IPwars.com

Mainly intellectual property (IP) issues Down Under

Productivity Commission reports on IP (in draft)

The Productivity Commission has released its draft report into Intellectual Property Arrangements.

You will be startled to learn that the Productivity Commission has discovered Australia is a net importer of intellectual property. We buy more IP from the rest of the world than we sell to it. Fig. 2 in the Report indicates Australian IP earned AUD1 villion from overseas, but we paid out about AUS4.5 billion for the use of their IP. The Productivity Commission then notes that we provide surprisingly strong IP protection for a country in our position.[1] This finding guides the Productivity Commission’s recommendations which might broadly be characterised as: take the least restrictive option in terms of IP protection (where our international obligations permit).

The Productivity Commission explained its position this way:

Intellectual property (IP) arrangements need to balance the interests of rights holders with users. IP arrangements should:[2]

• encourage investment in IP that would not otherwise occur;

• provide the minimum incentives necessary to encourage that investment;

• resist impeding follow-on innovation, competition and access to goods and services. (emphasis supplied)

So, for example, after much gnashing of economists’ teeth about the (let’s face it, indefensible) term of copyright protection, the Productivity Commission considers that the appropriate term of protection is somewhere between 15 and 25 years.[3] However, what it actually recommends is rather more limited:

4.1: remove the current unlimited term of protection for published works.[4]

5.1: implement Parliament’s At What Cost? IT pricing and the Australia Tax recommendation to make it clear that it is not an infringement of copyright to circumvent geoblocking.

5.2 repeal the remaining parallel import restrictions for books.

5.3 amend the Copyright Act 1968 to replace the current fair dealing exceptions with a broad exception for fair use.

The latter two, so far, have elicited the loudest complaints here and here.[13] Meanwhile, the US’ Register of Copyrights is celebrating the first anniversary of her Fair Use Index.

18.1 expand the safe harbours to online service providers.[5]

Patents

The Productivity Commission reports that there are 120,000 active patents registered in Australia. 93% of these have been granted to non-residents. There are also 25,000 – 30,000 applications each year; of which about 60% ultimately proceed to grant.

According to the Productivity Commission, however, there are too many granted patents which do not contribute social value and are not “additional” – in the sense that they would not have been made if there was no patent protection.[6]

This needs to be remedied. However, the Productivity Commission acknowledges that international agreements put constraints on our freedom of action. There are 10 recommendations for patents.

The key recommendation for standard patents is yet another go at raising the threshold of inventive step.

an invention is taken to involve an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the relevant art.

This looks very similar to what we already have. As the Productivity Commission envisages matters, however, there are important differences. First, it reverses the onus currently expressed in s 7(2). According to the Productivity Commission, the current position is the opposite of where the onus lies in the USA, Japan, the EU and the UK (amongst others). Rather than a challenger having to prove the invention is obvious, therefore, the patentee will have to prove it is not.

Secondly, the Productivity Commission sees the current requirement that there be only a scintilla of invention being raised. The Productivity Commission sees this low threshold being reflected in the limitation on “obvious to try” being something which the skilled addressee would be directly led as a matter of course. Instead, the Productivity Commission considers that the test should be at least:

whether a course of action required to arrive at the invention or solution to the problem would have been obvious for a person skilled in the art to try with a reasonable expectation of success (as applied by the Boards of Appeal of the EPO).[7]

This change would be buttressed with appropriate comments in the Explanatory Memorandum and, additionally, the insertion of an objects clause into the Act. The latter would be intended to ensure that the Courts focused on the social objectives of the Patents Act including, in particular, the public interest.[8]

On the more colourful fronts, the Productivity Commission also recommended repeal of the abomination innovation patent and amendment of s 18 explicitly to exclude from patentable subject matter business methods and software.[9]

Pointing to analysis which estimates the net present value to R & D of the extension of term for a pharmaceutical patentat at year 10 at $370 million – of which only $7.5 million would accrue to Australia because our industry is so small – while the cost to the Australian government and consumers of the same extension of term is estimated at $1.4 billion, the Productivity Commission also wants a significant tightening up of the regime for extending the term of pharmaceutical patents. The Productivity Commission also opposes any extension of the period of data protection for therapeutic goods, including biologics.[10]

The Productivity Commission also recommends exploring raising the renewal fees payable, particularly in later year’s of a patent’s life.

Registered designs

The Productivity Commission considers the registered design system deficient but, as we have committed to it internationally and there is no better alternative, we are stuck with it.

However, continuing the net importer theme, Australia should not go into the Hague system “until an evidence-based case is made, informed by a cost–benefit analysis.”

Trade marks

I’m just going to cut and paste here: the Government should:

  • restore the power for the trade mark registrar to apply mandatory disclaimers to trade mark applications, consistent with the recommendation of the Advisory Council on Intellectual Property in 2004 (the only people that won’t support this are in the place that counts – IP Australia)
  • repeal part 17 of the Trade Marks Act 1995 (Cth) (Trade Marks Act)
  • amend s. 43 of the Trade Marks Act so that the presumption of registrability does not apply to the registration of marks that could be misleading or confusing
  • amend the schedule of fees for trade mark registrations so that higher fees apply for marks that register in multiple classes and/or entire classes of goods and services.
  • require the Trade Marks Office to return to its previous practice of routinely challenging trade mark applications that contain contemporary geographical references (under s. 43 of the Trade Marks Act). Challenges would not extend where endorsements require goods and services to be produced in the area nominated
  • in conjunction with the Australian Securities and Investments Commission, link the Australian Trade Mark On-line Search System database with the business registration portal, including to ensure a warning if a registration may infringe an existing trade mark, and to allow for searches of disclaimers and endorsements.

