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US golf company faces setback in attempt to reclaim trade mark from Australian rival

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The Federal Court of Australia has refused an application by US golf company King Par LLC (King Par) for summary judgment against its Australian rival Brosnan Golf Pty Ltd (Brosnan), in a case involving competing ownership claims for the ORLIMAR trade mark in relation to golf equipment.

While the decision represents a setback for King Par, the case is ongoing and it remains to be seen whether King Par or Brosnan has the better claim to ownership of the ORLIMAR trade mark.

Key lessons

For trade mark owners generally, the court’s decision highlights some key lessons about the concept of trade mark abandonment:

  • Trade mark abandonment can cause a trade mark owner to lose ownership rights in their trade mark. It occurs when a trade mark owner intentionally abandons their trade mark.
  • An intention to abandon can be established by drawing inferences from the facts of a given case. However, abandonment cannot be inferred merely from the fact that an owner does not use a trade mark, or fails to renew a trade mark registration.
  • Conversely, actual use of a trade mark will not necessarily preclude a finding of abandonment, as it may be possible to infer from other evidence that an owner intended to abandon their trade mark. This particular point was a key reason for the court’s decision in the King Par case.
  • The issue of abandonment commonly arises in cases where the validity of a registered trade mark is in dispute. In particular, abandonment can be argued as a “defence” to invalidity by a party who registers a trade mark that was originally owned by another party.

Background facts of the case

The Orlimar group of companies (Orlimar Group) was established in the 1970s by three Americans, who conceived of the word ORLIMAR as their trade mark by combining the initial letters from each of their surnames: Lou Ortiz, Pedro Liendo and Emilio Martinez.

The brand achieved notoriety in the late 1990s after Orlimar Group released a fairway wood known as the “Orlimar Trimetal”. The product went on to become the number one played fairway wood on the PGA Tour from 1998 to 2001.

At the same time, in 1998, the Orlimar Group obtained trade mark registrations in Australia for the words ORLIMAR and ORLIMAR TRIMETAL in respect of sporting equipment including golf equipment and golf clubs (being goods in class 28).

Despite the commercial success of the Orlimar Trimetal fairway wood, Orlimar Group fell into major financial difficulty in 2002 and its business was eventually wound-up. As a part of the winding-up process Orlimar Group’s remaining assets, including its two Australian trade mark registrations, were sold to a company that on-sold them to King Par.

King Par’s registrations fall by the wayside: Enter Brosnan

The ORLIMAR and ORLIMAR TRIMETAL trade mark registrations came up for renewal in 2008. However, despite several years having passed since King Par acquired the registrations, the registration details had not been updated. This resulted in the official renewal notices being sent to Orlimar Group and its trade mark attorneys, rather than King Par.

The precise events following the renewal notices being sent are not yet clear. Suffice it to say, King Par failed to take any official action to renew either registration which led to both registrations being cancelled by IP Australia in early 2009.

In the following year, Brosnan decided to adopt and use the ORLIMAR trade mark for its own commercial purposes. According to evidence submitted by Brosnan in the court proceeding, Brosnan believed at the time that the trade mark had not been used in Australia since the early 2000s, and that Brosnan was entitled to adopt the mark in 2010 because Australian golfers did not, at that time, relate to or identify with the brand ORLIMAR.

Based on this belief, Brosnan applied to register ORLIMAR as a trade mark in relation to various goods in classes 25 and 28 including golf clubs and golf equipment. The application was subsequently accepted and registration granted.

In early 2013, King Par commenced court proceedings seeking cancellation of Brosnan’s registration.

King Par’s summary judgment application

In the ongoing court proceeding, King Par’s primary claim is that Brosnan’s trade mark registration should be cancelled on the basis that King Par, and not Brosnan, was the owner of the ORLIMAR trade mark at the time Brosnan applied for registration in 2010.

This was the same claim that King Par relied on in its application for summary judgment against Brosnan which, as noted above, was recently refused by the court in a decision handed down by Justice Greenwood on 30 July 2014.1

In considering King Par’s application, the court accepted that evidence submitted by King Par suggested that the ORLIMAR trade mark had been used in Australia by King Par and its predecessors continuously from to 1998 to 2013. This included use after the cancellation of King Par’s two trade mark registrations in 2009.

However, the court did not consider this evidence was enough in all the circumstances to support a finding that Brosnan had no reasonable prospects of successfully defending the proceeding in order to warrant pre-trial summary judgment being entered against Brosnan.

Abandonment by King Par a real possibility

In reaching its decision, the court has implicitly accepted that Brosnan has “some” reasonable prospects of proving a claim of trade mark abandonment against King Par, which, if found, would mean that King Par lost its ownership rights in the ORLIMAR trade mark by the time Brosnan applied for registration in 2010. This would in turn undermine King Par’s primary basis for seeking cancellation of Brosnan’s registration.

According to the court, Brosnan’s claim of abandonment could potentially be established by further evidence becoming available before the trial. Such further evidence could support Brosnan’s claim if it indicates that King Par intended to abandon the ORLIMAR trade mark prior to Brosnan applying for registration in 2010.

The court was particularly mindful of the possibility for further evidence coming to light regarding communications between Orlimar Group’s trade mark attorneys and King Par in the lead up to King Par’s two trade mark registrations being cancelled in 2009.

The case between King Par and Brosnan now continues, with the court recently making orders on 20 August 2014 for both parties to give discovery and attend mediation in November 2014. Interestingly, the court has also granted leave for Brosnan to have a subpoena issued to Orlimar Group’s trade mark attorneys.

By Len Hickey
Senior Associate

1 King Par, LLC v Brosnan Golf Pty Ltd [2014] FCA 795


Protecting Your Brand: The Justice League Way

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San Diego Comic Con 2014: Warner Bros Panel featuring (from left) Ben Affleck, Chris Hardwick (moderator), Henry Cavill and Gal Gadot. [Photo by Dr. Renee White]

 

It may be over 18 months away until the release of the highly anticipated Batman V Superman movie, but Warner Bros. (WB) and DC Comics have already begun establishing their IP rights through the registration of trade marks and domain names.

Fans of the comic, like me, first learned of the upcoming movie with an announcement at San Diego Comic Con last year. Director, Zack Snyder, even gave a glimpse of the renowned Superman shield embedded within a slightly more robust Batman logo, alluding to the epic battle between the two superheroes.

Building an IP portfolio

Warner Bros. quickly began registering domain names BatmanVsSuperman.com, SupermanVsBatman.com and BatmanVsSupermanMovie.com, giving fans the first insight into possible movie titles. However, nerds like myself, were quickly thrown off the scent by WB registering several Man of Steel titles, including Man of Steel: Battle the Knight and Man of Steel: Beyond Darkness, suggesting that we may see a sequel from the original Man of Steel feature.

Fast forward to July 2014, WB and DC Comics were preparing for their next instalment of marketing releases at San Diego Comic Con. As a bleary-eyed fan who had camped out for the Warner Bros panel at ‘The Con’, I was ecstatic to witness footage featuring a laser-eyed Superman hovering in the silhouette of the Bat signal cast above the stormy Gotham skyline.

Unbeknown to the 6,500 cheering fans in Hall H, DC Comics had already filed trade marks across Australia (1), Europe (2) and the United States (3) for the movie title, “Batman V Superman: Dawn of Justice”. Each of these marks has now been accepted in goods and services classes 9 and 41, which relate to motion pictures and entertainment services, respectively.

Trade Mark filing strategy

WB and DC Comics are no stranger to protecting their brand in the market, like most international companies, the establishment of IP is critical to maintaining exclusive rights. The ‘Dawn of Justice’ trade mark adds to the list of over 100 accepted marks in Australia, including the infamous Superman shield (Trade Mark Nos. 426045 & 728445) and variations of the Batman logo (Trade Marks Nos. 1513455 and 1517824).

The marks build on earlier intellectual property rights given to DC Comics. The life-span of an Australian trade mark is 10 years (4), however the continual ‘regeneration’ of marks similar to those registered contribute to an ‘extension strategy’, akin to what we already see with ‘ever-greening’ of patents in the BigPharma space.

For companies like WB or DC Comics, it is extremely important to file for marks and domains as early as the conception of the idea, preventing domain-squatters and those capitalising from marks yet to be registered. In this particular case, we saw a ‘footprint’ of the brand established several months after the initial announcement of ‘a movie’ in 2013 with the registration of domain names. However, DC Comics left the filing of trade marks, for the movie title, until 7 weeks after the release of the name.

Why did they leave the trade mark filing so late?

Those familiar with Australian trade mark law would understand that ownership of a trade mark is evidenced by ‘first to use’ (5). DC Comics have an extensive and well-established portfolio of Superman and Batman marks, dating back to the 1940s. Therefore any applicant who dared to file for the ‘Batman V Superman: Dawn of Justice’ mark or similar, would have been denied by General Zod the Trade Marks Registrar on the grounds of section 43 of the Trade Marks Act 1995 ‘likely to deceive or cause confusion’ or section 44 ‘marks that are substantially identical or deceptively similar’. Alternatively though, domain names and social media accounts are not governed by similar laws and hence ‘Flash’ speed is required to secure these marketing avenues.

Section 43.  Trade mark likely to deceive or cause confusion
An application for the registration of a trade mark in respect of particular goods or services must be rejected if, because of some connotation that the trade mark or a sign contained in the trade mark has, the use of the trade mark in relation to those goods or services would be likely to deceive or cause confusion.

Interestingly, the mark for the Batman V Superman logo, see below, filed in August is still pending. Unlike the ‘movie title’ mark, DC has filed for nearly every class except the kitchen sink (class 11)! Presumably in anticipation for those marketing products which will feature the logo, including clothing (class 25), beverages (class 30 and 32) and of course printed matter (class 16).

Overall this gives an insight into the strategy and capture of IP by large enterprises. In the meantime, we wait with bated breath for March 2016, where I sincerely hope the Dawn of Justice successfully translates into the incarnation of the Justice League on the Big Screen, rivalling the likes of Marvel and their ‘Avengers’.

Australian Trade Mark Application No. 1643438

By Dr Renee White

(1) Australian Trade Mark No. 1633098
(2) European Trade Mark No. 13066014
(3) US Trade Mark Nos. 86332922 and 86332927
(4) Australia Trade Marks Act 1995 s 72(3)
(5) Australia Trade Marks Act 1995 s 58A

From PhD to Postdoc to Patents

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I was recently quoted in the article “Ageing of Australia’s scientists creating a void in nation’s future research workforce”, in connection with making the ‘giant leap’ from the bench to the boardroom last year. It’s been 12 months now and honestly – I haven’t looked back. How am I doing this, what does it take and is it what I hoped it would be? Read on!

Since January 2014, I’ve been working at Watermark as a Trainee Patent and Trade Marks Attorney in the biological and chemical technologies group. During this time I’ve vetted many emails, phone calls and the occasional Facebook message about ‘what it’s like on the other side?’ So I thought I might piece together a few points about my personal experience transitioning out of the lab.

Let’s start from the top, what does it take to be a trainee?

To be considered for my position, you have to have a PhD in a Biology or Chemistry related field. More preferably, post-doc experience and a proficiency in writing is highly recommended. Here at Watermark, we provide a holistic approach to the clients’ IP portfolio so a background and interest in law and business commercialisation definitely adds value to your CV.

The rules about what you have to do to become a Patent and/or Trade Marks Attorney are set out in the Patents Act, and the Trade Marks Act respectively. You can find out more about precisely what these are from the Professional Standards Board website, and about being a Patent Attorney or a Trade Marks Attorney on the IPTA website.

During your training, which typically runs over about three years, you will need to complete nine subjects as part of a Masters of Intellectual Property Law in addition to gaining everyday hands-on experience within the firm. The University of Melbourne, Monash University, University of Technology Sydney and Queensland University of Technology deliver courses that are accredited by the Professional Standards Board, but not all topic groups are offered by all the above providers.

Don’t get me wrong, it was a huge culture shock going ‘back to uni’; something I swore I would never do. But, in hindsight, it’s really not so bad. Most of the subjects at the University of Melbourne can be taken as an intensive program, running over about five days followed by a take-home exam.  ‘Drafting’ and ‘Interpretation and Validity’ are also taught in an intensive manner but require traditional ‘lock-you-in-a-room’ exams.

A Day in the Life of a Trainee

The second most popular question I get is “what do you actually do?” My typical response is, “I write a lot of letters.” This is somewhat true. These letters are mostly in the form of reporting examination reports to the client, requesting client instructions, responding to foreign associates and the like. Some people appear bored and disheartened at this stage of the conversation, but then comes the best bit! In order to write these letters I get to devour ‘prior art documents’ a.k.a journal articles and patent specifications which showcase the latest and most innovative technology the world has seen. And I have to be honest -  some of the inventions have literally left me gob-smacked and in awe. And, apparently, I’m just starting out on all the exciting stuff I’ll get to advise upon!

Starting from the ‘bottom of the heap’

After eight years of lab experience, I could perform an ELISA, purify a protein and run an SDS-PAGE gel in my sleep. These days I’m on the bottom rung of the ladder, which can shake-up some personalities. It’s not for everyone. The realisation that you are still the expert in your field, but no longer the ‘expert’ in your workplace is sometimes hard to swallow. To an extent, you are no longer in control of your daily activities. Matters are delegated to you – it may be a very busy period or quiet – in which case you are given the opportunity to write fun articles such as ‘Balenciaga Puts its Foot Down Again with Steve Madden’ or ‘Protecting Your Brand: The Justice League Way’. At the same time, you are learning a completely different language and set of skills: IP with a heavy helping of law and a dash of commercialisation.

Overall, I don’t have any regrets about leaving the bench. I still get to interact with scientists whether it is at conferences or client meetings. More importantly, I get to utilise skills learnt in my PhD in my everyday life as a trainee patent attorney. These include multi-tasking, writing and communication, time management, and innovative thinking.

All this being said, I’ll leave you with some final thoughts.

What do I miss about the ‘bench’?
The adrenalin rush of that ‘killer’ experiment giving you the result you were hoping for.

What don’t I miss about the ‘bench’?
The continual begging for funding

Best thing about becoming a Patent Attorney?
Moving into a profession which capitalises on my PhD and keeps me intellectually stimulated

The downside to becoming a Patent Attorney?
Hanging up my Converse Chuck Taylors……. but I do drag them out on casual Fridays.

