extension request, Orekinetics filed no evidence
of any action being taken by the first attorney on its
behalf during its employee’s absence. The delegate
commented that it “is not reasonable to totally suspend
the preparation of evidence during the period of a
drought …” and that “… preparation of evidence should
continue … as promptly and diligently as possible in the
circumstances”30 (emphasis added). He then held that
Orekinetics’ employee “acted quickly once he became
aware of the deadline”;31 with the drought and case
transfer placing his inaction into context. The delegate
concluded that Orekinetics’ actions were reasonable,
prompt and diligent given the circumstances32 and
allowed the extension without expressly mentioning the
“at all times” requirement in the legislation.
November/December 2015
283
At first glance, this decision appears to be inconsistent with T&T above, where a first attorney’s delay
resulted in a second attorney’s failure to meet the
deadline. Further, the Explanatory Statement to the
Intellectual Property Legislation Amendment (Raising
the Bar) Regulation 2013 (Explanatory Statement) says
that:33
… the Commissioner will not be required to give a
direction to extend a period solely because of delays caused
by an agent or a legal representative failing to act promptly
or diligently …
It is not entirely clear how the inaction of the first
attorney in Orekinetics did not result in a finding that
Orekinetics lacked diligence at all times, pursuant to
reg 5.9. However, the notable distinction between the
two cases is that Orekinetics provided the delegate with
an additional (and apparently convincing) explanation
for the delay. In this regard, it appears that the context of
the delay fulfilled the “at all times” requirement in
reg 5.9 because Orekinetics was deemed to have acted
reasonably “in the circumstances”.34
Exceptional circumstances
In TRED, exceptional circumstances were described
as “matters outside the normal evidentiary process, and
outside the control of the party, where it would be
unreasonable to insist on a party filing their evidence”.35
Consistent with this, the delegate in Tabcorp rejected
the submission that the Spring Racing Carnival (which
strained Tabcorp’s resources) was an exceptional circumstance calling it an annual event that could be “anticipated and acted upon”.36
In Cantarella Bros Pty Ltd v Nestec SA37 (Cantarella)
another “predictable event”38 which “does not automatically entitle the party to an extension of time”39 was
observed when the Christmas/New Year period coincided with Nestec’s evidentiary period as “Christmas is
no less foreseeable than the Spring Racing Carnival”.40
As mentioned above in Merial, a delay caused by the
expected absence of an expert was not an exceptional
circumstance due to the prior knowledge that the expert
would be absent. This is consistent with the Explanatory
Statement which expressly excludes “difficulties in obtaining expert evidence that could have been anticipated and
acted on”41 as sole justification for an extension.
Intriguingly, the delegate in Orekinetics recognised
that a drought was “outside the normal evidentiary
process, and outside the control of Orekinetics”,42 yet
stopped short of concluding if this constituted an exceptional circumstance.
Thus, other than the specific examples in reg 5.9, the
bounds of what constitutes “exceptional circumstances”
have yet to be determined; although we have some
examples of what does not constitute an “exceptional
circumstance”.
284
Public interest
The public interest argument in TRED was quickly
dismissed by the delegate who commented that the new
provisions were there to “speed up oppositions”43 and
that “[b]road assertions about the public interest cannot
be used to sweep aside the words of the regulation and
the statements in the [Explanatory Statement]”.44
Furthermore, IP Australia considers that delays in
proceedings for private negotiations are contrary to
public interest.45 An unwillingness to allow a delay due
to settlement proceedings is supported in the Explanatory Statement, which expressly states that settlement
discussions are not a proper basis for an extension of
time; a sentiment which was upheld in Fonterra Co-operative
Group Ltd v Meiji Dairies Corp.46
The intent behind the new legislation, which has been
affirmed by the APO, is that the public interest is best
served by a swiftly resolved opposition.
However, in cases where no evidence is filed by a
party, the opposition would be decided without both
sides being heard. This is a timely reminder to attorneys
that an extension of time cannot be relied upon in any
circumstance. But in a case such as T&T above, how
could this situation have been avoided, given the circumstances?
Had T&T amended its claims prior to the deadline, in
a genuine attempt to resolve at least some of the issues
of the opposition, it may have been possible to obtain a
stay in proceedings. As a stay is expressly mentioned in
the regulations as a legitimate ground for an extension,
T&T may have also received an extension of time to
submit evidence relating to any unresolved opposition
issues.
In such dire circumstances, an amendment on an
applicant’s own terms might have proved a better
outcome than being forced into a less than favourable
settlement, or a decision made without the applicant’s
evidence.
Take home message
The new restrictions clearly represent significant
changes in opposition practice, which now requires a
much more assiduous approach by the parties.
Extensions of time remain available but in order to
fall in line with reg 5.9, parties must demonstrate that
they have acted reasonably, promptly, and diligently at
all times and that, despite a carefully executed and
adaptable strategy, the circumstances got the better of
them.
Below, we set out some useful tips for navigating an
opposition under the tough new restrictions:
intellectual property law bulletin
November/December 2015
• prepare a formal strategy for managing the entire
opposition, outlining the critical pathway and
including key milestones and nominal deadlines;
• modify the strategy as necessary;
• act reasonably, promptly and diligently at all times
(not just sometimes);
• engage experts early;
• identify and/or retain back-up experts and consider using them if your preferred expert will be
absent at any time;
• enquire early with all parties (attorneys, clients
and experts) about foreseeable interfering events;
• plan for delays but more preferably avoid them
altogether; problem solve quickly as any obstacles
arise;
• always continue preparing evidence, in spite of
any distractions, setbacks or settlement negotiations;
• record all activity for preparing evidence, including action taken to address potential delays;
• in an extension application, detail all activities,
especially delays and explain any periods of apparent inactivity;
• consider requesting extensions early so that the
matter is decided before the evidence deadline;
• file what you have or in “desperate” times (and to
avoid impending doom) consider attempting to
resolve the opposition by amending and requesting a stay; and most importantly
• do not expect the delegate to “assume diligence”,
convince them of it.
Despite the tough approach employed by the APO, it
appears that the trend in recent decisions is currently
towards grant of an extension. However, it is clear from
these decisions that the days of short and easily obtainable extension of time requests are behind us. Oppositions are becoming a specialised area of practice, requiring
sophisticated project management strategies. While extensions are still obtainable, they are no longer a fait
accompli and instead should be regarded as an absolute
last resort.
Below is a table setting out in chronological order the
patent opposition extension of time decisions made
since the new regime commenced in 2013.
intellectual property law bulletin
Donna Meredith
Patent and Trade Marks Attorney
Wrays
[email protected]
www.wrays.com.au
With special thanks to Tim Francis, Principal
Footnotes
1.
2.
3.
W Shakespeare The Tempest Act I, Scene II.
Intellectual Property Laws Amendment (Raising the Bar)
Act 2012.
Explanatory Statement to the Intellectual Property Legislation
4.
Amendment (Raising the Bar) Regulation 2013 (Explanatory
Statement) at p 1.
Tred Design Pty Ltd v McCarthy (2013) 105 IPR 291; [2013]
5.
6.
7.
8.
9.
10.
APO 57.
Above, n 4, at [26].
Above, n 4, at [25].
Above, n 4, at [76].
Above, n 4, at [61].
Above, n 4, at [75] and [76].
Merial Ltd v Novartis AG (2013) 105 IPR 133; [2013] APO
65.
11.
12.
Above, n 10, at [19].
Above, n 10, at [20].
November/December 2015
285
13.
Above, n 10,at [22].
30.
Above, n 28, at [46].
14.
31.
Above, n 28, at [39].
32.
Above, n 28, at [41].
15.
