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Intellectual Property Bulletin – March-April 2004

In this issue: Our intellectual property lawyers and patent and trade marks attorneys provide an update on how the Australia-US Free Trade Agreement will impact on intellectual property. We also review the latest cases and legislative developments affecting patents, designs, trade marks, domain names, copyright, and practice and procedure. 

 

Free Trade Agreement – impacts on IP

In brief: The full text of the Australia-US Free Trade Agreement will have an impact on intellectual property. 

By Jim Dwyer, Partner, Raani Costelloe, Senior Associate, and Prataal Raj, Lawyer

Although the full text of the Australia-US Free Trade Agreement (AUSFTA), released on 4 March, is still expressed to be 'subject to legal review for accuracy, clarity and consistency', it is expected that a 'plain English' version will be available on Australian and US Government websites shortly.

Some of the intellectual property issues covered in the text released on 4 March include:

Copyright

A wide range of commitments have been made, including:

  • Term of copyright will be extended by 20 years for works (eg literary, musical and artistic works) so that the term will continue for 70 years (rather than 50 years) from the author's death. For films and sound recordings, it will be 70 years (rather than 50 years) from first publication.
  • Internet Service Providers (ISP) will have to comply with rights-holder 'take down' notices if they are to avoid liability for the infringing activities of their subscribers under an ISP liability regime.
  • It will be a criminal offence to receive and make use of an encrypted program-carrying satellite signal where the person knows that the signal was illegally decoded.
Domain names

Australia must ensure that the management of its top level domain name (.au) provides an appropriate procedure for the settlement of disputes, based on the principles established in the Uniform Domain Name Dispute Resolution Policy (UDRP) in order to address trade mark cyber piracy.

Trade marks

Some legislative changes appear to be required to deal with geographical indications and terms used as the common name for a particular product.

Provision will be required that counterfeit copies of trade marked goods will not be released into the marketplace by the simple removal of the unlawfully affixed trade mark.

Patents

The AUSFTA maintains the existing legislative regime for the protection of pharmaceutical patent holders. It also introduces new measures that will significantly increase the level of protection available to pharmaceutical patent holders.1

The existing regime

Presently, under the Patents Act 1990 and the Therapeutic Goods Act 1989:

  • Subject to some limitations, holders of pharmaceutical patents may extend their patent term for up to five years if there is a delay of at least five years between the patent grant and the grant of marketing approval for the patented substance.
  • Patentees are protected by data exclusivity provisions which provide that data submitted in support of a marketing authorisation application will not be available for use by third party applicants seeking approval of generic products for a period of at least five years after the grant of marketing approval without the consent of the party submitting the original data.

The AUSFTA maintains these existing measures and introduces new protection for patentees.

The AUSFTA provides:
  • that patent extensions will continue to be available where the use of a pharmaceutical patent has been curtailed by the process of obtaining marketing approval. Significantly, the agreement does not specify a maximum period for such extension;
  • that existing data exclusivity provisions will be maintained;
  • that measures will be introduced into the marketing approval process to ensure that patented products are not marketed during the patent term without the patentee's consent; and
  • that patentees owners will be notified of marketing approval applications by third parties for patented substances.
Pharmaceutical patents

The new requirements will increase the effectiveness of patent protection for pharmaceutical patentees, by introducing steps into the marketing approval process that will increase the patentees' ability to enforce their monopolies before and during the marketing approval process.

We will be providing further discussion on the impacts of the AUSFTA on intellectual property in a separate series of articles, to be published in the next few weeks.

Footnote
  1. The Free Trade Agreement also offers corresponding protection to patentees for patents relating to agricultural protection. Implementation of these measures will involve significant legislative reform.

Patents – Federal Court reaffirms that the onus is on revokers to prove invalidity

Arrow Pharmaceuticals Ltd v Merck & Co Inc FCA 642 (27 June 2003)

In brief: A recent Federal Court decision has held that patentees are not required to respond to particulars of invalidity or to provide particulars of inventive step or persons skilled in the art. The court reaffirmed the principle that the onus is squarely on parties seeking revocation of a patent to prove invalidity.

By Philip Kerr, Partner, and Clare Cunliffe, Lawyer

The parties' arguments

Arrow Pharmaceuticals sought orders that Merck should provide:

  1. a statement in answer to the Amended Particulars of Invalidity (the Particulars);
  2. particulars of inventive step; and
  3. particulars identifying the person/s skilled in the art.

Arrow contended that these orders were necessary for effective case management of the proceeding.

Statement in answer to the Particulars

Arrow's contentions

In support of its first argument, Arrow argued that the order was necessary to allow it to effectively define the issues in the proceeding and to ensure there were no false issues that might derail the preparation of evidence and/or the progress of the proceeding.

Merck's reply

Merck argued that the Particulars were not in a form or content that would render a statement in reply appropriate, since the Particulars did not plead the material facts relied upon for the patent's revocation. Merck further submitted that there was no authority either in case law or in the Federal Court Rules to make provision for such a procedure.

Particulars of Inventive Step

Arrow's contentions

Arrow argued that since Merck's right of monopoly was dependent on an inventive step, Arrow should not be left to make assumptions as to what might comprise the inventive step. Further, Arrow asserted that the particulars of inventive step would enable an early definition of the issues of relevance between the parties.

