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Intellectual Property Bulletin

15 December 2006

In this issue: Our intellectual property lawyers and patent and trade marks attorneys provide an update on the latest cases and legislative developments affecting patents, trade marks, trade practices, copyright and technology.

Patents – Interlocutory injunctions in pharmaceutical patent cases

In brief: A recent decision shows the Federal Court's willingness to grant interlocutory injunctions preventing infringement of pharmaceutical patents pending trial. This may indicate a trend in the court's approach, in favour of patentees, following the grant of an interlocutory injunction in another pharmaceutical patent case in the Federal Court in November 2005.

by Sarah Matheson, Partner, and Jacky Mandelbaum, Senior Associate

Australian courts have traditionally been reluctant to grant interlocutory injunctions in pharmaceutical patent cases. However, in the October 2006 case of Merck and Co Inc v GenRx Pty Ltd [2006] FCA 1407, the court stated that it is clear that courts are now considerably less reserved about granting interlocutory injunctions in patent infringement proceedings than was the case historically. This is the second decision of the Federal Court since November 2005 in which an interlocutory injunction has been granted in favour of a patentee in a pharmaceutical matter, to restrain infringement of a patent pending trial.1

The proceeding

Merck & Co Inc (Merck) owns an Australian patent for the compound alendronate, which is used for the treatment of various bone disorders such as osteoporosis (the patent) and marketed in Australia as 'FOSAMAX'.

GenRx Pty Ltd (GenRx) obtained inclusions on the Australian Register of Therapeutic Goods and the Pharmaceutical Benefits Scheme (PBS) of drugs containing alendronate (GenRx products). Arrangements were underway for the GenRx products to be imported into Australia. Evidence showed that GenRx had been aware of the patent since at least November 2004.

The court found that the conduct of GenRx would clearly infringe the patent. GenRx sought to defend the application by raising evidence of alleged invalidity of the patent, particularly in relation to lack of novelty. The court held that the case on lack of novelty did not have strong prospects of success, although accepted that there was a serious question to be tried. The court determined, however, that the balance of convenience favoured granting interlocutory relief.

The court granted interlocutory relief on the basis that it accepted Merck would clearly suffer damage as a result of the proposed importation of the GenRx products, much of which would be financial loss that could be compensated by damages. Merck's argument that GenRx would be unable to meet any damages claim was not considered important. However, the court determined that certain factors made the potential loss difficult to quantify, such as the likely entry of other generics into the market following GenRx, which would quickly erode Merck's market share, the loss of Merck's commercial advantages of being in the market when the patent expired, and the unknown effect of imminent changes to the PBS.

GenRx and its distributor, Symbion, offered undertakings that neither would request a reduction in the benchmark price of the drug under the PBS until the final decision was handed down in this proceeding. However, this did not sway the court.

Central to the decision on the balance of convenience was the fact that despite its awareness of the patent, GenRx had proceeded to make commercial arrangements to import the GenRx products, in the knowledge that unless the patent was found invalid its conduct would infringe the patent. Yet, GenRx had not instituted revocation proceedings. The court held that GenRx could not complain that it would suffer loss as a result of being restrained from putting into place the commercial arrangements, as GenRx had placed itself in that position 'deliberately and knowingly', with its 'eyes wide open' to the possible consequences.

This language, also used in Pharmacia Italia SpA and Pfizer (Perth) Pty Ltd v Interpharma Pty Ltd (2005) 67 IPR 397, reflects statements made by courts in the United Kingdom in recent interlocutory (interim) injunction applications involving pharmaceutical patents. In the United Kingdom interlocutory injunctions are now commonly granted in pharmaceutical patent cases.

Indeed, the court in this case stated that the Patents Act 1990 (Cth) is intended to provide protection to patentees during the term of their patent, subject to the patent being found invalid, and that protection should continue until the determination of any proceeding related to the patent.  

