The bill repealing (amongst other things) s 51(3) of the Competition and Consumer Act did get passed and has received royal assent.
The repeal takes effect on 13 September 2019.
So, if you thought you were relying on s 51(3)’s protection, you have a bit less than 6 months to get your house in order.
Your licences and assignments of IP rights probably will not get you into trouble for the most part unless you have market power. But that is not exactly a hard and fast rule so you should discuss your arrangements with your lawyers ASAP.
As discussed in this post, one area of potentially significant concern is where the IP holder has its own retail outlets and also licenses other retail outlets – e.g. not uncommon for franchisors who have their own outlets and franchisees. There is a concern that may give rise to criminal cartel conduct.
On Tuesday, the ACCC also announced it hopes to publish draft guidelines by “mid-2019” and finalise them before 13 September. Amongst other things, these proposed guidelines will outline:
how the ACCC proposes to investigate and enforce Part IV in relation to conduct involving intellectual property rights. They will also provide hypothetical examples to illustrate conduct that the ACCC considers is likely or unlikely to contravene Part IV.
Redbubble’s online market place has survived the Hells Angels’ copyright infringement claims, but did infringe their registered trade marks. The reasoning, however, leaves questions hanging over Redbubble’s business model.
Redbubble provides an online market place. Artists can upload their artwork and potential buyers can browse the site to purchase the artwork or merchandise such as t-shirts and coffee cups emblazoned with the artwork. If a purchase is made for, say, a t-shirt with a particular artwork printed on it, Redbubble’s system arranges for the order to be placed with a fulfiller and ultimately shipped in packaging which bears a Redbubble trade mark.
The claims in this case related to uploaded images of a Hell’s Angels membership card featuring a helmeted death’s head in profile:
and registered trade marks featuring versions of the death’s head: Trade Marks Nos 526530,723291, 723463, 1257992 and 1257993.
At 552 paragraphs long, this post is going to be a high level overview only.
A key feature in the case is that Hells Angels Motorcycle Corporation (Australia) Pty Ltd is not the owner of the copyright or the registered trade marks. It contended it was the exclusive licensee in Australia of those rights; the exclusive licences having been granted by Hells Angels Motorcycle Corporation, a US corporation.
The Hells Angels lost the claim of copyright infringement. They did so, however, because they could not prove Hells Angels USA was the owner of the copyright. As a result, Hells Angels Motorcycle Corporation (Australia) Pty Ltd could not be the exclusive licensee.
Reaching this conclusion required Greenwood J to explore, amongst other things, the notion of publication and whether the supply of membership cards was supply of copies of the work to the public. And the non-applicability of the US “work for hire” doctrine in ownership disputes under Australian law.
Redbubble is still in trouble.
First, if the applicants had been able to prove title to the copyright, Redbubble would have infringed.
Contrary to Hells Angels’ arguments, Redbubble was not liable for infringement by uploading the images. That was done by the artists in question. In the examples in question, the acts involved uploading images to websites outside Australia. For example, Example 1 was uploaded by an individual in Virginia in the USA. So the uploaders themselves were not liable as their actions did not involve any act done in Australia. At  – , Greenwood J ruled that, even though the images were made available online to the public in Australia, the artists (uploaders) did not infringe because they did no act in Australia.
…. the act of the artist in uploading the image to the website and thus making the work available online to the public must be an act “done” (that is, an exercise of the exclusive right), “in Australia” and therefore, none of the artists in the examples in suit can be regarded as a “primary infringer” in the territorial sense contemplated by s 36(1) because the relevant act was not done “in Australia”.