Innovia Security Pty Ltd v Visual Physics LLC (2014) 106 IPR
568; [2014] APO 15; BC201403613.
Above, n 14, at [23].
33.
Above, n 3, at p 19.
16.
Above, n 14, at [23].
34.
Above, n 28, at [41].
17.
Above, n 14, at [25].
35.
Above, n 4, at [64].
18.
36.
Above, n 18, at [68].
37.
19.
Sportingbet Australia v Tabcorp International Pty Ltd (2014)
107 IPR 161; [2014] APO 21.
Above, n 4, at [51].
Cantarella Bros Pty Ltd v Nestec SA (2015) 112 IPR 172;
[2015] APO 15; BC201503067.
20.
Above, n 18, at [45].
38.
Above, n 37, at [29].
21.
Above, n 18, at [42].
39.
Above, n 37, at [27].
22.
Above, n 18, at [65].
40.
Above, n 37, at [29].
23.
Quaker Chemical Corp v T & T Global Solutions Pty Ltd
41.
Above, n 3, at p 19 relating to reg 5.9.
42.
Above, n 28, at [45].
24.
(2014) 111 IPR 291; [2014] APO 69; BC201411988.
Above, n 23, at [17].
43.
Above, n 4, at [26].
25.
Above, n 23, at [17].
44.
Above, n 4, at [26].
26.
Above, n 23, at [27].
45.
27.
Above, n 23, at [28].
28.
Mineral Technologies Pty Ltd v Orekinetics Investments Pty
IP Australia, Resolving patent opposition proceedings faster Toward a stronger and more effıcient IP rights system, Consultation Paper (2009) p 4.
Fonterra Co-operative Group Ltd v Meiji Dairies Corp (2014)
Ltd [2014] APO 63; BC201419294.
29.
286
Above, n 28, at [16] and [17] of Annex A.
46.
106 IPR 196; [2014] APO 11; BC201403104.
intellectual property law bulletin
November/December 2015
Jeans go West — big time
Kate Tidbury and Earl Gray SIMPSON GRIERSON
Takeaway tips
• Australian and New Zealand laws around design
protection are very different. It is important to
understand both regimes if your business trades in
fashion or other design led industries in both
countries.
• New Zealand courts are awarding larger amounts
of additional damages for flagrant copyright infringement.
• Creating, importing and selling infringing copies
can give rise to both primary and secondary
copyright infringement in New Zealand.
In 2013, G-Star Raw (G-Star) was successful in its
claim of secondary copyright infringement against Jeanswest
Corporation (New Zealand) Ltd (Jeanswest) in the High
Court. In the weeks after the decision was released, the
meagre award of NZ$325 in damages to G-Star made by
the High Court for copyright infringement of the “5620
Elwood” jean design was a popular topic of discussion
among New Zealand intellectual property practitioners.
Unsurprisingly neither party was satisfied with the
result. Jeanswest appealed the High Court’s finding of
copyright infringement and G-Star cross-appealed the
failure to find primary infringement and the damages
award.
Following the release of the Court of Appeal decision,1 the damages award is once again a topic for
discussion but G-Star is likely to be feeling significantly
happier with the outcome.
Elwood design by manufacturing, retailing and importing into New Zealand the “Dean Biker Slim Straight”
jeans (Dean Biker Jean). G-Star claimed that the Dean
Biker Jean was a copy of the jean design it released in
2006 in celebration of the tenth anniversary of M
Morisset’s original creation. Jeanswest admitted that it
had imported and sold 63 pairs of the Dean Biker Jean
in New Zealand but denied the Dean Biker Jean was an
infringing copy of G-Star’s Elwood design.
Following his analysis of the two jean designs, Heath
J, the trial judge in the High Court, found that there were
“telling similarities” between the two designs. As a
result, he concluded that Jeanswest had copied the
Elwood Jean and was liable for secondary infringement.
Heath J found that Jeanswest was not liable for primary
copyright infringement.
The appeal
There were seven issues on appeal:2
(1) Copyright work:Did the Judge err in the way he
identified the nature of the copyright work? Essentially, what was the copyright work?
(2) Copying: Did the Judge err in the way he went about
assessing whether Jeanswest had copied the original
work?
(3) Primary infringement: In finding no primary infringement by Jeanswest, did the Judge err?
(4) Secondary infringement: Conversely, did the Judge
[err] in finding there was secondary infringement by
Jeanswest?
(5) Additional damages: Was Heath J wrong not to
award G-Star additional damages?
(6) Permanent injunction: Was Heath J wrong to grant
G-Star a permanent injunction?
(7) Costs in the High Court: Heath J awarded increased
costs to G-Star. Did he [err] in doing that?
Background and High Court judgment
The case has its origins in the south of France.
Monsieur Morisset, a French clothing designer contracted by G-Star was sitting in a café. It was a wet day.
A motorcyclist arrived at the café in a rather damp state,
with his jeans stretched over his knees. Inspired by the
crinkled shape the jeans made around the biker’s knees,
M Morisset spent half an hour sketching out a design
that captured the shape of the biker’s jeans.
M Morisset’s design was branded the Elwood jean
and subsequently became G-Star’s signature design.
More than 10 million pairs of Elwood jeans have been
sold worldwide.
In the High Court, G-Star alleged Jeanswest had
infringed its copyright in the original drawings for the
intellectual property law bulletin
The court agreed with Heath J on four of the seven
issues. It found that Heath J had not erred in the way in
which he identified the copyright work, and that Jeanswest
had copied the Elwood design. The finding of secondary
infringement was upheld and no change was made to the
award of increased costs.
The Court of Appeal overturned Heath J’s findings in
relation to primary infringement, the permanent injunction and the damages award. After dealing with the
preliminary issue of whether G-Star had actually pleaded
primary infringement, the Court of Appeal found that
primary infringement was made out. In its view, this
November/December 2015
287
followed from the fact Jeanswest had copied the Elwood
jean and had admitted importing the Dean Biker Jean
into New Zealand.
In relation to the permanent injunction restraining
Jeanswest from selling, manufacturing, importing or
otherwise disposing of or dealing with the infringing
Dean Biker Jean, the court found this was wrongly
granted. G-Star’s jean design had been industrially
applied, meaning that G-Star, under New Zealand law,
was only entitled to prevent copies of the Elwood jean
being sold for 16 years after the launch of the Elwood
design in 1996. The 16-year period ended in March
2012, before the trial in the High Court, meaning that
there was no basis for the permanent injunction.
Finally and perhaps most significantly, the Court of
Appeal awarded G-Star additional damages.
Additional damages
Under s 121(2) of the Copyright Act 1994, the court
has discretion to award such additional damages as it
considers the “justice of the case requires, having regard
to all circumstances”. The section specifically refers to
flagrancy as being relevant to the assessment of additional damages.
Previously, New Zealand courts have rarely made
additional damages awards. Prior to the Court of Appeal’s
decision, the highest award of additional damages, by
some margin, was NZ$20,000 in the relatively recent
Court of Appeal decision in Skids Programme Management Ltd v McNeill (Skids)3.
In the High Court, Heath J decided not to award
G-Star additional damages under s 121(2) for two
reasons. First, there was no evidence that Jeanswest
intended to initially sell a small number of Dean Biker
Jeans to test the market for risks of infringement claims
before selling a larger order in New Zealand. Second,
Heath J concluded that the primary reason for the
infringement was Jeanswest’s ignorance of the differences between New Zealand and Australian copyright
law. Jeanswest’s parent company, the designer of the
Dean Biker Jean, was based in Australia where copying
of this nature is not copyright infringement.