Merck's reply

Merck noted that the inventiveness of a step depended on the nature of the result viewed against the background of common general knowledge. Therefore, Merck submitted that it was inappropriate to judge inventiveness by what the inventor actually did, instead of by a comparison of the invention against the prior art. Merck finally asserted that the onus should be on the applicant to show that the invention was obvious.

Merck submitted that, since it had not sought to advance a positive case for the validity of the patent (rather than a simple denial of invalidity), it should not be required to provide particulars of inventive step.

Particulars as to person skilled in the art

Arrow's contentions

Arrow contended that the patentee should provide particulars as to the person skilled in the art to assist in identification of the issues between the parties.

Merck's reply

Merck submitted that since it had not made reference anywhere in its defence to the skilled person or persons, it was inappropriate to require Merck to particularise this issue.

The court's deliberations

The court emphasised two points:

  1. the onus was upon Arrow to establish invalidity, and;
  2. Arrow had initiated the challenge to the patent.

The court refused to impose an evidentiary onus on Merck to establish the patent's validity by forcing Merck to identify the inventive step, the skilled addressee or what constituted common general knowledge. The court said that Arrow's evidence challenging the validity of the patent was the appropriate stage for the identification of the issues between the parties.

This consideration was underscored by the fact that Merck's patent had gone through a process of examination prior to being granted.

Implications

The decision in Arrow Pharmaceuticals is consistent with the approach of the courts, typified by the recent High Court decision in Aktiebolaget Hassle v Alphapharm Pty Limited (2002, HCA 59), that there is a prima facie assumption that a patent is valid and that the onus is squarely on the party seeking revocation of a patent to prove that the patent is invalid. This approach will extend not only to the tests to be applied by the court (for example, in relation to assessing obviousness) but also to the procedural steps by which a case for revocation may be made out.

Patents – Extension of term for pharmaceutical patents

Merck and Co, Inc v Arrow Pharmaceuticals [2003] FCA 1344

In brief: The Federal Court has overturned a case on appeal from the Australian Patent Office concerning the extension of the standard patents term relating to pharmaceutical substances.

By David Yates, Senior Associate

In AAR's Intellectual Property Bulletin, April 2003, we reported on recent cases considering the extension of the term of standard patents relating to pharmaceutical substances. One of the cases considered was the Australian Patent Office decision in Merck and Co, Inc v Arrow Pharmaceuticals [2002] APO 13. The decision in that case has now been overturned on appeal by the Federal Court.

The case concerned a substance called 'lovastatin', and its beta-hydroxy metabolite. Lovastatin is used for the control of cholesterol levels and is a pro-drug which, when administered, is metabolised into the beta-hydroxy form (being the substance that produces the therapeutic effect). There was no dispute that such a pro-drug fell within the definition of 'pharmaceutical substance' in section 70 of the Patents Act 1990. However, the patent for which extension was sought did not claim lovastatin. It did claim the beta-hydroxy form of lovastatin. The claim for lovastatin had been deleted during examination because it was prior claimed by an earlier patent.

The evidence was that each tablet of Mevacor, the product containing lovastatin, contained between 0.1% to 0.6% of the beta-hydroxy form. Lovastatin, however, was the primary active ingredient of Mevacor. By subsection 70(3)(a) of the Patents Act 1990, it is a condition of extension of a patent that goods containing, or consisting of, the pharmaceutical substance must be included in the Australian Register of Therapeutic Goods (ARTG). In this instance, the beta-hydroxy form of lovastatin was the pharmaceutical substance. Mevacor is included in the ARTG.

The court concluded that it was irrelevant whether or not the beta-hydroxy form of lovastatin itself was included in the ARTG. It was enough that it was contained in a good (Mevacor) that was included in the ARTG, and it did not matter if it was present only in minute quantities. The section did not stipulate for any particular quantity or proportion of the substance in the registered goods.

It should be noted that Merck and Co, Inc originally named Arrow Pharmaceuticals Limited as the respondent to the appeal, as Arrow had been the opponent to the application for extension. However, early in proceedings, Arrow obtained leave to withdraw from the proceeding. As the Commissioner took no part, the appeal was undefended.

Patents – How fair is fair basis? Special leave to appeal granted for patent case

Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2003] FCAFC 29

In brief: The High Court will directly consider the issue of fair basis for the first time in many years, following the granting of a special leave application. 

By Anthony Selleck, Trainee Patent Attorney

In December 2003, the High Court of Australia granted special leave to appeal from the Full Federal Court's decision in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2003] FCAFC 29. The High Court is the ultimate appellate court in Australia's judicial system, and its decisions are binding on all other courts. Because the High Court only hears cases involving legal principles, its decisions have a significant impact beyond the parties to the particular dispute.

Fair basis

The particular legal point at issue in Lockwood v Doric relates to the essential requirement under Australian patent law that a claim must be 'fairly based' on the matter described in the specification. The concept of fair basis derives from United Kingdom jurisprudence and was first introduced into Australian patent law in the Patents Act 1952. There is no directly equivalent doctrine to Australian 'fair basis' in overseas jurisdictions; US, European and UK patent laws now apply the subtly different concept of 'support' for claimed matter.