Patents – Business method patents – an update

In brief: A UK patent applicant seeks to appeal to the House of Lords in a business method invention case.

by Chris Bird, Partner

In our Focus: Patents & Trade Marks – September 2006, we discussed the patentability of business method inventions in the aftermath of the Australian Full Federal Court decision in Grant v Commissioner of Patents [2006] FCAFC 120. In that context, we also commented on a pending United Kingdom Court of Appeal decision regarding an invention by Neal Macrossan, an Australian resident, whose application to patent a computer invention (a web-based system for the automatic generation of documents necessary for incorporating a company in the UK) had been turned down by the UK Patent Office on the grounds that it was excluded from patentability by the European Patent Convention (EPC) and the UK Patents Act 1977.

That appeal decision, Neal William Macrossan v Comptroller-General of Patents, Designs and Trade Marks [2006] EWCA Civ 1371, was handed down on 27 October 2006 and maintained the refusal of grant of the patent on the grounds that it was a 'business method' and a 'computer program', determining in effect that the invention was not 'technical as such'. The court established a new four-part test for deciding which inventions are excluded from patentability, and this has now led to revised guidelines for examination in the UK Patent Office concerning patentable subject matter.

But that is not the end of the matter. The latest decision is controversial, with the Appeal Court judges choosing not to define what is meant under the EPC or UK patent law by 'technical' or 'as such'. The final step of the new four-part test asks the question: Is the actual or alleged contribution technical in nature? We now learn that Mr Macrossan has lodged a petition for leave to appeal the decision to the House of Lords, with the decision on whether leave will be given likely to be issued early in 2007.

The House of Lords does not hear patent cases very frequently. In view of the substantial differences between jurisdictions concerning the limits of proper subject matter for patents, there will no doubt be enormous public interest if the highest court in the UK chooses to hear this matter. 

Patents – Challenge to entitlement of patents

In brief: Conor Medsystems is challenging the validity of three patents held jointly by the University of British Columbia and Angiotech Pharmaceuticals Inc, on the ground, amongst others, that the patentees are not entitled to the patents.

by Sarah Matheson, Partner, and Anna Howard, Articled Clerk

Background

In University of British Columbia and Anor v Conor Medsystems [2006] FCAFC 154,
the patentees claim to be entitled to the inventions by assignment from the US inventors. Conor Medsystems asserts that the two people from whom the University of British Columbia (UBC) claims title are not inventors.

In Intellectual Property Bulletin – April 2006, we reported on Justice Finkelstein's decision on a preliminary question put to the court on entitlement. The preliminary question asked whether certain facts in the particulars of invalidity, if assumed to be established by evidence, would support a finding that the patents are liable to be revoked on the ground that 'the patentee is not entitled to the patent' under section 138(3)(a) of the Patents Act 1990 (Cth).

The Patents Act provides that a patent may be granted to two or more persons jointly. Section 15(1) of the Patents Act provides an exhaustive list of persons to whom a patent may be granted. This list includes the inventor or someone who derives title from the inventor.
Justice Finkelstein ordered that the preliminary question be answered 'yes'. UBC and Angiotech appealed. For the purposes of the appeal, the parties agreed on an amended set of assumed facts including that:

  • the international (PCT) patent application identified Angiotech and UBC as the persons to whom the patent was to be granted and named five inventors;
  • prior to the grant of the Australian patent, the claims of the PCT application were deleted and new claims were substituted;
  • two of the inventors made no contribution to the alleged invention as claimed in the granted Australian patent;
  • prior to the grant of the Australian patent, those two inventors assigned their interest in the invention as claimed in the PCT application to UBC; and
  • the Australian patent was granted to UBC and Angiotech jointly and named all five inventors.
Arguments of UBC and Angiotech

The main argument was that Angiotech is a person to whom the patent could be granted under s15(1) and therefore Angiotech and UBC, considered jointly, fall within s15(1). In other words, so long as Angiotech is entitled to the grant of the patent, Angiotech and UBC are jointly so entitled. They argued that s15(1) was satisfied by being jointly identified in the patent request as the person to whom the patent was to be granted.

