Scintilla – a flash, a spark, an iota. Shorthand for creativity and an indicator of inventiveness under Australian law.






Tuesday, April 23, 2013

Google updates AdWords policy

By Lawyer Sarah Lux

As of today, Google has a new policy on the 'invisible' use of trade marks as AdWords (keywords purchased by advertisers to trigger the display of advertisements in Google search results).

Google's approach around the world has been to allow competitors to use each others' trade marks as AdWords. Until yesterday, however, this general policy did not apply in Australia, where a trade mark owner could complain about and ultimately prevent the use of its registered mark as an AdWord by a competitor. From today, Google's general policy has been extended to Australia.

The changes to Google's policy mean that:
  • Google will no longer prevent the use by an advertiser of another person's registered trade mark as an AdWord; and
  • AdWords that had previously been restricted as a result of a trade mark complaint will no longer be restricted.

Today's policy change also applies in China, Hong Kong, Macau, Taiwan, New Zealand, South Korea and Brazil, which had similarly been carved out of Google's general policy regarding AdWords.

In all of these jurisdictions, Google will continue to investigate, and in some cases restrict, use of trade marks within the text of sponsored advertisements on Google, as distinct from the invisible keywords used to trigger the display of those advertisements.

Today's changes follow Google's recent High Court win against the ACCC, on which we reported in a recent Focus article. The High Court cleared Google from liability for misleading or deceptive conduct arising from the publication of certain sponsored advertisements. This led commentators to anticipate the lessening of intervention by Google in trade mark disputes, which has been reflected in today's policy change.

Monday, April 22, 2013

Apple appeals unappealing 'app store' outcome

By Lawyer Sarah Lux

Today will mark the first directions hearing in what is likely to be a hotly contested Federal Court appeal by Apple, Inc. against the recent rejection by the Australian Trade Marks Office of its application to register the mark APP STORE in classes 35, 38 and 42.
 
Background

Earlier this year, a Delegate of the Registrar of Trade Marks found that the mark APP STORE is not capable of distinguishing Apple's software retail services (class 35), telecommunication services (class 38) or web-based services (class 42), and rejected the application under sub-section 41(6) of the Trade Marks Act 1995 (Cth).

Apple's experience in the Office was vexed. Its application was originally objected to by the Examiner under section 44 of the Act, on the basis that it was too close to existing registered trade mark 1156967 for APPSTORE. Apple subsequently purchased that mark, the objection was withdrawn and the application was accepted. However, this acceptance was revoked by the Registrar under sub-section 41(6) of the Act in respect of class 35 services (retail store services featuring computer software), on the basis that APP STORE is only to some extent capable of distinguishing those services. Apple's evidence of use was regarded by the Examiner as insufficient to overcome this objection, and Apple requested a hearing before a Delegate of the Registrar.

Decision

The hearing produced an unfavourable outcome for Apple. The Delegate not only upheld the objection in relation to class 35 services, but went much further, deciding that APP STORE has no capacity at all to distinguish any of the services in classes 35, 38 or 42 to which the application related, pursuant to the much more stringent ground of objection under sub-section 41(6) of the Act.

The Delegate noted that APP STORE can be defined in ordinary English as 'a store (or retail outlet) that sells or provides computer application programs', and considered that the term is 'relatively straight forward, easily defined and well understood by modern digital-savvy consumers'. She pointed to examples from Apple's own evidence that indicated that Apple has sometimes used the mark descriptively.

Apple had pointed out that the previous registration it had acquired for APPSTORE had not attracted any similar distinctiveness objection at the examination stage. However, the Delegate responded that 'it is not possible to ascertain whether the examiner ever assessed or conducted appropriate research to determine if the expression APPSTORE had any descriptive meaning.' In addition to insinuating that the prior mark had been registered in error, the Delegate suggested that the fact that APPSTORE was previously registered by a third party actually supported the conclusion that traders other than Apple would legitimately wish to use the term in relation to their goods and services.

