The battle to keep “The Secret” continues

The dispute between the creator of “The Secret”, Rhona Byrne and her company TS Productions LLC and the Australian director Drew Heriot concerning the copyright in the film and the related book continues in Australia. Earlier this year, Justice Sundberg of the Federal Court of Australia, ordered a stay of the Australian proceeding pending the outcome of the US proceeding.

A major issue before his Honour was whether in the US proceeding, the US court would apply the law of that country or Australian law. After considering the rival opinion evidence of two American lawyers, his Honour found that US law would be applied.

After argument had concluded, but before Justice Sundberg delivered his judgment, the US District Court delivered a judgment declining to stay the US proceeding. The judge, the Honourable Suzanne B Conlon, reached the same conclusion as Sundberg J as to the choice of law in the US proceeding. Judge Conlon made various procedural directions including discovery and other dates for joint pre-trial orders.

The matter has again returned to the Federal Court of Australia where TS Production LLC has sought leave to appeal to the Full Court from the judgment and orders of Justice Sundberg. The issue before Justice Heerey was not the substantive question of leave but whether the application for leave should be dealt with by a single judge or by the Full Federal Court. Order 52 r2AA of the Federal Court Rules requires some ground to be shown as to why an application for leave to appeal should be determined by the Full Court. Heerey J noted that this case could not be “characterised as a minor interlocutory squabble over discovery or the like” but rather one in which Sundberg J’s orders could give rise to important consequences for the parties. Despite various contentions from Drew Heriot’s counsel that the only prejudice to the applicant was the cost of the US proceeding and that there was no “substantial injustice” to the applicant that would warrant the appeal being considered by the Full Court, Heerey J granted TS Production’s request on the basis that Sundberg J’s judgment deals with substantial legal issues which are appropriate for resolution by a Full Court.

Gummow J sets homework assignment for IceTV and Nine

As reported elsewhere , the High Court last Tuesday granted IceTV special leave to appeal against the Full Court's finding that it had infringed Nine's copyright in its TV schedule. The transcript of the special leave hearing is now available and makes for interesting reading.

Gummow J gives some interesting clues as to how the Court may approach the appeal, noting in particular that the principles underlying the US decision in Feist, dealing with originality in compilations, may have some application to the issue of substantial part under Australian law. His Honour concludes by noting that:

we expect to have the assistance of counsel to deal with this matter thoroughly without any reticence in starting at the bottom, so to speak, and we expect counsel to be familiar with the academic writing in this field. They have already been referred, I think, to an article by Dr Deazley in [2004] Intellectual Property Quarterly 121. There is also what may be a useful article by Professor Sterk in Michigan Law Review for 1996, Volume 94, pp 1197 called Rhetoric and Reality in Copyright Law. There is a lot of other material out there as well. I hope the arguments will be informed with all of that, at least in a suitable background.

IP Australia surveys fashion designers

IP Australia recently sent a short survey to 450 members of the fashion industry.

The results revealed a pretty good level of awareness of IP, but with room for improvement!

New High Court Chief Justice

The Australian Government recently announced the appointment of Justice Robert French (currently of the Federal Court) as Chief Justice of the High Court of Australia.

Justice French takes up the position from 1 September, becoming the 12th Chief Justice appointed to the High Court since Federation, and the first from Western Australia. The current High Court Chief Justice Murray Gleeson will retire on 29 August. This appointment represents a significant change to the High Court bench and one that will prove very interesting especially in the area of IP given his Honour's experience in this area.

Copying tests lands teacher in trouble

In Boyapati v Rockefeller Management Corporation [2008] FCA 995, Kenny J considered, amongst other causes of action, a claim for infringement of copyright in a series of tests designed to prepare candidates for the Undergraduate Medicine & Health Sciences Admission Test (“UMAT”).

There was little doubt that the respondent, also engaged in the business of preparing students for the UMAT, had reproduced the applicants' tests and most consideration was directed to whether the tests were sufficiently original for copyright to subsist. Of the 800 questions forming the various tests, there was evidence to the effect that while half where written from scratch, the other half where developed from existing questions compiled from various sources. After reviewing a number of authorities on originality in compilations, her Honour concluded that:

Whilst the evidence established that she [the second applicant] derived the balance of the questions and answers from third party sources, she used these sources in different ways, selecting, adapting and modifying them to varying degrees to suit her purpose of compiling sets of practice exams that simulated the UMAT. Even where she made minimal modification to a pre-existing question, she exercised skill and judgment in selecting the question and including it in either section 1 or 2, depending on whether it concerned logical reasoning or interaction skills. There was also a degree of skill and judgment involved in organising the sequence and, to a lesser extent, the number of questions in sections 1 and 2 so as to simulate the UMAT. The practice exams that she created were therefore a product of her skill, judgment and labour, combined with that of Ray and Edward Boyapati to the extent that they contributed to the process. The skill, judgment and labour involved were sufficiently substantial to attract copyright.

