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IP & IT Bulletin no 4, February/March 2000

In this issue: We look at new moral rights for authors; new rules expanding legitimate software copying; the risk that e-commerce solutions infringe existing patents and the need to protect genuinely new solutions; and the dangers of transferring trade marks to prevent parallel importation.

Moral rights revisited

In brief: You may recall that in 1997 the Federal Government introduced a Bill that proposed to amend the Copyright Act 1968, to introduce moral rights for authors. This Bill was removed due to concerns raised about various issues, particularly waivers. The Federal Government has now introduced a new Bill - the Copyright Amendment (Moral Rights) Bill 1999. The new Bill proposes to introduce moral rights in a similar fashion to the 1997 Bill, but with some important differences.

The proposed moral rights

The 1999 Bill retains the same three moral rights contained in the 1997 Bill:

  • The right of an author to be identified on a work - 'the right of attribution'.
  • The right of an author not have his or her work subjected to derogatory treatment (treatment which has a prejudicial effect on his or her reputation) - 'the right of integrity'.
  • The right not to have someone falsely identified as the author when they are not the author and, where the work has been altered by someone other than the author, the right for the work not to be dealt with as the unaltered work of the author - 'the right not to have authorship of a work falsely attributed'.
    (This right exists, in slightly different wording, in the current legislation.)

An author can enforce moral rights even after the assignment of copyright in the work. Therefore, compliance with these rights may restrict the uses which a copyright owner might otherwise wish to make of a work.

Consents vs waivers

Provisions for authors to waive their moral rights-which were in the 1997 Bill-have been removed. Therefore, clauses in contracts providing for authors to waive their moral rights will now be unenforceable. To avoid the possibility of action arising as a result of dealings with works created by employees and contractors (or others who have created works which you might be dealing with) which could infringe their moral rights, it will be necessary either to comply with the moral rights, or obtain from the authors a consent in writing to non-compliance.

Existing contracts and arrangements may therefore need to be reviewed and standard contracts and contracts to be entered into in the future will also need to reflect this change. Existing practices in dealing with copyright works will also need to be reviewed.

Application

The 1999 Bill distinguishes between how the right of integrity and the other moral rights are applied. In connection with the right of integrity, the new Act will apply only to works and films made after the Act commences.

In relation to the right of attribution and the right not to have the work falsely attributed, the new Act will apply to acts or omissions occurring after it commences. This also applies for works in existence before the Act begins.

It will therefore be important for consents to cover dealings with works created before the legislation comes into effect, as well as after. This may create practical problems if the relevant work was created some time ago and you no longer have a commercial relationship with the author.

Authors

The 1999 Bill extends the scope of authors of cinematograph films by providing that moral rights extend to the screenwriter, not only the director and the producer.

There is also a specific provision that moral rights are conferred only on individuals. Therefore, if the producer of a film is a company, the company will have no moral rights in the film and the authors will be the director and screenwriter.

Duration of moral rights

The 1997 Bill provided that all moral rights continued until copyright ceased to subsist in the work (which, for most works is 50 years from the end of the year in which the author dies or, in the case of films, 50 years from the end of the year in which the film was first published).

The 1999 Bill provides that the author's right of attribution and the right not to have a work falsely attributed both continue until copyright ceases to subsist in the work. However, a distinction is made in respect to the right of integrity in the new Bill. This right continues only until the death of the author.

The Bill was introduced into Parliament in the last sitting on 8 December 1999. We should expect the Bill to be considered by the Senate early this year.

Software copying: what you can and can't do under the new Copyright Amendment (Computer Programs) Act 1999 

In brief: Australia has amended the new Copyright Act by extending the circumstances when software can be copied legitimately. The changes are substantially in line with US and European Union laws and should increase international competitiveness for Australian software developers.

Since commercial software was first made publicly available, software 'pirates' have copied and reverse engineered programs in order to use parts of the original program in their own computer programs, or simply to allow the programs to be copied freely. The software industry claims that such pirated software, copied without a separate payment or licence, costs the industry millions of dollars in lost revenue each year.

On the flip side, the process of copying and reverse engineering programs (basically pulling the program apart, allowing it to be modified) has legitimate uses as well. Such uses include allowing the program to be linked to other programs, to fix bugs in programs and to ensure that the program is secure.

The capacity to legitimately copy software is especially useful when the programmers who wrote the program are no longer available, the company that produced the program no longer exists or, as in the majority of cases, the company which produced the program is unable to rectify problems or make it interoperable with other programs, or is uninterested in doing this.

Given the fine line between legitimate and illegitimate copying, determining what people can and cannot do with computer programs once they have bought them has been the subject of significant debate. The Federal Government's response has been to enact the Copyright Amendment (Computer Programs) Act 1999 (the Act).

The amendment enacts a new Division 4A into the Copyright Act 1968. The new Division creates exceptions to what in the past would have amounted to copyright infringement.

When can you copy?

The Act allows for the copying of legitimately purchased or licensed software to ensure that the program can be used for the purposes for which it was designed. As a result, copies can be made:

  • as backup copies (for when the computer fails or the programs need to be re-installed);
  • to study the way in which the program functions;
  • to link one program with another;
  • to correct program errors which are stopping the program from working properly; and
  • to fix security problems.
When can't you copy?

