ISP cooperative proposes scheme to combat online copyright infringement

Posted by Kate Vaughan

Late last month, the Communications Alliance (CommsAlliance) and five large Australian internet service providers (ISPs), including iiNet, announced plans to assist copyright holders in combatting internet piracy.  This announcement conveniently preceded an appeal before the High Court last week - the iiNet case - concerning precisely this issue.

Image courtesy of renjith krishnan

In iiNet, the High Court is considering the Full Federal Court's decision from earlier this year that ISP iiNet cannot be held liable for copyright infringement for the downloading of films and TV shows by its subscribers.  The Full Federal Court had held that, despite iiNet's failure to send warnings to suspected infringing subscribers (as requested by the consortium of film and television studios), that failure was not unreasonable in light of evidentiary deficiencies in the notices received from the studios requesting that action be taken against them.

New Zealand and France have recently introduced 'three strike' policies targeting individuals who infringe copyright in the manner at issue in the iiNet proceedings.  In New Zealand, once an ISP has issued three notices to an individual user alleging that the user may be infringing copyright (and if the individual continues to infringe), the copyright owner is entitled to take action in the New Zealand Copyright Tribunal (see our previous blog post discussing the New Zealand scheme).

The CommsAlliance and the five ISPs have proposed a similar scheme for Australia.

The three notice scheme

Under the proposed scheme (Scheme), copyright owners will be able to assert their rights directly against alleged infringers through a copyright infringement action.  The action would become available following three stages of warnings to infringing users by the ISP.

Where a copyright owner detects a suspected infringement of its copyright occurring via an ISP, the copyright owner is expected to notify the ISP.  If the ISP is able to identify the suspected infringing user, it will then be obliged to issue infringement warning notices in three stages to that user (for as long as the infringement persists), namely:

• an Education Notice, setting out that the user may have infringed copyright and that failure to act on the Notice may result in further action;
• up to three Warning Notices over a 12 month period; and
• finally, a Discovery Notice, informing the user that they have failed to address the matters set out in the previous notices.

Unlike the French scheme, ISPs will not be obliged to terminate a user's internet account or impose any punitive sanctions at any time during the three warning stages.  This part of the proposal is consistent with iiNet arguments about reasonableness asserted last week in the High Court.  More specifically, on day two of the High Court appeal last week, iiNet maintained that terminating user accounts was (and is) not commercially reasonable.

However, following issue of the final Discovery Notice by the ISP to a user, the copyright owner may apply for a court order to obtain the user's contact details.  If the ISP is served with a preliminary discovery order or subpoena, they will be required to disclose the user's contact details to the copyright owner, and the copyright owner will itself be able to commence proceedings.

Users will be able to appeal any notices they receive (and an independent 'Copyright Industry Panel' will be established to give effect to the appeals process).

It is proposed that the Scheme will be trialled on residential landline customers for 18 months.  After the 18 month trial, an independent evaluation of results will be conducted to determine the Scheme's effectiveness in significantly changing user behaviour.

User education and awareness are key themes under the proposal.  In particular, the Scheme will aim to stop infringements after the issue of the initial 'Education Notice'.

The role of ISPs in addressing infringement

ISPs will not be required to monitor user connections or activities under the proposal.  Instead, the onus will continue to rest on copyright owners to detect infringement and assert their rights (by notifying the ISPs of suspected infringement).  However, where an ISP is able to identify a suspected copyright infringer, it will be required to assist a copyright owner by issuing up to the three stages of infringement notices (as outlined above).

There are two other key components to the Scheme:

(a) copyright owners will be required to indemnify the ISPs for actions they take in operating the Scheme if the ISPs act in accordance with the Scheme rules (which are yet to be settled); and

(b) unless the notifications of suspected infringement by copyright holders comply with an agreed format, there will be no obligation for ISPs to send infringement notices to users.

The format of notification by copyright owners is yet to be finalised.  However, a notification will at least need to include an outline of the works protected by copyright; details of the alleged infringement(s); and the suspected infringer's IP address.  Each notification will also need to contain sufficient detail about the copyright owner to enable the ISP to audit the validity of the copyright claimed and its ownership.

Interestingly, under the Scheme, ISPs will not be obliged to process or audit more than 100 copyright infringement notifications in any calendar month during the 18 month trial period.

Fair enough?

The Scheme has been criticised by content groups.  More specifically, the Australian Content Industry Group (ACIG)[1] has asserted that a continued onus on copyright holders to identify and prosecute infringement fails to strike an appropriate balance between ISPs and copyright owners in addressing internet piracy.  (Conversely, iiNet argued in the High Court last week that it is unable to proactively monitor its customers' internet activities for infringement due to the privacy-related provisions under the Telecommunications Act 1997.)

Similarly, the Australian Federation Against Copyright Theft (AFACT) has raised doubts about the effectiveness of the Scheme, on the basis that it will rely on notices rather than sanctioning users (although research out of France and Canada suggests the majority of infringers change their behaviour after receiving notices under the regimes operating in those jurisdictions).

The imminent iiNet decision ...

It's perhaps unsurprising that CommsAlliance and the ISPs chose to go public with the Scheme in the week before iiNet was heard in the High Court.  If the High Court finds that iiNet should have done (and must in the future do) more to assist copyright owners in protecting their IP, the proposal may be moot.  Through the Scheme, CommsAlliance and the ISPs are sending a clear message about what they considers the role of ISPs to be in combatting piracy in the digital age.

The High Court is expected to hand down its decision in mid-2012.

Partner: Paul Kallenbach

[1] Representing organisations including the Australian Record Industry Association (ARIA), Microsoft, the Business Software Alliance (BSA), Music Industry Piracy Investigations (MIPI) and the Interactive Games and Entertainment Association (IGEA).

The Royal Children's Hospital [2011] APO 94 - a lighter shade of Gray?

Posted by Sarah Doyle

Following the much debated Federal Court decision in University of Western Australia v Gray (No 20) [2008] FCA 498, the ownership of inventions in the context of the employer-employee relationship was considered again earlier this month. This time the Australian Patent Office considered an application filed by the Royal Children's Hospital (RCH) for a direction under section 32 of the Patent Act 1900 (Cth) concerning two patent applications filed by one of its employees, Dr Alexander.

Dr Alexander was Head of Virology at RCH when he developed two inventions the subject of the patent applications. The first invention related to improvements in the medium used to inoculate and grow viruses in culture. The second invention related to improvements in the design of a microtitre tray (a standard tool used in clinical diagnostic testing).

RCH accepted that Dr Alexander was not employed in a sufficiently senior management position to attract a fiduciary duty to forward the interests of RCH, which might otherwise have enabled RCH to argue that, in applying for the patent applications in his own name, Dr Alexander was forwarding his own interests ahead of RCH's interests in breach of that fiduciary duty.

RCH therefore relied on the common law principle that inventions developed by employees 'in the course of their employment' belong to their employer as an implied term of their employment contract, to assert rightful ownership of any patents granted in respect of Dr Alexander's inventions.

UWA v Gray confirmed that, in employment categories where the implied term applies, whether an invention is developed in the course of an employee's employment depends on whether the employee has a 'duty to invent', in the sense that it is part of the employee's engagement to 'utilise his or her inventive faculty in an agreed way or for an agreed purpose, and for the benefit of, or to further the purposes of, the employer'. Put another way, the invention would need to be 'the product of work which the employee was paid to perform'.

As Head of Virology at RCH, Dr Alexander was responsible for the quality and efficiency of the viral diagnostic work performed at RCH. He did not have any express duty to invent under his employment contract and his day to day duties did not involve any pure research. However, Dr Alexander's duty statement specifically highlighted a job requirement of 'identifying potential areas for improvement in the diagnostic service', and he accepted that he had a role in improving the clinical testing procedures at RCH.

