In this issue: we explore how textile merchants can weave in copyright protections when purchasing designs from third-parties; McDonald's loses its iconic 'BIG MAC' trade mark in Europe; 'best method' goes from bad to worse for divisional patents; a deodorant standoff explores the meaning and use of 'clinical strength'; New Zealand introduces a saving grace for inadvertent public disclosures; and the ACCC delivers the goods in its first two decisions on bad faith.
- A pattern of infringement
- McDonald's gets bite taken out of trade mark portfolio
- 'Best method' a heavy burden for patentees
- Don't sweat it - Federal Court finds 'clinical strength' claims on deodorant were not misleading
- New Zealand's self-disclosure 'grace period' provisions take effect
- ACCC's good result in bad faith claim
In brief: The recent decision in The Dempsey Group Pty Ltd v Spotlight Pty Ltd  FCA 2016 on what constitutes the reproduction of a substantial part of a copyright work offers a timely reminder for Australian textile merchants on how best to thread the needle when purchasing designs from third-party manufacturers. Summer Clerk Jake Boudsocq and Lawyer Edward Thien report.
Key considerations when using third-party designers
- Businesses should exercise caution when purchasing products from third-party designers. Particular caution should be exercised when dealing with suppliers for the first time. In these circumstances, businesses should conduct further investigations as to any potential competing intellectual property claims in the products.
- From a practical perspective, businesses should attempt to incorporate carefully drafted warranties and indemnities in their supply agreements with third-parties, particularly concerning intellectual property rights in the goods and/or services being offered.
- If a business is put on notice that it has engaged in conduct infringing another's intellectual property rights, it should take immediate steps to address the issue and cease the infringing conduct, including contacting lawyers for clarification of the relevant legal grounds and guidance on whether to change business operations.
The Dempsey Group Pty Ltd (Dempsey Group) sued Spotlight Pty Ltd (Spotlight) claiming Spotlight infringed its copyright in three artistic works appearing in 'Morgan & Finch' quilt covers and pillow sets (the Dempsey Products).
Dempsey Group alleged that Spotlight instructed fabric manufacturer Yantai Pacific Home Fashions (Yantai), from which both parties purchased their products, to design prints that copied the Dempsey Products. Spotlight denied any infringement, arguing it had no knowledge of its products (Spotlight Products) infringing Dempsey Group's copyright.
By late-November 2016, Dempsey Group notified Spotlight of its infringement claims and requested a total recall of the Spotlight Products. Documents in support of Dempsey Group's proof of ownership were provided several days later, on 2 December. On 29 December 2016, Spotlight commenced a nationwide recall of the Spotlight Products.
Infringement of the Dempsey Products
Dempsey Group argued the 'look and feel' of its artistic works were protectable, and that Spotlight had copied a substantial part thereof. The court accepted this submission.
The court considered the artistic works in the Dempsey Products included 'colour, layout and shaping of the designs', which cumulatively created the desired 'look and feel'. Taken as a whole, the court was satisfied the Spotlight Products 'qualitatively' reproduced a substantial part of the 'look and feel' of the artistic works.
Defence of innocent infringement
The court was satisfied that Spotlight did not have knowledge, nor that it ought reasonably to have assumed, it was infringing the Dempsey Products. Significantly, the court considered that the long-standing business relationship between Spotlight and Yantai meant it was reasonable for Spotlight to assume Yantai would notify it of the potential for infringement. Accordingly, Spotlight was not liable for damages relating to the infringement during the period prior to 2 December 2016.
In brief: The European Union Intellectual Property Office recently revoked the McDonald's 'BIG MAC' trade mark. Associate Emma Gorrie and Summer Clerk Spiro Kalavritinos detail how one of the world's most well-known brands suffered this blow in relation to its namesake product.
Irish burger chain Supermac's (Holdings) Ltd filed a request for revocation of the European trade mark registration for ‘BIG MAC’, directed against all goods and services covered by the specification. The request was on the grounds that the trade mark had not been put to 'genuine use' under Article 58(1)(a) of the European Union Trade Mark Regulation.
