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Intellectual Property

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What's happening in intellectual property

August 2018

In this issue: we look at challenges for domain name searching posed by the GDPR, the second round of draft amendments to the Patents Act, developments in the patentability of computer-implemented inventions, the dangers of falsely marking products as 'patented', the latest brand wars in the Federal Court and the US Postal Service's costly case of mistaken identity.

ICANN caught in regulatory web

In brief: Since it took effect on 25 May 2018 across the entire European Union, the General Data Protection Regulation has sent shockwaves through countless internet infrastructure industries. US-based organisation ICANN has been caught in the crossfire. The enforcement of these new data privacy provisions could significantly affect its WHOIS service and, in turn, the way IP due diligence is conducted. Law Graduate Phoebe St John reports.

By enforcing compliance with strict data privacy and governance frameworks, the General Data Protection Regulation (GDPR) aims to protect all individuals located in the EU from privacy and data breaches by the companies that process and hold their personal data. Caught in this shake-up of data protection laws is the Internet Corporation for Assigned Names and Numbers (ICANN), a US-based, non-profit organisation responsible for administering a large portion of domain names.

ICANN manages the WHOIS internet domain directory, which makes the administrative and technical contact details of those who have registered certain internet domains searchable to the public. By virtue of collecting the personal data (eg, a registrant's name, email and telephone number) of individuals located in the EU, ICANN falls within scope of the GDPR. This means public domain registration data relating to a natural person is no longer available on WHOIS.

Initially, ICANN showed no indication of abandoning its procedures to comply with the GDPR. Yet following pressure from IP specialists, cyber experts, industry and government officials alike, ICANN dramatically accelerated processes to bring WHOIS into compliance before the 25 May 2018 deadline. However, as it stands today, its various draft proposals are yet to be implemented, and many of its contracting registry operators no longer collect WHOIS information in fear of breaching the GDPR. This leaves WHOIS with a fragmented approach to data availability, and no clear path ahead.

How does this affect you?

The inability to confirm the registrant details of a large number of .com domain names worldwide presents two primary challenges.

Firstly, it can significantly limit the ability of a rights holder to discover the identity of individuals operating infringing websites. The non-disclosure of domain name registrant information presents a challenge for those seeking to chase down sources of counterfeit goods.

Secondly, parties undertaking due diligence during sale of business transactions are likely to encounter difficulties. Domain names are regarded as an important category of IP rights for businesses. The WHOIS directory is relied upon by many IP and cybersecurity professionals for the legitimate retrieval domain name ownership information. This is critical to ensure infringement is avoided, assets are verified, registrants are accurately identified and domain names are registered by the appropriate entity.

When contact information is removed for all registrants from WHOIS, the ability to confirm registrant information for (or inquire into) a domain name, to enforce legal remedies against cybersquatters, or to investigate security breaches and other domain name misuses are all jeopardised.

Compliance with the GDPR would likely mean that certain categories of personal data would not be available via the WHOIS directory (particularly where ICANN does not obtain consent to disclose it), with the result that such data would be unavailable for legitimate purposes such as due diligence. By attempting to balance its own data-governance practices and the GDPR, ICANN could risk either significantly limiting the utility of WHOIS searches, or facing steep multi-million euro penalties for failing to comply with the GDPR. Until such balance is struck, the IP community waits with bated breath.

Second round of changes to Australia's IP laws released for comment

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

IP Australia has released an exposure draft of the legislation that will implement the second part of the Federal Government's response to the Productivity Commission's final report on its inquiry into Australia's IP arrangements. We outline the key changes below. IP Australia is accepting submissions on the exposure draft until 31 August 2018. We've previously discussed the Bill to implement the first part of the Government's response, which has since passed both Houses of Parliament.