The APO considered that this prima facie provided both a duty to invent and an agreed purpose as required by Gray.

The APO then went on to consider whether, as the Federal Court decided in relation to Dr Gray in UWA v Gray, there were sufficient negating factors which were inconsistent with, and went against, the implication of employer ownership of employee inventions that were developed in the course of, and as a product of, what the employee was actually employed to do.

One of the negating factors emphasised by the Federal Court in UWA v Gray was that Dr Gray was not bound by confidentiality obligations preventing him from freely publishing the results of his experiments, even though this would have had the potential to destroy patentability.

Dr Alexander sought to rely on the fact that RCH had similarly failed to impose on him a duty of confidentiality which would ordinarily be required in an industrial setting. However, the APO did not consider this to be determinative in a public hospital environment. This was because hospitals do not need to commercialise an invention to benefit from it. Conversely, hospitals have a large public interest role which is served by disclosing and sharing new methods and techniques including, in the present case, to ensure the proper diagnosis of viral pathogens for the treatment and management of diseases.

The APO also pointed out that in UWA v Gray, Dr Gray's lack of confidentiality obligations was merely one of a number of negating factors. Also critical to the decision in that case were that:

(i) Dr Gray was free to select what lines of research he would undertake and in what fields, without regard to furthering any commercial interest or other benefit of UWA; and

(ii) Dr Gray was expected to solicit funding for his research from sources outside of UWA.

In contrast, the APO found that while Dr Alexander had limited discretion with his lines of research, his research as a whole was confined to, and focused on, improving the viral diagnostic techniques used at the hospital. Such research was directly related to the purposes of, and directly benefited, RCH. Dr Alexander was also not expected to (and did not) obtain any external funding for his research.

Therefore, the APO held there were insufficient factors to negate Dr Alexander's prima facie duty to invent. However, the APO found that the agreed purposes of this duty were limited both by Dr Alexander's specific job requirement to identify 'potential areas of improvement' and by the limited support provided by RCH for Dr Alexander's research (including RCH's refusal of funding requests for laboratory equipment where benefits were untested). This meant that Dr Alexander only had a duty to invent in circumstances where there was a clear motivation arising in the course of his employment, which were found to be broadly limited to situations:

(i) where there was a recognised problem which he would have been reasonably expected to resolve; and

(ii) where he was otherwise motivated to pursue a particular avenue of research in the reasonable expectation of identifying potential improvements (and not just where an invention might possibly result).

Turning to whether the two inventions the subject of the patent applications challenged by RCH were developed within the ambit of this limited duty, the APO held that:

(i) the first invention relating to improvements in the medium used to inoculate and grow viruses was an avenue of research which Dr Alexander would be expected to investigate further in the reasonable expectation of identifying potential improvements in the course of his role as Head Virologist;

but that

(ii) the second invention relating to improvements to an existing device which was already effective in design and not in need of any trouble-shooting was outside the scope of research avenues that Dr Alexander would reasonably be expected to pursue in the reasonable expectation of identifying improvements.

This is a victory of sorts for both RCH and Dr Alexander and demonstrates that while the legal principles may be clear, the application of those principles may lead to very different conclusions depending on the particular facts of the case.

For employers, this reinforces the need to include clear IP assignment provisions in all employment contracts which are more prescriptive than a restatement of the common law principle – 'that the employer will own all IP developed by an employee in the course of his or her employment' - which are still common place in employment contracts.

Partner: Kylie Diwell

Update on reforms to Australia's patent laws

Posted by Dennis Schubauer

Patent law has been the subject of a number of reports and proposals for reform, particularly in relation to gene technology, including:  

• the Senate Community Affairs References Committee's Gene Patents Report – calling for increased patentability standards, particularly regarding gene patents;
• the 2011 Advisory Council on Intellectual Property's Patentable Subject Matter Report (the ACIP Report) – recommending that, among other things, the Patents Act 1990 (Cth) is amended (i) to include a statement of objectives, (ii) to define the requirements for patentable subject matter; and (iii) to replace the current exclusions to patentability with a morality exclusion;
• the 2004 Australian Law Reform Commission's Report No 99, Genes and Ingenuity: Gene Patenting and Human Health (the ALRC Report) – calling for improved patent law and practice, and greater monitoring and education regarding gene patents and licensing; and
• IP Australia's review of the patent system.

In addition, there is currently before Parliament: 

• the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (the IP Bill); and
• the Patent Amendment (Human Genes and Biological Materials) Bill 2010 (the Genes Bill).

On 23 November 2011 the Australian Government issued a consolidated response to these reports, clarifying how it intends to deal with the various proposals.

In the Government's view, most of the recommendations are addressed by the IP Bill, which broadly seeks to:

• extend the information that can invalidate the inventiveness of a patent (eg. common general knowledge outside Australia is relevant if it would be 'understood and appreciated' as relevant (without the current 'ascertained' requirement));
• raise the standard of information a patent specification must include to support the invention;
• raise the burden of proof to a 'balance of probabilities' threshold for all patentability criteria; and
• expand the grounds on which the Commissioner can challenge a patent or patent application.

Significantly, the Government accepts that the Patents Act:

• in principle, should not be amended to exclude genetic material and technologies from patentable subject matter; and
• should not exclude methods of diagnostic, therapeutic or surgical treatment from patentable subject matter (Recommendations 7-1(a) and (b) of the ALRC Report).

Further, the Government accepts that patent applications directed to genetic materials and technologies should be assessed against the same criteria as patent applications in other fields (Recommendation 6-1 of the ALRC Report).  This indicates that the Government will not support those seeking to specifically excluded genes and genetic material from patentability, eg. the Genes Bill, which remains pending following an unfavourable Senate Inquiry.

The Government also commented favourably on initiatives by IP Australia to increase the transparency of the patent system (eg, improvements to the 'AusPat' search tool and the creation of the 'eDossier' tool which provides access to prosecution documents) and to improve the training of patent examiners (eg, spending $5,900 per examiner on training in 2010). These initiatives are viewed as reinforcing the objectives of the IP Bill and consistent with a number of the recommendations.

The only recommendations that require substantive further drafting are those of the ACIP Report noted above. While the ACIP Report proposed some straightforward drafting solutions, the Government's desire that the proposals receive a 'considered and comprehensive public consultation process' will likely mean that there are no conclusive developments in the near future.

In the meantime, the IP Bill has had its first reading in the Senate; and the Government's view that the IP Bill addresses a number of the calls for reform will likely assist the passage of the IP Bill through Parliament.

Partner: John Fairbairn

Copyright in pharma product information - revisited

On 18 November 2011 the Federal Court delivered a further judgment in the long running dispute between Sanofi-Aventis and Apotex relating to generic Arava® (leflunomide) (Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 4) [2011] FCA).  The dispute included an interesting application of the vexed dichotomy in copyright law between information and its embodiment, encapsulated in the maxim that copyright protects the form of expression of an idea or information and not the idea or information itself.

At key issue in dispute was the effect of the Therapeutic Good Legislation Amendment (Copyright) Act 2011 (Cth) (Amendment Act), which commenced May 2011.  Jagot J had previously found that Apotex had infringed copyright in Sanofi-Aventis' product information document (PI) by reproducing it in its PI for generic leflunomide-containing products: Sanofi-Aventis Australia Pty Ltd & Ors v Apotex Pty Ltd (2011) 92 IPR 320.

'Product information' is defined in the Therapeutic Goods Act 1989 (Cth) (TG Act) to mean 'information relating to the safe and effective use of goods, including information regarding the usefulness and limitations of goods'.  Generally, a PI must be submitted to the Therapeutic Goods Administration (TGA) before a new drug, or generic version thereof, is approved or can be lawfully marketed or supplied in Australia.

