Section 92A bill introduced to Parliament today

A bill repealing Section 92A of the Copyright Act will be introduced into Parliament today by Commerce Minister Simon Power.

The Copyright (Infringing File Sharing) Amendment Bill repeals Section 92A and replaces it with a three-notice regime which is intended to deter illegal file sharing.

“This amendment puts in place a fair and balanced process to deal with online copyright infringements occurring via file sharing,” Mr Power says.

“The major feature is the three-notice process, which educates the public about illegal file sharing and provides effective methods for copyright owners to enforce their copyright.

“It ensures that file sharers are given adequate warnings that unauthorised sharing of copyright works is illegal.”

The bill also extends the jurisdiction of the Copyright Tribunal, enabling it to hear complaints and award penalties of up to $15,000 based on the amount of damage sustained by the copyright owner.

Mr Power says the bill will also enable copyright owners to seek the suspension of internet accounts through the District Court for up to six months.

“It’s important that account holders are given a reasonable time to stop infringing before enforcement takes place.

“The bill prescribes timeframes so account holders have the opportunity to address illegal file sharing activity occurring on their internet connection before enforcement action is taken.

“They will also have the chance to challenge notices and may request hearings at the Copyright Tribunal to contest infringement claims.

“Regulations will outline the awards the tribunal may make and they’ll be drafted later this year when the bill has been enacted.

“Online copyright infringement is a problem for everyone, but especially for the creative industry, which has experienced significant declines in revenue as file sharing has become more prevalent.

“This bill is the result of extensive consultation with stakeholders and is an important step in addressing a complex issue.”

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The bill is available online at http://www.legislation.govt.nz/bill/government/2010/0119/8.0/DLM2764312.html”>

Watch this space for further developments.

1. The purpose of this paper is to update practitioners on recent developments in the copyright law area. I approach the task in two parts. Firstly, dealing with the principal legislative developments and secondly looking at a couple of other developments of interest.

Main Legislative Developments
Copyright (New Technologies) Amendment Bill

Background
2. The proposed amendments to the Copyright Act 1994 took another step when the Commerce Select Committee reported back to Parliament on 29 July 2007. A number of provisions in the Bill remain the same. However, others are likely to change. The key changes are discussed below.
3. Firstly, it is proposed that that the title of the legislation be changed to the Copyright (New Technologies) Amendment Act, removing reference to “performance rights”. That is, given the relatively limited treatment they receive in the Bill, the committee has stated that while the Bill does have some sections that refer to performers’ rights their only purpose is to make those sections technologically neutral.

Storing for educational purposes
4. The committee recommends amending the new s 44A(1)(b)(ii) so that the requirement that the author of a copyright work be identified be dependent on the author’s identity being known. This is to take into account the fact that authors on the internet are often not capable of identification.
5. It is recommended that s 44(1)(b)(iv) be removed. The section provides that educational establishments must identify the course of instruction for which material is stored, if it is stored. The committee suggests that this is impractical as the website could be used in many courses and it will also reduce flexibility in internet based teaching.

Copyright for librarians and archivists for replacement
6. The committee posits that the new s 55(4) be inserted into clause 34(2) so that it is consistent with s 55(1)(b) of the Act. This would allow a digital copy to be made to replace an item in a prescribed library or archive but only under certain limited circumstances.
7. In accordance with submissions made by the New Zealand Law Society, the committee has accepted that it impossible to differentiate between on-site and off-site access and as such the conditions in the new s 56A should apply no matter where digital copies are accessed. It has also accepted that the term ‘Authenticated user’ be more restrictively defined in order to properly balance the competing rights of protection and access.
8. It is now proposed that the new ss 56B(a) and 56C(a) be abandoned. These sections require requesters of digital copies to state the purpose for which the material will be used and to put the request in writing. This is seen as unnecessary in light of current practice and existing sections in the Act.
9. The committee recommends that ss 56B(b) and 56C(b) be deleted because of compliance costs for libraries and archives. These two sections require a written declaration that certain provisions of the Copyright Act have been followed.

Observing, studying, or testing of computer program
10. The committee recommends inserting new s 80 BA (clause 43) in order to clarify that a lawful user of a computer program may observe, study, or test the program and how it runs under certain circumstances without infringing copyright. This is recognition of the need, once again, to balance the often competing interests of copyright owners and the wider public, who may need or wish to access a particular copyright work.

Fair Dealing
11. Fair dealing defences, exceptions or savings relating to CDs, DVDs and a range of audiovisual works remain an area of continuing debate and disagreement.
12. In terms of format shifting, the committee received a number of submissions from parties contending that a purchaser of a copyrighted sound recording (for example a CD) should be able to copy it to another format without restrictions. The committee however stressed that such a person does not acquire copyright in the sound recordings and that the copyright owner retains the exclusive right to control copying of the works under s 16 of the Act. On this basis it maintained the status quo to the extent of maintaining the existing form of restrictions.
13.However, it is now proposed that s 81A(1)(e) be amended to clarify that the copy must be solely for the personal use of the person who made it or of a member of the person’s household if the format-shifting exception were to apply.
14.Further, it is now proposed that s 81A(1)(g) be amended so that a person who has purchased a CD must retain possession of both the original copy and any copy subsequently made, meaning that if the original CD is sold, the copy could not be retained.
15. Is also proposed that s 81A(3) be removed on the basis that it would create uncertainty as to whether purchasers of sound recordings recorded on older technology would be allowed to continue format-shifting. The section itself states that new s 81A will expire two years after enactment, unless extended by the Governor-General by Order in Council. The committee rejected submissions that s 81A should be extended beyond sound recordings, on the basis that this would not be in accordance with our obligations under the Berne Convention for the Protection of Literary and Artistic Works.
16. In terms of time shifting, the committee recommends that new s 84(1)(a) be amended so that it is more clear that the recording must be solely for the personal use of the person who made it or of a member of his or her household were the time-shifting exception to apply. Equally, it is envisaged that s 84(1)(c) be reworded in order to clarify that a time-shifted recording must not be made from an on-demand service.

Internet service provider obligations
17.The committee has recommended that the definition of ‘internet service provider’ (‘ISP’) in clause 3(2) be amended so that a person who hosts material on websites or other electronic retrieval systems that can be accessed by a user falls within the definition.

Liability if user infringes copyright
18.The committee is of the view that the wording of new s 92B (clause 53) is not satisfactory because of the risk of it exposing ISPs to liability for copyright infringement – specifically when a person has infringed the copyright concerned before using the services of the ISP. That is, for example in sending or distributing any infringing content. If amended the section will make it clear that it applies only if a person infringed copyright in a work by using internet services of the ISP. Likewise, ‘Internet services’ are defined.

Liability for storing infringing material
19.It is proposed that in clause 53, the new s 92C(2)(a) be amended and that a new s 92C(2)(ba) be inserted so that it is clear when ISPs would be required to take material down, an issue of some concern to ISPs. A new s 92C(2)(b) also provides that an ISP would become liable for copyright infringement by storing infringing material if a user of the service committed an act of copyright infringement on behalf of, or at the direction of, the ISP.

Technological protection measures
20. Technological protection measures (‘TPM’) are devices designed to manage and prevent piracy of digital copyright works. Certain interests argued that the Act should be extended so that the act of circumventing a TPM is prohibited. However, the committee resisted this approach on the basis that there are likely to be situations in which users of copyright works may want to circumvent a TPM for legitimate reasons and purposes, such as fair dealing.
21. Therefore, the existing provisions are largely retained. The definition of TPMs in new s 226 is to be amended to specifically exclude controls on access to a work for non-infringing purposes. It is however now clear that the Copyright Act is not meant to protect access-control technologies that are used for price discrimination or to control the geographical distribution of works. Once again, this will please those who argued that access control is a competition law issue and has little or nothing to do with copyright law and that ultimately many access control measures work to the detriment of users in New Zealand.
22. Again, in accepting another of the Law Society’s submissions, it has been acknowledged that the rather pejorative term ‘TPM spoiler’ should be replaced by the more accurate and neutral term ‘TPM circumvention device’.
23.Finally, in recognition of the need to find the appropriate balance between competing interests, new s 226E (clause 89) is to be changed to allow users to get assistance from a person who is qualified to exercise a permitted act using a TPM circumvention device without applying to the copyright owner, something which many saw as onerous and unnecessary. Further, new s 226E(4) ensures that such persons cannot charged unreasonably high fees for such assistance.

Commissioning of Copyright Works
24. In March 2006, the Ministry of Economic Development released a discussion paper The Commissioning Rule and the Copyright Act 1994. This paper can be found on the MED website at http://www.med.govt.nz/templates/MultipageDocumentTOC____18837.aspx
25. The discussion paper dealt with two issues. The first is the adequacy of s 21(3) of the Copyright Act which provides a regime for dealing with ownership of copyright in commissioned works. The second is the relationship between copyright law and contract law. It is understood that 70 responses were received by the MED. These responses have been considered and a second discussion paper has been released, eliciting further comment from interested stakeholders. This paper focuses in particular on the following areas:
•Whether the underlying rationale for the commissioning rule continues to be relevant;
•The scope of copyright works covered by the rule;
•How privacy interests of those who commission works for private and domestic purposes should be protected; and
•Consistency between the Copyright Act and the Designs Act.
26. Submissions on the discussion paper are due later this month and the New Zealand Law Society is likely to contribute to the debate.

Other Areas under Review
27. A number of other related issues are being considered at present. These include the following.

Off-air recordings of television programmes to educational establishments
28. The MED is in the process of reviewing whether the Copyright Act should apply to off-air recordings of broadcast television programmes provided to an educational establishment by an external grant. A report is expected in September.

Directors’ Rights
29. Film directors have argued that they should be defined as ‘authors’ and thus the first owners of the relevant works under the Copyright Act. The committee has indicated that the issue requires further attention but that it needs to be done as a separate exercise, because other interest groups are likely to want to have their say. It is understood that the MED is likely to look at this in early 2008.

Orphaned works
30. It has been proposed that the Copyright Act needs to be amended to allow the legitimate copying of so called orphaned works. These are works where the owner cannot be identified for some reason. The MED is also to investigate this and report back to the Associate Minister of Commerce.

Access to works for print-disabled persons
31. The issue of whether and under what circumstances entities may make adaptations of works for print-disabled people without infringing copyright is dealt with by s 69 of the Copyright Act. The issue of consultation between the MED and the Royal New Zealand Society for the Blind and other parties is to be considered and once again a report made to the Associate Minister of Commerce.
32. Finally, in terms of the Act as a whole, the MED has indicated that it will be subject to review in five years time to ensure that it maintains its relevance in the face of new technologies. This is welcome but it is not just in the area of new technologies that the Act requires attention. I consider that more fundamental issues such as the whole area of “fair use” needs to be reviewed. Hopefully, this process can be initiated before too long.

Case Law Developments
The Da Vinci Code
33.A case of particular interest relates to the celebrated novel, The Da Vinci Code, written in 2003 by Dan Brown. On 28 March 2007 the Court of Appeal handed down its decision in Baigent and another v Random House Group Ltd [2007] EWCA Civ 247. This was an appeal against a decision of the High Court to dismiss the Claimants’ claim of breach of copyright under s16 of the Copyright, Designs and Patents Act 1988 (UK). At issue was whether the High Court Judge was correct in legal principle, and therefore whether he was entitled to his conclusions.
34.The Claimants are two of the three authors of a book first published in 1982, The Holy Blood and the Holy Grail (‘HBHG’) which is described by them as a work of historical conjecture, and suggests a secret history of the Holy Grail and Christianity. The Defendant is the publisher in the United kingdom of The Da Vinci Code (‘DVC’).

35. It was common ground between the parties that HBHG was essentially historical in nature whereas DVC was a thriller. It was also common ground that the thriller adopted certain themes similar to and overlapping with the content of the historical work. It was not in dispute that HBHG is an original literary work in which copyright subsists, nor that the Claimants are two of the joint holders of the copyright. The Claimants’ case is that Brown derived the majority of six chapters of his work from HBHG, that he copied part of HBHG and that what he copied was a substantial part of the work.

Procedural History

36. The case first went to trial before Mr Justice Peter Smith in the High Court (Chancery Division) in February and March 2006. His Honour’s judgment was delivered on 7 April 2006, dismissing the claim. Lloyd LJ, in the Court of Appeal, describes Peter Smith J’s judgment as “not easy to read or understand”, and suggests he should “have allowed himself more time for the preparation, checking and revision of the judgment”. Smith J appears to have held that while the six chapters of DVC in question were largely derived from HBHG, the claim for breach of copyright did not succeed as the claimants failed to establish that a substantial part of HBHG had been copied. Peter Smith J refused permission to appeal, but the Claimants’ application to the Court of Appeal was accepted by Lloyd LJ, with permission to appeal being granted on 13 June 2006.

Decision of the Court of Appeal
37. All three judges delivered concurring decisions. The first and most detailed judgment was delivered by Lloyd LJ, who noted at para [5] the unusual nature of the claim:
If the copyright work in question is a literary work, the allegation will normally be that part of the text of the earlier work was copied exactly or with some modification, in the creation of the later work. In the present case that is not what is alleged as the basis for the claim in copyright infringement. What is said to have been copied is a theme of the copyright work
38. In setting out the test for breach of copyright, Lloyd LJ stated at para [5]:
Copyright does not subsist in ideas; it protects the expression of ideas, not the ideas themselves. No clear principle is or could be laid down in the cases in order to tell whether what is sought to be protected is on the ideas side of the dividing line, or on the expression side.

39.As legal authority for the lack of a definite rule with regards to delineating ideas and expression, Lloyd LJ cited Lord Hoffmann’s discussion of artistic copyright in the House of Lords in Designers’ Guild Ltd v Russell Williams (Textiles) Ltd [2001] 1 All ER 700, [2000] 1 WLR 2416, at para 24, [2001] FSR 113:
There are numerous authorities which show that the “part” which is regarded as substantial can be a feature or combination of features of the work, abstracted from it rather than forming a discrete part. That is what the judge found to have been copied in this case. Or to take another example, the original elements in the plot of a play or novel may be a substantial part, so that copyright may be infringed by a work which does not reproduce a single sentence of the original. If one asks what is being protected in such a case, it is difficult to give any answer except that it is an idea expressed in the copyright work.
40.Lloyd LJ also cited paras [25] and [26] of Lord Hoffmann’s judgment in Designers’ Guild, which is now authoritative on this point, namely that:
The other proposition is that certain ideas expressed by a copyright work may not be protected because, although they are ideas of a literary, dramatic or artistic nature, they are not original, or so commonplace as not to form a substantial part of the work.
Generally speaking, in cases of artistic copyright, the more abstract and simple the copied idea, the less likely it is to constitute a substantial part. Originality, in the sense of the contribution of the author’s skill and labour, tends to lie in the detail with which the basic idea is presented.
41.Applying this approach His Lordship set out the following test at para [7]:
•what relevant material was to be found in both works;
•how much, if any, of that had been copied from HBHG
•whether what was copied was on the copyright side of the line between ideas and expression; and.
•whether any of the material that was copied and did qualify as expression, rather than as ideas, amounted to a substantial part of HBHG.

The third and fourth of these issues, as often, are interconnected.
42. Lloyd LJ further stated at para [8] that:
If, by applying those tests, the judge found that a substantial part of HBHG had been copied by Mr Brown in writing DVC, it was irrelevant to consider Mr Brown’s intention in doing so. Breach of copyright does not depend on the intention or state of mind of the alleged infringer.

Application:
43. According to Lloyd LJ, Peter Smith J found that even though relevant material in HBHG was also found in DVC, that Dan Brown had access to HBHG while including this common material in DVC (and Brown used HBHG at this stage), and that Brown based relevant parts of DVC on material in HBHG. His Lordship summarises the position thus at para [99]:
what [Brown] took from HBHG amounted to generalised propositions, at too high a level of abstraction to qualify for copyright protection, because it was not the product of the application of skill and labour by the authors of HBHG in the creation of their literary work. It lay on the wrong side of the line between ideas and their expression.

44.As a result, Peter Smith J was correct to conclude that:
whatever elements (if any) were copied from HBHG, they did not amount to a substantial part of it.” Concluding at para [100] that it had not been shown that the judge was wrong in the conclusions to which he came and indeed he was entitled to come to those conclusions. I would therefore dismiss the appeal.

45.One of the real difficulties the Claimants faced in this case was that even though the trial judge had found that Brown had in fact copied some material from HBHG in writing DVC that however viewed this did not amount to a substantial part of HBHG and in effect was on the wrong (ideas) side of the dividing line between ideas and expression. That is, because it was expressed at too high a level of abstraction. More fundamentally however the trial judge concluded that the so-called Central Theme was not in fact a part of HBHG at all.

46.In practical terms, the Claimants position was seriously undermined by two critical factors. The first was that when one of the authors, Mr Baigent gave evidence as to what the Central Theme was and where it could be found in the copyright work as a theme, his evidence was “comprehensively destroyed” in cross-examination (see paragraphs 231 and 233 of the High Court judgment). The second was that the Claimants made repeated changes to the way in which the Central Theme was formulated, the Appeal Court noting with displeasure the number of changes in the particulars provided. Indeed, after observing (at paragraph 231) in a very direct way that this evidence was “lamentably inadequate” the trial judge went on to note at paragraph 240:
“I am entitled to see whether or not the Claimants evidence about their Central Theme is credible. At the end of the day if they are unable to say in a coherent way what their Central Theme is that is strongly supportive of the proposition that there is no such Central Theme as alleged.”

47.That makes it clear that in a literary copyright case that where a party seeks to allege infringement and does not rely on copying of the text, structure or architecture of the work that as a minimum they should at least to have a clear idea as to what part has been copied and try to have a reasonably consistent stance in terms of what comprises the work in issue.

The Brash E Mail Saga

48.The Don Brash e-mail saga was not just the last straw that broke the camel’s back in the case of Dr. Brash’s political aspirations. It also throws up some very interesting legal issues around the question of confidentiality, privacy and copyright. The exact sequence of events is a little unclear. It does however appear that a relatively large number of e-mails to and from the Dr. Brash got into the hands of the author Nicky Hager and formed part of his book “The Hollow Men”. Dr. Brash indicated that while he had nothing to hide over the misappropriated emails he nevertheless obtained an ex parte interim injunction to prevent their publication, on the basis that the threat of publication had become more tangible in the weeks prior to seeking such relief.

49.At the time, Commentators such as Fran O’Sullivan stated that there appeared to have been a serious security breach which should be investigated by Parliament’s Speaker Margaret Wilson and that a full-scale inquiry was necessary. She also expressed the view that the electronic theft of the Opposition Leader’s emails from Parliament’s server was a significant matter and that it was necessary that our politicians could operate, secure in the knowledge that their emails would not find themselves in their opponents’ hands.

50.In Brash v John Doe & Jane Doe (HC, Wellington, CIV-2006-485-2605, 16 November 2006, per Mackenzie J) Dr. Brash sought an order for an ex parte application for an interim injunction alleging that an unknown person or persons had gained unauthorized access to his computer and had taken copies of email messages without authority. He also claimed to have reason to believe that this person or persons had distributed copies of these emails and with the intention of having them published in book form.

51.Mackenzie J granted the order relying on earlier cases where interim injunctions had been granted against unknown persons; in Tony Blain Pty Ltd v Splain [1993] 3 NZLR 185 per Anderson J and Bloomsburny Publishing Group Ltd v News Group Newspapers Ltd [2003] EWHC 1205 (ch). Mackenzie J was satisfied on the basis of these authorities that the necessary jurisdiction to make the order existed. Dr. Brash established a serious question to be tried, in relation to four causes of action: conversion, copyright infringement, breach of confidence and the tort of privacy.

52.On the breach of copyright action in finding that a serious question arose the Judge relied on Ashdown v Telegraph Group Ltd [2001] 4 All ER 666 (CA) where it was held that copyright protection will prevail over freedom of expression. In terms of the balance of convenience His Honour found that it lay with the plaintiff in that he would suffer damage if the emails were published and the orders were made without notice, given the prejudice that would be suffered if this was required.

53.However, the situation was soon to change because on 24 November 2006 Mackenzie J was asked by the plaintiff to discharge the orders and a minute was issued accordingly. By then, the book ‘The Hollow Men’ had been published and at that point the plaintiff stated that he did not wish to have the orders to have continuing application to the book.

54.A question that arises is whether Nicky Hager was entitled to publish the e-mails contained within his book, even if they were ‘stolen’, as alleged. Leading to one side possible ramifications under the Crimes Act the question is whether the Court would have granted or continued an interlocutory injunction once the matter had been fully argued or indeed whether a permanent injunction would have been granted. Obviously, the Court would have had little difficulty in recognizing the need to protect confidences whether of a personal nature (for example a communication between a constituent and a member of Parliament) or a more formal communication (for example, one involving a government official or the Leader of the Opposition, something in the nature of a government secret).