The Court of Appeal took a different approach to the
High Court. In consideration of Jeanswest’s design
process, which involved copying the features of garments designed by others and collected by Jeanswest
personnel on trips around the fashion world, it found the
infringement to be flagrant.
The court also considered four other factors in
assessing whether an award of additional damages
should be made, namely (at [129]):
• The decision to import a very small number of
jeans (63 pairs) into New Zealand was held to be
288
intended to test the market to determine consumers’ appetite for the style with a view to further
importation if the Dean Biker Jean sold well.
• Following a cease and desist letter from G-Star’s
solicitors, Jeanswest immediately desisted selling
the Dean Biker Jean. However, Jeanswest’s decision to do so had little impact as by that point the
jeans had all been sold.
• A number of the ways in which Jeanswest conducted its defence prior to and during the trial
reflected unfavourably on it. For example:
— the sample order, which recorded the design
process for the Dean Biker Jean and became a
critical document at trial, was disclosed less
than a month before the trial following directions made in relation to further discovery;
— Jeanswest objected to a pre-trial application by
G-Star to join two related Jeanswest companies
to the proceedings on the basis of the availability of a witness. The judge considered this to be
a key reason to decline the joinder application.
However, the witness was later not called by
Jeanswest at trial; and
— Jeanswest persistently denied copying the Elwood
jean but opted not to call the two witnesses that
could have substantiated the denial. The Court
of Appeal considered this to be a “glaring
inconsistency”.
• The failure by Jeanswest, a relatively substantial
international business, to obtain legal advice on
New Zealand copyright law showed a lack of
effective internal systems. Jeanswest had taken
steps to educate its staff on copyright laws but
failed to appreciate the differences between New
Zealand and Australia. “It should have been a
simple matter to obtain the required legal advice”.
The court then undertook a review of additional
damages awards made in comparable copyright cases in
New Zealand and Australia. (This analysis is helpfully
set out in an appendix to the judgment.) After weighing
the four factors considered above in the context of the
recent additional damages awards, the court awarded
NZ$50,000 to G-Star in additional damages.
The Court of Appeal’s willingness to make more
sizeable awards of additional damages suggests that the
New Zealand courts have no patience for flagrant
copyright infringement, and are alive to the need to deter
such behaviour and compensate the plaintiffs. While
awards are yet to reach the heady heights of those made
by our Australian neighbours, additional damages are
finally starting to be taken seriously in New Zealand.
intellectual property law bulletin
November/December 2015
Kate Tidbury
Associate
Simpson Grierson
[email protected]
www.simpsongrierson.com
Footnotes
1.
Jeanswest Corporation (New Zealand) Ltd v G-Star Raw CV
[2015] NZCA 14; BC201560328 per E Rance, Randerson and
Wild JJ.
Earl Gray
Partner
Simpson Grierson
[email protected]
www.simpsongrierson.com
intellectual property law bulletin
2.
Above, n 1, at [8].
3.
Skids Programme Management Ltd v McNeill [2012] NZCA
November/December 2015
314,; [2012] 1 NZLR 1; BC201262600 at [126] per E France,
Venning and Asher JJ.
289
Copyright in databases: the spectre of IceTV
lives on
Tim Golder, Adrian Chang and Scott Joblin ALLENS
As with any copyrighted work, an applicant alleging
infringement of copyright subsisting in their database
must show that the answers to two questions fall in their
favour: first, the applicant must demonstrate that copyright subsists in the database; and second, the applicant
must demonstrate that a substantial part of the work has
been copied.1 While early cases concentrated on the first
question, the 2009 case IceTV Pty Ltd v Nine Networks
Australia Pty Ltd2 (IceTV) so dramatically changed the
way database infringement cases are treated that the full
consequences of the case have yet to be determined (or
fully appreciated) 6 years later.
Background
Databases are considered literary works for the purposes of s 32 of the Copyright Act 1968 (Cth) (the Act).
They are treated as “a table, or compilation, expressed in
words, figures or symbols”.
To establish infringement, the first question is whether
the database is sufficiently original to attract copyright.3
“Originality” in the context of determining the existence
of copyright in compilations refers to the human effort
that has gone into the work’s creation. Originality is
therefore generally assessed in terms of the degree of
skill, judgment or labour exerted by the author in order
to create the work.4
The requirement for skill, judgment or labour can be
met by showing that the process of determining what
items go into the compilation requires substantial intellectual thought, expertise or curatorship. However, originality can also be established in the case of compilations
of mundane facts, by demonstrating that compiling those
facts requires substantial effort or cost.5 The work must
also originate from an individual author or from multiple
authors who have demonstrated some collaboration.6
In practice, many modern databases fit into the
second type of compilation — that is, compilations of
mundane facts. The creators of those databases therefore
rely on the difficulty or expense of compiling the
information subsisting in the database to attract copyright protection.
Once copyright is determined to subsist, the assessment turns to whether the work has been infringed.
Copyright in a literary work is directly infringed where
290
a person, without authority, does or authorises any of the
acts comprising the exclusive rights of the copyright
owner.7 It is sufficient for infringement that an infringing
act is done in relation to a “substantial part” of the
work.8
While cases in the first decade of the millennium
focused on adapting law which had been developed to
deal with bound tomes to work for digital databases, we
consider that cases in this space in the coming decade
will be characterised by how the courts will answer a
different question: if copyright subsists in a database,
what is the scope of its protection? The significance of
this new question was revealed by the High Court’s
decision in the IceTV case.
IceTV and the narrowing of database
copyright protection
In the IceTV case, an IceTV Pty Ltd employee spent
3 weeks watching television in order to write down the
time and title of the programs broadcast over that period.
Employees then compared the information in IceTV’s
schedule with publically available television schedules
published by Nine Networks and others. In almost all
cases where there was a discrepancy, IceTV would
amend its guide to match the schedules published by
others. In doing so, Nine alleged that IceTV had
infringed the copyright in its scheduling database. IceTV
conceded that copyright subsisted in the material it was
reviewing, so the judgment of the High Court focused on
infringement — in particular whether IceTV had copied
a substantial part of Nine’s schedules.
All six justices ultimately reached the conclusion that
IceTV had not infringed Nine’s copyright in its program
schedules. There were two judgments and while each
judgment approached the issues from different perspectives they arrived at the same conclusion.
The broad thrust of the judgments was to highlight
the distinction between the various types of effort
exerted to create a compilation. Their Honours recognised
that while it took effort, skill and judgment to determine
what shows should play at what times in order to
maximise viewership, they did not consider that copyright protection extended to protect that effort.
intellectual property law bulletin
November/December 2015
For example, French CJ and Crennan and Kiefel JJ
emphasised the importance of the particular form in
which the underlying facts which make up the compilation are expressed and held that it was only skill and
labour directed to that expression which could be taken
into account. Their Honours then noted that the expression of the time and title information was essentially
dictated by the nature of the underlying information
(being the scheduling determined by the station’s programmers). Therefore, the bulk of the effort of setting
out the schedules was not directed towards “the originality of the particular form of expression”.9 Accordingly, the mere time and title information lacked sufficient
mental effort or exertion to constitute a substantial part
of the work.10
Similarly, the judgment of Gummow, Hayne and
Heydon JJ held that the part of Nine’s work that attracted
copyright was the presentation of the material, not the
factual content underlying that presentation. Since the
presentation was not copied by IceTV, there was no
infringement.11
Nine’s schedules were essentially a catalogue of their
shows and running times — mere facts. The High Court
recognised that a compilation of mere facts can attract
copyright if compiling those facts takes great effort or
expense. However, the degree of protection offered by
copyright does not extend to protection of those facts.
