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Intellectual Property Bulletin – April 2006

In this issue: Our intellectual property lawyers and patent and trade marks attorneys provide an update on the latest cases and legislative developments affecting patents, trade marks, passing off, copyright and domain names.

Patents – Can a patent be revoked if one patentee has no entitlement?

Conor Medsystems, Inc v The University of British Columbia (No 2) [2006] FCA 32

In brief: A recent Australian Federal Court decision has confirmed that a patent granted to several persons is liable to be revoked if one of the patentees has no rights to the invention.

By Miriam Stiel, Senior Associate

Background

Three patents were granted jointly to the University of British Columbia and Angiotech Pharmaceuticals, Inc. The patentees claimed to be entitled to the inventions by assignment from the US inventors. Conor Medsystems, who commenced proceedings in the Federal Court challenging the validity of the patents, argued that the two people from whom the University of British Columbia claimed title were not inventors and that the patents must therefore be revoked.

A preliminary question was put to the court that asked whether the facts in the particulars of invalidity, if assumed to be established by evidence, support a finding that the patents are liable to be revoked under section 138(3)(a) of the Patents Act 1990 (Cth), which permits the revocation of a patent where 'the patentee is not entitled to the patent'.

Reasoning and decision

In answering the question, Justice Finkelstein examined the history of the Patents Act and, in particular, the predecessors to s15, which specifies the persons to whom a patent may be granted, and looked at three US Supreme Court decisions that considered the meaning of the term 'inventor'. In the US, the Commissioner of Patents may issue a certificate deleting the name of a joint inventor from a patent where that person was named as a joint inventor by error and without any deceptive intention. There is no equivalent provision in the Patents Act.

Justice Finkelstein concluded that a patent cannot be granted to two or more persons if one of them does not fall within the terms of s15 and that s138(3)(a) allows for revocation where one of several patentees is not entitled to the patent. Section 138(3) (d) provides an alternative ground for revocation, on the basis that the grant was obtained by 'false suggestion or misrepresentation'.

A number of questions may arise if the facts support Conor Medsystems' claim that the University of British Columbia is not entitled to the patent whether:

  • the making of a revocation order is discretionary and, if so, whether that discretion should be exercised;
  • Angiotech can take steps to obtain a grant of the patents for itself; and
  • the court can order rectification of the Register rather than revoking the patents.

The respondents have appealed from the decision to the Full Federal Court and the hearing of the appeal has been set for 17 May 2006.

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Patents – The blade that longed to be a knife

Breville Pty Ltd v The Warehouse Group (Australia) Pty Ltd [2005] FCA 1893

In brief: The Federal Court found that an allegedly infringing vegetable and fruit juicer lacked the essential feature of a 'knife or knives having an upwardly directed cutting edge' and did not achieve the specific advantage attributed to this feature. The defendant's juicer escaped the claim because it used instead a blunted blade.

By Chris Bird, Partner, and John Landells, Technical Assistant

Breville, the owner of Australian Patent 684615, alleged that the Warehouse Group had infringed its patent by selling a competing fruit and vegetable juicer with a horizontal rotating grating disc, marketed as the 'Cascade Juicer'.

The Breville vegetable and fruit juicer had a horizontal rotating grating disc that included a feed tube and a food pusher. The primary focus of the decision turned on the construction of the following features of claim 1 (emphasis added):

  • a feed tube including 'a knife or knives having an upwardly directed cutting edge';
  • whereby downward movement of the food pusher causes 'an article of food to be cut by the cutting edge or edges of the knife or knives and pressed onto the grating disc, the food being held against rotation by the knife or knives.'

In contrast to the knife feature of the Breville invention, the Cascade Juicer used a blunt wedge-shaped rib or vane (see picture) – for which the court coined the 'neutral' term 'blade' – as a means to hold food against the rotation of the grating disc.

 
   

In line with principles restated in recent Australian and UK case law, including the House of Lords review in Kirin-Amgen, the court applied purposive construction and found that the Cascade Juicer was not 'on any reckoning, "a knife ... having an upwardly directed cutting edge".' It appears that the court considered that, even on the widest possible interpretation of this descriptive phrase, the blade of the Cascade Juicer did not fall within its scope. In other words, it was not a variant of the feature but a different feature altogether.