55.However, that is only one side of the coin. Given the nature of certain of the communications, some of which were less than flattering of Dr Brash (and had been leaked from time to time when it suited his political opponents) the question of the public interest arises. Accordingly, the question which would need to be addressed at either the interim or substantive stage of any proceeding was whether the public interest and the need of the public to know what was said, by the road any other interests. Certain commentators have suggested that the public interest arguments should have also prevailed in terms of the copyright argument and that an injunction should not be granted where, as in this case, the public interest is necessarily involved. I am not sure that that is necessarily so if, following full argument, Ashdown is followed in New Zealand. Having said that, the proposition in Ashdown is that copyright should, except in rare cases, prevail over freedom of expression. Where however the issue of freedom of expression is closely connected to broader issues of public interest, for example, involving a prominent politician, the balance may well shift.

56.Coming back as we should to copyright, the difficulty might well be that copyright in the various e-mails would belong to the authors of those e-mails and even though they may have resided for the time being on Dr Brash’s computer (or more correctly the Parliamentary server) he would not actually own the copyright. On the other hand, if he had responded to a particular e-mail he would arguably own the copyright in the response. And then there are the issues of privacy and the Bill of Rights Act. That however will need to be for another day.

This paper was written for the Auckland District Law Society and presented to its members in October 2005

1.INTRODUCTION

The aim of this paper is to give practitioners an overview of some of the more important recent developments in intellectual property (IP) law in New Zealand. The focus is on IP but with some discussion of related internet and privacy issues. In doing so, I hope to be able to provide a broad review of the past 12-18 months, identifying the main developments and more significant trends.

I have not attempted to deal with all developments. Neither time nor space permits that. However, hopefully I will be able to discuss a few of the more relevant and interesting issues, so as to give participants an overall feel for what is happening in this field.

2.PATENTS

Patents are regarded by many as one of the more esoteric and at times difficult areas of IP law. It represents as good a place as any to start.

Methods of Treatment of Humans

The Court of Appeal has handed down two recent decisions in the patents field. In the first, Pfizer v Commissioner of Patents, [2005] 1 NZLR 362, a full court (Anderson P, Glazebrook J, Hammond J, William Young J, O’Regan J) ruled on the allowability of methods of treatment of humans.

Pfizer had lodged two applications directed to methods of medical treatment of psychotic disorders, using a new compound. The Commissioner rejected the claims on the basis that they related to a method of treating humans and therefore failed to meet the test of a patentable invention as per s 2 of the Patents Act 1953. The hearings officer rejected the claims on the basis that they were not allowable on moral/policy grounds. Pfizer appealed the IPONZ decision to the High Court (judgment of Ellis J in Re Pfizer Inc, High Court – Wellington, AP257/2000, 30 August 2002, unreported). The High Court upheld the decision of the Assistant Commissioner. Pfizer then appealed that decision to the Court of Appeal.

In doing so, Pfizer argued that it was desirable that methods of medical treatment should be patentable and that Wellcome Foundation Ltd v Commissioner of Patents [1983] NZLR 385 (“Wellcome“) should be overruled essentially for policy reasons.

In dismissing the appeal, the Court of Appeal found that its earlier decision in Wellcome was clear and that it prevented patents being granted for methods of treating disease or illness in human beings. Accordingly, it concluded that the issue was properly one for the legislature not the courts. The Court also stated that while conformity between the laws of New Zealand and Australia may be a desirable policy objective, that Australia’s acceptance of patentability of methods of medical treatment was not determinative.

Pfizer’s central argument was that, consistent with the judgment of the Court of Appeal in Pharmac, (Pharmaceutical Management Agency Ltd v Commissioner of Patents [2000] 2 NZLR 529) it was now appropriate for the Court to overrule Wellcome so as to permit the patenting of methods of medical treatment. It argued that such a conclusion would logically follow from the finding in Pharmac that methods of medical treatment are in fact capable of being an invention under the Act.

In delivering the principal judgment, O’Regan J accepted that the course proposed by Pfizer was certainly open to the Court, stating at paragraph 80 that:

“All of these heads of argument must, of course be addressed in the context of Pfizer’s broad contention that that patentability of methods of medical treatment was desirable and that we should overrule Wellcome (and Pharmac to the extent that it did not overrule Wellcome) for policy reasons. We accept that it would be open to us to do so, in the same way this Court accepted the patentability of Swiss claims in Pharmac.” In saying this, to some extent we have consistency between New Zealand and Australia”.

However, the Court was not prepared to go down Pfizer’s path, for reasons explained by O’Regan J. at paragraphs 83 and 84; namely that:

“…our overall view (which is confirmed by the nature of the evidence led) is that reform of this area of the law is better undertaken through the Parliamentary process. This would allow proper consultation with medical professionals and other organisations as well as the commercial interests which favour patentability, and the formulation of considered reform proposals after that consultation process has taken place.”

At the end of the day, the views of the Court are probably well summed up at paragraph 7 of the judgment of Anderson P, where his Honour states:

“…this Court once more unanimously holds that in terms of the present law, methods of medical treatment of humans are not patentable. Such methods may be inventions, but in terms of longstanding authority it is generally inconvenient to protect them with letters patent or grants of privilege.”

This result is an unwelcome one (sorry couldn’t resist) for the pharmaceutical industry. In Pharmac, (admittedly a case relating to Swiss-style claims) Gault J acknowledged that the exclusion from patentability of methods of medical treatment rests on moral, or more properly policy, grounds. Following this expression of opinion, IPONZ altered its practice, by refusing claims to methods of treating humans pursuant to Section 17 of the Patents Act – on the basis that the use of the invention would be contrary to morality.

Something in the order of 600 applications were left in limbo pending the outcome of the Pfizer appeal. Now that the position is clear again, objections are once again being made under section 2 of the Patents Act. Obviously, some claims may be capable of amendment by reformulating them as Swiss-type claims but for the rest, the prognosis is not good.

The net result is that we once again have a divergent position between New Zealand and Australia, even though the definitions of invention in the respective patents acts are materially the same. Further, decisions such as Bristol Myers Squibb Company v FH Faulding & Co Limited (2000) 170 ALR 439, (methods of medical treatment patentable and patents should be granted for such methods) might have formed the basis for some level of harmony. What we do see, on both sides of the Tasman is a delicate dance between our courts and legislatures as they try to demarcate the often fine line between making and interpreting the law.

In New Zealand, the courts having left the decision to Parliament, it seems that the likely result is that the new Patents Act will exclude from patentability inventions concerning diagnostic, therapeutic and surgical methods for the treatment of humans.

Accordingly, Parliament seems set to have the final word on this issue and to close the door on any further debate in New Zealand, at least for the foreseeable future.

Infringement and Validity

In the second decision, in Peterson Portable Sawing Systems Ltd v Lucas (Court of Appeal, CA64/03, 4 March 2005, Anderson P, McGrath J, Glazebrook J, unreported) the Court turned its mind to something completely different, portable sawmills. The appellant, Peterson, appealed against a High Court decision which had found that the patent was valid and infringed. One of the principal arguments put to the Court of Appeal was that the High Court judge had failed to distinguish between novelty and obviousness and in so doing finding that inventiveness is a matter of degree rather than classification. It was also asserted that in the High Court Fisher J had not properly addressed the issue of the common general knowledge.

In dismissing the appeal, the Court, per Anderson P, noted at paragraphs 79-83:

“The inventive concept was the addition to the Peterson Standard mill, with its advantages of open end framing, lightness and stability, of a quick and efficient method of, simultaneously, raising and lowering the separate rails…

That combination was fairly readily achievable, obvious in hindsight, and as the commercial success showed, very desirable to millers. But designers were designing away from such integration, not towards it. This would seem to be a classic case of a simple but not obvious solution, like the wheel.

Such observations are, however, less pertinent than the essentially factual enquiry which had to be undertaken by the trial Judge. It was for him to determine whether the Lucas mill was anticipated or obvious to the skilled addressee.

There will be cases where the subject art is complex and diverse, with the skilled addressee possessing extensive arcane knowledge which must be evaluated by a trial judge. Yet other cases will concern an art less specialised and complex. In those cases the scope for novelty and inventiveness may be relatively compressed and the notional skilled but unimaginative addressee may be more readily identifiable.

The present case seems one of the latter type. Indicative of the notional addressee are Mr Lucas, Mr Peterson, Mr Hutchinson and such designers as those of the Lewis mill. Fisher J was plainly entitled to have regard to reality in seeking to identify the notional. The appellants’ approach has been to invest a relatively straight forward, albeit subtle, question with an unwarranted complexity”.

As the person responsible for such complexity I should probably not comment at this point. In July leave was given by the Supreme Court, in what I think is the first IP case to be heard, to appeal parts of the decision (relating to the grounds of anticipation and obviousness). The appeal will be heard in November this year.

E Commerce Patents

Following the Federal Circuit’s decision in State Street Bank & Trust Co v Signature Financial Group Inc (method of doing business, producing a “useful, concrete and tangible result” and practical utility and therefore patentable) the general approach in New Zealand has been that methods of doing business are regarded in the same light as other methods and subjected to the same rules.

As a result, IPONZ has been inundated with new business method patent applications. While the New Zealand courts have yet to decide whether software or business methods are patentable it is likely that they will follow the international approach.

Law Reform

The patent area has been under the law reform microscope for some time now. A discussion document, Boundaries to Patentability was released by the Ministry of Economic Development (MED) in March 2002. Cabinet agreed to the policy proposals arising from the third stage of the review process and on 20 December 2004 a Draft (exposure draft) Patents Bill was released for public consultation. Submissions closed on 11 March 2005. The draft Bill is currently being reviewed. It is unclear when it will be introduced to the House, but with elections this year it is now likely to be in 2006.

The draft Patents Bill is a substantial document that will entirely replace the existing Act. Very briefly, the major proposed changes include:

a.A strengthening of the criteria for granting a patent;

b.Certain of the threshold tests, including that of utility, will be amplified and brought up-to-date with modern technological developments;

c.Novelty and obviousness will be measured against all matter made available to the public anywhere in the world, by any means, as opposed to just in New Zealand as at present; and

d.A Maori Consultative Committee will be set up to advise the Commissioner on matters relevant to Maori.

3.COPYRIGHT

Ownership/Enforcement re Software

The courts are often called in to determine the ownership or vesting of rights in software. It is often a complex task.

In Pacific Software Technology Ltd & Anor v Perry Group Ltd & Anor [2004] 1 NZLR 164, (2003) 57 IPR 145, the Court of Appeal dismissed an appeal against a High Court decision which dealt with the ownership of computer software. The High Court ordered that the appellant deliver up the source code to the respondents. One issue which arose was as to the ownership of pre-existing libraries in which separate copyright vested. The Court found that it was necessary to imply licences vis-à-vis the source code and object code.

In New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd & Anor [2003] 3 NZLR 1, the Court of Appeal considered s113, and s113 (1)(a) of the Copyright Act. The case related to the purported transfer of copyright in computer programs known as “LEADER”. In dismissing the appeal, the Court endorsed the High Court’s findings that, after the ongoing enhancement and modification of the software, the Crown, while once owning 100% of the software, at the time of the judgment owned 25%. The Court also found that the program had to be seen as a composite whole and not as separate units representing each different step in the process. As a result, it held that copyright was held in trust in appropriate proportions.

This case illustrates that the courts will intervene to determine the proportions of ownership or the vesting of other rights when software is developed and to import notions of the law of trusts, to balance the competing interests of parties who have worked together in a joint development programme.

In The Callista Group Ltd v Zhang, High Court – Auckland, CIV-2003-404-5127, 11 July 2005, Laurenson J considered a claim for breach of copyright. Callista sued Zhang (a computer programmer and dismissed former employee) alleging he had infringed its copyright. Callista asserted that Zhang had unlawfully written computer programmes for the second and third defendants. Zhang accepted that Callista owned the relevant copyright for its programmes but claimed parts of the source codes had been obtained from other sources and that the security keycode programmes were simply generic tools He also said that the programmes were not copied and lacked the necessary similarity to amount to an infringement.

The Court was firm in finding that copyright subsists in the programmes, in that they had been created over a significant period of time using skill, labour, and judgement. In terms of causal link, the Court concluded that the security programmes had been entirely incorporated in to the works created by Zhang. An injunction and damages of $150,000 were awarded.

On the issues of damages, Laurenson J expressed concern about the state of the evidence. His Honour considered the traditional approach as adopted in Feltex Furnishings of New Zealand Ltd v Brintons Ltd (1992) 4 NZBLC 102,913 but at the end of the day followed a broad “equitable/global” approach. In doing so, the Court lumped together the questions of compensation, flagrancy and ability to pay and ordered a single amount to be paid by way of damages. It is unclear as to whether this approach is correct in principle but in practical terms it might be seen as a solution to something of a dilemma.

In a case in which the trial judge expressed difficulty with both the facts and the law, this is a timely reminder that parties who represent themselves often do themselves a disservice, as Mr Zhang unfortunately discovered.

Copyright/Fair Trading Act

The interface between copyright and fair trading principles was recently canvassed in World TV Ltd v Best TV Ltd (2005) 11 TCLR 240 and 247.

WTVL (World) claimed that BTVL (Best) had infringed its copyright, or copyright that it had an interest in, by broadcasting Mandarin and Cantonese language programmes on a subscription basis. Baragwanath J dealt with the matter in two separate judgments. In the first, World obtained an interim injunction against Best. It alleged that Best was downloading by satellite programmes for which World had an exclusive New Zealand licence. It asserted that it was authorised to bring legal proceedings in New Zealand against other parties who, without authority, broadcast programmes produced by the Chinese state broadcaster CCTV.

In terms of the claim for interim relief, Baragwanath J stated that the Court’s responsibility in relation to intellectual property was to deal promptly and effectively with breaches. The Court was of the view that to not grant relief would be likely to cause damage to further subscribers. His Honour was uncertain as to whether he should grant relief in relation to various CCTV programmes, as pursuant to s 124 of the Copyright Act, Best was not the copyright owner or exclusive licensee. The Judge asked for further submissions on the latter point.

In its second judgment, the Court found that there was no evidence to support Best’s claim in copyright and that in the result it was not an infringement to simply rebroadcast material. Given that the copyright owner had elected not to sue the question was whether Best could itself bring a claim under the Fair Trading Act. On this point, the Court found that the scheme of the Copyright Act includes freedom to publish copyright material, subject of course to the right of the copyright owner to sue for breach of copyright. However, given that the copyright owner had elected not to do so his Honour concluded that it would be wrong to treat conduct that goes no further than mere copyright infringement as being actionable under the Fair Trading Act by a third party who was not the owner or an exclusive licensee.

This conclusion was dependant on the view that the mere broadcast of the particular programme was not misleading or deceptive. In doing so, the Court made interesting observations about the way to balance competing rights/interests provided by general and specific legislation and cited passages from Burrows, “Statute Law in New Zealand”, 3rd ed, LexisNexis, Wellington, 2003, pg 308, pg 314, pgs 368-383, and Ricketson, “The Law of Intellectual Property: Copyright, Designs and Confidential Information”, 2nd ed, Law Book Company, Sydney, 2002, para 1.125

Copyright in House Plans

In Golden Homes (1998) Ltd v Blue Chip Construction Ltd, High Court – Auckland, CIV-2003-404-7090, 21 June 2005, Allan J considered the question of copyright in building plans. The second plaintiff, Golden Homes Holdings Ltd (Golden) sought an extension of an earlier granted interim injunction against the defendants. The Court also considered an application for further and better discovery and for an order joining a new party. However, the judgment is more noteworthy in so far as it deals with the question of whether the interim injunction should be extended.

In declining an extension, his Honour considered the well established approach adopted in Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 and Beazley Homes Ltd v Arrowsmith [1978] 1 NZLR 394. He found that there was a sufficient degree of objective similarity between Golden’s plans and those of certain of the defendants so as to raise a serious question for trial. However, he found that the balance of convenience favoured the defendants because, in part, the claim was not strong. Obviously, while only an interlocutory decision, it is a further reminder that in relation to building plans the courts tend to interpret copyright restrictively. As to whether infringement is ultimately made out, this will require determination at a substantive trial.

Dealing in Infringing DVD’s

On 15 November 2004 Zheng Wang was convicted in the Manukau District Court, Auckland under the Crimes Act 1961, for using a document known to be forged, to obtain a pecuniary advantage, and then escaping from custody. Wang was arrested by the police for selling pirated DVDs – being caught with a large number of DVDs and a sum of money in his possession. At the time of his arrest he tried to escape from custody.

The police charged Wang under the Crimes Act (S 257 making or using a forged document) rather than under the Copyright Act (S 131 criminal offence of dealing in objects that are infringing copies of copyright works). In his sentencing, Judge Harvey took into account the need to deter other potential pirates and to protect the community from the impact that pirating can have in terms of reduced creativity and the increased prices of accessing copyright materials.

Judge Harvey sentenced him to 15 months in prison on each charge, with the terms to run concurrently. It is understood that this was the first time in New Zealand’s that someone had been given a prison sentence in relation to pirated DVDs. Wang then appealed against both his conviction and sentence. See Wang v Police (High Court, Auckland, CRI-2004-404-000476, 12 May 2005 and 23 March 2005, Baragwanath J unreported).

While endorsing Judge Harvey’s concerns, Baragwanath J rejected the Crown’s argument that s 257(a) of the Crimes Act does not require proof of an attempt to deceive. His Honour noted that the requirement in sub clause (e) that the document be made “with the intention that it should pass as being made by some other person who did not make it…” point to Parliament’s purpose. They require the Crown to prove intent to deceive.

Accordingly, he found that because the DVDs were obvious forgeries and bore no resemblance to genuine licensed products that would be bought and sold legitimately that the necessary element could not be established. As a result his Honour found that the forgery conviction could not stand. The appeal against conviction was thus allowed and a sentence of 15 months for escaping from custody was set aside. A 26 day prison term was substituted.

With respect, it seems most unfortunate that someone found with 56 pirated DVD’s and a sum of money from the sale of others pirated DVD’s and who then attempts to escape from custody, ends up with a sentence of just 26 days. Music and movie piracy is a major problem and one would have thought that the police would have done a better job in getting a conviction that would stick and would have a bit more deterrence value.

To compound the problem, Mr Wang has since been charged with further offences – see article on DVD pirating in the 17 October 2005 issue of LawTalk.

Law Reform

In the digital copyright area, the main law reform proposals are contained in the position paper – “Digital Technology and the Copyright Act 1994 – Position Paper” Ministry Of Economic Development (December 2002). Issues discussed include:

a.Whether a broad distribution/communication right should be introduced;

b.Whether the existing definition of copying is broad enough to allow copyright owners to prohibit unauthorised copying of material in digital form and the conversion of print or analogue works to digital form;

c.Whether the definition of copying should be amended to address explicitly incidental and temporary copies;

d.Whether the fair dealing exceptions are adequate for digital technology and whether further exceptions are necessary; and

e.Whether time and format shifting should be allowed.

As at October, the Bill is still awaited. However, the timing of its introduction remains uncertain, given the election.

4.TRADE MARKS

New Act

The Trade Marks Act 2002 came into force on 20 August 2003. This represents the first major overhaul of trade mark law for some 50 years. However, the new Act retains a number of existing features.

A trade mark is defined as any sign capable of being represented graphically and distinguishing the goods or services of one from another. A sign includes a brand, colour, device, heading, label, letter, name, numeral, shape, signature, smell, sound, taste, ticket, or word; many of these falling into the category of “non-traditional” marks, something I touch on below.

A series of new “absolute” and “relative” grounds for objection to registrability now exist. Certain marks cannot be registered:

a.a sign that is not a trade mark;

b.a trade mark that has no distinctive character;

c.a trade mark that consists only of signs or indications that may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin, time of production of goods or of rendering of services, or other characteristics of goods or services; and

d.a trade mark that consists only of signs or indications that have become customary in the current language or in the bona fide and established practices of trade.

A number of other significant changes have been made. The first is that the distinction between Parts A and B of the register has been abolished. Multi-class applications can now be lodged. Well-known marks receive greater protection and dilution of such marks may now be prevented where the use takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the mark. The use of trade marks in comparative advertising is now expressly permitted, as long as it is in accordance with so called “honest practices”.

Indigenous rights are expressly catered for. A Maori advisory committee advises the Commissioner of Trade Marks on whether a trade mark is considered to be offensive. Other marks, that are likely to offend “significant sections” of the community, may now also be rejected (see further comment below).

By all accounts, the new regime is working well, which in part is a reflection of the quality of people involved. This is encouraging, because similar advisory committees are proposed in the patents and plant varieties (PVR) areas, on the latter see comments below.

Case Law

A number of trade mark cases are worthy of mention. The Court of Appeal dealt with the difficult issue of whether and if so to what extent a company can use a competitor’s marks in Benchmark Building Supplies Ltd v Mitre 10 (New Zealand) Ltd [2004] 1 NZLR 26. Benchmark appealed successfully from a High Court judgment granting an interlocutory injunction restraining an unusual form of comparative advertising. Mitre10 produced promotional brochures advertising their products and prices. Benchmark used these brochures, after putting their own stickers on them, setting out prices of equivalent products in its own Benchmarks stores. The High Court considered that this amounted to both copyright and trade mark infringement. The Court of Appeal differed, finding that Benchmark had not reproduced any copyright works as such; pointing out that nothing had actually been copied. Accordingly, it found that even though Benchmark had taken advantage of the brochures, economic benefit is not a relevant consideration in deciding copyright infringement and absent reproduction there was no infringement.