This point was driven home by Gummow, Hayne and
Heydon’s JJ observation that the European Parliament
has passed a directive protecting the arrangement and
layout of databases from reproduction in Directive
96/9/EC. Similarly, Copyright, Designs and Patents
Act 1988 (UK) provides protection both for databases
and works produced through the use of computer software. By contrast, Australia’s copyright protection regime
does not grant a monopoly to information — only the
expression of information. Accordingly, there is no per
se action in copyright due to appropriation of effort.
The High Court’s judgment has the consequence of
substantially limiting the protection afforded by copyright to database owners. If copyright were to exist in a
compilation created through great effort, it appears that
the scope of that protection is limited to the form of that
compilation’s presentation. Accordingly, the outcome of
the IceTV case appears to be that copyright will not
assist a database owner where the information in the
database is copied but the presentation of the database is
not.
The post IceTV landscape
Since IceTV, one could argue that the question of
whether copyright subsists in a database is reduced in
relevance — the real question is what copyright would
actually protect.
intellectual property law bulletin
The scope of protection offered by copyright has been
neatly encapsulated by the words of Justice Stone in
Primary Health Care v Federal Commissioner of Taxation:12
Given that copyright protects the expression of an idea not
the idea itself, it is necessary to bear in mind that the
independent intellectual effort that is required to produce an
original literary work must be effort directed to the expression of the idea.
In some cases, where the value of the database lies in
the information, the scope of protection would likely be
very narrow. For example, in Telstra Corp v Phone
Directories Co Pty Ltd (Telstra), the Full Federal Court
held that Phone Directories Company had not infringed
Telstra’s hard copy White and Yellow Pages phone
directories. The Full Federal Court based its decision on
the fact that Telstra’s directories were the product of a
computer program, not of a human author or authors and
that the human effort that did go into creating the
directories was not directed to the layout of the directories.13 The court also rejected Telstra’s arguments that
the directories were the result of joint authorship, noting
that each “author”, being a Telstra employee tasked with
inputting information into the database, did not collaborate, which in the view of the court, is the principal
feature of joint authorship.14 Accordingly, no copyright
subsisted.
However, if the court had ruled on the question of
copyright subsistence differently, the question of whether
Telstra’s copyright would have been infringed would be
worthy of consideration in light of the High Court’s
formulation of infringement in the IceTV case.
In the case of Telstra’s White Pages, clearly it would
not have been infringed. The White Pages is essentially
a database of mere facts — names and phone numbers
— and if copyright subsisted by virtue of the effort of
collecting that information, there is no art in its presentation at all.
In the case of Telstra’s Yellow Pages, it is likely the
outcome would be less clear cut. It is arguable that there
is some artistic, or at least thoughtful consideration, of
the layout and presentation of the various advertisements that appear on each page of the Yellow Pages.
Accordingly, the authors could expect to at least have
copyright over the presentation of each manuscript,
though they could not expect copyright over the information contained therein.
To help illustrate this point, consider the scenario in
Dynamic Supplies Pty Ltd v Tonnex International Pty
Ltd.15 In that case, a Dynamic Supplies employee was
said to have expended considerable effort devising a
customer-friendly means of arranging a table to allow
convenient cross-referencing of the compatibility of
various computer and printer parts. The list of parts and
November/December 2015
291
their compatibilities was kept on a database maintained
by Dynamic Supplies’ employees but the layout of the
customer catalogue involved considerable effort by one
employee.
Dynamic Supplies alleged that its competitor, Tonnex
International, copied Dynamic Supplies’ catalogue, which
included the compatibility chart. Tonnex argued that no
copyright subsisted in the catalogue. Justice Yates held
that copyright subsisted in the catalogue, for the following reasons:
• first, the selection of material for the compatibility
chart was “informed by Mr Campbell’s personal
assessment of what information might be valuable
to a customer searching a website”;16
• second, the selection of information and its expression in a certain form reflected an understanding
of the “greatest utility” of the chart to consumers;17 and
• third, the arrangement of the information in the
compatibility chart into columns was a result of
intellectual effort.18
His Honour went on to hold that Tonnex International
had infringed Dynamic Supplies’ copyright.
While it would be reasonable to assume that there
would be no copyright in the mere information presented in the catalogue, in the circumstances, the bulk of
the utility of the compilation lay in the presentation of
the information, not in the information itself. Accordingly, copyright provided an effective remedy for the
compilation owner.
Infringement of selected parts
Another issue facing database owners in enforcing
their rights is that in many instances the database in
question comprises only a small portion both of the
owners’ and of the alleged infringers’ materials. Can one
focus on a specific aspect of this subject matter and
argue that it has separate protection?
This issue was flagged by Wigney J in the recent case
of Sports Data Pty Ltd v Prozone Sports Australia Pty
Ltd.19 In that case, his Honour posed the question in the
following terms: “Can a person alleging copyright
infringement effectively skirt around the ‘substantiality’
element by confining the relevant works to a small part
of a much larger whole?”20
The case involved an interlocutory injunction application lodged by Sports Data, a company engaged in the
business of providing match analysis and statistics to the
National Rugby League (NRL) and its clubs. This
involved providing a database of events that occur
during each game (of which there are hundreds). In
order to create such a database, one must first create a
292
list and description of the events that are to be tracked
(input criteria). There are therefore two separate but
related compilations — one compilation being the substance of the database, being a compilation of events
during every NRL match (a compilation of facts), and
the other being the input criteria (a compilation of
original ideas). Under its agreement with the NRL, the
NRL would own the contents of the database, while
Sports Data would own all other information, including
the input criteria.
In 2013, the NRL changed statistics providers to
ProZone, though at that time, ProZone had not yet fully
developed its own input criteria. Sports Data alleged that
sometime around December 2013 or January 2014,
ProZone obtained a copy of Sports Data’s input criteria
and copied them into its own.
His Honour accepted that compiling the input criteria
involved sufficient effort to attract copyright protection.
However, the input criteria were in truth only a very
small part of Sports Data’s whole database. This gave
rise to the issue of whether it was legitimate for Sports
Data to claim that the input criteria were a distinct,
independent work, rather than simply a part of the
database as a whole.
Ultimately, his Honour declined to resolve that issue
in his judgment, and relied on other reasons to find that
Sports Data had not demonstrated that a substantial part
of its works had been copied. However, it seems this is
an issue that litigants will want to consider very carefully in the future.
Although we are yet to see resolution of this issue in
relation to databases, it has arisen for consideration in
two other areas, namely, television broadcasts and computer programs.
Television broadcasts
In TCN Channel Nine Pty Ltd v Network Ten Pty Ltd
(No 2),21 the Full Federal Court considered whether
Network Ten had infringed Channel Nine’s copyright by
re-broadcasting short extracts from some of Nine’s
television programs in episodes of The Panel.
Prior to remitting the decision back to the Full
Federal Court, the High Court had already determined
that each of the Channel Nine programs from which the
extracts were taken were separate television broadcasts.22 However, the majority had reserved consideration of whether a particular segment of a program can
constitute a separate “television broadcast”.23
The parties were at odds as to whether the High Court
had left open the possibility that the programs at issue in
this proceeding could be segmented for the purposes of
analysing infringement. Nine’s position was that, if a
program can be divided up into distinct parts in terms of
theme, story and impact, then the various segments of
intellectual property law bulletin
November/December 2015
that program should be treated as separate broadcasts.24
The issue was ultimately left unresolved by the Full
Federal Court.
One of the programs being considered was a broadcast of the 1999 National Rugby League Grand Final on
Wide World of Sports. The Panel had used an 8-second
extract of Melbourne Storm captain Glen Lazarus, who
was playing his last ever rugby league game, doing a
cartwheel after the match while celebrating his team’s
victory. If works can be segmented in the way that Nine
contended, then it might be argued that the relevant
work for analysing infringement is the post-match coverage (approximately 8 minutes), rather than the entire
program (almost 5 hours).
