IP & IT Bulletin no 6, August 2000
In this issue: We examine how you can protect the shape of your products; legislative changes in five areas that affect intellectual property rights; a recent case in which Nike sought expungement of two trade mark registrations for the word 'Nike' belong to Campomar Sociedad Limitada; and more.
- Getting into shapes
- Intellectual property bills: progress report
- Confusion – when?: The Nike case
- Fame and misfortune
- When disclaimers go off the rails
- When is a click-wrap agreement a binding legal document?
- Symboli©ally speaking
Getting into shapes
In brief: Do you see value in the shape of your products? Do imitators copy the shape of your products? Developments in the law relating to product shapes as trade marks could help to protect your intellectual property.
Previous trade mark legislation allowed product packaging or design features to be registered, but not the actual shapes of the products. However, under the Trade Marks Act 1995, a product's three-dimensional shape is registrable as a trade mark.
For this to occur, the test is the same as for any other type of trade mark – the 3D shape must be inherently adapted to distinguish the product (or 'distinctive'), or the shape must actually distinguish the product from those of other traders due to the extent of its use as a trade mark, or a combination of both.
If a product shape is functional because it has a direct relation to the nature or function of the product, the shape may not be registrable as a trade mark. Some factors to consider here include whether:
- other traders would legitimately want to use the shape to sell their competing products;
- it is a commonplace shape for that product;
- the shape is needed to achieve a technical result; or
- the shape results in an advantage in engineering, distribution or storage, or in lower costs of production.
If the product can have other shapes and retain the same functional performance or other advantages, then it is more likely that the shape is distinctive. For example, features used to make a product more attractive may distinguish it and therefore qualify the product shape for registration. But if a product shape itself has aesthetic or novelty appeal to consumers, other traders may legitimately want to use that shape for competing products.
Remember that the product shape by itself must be distinctive. If the shape is always used in conjunction with a word mark such as a brand name, the Trade Marks Office may consider it to be a 'limping' trade mark and it will be more difficult to obtain a registration.
Infringement of 2D or 3D marks
The Federal Court has shed light on when use of a product shape will infringe a registered mark in two cases – Coca-Cola Co v All-Fect Distributors Ltd and Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd.
Infringement occurs when a product shape is deceptively similar to a registered mark and is used as a trade mark in relation to goods in respect of which that mark is registered. At the moment, most of the relevant registered marks are 2D and 3D registrations for packaging or design features.
The Coca-Cola case
In this case, a confectionery wholesaler infringed Coca-Cola's registered contour drawing of its classic Coke bottle by importing and distributing cola-flavoured sweets shaped like the registered contour bottle. The Federal Court stated that whether a product shape is used as a trade mark is determined separately from the issue of infringement. So the question is not whether the shape is used to indicate that the product origin is in the registered trade mark owner, but whether the shape is used to indicate origin in itself. The use of three distinctive features – the silhouette of the bottle, the fluting on the bottle and the label band – was use as a trade mark because these features distinguished the goods from others.
The Philips Electronics case
In this case, Remington's use of a triple-headed configuration for its rotary shaver did not infringe Philips' registered 2D and 3D device trade marks for the triple head of a rotary shaver. (Figure 1 is the registered 3D mark). The Federal Court found that Remington did not use the triple head as a badge of origin – although the triple head was prominent in the product packaging, the Remington brand name was also emphasised.
The Federal Court recognised that earlier authority is of limited assistance in deciding whether the use of the shape of an article is trade mark use. Courts have traditionally considered whether words are used as trade marks by asking: does the mark suggest commercial origin – which is likely trade mark use – or some other message, such as describing the goods or some characteristic of them?
When it comes to a product shape, the difficulty is that the shape itself is one of the characteristics of the product. In this case, the context of the use was important.
These cases go some way to clarifying when a product shape is being used as a trade mark, but further cases should provide more guidance.
What to do!
Consider whether the shape of your product is distinctive and therefore registrable as a trade mark. The Trade Marks Office currently takes a stringent view of whether a product shape is registrable, but the potential benefits of registering to protect against imitators make it worthwhile. Also consider whether imitations of your product infringe your existing registrations for packaging or design features.
Intellectual property bills: progress report
In brief: A round-up of legislative developments that impact upon intellectual property rights.
- The Commonwealth Government has introduced the Privacy Amendment (Private Sector) Bill 2000 (Privacy Bill) to amend the Commonwealth Privacy Act 1988.