The Delegate noted Apple's evidence that over 850 million applications had been downloaded in Australia through Apple's Australian App Store service since its launch in July 2008, and accepted that the APP STORE mark had been used extensively in Australia.  (It is worth noting that the App Store launch occurred only seven days before the application's priority date, and that strictly only use within that seven day period should have been relevant to the sub-section 41(6) objection).  However, the Delegate noted that in most cases APP STORE was used in combination with the well known trade mark APPLE, as well as other expressions such as iTunes, iPhone, iPad or iMac. This made APP STORE a 'limping mark', which was not on its own distinctive of Apple's services.

The Delegate concluded that APP STORE was descriptive, and that Apple had not demonstrated through evidence that the mark had acquired a meaning related to Apple which overshadowed its descriptive meaning. The application was therefore rejected in relation to all three applied-for classes under sub-section 41(6).

Comment

Apple will have an opportunity to put on new evidence for the Federal Court appeal, which will be a hearing de novo of this application. Overcoming a section 41(6) objection tends to require very substantial evidence of the acquired meaning of a mark, which Apple may not be able to provide in light of the fact that there were only seven days of use between the launch of the App Store in Australia and the date of the application.

Apple is likely to focus instead on demonstrating that APP STORE is at least to some extent capable of distinguishing its retail, telecommunications and web-based services. To do so, it will emphasise the novelty of the APP STORE mark and concept as at the priority date, and may also put on evidence from third parties attesting to recognition of the trade mark meaning of APP STORE in the market at that time. This would complement the evidence it put before the Office from a linguistics professor, that APP STORE did not have a commonly understood or used meaning in 2008.

Some commentators have suggested that the decision may be moot, as Apple could rely on existing registration number 1156967 for APPSTORE to protect its mark. However, as noted above, the Delegate's reasons insinuate that the prior mark may have been registered in error. Apple faces some risk that a competitor will use this opportunity to apply for cancellation of the APPSTORE mark on the basis that it was wrongly registered. The mark could also be challenged on the basis of non-use, if the space between the words APP and STORE which appears in Apple's uses of the mark is regarded as a key feature.

The Federal Court appeal may also shed light on Apple's strategy in approaching this application. The Examiner's original objection applied only to class 35 goods, and it would have been open to Apple to pursue a divisional application to register APP STORE in classes 38 and 42, which would have proceeded to registration. Apple may have chosen not to avail itself of this opportunity on the basis that having all three classes considered together by the Office, and ultimately by the court, might increase the likelihood that the most descriptive component of the application (in relation to class 35) might be accepted together with the more distinctive component (in relation to classes 38 and 42). 

The Australian decision and appeal occur within an international context of legal battles in relation to use of the APP STORE mark. Apple and Amazon are embroiled in litigation in the US over the 'Amazon Appstore', with a trial scheduled for August. Apple's US application to register APP STORE, which has been opposed by Microsoft, will remain in limbo by agreement between the parties until the dispute between Apple and Amazon is resolved.

A version of this article first appeared in the World Trademark Review Daily on 8 April 2013

Thursday, April 18, 2013

The clock is ticking - time for trade mark owners to keep watch

By Senior Associate Mark Williams

A recent decision of the Australian Trade Marks Office, along with the Raising the Bar legislative changes, has placed greater pressure on trade mark owners to keep a watch on the trade mark activities of their competitors.

In Bridgestone Corporation v Zylux Distribution Pty Ltd 2013 ATMO 19, a Trade Marks Hearing Officer considered Bridgestone's application for a late extension of time in which to oppose a trade mark application based on 'an error or omission by the person applying for an extension of time, or by that person's agent'. In denying the application, the Hearing Officer confirmed that case law which states that there must be a causal connection between the error by the agent, and the opponent's failure to file the notice of opposition.

Bridgestone was not aware of the existence of the Zylux application due to an error by its agent in referring an examination report. Despite submissions from its representative that, if it had been aware of the Zylux application before the opposition deadline, Bridgestone would have opposed, the Hearing Officer noted the absence of any evidence demonstrating that:

  • Bridgestone had undertaken any search of the Register prior to filing; or
  • Bridgestone or its representative considered it appropriate to keep a watch for similar marks on the Australian Register.