In addition to finding that the respondent had infringed copyright, her Honour also held that the applicants should succeed in their claim for conversion under s 116 of the Copyright Act. The Court made orders that the parties file further submissions in relation to the appropriate relief, both for the conversion and copyright infringement, including whether additional damages should be awarded.

Who pays the cost of copying?

The manner of calculating an account of profits by reason of copyright infringement was considered by Heerey J in Tenderwatch Pty Ltd v Reed Business Information Pty Ltd [2008] FCA 931.

On the question of what proportion of the profits made were attributable to the infringement, his Honour considered that the use made of the infringing work was so fundamental to the activities of the infringer that the whole of the profit should be so attributable.

On the question of whether the infringer was entitled to deduct from the gross profits, an amount based on his time spent in preparing the infringing work his Honour considered that such a deduction would be wrong in principle, stating that “This would be tantamount to making a copyright owner pay an infringer for the time and effort spent in infringement.” The cost of printing the infringing works was however held to be properly deductible.

Anti-counterfeiting trade agreement negotiations

Both the Australian and New Zealand governments have announced that they will join with a number of other countries (including the USA, Japan, Switzerland, Canada, Korea, Mexico and the EC) to develop an Anti-Counterfeiting Trade Agreement (ACTA) as part of an international effort to curb the trade in counterfeit goods and pirated works.

It is intended that ACTA will set a common standard for intellectual property rights enforcement in matters such as criminal enforcement, border protection measures and civil enforcement; and establish enforcement best practices and mechanisms for international cooperation.

Costly Consequences

Three decisions handed down on 12 June 2008 illustrate how various tactical decisions can have implications on the costs awards made in intellectual property litigation.

In ITW AFC Pty Ltd v Loi and Tran Pty Ltd (No 2) [2008] FCA 895, Finkelstein J held that costs should lie were they fell in a patent dispute where both the claim for infringement and the cross-claim for revocation were unsuccessful. In rejecting the respondents argument that the proceeding should be treated as a single case in which the patentee failed, his Honour made several comments on the undesirability of parties bringing revocation actions without merit for purely tactical reasons concluding that:

“The usual order for bringing a hopeless case is to require the losing party to pay indemnity costs. Sometimes even that might not be enough. In patent litigation the parties are often large organisations that will not sufficiently feel the pain of an indemnity costs order. In those cases (I do not suggest this one) the proper order might be to require the legal practitioner to himself bear the costs, coupled with an order that the practitioner shall not be entitled to recover those costs from his client, notwithstanding any agreement to the contrary.”

In Nutrasweet Australia Pty Ltd v Ajinomoto Co Inc (No 4) [2008] FCA 876, also decided by Finkelstein J, his Honour was not prepared to award the successful party their costs on an indemnity basis because the ground upon which they had succeeded was raised only six days before the trial.

Finally, in Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 3) [2008] FCA 896, Besanko J ordered that the applicant should have its costs of the infringement of copyright and breach of implied contractual term claims on which it succeeded, but that the respondents should otherwise have their costs of the proceeding. Despite the applicant being awarded only $10 nominal damages for the infringement of copyright, his Honour also made an order that the costs payable to the applicant not be reduced pursuant to O 62 r 36A(1) on the basis that copyright litigation is appropriately commenced in the Federal Court even where the monetary claim is small.

Copyright and confidentiality

In Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd [2008] FCA 803, the applicant was successful in its claims for infringement of copyright and breach of confidence. The applicant had disclosed to the respondents as part of a quote to build trucking trailers, information regarding a load restraint system. The respondents argued that the information could not be confidential because it was not sufficiently original or novel having regard to information already in the public domain. Gordon J held that the information did have the necessary quality of confidence and in doing so noted that: “To put it more plainly, information need not be patentable, copyrightable, or otherwise protected by the intellectual property laws in order to be confidential.” The decision is here.