Essentially, the decision involved the determination of the scope of a descriptive phrase, primarily at what degree of sharpness does a blade become a 'knife' capable of causing food to be 'cut by the cutting edge'. The court also referred to dictionary definitions that supported the meaning of a 'knife' usually requiring a sharpened edge. In the context of the claim language used, which required the knife to cut by its cutting edge, the court considered that the 'knife' would be understood by a skilled person to possess a sharpened edge. Although expert opinion presented in the court suggested that the blade of the Cascade Juicer would, in practice, be likely to penetrate or split fruit or vegetables, this was not sufficient to satisfy the claim language.

The court also considered that, although the allegedly infringing juicer was found to achieve the primary object of the patented invention, namely the efficient use of the entire grinder by holding food against the rotation of the grater, it did not achieve the specific advantage provided by the missing essential feature, namely the efficient cutting of large pieces of fruit.

The present decision provides further caution to the drafters of patent specifications that the Australian courts continue to employ a relatively narrow approach to purposive construction, and will be very reluctant to look beyond the strict meaning of the words of the claims. Broad terms should be used in the claims wherever possible, supported by a broad description and a number of alternative embodiments in the specification.

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Trade Marks – Attempts to settle civil contempt matter – limits on demands

Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83 (14 February 2006)

In brief: Trade mark owners and their legal representatives need to be extremely careful in attempting to settle matters of civil contempt, especially against unrepresented parties.

By Sabiene Heindl, Senior Associate, and Caitlin Boyce, Law Graduate

Facts

Mrs Maskiell, and the company of which she was a director, Design Elegance Pty Ltd (the respondents), had been involved in a number of infringements of Louis Vuitton trade marks in 2003. In 2004, Louis Vuitton's investigators discovered that the respondents were continuing to sell and display counterfeit Louis Vuitton product. Louis Vuitton's legal representatives wrote to the respondents, alleging that their conduct was in breach of consent orders made in 2003 and made an offer to settle Louis Vuitton's claims for 'damages and costs fixed in the sum of $30,000'. Mrs Maskiell offered to pay $15,000, which was accepted by Louis Vuitton.

In May 2005, the Australian Customs Service issued a notice that it had seized 63 counterfeit Louis Vuitton products that had been imported from China by Mrs Maskiell. In June 2005, Louis Vuitton's legal representatives wrote to Mrs Maskiell on a 'without prejudice' basis stating that Louis Vuitton would only be prepared to refrain from taking immediate action in respect of her 'blatant re-infringements' if Mrs Maskiell agree to provide, among other things:

  • a statutory declaration setting out details of her sales of counterfeit Louis Vuitton products, and identified all importers and sellers of counterfeit Louis Vuitton products in Australia and elsewhere that she was aware of;
  • an undertaking that she would furnish Louis Vuitton with information regarding people dealing with counterfeit Louis Vuitton products which led to:
    • Louis Vuitton obtaining damages of more than $250,000 or delivery up of counterfeit Louis Vuitton products valued at more than $250,000; or
    • the Australian Customs Service seizing counterfeit Louis Vuitton products valued at more than $250,000; and
  • monthly reports on her progress and undertakings to provide evidence.

Mrs Maskiell did not accept the offer. Louis Vuitton commenced proceedings against the respondents for infringement of its trade marks and contempt.

The Federal Court decision

In February 2006, Justice Merkel upheld a number of the charges of trade mark infringement and imposed a fine of $20,000 against the respondents.

His Honour acknowledged that the respondents had deliberately breached the consent orders on a number of occasions and such conduct had the potential to give rise to claims for both civil and criminal contempt. Civil and criminal contempt were contrasted. Civil contempt was defined as the 'mere failure to comply with an order or a deliberate, but not contumacious, breach of an order' that traditionally could be waived by an aggrieved party in a settlement. In contrast, criminal contempt raised public interest issues and could arise, for example, through conduct that was scandalous to the court or constituted an interference with the course of justice. It was recognised that it may not be in the public interest for parties to settle a matter involving criminal contempt.