Also, s 123 should be fixed up so that parallel importing does not infringe.

Like the rest of us, the Productivity Commission is bemused by the Circuits Layout Act and recommends implementing “without delay” ACIP’s 2010 recommendation to enable “essentially derived variety declarations to be made in respect of any [plant] variety.”

On competition policy, s 51(3) should be repealed and the ACCC should develop guidelines on the application of our antitrust rules to IP.

Innovatively, the Productivity Commission also recommends free access to all publications funded directly by Government (Commonwealth, State or Terriroty) or through university funding.

There are also at least 17 requests for further information.

If you are inspired to make a further submission, you should get it in before 3 June 2016.[11]


  1. Not much discussion here whether the best way to get more technological development is through a strong IP regime or to,scrap the IP system and fully commit to free riding.  ?
  2. Despite the tentative nature of this declaration, it is the first “Main key points”.  ?
  3. Draft finding 4.2.  ?
  4. The Government is trying to do this – see schedule 3 of the exposure draft of the Copyright Amendment (Disability Access and Other Measures) Bill (pdf).  ?
  5. See schedule 2 of the Disability Access and Other Measures bill.  ?
  6. You will have to read Appendix D to find out how the Productivity Commission works out which patents are socially valuable and “additional”.  ?
  7. The EPO cases the Productivity Commission referred to are T 149/93 (Retinoids/Kligman) (1995) at 5.2 and T 1877/08 (Refrigerants/EI du Pont) (2010) at 3.8.3.  ?
  8. Here, the Productivity Commission notes that the Full Federal Court rejected reference to the public interest in Grant.  ?
  9. Dr Summerfield tells you why he thinks that’s a bad idea over here and of course, the Europeans (including the UK in that) do not have all sorts of complications carrying out their nice, clean exclusion.  ?
  10. In an interesting departure from its overarching premise that patents do not really contribute much to innovation because there are other protections such as lead time and trade secrets, the Productivity Commission warns that reliance on data secrecy is sub-optimal compared to patent protection.  ?
  11. Bearing in mind they have to submit their Final Report to Government by 18 August 2016.  ?
  12. In between buying your books from Amazon and Bookdepository, some references to the larger economic issues affecting booksellers here.  ?

Productivity Commission reviews IP

The Productivity Commission has released an issues paper for its inquiry into Intellectual Property Arrangements.

What it was asked to do

In his reference the then Treasurer directed the Productivity Commission to investigate:

The Australian Government wishes to ensure that the intellectual property system provides appropriate incentives for innovation, investment and the production of creative works while ensuring it does not unreasonably impede further innovation, competition, investment and access to goods and services. In undertaking the inquiry the Commission should:
1. examine the effect of the scope and duration of protection afforded by Australia’s intellectual property system on:
(a) research and innovation, including freedom to build on existing innovation;
(b) access to and cost of goods and services; and
(c) competition, trade and investment.
2. recommend changes to the current system that would improve the overall wellbeing of Australian society, which take account of Australia’s international trade obligations, including changes that would:
(a) encourage creativity, investment and new innovation by individuals, businesses and through collaboration while not unduly restricting access to technologies and creative works;
(b) allow access to an increased range of quality and value goods and services;
(c) provide greater certainty to individuals and businesses as to whether they are likely to infringe the intellectual property rights of others; and
(d) reduce the compliance and administrative costs associated with intellectual property rules.

Big job!

As a consequence, there are a “gazillion” questions set out in the Issues Paper. Here’s just a few:

Do IP rights encourage genuinely innovative and creative output that would not have otherwise occurred? If not, how could they be designed to do so? Do IP rights avoid rewarding innovation that would have occurred anyway? What evidence and criteria should be used to determine this? Are IP arrangements in other jurisdictions more effective in generating additional creative output?

To what extent does the IP system actively disseminate innovation and creative output? Does it do so sufficiently and what evidence is there of this? How could the diffusion ofknowledge-based assets be improved, without adversely impacting the incentive to create?

What, if any, evidence is there that parties are acting strategically to limit dissemination?

Do IP rights provide rewards that are proportional to the effort to generate IP? What evidence is there to show this? How should effort be measured? Is proportionality a desirable feature of an IP system? Are there particular elements of the current IP system that give rise to any disproportionality?

What are the relative costs and return to society for public, private and not-for-profit creators of IP? Does the public provision of IP act as a complement or substitute to other IP being generated? Are there any government programs or policies that prevent, raise or lower the costs of generating IP?

What are the merits and drawbacks of using other methods to secure a return on innovation (such as trade secrets/confidentiality agreements) relative to government afforded IP rights? What considerations do businesses/creators of IP make in order to select between options? How does Australia’s use of methods besides IP rights to protect IP compare to other jurisdictions? Why might such differences arise?

The Commission seeks submissions about how the parameters of the IP system came to be set, and on the basis of what evidence and analysis.

