Intellectual Property

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What's happening in intellectual property

February 2018

In this issue: we look at a digital rights management platform to help photographers protect their copyright; a new copyright infringement lawsuit against pop superstar Ed Sheeran; an Insta-celebrity clash over the word 'Bod'; changes to Australia's IP laws; the difficulties in comparative advertising; heightened risks that may be faced by patentees when PBS changes take effect; and a Federal Court decision that genetic testing methods continue to be patentable in Australia.

KODAKOne: the Kodak Moment moves up the Blockchain

In brief: Kodak, in partnership with WENN Digital, recently announced the launch of the KODAKOne digital rights management platform and KODAKCoin cryptocurrency. The goal of the blockchain-based platform is to assist photographers to protect their copyright, license their images and flush out potential infringers. Senior Associates David Rountree and Julia Taylor and Summer Clerks Jade Bouchier and Alexi Polden take a closer look.

Protecting copyright

Photographs are a class of 'artistic works' protected by copyright, giving the owner a set of exclusive rights, including to reproduce, publish and communicate the photograph to the public. There is no formal copyright registration process in Australia, putting the evidentiary burden on the person claiming ownership.

In Australia, copyright arises on creation and the person who 'took' the photograph owns it. While it's generally considered that this is the person who pressed the shutter button, this is yet to be tested and may be ambiguous. For example, if one person sets up the shot – selecting the lens, focus, camera angles and exposure – but a second person presses the shutter button, who actually 'took' the photograph? Arguably, the person pressing the shutter button has only performed a mechanical task, without any 'creative spark', 'independent intellectual effort' or 'skill and judgment'. However, the second person may also not meet the legal threshold, since they didn't actually 'take' the photo – they simply prepared the scene.

Kodak's proposed platform

A key aspect of the KODAKOne platform is the use of 'blockchain' technology, also known as distributed ledger technology (DLT). DLT refers to storing a digital record of transactions (or data) shared between a network of participants and updated in real time. This has a number of potential benefits for the recording of digital rights information, including:

  • Transparency: Distributed ledgers are often public, providing a transparent record of the database.
  • Immutability: To ensure the system's integrity, data must be consistent between different ledgers for information to be validated. Once entered, it's very difficult to tamper with the record, providing a level of trust in the information.

The KODAKOne platform is intended to be a one-stop-shop for photography licensing. Photographers will be able to register photographs on an encrypted blockchain ledger, intended to be a form of proof of ownership (it will be interesting to see how KODAKOne deals with disputes over ownership such as the one above). Users will also have access to other platform features, including:

  • licensing and payment for use of images, to be made in KODAKCoin cryptocurrency using 'smart contracts' (self-executing software applications); and
  • management of the post-licensing process, including continual web crawling to monitor infringement.

Watch this space

KODAKOne is not the first platform to flag the use of blockchain and cryptocurrency digital rights management. Others include Binded (a service for photographers), Verdictum (a film and video content protection platform) and DECENT (a general content distribution platform).

While a ledger of digital rights might be useful, to be successful it requires both rights holders (and, hopefully, the correct rights holders, according to the legal test!) and end-users to sign up and license through the platform (including adopting the use of the unique digital currency).

Even then, unless all pre-existing licensing arrangements are registered on the platform, some manual rights management will be required. It's not yet clear how KODAKOne will distinguish infringing use from licensed use simply not registered in the blockchain, or how it will persuade unlicensed users to pay the copyright owner. Further, rights holders will be paid in KODAKCoin, which (if freely traded) will likely have a fluctuating value. Recent wild fluctuations across a range of cryptocurrencies highlight the challenges for rights holders looking for a constant royalty stream.

While conceptually a digital rights platform for photographers is very appealing, the success of the KODAKOne platform is in the hands of its target users, and will be reflected in the level of uptake. If the platform is a roaring success, perhaps it will encourage other management of other rights to move onto the blockchain.