Litigation, document production and storing data in the cloud

Posted by Sandra Draganich

Image courtesy of lennysan

Litigation issues are often not given the consideration they deserve when negotiating the terms of cloud service provider agreements.  Perhaps this is because negotiation is often undertaken by commercial managers and technical staff to the exclusion of the legal team, or because no-one likes to think they'll end up in litigation.  Even when the legal team is involved, the focus tends to be on regulatory compliance, privacy and data security issues, rather than dispute resolution or litigation.

The recent introduction of civil dispute legislation at the Federal level (the Civil Dispute Resolution Act 2011 (Cth)) and Victoria (Civil Procedure Act 2010 (Vic))  - with similar legislation expected to be introduced in other Australian jurisdictions - provides a timely reminder of the importance of considering the impact that storing data in a cloud might have on any litigation in which the owner of the data is involved.

The legislation aims to encourage the early resolution of disputes and, to that end, the early identification of the real issues in dispute.

At the Federal level, the Civil Dispute Resolution Act obliges an applicant to inform the Court (via the filing of a 'genuine steps statement' when proceedings are issued) of the steps taken to resolve the dispute.   The Act provides, as an example of what might constitute a 'genuine step', the provision of documents to the other person to enable them to understand the issues involved and how the dispute might be resolved.

In Victoria, the Civil Procedure Act applies when proceedings are on foot, and obliges parties to a proceeding to comply with certain 'overarching obligations', including an obligation to disclose critical documents at the earliest reasonable time after the relevant party becomes aware of their existence.

What this means, on a practical level, is that a litigant needs to ensure that it has ready access to its documents, including those stored in the cloud: being able to access and retrieve data quickly and in an admissible form will best position a party to pursue, or defend, any claim, as well as meet any disclosure or discovery obligations it needs to meet should litigation ensue.

Of course, quick access to documents is generally desirable should a person be involved in litigation, irrespective of the application of the recent legislation. For example, notices to produce might be issued on short notice, or a party might be involved in litigation with an expedited timetable so that discovery might need to be completed within a short timeframe.   If documents are stored in the cloud, the party's ability to comply at short notice might be impeded, absent any contractual 'safeguards' with the cloud service provider.

Cloud computing arrangements, while various in nature, typically involve the cloud service provider receiving, processing, holding and storing client data at a location separate from the client (and sometimes overseas).   As the client generally does not have possession of the data or documents (but does have 'control' of the data or documents in the sense of a legally enforceable right to call for production), several key issues arise when litigation looms, including data access, retrieval and integrity.   These issues need to be carefully considered at the time of negotiating a cloud service provider agreement.

Data access and retrieval

The timely retrieval of data will be pivotal in determining a client's ability to pursue or defend any litigation, or comply with any subpoenas to produce (failing which the client will be in contempt of court).

For this reason, provider agreements should expressly address service levels, data availability and turnaround times for requests for access to or the return of data.  As soon as proceedings are issued, the client should think about what data might need to be reviewed (and retrieved), and make an early request from the cloud service provider for the retrieval of the data.  Enquiries should also be made of the cloud service provider before agreeing to any discovery timetable as this will be relevant to the client's ability to comply with any timetable set by a court.  If possible, a contractual indemnity should be obtained from the service provider, so that it is obliged to indemnify its client in respect of any loss occasioned as a result of delays (such as costs associated with a court hearing in relation to non-compliance with a discovery timetable).

Integrity

A client might wish to ensure that its data is stored separately from that of others (eg, if privacy or confidentiality issues are of concern), and that only designated people or groups have access to the data. The issue of ownership might be particularly important if the cloud service provider becomes insolvent.

Contractual protections should also include prohibitions against altering or modifying the data (other than as agreed), as this might raise questions about ownership (including of intellectual property rights) in relation to the modified version of data and, importantly, the integrity and therefore admissibility of the data should the client become involved in litigation and the data is required to be produced to the court or tendered in evidence.

In this regard, whilst the Uniform Evidence Acts contain provisions directed towards facilitating the admissibility of electronic data or documents, it might be prudent to impose a contractual obligation on the cloud service provider to provide all necessary assistance in relation to legal proceedings in which the client is involved, including an obligation to provide evidence as to the manner in which the data has been stored and retrieved should data integrity become an issue on a challenge to admissibility.

Other matters

Cloud service provider agreements should also address the client's rights and obligations in the event that the agreement is terminated by either party, where the agreement naturally comes to an end, or where the cloud provider becomes insolvent.

The location of the data and the cloud provider are also very important.  A client should be mindful of the potential application of foreign laws, for example the application of foreign insolvency laws on the insolvency of the cloud service provider, or the application of general laws of the jurisdiction entitling a third party to access data within its jurisdiction (eg, the USA PATRIOT Act).

Other jurisdictional issues relate to the proper law of the service agreement; the service of proceedings should the client wish to issue proceedings against the cloud service provider for breach of the service agreement; and the enforcement of any judgment in the client's favour should it succeed in any proceedings.

Some more general issues relating to the use of the cloud are canvassed in AGIMO's paper, 'Negotiating the cloud - legal issues in cloud computing agreements', released earlier this month.

Partner: Paul Kallenbach

Website users beware – accessing a website with fine print may form a binding contract and copying its content may infringe copyright

A recent decision of the Supreme Court of British Columbia found that visitors to publicly available websites can be bound by its terms and conditions, even where users did not explicitly accept them. The decision has broad implications, particularly for automated website indexing.

Background to the Dispute

Century 21 Canada Limited Partnership (Century 21 Canada) developed and operates a publically accessible website (Century 21 website) designed to promote its business to potential users by featuring property listings belonging to Century 21 brokers and agents from British Columbia and across Canada.

Zoocasa Inc. (Zoocasa) operated a website that collated property listings from various real estate websites using automated software programs. It provided users with relevant results in response to their search queries (such as location, price and number of bedrooms), including photographs of properties offered for sale, property descriptions and other property details on the Century 21 website.

Century 21 Canada informed Zoocasa that they did not consent to their activities in indexing and copying material from their website. It then placed Terms of Use on their website home page, forbidding the copying or reuse of its property listings. The Terms of Use were at the bottom of the home page and were not drawn to the attention of users in any active way. The Terms stated that 'by accessing or using the Website You agree to be bound by these Terms of Use without limitation or qualification'. The website did not require users to acknowledge reading and agreeing to them. Century 21 Canada also immediately notified Zoocasa of the existence of the Terms of Use and that they considered Zoocasa to be in breach of those Terms and infringing Century 21 Canada's copyright.

Zoocasa continued to access Century 21 Canada's website to index and copy material without consent. As a result, Century 21 Canada commenced proceedings seeking an injunction and damages for Zoocasa's conduct. The issue for the Court was whether Zoocasa's acts in accessing the Century 21 website were sufficient to result in the formation of an agreement.

Contract claims

Zoocasa argued that there was no valid offer, acceptance or consideration for the creation of a contract, particularly as users did not have to expressly agree to anything and the website was freely available for anyone to access. Zoocasa also argued that, as a matter of public policy, it would be detrimental to the operation of the Internet if merely accessing a website that contained terms and conditions would serve as acceptance sufficient to form a binding contract, where the user did not expressly agree to such acceptance.

Punnett J was unconvinced by this argument. In its view, not all information on the web is available without restrictions and contract law is available to protect such restricted information. The Court considered how the law has adapted to changing methods of contracting through the recognised 'ticket' cases, such as buying a car park or concert ticket, where a machine is involved in the contractual process. In these cases, the machine is the mechanism by which the customer enters into a contract upon the receipt of a ticket. Applying these principles, Punnett J found that a publicly available website does not necessarily give a right of access free of any contractual terms.