The exposure draft includes significant amendments to the Patents Act, including:

  • Amending the inventive step requirements. The current s7(2), which says that 'an invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious…', would be amended to say 'an invention is taken to involve an inventive step when compared with the prior art base if the invention is not obvious…'.
  • Introducing an objects clause. The proposed objects clause provides that the object of the Patents Act is, amongst other things, to provide a patent system in Australia that 'promotes economic wellbeing through technological innovation'. IP Australia says the clause is a 'broad guiding statement' about the benefits of the patent system, rather than an indication that the grant of any specific patent should achieve the stated objects.
  • Abolishing the innovation patent system. 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. The current regime would continue to operate for existing applications and the 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.
  • Amending the Crown use provisions. A new s160A would extend authorisation to any use which is necessary for the proper provision of services where those services are 'primarily provided or funded by' the Commonwealth or a State/Territory. A new s163, which provides a general rule for Crown use in non-emergency situations, would require the relevant authority to first attempt for a reasonable period to negotiate with the patent owner for authorisation to exploit the invention on reasonable terms.
  • Amending the compulsory licensing provisions. The 'reasonable requirements of the public' test would be replaced with a 'public interest' test when the Court considers an application for a compulsory licence. The amendments would address the problems with the current provisions as they relate to compulsory licences to exploit dependent patents, by clarifying that only the patentee of a dependent patent can seek a compulsory licence over the use of the original patent.

You can read more about the proposed amendments in our publication Proposed changes to the Australian Patents Act, and how they will affect you.

We'll continue to keep you updated on the progress of the changes to Australia's IP laws.

Red letter day for Louboutin – Frucor green with envy

In brief: Two recent decisions provide mixed news for the owners of colour trade marks. The European Court of Justice has upheld the validity of Louboutin's registered trade mark for the colour red applied to the soles of high heels. Meanwhile, the Federal Court has found that Frucor's application to register a green colour mark in relation to energy drinks must be refused. Associate Anna Conigrave reports.

'V' Green

In 2012, Frucor Beverages Limited, the maker of 'V' energy drinks, applied for registration of a green colour mark in relation to energy drinks. The mark was defined by a description and graphic representation. The description was of 'Pantone 376C', referred to by Frucor as 'V' Green. However, the representation provided to IP Australia was of a different shade of green than that actually used by Frucor.

The Coca-Cola Company successfully opposed registration of the mark; Frucor appealed to the Federal Court. Justice Yates heard the appeal and considered, among other things, whether the mark was capable of distinguishing Frucor's energy drinks or should be rejected pursuant to s 41 of the Trade Marks Act 1995 (Cth).

Justice Yates kicked off his reasons by noting that the mark is not inherently adapted to distinguish Frucor's product. His Honour went on to say that the relevant question is, therefore, whether the mark was used by Frucor before the filing date to such an extent that the mark does in fact distinguish Frucor's energy drinks. In answering that question, Justice Yates noted that it is use of the mark applied for, and not any other mark, that is relevant. His Honour reasoned that, because the mark applied for by Frucor was ambiguously defined, Frucor could not establish use of the mark, and registration of the mark should be refused.

Justice Yates then turned his mind to the hypothetical scenario in which the mark was unambiguously defined as 'V' Green. His Honour said that the questions relevant to that scenario were: 1) whether Frucor used 'V' Green as a trade mark in relation to energy drinks; and 2) if so, whether the use was such that 'V' green distinguishes Frucor's energy drinks. In relation to the first question, His Honour found that, while Frucor used 'V' Green extensively in relation to energy drinks, 'V' Green did not function as a trade mark. This was because: 1) consumers would have regarded Frucor's 'V' logo as the badge of origin for Frucor's 'V' energy drink products; and 2) Frucor used colour descriptively, to denote differences between 'V' energy drink products (eg, 'V' Green denoted the core product, and silver denoted the sugar-free product).

Justice Yates dismissed Frucor's appeal with costs.

Louboutin Red

In 2013, Christian Louboutin commenced proceedings in the Netherlands against Dutch shoemaker Van Haren Schoenen BV for infringement of Louboutin's registered trade mark for the colour red applied to the soles of high-heels.