How were decisions to extend IP rights in the past (e.g. copyright) assessed? Is an evidence-based approach systematically used to assess changes to the IP system? How transparent have decisions to change the IP system been, including when it comes to legislation and international agreements? Is a stronger evidence base and greater transparency in the public interest, and if so, how should this be accomplished?

Don’t worry. Things get more specific from here. Some of the questions about patents will give you the flavour:

What evidence is there that patents have facilitated innovations that would not have otherwise occurred, or have imposed costs on the community, including by impeding follow-on innovation?

Are there aspects of Australia’s patent system that act as a barrier to innovation and growth? If so, how could these barriers be addressed?

Do patents provide rewards that are proportional to the effort to generate IP? What evidence is there to show this? How should effort be measured? How does the balance of costs and benefits from patent protection compare across sectors and innovations?

What scope is there to better leverage the economic benefits of patents, by taking steps to improve the diffusion of patent information?

Is the patent system sufficiently flexible to accommodate changes in technology and business practices?

Do the criteria for patentability in the Patents Act 1990 (Cwlth) help the patent system to meet its objectives? Would introducing economic criteria for patentability and/or gradually reducing the duration of patent protection substantially improve the efficiency and effectiveness of the patent system?
….

There are numerouse questions in similar vein for the other IP rights and “data”.

Don’t get me wrong. These are all facinating questions. You, or professors and teams of doctoral candidates, could spend lifetimes trying to answer them.[1]

But here’s a thing. Are we really going to withdraw from the World Trade Organisation (with its obligations under the TRIPS Agreement)? Are we really going to pull out of the Australia – USA Free Trade Agreement? Or, given what the Prime Minister is reported to have said, does anyone seriously think we are not going to implement the TPP?

Hmmm. Maybe, at least as far as patents go, we could tell them that [28] of the majority’s ruling in Myriad has solved all the problems.[2] On the other hand, may be you are thinking this might be a good place to try and “fix” Myriad. In that case, you might like to read “Box 3 Beyond the theory” right up the front of the Issues Paper:

While discussions about IP rights are often theoretical, policy decisions about the balance between creators and consumers matter in real ways. Striking the wrong balance can impact the price and availability of books, music, cars, phones or even clothes.

The balance is particularly contentious in pharmaceuticals. Cases exist where patents have allowed pharmaceutical companies to charge what some consider to be unconscionably high prices for life-saving medicines. New compounds and biologic drugs, and their safety and efficacy, are no doubt expensive to develop and test and consumers are often willing to pay almost anything to access them (or the community as a whole through pharmaceutical subsidy schemes). Practices such as patent ‘evergreening’, seeking extended test data exclusivity for biologics, or paying competing firms not to produce generic medicines makes the balance of IP rights all the more contentious. (my emphasis)

Yes, once it has been “discovered”, the price of a new drug or treatment will be higher than if there was no patent. That is the point of the patent (or any other IP right): to allow the holder the opportunity to charge higher than marginal cost. How do you work out whether the price for that expensive drug is “unconscionably high”?


  1. As it happens, you have until 30 November 2015 to get your thoughts in.  ?
  2. Apart of course from those “innovation” patents.  ?

Productivity Commission to review all IP laws

The Harper Review[1] recommended that the Government should direct the Productivity Commission to undertake an overarching review Australia’s IP laws.

The Treasurer and the Minister for Small Business have now announced that review.

According to the Harper Review:

an appropriate balance must be struck between encouraging widespread adoption of new productivity-enhancing techniques, processes and systems on the one hand, and fostering ideas and innovation on the other. Excessive IP protection can not only discourage adoption of new technologies but also stifle innovation.

Given the influence of Australia’s IP rights on facilitating (or inhibiting) innovation, competition and trade, the Panel believes the IP system should be designed to operate in the best interests of Australians.

The Panel therefore considers that Australia’s IP rights regime is a priority area for review. (emphasis supplied)

In reaching that view, the Harper Review flagged concern about entering into new treaties with extended IP protections.

The terms of reference state:

In undertaking the inquiry the Commission should:

  1. examine the effect of the scope and duration of protection afforded by Australia’s intellectual property system on:

    a. research and innovation, including freedom to build on existing innovation;

    b. access to and cost of goods and services; and competition, trade and investment.

  2. recommend changes to the current system that would improve the overall wellbeing of Australian society, which take account of Australia’s international trade obligations, including changes that would:

    a. encourage creativity, investment and new innovation by individuals, businesses and through collaboration while not unduly restricting access to technologies and creative works;

    b. allow access to an increased range of quality and value goods and services;

    c. provide greater certainty to individuals and businesses as to whether they are likely to infringe the intellectual property rights of others; and

    d. reduce the compliance and administrative costs associated with intellectual property rules.

Then follows a catalogue of 9 matters for the Commission to have regard to. These include the Government’s desire to retain appropriate incentives for innovation, the economy-wide and distributional consequences of recommendation and the Harper Review’s recommendations in relation to parallel imports.[2]

The Commission must report within 12 months.