The basic rules of fair basis under Australian law are known as the 'Mond Nickel rules' (after Mond Nickel Company Ltd's Application (1956) RPC 189). Essentially, a claim may lack fair basis for a number of different reasons, including:

  • where there is no disclosure of a particular claimed feature in the description;
  • where the claim is inconsistent with the description, such as omitting a feature of the invention said to be essential; or
  • where the claim defines an overly broad monopoly when compared to what the patentee has actually invented – as determined from a reading of the description as a whole.
Lockwood v Doric

Lockwood v Doric was concerned with the third type of fair basis referred to above. The relevant claim defined a latch assembly comprising six features, all but one of which were known in combination from the prior art. The applicants had identified a problem with prior art latch assemblies of this type, namely that, if deadlocked from the inside, key operation from the outside of the door would not release the lock so it could be opened from the inside (for example, if the lock key was misplaced and the occupant urgently needed to open the lock from the inside). The additional novel integer was a 'lock release means' responsive to an actuator and operable from the outside of the door. In the description, the applicant described a single embodiment of such a lock release means.

Both at first instance and on appeal to the Full Federal Court, the claim was held to lack fair basis and was therefore declared invalid. In the court's opinion, the patentee had provided a single solution to a problem, yet attempted to claim all possible solutions to that problem. When the description was read as a whole, there was no disclosure of lock release means other than the embodiment specifically described. Of particular significance was the fact that, given the stated object of the invention to provide a latch that could be unlocked by using a key on the outside, the solution provided by the sixth integer was seen as merely restating the problem, and thus claiming all solutions to that problem.

The patentee will no doubt maintain that the description provides a real and reasonably clear disclosure of lock release means other than the particular mechanism described.

Astute readers might consider that the issue of fair basis in this type of situation overlaps with that of obviousness. However, in the Federal Court proceedings, the defendant had not conclusively proved that the problem solved by the invention was obvious in light of the prior art. The patentee is likely to argue that the lower courts improperly considered issues of 'inventive merit' under the guise of fair basis, when the concepts are, in fact, doctrinally distinct.

This will be the first direct consideration of the issue of fair basis by the High Court for many years, and the decision is likely to provide important illumination of this area of Australian patent law.

Designs –  Reform of Australian designs law: implications for design right owners

In brief: The long-anticipated Designs Act 2003 will come into force on 17 June this year, radically overhauling designs law in Australia.

By Kimberley Lloyd, Lawyer

The Designs Act 2003 (Cth) (the Act) is intended to resolve several deficiencies in the existing design law framework that have impeded effective design protection to date.

This article outlines the most significant reforms to be implemented by the Act and examines contemporaneous amendments to be made to the so-called 'design/copyright overlap' provisions contained in the Copyright Act 1968 (Cth). It also briefly discusses the implications of these reforms for current and future design right owners.

Key changes

Accepting the majority of recommendations contained in the ALRC's Report 74 (1995), Designs, and after substantial consultation with interested parties, the Federal Parliament passed legislation adopting the following key reforms.

A streamlined registration process – under the new regime, applications will only need to undergo a formalities check to ensure that they contain all relevant information before the applications proceed to registration and publication. This will enable design owners to put their rights on public record without having to go through a costly examination process. However, the owner will not be able to enforce those rights by infringement proceedings until a more thorough examination has taken place and a Certificate of Examination issued by the Designs Office.

A higher threshold test for obtaining registration – the existing regime requires only that designs be either new or original when judged against the prior art base (material available in the public domain) in Australia. Under the new test, designs must be both new and distinctive and the prior art base has been expanded to include designs published anywhere in the world. Further, in determining whether a design is distinctive, the Act directs that more weight should be given to the similarities than the differences between the design sought to be registered and designs forming part of the prior art base.

A lower threshold test for design infringement – the current Act defines infringement as an obvious or fraudulent imitation of a design without the owner's consent. Courts have tended to apply this test narrowly, finding no infringement unless there has been an almost exact replication of a registered design. Under the new test, it is infringement if a product embodies a design that is substantially similar in overall impression to a registered design. Again, the Act directs a focus on the similarities rather than the differences between designs when determining whether infringement has occurred. This fundamental change should mean that registered designs (once they are formally examined prior to infringement actions) will have more effective protection than is currently the case.

A shorter term of protection – under the new regime, the maximum term of protection will be reduced from 16 years to 10, in compliance with Australia's minimum obligations under the TRIPS Agreement. This can be viewed as a trade-off for the greater protection against infringement provided by the new regime.

A new 'spare parts' defence against infringement – this is perhaps the most controversial reform to be implemented by the new Act. It was inserted in response to concerns that owners of registered designs for spare parts (eg car manufacturers) could leverage their market power in the spare parts market to dominate the market for the whole product. The new section gives a 'right of repair' exemption against design infringement where a component part of a complex product is made, sold or otherwise commercially dealt with 'for the purpose of repair of the complex product so as to restore its overall appearance'. The onus is on the design owner to establish that the alleged infringer knew, or ought reasonably to have known, that the use of the component part was not for a genuine repair purpose.

How will these reforms affect your design registration/application?

If you have a design that was registered before the new Act comes into force then, in most respects, your design will continue to be governed by the old regime. Although your registration will automatically be deemed to be registered under the new Act and to have been granted a Certificate of Examination according to the terms of the new Act, the old Act will apply for the purposes of the term of protection of your registration and in relation to the tests for determining validity and infringement that will be applied in any proceedings currently pending or that may be issued in the future.

If you apply for a new registration before the Act commences, then the old regime will automatically apply in the manner described above (even if your application does not proceed to registration until after the commencement date). However, if you so choose, you can make a 'conversion request' for your application to be processed under, and governed by, the terms of the new Act. If you would like the option of choosing which regime will govern your design, then you need to file your application before 17 June 2004. Applications filed after that date will be governed by the new Act. Please contact us if you would like advice in this area.