His Honour found, however, that Redbubble would be liable for communicating the images to the public in Australia as it was the person who was responsible for determining the content of the communication for the purposes of s 22(6) when a potential customer in Australia viewed the image on the website. Redbubble’s business model was crucial here. At , his Honour explained:
The business model as described by Mr Hosking and its working operation as described by Mr Kovalev makes it plain that Redbubble is not in the nature of an ISP linking a user to remote websites. It is not an intermediary providing a transmission service between particular participants. It owns, operates, manages and controls the website and conducts a transactional enterprise in which it facilitates the uploading of images, the interrogation of those images in Australia, relevantly, by users, with a view to enabling sales to consumers of articles bearing the relevant images. It has a detailed business model in which it derives revenue from each transaction and controls every step of the transactional engagement between an artist and a buyer. It confirms the sale. It facilitates payment. It organises a fulfiller to apply the work to the relevant goods. It facilitates delivery of the goods to the buyer. It generates email responses which not only confirm the order but track every step of the transaction. It affixes its own trade marks to the goods. It says that it does not directly do that but there is no doubt that an essential part of its business model is ensuring that fulfillers affix the Redbubble trade marks to the goods. The labels bearing the trade marks are on the goods as delivered to each buyer. Although I will address the trade mark case shortly, the reference to Redbubble’s trade marks, in this context, is simply to note another feature of the extent of Redbubble’s engagement in and association with each transaction. It is Redbubble’s business. But for the Redbubble website, the transactions would not occur. The artworks would not be available online to consumers in Australia to consider and appraise with a view to purchasing a product bearing the artwork. The entire focus of the business model is to enable works to be made available online so that consumers can pick and choose amongst the works so as to have them applied to goods. It would be difficult to imagine a more directly engaged participant than one deploying the business model adopted by Redbubble. Although Redbubble describes itself as the “agent” of the artist (presumably as principal), the relationship is not, in truth, a relationship of agent and principal. Redbubble acts as an “independent contractor” to “facilitate the transaction” as the Redbubble User Agreement and Appendix A to the Services Agreement makes plain:  and  of these reasons. The artist, in truth, is not the “seller” in the classic sense in which that term might be understood because Redbubble is the supplier as the facilitator of all of the essential elements of the transaction with the consumer in an analogous way to that discussed in: International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company  HCA 16; (1958) 100 CLR 644 at 653; Heidelberg Graphics Equipment Ltd v Andrew Knox & Associates Pty Ltd (1994) ATPR 41326 at 42, 31011, notwithstanding that the nature of the technology is different to the forms of distribution arrangement in those cases.
His Honour would, if necessary, have also found Redbubble liable for authorising the conduct if it had been infringing.
Secondly, Greenwood J found Redbubble liable for infringement of the Hells Angels’ registered trade marks on works such as t-shirt designs featuring the death’s head logo.
The crux of this finding came back to Redbubble’s business model. Greenwood J accepted that the artist who uploaded the image was using the trade mark as a trade mark. Unlike the copyright test, there was no requirement that the artist be in Australia. However, so was Redbubble.
At  – , his Honour explained:
As to Redbubble, that company is “in the business” of facilitating the supply of products bearing the uploaded image of Ms Troen (in this example) or, put another way, Redbubble is in the business of facilitating the supply of clothing bearing, put simply, the registered trade marks of HAMC US (in this example). Redbubble is not the “seller” of artwork. However, it is the supplier, in the sense that it is responsible for all of the transactional supplyside elements of a transaction for the supply of goods bearing the applied works. (emphasis supplied)
Redbubble has created a business model designed to enable users, in Australia (and, for that matter users in all jurisdictions in which the website is accessible), to find images through the website comprised of, in this example, Ms Troen’s image made up of the identified trade marks of HAMC US. Redbubble enables images containing the relevant trade marks to be presented to buyers of particular goods (nominated by the artists from the website categories of those goods to which the work can be applied) expressly for the purpose of facilitating the supply of goods (clothing, in this example) to which the marks are applied. It does so by and through the functions and protocols of the website engaged by Mr Hansen (and other potential viewers of the image), in Australia.
His Honour elaborated on why Redbubble’s conduct attracted liability at  – . While this and two other examples infringed, his Honour found that, on the particular facts, Example 2 was not infringing use.
Greenwood J’s reasons also include an extended consideration of whether Hells Angels Australia was an authorised user; ultimately concluding it was.
