ezine

11 Oct 2010

In our first article, Syndicated Procurement and All of Government Contracts - What is the Difference?, we summarise and contrast the key aspects of syndicated procurement and all of government contracts.

Our second article, Why is that fake staring at me?, looks at a report published for the British Journal of Criminology which declared that buying fake designer goods can benefit both consumers and the companies whose brands are being ripped off. While New Zealand does not have a sizeable counterfeit problem by international standards, we are by no means immune.

The Federal Court of Australia recently considered whether copyright could subsist in source code. The source code itself was regarded as a “literary work” but the Court found it could not be regarded as an “original literary work” because, due to the nature of the code, neither a single human author nor joint authorship of the source code could be identified. Our third article, Is there copyright in that source code?, looks at how this impacts on New Zealand. 

Our final article, Privacy Act changes and some practical implications, considers recent changes to the Privacy Act relating to cross-border information and some practical implications.

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Syndicated Procurement and All of Government Contracts - What is the Difference?

Central government has been moving towards a more centralised procurement model over recent years. The movement started with syndicated procurement. More recently, all-of-government contracts (AOG Contracts) are expanding on this trend. 

The government has stated that it will not return to fully centralised procurement. However, the marked trend is a move away from individual government agencies meeting all of their procurement needs independently.

In this article, we summarise and contrast the key aspects of syndicated procurement and AOG Contracts.

Syndicated Procurement

In summary, syndicated procurement allows multiple government agencies to leverage off a contract which one government department has entered into with a supplier. 

Syndicated procurement is effected by a lead agency (or agencies) including a "common use provision" in a supply contract (CUP Contract). CUP Contracts will enable eligible agencies to procure supply on the same terms during the CUP Contract's term, subject to supplier and lead agency agreement. An eligible agency can "join" a CUP Agreement by signing an addendum to the master CUP Contract. This will create an independent contract between the supplier and the agency.

All state sector agencies are eligible agencies. State sector agencies include public service departments, Crown entities and state-owned enterprises.

The Ministry of Economic Development (MED) exercises a substantial degree of control over CUP Contracts. Lead agencies must obtain MED's approval before approaching the market with, or executing, a CUP Contract.

AOG Contracts

In summary, an AOG Contract is a single master supply agreement between the Crown and a supplier that can be used by participating state sector agencies.

AOG Contracts will be let and negotiated by a "centre of expertise" (currently located within the Ministry of Economic Development or Department of Internal Affairs). The centre of expertise will subsequently be responsible for general contract management - e.g. review of performance against service levels, pricing reviews and the strategic relationship. Participating agencies will remain responsible for management of their operational relationship with the supplier.

AOG Contracts may be used to appoint a panel of suppliers. Participating agencies will be able to select which panel supplier to use.

The preferred channel for participating agencies to access AOG Contracts is electronic. This can be achieved through existing systems or the (more general) New Zealand Government e-Marketplace (NZ e-M). 

Once an AOG Contract is in place, all public service and state service agencies will have to transition to the AOG Contract for procurement in that area. Agencies in the wider state sector (e.g. state-owned enterprises and tertiary institutions) will also be able to use AOG Contracts. Territorial authorities and regional councils will not be able to use AOG Contracts initially.

To date, AOG Contracts have been put in place for office consumables, passenger vehicles, laptop/desktop computers and single and multifunction printers. The next set of AOG Contracts will be for external legal services, recruitment services, ICT hardware (e.g. mobile telephony) and utilities (e.g. electricity).

Key differences between Syndicated Procurement and AOG Contracts

AOG Contracts are essentially an evolution of syndicated procurement. However, the two models are complementary, and both are likely to be used in the future.

The key differences between CUP Contracts and AOG Contracts are summarised below.

Generally, AOG Contracts present more opportunities and challenges than CUP Contracts. An AOG Contract may introduce a supplier to government departments it has not previously dealt with. 

Key Contacts

Don Holborow
Karen Ngan
Michael Sage
Adam Jackson
Mark Cunliffe

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Why is that fake staring at me?

Who hasn't been confronted with a 'genuinely fake' Louis Vuitton handbag, a Gucci belt, or a Rolex watch? They look so similar to the genuine items, and they are such a bargain (!), that you could catch yourself asking the rhetorical question: 'why shouldn't I?' It used to be quite a clear answer: 'because it is wrong; it is an offence'. A more sophisticated response is that counterfeits stifle innovation and investment. Well, if the opinion of one commentator is accepted, from now on, you may have to come up with something else.

A report published for the British Journal of Criminology has declared that buying fake designer goods can benefit both consumers and the companies whose brands are being ripped off.