Amendments to designs/copyright overlap provisions

The Designs (Consequential Amendments) Act 2003 (the Amending Act), which will also come into force on or about 17 June 2004, makes amendments to a number of other pieces of legislation consequential to the enactment of the Designs Act. Most notably, it amends the designs/copyright overlap provisions contained in sections 74 to 77 of the Copyright Act 1968.

These provisions provide that it is not an infringement of copyright to reproduce an artistic work by applying a corresponding design to a product, if the owner of that artistic work has already registered the corresponding design under the Designs Act or applied the corresponding design industrially (subject to some limited exceptions, including in the case where a relevant design is not registered and the work is 'a work of artistic craftsmanship').

The purpose of these provisions is to ensure that artistic works that are industrially exploited as three-dimensional designs do not receive the extensive protection generally given to artistic works under the Copyright Act, but are instead subject to the more limited design protections.

The amendments made by the Amending Act do not change the policy behind the overlap provisions, but are intended to close a number of loopholes and remove definitional ambiguities.

The main reform in this regard is the extension of the defence to copyright infringement for incidental reproductions. Under the current terms of s77(2), the defence to copyright infringement only applies when a defendant reproduces the plaintiff's work by applying the corresponding design to a three-dimensional article of manufacture. Design owners have identified a clever loophole: the defence does not apply to 'plan-to-plan' copying, that is where the plaintiff's work is reproduced by a drawing that is used to assist the defendant in creating the article. This is because the drawing is not itself an article of manufacture. Likewise, the defence does not apply to drawings or photographs of the work that are used by the defendant for the purposes of advertising.

As was noted by the Australian Law Reform Commission, unless the s77(2) defence is extended to permit such incidental actions, the whole purpose of avoiding dual protection for three-dimensional articles under the copyright and designs regimes is undermined. The Amending Act closes the loophole. Section 77A provides that it is not an infringement if the relevant reproduction is incidental to or in the course of making, hiring or selling the product.

Owners of artistic works that have not been registered as designs may seek to rely on an exception to the defence to copyright infringement by arguing that their work is a 'work of artistic craftsmanship'. Section 77 will still provide (as it currently does) that the defence does not apply where the plaintiff's work is a 'work of artistic craftsmanship'. Unfortunately, the legislation does not define what a 'work of artistic craftsmanship' actually is. However, recent cases, including Sheldon v Metrokane [2004] FCA 19 and Muscat v Le [2003] FCA 1540, demonstrate courts' reluctance to find that mass-produced industrially applied articles are works of artistic craftsmanship.

What do these changes mean for you?

The reforms in the Amending Act are clearly directed towards reducing the circumstances in which owners of commercially exploited artistic works can take advantage of the Copyright Act protections. Therefore, it is now more important than ever for you to consider registering the corresponding design of your artistic work under the Designs Act, if you have any intention of applying the design industrially.

Once you register your design, you will automatically lose the right to claim copyright infringement but will at least have the protections afforded by the Designs Act. If you do not register your design and apply it industrially, you may have no protection at all. With the closing of the loopholes (subject to the issue of 'works of artistic craftsmanship'), it is no longer open to you to claim copyright infringement in relation to 'plan-to-plan' copying or reproductions used for advertising purposes.

Trade marks – 'What's in a name?' ACIP considers interface between trade marks, business names, company names and domain names

In brief: The Advisory Council on Intellectual Property has released an issues paper examining the relationship between trade marks and business, company and domain names.

By Tim Golder, Partner and Marina Lloyd Jones, Lawyer

In January 2004, the Advisory Council on Intellectual Property (ACIP), an independent body responsible for advising the Federal Government on IP matters, released an issues paper on the relationship between trade marks, business names, company names and domain names.

As the paper notes, there is a degree of confusion in the business community as to the nature of the rights associated with each identifier. A common misconception exists that business and company names grant proprietary rights similar to those that attach to trade mark registration, and that business, company, and domain names offer immunity from infringement of a trade mark.

While current measures for countering these misconceptions are purely educative, the paper discusses a range of alternative structural initiatives, including:

  • abolition of the business names registers – following the UK by abolishing business names registers, and imposing mandatory disclosure requirements on businesses and sole traders;
  • mandatory trade mark register search – requiring that business name registrants undertake searches of the trade mark register prior to obtaining registration;
  • central register for business names – amalgamating state and territory business names registers to form one central business register; and
  • two-tier trade mark system – modifying the trade mark system so that the registration of a business or company name automatically entitles its owner to a limited exclusive right to registration of the name as a second-tier trade mark.

Some of the options have merit (although the devil will be in the detail), but the suggested two-tier trade mark system is ill-conceived and would only add to existing confusion. Such a proposal has been roundly condemned when previously mooted.

The paper also examines, at a very general level, the implications of domain name registration for trade marks, business and company names. It invites comments on:

  • the effectiveness of the .au Dispute Resolution Policy and whether its remedies are adequate; and
  • whether a similar dispute resolution procedure should be adopted for disputes between trade mark owners and business or company name registrants.

Comment and submissions to ACIP on the issues paper closed on 15 March 2004. We will keep you informed of future developments.

