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IP & IT Bulletin no 1, March 1999

In this issue: We look at claim 'Made in Australia'; a case where Coogi claimed copyright in the stitch structure of its fabrics as a work of artistic craftsmanship; an Act designed to encourage the disclosure and exchange of information about Year 2000 problems; and the equitable distribution of the benefits of exploiting biodiversity.

'Made in Australia'

The Australian government's highly successful 'Buy Australian' advertising campaign of the mid 1980s changed the way goods are sold in this country. Consumers were encouraged to support Australian industries and local employment by purchasing products of local origin. However, the campaign foundered on legal and consumer uncertainty about what can be legally classified as a product of Australian origin. The courts fuelled this uncertainty by repeatedly changing requirements for 'Australian Made' claims. Labelling in the form 'Made in Australia from local and imported components' proliferated. This sort of labelling has proved unhelpful and confusing and is out of line with world practice. With the new rules many manufacturers can now resort to a simple 'made in Australia' claim.

'Made in Australia' claims

There is no general requirement under Australian law that goods sold in Australia must be marked with their place of origin (although there are specific provisions governing particular types of goods, such as foods). However, when origin labelling is used it must be used correctly. The relevant law is found in the Trade Practices Act (the TPA) and is expressed in terms such as 'false', 'misleading' and 'deceptive'. Our courts have struggled to find a consistent and fair basis for applying the general language of the TPA to products of mixed Australian and imported origin.

A new defence for 'Made in Australia' labelling

Amendments to the TPA were introduced in July 1998 to provide greater certainty for companies using Made in Australia labelling. Previously, a party who was alleged to have engaged in misleading or deceptive conduct by labelling itsgoods 'Made in Australia' had to meet an arbitrary and uncertain test which varied in its applications from judge to judge. This position has been dramatically simplified by explicit criteria for country of origin labelling on goods sold in Australia.

The TPA amendments provide a defence against allegations that 'Made in Australia' labelling is misleading or deceptive. If the goods in question fulfil the criteria set out by the defence, the party's conduct is deemed not to be misleading or deceptive. The defence applies to goods carrying the label that:

  • are substantially transformed in Australia; and
  • for which 50% or more of the cost of producing or manufacturing the goods was incurred in Australia.

To be substantially transformed, a product must undergo a change as to how it looks, how it operates or the purpose for which it is to be used. Examples are sewing cloth into a shirt or pressing sheet metal into a car panel. The cost of production is the sum of the expenditure on materials, labour and overheads. On a first glance, this criterion appears to provide a simple basis for determining Australian origin but difficulties remain in quantifying costs in diverse manufacturing businesses. The allocation of labour and overheads to a particular product is problematic when facilities and expenses are shared in making multiple products. In these cases, the criteria may be too difficult to work with and a party may seek to rely on general principles under the TPA rather than the new defence. Nevertheless, many manufacturers currently labelling their products in the form 'Made in Australia from local and imported components' will now be able to revert to the previous 'Made in Australia' form, when they meet the criteria set out in the defence.

A new defence for 'Product / Produce of Australia' labelling

The TPA amendments also include a specific defence where goods are labelled 'Product/Produce of Australia'. Using the label 'Product of Australia' is not misleading or deceptive by reason of the labelling if:

  • all of the significant ingredients/components of the goods come from Australia; and
  • all, or virtually all, processes involved in the production or manufacture happened in Australia.

The requirements for the 'Produce of Australia' defence are therefore more stringent than where the products are labelled 'Made in Australia'. 

An ingredient or component is 'significant' if the ingredient is integral to the nature of the goods. All 'significant' ingredients must be from Australia for a party to make a 'Product of Australia' representation. Small percentage of product composition does not necessarily resolve the issue of 'significant' because small percentages of an ingredient can be critical in establishing the nature or function of goods. For example, to represent that apple and cranberry juice is a 'Product of Australia', even though only 5% of the juice is cranberry, both the apple juice and cranberry juice must be from Australia.