The Court then considered the question of moral rights. It confirmed that a breach of an author’s moral rights is a wrong actionable only by the author, not the copyright owner and as Mitre 10 was not the author of the brochures, that it could not do so. Finally, in terms of trade mark infringement, it found that Benchmark’s use of Mitre10′s trade marks constituted comparative advertising within s 94 of the Trade Marks Act 2002 and was therefore permissible.

Spill over Reputation

The conflict between local and overseas rights and interests continues to exercise the IP community’s mind. The need to recognise local proprietors’ interests, while at the same time acknowledging the internationalisation of IP, is likely to continue to create tensions. This it has, as illustrated by the recent Le Mans decision.

The Automobile Club de l’Ouest (ACO) is the organisation behind the famous Le Mans car races. It sought to register Le Mans in New Zealand for, inter alia, vehicles, engines and car tyres and parts, fittings and accessories therefore. However, the local Dunlop company, South Pacific Tyres New Zealand Ltd, opposed registration on the basis that it had been using the trade mark on tyres in New Zealand since the 1980s. It argued that ACO had not used the mark for the relevant goods set out in its specification and further that the trade mark was not distinctive, given the geographical significance of the French town Le Mans.

ACO responded by saying that the town of Le Mans was only well-known and indeed world-famous because of its efforts to hold and promote the race and without these efforts few people would have heard of the town at all. The applicant provided survey evidence which showed (not unsurprisingly) that the public at large associated Le Mans with the car race rather than the particular geographical location of the town (no doubt true!) Thus, the applicant argued that the primary significance was the race rather than the place

The hearings officer was clearly faced with a difficult call. The survey evidence was highly probative and one could understand ACO’s view that it was the true and rightful owner of the trade mark not just in France, but internationally. This viewpoint was supported by the results of the market survey which showed that the majority of the public thought of a car race when shown the words LE MANS in relation to tyres and the fact that only a small percentage of respondents made a connection with South Pacific/Dunlop.

The hearings officer concluded that the name Le Mans has more than one signification and that notwithstanding the evidence that the Le Mans trade mark was distinctive, that one of its meanings was geographical. Significantly, it was found that South Pacific had proved that it in turn had a reputation in the mark for tyres in New Zealand, it being able to show this notwithstanding the survey evidence which might suggest otherwise. The hearings officer also placed emphasis on the fact that South Pacific was the first party to use the trade mark in New Zealand for tyres. Accordingly it was found that South Pacific had sufficient reputation in the trade mark in relation to tyres, notwithstanding the contrary evidence.

Finally, ACO’s argument that South Pacific’s use of the mark Le Mans for tyres was a misappropriation was rejected on the basis that there was no evidence of fraudulent use.

In the result, while both parties had argued that the goods were too similar, the hearings officer came to a conclusion that the merits were sufficiently evenly balanced and that neither party should succeed entirely at the expense of the other. Even if this is not what the parties wanted, it is suggested, with respect, that the decision is practical and logically sound. This however will not necessarily be the final word on the issue. The parties have appealed/cross appealed. Accordingly, the outcome may only be known once the High Court has heard the appeal.

In Valley Girl Co Ltd v Hanama Collection PTY Ltd, (High Court – Wellington, CIV2004-485-2005, 6 April 2005, Miller J, unreported) the issue of spill-over arose again.

The appellant, (the New Zealand company, Valley Girl), failed in its appeal against an IPONZ decision that the use of the trade mark VALLEYGIRL was likely to mislead or deceive. The respondent, Hanama, had used the same mark throughout Australia since 1996. The sole director of Valley Girl had supplied garments and materials to Hanama in the past. The applicant indicated that the VALLEY GIRL name was intended to evoke fresh, youthful, and feminine qualities. Unfortunately, that connotation escapes me. The Office refused the trade mark application on grounds that Hanama had established a reputation in the mark in New Zealand before the relevant (application) date and was therefore the true proprietor of the mark in New Zealand.

Of possible relevance to those preparing evidence in these types of situations, I think it can be said that our tribunals and courts are reasonably well inclined to rely on Australian spill-over. Miller J put it this way, at paragraph 27:

“The number of travellers between New Zealand and Australia is also very substantial. It is true that the evidence does not establish what proportion of them would be aware of the respondents’ goods in Australia, but it is a reasonable inference that the proportion of travellers who fall into the target market corresponds to the proportion of that group in the population as a whole.”

The Court had to assess the situation under the Trade Marks Act 1953. It held that while the opponent/respondent had to point to knowledge of the mark in New Zealand, actual trade or dealing in the goods bearing the mark in New Zealand was not required. Both the Assistant Commissioner and the High Court Judge were influenced by the fact that the marks were identical.

The Court also looked at the issue of bad faith, an issue which had awaited detailed judicial comment and found that there was no evidence of fraud and that something more than the mere appropriation of a foreign mark must be shown in order to establish bad faith.

As to good/bad faith, his Honour stated, at paragraphs 52 and 53:

“As was held in Malibu Boats West Inc v Catanese (1999) 51 IPR 134 at [28], the Courts view borrowings from abroad with suspicion, and in circumstances where the appellant appropriated the same mark for goods in the same class, it is perhaps easier to draw the inference that the mark is valuable to the appellant precisely because it has some measure of recognition in this country.

I will approach the matter on the basis that the appellant was not entitled to claim proprietorship of the mark in New Zealand if its claim is affected by fraud or breach of duty, or the application was made in bad faith. The New Zealand Act does not refer to bad faith, but I accept that bad faith is not confined to dishonesty. It may be demonstrated by evidence of conduct falling short of reasonable standards of commercial behaviour”.

His Honour then concluded at paragraphs 56 and 57:

“I accept that the appellant has chosen to appropriate the respondents’ mark. In so doing the appellant took an opportunity that arose out of Mr Cho’s business dealings with the respondents in Australia. It is a reasonable inference that the appellant hopes to exploit such recognition as the mark has in New Zealand arising out of its use in Australia. The question is whether that amounts to bad faith.

I am not satisfied that it does. Accordingly, something more than appropriation of a foreign mark must be shown in order to establish bad faith. Since that is all the respondents can point to, their objection to the appellants’ claim to proprietorship fails so far as it is based on bad faith, fraud, or breach of duty”.

Rules of Comparison

In Austin, Nichols & Co Inc v Stichting Lodestar, (High Court – Wellington, CIV-2004-485-1281, 5 May 2005, Gendall J, unreported) the Court considered an appeal from ANCI, the proprietor of the well known trade mark “WILD TURKEY” for alcoholic beverages. It opposed registration of the trade mark “WILD GEESE” also for alcoholic beverages, on the basis that it was likely to deceive or cause confusion.

His Honour Justice Gendall agreed with the appellant. He held that the relevant consideration was of notional not actual use; and that the test is whether, as part of the overall assessment, this being the key consideration, the marks convey the same “idea”. The Judge found that confusing similarity may exist (in this case because of the “wild game bird” connection) despite differences and ultimately concluded that the overlap or similarity between the proposed goods to which marks would be used was likely to confuse or deceive the public. Accordingly, the appeal was allowed.

In Tammy v Tommy Hilfiger Licensing, Inc., (IPONZ, T4/2005, 14 December 2004) the same comparative exercise was undertaken in relation to marks used in the clothing industry. This time the Assistant Commissioner compared TOMMY with TAMMY. She did so because she considered that TOMMY is the essential feature of the Tommy Hilfiger marks and the Tommy Hilfiger marks are apparently commonly referred to by persons in the trade and by customers as “Tommy”.

Having done so, she concluded that:

“In comparing the TOMMY and TAMMY marks, I must ultimately focus on the whole of each word, not do a side by side comparison, and I must allow for imperfect recollection….

Having considered the parties’ submissions and evidence, my overall impression of TOMMY and TAMMY is that the marks look similar, but they sound different. In my view, the most important difference between the marks is the conceptual difference – that TOMMY is the name of a male and TAMMY is the name of a female. It is difficult to envisage how a substantial number of persons in the relevant market are likely to be deceived or confused by these two marks, which have such a significant difference as this.”

Non-Traditional Marks

Non traditional marks i.e. colour, shapes, smells and the like, have proved to be a fertile area for disagreement. This is perhaps not surprising, given that they tend to occupy ground outside the traditional sphere of trade mark rights.

In terms of one category of “non-traditional” marks, namely shape marks, the decision in Fredco Trading Ltd v Miller, (High Court – Auckland, CIV2004-404-000895, 16 December 2004, Venning J, unreported) is likely to be important going forward.

Fredco applied for a declaration of invalidity in relation to a trade mark registration for plastic vine ties – known commercially as the Klipon. Trade Mark registration number 661428, is represented as follows:

and covers “plastic vine ties” in class 22. By way of explanation, the registration states that: “The mark consists of the three dimensional shape of a vine tie, as shown in the representation attached to the application”. The registration thus relates to a relatively simple and in part functional shape, making the decision an important one in this relatively new and largely uncharted area.

Miller, the proprietor of the trade mark, established that it had designed and sold the vine tie for over 20 years for use in the kiwifruit industry and had amassed very substantial sales. The parties were commercial competitors selling functionally similar vine ties. When Fredco launched a competitive product Miller sued for passing off, breach of the Fair Trading Act 1986 and infringement of its shape trade mark. The infringement proceedings were stayed pending resolution of the attack against the validity of the trade mark registration.

It is clear that his Honour Justice Venning was influenced by the evidence. He stated:

“The Klipon vine tie and the ITW vine tie carry out the same task. They satisfy the same basic requirements. However, aspects of the shape of the Klipon vine tie are different to that of the ITW vine tie. The swan-neck hook in particular and to a lesser degree the rectangular shape of the head are features that distinguish the Klipon vine tie from the ITW vine tie. More significantly, there is evidence that consumers can and do distinguish between a Klipon vine tie and its competitor based on shape”.

He went on to say that:

“While the shape of the Klipon vine tie is influenced by functional considerations because a vine tie must have certain features, the shape of the Klipon vine tie is not wholly determined by these considerations. There is a combination of aesthetic with functional by the use of, for example, the swan-neck.”

Accordingly, the Judge found that the shape mark was valid, relying on the important factual findings that:

a.“The ITW vine tie is distinguished by consumers as different to the Klipon vine tie.

b.The shape of the respondent’s vine tie is promoted along with the brand name Klipon.

c.There is evidence before the Court that customers use the shape to identify the product and its source as a Klipon vine tie both before and after sale.

d.It is possible to use alternative shapes to achieve the same purpose without copying identically the Klipon shape.

e.There is an aesthetic component to the shape of the Klipon vine tie, the swan-neck”.

In holding that the trade mark registration was valid the Court found that the “swan neck” shape of the Klipon vine tie made it “capable of distinguishing” from other vine ties. In doing so the his Honour noted that the terms “capable of distinguishing” and “distinctive character” have different meanings and that the swan-neck rectangular end and other variations of the Klipon vine tie were merely examples of how the same technical result could be achieved. Accordingly, the Court concluded that the evidence was sufficient to establish the necessary distinctive character and sustain the registration.

The decision has been appealed. The Court of Appeal will no doubt add to the debate over where the proper line of demarcation ought to lie in relation to “distinctive character”

In Société des Produits Nestlé SA v Cadbury Limited and Effem Foods Limited (IPONZ, T14/2005, 22 March 2005) Nestle sought to register their LIFE SAVER sweet as a shape mark. The grounds of opposition were that the shape mark was not registrable –

a.because the mark was in common usage and non-distinctive for food products and confectionery;

b.that the mark could not be distinctive of the goods for which Nestlé sought registration; and

c.because the mark was not capable of distinguishing the goods of Nestlé from those of other traders.

The Assistant Commissioner agreed, first noting that the scope of the shape mark was very broad. For example, she pointed out that it is possible that the shape mark could be of any size, any colour or colours, and of any solidity and that the goods to be covered by the mark (confectionery) were also very broad in scope.

Accordingly, she held:

“I consider that the very broad scope of the shape mark and the goods will make it more likely that other traders will legitimately wish to use the same or a similar mark as, on or in connection with, their own goods.

Although, this ring-shaped confectionery may not be similar to Nestlé’s LIFE SAVER sweet, I consider that this ring-shaped confectionery of other traders could be similar to the shape mark shown in representation attached to the trade mark application. Indeed, I consider that a doughnut could be caught by the shape mark as it currently stands.

There is also evidence that other traders may wish to use a ring-shape as the shape of their confectionery for functional reasons such as the “play” value of sugar candy with a ring shape, how shape affects taste, and how a ring shape may be perceived as making the product appear larger than a solid circular shape…”

This illustrates how important it is with ‘non-traditional’ marks to give very careful thought to the scope of the mark and the goods or services covered.

Further, the hearings officer supported her refusal, with further reasons, namely:

“Even if the shape mark had been defined to equate exactly with the LIFE SAVER sweet (but without the mark LIFE SAVER embossed on the surface of the shape mark), which is logically inconsistent because it could not equate exactly with the LIFE SAVER sweet in that case, I consider that there is still a significant difficulty in establishing that the shape mark is factually distinctive.

There is no evidence from consumers concerning how they would perceive the shape mark without the LIFE SAVER mark. And, in my view, there is insufficient evidence to support the contention that a LIFE SAVER sweet (with the LIFE SAVER mark) would be perceived by consumers as a trade mark even though there has been extensive marketing of the “hole” feature of the LIFE SAVER sweet.

If the shape of the LIFE SAVER sweet has not functioned as a reliable badge of origin, it must follow that the shape mark (which is much broader in scope than the LIFE SAVER sweet shape) is not factually distinctive”.

Again, the lesson is clear; appropriate evidence must be directed specifically to the ‘non-traditional’ elements of use, particularly given the growing and proper recognition that use does not necessarily equate to distinctiveness.

In Cadbury Ltd v J H Whittaker & Sons Limited, (IPONZ, T26/2004, 4 and 5 October 2004) registration of the colour purple was allowed. Cadbury Limited filed an application for registration of the colour purple, in Part A of the register; on the basis of use of the colour in relation to chocolate products. The specification of goods covers block chocolate, chocolate in bar or tablet form. Assistant Commissioner Walden allowed the application, stating in terms of the legal test, that:

“I must, however, focus on the particular goods covered by the application and how the colour purple has, in fact, been used by the applicant on those goods up to the relevant date so that I may properly understand:

(1)What consumers and traders will understand the applicant’s colour mark consists of:

(2)Whether consumers and traders will perceive the colour mark as a badge of origin.

I consider that the public will not normally perceive a single colour as a badge of origin unless they have been educated to understand that the colour functions in this way. And I consider that the use of the colour purple on packaging that contains other trade marks does make it more difficult (but possible) for the applicant to establish that the colour purple has functioned as a trade mark.”

Referring to the actual evidence lodged by Cadbury, the hearings officer found that it was sufficient to get the applicant home, putting it this way:

“… I find that the extensive, continuous, and largely consistent use over such a long period of time (since 1920 in New Zealand) of the colour purple on the packaging of the applicant’s milk chocolate blocks combined with specific attempts to educate the public into perceiving the colour purple as a badge of origin are likely to result in the public perceiving that the colour purple functions as a badge of origin for the applicant’s goods.

In the circumstances, I conclude that the applicant has established the very substantial level of factual distinctiveness needed to overcome the low inherent distinctiveness of its colour mark.”

It is clear from this that in all colour cases the opposing forces of inherent and actual distinctiveness will compete and that the “actual” will only prevail in relatively limited situations, and will of course depend on the quality of the evidence.

Offensiveness

The issue of offensiveness is an interesting, and I suggest, an increasingly relevant one. Under the current Act S 17 provides a series of absolute grounds for the Commissioner to deny registration. One of the grounds is that the Commissioner considers that the use or registration of the trade mark “would be likely to offend a significant section of the community, including Maori”.

In terms of self-regulation, the ASA Code in turn states that insofar as ethical obligations are concerned advertisers have a general obligation to ensure that their ads are decent and that advertisements should not contain anything which clearly offends against generally prevailing community standards, taking into account the context, medium, audience and product (including services).

Specifically in terms of offensiveness, the Code states that:

“Advertisements should not contain anything which in the light of generally prevailing community standards is likely to cause serious or widespread offence taking into account the context, medium, audience and product (including services)”.

See: http://www.asa.co.nz/codes/codes.htm

I will not review advertising standards decisions. However, in terms of what gets onto the trade mark register, it is sometimes difficult to see where the line has or ought to be drawn. For example, we have trade mark registration number 701409 for CNUT in class 25 for clothing, footwear, headgear. The proprietor is Cnut Limited, a United Kingdom company. We also have trade mark registration number 701410 for WNAK for the same class and goods and in the same name.

We then have trade mark registration number 289545 for the well known mark FCUK. The goods covered are articles of clothing; headgear, footwear in class 25. The proprietor is French Connection Ltd, of England.

Then we find trade mark registration number 308977 for the BUGGER device:

This registration is in class 16 covering paper, cardboard and goods made from these materials not included in other classes; printed matter. The proprietor is a New Zealand citizen.

I was then interested to note trade mark registration number 654408 for the GOOD BASTARDS device in class 32 for beer in the name of a Queensland individual.

I then did a search for “bad bastard” but the search returned a “no result”. This suggests that buggers and good bastards are okay but bad bastards are not necessarily so.

In terms of marks like “Tiny Penis” (see Ghazalian’s Trade Mark Application [2002] RPC 33) the jury still seems to be out. That is not to say that “penis” marks are necessarily off-limits. When giving a recent talk in Australian, an Australian practitioner noted that there was nothing offensive about the word “penis” and that it was more the word “tiny” that was offensive.

Trade mark application number 725947 is currently under examination. It is for the word mark “On The Wrong End Of The Penis” covering printed matter e.g. books and calenders in class 16. The applicant is an individual from Beverly Hills, New South Wales. She also has an accepted application (Number 725949) for the word mark “On The Right End Of The Penis” in the same class and for the same goods. I regret to say that the applicant does not explain what distinguishes the wrong from the right end.

In deciding what is offensive and to who that offensiveness needs to be directed or felt, issues tend to arise as to how the so-called reasonable person would react and if the issue is to be looked at objectively, just how narrowly or broadly should the relevant universe be constituted. A recent Court of Appeal decision might shed a shard of light on that issue.

In R v Hana, (Court of Appeal, CA193/04, 27 September 2004, Anderson P, McGrath J, Glazebrook J, unreported) Hana applied unsuccessfully for special leave to appeal; having been convicted in the District Court on two counts of, inter alia, offensive behaviour. This comprised standing naked on a traffic island in Courtenay Place, a major Wellington thoroughfare, at 2.30 am. It was common ground that some of the patrons of nearby night club (Kitty O’Sheas) found the incident amusing rather than offensive. It is unclear whether Guinness or some other lubricant was involved. However, one member of the public complained and charges were laid. It was argued that his behaviour was confined to a nude appearance and did not involve any “ancillary lewdness” and that the public reaction was confined to amusement and derisory comments and that the only people likely to be in vicinity at the time were those who had been enjoying the convivial atmosphere of the adjacent night club.

The Court of Appeal, in a slightly more censorious tone, held that a deliberate display of nakedness by an adult in the middle of a major city thoroughfare, even in the early hours of the morning, is manifestly legally capable of being offensive and that the interests of the wider community needed to be taken into account in reaching that conclusion. At paragraph 5 the Court stated:

“With respect to counsel, we think the submissions overlook the readiness with which intoxicated persons may be amused by offensive behaviour. But in any event Courtenay Place, even in the early hours of the morning, is not the exclusive domain of such people. At 2.30 in the morning it is highly likely there will be other people around; those driving vehicles in the area for personal or business reasons, patrons of night clubs who have not been reduced to frivolity by over indulgence in alcohol, local residents travelling to or from their homes, and such like.”

This suggests that when offensiveness is involved an objective “wider community” approach may be adopted and that sectional and sometimes more tolerant views will not necessarily prevail.

Law Reform

Statutes Amendment Bill

The Statutes Amendment Bill (No. 5) was reported to contain “minor and technical amendments” to the Trade Marks Act 2002, (the “Act”). It received its first reading in the House on 14 April 2005. The Government Administration Select Committee was to give its report back to the House by 14 August 2005. According to George Wardle, Senior Analyst, Intellectual Property Policy Group, Ministry of Economic Development, (whose assistance I acknowledge), the Bill was reported back to the House of Representatives by the Government Administration Select Committee on 1 August 2005, just prior to when the House dissolved for the elections. A copy of the Select Committee’s report can be accessed at http://www.clerk.parliament.govt.nz/Content/SelectCommitteeReports/249bar2.pdf

A copy of the Bill is available at www.knowledge-basket.co.nz

A number of the proposed amendments are purely technical. However, a number of them have potentially important consequences. The more significant changes are as follows.

