Trade marks as security for costs

Lindgren J has ordered that the owners of the WILD TURKEY trade mark (which those of you who drink bourbon may be familiar with) provide security for costs before they can pursue their Federal Court application to have WILD GEESE removed from the Register of Trade Marks.

Lindgren J accepted that the owners, members of the international Pernod Ricard or Davide Campari groups, would have sufficient funds to satisfy an order of costs if they were unsuccessful. However, the purpose of s 56 of the Federal Court of Australia Act was to ensure that there was a fund available within Australia to satisfy the costs order.

His Honour accepted that there were procedures available to enforce money judgments against the owners in their home base(s) eg New York, but those procedures placed an additional burden on a party seeking satisfaction of a costs order over and above the difficulties a party litigating against an Australian based entity would incur.

Lindgren J then rejected the owners’ argument that their registered trade marks in Australia were sufficiently liquid assets within the jurisdiction. They were indeed assets, but they were not “sufficiently liquid”.

44 With respect, the applicants’ submissions fail to grapple with the critical question whether the bare trade marks would be readily convertible into cash by sale to satisfy an adverse order for costs.

45 The evidence to which the applicants refer is not evidence of a sale of the trade marks as items of property distinct from a sale of the underlying business.

46 Considerable difficulty might be experienced in realising the trade marks if Lodestar ever had to take that course. The underlying business would remain that of Rare Breed. A prospective buyer of the trade marks would know that Rare Breed would remain a competitor in the Australian market, albeit under a mark or name dissimilar to the trade marks.

47 Moreover, the only prospective buyers would be sizeable corporations that were in the same line of business in Australia or wished to embark upon such a line of business in Australia. If they already traded under a trade mark or business name, they might not be prepared to abandon it in order to buy and use Rare Breed’s trade marks. Would they be interested to acquire those trade marks in addition?

48 It may be that a receiver would eventually be able to sell the trade marks but the course of doing so would or might well be fraught with considerable difficulty and delay.

With respect, the applicants’ submissions fail to grapple with the critical question whether the bare trade marks would be readily convertible into cash by sale to satisfy an adverse order for costs.
The evidence to which the applicants refer is not evidence of a sale of the trade marks as items of property distinct from a sale of the underlying business.
Considerable difficulty might be experienced in realising the trade marks if Lodestar ever had to take that course. The underlying business would remain that of Rare Breed. A prospective buyer of the trade marks would know that Rare Breed would remain a competitor in the Australian market, albeit under a mark or name dissimilar to the trade marks.
Moreover, the only prospective buyers would be sizeable corporations that were in the same line of business in Australia or wished to embark upon such a line of business in Australia. If they already traded under a trade mark or business name, they might not be prepared to abandon it in order to buy and use Rare Breed’s trade marks. Would they be interested to acquire those trade marks in addition?
It may be that a receiver would eventually be able to sell the trade marks but the course of doing so would or might well be fraught with considerable difficulty and delay.

Similarly, his Honour rejected the Australian distribution rights for Wild Turkey.

Austin, Nichols & Co Inc v Lodestar Anstalt [2009] FCA 1228

Lid dip POF

Parallel imports, books and Australia

The Australian Government has announced today that it will not be changing the limitations in the Copyright Act on the parallel importation of books.

According to the Press Release:

Australian book printing and publishing is under strong competitive pressure from international online booksellers such as Amazon and The Book Depository and the Government has formed the view that that this pressure is likely to intensify.
In addition, the technology of electronic books (e-books) like Kindle Books will continue to improve with further innovations and price reductions expected.
The Government has not accepted the Productivity Commission’s recommendation to remove the parallel importation restrictions on books.

Australian book printing and publishing is under strong competitive pressure from international online booksellers such as Amazon and The Book Depository and the Government has formed the view that that this pressure is likely to intensify.

In addition, the technology of electronic books (e-books) like Kindle Books will continue to improve with further innovations and price reductions expected.

The Government has not accepted the Productivity Commission’s recommendation to remove the parallel importation restrictions on books.

You could write a book on the rules governing parallel importation of books so I won’t attempt to summarise them here.

The Productivity Commission’s report. I still don’t think there has been any answer to the question whether the prices of music CDs or computer software fell after open markets were introduced for those products.

Vegemite iSnack 2.0

Kraft’s attempt to extend the Vegemite range has been attracting attention around the world.