In light of the Raising the Bar legislative amendments which came into effect on 15 April 2013, which shortened the opposition deadline to two months from the date of advertisement of acceptance, it is now even more important for trade mark owners to keep a watch out for applications for similar trade marks. To this end, it would be prudent for trade mark owners to consider implementing monthly trade mark watches which can be conducted by reference to mark, class(es) or party name.

Wednesday, April 17, 2013

Optus' banned 'TV Now' service would likely be legal in the USA

By Senior Associate Jesse Gleeson

In a major blow for US TV networks, the US Court of Appeals for the Second Circuit has refused to grant a preliminary injunction against streaming television provider Aereo. This presents a contrast with the Australian Full Federal Court decision in relation to the Optus TV Now service.

Online video is now mainstream and looks set to take a more significant share of eyeballs from conventional TV. For example, Netflix's recent political thriller House of Cards, starring Kevin Spacey and directed by David Fincher (The Social Network), which had a production budget of more than $100 million, is only available online. 

Free-to-air and pay TV providers are making huge amounts of video available through their own services (see ABC's iView and Foxtel GO), and also services like Apple TV.

This presents huge opportunities and challenges for content owners and broadcasters. Indeed, companies are launching services which try to avoid licensing content. One way to do this is for companies to contend that their services are internet-based equivalents of watching and recording television at home.

Australia is not immune. For instance, Telstra paid approximately $153 million for the online and mobile rights for AFL games and a significant amount for similar rights in relation to NFL. However, Optus subsequently launched an unlicensed service which allowed its users to view broadcast AFL and NFL matches, without paying a cent in licence fees. Optus's TV Now service was essentially an online video recorder operated by Optus and its subscribers, which allowed customers to record their own individual copies of free-to-air television content on Optus's servers and view it later on mobile devices. Particularly important for time-sensitive content such as AFL matches, customers could stream near-live.

Australian television networks and content owners commenced proceedings in the Federal Court. While the trial judge held that the service was legal by virtue of time shifting exceptions in the Copyright Act, the Full Federal Court overturned that decision and the High Court then denied special leave. We have reported previously on the TV Now decision (see our reports on denial of special leave and the decision of the Full Federal Court, as well as our post on Telstra's latest app), so we won't recap the detail here.

We have been following with great interest a US service called Aereo. Aereo provides each subscriber with remote access to a tiny dedicated television aerial, which receives free-to-air television broadcasts, and streams that content live to web browsers and mobile devices. It also offers personal video recorder functionality much like Optus did. Various US TV networks commenced copyright infringement proceedings against Aereo.

The US Court of Appeals for the Second Circuit just handed down a decision denying preliminary injunctive relief against Aereo. While the proceedings will likely continue on (and further appeal avenues exist for the plaintiff broadcasters), the court's judgment suggests that services such as Aereo's will ultimately be held to be legal in the US.

The Aereo decision relies heavily on the same court's decision in the Cartoon Network LP v CSC Holdings (the Cablevision Case) decision in 2008. There, the court held that creating temporary buffer copies for customers, creating permanent copies for customers and transmitting the broadcast to customers did not infringe copyright. In Aereo, the plaintiffs only pressed the transmission argument in the preliminary injunction application. That argument relies on the transmission being 'to the public'. The court held that Aereo's service records and transmits content for each subscriber individually, and did not constitute transmission to the public.

In the Australian TV Now case, it was not necessary for the plaintiffs to prove transmission to the public. It was sufficient that copies of the broadcasts were made. The key controversy was whether Optus could rely on the time shifting exception in section 111 of the Copyright Act, and in turn on whether it was Optus or the subscriber (or both) making the relevant recordings.

Notwithstanding Aereo's litigation success thus far, it would take a brave entrepreneur to set up a similar service in Australia, at least as the law in Australia currently stands. The Australian Law Reform Commission is looking at this issue in the context of a broader review of digital copyright issues, with a report due in November 2013. We would not bet on any consequent legislative changes paving the way for Aereo-type services. 