Will Ed Sheeran be facing copyright lawsuits for The Rest of Our (or his) Life?

In brief: It's a new year and, in what is seemingly becoming an annual tradition, a new copyright infringement lawsuit has been filed against pop superstar Ed Sheeran. Lawyer Elliott Burton and Summer Clerk Jessie McKenna report.

In 2016 a lawsuit was brought against Sheeran claiming that he copied Marvin Gaye's 'Let's Get It On' in his hit 'Thinking Out Loud' (the case was dismissed for procedural issues). In 2017 a $20 million lawsuit was filed against Sheeran, claiming his song 'Photograph' copied Thomas Leonard and Martin Harrington's 'Amazing' (resulting in them being added to 'Photograph''s credits and getting a significant share of royalties).

Now Australian musicians Sean Carey and Beau Golden are alleging copyright infringement. They claim the 2017 song 'The Rest of Our Life', co-written by Sheeran and released by Tim McGraw and Faith Hill on the Sony label, is a 'blatant note for note copy' of their 2014 song 'When I Found You', performed by country singer Jasmine Rae. Released in 2015, 'When I Found You' reached number 1 on The Music Network's Australian Country Chart and was the most played Australian country song on the radio in 2016.

Carey and Golden filed their complaint in the US District Court in New York on 10 January 2018, seeking more than US$5 million in damages. They will need to prove that:

  • 'The Rest of Our Life' is substantially similar to 'When I Found You'; and
  • the co-writers of 'The Rest of Our Life' had access to 'When I Found You' before or while writing the song.

Carey and Golden certainly believe that the songs are substantially similar. They point to the similarities between the songs' melody, chord progressions, scale degrees, musical context and overall mood, claiming they're so obvious, it should be apparent to the ordinary observer that Sheeran 'ripped off' their song.

But why exactly do Carey and Golden think Sheeran had access to 'When I Found You'? They have two theories. The first is that Sheeran and Sony Music were exposed to it by Jasmine Rae's boyfriend, Tim Holland, a marketing manager for Sony Music. Carey and Golden suspect he may have promoted the song to Sony Music to gain exposure for Rae. Indeed, Holland confessed he was aware of the similarities between the songs for more than two months before 'The Rest of Our Life' was released. The second is that Sheeran may have been exposed to the song when he was touring Australia in 2016, at the same time that 'When I Found You' was enjoying its greatest radio success.

If Carey and Golden are successful, they will be seeking a permanent ban on the future use of 'The Rest of Our Life' without their permission, or royalties for any future use. This just goes to show that the consequences of having a catchy tune stuck in your head can be extremely serious.

BODalicious Instafamous stars come to litigious blows

In brief: Two sporty Insta-celebrities have clashed over who gets to use the word 'Bod'. Vacation Clerk Noush Tait and Associate Nick Li report.

Tale of two BODs

Sophie Guidolin and Rachael Finch's hefty Instagram followings of 360K and 225K respectively, show that, like so many #instafamous accounts out there, @sophie_guidolin and @rachael_finch aren’t just Instagram handles, they’re part of a business (maybe it’s time for us to bump up our followers with another brunch shot?).

Recently, Rachael Finch’s use of the word ‘BOD’ or ‘B.O.D’ saw Sophie Guidolin apply for an interlocutory injunction to restrain her from using them in relation to apparel (Inspire by Sophie Guidolin v Finch Entertainment Pty Ltd [2017] FCA 1618).

After about ten minutes of Insta-stalking, you’ll see that Sophie 'The Bod' Guidolin has got a pretty full plate, as an Australian fitness model, mum of four and creator of a fitness empire. Her company, Inspire by Sophie Guidolin Pty Ltd, owns the registered trade mark for the words ‘The Bod’ for physical health and education services.

Rachael Finch (aka Miss Universe 2009), in between her regular TV appearances on shows such as MasterChef and Dancing with the Stars, has created her own empire with a variety of businesses, including her presently contentious apparel business, ‘Body of Dance’ (commonly abbreviated to B.O.D or BOD).