Trade marks –  AAR Partner: author of new trade mark book

The leader of our trade marks registration practice, Colin Oberin, is the co-author of a new book concerning Australian trade marks, recently released by Thomson Law Book Co. The book is entitled Practical Guide to Australian Trade Mark Law and Colin's co-author is Ben Fitzpatrick from the Victorian Bar.

As the title implies, this is a commonsense practical guide that follows the course taken by trade marks from selection and initial searching through to lodgment of an application, examination, opposition and infringement. The Guide contains practical hints on documentation and fees and is designed to be an initial point of reference for the novice and professional alike.

The book provides information on a task-by-task basis, rather than on a topic-by-topic basis and addresses such areas as non-use, international protection, licensing and assignments, as well as the selection, adoption and registration of trade marks.

The Guide is a companion volume to the well-known Shanahan's Australian Law of Trade Marks and Passing Off and provides cross-references to that text for readers who require a more detailed analysis of particular subject matter.

Trade marks – New THORPEDO trade mark

In brief:  Can a high-profile personality create a trade mark that can withstand a challenge from similar names?

By David Yates, Senior Associate

Australia's swimming champion Ian Thorpe was recently successful in his attempt to register, as a trade mark, his nickname 'THORPEDO' for various classes of goods and services. Registration had been opposed before the Australian Trade Marks Office by a sportswear company, Torpedoes Sportswear Pty Limited, but the opposition was unsuccessful. That company appealed the decision to the Federal Court, but the court recently rejected that appeal. The 'THORPEDO' mark has now proceeded to registration.

Ian Thorpe's company sought registration of the 'THORPEDO' mark for goods in classes 3, 5, 9, 12, 16, 18, 25, 28, 29, 30, 32, and services in classes 35 and 41. Torpedoes Sportswear Pty Limited (Sportswear) was the registered owner of three prior trade marks: the word mark 'PARADISE LEGENDS TORPEDOES', registered for protective paddings etc in class 28; the word and device mark 'T TORPEDOES', where the first T was large, and the letters were stylised (the T device mark), registered for clothing in class 25; and, the same T device mark registered for travelling bags etc in class 18. Sportswear also relied on its use of the unregistered word mark 'TORPEDOES' in relation to apparel.

The first occasion on which Ian Thorpe was called 'THORPEDO' was apparently on 17 March 1997, when the name was used in a Sydney newspaper. Ian Thorpe arranged for incorporation of a company to enter into commercial arrangements on his behalf. He called the company 'Thorpedo Enterprises Pty Ltd' because he liked the name.

Before the Federal Court, there was no dispute that the nickname 'Thorpedo' had been applied to Ian Thorpe, nor that the name had been used frequently in connection with him, including by the media, in his sponsorship of various goods and services, and in other promotional activities. There was no evidence that the name, however, was used as a trade mark prior to the filing of the trade mark application.

On appeal before the Federal Court, Sportswear relied on the grounds of opposition contained in sections 44, 58 and 60 of the Trade Marks Act 1995. Under s44, an application for a trade mark registration must be rejected if the mark is substantially identical with, or deceptively similar to, a prior registered or pending mark, where that mark is registered or its registration is sought for the same or similar goods and/or services. Under s58, a person may oppose registration of a trade mark on the basis that the applicant for registration is not the owner of the trade mark. Under s60, a person may oppose registration of a trade mark on the basis that it is either substantially identical with, or deceptively similar to, a trade mark in which the opponent has acquired a reputation (whether it is registered or not) and, because of that reputation, the applicant's use of its mark is likely to deceive or cause confusion.

For the purpose of s44, the only mark claimed to be substantially identical with, or deceptively similar to, the 'THORPEDO' mark was the T device mark. Justice Bennett concluded that the marks were neither substantially identical nor deceptively similar. When comparing two words that are both well known, where one is a word in common use and the other a word associated with a particular person, it is more difficult to establish a likelihood of mistaken impression, as compared to where the registered mark is not a commonly used given name and its meaning is not so well known or obvious so as to offset the likelihood of mistaken impression derived from imperfect recollection. In fact, the evidence led Justice Bennett to the conclusion that, between 'THORPEDO' and 'TORPEDOES', the former was, at the priority date of the 'THORPEDO' application, the more well known and, it could be said, famous. Further, there were different ideas behind each of the marks: 'THORPEDO' is based upon Ian Thorpe's name. It connotes Ian Thorpe rather than a torpedo, which was the connotation of the T device mark. The s44 ground of opposition was unsuccessful.

In respect of the ground of opposition contained in s60, Sportwear also relied on its prior use of the unregistered word mark 'TORPEDOES' for apparel. Justice Bennett concluded that 'THORPEDO' was not deceptively similar to 'TORPEDOES'. The association of 'Thorpe' with Ian Thorpe, particularly in connection with sporting apparel, could not be disregarded. Further, there was no evidence of actual confusion. Even if her Honour had held that the marks were deceptively similar, the evidence did not lead to the conclusion that, because of the reputation of 'TORPEDOES', the use of the 'THORPEDO' mark would be likely to deceive or confuse. The s60 ground of opposition was unsuccessful.

In relation to the ground of opposition under s58, the Sportswear marks were not substantially identical with the 'THORPEDO' mark and thus Sportswear could not claim ownership of that mark. In any case, while Ian Thorpe's company did not invent the word, it was that company that first entered into an agreement permitting its use as a trade mark, and it was that company that applied to register it as a trade mark with the authority of Mr Thorpe.