Van Haren argued that Louboutin's mark was invalid on the basis of a European law that prohibits the registration of marks consisting exclusively of certain shapes. The Dutch court was unsure of how to apply the law, so referred the matter to the European Court of Justice (ECJ).

The ECJ found that Louboutin's mark does not cover a specific shape of high-heel sole, and that, in any event, the mark could not be said to consist 'exclusively' of a shape since the main feature of the mark is a colour. The red sole mark therefore remains valid, and the Dutch proceedings will now continue.

The takeaway

The Frucor decision serves as a warning to the owners of colour trade marks – to avoid being browned off, owners should ensure that their marks are clearly defined in trade mark applications (including by reference to the correct pantone) and used sufficiently as trade marks before the filing date. This requires a level of consistency similar to that employed by Louboutin.

An interlocutory injunction outcome you wouldn't have bet on

In brief: Crownbet's efforts to rebrand itself as 'Sportingbet' suffered a blow after Sportsbet successfully applied for an interlocutory injunction in the Federal Court of Australia. Lawyer Edward Thien reports.

Background

Earlier this year, InIP covered an unsuccessful interlocutory injunction application regarding the trade marks 'BOD' and 'The Bod'. Sportsbet Pty Ltd v CrownBet Pty Ltd [2018] FCA 1045 illustrates the fine line that exists in such applications.

Sportsbet operates an online betting website using the trade mark 'SPORTSBET'. Crownbet, as part of a rebranding following its purchase of rival betting agency William Hill Australia, sought to operate under the name 'SPORTINGBET'. While the court applied the same principles as in 'The BOD' case, this time it reached a contrasting result. In this case, the court was satisfied that Sportsbet had a prima facie case and that the balance of convenience warranted ordering the interlocutory injunction.

Sportsbet's argument

Sportsbet's application for interlocutory injunctive relief relied solely on its action under the Australian Consumer Law relating to misleading or deceiving conduct. Interestingly, 'SPORTINGBET' and 'SPORTSBET' had both been used concurrently between 2001 and 2015. However, on this point, Sportsbet drew the court's attention to evidence of confusion between these two brands. Notably, it was shown that the Northern Territory Revenue Office mistakenly believed Sportsbet had made a payment twice, such was the similarity between the two marks.

Prima facie case

An analysis of the way in which online betting occurs was fundamental to examining the plausibility of a misleading or deceptive conduct claim. For example, a significant proportion of Sportsbet's users make organic searches via their mobile phone's application store or through online search engines. Further, the majority of customers place bets on their mobiles devices in what is often a spontaneous and brief interaction.

In light of the way online betting transactions occur (particularly the brief amount of time exerted), the similarly between 'SPORTSBET' and 'SPORTINGBET' led the court to find that there was a strong prima facie case for misleading or deceptive conduct. It was held that a substantial number of consumers would likely access Crownbet's platform rather than Sportsbet's in error, or be likely to assume a trade association, if CrownBet started using the 'SPORTINGBET' mark

Balance of convenience

The court accepted that if an interlocutory injunction was granted and Crownbet was successful at trial, it would not likely be feasible to rebrand a second time. Therefore, granting interlocutory relief was tantamount to final relief in Sportsbet’s favour. On the other hand, without an injunction, Sportsbet's potential for loss would be difficult to quantify, with a likelihood of enduring confusion existing in the marketplace resulting from the use of 'SPORTINGBET' in the event an interlocutory injunction had not been granted. On balance, the court ruled in favour of Sportsbet, with its strong prima facie case contributing to this conclusion.

What does this mean?

Crownbet has since rebranded its new offering to 'BetEasy' in the light of the court's decision. When compared to the contrasting result in the 'The Bod' case, this case shows the weight placed on the complexities of the factual matrices in interlocutory applications. The courts will not make their decision purely based on an objective analysis of the similarities between two marks. Instead, analysis is required of the markets in which these marks operate.