Greenwood J, however, rejected Hells Angels’ claims that use of “Hells Angels” as search terms, or key words, within the Redbubble site was infringing. At  explaining:
542. …. However, I am not satisfied that this use, in itself, is use of the word marks as a trade mark, at this point in the functionality of the website. I take that view because I am not satisfied that using the term as a search term to find a relevant image is use of the term as a “badge of origin” of Redbubble. It is, undoubtedly, a use which is designed, quite deliberately, to lead a consumer by the “search nose” to images, marks, devices, livery and badging somehow or other connected with the Hells Angels Motorcycle Club.
544. … use of the word marks … as a search term is a search step along the way to use of the image and thus the registered trade marks, as trade marks but use of the word marks at the point of searching is not, in itself, in my view, use as a trade mark. (original emphasis)
It appears that, at the stage of entering the search term, it is not being used to identify things offered under the aegis of the Hells Angels, but just to locate things about the Hells Angels in some way.
This is the second ruling at first instance where Redbubble has been found to infringe.
While Redbubble’s business model does leave it exposed along the lines indicated above. It is worth noting that Greenwood J awarded only nominal damages of $5,000 in respect of two of the three infringements. His Honour did not allow even nominal damages in respect of the third infringement, Example 4, as it was online for a short period, viewed only 11 times and no sales resulted.
Greenwood J expressly rejected any claim for exemplary damages. His Honour does not go into reasons. Perhaps, Redbubble’s business model did protect it. The evidence was clear, for example, that Redbubble had a policy relating to infringement claims and implemented it promptly.
Will your assignments and licences of intellectual property, such as in a typical franchise agreement, expose your client to liability for cartel conduct or will you be ready to apply for an authorisation?
Section 51(3) exempts from most of the prohibitions in Pt IV of the Competition and Consumer Act terms and conditions in assignments and licences of intellectual property which most of us take for granted.
The rationale for repeal is that most transactions involving IP do not have anti-competitive effects or purposes and, if they do, they should not be exempt from the competition laws.
Rodney De Boos, a consultant at DCC with many years’ experience in licensing and commercialisation of IP, however, points out that this explanation was developed before the provisions banning cartel conduct were introduced into the Act. And, he contends, typical arrangements in IP agreements which allocate, for example, territories or customers will constitute cartel conduct and so need authorisation if the parties are not to be in breach of the cartel provisions.
As Rodney explains, a cartel provision are certain types of specified provisions between competitors.
Now, it may well be that an assignor and assignee, or a licensor and licensee, will not be competitors. There are many types of arrangements, however, where the Competition and Consumer Act will deem them to be competitors. An obvious example is the case of a franchisor who has retail outlets (either itself or through a related body corporate) as well as retail franchisees. Other arrangements involving IP could also be similarly problematical.
You can read Rodney’s concerns in more detail here.
The bill repealing s 51(3) has already passed the House of Representatives and is due to be debated by the Senate in the sittings coming up.
As you were scrolling down, you will notice that the “homepage” also includes some details about the six “roundtables” on specific topics:
quotation and educational uses of copyright
incidental or technical uses of copyright
libraries and archive use
Unfortunately, and despite all the official inquiries to the contrary, all indications are that yet again we shall be going down the path of inflexible exceptions.
Apparently, the next stage contemplated is an information session for interested stakeholders, to provide a general overview of the views and evidence raised in submissions, proposed for early September.
Instead of amending the definition of persons who can (potentially) claim the benefit of the online safe harbours to accord with the definition of service provider required under the Australia – United States Free Trade Agreement, it will extend the class of potential beneficiaries from carriage service providers to what may broadly be described as “the education, cultural and disability sectors”.
To implement this impending development, the Department of Communications and the Arts has released a consultation paper on on draft Copyright Amendment (Service Providers) Regulations 2018 (you have to scroll down to get to the links for (a) the consultation paper itself and (b) the draft regulations).
If you are in one of those sectors or a rights holder with concerns, you need to get your submissions in by 29 June 2018.