By Dr Renee White
Contact Renee: r.white@watermark.com.au

Protecting a Brand is About More Than Your Trade Mark: Red Bull May No Longer “Give You Wings”

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The Austrian-based company, Red Bull GmbH, has agreed to pay US$13 million to settle its class action lawsuit pertaining to an alleged breach of express warranty, unjust enrichment, and violations of over 30 state consumer protection acts. The plaintiffs sought compensation primarily for false advertising, claiming that the Red Bull beverage does not provide more benefits to the consumer than a cup of coffee or caffeine pill, contrary to what the company’s global marketing “Red Bull Gives You Wings” campaign would have you believe. The case warrants a review of the concepts of brands and trade marks and the relative importance of each.

Source: still images taken from Red Bull TV Advertisement (http://www.youtube.com/watch?v=Kw_uQUQLhwI).

A class action lawsuit was brought with Benjamin Careathers as the primary plaintiff on 16 January 2013 in the United States District Court of the Southern District of New York. The case brings into focus how a “brand” is more than just a trade mark, and how looking after the trade mark involves considerations broader than those associated with trade mark law. What exactly does the term “brand” encompass? Originally, “brand” was the term given to indicate that a product or service is from a specific source. This concept is now covered by what is referred to as a “trade mark”. This shift coincided with the realisation that there are numerous factors in branding other than simply the product name. Such factors include the consumer’s previous experience, perceptions, and expectations, all of which ultimately form what the consumer knows and feels about a company’s offering. The brand is the intangible sum of a product’s attributes, and has been shown to be the most valuable asset of a business – it is estimated that, on average, 75% of a business’ value is associated with its brand. One of the greatest challenges of becoming a successful business is establishing, and maintaining, a good brand.

Although this decision has no legal impact on the Red Bull trade mark, the question is: will this latest lawsuit damage the Red Bull brand? Regardless of whether the allegations are true, the consumer will inevitably question their previous experience of the product, how they now perceive the product, and what they expect from the product in the future.

In view of this, it is not surprising that Red Bull have denied any wrong doing, despite agreeing to the exorbitant settlement. In the class action, the plaintiffs argued that the marketing campaign, wherein the “Red Bull Gives You Wings” slogan is a predominant feature, amounted to a breach of express warranty, unjust enrichment, and violations of over 30 state consumer protection acts, including New York’s Deceptive Acts and Practices Act and California’s Consumers Legal remedies Act and Unfair Competition Law.

Apparently, guzzling a can of Red Bull does not cause the consumer to conveniently sprout wings, thereby allowing them to escape whatever distasteful situation they have somehow found themselves in – quite to the contrary of the company’s global marketing campaign. Who would have thought? Indeed, this is what Red Bull has argued; clearly, the overly sweet liquid could not generate such a spontaneous, morphological change in the consumer’s body, and as such, there was no chance of the consumer being mislead.

To be fair, this is not the central issue of the lawsuit. Rather, the real issue is whether or not Red Bull is effective in providing energy to its consumers. Many consumers of the product felt cheated, and decided to unite to sue the company for false advertisement. Mr Careathers sought an injunction for the company to stop falsely advertising its products. The suit states that “such deceptive conduct and practices mean that Red Bull’s advertising and marketing is not just ‘puffery’, but is instead deceptive and fraudulent and is therefore actionable”.

Mr Careathers claimed he had been drinking Red Bull since 2002, and accused the company of misleading consumers about the superiority of its product. The plaintiff alleged that the deception has been proliferated through print, TV and Internet marketing campaigns, which promote that the consumption of Red Bull leads to an increase in performance, concentration, and reaction speed.

Red Bull markets the product as providing more energy than a cup of coffee, despite the fact that a can of Red Bull provides roughly half the content of an equivalent sized cup of coffee. Add to this, a regular serving of Starbucks coffee costs just US$1.85, a marked difference in comparison to the exorbitant cost of a Red Bull can. The suit maintains, “even though there is a lack of genuine scientific support for a claim that Red Bull branded energy drinks provide any more benefit to a consumer than a cup of coffee, the Red Bull defendants persistently and pervasively market their product as a superior source of ‘energy’ worthy of a premium price over a cup of coffee or other sources of caffeine.” In evidence submitted by the plaintiffs, it was alleged that a 7 oz. cup of drip coffee contains approximately 115-175 milligrams of caffeine, while an 8.4 oz. can of Red Bull contains 80 milligrams of caffeine.

Red Bull has agreed to settle the lawsuit at a cost of US$13 million, but not because it has falsely advertised its product. Rather, it has merely “settled the lawsuit to avoid the cost and distraction of litigation”. A Red Bull representative stated that the company “maintains that its marketing and labelling have always been truthful and accurate, and denies any and all wrongdoing or liability”. This seems to be an attempt by Red Bull to prevent further damage to its brand. The allegations will possibly prove damaging, at least in the short term. What remains to be seen, is the long-lasting effects of this lawsuit on the consumer’s experience of the product (‘I didn’t grow wings, but did I receive anything more than what a cup of Starbucks coffee would give me?’), their evaluation of how they perceive the product (‘If I didn’t get wings, what am I actually paying for?’), and what they now expect from the product (“Well, no wings, no additional energy hit, so what?’).

Given 75% of Red Bull’s value is estimated to be associated with its brand, the lawsuit was not a matter Red Bull took lightly, as evident from the US$13 million payout to which it has agreed to. US residents, who purchased a can of Red Bull in the last ten years, may be eligible for either a US$10 refund or a US$15 Red Bull product purchase. If it were me, I’d take my refund to Starbucks.

By Dr Brittany Howard
Contact Brittany: b.howard@watermark.com.au

Brand strategy: what’s in a name®?

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Many famous brands have their origin in the surname of a founder of the business: Selfridges®, Myer®, Givenchy® and Harrods® to name a few. These trade marks are now first and foremost associated with the businesses of the men who founded them, but once upon a time, Mr Selfridge and the others were just bright-eyed entrepreneurs, with no reputation, each trying to make an impression by using their name to distinguish their products and services in the market. History shows that these men were very successful, but it was a risky brand strategy to adopt!

The rules

It’s fundamental to trade mark law that the ‘origin’ of a product or service can be associated with a particular trade mark. When applied to particular goods or services, if the trade mark has an element of uniqueness to it – known as ‘distinctiveness’ – then the owner of the trade mark can acquire the right to stop others using that trade mark on their similar products or services. It follows that if a trade mark is not distinctive for particular products or services, then no exclusionary right should be possible. Of course, what is distinctive is not always clear cut, and so the law has adapted to soften the hard edges of these rules.

A surname can be a ‘good’ brand

One factor in determining whether a trade mark is distinctive is whether other people might have a legitimate reason to adopt the same trade mark. Using your surname as your brand is a very legitimate way of evoking the most personal and direct connection between your product and its origin. From a marketing perspective, this is a very good reason to use your surname as your brand.

But, when other people have the same surname, and are equally entitled to use their own name to indicate the origin of their product, the risk you run is that you will be unable to obtain the exclusionary protection afforded by trade mark law. Without that exclusionary protection, the competitive landscape is much rockier.

Knowing what you have to do

If you choose to adopt a surname as your brand, and you want to have all the benefits of trade mark law on your side, here are some factors you’ll need to take into account:

  • The Australian Trade Marks Office has a mechanism for determining just how distinctive a surname is. If a surname occurs on the Australian electoral roll more than 750 times, then it is questionable whether it is capable of being distinctive.
  • If your product or service is a commonplace one – a café, clothing or retail outlet – then using a non-distinctive surname is going to be especially risky. If your product or service is more obscure, then the risks are much lower.
  • If your surname is a common one, and your new business involves popular products or services – don’t despair. You’ll need to be really committed, but if you can prove that, through heavy advertising and sales, your business has developed a strong reputation, i.e. the surname has become strongly associated with your business, then the protection of the law may be achievable.
  • In the case of very common surnames, ‘heavy’ means many years of widespread and high volume use before you seek trade mark protection.
  • If someone else in the past developed a strong reputation for their business using your surname, the residual power of that reputation might prevent you from starting your own business under the same name. Once a surname is recognised as a brand, the law can protect it well.

Talk to us early when you are strategising!

Surnames can become powerful and valuable brands. But getting the protection of trade mark law around them can be tricky – and expensive. The best approach? Talk to us early in your brand development process about ways to leverage a surname for long lasting success.

By Karen Sinclair
Contact Karen: k.sinclair@watermark.com.au

ISPs forced to the frontline in the war against online IP infringement

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Two recent cases highlight the increasingly active role ISPs are being forced to play in global responses to online IP infringement.

The cases are consistent with a broader trend that is seeing ISPs face increasing pressure to assist rights holders in their efforts to curb widespread instances of IP infringement in the online environment.

Earlier this year Australian ISPs publically declared their willingness to join the fight against online copyright infringement, by announcing that they “stand ready to engage in good faith discussions with rights holders on a potential industry-agreed scheme to combat infringement”.1

Despite such public assurances, it would seem many ISPs are reluctant to truly “join the cause” in assisting rights holders.

While legislative changes are on the agenda, progress is slow and, in the meantime, rights holders have forged ahead by asking courts to intervene to compel greater ISP participation. The two cases below are recent examples of this movement.

Case 1: UK court orders ISPs to block access to websites selling counterfeit goods

The first case concerns a UK High Court decision in October 2014 where a luxury brand owner obtained an injunction requiring ISPs to block access to websites advertising and selling counterfeit luxury goods.2

This “blocking-injunction” is the first of its kind in the UK and paves the way for similar such orders to be sought by brand owners to force ISPs to play an active part in preventing online trade mark infringement.

The case involved the owners of the Cartier, Montblanc and IWC brands (collectively “Richemont”) taking court action against the five main UK ISPs, which between them have a 95% share of the UK retail broadband market.

While the Richemont case is ground breaking from a trade mark perspective, UK courts have been granting blocking-injunctions in copyright infringement cases for a number of years. This has resulted in UK ISPs already blocking access to websites used by UK consumers to download pirated films, TV shows and music.

The availability of blocking-injunctions for copyright infringement cases in the UK stems from legislative provisions introduced in 2011, which give UK courts explicit powers to grant blocking-injunctions against ISPs that have actual knowledge of another person using their service to infringe copyright.3 In contrast, UK trade mark legislation does not provide courts any powers to grant blocking-injunctions.

So how was Richemont able to obtain one in the recent UK High Court case?

The basis for blocking-injunctions in UK trade mark infringement cases

Richemont argued that the UK High Court had the power to order a blocking-injunction against the ISPs based on the court’s general powers to grant injunctions in cases where it is “just and convenient” to do so.

Agreeing with Richemont on this point, the High Court held that it indeed had a general power to grant blocking-injunctions in trade mark infringement cases, despite the absence of any such powers under UK trade mark legislation.

The court also found that it had a principled basis upon which it could exercise this general power in the manner sought by Richemont. The court referred to an earlier UK case in which a differently constituted court had exercised its general power to make “publicity orders”.

Significantly, the publicity orders had been granted without any finding of infringement being made. This led the court in Richemont to reject a key argument advanced by the ISPs, where they submitted that a blocking-injunction should not be ordered since the ISPs themselves had not infringed any of Richemont’s legal or equitable rights.

Could blocking-injunctions happen in Australia?

Australian courts have no specific powers to grant blocking-injunctions to force law-abiding ISPs to block access to websites used by third parties to commit online IP infringement.

The Australian Federal Government has flagged legislative changes which, if enacted, would give courts such powers in copyright infringement cases. In a discussion paper on online copyright infringement released in July 2014, the Australian Government referred to the existing UK copyright legislation on blocking-injunctions before concluding that:

“[a] similar provision in Australian law could enable rights holders to take action to block access to a website offering infringing material without the need to establish that a particular ISP has authorised an infringement. If adopted, any proposed amendment would be limited to websites operated outside Australia as rights holders are not prevented from taking direct action against websites operated within Australia.”4

Regardless of future statutory reforms, Australian rights holders could potentially rely on existing laws to seek blocking-injunctions in much the same way as Richemont did in the UK.

Like the UK High Court, some Australian courts are invested with general powers to grant injunctions in cases where it is “just and convenient” to do so.5

However, it is doubtful whether an Australian court would exercise its discretion to grant a blocking-injunction given the unique landscape in which Australian ISPs operate.

For example, an Australian court would be reluctant to grant a blocking-injunction where this would place a significant financial and operational burden on ISPs given that they would invariably need to implement new systems and processes to comply with blocking-injunctions.

This can be contrasted with the Richemont case which was decided at a time when UK ISPs already had systems in place to enable them to comply with blocking-injunctions due to the earlier UK copyright cases.

It remains to be seen whether any rights holders might seek blocking-injunctions in Australia on the back of the Richemont decision. If the prophetic words of the UK High Court are anything to go by, it may only be a matter of time before Australian courts are asked to look at the issue.6

Case 2: Film makers take action against Australian ISPs to obtain details of customers accused of infringing copyright

The second case involves an Australian Federal Court action commenced in October 2014 by the makers of the award-winning Hollywood film Dallas Buyers Club (“DBC”) against a number of Australian ISPs.

The case is ongoing and the hearing looks likely for early next year.

DBC has applied to the court for orders that would require the ISPs to hand over details about their customers through a process known as “preliminary discovery”. The customers in question are said by DBC to have illegally downloaded pirated copies of Dallas Buyer Club using the popular Bit Torrent file sharing platform.

DBC is claiming that it needs the ISPs’ customers’ details (noting it only has raw IP addresses at this stage) to enable it to take legal action against those customers directly.

In response to DBC’s application, the largest ISP involved, iiNet, has come out swinging issuing a public statement that it intends to defend the case.7

On one view iiNet’s position hardly seems surprising given its impressive track record for fending off court action by Hollywood film makers (it won a High Court case in 2012 against the major Hollywood movie studios).

From a legal perspective however, it is doubtful that iiNet will be able to succeed in opposing DBC’s application for preliminary discovery.

iiNet’s apparent basis for opposing DBC’s application

iiNet has said it is defending the case due to “serious concerns” about DBC’s intentions. These concerns focus on the questionable practices DBC has employed overseas in previous dealings with consumers accused of illegally downloading its film.

These practices – dubbed “speculative invoicing” – are said by iiNet to involve DBC sending intimidating letters of demand to subscribers seeking significant sums for an alleged infringement, and threatening court action and high monetary penalties if those sums are not paid.