Fool's gold – how packaging can be misleading or deceptive

In brief: The Federal Court has ruled that adopting distinctive branding may not be enough to get a trader out of hot water if the get-up of the trader's products is similar to somebody else's. Despite each product displaying the trade marks CHANTELLE and CHÉRI, last month, the Full Federal Court confirmed that Homart Pharmaceuticals had engaged in misleading or deceptive conduct in effectively copying the get-up of Careline Australia's bio-placenta products. Lawyer Isabel Burraston reports.

Background

Since 2008, Careline Australia has manufactured and sold a bio-placenta cosmetic product under the trade mark CHANTELLE. In early 2016, Homart Pharmaceuticals launched a competing bio-placenta cosmetic product called CHÉRI. The two products were packaged as shown below:

Primary judgment

At first instance (Homart Pharmaceuticals Pty Ltd v Careline Australia Pty Ltd [2017] FCA 403), Burley J found that the visual features of Homart's packaging were misleading or deceptive under section 18 of the Australian Consumer Law for reasons including that:

  • Homart had copied almost all features of the CHANTELLE products, including both the external and internal shape, size and colour of the product and packaging;
  • Careline had acquired reputation in the unique 'eye-catching' combination of features that comprised the get-up of the CHANTELLE product, which provided 'strong visual cues' that consumers would remember;
  • CHÉRI was a weak mark by which to distinguish the products and, according to the evidence, lacked reputation. There were strong phonetic and visual similarities between the French-sounding names, CHÉRI and CHANTELLE. Furthermore, as the products would often be stacked or displayed in an open configuration instore, the mark was not always visible. This meant consumers would identify the get-up of the product rather than the product's name. There was also an unexplained change in style from the packaging of Homart's full CHÉRI product range to the bio-placenta product – from typically two-tone in colour to plain gold;
  • based on evidence of Homart's head of design, Homart intended to gain a market advantage at the expense of Careline by adopting similar packaging. This lead Burley J to apply the principle in Australian Woollen Mills (1937) 58 CLR 641 that if 'get-up is adopted for the purpose of appropriating part of the trade or reputation of a rival', this constitutes 'reliable and expert opinion' that the product is likely to deceive consumers; and
  • a 'not insubstantial' number of relevant consumers, who were aware of the CHANTELLE product, would likely be drawn from a search for the CHANTELLE product by the visual features of CHÉRI.

Appeal

The decision was appealed by Homart (Homart Pharmaceuticals Pty Ltd v Careline Australia Pty Ltd [2018] FCAFC 105), who argued that Burley J had failed to consider a number of issues when assessing Homart's conduct. Homart argued that Burley J failed to consider the fact that the CHÉRI products were often purchased in bulk and that the expense of this transaction was important when assessing the likelihood of consumers overlooking the different CHANTELLE and CHÉRI labelling.

Homart also argued that Burley J failed to consider the fact there was no first-hand direct evidence of confusion among consumers, that the colour gold (a colour synonymous with luxury) was commonplace within the cosmetics market, that regard was had to matters that were outside Homart's control (eg, the instore display of the products), and that the principle in Australian Woollen Mills was incorrectly applied. However, the Full Court of Murphy, Gleeson and Markovic JJ disagreed with Homart on each point, finding that Burley J's reasons did not reveal any error, and confirming each of his Honour's first instance findings.

Golden rule?

This case is a timely reminder that trade marks alone may not be enough to differentiate between get-ups that are near-identical. Even where packaging prominently displays trade marks, if a company can demonstrate sufficient reputation in the features of its get-up, it may be successful in asserting misleading or deceptive conduct against a rival appropriating that get-up.

Discouraging Innovation?

In brief: More companies are investing in software-based products, including those using machine learning, blockchain and the internet of things. But how has the Australian Patent Office been processing patent applications for computer-implemented inventions in the current climate? Senior Associate Robert Munro reports.

What's Happened?

As recently reported in The Australian Financial Review, Bruce Buchanan from Rokt, one Australia's fast-growing Australian marketing technology start-ups (with a current revenue of approximately $134 million per annum), has hit out at the Australian Patent Office (IP Australia) for discouraging innovation through its approach to patentable subject matter concerning software patents. Rokt is currently appealing a patentable subject matter decision from IP Australia in the Federal Court of Australia.