The Court found that the user's act of accessing the website beyond the initial screen page constituted agreement to the contractual terms of the website. As a result, Zoocasa had agreed, simply by accessing Century 21's website, to observe Century 21's Terms of Use. In making this finding, the Court noted that the type of user of the site will be taken into account in determining whether a valid contract exists. For example, whether the user is (i) an individual consumer or a commercial entity or (ii) a one-time user or a frequent user.

The Court concluded that Zoocasa breached the contract with Century 21 Canada. Interestingly, the Court only awarded $1,000 in damages, stating that Zoocasa's conduct was not 'particularly egregious'.

Copyright infringement claims

There was also claims for copyright infringement made on behalf of Century 21 Canada and two real estate salespersons who were the authors of the sales listings. They argued that the photographs and property descriptions (the Works) created for its online property listings were protected by copyright and Zoocasa infringed that copyright by indexing and copying them on the Zoocasa website. Punnett J found that the Works were entitled to copyright protection due to the level of skill and judgment required to produce them. Punnett J held that Zoocasa had copied a substantial part of the property descriptions and the entire photographs and as such, Zoocasa had infringed copyright.

The Court granted Century 21 Canada a permanent injunction, restraining Zoocasa from accessing the Century 21 website in contravention of the Terms of Use posted on that website.

Implications of the decision

The critical consideration as to whether the sort of agreement at issue in this case (often referred to as 'browse wrap' agreements) is enforceable is whether the user is aware of the terms and conditions. If so, then the browse wrap agreement could be binding and enforceable. Importantly, there is no need for the user to take steps to indicate his or her acceptance of the terms eg. by ticking 'I agree'. Whether or not the user can be taken to have accepted the terms in such circumstances will depend on factors such as:

(i) what notice the user has respecting what they are agreeing to, including the prominence the site gives to the terms and conditions

(ii) whether the user is an individual consumer or a commercial entity and in addition a one-time user or a frequent user of the site.

As the Judge stated, '[a]t the root of this lawsuit is the legitimacy of indexing publically available websites'. A website operator seeking to prevent a competitor from scraping its site can potentially use contractual terms to do so.

Partner: John Fairbairn

Woolworths has a successful victory over disputed domain name wooliesonline.com.au

The WIPO Arbitration and Mediation Centre Administrative Panel has decided in favour of Woolworths Limited (Woolworths), finding that the domain name wooliesonline.com.au (the Domain Name) is confusingly similar to Woolworths' trade mark WOOLLIES.

Background to the Dispute

In 2008, Woolworths obtained registration in Australia of the WOOLLIES trade mark (the Mark) for a variety of goods and services, including online wholesaling and retailing of products. The Mark is known as a colloquialism to the supermarket trade name, Woolworths.

In March 2011, Save Cash Pty Ltd (Save Cash) registered the Domain Name. In July 2011, the Domain Name linked to a web page containing sponsored advertising links, including links to Woolworths and its competitor, Coles.

Woolworths subsequently filed a complaint to the Arbitration and Mediation Centre.

Parties' Arguments

To succeed in its claim under the .au Dispute Resolution Policy and the Rules for .au Dispute Resolution Policy, Woolworths had to establish that:
(i) the Domain Name was identical or confusingly similar to its Mark;
(ii) Save Cash had no rights or legitimate interests in respect of the Domain Name; and
(iii) the Domain Name was registered or subsequently used in bad faith.

In arguing satisfaction of the second limb (which went to legitimacy), Woolworths argued that Save Cash is not known by the Domain Name, appeared to be running a car sales business and the Domain Name was not being used in good faith in the offer of goods and services.

In respect of the third limb (bad faith), Woolworths asserted that the Domain Name had clearly been registered in bad faith, as Save Cash had no rights or legitimate interests in the Domain Name and Woolworths had not consented to its use of the WOOLLIES mark. Further, Woolworths' strong reputation was such that Save Cash must have been aware of Woolworths and its mark or must have known that the Domain Name would have benefited from being so similar to the Mark.

Save Cash in turn argued that it intended to develop the Domain Name to market goods and services that incorporate woollen products and other associated lines, and not to sell food or other items which Woolworths sells. They further claimed that the Domain Name did not infringe the Mark as it was not offering or selling food or anything that would fall within the goods or services in respect of which the Mark was registered. Save Cash also argued that it was lawful to use a trade mark within a domain name provided the website contained a disclaimer dissociating it from the trade mark owner or offered a completely different product or service.

Panel Findings

The Panel considered that the Domain Name comprises the WOOLLIES Mark together with the word 'online', which describes one of the services for which the Mark is registered. In that respect, the Domain Name did not detract from the distinctiveness of Woolworths' well-known Mark and was found to be confusingly similar.

In finding that Save Cash had no rights or legitimate interests in the Domain Name, the Panel stated that:
(i) Save Cash failed to provide evidence of its plans to use the Domain Name in any of the ways it claimed;
(ii) Save Cash was not commonly known by the Domain Name or the word Woollies; and
(iii) the Mark is so well-known that it is inconceivable that the Domain Name could be used in a way that would not mislead Internet users.

The Panel also found that Save Cash had registered and subsequently used the Domain Name in bad faith. The Panel considered that, as the Domain Name contains the distinctive Mark with a descriptive word, it gave an impression that users would be led to a website where Woolworths' products were available to buy online and created a likelihood of confusion that the Domain Name was endorsed by or affiliated with Woolworths. The Panel held that Save Cash must have been fully aware of this potential affiliation and used the Domain Name in an attempt to attract Internet users for commercial gain.

Impact of the Decision

As Woolworths had satisfied all the elements, the Panel ordered the Domain Name to be transferred to Woolworths. The decision is confirmation that domain name dispute resolution policies can be effectively utilised to prevent trade mark misuse within domain names and that the addition of certain words to a trade mark ('online' in this case) may not obviate the likelihood of confusion.

Partner: Lynne Peach

Full Federal Court provides further clarification on the purposive approach to patent construction

The Full Federal Court recently dismissed Australian Mud Company Pty Ltd's (AMC's) appeal against Barker J's finding that its innovation patent (the Patent) was not infringed. In doing so, the Court endorsed the 'purposive approach' to claim construction and provided helpful guidance on the fundamental principles of patent construction.

By way of background, the Patent claimed a device for indicating the orientation of a sample obtained from a geological drilling survey. AMC alleged that Coretell Pty Ltd's (Coretell's) orientation device (which consisted of two components; a 'down hole' component wirelessly connected to a 'handset' component) infringed the Patent. The primary judge (Barker J) accepted that Coretell's device, by operation of its two components, performed the same function as the device claimed in the Patent. However, the issue of infringement turned on the meaning of the word 'device'. After hearing expert evidence, Barker J concluded that the 'two separate and separated parts' of Coretell's device were not within the scope of the term 'device' as used in the claims of the Patent. Accordingly, AMC's infringement claim failed.

The appeal centred solely on whether the primary judge had erred in that conclusion. AMC argued that the primary judge had disregarded the 'bedrock of claim construction in Australia'; namely, that 'it is not legitimate to narrow or expand the boundary of the monopoly fixed by the words of a claim by adding glosses drawn from other parts of the specification'. Based on this principle, AMC contended that the primary judge had 'read in' an integer that was not present in the claims (that the device must be a single piece), and therefore construed the claims by importing a gloss from the specification, not from the wording of the claims themselves.

AMC also argued that, even on a literal interpretation, the word 'device' could encompass orientation tools in two or more parts. To support this assertion, AMC referred to the dictionary definition of the word as meaning 'a particular function for the thing', as opposed to 'a single thing'. As such, the claims of the Patent would not be 'impermissibly stretched' if the word 'device' was construed as referring to all the components of a thing which performs a single function.