It seems likely iiNet will argue that DBC’s preliminary discovery application should be refused on discretionary grounds, in light of DBC’s questionable practices overseas.

DBC will no doubt argue that it has a strong prima facie case for copyright infringement against each of the relevant ISP customers. Assuming DBC has sound evidence to support a prima facie case (or cases), it is unlikely the court will be quick to deny DBC the opportunity to legitimately enforce its rights. It seems more likely than not that the court will order the ISPs to provide DBC at least some of the customer details DBC is seeking.

For the ISP industry generally, this is certainly a case to watch.

By Len Hickey
Contact Len: l.hickey@watermark.com.au

1 Cartier International AG & Ors v British Sky Broadcasting Ltd & Ors [2014] EWHC 3354
2 See this response [PDF 618KB] by the Communications Alliance Ltd (whose members include Australia’s major ISPs) to the Federal Government’s discussion paper referred in the footnote below.
3 Section 97A of the Copyright, Designs and Patents Act 1988 (UK)
4 The Federal Government’s discussion paper can be found here
5 For example, the Supreme Court of the State of Victoria has statutory powers to this effect under section 37(1) of the Supreme Court Act 1986 (Vic). Interestingly however, Australian Federal Courts – which is where most IP cases tend to be run – do not have general powers to grant injunctions in “just and convenient” cases.
6 The UK High Court described the Richemont case at [6] of its reasons as follows: “It is a test case, which, if successful, is likely to be followed by other applications by Richemont and other trade mark owners, both here and in other countries.”
7 See http://blog.iinet.net.au/not-our-kind-of-club/

When is a foreign language mark registrable in Australia?

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The High Court of Australia has handed down an important decision concerning the test for when a trade mark is registrable.  The impact of the decision will be particularly significant for businesses who deal in imported products that are labelled with words in languages other than English, and may open the door to the registration of many marks that would previously have been considered unregistrable.

The key issue in Cantarella Bros Pty Ltd v Moden Trading Pty Ltd was whether the Italian words ORO and CINQUE STELLE were properly registered for coffee.    Cantarella is the registered owner of both marks, and sued Modena for infringement.  In defence, Modena argued that Cantarella’s registrations should be cancelled on the ground that neither mark meets the requirements for registrability under the Trade Marks Act.  According to Modena, both marks were descriptive terms which traders who deal in coffee would legitimately wish to use.  The word ORO translates from Italian as “gold” and CINQUE STELLE means “five stars”.

Previous cases have established that, as a matter of public policy, the trade mark registration system should not confer monopoly rights over words that other traders might legitimately wish to use.  For example, WHOPPER was held to be unregistrable for hamburgers (it describes a large hamburger), and BARRIER was held to be unregistrable for skin creams (it describes a cream that acts as a barrier to protect the skin).

On the other hand, in another famous trade mark case TUB HAPPY was considered registrable for cotton clothing, despite conveying some meaning (i.e. the clothes are readily washable) because the term is allusive and not directly descriptive of the relevant goods.

Ordinarily, terms such as “gold” and “five stars” would be considered to have a very low level of inherent capacity to distinguish, because they are commonly used in a variety of contexts to indicate that products or services are “premium” or “luxury” in nature.

At trial, it was held that only a very small minority of Australians would recognise the allusions made by CINQUE STELLE and ORO, and so the trial judge held that the marks were registrable.  On appeal, the Full Federal Court disagreed with trial judge.  The Full Court cautioned against an “Anglocentric perspective”, and held that the Italian meaning of the words was entirely descriptive in relation to coffee, and that it did not matter whether Australian consumers understood the meaning of the words or not.

The High Court (by 4-1 majority) held that the test for whether a word is “inherently adapted to distinguish” involves an assessment of the “ordinary signification” of the word.   The Court stated:  “If a foreign word contains an allusive reference to the relevant goods it is prima facie qualified for the grant of a monopoly. However, if the foreign word is understood by the target audience as having a directly descriptive meaning in relation to the relevant goods, then prima facie the proprietor is not entitled to a monopoly of it”.

There was evidence to show that the term ORO (and D’ORO) had in fact been widely used by various traders in relation to coffee.  However, the Court considered that the evidence was not sufficient to show that traders used (or desired to use) ORO or CINQUE STELLE to directly describe their coffee products.   According to the Court, the evidence did not show that either term was understood in Australia by persons concerned with coffee products to be directly descriptive of the character or quality of coffee.

Ordinarily, widespread use of a term by a variety of traders would suggest that the term lacks inherent capacity to distinguish, because widespread use indicates that traders legitimately desire to use the term..  The Full Court placed considerable weight on the fact that other traders had used the term ORO in relation to coffee.  However the High Court was unconvinced, deciding that whilst other traders had used the term, they did so as part of composite trade marks comprising other Italian words, and not descriptively.   Prior registrations containing ORO were also not evidence that the term was directly descriptive of coffee.

The Court stated that the trial judge “was right to reject Modena’s submission, based on the evidence, that honest traders might legitimately wish to use the words to directly describe, or indicate, the character or quality of their goods”.

In his dissenting decision,  Gaegler J stated that “Gold” and “Five Star” are ordinary English words which signify quality and which any person might legitimately wish to use.  His Honour concluded that the same reasoning applied to their Italian equivalents when used for goods “of a kind commonly associated with Italy, often enough imported from Italy and often enough sold to Italian speakers”.

Taken at face value, the High Court’s decision has lowered the bar for when a mark will be considered “inherently adapted to distinguish”.  It is surprising that a laudatory term that is widely used by various traders would be considered inherently distinctive.    The Court’s focus was very much on whether the marks in question were directly descriptive.  The Court stated that they key to resolving the appeal was the distinction between a word which is a “covert and skilful allusion” to the goods (prima facie registrable) and a word having a “direct reference” to goods (prima facie not registrable).  The Court was of the view that ORO and CINQUE STELLE were merely allusory and not directly descriptive, because the evidence did not show that the terms conveyed “a meaning or idea sufficiently tangible to anyone in Australia concerned with coffee goods as to be words having a direct reference to the character or quality of the goods”.

However it might be doubted whether a word that is widely used by a variety of traders in relation to particular products could ever be capable of indicating a unique trade origin for those products, regardless of whether the word is directly descriptive or not.    This is particularly so in the case of imported products.    If a word is commonly used in another country in relation to coffee (for example), it is likely that traders importing coffee from that country will wish to use that word on packaging, even if the meaning of the word is not understood in Australia.  By focusing on whether the words ORO and CINQUE STELLE are descriptive, the Court perhaps gave insufficient weight to the fundamental question of whether the words are capable of functioning as trade marks at all.

To some extent the Court’s decision may have been influenced by how the case was run and the evidence presented at trial.  If Modena had demonstrated that not only is the term ORO widely used by a variety of traders in relation to coffee, but that traders choose to use the term because of its descriptive or laudatory significance, the outcome of the case may well have been different.

In light of the Court’s decision, there would now appear to be greater scope to register marks that are not understood in Australia to be directly descriptive of the goods or services for which they are used, and in particular foreign language marks.

By Peter Hallett
Contact Peter: p.hallett@watermark.com.au

Advancing home grown innovation through a “Patent Box” Tax system

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Australia is a world leader in innovation, with businesses investing heavily in Research & Development (R&D) activities. However, currently our businesses lack the financial support and incentives to locally commercialise the outcomes of these R&D activities. To bridge this gap between creation of intellectual property (IP) and commercialisation, Australia needs to consider the implementation of a patent box tax system.

What is the Patent Box Tax System?

The patent box initiative is essentially a tax incentive in the form of a reduced company tax rate applied to profits made on the commercialisation of patents. Under this system, companies with unique IP subject to patent protection are eligible to receive reduced tax rates of between 5-15% on profits that are attributable specifically to this IP and it may just be the missing element needed to retain home-grown IP in Australia.

The currently available R&D tax incentive program allows businesses to receive up to a 45% tax offset on the costs associated with undertaking R&D activities. Complementary to this program, the patent box system is the progressive next step aimed at retaining the outcomes of this R&D locally, rather than see it sold off overseas.

Currently, the patent box tax system is in place across 7 different countries with France and Hungary the first to get on board in 2001 and 2003 respectively, followed more recently by the UK in 2013. Since the introduction of the patent box tax system, these countries have seen a significant increase in retention rates of their local IP and associated patents.

In the UK, companies can elect to pay as little as 10% company tax on all profits made from the commercialisation of eligible patents and claiming the patent box tax does not affect an entities R&D tax incentive claim. Unlike the R&D tax incentive however, the UK’s patent box model does not offer any financial benefit to companies that are in losses.

Recently however, the UK has bent to pressure from Germany to limit the accessibility of their patent box tax benefit citing the negative impact on the economy of those European Union (EU) countries that do not have a patent box tax system as a major consideration. The UK has now watered down their patent box tax model so that companies can only claim this benefit only if the R&D behind the patents generated is also conducted within the UK. This is aimed at reducing any tax avoidance where large multinationals cannot move their IP to the UK for a tax break without moving their entire R&D operations across too.

The implementation and ultimate effect of the patent box tax model varies between each country and table 1 below provides a brief overview of the different patent box (or similar) systems that are currently in effect across the EU.

Table 1: Overview of Patent Box Tax Systems in the EU

Country:

Belgium

France

Hungary

Luxemburg

Netherlands

Spain

U.K

Year enacted:

2007

2001

2003

2008

2007

2008

2013

 Nominal tax rate on
qualifying income:

6.8%

15%

9.5%

5.76%

5%

15%

10%

Brief description:
Belgium: Companiesare taxed at normal company rates on 20% of income generated from qualifying IP.
France: Income derived from qualifying IP is subject to a reduced tax rate of 15%.
Hungary: Companies can deduct 50% of qualifying income from their pre-tax income.
Luxemburg: Companies are taxed at normal company rates on 20% of income generated from qualifying IP.
Netherlands: Income derived from qualifying IP is subject to a reduced tax rate of 5%.
Spain: 50% of gross income generated through qualifying IP is considered tax exempt.
UK: Qualifying income is subject to a reduced tax rate of 10%.

Status in Australia

The current Australian government included the consideration of the patent box system in their pre-election policy to “Boost the Competitiveness of Australian Manufacturing” and the Australian Assistant Treasurer, Arthur Sinodinos, confirmed in January 2014 that the government will consider this system. In addition to the support shown by the current government, the Australian Innovation and Manufacturing Incentive (AIM) campaign, being led by industry bodies such as AusBiotech and Export Council of Australia, are actively campaigning to have a patent box tax realised in Australia.

Given the variation between current models in place worldwide, there is no guarantee as to how Australia will choose to implement this tax model, if we do so at all. There are a range of issues and key considerations that must be considered in designing an Australian patent box tax model such as defining what types of IP will qualify, how that IP related income will be taxed and how to combat tax avoidance so international alliances and diplomacy is upheld.

The patent box tax system may give local innovators the leg-up they need to commercialise their IP on home soil whilst also encouraging multinational companies to innovate and invest within Australia. With the US introducing a bill to parliament in 2012 for the consideration of a patent box model with an effective tax rate of 10% on qualifying income, Australia must now seriously consider getting on board if we want to remain competitive. As it stands however, there is only one certainty and that is, the consideration and possible implementation of a patent box tax model will likely take years until our businesses, and the economy, start to reap the benefits.

By Ashanie Perera
Contact Ashanie: a.perera@watermark.com.au


Australia’s Innovation Report Card: Could Do Better

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The 2014 Australian Innovation System Report [PDF, 6MB] from the Office of the Chief Economist has identified Australia as a relatively mediocre innovator compared to other OECD countries.  This lack of innovation leaves us vulnerable to economic shocks as resources play a less dominant role in the economy.

The report finds that Australian levels of so called ‘new to market’ innovation has actually dropped in the last ten years.  Yet despite this, Australian rates of business creation are high by world standards; ranked between first and fifth depending on the measure used.  When surveyed, Australian businesses nominated a lack of funding as the main barrier to innovation, and this is reflected in Australia’s relatively low investment in innovation.  In 2010, the ratio of investment in intangibles (R&D, patents, trademarks and so on) to investment in tangibles was 42% in Australia – just half that of the OECD average (82%) and a mere 20% of the US investment ratio (200%).  Investment in intangibles is seen as a proxy for innovation and its relatively low levels are discussed further below.

Another worrying statistic is that, of the 2 million businesses in Australia, only 9000 undertake R&D.  Overall, Australia spends 1.23% of GDP on R&D which puts us 15th out of 34 OECD countries.  However, this expenditure is concentrated in primary industries and in particular mining.  As a nation, our R&D investment in high tech manufacturing is well below the OECD average. Measured as ‘R&D intensity’ (see Figure A.18 below), the OECD average for manufacturing as a whole is 7.49 compared to Australia’s 4.35, but for machinery and equipment, the OECD average is 19.28 against Australia’s meagre 8.27.

This relatively poor performance on innovation is put down to:

  • poor collaboration between entities (business/government/industries)
  • low capital investment in innovation
  • obstructive or non-incentive government policies
  • lack of business culture that values innovation
  • high risk aversion

Australia cannot blame its small size or relative remoteness.  Countries such as New Zealand, Israel and South Africa are also small and remote but are all actively collaborating and innovating.  This shows that the ‘tyranny of distance’ is not a valid excuse.

A common measure of innovative activity is investment in intangibles such as R&D, patents, brand equity and other intellectual property.  The report highlights correlations between R&D, innovation, international competitiveness and business performance (see Fig. A.1 below).  However only one sector, mining, has a labour productivity (competitiveness) that is well above the OECD median.  All others were at the OECD median or below.

Unfortunately, Australia shows a definite decline in the number of (Australian originating) patents, trade marks and designs filed; especially designs where the number of certifications has dropped 32% in the past year.  From an international perspective, the number of locally originating patent, trade mark and design filings places us in the lower middle range of the OECD.

Figure 2.9 from the report (see below) shows Australia invests relatively little in all forms of intangibles.  While the percentage of intangible capital stock in Australia is growing over the long term (see Fig. A.7 below), the growth rate is about one quarter of that of the US, and about one half of the OECD average.  Worse still, the report shows that the percentage of ‘innovation-active’ businesses in Australia decreased in 2012/13 (42.2%) compared to 2011/12 (46.6%).