There has been no legislative change to patentable subject matter recently, but the case law relating to computer-implemented inventions has been evolving over the past few years. This evolution, combined with IP Australia's interpretation of the case law, has left many IP owners (and their attorneys) frustrated over the obtainment of patent rights for computer-implemented inventions. It is accepted that computer-implemented inventions may form the basis of patentable subject matter, providing that the contribution of the invention is not abstract. However, defining the contribution of the invention has left the industry trying to reconcile whether IP Australia's current approach to patentable subject matter is a pseudo-inventive step test. This issue was also evident in the recent case of Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421 (Encompass), which is currently on appeal.

Why is this important?

Taking the internet of things (IoT) as an example, this industry is expected to generate revenue close to USD10 trillion globally by 2025. Investment in this area is therefore growing rapidly but, in order to gauge the risks and opportunities of such investment, having an element of uncertainty around patentable subject matter could curb such growth, at least in Australia. For instance, whilst gaining patent protection in other overseas jurisdictions may be available, if Australian companies are unable to protect their innovation and investment in their initial (primary) market, there will likely be reluctance in investing in these developing industries. Conversely, it is appreciated that if patent protection is not available in these areas, this may encourage other open-source forms of collaboration and innovation. Ultimately, however, uncertainty is the key here, and Rokt's ongoing litigation is a case in point in this regard. Companies are growing and heavily investing in computer-implemented inventions and, whilst good patent attorneys can guide clients through the current pitfalls, further judicial or legislative clarification is needed to shore up Australia's current patent approach to computer-implemented inventions.

What's Next?

The forthcoming decision of the Federal Court in Rokt may provide some further guidance on patentable subject matter. However, as evident in the Encompass decision, it is likely that the Full Court will need to weigh in further on this matter. In the meantime, it is important to stay abreast of the practicalities in this IP area in order to ensure informed commercial decisions are made.

US Postal Service breaches copyright in the Statue of Liberty Las Vegas

In brief: A US Federal Court has ordered the US Postal Service to hand over $3.5 million to a Las Vegas sculptor after the former accidentally copied the sculptor's artistic work on a Statue of Liberty postage stamp. Law Graduate Ammy Singh explains.

Mistaken identity

In 2010, the US Postal Service (USPS) released a stamp design using a resized and cropped photograph from Getty Images that it believed was a depiction of the Statue of Liberty. It was at least three months and 3 billion stamps later that the USPS realised its mistake: the stamp pictured the wrong Lady Liberty. Rather than the original New York statue, the photograph featured in the stamp was actually of a Statue of Liberty replica outside the New York-New York casino hotel in Las Vegas.

The sculptor who created the Las Vegas statue, Robert Davidson, filed a copyright infringement lawsuit against the USPS in 2013. The USPS discontinued the stamp design in 2014, after generating $2.1 billion in revenue from the sale of 4.9 billion stamps, of which $70 million was profit. In June this year, Federal Judge Eric Bruggink found that the Las Vegas statue was an original design and had been used without permission or attribution by the USPS.

Lady Liberty's makeover

At trial, the USPS argued that Davidson's artwork was too similar to the original Statue of Liberty to be protected by copyright. Davidson argued that his version of Lady Liberty is unmistakably different to the original because it is 'sultry', 'sexier', and more 'fresh-faced'. Davidson stated that he made the statue's appearance 'a little more modern, a little more feminine' than the original, which he perceived to be harsher and less welcoming than his own design.

Among the changes Davidson made were sculpting more defined eyes and eyelids, and a pronounced cupid's bow shape on Lady Liberty's upper lip. According to Davidson, this design was inspired by his mother-in-law's face.