- The Privacy Bill primarily regulates the collection, use and disclosure of personal information (through the application of what are referred to as the National Privacy Principles (NPPs)) by extending the application of the NPPs from the public sector to the private sector.
- The Privacy Bill has had its second reading and is expected to be passed before the end of the year.
Copyright Amendment (Digital Agenda) Bill 1999
- The Digital Agenda Bill was passed by the House of Representatives on 28 June 2000 after being subjected to a vast array of amendments by both the Government and the Opposition following the recommendations of the House of Representatives Standing Committee on Legal and Constitutional Affairs (the Andrews Committee).
- It is likely the Bill will be considered by the Senate in the Spring sittings which commence on 14 August and conclude on 7 December.
- The Commonwealth Government announced on 27 June that it will amend the Copyright Act 1968 to allow for parallel importation of legitimately produced books, periodicals, printed music and software products including computer games, video arcade games, word processing, database management and graphical analysis packages.
- The proposed amendments are to be introduced as soon as possible but won't take effect until 12 months after the passing of the amending legislation.
- This will extend the operation of the amendments contained in the Copyright Amendment Act (No. 2) 1998 which permit the parallel importation of legitimately produced sound recordings including CDs.
- The Trade Marks Amendment (Madrid Protocol) Bill, introduced to the House of Representatives on 28 June 2000, seeks to amend the Trade Marks Act 1995 to give effect to the provisions of the Madrid Protocol (a treaty administered by the World Intellectual Property Organization), pursuant to Australia's proposed accession to that treaty.
- The amendments contained in this Bill will enable the Trade Marks Office to process international applications and registrations under the Madrid Protocol allowing trade mark owners seeking protection for their marks in countries party to the treaty, to do so by filing a single application and paying one set of fees.
- The Bill has had a second reading but has not been passed as yet.
Copyright Amendment (Moral Rights) Bill
- This Bill, as previously discussed in February/March 2000 issue of the Bulletin, is still to be debated in the House of Representatives, since it was introduced in December last year.
Confusion – when?: The Nike case
In brief: We examine the case of Campomar Sociedad, Limitada & Anor v Nike International Limited & Anor, recently heard before the High Court of Australia, which focused on the interpretation of section 28(a) of the superceded Trade Marks Act (1955).
The interpretation of section 28(a) of the Trade Marks Act 1955 provided that a mark, the use of which would be likely to deceive or cause confusion ... shall not be registered as a trade mark.
While the 1955 Act has been repealed and replaced by the Trade Marks Act 1995, section 234(2) of the 1995 Act provides that a registered trade mark under the 1955 Act is taken to be valid in all respects after a period of seven years from the date of registration of the trade mark unless one or more of three matters is shown.
The second of those matters is that the registration of the trade mark would be contrary to section 28 of the 1955 Act.
Interpretation of section 28(a) of the superceded Act was the focus of Campomar Sociedad, Limitada & Anor v Nike International Limited & Anor, recently heard before the High Court of Australia.
Perfumes and soaps
Campomar Sociedad Limitada (Campomar), was the registered proprietor of two trade mark registrations for the word 'Nike' in Class 3. The first registration covered 'perfume products of all kinds and essential oils' while the second covered 'bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; [and] soaps' (the Campomar registrations). The filing dates were 29 August 1986 and 2 August 1992 respectively. Campomar began marketing its products in Australia, in some cases using the expression 'Nike Sport Fragrance'.
Nike International held trade mark registrations for the word 'Nike' covering goods such as athletic shoes and athletic uniforms, but not for goods in Class 3. As of 1986 and 1992, they had not marketed perfume products under this trade mark.
In 1994, Nike instituted proceedings in the Federal Court of Australia seeking, among other things, expungement of the Campomar registrations, arguing that the Campomar registrations were 'wrongly made' or 'wrongly remaining' on the Register within the meaning of section 22(1)(b) of the 1955 Act.
Nike argued that its merchandising efforts had generated an immense reputation in the mark in relation to a number of products, and that as a result, use of the mark by Campomar at the date of the application for removal was likely to deceive or cause confusion within the meaning of section 28(a) of the 1955 Act. Accepting this argument, Sheppard J ordered the expungement of the Campomar registrations and, by a majority, the Full Federal Court of Australia dismissed an appeal from his decision.