The innovation report also reveals a stark difference in the innovation of SMEs and big business.  Australian SMEs rank 5th out of 21 OECD countries, whereas Australia’s largest 4000 companies are a lowly 21st out of 29.  To address this disparity, the Chief Economist recommends more collaboration between businesses large and small, as well as with research organisations.  Collaboration between organisations for the purposes of innovation provides a mechanism for sourcing the widest possible range of ideas and resources to enhance competiveness.  Currently, Australia is one of the lowest ranked countries for industry/research collaboration on innovation.  And Australia’s policy framework is not helping.  Our government needs to do more as the figures show Australian public sector support for innovative business is the lowest in the OECD.

The Australian Innovation System Report references a multitude of other reports establishing innovation as vital to improving performance and competiveness.  As the mining investment boom recedes, the role of innovation becomes even more crucial.  Despite this, the report finds that Australian business tends not to prioritise innovation or actively promote an innovative culture.  Government has a responsibility to facilitate and encourage innovation, but ultimately the private sector must decide to make meaningful investments in innovation.

By Ken Bolton
Contact Ken: k.bolton@watermark.com.au

Teen Sensations ‘5 Seconds of Summer’ Bring Unwanted Notoriety Upon Australian Trade Marks Office

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The Australia Day long weekend seems an appropriate time for the Australian press to run a story about an internationally famous Australian boy-band that was denied protection for its trade mark because an officer in the Australian Trade Marks Office had never heard of it.  Specifically, on 24 January 2015 – two days prior to Australia’s national day – News Ltd outlets reported that an application by the production company behind ‘5 Seconds of Summer’ to register ‘5SOS’ as a trade mark had been rejected for this reason.

The story, as it happens, is only partly correct.  It is also entirely unfair on the Trade Marks Office, and the officer in question, who was just doing his job.  The application in question, no. 1556294, was in fact accepted for registration in early December, nearly two months before an entertainment reporter discovered the story, and decided to ‘name and shame’ Hearing Officer Iain Thompson for his apparent ignorance of global teen culture.

It is true, however, that the application to register ‘5SOS’ for various goods and services – including recordings in class 9, printed matter in class 16, clothing in class 25, and entertainment services in class 41 – was rejected a number of times by the examiner.  Eventually, the applicant requested a hearing which resulted in acceptance, but not before the specifications of goods and services were amended a number of times, including deletion of class 25 in its entirety.

The lesson in this for all trade mark applicants is that it does not matter how famous you are (or think you are), the ‘rules’ of trade mark registration are the same for everybody!  Certainly there are circumstances in which notoriety may enable a trade mark to be registered, despite the existence of one or more barriers.  In such cases it will generally be up to the applicant to satisfy the examiner that its trade mark is sufficiently well-known to justify registration.  In general, nobody is entitled to expect that a trade marks examiner will simply take ‘official notice’ of fame.

So, what happened to ‘5SOS’?  And what should other trade mark applicants do to ensure that they do not find themselves in a similar predicament?

Barriers to registration of trade marks

The two main barriers that may prevent a trade mark from being registered are: descriptiveness; and deceptive similarity to prior applications and registrations.

A trade mark that describes the goods or services, and which is therefore likely to be required for non-trade mark purposes by other traders, will be denied registration.  A well-known Australian example of this type of trade mark is AUSSIE HOME LOANS.

Additionally, a trade mark that is similar to one that is the subject of an earlier application or registration may encroach upon the rights of the prior owner, and may result in consumer confusion.  The potential for consumers to be deceived or confused by similarity between trade marks is another reason for which registration may be denied.

It is apparent that ‘5SOS’ has no inherent descriptive significance.  The difficulty encountered by ‘5 Seconds of Summer’ was due to similarities with prior trade marks.  Indeed, there are a number of pre-existing Australian applications and registration in classes 9, 16, 25 and 41 for trademarks that consist of, or include, the letters ‘SOS’.

While the band’s 5.83 million Twitter followers would no doubt argue that they would not be confused between ‘SOS’ and ‘5SOS’, the trade mark laws do not play favourites.  The fact is that, assuming neither trade mark has acquired any special notoriety, it would be very easy for consumers to be confused about whether or not goods marked ‘5SOS’ are somehow related to those marked ‘SOS’, or any similar minor variation.

But surely notoriety must count for something?

It is a matter of common experience that if a trade mark becomes sufficiently well-known, and uniquely associated with its owner, then it will be widely recognised as serving to distinguish the specific goods or services of that trader from other similar goods or services.  Even a trade mark as descriptive as AUSSIE HOME LOANS can be registered if the applicant is able to furnish sufficient evidence to establish that it has become distinctive (it is Australian trade mark registration no. 747823).

However, the key word here is ‘evidence’.  No trade mark applicant is entitled to expect that a decision-maker – whether an examiner, a hearing officer, or a judge in the Federal Court – will simply accept that a trade mark is famous.

Indeed, in the ‘5SOS’ case, the applicant did not even attempt to prove fame or notoriety.  Rather, it relied upon an argument that the trade mark would be pronounced ‘five-soss’, and would therefore be readily distinguished from prior ‘SOS’ trade marks that would most likely be pronounced ‘ess-oh-ess’.  But, as the Hearing Officer pointed out in his written decision (One Mode Productions Limited [2014] ATMO 89), while the applicant ‘submitted that the pronunciation of the Trade Mark is similar to “five soss”, this conclusion is, in my view, only probable if one is familiar with the musical group and what they call themselves.’

This is doubtless correct.  What is missing in the applicant’s evidence is a showing that a sufficiently large proportion of the relevant consuming public are familiar with ‘5 Seconds of Summer’, and the common pronunciation of the abbreviation ‘5SOS’.

So why did ‘5 Seconds of Summer’ not prove their fame?

The article published by News Ltd implicitly ridicules the Hearing Officer for having ‘never heard’ of ‘5 Seconds of Summer’, despite them being ‘one of the biggest bands in the world’.

Yes, right now ‘5SOS’ is enjoying a high level of international fame.  However, the Wikipedia entry for the band reveals that this is a comparatively recent development.  The band formed only in 2011, and did not release its first single until November 2012.  Its fame grew in 2013, after being selected to support ‘One Direction’ on that band’s tours of the UK, US, Australia and New Zealand.  However, it was really only with the launch of the band’s first worldwide single and album in February and June 2014, respectively, that ‘5 Seconds of Summer’ rose to its current heights of notoriety.

The ‘5SOS’ trade mark application was first filed in May 2013, and initially examined in June 2013.  The hearing was eventually held in June 2014, and the Hearing Officer’s decision published on 24 September 2014.  For most of this period, the band was not sufficiently famous to establish that ‘5SOS’ would be differently pronounced by consumers than similar prior trade marks.  Even now, the ‘5SOS’ trade mark may not be notorious enough among a broad cross-section of consumers, or have been famous for long enough, to overcome the remaining similarity barriers.

The fact is that nobody – not even one of the biggest teen sensations in the world – gets special treatment at the Trade Marks Office, unless they can show they deserve it.  Fortunately, decisions on trade mark registration are not made by News Ltd entertainment reporters, but by trained and experienced officers who are familiar with the law, and how it is applied.

Conclusion – lessons for other applicants

Applicants will sometimes be required to provide evidence in order to secure registration of their trade marks.  In particular, when objections to registration are raised based on descriptiveness, or on similarity with prior trade marks, an applicant may need to establish that it has been using a trade mark during a relevant period of time, and possibly also that the trade mark has acquired a substantial reputation such that it is recognised as distinctive by the relevant consuming public.

It is important to understand the nature, quality and quantity of evidence that may be required.  The task of examiners and other decision-makers within the Trade Marks Office is to apply the rules without fear or favour.  Personal knowledge of a trade mark – or of a band or other famous persons or entities – cannot be substituted for actual evidence of reputation.

Furthermore, the evidence must support the arguments for registration of the trade mark.  If, for example, it is necessary to show that most consumers would know to say ‘5SOS’ as ‘five-soss’, rather than ‘five-ess-oh-ess’, then the evidence must establish this.
Sometimes there is just not enough evidence available to overcome an objection to registration.  The law will often require a showing that a trade mark enjoys an established reputation among a broad range of consumers.  This kind of notoriety can take years – not mere months – to develop.  It may be that, one day, ‘5 Seconds of Summer’ will have been famous enough, for long enough, to register ‘5SOS’ in relation to any goods or services with which the band may wish to involve itself.  But, right now, it is not there yet!

Addressing objections to registration of a trade mark can be tricky, especially where evidence must be prepared to support an argument.  Watermark has a number of experienced specialist trade mark practitioners who can advise and assist in such cases.

By Mark Summerfield
Contact Mark: m.summerfield@watermark.com.au

Uber: There’s a patent for that

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Most urbanite readers will have heard of ‘ride-sharing’ service Uber, even if they have not (as yet) used it. Befitting a disruptive market entrant with a strong technology focus, Uber has invested in a strong patent position. There has been a flurry of patent activity in the United States and elsewhere, with Uber reportedly having filed over 24 patent applications. What are they patenting? And more importantly, why?

The story so far

Uber, Inc of California launched in 2010 in San Francisco, and is now active in over 200 cities throughout more than 50 countries. Initially, luxury cars were offered for hire, but since 2012 Uber has expanded its offering to include any qualified driver with an acceptable vehicle. Uber relies on drivers and commuters using smartphones to access its platform to co-ordinate transport.

In many markets, Uber operates in a regulatory grey zone, as it is viewed as a de facto unlicensed taxicab service. Uber’s position, by contrast, is that it simply provides a platform to match willing commuters with willing drivers. As ‘ride sharing’ is new in a large-scale or commercial sense, it falls into a regulatory blind spot not directly addressed by existing regulations.

Whatever the case, Uber is certainly a disruptive entrant to the transportation sector – one that has been welcomed by many commuters, but less so by incumbent taxi operators. Commuters – armed with the Uber geo-aware smartphone app – find the service cheap, slick, and convenient. Taxi companies call the service dangerous, unsupervised and illegal.

Broad patents, narrow patents, start-up patents

The mere mention of patents tends to suggest that inventors have made a ground-breaking, once-in-a-lifetime discovery. This is, of course, not always the case as patents need only meet a ‘non-obviousness requirement which, in some countries at least, is not regarded as a high threshold. Some patents may be sweeping in scope, or minute in detail. Others, not so. Of course, some companies will be more aggressive than others in how doggedly they seek patent protection for their innovative activities.

Startup companies will seek patents for many reasons, and these may include:

  • blocking competitors from copying products or features
  • inflating valuations prior to public offering
  • gaining leverage in negotiations with business partners
  • avoiding costly litigation from competitors
  • recognition of market or sector leadership

Ideally, a company will be able to seek patent protection for its basic business model, which provides it with unique advantages over any prospective competitors, albeit that this can be tricky.

Uber has invested in a patent portfolio

Uber, undeniably a savvy and innovative operation, has been ambitious in seeking protection for both its fundamental business model, as well as select features it has introduced to its service offering.

Title:

  1. System and method for splitting a fee for an on-demand service
  2. Generating promotions for a service using a map interface
  3. Determining an amount for a toll based on location data points provided by a computing device
  4. Providing on-demand services through use of portable computing devices
  5. Providing a confirmation interface for on-demand services through use of portable computing devices
  6. Dynamically providing position information of a transit object to a computing device
  7. System and method for providing dynamic supply positioning for on-demand services
  8. Transitioning user interface features for on-demand services through use of portable computing devices
  9. Providing a summary or receipt for on-demand services through use of portable computing devices

Uber’s published United States patent applications

The first (and so far only) Uber patent application to be filed in Australia is for a ‘system and method for arranging transport amongst parties through use of mobile devices’. This essentially covers the operational model as a whole. While yet to be examined in Australia, Uber has found the United States Patent Office unreceptive to a counterpart application thus far.

Essentially, the difficulty Uber is encountering is that some of its patent applications are – according to the United States Patent Office – for basic business concepts that have been around for a long time, notwithstanding that they may be innovative in their chosen sector.

One specific feature of the service which Uber has sought to patent is its ‘surge pricing’ feature. The price of the service goes up when demand is high, or supply is low. This was controversially witnessed during the Sydney siege earlier this year, when many in the Sydney were looking to flee the CBD.

Should the United States Patent Office decide that Uber’s surge pricing model is simply using a computer to do the type of pricing dynamics businesses have done for decades, it may well reject the Uber claim, or at least require very specific restrictions.

Coupled with the question of whether or not Uber’s patents are obvious, United States court decisions have more recently stipulated more rigorous requirements for patents relating to business models which are implemented in a computer, or smartphone. Essentially, patents must be for more than an ‘abstract idea’. Patentable technologies are for realised solutions, in which computer hardware plays more than a more than a merely incidental role.

Simply experimenting? Or creating value for the business?

Uber is without doubt well funded (at a recent valuation of USD40B), and can certainly afford to experiment with the patent system. But Uber’s strategy is unlikely to be one solely base on a whim.

Like Uber, any online business using an innovative model, regardless of funding or capitalisation status, would do well to at least consider whether they can gain a valuable competitive advantage using the patent system.

While there are expenses involved, the difference in success or failure for the business can be between attracting the next funding round, or not. Having a patent portfolio – even a nascent one – can help push a company towards that next funding round. There are many other prizes to be won in the patent process as mentioned in the list above.

Each business and market is of course different though, and at startup level, especially in a fast-moving technology sector, the game of business can be sufficiently complicated and dynamic that anticipating potential problems is exceedingly difficult.

A patent position in these circumstances is one of risk management, if nothing else. When things go wrong, as they often do, a company with a patent portfolio will have options not otherwise available if it had never sought patent protection. Akin to playing snakes and ladders with a loaded dice, if you will.

As an example, if you receive a patent infringement notice from a competitor, you are far more likely to be negotiate a favourable outcome if you are in a position to counterattack with your own patent infringement action. Also, the prospect of securing patent protection is likely to drive up your valuation, and assure investors that you can deter competitors while establishing market leadership.

Takeaway lessons

What can an online startup company learn from Uber’s example?

  • consider seeking broad patent protection early, prior to launch
  • assess whether innovation can be protected before introducing new features
  • select extent of patent coverage taking into account cost and likelihood of success

By David Perkins
Contact David: d.perkins@watermark.com.au

‘Cease and desist… please’: why Nokia should take a leaf from Jack Daniels’ playbook

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Finnish company Nokia is not the telecommunications behemoth it once was.  After selling its mobile phone division to Microsoft in 2014, Nokia is now focussed on other areas of business, one of which is a mapping service called HERE.