Neil Wilkof considers what the impact from a trade mark or branding perspective was.

Shape and colour trade marks

Julian Lee, in the Age yesterday, reported on the concerns of “marketers” about how hard Australian regulators are making it to register a shape as a trade mark, in the wake of:

  1. last month’s ruling by Sundberg J against Guylian’s sea-horse shaped chocolate; and
  2. the commencement of Nestle’s appeal against Aldi’s successful opposition to registration of the shape of a Kit Kat bar as a trade mark (BDW discussed the decision here, but the decision itself seems to be hiding on-line).

To digress for a moment from the “shape” issue – Mr Lee also reports that Cadbury and Darrell Lea have settled their long running litigation and Cadbury has secured registration of its trade mark for the colour purple.

Back to “shape” marks, you might have thought from the tenor of Mr Lee’s article that Australia is yet again embarking on anutochthonous experience, but it seems that the Europeans are playing hardball too; e.g. here and here.

IPRIA, parallel imports

IPRIA has organised a seminar in Melbourne on 15 September and Sydney on 16 September to discuss whether freeing parallel imports will make books cheaper.

Speakers include both Prof. Fels, who started it all, and Dr Rhonda Smith.

Details from here.

Has anyone established how far the prices of CDs and computer software fell once the markets for those products became open?

Uni of WA v Gray

The Full Court (Lindgren, Finn and Bennett JJ) have dismissed the University’s appeal against the trial judge’s (the then French J) findings that the University did not own the targeted microsphere technology inventions Professor Gray made (partly) while a professor at the Uni.

The full 380 paragraphs – University of Western Australia v Gray [2009] FCAFC 116

Lid dip @pofip

Patenting racemates and enantiomers

Lundbeck had a patent for citalopram for the treatment of depression, which it marketed in Australia under the name Cipramil

Citalopram is a chiral molecule: it can exist in two isomeric forms; a (+)-enantiomer and a (-)-enantiomer. The two forms have the same chemical structure, but they are mirror images. At its priority date, the relevant skilled addressees would have understood that the compound was a racemate or racemic mix consisting of both the (+)-enantiomer and the (-)-enantiomer.

Subsequently, Lundbeck discovered a way to make the (+)-enantiomer in isolated or pure form and, even better, it was this enantiomer that contributed the therapeutic effect of citalopram. It obtained a further patent, claim 1 of which was for:

1. (+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile and non-toxic acid addition salts thereof.

The Full Federal Court by 2-1 (Bennett and Middleton JJ; Emmett J dissenting) has upheld the validity of this claim in the face of the prior patent for citalopram.

If resort could be made to the body of the specification, it was clear that the skilled addressees would have understood that claim was a claim to the enantiomer in its pure, isolated form and not to the product as part of a racemic mix.

Emmett J considered the claim was clear and unambiguous. Accordingly, there was no warrant to resort to the body of the specification.  Bennett and Middleton JJ, on the other hand, accepted that the trial judge was entitled to accept evidence about how the skilled addressee would have read the claim.  Bennett J approved the approach taken by Dr Barker, as delegate for the Commissioner, in Emory University v Biochem Pharma:

[152] …. He drew a distinction between a reading of the claim in the context of the specification to understand what the claim is talking about (as did Burchett J in International Business Machines Corporation v Commissioner of Patents [1991] FCA 625; (1991) 33 FCR 218), where the whole thrust of the specification makes a limitation clear, and impermissibly importing a limitation from “mere comments” in the description. ….

Her Honour further explained that the citalopram patent didn’t anticipate the claim:

193 The prior citalopram patent described the racemate. It did not describe the pure or isolated (+)-enantiomer. There is no anticipation unless the disclosure of the racemate was, to the skilled addressee, a disclosure of the (+)-enantiomer. As the primary judge pointed out at [171], the skilled but non-inventive addressee would have understood that (+/-)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer and would have been able to identify the formulae for the S and R enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which the (–)-enantiomer. As his Honour said, these facts would not point specifically to the independent existence of the enantiomers. They did not disclose an invention which, if performed, would necessarily infringe the Patent.
194 It is the case that the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. Further, the prior citalopram patent was silent as to the means of obtaining the enantiomers and there were different methods available to try to do so. There were no clear and unmistakable directions to obtain the enantiomers. Some of the available methodology may have been successful, other methods may not.