Logos

A further defence is provided for country of origin labelling made by means of certain prescribed logos. The logos encompassed by this provision will be outlined in forthcoming Regulations, but are likely to include logos similar to the 'Buy Chloe Heath is an articled clerk from the Intellectual Property and Information Technology department. She has assisted in trade practices, patent litigation and IP licensing matters. Australian' tags or 'Advance Australia' labels. 

Conclusion

Recent amendments to the TPA will provide a system which is relevant and accessible for many local manufacturers and retailers. In most cases it will remove the need for the qualification 'from local and imported components'. In the case of some products, however, the new defences will not be as simple and accessible as the government intends and this will remain an area where continued care is required.

A ripper of a yarn

Coogi Australia Pty Ltd v Hysport International Pty Ltd & Ors

Decision of Drummond J in the Federal Court of Australia – 21 August 1998

Coogi Australia manufactures jumpers which consist of combinations of stripes of varying widths and textures in multiple, vibrant colours. 

In this case, Coogi alleged that Hysport International had infringed its copyright twofold: first in a 'work of artistic craftsmanship' being its fabrics and garments in a particular design; and second in a literary work being the computer program and/or data comprised in the computer program used by computerised knitting machines to produce the fabric for the jumpers in issue. Hysport had allegedly sought to copy the stitch structure of Coogi fabric and then written its own program to effect the same stitch structure.

Copyright in the jumpers / fabric

At the trial, Coogi narrowed its claim to copyright in the stitch structure of the fabric as a work of artistic craftsmanship, and argued that Hysport had infringed its copyright in this work by reproducing, in its own fabrics, a large part of this stitch structure. A possible reason why Coogi did not argue that colour was integral to the design was because there was no obvious comparison between the fabrics as a whole – for example, the colours of Coogi's fabric and the infringing fabric may have been different.

Section 22 of the Copyright Act states that a work is 'made' when it is first reduced to material form. In this regard, the first roll of fabric was held to be the artistic work as its production was the moment when the work was 'made', as this is when the first fixation in tangible form of the idea of the design occurred. The fact that the roll was produced by an automated process did not prevent such a finding. However, Drummond J held that mass production of the fabric rolls, and the garments, prevented them from being works of artistic craftsmanship because 'it is only the first expression or fixation of the author's skill and labour that can constitute the work in which copyrightsubsists.'. His Honour left open the possibility that the first roll in each run of fabric, prior to that fabric being replicated by an automated process, could be considered a work of artistic craftsmanship.

A crucial aspect of Drummond J's finding with respect to the first roll of fabric, was the fact that an individual had made substantial creative and practical contributions to the development of both the design of the computer program and of the fabric itself. Accordingly, this person was entitled to be considered a craftsman – and the product he created a work of artistic craftsmanship. Had a range of people been involved in 'creating' this work, the result may have been different.

The significance of this decision, with respect to the issue of artistic works, is that although many artistic works may have their copyright protection substantially reduced once they have been industrially applied (effectively meaning mass produced), products embodying 'works of artistic craftsmanship' that are not registered as designs will not lose copyright protection if industrially applied. 

Drummond J went on to hold that copyright could not subsist in the stitch structure alone because it was only a part of the work and not the work in its entirety. In addition, he considered that the use of colour in the design was an integral element of the work and could not be disregarded in any description of the copyright work. 

Here, because Coogi focused its claim on infringement of its stitch structure, it failed to lead sufficient evidence regarding the similarities of the copyright work and the allegedly infringing work as a whole. Drummond J held that he was therefore unable to make any comparison of the two works, and could not find that any infringement had occurred. 

Computer program 

Hysport submitted that the XYZ knitting program was not a 'computer program' within the meaning given to this term in the Copyright Act. Hysport argued that the knitting program could not constitute a computer program, as defined in section 10(1) of the Copyright Act to mean 'an expression in any language, code or notation, of a set of instructions ... intended ... to cause a device having digital information processing capabilities to perform a particular function'.