Even so, Nokia is a giant when compared with four-person London start-up Lowdownapp Ltd, which is the developer of a meeting manager app for iPhone called Lowdown.  The app includes a function that tracks location, and enables the user to let people know when they have arrived for a meeting.  This function is also provided in a small stand-alone app.  The function within Lowdown, and the stand-alone app, were both named ‘HERE’.

No doubt you can see where this is going…

In January, Nokia sent Lowdownapp Ltd a ‘cease and desist’ letter, demanding that it change the name of its HERE app, on the basis that the name would confuse the public into believing that the app was part of Nokia’s own HERE range of products and services.  Nokia has registered trade marks incorporating the word HERE, and claims that it has so far invested US$12 million in promoting the HERE brand.

Nokia may now be regretting the approach it took against Lowdownapp, which has resulted in a significant amount of adverse publicity.  This is a particularly bad look for a company that wants to be seen as a leader in technology, and online services, and ought therefore to be more familiar than most with the workings of social media and the web.

Where did Nokia go wrong?

Nokia is entirely within its rights to protect its investment in HERE.  But the very ‘traditional’ manner in which it has gone about asserting those rights has proven to be something of an own-goal, in terms of its public-relations.  According to a statement published by Lowdownapp, the correspondence received from lawyers representing Nokia was 104 pages in length, and gave the start-up a deadline of 10 February 2015 to eliminate all traces of HERE from its apps.

Reaction to Nokia’s actions on social media has been generally critical, and reporting of the story (including by the BBC) has been broadly sympathetic to Lowdownapp.  Most observers have been happy to take up the characterisation of Nokia as a ‘corporate bully’ and a ‘Goliath’ to Lowdownapp’s ‘David’.

The format of the letter prepared by Nokia’s lawyers will be familiar to many people who have been on the sending or receiving end of a ‘cease and desist’ demand over the past few decades.  It opens by explaining that the firm in question acts for Nokia, followed by a brief overview of the client’s business, and its interest in the HERE brand.  It then goes on to outline Nokia’s legal rights, complete with a list of registered trade marks and a discussion of its reputation and goodwill in the HERE brand. The letter then outlines the activities to which Nokia objects, explains the legal avenues available to Nokia, and concludes with a threat of court proceedings if Lowdownapp does not comply with Nokia’s demands by the specified deadline.

(Sorry – that last paragraph was rather dull, though far less so that Nokia’s actual letter of demand!)

The remainder of the 104 pages is taken up with ‘annexes’ including evidence of Nokia’s trade mark registrations, its use of the HERE branding on its web sites, products and services, legal information, and a letter of undertaking to be signed by Lowdownapp.

Letters of demand in the ‘social media age’

This is how letters of demand have traditionally been written, and there may still be circumstances in which this is the best way to communicate the necessary information to an alleged infringer.  A letter of this type may be entirely appropriate when, for example, the recipient is a larger company, and will initially be addressed by in-house general counsel.

But brand-owners need to bear in mind that we no longer live in a ‘traditional’ world.  The days when it could be assumed that legal correspondence would remain private between the parties are long gone.  It requires only a scanner and a few mouse clicks for a recipient to share a letter with the world.  In this environment, a conventional, heavy-handed, legalistic approach will not always be the best option.

As Lowdownapp said in its statement, ‘all they needed to do was call us up, tell us about Nokia Here, then ask us to please change the name.’  Of course, it is easy enough for them to say this after the fact, but that is the point.  When Nokia decided that the best way to address its concerns about the activities of a tiny start-up company was to have its lawyers prepare and send a 104 page letter of demand, it handed Lowdownapp the upper hand in how the action would be portrayed publicly.

It certainly could not have hurt to try saying ‘please’ before pulling out the big guns.

How Jack Daniels did it better

Faced with a similarly tricky problem back in 2012, distiller Jack Daniels adopted a different approach.

Author (and Jack Daniels aficionado) Patrick Wensink published a book called Broken Piano for President. The cover art was undoubtedly creative but, unsurprisingly (as the side-by-side images below demonstrate), was a cause of concern to Jack Daniels.

‘Captain Jack’, however, adopted a decidedly non-traditional approach.  In a one-page letter, sent by an in-house trade marks attorney via email only, the company explained that while it was ‘flattered’ by Wensink’s affection for its brand, it hoped that he would also understand the importance of protecting it against dilution.  It appealed to Wensink’s own interest, as an author, in effective protections for intellectual property.

And, on the basis that Wensink was a ‘Louisville neighbour’ and a fan of the brand, Jack Daniels made the very reasonable and non-onerous request that Wensink change the cover when the book was reprinted, stating that his response would be ‘appreciated’ by a specified date, ‘if possible’.

The were no long and tedious paragraphs outlining Jack Daniels’ rights under the law, no demands that Wensink destroy all existing copies of the book at his own expense, and no hard deadlines accompanied by threats of legal action.

To top it all off, Jack Daniels wished Wensink ‘continued success with his writing’.

It is hardly surprising that this was variously described as the ‘nicest’ and ‘most polite’ cease and desist letter ever, by outlets such as Forbes, The Telegraph and Business Insider.

The letter went viral on social media, and received global coverage.  It resulted in huge positive publicity for Jack Daniels, and a significant boost in sales for Wensink’s book, the cover of which now looks like this:

That is what you call a ‘win-win’!

Conclusion – move with the times

Changing times, and changing technologies, call for changing approaches to protecting and asserting intellectual property rights.

There is little point in having exclusive use of a trade mark that is associated with a hated brand.  It would be a rare case in which the public would take the side of the big guy caught out beating-up on the little guy.  And in the modern world of social media, you have to assume that you will get caught out!

Jack Daniels clearly ‘gets it’.  Maybe Nokia does not, but it should.  The Finnish company is struggling enough already, without having to contend with being represented in the media as a big, clumsy, lumbering dinosaur!

It is also worth bearing in mind that even a letter of demand can be a reflection of your company’s values.  If you are not a ‘corporate bully’, then do not behave like one.  Ultimately, you may need to get tough on an unrepentant infringer, but maybe that is not the right way to start out.

And if your legal representatives do not seem to get what you are all about, and only know one way to do things, then maybe it is time to get a second opinion.

By Mark Summerfield
Contact Mark: m.summerfield@watermark.com.au

An ongoing summer of sport impacted by inventions

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Australia is the place to be for major sporting events in the first three months of 2015, with the Australian Open Tennis and the Asian Cup Football tournaments reaching their climax at the end of January.  Congratulations to Serena, Novak and Australia.

In addition, the Cricket World Cup in Australian and New Zealand starts this week with the first match on 14 February and the Melbourne Formula One Grand Prix is in March.

The amount of sports coverage in Australia at the moment has led us to search for sporting inventions in Australia.

Predator on and off the field

Dan and I recently attended a networking event for the Asian Cup with past Australian footballers Craig Johnston (Ex-Liverpool) and Mark Bosnich (Ex-Manchester United) as guest speakers.  Craig Johnston became an inventor after hanging up his boots and invented the PredatorTM football boot which was marketed by Adidas (Australian patent 650081)

‘PredatorTM’ AU650081

The boot allows more grip when kicking the ball because of deformable sections made of rubber (or similar) material that maintains contact with the ball for a longer time.  Johnston came up with this ingenious idea when coaching children in Australia.  He realised that they could not grip the ball sufficiently in the wet conditions because of the leather material of the boot.  In his first prototype he used the rubber section of a table tennis bat glued to his own boots and instantly noticed the difference. The technology was later bought by Adidas.

The Predator boot was not Johnston’s only attempt at patenting football boot technology.  He later had another idea for a boot called ‘the PIG’ (patented interactive grip) – European application EP1430801.  The goal of the boot is also to provide improved grip when kicking a football.  The technology involves placing a number of pointed protrusions over the front sections of the boot which are deformable and made of layers of material of different hardness.  The end result looks fairly menacing!

‘The PIG’ EP1430801

Unfortunately, this idea did not take off in the same way that the Predator boot did and no sports company took up the technology.  This meant that the patent application lapsed and the idea was not taken further.

Hawk-Eye Video Review System

While watching either cricket or tennis on television there is one piece of technology which is jumps out at viewers – Hawk-Eye. This system is now used to review close decisions during most major cricket and tennis matches, particularly for close lbw decisions in cricket and tight line calls in tennis.  Originally developed at Roke Manor Research Ltd by a team led by Dr. Paul Hawkins, the full history of the technology and its use in sport is available on the official Hawk-Eye Website.

Hawk-Eye works by using multiple high frame rate cameras placed around the arena to keep track of the ball in 3D space.  Their vision is sent to a central computer which provides a computer simulation of the ball in motion to show if it would have gone on the hit the stumps in cricket or where the ball bounced in relation to the line in tennis.  The original PCT application is published as WO2001/041884.

Figure 1 of WO2001/041884

New balls please

Even in relation to the simplest aspect of most sports, the ball, there can be a great deal of innovation involved.  Take the ‘Nike Ordem II Ball’ used throughout the AFC Asian Cup for example.

According to Nike’s own website the ball features ‘Fuse-welded synthetic leather casing offers optimal touch and maximum response’, ‘radar technology’ which helps players to ‘see the ball faster and react faster’ and ‘Aerowtrac grooves and micro-textured casing designed to deliver accurate flight’.

Each new football tournament is accompanied by a new ball that claims to be the best ever.  Obviously, much of this is probably hot-air used to inflate interest in, as well as the price of, replica footballs.  After all the basic design of a football remains the same as it has been for decades – an inflated bladder inside a leather (or synthetic) outer shell.

A quick search reveals a number of patents relating to Nike football technology, such as:

  • PCT publication WO2008141284 titled ‘soccer ball with motion graphic’.  This claims the inclusion of graphics on the ball which enhance perception of the balls motion and rotation.  This has lead to granted patents in both Europe and USA.
  • PCT publication WO2013148946 titled ‘sport ball casing and methods of manufacturing the casing’.  This claims a simplified construction of the ball including pentagonal panels ‘welded’ together.

Soccer ball with motion graphic

Sport ball casing and methods of manufacturing the casing

Whether any of these features make a difference to the players is debatable, but it is comforting to know that even the fundamental parts of sport are being constantly developed.

Cricket Cooler

It is not just the professional sports scene that has seen innovation, there is also plenty of backyard inventors in Australia.  Take the Cricket Cooler for example, an invention developed and patented by two friends from Adelaide.

Figure 1 of AU2008318301

The simplicity of the design of the Cricket Cooler has made many wonder why it had not been thought of before.  It doubles up as both a working drinks cooler and a set of cricket stumps, the stumps can even be used to drag the cooler around when being transported.  This invention was featured on the Channel 10’s ‘Shark Tank’ television show and gained backing from one of the show’s investors.

This invention could well be a hit, so don’t be surprised if you see one at a beach, park or backyard barbecue in the near future.

Watermark has experienced patent and trade mark attorneys, several with sporting interests, who can assist you with appropriate IP protection via patents, registered designs and trade marks for your sporting inventions.

By Roger Green and Dan Bolderston
Contact Roger: r.green@watermark.com.au
Contact Dan: d.bolderston@watermark.com.au

Incentives for innovation

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First published in Chemistry in Australia, www.chemaust.raci.org.au

The Global Innovation Report 2014 (Cornell University, INSEAD and WIPO) reiterates what has long been well understood – Australia lags behind other countries in terms of protecting and commercialising intellectual property. The report shows that while Australia fairs reasonably well in the funding of research and development, there is a real inability to translate innovation into commercial outcomes. Given universities are at the forefront of Australia’s research, and patenting this research is often the first step to a successful commercial result, the key question arises: how can patenting in Australian universities be incentivised?

Australia was ranked a disappointing 17th in respect of its global innovation index – just fourth in the Asia–Pacific region. Leading the rankings were Switzerland, the UK, several Scandinavian countries, and the US. In terms of R&D expenditure, Australia is ranked 13th with a gross expenditure of 2.4% of GDP. This falls well behind the rankings leader, the Republic of Korea, with a gross expenditure of 4.4% of GDP. The issue becomes most evident from a direct comparison to the US and UK figures; Australia is simply less efficient in translating R&D expenditure into commercial outcomes.

Global Innovation Index      Gross Expenditure on R&D
Score 0-100         Ranking        (% of GDP)

Australia     55.01                   17th                2.4
US              60.09                    6th                 2.8
UK              62.37                    2nd                1.7

Further compounding the issue, the report also detailed that although Australia published an impressive 48 scientific and technical articles per billion dollars of GDP (ranked 12th; USA published 21 and UK 43), Australia had a mere 2.7 patent applications (ranked 40th, with the USA at 16.6 and UK at 6.7). Again, our patenting performance in comparison to our counterparts is, to put it politely, rather dismal.

Where Australian universities are concerned, the patenting story is perhaps unsurprising given the above statistics. In October 2013, IP Australia released its pilot assessment of the patenting activity of Australian universities, as well as the impact of Australian university patents (Research performance of university patenting in Australia: a pilot assessment). The study was based on a cross-section of 12 Australian universities, and identified 4056 university patent applications relating to 1293 inventions over the period of the study (1 January 2006 to 30 June 2012). All in all, Australian university patenting activity averaged just 16 new inventions per university per year. This is most concerning when you consider that the University of California obtained almost 400 granted US patents in 2013

The information suggests that while many Australian universities file patent applications, the rate at which they are pursued to grant is low. Given the cost of the patenting process and the current financial pressure on Australian universities, who would be surprised by this?

So how can patenting in universities be incentivised? One approach, as proposed by the Minister for Industry, Ian Macfarlane, is to base university grants on the number of patents that are obtained by researchers, not on the number of scientific articles they publish. The statistics show that Australian researchers are consistently publishing world-class research, so it would seem logical that they can patent this research as a means to potentially obtaining commercial outcomes. However, this proposal is flawed in practice.

It’s not a surprising revelation that patents are expensive. There are substantial costs associated with getting a patent to grant, and these costs increase with every country in which patent rights are sought. Do universities have this financial capacity? As a former university researcher, I can tell you that they simply do not.