  1. The Competition Policy Review, recommendation 6.  ?
  2. Rec. 13 and section 10.6 of the Competition Policy Review: i.e., repeal any remaining restrictions unless the benefits outweigh the costs and the objectives of the restrictions can only be achieved by restricting competition. Cue diatribe about “restricting competition” especially given the oft mouthed formula that IP rights rarely (if ever) restrict competition.  ?

ACIP Final Designs Report

ACIP’s final report into its review of the Designs System has been published.

The report is 70 pages (including annexes) – 43 pages for the report itself; and 23 recommendations. Key recommendations include:

  • investigate joining the Hague system and, if a decision is made to join, extend the maximum term of design protection to 15 years;
  • introduce a grace period of 6 months before the filing date, but require an applicant relying on it to file a declaration to that effect;
  • rename a registered design that has not been certified as an “uncertified design”;
  • require a registered design owner to request examination by the first renewal deadline (i.e. 5 years);
  • introduce a system of opposition following certification;
  • improve the process for multiple designs by reducing fees in line with the ALRC’s original proposal;
  • allow fiddling with the statement of newness and distinctiveness until certification;
  • fix up a range of anomalies;
  • specifically include the role of the designs system in any broader review of Australia’s IP framework such as that contemplated by the Competition Policy Review;
  • not introducing an unregistered design right.

Australian Intellectual Property Report 2015

IP Australia has released its Australian Intellectual Property Report 2015.

In addition to reporting on a range of statistics and some commentary, the report includes a number of “interactive” graphs that you may explore. Much, if not all, of the data is available through the Government Open Data initiative.

The headline point is that applications for trade marks and plant breeder’s rights increased over 2013, while applications for patents and registered designs decreased. The report attributes the decline in patent applications to the increased threshold arising from the commencement of most of the substantive reforms in the Raising the Bar and the rush to file before their commencement.

Australians are the largest source of filings for trade mark, registered designs and pbr. US-based applicants the largest source of patent applications; Australian residents being the second largest.

There were 25,947 applications for standard patents in 2014, a decrease of 13% on 2013. 19,034 standard patents were granted; an increase of 13% over 2013. Over 94% were granted to non-residents. The average number of months from filing to request for examination fell from 16.3 to 13.6 months; the average time from request to first report is just over 9 month and, on average, the time from first examination report to acceptance was a further 14 months. Australians filed 9,012 patent applications abroad in 2013 (41% in the USA), up 3% on 2012.

There were 1523 applications for innovation patents, down from 1676 in 2013. Australians accounted for 66% of the filings.

There were 64,381 trade mark applications filed in Australia in 2014, up 2% from 2013; correspondingly, Australians filed 16,267 applications overseas (in 2013). The top 3 filing destinations were the USA, China and NZ – accounting for 50%. The USA supplanted China as the “top destination”. Apparently, this is in line with a global trend.

6550 designs were registered in 2014, and 1452 were certified – almost double the number certified in 2013. IP Australia speculates that there are few applications to register designs because:

According to Lim et al (2014) the role of IP rights in the market for designs is limited.9 Buyers and sellers in the market view designs as a service that is co-created. As IP rights protect the artefact, not the service, IP rights are perceived as a secondary issue in the marketplace. This view of design rights provides insights into the low volume of design registrations relative to patents and trade marks.

The number of applications for plant breeder’s rights skyrocketed from 330 in 2013 to 341!

The report notes that IP Australia is aiming in 2015 to complete research projects into innovation trends in the mining industry, who and in which areas in the textile, clothing and footwear industry is filing patents and the role of geographical indicators.

IP Australia consults on red tape streamlining and costing

IP Australia has issued to discussion papers:

  • Proposals to streamline IP processes and support small business; and
  • Proposals to streamline IP processes and support small business – Regulatory costs,

apparently following Parliamentary Secretary Karen Andrews’ announcement.

According to IP Australia’s website, the “streamlining” paper:

The … Consultation Paper outlines 22 proposals to align and simplify our IP processes, support small business and make some technical fixes relating to the regulation of IP attorneys.

The first 10 proposals apply across the board (as it were) to patents, trade marks, designs and PBR and relate to matters such as aligning renewals re-examination/revocation, extensions of time, writing and filing requirements.

There are 3 further proposals affecting patents: third party requests for examination, colour drawings and extensions of term – notices to the department of health.

The 14th proposal relates to the acceptance timeframe for trade mark applications.

15 and 16 affect the registration of designs and multiple copies of representations.

There are 6 proposals “supporting small business” including unjustified threats of infringement and trade marks and shelf companies.

And 2 “technical fixes” relating to publishing the personal information of “IP attorneys” and prosecuting “IP attorney” offences.

There are some 84 pages in the paper. So this post is not going to do the paper anything approximating “justice”.

One proposal is to reduce the acceptance period for trade marks from 15 months to 6 months. There are also substantial changes proposed for the regimes relating to extensions of time:

 – Align PBR extensions with those for patents and for a wider range of actions

 – Specify the grounds for the ‘special circumstances’ extension in the trade marks legislation and align circumstances beyond control across the rights

 – Allow extensions of time for renewal grace periods but not renewal dates, for all IP rights

– Make the ‘despite due care’ extension available for all IP rights and have no limit on the period of the extension

– For all rights, limit the ‘error or omission by applicant/owner’ extension to 12 months

 – Streamlined process for short extensions of time

– Simplify and align fees

– Make all extensions of time non-discretionary.