UBC and Angiotech relied on the fact that each of the inventors assigned their rights to the claimed invention to one or other of Angiotech and UBC. Therefore, considered jointly, Angiotech and UBC have the totality of rights from each and all of the named inventors. Accordingly, they contended it did not matter that two of the five named inventors made no contribution to the invention as claimed in the patent as granted.

Judgment

The Full Court held that the facts to be assumed were insufficient, so it was inappropriate to determine the preliminary question, either as originally formulated before Justice Finkelstein or as reformulated for the appeal. Justice Emmett noted that UBC may yet establish some act or conduct whereby it could be said that it would have been entitled, on the grant of the patent, to have an interest in the patent assigned to it. Alternatively, UBC may be able to establish that it derived title to the invention of the patent as granted either directly through the three remaining inventors or through Angiotech.

The Full Court set aside Justice Finkelstein's orders and directed that the matter be determined at trial in February 2007.

The conclusions on the interpretation of 'the patentee is not entitled to the patent' varied. The majority (Justices Emmett and Stone) considered that where there are two or more joint applicants or patentees, each is a separate entity and each must be a person entitled to the patent to satisfy s15(1). Angiotech derives title from three of the named inventors. On the assumed facts, UBC did not derive a right or an interest in the patent as granted from the two inventors who purported to assign their rights to UBC. On the basis that UBC is not entitled to the patent, they considered UBC and Angiotech are jointly not entitled to the patent.

Justice Bennett disagreed, noting that s138(3)(a) refers to the entitlement of 'the patentee' (and not 'a patentee'). She considered that where 'the patentee' comprises two persons who have collectively been assigned all rights in the claimed invention, it cannot be said that 'the patentee' is not entitled to the patent because one of those persons is not individually a person entitled to the patent.

Implications

The majority reasoning and conclusion on the assumed facts follows that of Justice Finkelstein, giving rise to the questions noted in our April report of his decision. The matter will be determined at trial. Should the majority reasoning prevail, it will be important for joint patent applicants to ensure that:

  • if deriving title from more than one inventor, each named inventor has made a contribution to the invention as claimed; and
  • when deleting, adding or amending claims prior to grant, each of the named inventors continues to be a person who has made a contribution to the invention as claimed; or
  • if not the inventor, they are each otherwise a person who would on the grant of the patent be entitled to have the patent assigned to them.

Trade Marks – Nestlé's 'GO ON...' mark held not inherently adapted to distinguish

In brief: In Unilever Australia Ltd v Societe Des Produits Nestlé S.A. [2006] FCA 782, Justice Bennett allowed an application by Unilever for the cancellation of Nestlé's mark 'GO ON...', finding that the 'GO ON...' mark was not inherently adapted to distinguish Nestlé's goods from those of other traders.

by Amanda Andreazza, Lawyer

Facts

After registration of the mark 'GO ON...' in 2001, Nestlé used the mark for its ice cream products, for example, the well known advertisement featuring the expression 'GO ON...Have a Drumstick'.

Nestlé threatened Unilever with trade mark infringement proceedings because of Unilever's use of the expression 'GO ON...treat yourself' in relation to its ice cream products. In response, Unilever made an application that Nestlé's 'GO ON...' mark be cancelled on the ground that it was not inherently adapted to distinguish.

Findings

Justice Bennett held there are some marks that lack a capacity to distinguish so that they cannot become capable of distinguishing through use. With regard to the mark 'GO ON...' her Honour held that this mark was not inherently adapted to distinguish for the following reasons.

  • There was extensive use by other traders of the expression 'GO ON...' which showed a lack of inherent adaptability to distinguish.
  • Even though the mark 'GO ON...' was not descriptive and did not refer directly to the characteristics of the goods, it has an association or connotation with those goods, that is, goods of an 'indulgent nature'.
  • The expression 'GO ON...' has an ordinary meaning in the English language.
  • The ellipsis after the words 'GO ON' was insufficient to make the mark inherently adapted to distinguish because other traders had used the same, or a similar, punctuation device in connection with the words 'GO ON'.