See art. 17.11.29(xii): “For the purposes of the function referred to in clause (i)(A), service provider means a provider of transmission, routing, or connections for digital online communications without modification of their content between or among points specified by the user of material of the user’s choosing, and for the purposes of the functions referred to in clause (i)(B) through (D), service provider means a provider or operator of facilities for online services or network access.” ?
You may recall that, amongst other things, the Bill has another go at parallel imports and trade marks (which also entails repealing s 198A of the Copyright Act 1968), reduces the period before registered trade marks can be attacked for non-use, permits non-PBR-protected varieties to be declared as essentially derived varieties and a host of other reforms (Sch. 2 has 21 Parts)
The Senate committee is required to report on the bill by 22 June 2018.
If you are an agricultural organisation, medical research industry, an IP peak body (who is not going to INTA) or somehow at a loose end, you need to get your skates on as submissions must be made by 1 June 2018.
Nicholas J has granted further injunctions under s 115A against the telcos / ISPs to block access to websites related to HD Subs+.
The interesting point about these injunctions is that the blocked websites provide software to be downloaded for X–96 Smart TV Boxes, set-top boxes which provide a subscription service to access pirated streams of films and television programs.
Once the user had downloaded the software and activated a subscription, the software would connect to “facilitating servers” which authenticated the user, provided electronic programming information, software updates and content management information – allowing retrieval of the IP addresses of the “content servers” that hosted the movie or TV program to be streamed.
Thus, the primary purpose of the HD Subs service was to “facilitate” copyright infringement. At , Nicholas J explained:
The target online locations contribute functionality to a subscription based online service (“the HD Subs service”) that facilitates the electronic transmission of films and television broadcasts in which copyright subsists, without the licence of the copyright owners. The target online locations facilitate such infringements by providing updates, authenticating users or providing EPG information for the HD Subs service. This appears to be their sole function. In the case of the HD Subs website, it provides the HD Subs+ Apps, processes payments, and provides activation codes that enable a user to access the HD Subs service. Again, this would appear to be its sole function.
The terms of the injunctions correspond with the decisions already handed down – so much so that the ISPs didn’t turn up.
The Commonwealth government is participating in negotiations for a new Convention on the recognition and enforcement of foreign judgments. Now it is seeking public input on a range of outstanding issues.
One of the general issues on which input is sought is the extent to which and the nature of problems experienced in trying to enforce a judgment in a foreign country.
Intellectual property issues are high on the list of matters being debated. Chapter 5 of the consultation paper is directed to intellectual property rights’ issues.
The issues include whether or not intellectual property rights should even be included in the judgments covered by the Convention. So draft article 2(m) proposes to exclude judgments about intellectual property rights from the Convention altogether; alternatively, articles 5 and 6 proceed on the basis that intellectual property rights are included. Which approach should it be?
If included, the basic idea is that a judgment on subsistence, ownership or infringement of an intellectual property right made by a Court in the country which granted the right could be enforceable under the proposed Convention to the extent that the judgment dealt with the subsistence, ownership and infringement of the right in that country.
It is proposed to treat judgments about the subsistence, ownership and infringement of registered rights granted by the country where the judgment is made as falling exclusively under the Convention. Judgments about unregistered rights, such as copyright and unregistered designs, would not be exclusive.
According to the consultation paper, one consequence of this arrangement would be that judgments involving “multi-state IP infringements” of registered rights will be enforceable under the Convention only to the extent that the judgment relates to infringements in the country/jurisdiction issuing the judgment.
No doubt for sound philosophical rationalising, trade secrets do not count as intellectual property rights under the draft Convention. Practically speaking from a business’ perspective, however, one might wonder why confidential information should be treated differently to unregistered “rights”.
Another area of issues raised in the consultation paper is the extent to which awards of damages, especially additional or exemplary or otherwise punitive damages, should be capable of enforcement under the Convention.
As the next (and possibly final) meeting of the commission preparing the draft for a Treaty conference is on 24 – 29 May 2018, the deadline for submissions is COB 27 April 2018.