Certificates: you know, things like Certificates of Registration:

The IP legislation would be amended so that certificates would not be required to be issued for examination, registration and grant. Also, the patents and trade marks Acts would be amended to no longer provide that a certificate signed by the Commissioner or Registrar is prima facie evidence of a matter. Instead, the Acts would provide that any document approved by the Commissioner or Registrar (or similar wording) would constitute prima facie evidence of a matter. This would enable IP Australia to continue to provide documents for such purposes, without requiring them to be signed certificates. Signed copies or extracts of the Registers would continue to be admissible in proceedings as if they were the original Register, and therefore prima facie evidence of the particulars on them.

Unjustified threats: this would see removal of the defence under s 129(5) of the Trade Marks Act of bringing infringement proceedings reasonably timely (which is not currently a defence for patent or designs threats), providing the remedy for PBR and introducing a power to award additional damages in respect of blatant and unjustified threats against another party.

Trade marks and shelf companies: this proposal would see amendment of s 27 so that it would not be necessary to incorporate the company that is intended to use the trade mark, but purchase of a shelf company would suffice.

The renewals proposal would see a grace period of 6 months introduced for renewing PBR and provision that all IPR could be infringed during the grace period if subsequently renewed.

In coming up with those proposals, IP Australia has used a costing framework and developed detailed costings which are set out in the “costings” paper. We are being invited to comment on those too.

If you are feeling excited, you should get your submissions in to IP Australia by 7 April 2015.

Proposals to streamline IP processes and support small business (pdf)

Proposals to streamline IP processes and support small business – Regulatory costs (pdf)

ACIP – Designs Options Paper

The Advisory Council on Intellectual Property (ACIP) has released an options paper for arising from its Review of the (Registered) Designs System.

The Options Paper identifies 3 potential routes for further development of designs law in Australia.

Option 1 would involve addressing a few specific issues in how the 2003 Act works without revisiting the policy settings. This could involve:

  • making the identity of Convention applicants consistent with the rules on entitlement;
  • expanding the rules on priority claiming so that differing formal requirements between jurisdictions do not disadvantage Convention applicants;
  • bringing the rules on entitlement into line with the Patents Act;
  • expanding the prior art base so that it is not just limited to the product the subject of the application;
  • expanding the situations where fraud, false suggestion or misrepresentation can be invoked for revocation purposes;
  • allowing exclusive licensees to sue for infringement;
  • making it clearer that a registered, but uncertified, design does not confer enforceable rights until certification;
  • removing the option to publish a design instead of registering it;
  • reducing the fees for multiple designs included in a single application; and
  • addressing anomalies that have arisen in the copyright-design overlap, especially in relation to 2D and 3D ‘embodiments’.

Option 2 would include the changes identified under Option 1, but going further to bring Australian law more into line with “major trading partners and international treaties”. That could involve amending the Act to allow accession to the Hague Agreement. Changes could involve:

  • extending the term of protection from 10 years to 15 including introducing a require to obtain certification on renewal after the first 5 years and a system of opposition following certification
  • introducing a grace period of 6 months
  • deferring publication to registration
  • introducing customs seizure provisions

Option 3 is summarised in the Executive Summary as:

a wholesale revision of the role of the designs system in Australia’s IP law, including consideration, in particular, of the need for unregistered design protection, and the scope of design protection (including the scope of secondary liability) in the context of technological developments such as 3D scanning and printing. This would also involve consideration of whether protection should be extended to partial designs and whether virtual or non-physical designs (such as screen displays and icons) should themselves be treated as products.

ACIP appears to consider Option 3 would be appropriate if the policies reflected in the 2003 Act no longer make sense or have been superseded. Examples where this might be the case include unregistered design right, full copyright proection regardless of industrial application or broader rights such as allowing registration for parts of products, such as handles, rather than for products as a whole.

The impending availability of 3D-printing, or at least its more widespread take up, is raised as a potential basis for pursuing option 2 or option 3.

ACIP does note that going down the path of Option 3 (at least) would involve costs as well as benefits and concludes:

ACIP does not presently have evidence sufficient to suggest that wholesale change would be in the national interest. ACIP envisages that Option 3 would involve consideration, not only of the designs system per se, but how it interacts with other systems: most obviously the copyright system, but also standard and innovation patents and other systems such as protection for confidential information. Ideally, such a review would also involve gathering more detailed evidence on Australia’s industrial and economic strengths, and developing strategies for industry development in the field of design, as well as more information on the operation of systems, such as those in operation in some European countries, which do not exclude industrial design from the copyright system. Such a review ought to be undertaken by specialist intellectual property economic, business and legal analysts.

In formulating these proposals, ACIP has taken into account responses to a survey it conducted as well as submissions.

ACIP would like to receive your submissions on these submissions on their return from the Christmas/Summer holidays: i.e. 23 January 2015.

ACIP – Review of Designs System Options Paper (pdf)

Fraudulent imitation

The Full Court has dismissed both Bluescope’s appeal and Gram’s cross-appeal from the ruling that Bluescope infringed Gram’s registered design for the Smartascreen fencing panel.

This is an “old Act” case.[1] At first instance, Jacobson J held that Bluescope’s product was an obvious imitation of Gram’s registered design. However, his Honour rejected the allegation that it was also a fraudulent imitation.