In response, Coretell argued that ‘the claims of the patent do not comprehend the assemblage of the accused apparatus, being an apparatus in two parts which… provided an improved form of orientation equipment’. In construing the Patent, the word 'device' should not be isolated, but instead considered as part of the 'phraseology of the claims' specifically chosen by AMC to define its monopoly. Coretell submitted that the correct construction of the claims involved looking at all the words appearing in each claim, which necessarily resulted in a finding that the claims covered only a unitary apparatus.

The Court upheld the decision of the primary judge, confirming that he applied the correct principles of patent construction. In particular, the Court re-iterated that the words of the claim define the invention and that they should not be stretched beyond their textual limits:

'there is no warrant for adopting a method of construction that gives a
patentee what it might have wished or intended to claim, rather than what the
words of the relevant claim actually say. While the Court should read the claims
purposively and not with an eye for pedantry, even an appropriately liberal
approach to construction should not permit the words of the claims to be
stretched beyond their textual limits'.

Furthermore, the Court held that 'a purposive construction of the claims did not result in a construction that was at variance with the plain text of the claims themselves'. Applying these principles, the Court rejected AMC's approach requiring the various meanings of the word 'device' as used throughout the claims to be considered in isolation. The Court even expressed a suspicion that this approach to construction was an attempt to capture the accused apparatus within the Patent. On the other hand, Coretell's construction of the claims provided a consistent meaning to the word 'device' throughout the claims and was the preferred approach. Accordingly, the Court dismissed AMC's appeal.

The decision provides an important reminder that patentees should take extra care when drafting their patent claims to ensure that the specific words they use accurately reflect the monopoly they seek. The principle of purposive construction does not allow one to depart from the monopoly as defined by the words used in the claims and does not enable broader inventive ideas to be imported from the body of the specification. If AMC had intended their Patent to cover orientation tools comprising multiple components (which would have been a simple matter of drafting), then they should have provided for it in the words they chose for the patent claims.

Senior Associate: Dennis Schubauer

Global tablet war between Apple and Samsung continues

As the fierce global battle between Apple Inc. (Apple) and Samsung Electronics Co. Limited (Samsung) continues, the Federal Court of Australia has granted Apple an interlocutory injunction restraining Samsung from releasing the Galaxy Tab 10.1 tablet (the closest competitor to Apple's iPad 2) in Australia. As a result of the injunction, Samsung would miss out on the significant pre-Christmas sales market. Samsung therefore (successfully) applied for an expedited appeal hearing which will be heard by the Full Bench of the Federal Court (comprising Justices Keane, Dowsett and Yates) on Friday, 25 November 2011.

Background to the dispute

Samsung had intended to launch the US version of the Galaxy Tab 10.1 in Australia, however Apple caught on and threatened to take action for patent infringement. Samsung agreed to modify the US version and provide Apple with a sample prior to releasing it. Despite the modifications, Apple commenced proceedings alleging that the modified Galaxy Tab 10.1 infringed 2 of Apple's patents (the Patents), breached provisions of the Australian Consumer Law and constituted passing-off of Apple's iPad 2.

The Patents alleged to have been infringed are the 'Touch Screen Patent' (which covers multipoint touch screens) and the 'Heuristics Patent' (which covers the touch screen method and graphical user interface for determining user commands by heuristics).

The Court's finding

In determining whether to grant Apple the interlocutory injunction, Justice Bennett considered whether Apple had established two elements, namely (i) a sufficient likelihood of success at the final hearing (ie. a prima facie case); and (ii) that the inconvenience or injury Apple would be likely to suffer if an injunction were refused outweighs the inconvenience or injury Samsung will suffer if the injunction were granted (Australian Broadcasting Corporation v O'Neill (2006) HCA 46).

Justice Bennett was of the view that Apple would be successful in proving that the Galaxy Tab 10.1 infringed at least one of its Patents, and therefore found that Apple had established a 'prima facie case'. In doing so, she acknowledged the presumption that the Patent Office has properly examined the patent application and that the granted patent is to be presumed valid unless there is strong evidence to the contrary.

She considered that the 'balance of convenience' was evenly weighted, that is, one party would suffer significant harm whether the injunction was granted or refused.

Ultimately, Justice Bennett appears to have been heavily influenced by Samsung's decision to launch in Australia with its 'eyes wide open' (it knew that Apple would likely commence proceedings because there were equivalent actions pending in the United States). She also criticised Samsung's failure to move expeditiously. Not only was Samsung unable to prepare for a final hearing in November 2011 (albeit on limited grounds), Samsung maintained that it could not be ready for a trial before March 2012 (nearly 5 times the proposed timetable). Accordingly, Justice Bennett found in favour of Apple and granted interlocutory relief restraining the importation, promotion, sale and supply of the Galaxy Tab 10.1 in Australia.

Impact of the decision

The decision was solely concerned with whether to grant the interim injunction (both parties requested that the final decision be reserved in order for them to gather further evidence). As noted above, Samsung has successfully applied for an expedited hearing, which will deal with both Samsung's application for leave to 'appeal', and its substantive case against the injunction. The outcome of this hearing will be crucial as to whether the Galaxy Tab 10.1 can take advantage of the peak holiday shopping period. Interestingly, a number of online retailers have sought to circumvent the injunction by directly importing the Galaxy Tab 10.1 product from outside Australia. It remains to be seen whether Apple will also pursue such retailers and, if so, how.

On a broader level, the decision demonstrates the importance of moving quickly and remaining flexible in the context of interlocutory injunctions. Where a party enters the market with its 'eyes wide open' to the risk of patent infringement (having decided not to revoke the patent first), it would be wise to take steps to prepare defensive evidence as soon as possible.

Partner: Charles Alexander

Full Federal Court of Australia – update on 'fair basis' requirements for patents

The Full Federal Court of Australia (Bennett, Nicholas and Yates JJ) recently found that the majority of Wyeth's patent claims covering a method of administering the antidepressant compound venlafaxine hydrochloride (Patent) were invalid (see Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2011] FCAFC 132).

The Full Federal Court based its decision on a finding that the Patent was not entitled to its earliest priority date. Wyeth had accepted that, without the earliest priority date, the patent lacked novelty – perhaps not surprising given the loss of 10 years' priority. The decision highlights the care required when amending patent claims to ensure they are not broadened such that they cease to be fairly based on the specification and any priority documents.

By way of background, the complete specification of the Patent was first filed in 1997 and claimed a priority date of 1996 based on a US patent application (Priority Document). In 2006 the Patent was amended by removing references to 'encapsulated extended release' (ER) formulations from the specification and claims.

At first instance, Jagot J found that the Priority Document disclosed two inventions: (i) an encapsulated ER formulation; and (ii) a method for controlling drug plasma levels. In particular, she found that the method was not confined to the encapsulated ER formulations of the Priority Document. Accordingly, the Patent (as amended) was fairly based on the Priority Document (and Sigma had threatened to infringe the Patent).

Wyeth submitted that the claimed method represented a new result or thing, obtained by a new application of principle as in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274. In that case, the High Court rejected notions of 'inventive merit' in assessing fair basis. In assessing whether a claimed invention is fairly based, the High Court held that it is only necessary to consider what the specification describes as the invention. Accordingly, Wyeth submitted, the inventor may claim all the alternative means by which the thing or result may be achieved.

With respect to fair basis, Wyeth relied on references in the specification of the priority document, including the consistory statement, to the provision of an encapsulated ER formulation containing venlafaxine hydrochloride, unlimited by reference in that sentence to the particular spheroid formulation the subject of the later examples. In essence it argued that all that was required was a mere comparison of the claims and the relevant priority document to assess whether there is a disclosure that mirrors and supports the claims as a matter of drafting of words.