Justice Bennett considered whether or not Nestlé had intended to use the trade mark as a mark and found that it had not. The evidence showed that Nestlé had never used the mark by itself but in conjunction with other tag lines which Justice Bennett found demonstrated an intention to use the expression 'GO ON...' as a persuasive phrase rather than a brand signature.

Justice Bennett provides a helpful summary of the case law on 'inherent adaptability to distinguish' in other jurisdictions including the UK, the European Court and the United States. Her Honour gives examples from those cases of marks that were held to be inherently adapted to distinguish and those that were not.

The decision is a cautionary tale for traders and shows that the use of a mark may not protect it from cancellation if the mark lacks the capacity to distinguish. Therefore, care should be taken in the choice of marks, especially when they are to be used as, or as part of, a slogan.  

Trade Marks – Trade Marks Amendment Act 2006

In brief: The Trade Marks Amendment Bill 2006, reported in Intellectual Property Bulletin - September 2006, received Royal Assent on 23 October 2006. The Trade Marks Amendment Act 2006 (Cth) therefore commenced on this date. Some of the amendments came into effect on 23 October 2006. The remainder will come into effect some time after 27 March 2007. We briefly outline some of the key amendments to the Trade Marks Act 1995 (Cth) made by the new Act, and how they will affect trade mark owners.

by Philip Macken, Partner, and Peter Ryan, Trade Marks Attorney

Provisions which came into force on Royal Assent

The following provisions came into effect on the date of Royal Assent of the Trade Marks Amendment Act 2006 (Cth) (the TMAA).

Trade mark ownership provisions

Only entities having 'legal personality' (such as companies and individuals) may now apply to register their trade marks (section 27(2)(c)). Applications filed in the name of a trust, a business name, or other structures, which are not legal persons, will no longer be acceptable. This new provision does not affect any applications filed, or registrations granted, prior to the date of Royal Assent. This amendment does not apply to applications for registration of collective trade marks.

New opposition grounds and determinations

The TMAA makes several significant changes to the grounds on which an accepted trade mark may be opposed (as summarised below).

  • The owner of an existing trade mark application or registration may now oppose a later application (which has been accepted on the basis of use before the priority date of the existing trade mark) on the ground that:
    • the existing trade mark was first used, in respect of similar goods or services, before the first use of the later trade mark; and
    • the owner of the existing trade mark has continuously used the trade mark in respect of these goods or services (s58A).
  • Under s60(a), a trade mark application could be opposed on the ground that it was substantially identical with, or deceptively similar to, a trade mark that, before the priority date of the application, had acquired a reputation in Australia if, because of that reputation, the use of the opposed trade mark would be likely to deceive or cause confusion. This section has been amended so that it is no longer necessary to establish that the respective marks are substantially identical or deceptively similar. Now, one need only show that the earlier trade mark had a reputation (before the priority date of the opposed application) and that, because of that reputation, use of the opposed trade mark would be likely to deceive or cause confusion.
  • An application may now be opposed on the basis that it was filed in 'bad faith' (s62A). This new ground of opposition may encompass numerous possible situations, including where a mark contains deliberate misspellings of a registered trade mark or an application is filed purely to derive some commercial advantage without any intention to use the trade mark (in good faith) in Australia.
  • Under the Trade Marks Act 1995 (Cth) (the Act), it is possible for a trade mark for particular goods ('relevant goods') to be opposed on the ground that the trade mark is (or contains) a geographical origin (GI) for certain goods ('designated goods'). It is now clear that, for the opposition to succeed on this basis, the 'relevant goods' must be similar to the 'designated goods' or the use of the subject trade mark, in respect of the relevant goods, would be likely to deceive or cause confusion (s61(1)).
  • If an application is successfully opposed on the ground that the application was amended contrary to the Act, the Registrar will now have a discretion to revoke acceptance and re-examine the application (instead of having to refuse or register the trade mark) (s55(2)).