193 The prior citalopram patent described the racemate. It did not describe the pure or isolated (+)-enantiomer. There is no anticipation unless the disclosure of the racemate was, to the skilled addressee, a disclosure of the (+)-enantiomer. As the primary judge pointed out at [171], the skilled but non-inventive addressee would have understood that (+/-)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer and would have been able to identify the formulae for the S and R enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which the (–)-enantiomer. As his Honour said, these facts would not point specifically to the independent existence of the enantiomers. They did not disclose an invention which, if performed, would necessarily infringe the Patent.

194 It is the case that the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. Further, the prior citalopram patent was silent as to the means of obtaining the enantiomers and there were different methods available to try to do so. There were no clear and unmistakable directions to obtain the enantiomers. Some of the available methodology may have been successful, other methods may not.

That seems rather to qualify the force of the earlier point. One might even think, with respect, that it limits the patentable subject matter to some particular method of making the purified, isolated (+)-enantiomer, rather than the substance per se.

In contrast to this approach, however, Lundbeck lost its attempt to get the term of the second, escitalopram patent extended pursuant to s 70 of the Patents Act.

The problem for Lundbeck here was that s 70(2) referred to a patent for a pharmaceutical substance per se, but s 70(3) and (5) and s 71 did not. The Full Court found that s 70(2) operated to identify the subject matter of the extension application – the substance per se here being escitalopram.

Because the later sub-sections did not refer to the substance per se, when it came to working out the timing for making the application for an extension of term, the question was (in this case) the date when goods containing the substance (not the substance per se) were first included in the Australian Register of Therapeutic Goods.

Citalopram, of course, contained the (+)-enantiomer and it had been registered in the ARTG. It was first included in the ARTG on 29 December 1997. The application to extend the term of the escitalopram patent was made almost 6 years later – on 22 December 2003.

Section 71(2), however, required the extension application to be made within 6 months of the patent being granted or “the date of commencement of the first inclusion in the [ARTG] of goods that contain … the pharmaceutical substance referred to in s 70(3)” (i.e., within 6 months of the inclusion in the ARTG of citalopram).

The majority also found that claim 5 was invalid for insufficiency. However, Lundbeck did succeed insofar as Alphapharm was found to have infringed claims 1 and 3 of the escitalopram patent, presumably up to the date of expiry of the patent on 13 June 2009.

ACIP: Post grant patent enforcement

ACIP’s interim report on Post-Grant Patent Enforcement Strategies is now available on the internet (pdf).

The main recommendation is that:

Proposal 1: That IP Australia establish an IP dispute resolution centre along the lines of WIPO’s Arbitration and Mediation Center, which in the first instance focuses on patent disputes. Funding for the centre should be on a “user pays” basis.

A number of “implementation” recommendations hang off that. For example:

Proposal 2: That IP Australia establish a validity and infringement opinion service (taking into account the needs of SMEs), along similar lines to that provided by the UKIPO, and incorporated within the IP dispute resolution centre.

Proposal 4: That IP Australia establish, within the IP dispute resolution centre, a determinative ADR process in the form of a Patent Tribunal along the following lines:

(a) each Tribunal hearing panel to comprise up to 3 people, integrating legal and technical expertise;

(b) Tribunal hearing panel members to be drawn from the register of experts established under Proposal 3;

(c) patent attorneys to have a right to appear;

(d) the Tribunal to have more streamlined procedures and simplified evidentiary requirements;

(e) the Tribunal to take a pro-active and inquisitorial role;

(f) mechanisms be introduced to encourage parties to comply with the Tribunal’s determinations, and to discourage parties from using the courts instead of the Tribunal where it would be appropriate to do so; and

(g) that the effectiveness of the Patent Tribunal be monitored from its date of establishment.

Also, there should be a power of customs’ seizure (as already exist for copyright and trade marks).

Submissions need to be in by Wednesday 30 September 2009.

Interim Report (pdf); press release (pdf too)

Sea-horse shaped chocolate not a trade mark

Having secured an International Registration, Guylain tried to register a chocolate in this shape

as a trade mark in Australia through the Madrid Protocol (TM App 936483).

Sundberg J, on appeal from the Registrar’s refusal, has also rejected it as incapable of distinguishing Guylain’s goods (pralines and chocolate, to be precise) under s 41.