Ultimately, his Honour did not go so far to find that claims of contempt arising from the current set of circumstances could not be settled. However, given the fine distinction between criminal and civil contempt, the court stated that it was important that an aggrieved party and its solicitors exercise prudence and caution when offering to settle claims involving contempt. His Honour cautioned that potential applicants and their legal representatives:

should ensure [that their] offer does not travel beyond the legal entitlement or beyond a reasonable and reliable estimation of the entitlement, particularly if the offer is being made to an unrepresented litigant.

His Honour found that the initial demands made of Mrs Maskiell travelled well beyond Louis Vuitton's legal entitlements. In particular, the letter of June 2005 to Mrs Maskiell was described as 'indefensible' as:

It plainly failed to meet the requirements discussed earlier in that its demands went far beyond any demands Louis Vuitton had a legal right to make. Indeed, it made demands far beyond any remedy known to law.

Justice Merkel held that the actions of Louis Vuitton's legal representatives amounted to serious misuse of the entitlement of Louis Vuitton to threaten and bring contempt proceedings in respect of the respondents' conduct in breach of the consent orders and ordered that Louis Vuitton pay Mrs Maskiell's costs.

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Trade Marks – Colorado trade marks battle

Colorado Group Limited v Strandbags Group Pty Ltd [2006] FCA 160 (28 February 2006)

In brief: This recent trade mark infringement case considers the issues of proprietorship and inherent distinctiveness.

By Jim Dwyer, Partner, and Deborah Doctor, Law Graduate

Facts

This case involved an action for trade mark infringement and a subsequent counterclaim seeking an order for the removal of the trade mark from the Register. The trade mark in issue was the word 'Colorado', which was registered by the applicant in 2001 for, among other articles, bags, wallets, purses, backpacks and belts.

The respondent's counterclaim was based in part on the argument that the Colorado Group was not the proprietor of the mark or, if it was the proprietor, that the mark was not distinctive of its goods as the mark was simply a geographic description.

Proprietorship

On the issue of proprietorship, Justice Finkelstein held that a person may be the proprietor of a mark in one of two ways. First, in respect of a mark that has never been used, the proprietor is the person who is (or claims through) the author of the mark and intends to use it. Secondly, a person may be a proprietor of the mark if they have used it and can show that they were the first to use the mark. It should be noted that, if the mark is not inherently distinctive, first use is not sufficient to establish proprietorship and, in such cases, it would be necessary to show that the mark does in fact distinguish the applicant's goods from the goods of others. Furthermore, it was held that proprietorship by first use is proprietorship in relation to the goods or classes of goods on which the mark has actually been used. The proprietor was entitled to have the mark registered in respect of those goods.

Inherent distinctiveness

As to the issue of distinctiveness, it was held that a designation that is merely descriptive of the character of the goods or of their geographic origin or location cannot be inherently distinctive. However, a geographic name is not always descriptive of the origin or location and, in such cases, where the geographic name has only an arbitrary or fanciful significance in connection with the goods upon which it is used, the mark will be inherently distinctive.

Findings

The court held that the Colorado Group could be regarded as the first user of the 'Colorado' mark on backpacks. This was despite the fact that the word 'Colorado' had first been used in combination with the 'simple mountain motif'. Justice Finkelstein held that it was possible to dissect a mark that was made up of several components and obtain trade mark registration for only one component so long as that one component performed the function of identifying the source of the goods and services to customers. Moreover, the word 'Colorado' when applied to backpacks is not used in a geographical sense and is thus inherently distinctive and requires no proof of secondary meaning. While the Colorado Group was held to be the proprietor of the trade mark in relation to backpacks, the court did not consider bags, wallets, purses and belts to be goods of the 'same kind' as a backpack. Consequently, the court held that the Colorado Group was the proprietor of the mark only in respect of backpacks and that the mark should be removed from the register in relation to the other goods. The Strandbags Group's use of the 'Colorado' mark in relation to the sale of backpacks was found to infringe the Colorado Group registered trade mark.

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Trade Marks –  Application for interlocutory injunction – care in preparing evidence

Virgin Enterprises Limited v Virgin Star Pty Ltd & Ors [2005] FCA 1846

In brief: A recent Australian Federal Court case highlights the importance of adducing evidence relevant to the particular issues.