The court was ultimately satisfied that Davidson had succeeded in making the statue his own creation. Judge Bruggink found that the differences between the statues were 'plainly visually observable' and not merely ideas. As the USPS did not have a defence to its otherwise unauthorised use of the statue, it was ordered to compensate Davidson to the tune of $3.5 million in damages.

Lessons in taking Liberties

USPS's costly blunder, which attracted considerable media attention, demonstrates the potential pitfalls of using stock photo services without confirming the original source (and subject matter) of the image. If Lady Liberty's face suddenly looks more alluring over 100 years after arriving in Manhattan, check that she hasn't had a makeover since you last saw her.

Beware the perils of false patent marking

In brief: Patent marking is a useful way of notifying the public and potential infringers that monopoly rights exist or are pending in a product. However, falsely marking a product as 'patented' or 'patent pending' is fraught with danger. Associate Claire Gregg explains.

A patent is an important commercial asset that defines a monopoly right over an invention to the exclusion of others. Marking a product as 'patented' notifies the public that rights subsist in that product and can also aid in establishing in infringement proceedings that an alleged infringer was aware (or ought to have been aware) of those rights.

Accordingly, making false assertions that a product is patented, including statements made on product packaging, in the media and online, carries a number of risks and penalties. In addition to the legal consequences outlined below, failure to correctly identify the status of a patent can cause costly delays in business transactions and erode consumer confidence.

Penalties under the Patents Act

Subsection 178(2) of the Patents Act 1990 (Cth) (the Patents Act) provides that a person must not falsely represent that an article sold by that person is patented (or the subject of a patent application) in Australia. A person will be taken to have made such a representation if the words 'patented', 'patent pending' or any other words that incorrectly imply that a patent is associated with an article. This provision has not yet been considered by the courts, so it is unclear whether an intention to mislead is required.

The penalty prescribed for breach of subsection 178(2) is 60 penalty units (currently AU$12,600). Although it is possible that this penalty could apply to each individual instance of false representation on a product, in view of the current position in the US it is more likely that this would be considered a single offence.

Unlike its US counterpart, the Patents Act does not require inclusion of the patent number or virtual marking for products. Although not a requirement in Australia, legitimate marking can be useful to notify third parties of your rights. As it can be particularly onerous for consumers or potential infringers to verify whether a 'patented' claim is legitimate, false patent marking may exclude or deter competitors from entering the market by creating an illusory risk of infringement.

Misleading or deceptive conduct

Under section 18 of the Australian Consumer Law (ACL), a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Importantly, this applies even if there was no intention to mislead or deceive.

In Elconnex Pty Ltd v Gerard Industries (1991) 32 FCR 491, the only decision to date in Australia on patent marking, the Federal Court considered whether the respondent had engaged in misleading or deceptive conduct (under the predecessor to section 18 of the ACL) for marking its products with 'pat pend', even though no patent application was ever filed in respect of these products. The Court found in the affirmative because the 'pat pend' mark was 'likely to produce the impression that it has made an invention, or acquired the benefit of an invention for which a patent will issue, or at least is expected to issue'.

The available remedies for contravention of section 18 of the ACL include damages, injunctions, and compensatory orders.

Other provisions of the ACL also arguably apply to false patent marking, such as sections 29 (false or misleading representations) and 33 (misleading conduct as to the nature etc. of goods). Contravention of section 29 or 33 of the ACL may attract a pecuniary penalty of up to AU$1.1 million for corporations and $220,000 for individuals.

How should I mark my product?

If you intend to mark your products, it is important to consider whether you have a granted patent or a pending patent application before making a representation that your product is 'patented' or has a 'patent pending'. The following provides an overview of the appropriate marking of products:

Patent or application type Appropriate mark
Pending provisional patent application 'patent pending'
Pending patent applications 'patent pending'
Granted standard patent 'patented'
Granted innovation patent 'patented'
Certified innovation patent 'patented'
Expired/lapsed/withdrawn/abandoned application or patent should not be marked as 'patent pending' or 'patented'

If in doubt, we recommend that you contact a patent attorney to ensure that any representations made in relation to your products are accurate.

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