The Full Court held that the invention was not the discovery of a new method with any formulation. The method disclosed is the use of the invention, the ER formulation. It also emphasised that Lockwood does not set down a superficial test based solely on the presence or absence of words. Rather, the words must be construed in the context of the document as a whole.

In the case of external fair basis, the Court acknowledged that 'a development along the same line of thought which constitutes or underlies the invention described in the earlier document' may be fairly based. However this principle must not derogate from the requirement that the priority document must in substance disclose the claimed invention. The Court found that properly construed, the Priority Document was limited to encapsulated ER formulations (further, it even expressly taught away from the use of conventional (non-encapsulation) formulation techniques). The consistory statements in the Priority Document did not help Wyeth – such statements were said to be 'in accordance with this use aspect of the invention' and therefore limited to the invention, ie. the ER formulation.

Accordingly both the product and method claims of the Patent were not fairly based in the Priority Document (ie the was no external fair basis for those claims).

The Court also considered whether the claims were fairly based on the specification (ie. internal fair basis). The Court emphasised that the specification must contain a 'real and reasonably clear disclosure' of what is claimed. In this case, the invention was in the context of a finding that an ER formulation was impossible to achieve using conventional (hydrogel) technology. The amended claims covered such conventional technologies and, accordingly, were not fairly based on the specification.

The decision echoes the amendments proposed by the Intellectual Property Laws Amendments (Raising the Bar) Bill 2011 currently before the Senate. That Bill proposes a number of amendments to the Patents Act with a view to raising Australian patentability standards in line with international standards. The current 'fair basis' test (both for internal and external fair basis) would be replaced with a support requirement –  there must be basis in the specification for each claim and the scope of the claims not extend beyond that justified by the description, drawings and contribution to the art.

Louboutin in red rage over US Court's denial of trade mark protection for its famous red-soled shoes

Posted by Christina Ilinkovski

The United States District Court in the Southern District of New York recently handed down its decision that denied famous fashion shoe designer, Christian Louboutin S.A., Christian Louboutin, L.L.C. and Christian Louboutin's (together Louboutin) motion for a preliminary injunction against the fashion house Yves Saint Laurent (YSL).

In 2008, Louboutin obtained registration of a lacquered red sole as a trade mark in relation to 'women's high fashion designer footwear' in the United States (Red Sole Mark). Louboutin accused YSL of marketing and selling shoe models in YSL's Cruise 2011 collection that used 'the same or a confusingly similar shade of red as that protected by the Red Sole Mark'. Specifically, Louboutin took issue over four shoe designs that featured in the collection: the Tribute, Tribtoo, Palais and Woodstock models, which all had red soles similar to Louboutin's Red Sole Mark.

As YSL refused to withdraw the challenged models from the market, Louboutin commenced proceedings claiming trade mark infringement, counterfeiting, trade mark dilution and unfair competition. YSL filed a counter-claim seeking cancellation of the Red Sole Mark on grounds that it is not distinctive and that it is merely ornamental or functional.

At the outset, Judge Victor Marrero recognised that Louboutin diverted from industry custom when he came up with the idea in around 1992 to colour the outsoles of his high fashion women's shoes in a glossy red nail lacquer. Louboutin himself stated that he chose the colour red because he regarded it as 'engaging, flirtatious, memorable and the colour of passion'. Judge Victor Marrero further acknowledged that Louboutin's shoes have become so famous worldwide that the fashion savvy can immediately identify a pair of shoes as the Louboutin brand simply from the red outsole. He described it as 'a product visually so eccentric and striking that it is easily perceived and remembered'.

The dispute between the two fashion leaders centred on whether Louboutin should be granted the exclusive right to red soles on shoes. Under US law, to succeed on a claim of trade mark infringement, Louboutin must establish that (1) its Red Sole Mark merits protection and (2) YSL's use of the same or a sufficiently similar mark was likely to cause consumer confusion as to the origin or sponsorship of YSL's shoes.

Judge Victor Marrero noted that colour alone may sometimes be capable of trade mark protection where 'it acts as a symbol that distinguishes a firm's goods and identifies their source, without serving any other significant function'. Where colour is used in a 'functional' sense, meaning it is essential for the use or purpose of the product or where it affects the cost or quality of the product, it is not protectable. Specifically, in the American fashion industry, the use of colour in a trade mark has only been upheld where it resides in distinct patterns or combinations of shades so as to manifest a conscious effort to portray a uniquely identifiable mark embedded in the fashion item (e.g. the widely recognised Louis Vuitton monogram using 33 bright colours, or the Burberry check pattern).

In discussing the role that colour plays in the fashion industry, his Honour discussed the uncertainties created in the fashion industry by the registration of a trade mark for a single colour, particularly as 'in fashion markets colour serves not solely to identify sponsorship or source, but is used in designs primarily to advance expressive, ornamental and aesthetic purposes'. In that respect, he stated that colour performs a creative function, including 'to attract', 'to beautify' and 'to stand out', which are non-trade mark functions. As a result, relying on the 'functionality doctrine', the Court stated that the granting of a trade mark for a product's features (such as colour) should be prohibited where competitors will be placed at a significant disadvantage, because the feature is essential to the use or purpose of the item or affects its cost or quality.

YSL argued that a fashion brand should not be granted a monopoly over a single colour as it would stifle competition and diminish the ability to be creative with designs.

Judge Victor Marrero expressed his view that the Red Sole Mark, without any limitation, was too broad and that awarding one participant in the designer shoe market a monopoly on the colour red would impermissibly hinder competition. He concluded 'because in the fashion industry colour serves ornamental and aesthetic functions vital to robust competition, the Court finds that Louboutin is unlikely to be able to prove that its red outsole brand is entitled to trade mark protection, even if it has gained enough public recognition in the market to have acquired secondary meaning'. The Court therefore concluded that Louboutin failed to demonstrate a sufficient likelihood that its Red Sole Mark merits protection.

The decision has important implications for the fashion industry as a whole. In a narrow sense, YSL and other designers can continue to produce red soled shoes, or soles of any colour for that matter. However, the decision suggests that in the United States at least, fashion designers will struggle to attain registration of single colour trade marks in relation to fashion items.

Under Australian law, similar issues have been raised in cases concerning colour trade marks. While Australian Courts have not refused the possibility of trade mark registrations for a colour, there is also a strong emphasis on the applicant having to demonstrate how that colour is used to identify or distinguish a particular brand. However, the Courts appear to be more readily in favour of trade mark applications for colour combinations.

Partner: Charles Alexander

Attorney General announces ALRC inquiry into copyright

Posted by Nicholas Stewart

In his keynote address to the 15th Biennial Copyright Symposium, the Attorney General, the Hon. Robert McClelland MP, announced the intended focus of the terms of reference he intends to provide to the Australian Law Reform Commission (ALRC) in respect of an ALRC inquiry into copyright.

Mr McClelland said:

The inquiry will seek a review of whether the exceptions in the Copyright Act are adequate and appropriate in the digital environment. Currently the Copyright Act has general exceptions to the rules regarding infringement of copyright. These include: fair dealing, the 10 per cent rule and private copying when format-shifting, time-shifting or for special purposes.

There are also specific exceptions such as allowing the making of a copy of a computer program resulting from the process of normal use of the program or for back-up purposes. However, in a fast changing, technologically driven world it is vital for us to see whether [the] existing statute is appropriate and whether it can be improved.

Mr McClelland said his department is consulting with the ALRC and intends to release the proposed terms for comment before the end of the year.

