Austra Pty Ltd Legal Situation - Assignment Example

MEMO OF ADVICE TO: Senior Partner FROM: RE: Austra Pty Ltd legal situation (Breach of Intellectual Property) DATE: 4 April 2016 QUESTION PRESENTED What IP rights Novice Ltd currently has in Australia? Have any of them have been infringed and does Novice Ltd likely to get a trademark and a design registered in Australia? Thirdly, Assuming that Novice Ltd manages to register a trademark over ‘Wooloo’ and a design over a suitcase, would any of the above mentioned activities by Austra Pty Ltd infringe any of these rights? BRIEF ANSWER Since Novice Ltd has applied but have not yet registered the trademarks or intellectual property rights, they enjoy protection under the passing off law. The Novice Ltd notice on the infringement of their IP is actionable. By producing products that are similar to those of Novice Ltd, Austra Pty Ltd has infringed on the intellectual property of Novice Ltd. The trademark law in Australia is based on and regulated by legislation and common law. The 1995 Trade Mark Act offers the legislative framework for the trade mark application and the registration of trade marks in Australia1. The legislation offers registered trademarks protection for renewable terms of 10 years. The legislation also requires that the registered trademark is in use within the Australian jurisdiction to avoid deregistration for non-use. Under the common law, an unregistered trademark could be protected through the action of passing off. However, the law requires that the trademark should have a reputation within the Australian jurisdiction. Any deceptive and misleading actions can be acted on through the competition and consumer Act 20102. An unregistered trademark is simply a trademark that has not been registered. Legally, a trademark does not require registration. However, a patent registration is required before it can be used or put in the market. The Novice ltd company had sought and got registration for the patent and trademark within the Australian jurisdiction, therefore, they had the right to issue the letter of seize-and cease to Austra Pty ltd. According to the facts availed from the brief research on Novice ltd and the action they intend to take against Austra Pty ltd, it is found that the cease-and-desist letter sent to Austra Pty ltd by Novice ltd is valid. The legal liability may be prohibitive. The best route is to seek arbitration with the intention of arriving at an agreement for the payment of royalties. The company could approach Novice ltd and urgently open up negotiations. FACTS 1. What IP rights Novice Ltd currently has in Australia? 1.1. Novice ltd designed and manufactured the ride-on suitcase for children in 2012. The design has won several international awards. The company has also protected their IP rights for the design of the suitcase and the innovative braking system that allows the locking of the wheels when the suitcase is standing in the United Kingdom in 2013. In December 2014, Novice ltd got a patent for the new types of brakes in the United States of America, United Kingdom, and Australia. The company named the product wooloo. Wooloo was registered as a trademark in the United Kingdom in December 2013 in relation to toys and suitcase products. Thus, the Novice Ltd Company has registered rights under the design, patent, and trademark laws. The company has all the required registrations to trade in Australia. 1.2. Since 2015, Novice Ltd has been marketing the products through their website and e-bay to more than 27 EU countries as well as the United States of America, New Zealand, and Australia. The company has also been advertising heavily on the internet through Google Adds, Facebook and e-bay specifically targeting the Australia as one of their trial markets. Given the facts, Novice Ltd has sought and got the necessary IP registration in the United Kingdom, the United States of America, and Australia. 1.3. Austra Pty Ltd designed and introduced to the Australian market a similar product to the one being marketed by Novice Ltd. The design involved changing some details of the novice design such as introducing animal-like patterns and features as well as partially hiding the suitcase wheels. In essence, the Austra Pty ltd products were similar to those produced by Novice ltd. The trademark that Austra Pty ltd chose, wooloomooloo was also similar to the Novice Ltd registered wooloo trademark. Under the patent law, Austra Pty ltd is in infringement of the Novice Ltd intellectual property rights. 1.4. Under the intellectual property legislation, a design, when taken in relation to a product, refers to the overall appearances of a product as a result of one or more features of the product. Nevertheless, a design is viewed as just a design in the Design Act when used in relation to a registered product. It means, therefore, that the registration of a design of itself cannot offer any protection against the design being expropriated by other people since the pattern itself is not eligible for registration. In the Dixon J, in Macrae Knitting Mills Ltd versus Lowes Ltd case it was shown that the Design Act concerns itself with the configuration and shapes and not the function3. 