Thus, while networks and content owners doing business in Australia face significant challenges from piracy and also legitimate online competitors, their shareholders can sleep a little easier knowing that they will not likely have to compete with services like Aereo.

Tuesday, April 16, 2013

The importance of playing by the rules

By Lawyer Joel Barrett

There's no guarantee that the Federal Court will admit evidence that fails to comply with the Federal Court Rules, no matter how material it is to your case or how much prejudice its exclusion will cause. Generic Health Pty Ltd, a generic pharmaceutical supplier, found that out the hard way in Justice Jagot's recent decision in Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd.

The case involved a patent covering a pharmaceutical contraceptive. The patentee, Bayer Pharma Aktiengesellschaft, markets the product as YASMIN, and Generic Health started selling its own version – ISABELLE – in February 2012, 11 years before the patent was due to expire. Bayer sued for patent infringement and Generic Health naturally cross-claimed for patent invalidity.

The decision is relatively straightforward. On the facts, Justice Jagot found that Generic Health failed to establish any of its pleaded grounds of invalidity: lack of inventive step, lack of a manner of manufacture and lack of fair basis. Essentially, ISABELLE infringes a valid patent. The interesting part is that Generic Health might have succeeded on lack of novelty, but we will never know because Justice Jagot ruled Generic Health's only evidence on that point inadmissible in an earlier interlocutory skirmish, and Generic Health had no option but to abandon the argument at trial.

In early March 2013, Generic Health had sought leave to rely on the affidavit of Mr Burgess, who had observed an experiment in Pune, India in September 2012 involving the manufacture of tablets in accordance with information in a piece of prior art, which Generic Health claimed anticipated the patent and thus destroyed its novelty. Bayer argued that Generic Health hadn't complied with rule 34.50 of the Federal Court Rules, which basically requires a party who proposes to tender 'experimental proof of fact' as evidence to first apply for certain orders, including orders about the time and place of the experiment, who must be permitted to observe it, and so on. The party must then comply with the orders or obtain leave of the court, otherwise evidence regarding the experiment's conduct and results will likely be inadmissible.

Generic Health argued that rule 34.50 was not enlivened because Mr Burgess' evidence only related to the experiment involving manufacture of tablets, and so didn't constitute 'experimental proof of fact'. The relevant fact, Generic Health contended, concerned the dissolution rates of those tablets, and the dissolution tests were conducted after, and separately from, the experiment. Justice Jagot disagreed with that characterisation, finding that the tablets were manufactured for the purpose of carrying out the subsequent dissolution tests, so the experiment was plainly part of the 'experimental proof of fact'.

So rule 34.50 applied, and Generic Health obviously hadn't complied with it. After much correspondence between the parties leading up to the Pune experiment, during which Bayer repeatedly argued that rule 34.50 was engaged, complained that an experiment outside Australia wouldn't be cost-effective and emphasised that it would be inappropriate for Generic Health's parent company to conduct the experiment, Generic Health proceeded with the experiment anyway. Although Generic Health advised Bayer of the impending experiment in a letter, it failed to disclose that it would be taking place the very next day, which Justice Jagot noted 'effectively [denied Bayer] any opportunity to be present during the manufacturing process and to observe what Mr Burgess had the opportunity of observing'.

Despite its failure to comply with rule 34.50, Generic Health argued that it would be heavily prejudiced if Mr Burgess' affidavit was not admitted, which would far outweigh any prejudice suffered by Bayer if the affidavit was allowed. While Justice Jagot accepted that excluding the evidence would prejudice Generic Health, her Honour refused to admit the evidence for several reasons, including that Bayer was prevented from observing the experiment 'when it would always have been in the power of [Generic Health] to give [Bayer] that opportunity', Bayer would be considerably prejudiced by admission of the affidavit due to the importance of the novelty issue to Bayer's defence of the invalidity claim, the affidavit was inscrutable (in that Mr Burgess simply observed an experiment conducted by other people, and couldn't be meaningfully cross-examined on the experiment's conduct), and the evidence might be unfairly prejudicial to Bayer under section 135 of the Evidence Act 1995 (Cth).