Several qualifications apply:

  • The reproduction or adaptation must not be made from an already infringing copy. Any software reproduction or adaptation must be made by, or on behalf of the owner or licensee of an original copy. Permitting decompilation will not legitimise the making of pirate copies, nor provide a means to make clones of existing software products.
  • The amount of the program copied must be limited to only what is needed for the relevant purpose.
  • Decompilation for any other reason outside the exceptions outlined above will remain an infringement of copyright.
  • Other more specific qualifications apply to some or only one of the exceptions. So, before copying for a specific purpose you should take steps to find out what the exact qualifications are.

These changes are substantially in line with similar laws in the USA and EU countries, and are an important step towards allowing Australian software developers to better compete internationally. It's worth noting that any agreement between parties which attempts to exclude or limit any of the exceptions will have no effect.

Patents: old weapons for a new battle

In brief: E-commerce business processes have been patented in the US, with companies using these as weapons in the battle for online supremacy. Australian companies should check that e-commerce solutions do not infringe existing patents as there are real risks of litigation by ignoring patents. Conversely, if you have a genuinely new solution, you should seek patent protection for it before disclosing the solution or using it commercially.

Internet giant, Amazon.com, has struck a blow against arch-rival barnesandnoble.com in the battle for online supremacy. A US Federal District judge recently granted a preliminary injunction restraining barnesandnoble.com from using its user-friendly 'Express Lane' system. Why? Because Amazon.com had been issued a US patent which arguably encompasses barnesandnoble.com's system.

Patents are the new weapon in the battle for Internet supremacy. For example, Priceline.com is suing its competitor, Expedia (a Microsoft spin-off), in the US for breach of its e-commerce system patent. Meanwhile, Yahoo Shopping is also being sued in the US for infringement of an integrated shopping system patent.

Amazon's 1-Click ordering method

The Amazon.com patent protects Amazon's 1-Click checkout system. However, it also covers any ordering process where a customer's payment and delivery details are stored in such a way that the customer can place subsequent orders with a single action. That action might be a mouse click, a voice command or even the use of a remote control!

Although it might seem surprising that the US Patents Office would issue such a broad patent for a business process, the patent complies with recent US Court decisions liberalising patentability for those systems. Australian courts take a similar approach, applying the threshold question that the invention must have a commercially useful effect. It is difficult to imagine any e-commerce system which would not pass this test. Of course, the business system must still be novel, and not obvious, to justify the grant of a patent.

Parallel imports: no quick fix?

In brief: This case concerned an attempt by an Australian exclusive distributor of tyres to use the law of registered trade marks to prevent a competitor importing those tyres in competition with it ('parallel importation') by having the foreign manufacturer's Australian trade mark registrations transferred to it. There are real dangers in a manufacturer transferring its trade marks to a local distributor in order to prevent parallel importation.

The Australian Trade Marks Act states that it is not an infringement of a trade mark registration to use a trade mark that has been applied to goods by (or with the consent of) the registered owner. This clearly makes it difficult for a local distributor to prevent parallel importation of a foreign manufacturer's genuine goods because the manufacturer generally applies its trade marks to its goods.

In this case (heard initially by Justice Wilcox and then, on appeal, by the Full Federal Court), Tyre Transport Sales Pty Ltd (TTS), the Australian exclusive distributor, adopted the tactic of having the foreign manufacturer's trade mark registrations transferred to it in an attempt to overcome this defence to infringement. The parallel importer, Montana Tyres Rims & Tubes Ltd (Montana), then challenged those registrations. This tactic appeared to be successful because the trade mark registrations, though challenged, were held to be valid. However, for reasons explained below, despite appearances this case does not illustrate a foolproof practical method for preventing parallel importation.

Challenge to validity

The focus of the case was the validity of the trade marks as registered in the name of TTS. Montana challenged the validity on two bases:

  • It was argued that TTS should not have been recorded as the trade mark owner because the Trade Marks Office was not informed that the foreign manufacturer had retained an option to have the marks transferred back to it under certain circumstances. The trial judge considered that the assignment was recorded on the basis of a false suggestion or misrepresentation to the Trade Marks Office. However, the appeal court considered that the there was no need to lodge the option deed as it did not alter the fact of ownership.
  • The trade marks would cause deception or confusion to the public because the trade marks did not indicate that the goods were those of the registered owner but actually indicated that the goods were those of the foreign manufacturer.

Therefore, the result of the decision is that the trade mark registrations in the name of the TTS were held to be valid.

Infringement

The court considered that Montana had not infringed the trade marks by selling goods that were imported before the transfer of the trade marks. Due to the peculiar facts of this case, the court did not need to consider whether it would have been an infringement to sell goods imported after the transfer. In our view, there are good arguments that Montana would not have infringed in this situation either.

Notwithstanding this decision, there are real dangers in a manufacturer assigning its trade marks to a local distributor in order to prevent parallel importation. The problem with relying on this case is that not all relevant issues were put before the appeal court.

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