Justice Finkelstein (with whom Sundberg J agreed)
thought that the High Court had left it open to find that
Nine’s programs could be divided into segments with
separate copyright protection. Ultimately, however, it
was not necessary for him to resolve the issue.25 In
relation to the footage of the Glen Lazarus cartwheel,
Finkelstein J held that this was “on any view, a ‘highlight’”.26 In contrast, Hely J thought that the High Court
had authoritatively determined the question but, on
either view, he thought that the footage of the cartwheel
was “trivial, inconsequential or insignificant”27 in terms
of the source broadcast.
This case suggests that courts are at least open to
arguments around carving out separate works from
larger works in situations where there is an ability to
identify and label discrete portions of those larger
works.
this, the macros still constituted a set of instructions used
to indirectly bring about a result.
Although this decision leaves open the issue of the
minimum amount of code that can be protected as a
separate computer program, it makes it clear that smaller
segments of whole software packages can be the subject
of copyright protection. However, given that it is the
definition of “computer program” in the Act which
enables this to occur, there is perhaps little scope for
analogous arguments in relation to databases.
Conclusion
Following IceTV, the key issue in this space (and in
copyright law generally) is arguably not whether copyright will subsist in a database but the extent to which
copyright law will protect that database. There is often a
substantial amount of effort or cost involved in collating
data for a database, and it now seems reasonably clear
that such effort or cost will attract copyright protection.
Whether copyright subsists in a particular database,
however, is almost completely irrelevant if the information has not been presented in a way that can be
protected. The distinction between the underlying information in a database and the way in which that information has been presented is crucial.
Tim Golder
Partner
Allens
[email protected]
www.allens.com.au
Computer programs
The issue has also arisen in the context of computer
programs and “macros”.28 A macro is a command in
computer software “which, when executed, causes a
sequence of other functions to be executed, so that the
overall effect of performing a more complex function is
achieved”.29
In CA Inc v ISI Pty Ltd,30 it was argued that a macro
met the definition of “computer program” as defined in
the Act. Under s 10(1) a “computer program” is defined
as “a set of statements or instructions to be used directly
or indirectly in a computer in order to bring about a
certain result”.
Justice Bennett of the Federal Court emphasised the
wording of this definition in finding that a set of macros
was a “computer program” in its own right (making it a
literary work for the purposes of the Act). In reaching
her conclusion on this point, Bennett J rejected the
argument that, because the macros required the participation of various other components to bring about a
result, the macros did not constitute a complete “set of
statements or instructions”. Her Honour held that, despite
intellectual property law bulletin
Adrian Chang
Allens
www.allens.com.au
Scott Joblin
Allens
www.allens.com.au
Footnotes
1.
Copyright Act 1968 (Cth), ss 36, 31 and 14.
2.
IceTV Pty Ltd v Nine Networks Australia Pty Ltd (2009) 254
ALR 386; (2009) 80 IPR 451; [2009] HCA 14; BC200902942.
3.
See Victoria Park Racing and Recreation Grounds Co Ltd
v Taylor (Victoria Park case) (1937) 58 CLR 479; (1937) 1A
IPR 308; BC3700015 at 511.
November/December 2015
293
4.
Boyapati v Rockefeller Management Corp (2008) 77 IPR
19.
251; [2008] FCA 995; BC200805370 at [42].
5.
Desktop Marketing Systems Pty Ltd v Telstra Corp Ltd (2002)
192ALR 433; (2002) 55 IPR 1; [2002] FCAFC 112; BC200202458
20.
21.
at [593].
6.
Telstra Corp v Phone Directories Co Pty Ltd (2010) 273 ALR
725; (2010) 90 IPR 1; [2010] FCAFC 149; BC201009581 at
22.
[57] and [92].
7.
Above, n 1, at ss 36 and 13(1).
8.
Above, n 1, at s 14(1).
9.
Above, n 2, at [49].
10.
Above, n 2, at [56].
11.
Above, n 2, at [167]–[170], [185].
12.
Primary Health Care v Federal Commissioner of Taxation
(2010) 267 ALR 648;
(2010) 86 IPR 259; [2010] FCA
419; BC201003082 at [38].
13.
Above, n 6, at [101].
14.
Above, n 6, at [92].
15.
Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd
23.
24.
25.
26.
27.
28.
29.
(2011) 91 IPR 488; [2011] FCA 362; BC201102048.
16.
Above, n 15, at [78].
17.
Above, n 15, at [79].
18.
Above, n 15, at [82].
294
30.
Sports Data Pty Ltd v Prozone Sports Australia Pty Ltd (2014)
316 ALR 475; (2014) 107 IPR 1; [2014] FCA 595; BC201404485.
Above, n 19, at [83].
TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (No 2)
(2005) 216 ALR 631; (2005) 65 IPR 571; [2005] FCAFC
53; BC200503457 per Sundberg, Finkelstein & Hely JJ.
This was because they were “… put out to the public, the object
of the activity of broadcasting, as discrete periods of broadcasting identified and promoted by a title … which would
attract the attention of the public”, Network Ten Pty Ltd v TCN
Channel Nine Pty Ltd (2004) 205 ALR 1; (2004) 59 IPR
1; [2004] HCA 14; BC200400864 at [75].
Above, n 22, at [76].
Above, n 21, at [4].
Above, n 21, at [6].
Above, n 21, at,[34].
Above, n 21, at [65].
Above, n 1, at s 10(1), a “literary work” includes “a computer
program or compilation of computer programs”.
CA Inc v ISI Pty Ltd (2012) 95 IPR 424; [2012] FCA
35; BC201201297 at [116], citing Data Access Corp v Powerflex
Services Pty Ltd (1999) 166 ALR 228; (1999) 45 IPR
353; [1999] HCA 49; BC9906268 at [99].
Above, n 29. The case involved a complex factual background,
which it is not necessary to set out in this article.
intellectual property law bulletin
November/December 2015
intellectual property law bulletin
November/December 2015
295
Utility models in China: “small” inventions, big
outcomes
Renee White WATERMARK
Tips
• utility models are short term second tier patent
species available in many countries;
• utility models can be useful and cost effective
particularly in fast moving industries; and
• evidence suggests that Chinese utility model patents might be well suited to Australian companies.
Utility models are a so-called “second tier patent”
similar to a standard patent but generally having a lower
threshold of patentability balanced with a shorter term of
protection. Typically the term is 7 to 10 years. Protectable subject matter varies across jurisdictions, notably
excluding processes, chemical and pharmaceutical products. Examination is generally faster and cheaper; so it
can be a cost effective mechanism in rapidly developing
industries such as those involving fast moving consumer
goods (FMCG), certain types of software such as apps,
and novelty consumer goods.
History
Germany established a utility model system in 1891
in order to protect incremental innovations that represented a technical step forward in the art but which were
not otherwise patentable due to the high threshold of
inventive step. These “small patents” encouraged domestic inventors to protect minor inventions.
In 1979, Australia initiated its first utility model-like
system, which was called the petty patent system. This
was later replaced by the innovation patent system,
introduced by the Patent Amendment (Innovation Patents) Act 2000 (Cth). Throughout the years, numerous
other countries have established a similar scheme; including Argentina, Brazil, China, France, Italy, Japan, Mexico,
Republic of Korea, Russian Federation and Spain. Notably, Canada, the United Kingdom and the United States
do not offer an equivalent system.