The above amended grounds of opposition only apply to applications accepted after 23 October 2006. It is therefore important to check acceptance dates when considering the grounds now available in opposition proceedings.

Registrar may apply to court for amendment or rectification if in public interest

Previously, only an 'aggrieved person' could apply to a court to order the Registrar of Trade Marks (the Registrar) to amend or cancel an entry on the Australian Trade Marks Register (the Register). Now, the Registrar may also apply to a court for an order to rectify the Register (ss 86, 87 and 88). However, the Registrar must not make any such application to a court unless the Registrar considers such action 'desirable in the public interest' (s88A).

It is unclear in what situations the Registrar will initiate rectification proceedings. It is anticipated that, in considering any such action, the Registrar will have regard to the extent of the 'public interest', the existence of any aggrieved parties and their inclination or capacity to take action on their own behalf.

Non-use removal applicant no longer needs to be 'aggrieved'

Previously, a person who wanted to have a trade mark registration removed on the basis of non-use had to be an 'aggrieved person', that is, a party who is 'appreciably disadvantaged in a legal or practical sense' by the registration. Now, any person may apply to the Registrar for removal of a registered trade mark on the basis of non use of that mark (s92(1) and (3)).

Power of owner to deal with registered trade mark

A registered owner's power to deal with a trade mark will now only be limited by 'rights appearing in the Register to be vested in another person' (s22(1)). Therefore, it is now critical for other persons with interests in a registered trade mark (eg licensees, mortgagees etc) to have their 'interests' recorded in the Register.

Provisions to commence next year

The following provisions come into effect either upon Proclamation or six months after the day on which the TMAA received Royal Assent. However, the commencement date for these provisions is expected to be some time after 27 March 2007.

'Series' trade mark applications

An application for a series of trade marks will be allowed in multiple classes (s27(5)), whereas presently 'series' applications can only cover one class of goods or services. Where several 'series' applications were filed before commencement of this provision, the owner will be able to apply to have those applications/registrations 'linked', provided they contain the same 'series' of marks and they share the same filing date (s82A). There may be some administrative and cost benefits in linking such registrations.

Currently, to qualify as a 'series' of trade marks, the relevant marks may only differ in respect of matter that is not inherently adapted to distinguish, or which does not substantially affect, the identity of the trade marks in the series. Under the TMAA, this test has been tightened. 'Series' applications will now only be permissible where the relevant trade marks differ only in respect of the colour of the marks or descriptive matter relating to the relevant goods or services, such as statements or representations to the relevant goods or services, and the price or quality of such goods or services. (s51(1)(d)).

Divisional applications

Currently, divisional applications can be made in relation to some of the goods and/or services covered by a 'parent' trade mark application or, to a very limited extent, parts of the original trade mark. Under the amended Act, it will no longer be possible to file a divisional application in relation to part of a trade mark. Divisional applications will only be allowed for the same trade mark in respect of some of the goods and/or services included in the parent application (ss 45 and 46). The amended Act will confirm that a divisional application takes the priority date of the original 'parent' application, even if it derives from an earlier (or more than one earlier) divisional application(s).

Summary

The TMAA makes some significant changes to Australian trade mark law and practice. Some of these changes have already occurred, while others will come into effect within the next few months. Regulations are presently being formulated for some of the above amendments and we will report further on these and other developments in future editions. For further details on the TMAA, or if you have any specific questions, please contact us.

Trade Practices – Trade practices damages claim cannot be assigned

In brief: In Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352 (16 October 2006), the Federal Court again ruled that a cause of action for the recovery of damages under section 82 of the Trade Practices Act 1974 (Cth) is not one which is capable of assignment.

by David L. Yates, Senior Associate

The representations which were the subject of the proceeding, alleged to be in breach of s51AC and s52 of the Trade Practices Act 1974 (Cth), were said by the applicant (the assignee company) to have been made by the respondent to the assignor company. The applicant said that a sale of business agreement made 1 July 2005, after the date of the alleged representations, constituted an assignment which in effect entitled it to succeed to the assignor company's rights and liabilities so as to entitle the assignee company to exercise the assignor company's causes of action in contract and under ss 51AC, 52 and 82 of the Trade Practices Act.