The report, which had a huge impact in the media, hit the European press on 29 August 2010. Newspapers, bloggers and Trade Mark associations had more than a word to say about it. While it is true that the report itself invites a debate about the responsibilities of brand owners and governments towards IP enforcement, some of the conclusions outlined in the report have been controversial, especially for brand owners and those on the side of Intellectual Property rights protection.

The study, co-written by Professor David Wall (an advisor for the UK government in relation to crime), says consumers benefit from the market for knock-off designer items at knock-down prices. It also claims that losses to the industry as a result of counterfeiting are vastly exaggerated because most of those who buy fakes would never pay for the real thing and in some cases counterfeit goods can actually have the effect of promoting the designer brands. Professor Wall claimed that the production of lower-end counterfeits inadvertently stimulates the market, promotes the brand and also accelerates the fashion cycle - his basis for these claims is that consumers of the genuine goods will buy new and more exclusive genuine goods once the market has been flooded with fake versions of their high-end items.

The industry, predictably, disagrees with and is concerned about the claims made in Wall's report. A spokesman for Louis Vuitton said: "The sale of counterfeit goods is a serious offence whose revenue funds criminal organisations at the expense of consumers, companies and governments. " A representative from Burberry added: "Counterfeiting is taken extremely seriously. Where a case is proved, Burberry will always push for the maximum penalty."

The most controversial point of the report is where Wall defines and differentiates several types of counterfeit goods. He makes reference to "Safety-critical counterfeit goods," such as certified aircraft and vehicle parts or drugs, and states that they present "a clear danger to both individuals and society that demands immediate attention in the public interest." He then goes on to say that: "The case to support the public policing of counterfeit luxury fashion goods, however, is quite different by comparison, as it chiefly focuses upon the economic losses incurred by the brand owners".

Professor Wall's report concludes that the position against consumers of counterfeits is relaxed because there is little public interest in using public funds for policing and prosecuting the commissioning and manufacture of counterfeits and, more controversially, this is partly because a significant slice of consumers benefit from them. 

One response is that it is time to think about alternative strategies in the protection of Intellectual Property rights. Brand owners have spent many years trying to stop the counterfeits industry, yet continue to come up against the same old problem. One alternative approach to break the cycle of counterfeiting is to criminalise the purchase of fake products rather than prosecuting only those who manufacture, sell or distribute them. In France and Italy, for example, those who purchase counterfeits can face substantial fines and even prosecution. However, the UK authorities target only those who trade in fake goods, but not consumers who buy them.

New Zealand follows the UK's approach in terms of criminalisation. Under New Zealand law, every person who manufactures, imports or possesses fake goods other than for that person's private and domestic use, commits an offence. In order to protect the rights of trade mark owners, New Zealand Customs are entitled, under the Trade Marks Act 2002 and the Copyright Act 1994, to operate border protection measures, to detain counterfeit imported goods. For now, Customs can only detain goods if the copyright or trade mark owner has filed a notice requesting Customs to do so. In contrast, consumers of counterfeit goods for private use remain unpunished.

While New Zealand does not have a sizeable counterfeit problem by international standards, we are by no means immune. There is also evidence that international counterfeit organisations use New Zealand's relatively clean reputation to re-export counterfeits so they appear to originate from a New Zealand "origin".

European experience suggests that finding a middle ground is difficult. Criminalisation of the purchase of counterfeits may be conceptually justified, but the potential diversion of enforcement resource away from counterfeits and towards the public also presents problems.

New Zealand is currently treading a middle ground. We are taking steps to increase "front-end" powers to enforce the current prohibitions on importing and trading in counterfeits. Our Trade Marks (International Treaties and Enforcement) Amendment Bill looks to do this by providing both the Ministry of Economic Development's enforcement unit and Customs with search and seizure powers, allowing them to take a more active role in enforcement.

It is hoped that by providing increased powers to the Ministry of Economic Development and Customs, the problem of counterfeits in New Zealand can be fought at the border and in the warehouse. Only time will tell us whether this will be enough.

Key Contacts

Earl Gray
Richard Watts
Sonia Felipe

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Is there copyright in that source code?

In the case Acohs Pty Ltd v Ucorp Pty Ltd [2010] FCA 577 (10 June 2010), the Australian Federal Court considered several important copyright law principles. 

Of particular interest to Xtech readers is the Court's finding that copyright did not subsist in source code generated through a central database and related software program owned by Acohs Pty Ltd. The database produced Material Safety Data Sheets (MSDS) for hazardous substances. Users of the Acohs database entered information via the software program, which then compiled the source code and sent this code to a computer which allowed the MSDS information to be viewed on screen (as a single MSDS document).

Ucorp held MSDS information in an electronic library which contained MSDS created by Ucorp and, where an MSDS is requested that Ucorp does not already have, MSDS documents located and downloaded from the internet. An internet-sourced MSDS will necessarily be identical in content and appearance to the "original" MSDS from which it was derived. For internet downloads of MSDS documents originally created by Acohs, Acohs argued that Ucorp was reproducing its source codes in a material form and that this infringed copyright held by Acohs in the codes.