Genuine use exists where a trade mark owner has used the mark to signify the origin of goods and services for which the trade mark is registered. The burden of proof was on McDonald's to show it had used the trade mark, as it is a tall order to ask a revocation applicant to prove a negative (ie that McDonald's had not used the trade mark). In short, to successfully defend the application, McDonald's had to prove it had marketed sandwiches under the name BIG MAC.
McDonald's claimed that not only had the trade mark been used in advertising and on the packaging of its goods, but that millions of products had been sold under the trade mark.
In support of its claims, McDonald's submitted evidence showing use of the trade mark, including affidavits signed by representatives of McDonald's companies, brochures and printouts of advertising posters and packaging for sandwiches, printouts from its websites and a printout from Wikipedia on the history of the 'Big Mac'.
The Cancellation Division of the European Intellectual Property Office ruled that McDonald's did not prove genuine use of the trade mark. Under the European Union Trade Mark Delegated Regulation, evidence of use must establish the place, time, extent and nature of use of the contested trade mark. These factors are cumulative, such that evidence must sufficiently cover all of these factors in order to prove genuine use. McDonald's was found to have failed to establish extent of use in its evidence.
Evidence needed beefing up
The Cancellation Division found that the evidence was missing some key ingredients, identifying the following issues:
- Affidavits: statements by interested parties are admissible, but have less probative value than independent evidence. As such, the statements in the affidavits regarding factors like sales of the 'Big Mac' had to be analysed with reference to the other evidence.
- Brochures, posters and packaging: there was no information about how the brochures and posters were circulated, who they were offered to and whether they led to any purchases. In relation to the packaging, there was no independent evidence showing the number of products for which the packaging was made were actually offered for sale or sold. The materials did not give any data for the real commercial presence of the trade mark.
- Printouts from websites: the mere presence of a trade mark on a website is insufficient to prove genuine use. The place, time and extent of use must also be displayed on the website or be provided elsewhere. The evidence failed to establish whether the website had been visited (internet traffic and hits), what countries the website had been visited from, and whether orders could be, or had been, made through the website.
- Printout from Wikipedia: due to its ability to be amended by any user, the information was not considered to be a reliable source of information unless supported by other independent evidence.
Even a trade mark for something as iconic as the Big Mac can be vulnerable to challenge. No amount of reputation can overcome the need to satisfy technical evidential requirements. However, all is not necessarily lost for McDonald's. It has the opportunity to appeal, and has indicated it will do so. In addition, the BIG MAC mark was just one of many in the McDonald's trade mark portfolio (including another for 'Big Mac' in an uncapitalised form).
In brief: Despite a global trend away from requiring patentees to disclose the best method of performing their invention, Australia continues to impose an arguably obsolete, yet increasingly onerous, statutory best method requirement. Associate Claire Gregg discusses the recent developments.
Best method back in the spotlight
Failure to disclose the best method known to the patentee of performing the invention described in a patent specification is a particularly damaging ground of invalidity, as it invalidates the entire patent. Since the controversial decision of the Full Federal Court in Les Laboratoires Servier v Apotex Pty Ltd  FCAFC 27 (Servier), best method has been a popular ground of attack before both the Australian Patent Office (APO) and the courts.
We discussed some of the relevant decisions in our article of 15 September 2017. In particular, the Full Federal Court in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd  FCAFC 138 (Sandvik) found that a lack of disclosure of the best method in relation to non‑essential features of the invention was fatal to the patent. Further, in Kineta, Inc.  APO 45 (Kineta), the APO found that the applicant failed to disclose the best method of performing the invention because it had not disclosed that the only method known to it of obtaining the compounds of the invention was to commission their synthesis from a particular supplier.
The Court in Servier confirmed there is a residual requirement to disclose the best method beyond the requirement for sufficiency of disclosure. However, that case was decided pursuant to the pre-Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Raising the Bar) law, under which the specification must only enable one embodiment falling within the scope of each claim. Arguably, the best method requirement now has limited relevance in view of the post-Raising the Bar sufficiency test, which necessitates enablement across the full breadth of the claims. Despite this, best method remains a validity requirement under Australian law. Moreover, for applicants seeking to file divisional applications, the disclosure requirements have become particularly onerous.
A heavy new burden for divisional patents
The assessment of best method involves an inquiry into the subjective knowledge of the patentee at a particular point in time. Given the filing date of a complete specification for a divisional patent will typically differ from the filing date of its parent, the relevant date for the assessment of best method of divisional patents has been a matter of debate.