However, the Federal Court, applying previous Federal Court decisions on point, held that a s82 damages claim was incapable of assignment, and for this and other reasons the proceeding was dismissed pursuant to s31A of the Federal Court of Australia Act 1976 (Cth) as the applicant had no reasonable prospect of successfully prosecuting the proceeding against the respondent.

Copyright – Major reforms to Australian copyright laws on their way

In brief: The Copyright Amendment Bill 2006 was passed by the Australian Parliament on 5 December 2006. The Bill had been introduced into the House of Representatives on 19 October, following the release of exposure drafts in September. The Bill was referred to the Standing Committee on Legal and Constitutional Affairs, which recommended a number of changes. The amendments made by the Senate were agreed to by the House of Representatives and the Bill is now awaiting Royal Assent, which is expected before Christmas.

by Miriam Stiel, Senior Associate

The Bill contains a range of significant reforms to the Copyright Act 1968 (Cth). Some of the changes have come about following government reviews, while others are intended to implement Australia's remaining copyright obligations under the Australia-United States Free Trade Agreement.

What are the changes?

In broad terms, the areas of reform covered by the Bill are:

  • Exceptions to infringement 
    • The Bill introduces new exceptions to copyright infringement including:
      • private copying exceptions to allow 'time-shifting' and 'format-shifting';
      • a new 'flexible dealing' exception for non-commercial uses of copyright material by libraries, archives, museums and educational institutions and for people with disabilities; and
      • a new fair dealing defence to allow copyright material to be used for parody or satire,
    • as well as amending the existing 'fair dealing for the purposes of research or study' defence.
  • Enforcement measures
    • The Bill contains new provisions dealing with enforcement which are designed to assist in combating copyright piracy and to make the criminal offence provisions of the Copyright Act consistent with the Commonwealth criminal law policy and Criminal Code. The enforcement provisions include:
      • the introduction of a tiered system of copyright offences with a range of enforcement options, including for the first time an 'infringement notice scheme' for minor offences;
      • amendments relating to evidential presumptions in civil and criminal proceedings, to provide that information from labels, marks, foreign certificates or chains of ownership documents are presumed true unless proved otherwise and to recognise the labelling practices of films and computer software;
      • amendments to the Customs seizure provisions to reflect changes made to the Trade Marks Act 1995 (Cth) earlier in the year.
      • Amendments to the liability regime for the circumvention of technological protection measures (TPMs) to extend protection to TPMs which control access to copyright material.
      • Amendments arising from the Government's response to the 2001 'Digital Agenda' reforms relating to use for educational purposes and by educational institutions and amendments to the educational statutory licences.
      • Amendments to the provisions covering unauthorised access to encoded broadcasts, making it an offence to dishonestly access a subscription broadcast without authorisation and payment of the subscription fee and to distribute a subscription broadcast to others or use it for commercial purposes without the broadcaster's authorisation.
      • Amendments to the jurisdiction of the Copyright Tribunal.

The new exceptions, the Digital Agenda reforms and the Copyright Tribunal provisions will come into force when the Bill receives Royal Assent. The encoded broadcast provisions will come into effect 28 days after Royal Assent. All other provisions will have effect from 1 January 2007.

UPDATE: The Copyright Amendment Bill 2006 received Royal Assent on 11 December 2006.