Not inherently adapted — enough

First, Sundberg J was satisfied that the sea-horse shaped chocolate was inherently adapted to distinguish to some extent, but not enough to be distinctive.

Guylain argued:

31. its shape is a “fanciful stylised” representation of a seahorse, which “depart[s] radically from the shape of seahorses found in nature”. The departure, it says, arises from two particular features of its chocolate shape:
(a) the tail that wraps up behind the spine of the creature, rather than forwards; and
(b) the solid and “chunky” appearance, as opposed to the more slender and elongate shape of a real seahorse.

31. … its shape is a “fanciful stylised” representation of a seahorse, which “depart[s] radically from the shape of seahorses found in nature”. The departure, it says, arises from two particular features of its chocolate shape:

(a) the tail that wraps up behind the spine of the creature, rather than forwards; and

(b) the solid and “chunky” appearance, as opposed to the more slender and elongate shape of a real seahorse. (my emphasis)

Accepting this to some extent, Sundberg J considered nonetheless:

[77] …. there is a danger that first impressions will be sidelined when an analysis of a shape’s individual components or features is undertaken. In this case, the immediate impression one has of the mark in suit is of an ordinary seahorse. I would not expect most ordinary consumers to know that the tails of seahorses do not curl backwards, only forwards. I think most would know that seahorses have a tail and expect that they curl up in some direction. Accepting that the tail and the stocky appearance might, to a studious observer, appear unusual, I consider on balance that the average consumer would see it as a relatively ordinary representation of a seahorse. The possibility for confusion therefore between Guylian’s shape and any other seahorse shapes is, I think, a real one. (my emphasis)

Test this for yourself: do you think either of these would be deceptively similar to Guylain’s shape (if it were registered)?

To those who might wonder who on Earth would want to sell a chocolate in a sea-horse shape if it hadn’t been for Guylain’s success, Sundberg J had earlier explained:

71   … In my view, it is quite possible that as at the priority date other traders might want to depict a seahorse, along with starfish, crabs, prawns for example, in a way that is similar enough to cause potential confusion in the minds of consumers. …. [after noting that no-one in Australia was in fact selling sea-horse shaped chocolates at the priority date, his Honour continued] ….  It might be thought that that fact, together with the fact that Guylian had been selling its seahorse shape in Australia for a long time (since the 1980s), would diminish the likelihood that, as at 2002, other legitimately motivated traders might in the ordinary course of their business wish to sell seahorse chocolate shapes. However, the absence of other seahorses on the market does not in my view mean it was unlikely that others may in the future wish to depict that particular sea creature. (His Honour’s emphasis)

Not qualified under s 41(5) either

Guylain has been selling its sea-horse shaped chocolates in Australia since 1980 as part of its sea shells range. In recent years, reatail sales of the sea shells range had exceeded tens of millions of dollars each year and millions of dollars were spent each year on advertising and promotion. The sea-horse shaped chocolate was not sold by itself, however. There seem to have been some rather small sales of sea-horse shaped chocolates by other brands, at various points, although they seem to have been after the priority date.

Nonetheless, survey evidence before the Court showed that 40% of the sample identified the sea-horse shaped chocolates as coming from Guylain, unprompted. Conversely, all the other brands mentioned accounted for only 13% of the sample; the highest of these, Lindt, reached 1.7% and no other brand reached 1%.

Given that level of association, why wasn’t the sea-horse shape distinctive of Guylain?

Because, following Woolworths v BP (No 2), the association must be shown to have arisen from use of the sea-horse as a trade mark, not just use. His Honour quoted with approval from Jacob LJ’s explanation of the distinction in the Vienetta case:

There is a bit of sleight of hand going on here and in other cases of this sort. The trick works like this. The manufacturer sells and advertises his product widely and under a well-known trade mark. After some while the product appearance becomes well-known. He then says the appearance alone will serve as a trade mark, even though he himself never relied on the appearance alone to designate origin and would not dare to do so. He then gets registration of the shape alone. Now he is in a position to stop other parties, using their own word trade marks, from selling the product, even though no-one is deceived or misled.

As in that case, his Honour found that Guylain had not in fact used its sea-horse shape as a trade mark and the public would not have understood it as being used in that way. For example, his Honour found that this wasn’t use of the sea-horse shape as a trade mark:

The fact that other traders, such as Darrell Lea, sold sea-horse shaped products in boxes with their own brands on them contributed to this conclusion, as did the prominence of the Guylain and, in many case, a stylised ‘G’ on the packaging. Sales of Guylain’s sea shell range in sea-horse shaped boxes didn’t help either as the evidence did not suggest the sales were particularly significant.