Clause 90 substitutes a new S 17 into the Act, which has been re-drafted to remove the perceived lack of clarity of the phrase “register a trade mark or part of a trade mark”. It is not possible for the Commissioner to register part of a trade mark and the amendment is designed to correct this possible anomaly.

Clause 91 amends S 18(1)(c) of the Act to remove the suggestion that a purely descriptive certification trade mark can be registered. This will be achieved by deleting from S 18(1)(c) “(unless the trade mark is a certification trade mark)”. Once this is done, the Commissioner will be able to register something which has not previously been legally recognised as a certification trade mark.

Clause 92 amends S 25(1) of the Act. A new S 25(1)(a)(ii) restores a ground for refusing registration that was inadvertently not carried over from the Trade Marks Act 1953.

S 25 of the Act was intended to perpetuate the provisions of S 17 of the old 1953 Act, with some modifications in relation to well-known trade marks. S 17 of the 1953 Act provided the Commissioner with a specific power to refuse to register a trade mark. One such situation was where an identical mark was thought to be registered in respect of similar goods or services and where its use was likely to deceive or confuse.

The Ministry of Economic Development has taken the view that the current wording of S 25 does not provide the Commissioner with the power to refuse to register a trade mark where it is identical to another trade mark (belonging to another person) for similar goods or services and where its use is likely to deceive or confuse. The view that it has taken is that while the Commissioner does have a general power under S 17 of the Act to refuse to register a trade mark, (where its use is likely to deceive or cause confusion), S 25 needs to be amended to expressly provide the Commissioner with the power to refuse to register trade marks in the above situation.

Clause 93 amends S 32(1) of the Act by clarifying that it is the owner of the trade mark who applies for its registration. S 32(1) specifies that a person may, on payment of the prescribed fee, apply for the registration of a trade mark. Under S 17(1)(b)(iii) the Commissioner must not register a trade mark if the application for the registration of the trade mark is made in bad faith. This is a new provision which did not exist in the 1953 Act.

A trade mark can now be attacked or opposed on the basis of bad faith. The term “bad faith” is not defined in the Act. However, as our new act is based on the corresponding UK act, it is likely that UK case law will be persuasive in determining what amounts to bad faith.

It is clear from earlier UK cases that an improper claim to proprietorship may amount to bad faith. It is also clear that the applicant’s intention and knowledge will be important considerations in determining whether good or bad faith exists. It is possible that an applicant might apply for a trade mark not knowing of the existence of another entity, even though the existence of that entity might be proved conclusively at a subsequent date. The purpose of the change is to move back to the approach under S 26 of the 1953 Act, which provided a purely objective test of ownership. The amendment does this by clarifying that the person applying to register a trade mark, merely needs to be the person claiming to be the owner of the trade mark.

Clause 105 amends S 208(5) of the Act to clarify the relevant uninterrupted period of suspension of use in relation to certain trade marks registered before the commencement of the principal Act. S 208 sets out the transitional arrangements in respect of trade marks registered before the commencement of the current Act. Under the 1953 Act, a registered trade mark could not be revoked for non-use during the period of five years, beginning at its actual date of registration. This meant that the relevant date was the date the trade mark was entered onto the register.

The wording of S 208(4) of the Act was designed to preserve the five-year non-use period only for those trade marks whose actual date of registration was before the date of commencement of the current Act. However, it soon became apparent that S 208(4) could be interpreted as applying to registered trade marks that had a deemed date of registration. That is, the date an application for registration of a trade mark was filed and that this was before the date of commencement of the current Act. It was therefore felt that S 208(4) needed to be amended to remove this uncertainty.

MED officials have stated that S 208(5) was supposed to preserve the five-year period of suspended use under the 1953 Act for any trade mark whose actual date of registration was before the commencement of the current Act, and where use of the trade mark was suspended within the 5-year period prior to the commencement of the current Act. It appears that, as drafted, it provides that the use of the trade mark must be suspended before that 5-year period. S 208(5) is therefore designed to provide that the use of the trade mark must be suspended within the 5-year period before the commencement of the current Act.

All of these changes are potentially important, depending on the particular factual situation that arises. The passage of the Bill will be closely followed for this reason.

5.BREACH OF CONFIDENCE

Breach of confidence is an important remedy. Breach can be difficult to prove. However, once established, it can be a remedy with real teeth. This is illustrated by the recent case: Eil Brigade Road Ltd v Brown, (High Court – Christchurch, CIV2001-409-000733, 5 August 2004, Fogarty J, unreported). The plaintiff, EIL, brought a successful action against seven defendants, all of whom had been former employees, claiming it had lost five major customers as a result of the defendants’ breaches. The judgment provides a useful summary of the law in relation to breach of the duty of confidence; breach of duties of loyalty, good faith and fidelity; misuse of confidential information, inducing a breach of contractual relations and interference with business by unlawful means and conspiracy, all of which were run by the plaintiff.

The defendants argued that the customers could not be, and in fact were never, the property of the plaintiff; those customers who did transfer would have transferred their business to the defendants anyway and at most nominal damages should be awarded, as the customers would have moved regardless of any breach of duty or unlawful conduct by the defendants.

The Court rejected these defences and found that the principal defendant breached his duty of mutual trust and confidence by taking personal advantage of social relationships with account managers to encourage them to leave the plaintiff and that these breaches were serious enough to warrant liability for damages. His Honour also found that the breaches of duties of fidelity, inducement of breach of contractual relations and conspiracy were all substantial factors in the plaintiff losing its customers. In the result, the quantum of damages was assessed only on the conspiracy action on the basis that it was in reality causative of the harm. General damages of $1,578,000 were awarded for loss of profits and the sum of $1,556,000 was awarded for loss of business value on the sale of the plaintiff company.

In Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2004] 3 NZLR 49 (Court of Appeal, Keith J, Tipping J, McGrath J) the Court dealt with the sometimes vexed issue of onus of proof. Norbrook brought proceedings against Bomac, alleging, inter alia, that it had misused confidential information that Norbrook had given it, by supplying the information to another party or alternatively, in making an application for regulatory approval. The central allegation was that Bomac had misused information concerning the correct percentage of an ingredient in Norbrook’s animal remedy product. In the High Court, Heath J dismissed Norbrook’s claims for misuse of confidential information and breach of fiduciary duty. On appeal, Norbrook argued that Bomac must have, either subconsciously or otherwise, provided the third party with the relevant confidential information concerning the percentage.

The appeal was dismissed. The Court found that there was no legal or evidential onus on a party in possession of confidential information, pursuant to a commercial agreement or otherwise, to satisfy Court that it has not misused it. It reiterated that the onus of proving a breach remained on the party alleging such misuse.

At paragraph 27 the Court stated:

“Nor do we accept that contractual obligations of confidentiality in a commercial context require that there should be a legal or evidential onus on a party in possession of confidential information to satisfy the Court that it has not misused it. Any other approach would unduly inhibit competition and would be contrary to the principles as stated in the citation from Copinger and Skone James……… The onus of proving the breach accordingly remains with the plaintiff Norbrook. That onus required it to call evidence of misuse, that is evidence giving rise to an inference that there was misuse. Norbrook also had to negate any evidence put forward by Bomac to counter an inference that the confidential information was misused.”

The Court of Appeal differed from the trial judge on certain questions of fact and accordingly considered the matter of breach afresh. Nevertheless, it came to the same conclusion and after having looked at the practicalities of the situation, stated at paragraph 35 that:

“It is helpful to begin from some basic principles. First, the possession of confidential information does not of itself preclude a person from developing a product equivalent to that which is protected, provided that the confidential information or element is not misused. Secondly, the fact that a person is aware, when receiving information from an independent source, that it conforms with the confidential information, does not in itself give rise to misuse. Nor does the mere fact that the person takes comfort from that knowledge. It is only if the knowledge or comfort causes the person to do, or to omit to do, something that there is conduct amounting to misuse. Normally this will take the form of a person avoiding having to undertake some part of the process required to develop the product. Were the rule to be otherwise, it would be virtually impossible for those possessing confidential information ever to be involved in developing equivalent competing products. It must be borne in mind that the purpose of the protection of confidences in law and equity is to prevent disclosure and misuse, not to disqualify people from competing.”

This should help to clarify just what a defendant is expected to do when allegations of misuse are made.

6.DESIGNS

Apart from a number of interlocutory injunction decisions (see the September issue of IPSANZ’s journal – the Intellectual Property Forum) there has not been too much to report. However, in Bruce Sutton v Bay Masonry Ltd (High Court, Tauranga, Civ-2003-470-000260, 28 May 2004, Williams J, unreported) the plaintiffs were the proprietors of a New Zealand registered design for a so-called “Z-post”; essentially a metal stake used for fencing. They sued the defendants for design infringement. The defendants alleged that the design was invalid. The proceeding went to trial on the rectification claim alone. The Judge concluded that the Z-post did not appeal to the eye and it was dictated solely by function. Accordingly, it was found that the registered design was invalid. The case can be noted for containing a full analysis of the dichotomy between form and function.

In Viscount Plastics Ltd v Lamnei Plastics Ltd, High Court – Auckland, CIV-2005-404-3452, 13 September 2005, Gendall J considered an application for an interim injunction in relation to plastic crates adapted to carry bread loaves. The plaintiff alleged that the defendant had infringed its registered design and copyright. The defendant argued that its design was sufficiently different and whatever similarities existed were too general in nature.

The Court found that there was a serious question to be tried on both the primary claim and the counterclaim and that while the plaintiff’s ability to manage its monopoly situation was a factor to be weighed in determining balance of convenience, considered that the delay which the plaintiff had allowed militated against granting relief. Accordingly, the application was declined. This illustrates that the management of the monopoly situation will certainly continue to give to a plaintiff the initial advantage, but that traditional considerations such as delay and a prejudice may well overcome it.

7.DOMAIN NAMES

Dispute Resolution

The Internet Society of New Zealand (InternetNZ) has set up a working group to formulate a policy as to whether the New Zealand country code should have an alternative dispute resolution system for domain name disputes and, if so what form it should take. The working group has been looking at options for some time now but a long overdue proposal is expected shortly. It is expected that we will adopt a regime similar to the one run by Nominet in the UK.

Recent Cases

In terms of cases, in Containerlift Services Ltd v Maxwell Rotors Ltd, (2003) 10 TCLR 807, the plaintiff obtained an interlocutory injunction enjoining the defendants from using the name “Containerlift” or any confusingly similar name, including using it as Internet domain name or in promotional material. It did so, even though it only had a reputation and goodwill in the name in the United Kingdom. In doing so, the Court accepted that the defendants’ use of the domain name was designed to misappropriate the plaintiffs’ goodwill and reputation in name and trade mark. In doing so the Court relied on a “conflict of laws” rule on double actionability, finding that if the defendants’ acts constituted passing off they would be actionable in England, and if they occurred in New Zealand, they would be actionable in this country.

In an application for review (see Containerlift Services Ltd v Maxwell Rotors Ltd (No 2) (2003) 10 TCLR 817) the defendants raised concerns at the worldwide scope of the prohibition and submitted that the plaintiffs or any of them had failed to establish any reputation outside the United Kingdom and parts of northern Europe. Accordingly they said that the injunction should be varied. The defendants also argued that the cause of action based on s 3 of the Fair Trading Act should be struck out because the Act could only regulate supply of goods and services, (a jurisdiction provision) in New Zealand and did not have extraterritorial effect.

In relation to the Fair Trading Act jurisdiction argument, the Court accepted that s 3 does not have extraterritorial effect and that it governs actions of people who are in New Zealand. However, it concluded that people outside New Zealand can still invoke the Act and as the defendants’ website operated from New Zealand and was designed to promote its business, their actions were subject to the Act.

The Court agreed that as the plaintiffs had no reputation outside the United Kingdom and Europe, any interim injunctions should be no broader in their effect than is required. Accordingly, the injunction was amended so as to limit it to the United Kingdom and Europe. The Court also noted that the defendants were required to ensure inquiries from those areas were redirected and that if that was not feasible technically, to simply refrain from using the expression “Containerlift” at all on their website.

UDRP

In terms of the UDRP, in Museum of New Zealand Te Papa Tongarewa v Greg Nicolas, Case No. D2004-0288, WIPO, Sir Ian Barker QC, the panellist ordered the transfer of the domain name “tepapa.com” to the Museum of New Zealand, commonly known as Te Papa (“Our Place”) and located in country’s capital, Wellington.

One of the central issues in these disputes is whether the respondent has a legitimate interest in the disputed domain name. In this particular case, the respondent stated that he had made demonstrable efforts to use the domain name and that these efforts were genuine. To support this contention he asserted that he wished to “create a website extolling the beauties and advantages of the many places he had visited and of New Zealand in particular” and that it was just coincidental that the first letters of what he had in mind coincided with the domain name. The phrase the respondent had in mind when the creative process was underway was the somewhat bizarre: “The Exciting People and Places Around”.

Sir Ian Barker was not willing to slip too easily into that trap, stating, rather incredulously that:

“the full name for the initials, does not immediately call to mind a website where Filipino migrant workers would find either inspiration as to other places where they might live or solace from their current adversities.”

If there was, as the Respondent claims, a religious and altruistic element in his proposed website, then one could readily have thought of many other names which would indicate both a religious element and the desire to assist Filipino migrant workers abroad”.

Sir Ian then concluded, rather pointedly, that:

“the inference is easy to draw that the name, “The Exciting People and Places Around,” was one concocted to give legitimacy to the disputed domain name”.

Finally, Sir Ian also noted that:

“given the publicity surrounding the naming of the national museum as “Te Papa” it is hard to see why the Respondent did not search the Trade marks register where he would have learnt at the time of registration of the domain name, of the Complainant’s trade mark application.”

He therefore found, correctly many would say, that the domain name had been lodged and subsequently maintained in bad faith.

In a similar vein and in a UDRP case relying on Te Papa you may want to refer to Maori Television Service v. Damien Sampat Case No. D2005-0524, WIPO.

8.FAIR TRADING ACT

The Fair Trading Act remains an important weapon in a competitor’s armoury, not just in terms of straight IP issues but also in terms of product and label claims. The High Court recently considered two cases which involved allegations of misleading or deceptive conduct in trade. The first related to a “Made in New Zealand” claim. In Carter Holt Harvey Limited v Cottonsoft Limited ((2004) 8 NZBLC 101,5887, 7 October, 2004), the large local paper and packaging materials company Carter Holt Harvey stated that its KIWISOFT toilet paper was manufactured by a New Zealand company. The product also bore the ‘Buy NZ Made’ logo. Consumers might have been forgiven for thinking that the toilet paper concerned came from New Zealand. It transpired that the paper was in fact made from imported bulk tissue and converted into toilet paper in New Zealand.

The High Court ordered that the company alter its packaging to make it clear that only part of the relevant manufacturing process occurred in New Zealand. Carter Holt appealed that decision, only to have the appeal dismissed by the Court of Appeal – see Carter Holt Harvey Ltd v Cottonsoft Ltd (2004) 8 NZBLC 101,588.

In an unrelated but seemingly connected development in Reckitt Benckiser (NZ) Ltd v SC Johnson & Son Pty Ltd, (High Court – Auckland, 9 September 2004, unreported), Reckitt Benckiser challenged SC Johnson’s television commercials for an air freshener. Leaving the obvious one liners to one side, very briefly SC Johnson claimed that the product sanitized the air by eliminating odour-causing bacteria. Reckitt Benckiser challenged the scientific basis for the claims and sought an urgent injunction preventing further commercials going to air.

The High Court agreed that there was merit in the challenge and granted an interim injunction.

9.PLANT VARIETY RIGHTS

This is another relatively seldom resorted to remedy in New Zealand. However, in Cropmark Seeds Ltd v Winchester International (NZ) Ltd, (High Court – Timaru, CIV-2003-476-8, 28 September 2004, John Hansen J, unreported) Cropmark was partially successful in its application for a declaration under the Plant Variety Rights Act 1987. It is the proprietor of a PVR in barley, known as “Optic”. In the declaration it sought a determination that the defendants had directed others to buy unlicensed varieties so as to avoid payment of a licence, thereby infringing its PVR. The plaintiff sought in addition to the declaration various monetary relief, including exemplary damages.

The Court made the declaration against both defendants, on the basis that they had infringed the PVR. The claim for monetary relief was unsuccessful against one defendant on the basis of lack of evidence as to knowledge/intent. However, in relation to the other defendant, the Court was satisfied that his conduct was sufficiently outrageous and illustrated a flagrant disregard for the plaintiff’s rights. Accordingly exemplary damages of $10,000 were awarded.

Law Reform

In 2002 the Ministry of Economic Development released a discussion paper on plant variety rights. This was followed by a 2003 Cabinet Paper. Both indicated that the Plant Variety Rights Act 1987 was to be amended to be compliant with the provisions of the 1991 UPOV Convention. A draft Plant Variety Rights Amendment Bill was released for consultation in mid 2005, with comments on the draft bill due by mid October.

The Bill is clearly a step in the right direction. However, it does not necessarily meet the policy objective of bringing the legislation into line with UPOV and the Bill still lacks a lot of detail, particularly at the procedural level. For example, there is no detail as to how plant variety rights are contested and cancelled, and just what powers the Commissioner has. The Bill is also unsatisfactory in so far as appeals are concerned, limiting any appeals from the Commissioner to the district Court in Christchurch. Given that other IP legislation provides clear structure in this regard, it as unfortunate that the Government has not taken the opportunity of bringing the PVR regime into line with other IP rights regimes.

10.PERSONALITY RIGHTS

The concept of personality rights is now more often referred to in the context of “image rights”. The situation in New Zealand remains unacceptably complicated, and some would argue introspective. However in Hosking (see below,) the Court of Appeal has at least confirmed that the law does not recognise a separate tort of breach of image rights. To that extent the position is now absolutely clear. Accordingly, a person wishing to try and prevent a third party from misusing or misappropriating his or her image has to choose from a range of ill-suited options.

In our modern personality/media driven society, I suggest that this is an area of the law that will receive increased attention. I certainly subscribe to the view that “image rights” are overdue for greater recognition in a developed society like New Zealand and that incremental growth, perhaps even into a separate tort, is likely.

11.PRIVACY

Covert Filming

Intimate and often voyeuristic covert filming is a particular type of activity which seems to be on the rise in New Zealand. By comparison, the relatively recent case on Bondi where topless sunbathers were photographed on a mobile phone comes to mind. It occurs when one person makes a surreptitious visual record of another person in intimate circumstances without the person’s consent or knowledge and in circumstances that the person would reasonably expect to be private. It takes away a person’s freedom of choice to decide how they respond or conduct themselves, for example, to adjust their behaviour to minimise the intrusion and control how they are viewed.

The Law Commission’s report (Study Paper 15) on the topic of Intimate Covert Filming, recommended both the creation of new criminal liability and amendments to the Privacy Act to provide a civil remedy through the complaints process under that Act. On 12 April 2005 the Justice Minister introduced the Crimes (Intimate Covert Filming) Amendment Bill.

The aim of the legislation is to criminalise specific types of conduct. This Bill proposes amendments to the Crimes Act 1961 to create three new offence provisions, relating to the making, possession and the publishing, importing, exporting, or selling of an intimate visual recording. All offences have a penalty of imprisonment not exceeding three years, other than simple possession (possession without an intention to publish, export or sell the intimate visual recording) which has a penalty of imprisonment not exceeding one year.

The Bill was reported back to the House by the Government Administration Select Committee on 1 August 2005. A copy of the Select Committee’s report can be accessed at http://www.clerk.parliament.govt.nz/Content/SelectCommitteeReports/257bar2.pdf

Tracking and Monitoring

Internet technology has spawned a plethora of devices and software for identifying, tracking, collating and retrieving information, which often includes personal information. I deal with these various topics under the “privacy” head. One of the most common of these new practices is rather endearingly referred to as cookies, spiders and web bugs. Another more recent phenomenon is ‘phishing’, also called ‘brand spoofing’ or ‘carding’. This involves sending an email to customers of established legitimate enterprises attempting to deceive them into providing personal information that is then used for identity theft and fraud. The email normally directs the recipient to a mock website. The recipient is then asked to update personal information such as credit card details and account information. Even if only a small proportion of these attempts succeed the potential for online fraud is significant and anecdotal evidence suggests the problem is real and happening now.

Cookies are data files which reside on a user’s computer hard drive. They are deposited on the hard drive and retrieved when the user visits the same website again. The information stored is used to convey the user’s preferences and again his/her personal details. Cookies are however also used for legitimate purposes, including allowing the use of “shopping carts” when buying online.

Web bugs are similar. These are programming codes comprising tiny graphics files, undetectable to the human eye. They allow others to monitor who is accessing a website and to provide details of the Internet protocol address – the user’s unique identifier. There has not, to my knowledge, been any litigation in New Zealand in this area. However, it is only a matter of time before it occurs.