Copyright – Moral rights – first Australian case

In brief: In Meskenas v ACP Publishing Pty Ltd [2006] FMCA 1136, the Federal Magistrates Court has awarded $9100 in damages to the applicant, artist Mr Meskenas, for breach of his moral rights under Part 9 of the Copyright Act 1968 (Cth).

by Jim Dwyer, Partner, and Natasha Simonsen, Paralegal

Mr Meskenas brought the action in respect of a photograph, published in Woman's Day, depicting Princess Mary standing in front of a portrait which he had painted of Dr Victor Chang. The magazine incorrectly attributed the painting to one of the artist's rivals and failed to publish a promised apology and retraction despite 90 phone calls from Mr Meskenas. When proceedings were commenced a year later an apology was finally printed. The relevant article included a photograph of the painting, but the negative had been reversed rendering the representation inaccurate. The two main issues discussed were (1) breach of copyright; and (2) breach of the artist's moral rights.

Breach of copyright

On the question of breach of copyright, Federal Magistrate Raphael found that the applicant did not own the copyright in the painting because it had been produced under an agreement made for valuable consideration (section 35(5) of the Copyright Act). Since the painting was commissioned by Dr Chang and paid for by the provision of surgery free of charge, the copyright in it belonged to Dr Chang's deceased estate. In any case, the respondents could not have claimed the benefit of the 'fair dealing' defence in s42 because, notwithstanding that the publication was 'for the purpose of, or associated with, the reporting of news', there was no acknowledgment of Mr Meskenas's authorship. The Federal Magistrate also rejected ACP's attempt to establish an 'innocent infringer' defence under s115(3) of the Copyright Act, finding that the magazine 'knew that there would be an infringement if it had got the attribution wrong', and, moreover, that the defence may not be available where no enquiries as to ownership of the copyright are made.

To limit the possibility of a retrial should he be found to have erred in holding that the copyright belonged to Dr Chang's estate, the Federal Magistrate went on to consider the damages he would have awarded had the copyright belonged to the artist. Since none of the defences in s115 were available to the respondents, Mr Meskenas would have been entitled to damages or an account of profits. Having elected damages, the Federal Magistrate considered that the award for breach of copyright should be nominal ($100) because of a concession made during proceedings that there would have been no court case had the respondents printed a retraction and apology, and because the 'infringement was, at its strongest, negligent and not deliberate'. Mr Meskenas would also have been entitled to some compensation for the personal distress he suffered ($1000) and damages for the respondents' conduct during proceedings ($8000).

Moral rights

Having found that the applicant did not own the copyright in the painting, the Federal Magistrate considered the question of the artist's moral rights. This is the first Australian case to consider moral rights, which were introduced into the Copyright Act by the Copyright Amendment (Moral Rights) Act 2000 (Cth). Part 9 of the amended Copyright Act outlines three 'moral rights': the right of attribution of authorship (s193); the right not to have the authorship falsely attributed (s195AC); and the right of integrity of authorship (s195AI). Only the first two were pleaded in this case.

The Federal Magistrate considered that 'the right of attribution expressed in s193 of the Copyright Act is a positive right and prima facie was breached by the publication'. He found that the painting's reproduction by way of a photograph in Woman's Day was an 'attributable act' under s194(2)(d) of the Copyright Act because it involved communication of an original artistic work to the public. As a result, the magazine was bound to acknowledge Mr Meskenas's authorship. The Federal Magistrate inferred that the magazine knew this because it had attributed authorship to someone, albeit the wrong person.

The respondents raised two defences. They were unable to make out the defence of 'reasonable non-attribution' in s195AR because there was no evidence from the nature of the work or the purpose for which it was used that there would have been any difficulty arising from a proper attribution. Second, the respondents argued that breach of the artist's moral rights required proof of subjective intent, so that 'false attribution' should be construed to mean 'purposely or deliberately or intentionally untrue'. Federal Magistrate Raphael concluded that proof of subjective intent was only required where quasi-penal consequences would follow for the respondent. The remedies for infringement of Part 9 of the Copyright Act are outlined in s195AZA and include: the granting of an injunction; damages; a declaration of infringement of the author's moral rights, an order that a public apology be made; and/or that a false attribution be removed or reversed. The Federal Magistrate concluded that these remedies were restitutional rather than penal or quasi-penal and so the word 'falsely' should be construed to mean 'objectively incorrect'. Applying this standard, it was clear that the identification of an artist other than Mr Meskenas amounted to a 'false attribution' and infringed his moral rights.