A recent news article reported that Ian Thorpe is already considering development of a spring water product under the name 'THORPEDO'. The securing of this trade mark registration was no doubt a key aspect of his strategy to fully exploit the commercial rights associated with his name.

Trade marks – Who is the real Harry Potter?

Time Warner Entertainment Company, LP v Stepsam Investments Pty Ltd [2003] FCA 1502 (December 2003)

In brief: The Federal Court recently ruled on a dispute over the trade mark HARRY POTTER between a clothing company and the Time Warner Entertainment Company, which owns the rights to make movies based on the Harry Potter books.

By Colin Oberin, Partner, and Cynthea Reynolds, Lawyer

Background to the case

This case involved an appeal from the Registrar of Trade Mark's decision to allow Stepsam Investments Pty Limited (Stepsam) to register HARRY POTTER in class 25 in relation to clothing. Stepsam licensed the trade mark to Wombat Enterprises Pty Ltd (Wombat), who had been selling women's clothing under this trade mark since approximately 1994. The Registrar rejected an opposition by Time Warner Entertainment Company, LP (Time Warner) (which owns rights to make movies based on J K Rowling's Harry Potter books), and registration was allowed under section 41(5) of the Trade Marks Act 1995 (Cth) (the Act).

In its appeal to the Federal Court, counsel for Time Warner modified their position and contended that Stepsam's registration of the trade mark should be limited to adults' clothing. However, Stepsam argued that it was entitled to have the trade mark registered in relation to all types of clothing.

Legal issues

Time Warner relied on four grounds of opposition:

  • the trade mark is not capable of distinguishing Stepsam's goods from the goods and services of other persons (s41);
  • the use of the trade mark by Stepsam would be contrary to law (s42(b));
  • Stepsam does not intend to use, or authorise the use of, the mark in Australia, or to assign it to a body corporate for use in Australia (s59); and
  • the Registrar accepted the application for registration on the basis of representations that were false in material particulars.

All grounds of opposition failed.

Section 41: capable of distinguishing

The court endorsed the explanation of s41 given by Justice Branson in Blount Inc v Registrar of Trade Marks (1998) 40 IPR 498 at 504-505. That is, the decision maker must conduct a three-staged inquiry into whether the trade mark is capable of distinguishing the goods from the goods of other persons. In summary, the three stages involve questioning:

  1. whether the trade mark is inherently adapted to distinguish the designated goods from the goods or services of other persons by itself (s41(2);
  2. if not, whether the trade mark is to some extent inherently adapted to distinguish the designated goods from the goods or services of other persons, either in conjunction with evidence of use, intended use or 'other circumstances' (s41(5)); or
  3. if the trade mark is not to any extent inherently adapted to distinguish the designated goods from the goods or services of others whether, because of evidence of the extent of the mark's use, that trade mark is nonetheless capable of distinguishing the goods (s41(6)).

In the event that the court is satisfied as to (a), then consideration of neither (b) nor (c) will be necessary.

The court held that the first limb of s41 was not satisfied in this case, but that s41(5) was applicable. The court rejected Time Warner's arguments that the name failed to satisfy s41(5) because it was not used by Stepsam before the priority date (ie the user was Wombat, not Stepsam) and the use by Wombat was limited to low-priced women's clothing. In relation to the limited use argument, the court stated that it is commonplace for a manufacturer or distributor of women's clothing to add to its range of related goods. Thus, the court found that, given the following factors, s41(5) was satisfied and the ground of opposition failed:

  • the extent to which the trade mark is inherently adapted to distinguish Wombat's goods;
  • the fact that there is only a small chance of the mark being used by a person named Harry, Harold or Henry Potter;
  • the volume of sales of HARRY POTTER women's clothing before the priority date; and
  • the closeness of the relevant fields (ie women's clothing and children's clothing).
Section 42(b): contrary to law

Time Warner argued that use of the HARRY POTTER trade mark on clothing for children and teenagers would be 'contrary to law' because it would mislead and deceive (or is likely to mislead or deceive) customers and would constitute a breach of s52 of the Trade Practices Act 1975 (Cth). It was argued that HARRY POTTER has now acquired a secondary meaning directly associated with the Harry Potter books, films and merchandising. Thus, a substantial number of persons seeing the name HARRY POTTER on clothing would be misled or deceived into making a purchase in the mistaken belief that they would be acquiring clothing with some legitimate association with the Harry Potter boy wizard character.

The court held that Time Warner's argument effectively asserts a monopoly over the words HARRY POTTER, at least in relation to products intended to be purchased by, or on behalf of, children and teenagers. Also, the court affirmed the principle that the application of s42(b) should be considered at the priority date, although prospective conduct after registration could be considered. The court held that, as at 26 February 1998, any association in the Australian public's mind between the name 'Harry Potter' and a product would not have been with the fictitious character created by J K Rowling, but rather with Wombat's clothing. This was based on the fact that, at the priority date for Stepsam's application, Wombat operated 17 clothing stores in New South Wales and Queensland, the first Harry Potter book was published only shortly before Stepsam's priority date, with only approximately 2000 copies having been sold in Australia by that time.