Infringement of copyright - damages

In Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746, the Court awarded only nominal damages of $10 pursuant to s115(2) of the Copyright Act 1968, having regard to the failure of the Applicant to show any economic loss flowing from the Respondent's infringement of copyright. However, after noting that the flagrancy of the infringing conduct is a factor to be considered but not a precondition of an award of additional damages under s115(4), the Court found that in this case the infringement was flagrant. Having regard to that finding and other circumstances of the case, the Court awarded additional damages of $10,000. The decision is here.

Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd

The Federal Court has confirmed that the door is now shut to trade mark owners seeking to use copyright in a mark or label as a means of preventing parallel importation in the recent decision of Rares J in The Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd [2008] FCA 49.

Ziliani Holdings (Ziliani) had imported into Australia for sale a number of articles of clothing onto which the Polo/Lauren ‘polo player logo’ was embroidered. Ziliani did not have the licence or consent of Polo/Lauren to import or sell those articles in Australia. The central issue in the case was whether sales to and purchases by Ziliani in the United States of genuine articles of clothing under the Ralph Lauren brand entitled it to ‘parallel import’ those goods into Australia.

Polo/Lauren had claimed that Ziliani infringed its copyright in the ‘polo player logo’ in Australia when it appeared embroidered on a genuine article imported into Australia. However, the proceedings were dismissed with costs.

The main question was whether a symbol or trade mark comprised of an artistic work when lawfully applied or embroidered overseas to the external surface of an article of clothing, was protected by copyright under the Copyright Act 1968 (Cth) (“the Act”) such that the copyright owner in Australia could prevent importation into, or sale in, Australia. This turned on whether the ‘polo player logo’ when embroidered on an article of clothing was a “non-infringing accessory” and therefore within the scope of section 44C of the Act.

In a similar manner to section 123 of the Trade Marks Act 1995, section 44C provides that copyright in a work, a copy of which is on or embodied in a “non infringing accessory” to an article is not infringed by importing the accessory with the article. The term “non infringing accessory” is broadly defined in section 10 of the Act to be an accessory made in a Berne Convention or WTO country with the permission of the copyright owner in that country. An “accessory” is also broadly defined and relevantly includes a “label” affixed to, or incorporated into the surface of the article.

Section 44C of the Act was introduced in 1998 following the decision of Young J in the Supreme Court of New South Wales in R & A Bailey & Co Ltd v Boccaccio Pty Ltd ((1986) 4 NSWLR 701; 77 ALR 177) in which the plaintiffs, who owned copyright in a painting appearing on a label affixed to a liqueur bottle, were entitled to restrain the importation and sale of liqueur in the bottles on which the label appeared. The Copyright Law Review Committee in recommending the amendment to the Act stated that distributors of goods should not be able to control the market for their products by resorting to the subterfuge of devising a label or a package in which copyright subsists. Rares J stated that the 1998 amendments to the Act were designed to prevent such an inappropriate use of copyright.

Polo/Lauren argued that the polo player logo was not a label but rather a decorative feature of articles on which it was placed. Rares J noted that the term “label” is not defined in the Act and therefore it was likely that the ordinary English meaning was that intended by Parliament. This was held to include a brand name, trade mark and the name by which a design or fashion house, and its product, such as ‘Polo’ and ‘Ralph Lauren’ and ‘Polo Ralph Lauren’, is generally known.

The evidence accepted by Rares J had established that if a shirt had the polo player logo on it, the presence of the logo conveyed to the person looking at it that it was manufactured by an entity within the Ralph Lauren group. According to Rares J, the polo player logo ‘labels’ the garment as a product of that design or fashion house and was therefore a label within the definition of accessory.

Accordingly, it was held that the polo player logo when embroidered on an article of clothing was a “non-infringing accessory”, being a “label” for the purposes of section 44C and therefore that copyright was not infringed by the importation or sale of the article. Rares J in dismissing the proceedings, stated that the Trade Marks Act and the tort of passing off adequately protected trade mark owners of wrongful exploitation of the trade mark by another.

Additionally, Rares J held that the copyright/designs overlap provisions would apply to the ‘polo player logo’ such that it would not be an infringement of copyright to embroider the polo player logo on an article of clothing in Australia. Therefore an importer in that situation would not be liable for copyright infringement as it could not have the requisite knowledge that the article would infringe copyright if made in Australia.