Bluescope (then Lysaghts, part of BHP) had long been the market leader for fencing made from metal sheeting. There was a problem, however: one side of the fence was less desirable because the posts and rails supporting the cladding were visible. Gram came up with its Gramline solution which was symmetrical, looking the same from both sides. It quickly usurped Bluescope’s position as the market leader. Bluescope then spent (roughly) 6 years trying to come up with a competing design. In the course of doing so, it rejected a number of alternatives in favour of one that so closely resembled Gram’s product that the two could be stacked one on top of the other.

AU 121344
AU 121344
Smartascreen
Smartascreen

Construction of the design

Besanko and Middleton JJ endorsed the trial judge’s principles for construing the design, summarising them at [28]:

(a) a design is the mental picture of a shape, configuration, pattern or ornamentation of the article to which it is to be applied;

(b) construction is a question of fact for the Court to determine by the eye alone;

(c) expert evidence may be led to assist the Court;

(d) the Court is to apply an ‘instructed eye’ to the design – that is the Court must be made aware of the characteristics of the article to which the design is applied, and the manner in which such articles would normally be found in trade, commerce and in use; and

(e) however, considerations of utility have no relevance to the proper construction of a design.

In applying those principles, the trial judge found

“the primary feature was the sawtooth pattern consisting of six identical repeating pans, oriented vertically. The sawtooth pattern was the product of the unique proportions of the wavelength, amplitude and angles of each sawtooth module”.

It was this combination of features, which contributed to the symmetricality of the product, that ultimately conferred the design with novelty[2] and which were taken by Bluescope, leading to the finding of obvious imitation.[3] Three points of note on these parts of the case.

First, at [51] Besanko and Middleton JJ rejected Bluescope’s challenge to the trial judge’s reliance on Gram’s design being viewed vertically as an in-fill sheet between posts so that the saw-tooth ran top to bottom:

While considerations of utility are not relevant, designs cannot be construed without context. It is often the case that features of the article to which the design applies, will serve both visual and functional purposes. Where this is the case, the implication of BlueScope’s submission is that the feature’s appearance and utility must be divorced. However, a design without context is a meaningless drawing. As Lockhart J observed in Dart Industries 15 IPR 403 at 408, the design is ‘the mental picture of the shape, configuration, pattern, or ornament of the article to which it has been applied’ (emphasis added). It is inescapable that the Design is for sheet metal fencing and the construction of the Design must reflect this.[4]

That is, because the design was for a sheet metal fencing panel which “worked” in one way, it should be interpreted in the way (presumably) those who would use it for that would understand it.

Secondly, the trial judge had not impermissibly referred to the fact that the Bluescope product could be “nested” with the Gram product (embodying the design). But, it was not the fact of “nestability” as such that was important. Rather, it was relevant because it was helpful in forming a view about the similarity of the sawtooth profile. Besanko and Middleton JJ explained at [89]:

the nesting qualities are instructive. As has been discussed at length, the combination of amplitudes, wavelengths and angles create the sawtooth profile. For the GramLine and Smartascreen sheets to nest, albeit imperfectly, they must by logical extension, have similar amplitudes, wavelengths and angles. This is clearly helpful in deciding if Smartascreen is an obvious imitation of GramLine, and it was entirely open for the primary judge to be assisted by the nesting properties of the two articles. It is further relevant because as noted above, an obvious imitation is not one which is the same as the design, but one that is an imitation apparent to the eye notwithstanding slight differences.

Care definitely needs to be taken with this as the physical embodiment of the registered design is not always the same as the design and the comparison must be between the accused product and the registered design. It is important to note, therefore, that the Full Court treated this as confirming or reinforcing the view based on comparison of the appearance of the infringing article to the registered design.

Thirdly, the Full Court considered the trial judge had impermissibly taken into account Bluescope’s commercial objectives – to introduce a product to compete with the Gramline product – in deciding whether or not the Smartascreen was an obvious imitation. With respect that must be right as the test of obvious imitation is an objective test based on visual resemblance. Yates J, however, was prepared to accept at [198] to [201] evidence such as that Bluescope was attracted to the design because “it had a similar appearance to the GramLine sawtooth profile and would gain ready market acceptance” as a kind of expert evidence about the similarity of Bluescope’s product to Gram’s design.

Fraudulent imitation

In Polyaire, the High Court rejected the interpretation of fraudulent imitation which had required the alleged infringer to have attempted to disguise its copying. Instead, the High Court had said at [17]:

the application of a “fraudulent imitation” requires that the application of the design be with knowledge of the existence of the registration and of the absence of consent to its use, or with reason to suspect those matters, and that the use of the design produces what is an “imitation” within the meaning of par (a). This, to apply the general principle recently exemplified in Macleod v The Queen, is the knowledge, belief or intent which renders the conduct fraudulent.

At [36], the High Court approved Lehane J’s formulation of the test for fraudulent imitation in the following terms:

[T]he essential questions are, first, whether the allegedly infringing design is based on or derived from the registered design and, then, whether the differences are so substantial that the result is not to be described as an imitation. ….

