|
In this issue:
- Patents Bill (Finally) Introduced
- Visual Artists to Get More Share in the Spoils
- New Zealand Joins Anti-Counterfeiting Negotiations
- Factors Relevant to Accounts of Profits for Infringement
Patents Bill (Finally) Introduced
After waiting the best part of two decades, the long overdue revision of New Zealand's antiquated patent legislation took a monumental step forward in July with the introduction of the Patents Bill 2008 to Parliament. The Bill proposes significant changes to our patent system and will for the most part bring New Zealand into line with its major trading partners.
While the Bill introduces a wide variety of changes, some key issues are summarised below:
- Absolute novelty: The Bill removes New Zealand's current 'local novelty' requirement for patentability, and replaces it with 'absolute novelty' – meaning that an invention will not be considered novel if it has been disclosed or performed anywhere in the world. This fundamental change brings New Zealand into line with the great majority of countries, and recognises that innovation is a global matter. New Zealand cannot operate in a vacuum.
- Creation of Maori Advisory Counsel: On the registrability front, the Bill creates a Maori Advisory Counsel to advise the Commissioner whether an invention has been derived from traditional Maori knowledge or materials, and to advise if commercialisation would be contrary to Maori values. Similar provisions are found in New Zealand’s plant variety rights and trade mark legislation.
- Exceptions to Patentability: While this will not be any significant change from current law, probably likely to spark the most active debate is the public policy exclusion of patentability of medical treatment and diagnosis of humans.
- Re-examination: The ability to oppose a patent pre-grant will be removed, although in its place will be a facility allowing any person to request the re-examination of a patent by the Commissioner of Patents on the basis of lack of novelty or obviousness.
Without following any particular jurisdiction, there are recognisable elements of the UK, Australian and European regimes in the proposals. Importantly, though, the Bill will create a patent procedure that is, overall, consistent with the general approach taken by our major trading partners, meaning a greater understanding and (hopefully) greater international consistency for international patentees. At the same time, however, the Bill has not forsaken local issues for the sake of international uniformity – as shown by the creation of the Maori Advisory Committee.
The Bill has not yet been before Select Committee, and we expect there to be vigorous debate with the possibility of significant changes being proposed.
With a general election due in November this year, and patents not being renowned for their vote-attracting qualities, it is unlikely we will see much substantive progress with the Bill until 2009. But having waited twenty years, one more year is hardly likely to be noticed …
Visual Artists to Get More Share in the Spoils
Visual artists, unlike writers or recording artists, generally have limited opportunities to benefit financially from the protection provided by copyright law. This is because copyright law usually concerns itself with the reproduction or reuse of material – rather than the resale of material. For emerging visual artists, the price tags for their new pieces of work will generally be low. Only when an artist's work becomes well known will the work generate a higher value; the resale price often far eclipsing the paltry sum initially paid. But this may be many years down the track and under current law the original artist will receive nothing. The Copyright (Artists' Resale Right) Amendment Bill, which was introduced into Parliament on 13 May, seeks to address the perceived inequity of this situation.
If enacted, the Bill will amend New Zealand's Copyright Act 1994 by establishing a resale right for visual artists. The main purpose behind a resale right is to allow the creator and his or her surviving heirs to share in the financial gains derived from subsequent sales of their artistic work. This amendment aligns New Zealand with over 50 countries worldwide which operate similar schemes.
The Bill would entitle visual artists to receive a royalty payment each time their original work is resold on the secondary art market through any auction house, gallery, dealer, or any other business that deals with artistic works. It applies to any visual artwork in which copyright subsists, such as paintings, drawings, photographs and sculptures (but, like other overseas jurisdictions, excludes architecture). Significantly, the resale royalty right will not apply to private sales between individuals. The Government states that the resale royalty right will also not apply in respect of sales of less than $500 in value.
In response to the concern that a resale right would lead to increased compliance costs for businesses in the industry, the Government has advocated the introduction of a flat 5 per cent royalty rate rather than a variety of royalty rates as in some other countries. The resale royalty rate will be set under Regulations. Royalties will be due on artistic works sold during an artist's lifetime up until 50 years after the artist's death. This is the same as the current period of copyright protection for artistic works under the New Zealand Copyright Act 1994.
The artist who creates the original artwork will be deemed the holder of the resale right and this right will be inalienable (although it will transfer to an artist's heir on death of the artist). It is envisaged that a collecting agency will be appointed to collect royalties from commercial dealers. The collecting agency will administer the scheme in return for a fixed fee or percentage of each royalty.
Judith Tizard, Associate Arts, Culture and Heritage Minister, said that New Zealand's move to introduce the royalty scheme is "about giving artists a fair deal in terms of the economic returns they get from their work".
The introduction of resale royalty rights has been criticised in some quarters for unreasonably distinguishing artists from other producers of negotiable goods. Questions have also been raised as to whether such a scheme would benefit the majority of New Zealand artists, or only benefit existing and successfully established artists.
The New Zealand art market has witnessed significant growth over the last 10 years. Concerns have been expressed both in New Zealand and overseas that a resale royalty scheme will depress the growing art market. There may also be potential for such a scheme to hurt emerging artists. However, proponents of a resale royalty right argue that, overall, it provides an incentive for emerging artists to carry on their profession.
New Zealand Joins Anti-Counterfeiting Negotiations
New Zealand has agreed to join negotiations for the development of an Anti-Counterfeiting Trade Agreement, along with key economic trading partners including the European Union, Australia, United States and Japan.