1.5. Since Novice Ltd has a registered patent, their products innovation is protected by the Australian Patent Act. Within the Australian jurisdiction, a registered patent is a legally enforceable right to the exploitation of the invention for a specific period. Patent rights, unlike copyrights, are not automatic; they must be registered at the Patent Office in Australia. Novice Ltd has complied with this provision and therefore, stands protected and any company using similar products is in infringement of the patent. 1.6. In order for a patent to be eligible for protection, a product invention has to fall within the scope of patentable products or matter. The patentability of a product is established by legislation and is defined by its exceptions to patentability. It is accepted that the patent protection is available in all fields of technology as provided for in the TRIPS Agreement Article 27.1. Australia is a member of TRIPS. An invention is patentable if it can serve a practical purpose. Thus, the Novice ltd products qualify for protection under the Article because they are of practical purpose. 1.7. Whereas the patent registration offers protection within a territory jurisdiction, and it has no effect in a foreign state, Novice Ltd, therefore, has had to extend the registration of its innovation in the United Kingdom to both Australia and the United States of America by seeking registration in those countries. 1.8. The Novice Ltd part products such as the wheels are also covered by the Design Act. The Act provides monopoly on components part which is deemed to be a product for the purpose of the Act. It is interpreted in common law that if a part of product forms part of the fundamental part of the whole product, it is ascribed as being dictated by its functional purpose. It is, therefore, rendered registarable and therefore, protected by law. 1.9. Infringement of a registered design occurs when a person without the authority of design owner, offers to produce a product that is similar to the registered design or is identical to, or similar in impression to the already registered design. An infringement of a design may occur if somebody imports to Australia a product similar in design to a registered design with the intention of putting it up for sale or for any other business purpose. 1.10 .Passing off is a common law tort practiced in the United Kingdom, Australia and New Zealand. The tort is used to protect unregistered trademarks rights. Essentially the law of passing off is used to protect the goodwill of an enterprise from a possible misrepresentation. The Novice Ltd products can also be protected by the passing off tort. Austra Pty Ltd is liable under the passing off tort of the misrepresentation of Novice Ltd products in Australia. Suffice to say, on a common sense basis, it is an offense for one enterprise to misrepresent its products as those of another. Austra Pty Ltd not only offers for sale goods that are materially similar to those of Novice Ltd, but also uses a trademark that significantly resembles that of Novice Ltd. 1.10. In order for a passing off to be affected, there are three elements that need to be established. Firstly, it is important to demonstrate that a trademark has a reputation or goodwill. It means, therefore, that the passing off tort cannot be used on a new product as it does not have any reputation to protect. Secondly, a demonstration that a misrepresentation has occurred or is likely to occur is necessary. For example, Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd case can suffice4. Some former employee of CTI left the company and although they had a “no compete” clauses in the contracts, they proceeded to set up a company by the name Green Energy and operated in the same field and also continued to give out business cards and invoices with “CTI” labels. The court finding was that this was a good example of passing off. Consequently, the prove demands that the trademark that is of concern has distinct similarity that a customer can easily be deceived. Lastly, it must be demonstrated that there is a significant likelihood of damage resulting from the misrepresentation. All the above conditions can be ascribed to the activities of Austra Pty Ltd except that the Australian company has not claimed to be offering products from Novice Ltd; rather, they claim the products as their innovation which, under the law is deception. In the current matter, the case of Vivo International Corporation Pty Ltd versus TiVo Inc. is used to demonstrate how confusingly some trademarks are5. The courts have maintained that the effect of spoken words or description should b considered. It has been observed that if a trademark nature is likely to lead consumers to express their desire of having the goods, then the similarity of meaning and sound play a significant role since the consumer is not expected to exercise any habitual caution. In the case of Austra, the suitcases are almost identical to those of Novice ltd except for the partially hidden wheel and the animal-like decorations. Conclusion Austra Pty ltd case may end up in court due to the perceived misrepresentation. It is the legal opinion that the best defense is that of invalidity arising from the possibility that Novice ltd may not have registered the patent. 