The issue of fair dealing has long been a matter for debate and was the subject of a 1998 review by the Copyright Law Review Committee which recommended a move to a more flexible system while retaining the current exceptions.  However, the proposal never gained enough traction to result in legislative change. Technological changes since then have underlined the need to revisit this area again and the announcement of the review is to be welcomed.

Partner: Charles Alexander

Broader scope for the copyright safe harbour scheme

Posted by Nicholas Stewart

On 12 October 2011 the Hon. Robert McClelland MP, Commonwealth Attorney General, launched a public consultation paper proposing amendments to Part V Division 2AA of the Copyright Act 1968 (Cth)to extend the application of the safe harbour scheme to include entities providing network access and online services. Mr McClelland announced the proposal at the biennial Copyright Law & Practice Symposium.

The proposed changes

The Attorney General proposes to broaden the scope of the safe harbour scheme in the Copyright Act to cover service providers such as educational institutions, workplaces, or online services such as search engines.

The term 'carriage service provider', originally defined in the Telecommunications Act 1997 (Cth) and adopted in the Copyright Act, would be replaced with the term 'service provider' which has been defined for consultation purposes as:

A person who provides services relating to, or provides connections for, the transmission or routing of data; or operates facilities for, online services or network access, but does not include such person or class of persons as the Minister may prescribe in the Regulations.

While the proposed definition is different to the two-tiered definition of 'service provider' under the Australia-United States Free Trade Agreement, the Attorney-General noted that the new term would be consistent with the Australia-United States Free Trade Agreement and comparable international approaches.

A brief history of the safe harbour scheme

The safe harbour scheme came about in 2006 in response to the Australia-United States Free Trade Agreement. The Copyright Actwas amended to offer legal incentives for Carriage Service Providers (CSPs) to cooperate with copyright owners in deterring copyright infringement on their networks. The safe harbour scheme effectively limits the remedies available against CSPs for copyright infringements that take place on their networks that they do not control, initiate or direct.

Defined in the Telecommunications Act 1997 (Cth), a CSP is required to operate primarily as a provider of network access to the public. The definition was adopted in the Copyright Act but its application is limited considering the pace of technological change.

Under the Copyright Act a CSP must satisfy certain conditions to take advantage of the limited remedies available against it for copyright infringement. The limitations are automatic if a carriage service provider complies with the relevant conditions.

Digital industry calls for change

The Consultation Paper highlights the fact that many organisations provide internet access to customers, students and other users, but not to 'the public'. These organisations cannot benefit from the safe harbour scheme as it currently stands.

Online search engines such as Google and Bing are also excluded from the current definition of a CSP because they do not provide 'network access'. The Consultation Paper points out that search engines face similar problems to CSPs in that they cannot control the actions of their users. As a consequence, they face legal risks under the Copyright Act when copyright is infringed through their services.

The Consultation Paper also states that the Australian definition of a CSP 'gives the Australian scheme a more restricted scope than equivalent safe harbour schemes in the United States, Singapore and Korea'. For example, United States courts have held the term 'service provider' to mean an ISP acting as a conduit for peer-to-peer file sharing programs, organisations providing instant messaging services, ISPs who provide their subscribers with news groups and online vendors.

Many organisations have lobbied the Australian Government for change. For example, the Yahoo! Group Australia & New Zealand's submission on the Digital Economy Future Directions Paper can be seen here. Google's submission on the same paper can be found here.

Call for submissions

Written submissions on the proposed definition must be sent by 22 November 2011 to the Business Law Branch, Attorney General's Department, 3-5 National Circuit, Barton ACT 2600.

Partner: Charles Alexander

Apple, ‘app store’ and trade mark infringement

Photograph by Cristiano Betta

Posted by Nicholas Stewart & Lucy McGovern

The U.S. District Court recently refused Apple's application for a preliminary injunction to stop Amazon from using the word 'appstore' in relation to its online portal through which consumers can purchase mobile applications (called the 'Amazon Appstore'). The application was part of the trade mark proceedings filed by Apple in March this year against Amazon.

In light of this, it is timely to reflect on the American decision and consider how it could play out in the Australian context.

Australia moves one step closer to enacting a statutory cause of action for serious invasion of privacy

Posted by Nicholas Petrie

On 23 September 2011 the Commonwealth government released an issues paper (issues paper) seeking views as to whether it should create a right for individuals to seek redress from another person who seriously invades their privacy.

The issues paper follows an extensive 28-month inquiry into privacy law by the Australian Law Reform Commission (ALRC), which tabled its Report in Parliament in August 2008. One of the ALRC recommendations was that a statutory cause of action be enacted for serious invasions of the privacy of natural persons. Since then, the Victorian and New South Wales Law Reform Commissions have recommended substantially similar legislation be enacted, although the Victorian report recommended two causes of action – for both misuse of information and interference with seclusion.

The publication of this issues paper is sure to reignite debate about the need or otherwise for a statutory cause of action for serious invasions of privacy in Australia. However, it does not substantially add to the debate. Rather, the issues paper summarises the key findings in the 2008 ALRC Report and its Victorian and New South Wales counterparts.

The issues paper notes that there is currently no statutory cause of action and ‘scant common law’ for invasion of privacy in Australia. This is contrasted with the position in the United States, the European Union, the United Kingdom, Canada and New Zealand, which each have varying degrees of privacy protection under common law or statute.

Arguments for and against the need of a statutory cause of action for serious invasion of privacy in Australia are canvassed in the issues paper. However, the paper tends to support the notion that development in the law would be best served by legislative change, rather than incrementally under the common law.

The issues paper considers how a new cause of action should operate, if it were enacted. For example, the paper cites wide support for a ‘reasonable expectation of privacy’ requirement in any new privacy cause of action. Further elements to such a cause of action, including an objective test of seriousness or offensiveness, are also discussed in the paper.

A range of other matters are raised in the issues paper, such as the interaction between a new cause of action for privacy and other public interests, including freedom of expression; the availability of class actions under such a cause of action; and potential defences and remedies that would be available.

Interestingly, the issues paper raises the possibility of an ‘offer of amends’ process, that could be used as an alternative to litigation under a new cause of action.

The focus of this issues paper is the form that a new statutory cause of action should take, if it were enacted; rather than on the actual need for legislation, in light of various protections of privacy that currently exist in Australia under common law and statute.

The central question of whether new legislation to protect privacy is necessary should not be lost in the ensuing debate, particularly as the High Court of Australia has not ruled out the existence of a common law cause of action for invasion of privacy. To the contrary, in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, the High Court left that question open to be determined. Furthermore, the continued expansion of the 'breach of confidence' doctrine (as seen in cases such as Giller v Procopets [2008] VSCA 236) has led many commentators to question the need for a separate privacy tort. There are arguments that the development of Australian breach of confidence has resulted in outcomes not all that different to those achieved via privacy developments in the UK and New Zealand. These arguments are not adequately addressed in the government's issues paper.

Some may also consider it surprising that the government has chosen to now advance its consideration of a statutory privacy tort, when it has not yet introduced the first suite of amendments to the Privacy Act 1988 which was foreshadowed following the ALRC Report in 2008. The government has also not responded to a Senate Committee report into online privacy, which made a series of recommendations in April 2011, concerning the collection and use of personal information via the Internet, including the potential erosion of the 'small business' exemption under the Privacy Act.[1]

The Department of Premier and Cabinet has requested responses to the issues paper by 4 November 2011. Responses can be submitted by email to privacycauseofaction@pmc.gov.au.

Partner: Charles Alexander

[1] The report by the Senate Standing Committee on Environment, Communications and the Arts: The adequacy of protections for the privacy of Australians online, did recommend that the government adopt the ALRC recommendation for a statutory tort of privacy, but the government is yet to respond to any of its other recommendations, which arguably have a more immediate relevance to the proposed amendments to the Privacy Act which have already been announced (http://www.aph.gov.au/senate/committee/eca_ctte/online_privacy/info.htm).