The court considered that the visual content of the trade mark was relevant. Not only are the initial letters of each word on the clothing label in lower case, as distinct from the upper case letters used in all the J K Rowling character merchandising, but the label contains none of the graphics that reinforce identification of the character being merchandised. Thus, mere use by Stepsam or Wombat of the subject trade mark on clothing (even for children) would not be likely to mislead the public into believing the clothing was associated with Time Warner or the Harry Potter books or films. The court noted that, if the trade mark was used in a different way in future, that situation might change – that is, any s52 case that is brought on such grounds in the future can be determined on its merits.

The marked dissimilarity between the fields of activity engaged in by the parties was also considered relevant. The court stated that it is usual for a merchandiser to use pictorial material reminiscent of the character, which is a phenomenon markedly absent from Wombat's clothing.

Section 59: intention to use

Time Warner argued that, at the application date, Stepsam did not have a bona fide intention to use the trade mark (or to authorise it to be used by Wombat), except in relation to women's clothing, to which it had been applied before that date. Time Warner argued that the applicant must have a definite and real intention to deal in certain goods and not a mere general intention of extending the business at some time. However, the court endorsed the rider that this intention does not necessarily have to be immediate or be formed within a limited time. The court accepted Stepsam's evidence that it had always intended to extend the range of clothing into other areas. This was sufficient to support the existence of a real and definite intention to take this step at some time.

Section 62(b): false representations

In regard to s62(b) of the Act, it was contended that Stepsam made false representations regarding the extent to which the trade mark had been used by Stepsam by virtue of the following comments:

  • 'The Trade Mark has been used for five years in a quite extensive manner...'; and
  • '...the Trade Mark was first used... in Australia upon clothing... in 1994'.

Time Warner asserted that these statements were false, as the trade mark had been used only for a select range of women's fashion and that the trade mark had not been used in every part of the Commonwealth of Australia. However, the court held that the products upon which the trade mark was used are correctly to be described as 'clothing', notwithstanding that those products represented only part of the range of products that are clothing (ie women's clothing). Also, Stepsam's use of the trade mark 'in Australia' contains no implication that sales occurred in every part of the Commonwealth of Australia.

Conclusion

The HARRY POTTER trade mark has been registered by Stepsam in class 25 (clothing). At 1 March 2004, there has been no appeal filed with the Full Federal Court.

Domain names – Extension of the .au Dispute Resolution Policy

In brief: The .au Dispute Resolution Policy will be extended to all applicable domain names from 1 August 2004.

By Prataal Raj, Lawyer

  • The .au Domain Administration Board (auDA) adopted the .au Dispute Resolution Policy (auDRP) in 2001, in response to the issue of 'cybersquatting'. The auDRP created an alternative dispute resolution mechanism for open second-level domain name disputes.
  • The auDRP is broadly based on the Uniform Dispute Resolution Policy of the Internet Corporation for Assigned Names and Numbers, and covers the asn.au, com.au, net.au, id.au and org.au domain names.
  • auDRP proceedings are administered by independent, auDA-approved providers of dispute resolution services rather than the auDA itself.
  • Domain name licences issued or renewed prior to 1 August 2002 are not subject to an auDRP proceeding unless the registrant elects to participate.
  • Domain name licences issued or renewed after 1 August 2002 are subject to an auDRP proceeding and this will occur even if the registrant elects not to participate.
  • It is important to note that involvement in an auDRP proceeding does not preclude either party approaching a court for appropriate relief.
  • However, importantly for trade mark owners, the Free Trade Agreement signed between Australia and the United States in February this year may have implications for domain name disputes involving trade marks. The US statement refers to a system being implemented to 'resolve disputes about trade marks used in Internet domain names'. While the auDRP has the ability to deal with these types of disputes, it is not clear at this stage precisely what changes the US has in mind for dealing with domain name disputes involving trade marks, although this may involve greater protection for trade mark owners.

Copyright – High Court upholds Ten's appeal on The Panel decision

In brief: The High Court has handed down its ruling on the extent of copyright protection in television broadcasts. This article, by Partner Jackie O'Brien, Senior Associate Miriam Stiel and Law Graduate Brendan Plant, was published on our website on 17 March. For more detail, please refer to our client update.

Copyright – Additional damages under the Copyright Act

FNH Investments Pty Ltd v Sullivan [2003] FCAFC 246 – 7 November 2003

In brief: A recent Full Federal Court decision considered the factors that may influence the award of additional damages under section 115(4) of the Copyright Act 1968 (Cth).

By Marina Lloyd Jones, Lawyer 

Facts

FNH Investments Pty Ltd (FNH), the owner and operator of Palm Bay Hideaway Resort (the Resort) engaged a Mr Sullivan to take photographs of the Resort for use in advertising and marketing material. The contract provided for half-payment of the fees prior to the assignment, and the final amount payable within 30 days of an invoice being prepared upon completion of the work. Mr Sullivan agreed to grant a usage licence once the final payment was received.

The upfront payment of $7425 was made in advance by FNH. Mr Sullivan took the photographs and sent a selection to FNH's directors, who were unhappy with their quality. Mr Sullivan retouched one photograph and sent 61 originals to FNH, together with a letter stating that any use of the photos before final payment would be a copyright infringement.

Despite maintaining that they were unhappy with their quality and refusing to make the final payment, FNH used three of the photos in an advertisement and a promotional brochure. Mr Sullivan contacted FNH and again requested the settlement of the account. FNH refused to do so, adopting what was held to be 'plainly a very aggressive stance'. Further correspondence ensued between Mr Sullivan's solicitors and FNH's solicitors, during which time FNH continued to use the photographs.