In this case, the trial judge considered that fraudulent imitation required a finding that the infringing product was deliberately based on the registered design. The Besanko and Middleton JJ endorsed that test at [115]:

In our opinion, it must be shown that there was deliberate, in the sense of conscious, copying for there to be fraudulent imitation. If imitation imports the notion of making use of the registered design, there must be at least a conscious use of the registered design before it could be concluded there was fraudulent imitation.

The trial judge had found that:

  • Bluescope knew the Gramline design was registered;
  • Bluescope knew that Gram had achieved runaway commercial success with its product;
  • Bluescope was trying to design a “Gram lookalike”;
  • Bluescope had come up with a number of different symmetrical designs to Gram’s design, but rejected those in favour of the Smartascreen design; and
  • Bluescope had adopted a panel size of 762mm which was the same as Gram’s but different to the standard 820mm panel prevailing in the industry at the time.

His Honour was also “sceptical” of Bluescope’s claim that the resemblance to Gram’s design was coincidental. Gram argued that, given these findings, what other conclusion could there be but deliberate copying.

The Full Court upheld the trial judge’s refusal to find the Smartascreen was deliberately based on the Gramline design. Two factors seem to have played an important role here.

First, the Full Court accepted at [118] that an allegation of fraudulent imitation was a serious matter and the level of proofs needed to reflect the gravity of that.

Secondly, the evidence showed that the Bluescope employees who came up with the final design from 2000 onwards were influenced by, or at least referred to, design work done by a Mr Field in 1996.

Mr Field did not give evidence so it was not clear on the evidence what influences or references he made use of. Now, in many cases, the unexplained failure of a key player in the design process to give evidence (especially when there are inferences (at least) suggestive of copying available) might be sufficient to give rise to a Jones v Dunkel that the witness could not say anything helpful to the defendant’s case. Here, however, Mr Field’s absence was explained: he was old and in very poor health. His design work had taken place in 1996 very early in the picture. Moreover, Bluescope’s product had been introduced in 2002. Gram had of course known about it pretty much straightaway, but had delayed until 2010 before taking action. One may speculate, therefore, that the Court was not willing to allow Gram the benefit of negative inferences when its own delay had contributed to the witness being unavailable.

BlueScope Steel Limited v Gram Engineering Pty Ltd [2014] FCAFC 107


  1. Given the transitional provisions, there are potentially almost 6 more years for designs for designs under the old Act to still be in force. Design applications that were pending on 17 June 2004, when the 2003 Act came into force, continue to be governed by the old Act’s provisions for validity and infringement unless they were “converted” to “new” Act designs.  ?
  2. Full Court at [63], [71] – [72] (Besanko and Middleton JJ), [163] – [181] (Yates J).  ?
  3. Full Court at [89] – [93], with a useful summary of the key principles at [82] (Besanko and Middleton JJ). There were differences between the Smartascreen’s appearance and the registered design, but these were treated as insubstantial: [] (Besanko and Middleton JJ) and [188]ff (Yates J).  ?
  4. Yates J to similar effect at e.g. [166], [174].  ?

Copyright in bikini designs

Seafolly is in the news again: this time as the winner. In her last decision before retiring, Dodds-Streeton J has ordered that City Beach[1] pay Seafolly $250,333.06 by way of damages for infringing copyright in 3 Seafolly designs: the English Rose artwork, the Covent Garden artwork and the Senorita artwork.

The English Rose artwork and the Covent Garden artwork were both patterns or ornamentation printed on the fabric. The Senorita artwork, however, was in effect stitched on to the garment using shirring and smocking. Dodds-Streeton J, however, rejected City Beach’s defence based on sections 74 and 77 of the Copyright Act. Apart from all the other issues, her Honour’s application of the Full Court’s decision in the Polo/Lauren case struck me as particularly important.

Seafolly’s Senorita artwork:

321.12
321.11

City Beach’s Richelle embroidery:

321.13

The subsistence point

As you can see, the Senorita design is pretty simple in appearance. City Beach’s argument was that this simple design was the more or less inevitable outcome of using the type of industrial sewing machine used to produce it. According to the evidence, however, it involved significant trial and error to produce because smocking fabric was very difficult to work with, smocking did not always involve using triangles or diagonals and City Beach’s expert conceded “there was a huge array of different ‘cams’ which could produce an almost indefinite variety of patterns.” Her Honour rejected City Beach’s attack, therefore:

416 …. the Senorita embroidery was not the inevitable outcome of the operation of an industrial sewing machine. Nor was the work so rudimentary and simple as to be unprotectable because, in essence, there was no meaningful distinction between the subject matter and the form of expression.

The use of the sewing machines, therefore, appears to involve use of the machine to implement the human idea more in the vein of Coogi or a wordprocessor to record the text than as an automatically generated entity like the phone books in PDC. The second point made by her Honour seems to pick up the High Court’s point that the ordering of title and time of television program in chronological order did not involve sufficient creativity (or intellectual effort) to qualify as original.[2]

The copyright/design overlap

City Beach’s defence based on the copyright/design overlap provisions failed also, because the Senorita design when sewn on to the bikinis was not a corresponding design.