Drummond J rejected Hysport's submission and held that the knitting pattern operated as a body of data which, together with the pre-existing machine program, instructed the machine to knit the fabric. The 'data' operated as a set of instructions and the definition of 'computer program' (in accordance with the Explanatory Memorandum accompanying this definition) should be read broadly to encompass instructions to a device with digital information processing capacities which then caused the device to perform a mechanical function.

Drummond J went on to consider whether Hysport had created an unauthorised adaptation of Coogi's computer program by writing a program in a different language to achieve the same result. The computer program created by Hysport was in a different computer language to that created by Coogi. Because of the lack of objective similarity between the two programs, Coogi did not argue that its computer program had been 'reproduced'. Instead Coogi argued that Hysport had created an unauthorised 'adaptation' of its program. Under the Copyright Act, an adaptation is defined (by section 10(1)(ba)) to mean:

... in relation to a literary work being a computer program – a version of the work (whether or not in the language, code or notation in which the work was originally expressed) not being a reproduction of the work.

The fact that Hysport's program was expressed in an entirely different language than Coogi's program was not an obstacle to a claim of infringement. However, as Drummond J noted, for a work to constitute an unauthorised 'adaptation' of another copyright work, sufficient objective similarity must still exist between the two works. This requirement of objective similarity – in respect of a computer program – necessitates that the allegedly infringing work be based so closely on the original 'text' as to constitute a 'translation' of the precise sequence of words or instructions represented in the original.

Here, Hysport's program was not based so closely upon Coogi's that it replicated the particular sequence of events described in Coogi's program. Hysport had examined a garment produced by Coogi, and devised its own program to create a similar article. Such an action did not constitute an infringement. In the example used by Drummond J, if A writes in German a set of instructions for making a clock and B takes the clock and breaks it into its various parts and then writes his own set of instructions in English for reproducing the clock, B does not infringe A's copyright in the German instructions. 

Accordingly, Drummond J held that one computer program will:

'...be an unauthorised 'adaptation' of another firstly, only if the whole or a substantial part of the particular form of expression of the program in which copyright is claimed appears in the allegedly infringing program in a different computer language, either at the same language level or at a different language level and, secondly, only if the allegedly infringing program has been produced by direct or indirect use, in the sense described, of the copyright program.'

Hysport had not made any use of Coogi's program in devising its own program. As discussed above, using Coogi's garment to create a program to replicate the stitch structure (or at least part of the stitch structure), meant that the Hysport program did not simply translate Coogi's program into a different computer language – it devised an entirely separate program. As Hysport has not made any use of Coogi's program, the two programs were not causally connected. As a result, Hysport was held not to have infringed Coogi's copyright.

Conclusion

The fact that a mass produced jumper could be protected as a work of artistic craftsmanship (along with sculptures, etc) is of great interest, although the findings of this case may be limited to its facts because Coogi jumpers are manufactured in such a way as to be 'wearable art'. 

Also of note is Drummond J's finding that the fact that an essential part of the Coogi program was comprised of graphs containing tables of data was not an impediment to the graphs (together with the control program) being a computer program and therefore a literary work under the Copyright Act. It is worth noting that the elements of objective similarity and causal connection were addressed contemporaneously by Drummond J. In this regard, the lack of objective similarity between the two programs appeared to derive (to some extent) from the lack of causal connection between the two. Although there is some indication that UK courts may take a more lenient approach to the issue of causal connection, in Australia it seems clear that, in the absence of any actual use of a copyright protected program, there will be no infringement where someone merely creates a new program to perform the same function.

Section 202 of the Copyright Act prohibits a person from making groundless threats of legal proceedings in respect of a copyright infringement. In these circumstances, the person against whom the threats are made is entitled to bring an action against the maker of the threats and obtain various remedies-unless the acts in respect of which the threats were made can be established as an infringement of copyright. Hysport's counterclaim against Coogi pursuant to this provision was upheld in this case. Importantly, Drummond J held that a bona fide belief by Coogi that an infringement had occurred, was not a defence to Hysport's counterclaim under section 202. This case is on appeal to the Full Federal Court

Year 2000 Information Disclosure Act 1999

Background

On 26 February 1999 the Year 2000 Information Disclosure Bill 1999 (Cth) received the Royal Assent and became law in Australia the following day. The Act is modelled on the Year 2000 Information and Readiness Disclosure Act 1998 (US) which recently passed into law in the United States of America, but with some significant differences.