The Federal Magistrate concluded that an award of damages under s195AZA would be the appropriate remedy for infringement of the artist's moral rights. In the absence of any authority, he concluded that the appropriate figure was the sum which he would have awarded had the applicant been the owner of the copyright. He found that there had been no commercial dealing with author's rights, and that it was unlikely that Mr Meskenas's reputation had been damaged or that a correct attribution would have particularly enhanced it. He awarded a sum of $1100 for 'the wrongful attribution which includes the 'non-attribution' and the distress which it caused to the applicant'. The remaining $8000 was referrable to aggravated damages for the hurt caused by the respondents' conduct, which the Federal Magistrate considered to be 'additional to the lesser sum awarded in respect of the original infringement' as distinct from 'a species of exemplary or punitive damages'.

Technology – Federal Court – Clarity1 ordered to pay $5.5 million penalty for spam email

In brief: As we reported in Intellectual Property Bulletin – September 2006, the Federal Court on 13 April 2006 held that the actions of Clarity1 and its director, Wayne Mansfield, in sending at least 231 million commercial emails, most of which were unsolicited, in the twelve months after the Spam Act 2003 (Cth) commenced in April 2004, was in breach of sections 16(1) and 22(1) of that Act. The Federal Court also held that Clarity1 used harvested electronic addresses in contravention of the Spam Act.

by Bill Singleton, Lawyer

In October 2006, the Federal Court determined the penalty to be imposed on Clarity1 and Mr Mansfield. At the hearing on penalty the applicant, the Australian Communications and Media Authority (ACMA), asked the court to have regard to:

  • the maximum penalty available under the Spam Act, which, in the case of Clarity1, amounted to $99 million, and in the case of Mr Mansfield $18.8 million, which it said indicated how serious the Federal Government views the issue of spam and its intention to send a message to other businesses and individuals that such conduct will not be tolerated;
  • what it said was the entrenched culture within Clarity1 and its 'systematic, flagrant, deliberate and blatant' conduct in relation to sending spam; and
  • the alleged conduct of Clarity1 in continuing to send spam after the original determination of liability by the Federal Court.

In setting the appropriate penalty, the Federal Court considered the following factors that should be taken into account:

  • the need to send a clear message of deterrence, even if Clarity1 had no hope of paying such a large penalty or would go into bankruptcy;
  • the fact that it was difficult to establish that recipients of spam sent by Clarity1 suffered loss was not a mitigating factor; and
  • the commercial realism of the particular circumstances of the matter, including the capacity of Clarity1 to pay and proportionality with the deliberation with which Clarity1 contravened the Spam Act.

The Federal Court imposed a penalty of $4.5 million on Clarity1, and a penalty of $1million on Mr Mansfield, and made orders restraining both Clarity1 and Mr Mansfield from sending further unsolicited commercial email.

The clear message to emerge from the case is that the Federal Court is willing to impose huge penalties for the contravention of the Spam Act.

Businesses that market using email should note that to comply with the Spam Act, commercial email may only be sent to recipients where:

  • the recipient consents to receive such email; and
  • the identity of the sender is prominently displayed; and
  • there is a functional unsubscribe facility.

Under the Spam Act, consent may be inferred, but email marketers should be extremely careful and seek advice if intending to rely on inferred consent. Consent should not be inferred by a mere failure of a recipient to opt-out via an unsubscribe link. In particular, a recipient's failure to opt out using unsubscribe links in prior emails should not be taken to infer consent to receive later emails. Note that some email marketers may have further obligations under the Australian eMarketing Code of Practice.

Footnotes
  1. Pharmacia Italia SpA and Pfizer (Perth) Pty Ltd v Interpharma Pty Ltd (2005) 67 IPR 397.

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