The Court examined whether copyright subsisted in the source codes by considering (1) whether the source codes could be considered literary works, and (2) if so, whether the source codes could be considered original.

Source codes as literary works

A tiny excerpt of a source code could look like this: 

Such a code can go on for pages and pages, and make no sense to the ordinary reader.  It will, though, make perfect sense to the individual(s) who wrote the code and the computer that is programmed to interpret such a code.

The Court found that there is no known or previously established reason to deny a body of source code the status of a “literary work” under the Australian Copyright Act. The source code contains words, letters, numbers and symbols which are intelligible to someone skilled in the relevant area, and which convey meaning. Further, the code has a discrete existence as an entity in its own right, with a definite point of commencement and a definite point of conclusion. The source code was considered to be a "set of statements or instructions to be used in a computer to bring about the appearance on the screen of the corresponding MSDS" and was therefore "a computer program, and thus a literary work within the meaning of the Copyright Act.”  

The Court went on to say that the source code had all the necessary attributes of a literary work, bearing in mind that the test is not literary quality and that quite mundane, functional expressions may be literary works in the statutory sense.

Source codes as original literary works - a more difficult question

The more difficult question was whether the source code was an original literary work. 

The need for a work to spring from the original efforts of a human author is a fundamental requirement of copyright law. Authorship (and thus originality) goes to the heart of copyright and provides the dividing line between human and machine (in this case a computer) for determining if copyright subsists in particular works. 

Ultimately the Court found that the source code could not be regarded as an original literary work because it was not the work of any one human author, nor was it a work of joint authorship. 

Joint authorship of source code considered

The concept of joint authorship was considered in some detail. Acohs argued that the source code (as a literary work) was jointly authored by the computer programmers who originally wrote the software and Acohs' employees who entered the relevant data to generate specific MSDS documents. This is a common situation in businesses where any number of contractors or employees may be responsible for the creation, maintenance and upgrade of source codes.

Under the Australian Act (as in New Zealand), a work of “joint authorship” is a collaborative work in which the contribution of each author is not separate from the other authors.

The Court found that the respective contributions of the programmers and Acohs employees were "separate each from the other along the axes of communication, time, expertise and content" and that it would be "a quite artificial straining of the language" for each contribution to be regarded as a matter of collaboration to meet the requirements of joint authorship under the Act.

What will New Zealand make of this?

How will the Federal Court's decision in Acohs impact on New Zealand? The Australian Courts have taken a stringent approach to authorship and originality in recent times. Will the New Zealand Courts follow this more stringent approach or will they take a more permissive (and some would argue, realistic,) attitude to copyright's response to advancement of technology.

In a general sense, the New Zealand Courts have not yet had much opportunity to consider the types of issues discussed in Acohs in detail. On this basis, there is scope for a more flexible response to authorship and originality that could arguably take a more "technology friendly" approach to the issues at hand. 

In the 2001 case of Advanced Management Systems Ltd v Attorney-General 30/11/01, Randerson J observed:

"Whether an independent copyright is created in individual changes with the necessary originality will depend on the degree of skill, labour, and judgement applied by AMS in carrying out the change and is a question of degree."

Addressing that principle on the facts of the case, Randerson J went on to say:

"Where, as in the present case it is accepted to be practically impossible to separately analyse each change, it is legitimate to form an overall assessment based on the combined effects of the changes which have occurred over time and to compare the extent to which copyright may be owned by different parties."

Arguably, then, a Court might be able to avoid analysing in detail distinctions between the various copyright works, or indeed identifying individual works within a process of development of a computer program over a number of years. Under New Zealand's Copyright Act the author of a computer-generated work is deemed to be "the person by whom the arrangements necessary for the creation of the work are undertaken". This statutory recognition that a computer can be regarded as a generator of some works may give scope for a less stringent analysis of the role of human responsible for instructing the computer role in each "work".

As always, the facts of each case will be key. New Zealand Courts will take the Acohs decision into consideration, but arguably there is also scope for a less stringent response to authorship and originality here.

Key Contacts

Earl Gray
Sonya Hill

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Privacy Act changes and some practical implications

This article updates an x-tech article from February 2009 about the Privacy (Cross-border Information) Amendment Bill (Amendment Bill). The Amendment Bill came into force as the Privacy (Cross-border Information) Amendment Act 2010 (Amendment Act) on 8 September 2010. The Amendment Act amends the Privacy Act 1993 (Privacy Act) in order to more adequately address the cross-border transfer of personal information. 