The Act is designed to encourage the disclosure and exchange of information about Year 2000 computer problems and Year 2000 remediation efforts without fear of potential legal liability. 

Summary Of The Year 2000 Information Disclosure Act 1999
Year 2000 statements

To receive the protection of the Act, the original Year 2000 statement has to be in writing (which includes electronic means of writing such as e-mail or publication on the internet) and must:

  1. be made after the commencement of the Act and before 1 July 2001; and
  2. relate in some way to the year 2000 problem (the Act contains a lengthy list of relevant ways); and
  3. include a statement that it is a Year 2000 disclosure statement and that the statement may be protected from liability in certain circumstances; and
  4. identify the person or corporation who authorised the statement. 

The Act includes suggested words to append to a Year 2000 disclosure statement which would satisfy

  1. above, namely:

This statement is a Year 2000 disclosure statement for the purposes of the Year 2000 Information Disclosure Act 1999. A person may be protected by that Act from liability for this statement in certain circumstances.

It is important to note that the Act does not protect statements about Year 2000 processing which are made in combination with other information – the sole purpose of the statement must be Year 2000 disclosure. Additionally, the Act is not retrospective and applies only to statements made after it comes into effect.

Republications of Year 2000 statements attract the same protection as do the original statements. Importantly republication may occur orally, but must contain the whole of the original disclosure statement.

Protection from civil liability

The Act provides that, subject to certain exceptions:

  1. no civil action is available against a person (which includes a corporation) in relation to any matter arising out of, or incidental to, the making of a Year 2000 disclosure statement; and
  2. a Year 2000 disclosure statement made by a person is not admissible as evidence in a civil action to which that person is a party. 

The obvious intention of the Act is to provide very broad protection to the makers of Year 2000 disclosure statements. The most important exceptions to the protection are where:

  1. the maker of the statement knew it to be false or misleading in a material particular or was reckless as to whether the statement was false or misleading in a material particular; 
  2. the Year 2000 disclosure statement was made for the sole or dominant purpose of inducing a consumer to purchase goods or services and the consumer is a party to the civil action relating to such goods or services;
  3. the Year 2000 disclosure statement was made to another person in connection with the formation of a contract, or in fulfilment of an obligation under contract, and that other person is a party to the civil action relating to that contract;
  4. the relevant civil action relates to proceedings for injunctive or declaratory relief; or
  5. the proceedings relate to infringement of copyright, a trade mark, a design or a patent. 
Presumption that statements do not amend contracts 

A Year 2000 disclosure statement will not operate to vary or amend a contract unless the parties to the contract agree to the amendment or variation in writing, or the contract expressly allows for the amendment or variation.

Exemptions from the Trade Practices Act

The Act excludes Year 2000 disclosure statements from the operation of section 45 of the Trade Practices Act 1974 (Cth), which prohibits contracts, arrangements and understandings which have the purpose or effect of substantially lessening competition. Contracts, arrangements or understandings made between 27 February 1999 and 1 July 2001 will be allowed if their sole purpose is for the exchange or disclosure of Year 2000 information as defined in the Act.

Application of the Act

Because the Year 2000 Disclosure Act is Commonwealth legislation, it can only grant protection in situations where the Commonwealth Government has legislative power. This will include statements by companies incorporated under the Corporations Law, statements made by Commonwealth authorities and statements made in the course of trade or commerce among the states. Although this will cover many Year 2000 statements, there will also be many situations where the immunity from civil action for a Year 2000 disclosure statement will not apply. Until similar legislation is enacted in the States, the Commonwealth legislation should be reviewed carefully in all cases to ensure that the disclosure statements are covered. For instance, the Act will not necessarily apply to statements made by natural persons or statutory corporations operating entirely within the one State.

At present it seems likely that the State governments will enact similar legislation to complement the Commonwealth scheme.