The presumption of registrability

Sundberg J also addressed the “presumption of registrability” wars, which his Honour broke down into 2 parts.

First, his Honour explained that s 33 requires that the trade mark be registered unless the Registrar is satisfied that a ground of rejection exists. Thus, in the case, of the distinctiveness inquiry under s 41, the trade mark must be registered unless the Registrar is satisfied that the trade mark is not sufficiently inherently adapted to distinguish as to be capable of distinguishing. If the Registrar was satisfied that the trade mark had insufficient inherent adaptation, the words of s 41(5) and 41(6) plainly imposed the onus on the applicant to satisfy the Registrar that the trade mark had in fact become distinctive (s 41(6)) or otherwise did have the necessary capacity. See [21]. The wonders of plain English drafting!

Secondly, Sundberg J joined the gang (so far comprising Finkelstein and Gyles JJ) rejecting any standard other than the Registrar being satisfied on the balance of probabilities.

The role of the Registrar

Somewhat unusually, the Registrar went to the lengths of filing evidence about other uses of sea-horse shaped chocolate. Those practitioners who have seen their valiant efforts in scrambling around the internet to assemble evidence snidely dismissed will note that the Registrar was reduced to much the same course.

Interestingly, Sundberg J noted:

54. …. Although differing as to the weight such evidence should be given, the parties also appeared to accept more generally that evidence of events taking place after the priority date, whether that be the applicant’s use of the mark itself or use of other similar or otherwise relevant shapes by rival traders, may be relevant to whether the seahorse shape is capable of distinguishing Guylian’s goods. This was an appropriate course to take. In my view, evidence of what other traders were selling prior to, at or subsequent to the priority date has the ability to rationally affect, albeit with varying degrees of weight, the conclusion one might reach about the extent to which a mark is inherently adapted to distinguish under s 41(3) of the Act. ….

Chocolaterie Guylian N.V. v Registrar of Trade Marks [2009] FCA 891

IP Australia issues more reform discussion papers

IP Australia has released two more discussion papers of reform proposals:

  1. Flexible search and
    examination

    Flexible Search and Examination (patents)

  2. Streamlining the patent process

The Streamlining paper has some ambitious goals:

  • Removing unnecessary differences in law between Australia and overseas jurisdictions. This would help reduce the cost to applicants of re-drafting claims to meet the various requirements of each jurisdiction. It would also reduce the potential for errors to occur as a result of the applicant being unaware of such differences.
  • Simplifying and modernising systems for processing patent applications. These include processes associated with amending details relating to patent applications, processing Patent Cooperation Treaty2 (PCT) applications entering the ‘national phase’, and accessing or restricting access to information relating to a patent.
  • Remedying other procedural problems within the patent system..

In relation to ‘harmonising’, proposals include:

Interpretation of the prior art—For the purposes of determining novelty, citations are to be construed at the priority date of the claims under examination rather than the date of publication of the citation.

Whole of contents citation—For the purposes of determining novelty, only the information in the citation at its filing date is to be taken into account.

A claimed product will no longer be patentable merely because it is produced by a patentable process or method.

If the product per se in a product-by-process claim is unpatentable in light of the prior art base, the claim to the product will be unpatentable even though the disclosed product was made by a patentable process.

The claims shall not, except where necessary, rely on reference to the description or drawings.

When an application includes an omnibus claim, an examiner is likely to object to the claim unless it is apparent from the face of the specification that it is necessary for the claim to refer to the description or drawings in order to define the invention.

On flexible examination, proposals include:

  • An early search and opinion would provide an early indication of the validity of a patent (section 3.1). This would also provide the public and business with earlier certainty as to where they have freedom to operate.
  • The introduction of various levels of examination. This would ensure that the fee charged to applicants for examination of a patent application would reflect the extent to which the examination relies on work done by other offices (section 3.2).
  • An option for third parties to request examination of an application. This would provide third parties with an opportunity to obtain an earlier determination of a patent application that potentially impacts on their commercial interests (section 3.3).
  • “adjustment” of “some” examination timeframes

Get your submissions in by 16 October 2009.

Download the papers (pdf) or (doc) here.