2. Is Novice Ltd likely to get a trademark and a design registered in Australia? 2.1. Australia offers legislations that protect various intellectual property including copyrights, trademarks, patents, and designs. There are also remedies available particularly under the Australian common law for services or goods that are passed off under the Competition and Consumer Act for enterprises that may be misleading or are likely to deceive or mislead. The Trademark Act 1995 is a legislation that provides for the official registration of trademarks. The trademark should be capable of distinguishing the goods from those of other companies. The normal registration period is for ten years with a possibility of renewal. So, Novice Ltd is eligible for registration in Australia for all design, patent, and trademarks as per the Trademark Act of 1995 and the Design Act enacted in 2003. 2.2. Australia is member of the Paris Convention for the Protection of Industrial Property. Thus, Novice Ltd is eligible for the registration of its trademarks, patents, and designs in Australia. Based on a first application for registration in another Convention country, an application can be made in Australia. It is done as a claim for the priority date of the initial application so long as it is done within the first six months from the original application. Conclusion A perusal of the brief from Novice Ltd investigations demonstrates the eligibility of the registration of Novice application. In Australia, the Patent Act 1990 governs the granting of patents6. The Act confers on the successful applicant the monopolistic rights to enjoy the proceeds from the patented product for 20 years. A patent is granted if on comparison with prior art base, the new product is found to be novel, had involved an invention step, has not been previously disclosed, and it is useful. Novice innovations embrace all the conditions demanded by the Act, and therefore, qualify for registration in Australia. 3. Assuming that Novice Ltd manages to register a trademark over ‘Wooloo’ and a design over a suitcase; would any of the above mentioned activities by Austra Pty Ltd infringe any of these rights? 3.1. Patent infringement often occurs when an enterprise makes, uses, sells, or offers for sale a patented product or innovation, or imports into Australia a product that is covered by c patent claim without the authorization of the patent holder. A patent infringement may be committed if a product that is made using a patented method is imported to Australia unless the product is materially changed through further processes or it is a trivial part of another product. Thus, an individual infringes on a patent through the practice of each element of the patent claim relating to one the above acts. The infringement of a patent is a serious crime and it can result in heavy claims imposed by the courts. Austra Pty ltd has infringed on the patent and trade marks belonging to Novice Ltd. The 3.2. Austra Company commenced on the design and production of the products after viewing the Novice product in a trade-fair in 2014. Austral developed their products by altering some details of the Novice ltd design. They added the animal-like ornamental patterns on the suitcase and the wheels were partially hidden. These were superficial changes because the core design remained the same. They also used similar braking system as the one used by Novice Ltd suitcases. Although Austra did not know that Novice ltd had applied for a patent for the wheels technology in Australia, they should have made some investigation. The perception that the Novice wheels looked similar to those used on baby prams and therefore, not protected by the patent law may not hold in a court of law. The decision to market the Austra Pty ltd products under the trade name wooloomooloo was also an infringement of the Novice trademark Wooloo. The Austra trademark has the potential of confusing the consumers. It is evident that Austra were misrepresenting their products and tried to copy the innovative technology developed by Novice including the trade name. It appears that the company wanted to make their business case by infringing on the patents and trademarks of another company. The fact that the company is based in a town bearing the Wooloomooloo may not hold any strength in a patent and trademark case. 3.3. If, on the other hand, Novice Ltd had not managed to register the