Key differences from the US legislation

While the Australian Act is modelled on the Year 2000 Information and Readiness Disclosure Act 1998 (US), there are some key differences which include:

  1. The Australian Act provides less protection to oral disclosures;
  2. The formal requirements which must be satisfied in order to qualify as a Year 2000 Disclosure Statement are quite stringent; and
  3. The Australian Act does not operate retrospectively.
Conclusion

The Australian Act is substantially narrower than the US legislation and, until complementary State legislation is enacted, will in any event not apply to all Year 2000 Disclosure Statements made in Australia. However, within the scope of its field of application, it serves a useful purpose in encouraging the disclosure of information which may prevent Year 2000 problems arising.

Drug development from biodiversity

Biodiversity has long been the catchcry of conservationists. Today the word is also increasingly used to describe nature's storehouse of information for new medicines and biotechnology. Currently 7 of the 25 best selling pharmaceuticals are derived from compounds isolated from natural sources, an estimated market worth $7 billion per year, world wide. This is nothing new. Many of medicine's best known drugs, such as asprin, penicillin, quinine and morphine were found in nature. Governments are now beginning to recognise the economic value of biodiversity and increase the degree to which the exploitation of biodiversity is subject to sovereign ownership and regulation.

Calls for the recognition of sovereign rights in biological resources have generally come from less developed nations. The Rio Convention on Biological Diversity was adopted by UNCED in 1992 and deals principally with genetic biological resources. It recognises the sovereign rights of States over their natural resources and provides for the equitable distribution of the benefits of exploiting biodiversity. In the same year The Manila Declaration on The Ethical Utilization of Biological Resources provided a statement from the Asian scientific community on the exploitation of biodiversity, particularly in relation to drug development. The common theme expressed in these forums is that countries own rights in their biological resources and should regulate their exploitation to obtain an equitable share of the benefits.

Australia has highly diverse plant and animal life. Eighty per cent of our plant species are not found in other parts of the world which has made Australia an attractive source of natural materials for drug discovery.

The collection of plant and animal materials from public and private land is increasingly subject to Federal and State legislation. The ownership of intellectual property derived from natural materials is a separate issue from the ownership of the natural materials, as such. Nevertheless, the collection of plant and animal materials for research purposes will be unlawful and will not provide ownership of the materials unless the appropriate approval is obtained in advance.

Australia's federal system and the range of potentially applicable legislation make it impossible to know the requirements of approval and consent for the collection of natural materials without taking account of the specific location and nature of the materials to be collected. However, there are some general issues that need to be considered in most cases, as outlined below.

Legislation

All public land in Australia is subject to some kind of legislation affecting the removal of sample materials. Commonwealth, State and Local Government jurisdictions often overlap and it will commonly be necessary to consider laws from more than one source to obtain approval for to be collected will be used in research to identify new medicines and acknowledge that the owner will have no rights to the products once developed. The R&D pipeline for drug development is a long and expensive journey. Generally several years and hundreds of millions of dollars will be spent between a promising experiment and a therapeutic product. It is therefore imperative to obtain the correct approval and consent at the beginning of R&D investment, before the prospects of commercial success make them more difficult to negotiate. collection operations. Many native species of flora and fauna are also protected by conservation laws. These laws will apply to collection whether it is done on public or private land. Again, more than one source of legislation may be applicable.

Aboriginal rights

Where land is the likely subject of native title claims (under the Native Title Act) or at common law, it is important to consider obtaining permission from the holders of native title. 

Private land

An agreement with a private land owner to collect plant or animal materials from their premises creates a common law property right analogous to a profit a prendre. The forms of such an agreement should inform the land owner that the materials to be collected will be used in research to identify new medicines and acknowledge that the owner will have no rights to the products once developed. 

The R&D pipeline for drug development is a long and expensive journey. Generally several years and hundreds of millions of dollars will be spent between a promising experiment and a therapeutic product. It is therefore imperative to obtain the correct approval and consent at the beginning of R&D investment, before the prospects of commercial success make them more difficult to negotiate.

 

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