Matter of timing
The High Court disagreed with Sheppard J's interpretation of section 28(a) of the 1955 Act, and held that the time at which one decides whether or not the trade mark would be likely to deceive or cause confusion by its use 'is restricted' to the date of the application for registration. The applicant for the registration had to show that 'at that time' there was no such likelihood of deception or confusion in relation to all the goods or services covered by the application. Consequently, Campomar's registrations were not 'wrongly remaining' on the Register within the meaning of section 22(1)(b) of the 1955 Act and their automatic registration under the 1995 Act was valid.
The court still had to decide whether the Campomar registrations were to be expunged under section 22(1)(b) of the 1955 Act because they were 'wrongly made'.
The application date of the first registration was 29 August 1986. The Court found that there was no reasonable probability of confusion on that date because Nike had not generated sufficient reputation for its trade mark on that date and the Court was not satisfied that on that date the ordinary person would have had a reasonable doubt that Nike perfumery products would be produced by the same company that manufactured athletic shoes and uniforms.
The application date of the second registration was 2 August 1992. The Court held that on that date there was a reasonable probability of confusion because by then Nike had a strong reputation for athletic footwear and sporting gear. The second registration was therefore liable to being taken off the Register, although this involved the exercise of a discretion.
In written communications between Campomar and Nike before the matter was taken to Court, the latter had stated that perfumes and cosmetic products were not part of their company's image and that they were aware that Campomar had registered Nike in relation to perfume and essences.
Relying on these communications and the fact that Nike did not oppose the Campomar registrations, the Court decided against expunging the second registration and instead simply restricted the goods covered by the second registration to 'soaps'. This is a reminder that exceptional care must be taken with information provided in communications relating to trade mark disputes.
The Court did, however, uphold Sheppard J's conclusion that the marketing of sports fragrances as 'Nike Sport Fragrance' contravened section 52 of the Trade Practices Act and constituted passing off. It also accepted the Sheppard J's conclusion that by placing the Nike Sport Fragrance product near other sports products the public was likely to be misled and deceived into thinking that it was promoted by the Nike Group or with its consent.
Where to from here?
In the end, Campomar succeeded in preserving its trade mark registrations for Nike in relation to perfume products of all kinds, essential oils and soaps. These registrations provide Campomar with the right to use the word 'Nike' in relation to such goods and will prove an obstacle to the Nike Group using it in relation to same or similar goods or services of their own.
The Court did leave it open that, depending on the circumstances, Campomar's use of 'Nike' may contravene section 52 of the Trade Practices Act and constitute passing off, but this would have to be proved in any proceedings brought against Campomar.
The interpretation placed on section 28(a) of the 1955 Act elevates the status of the marks registered under the 1955 Act. However, if a mark has become deceptive then there is still some basis for challenge under the 1995 Act, if it can be shown in the circumstances that deceptiveness is due to the blameworthy conduct of the trade mark proprietor. In the case where another party (in this case Nike) has created a huge reputation in respect of other products, and where it is difficult to see that Campomar could have done anything to stop that, one would expect the Court would hold that Campomar would not have engaged in any blameworthy conduct; and therefore it would be able to retain its registration even if challenged under the 1995 Act.
Fame and misfortune
In brief: MP3 technology allows music recorded onto Compact Discs (CDs) to be compressed and transferred over the Internet. The proliferation of MP3 audio files on the Internet is of increasing concern to intellectual property owners.
Two recent disputes, in relation to Napster and MP3.com, have resulted in mixed outcomes for those protecting copyright against those promoting new technologies. Both disputes highlight the difficulties in reconciling Internet technology with traditional legal thinking.
Metallica v Napster
One MP3-related service that has come under fire from the music community, is Napster. Many in the community claim that it encourages piracy of audio CDs because the Napster software allows internet users to pool and exchange MP3 audio recordings.
When a user logs on to the Napster Internet service, the software scans the user's computer for a list of MP3 recordings that the user is willing to share (Figure 1), and sends the details of each file to a central database. Other users can then search that database for a desired recording (Figure 2) and download it by double clicking on its listed file name (Figure 3).Interestingly, the recording is not copied from the Napster database and, in fact, never passes through Napster at all. This database merely provides the requesting computer with the information it needs to connect directly to the computer hosting the desired file.
Rock band Metallica recently tried using the US Digital Millennium Copyright Act (DMCA) to shut Napster down.
The DMCA provides that, where an Internet service provider receives a complaint alleging that a user has violated copyright, then it must immediately remove the user's access. Metallica submitted a list of 317,377 users who were allegedly swapping its recordings using Napster (see Figure 4). Accordingly, Napster was forced to block the access of all 317,377 users.