Her Honour stated that as early as August 2012, when Justice Yates foreshadowed in a directions hearing that the potential evidence probably wouldn't be accepted at trial if it didn't comply with rule 34.50 and that 'the risk is with [Generic Health] on that', Generic Health should have either taken steps to comply with the rule or sought an interlocutory determination on the 'experimental proof of fact' issue.

So remember: eat your greens, never run with scissors and always comply with the Federal Court Rules.

Friday, April 12, 2013

Pharmaceutical Patents Review - clarification

An earlier post stated that in its draft report, the Pharmaceutical Patents Review Panel had recommended against making the patent term extension regime under sections 70-79A of the Patents Act available for formulation patents and patents for methods of treatment.

The post should have stated that the Panel had recommended against making the extension regime available for patents for method of manufacture or methods of treatment. Formulation patents are already potentially eligible for an extension, and the Panel's draft report recommends that continue.

Thursday, April 11, 2013

Bad news for pharma originators

By Senior Associate Tom Reid

The Pharmaceutical Patents Review Panel has released its draft report on Australia's pharmaceutical patents system, and while it remains to be seen what the final recommendations will be, and what will become of them in an election year, the draft will generally be unwelcome news for originators.

As we reported in an earlier Focus, the Review was commissioned by Mark Dreyfus, then the Parliamentary Secretary for Innovation and now the Attorney-General. The terms of reference were to evaluate whether the patents system 'is effectively balancing the objectives of securing timely access to competitively priced pharmaceuticals, fostering innovation and supporting employment in research and industry'. The draft report follows a period of public submissions and hearings in response to an issues paper issued last November. The issues paper and written submissions are available.

The focus of the review is the extension of term provisions in sections 70-79A of the Patents Act. To compensate the patentee for the time taken up with obtaining regulatory approval, a patentee may extend the term of a patent for a pharmaceutical substance per se, or a pharmaceutical substance produced by a process involving the use of recombinant DNA technology, by up to five years. The rationale is to make the patents system more technology-neutral. Even so, the provisions provide a maximum effective term for eligible patents of only 15 years.

The Review Panel's draft recommendations include cutting the maximum extension term to save cost to the Pharmaceutical Benefits Scheme. The savings could, it is suggested, be directed to subsidising the local pharmaceutical industry directly, the Review Panel's complaint being that the existing system is not effective in fostering local R&D. The draft report further recommends against making the patent term extension regime available for other types of pharmaceutical patents, such as patents for methods of manufacture or methods of treatment.

The draft report characterises the additional cost to the PBS of pharmaceutical patent term extensions as an 'indirect subsidy' to the pharmaceutical industry. We query whether any savings to the PBS generated by reducing that 'indirect subsidy' would, in reality, be used the way proposed. But in any event, any extension is a quid pro quo for the period at the front end of the patent term during which the patentee is unable to market the patented pharmaceutical. The cost to the PBS during that period is nil. Moreover, originators would contend that the fact extensions are available only for a limited class of pharmaceutical patents, the cap on the maximum effective term under the legislation, the time value of money, and the risk that pharmaceutical science will have moved on by the time the extension comes into effect all mean that the compensation they offer can never be total.

Another question is whether the recommendations take proper account of the value of Australia's strong IP regime to its overall trading position. As a net importer of technology, Australia's patent system is of proportionately greater benefit to foreign patentees. But Australia may reasonably expect that by offering foreign patentees substantially equivalent recognition and protection here as they may expect to receive at home – and the draft report finds that, on average, pharmaceutical patents generally have a similar effective term, resulting in a similar exclusive period in the market, in Australia, the US and the UK – it will receive favourable treatment in other areas of trade.