In Kineta, the prohibition on added subject matter under Raising the Bar meant the applicant could not amend the specification to include the best method in order to gain acceptance. Instead, the applicant filed a divisional application, supplemented to include the best method. This 'topped up' divisional was ultimately granted by the APO which, in doing so, embraced the practice of assessing the best method at the time of filing the complete specification (in this case, the divisional filing date).
The Federal Court in Dometic Australia Pty Ltd v Houghton Leisure Products Pty Ltd  FCA 1573 (Dometic) confirmed the relevant date for assessing best method with respect to a divisional innovation patent was the date of filing of the complete specification for the divisional application. Although evidence was adduced that a better method of performing the invention was developed by one of the inventors between the date of the patent and the divisional filing date, knowledge of this improved method could not be attributed to the patentee in all the circumstances. While this turned out to be a lucky case of 'what the patentee didn't know, couldn't hurt them', applicants for divisionals should proceed with caution and ensure the best method is disclosed.
Ramifications of Dometic
The Dometic decision highlights the need to disclose the best method of performing the invention at the time of filing a divisional application. Applicants who wish to file a divisional application, but who become aware of a better method of performing the invention between the filing date of the parent application and the divisional filing date, need to include the improved method in the divisional specification. However, this creates a risk of adding new information in the divisional specification, which could also affect the priority date of any claims that rely on the added matter. It also means that already granted divisional patents are at risk of an invalidity challenge where evidence can be adduced that the patentee became aware of a better method of performing the invention during the relevant time.
Both the IP Committee of the Law Council of Australia and the Institute of Patent & Trade Mark Attorneys have previously filed submissions to IP Australia to repeal the best method requirement. More recently, they have entered into discussions with IP Australia to try to temper the retrospective effects of the Dometic decision on already granted divisional patents. We will keep you informed of any new developments.
In brief: The Federal Court recently handed down its decision in a dispute between Unilever (owner of Rexona and Dove) and Beiersdorf (owner of Nivea) regarding 'clinical strength' antiperspirant deodorants. The Court found that the use of 'clinical strength' marketing in relation to Nivea deodorants was not false, misleading or deceptive as Unilever had claimed. Associate Anna Conigrave and Summer Clerk Lydia Watson-Moore report.
In 2009, Unilever Australia began selling a 'Clinical Protection' range of Rexona and Dove antiperspirant deodorants, marketed to people who sweat heavily. In 2013, Revlon Australia introduced a 'Mitchum Clinical' range, and, in 2014, Beiersdorf Australia introduced a 'Nivea Stress Protect Clinical Strength' range. The 'clinical' products sold by the three companies had a number of features in common, including that they were sold in a box with an instruction leaflet, were sold at a higher price than most other antiperspirant deodorants on the market and were marketed to people who sweat heavily.
Unilever alleged that Beiersdorf's marketing, distribution and sale of the Nivea 'Stress Protect Clinical Strength' range amounted to misleading or deceptive conduct, or false or misleading representations, contrary to sections 18 and 29(1) of the Australian Consumer Law (ACL).
Unilever claimed that Beiersdorf made 11 false or misleading representations, which Justice Wigney grouped into the following categories:
- The 'Similarity Representations': that the Nivea products had, or would have, similar antiperspirant efficacy, or similar efficacy, in preventing stress sweat, to the Rexona and Dove Clinical Protection products and the Mitchum Clinical products.
- The 'Superiority Representations': that the Nivea products had, or would have, superior antiperspirant efficacy, or superior efficacy, in preventing stress sweat, than all ordinarily available 'non-clinical' antiperspirant deodorants.
- The 'Stress Sweat Representations': that the Nivea products were highly efficacious, or would provide particularly strong protection in relation to stress sweat.
Beiersdorf denied making the Similarity and Superiority Representations, and admitted making the Stress Sweat Representations, which it argued were substantiated.
The Similarity and Superiority Representations
Beiersdorf did not expressly make the Similarity or Superiority Representations. Accordingly, the issue was whether the representations could be implied from Beiersdorf's conduct.