Below, we analyse the three significant changes made by the Amendment Act, being:

• amendments to an individual's right to request access to, and correction of, personal information;
• the Privacy Commissioner's powers to co-operate with overseas privacy enforcement authorities; and
• the Privacy Commissioner's powers to prohibit the transfer of personal information overseas,

and some practical implications of these changes.

Individual's Right to Request Access and Correction of Personal Information

Section 34 of the Privacy Act allows an individual to make an information privacy request to an agency, requesting access to, and correction of, personal information held about them by that agency.  Before the Amendment Act came into force, this right was restricted to individuals who were:

• physically located in New Zealand;

• a New Zealand citizen; or

• a permanent resident of New Zealand.

The Amendment Act has modified section 34 so that now the only restriction is that the request has to be made by an individual.

Commissioner's Co-operation with Overseas Privacy Enforcement Authorities

The Amendment Act allows the Privacy Commissioner, the official that oversees the enforcement of the Privacy Act, to refer a privacy complaint to an overseas privacy enforcement authority. Where the Privacy Commissioner forms the view that a complaint relates to a matter that may be more appropriately addressed by an overseas privacy enforcement authority, the Privacy Commissioner may consult with that overseas authority to determine which jurisdiction the complaint more properly falls within. If the Privacy Commissioner determines that a complaint should be dealt with, in whole or in part, by an overseas privacy enforcement authority, and both the overseas authority and the complainant agree, the Privacy Commissioner may refer the complaint or, the appropriate part of the complaint, to the overseas authority to be dealt with. 

Commissioner's Power to Prohibit the Transfer of Personal Information Overseas

The Privacy Commissioner now also has the power to prohibit the transfer of personal information outside New Zealand if:

• the information has been transferred from a country to New Zealand, and is likely to be transferred to another country that has inferior data protection safeguards to those that are available under the Privacy Act; and

• the transfer would be likely to breach the current basic principles of national application set out in Part Two of the Organisation for Economic Co-operation and Development Guidelines Governing the Protection of Privacy and Transborder Flows of Personal Data (OECD Guidelines). Part Two of the OECD Guidelines are set out in a new schedule 5A to the Privacy Act.

In determining whether to prohibit a transfer of personal information outside New Zealand, the Privacy Commissioner must consider:

• whether the transfer affects, or would be likely to affect, any individual;

• the general desirability of facilitating the free flow of information between New Zealand and other countries; and

• existing or developing international guidelines relevant to transborder data flows.

When determining whether to prohibit a transfer of personal information outside New Zealand, the Privacy Commissioner may use the investigative powers she has in the Privacy Act.

If the Privacy Commissioner does determine to prohibit a transfer, a prohibition notice is to be served on the agency proposing to transfer the personal information concerned. There is a right to appeal against the issue of the notice and the notice will not be effective until the appeal period has expired. However, the Privacy Commissioner may, in special circumstances, state that the notice is to take effect as a matter of urgency. In such cases, the notice takes effect regardless of the right to appeal.

The Privacy Commissioner also has the power to vary or cancel a transfer prohibition notice.

It is an offence not to comply with any transfer prohibition notice (punishable on summary conviction by a fine of up to $10,000). 

Practical Implications

When the Amendment Bill was first introduced it was stated that the amendments will substantially reduce the likelihood of New Zealand being used as an intermediary for the avoidance of other countries' privacy laws and will better protect New Zealanders engaged in international transactions. In introducing the Amendment Bill, Hon Simon Power said that the amendments would assure our international business partners that their customers’ personal information will be protected. 

A major driver appears to have been "white-list" status from the European Union. White-list status for a country means that personal data can flow from the 27 EU member states (and three EEA member countries) to that country without any further safeguard being necessary. Marie Shroff, the current Privacy Commissioner, has said that she believes New Zealand businesses are missing out on trading opportunities through a gap in our privacy laws and that the Amendment Act will allow New Zealand to compete on a secure basis for international data business. If New Zealand businesses have indeed been missing out on trading opportunities then these changes should be welcome, especially for those providing follow-the-sun services or services in the cloud. 

With the passing of the Amendment Bill agencies who hold personal information about foreign nationals will need to ensure that they are equipped to provide access to that information on receipt of a privacy information request and to consider requests for correction. While an agency may require payment of a reasonable charge for information privacy requests with the charge taking into account labour and material costs, there may need to be a review of existing practices to ensure that such requests can be appropriately managed. 

Another practical implication will be that if an agency is receiving personal information in New Zealand from one country (for example, as a result of providing call centre service or data processing services) and transferring that information to a third country (for example, for data warehousing purposes) the agency should assess whether that third country has inferior data protection safeguards to those that are available under the Privacy Act. If the Privacy Commissioner has concerns about the level of protection in that third country and continued compliance with the OECD Guidelines she may issue a prohibition notice preventing such transfer.

Key Contacts

Karen Ngan
Mark Colley