By David Yates, Senior Associate

In this case, Virgin Enterprises Limited (Virgin) sought interlocutory orders to (among other things) restrain the respondents from using names that include the word 'Virgin' in connection with Internet service provider services, web-hosting services and website services, and from using the domain names www.virginstar.com.au and www.virginstar.net in connection with the conduct of any business. Virgin is a member of the Virgin group of companies associated with Sir Richard Branson. Virgin claimed that by reason of the use by members of the Virgin group of the names and marks that constitute or include the word 'Virgin', both in Australia and throughout the world, those Virgin names and trade marks are well known throughout Australia. The respondents did not have legal representation. The third respondent appeared for herself and represented the other three respondents. The Federal Court inquired whether there was a serious question to be tried, and whether the balance of convenience favoured the grant of relief on an interlocutory basis.

Virgin filed a large amount of affidavit evidence and exhibits, including a considerable amount of material that was filed shortly before the matter came on for hearing of the interlocutory application. As 'reputation evidence', the court noted that, in an application for an interlocutory injunction, the quantity of material reproduced and served by Virgin was 'manifestly excessive', and most of the material was 'quite unnecessary'. Further, this mass of material had been served on respondents who were not legally represented without any attempt to seek some indication from the respondents as to the elements of the application that were disputed. The court said:

Having regard to the manifest lack of relevance of much of the material, the volume and nature of the material filed and served by Virgin on this application borders on vexatious and frivolous use of Court procedure [at 32].

The court indicated that this conduct would result in an appropriate costs order at a later stage.

The court considered that the evidence did not make it clear what it was about the reputation of the Virgin group that would be damaged by the use of the respondents' website. While the court concluded that there was a serious question to be tried in respect of whether there could be confusion or misunderstanding, or a breach of trade mark or a passing off by virtue of the respondents' use of the word 'Virgin', the court did not accept Virgin's contention that if interlocutory injunctive relief was not granted it would suffer irreparable harm that could not be compensated for in damages. The only harm that could be readily identified from the evidence was a possibility of detriment to the reputation of the Virgin group as a result of the provision of poor quality services by the respondents. However, the nature of this harm was not defined, nor was there evidence to suggest that the Internet services to be provided by the respondents would in any way be inferior or unsatisfactory from a technical or commercial viewpoint. The respondents were able to show that there had been substantial investment by the third respondent in the establishment of the website and the registration of the business name. The balance of convenience did not favour Virgin and the interlocutory relief sought was therefore not granted.

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Trade Marks – Rights to the registered trade mark SCHOOLIES

In brief: Overzealous action by monopoly rights holders can give rise to breaches under the Trade Practices Act 1974 (Cth).

By Andrew Cameron, Lawyer

The word 'Schoolies' has a particular significance in modern Australian culture that may be lost on our readers overseas, so it is worth a few words of explanation by way of introduction. At the end of every school year, thousands of students make their pilgrimage to holiday destinations around the country – usually to Queensland's Gold Coast – to celebrate the end of school; characterised by high spirits and hard partying. This is known as 'Schoolies Week'.

In November 2005, the Australian Competition and Consumer Commission (ACCC) announced that it had received from trade mark owner Break Free Holidays (Break Free ) an undertaking that the company would no longer threaten legal proceedings for trade mark infringement against third parties who make use of the word SCHOOLIES in circumstances where Break Free has no right to do so. The ACCC believed Break Free may have breached section 52 of the Trade Practices Act 1974 (Cth) through engaging in misleading or deceptive conduct, by representing to other parties that they were not able to use the word SCHOOLIES, regardless of the context in which the word was used.

This undertaking follows on from a decision of the Federal Court in 2000,1 which held that the word SCHOOLIES had become a descriptive term prior to 1992, when Break Free registered the word as a trade mark. On that basis, the word was not – at least in certain areas of use – capable of differentiating the goods and services provided by Break Free from those of other providers, although the registrations of the mark remain on the register in six classes.

To avoid disciplinary action, the undertakings require that Break Free will:

  • obtain proper legal advice before communicating with third parties in relation to their use of the word SCHOOLIES for the next five years;
  • establish a Register of Communications documenting approaches to third parties about their use of the word SCHOOLIES, to be provided to the ACCC annually for three years; and
  • implement a trade practices law compliance program for three years.