The Review Panel makes a number of draft findings and recommendations in other areas, including in relation to the efficacy of existing avenues to challenge patent validity, the granting of 'follow-on' patents (or 'evergreening'), the exclusivity provided in respect of safety and efficacy data submitted to the Therapeutic Goods Administration, contributory infringement, and an infringement exemption for manufacturing for export. Notably, the draft report includes recommendations that:
  • the Federal Government put in place financial incentives for generics to challenge patents;
  • the Federal Government establish two new permanent bodies, one an 'external patent oversight committee' responsible for reviewing IP Australia's decisions and processes to address concerns regarding the quality of 'follow-on' patents, and the other a 'Pharmaceutical System Coordinating Committee' responsible for reporting to Parliament on the success and effectiveness of the patent, marketing approval and PBS systems;
  • patentees voluntarily agree as an interim measure not to sue for infringement where a party manufactures solely for export to a country where no equivalent patent exists; and
  • a generic not be liable for contributory infringement where it takes reasonable steps to ensure that an unpatented product that it supplies is not used for a patented indication (with reasonable steps to be presumed where the product is not labelled as being for use for any patented indication) – this last being a recommendation that also received support from some originators.
Submissions in response to the draft report are due by 30 April 2013, with the final report expected in May 2013. This blog will follow the progress of the Review.

Thursday, April 4, 2013

Australian fashion shakes its money maker

By Senior Associate Lester Miller

Fashion designers have quadrupled their usage of the registered designs system in the last decade, and 80 per cent of those users are Australian.

Our wallets are gratefully resting unopened in the eye of a sartorial storm, between the Melbourne and Sydney fashion celebrations. We took pause to reflect on the usage and users of Australia's registered design system, and enquire whether fashion designers find the system useful.

Overall Australian design protection

We interrogated the IP Australia designs database for this review. Overall, in the last 15 years, design applications have increased 55 per cent, as shown below in Figure 1.

The composition of the innovators overall is quite different from those in the patent system, where foreign applicants outweigh Australian applicants by roughly 10 to 1. Up until very recently, registered designs were filed equally by Australians and foreign applicants - in 2006 it was a 50/50 split. In the years from then to today, design applications by Australians have dropped by about 10 per cent but the number of foreign applicants have increased by about 30 per cent.



Figure 1 – Registered design applications in Australia 1998 - 2012


Australian fashion design leading the way

In fashion, that trend has been reversed - the number of Australian applicants has grown to be a whopping 80 per cent.

Digging down sector by sector in Figure 2, we see fashion apparel, which in 1998 was a fairly minor player in the registered design system at 5 per cent of total users, has now doubled in relative size to 10 per cent of overall users. Depending on which section of the graph you segment, fashion industry tripled or quadrupled its design application total. Also, 80 per cent of the applications were not filed as Paris Convention applications from overseas, which indicates that the applicants were Australian.

The red line in Figure 2 below is fashion apparel filings, which sharply increased from a flat line in the high 100s a decade ago to the 500 – 600 range today.

Other sectors

Another sector similarly sharply increasing its use of the design system, albeit with a higher volatility, is the recording devices category which includes smartphones: the lilac line. Packaging (dark green) and hardware (dark blue) innovators have also taken increasing advantage of the design system to protect their designs, with a steady uptake in their use of the system from a high base.

Small industry users are seen in the flatter lines along the base of the graph – camera designers and sunglasses (optical category – violet) who, according to our research appear to register designs prolifically in the United States but not in Australia. Pharma product makers have also commenced a small increase in their use of the system, on a par volume-wise with adornments (body and landscape).



Figure 2 – Australian registered design applications by Sector 1998 - 2012

Protecting the bottom line

IP Australia implemented the 'Fashion Rules' design promotion campaign in the mid-noughties. It seems likely it has put registration and legal protection of their creative work on the radar of fashion designers. The success of Review Australia in asserting its design rights in at least some of its Federal Court cases also may also have had some effect. 

The widespread availability of technology to facilitate copying has also likely spurred many to action to protect their designs.

Businesses that have design integrated into their vision and strategy have unmistakably been growing at a faster rate than those where it is incidental, according to Brandon Gien of the Australian International Design Awards. 

The 55 per cent growth in registration of designs generally, and the four-fold growth in fashion apparel over the last decade or so, may be an indication that businesses are taking protection of the design contribution to their bottom line increasingly seriously.