Currently there is no Patent Cooperation Treaty
(PCT) route provided for utility models and therefore
the applicant must file individual applications in each
jurisdiction. Each country has distinguishable differences in terms of what subject matter is patentable,
296
novelty and inventive step requirements and substantive
examination practice. Following upon the recently signed
Free Trade Agreement between China and Australia, it is
worth exploring the differences between the Chinese and
Australian utility model systems since trends suggest
that Chinese utility models may be well suited to
Australian companies.
Comparison of Australian and Chinese
utility model systems
Australia
• An Australian innovation patent may contain a
maximum of five claims and has an 8 year term of
protection.
• After filing, the application undergoes a formalities check.
• A notice of grant is typically issued within 4 to 8
weeks.
• However, the patentee may only enforce their
rights to the patent if the application undergoes
substantive examination, and a certificate of examination is issued pursuant to Patents Act 1990 (Cth)
s 101E(2)(c).
China
• The Chinese Utility Model system has no restriction on the number of claims and allows for a
10–year term of protection.
• The preliminary examination provides marginally
higher requirements than that of the Australian
formalities check, including examining for obvious substantive defects in the description, drawings and claims. In addition, clarity, unity and
support are examined at this time.
• Typically, the application proceeds to grant in 3 to
4 months.
• Analogous to the Australia system, enforcement is
only allowed following an evaluation report, which
is akin to the Australian patent certification, made
by the Chinese State Intellectual Property Office
(SIPO) to the Chinese People’s Court.
intellectual property law bulletin
November/December 2015
Patentable subject matter
• the nature of the invention “so far as claimed in
any claim”;
• the “person skilled in the relevant art”;
• the common general knowledge as it existed in
Australia before the priority date; and
• whether the invention varies from the prior art
information in ways that make a “substantial
contribution to the working of the invention”.
The technology eligible for protection by an Australian innovation patent is subject to the same restrictions
as a standard patent. For example, an innovation patent
cannot be granted for:1
• the use of the invention which would be contrary
to law,
• a substance that is capable of being used as food or
medicine and is a mere mixture of known ingredients,
• a process producing such a substance by mere
admixture, or
• claims that include the name of a person as the
name, or part of the name of the invention.
In comparison, under Chinese Patent Law, a utility
model can be granted for “any new technical solution
relating to the shape, the structure, or their combination,
in a product, which is fit for practical use”.2 Therefore,
three elements must be present:
•
•
the utility model must be a product, not a process;
must include improvements relating to the shape,
structure and/or their combination; and
• the technical solution is adopted to solve a technical problem in observance with the eligible
subject matter.
Similar to Australian law, patentable subject matter
does not include any invention that is contrary to law or
social morality or is of plant and animal varieties.3
In this context, it is worth noting that the claimed
invention may be innovative in light of the prior art,
provided that there is support for a “substantial contribution to the working of the invention”. This is unlike
the standard for inventive step which requires that the
contribution was not obvious to a skilled person, irrespective of what difference it may make to the working
of the invention.
The Patent Law of China provides a more restrictive
test for the inventiveness of a utility model; specifically
in the number of prior art documents that can be cited
against the application and the technical elements required
to overcome the prior art.
The inventiveness of a utility model patent is based
on the invention “having substantial features and representing progress”.7 Despite this broad statement, there is
a lower threshold applied compared to standard patents,
in which inventiveness is tested as having “prominent”
substantial features and representing “notable” progress.
In practice, the inventiveness of the utility model is
determined by identifying the differences in “technical
hints” between the prior art and that of the invention.
Specifically, the examiner will consider two aspects:
Novelty
The novelty of innovation patent applications is
examined according to the same tests that are applied to
the respective standard patent applications in both Australia and China. This includes the 12-month grace
period in Australia which covers the disclosure of the
invention made by, or with the consent of, the applicant
or patentee.4
Innovative/inventive step
In Australia the Patent Amendment (Innovation Patents) Act 2000 (Cth) introduced the requirement for an
“innovative step”.5 However, this test was not fully
considered until 2009 in Dura-Post v Delnorth.6
In this landmark case, the Full Federal Court confirmed that the threshold requirement for an innovative
step is lower than that required for the inventive step of
a claim in a standard Australian patent application. To
establish an innovative step, four key elements are to be
identified and considered in accordance with ss 7(4) and
(5) of the Patents Act 1990 (Cth):
intellectual property law bulletin
• the field of the prior art; and
• the number of cited prior art documents.
Both standard patent and utility patents will be
assessed relative to prior art that encompasses the exact
technical field to which the invention or utility model
belongs. However, other technical fields will only be
considered relevant for utility patents if there is explicit
description in the prior art indicating that a skilled
person should look for technical means there. In addition, examiners rely heavily on the International Patent
Classification (IPC) to determine whether the prior art is
in a similar technical field to the utility model.
For example, in invalidation decision number 13581,
the subject matter of the utility model patent is a battery,
specifically the housing configuration of the battery
assembly. The IPC for the invention was H01M2/10.
The opponent cited D1–D4 in the opposition proceedings, which fall into classifications other than H01M2/
10. The board ruled that as the current invention had a
different IPC to that of the prior art, it fell into a different
technical field and therefore the utility model was valid.8
November/December 2015
297
The number of prior art documents that can be cited
against a single Chinese utility model patent is restricted.
According to the Examination Guidelines 2012, a maximum of two prior art documents may be cited unless the
invention is directed to a simple combination of features,
in which case two or more prior art documents may be
cited. In practice, Chinese Patent law regards a “simple
combination of features” as features that are:
• known from the prior art; and
• even after combining said features, they provide
no new or unexpected synergism or outcome.
Nevertheless, it is not enough for an opponent to
assert that the utility model is a simple combination of
features; the opponent must provide evidence and/or
convincing arguments.
Filing strategy and infringement
A patentee may file a Chinese utility model or an
Australian innovation patent at the same time as a
standard patent. This provides a low cost mechanism to
enable the establishment and enforcement of rights
quickly, in lieu of the lengthy time taken to obtain a
grant of a standard patent.
In Australia, an innovation patent can be converted
into a standard patent and vice versa. It is worth noting
that, in the event of a divisional innovation patent being
divided from a pending standard patent application, the
courts have deemed that the patentee may be entitled to
claim compensation from an infringer from the date of
filing the “original patent application”, being the standard parent application.9 Furthermore, it is irrelevant
that the claims of the innovation patent are present or
foreshadowed in the parent application, as a valid
standard patent shall provide fair basis for any claims at
the time of filing. Strategically, this ruling may provide
a broader scope of infringement rights to the patentee;
however, one must be mindful that those rights are not
enforceable until the innovation patent has undergone
substantive examination and certification.
Although a patentee may file an innovation patent
and a standard patent application for the same invention
in parallel, s 64(2) of the Patent Act 1990 (Cth) prohibits
the grant of more than one application for the same
invention where:
… an application for a standard patent claims an invention
that is the same as an invention that is the subject of a
patent and is made by the same inventor.
Typically, the patentee will withdraw the innovation
patent before the standard patent proceeds to grant. This
legislation was in issue in one of the ongoing litigation
cases of Samsung v Apple. In 2012, Samsung filed an
application with the Federal Court of Australia, under
298
the Administrative Decisions (Judicial Review) Act 1977,
to petition a review of the validity, or lack thereof, of
four of Apple’s standard patents (2006330724, 2007283771,
2008201540 and 2009200366). Samsung alleged that
the commissioner should have never granted the standard patents, as they were essentially duplicating the
previously granted innovation patents, hence, they were
null and void. However, this matter was settled out of
court and therefore the issue was never decided.