Conversely, publications are free. They’re also peer-reviewed, and, most importantly, provide an international standard of measuring research success. Government funding of research is not globally uniform, and so a free system that enables researchers to be ‘ranked’ on the basis of their professional research publications serves as a global indicator of the quality of research being undertaken.

Many would argue that radically reforming the Australian research-grant process to incentivise patenting, as proposed by Minister Macfarlane, with the view of increasing the protection of intellectual property and hopefully commercialisation, is a far more complex issue than he appears to have given credit. Any scheme to increase patenting in Australian universities would require a considerable contribution by the Australian Government to get the ball rolling. That is, Australian universities will need to be in a position where they are exploiting several patented inventions and have commercial outcomes before they can self-fund future patenting ventures.

In view of the Australian Government’s continuing decrease in R&D funding, it seems unlikely that, at least in the short term, Australian universities will receive any contributions of this nature. As such, incentivising university grants based on granted patents is not the solution. So what is an alternative option?

One option would be to adopt a ‘patent box’ scheme. This is a tax incentive in the form of a reduced company tax rate applied to profits made on the commercialisation of patents. It was first introduced in 2000 in Ireland, and shortly thereafter adopted by the French in 2001. Today, the patent box, or a variation of it, is effective in the UK, the Netherlands, Belgium, Switzerland, China and Spain, among others. The US is now considering its own patent box scheme, with legislation introduced into the House of Representatives on 28 June 2013. A patent box scheme was the lone IP-related initiative taken into the most recent federal election. However, Treasurer Joe Hockey appears to have back flipped on the issue, recently calling for other countries to amend their own patent box rules in November’s G20 Summit in Brisbane.

How would such a scheme affect Australian universities? Australian companies will no doubt be more willing to support and commercialise patented university research if such an incentive exists. In doing so, they will have the opportunity to receive reduced tax rates of between 5 and 15% on profits attributable to this intellectual property. In essence, if a company invests in university research, in developing and/or commercialising intellectual property that is subject to patent protection, any profit attributed to this is eligible for a reduced tax rate. A patent box scheme provides a direct incentive to invest in innovation.

There is a real need to drive revenue from Australia’s intellectual property, though to do this, we must first have it. Offering grants to researchers based solely on their patenting record, without significant initial contributions from the Australian Government, is not a feasible solution. One avenue of incentivising use of the patent system would be to financially support those companies that successfully exploit granted patents – especially those from our prolific academic sector. A way of doing this may be through the adoption of a patent box scheme, a step which has proven successful in several other jurisdictions. Doing so would incentivise investment in innovation and commercialisation in Australian universities.

By Brittany Howard
Contact Brittany: b.howard@watermark.com.au

Beware!! IP Australia refuses extension of time for filing evidence

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Case note:  Monster Energy Company v USA Nutraceuticals Group Inc [2015] ATMO 1

The implementation of the new IP laws in April 2013 brought about some welcome changes.  One change that has not been so welcome in the IP community is the more stringent application of extensions of time for filing evidence in oppositions.

Just last month, the Registrar’s delegate Bianca Irgang refused one additional month (above the initial statutory three months) to allow the applicant to file its evidence in answer.

USA Nutraceuticals Group Inc faced a deadline of 16 December 2013 to file its evidence in answer.  Despite the Australian attorney firm informing USA Nutraceuticals Group’s US attorney firm of the deadline in early October and sending several reminders, no evidence details were provided to the Australian attorney firm until 14/15 December 2013.  A draft declaration was sent to the declarant for signing that same day, but was not actually signed until 8 January 2014.

A one month extension of time was sought on the basis that the applicant:

  1. had made all reasonable efforts to comply with all relevant filing requirements; and
  2. despite acting promptly and diligently at all times to ensure the filing of the evidence within the [3 month] period, was unable to do so.

The reasons put forward by the applicant for the delay were:

  • The applicant was delayed in finalizing its Evidence in Answer because Mr Altieri, the President of the Applicant, had been travelling extensively throughout the United States, Canada, Japan and the United Kingdom for business;
  • The applicant was engaged in litigation proceedings in the United States which had demanded a substantial amount of Mr Altieri’s time and attention;
  • The applicant experienced further delay when collecting information specific to Australia, as the applicant was required to search extensively through physical historical data which dated back over 10 years. Much of the material and information required retrieving and searching through old archived files and boxes which had been kept in storage; and
  • A lot of information and documentation of sales in Australia was obtained from third party retailers and distributors, which are based outside of the United States.

These are pretty typical issues faced by many trade mark owners when preparing evidence.

Not surprisingly, the opponent, Monster Energy Company, opposed the extension.

In submissions at the hearing, a timetable was provided by the applicant showing dates when various correspondences between the Australian attorney firm, the US attorney firm, and the applicant took place.  Unfortunately, this timetable revealed a glaringly big ‘black hole’ in the dates:  On 8 October 2013 the Australian attorney firm notified the US attorney firm of the evidence in answer deadline and provided details of what would be required; 14/15 December 2013 is the first date listed that the US attorney firm responded and provided evidence, one day before the evidence was due.  No details of what preparation was done between those dates by the applicant was provided.

The applicant’s counsel tried to provide additional reasons for the ‘black hole’, including the shut down of offices due to snow storms in the USA and substantial travel by the declarant.  One problem with this was that there was a distinct lack of detail – exact dates were not provided – so the Registrar’s Delegate rightly afforded these additional reasons very little weight.

A quote from the case:

“This two month period between the 8 October and 14/15 December 2013 appears to be a black hole when it comes to action from the holder. There is no indication of unusual events or new litigation commencing during this time but rather broad statements that the litigation was ongoing and that Mr Altieri engaged in business travel. If and how long that business travel occurred during this period is unknown.”

Lessons Learnt

There are some vitally important lessons to take away from this case:

  1. Evidence deadlines should be treated as non-extendible.  Evidence preparation must commence as early as possible, even before the pleadings phase and/or the opponent’s evidence phase has been completed.
  2. Steps in the evidence preparation period, no matter how small, must be undertaken (and noted) consistently and continuously from the beginning.  Don’t leave a ‘black hole’ within the period where no action was taken.
  3. Any application for extension of time needs to have VERY detailed reasons, with timelines describing all the steps taken since the start of the relevant evidence period.

While in a past life it was somewhat straightforward to be granted extensions of time up to nine months or more, it seems those good times have gone.  Don’t be caught out – prepare early!

The full decision can be read here.

By Leanne Oitmaa
Contact Leanne: l.oitmaa@watermark.com.au


Can your business keep a secret? Protecting confidential information assets when key employees leave

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The unexpected resignation of a key employee can present a range of challenges to an employer business. Where an employee resigns to take up a position with a trade competitor, particular attention needs to be paid to the security of the business’s confidential information assets (“CI assets”).

At the very least, the business should formally notify the departing employee of his or her obligations not to use the business’s CI assets after they cease employment, and not share them with a new employer. This will typically involve reminding the employee of relevant obligations under their employment contract.

Whether further measures are warranted will depend on an assessment of the specific security risks for each employee.

If the risks are considered serious enough (such as where the employee has had access to mission-critical CI assets), a business might engage the services of a forensic IT investigator to examine the “digital footprints” left by the employee while using the business’s computer systems in the lead up to their departure.

A forensic examination can uncover how and when the employee accessed computer files that embody or contain CI assets of the business, such as client lists, technical manuals and financial reports. If an examination reveals signs of suspicious access by the employee outside of what they would normally do in their day-to-day activities, this could be an indicator of foul play.

Beware the smoking gun

But forensic investigations have inherent limitations. Crucially, they don’t directly shed any light on the conduct of the employee after their departure from the business.

Even so, where an investigation reveals that, for example, an employee sent a large number of important company documents to a personal email address immediately before departing, the business might understandably be tempted to treat this as a smoking gun – a precursory sign of inevitable misuse of CI assets by the employee.

Businesses should resist this temptation however. More extensive enquires and investigations will generally be necessary in addition to obtaining forensic evidence, regardless of how “guilty” the employee may appear on the face of that evidence alone.

The pitfalls of not undertaking these broader enquiries, and relying solely on forensic evidence, were highlighted in a recent decision of the Australian Federal Court (see Coffey Information Pty Limited v Cullen [2015] FCA 28).

The Coffey case

The case involved an application for preliminary discovery by Coffey against three of its former employees and their new employer, Qualtest, each of whom Coffey suspected of misusing its CI assets.

Preliminary discovery is a court process whereby a party (a “prospective applicant”) may make a stand-alone application to the court seeking discovery of documents in the possession of another party (a “prospective respondent”) where those documents would assist the prospective applicant in deciding whether to commence proceedings against the prospective respondent.

In Coffey’s case, it sought preliminary discovery based on a belief that its former employees had shared Coffey’s CI assets with Qualtest to assist their new employer in obtaining a lucrative accreditation with a major industry association called NATA, and for Qualtest to use otherwise in running a business in competition with Coffey.

Coffey argued that, while it did not have sufficient evidence to prove such conduct had in fact occurred, obtaining preliminary discovery would enable Coffey to decide whether or not to proceed with court action against the former employees and Qualtest.

The requirements for preliminary discovery

To succeed in its preliminary discovery application, Coffey needed to satisfy the court that:

  • it had a reasonable belief of a potential legal claim against the former employees and Qualtest for misuse of its CI assets;
  • after making reasonable enquiries, it did not have sufficient information to decide whether to commence proceedings for such a claim; and
  • it had a reasonable belief that the former employees and Qualtest had documents in their possession that would assist Coffey in deciding whether to commence proceedings against them.1

In support of its preliminary discovery application, Coffey relied primarily on the results of a forensic examination of its computer systems that it commissioned from a third party investigator shortly after the employees left the business.

The examination revealed numerous documents that had been accessed by the employees and emails that they had sent to their personal email addresses shortly before their departure from Coffey.

Outcome of the Coffey case

On 30 January 2015, Justice Farrell of the Federal Court handed down a judgment dismissing Coffey’s application with costs.

Her Honour found that Coffey had failed to satisfy the requirements for preliminary discovery for a number of reasons:

  • Coffey had not undertaken any enquiries beyond the forensic examination of its computers. In Justice Farrell’s view, Coffey was trying to use the preliminary discovery process as an alternative to making the enquiries it should have made prior to bringing the application.
  • The forensic results relied on by Coffey were insufficient to found a reasonable belief that the former employees had or would misuse Coffey’s CI assets, or pass them on to Qualtest. Speaking generally, Justice Farrell noted that where former employees have a legitimate basis for accessing CI assets prior to their departure, it is not enough merely to demonstrate that such access has occurred and that the employees are persons who would be in a position to compete effectively with their former employer.
  • Coffey had not made enquiries of its other staff who were involved in the formal handover process that each of the three former employees was required by Coffey to undertake before leaving.
  • Justice Farrell accepted the evidence of the former employees explaining their reasons for accessing documents and sending emails to their personal email accounts. This included evidence from one former employee that he had accessed a number of old archived documents “out of nostalgia and curiosity”. In considering this evidence, Justice Farrell found that it was “entirely plausible that an employee of 32 years standing who had resigned and was performing handover might spend 25 minutes (or more) glancing at archival documents which represented a body of his work”.

In another example, the former employee said he would occasionally send emails to his personal email account at home to either read at leisure or in order to complete work. The employee preferred doing this on his home computer which had a large screen and was more reliable than the laptop he had been provided by Coffey.

  • Justice Farrell accepted Qualtest’s evidence that it had relied on documentation given to it by an interstate affiliates to obtain accreditation from NATA, and had not used any of Coffey’s documentation. Significantly, this evidence was not contradicted by documentation obtained from an earlier subpoena issued to NATA in April 2013 on Coffey’s application.

To get the right answers, you have to ask the right questions

The Coffey case brings into sharp focus the pitfalls of prematurely reaching conclusions about the intentions and actions of departing employees with respect to CI assets, without adequately considering all the relevant surrounding circumstances.

Proper enquiries are a must before any court action is taken, including applications for preliminary discovery.

Businesses should expect fierce opposition from former employees and their new employers when making allegations of misuse of CI assets. Forensic evidence, whilst useful, is likely to be closely scrutinised in the courtroom environment. It should be used cautiously where an employee had a legitimate basis for accessing the business’s CI assets prior to their departure.

By Len Hickey
Contact Len: l.hickey@watermark.com.au

1 These requirements are set out in r 7.23 of the Federal Court Rules 2011 (Cth)

Has Katy Perry Jumped the (Left) Shark With Her Latest Trade Mark Grab?

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Katy Perry is undoubtedly one of the biggest stars – and biggest brands – in the entertainment world today. Her position in the firmament was cemented by her recent half-time performance at Super Bowl XLIX which, as Rolling Stone put it, ‘more than made up for a sleepy affair on the field.’

However, it was a member of Perry’s supporting cast that really made a ‘splash’ on social media.

In case you have managed not to encounter him (or, perhaps, her) already, meet ‘Left Shark’:


Source: NBC Universal

Left Shark – so named to distinguish her (or him) from the shark dancing on the other side of Ms Perry during her performance of Teenage Dream – gained instant fame after apparently losing track of the choreography in front of over 110 million US viewers. The hash-tag ‘#leftshark’ immediately started trending on Twitter, where (of course) some wag created an account and profile for the character (‘I may be left shark, but I’m the right shark for you’).

‘Viral’ content and IP rights

This kind of fan involvement and creativity is all fun and games until somebody decides that their intellectual property rights have been infringed. Within days, an artist in Orlando, Florida, named Fernando Sosa had created a 3D-printed model of ‘Left Shark’ that he was selling for US$24.99 via online marketplace Shapeways. This prompted lawyers for Katy Perry to send a cease-and-desist letter, claiming that the models infringe copyright in the shark costume. At the time of writing, questions have been raised as to whether the costume is sufficiently original to attract copyright protection and, if so, whether Katy Perry is able to establish ownership of the copyright. With these questions unanswered by Perry’s lawyers, it appears that – for now, at least – Sosa’s sharks are back on sale at Shapeways.

In the latest development, Katy Perry’s company Killer Queen, LLC has filed applications at the US Patent and Trademark Office (USPTO) to register LEFT SHARK, RIGHT SHARK, DRUNK SHARK and BASKING SHARK as trademarks in respect of goods and services including cell phone covers, stickers, mugs, various clothing items, plush toys, figurines and live musical and dance performances.