The DMCA provides that if users claim that they have been misidentified then they may submit a legal counter-notification. The copyright holder then has 10 business days to commence legal proceedings; otherwise, the service provider must reinstate the user. Napster then turned the DMCA against the band. Napster encouraged tens of thousands of blocked users to lodge a counter-notification, thereby undermining Metallica's attempt to protect its intellectual property.
RIAA v MP3.com
MP3.com provides subscribers with online access to their own CD collection. There are two ways subscribers can add recordings to their online collection. They can purchase a CD from MP3.com over the Internet. The CD is then shipped to the purchaser and is made available to that user online in MP3 format. Alternatively, in a process called 'beaming', a subscriber can place a CD into a computer and run MP3.com software to make that CD available in MP3 format for internet download (see Figure 5). Essentially, this service allows suscribers to access their 'CD collection' anywhere they can log into the internet.
In the US Federal District Court in Manhattan, the Recording Industry Association of America (RIAA) successfully argued that MP3.com's copying of 80,000 CD's onto their internet servers constituted an infringement of copyright. At the time of writing, damages have not yet been awarded against the company, but are estimated to range between US$1 billion and US$240 billion.
The District Court's decision seems inconsistent with the US Court of Appeals decision in relation to RIAA v Diamond Multimedia Systems. In that case the Court held that Diamond's portable MP3 Rio player 'merely makes copies in order to render portable, or 'space-shift', those files that already reside on a user's hard drive'. Arguably, MP3.com was acting in an agency-like relationship with its subscribers, merely copying and making available recordings on its customers' behalf. In other words, the company merely facilitates 'space-shifting', allowing users to listen to recordings they already apparently own. Certainly, the result – allowing a user to listen to his or her CD collection wherever they like – is the same. That the differences in the technical means of achieving that result have such different legal consequences is an indication of how difficult it is for IP laws to deal with this new technology.
Metallica v Napster
Late last month the Recording Industry Association of America (RIAA) obtained an injunction from the US District Court ordering the Napster site be shut down. Judge Patel found 'overwhelming' evidence that the site was created to allow duplication of copyright works, ruling 'That was the whole reason for Napster's existence.' She ordered the site be shut down on 30 July.
On 30 July, the 9th US Circuit Court of Appeals sitting in San Francisco granted Napster a reprieve from the District Court's decision. The decision allows Napster to continue operating while its appeal of the injunction is pending.
When disclaimers go off the rails
In brief: Convincing the public that your business is not related to a toy steam engine is not straightforward. Adelaide small business operator Robyn Miller found, to her detriment, that it was harder than she first thought to disclaim any association with Britt Allcroft, the copyright owner of Thomas the Tank Engine books, videos and toys.
Under the Trade Practices Act, if a person acts in a way that indicates that his or her business has some connection with another body, those actions can be regarded as misleading or deceptive even if there is, in fact, no connection.
In the case of Britt Allcroft (Thomas) LLC v Miller  FCA 699 (30 May 2000) it was found that, through her retail outlet, The Thomas Shop, Mrs Miller engaged in misleading and deceptive conduct by representing to the public that an association existed between herself and Britt Allcroft.
Shortly after Mrs Miller opened the shop in 1997, Britt Allcroft complained to her of her use of representations of Thomas the Tank Engine in her store. Discussions followed and Mrs Miller placed a disclaimer inside the shop above the cash register and on some promotional material, stating that:
The Thomas Shop is independently owned and operated and is not associated, affiliated, related to or aligned with Britt Allcroft.
Unfortunately for Mrs Miller, her disclaimer was not enough to sway Mansfield J, who found that Britt Allcroft had established a significant reputation in Australia in relation to its Thomas the Tank Engine products and that:
Mrs Miller's shop named The Thomas Shop does represent to the public that she has some licence from or approval from the owners of the Thomas logos and marks and goodwill to conduct the shop.
Although courts in the past have held that a clearly positioned disclaimer of association was sufficient means for avoiding misleading or deceptive conduct, Mansfield J found the disclaimer above the cash register insufficient because:
- no disclaimer existed on the exterior of the shop;
- the disclaimer only became apparent to people already in the shop, at the point of sale; and
- much of the promotional material either provided no disclaimer at all, or one so small, relative to the main content of that material, as to have no real impact on those who saw it.