Justice Wigney found that the ordinary reasonable consumer of antiperspirant deodorants would perceive that there was a 'clinical' subcategory of the Australian antiperspirant deodorant market, which included Unilever's Rexona and Dove 'Clinical Protection' range, Revlon's 'Mitchum Clinical' range, and the Nivea Stress Protect Clinical Strength range. The key question for his Honour was what membership of the 'clinical' subcategory meant to the consumer.
Justice Wigney found that the meaning of the word 'clinical' as a marketing or descriptive term for antiperspirant deodorants was unclear, and that the evidence did not suggest the word had acquired a secondary meaning which included a set benchmark of antiperspirant efficacy. He considered that the ordinary reasonable consumer would understand that 'clinical' in this context meant the product was a high-strength or high-efficacy product that provided strong protection against sweat and associated odour.
Accordingly, he concluded that Beiersdorf had not made the Similarity or Superiority Representations.
The Stress Sweat Representations
Justice Wigney found that Unilever had failed to prove the Stress Sweat Representations were false, misleading or deceptive, or likely to mislead or deceive. The results of tests carried out by Beiersdorf suggested the Nivea Stress Protect Clinical Strength products were highly efficacious, including against stress sweat.
The sweet smell of clarity
A number of consumer products are marketed using the description 'clinical' or 'clinical strength'. Why not? It is a common English word used often and in many contexts. This case reaffirms that whether or not any particular use of the word in context is false or misleading will turn on whether the description has acquired a secondary meaning in the relevant market.
In brief: On 30 December 2018, New Zealand introduced a one year 'grace period' for filing a patent application following an inadvertent public self-disclosure of the invention. Associate Claire Gregg takes a closer look at how the new provision protects applicants.
As part of its obligations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, New Zealand has taken steps to protect patent applicants from their own inadvertent public disclosure by introducing new subsection 9(1)(f) into the Patents Act 2013 (the Act). Applicants can now invoke a one year 'grace period' for filing a complete specification following self-disclosure of the claimed invention in the prescribed circumstances.
The grace period
According to new ss 9(1)(f), when determining the prior art base for novelty and inventive step, a prior disclosure must be disregarded where that disclosure occurred during the one year period immediately preceding the patent date and the disclosure was made by any of the following persons:
- the patentee or nominated person;
- any person from whom the patentee or nominated person derives title;
- any person with the consent of the patentee or nominated person; or
- any person with the consent of any person from whom the patentee or nominated person derives title.
The new self-disclosure grace period provision applies only to public disclosures of an invention made on, or after, 30 December 2018, for which a complete specification is filed within the subsequent one year. To enliven the grace period, the Intellectual Property Office of New Zealand (IPONZ) has published examination guidelines requiring the applicant to file:
- a statement that the invention was publicly disclosed by, or with the consent of, the nominated person in the one-year period preceding filing date of the complete specification; and
- evidence that the disclosure falls within the provisions of new ss 9(1)(f), and was not made public before 30 December 2018.
This information can be filed at IPONZ prior to examination, or in response to a relevant novelty and/or inventive step objection during examination.
Falling into line
The new ss 9(1)(f) supplements the existing provisions of ss (1)(a)-(e) of the Act, which set out the other circumstances under which a public disclosure must be disregarded for validity purposes including, for example:
- disclosure of matter obtained unlawfully or in breach of confidence (one year);
- disclosure of the invention at a specified exhibition (6 months); and
- necessary public working of the invention for the purpose of reasonable trial only (one year).
The introduction of new ss 9(1)(f) brings New Zealand's grace period provisions somewhat into line with other jurisdictions such as Australia and the US, which protect against prior public disclosures both with and without the consent of the patentee or nominated person. However, each jurisdiction adopts a nuanced approach to the scope and construction of its grace period provisions, and other jurisdictions do not offer any grace period for applicant/inventor disclosure (eg, Europe).
How this affects you
We do not recommend that applicants/inventors rely on the grace period as a filing strategy. Instead, we recommend filing a provisional patent application before disclosing an invention publicly. However, if an inadvertent disclosure of an invention occurs, it is important to utilise the grace period safety net and file a complete application in New Zealand and/or any other relevant jurisdictions within the prescribed period to preserve any patent rights that might otherwise be lost.