Scraping involves gathering information from websites and re-using it. The question then arises as to whether this places an unacceptable strain on a company’s computer system and/or breaches a service provider’s terms and conditions.

In New Zealand, the online auction organisation Trade Me took similar action and managed to get a competitor TradeWise to stop scraping auction information (called “screen scraping”) from its site. See article by Russell McVeagh in World eBusiness Law Report, 9 May 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=1925.

In terms of the threat to privacy, in Private Word, Issue No. 48, April-June 2003, the Privacy Commissioner notes that the 1980 OECD Guidelines on Privacy may well be ineffective with spiders and crawlers. This may well be correct as the guidelines were prepared before these devices were invented. It is also noted that these devices are capable of subjecting personal data to fresh surveillance against criteria different from those for which the data had originally been collected and possibly unknown or even non-existent at the time of collection.

Interception and Monitoring of Emails

The issue of interception was graphically illustrated in a recent High Court decision in S P Bates & Associates Ltd v Woolworths (NZ) Ltd (HC Auckland, CL 15/02, 13 March 2003, Fisher J; unreported, noted in 26 TCL 15/2 and [2003] BCL 391).

The plaintiff trades under the name “SecureNet”. SecureNet is an ISP which provides Internet services to Woolworths. Part of the service included scanning for viruses, spam, fraud, unauthorised access of the Woolworths’ computer system along with unauthorised computer usage by Woolworths’ own staff. Woolworths pulled out of their arrangement and SecureNet sought an interim injunction to prevent Woolworths doing so.

When the relationship between the parties deteriorated, SecureNet started checking Woolworths’ e mails saying that that they were entitled to do so pursuant to the arrangement and in the context of the deteriorating commercial relationship.

Justice Fisher was less than impressed with this suggestion. His Honour noted (at paragraph 8) that the screening of e mails was in the first instance a purely automatic process effected by software services contracted by others to SecureNet. The lesson is clear. Technical ability and access does not justify an invasion of others’ space. Likewise, a contractual relationship does not entitle a party to go beyond the terms of the agreement to pry into other person’s affairs, whether they are commercial or private.

Sections 216 A-F of the Crimes Amendment Act (No 6) extends the prohibition against interception of communications to cover electronic and data communications, which would probably cover e mails. S 216 B(1) now makes it an offence to intercept any private communications by means of an interception device (which is widely defined so as to include a “computer”). To “intercept” requires the conduct to occur while the communication is taking place. Arguably it would cover the unauthorized tracking and monitoring of e mails in the fashion dealt with in SecureNet and suggests that caution will need to be exercised by contractors who go outside the scope of their contracts (and indeed others).

The Privacy Commissioner, in the Telecommunications Information Privacy Code 2003, (28pp) (document available from annabel.fordham@privacy.org.nz) relates to telecommunications agencies, insofar as they handle personal information about customers and telecommunications users. Amongst the requirements is that telcos must provide “blocking” options free of charge when caller ID is offered and prohibiting the use of traffic data gained from interconnection for unauthorised direct marketing. The Code commenced in November 2003.

Spam

Spam is a major problem in New Zealand, just as it is in Australia.

In May 2004 the Ministry of Economic Development produced a discussion paper. It received a large number of submissions in response. It is understood that respondents virtually all agreed that spam has markedly eroded confidence in the reliability of email and that legislation is necessary. In late July 2005, the Unsolicited Electronic Messages Bill was introduced. The Bill deals with text and instant messaging services and emails. It targets New Zealand-based spammers. The Bill adopts, in the main, an opt-in model, concentrating on multiple marketing messages.

It differentiates between three types of messages:

a.Commercial electronic messages which require an “opt-in” regime;

b.Promotional electronic messages which are not commercial but have as their primary purpose, the promotion or marketing of an organisation’s aims or ideals – these may have an “opt-out” regime; and

c.Non-controlled messages which are neither promotional nor commercial. These are un-regulated.

It is arguably difficult to properly distinguish between commercial and promotional messages and between organisations that are delivering a promotional message and those that are delivering commercial messages. Hopefully this issue will be addressed.

It is also unclear as to why the Bill has limited the opt-in approach to just commercial electronic messages. Arguably, it should apply to all commercial/promotional messages and not just those with a primary commercial/promotional purpose.

According to George Wardle of the MED, the Bill was introduced into the House on 28 July 2005. This was just prior to the House dissolving. It did not receive a first reading before the House dissolved and as a result was not referred to a Select Committee for consideration.

In addition, arguably, certain types of spam can now be caught by s250 of the Crimes Amendment Act (No 6), which covers a situation where someone intentionally or recklessly and without authorization:

“Damages, deletes, modifies, or otherwise interferes with or impairs any data or software in a computer system”.

The word “adds” was deleted from the provision because it would probably have caught “cookies”. Even so, denial of service (DOS) attacks would clearly be caught by the provision as would spam and crawlers that materially impair or erode a computer system/service through a sudden or sustained attack of sufficient magnitude.

The Tort of Privacy

In terms of the development of a tort of privacy, the recent developments in Hosking v Runting [2003] 3 NZLR 385 are well known. Mike Hosking applied unsuccessfully to prevent the publication of photographs of his wife and daughters in a stroller along a public footpath. He expressed concern about the risk to their children’s safety should photographs be published; particularly given his then profile. The media argued that the public effect of the orders sought would significantly impact on freedom of expression and on their commercial interests. It was also argued that the couple had allowed their private lives to be publicised in the past and that their privacy had to give way to the wider public interest.

In the High Court, Randerson J held that the Court should not recognise a separate tort of privacy and that the deliberate approach to privacy taken by the legislature to date indicated that the courts should be cautious about creating new law in this field. In effect, his Honour concluded that the law in New Zealand did not recognise a tortious action of privacy based on publication of photographs taken in a public place and that if this was to occur it was up to Parliament, not the courts, to create any new law.

In the Court of Appeal (Hosking v Runting (2004) 7 HRNZ 30, [2005] 1 NZLR 1) the Court unanimously agreed that, on the facts, the publication of the photographs did not amount to a breach of privacy. However, more importantly, a majority found that there is a new civil liability for publishing facts about a person. It did so on, the basis of an impetus for development caused by the international emergence of concern for the protection of human rights and a shift in the emphasis from the traditional approach of liability for reprehensible conduct to the protection of identified rights.

The Court had the option of relying and possibly expanding on the existing remedy of breach of confidence. This is what has happened in the United Kingdom and the Court noted that in doing so the courts had been able to provide an adequate remedy in most cases where the publication involved deeply personal information.

The Majority were however not attracted to this approach, stating at paragraph 48 that

“Privacy and confidence are different concepts. To press every case calling for a remedy for unwarranted exposure of information about the private lives of individuals into a cause of action having as its foundation trust and confidence will be to confuse those concepts.”

However, at paragraph 21 of his judgment, Gault P (as he then was) noted the submission that the circumstances surrounding the taking and intended publication of the photographs did not give rise to any obligation of confidence. There was no undertaking of confidence, and the nature of the information was not such that would give rise to an obligation of confidence. I suggest that, given that the photographs were taken in public and did not reveal anything particularly private, the artificiality of trying to fashion a claim around breach of confidence in this type of situation is self evident.

Instead, at paragraph 25, his Honour traced the development of the concept of breach of privacy at common law, going way back to Pollard v Photographic Co (1888) 40 Ch D 345, where a woman who commissioned photographs of herself for private use was able to prevent a photographer from incorporating her image onto Christmas cards for general sale. That is, on the basis of a “gross breach of faith”.

At paragraph 117 his Honour Justice Gault noted that in New Zealand there are two fundamental requirements for a successful claim for interference with privacy. That is,

a.The existence of facts in respect of which there is a reasonable expectation of privacy; and

b.Publicity given to those private facts that would be considered highly offensive to an objective reasonable person.

Accordingly, it was felt that the appropriate test should be to prevent breaches of privacy which were “highly offensive to the reasonable person”. It seems that the test is deliberately strict and narrow in scope and that only severe forms of breach will be covered.

His Honour noted, seemingly with approval, the sentiments expressed by Kirby J, (in the seminal High Court of Australia decision of Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63, 76 ALJR 1) who commented (at paragraphs 188– 189), that:

In recent years, stimulated in part by invasions of individual privacy, including by the media, deemed unacceptable to society and, in part, by the influence of modern human rights jurisprudence that includes recognition of a right to individual privacy, courts in several jurisdictions have looked again at the availability under the common law of an actionable wrong of invasion of privacy. It is this course that the respondent invited this court to take to remove any doubt that the interlocutory injunction it sought was fully justified …

Whether, so many years after Victoria Park and all that has followed, it would be appropriate for this court to declare the existence of an actionable wrong of invasion of privacy is a difficult question. I would prefer to postpone an answer to the question.

It seems that the concerns expressed about invasions of individual privacy, including by the media, struck a chord and that the majority of the Court of Appeal were prepared to go where even Kirby J was not quite prepared to venture. This, I suggest, is an important development, of which no doubt more will be heard.

Other Privacy Related Case Law Developments

In Television New Zealand Ltd v Mafart, (High Court – Auckland, S89/85; S90/85, 23 May 2005, Simon France J, unreported) TVNZ applied for leave to access to closed-circuit television footage and documents relating to the infamous sinking of the Rainbow Warrior by French agents. TVNZ planned to run a documentary for the 20th anniversary of the incident and sought from the Court access to trial material for purposes of making a documentary marking the anniversary. While previously unsuccessful the broadcaster was this time able to gain access to material (other than administrative files and sentencing material). In doing so the Court considered whether the law had changed since previous applications and whether privacy interests remained paramount.

Simon France J concluded that TVNZ should be able to gain access on the basis that the French agents had themselves chosen to write on the topic and intended to control coverage rather than remove it from public domain. In the result, the his Honour found that the privacy expectation was inherently low and in effect that the public interest outweighed the privacy interest.

In Attorney-General v Television New Zealand Ltd (2004) 17 PRNZ 360, (Supreme Court, Gault J, Keith J) in a very high profile case, the Attorney General applied successfully for leave to appeal against a Court of Appeal decision relating to TVNZ’s efforts to interview Mr Zaoui, a person alleged to be a security risk and subject to a security certificate. In doing so, the Supreme Court assessed the competing interests involved in values in the integrity of statutory processes, freedom of expression and national security

These cases show that the conflict between freedom of expression and a right to, inter alia, privacy will continue to shape our jurisprudence. It is also clear that rights in content, access to information, privacy, and freedom of expression are all concepts that play an increasingly important role in our modern “information society”.

12.GEOGRAPHICAL INDICATIONS

On 21 June 2005 the Geographical Indications (Wines and Spirits) Registration Bill was introduced into Parliament. The Bill is designed to replace the Geographical Indications Act 1994, which has been in force for many years but surprisingly has never taken effect. Its purpose is to bring New Zealand up to date in this area.

Once passed in to law, registration of a geographical indications or GI will be limited to wines and spirits only. A registered GI restricts the use of the GI on wines and spirits that do not originate from the geographical area indicated. The Fair Trading Act and the common law will continue to provide the main source of protection for other goods and non-registered GIs.

The Bill contains a new definition of GI, namely an indication that identifies a wine or spirit:

a.as originating in the territory of a country, or a region or locality in that territory, and

b.as having a given quality, reputation or some other characteristic that is essentially attributable to its geographical origin.

The Bill seeks to deal with the relationship between trade marks and GIs and recognises a first-in-time, first-in-right principle for determining priority of rights. This regularisation is long overdue. The question is whether it goes far enough?

13.MATTERS OF GENERAL INTEREST

Regulation of the Patent Attorney Profession

In October 2002 the Ministry of Economic Development issued a discussion paper proposing a number of changes to the regulation of the patent attorney profession, including important issues such as multidisciplinary partnerships and profit-sharing. It also proposed that foreign-registered patent attorneys would be allowed to register and practice in New Zealand even when not resident here, subject to equivalence of qualification.

In June 2003 the Lawyers and Conveyancers Bill 2003 was introduced. Various submissions were made to the relevant Parliamentary select committee, liaison occurred between the patent attorney and legal professions and plenty of lobbying was done behind-the-scenes. A substantial piece of draft legislation eventuated but earlier this year the Bill was suddenly sidelined by the new Attorney General. This is one of the more rapid turnabouts, even in an election year. The future of this legislation looks decidedly uncertain and there is no point in trying to predict things until the new government clarifies its intentions.

Developments at IPONZ

Registered users of the IPONZ website are now able to send non-fee bearing trade mark correspondence electronically. Users can use this new online correspondence facility by attaching correspondence through a browser feature. Up to 10 letters can be lodged at a time. IPONZ is currently developing software that will allow registered users to submit patent and design correspondence online, including the ability to include payments. This is being done as part of the ECLIPSE project – a project to enhance and redevelop IPONZ’s present database (IPOL). It is hoped that this new functionality will be available early in 2006.

Internet Code of Practice

The New Zealand Internet Society, known as InternetNZ, has for some time now being working on an Internet Code of Practice. Its purpose is to serve as a guiding document for users, providers and businesses that use the Internet. It is designed to encourage responsible self-regulation.

In January this year it released its Internet Code of Practice Working Paper, so as to engender discussion and consultation. While adoption of the Code will be voluntary, ISPs that sign up may be liable for failing to comply with its provisions. Some of the principles include the rights of the public to:

a.clear and honest terms and conditions;

b.change service providers without unreasonable difficulty; and

c.information regarding blocking adult content and how to protect the security of their computer equipment.

ISP rights and obligations are also dealt with, including that they should not provide services that are illegal and certainly not knowingly host services that breach laws relating to offensive material, privacy, copyright and defamation. Likewise, the need to comply with New Zealand’s privacy laws is also dealt with as is the requirement to cooperate and deal responsibly with issues such as spam and hacking. A dispute resolution mechanism is also proposed.

Parallel Imports

Parallel importation is no longer the hot topic it was a few years ago, with the Government basically removing most barriers to the practice. The draft Patents Bill does not however expressly address the issue of parallel imports. Some commentators have suggested that this may create uncertainty as to the legality of parallel imports under the proposed new act. (The previous restrictions created under copyright and trade mark law have been removed – the Copyright Act 1994 allows parallel imports as long as the goods are not infringing copies in the country of origin and the Trade Marks Act 2002 provides that a trade mark is not infringed where the proprietor put the goods on the market under that trade mark anywhere in the world.)

The exception is the Copyright (Parallel Importation of Films and Onus of Proof) Amendment Act 2003, (which came into force on 30 October 2003) which prohibits the parallel importation of films within nine months of their first public release anywhere in the world.

14.PROCEDURAL CASES OF INTEREST

A number of cases may be of some interest, particularly to practitioners involved in contentious matters.

Ex Parte Orders

In Abn Amro Holdings Nv v Abn Union Treasury Management Ltd, (High Court – Auckland, CIV2004-404-7200, 9 February 2005, Heath J, unreported) the parties were in a dispute over the well known trade mark “ABN”. Abn Amro sought and obtained an ex parte interim injunction. The defendants, who included ABN Union Building Society, applied to rescind the order, on the basis that the disclosure made on the ex parte application was so inadequate as to justify a refusal of continuation of the injunction. Heath J declined to do so, finding that the disclosure was adequate in the circumstances. His Honour did however note that there was no reason why the Pickwick procedure (Pickwick International 1972] 3 All ER 384) could not have been utilised. The court commented:

“Nevertheless, that is the preferred practice: at least the Pickwick procedure provides an opportunity to be heard on the injunction application, albeit in a limited way. In my view, the application was not so urgent that the Pickwick procedure could not be used”.

One of the difficulties with ex parte applications is how to deal with hearsay and opinion evidence, often prepared in the heat of the moment. Heath J had no issue with it, pointing out entirely realistically I would suggest, at paragraph 18:

“Additionally, there can be criticism of the inadmissible opinion evidence before the Court from the private investigator. However, the inadmissible rhetoric of that evidence is most unlikely to have swayed the Judge”.

Nevertheless, his Honour still concluded that there was a seriously arguable case of trade mark infringement and that the balance of convenience favoured the plaintiff, for reasons including that:

a.the defendant had no prior business connection in New Zealand;

b.evidence on the nature of the potential loss to the plaintiff caused to the defendant by the injunction was sparse; and

c.the potential damage to Abn Amro was serious.

Accordingly, the orders remained in place.

As to the weight likely to be afforded to ECJ decisions (which are increasingly relied upon by IPONZ), the Court made its position crystal clear, at paragraph 28:

“To the extent that there is any difference in approach, while the English Court of Appeal and Laddie J were bound by the decision of the European Court of Justice, I am bound by the decision of the New Zealand Court of Appeal. I apply the approach evidenced in Anheuser-Busch”

Use of the Police

The Stepping Stones Nursery Ltd v Attorney-General, (High Court – New Plymouth, CIV2003-443-000054, 18 May 2004, Venning J, unreported), illustrates the dangers of using the police to try and advance commercial interests.

It is an interesting case that relates to PVR rights in a certain plant variety known as “Red Dragon”. The parties were commercial competitors, operating in New Plymouth. One of the parties managed to convince the local police to obtain search warrants and to search certain properties. The police did so and executed warrants with the assistance of a plant expert. Despite not finding any allegedly stolen budwood, the expert confirmed that the particular nursery involved was growing Red Dragon. On numerous occasions the police handed over sensitive commercial information to the company that had made complaint. The Stepping Stones Nursery then issued proceedings against the Crown claiming damages for breach of the New Zealand Bill of Rights Act 1990 (unlawful search and seizure) and for breach of confidence. It was successful.

The Court ruled, in this particular decision, that certain parts of witness statements’ be ruled inadmissible as they were not relevant. That is, as evidence of the competitive relationship between the parties and consequences on the unlawful disclosure were not relevant because the focus was on actions of the police in the conduct of the search and later in the disclosure of the information to a third party.

Stay of Proceedings

Situations arise where parties bring parallel proceedings at IPONZ and in the High Court. Questions then arise as to which particular proceeding should proceed first and if and in what manner the other proceeding should be stayed. This issue was dealt with by the High Court in Flexiteek International v Tek-Dek NZ Ltd, (High Court – Auckland, CIV2003-404-4123, 12 February 2004, Laurenson J, unreported).

Flexiteek was the proprietor of a patent. It threatened infringement proceedings against Tek-Dek. Tek-Dek then applied to IPONZ to have the patent revoked, under s 42 of the Patents Act 1953. Flexiteek and its manufacturer sought an interim injunction in the High Court alleging patent infringement. Tek-Dek in turn responded seeking a stay of the infringement proceedings in the High Court until the revocation proceedings had been resolved at IPONZ.

Tek-Dek failed however to convince the Court to grant a stay. Instead, Laurenson J found that the affidavit evidence indicated that resolution of the matter may take substantially longer if left to IPONZ. His Honour also noted that Flexiteek had already filed a number of documents in the High Court, whereas Tek-Dek had not yet filed original documents required to initiate the proceedings before the Commissioner. Finally, the Court took into account issues of costs and that there were case management advantages of dealing with and resolving both issues together and that this could be done better in the High Court, which at the end of the day was the better forum to decide the matter.

Sealed Air New Zealand Ltd v Machinery Developments Ltd, (High Court – Wellington, CIV-2003-485-2274, 25 August 2004, MacKenzie J, unreported) related to an appeal and cross appeal against a decision of the assistant commissioner in relation to an invention directed to certain packaging apparatus.

The facts are not necessarily that relevant. However, the Court did reaffirm that in patent opposition proceedings, while the standard of proof is the civil balance of probabilities the threshold which an opponent must reach is high; “manifestly untenable”. The Court also endorsed the assistant commissioner’s approach in allowing time for amendments to be made to the specification so as to remove ambiguity, on the basis that it was a practical and reasonable way of resolving the issues before him.

Summary judgment is being used more now in the IP field than in the past. For example, in University of Waikato v Benchmarking Services Ltd & Anor, (2004) 8 NZBLC 101,561 the appellant had sought the usual remedies against the respondents in relation to a survey which, it was alleged, the respondents had copied and used in their brochure and website. On appeal the Court of Appeal found that the respondents had no defence and that the claim for infringement was made out. As a result, summary judgment was granted and the question of damages remitted to the High Court for determination.

Belated Opposition Proceedings

In Lacme v Gallagher Group, High Court – Wellington, CIV-2004-485-2659, 17 August 2005, the Court considered an interesting technical point as to when patent opposition proceedings have been brought. Gallagher had opposed a patent by filing a notice of opposition, but it had not lodged a statement of case. The question was whether an opposition had been brought. The Commissioner found that Gallagher could bring belated opposition proceedings as the notice of opposition alone did not constitute the “launch” of the opposition.

The High Court differed. It considered that the concept of a “launched opposition” did not appear in the New Zealand legislation and there was no basis for importing it into the legislation and effectively putting a gloss on it. Accordingly, the appeal was allowed, meaning that Gallagher could not apply to revoke the patent through belated opposition proceedings. This of course did not preclude Gallagher from bringing subsequent revocation proceedings in the High Court.