Can Katy Perry really ‘own’ LEFT SHARK?

This raises the question of whether Perry can really claim proprietorship of these terms, or if this latest intellectual property land grab is a bridge too far for the pop star?

It is pretty clear that Katy Perry did not coin the term LEFT SHARK. There are well in excess of 100 million witnesses to the fact that, at the time the name was gaining currency on social media, Ms Perry was on a stage in Phoenix, Arizona, largely oblivious to the antics of the costumed dancer to her right, let alone the interest it was generating on Twitter.

However, this is not in itself a barrier to trade mark ownership. In contrast to patent rights, there is no ‘novelty’ or ‘inventiveness’ requirement for a trade mark, and unlike copyright a trade mark need not be ‘original’ or meet any minimum standard of substantiality. A common word, like APPLE, or the name of an ancient Greek goddess, like NIKE, can be legitimately adopted as a trade mark.

What is a trade mark?

The definition of a trade mark that appears in the Australian Trade Marks Act 1995 is ‘a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.’ A very similar definition appears in the US law.

The point is that, in order to function as a trade mark, a word or phrase must be capable of communicating to the relevant consumers the origin of the goods or services to which it is attached or associated. The challenge for Katy Perry, therefore, is to establish that the phrase LEFT SHARK (or any of the other terms she is seeking to register) will be recognised by consumers as a trade mark, i.e. as a sign distinguishing goods and services provided by Perry’s Killer Queen, LLC from the goods and services of other traders.

In more usual circumstances, this would probably not present a problem. Imagine (if you can) a world in which the Super Bowl, and Left Shark’s adorably uncoordinated dance moves, had never taken place. The term LEFT SHARK would then make no obvious reference to any particular person, costume or event. In the absence of existing connotations, it does not appear to be descriptive of cell phone covers, figurines, live musical and dance performances, or any of the other goods covered by Katy Perry’s trade mark applications. In all likelihood, it would be registrable.

So is one event – no matter how widely viewed – and a social media meltdown sufficient to change the nature of a phrase like LEFT SHARK such that it is no longer capable of acting as a trade mark on behalf of a particular proprietor?

Trade mark treatment of ‘viral’ words and phrases

There have been other recent examples of attempts to register, as trade marks, terms popularised on social media, most notably I CAN’T BREATHE (a reference to the last words of Staten Island resident Eric Garner, who had a heart attack and died in November while being arrested) and JE SUIS CHARLIE (the slogan of solidarity with the French satirical magazine Charlie Hebdo following the attack on its offices on 7 January 2015).

In Europe, the Office for Harmonisation in the Internal Market (OHIM), which is responsible for examination and registration of European trade marks, took the unusual step of issuing a statement on 16 January 2015 to explain why it would ‘probably’ not accept applications to register JE SUIS CHARLIE. In particular, it stated that ‘the registration of such a trade mark could be considered “contrary to public policy or to accepted principles of morality” and also … as being devoid of distinctive character.’ The French Intellectual Property Office had issued its own statement (in French) a few days earlier, explaining why it would not accept any application for registration of JE SUIS CHARLIE.

In Australia, the Trade Marks Office last year rejected an application to register MH370 (a reference to the flight number of the Malaysian Airlines flight that disappeared on 8 March 2014 while flying from Malaysia to China), although a combination of two letters and three digits would normally be considered distinctive in the absence of some established meaning. An Australian application to register JESUISCHARLIE as a trade mark in respect of publishing services was filed on 12 January 2015, and subsequently withdrawn prior to examination following adverse coverage in the media.

Applications recently filed in the US seeking registration of I CAN’T BREATHE and JE SUIS CHARLIE have, at the time of writing, yet to be examined. However, my expectation is that all such applications will be rejected. In earlier cases, the USPTO has treated popular slogans including OCCUPY WALL STREET, BOSTON STRONG and HANDS UP DON’T SHOOT as ‘informational matter’ that is not registrable under US trade marks law.

Conclusion – the fate of Katy Perry’s SHARK marks

Overall, then, it seems likely that Katy Perry will encounter some difficulty in registering LEFT SHARK as a trade mark. The term is already being widely used to describe a range of products and images bearing a greater or lesser similarity to the blue-and-white dancing fish, and may therefore fall foul of the USPTO’s practice of rejecting ‘informational matter’.

She may also encounter similar difficulties with RIGHT SHARK (the obvious complement to LEFT SHARK) and DRUNK SHARK (a term that has also been widely used on social media). The prospects of registration may be better for BASKING SHARK since, other than being descriptive of a species of shark, it does not have any existing association with the various goods and services specified in the application.

It will, in any event, be interesting to see how these applications play out, and whether Katy Perry persists with her attempts to monopolise an internet meme!

On a final note, it is perhaps just as well for Katy Perry that the trend of seeking to tie up aspects of performance and authorship via trade mark rights is relatively recent. Had the practice been common back in 1974, she might have found herself having to answer to the estate of the late, great Freddie Mercury for her choice of company name, Killer Queen, LLC. It may be true that Pop Will Eat Itself although, if Katy Perry has her way, any attempt to consume her contribution will result in somebody choking on her trade mark rights!

By Mark Summerfield
Contact Mark: m.summerfield@watermark.com.au

Could the Australian Courts ‘compel’ those who prescribe and dispense medicines to help big pharma fight generics?

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A recent UK court ruling has broken new ground in ordering an official health body to issue guidelines on prescribing a generic drug.  Could the same thing happen in Australia?

The Therapeutic Goods Administration (TGA) is the Australian regulatory body for therapeutic goods, including medicines.  A generic medicine can only be supplied if the TGA considers there to be evidence showing that the generic medicine is bioequivalent to the original medicine.  Before either an original or generic medicine can be registered in the Australian Register of Therapeutic Goods, the company seeking registration must supply and have approved by the TGA a summary of the scientific information relevant to the use of the medicine.  This summary is known as a ‘product information document’, and it is intended that this information be available to assist doctors, pharmacists and other health professionals in prescribing and dispensing medicines.

In recent times, product information documents have become a focus in legal battles between originators of medicines and their generic counterparts.  Notably, decisions issued by the High Court and Full Federal Court have provided guidance to generic pharmaceutical manufacturers for avoiding contributory patent infringement by amending product information documents.

An order issued recently by the UK High Court has gone a step further by compelling those who prescribe and dispense medicines to effectively enforce a patent owned by a pharmaceutical originator.  This may prove to be a game changer as to how generic medicines are prescribed and dispensed which may have global implications.

Use of ‘skinny labelling’ to avoid patent infringement

When patent protection for a reference medicine expires, it can sometimes be the case that patent protection for new indications (i.e. new uses of the medicine) can be obtained independently.  From the perspective of a generics manufacturer, the medicine per se can be made without the risk of infringement.  However, when seeking registration of the medicine with the TGA, if it were mandatory to include every new indication in the product information document, the generics manufacturer would arguably be liable for patent infringement.

In reality, Australian law (as do equivalent laws in Europe and the US) provides generics manufacturers the option of varying product information documents to exclude indications covered by patents that are in force.  Such practice is often referred to as ‘carving-out’ specific indications or ‘skinny labelling’.

Apotex v Sanofi (‘the Leflunomide case’)

In an earlier article (In dark times for biotech patents, Australian High Court provides a ray of light on methods of treatment), we reported on the significance of the decision issued by the Australian High Court in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd [2013] HCA 50 in relation to the patentability of methods of medical treatment in Australia.

The decision also deals with contributory patent infringement.  Specifically, Apotex had proposed to supply generic Leflunomide for the treatment of psoriatic arthritis and rheumatoid arthritis.  It had, however, carved out from the corresponding product information document the use of Leflunomide in treating psoriasis not associated with symptoms of arthritis.  In the Court’s view, this was sufficient to avoid infringement of a claim directed to a method of treating or preventing psoriasis patented by Sanofi.

Warner-Lambert v Apotex (‘the Australian Lyrica case’)

One might assume, after the above High Court decision was issued, that adopting a ‘skinny labelling’ strategy might provide a clear path as to avoiding patent infringement.  However, this turns out not to be the case as highlighted by the subsequent unanimous decision issued by the Australian Full Federal Court in Warner-Lambert Company LLC v Apotex Pty Ltd [2014] FCAFC 59.

Warner-Lambert (a member of the Pfizer group of companies) owns an Australian patent for treating pain using the pharmaceutical pregabalin.  Pfizer Inc, the parent of the Pfizer group, is a co-owner of an Australian patent which covers the use of pregabalin in the treatment of seizures.  Pfizer promotes pregabalin in Australia under the trade mark Lyrica in relation to the pain indication.

Apotex registered many products containing generic pregabalin in the ARTG in respect of the treatment of neuropathic pain and seizures, and has sought to invalidate the above patents.  While Apotex’s challenge to the patent covering the treatment of seizures was resolved through confidential negotiations, it continued to pursue revocation of the patent covering the pain indication.  Apotex amended only some of its registrations for generic pregabalin and associated product information documents to exclude the pain indication.  Other registrations and associated product information documents were not amended.  This included registrations/documents linking generic pregabalin to products carrying the brand names of recognised Australian pharmacies (namely ‘Terry White Chemists’ and ‘ChemMart’).  Further, Apotex intended to apply to list these other pregabalin-containing products in Australia’s Pharmaceutical Benefits Scheme (‘PBS’) such that the products could be available to consumers at a subsided price.

Warner-Lambert subsequently commenced infringement proceedings and sought interlocutory relief restraining Apotex from listing its generic pregabalin in the PBS or supplying its pregabalin-containing products.  At first instance (Warner-Lambert Company LLC v Apotex Pty Ltd [2014] FCA 241), the Federal Court granted an interlocutory injunction restraining Apotex from supplying products containing pregabalin indicated for the treatment of neuropathic pain.  However, the primary judge was not satisfied that Warner-Lambert had demonstrated a case for additional interlocutory relief restraining Apotex from supplying any product containing pregabalin.

Warner-Lambert appealed to the Full Federal Court.  In brief, the Full Federal Court found in Warner-Lambert’s favour as it had reason to believe that Apotex’s generic pregabalin would be used to treat pain based on the size of the ‘pain market’ compared to the ‘seizure market’ even though the pain indication had been carved out.  Apotex submitted that it intended to advise doctors and pharmacists not to use generic pregabalin to treat pain, however this was not persuasive.  Consequently, the Full Court extended the injunction to cover all of Apotex’s products containing generic pregabalin.

Warner-Lambert v Actavis (‘the UK Lyrica case’)

Similarly to Apotex, Actavis is a generics manufacturer that sought to make generic pregabalin.  Actavis also sought to revoke Warner-Lambert’s European patent for pregabalin which covers the treatment of pain (albeit indirectly, because claims directed to methods of treatment are not patentable in Europe).  Initially, Actavis planned to market its generic pregabalin under a skinny label in respect of seizures and anxiety disorders (not pain) while it challenged the validity of Warner-Lambert’s European patent.

Warner-Lambert subsequently applied to the High Court of England and Wales for an interim injunction to ensure that Actavis’ generic pregabalin would not be prescribed for pain.  Evidence was presented showing that the UK market for pregabalin in respect of pain treatment was substantial compared to other indications.  The Judge recognised that Actavis had taken steps to avoid having its generic pregabalin prescribed for pain, including restricting its marketing to non-pain indications, and by offering to write to prescribing and dispensing authorities to provide instructions that generic pregabalin is not to be prescribed for pain.

Ultimately, the Judge in that case (Warner-Lambert Company, LLC v Actavis Group Ptc EHF & Ors [2015] EWHC 72 (Pat)) refused the application for an injunction based on the steps taken by Actavis to avoid infringement.  However, Warner-Lambert was still concerned that generic pregabalin would be ultimately prescribed for pain.  In this regard, the Judge noted that the best solution was for the National Health Service (NHS) to issue appropriate guidance to doctors to prescribe Warner-Lambert’s Lyrica for pain.  The NHS is a publically funded healthcare system which is administered by the UK Department of Health.

Warner-Lambert then subsequently sought, and was successful in obtaining, a court order to compel the NHS to issue guidance to doctors and pharmacies that pregabalin should only be prescribed for the treatment of neuropathic pain under the trade mark Lyrica: Warner-Lambert Company, LLC v Actavis Group PTC EHF & Ors [2015] EWHC 485 (Pat).  This effectively places the doctors and pharmacists in the position of enforcing Warner-Lambert’s patent.

Could Australian doctors and pharmacists be compelled to enforce patents?

The Judge in the UK Lyrica case also made the point that, under current UK prescribing and dispensing practices, pharmaceuticals are almost always prescribed according to their generic name.  The situation is likely the same in Australia.  Further, pharmaceuticals are almost always prescribed without reference to the indication for which it is being prescribed (see, e.g., the basic legislative requirements associated with writing prescriptions in the State of Victoria, Australia [234kb, .docx]).  Thus, while Australian Courts might see skinny labelling as being sufficient to avoid infringement, the reality is that generics are likely to continue to be prescribed for patented indications.

Given the outcome of the UK Lyrica case, the question arises as to whether pharmaceutical originators will now seek court orders in Australia to have the Department of Health (the Australian equivalent of the NHS) issue guidance to prescribing and dispensing authorities to ensure that generics are not to be prescribed or issued to treat patented indications.

Acknowledgement

The author acknowledges the article High Court orders NHS to give guidance on the prescribing of pregabalin in Warner-Lambert v Actavis by Christofer Freeth of Wragge Lawrence Graham & Co LLP, UK for information on the UK Lyrica case.

By Chris Vindurampulle
Contact Chris: c.vindurampulle@watermark.com.au

When your tarnished trade mark is battering your brand

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Your trade mark may be tarnished if somebody else uses the same, or a similar, word or sign in a way that portrays it in a negative light. Branding experts say that an unfortunate association with a name can scar a business reputation, even if the connection is coincidental. As a result, you may be left with a battered brand, which can prove detrimental to the livelihood of your business.

Given the success of a brand is so often dependent on trade marks, this article takes a look at the law protecting you against trade mark tarnishment, and provides examples where, in the face of trade mark tarnishment, businesses have successfully salvaged their brand.

‘Dilution’ of a trade mark

To appreciate the law protecting the tarnishment of a trade mark, it is useful to discuss ‘dilution’. Some countries provide specific legal protection from dilution. For example, the United States Federal Trademark Dilution Act (15 USC 15 §1125) defines trade mark dilution as:

the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of
1.   competition between the owner of the famous mark and other parties, or
2.   likelihood of confusion, mistake or deception.