Going further, he advised that he would restrain Mrs Miller from using the name The Thomas Shop, the Thomas logos or any similar logos with or without even the most prominent disclaimers.
The case sends a warning to retailers, distributors and repairers who rely on disclaimers or use a supplier's trade marks without approval.
When is a click-wrap agreement a binding legal document?
In brief: Typically, Internet users are faced with a screen containing any number of terms and conditions, and need to click on an 'I Agree' or an 'I Accept' button before finalising a transaction. The legal effect of these documents has, however, been uncertain. Two recent decisions in Canada and the USA indicate a willingness to accept these agreements as binding on users.
In both Canada and the USA, it now appears that users who indicate acceptance of on-line click-wrap agreements are bound to them as they would be if they had signed on paper. The courts will, however, carefully examine the agreement in question and the circumstances of acceptance before reaching this conclusion, and will give particular weight to the on-screen formatting and the presentation of the document.
Placement and formatting – can you see it?
The agreement must be presented so that it is clearly visible and can not be avoided. Courts are unlikely to find an agreement binding if it is presented as being insignificant and users are encouraged to blindly click their way through, or if it contains terms displayed in a font so small that they are difficult to read.
It is vital that the agreement is placed in a prominent position on the web page. In Ticketmaster Corp v Tickets.Com, the US District Court of California found that an agreement that was only visible by scrolling to the bottom of the page was not binding. In this case the terms could have been completely overlooked if the user had clicked on a link at the top of the page and jumped to a page of more interest deeper within the site. Users could easily navigate their way through the site without being aware of the existence of the agreement.
The language used in the agreement is also relevant. Where terms are drafted in plain language (as opposed to legalese), the court is more inclined to consider the agreement binding.
Acceptance buttons – will they bind?
The most common method used to confirm users' acceptance in click-wrap agreements is by pressing the 'I Agree' button. In Rudder et al v Microsoft Corporation, the Superior Court of Ontario emphasised a number of other procedures that might accompany the use of this button, and give weight to the argument that an agreement is binding.
These included the following specific procedures and set-ups:
- there is an option to disagree with the terms and exit the set-up process; that is, the 'I Agree' button has to be clicked before set-up can be undertaken or completed, but the user can also choose to reject the terms and discontinue the set-up process;
- the user needs to scroll through the agreement to get to the 'I Agree' button;
- there are two or more 'I Agree' prompts throughout the set-up process, so the user is given more than one opportunity to read and acknowledge acceptance of the agreement; or
- the agreement contains a clear notice stating that if the user clicks 'I Agree', they are agreeing to be bound by the terms.
In another recent US case, an agreement that appeared in two separate on-screen windows was approved. One window contained the text of the agreement, and could be viewed by scrolling down. The other window contained an 'I Agree' and an 'I Disagree' option. The service could not be accessed until the user had clicked on 'I Agree'.
Australia – where do we stand?
As yet, no cases in Australia have dealt with click-wrap agreements. It is expected, however, that Australian courts are likely to consider the visibility and centrality of the agreement, the clarity of the terms, and the choice for the user to accept or reject the terms being presented. Australian courts will also look to established contract principles. For unsigned contracts, users will need to be given notice of the terms. Terms of particular significance must be presented in a manner that gives them emphasis.
In the absence of Australian case law relating to click-wrap terms, you should consider the following principles when developing a click-wrap agreement. Is it visible and obvious? Is acceptance of it necessary to complete the transaction?
Symboli©ally speaking – August 2000
In brief: Owners of patents, designs, trade marks and copyright need to be careful when using intellectual property symbols such as ®, TM, © and words such as 'patented' and 'registered design'. The following list of symbols may prove helpful.
- Rights are registered
- Rights are pending
- Rights are neither registered nor pending
Incorrect or inappropriate use of these symbols can place the intellectual property owner in breach of various intellectual property statutes and of the Trade Practices Act.
A rough guide to usage:
Rights are registered
Rights are pending
Rights are neither registered nor pending
Patent pending or Patent applied for
Design pending or Design applied for
© (no registration procedure available in Australia)
If the goods or services to which the intellectual property relates are exported, care should be taken to avoid indicating that the owner has registered rights in countries other than Australia, if no overseas rights are registered or pending.
If the goods or services are exported, we recommend adding the word 'in Australia' or 'Au' to the above symbols and statements.
If you would like specific advice regarding any of the above symbols or phrases, contact one of our Intellectual Property specialists.
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