design, patent, and Trademark with the Australian Patent Authority, Austra may not have any case to answer because the patent law is only applicable in the countries it is registered. It is also not possible to apply the law in retrospect. In the case of Australian Associated Motor Insurers Ltd versus Australian Automotive Motor Inspection Centre Pty Ltd, the trademark owner was an insurance company, AAMI while the alleged culprit was AAMIC who was in the business of assessing accident damages and the standards of repairs to the insured vehicles7. The Issue: were the services offered by AAMIC of the same description as those offered by AAMI? The court Held that they were, and therefore, there was a case of infringement of the patent and AAMI were held liable. Conclusion Austra Pty ltd has committed several infringements to the Novice patent and trade mark and risk being sued. There is not much defense on the issue except perhaps a claim of invalidity which may be difficult to prove. 4. If any of Novice’s rights have been infringed, what remedies the company could ask for? 4.1. A patent owner, such as Novice Ltd, can sue for patent infringement. However, the patent holder has to prove infringement. Should such a case succeed, the enterprise of individual that may have infringed on the patent can be fined monetary damages and ordered to stop the infringement. On the other hand, the court may find that there is no need for a license if the enterprise is not practicing the invention, or some of the patent claims are invalid, and finally, there may be other circumstantial reason that may demonstrate why the patent holders does not have a claim. 4.2. Novice ltd, as the registered patent and trademark owner can enforce the patent rights by instituting a patent infringement lawsuit or action in the high court against Austra Pty ltd for using the Novice ltd invention without the authorization or permission. Should the law suit be successful, the high court may issue an injunction or a court order preventing Austra from making any more use or sale of the devices. The court may also award damages to Novice Ltd. The court may also be an arbitrator and seek to reach an agreement where Austra would pay Novice Ltd royalties as an exchange for the authority to use the infringing components. 4.3. It should, however, be noted that remedies are made available for the infringement that obtain during the active life of the patent. That means that there is no remedy when the patent is pending registration. Often, the easiest relief for an infringement of a patent is an injunction. The injunction is a court order that prohibits the production, use, or sale of the infringing product. The court may also prohibit the use of products that had been manufactured prior to the registration of the patent. 4.4. A violation of a court injunction is contempt of the court. The case is sorted through contempt proceedings. In the contempt proceedings only the proof of violation is needed to be demonstrated. However, in some instances, it may require proof of infringement, especially in cases where a prior infringer may try to avoid the claims by seeking to modify the production of process. 4.5. In Australia, only one claim of a patent need to be proved in order for the patent holder or owner to be paid damages. In means, therefore, that even if the other claims are invalid, the one deceptive intent is cause for punishment. 4.6. There are two common defenses to the claim for patent and trademark infringement. Many people argue that they have not committed infringement or the patent was invalid. The non-infringement defense often harps at the contention that an element of the asserted claim may not be present in the infringer’s product or a step of the method had not been performed. The invalidity defense offers a counter attack on the validity of the patent and on the alleged claims. Austra Pty ltd. could attempt a defense on the invalidity approach, but they may find it a bit tough to prove. In the case, for instance, of Pinefair Pty Ltd versus Bedford Industries Rehabilitation Association Inc., the court was concerned with whether the infringer had omitted any essential integer or step in making the transition to the production of an item whose final form differs with the patented invention or whether the application of the product was trivial8. The case was an issue of invalid patent. Conclusion There are many remedies or relief available to Novice Ltd for the infringement of the patent and trademark. The enterprise has already issued seize-and-desist letter which requires Austra Pty Ltd to stop marketing and selling of their new product. It is most likely that Novice ltd intend to proceed to court. If such an eventuality happens, Austra could suffer overwhelming damages. The best route is to seek arbitration with the intention of arriving at an agreement for the payment of royalties. The company should approach Novice ltd and urgently open up negotiations. Read More