15.PROCEDURAL DECISIONS AT IPONZ

In applications for removal, success or failure is often determined by the quality and thus probative value of the evidence put forward. In Seamaster v HCB Technologies Ltd, IPONZ, P12/2005, 28 February 2005, the application for removal failed. The applicant had filed some evidence to prove its case but sought in addition to rely on allegations made in the pleadings but not otherwise supported in the evidence.

Unsurprisingly, this approach failed, the hearings officer stating:

“Acknowledging this, [namely its evidentiary problem] the applicant sought to rely on the details of sales and promotions set out in the application for invalidity.

On the face of it those details do disclose prior use of the mark (since October 2002) and a consequent reputation in the mark.

However, (subject to any regulations) evidence in any proceeding under the Act can only be given by affidavit or statutory declaration (section 160). There are no relevant regulations.

It follows, therefore (in accordance with common practice) that claims made in the pleadings are not evidence.”

This is a reminder of the need to ensure that the evidence supports the legal test as pleaded and that both the pleadings and evidence have their own separate roles.

In New Zealand Rugby Football Union Inc v Seabreeze Fashions New Zealand Limited

IPONZ, T17/2005, 23 May 2005, the issue of consolidation came up. One might be excused for thinking that the relatively simple task of consolidating two proceedings would at least be open to the Commissioner. Regrettably, this did not prove to be the case, with the Assistant Commissioner rather surprisingly concluding that he had no jurisdiction to consolidate two oppositions. He did so for the following reason:

“Unlike the High Court there is no express power conferred on the Commissioner by either the Act or the Regulations to consolidate opposition proceedings.

There is no inherent jurisdiction to do so and I do not consider there is, in this case, a discretion provided by regulations 93 or 94….

If I am wrong in this view and regulation 94 does provide the Commissioner with the discretion to dispense with an immediate hearing of this opposition, on the condition that it is consolidated with the LWR opposition, the applicant has nevertheless failed to satisfy me that it would be reasonable to do so.

I do not consider consolidation is in the overall interests of justice….

Weighing all relevant considerations, I consider the “open ended” delay to the opponents outweighs any prejudice to the applicant that may be caused by procedural difficulties”.

The Assistant Commissioner thus made it clear that he would not have allowed consolidation of the proceedings anyway. That much one can accept. However, the finding that he lacked jurisdiction is troubling and these procedural powers, or lack thereof, should be looked at.

In Synthon BV v Smithkline Beecham Plc, IPONZ, P23/2004, 2 November 2004 the question of late evidence arose. That is, whether late evidence could be submitted after a substantive hearing (a patent opposition) but prior to issuance of the decision. While normally it is difficult to have evidence admitted late, particularly after the hearing has been conducted, the assistant commissioner allowed it in this case. That is, on the basis that it seemed clear to him that he had the jurisdiction to allow further evidence at any time after the formal evidence stages, as set out in regulation 49 to 52, have been completed. In doing so, the Assistant Commissioner accepted that this discretion should be exercised sparingly, particularly, as in the present case, when the substantive hearing had been held. Nevertheless, he held that because of the exceptional circumstances of the case he should give leave, pursuant to regulation 52, for the filing of the affidavits.

16.CONCLUSION

It is apparent that there have been a number of developments in New Zealand over the past eighteen or so months. Some have obviously been more important than others. It is clear that IP law remains an area of growing importance. Likewise, sometimes loosely related areas, where electronic communications, content and individual rights are involved, particularly when freedom of expression and privacy come into play, continue to grow in complexity and importance. Likewise, the demarcation between traditional IP and a host of fringe areas is increasingly murky.

Hopefully, this review will assist in keeping you reasonably up to date.

In New Zealand the Ministry of Economic Development (MED) is considering issues relating to the enforcement of the criminal provisions contained in the Trade Marks Act 2002 and the Copyright Act 1994. In particular, the Ministry is investigating the possibility of the Ministry’s National Enforcement Unit (NEU) taking on a role in the enforcement of criminal offences.

On the international level the International Bar Association (IBA) Committee on Intellectual Property and Entertainment Law (IP-Committee) sent a delegate to the Second Global Congress on Combating Counterfeiting and Piracy in Lyon, France in 2005. Subsequent congresses have been held.

These congresses on Combating Counterfeiting and Piracy are coconvened by Interpol and the World Customs Organisation (WCO) were held with the support and cooperation of WIPO and a number of international business organisation, such as the Global Business Leaders Alliance against Counterfeiting (GBLAAC), the International Trade Mark Association (INTA), the International Chamber of Commerce (ICC) and the International Security Management Association (ISMA), all of which are members of the “Global Congress Steering Group”.

The congresses have dealt with the issue of the worldwide combating of counterfeiting and piracy. As outlined in the Lyon Declaration of November 15, 2005 the main goals of the initiative are (i) raising awareness, (ii) improving cooperation and coordination, (iii) building capacity and (iv) promoting better legislation and enforcement.

The issue of counterfeiting and piracy is regarded as one of utmost importance for the various IP Sub-Committees and IP Committee members work throughout the world. The IP Committee has therefore set up a sub-committee which focuses exclusively on the combating of counterfeiting and piracy.

A working group, with membership from around the world, has been set up. It has collected information on the status quo and opinions on the current position and as to what can be done to more effectively combat counterfeiting and piracy.  A standard set of questions was formulated so as to serve as a starting point for the work of the sub-groups within the various jurisdictions covered by the working group. The questionnaire touched on the following issues:

(i)factual/case perspective

(ii)legal perspective

(iii)enforcement perspective.

The working group is now working towards developing a set of best practice principles.

The answers/data has been compiled into a report. A copy is available at: IBA Anti-Counterfeiting and Piracy Survey Report – July 2008.pdf

This article was published in the June 2008 edition of the New Zealand Law Journal. This topic is of interest to me through my involvement as co-convener of the New Zealand Law Society’s Intellectual Property Committee (which contributed to the Society’s submissions to the Select Committee) and through  appearing before the select committee on this Bill.

Background

The Major Events Management Act 2007 (“the Act”) is an important new piece of legislation. It is designed to regulate and control the practice of ambush marketing.  Unlike the Act, ambush marketing is not new.  However, the tactics used have become more sophisticated and effective.  The explanatory note to the Bill observed that its purpose was essentially practical, namely to provide “for a clear, predictable, and fair regime for dealing with ambush marketing issues”.

This is done by providing for a regime for certain sporting events to be declared “major events” pursuant to s7 and to prevent unauthorised commercial exploitation at the expense of major event organisers or official sponsors.  It achieves this by prohibiting a range of conduct, including:

(a)representations that suggest an association with a major event;

(b)advertising that intrudes on a major event activity and the attention of the crowd or audience; and

(c)using certain emblems and words relating to events.

There seems to be reasonably widespread support for the law change.  This is not surprising, given the need to attract major sporting and other events to New Zealand.  Many would agree that ambush marketing needs to be closely regulated in a competitive international environment and that providing a relatively benign sponsorship environment is likely to deliver long-term benefits to the country.  However, at the same time, I believe that many people do not appreciate the wide sweep of the legislation.

Ambush Marketing in Play

Just what is ambush marketing?  A recent situation arose at the Soccer World Cup in Germany. Anheuser-Busch, marketers of Budweiser, had paid over the odds to have exclusive “pouring rights” at the tournament.  That obviously kept competitors off their turf.  However, Bavaria, a somewhat smaller Dutch (not German) brewery came up with the ploy of supplying Dutch fans with orange lederhosen (leather pants) with a lion’s tail (the team’s mascot being a lion) attached to the back and the brewery’s name on the front.

Anheuser-Busch complained and FIFA demanded that the fans remove their pants, resulting in many fans watching the game in their underwear. In the result, a win for the Dutch team on the day, not to mention the unofficial ambush marketer.

This is the very thing the Act is aimed at and colourful and at times amusing as it might be many people would agree with the need to tackle this sort of practice.  The explanatory note to the Bill notes that its purpose is to provide “for a clear, predictable, and fair regime for dealing with ambush marketing issues”.

Genesis of the Legislation

The Act is based in part on the London Olympic Games and Paralympic Games Act 2006. That legislation was seen as necessary to protect the United Kingdom’s interest in the 2012 Olympic Games. Few would quarrel with the broad purpose of the legislation.  However, some commentators have described the UK legislation as “the most draconian sponsorship law to date” and cautioned that businesses will need to take more than usual care “as even acts that seem intuitively fair can infringe”.

A number of the provisions in the Act are in fact wider in scope than the English legislation, in that they are not restricted to any specific event, for example the 2012 London Olympics, but cover any so-called “major event” declared by Order in Council pursuant to s7(1) to be so.  This gives the relevant government ministers very wide powers to recommend events be categorised as “major events”.

For example, would the Under-17 world rowing champs be deemed to be a major event? Probably not, as all events will need to meet set criteria in order to be designated a major event. To do so they will need to receive the recommendation of the Economic Development Minister after consultation with various other ministers and under s7(4)  take into account, inter alia, whether the event will:

(a)attract a large number of international participants or spectators;

(b)generate significant tourism opportunities for New Zealand; and

(c)offer substantial sporting, cultural, social, economic, or other benefits for New Zealand/ers.

However, unlike the proposed Canadian legislation, referred to below, there is no sunset clause.  Our legislation is both generic and permanent in nature, even though designated events may come and go and vary in terms of size, importance and national benefit.

Ambush by Association

The Act addresses two particular types of “ambush”.  The first is ambush marketing by association.  The explanatory note to the Bill states that this “involves an advertiser misleading the public into thinking that the ambush marketer is an authorised partner or somehow associated with the event”.

While that all seems relatively clear we need to get a better understanding of what is meant by “association”.  This is defined in s4 as meaning “a relationship of (sic) connection, whether direct or implied, such as an approval, authorisation, sponsorship, or commercial arrangement and includes offering, giving away, or selling a ticket to a major event activity in connection with the promotion of goods or services“.

This definition does not require anyone to be misled or deceived.  All that is required is that an appearance of a relationship or connection arises, whether direct or by way of implication.  The explanatory note acknowledges as much, stating at page 25 that: “the threshold tests require persons to prove a misleading or deceptive, confusing or deceptive, or false or misleading representation.  These tests are such that many types of ambush marketing cannot be prevented“.

In other words, mere association, without anything more is sufficient to trigger the infringement provisions of the Act.  This is clear from the wording of s10(1), which reads:

No person may, during a major event’s protection period, make any representation in a way likely to suggest to a reasonable person that there is an association between the major event and—

(a)goods or services; or

(b)a brand of goods or services; or

(c)a person who provides goods or services.

Dr Owen Morgan of Auckland University has noted, based on research done by Jerry Welsh (who coined the phrase “ambush marketing”), that a sponsor buys a specific product, not an event as a whole; that there is no obligation (legal or otherwise) to market away from a thematic space and finally that ambush marketing in fact makes events more not less valuable.  This suggests that the philosophical underpinnings of the law may be less secure than thought.

S10 needs to be interpreted in conjunction with ss 11 and 12.  S11 creates a presumption of breach if a representation uses so-called major event words or emblems, or something that so closely resembles them, so as to be likely to deceive or confuse a reasonable person. The commentary on the Bill makes it clear that once such a representation is made that the person making it cannot escape liability by using a disclaimer or a term such as “unofficial” or “unauthorised”.

S12 contains exceptions to ss 10 and 11.  The exception covers, inter alia,

a situation where a written authorisation has been provided or a representation is made and it is in the form of a “personal opinion” expressed by a natural person for no commercial gain. During the course of the Select Committee hearings the Select Committee agreed with the recommendation of the New Zealand Law Society, that some form of saving for freedom of expression was needed.

The Society proposed a reasonably wide exemption for conduct which amounted to social expression, commentary, parody or satire. This proposal was not accepted.  However, an express exemption for “expressing a personal opinion” was added. This provision is reasonably limited in nature because it needs to be expressed by way of an opinion, needs to be made by a natural person and for no commercial gain.

An exception covering representations which were incorporated into a context to which the major event was substantially irrelevant has been struck out.  Presumably this would have covered situations where the reference or representation was inconsequential or of limited significance, similar to the incidental copying exception under copyright law.  It is unclear why this was done.

Practical Pitfalls

In terms of practical pitfalls, the names and indicia relied upon by the event organiser or sponsor may be descriptive and commonplace words which would otherwise lack the distinctiveness required for legal protection, whether as common law or registered trade marks, or otherwise.  Once again, this is identified as one of the so-called “gaps” that the legislation seeks to fill.  In other words, for businesses operating day in and day out, non-distinctive and descriptive marks remain unprotectable at law, as they have always been.  For major event organisers, the position will be different.

If we put this in a bit more context, according to the Schedule to the Act certain Commonwealth Games and Olympic symbols and names are specifically reserved.  Thus, words or terms such as “Games”, “2008″ and “Games City” are off limits, as are any abbreviations extensions or derivations of the words, or indeed words that have the same or a similar meaning.  Once again, there is no need for the word or term to be misleading or even confusing in any way; similarity alone is sufficient.

No doubt, major events will spawn their own non-distinctive terminology and symbols – with the Rugby World Cup on the horizon presumably covering words such as Black, White and Green.

The net effect of this approach is likely to be to avoid and circumvent well-established rules which require that in order to secure trade mark rights or effective rights by way of passing off, that the mark or indicia is to some extent distinctive, and that consumers or other relevant people will be misled in some way and that the offending trade mark or indicia is not just similar but at least confusingly similar in some way.

Most major sporting and entertainment events attract fringe operators who may benefit directly or indirectly from the event but are not in any way formally associated with it.  As discussed below, this will however change, particularly in and around clean zones.

It is apparent that parody will be difficult if not impossible under this regime because an essential requirement of any good parody is to create an association with the real thing but to distinguish itself at the same time.  The problem with the broad concept of “association” that underpins this proposed legislation is that once an association is created that “link”, no matter how tenuous, cannot be broken.  Accordingly, parody or social commentary is not really an option.  As noted above however, that issue has to some extent been addressed with the limited exception for personal expressions of opinion.

Ambush by Intrusion/Clean Zones

The second form of ambush marketing is by intrusion.  This simply means “intruding on the attention of an audience” gathered to watch an event.

Pursuant to s16 the Minister of Economic Development is able to declare clean zones and clean transport routes  These zones are limited, to the extent that:

(a)they extend up to 5 kilometres from the closest point of the boundary of a clean zone (Green Party efforts to reduce this to 2 kilometres having failed);

(b)are directly proximate to a motorway, State highway, or railway line; and

(c)are likely to be used by a substantial number of people to transit to or from a clean zone during the applicable clean period.

It is apparent that these clean zones will be large and cover not just the venues but all arterial routes to and from them.  The situation may be compounded by overlapping clean zones when a number of venues are being used for a particular event.

S17 prohibits street trading in a clean zone during a clean period without the written authorisation of the major event organiser.  S18 prohibits advertising in the same fashion. Similar clauses deal specifically with billboards, aircraft etc. Essentially, any intrusive activity around a venue will be strictly controlled.

S22 does however protect existing organisations continuing to carry out their ordinary activities in accordance with honest practices in industrial or commercial matters, including:

(a)articles of clothing or other personal items being worn, carried, or used by a member of the public or participants, officials, or volunteers in a major event activity: and

(b)in a newspaper or magazine or on radios, television, or other electronic devices being used for personal use.

The intention here is to allow honest behaviour but clamp down on any form of coordinated activity by groups of people who intend that the advertising intrude on a major event.  In other words, it may be permissible for an individual to wear a T-shirt with an offending name or trademark on it, but as soon as one or two people do so together, the activity may be seen as coordinated and thus unlawful.  S23 states that it is an offence to knowingly breach the intrusion provisions. The penalty on summary conviction is a fine not exceeding $150,000.

S25 prohibits the unauthorised selling or trading of a ticket to a major event activity for a value greater than the original sale price of that ticket. Breach, which occurs up on knowingly selling or trading a ticket, is an offence with a penalty of a fine not exceeding $5,000.

S27 now makes it an offence to invade a pitch at a major sporting event.  This is defined as going onto the playing surface at a major sporting event or propelling an object onto the playing surface.

This provision was introduced by a Supplementary Order Paper tabled on 4 April 2007. This is no doubt designed to clamp down on streaking and the like. However, it is now proposed that it be an offence to merely “propel any object onto the playing surface”.  While the purpose might be to discourage crowds throwing projectiles, particularly those with rival brands on them, onto the playing surface, the problem with widely framed provisions like this is that it could arguably also catch innocuous conduct like throwing (defined as “intentionally setting an object in motion in any manner”) a paper cup or bottle into the air during a “Mexican wave”.

As noted above, given that the only form of expression recognized under the legislation is for expressions of “personal opinion”; when it comes to pitch invasions there is no exemption. Conduct such as streaking, even if the purpose is purely exhibitionist in nature or designed to make some form of social commentary or protest (and one need think no further than the 1981 Springbok tour by way of example) is clearly prohibited.

Is Legislation in this Form Necessary?

We are told that major sponsors “insist that there be protection against ambush marketing before they will commit to sponsorship contracts” and that this type of legislation is necessary to secure large sporting and other events.  I question whether this is perhaps overstating the position a little, given that a number of international events have been secured without such legislation.

However, assuming some form of ambush marketing law is in fact required in order to secure major events, the question is whether such far-reaching changes are necessary?  By way of comparison, the Canadian government has just introduced new legislation in the same area.  The purpose of the legislation is to deal with sponsorship concerns around the upcoming Vancouver 2010 Winter Games. The Olympic and Paralympic Marks Bill (Bill No C-47) provides the organising committee with specific powers over designated words and symbols.

The major thrust of the legislation is to prevent third parties from advertising in a manner that is likely to create a mistaken association. In particular, it prohibits any person from adopting or using in connection with a business, as a trademark or otherwise, an Olympic or Paralympic mark or a mark that so nearly resembles an Olympic or Paralympic mark as to be likely to be mistaken for it.

It also prohibits any person from promoting or otherwise directing public attention to a business in a manner that misleads or is likely to mislead the public into believing that there is an association between the person’s business and the Games or the organising committee or that the business has been approved, authorized or endorsed.

Likewise, s12 of the Melbourne 2006 Commonwealth Games (Indicia and Images) Protection Act 2006 requires that a reasonable person who is likely to mistake the infringing use as being legitimate use.

It is thus apparent that in this regard that Canada and Australia have tackled the same problem but in a more conventional and arguably appropriate way.  It also seems that a cornerstone of this overseas legislation is that while wide-ranging protection is necessary, that it still needs to be shown that people are likely to be misled as to the nature of the association (Canada) or mistaken by the infringing use (Australia).  This is a fundamental tenet of traditional consumer protection and intellectual property law. For some reason however we have gone down a different path.

Is the Balance Right?

The explanatory note to the Bill states that it is necessary to ensure that any new legislative protections are not “overly broad” and that “unnecessary duplication” of existing provisions is minimised.  The wish to avoid overbroad provisions and duplication is laudable. However, is it likely to be achieved?  I suggest that on closer analysis the answer is unclear.

Firstly, in terms of the scope and possible impact of the legislation, it is interesting to note that the Australian Department of Communications, Information Technology and the Arts is conducting a review of Chapter 3 of the Olympic Insignia Protection Act 1987 and the Melbourne 2006 Commonwealth Games (Indicia and Images) Protection Act 2005. The purpose of this review is to provide information and recommendations to the Australian government as to the effectiveness of this legislation and its impact on various stakeholders.  In particular, the review will look at whether the legislation strikes a fair balance between the interests of event organizers and those of other stakeholders, such as athletes, coaches, service providers and media organizations; and whether it has had any indirect, unintended or detrimental effects on certain organizations. I am unsure as to the nature and extent of any impact assessment done by our government.

The explanatory note to the Bill also stated that it is important for the fairness and efficiency of any ambush marketing legislation that there is an onus on event organisers to use existing measures where those measures are adequate to address the identified issues and can be reasonably implemented.   While this suggests that there is an onus on event organisers to use existing measures where those measures are adequate to address the identified issues and can be reasonably implemented, there is no express requirement in the Act itself to do so.

Instead, a new category of enforcers, “enforcement officers” are created. It is unclear why any event organiser would bother with enforcing traditional IP rights when these enforcement officers have the powers to police the events and issue formal warnings, obtain search warrants, seize and cover offending materials and generally oversee things which breach the provisions of the legislation.

The wide powers of these new enforcement officers are a concern, as is the means by which those powers are exercised. S67 allows a warrant to be issued by any High Court Judge, District Court Judge, Community Magistrate, Justice of the Peace, or Registrar of a District Court.  It is worth comparing these provisions with other existing regimes allowing, statutory search, and seizure and interception powers.  For example, Section 312B of the Crimes Act 1961 provides for application by the Police to obtain warrants to intercept private communications.  In this situation an application needs to be made to a Judge of the High Court (not for example the registrar of a court) and can be executed only by members of the Police.  The section contains a number of requirements including that the Judge needs to be satisfied that it is unlikely that the Police investigation of the case could be brought to a successful conclusion without the grant of such a warrant.  A central requirement is thus necessity.