Trading Post (but not Google) advertising misleading or deceptive

Posted by Simone Knight

The Federal Court has found that Trading Post Australia Pty Ltd (Trading Post) engaged in misleading or deceptive conduct by publishing an advertisement on Google's search engine website that linked searches for the words 'Kloster Ford' to Trading Post's website.

In ACCC v Trading Post Australia [2011] FCA 1086, the Federal Court dismissed allegations by the ACCC that Google engaged in practices likely to mislead consumers. The ACCC had alleged that by failing to adequately distinguish advertisements from search results, Google had engaged in misleading or deceptive conduct.

Google provides an advertising service known as a 'sponsored link', which advertises a link to a paying customer's website in response to particular word searches. Trading Post paid Google for a sponsored link to its website for the words 'Kloster Ford'. Kloster Ford is a car dealership in Newcastle that competes with Trading Post for car sales.

The Federal Court said that the Kloster Ford advertisement falsely represented that Trading Post was associated or affiliated with Kloster Ford and that Trading Post's website contained information regarding Kloster Ford. Accordingly, Trading Post contravened sections 52 and 53 of the Trade Practices Act.

The Court found, however, that Google had not engaged in misleading or deceptive conduct as it had merely communicated the representations made by Trading Post without adopting or endorsing those representations.

Partner: Geoff Carter

BTW, UR SACKED

Posted by Rory Jolley

Image courtesy of edans

Fair Work Australia has upheld the dismissal of a worker in circumstances where the dismissal was communicated by way of text message.

Brett Martin worked for DecoGlaze Pty Ltd from September 2006 until his dismissal in May 2011. In February 2011, he had been promoted to the position of a spray painter/foreman.

DecoGlaze Pty Ltd manufactures glass splash backs including for kitchens. To help the paint adhere to glass, an additive, Silane is typically added to the paint. It was Mr Martin's job to maintain stock levels of Silane and, in March 2011, he noticed that stocks were getting low. He ordered more, but there was a delay in receiving the additive.

Mr Martin's evidence was that he was left with a tough decision to make. He either had to cease production on those jobs which required the additive or continue without adding the Silane. Unfortunately for him, and for his employer, he chose the latter option.

Some weeks later, on 13 May 2011, Mr Martin was about to fly out of Australia on a holiday when he received a telephone text message from his managing director, Jason Hedges. Mr Hedges chastised Mr Martin for not using Silane and referred to several jobs coming back defective. A subsequent text message from Mr Hedges referred to $74,000 needing to be outlaid to replace defective painted glass.

And then, a third text message was sent informing the Applicant that he had been instantly dismissed.

Mr Martin claimed that he had not given him an opportunity to defend himself, and raised the inappropriateness of being terminated whilst on leave and by text message.

On 15 September 2011, Fair Work Australia found there was a valid reason for the termination, namely the misconduct of Mr Martin. As to the novel use of technology to dismiss Mr Martin, Commissioner Raffaelli stated:

In most situations, termination of employment by telephone texting is not appropriate. However, in this case I am not prepared to be too critical of [DecoGlaze Pty Ltd]. Indeed, even if there had been a face to face meeting, the outcome would probably have been the same.

In our view, the termination of an employee by way of text message would almost always be unreasonable, bearing in mind the personal nature of the employment relationship. The formalities of the employment relationship – the desirability of a written contract (short if necessary) setting out the key terms – need to be matched at the end of the relationship with a degree of process. 

As always, the facts of these cases are important. We have summarised them here. No doubt there is more to the story.

The point of this post is to note yet another way in which modern technology is impacting upon the employment relationship.

Partner: Michael Tehan

ACIP releases Review of the Innovation Patent System

Posted by Christina Ilinkovski

On 17 August 2011, the Advisory Council on Intellectual Property (ACIP) released a 'Review of the Innovation Patent System' (the Review) to assess the effectiveness of the innovation patent system in stimulating innovation by small to medium business enterprises in Australia. The Review also sets out a number of perceived problems with the innovation patent system and invites comments from interested stakeholders.

The innovation patent system was designed to provide patent protection for lower-level inventions that did not meet the 'inventive step' threshold required for a standard patent and could not be protected as a registered design. An innovation patent must satisfy a lower 'innovative step' threshold (as opposed to an 'inventive step'), namely that the difference between the claimed invention and what was previously known makes a substantial contribution to the working of the invention. Innovation patents are granted following a formalities check (with no substantive examination prior to grant required) and provide protection for a maximum of eight years (as opposed to 20 years for a standard patent). However, an innovation patent must undergo substantive examination and obtain certification before being enforced - this can be requested by the patentee or a third party or commenced at the Commissioner of Patent's decision.

It was hoped that this process would provide patent owners with a right that is quick and cheap to obtain, is relatively simple and lasts for a sufficient time to encourage investment. The Review notes that this is the first comprehensive review to assess whether the objectives of the system remain appropriate for Australia today and in the future.

The Review identifies a number of concerns with the innovation patent system, including:
(a) whether the innovation patent system remains relevant to Australia and continues to meet its original objectives;

(b) whether innovation patents are too easy to obtain and overly difficult to invalidate;

(c) that the innovation patent system is overly generous: this is based on its lower inventive threshold (particularly in light of the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (the IP Bill), which proposes to raise the degree of inventiveness required for standard patents to match the standards set by Australia's major trading partners) and the availability of identical remedies for infringement as a standard patent. Further, an innovation patent may be in existence for several years before it is examined and certified (and patentees may deliberately seek to delay this). This causes uncertainty in the market as other parties wishing to enter the market may find it difficult to determine whether they would infringe a valid claim of an innovation patent. The Review therefore questions whether the remedies for infringement of an innovation patent are appropriate;

(d) the issue of a significant proportion of applicants (particularly large corporate companies) using an innovation patent as a form of quick interim protection while they also pursue a standard patent. This arguably undermines the objective of providing for SMEs protection for lower level inventions;

(e) the abuse of the divisional application process, whereby applicants file a divisional innovation patent based on a standard patent application. This enables patentees to 'fast track' the grant of a certified innovation patent and subsequently, to commence infringement proceedings. This mechanism avoids the pre-grant opposition period (available in respect of standard patents) and may result in a competitor being driven out of the market before the merits of the standard patent have been properly assessed; and

(f) the issue of 'evergreening', whereby patentees seek to extend the period of patent protection beyond the initial patent term by applying for secondary patents (often covering only minor incremental developments). The Review considers that this practice has been most prevalent in the pharmaceutical industry. As a result, it proposes to exclude innovation patents from covering chemical or pharmaceutical compositions.

Currently, the pending IP Bill proposes to amend the Patents Act 1990, including certain provisions relating to the innovation patent system. These proposals include:

• expanding the possible grounds for revoking an innovation patent during re-examination;


• expanding the common general knowledge (CGK) against which innovative step is assessed, by removing the requirement that CGK is in Australia only;


• permitting the Commissioner of Patents to consider information made publicly available through the doing of an act when assessing both novelty and innovative step; and


• introducing a 'balance of probabilities' type test when the Commissioner of Patents decides whether to certify or revoke a granted innovation patent.

The aim of the proposals is to raise patent standards generally and increase certainty in the enforceability of patents. However, they do not seek to change the shorter term and lower patentability threshold for innovation patents. We await to see how these proposals may address the concerns with the innovation patent system.

ACIP is seeking written submissions on the Review by 14 October 2011. ACIP will then undertake further consultation with key stakeholders to develop reform proposals to address the findings of the Review.Click here to access the Review by ACIP.

Partner: Charles Alexander