None of the parties threatened by Break Free had taken action for groundless threats under the Trade Marks Act. Instead the matter was referred to the ACCC.

This case is a helpful reminder that monopoly rights holders should be cognisant of the limits of the intellectual property rights they hold, as overzealous action can give rise to sanctions. In particular, it is advisable that right holders seek proper legal advice before sending letters of demand and taking any other action against third parties.

Footnote

  1. Sports Break Travel Pty Limited v P & O Holidays Limited  [2000] FCA 924.

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Trade Marks – UGH BOOTS – mark ordered to be removed

Deckers Outdoor Corporation v B&B McDougal [2006] ATMO 5 (16 January 2006)

In brief: Trade mark owners need to be very vigilant in monitoring how they, and others, are using their trade marks.

By Melissa Finlay, Lawyer and Trade Marks Agent

The Registrar of Trademarks has directed that the Australian trade mark UGH-BOOTS be removed from the register on grounds of non-use, much to the disappointment no doubt of its US owner Deckers Outdoor (Deckers), which originally registered the mark in 1971.

Deckers opposed the removal action, relying primarily on its use of the term UGG and/or UGG Australia. However, the precise term as registered (UGH-BOOTS) had not been used by Deckers (or its authorised users). Use of variants without the hyphen and with alternative spellings were considered to depart from the mark as registered, and this was not, therefore, use of the registered mark. 'Ugh', 'ugg' or 'ug' boots were considered to be terms used interchangeably in Australia to describe a type of furry boot, making it essential that use by Deckers of the registered mark had to feature the hyphen and the correct spelling of the name.

Deckers also attempted to rely on a website, hosted in the US, advertising their boots, but this was not aimed at the Australian market. The only two Australian customers who ordered from the site were found never to have received their orders.

To reduce the risk of successful challenge, a trade mark owner needs to constantly check how they and others (journalists, commentators and competitors) are using their mark, to ensure what they are using in the market place is the same as – or very close to – the mark as registered, and that it is not in danger of becoming a common term of usage. Steps should be taken as soon as any risk is identified to avoid the sort of problems encountered by Deckers.

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Passing Off – Interlocutory injunction sought to change colour scheme of premises

Intellectual Property Pty Ltd v Mygroups Pty Ltd [2006] FCA 15

In brief: In a recent passing off case, the respondents were required to change the colour scheme of their premises to avoid being misleading or deceptively similar to a well-known franchise.

By David Yates, Senior Associate

In this case, the applicants sought an interlocutory injunction requiring the respondents to change the colour scheme of their premises such that it was not the colour scheme used by the applicants, nor one that was misleading or deceptively similar to it.

The third applicant licenses 'Clark Rubber' franchises in Australia. A franchisee may use the Clark Rubber colour scheme on the exterior of the store, comprising a vivid yellow background with yellow, blue, red and white signage, and the 'Clark Rubber' name and trade mark.

The second respondent is a director of the first respondent. In July 2005, the second respondent made an enquiry of the third applicant about commencing a Clark Rubber franchise business. However, the second respondent did not proceed with her proposal for a franchise. During December 2005 and January 2006, preparations were made for the opening of a business trading as 'Oasis Foam & Rubber' from a building on the first respondent's premises. The building was painted yellow with some signage in red and blue on the exterior. On 19 January 2006, the respondents' solicitor told the applicants' solicitor that his clients planned to open the store and commence trading on either 24 or 25 January 2006. These proceedings were heard on 23 January 2006 and judgment was given on the same day.

The applicants were concerned that people who saw the outside of the respondents' store would mistake it for a Clark Rubber store, even though the second respondent said the store would use the company's registered name 'Oasis Foam & Rubber' as part of its store front logo. The second respondent asserted that the basic colour scheme of 'gold' was designed to be an attractive colour that related to the leisure and outdoors nature of the business and that the blue and red colours were chosen because they were colours that particularly complimented the main colour.

Despite this, the court considered that there was a serious question to be tried in relation to the following: that Clark Rubber stores were well known to the Australian public and Australian consumers by reference to the distinctive Clark Rubber colour scheme; that the Clark Rubber colour scheme had acquired a secondary meaning in relation to Clark Rubber stores; that the first respondent, by painting the outside of its store in the manner which it had, has passed off the store as and for a business that was associated in some way with the Clark Rubber stores. The court was satisfied that the balance of convenience lay in favour of granting an interlocutory injunction. The court ordered that the respondents be restrained from trading at the store until such time as the colour scheme was changed.