Finch’s BOD apparel has been sold online since October 2017, and will be hitting Myer in February 2018.

Guidolin's case

After apparently engaging in its own ten minutes of Insta-stalking, Guidolin’s company applied for an interlocutory injunction to prevent Finch from selling her 'B.O.D' garments.

Guidolin argued that Finch had promoted her garments in a manner constituting trade mark infringement. She also claimed that Finch's conduct amounted to passing off and misleading and deceptive conduct under the Australian Consumer Law, in light of Guidolin's pre-existing clothing range under 'The BOD' brand, including leggings and booty bands. If any of you are unaware of booty bands, you're not alone. Just so we’re all on the same page, Justice Perram's judgment helpfully explained they are elastic straps ‘worn with a view to tightening one’s buttocks’ and are not, in his view, a garment.

Guidolin had to establish that:

  • she had an arguable case;
  • the balance of convenience weighed in favour of granting an injunction; and
  • damages were an inadequate remedy.

The result

The court held that Guidolin’s case was ‘at least arguable’ but found against her on the balance of convenience. In particular, the court considered that:

  • Guidolin’s apparel sales were modest compared with Finch’s range (especially as the fabulous booty bands, rather unsurprisingly, were not considered to be garments);
  • she and her company had ‘sat on their hands’ in bringing the application (the court found Guidolin's claim that she first became aware of Finch's apparel range in December 2017 implausible, holding that she would likely have come across it in October 2017 but did not bring an application until December); and
  • most of Finch’s material, which had the BOD brand, would be useless if an injunction were granted.

Accordingly, the court refused to grant the injunction.

The case highlights the expectation on businesses to be aware of competitors' activities in this digital age. Luckily, this means more active-wear options for us when we want to pretend we're going to the gym.

Changes to Australia's IP laws are on the way

In brief: IP Australia has released draft legislation implementing the Federal Government's response to the Productivity Commission's inquiry into IP arrangements. Senior Associate Lauren John reports.

Late last year, IP Australia released an exposure draft of the legislation that will partially implement the Government's response to the Productivity Commission's final report on its inquiry into Australia's IP arrangements. The consultation period finished in December 2017. IP Australia received 19 non confidential submissions (which can be read here).

The draft legislation includes, significantly, amendments to:

  • commence abolishing the innovation patent system; and
  • clarify the circumstances when parallel importation of trade marked goods doesn't infringe a registered trade mark.

Changes to parallel importation laws

Currently, section 123(1) of the Trade Marks Act 1995 (Cth) provides that an importer of trade marked goods won't commit an infringing act if the trade mark was applied to the goods 'by, or with the consent of, the registered owner of the trade mark'. Although expressed quite simply, s123(1)'s interpretation and application have proved challenging.

The legislation's exposure draft proposed replacing s123(1) with a new, and rather wordy, s122A that would apply to any infringement actions brought after it commences. The new provision is intended to reduce the evidentiary burden on the importer (who will only have to establish it was 'reasonable to assume' the trade mark had been applied with consent). A number of submissions IP Australia received raised concerns about s122A's lack of clarity and suggested it may have unintended consequences, so it will be interesting to see if, and how, the Bill addresses those concerns.

Abolition of the innovation patent system

The proposed amendments in the exposure draft would see the innovation patent system 'phased out', rather than abolished. The proposed amendments to the Patents Act 1990 (Cth) would take effect 12 months after the amending Act receives Royal Assent – most likely, sometime in 2019. They mean that IP Australia would no longer be able to:

  • grant an innovation patent on an application with an effective filing date on or after the day the amendments take effect; or
  • certify a claim of an innovation patent with a priority date on or after that day (an innovation patent must be certified before it can be enforced).

The current regime would continue to operate for existing applications. Also, the existing rights to file divisional applications and convert a standard patent to an innovation patent would remain for any patent/application filed before the amendments took effect.