The Police also need to satisfy the Judge that other investigative procedures and techniques have been tried but have failed to facilitate the successful conclusion of the Police investigation of the case, and the reasons why they have failed in that respect. Alternatively, they need to establish to the satisfaction of the judge the reasons why it is considered that the case is so urgent that it would be impractical to carry out the Police investigation using only investigative procedures and techniques, other than the interception of private communications. Once again, questions of proportionality and necessity and other available remedies/options are central to the enquiry.

This makes it clear that the Police have an appropriately heavy burden to satisfy and that the interests of the community are safeguarded in material respects, even though the offenders may be suspected of committing a criminal offence.

Under the Summary Proceedings Act 1957 for offences punishable by imprisonment, search warrants may be obtained pursuant to section 198.  Such warrants may be issued by a District Court Judge or Justice, Community Magistrate, or any Registrar (not being a constable). However, in the case of an application for a tracking device warrant, application needs to be made under s200B and only by an authorised officer to a High Court Judge or a District Court Judge. A pre-requisite is that the authorised officer believes that there are reasonable grounds to suspect that an offence has been, is being, or will be committed and that information that is relevant to the commission of the offence can be obtained by virtue of the tracking device.

In addition to this it needs to be established, pursuant to s200B(c), that:

“it is in the public interest to issue a warrant, taking into account the seriousness of the offence, the degree to which privacy or property rights are likely to be intruded upon, the usefulness of the information likely to be obtained, and whether it is reasonably practicable for the information to be obtained in another way.”

It is thus apparent that in the case of more intrusive intervention the bar is lifted and extensive safeguards are written into the legislation to ensure that the proper balance between public and private interests is maintained and that issues of privacy, protection of property rights and of course that of overall utility are adequately addressed.

The Commerce Act 1986 also contains relatively extensive “search and seizure” powers. S98 permits the Commission to authorise an employee of the Commission to search premises under a warrant.  Once again, s98A permits search warrants to be issued.  However, it needs to be established that there are “reasonable grounds to believe that it is necessary for the purpose of” ascertaining whether there is a breach or likely breach of the Act.  Once again, the question of necessity underpins the assessment.

This differs from the situation in the Act, which has the potential to cut across well-established common law principles relating to search and seizure. There may well be urgency involved in obtaining access to premises and computer records but the Anton Piller jurisprudence and procedures are now well honed and they are constantly being refined and updated. The Act essentially circumvents these rules in favour of a statutory search and seizure power, subject to few of the important safeguards developed by the Courts and the legal profession over the years, including for example the use of independent solicitors appointed by the Court to execute the Court Orders and protect the interests of those affected thereby.

Arguably, these concerns are magnified when the proposed role and appointment of enforcement officers is considered. The Act simply states that the chief executive of the Ministry of Economic Development may appoint enforcement officers, on a permanent or temporary basis, to perform the functions and exercise the powers conferred by the Act (s38).  However, we are not told what the criteria for appointment are, what law enforcement training these officers need or indeed whether they need any training at all.  Likewise, we are not told who is to instruct and supervise them and who is to coordinate their activities around major events.

The concern is that these officers could include, for example, individuals from private security companies, even part-time employees with no significant training, acting on behalf of the event organiser.  My concern is that this could be open to potential abuse. These powers have been mitigated to a limited extent by s68(2) which requires the enforcement officer to be accompanied by a member of the police when exercising search and seizure powers.

Conclusion

I support effective restrictions on ambush marketing. However, I consider that this legislation goes too far.  It may well provide a clear and predictable regime but I question whether it achieves the right balance between event organisers and sponsors and the wider New Zealand public, including fans and local businesses.

Supporters might argue that the benefits to the country are so great that these well established principles should yield to the new order.  However, in my view we should not implement legislation that is so broad that a range of decent people are likely to get caught up in its wake and end up falling foul of its pretty severe civil or criminal sanctions. That is, particularly when other viable and arguably less extreme options are available. That however is not the way Parliament saw it.

The copyright/design overlap has caused headaches for many in Australia.

The High Court of Australia has just ruled on the issue. Commentators see it as a major decision which will cast welcome light on the debate.

The yacht at the centre of the dispute is the JS 9000

It is described as a simple, narrow, 30 foot sport yacht. See

http://litoralis.blogspot.com/2006/02/law-and-sailing-js-9000-copyright-case.html

The following case summary (see below) from the High Court does little to identify the nature of the dilemma. Commentators have said that the decision provides useful guidance and draws a distinction between a ‘a work of artistic craftsmanship’ which needs a ‘real and substantial artistic effort’ which is not constrained by ‘utilitarian considerations’ and something that is essentially functional. That is, by looking at the extent that the artist had wide freedom for expression and where artistic expression is subordinate to the functional requirements, in this case (a yacht) of speed and smooth handling.

Unfortunately, cases like Sheldon v Metrokane, focusing as they do on relatively commonplace, mass produced industrial articles like corkscrews have cast doubt on the appropriateness of the description artistic craftsmanship. The fact that often these items have been intended for sale to members of the public for frequent or everyday use has not helped either.

This has created conceptual difficulties for the courts.  Perhaps this is why the High Court drew a distinction between a stained glass window and a boat. That is, indicating that while a stained glass window might perform a certain function as a window, it also gave the artist a wide freedom in terms of expression. In turn, this could be contrasted to an item such as a boat where any artistic expression was essentially secondary and subordinate to functional requirements e.g. speed and good handling.

However, perhaps it could be argued that this analogy is conclusory and to make the comparison is almost to determine the outcome.  A stained glass window brings to mind the great mediaeval cathedrals of Europe and magnificent stained-glass windows made by craftsmen of undoubted ability. Artistic excellence and craftsmanship come to mind. On the other hand the relatively more mundane sailing vessel designed for the recreational needs of the masses hardly meets the same lofty ideals.

However, I wonder whether that is the point. What of a one off yacht with a hull lovingly shaped by a master “craftsman” with the intention of looking superb and exhibiting his/her artistry of both form and function, but with the overriding goal of creating a superb sailing vessel regardless of whether it had the attributes of speed and a good handling? In that situation, why should the mediaeval glass smith take precedence over the modern day hull shaper?

The question would probably not have arisen in New Zealand where the distinction between artistic merit and craftsmanship and mundane but original industrial design is less important.

Anyway, this decision will no doubt be debated for some time to come. Here is the initial summary:

HIGH COURT OF AUSTRALIA

26 April 2007

BRENT BURGE, TREVOR ROGERS, BENJAMIN WARREN, BOLD GOLD INVESTMENTS,

GLEN PETER BOSMAN AND SERGIO EDWARD ZAZA v JOHN HARLEY SWARBRICK

Moulds used in the reproduction of a high-speed yacht did not attract copyright protection as works

of artistic craftsmanship, the High Court of Australia held today.

Mr Swarbrick is a naval architect whose Perth company Swarbrick Yachts International Pty Ltd

manufactures fibreglass yachts called the JS 9000, sold in Australia and around the world for up to

$65,000. He designed the JS 9000 as a fast boat sailed easily by two or three people. Mr Swarbrick

has also designed America’s Cup and Whitbread racing yachts. Mr Rogers and Mr Warren were

employed by Swarbrick Yachts in the moulding of hulls and decks but left to work for Bold Gold

to build a JS 9000 yacht using a hull and deck moulding which Bold Gold bought from Mr Rogers

for $7,500. In late 2002, Mr Swarbrick gave Mr Rogers the moulding in disputed circumstances

which have not been resolved. Mr Bosman and Mr Zaza formed Bold Gold Investments for the

purpose of acquiring the moulding from Mr Rogers. Mr Burge was engaged as factory operation

manager. Work at Bold Gold’s factory ceased in September 2003 after Justice Christopher Carr in

the Federal Court of Australia granted Mr Swarbrick an interim injunction. The injunction prevents

the manufacture of any mould using the JS 9000 hull and deck mouldings and the reproduction of

the object called “the plug”, a hand-crafted full-scale model of the hull and deck sections of a

finished JS 9000. The moulds are exact, although inverted, copies of the plug.

Section 77 of the Copyright Act provides for the limitation of copyright protection resulting from

use of a corresponding but unregistered design but an exception is provided for “a work of artistic

craftsmanship”. Justice Carr held that Bold Gold had infringed Mr Swarbrick’s copyright in the

plug, the hull mould and the hull moulding, being artistic works, and had engaged in conduct

which, but for the interim injunction, would have resulted in infringement of his copyright in

artistic works being the deck mould and deck moulding. The Full Court dismissed an appeal. Bold

Gold and its personnel then appealed to the High Court.

The Court unanimously allowed the appeal. It held that determining whether a work is “a work of

artistic craftsmanship” does not turn on assessing the work’s beauty or aesthetic appeal or on

assessing any harmony between its visual appeal and its utility. The determination turns on the

extent to which the work’s artistic expression is unconstrained by functional considerations.

Whether the plug was a work of artistic craftsmanship did not depend on Mr Swarbrick’s intention

to design and build a yacht of great aesthetic appeal or on his belief that the JS 9000 had a high

level of aesthetic appeal. The visual appeal was secondary to the functional aspects of a sports boat

of high speed. The Court held that Justice Carr should have concluded that the plug was not a work

of artistic craftsmanship because Mr Swarbrick’s work in designing it was not that of an artist-

craftsman. It held that Justice Carr was however correct to describe the hull and deck mouldings as

manifestations of the plug. The Court rejected a claim that the mouldings are independently works

of artistic craftsmanship. It set aside all orders, including the injunction, made by Justice Carr and

held that remaining cross-claims be stood over for determination by the Federal Court.

•

This statement is not intended to be a substitute for the reasons of the High Court or to be used in any later

consideration of the Court’s reasons.

Colleen McCullough

Morgan’s Run, Century, 2000

INTRODUCTION

This article is a modified version of a paper given by the author at the September 2000 International Bar Association meeting in Amsterdam.

The issue of trade secrets in an electronic environment is not a new one.  Indeed, large mainframe computers have been around since the 1950’s and since the 1980’s the ubiquitous P.C. has revolutionised the way we create and store information.  However, the true revolution has occurred in the past five years with the ability to connect separate desktop computers into groups or clusters which in turn, connect to others.  The result – a massive, robust network, now called the Internet.

It is apparent that trade secret law remains important in the current networked digital environment and has adapted well to the rigors of this environment.   Generally, it remains effective as a commercial tool.  However, because of the unique character of the Internet, special care needs to be taken to secure and preserve trade secrets dealt with in a digital environment.  At the local and international level, technology and the tensions between the information rich and the information needy will shape the future of the law as lawmakers grapple with the contradiction of trying to keep information closeted and confined but while working in an essentially open environment.

An action for breach of confidence protects information ranging from personal information (with the potential for an attendant right of privacy) to commercial and technical information.  It is this latter type of confidential information that is normally termed a trade secret.

In this article I have referred to “trade secrets” loosely.  There is of course a distinction between confidential information and trade secrets, the latter being a subset of the former.  For convenience I tend to use the term “trade secrets”, unless a distinction needs to be made.

BACKGROUND

The notion of the transmission of trade secrets through electronic means is, in itself, and not worthy of special mention.  That is, as long as the trade secret retains its character of confidence and the means of transmission is secure.  However, when the Internet is used as the means of transmission, the situation begins to change, some say, in a fundamental fashion.

The reason for this is that the notions of confidentiality and secrecy, which lie at the heart of the law of trade secrets and confidence are met by the opposing notion of an entity that is essentially ephemeral, open and largely unstructured.

Indeed, it could be argued that the Internet and trade secrets are inherently antagonistic and inimical to each other’s existence.  There are a number of factors, which create this situation.  Two are speed and scale.  As Lucinda Jones notes, developments in digital technology are now taking place with a pace that outstrips traditional law making processes and challenges law and policy makers.  She also points out the second dramatic feature of the Internet is its proportion, with 150-200 million people around the world connected and having access to more than an estimated 600 million separate documents.

[Lucinda Jones: An Artist’s Entry into Cyberspace: [2000] E.I.P.R.79

The eGlobal Report (at http://www.emarketer.com) reported that there were 130.6 million active users in 1999, Time Magazine (June 22, 1999)

Estimates for January 1999 by Forrester Research Inc. (at http://www.forrester.com)

The World has certainly changed since Commander Phillip landed at the inhospitable Botany Bay.

The pressures to normalise and regulate the Internet are significant and growing.  This is illustrated by the comment that:

“We are at a crossroads; the Internet can be a world-wide electronic kiosk of ideas, information, entertainment, or it can be a government restricted and monitored data highway complete with roadblocks, checkpoints and land-mines that are designed for surveillance, censorship, restricted access, and the use of government-mandated languages.”

[The Clash of Technology and Human Rights, Wayne Masden at Symposium on Privacy-Enhancing Technologies, September 17, 1996, The Citadel Hotel, Ottawa]

When it comes to confidential information and trade secrets the dilemma is no better illustrated than in the seminal words of John Perry Barlow in 1993, where he noted with remarkable precision of thought:

“I refer to the problem of digitised property.  The enigma is this: If our property can be infinitely reproduced and instantaneously distributed all over the planet without cost, without our knowledge, without its even leaving our possession, how can we protect it?  How are we going to be paid for the work we do with our minds?”

[John P. Barlow “The Economy of Ideas: A Framework for rethinking patents and copyright in the Digital Age (Everything you know about intellectual property is wrong)” (1993) Wired Online (at http://virtualschool.edu/mon/Economics/BarlowEconomyOfIdeas.html) ]

THE INTERNATIONAL ENVIRONMENT

At an international level a number of policy concerns have arisen.  As noted by Justice Baragwanath when discussing the challenges ahead:

“The first is a vision of a better future.  There is general consensus that a borderless world of electronic commerce is both technically attainable and essential to the optimal social and economic development of the world.  If properly managed, enhanced commerce and education, aviation safety and culture are among the benefits that can emerge, to the considerable advantage of the world community.

“The second message has a discordant note:  of risk that the opportunity will be lost by our generation.  That is because the legal systems of most of the 187 states are incompatible with one another and there are no adequate plans in place to deal with that problem.”

[Global Electronic Commerce: The Response of the Law Commission by W D Baragwanath, New Zealand Law Conference 1999]

When trade secrets are involved, it is unwise to assume that any particular viewpoint, whether it be socio-economic, political or legal, is necessarily correct.  Indeed, it may be inappropriate to even start from the assumption that trade secrets should necessarily be protected.  The modern digital environment and the Internet in particular present new challenges to law and policy makers.  Some argue that inventions should be protected through intellectual property only for the purposes of creating limited rewards to those whose ideas benefit the public and access to information should be preferred to strict enforcement of rights to control inventions. As Howard Anawalt points out, two major social policies favour the pro-access principle.  The first is a commitment to freedom of speech and the free exchange of ideas in the community.  The second is the general social policy that favours freedom to exercise a trade or to compete. These two principles find their way into judicial thinking in a number of jurisdictions and underpin a range of decisions where access/freedom was preferred over a right to restrict.

[Control of Inventions in a Networked World: Anawalt, Howard C: Information & Communications Technology Law, v8n2 pp: 141-150 June 1999.

Ibid, page 2]

This viewpoint is widely supported in developing countries.  The digital divide between developed and developing countries has been widely observed and commented on.  In the area of trade secrets it is an issue of real debate and concern.

At a recent meeting of experts, organised by UNESCO, in discussing the increasing gap between information have’s and have not’s and the role of recent international treaties and agreements, Wilfredo Trinidad from the Philippines noted that these treaties frustrate the public interest which includes the need for “equitable access to information” and suggested that a legal presumption that “every use is fair use” be adopted.

[Expert Meeting on Legal Framework of Cyberspace: 8-10 September 1998/Seoul, Republic of Korea: Summary of the Asia-Pacific Regional Expert Meeting on Legal Framework of Cyberspace]

This approach is reflected in the WIPO copyright treaty, which in its Preamble acknowledges the need to find “a balance between the interests of authors and the larger public interest, particularly education, research and access to information”.

The suggestion that developing countries accept a new intellectual property paradigm which presumes unrestricted access to digital information by all, and recognises this as a public right to information challenges many of the Western World’s underlying principles.  This call for “universal access” could become louder if the divide between information-rich countries and organisations and the rest is not addressed.

INTERNATIONAL TREATIES

In terms of international treaties, confidential information has, until recently, received little recognition.  The only possible exception was article 10bis of the Paris Convention that provides nationals of the Paris Union with “Effective Protection Against Unfair Competition”.  The TRIPs Agreement was the first attempt to deal with confidential information expressly and in explicit terms.  This step was controversial, with developing countries taking the position that confidential information should not be included within the Agreement because it was not strictly speaking a recognised category of intellectual property.  It is suggested that the real basis for the objection was the widely held view in the developing world that information should be freely available, rather than withheld by developed countries who wish to exploit it and maintain their technological edge.

[Michael Blakeney, Trade Related Aspects of Intellectual Property Rights:  A Concise Guide to the TRIPs Agreement, Sweet & Maxwell, 1996 para 10.01]

In section 6 of the TRIPs Agreement under the title “Protection of Undisclosed Information” article 39(2) states:

“Natural and legal persons shall have the possibility of preventing information, lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:

is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

has commercial value because it is secret; and

has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.”

A footnote to the paragraph indicates that the phrase “a manner contrary to honest commercial practices” means “at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by third parties who knew or were grossly negligent in failing to know, that such practices were involved in the acquisition”.

Article 39 clearly gives Member States of the WTO a broad margin within which to protect trade secrets.  They may range from relatively loose civil remedies to tough criminal sanctions, typified by the U.S. Economic Espionage Act 1996.  Importantly, however, at least there is now a common international base line from which to work.

THE TECHNICAL CONTEXT

In transmitting trade secrets through a communications network having multiple unsecure access points the holder of that information runs a risk.  In most situations, when a trade secret is lost, it is lost for good.  Practically, the risk increases with the number of recipients of the trade secret.  As Nicolas Browne-Wilkinson V.C. stated: “The truth of the matter is that in the contemporary world of electronics and jumbo jets news anywhere is news everywhere”.

[A.G. v Guardian Newspapers Ltd: [1987] 1 W.L.R. 1248 at 1269]

Likewise, a risk of unauthorised divulgement of the trade secret increases with the frequency, and number of nodes on en route, and the number of access points to the network, particularly if the route and any encryption is not entirely secure.  These are however practical considerations that have affected the maintenance of trade secrets since their very inception.

Where the digital world differs is that these practical problems have grown significantly in proportion.  As indicated above, this is in part because of the dual factors of speed and scale.  Hypothetically, a piece of information could be either transmitted to or otherwise made available to many of the 150-200 million people around the world who are connected to the Internet.  Hypothetically again, but not entirely in the realm of the fanciful, this information could be communicated to all Internet users within minutes, hours or days.  This would have been simply impossible in the older “hard copy” world.

The very essence of the Internet is that while it is very much a reality it is a reality without location, hence the term “cyberspace”.

[A term attributed to the science-fiction author, William Gibson in Neuromancer. Referred to by Lucinda Jones: An Artist’s Entry into Cyberspace: [2000] E.I.P.R. page 81 (cited in F. Gurry “Dispute Resolution on the Internet,” International Federation of Commercial Arbitration Institutions, 5th Biennial International Dispute Resolution Conference (May 1999) ]

What is significant is that when information is communicated over the Internet because of its packet switching system, packets may cross the globe on a large number of paths to geographically distributed points and only re-form in an understandable form when they reach their destination.  Legally, this means that the information, once transmitted, may disperse and pass through various jurisdictions and legal systems before finally reaching its destination.

This raises serious challenges to notions of national jurisdiction, whereby nation states apply their own brand of law, based primarily on the assumption that some actionable activity has occurred within its borders.

The current digital environment is to a large extent multi-faceted and platform neutral.  This makes both control and monitoring of activities extremely difficult (but it has to be said that many governments are trying hard to re-assert control).  The process is also highly democratic in the sense that large corporations and individuals are equally able to utilise the information disseminating advantages of the medium.  For example, information can be disseminated and collected through the World Wide Web, e-mail, news groups, bulletin boards and chat rooms, as well as through localised networks such as extranets, intranets and other controlled groupings.

Recent government attempts to monitor email communications are likely to prove to be difficult.  The Internet has proved to be flexible and innovative in avoiding control.  It may be found that more users by-pass traditional ISP’s and resort to high level encryption and other means of evasion.

To make the situation even more complicated, information is transmitted in an invisible and ephemeral world where transience is the principal feature.  This makes effective detection and enforcement a real problem.  It also allows information to be moved off-shore or reflected in “mirror sites” in jurisdictions where regulation is less rigorous.  Finally, it allows information to be manipulated and altered so as to render its source uncertain.

The problem here is that in countries where unlimited access to information is regarded as a basic human right the owners of trade secrets may have extreme difficulty in tracking down and apprehending those who choose to intercept or otherwise appropriate their trade secrets.  In a world where industrial espionage is a serious growth industry, repackaged trade secrets may become a commodity of a new breed of digital Mafia.