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Copyright – Technological protection measures exceptions report

In brief: A report reviewing exceptions to technological protection measures has been released by the Australian Government.

By Miriam Stiel, Senior Associate

On 1 March 2006, the House of Representatives Standing Committee on Legal and Constitutional Affairs released its report into the Review of Technological Protection Measures Exceptions, following an inquiry that was referred by the Attorney-General in July 2005. The inquiry arose out of the Australia-United States Free Trade Agreement (AUSFTA), which came into force on 1 January 2005.

Background

The AUSFTA requires Australia to implement a liability scheme to prevent the unauthorised circumvention of 'effective technological measures' (referred to in the report as TPMs) that are used to protect copyright material. The Copyright Act 1968 (Cth) already contains prohibitions on certain dealings with 'technological protection measures' that were introduced by the 'Digital Agenda' amendments that came into force in 2001. Under the AUSFTA, Australia is required to extend the current TPM liability scheme to cover devices that control access to protected copyright material.

Australia is required to implement its obligations by 1 January 2007.

The AUSFTA sets out seven specific categories of exceptions to liability where circumvention of TPMs is permitted, such as reverse engineering for the purpose of achieving interoperability, parental control locks and security testing. Australia is also allowed to create exceptions that are identified under an administrative or legislative review as addressing a credibly demonstrated actual or likely adverse effect on non-infringing use, provided that the exceptions comply with certain criteria. The Committee was asked to consider whether any additional exceptions should be included in the liability scheme beyond those specified in the AUSFTA.

The Committee received submissions from 64 parties and held public hearings over four days in Sydney, Melbourne and Canberra.

Recommendations

The Committee made 37 recommendations and concluded that a number of additional exceptions to liability for circumvention of a TPM are warranted. These include specific exceptions for certain activities, such as making back-up copies of computer programs, as well as exceptions that concern certain sectors of society, such as libraries, educational and cultural institutions, and government.

While acknowledging that it was not asked to examine the merits or otherwise of the AUSFTA, nor to consider wider copyright issues, the Committee made a number of general recommendations, including recommending that the balance between copyright owners and users achieved by the Copyright Act be maintained upon implementation of the AUSFTA and that region coding be specifically excluded from the amended definition of TPM to be introduced into the Copyright Act by 1 January 2007. The Committee also considered, and made recommendations dealing with, procedures for accommodating future exceptions to the liability scheme.

The Committee recommended that, if as a result of the Government's current inquiry into 'Fair Use and Other Copyright Exceptions' format-shifting of copyright material becomes a non-infringing act, the Government should investigate the appropriateness of introducing a corresponding TPM exception. The Committee also stated that it would support any moves to render format-shifting of copyright material a non-infringing act.

Legislative reform

The Attorney-General's department is currently considering the amendments to the Copyright Act that are required to comply with Australia's obligations under the AUSFTA. Whether or not the Government adopts any, or all, of the Committee's recommendations, remains to be seen. The Department is also conducting separate reviews into the Digital Agenda amendments (including the anti-circumvention device provisions) and the fair dealing exceptions, which may result in significant changes to the Copyright Act in the coming year.

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Domain Names – New .eu domain name registration open for business

In brief: With the launch of the new top level European domain name '.eu', companies with business in Europe now have an additional choice for their web or email addresses. Following expiry of a sunrise period, registrations for .eu domain names were opened to the general public on 7 April 2006.

By Chris Bird, Partner

In order to provide advance protection against cybersquatters for legitimate trade mark owners, the introduction of the new system was heralded by a four-month 'sunrise' period, during which only those who could invoke a prior right to a particular domain name were able to apply. In particular, the sunrise clause applied to the holders of existing trade marks and unregistered trade marks and trade names. The sunrise period has now expired, and the register is now open to all applicants.

Applications must be submitted through an accredited .eu registrar, and there are a number of geographical eligibility requirements relating to the applicant that must be met for registration to be successful. If you believe this may be relevant to your business and are interested in learning more, please contact us to discuss in detail.

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