Wait… there's more!

IP Australia has undertaken separate consultation on proposed reforms to implement other aspects of the Government's response, including amending Australia's inventive step requirements for patents. We'll continue to keep you updated on the likely timing and form of any proposed amendments to Australia's IP laws.

Nurofen maker in need of fast pain relief

In brief: Inaccurate and unbalanced comparative claims that don't reflect the overall picture can cause big headaches, even where those claims have some support. Senior Associate Adrian Chang explains.

Pain is big business in Australia, and the makers of Panadol and Nurofen are constantly trying to get the upper hand. Hence Reckitt Benckiser's late 2015 comparative advertising campaign claiming that Nurofen was faster and more effective at relieving headaches than GlaxoSmithKline's Panadol.

The campaign has been held to have been misleading (GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Ltd (No 2) [2018] FCA 1), in not accurately representing what's known about the relative efficacies of ibuprofen (the active ingredient in Nurofen) and paracetamol (the active ingredient in Panadol).

The below image captures the core message in Reckitt's advertising campaign.

Reckitt's claim that Nurofen was superior to Panadol (and paracetamol generally), relied only on the study quoted in the advertisement, referred to as the 'Schachtel Study'.

GSK made a raft of complaints, but it all boiled down to one issue – did the advertisement, and the Schachtel Study, accurately reflect the state of scientific knowledge about the relative efficacy of ibuprofen vs paracetamol?

The graph set out in the advertisement was essentially a replica of a graph from the Schachtel Study, and at that level, the advertisement accurately represented that study's results. Further, the study concluded that a 400mg dose of ibuprofen was significantly more effective than a 1000mg dose of paracetamol (the standard recommended doses for Nurofen and Panadol) in treating muscle contraction headaches.

GSK didn't dispute the design, or the conclusions, of the Schachtel Study. Instead, it argued that the advertisement was misleading because, by focusing on only that study, Reckitt ignored other scientific studies that found no clinically significant difference between a 400mg dose of ibuprofen and a 1000mg dose of paracetamol in treating pain.

Reckitt acknowledged that those other studies didn't replicate the Schachtel Study results, but claimed they didn't contradict it either.

Reckitt's 'no evidence to the contrary' argument ultimately didn't fly with Justice Foster, who held that, despite there being no studies that were necessarily inconsistent with the Schachtel Study, the advertisement didn't convey the true state of the science.

His Honour held that the preponderance of studies had found there was, in fact, negligible difference in pain relief between ibuprofen and paracetamol. Accordingly, it was misleading for Reckitt to claim that Nurofen provided faster and more effective relief from common headaches than did Panadol, when the Schachtel Study was the only one supporting such a clear-cut claim.

This case's outcome is a reminder that comparative advertising remains tricky in Australia. It's not enough to say your specific express messages are supported – to avoid a misleading representation, statements should be balanced, accurate and reflect the overall picture. As Reckitt learned, failure to observe that standard can lead to pain from which there is no relief.

No relief in PBS price changes for originators seeking injunctions

In brief: Patentees may face heightened risks when changes to the Pharmaceutical Benefits Scheme (PBS) take effect later this year. Special Counsel Ric Morgan and Associate Claire Gregg explain.

PBS changes

The National Health Amendment (Pharmaceutical Benefits – Budget and Other Measures) Bill 2017, which passed through both Houses of Parliament on 13 February 2018, aims to reduce the cost of providing reliable and affordable access to medicines through the PBS. There are new and changed price cuts for originators depending on the length of time a product has been listed. There are also other changes that provide benefits to originators, including discretionary exemptions from some price cuts.

A key change that will have a detrimental impact on originators is an increase in the price cut that occurs on the entry of the first generic competitor. From 1 October 2018 until 30 June 2022, this will trigger a 25 per cent price cut instead of the current 16 per cent price cut. The 25 per cent price cut will also significantly influence the way patent litigation is likely to proceed.