These types of laws protect the identifying or distinguishing power of a trade mark. In general, dilution of a trade mark can occur through two mechanisms:

  1. blurring: the ‘association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark’; or
  2. tarnishment: the ‘association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark’.

Trade mark dilution is expressly recognised in the United States, the European Union, several countries of Central and South America, South Africa, India and Japan. Many other jurisdictions recognise a similar concept under other names. For example, Canada recognises the concept of ‘depreciation of goodwill’ (R.S.C., 1985, c. T-13).

In Australia, the concept of trade mark dilution is not expressly recognised. However, well-known marks are granted added protection by allowing their owners to oppose registration of the same or similar marks (even if the well-known term is not registered), to seek ‘defensive’ registration (even if there is no real intention to use the mark in connection to those goods or services), and to initiate an infringement action if a person uses the same or similar mark in relation to unrelated goods or services and it is likely to be taken as to indicate a connection with the well-known mark. As such, avenues exist whereby well-known (i.e. famous) trade marks can be protected from tarnishment in Australia.

Famous trade marks tarnished

There are numerous entries on the Australian Trade Mark Register that encompass the term “Isis”. Isis itself references the mythical Egyptian goddess of magic and life, and may have served as the inspiration for developing trade marks and business brands. However, if your trade mark, business name or brand include this term, it is likely to be suffering from a completely coincidental and unavoidable association with the Islamic State of Iraq and Syria terrorist organisation.

Clearly your trade mark is susceptible to tarnishment, because the similarity between the ISIS terrorist organisation and your mark impairs the distinctiveness of your mark, and calls undesired associations to the minds of consumers. The question is whether the trade marks laws – in Australia, the US, or anywhere else – are of any assistance to you in these circumstances.

The senior director of Verbal Integrity at Interbrand, a global branding consultancy, Lynne LaCascia has been reported as stating that ‘No name is free of all negative associations in all geographies and languages, and any can fall prey to unrelated news or conversation that happens after launch’. Further, ‘News and topics like ISIS generally die down over time,’ LaCascia added, ‘So while it’s always a good idea for brands like Isis Wallet to communicate about what value and experience it offers its customers, it’s unlikely anyone would assume affiliation or mistake one entity for the other even without that communication’.

So what should your business do? Under normal circumstances, the registered trade mark owner would be entitled to bring an action for trade mark infringement. However, under such extreme trade mark tarnishment circumstances, a business will often choose to deal with the matter independently – and the quicker the better – either by changing the name and branding of the business, or by taking other steps to ensure that the consumer’s association isn’t devastating to your brand.

Take the ‘ISIS Mobile Wallet’, the cashless payment solution from US companies Verizon, AT&T and T-Mobile. In September, it was announced that the technology start-up would change its name to ‘Softcard’. CEO Michael Abbott stated that ‘However coincidental, we have no desire to share a name with this group, and our hearts go out to those affected by this violence’.

In fact, this option of dropping the association to ISIS appears common among brand managers. The popular animated series Archer has completely dropped its reference to ISIS, which formerly denoted the program’s ‘International Secret Intelligence Service’ spy agency. The show’s creator, Adam Reed, commented that ISIS is ‘The most awful thing and we didn’t want to have anything to do with it’. The show’s characters now operate under the banner of the CIA.

In Australia, construction company ISIS has warned staff not to wear their uniforms, clearly labelled with ‘ISIS’, in fears for their safety. ‘We take the safety and wellbeing of our workers and subcontractors very seriously and are being proactive in managing any potential for negativity from ill-informed members of the public,’ stated Michael Barnes, chief executive. The company has not yet decided whether it will rebrand under a different trade mark.

However, changing the naming or branding of an established company can be a complex task, not to mention costly. For instance, ISIS Pharmaceuticals Inc has no plans to change its branding, which is based on a reputation built over 25 years. ‘We’ve been around for a while’, says D. Wade Walke, Vice President of Corporate Communications, ‘They [consumers] can easily distinguish between us and a Middle Eastern terrorist group’. Although almost certainly unconnected (unless investors were actuated by sympathy), the company reported a 43% surge in stock price over the three months that the terror group’s notoriety increased, well above its usual moving average.

Of course, an unfortunate brand association to ISIS is not the first instance of widespread tarnishment. SS Cars Limited was an incredibly popular British manufacturer of sports saloon cars in the 1930’s. While the exact source of the name ‘SS’ remains unclear, one thing is for certain, the rise of Nazi Germany, and the Second World War, were to change the company’s image forever. In fact, the association to the Nazi Party’s elite military unit the Schutzstaffel, a.k.a. the SS, was so devastating that on 23 March 1945, a general meeting resulted in the company’s name change to Jaguar Cars Limited. The chairman, William Lyons, stated that ‘Unlike S.S., the name Jaguar is distinctive and cannot be connected or confused with any similar foreign name’.

Prior to the rise of the Nazis in Germany, the swastika symbol evoked a feeling of prosperity and good fortune in almost every culture. Indeed, the word ‘swastika’ means ‘well-being’. Coca-Cola used the symbol, as did the Boy Scouts, and the Girls’ Club of America titled their magazine Swastika. It was even used by American military units during World War One, and could be spotted on RAF planes until the late 1930s. The symbol was pure and inspiring – and then the Nazi Party adopted it as an Aryan symbol to inspire a sense of ancient lineage for the Germanic people. Today, the symbol is widely despised and synonymous with fascism.

This proved particularly problematic for the Carlsberg Group, where the founder had registered a swastika as his trade mark in 1881. The breweries began using the trade mark less and less following the German occupation of Denmark. The company was faced with an all too familiar dilemma – they did not want to be connected to the enemy, but the trade mark was part of their proud history. So what did Carlsberg do?

By the end of 1945, the Carlsberg Group had completely stopped the use of the Swastika. The negative association had surpassed the positive image the trade mark once provoked. Even so, the company cannot completely shake its association with the swastika trade mark, with the symbol still appearing on the famous elephant gates, built in 1902, which mark the entrance to its famous Copenhagen brewery.

The best decision for your business

A brand is the intangible sum of a product’s attributes, and has been shown often to be the most valuable asset of a business – it is estimated that, on average, 75% of a business’ value is associated with its brand. One of the greatest challenges of becoming a successful business is establishing, and maintaining, a good brand. In most instances, a business’ brand is supported by one or more trade marks that legally protect aspects of this brand.

If you choose to rebrand your business, the years invested in establishing and maintaining a good brand will likely be reset. The consumer will no longer associate the brand with your core values and attributes. In essence, the business will be forced to re-attract their consumers, reassure them that the business values are consistent, and take the time to demonstrate this to the consumer. It is a hefty investment.

Conversely, and I think more logically, a business should trust that previous branding and marketing will hold them in good stead. That is, the consumer is fully aware of its values and attributes, and has confidence in the product or service you are providing. If a business has been previously successful in this way, then a consumer’s confidence in your brand will hopefully be resilient to all but the most extreme cases of tarnishment.

By Brittany Howard
Contact Brittany: b.howard@watermark.com.au

Protecting IP in Asian markets: a note to Australian exporters

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In recent times there has been overwhelming interest and activity from Australian companies to export their products and services to the Asian market.  The market potential in Asian countries is attractive to Australian businesses.  For some companies this is natural growth, for others it is a result of saturation in the local market.  According to Australia’s International Business Survey 2014 conducted by the Export Council of Australia in conjunction with four other institutes, including Austrade, six of the top ten future export markets for Australian businesses are in Asia.  These are China, India, Indonesia, Japan, South Korea and Malaysia, in that order.

So, when it comes to protecting the intellectual property (IP) rights, what are the risks that Australian businesses could encounter and what steps can be taken by companies to mitigate these risks?

For simplicity, let us have a distinction between products/services that are technology intensive and those that are brand intensive.  Of course, there are products/services which may be a partly technology intensive and partly brand intensive.  For such products/services, a combination of the steps mentioned below may need to be taken to mitigate risks.

Technology Intensive Products/Services

Technology intensive products/services are those that are competitive because of the technology contained in them e.g. mining equipment, medical devices, etc.

Risk

The technology in these products/services is at a risk of being reverse engineered or copied by local competitors, mainly to provide a cheaper alternative in the market.  Such reverse engineering is carried out by competitors who get access to the products/services or by companies who see such competitors as their customers.

In many instances, the reverse engineered products are cheaper because there are no R&D costs, and also that the reverse engineered product may have just the essential features of the product/service. Higher level features, which may be considered as ‘bells and whistles’, can be omitted to keep costs low.

Mitigating the risk

To reduce risks of loosing market share to a local competitor, companies can take the following steps.

Patent protection

Although enforceability of patents in Asian countries is often questioned, patents can provide an effective way to deter competition.  Many national governments in the Asian region, particularly the Chinese government, are taking steps to improve enforceability and awareness of Intellectual Property Rights.

Marking ‘patent pending’ or ‘patent applied for’ on the product/service or its advertisement material or packaging acts as a deterrent to potential copying. In some cases, more active steps such as a ‘cease and desist’ letter could be sent to a potential infringer if enforceable patent rights exist. Bear in mind, that such a letter could lead the potential infringer to commence action ‘unjustified threats’ if no enforceable patent right yet exists.

Technology intensive products being exported to Asian markets are often those which are already being sold in the home (Australian) market.  Once an invention has been commercialised, it is not possible to get a valid patent in most jurisdictions.  Therefore, if companies are to rely on patents for IP protection, they need to decide from the outset, before commercialising, whether they plan to sell the product in Asian markets. The decision needs to be followed by steps to obtaining patent protection in potential markets.

For companies that are looking at selling/licensing technology alone i.e. without an associated product/service, sometimes known as pure IP licensing, patents are the most effective way of protecting IP.  If patents are not an option, for example because the technology has already been commercialised, then strong commercial contracts with the potential customers may be an option.  Controlling access to confidential information and trade secrets can also provide strong leverage.

Preventing access

Exporting companies have minimal or no presence in the local market.  Therefore, it is difficult to keep a watch on what takes place in the market place. Competitors get access to the technology in some instances by simply observing the products in the marketplace. Occasionally, access is provided by customers of Australian exporters, who seek out a cheaper alternative.

Confidentiality agreements with customers are generally difficult to put in place because of reluctance from customers.  In many cases, exporters seek to sell their products to large number of customers to benefit from the large market potential in Asian countries.  In such cases, a confidentiality agreement with each customer is not viable.   Even if a confidentiality agreement is put in place, breach of confidentiality is often difficult to prove, primarily because of lack of presence in the marketplace.

Another preventive measure is to ‘Black-box’ or hide the technology in a way that even if competitors get access to the technology, it is very difficult for them to re-create the product/service. Black-boxing for certain products/services may be through physical changes to the product/service. Technology can be kept black boxed perhaps by keeping the supply chain confidential. A caution on this approach is that if the black-boxed technology is somehow reverse engineered, there may be very little ground to salvage the misuse of IP.

Pricing

One direct way of reducing the chances of reverse engineering is to price the product/service such that there is no incentive to reverse engineer it.  This would require further engineering to reduce costs and put pressure on profit margins.  This is not the most lucrative of the strategies to protecting IP.  However, it is an option worth considering where costs can be reduced.

Brand Intensive Products/Services

Brand intensive products/services are those which are competitive because of their badge of origin.  The badge of origin is representative of the quality of goods/services.  Examples of brand intensive products/services include Wine, Dairy products, Vocational Education.  These products/services are competitive because of the quality associated with the branded product/service, and possibly brand following.

Risk

Brand intensive products/services are at a risk of being and imitated. For example, a competitor may produce the same product/service and label it with the Australian exporter’s brand name. Such imitation potentially leads to two types of losses – market share loss and reputation loss. As the competitor does not have to invest in building the brand, the competitor’s costs are low and the competitor can ‘piggy back’ on the Australian exporter’s reputation.  If the competitor’s product/service is of inferior quality, which is often the case, and the end user is unable to distinguish the original from the imitation, then an unsatisfied end user can lead to loss of reputation in the brand name.

In some cases, product may be parallel imported into the export markets.  However, this risk is low in Asian countries as these are generally low cost markets.

Mitigating risk

To reduce risks of loosing market share and/or reputation to a local competitor, companies can take the following steps.

Trade mark protection

A simple trade mark registration can be useful to take action against any imitators. If a company becomes aware of imitation products/services in the market place, then steps can be taken to investigate the origin of the imitation products.  Legal action can be initiated against the producer and the seller of the imitation products.

Without a trade mark registration, it is often an uphill battle to prove that the company has built reputation in the trade mark, in order to stop the imitating competitor. Therefore, it is advisable to seek trade mark registration before entering an Asian market in order to have prima facie rights to stops imitators.

Also, in certain jurisdictions, particularly in China, there exists a ‘first to file’ system which allows trade mark ‘squatting’. In China, the first person to file a trademark application will generally have priority over a prior user of the trademark.  So if a company is contemplating entering the Chinese market, then it is worthwhile filing a Chinese trade mark application instantly.

Proving prior ownership in copyright in a logo can be used in China to reclaim ownership of the trade mark filed by a third party.  Evidencing such copyright and reclaiming the trade mark can be an arduous and costly process.  The alternative of filing an early application for the trade mark can save much heartache.

Geographical Indication

A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.  Examples of international GI include Tequila and Champagne.  Generally, a GI is to be registered by a group or association of producers which then authorises certain persons/companies to use that GI in the country where GI registration is obtained.

In the Asian region, India, Malaysia and Thailand provide GI protection.

A hypothetical Australian example could be ‘Tasmanian Whisky’ registered by the ‘Tasmanian Whisky Producers Association’ to allow whisky producers located in Tasmania, and nowhere else, to mark their product as ‘Tasmanian Whisky’ in India.

Conclusion

The market potential for Australian exporters in Asia is large. However, selling in Asian markets may jeopardise companies’ intellectual property. There are measures described above, which companies can take to reduce this risk.

To devise an IP strategy specific to your company, speak with one of our IP Attorneys specialising in your field.

The above should be considered as general advice, and is not to be interpreted as specific advice. The above is not a comprehensive list of IP protection strategies, but are the most effective in the author’s experience.

By Shriraj Takle
Contact Shriraj: s.takle@watermark.com.au

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