The three main issues on which consultations are being undertaken are:
contracting out of exceptions; and
access to orphan works.
The consultation paper arises from the Government’s response to the Productivity Commission’s final report into Intellectual Property Arrangements indicating that these matters required further consideration.
Following the Productivity Commission’s report, the consultation paper sets out an interesting framework for considering how to approach these matters. According to the consultation paper, the proposals “recognise copyright’s role as part of a wider intellectual property system that is:
effective—The system should be effective in encouraging additional ideas and in providing incentives that ensure knowledge is disseminated through the economy and community.
efficient—The system should provide incentives for IP to be created at the lowest cost to society.
adaptable—The system should adapt to changes in economic conditions, technology, markets and costs of innovating.
accountable—The policies and institutions that govern the system, and the way that changes are made to them, need to be evidence-based, transparent, and reflect community values.” 
To what extent do you support introducing:
• additional fair dealing exceptions? What additional purposes should be introduced and what factors should be considered in determining fairness?
• a ‘fair use’ exception? What illustrative purposes should be included and what factors should be considered in determining fairness?
What related changes, if any, to other copyright exceptions do you feel are necessary? For example, consider changes to:
• section 200AB
• specific exceptions relating to galleries, libraries, archives and museums.
Contracting out of exceptions
Which current and proposed copyright exceptions should be protected against contracting out?
To what extent do you support amending the Copyright Act to make unenforceable contracting out of:
• only prescribed purpose copyright exceptions?
• all copyright exceptions?
Access to orphan works
To what extent do you support each option and why?
• statutory exception
• limitation of remedies
• a combination of the above.
In terms of limitation of remedies for the use of orphan works, what do you consider is the best way to limit liability? Suggested options include:
• restricting liability to a right to injunctive relief and reasonable compensation in lieu of damages (such as for non-commercial uses)
• capping liability to a standard commercial licence fee
• allowing for an account of profits for commercial use.
Do you support a separate approach for collecting and cultural institutions, including a direct exception or other mechanism to legalise the non-commercial use of orphaned material by this sector?
In a final section of the consultation paper, a number of “ongoing concerns raised by federal cultural and collecting institutions” are identified for consultation. Apparently, these “arts portfolio agencies” are concerned that copyright is being used to inhibit their ability to “provide broad-based access to their collections”. The consultation paper explains:
This includes concerns over exceptions being tied to an institution’s physical location, and thus preventing offsite supply of material. At other times, exceptions permit digitisation of content but not providing digitised content to users. Some arts portfolio agencies expend a disproportionate effort on copyright due diligence, especially when identifying and locating authors of works. This can discourage institutions from digitising, promoting or providing access to their collections. As a result, copyright law may inhibit them from adopting modern cultural institution practices and engaging with Australians online. The Department notes that, at least in some cases, better online access would involve non-commercial use or the use of copyright material with low commercial significance.
Accordingly, the consultation paper questions whether the Copyright Act 1968 should be amended by:
adding a fair dealing exception for libraries and archives, which may provide scope for ‘off-site access’ to be provided to those wishing to use and access certain digitised collections;
expanding the scope of the current fair dealing exception for ‘research or study’ to include situations where a person has a family connection to the work;
refining the current s 200AB flexible exception for libraries and archives, including by removing existing restrictions on the provision only applying to ‘special cases’ and where another provision of the Copyright Act could not otherwise be relied on;
broadening the range of libraries to which document supply provisions can apply to libraries outside Australia—this would accommodate the prevalence of overseas Australians seeking access to library material.
Submissions should be provided to the Department of Communications and the Arts by 5pm on 4 June 2018.
These include the National Library of Australia, the National Film and Sound Archive, the National Gallery of Australia, the National Portrait Gallery, the Australian National Maritime Museum, the Museum of Australian Democracy and the Bundanon Trust. The consultation paper does point out, in addition, that there are many state and territory institutions of similar nature which may well have similar concerns. ?