As in Australia, an applicant may file a Chinese
utility model and a Chinese standard patent application
simultaneously for the same technology. Once SIPO
grants the standard patent, the applicant must abandon
the utility model, continuing their patent rights with the
standard patent until the end of the 20 year term. The
abandonment of the utility model must be within a
specific time period before the grant of the standard
patent.
Unlike Australia, which does not provide any procedural requirements around simultaneous filings of this
nature, SIPO enforces specific practices to ensure events
similar to those in the Samsung v Apple case are
circumvented. These include the following requirements:
• the same applicant(s) must file the applications on
the same filing date; and
• a declaration must accompany each application at
the filing stage verifying that the application is for
two patent rights relating to one invention.
These requirements ensure that the Chinese examiner
is aware of both the utility model and standard patent
applications, preventing the applicant from “double
patenting”. This is not the case in Australia and thus may
enable the applicant to enforce rights against both an
innovation patent and a standard patent for the same
invention, effectively taking “two bites of the cherry”.
China has had its own share of high profile utility
model infringement cases as well. Despite the lower
threshold for inventiveness, the amount of compensation
for damages caused by the infringer is the same for both
utility model and standard patents. Typically the court
may award damages between RMB10,000—1 million,
depending on the nature and circumstances of the
infringing act. In 2007, Schneider Electric Low Voltage
(Tianjin) Co Ltd (Schneider) was found to have infringed
a utility model patent for a miniature circuit breaker,
owned by Chinese-based company Chint Group.10 In a
landmark decision, the court ordered Schneider to pay
RMB355 million in compensation to the Chint Group.
This was based on the amount of profits earned as a
result of the infringement, however, the case was later
settled for RMB157 million (USD$23 million).
intellectual property law bulletin
November/December 2015
Given the increased interest in intellectual property in
China, the government has responded by establishing
three specialised IP courts in Beijing, Shanghai and
Guangzhou. The Beijing court opened in 2014 and has
already accepted its first case, re-enforcing the Chinese
IP legal system and China’s commitment to compliance
and protection of IP rights.
Renee White PhD
IP Professional
Watermark
[email protected]
www.watermark.com.au
3.
Above, n 2, at Arts 5 and 25.
4.
See ss 9(e) and 18(1) (d) of the Act.
5.
See s 18(1A)(b)(ii) of the Act.
6.
Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd [2009] FCAFC
81; (2009) 81 IPR 480; BC200905629.
7.
Above, n 2, at Art 22.
8.
Q Ge and S Chen Four cases and their lessons for utility
models, (2013), Managing Intellectual Property, www.managingip.com.
9.
Britax Childcare Pty Ltd v Infa-Secure Pty Ltd (No 3) [2012]
FCA 1019; BC201207132.
10.
CHINT Group (Wenzhou, Fujian Province) vs. Schneider
Electric (Tianjin) Case: ZL97248479.5.
Footnotes
1.
2.
S 101B(2)(d)–(g) of the Patents Act 1990 (Cth).
See Art 2 of Patent Law of the People’s Republic of China.
intellectual property law bulletin
November/December 2015
299
Competition not to be discounted: Verrocchi
v Direct Chemist Outlet Pty Ltd1
Nicholas McConnell BECK LEGAL
Takeaway tips:
• Establishing a claim under the misleading or
deceptive conduct provisions of the Australian
Consumer Law will be difficult to prove when it
relates to the trade indicia of retail outlets due to
the ever changing nature of branding and advertising.
• While each case will be judged on their own
merits, provided that a trader does enough to
distinguish their brand from a competitor a trader
might not be seen to have engaged in misleading
or deceptive conduct even if the trader copies or is
shown to have been heavily influenced by the
marketing or branding of a competitor.
• Using descriptive advertising and marketing get-up
such as popular colours, slogans and layouts may
place significant barriers in front of an applicant in
their attempt to establish a misleading or deceptive
conduct claim.
• Extensive use of a trade mark might not necessarily prevent a court stripping a trade mark owner of
its registered trade mark.
• In this particular case as the respondent was able
to distinguish key features of its get-up, such as
the logo, from that of the applicants, the court was
satisfied that consumers were unlikely to be misled or deceived.
• As the applicant discovered in this case, trade
mark registration does not guarantee that a trade
mark owner will be able to enforce their rights as
removal from the trade mark register post the
priority date is possible.
Background
A recent decision of the Federal Court of Australia
(the court) considered whether a business could mislead
or deceive consumers by using similar get-up to that of
a competitor.
Mario Verrocchi and Jack Gance (the applicants) are
business partners of the discount chemist group, Chemist Warehouse. The applicants license the use of the
Chemist Warehouse trade marks, slogans and related
300
intellectual property rights to registered pharmacists
who trade under the name “Chemist Warehouse”.
Direct Chemist Outlet Pty Ltd and Ian Tauman (the
respondents) are a competitor of the applicants, who
similarly licences the use of the name Direct Chemist
Outlet (DCO) and related intellectual property to pharmacists within the DCO group.
The main focus of the proceeding involved the court
comparing the trade indicia of the Chemist Warehouse
and DCO brands, which included the store exterior, store
interior, catalogues, websites and other advertising material while also determining the extent to which a trader
could obtain a monopoly in such indicia. In this respect,
the Federal Court was asked, among other things, to
consider whether since 2006 DCO had breached s 18 of
the Australian Consumer Law (the ACL)2 by adopting
similar trade indicia to that of the applicants which
misled or deceived consumers into thinking that that
DCO chemists are either those of the applicants, or are
at least associated or affiliated with the applicants.
The applicants also alleged that the respondents
infringed the applicants’ registered trade mark which
contains the slogan “Is this Australia’s Cheapest Chemist?” (Trade Mark).3 In response to this claim, the
respondents lodged a cross claim challenging the validity of the Trade Mark pursuant to ss 41 and 88 of the
Trade Marks Act 1995 (Cth).
Comparing the trade indicia of the
applicants and the respondents
The applicants submitted that consumers have come
to recognise the visual branding of Chemist Warehouse
which has resulted in such branding being associated
with the applicants’ business.
In particular, the applicants submitted that the following key elements had become a part of their get-up:
• a predominately yellow store exterior which aimed
to “surprise and shock” consumers supported by
red or blue banners containing certain slogans
such as the Trade Mark coupled with a logo in the
form of a red shaped house with a chimney
(Chemist Warehouse Logo);
intellectual property law bulletin
November/December 2015
• a vertical shelf display within the store interior
with wide aisles, painted concrete floors, bright
fluorescence coloured price ticketing containing a
logo and inexpensive rack-self-racking which gave
the stores a distinctive cluttered look;
• widely distributed broadsheet catalogues with a
certain font, colour scheme and layout; and
• a website which shared certain key elements of the
colour schemes and contained the relevant slogans
and allowed for online sales.
The applicants claimed that the respondents had
replicated or moreover, copied many of the key features
of the Chemist Warehouse brand. In response, the
respondents dismissed this allegation and argued that
while it did not dispute it had copied elements of the
Chemist Warehouse brand, it had done enough to
distinguish itself from Chemist Warehouse to ensure that
consumers would not be misled or deceived. Specifically, it was contended by the respondents that:
• the catalogues had changed in their appearance
over the years in their layout, colour schemes and
the slogans used; however, the distinctive Chemist
Warehouse Logo had been consistently present;
and
• the website lacked consistency over time in appearance as it changed regularly.
In light of this, his Honour held that the only
consistent characteristic of the Chemist Warehouse brand
was the distinctive nature of the Chemist Warehouse
Logo.