Mr Sullivan initiated proceedings alleging breach of contract and copyright infringement on the basis of publication of the photographs in the brochure, permitting their publication in magazines, and converting them from film to digital format for use on the Resort's website. In addition to damages, Mr Sullivan sought additional damages under s115(4) of the Copyright Act 1968 (Cth) (the Act).

The trial judge's decision

In Sullivan v FNH Investments Pty Ltd (2003) 57 IPR 63, the trial judge found that FNH's conduct amounted to copyright infringement. He then considered whether additional damages should be awarded under s115(4) of the Act. At the time of the decision (see comments regarding its amendment below), that section provided:

Where, in an action under this section:

  1. an infringement of copyright is established; and
  2. the court is satisfied that it is proper to do so, having regard to:
    1. the flagrancy of the infringement; and
    2. whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
    3. any benefit shown to have accrued to the defendant by reason of the infringement; and
    4. all other relevant matters;

the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

In Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88, Justice Tamberlin had stated that the court need only be satisfied that one or more of these circumstances applied. The trial judge found that FNH's conduct was clearly flagrant, noting the 'aggressive determination on the part of (the directors) to use the photographs without regard to the legal consequences and in spite of ample warnings'. He then made the following observations:

  • additional damages are awarded on principles that correspond to those that govern awards of aggravated and exemplary damages at common law;
  • exemplary damages, which the court has a wide discretion to award, may be awarded where there has been conscious wrongdoing in contumelious disregard of another's rights;
  • no proportionality need exist between the amount of damages and of additional damages awarded; and
  • although the award of exemplary damages at common law is rare, it is specifically provided for under s115(4) and, if this section is satisfied, the court is empowered to award it.

His Honour held that, in addition to FNH's flagrancy of conduct, its conversion of the photographs into digital form, and the benefit plainly obtained from the infringement, also fell within s115(4). He awarded damages in the amount of the outstanding $7425 and additional damages of $15,000.

The appeal

FNH appealed to the Full Federal Court, claiming that additional damages are only awarded in rare instances involving breach of contract. The Full Court rejected this submission, saying that additional damages are not limited to contracting parties. Their Honours wholly endorsed the trial judge's enunciation of the principles governing additional damage and the award of $15,000.

Amendments to the Copyright Act

It is interesting to note that, after the original proceedings and judgment but prior to the appeal judgment, s115(4) of the Act was amended to add the following as factors to be considered in determining whether additional damages are appropriate:

(ia) the need to deter similar infringements of copyright; and

(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright.

The amendments statutorily confirm that a defendant's conduct after the allegedly infringing act, or after receiving notification of an objection to that act, is viewed as significant in any consideration of whether additional damages are justified. Parties should therefore treat seriously any allegations that they have infringed another's copyright, and take any steps necessary to demonstrate this fact, including obtaining legal advice on the merits of the objector's allegations. Other actions, such as refraining from use of the relevant material, may also be warranted.

Other awards of additional damages

Although claimed in most copyright infringement claims, additional damages remain a rarely awarded remedy. Section 115(4) provides a shopping list of factors that suggest when additional damages may be awarded, although it is difficult to predict when a court will be minded to do so. Despite this, a number of judgments over the past 10 years have included additional damages:

Microsoft v Goodview (2000) $500,000
Bailey v Namol (1994) $150,000
Milpurrurru v Indofurn (1994) $70,000
Raben Footwear v Polygram Records (1997) $15,000
FNH v Sullivan (2003) $15,000
APRA v Pashalidis (2000) $5,000
Flags 2000 v Smith (2003) $1,000

This sample demonstrates the difficulty of predicting the quantum of additional damages that may be awarded. Although there should be some relationship with the overall amount of damages claimed, as can be seen in the FNH v Sullivan case, additional damages may amount to as much as double the general damages awarded.

Practice and procedure – Sony wins anti-piracy case

Sony Computer Entertainment Australia Pty Ltd & Anor v Kasmara [2003] FCA 1496

In brief: A recent anti-piracy case in the Federal Court serves as a warning to people or companies who infringe the intellectual property rights of others.

By Miriam Stiel, Senior Associate

The decision of Justice Allsop of the Federal Court of Australia, handed down on 11 December 2003 in Sony Computer Entertainment Australia Pty Ltd & Anor v Kasmara [2003] FCA 1496, is encouraging for companies seeking to enforce their intellectual property rights and serves as a stern warning to would-be infringers.

The case was heard in the absence of the respondents, who, according to Justice Allsop 'abandoned the endeavour of defending the indefensible'. Based on the applicants' evidence, which included significant material obtained under 'Anton Piller' orders executed in 2002, the court found that:

  1. the four individual respondents' conduct in selling counterfeit copies of the applicants' 'PlayStation' computer games constituted a 'knowing, deliberate and dishonest infringement of the Applicants' trade marks';
  2. the fifth respondent, a company, was also liable for the infringement, based on the findings against the personal respondents, two of whom were directors of the company; and
  3. the applicants were entitled to an award of 100 per cent indemnity costs, because of the dishonest nature of the respondents' conduct and because of what the judge described as the 'thorough, comprehensive and efficient manner' in which the case was presented.

The respondents were ordered to pay a total of $320,000 and the judge also made declarations, injunctions and orders for delivery up of the infringing materials.

The case is the latest in a long line of cases brought in connection with Sony Computer Entertainment's national anti-piracy campaign, which has been running for almost five years.

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