When the Designs (Consequential Amendments) Act 2003 introduced the current form of s 74 and s 77, it was hoped that the old problems about whether something constituted a “design” and whether it had been “applied to” an article had been sidestepped. All that was necessary, was to identify an artistic work which had been embodied in the features of shape or configuration of the product.[3] Rares J, at first instance in the Polo case adopted that too simplistic (as we now know) approach to find that the 700 or so stitches used to embroider the Polo logo on to a shirt qualified. This was set right by the Full Court on appeal.

Dodds-Streeton J acknowledged that the Full Court’s observations were obiter. Her Honour also acknowledged that the Full Court’s reasoning “is not consistently explicit, but must be inferred”. Her Honour considered that the Full Court’s reasons:

470 …. in substance indicate that it is the features of shape or configuration of an artwork (not a label on which the artwork is reproduced) that must be relevantly embodied in a product, which will occur when the product (in the present case, a garment) is made in the shape or configuration of the artwork.

Thus, the diamond pattern was not a corresponding design because, when stitched on to Seafolly’s bikinis, it did not define the shape or configuration of the bikini as a garment.

In reaching this conclusion, Dodds-Streeton J had to interpret the Full Court’s declaration at [58] that a design must be conceptually distinct from the product in which it was embodied to qualify as ‘embodied’ for the purposes of s 74. That created a problem in the present case as Dodds-Streeton J considered the stitching, or smocking, could not have existed independently of the garment:

473 It is true that, in contrast to the logo in Polo/Lauren itself, the reproduction of the Senorita artwork sewn on to the relevant garment may not retain a separate existence, as probably, it could not survive removal and is not conceptually distinct from the garment. Accordingly, if the Full Court’s observations in [58] represent the correct and comprehensive test, the Senorita artwork could be embodied within the meaning of s 74(1). As stated above, however, the comment at [58] does not comprehensively reflect the reasoning of the Full Court’s judgment.

I am not sure, with respect, why the Senorita design was any the less capable of independent existence than the Polo logo. I think the design could not have an independent existence because it was created by attaching the stitching to the shirring framestrings and there was presumably no drawing.

Dodds-Streeton J identified a further problem. It seems difficult, with respect, to reconcile the Full Court’s interpretation of s 74 with the clear legislative intent to capture woven tapestries, bas relief and “textured” carpets within the concept of corresponding design by the inclusion in s 74(2) of:

“embodied in , ” in relation to a product, includes woven into, impressed on or worked into the product.

According to Dodds-Streeton J:

480 Following the insertion of the words “woven into”, “impressed on” or “worked into” in s 74(2), it seems clear that features of shape or configuration of an artwork can be embodied in an article which is itself a piece of embroidery, a carpet, bas?relief or similar, by being woven or worked in. This was the qualification to the maintenance of the tradition [sic] position to which the Full Court referred at [48]. The amendment to s 74(2) did not, however, apply to the circumstances of Polo/Lauren itself as the relevant product was a garment rather than a carpet, bas?relief or embroidery (although the design was applied or attached by means of embroidery or “weaving in”).

Instead:

481 In the light of the Full Court’s emphasis that the position was otherwise unchanged, it would seem that it rejected Rares J’s analysis not simply or principally because the logo remained conceptually distinct from the garment, but because the garment was not made in the shape or configuration of the artistic work, irrespective of whether it was three dimensional.

It’s not clear why garments should be treated any differently to tapestries, carpets etc. I suppose a carpet could for example be woven in the shape of a (stylised) polo player or teddy bear or some other novelty shape thought to be appealing to someone out there in the wide world, but a tapesty? One might have thought (if one didn’t have the Full Court’s obiter dicta hanging over one) the legislature intended to catch all such woven, stitched or otherwise ‘applied’ artistic works from its intention to ensure that carpets, tapestries and the like be “clearly” brought in.

This is not to say that the alternative, literal approach to interpreting s 74 is not without its challenges. Dodds-Streeton J went on in dicta to consider that the Full Court really also disagreed with Rares J’s view that the embroidered stitching was sufficiently three-dimensional to qualify as features of shape or configuration.In any event:

486 … the surface of the garment onto which the smocking is sewn is not flat because the fabric is shirred. Any protrusion of the smocking from the surface is minimal and probably significantly less than that in Polo/Lauren itself, which on a fair reading of its judgment, the Full Court nevertheless thought insufficient.

So, there may well be questions of degree in how much three dimensional appearance is required before something qualifies as shape or configuration.[4] That is, however, a problem which long challenged designs law.

Seafolly Pty Ltd v Feswtone Pty Ltd [2014] FCA 321

 

Update:

Tim Golder points out:

  1. At paragraph 13, her Honour noted that the Señorita work subsisted in final drawings – so my attempt to rationalise her Honour’s perceived distinction to the Polo logo fails dismally.
  2. City Beach has already lodged its appeal: VID224/2014 for mention before Gordon J on 2 May.

  1. City Beach Australia is the trading name of Fewstone Pty Ltd.  ?
  2. IceTV Pty Ltd v Nine Network Pty Ltd (2009) 239 CLR 458 at [54] and [170].  ?
  3. Putting to one side, of course, all the fun and games of what may be a work of artistic craftsmanship for the purposes of s 77(1)(a) or the difference between “shape or configuration” and “pattern or ornamentation”.  ?
  4. This would also be an issue to some extent under the UK’s test of “surface decoration”: see Lambretta Clothing v Teddy Smith [2004] EWCA Civ 886.  ?