2. Distinguishing between the Chemist
Warehouse and DCO brands
When comparing the trade indicia of both applicants
and the respondents, while the court did not doubt that
the respondents had been heavily influenced by the
applicants trade indicia in developing the DCO brand,
the court made several observations:
• in regards to the store exteriors, the Chemist
Warehouse storefronts were consistently loud and
cluttered with slogan bearing banners, while the
exterior of the DCO storefronts were comparatively less cluttered with the banners often limited
to uncapitalised wording while also including
lifestyle photos;
• in relation to the store layout and shop interior, the
Chemist Warehouse interior was cluttered while
the DCO interior more closely resembled a typical
retail chemist;
• while both parties catalogues were printed on
broadsheet, both had changed over time with the
logos of both parties remaining the consistently
present feature; and
• the respective websites both lacked consistency
over time which was further exacerbated by the
fact the Chemist Warehouse website focused on
online sales while the DCO website did not.
• the exterior of most DCO storefronts used a
primary colour palette, and only some had a
yellow background;
• unlike Chemist Warehouse storefronts, the exterior of some DCO storefronts incorporated lifestyle
photographs of families and pharmacists;
• DCO’s logo was a shape of a red half sunburst
(DCO Logo) and was sufficiently different from
the Chemist Warehouse logo;
• DCO store interiors were often cleaner in appearance through the use of lower shelving similar to
that of a traditional chemist; and
• the DCO website was restricted in its functions (as
it does not allow for online sales) but rather aimed
to provide information about the DCO group to
consumers.
Did the respondents engage in misleading
or deceptive conduct?
The court was not convinced that the respondents had
engaged in misleading or deceptive conduct and found
in favour of the respondents for two key reasons.
1. The ever-changing nature of the Chemist
Warehouse trade indicia
A key problem which the applicants’ faced was
establishing the extent in which the Chemist Warehouse
get-up obtained its own distinctive appearance. Despite
the submissions of the applicants, Middleton J was of
the view that:
Further, his Honour acknowledged that both Chemist
Warehouse and DCO had built their respective brands on
the use of colours such as blue and red but in particular,
yellow. With respect to the use of yellow, while the
applicants argued that the respondents did not need to
use this colour but had rather copied the idea from the
applicants, the court made certain observations, including that yellow:4
• there was an overall lack of consistency from store
to store of the store exteriors as while the exterior
of some stores was predominately yellow, other
stores exteriors contained little to no yellow;
intellectual property law bulletin
November/December 2015
• aims to provide high visibility to consumers in an
attempt to attract consumers to a trader’s store;
and
• denotes a value proposition, in that it used to
promote heavily discounted goods which create a
look of “cheapness”.
301
His Honour held that this use was not distinct to
either the applicants or respondents but rather is something that many discount stores including JB Hi Fi and
Bob Jane T-Mart utilise as a marketing strategy to attract
consumers’ attention.
The decision
While his Honour was satisfied that the respondents
had copied and applied many of the ideas and concepts
of the Chemist Warehouse branding and marketing
strategies, his Honour was not convinced that consumers
would likely be misled or deceived into thinking that the
DCO stores were Chemist Warehouse stores, or in some
way had an affiliation with the Chemist Warehouse
group.
Ultimately, his Honour ruled (at [280]) that the
relevant class of consumers “are more concerned with
the identity of the store by reference to its logo than by
any other feature of the get-up” and in the circumstances, his Honour was satisfied with the fact that the
DCO Logo was sufficiently distinctive from the Chemist
Warehouse Logo.
Further, his Honour reaffirmed the longstanding principle that confusion of consumers is not enough to
establish liability under the ACL (or its predecessor the
Trade Practices Act 1974 (Cth)).5 On this point, while
consumers may be drawn to recognise the similarity
between the get-up of Chemist Warehouse and DCO,
this was seen not be enough to establish that consumers
are likely to be misled or deceived.
parts signifying geographical location, price and the
nature of the business. Further, the words “Is this” was
seen to add to the non-distinctiveness nature of the
phrase. As a result, his Honour also held that the Trade
Mark was invalid and consequently, incapable of being
infringed by the respondents. In particular his Honour
held that “… minor variations on such a word cannot be
protected by trade mark registration, because to grant
such a monopoly would create trade mark infringers of
others who make other ordinary ‘deceptively similar’
use of that word”.7
As a result of the court’s findings, the Trade Mark has
been removed from the register.8
Conclusion
The applicants claim under s 18 of the ACL failed as
while the court was satisfied that the respondents had
been influenced by the trade indicia of the applicants, the
court was not satisfied that consumers would be misled
or deceived into drawing the conclusion that DCO stores
were Chemist Warehouse stores or in any way affiliated
with Chemist Warehouse.
The ruling is arguably a win for competition in that
traders will have trouble in monopolising the use of
descriptive and non-distinctive advertising and marketing strategies.
Furthermore, the decision may also encourage traders
to make their brand as distinctive as possible, rather than
attempting to argue this has been achieved by using
popular colours or marketing material layouts.
Trade mark infringement or a case of an
invalid trade mark?
Nicholas McConnell
Solicitor
Beck Legal
[email protected]
www.becklegal.com.au
In addition to their claim of misleading or deceptive
conduct, the applicants also contended their registered
trade mark “Is this Australia’s Cheapest Chemist?”
registered in classes 35 and 44 had been infringed by the
DCO slogan “Who is Australia’s Cheapest Chemist?”.
Footnotes
Figure 16
While his Honour noted the distinct similarities
between the two slogans, the respondents, in a cross
claim, alleged that the Trade Mark was not valid on the
grounds that the Trade Mark failed to distinguish the
applicants’ goods and services from the goods of other
persons as a descriptive or non-distinctive word cannot
be inherently adapted to distinguish a registered trade
mark owner’s brand from its competitors.
In assessing whether the Trade Mark failed to distinguish itself from other persons goods or services, his
Honour noted that the last three words of the Trade Mark
“Australia’s Cheapest Chemist” contained three separate
302
1.
Verrocchi v Direct Chemist Outlet Pty Ltd (2015) 112 IPR
200; [2015] FCA 234; BC201502395.
2.
Being Sch 2 of the Competition and Consumer Act 2010 (Cth).
3.
Australian registered trade mark number 1195650. Note that
this trade mark is no longer registered as a result of the rulings
in this case.
4.
Above, n 1, at [9] and [12].
5.
Equity Access Pty Ltd v Westpac Banking Corp (1989) 16 IPR
431; (1990) ATPR 40-994 at 440–441.
6.
The slogans were cited and appeared in his Honour’s judgment,
above, n 1, at [288]–[292].
7.
Above, n 1, at [297].
8.
Trade mark 1195650.
intellectual property law bulletin
November/December 2015
intellectual property law bulletin
November/December 2015
303
PRACTICE AREA LEAD: Genevieve Corish SUBSCRIPTION INCLUDES: 10 per year plus binder SYDNEY
OFFICE: Locked Bag 2222, Chatswood Delivery Centre NSW 2067 Australia
For further information on this or other LexisNexis products, call Customer Relations: 1800 772 772 Monday to
Friday 8.00am–6.00pm EST; email: [email protected]; or visit www.lexisnexis.com.au for
information on our product catalogue.
Editorial enquiries: [email protected]
ISSN 1035–1353 Print Post Approved PP 255003/00767 Cite as (2015) 28(9–10) IPLB
This newsletter is intended to keep readers abreast of current developments in the field of intellectual property law. It
is not, however, to be used or relied upon as a substitute for professional advice. Before acting on any matter in the area,
readers should discuss matters with their own professional advisers. This publication is copyright. Except as permitted
under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or
otherwise, without the specific written permission of the copyright owner. Neither may information be stored
electronically in any form whatsoever without such permission.
Printed in Australia © 2015 Reed International Books Australia Pty Limited trading as LexisNexis
304
intellectual property law bulletin
November/December 2015