In brief: The ACCC recently brought its first two cases alleging a breach of the good faith obligation in the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (the Franchising Code). In each instance, the ACCC successfully established both a lack of good faith and breaches of the Australian Consumer Law. Lawyer Edward Thien reports.
Under the Franchising Code, there is an obligation for parties to a franchise agreement to act in good faith towards each other 'in respect of any matter arising under or in relation to' the agreement and the Franchising Code. Failure to meet that obligation, albeit by different means, lay at the heart of both cases brought by the ACCC, namely ACCC v Ultra Tune Australia Pty Ltd  FCA 12 (Ultra Tune) and ACCC v Geowash Pty Ltd (No 3)  FCA 72 (Geowash).
What is good faith?
Whilst the Franchising Code provides some guidance as to the bounds of the good faith requirement, the actual meaning of 'good faith' is still determined by common law. A thorough examination of past cases considering 'good faith' ensued in each case, with Geowash distilling seven principles to inform its meaning in the Franchising Code:
- Good faith requires the parties to observe a 'normative standard' in their dealings.
- Good faith requires the parties to act 'honestly and with fidelity to the bargain' struck.
- Good faith requires the parties to act 'co-operatively in matters related to performance'.
- Good faith does not require a party to 'subordinate its legitimate interests', but the party is still required to consider the legitimate interests of the other party.
- A party whose conduct is 'dishonest, capricious, arbitrary', antithetical to the object of the agreement or Franchising Code, or 'motivated by bad faith' will breach the obligation.
- Objectively unreasonable conduct does not breach the obligation, although it is evidence to support a claim that a party is not acting in good faith.
- Whether a party has breached the obligation is to be considered in light of its sophistication and commercial power.
Application of good faith requirement
In Ultra Tune, the ACCC successfully established that Ultra Tune had failed to comply with its obligation to act in good faith in each of the following circumstances:
- Failing to advise a franchisee that its deposit was non-refundable, whilst actively representing that it was refundable;
- Pressuring a franchisee to pay a deposit before any disclosure documents were provided;
- Incorrectly representing to a franchisee the true cost and profitability of the business; and
- Failing to refund the deposit when a franchisee decided against taking up a franchise opportunity.
Similarly, in Geowash, a failure to act in good faith was found in the following circumstances:
- Negotiating payments that were said to be the costs required for establishing the site, conducting the fit-out and purchasing the equipment, but were actually just based on the maximum the prospective franchisee could afford;
- Requiring payments of lump sums to which Geowash was not entitled;
- Providing vague responses when pressed by franchisees as to what costs were for; and
- Pressuring potential franchisees to pay additional amounts by threatening they would otherwise risk losing the opportunity to secure a site.
Consequences of breaching the good faith requirement
In circumstances where an obligation is owed to all franchisees, a single breach can amount to separate breaches for each and every franchisee. For Ultra Tune, then, some of its conduct amounted to 185 distinct breaches per offending act (with damages adjusted to ensure they were not excessive and disproportionate). Ultra Tune's conduct with respect to one specific franchisee, however, was argued to be such a serious breach of the good faith obligation that it attracted the maximum possible penalty of 300 penalty units (or $54,000 as it was at the time). In all, a penalty of $2,604,000 was imposed.
In Geowash, declarations were granted in relation to each of the contraventions, and the parties were given leave to make submissions regarding the appropriate pecuniary penalties to be issued.
It should be noted, the conduct of both Ultra Tune and Geowash in breach of their good faith obligations was also the basis upon which the court found they had breached the Australian Consumer Law.
- Miriam StielPartner, Practice Leader, Intellectual Property, Patent & Trade Mark Attorneys,
Ph: +61 2 9230 4614
- Trevor Davies PhDPartner,
Ph: +61 2 9230 4007
- Tim GolderPartner,
Ph: +61 3 9613 8925
- Linda Govenlock PhDPartner, Head of Allens Patent & Trade Mark Attorneys,
Ph: +61 2 9230 5163
- Richard HamerPartner,
Ph: +61 3 9613 8705
- Philip KerrSenior Patent/Trade Mark Counsel,
Ph: +61 2 9230 4937
- Sarah MathesonPartner,
Ph: +61 3 9613 8579
- Andrew WisemanPartner,
Ph: +61 2 9230 4701
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