One of the consequences of burgeoning digital communication and electronic commerce is that the often more settled and secure hard copy world has given way to a far more transient and uncertain business environment where sensitive business data is electronically communicated with far greater frequency.  The greater the frequency and number of nodes involved in the communication the greater the risk that the digital data can be intercepted and copied without detection.  This leads to a greater likelihood of theft or misuse and in a trade secret context the potential for loss of a trade secret through dissemination in the public domain.  There are two reasons why the potential for harm is so much higher in the digital world:

an entire database or a company’s entire business records can be copied with relative ease; and

security measures and tracking devices are not always adequate.

In the old days an intruder would need a pick-up truck and avoid security guards to steal a company’s entire records.  Now it can be done effectively but invisibly through an off the shelf modem.

In trade secret terms the problem is severe.  As security expert Bruce Schneier said:

“… we can’t prevent network attacks.  We can install prophylactic technologies – encryption, firewalls, authentication mechanisms – but they can never be perfect.  Attackers will find and exploit flaws in the software, figure out way to bypass the technologies, or social engineer their way through them.  The only way to maintain security is through detection and response.”

April 4, 2000; ZDNet: Special Report: Lines of Defense: Issues: Opinion:  The Importance of Vigilance; http://www.zdnet.com/special/stories/defense/0,10459,2510681,00.html

With trade secrets it is often too late to close the door when the horse has bolted.  On the Internet a single posting can do a lot of damage.

As a visit to a hacking site shows – these guys are smart and organised and they are not well disposed to attempts to curtail their activities, as shown by some of the topics at their recent H2K conference on 13 July 2000 and in particular topics like:

Hacktivism – Terrorism or A New Hope?

Bypassing Modern IDS Products

Telephone Systems of the World

Lockpicking

Counterfeiting IDS and Identity Theft

How I Got My Own Area Code

[http://www.2600.com/

Allied to this is an increasing concern about the maintenance of privacy and the verification of the identities of participants in electronic transactions.  A key technical tool has been encryption.  The trend towards secure and widespread use of encryption is identified by Lorna Brazell as follows:

The Trade Secrets Home Page ™; R. Mark Halligan, Esq; http://www.execpc.com/~mhallign/

COMMERCIAL THEFT OF TRADE SECRETS

Having looked at the European mixed criminal/civil approach to trade secrets, it is appropriate to look briefly at the US response.  It is also a convenient point to lead into the issue of theft and espionage.

As Allison Coleman states:

Criminal laws regulating the misappropriation of confidential information in general, and trade secrets in particular, are of very respectable antiquity; the Hammurabic Code of 2100 BC, which is the oldest written code of laws, provided for the loss of an eye to one caught prying into forbidden secrets”.

[The Legal Protection of Trade Secrets, Sweet & Maxwell 1992, paragraph 7.1 ]

It is interesting to note from a review of the historical development of the law of trade secrets that it has long been used as a political tool, particularly in the hands of technologically advanced countries.  It is also interesting to note that espionage has always been a major means of technology transfer.  The misappropriation of trade secrets through both developing and technically advanced but economically depressed countries is likely to become an ever increasing problem, particularly as information is conveyed around the globe through digital networks.

[See paragraph 7 of the Legal Protection of Trade Secrets, Allison Coleman, Ibid]

It is widely acknowledged that there has been a significant increase in economic espionage and trade secret theft in recent years.  An example of this is given in a recent edition of Risk Management.  The authors quote the following example:

“… several years ago the New York Daily News reported that “American business executives were stunned in 1991 when the former chief of the French intelligence service revealed that his agency had routinely spied on U.S. executives travelling abroad [and] … regularly bugged first-class seats on Air France so as to pick up conversations by travelling execs, [and] then [entered] their hotel rooms to rummage through attache cases”.

[Complying with the Economic Espionage Act; Carr, Chris; Furniss, Jerry; Morton, Jack; Risk Management v47n3 pp:21-24;

They also refer to the fact that the American Society for Industrial Security estimates that potential losses to American industry total over $60 billion each year and 1,100 entities had experienced economic espionage that year.

[ZDNet: Special Report: Lines of Defense: News: FBI says cybercrime has doubled;

In 1996 the Economic Espionage Act was passed into law.  It creates two federal offences.  The first relates to stealing trade secrets in general.  The second is aimed at economic espionage for the benefit of foreign governments.  The Act also covers the theft of trade secrets by American citizens, who thereby attract federal criminal liability.

[

In her judgment, denying Ford the relief sought, the Honourable Nancy G. Edmunds stated:

[

The nub of the issue can probably be summarised on page 13 of the judgment where the Learned Judge stated:

[Trade Secrets and the Economic Espionage Act by Martin Weinstein of Foley Lardner;

Document Independent Development

[The Volkswagon-General Motors Trade Secrets Lawsuit, its Settlement:  Avoid the Lopez Effect;

The learned authors suggest a number of preventative measures, to lower the risk of experiencing the so-called Lopez Effect.  These are as follows:

The issue of interception was graphically illustrated in a recent High Court decision in S P Bates & Associates Ltd v Woolworths (NZ) Ltd (HC Auckland, CL 15/02, 13 March 2003, Fisher J; unreported, noted in 26 TCL 15/2 and [2003] BCL 391).

The plaintiff trades under the name “SecureNet”.  SecureNet is an ISP which provides Internet services to Woolworths.  Part of the service included scanning for viruses, spam, fraud, unauthorised access of the Woolworths’ computer system along with unauthorised computer usage by Woolworths’ own staff.  Woolworths pulled out of their arrangement and SecureNet sought an interim injunction to prevent Woolworths doing so.

Of relevance here, when the relationship deteriorated, SecureNet started checking Woolworths’ e mails saying that that they were entitled to do so pursuant to the arrangement and in the context of the deteriorating commercial relationship.

Justice Fisher was less than impressed with this suggestion.  The Judge noted (at paragraph 8) that the screening of e mails, was in the first instance a purely automatic process effected by software services contracted by others to SecureNet.  Even though these findings were preliminary in nature, His Honour found, at paragraph 35, that

“It can not be said that SecureNet’s interception in the present circumstances was carried out honestly, in good faith, or for a proper purpose”.

Further, at paragraph 34 the Judge noted:

“SecureNet was providing technology services. Woolworths was providing money.  Nowhere in that simple exchange is there room for the possibility that Woolworths intended to give SecureNet the right to covertly rummage through Woolworths’ communications in order to use them against Woolworths if the two should later fall out.”

The lesson is clear. Technical ability and access does not justify an invasion of others’ space. Likewise, a contractual relationship does not entitle a party to go beyond the terms of the agreement to pry into other person’s affairs, whether they are commercial or private.

Sections 216 A-F of the Crimes Amendment Act (No 6) extends the prohibition against interception of communications to cover electronic and data communications, which would probably cover e mails. S 216 B(1) now makes it an offence to intercept any private communications by means of an interception device (which is widely defined so as to include a “computer”). To “intercept” requires the conduct to occur while the communication is taking place. Arguably it would cover the unauthorized tracking and monitoring of e mails in the fashion dealt with in SecureNet and suggests that caution will need to be exercised by contractors who go outside the scope of their contracts (and indeed others).

The Privacy Commissioner in the Telecommunications Information Privacy Code 2003 (28pp) (document available from annabel.fordham@privacy.org.nz) relates to telecommunications agencies, insofar as they handle personal information about customers and telecommunications users.  Amongst the requirements are that telcos must provide “blocking” options free of charge when caller ID is offered and prohibiting the use of traffic data gained from interconnection for unauthorised direct marketing.  The Code commences in November 2003.

SPAM

Spam is basically unsolicited bulk communications usually by way of e mail. It is reported that some industry commentators estimate that more than half of e mail traffic worldwide is spam.  What makes spam so attractive to direct marketers is that the recipients end up paying for the inconvenience as they are responsible for paying for the Internet connection.

A recent Federal Trade Commission Report indicates that in the US about 44% of spam users have a false return address and/or a misleading subject line and in total 66% of spam was deceptive in some way.  This indicates the magnitude of the problem and is consistent with other reports.  Refer to article by Hall, Dickler, Kent, Goldstein and Wood LLP in World eBusiness Law Report, 17 June 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=2058

It is a serious problem that has sprung up in the last few years.  However, given the almost universal dislike for spam, responses are being formulated. A backlash against the epidemic is gaining.  In the US, the US Senate Commerce Committee has just introduced the first federal anti-spam legislation.  Called, in typical American fashion, the “Controlling the Assault of Non-Solicited Pornography and Marketing Act” or the “CAN-SPAM” Act, the Act will allow regulators and ISPs to take action against spammers who:

•Use inaccurate email subject headers;

•Do not let recipients unsubscribe; or

•Send bulk messages to email addresses obtained by crawlers.

Refer article in World eBusiness Law Report by Steptoe and Johnson on 4 July 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=2103

A copy of the bill is available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&docid=f:s877is.txt.pdf

Various states in the US have introduced new anti-spam legislation; including California which makes it unlawful to send unsolicited commercial emails unless the recipient has opted in, i.e. consented to receive the message.  Alternatively, the sender can escape liability if it can show there is a verifiable business relationship between sender and recipient.  Australia is also said to be on the verge of introducing legislation as are other countries.

Computerworld has reported that New Zealand representatives are “actively working” with international bodies to improve at least the chance of detecting the sources of spam. IT minister Paul Swain is quoted as saying:

“New Zealand is actively working in fora such as the OECD, the ITU (International Telecommunications Union) and APEC (Asia-Pacific Economic Co-operation), which are co-ordinating international approaches to matters such as consumer protection, privacy, internet security, intellectual property protection and cybercrime,”.

See Computerworld item on 21 February 2003 at

http://computerworld.co.nz/webhome.nsf/81476e1c0cf66ad0cc256896007c00e7/9726cf831320007fcc256cd30009cfec!OpenDocument

Large organisations are joining the fight.  Microsoft is reported to have filed fifteen legal actions against spam operators – in Washington, California and the UK.  The United Kingdom lawsuit is brought under the Computer Misuse Act 1990 (c18), which prohibits unauthorised access to computer material or unauthorised modification of computer material.

AOL and Yahoo have also taken steps to tackle the problem.  See article by Hall, Dickler, Kent, Goldstein and Wood LLP in World eBusiness Law Report, 11 July 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=2130

Section 1 of the Computer Misuse Act 1990 makes in an offence to use a computer to access data without permission.  Microsoft have alleged that harvesting email addresses from servers to build spam lists falls within the scope of s1 of the Act.  Refer article by Berwin, Leighton, Paisner, International Law Office Report, 26 June 2003 at http://www.internationallawoffice.com/Ld.cfm?i=17801&Newsletters__Ref=6998

Arguably, spam can now be caught by s250 of the recently enacted Crimes Amendment Act (No 6), which covers a situation where someone intentionally or recklessly and without authorization:

“Damages, deletes, modifies, or otherwise interferes with or impairs any data or software in a computer system” (emphasis added).

The word “adds” was deleted from the provision because it would probably have caught “cookies”. Even so, Denial of Service (DOS) attacks would clearly be caught by the provision as would spam and crawlers that materially impair or erode a computer system/service through a sudden or sustained attack of sufficient magnitude, a view supported in principle by Judge Harvey at p315 in “internet.law.nz”.

At a practical level, a range of reasonably intelligent spam-blocking software is now available. McAfee’s SpamKiller using open-source software and Spam Assassin using the Linux platform are two. Others include, IHateSpam, MailWasher (a New Zealand product), Spamnet and Spamnix. There are also a few practical steps that can be taken to resist spam. These include the following:

•Do not reply to suspicious looking e mails. Avoid the tendency to “just have a quick look”. Spammers often give themselves away by using common variations on a domain name. A reply simply confirms that one of the options is the correct one and the address is worth retaining or on-selling to others. The welcome looking “unsubscribe” option is sometimes little better. It is often just another (even more devious way) of trawling for and getting confirmation of valid addresses.

•Publish your email address with care, particularly when going onto live sessions like newsgroups.

Email Harvesting

Evidence suggests that most spam originates from actual e mail addresses posted on public websites which are “harvested” and added to spammers’ lists.  These lists are then utilised or on-sold for marketing purposes – with the net getting larger and larger.

One way to cut down on this is to mask or obscure actual e mail addresses in both e mail communications and on public websites.  This can be done by using simple software tools which give the name of the person but not his or her actual e mail address. Once again the day may come when not doing so may be negligent, particularly if an organisation or person fails to take adequate or any measures to guard against disclosure of others’ full e mail addresses.

Conclusion

The law in this area is evolving. However, it is unlikely that the law will keep pace with technology. The observations of Justice Michael Kirby given during his recent Privacy Forum address in Wellington, that the courts in Australia and New Zealand may be emerging as important guardians of privacy rights is significant.  With all the change we are facing, hopefully he is correct.

Cookies and Web Bugs

Cookies are data files which reside on a user’s computer hard drive.  They are deposited on the hard drive and retrieved when the user visits the same website again.  The information stored is used to convey the user’s preferences and again his/her personal details. Cookies are however also used for legitimate purposes, including allowing the use of “shopping carts” when buying online.

Session cookies are temporary in nature and only retain data about a user while he or she is present on that particular website. They are thus less invasive. However, stored cookies are more permanent and retain data from repeated visits to a particular website.

Web bugs are similar.  These are programming codes comprising tiny graphics files, undetectable to the human eye.  They allow others to monitor who is accessing a website and to provide details of the Internet protocol address – the user’s unique identifier.

eBay

A useful source of information on the technical issues can be found in the US decision eBay, Inc v Bidder’s Edge, Inc (US District Court, ND Cal, No. C-99-21200 RNW, 24 May 2000). See online at http://legal.web.aol.com/decisions/dldecen/ebayorder.pdf

eBay operates a massive live auction site with some 7 million registered users. It adds approximately 400,000 new items each day.  Bidder’s Edge used a variety of technical tools (variously called software robots, robots, spiders and web crawlers) to access auction information on eBay’s site, for transmission to its own customers.

eBay used a series of robot exclusion headers – utilising the “Robot Exclusion Standard” design – a data file “robots.txt”.  However, certain operators, including Bidder’s Edge, disregarded the standard and avoid the technical “blocks”.  In doing so they also ignored the warning on eBay’s website that web crawlers and the like were unwelcome.

Bidder’s Edge used proxy server software which allows outgoing requests to be routed through unprotected proxy servers and appear to originate from the proxy server, thereby getting past the website’s filter/block.  Bidder’s Edge accessed the eBay site approximately 100,000 times a day, giving an indication of the magnitude of the exercise or problem, depending on which way you look at it.

eBay sought a preliminary injunction, relying primarily on the tort of trespass.  It argued, by analogy, that the defendant’s activities were the rather frightening equivalent of sending an army of 100,000 robots a day to check the prices in a competitor’s store.

Without necessarily accepting the analogy, the Court noted at page 12:

“If eBay were a brick and mortar auction house with limited seating capacity, eBay would appear to be entitled to reserve those seats for potential bidders, to refuse entrance to individuals (or robots) with no intention of bidding on any of the items, and to seek preliminary injunctive relief against non-customer trespassers eBay was physically unable to exclude.”

The Court then went on to conclude:

“The analytical difficulty is that a wrongdoer can commit an ongoing trespass of a computer system that is more akin to the traditional notion of a trespass to real property, than the traditional notion of a trespass to chattels, because even though it is ongoing it will probably never amount to a conversion.  The Court concludes that under the circumstances present here, BE’s ongoing violation of eBay’s fundamental property right to exclude others from its computer system potentially causes sufficient irreparable harm to support a preliminary injunction.”

This approach was followed in Oyster Software v Forms Processing, (2001 WL 1736382, ND Cal, December 6, 2001).

However, more recently it was not followed in the Central District of California in Ticketmaster v Tickets.com. The decision is available online at http://www.netcoalition.com/keyissues/2003-06-12.430.pdfit

Also see article by Frankfurt, Kurnit, Klein and Setz PC on 17 July 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=2157

The plaintiff failed in part because of a lack of proof of harm, an issue that turns on whether using up existing computer capacity is sufficient to found the action. Judge Harvey at p308 of the text “internet.law.nz” (Lexis Nexis, 2003) suggests that it is not unreasonable to conclude that the rationale in eBay could be extended to New Zealand. Applying the flexible constructs of the tort of trespass, this seems correct.

Pharmatrak

The US Court of Appeals for the First Circuit has just found that web bugs and cookies may violate the Electronic Communications Privacy Act (ECPA).  See article by McCarter and English LLP in World eBusiness Law Report, 13 June 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=2040

Pharmatrak used stored cookies to collect date on users visiting websites of various pharmaceutical companies.  These web bugs identified the user’s internet address and sent it a cookie.  Even though the reports were generic (non-personalised) in nature, Pharmatrak’s servers were found to contain at least some personal information (on some 232 users among millions tracked).

Even so, the Court found that even though consent had been given by Pharamtrak’s clients, collection of this data was outside the consent provided.  As such, the Court found that the ECPA may have been breached in that there had been an “interception” of an electronic communication. However the Court found that as it needed to be shown that the interception was intentional the matter was remanded to the Trial Judge to determine whether this had occurred in advertently or intentionally.  For a full copy of the decision in In Re Pharmatrak, Inc (US Court of Appeals, First Circuit, No. 02-2138 – available on-line at http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=search&case=/data2/circs/1st/022138.html

Scraping

Scraping involves gathering information from websites and re-using it.  In American Airlines Inc v Farechase Inc (District Court, Tarrant County, Texas, No. 067-194022-02, 8 March 2003),

see copy of temporary injunction at http://www.eff.org/Cases/AA_v_Farechase/20030310_prelim_inj.pdf the defendant was enjoined from accessing American Airlines’ website.  The defendant had accessed and obtained information from various travel websites – in particular in relation to travel schedules are fare information – known as “screen scraping”.  As it did in the eBay case, the US courts found that this practice was unacceptable in that it placed an undue burden on American Airlines’ computer system.

The Court found:

“FareChase intentionally and without authorization from American continues to interfere with American’s possessory interest in its own computer system.  Fare Chase’s conduct intermeddles with and interferes with American’s personal property.  Such conduct constitutes a trespass.”

The Court also found that this conduct not only placed an unacceptable strain on American’s computer system but also breached the website’s terms and conditions.

Also see article by Skadden, Arps, Slate, Meagher and Flom LLP in World eBusiness Law Report, 24 April 2003 at  http://www.worldebusinesslawreport.com/index.cfm?selectedpub=1,8&action=dsp_item&id=1891

In New Zealand, the organisation Trade Me took similar action and managed to get a competitor TradeWise to stop scraping auction information from its site.  See article by Russell McVeagh in World eBusiness Law Report, 9 May 2003 at http://www.worldebusinesslawreport.com/index.cfm?action=login&c=17801&id=1925

In the EU, member states are required to introduce an “opt-out” option on or before 31 October 2003.  This means that users must be given the necessary information and allowed to opt out of having cookies on their system. See Linklaters newsletter – Spam Busters? The Implementation of the Directive on Privacy and Electronic Communications 20 June 2003 at http://www.linklaters.com/newsanddeals/newsdetail.asp?newsid=1469&navigationid=6

Web bugs can usually only be detected by examining the html code and are very difficult to disable.  Likewise, their very existence is often a mystery.  They do however raise real privacy concerns given that they are adapted to intercept and monitor communications and they have as much invasive capability as robots and other data gathering tools.

Privacy Concerns

From a privacy point of view, the main concern about cookies and bugs is that few Internet users understand exactly what they are and certainly do not consent to their existence on their computers.  Further, most users are not properly informed of the use to which the data is to be put.

Cookies and bugs raise significant human rights/privacy issues if they store information about a user’s private conduct. Commercial issues come to mind. However, there are other, more fundamental, issues.  By way of example, leaving aside plainly illegal conduct such as accessing child pornography, should an Internet user be entitled to access say lawful porn using his/her own computer terminal at home? And should each step be recorded by an anonymous cookie set up to recognise that person’s “viewing” interests but without informed consent? Finally, should that person then be subjected to unsolicited and mostly unwanted banner advertisements which appear on their monitors and are frustratingly hard to delete? Most observers would say no!

Assuming again the conduct in accessing that material is legal, is there any distinction between the situation outlined above and that in Lawrence (supra)?  Does either the state or a commercial enterprise, have the right to interfere, monitor and record that person’s activities?  I would suggest that in principle the answer is again no.

The threat to privacy has not gone unnoticed.  In Private Word, Issue No. 48, April-June 2003, the Privacy Commissioner notes that the 1980 OECD Guidelines on Privacy may well be ineffective to deal with spiders and crawlers, being prepared before these devices were invented.  It is also noted that they are capable of subjecting personal data to fresh surveillance against criteria different from those for which the data had originally been collected and possibly unknown or even non-existent at the time of collection.

In the same article, Justice Kirby is reported to have suggested that better encryption of personal data is necessary along with cross-checking measures, through some human agency rather than an automated process.