No (injunctive) relief for patentees

Because of the increased price reductions on generic entry, the PBS reforms will recalibrate the risk benefit analysis undertaken by originators seeking to restrain competitors from entering the market before patent expiry.

The 'usual undertaking as to damages' given by patentees in return for an immediate injunction allows any party affected by the injunction to claim damages if the patentee's case ultimately fails. One such party is the Commonwealth, because it is denied the savings it would have otherwise received flowing primarily from the price cuts on generic entry.

The Commonwealth is currently pursuing some of these claims and the most recent indication as to the size of these claims is the news report that BMS has provisions of about $450 million in relation to the Commonwealth's damages claim for losses arising from subsidising Plavix® at a higher price on the PBS while injunctions were in force. The increase in price reductions will increase the potential exposure to the Commonwealth by more than 50 per cent.

In addition, originators are exposed to damages claims from the generics that have been prevented from entering the market by the injunctions, although the size of these claims will presumably be reduced because of the lower prices forced by the mandatory price reductions.

The news isn't all bad

There is some good news for patentees in the amended legislative scheme, which will enable new presentations of a drug to be listed on the PBS without triggering the statutory price reduction that ordinarily occurs when a first additional new brand is listed.

Further, the new increases in PBS price reductions stem from a five-year Strategic Agreement between the Government and Medicines Australia, which expires on 30 June 2022, after which it is intended that the statutory price reductions will revert to 16 per cent.

A tender approach to genetic testing

In brief: The year has got off to a good start for innovators, with the Federal Court providing some assurance that methods of genetic testing continue to be patentable in Australia. But tender news for some can be a tough outcome for others. Senior Associate Tony Shaw reports.


Cargill and Branhaven applied for a patent covering methods of using cattle DNA to identify desirable traits, including meat tenderness. The method has broad applicability in animal breeding programs to increase the quality and value of livestock.

In 2016 Meat and Livestock Australia (MLA) and Dairy Australia Limited joined forces, and unsuccessfully opposed the grant of a patent on the application at the Australian Patent Office (MLA and Dairy Australia Limited v Cargill, Inc. and Branhaven LLC [2016] APO 26). MLA subsequently appealed the Patent Office decision to the Federal Court.

In the appeal, MLA’s principal challenge was that Cargill's claims to methods of genetic testing should not be eligible for patent protection.

Myriad distinguished

This is the first time that the High Court's watershed decision in D’Arcy v Myriad Genetics Inc [2015] HCA 35 has been applied to an invention involving genetic material. MLA's primary argument was that the court should apply the reasoning in Myriad to find that Cargill's claims were not eligible subject matter for patent protection, as they merely related to the discovery and use of naturally occurring genetic material.

The court soundly rejected MLA's argument, on the basis that Myriad was concerned with naturally occurring genetic information. In contrast, the court found that Cargill's invention related to the use of 'naturally occurring DNA sequences', rather than the DNA sequences themselves, and was therefore not excluded from patent protection.

Inconsistency (with US law), thou art a jewel

MLA also argued that the court should follow the paradigm-shifting US cases of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) and Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (2015), which held that diagnostic methods are not eligible for patent protection if the methods merely relate to the association of naturally occurring genetic information and a disease. Given the catastrophic effect that the Prometheus and Sequenom decisions have had on the biotech, medical and agricultural industries in the US, the Federal Court's recognition that patent eligibility is an evolving concept in the context of Australian legislation and Australian conditions, rather than following a foreign law approach, will bring some relief to innovators.

Cold reception for 'chilling effect'

MLA also argued that Cargill's patent, if granted, would have a 'chilling effect' on research in the livestock industry in Australia and would be contrary to the Australian public interest. In rejecting these arguments, the court pointed to the fact that MLA is a co-owner of a separate patent that has very broad claims, which is hardly consistent with their 'chilling effect' argument.

What's next?

The sizzle may not have gone out of the case just yet, as it remains to be seen whether MLA will appeal the decision.

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