The Anti-Counterfeiting Trade Agreement (ACTA) will establish a common standard for the global enforcement of intellectual property rights, particularly in the context of counterfeit and pirated products.
The proposed provisions of the ACTA will fall into three broad categories:
- International co-operation – directed at sharing of information and co-operation between law enforcement authorities, customs and other key agencies;
- Enforcement practices – developing enforcement practices that promote robust intellectual property protection, including public and private advisory groups and specialised intellectual property expertise within law enforcement agencies; and
- Legal framework – developing consistent legal frameworks for protecting intellectual property; possible provisions may include border control, and civil and criminal enforcement.
If successful, the ACTA will protect legitimate businesses and their innovation, challenge consumers’ acceptance of counterfeit goods and attempt to weaken a source of organised crime. The Ministry of Economic Development invited public submissions on the proposed ACTA to identify specific matters that should be the focus of the agreement for New Zealand. Initial feedback has been mixed, with ISPs in particular concerned that having just got used to the take down regime under the Copyright (New Technologies) Amendment Act, there might now be an even stricter regime to come.
Its geographical isolation has meant that in the past counterfeiting has been much less of a problem for New Zealand than many of its major trading partners. However, the digital age has to an extent ended that isolation and we have seen an increase in the availability of counterfeit goods in New Zealand. While New Zealand Customs have been vigilant and relatively successful in controlling counterfeits, ACTA may lead to a welcome increase in the arsenal of anti-counterfeiting measures.
Factors Relevant to Accounts of Profits for Infringement
Intellectual Property Development Corporation Pty Limited (IPDC) and Hefty NZ Limited (Hefty NZ) sought an account of profits against Primary Distributors New Zealand Limited (PDNZ) for unlawful sales of products sold under the brand name “Hefty”. PDNZ accepted that it had infringed the Hefty trade mark, but contested IPDC’s claim for an account of profits. This case examines the failure of the trade mark owner to act promptly to protect its rights in the Hefty trade marks and the impact of that delay on the amount of profits that is recoverable.
Factual Background
Cartigny Pty Limited (Cartigny) was the registered proprietor of the Hefty trade marks in New Zealand. PDNZ acquired a three-month trade mark licence to sell products branded with the Hefty trade marks from 31 March 2005 until end of June 2005. However, PDNZ continued to sell the remainder of the stock past the expiration of the licence agreement, which amounted to a breach of that agreement and infringement of the Hefty trade marks. When Cartigny went into liquidation, IPDC acquired the rights to the Hefty trade marks from 20 December 2005. In January 2006, IPDC became aware that PDNZ was infringing its Hefty trade marks, but did not issue a cease and desist letter until July 2006.
Legal Question
There was no question that PDNZ had infringed IPDC's Hefty trade marks. IPDC sought an account of the profits made by PDNZ from infringement of the Hefty trade marks (a period of eleven months from the beginning of September 2005 until July 2006). However, PDNZ argued that it should not have to account for all profits made on the sale of products branded with the Hefty trade marks during that period, since IPDC were aware of PDNZ’s continued sale of Hefty products, and had not taken steps to enforce its rights in the trade marks. Alternatively, PDNZ claimed that IPDC’s conduct amounted to waiver or acquiescence, or should invoke the doctrine of laches.
Account of profits
A plaintiff may seek an account of profits under section 106 of the Trade Marks Act 2002. Despite its incorporation in the statute, an account of profits is originally an equitable remedy and is to be treated as having an equitable character in relation to trade mark infringements. The analysis in this case is, therefore, likely to have general application to infringements of intellectual property. According to the equitable maxim, a plaintiff cannot stand by and permit the defendant to make profits over a period of years, and then expect to claim those profits.
IPDC claimed an account of profits on the sale of Hefty branded products from September 2005 until July 2006. PDNZ responded that IPDC had knowledge of PDNZ's continued sale of the Hefty products for that period and had not complained. As IPDC did not even acquire rights in the Hefty trade marks until December 2005, until that time IPDC had no rights on which to base a complaint. As noted, IPDC delayed putting PDNZ on notice of its rights in the trade marks from January 2006 until July 2006. Furthermore, the fact that IPDC did not itself attempt to trade under the trade marks during the first half of 2006, weighed against IPDC.
Asher J considered that it was not fair for a trade mark owner who knowingly permits a competitor to infringe its trade mark and cannot prove any actual loss to be able to claim the infringer’s profits. Therefore, Asher J found that IPDC was entitled to an account of profits from September 2005 until January 2006, but declined to extend the award past 18 January 2006 (when IPDC became aware of the infringement).
Doctrines of acquiescence, waiver or laches
In its submissions, PDNZ also relied on the equitable remedies of acquiescence, waiver and laches. PDNZ argued that IPDC’s inaction amounted to an assent to PDNZ’s continued sale of the Hefty products and disentitled IPDC from claiming relief for that infringement.
The court followed the established principle that a mere failure to sue without some positive act of encouragement to the guilty party is insufficient to give rise to the affirmative equitable defence of acquiescence.
In considering the doctrine of acquiescence, the court noted that there is some doubt as to whether the doctrine survives on its own, separate from laches and waiver. Asher J found that acquiescence requires some kind of conduct from which assent can be inferred, as well as reliance by the defendants on the assent. Asher J concluded that the doctrine of acquiescence was not applicable because IPDC’s inaction did not amount to an assent to IPDC’s infringement of the trade marks.
Due to the lack of any implied representation or reliance, Asher J also found that waiver did not apply in these circumstances.
The doctrine of laches requires such a delay that it would be unfair to allow a remedy against the defendant. The defendant must also show some change of circumstance consequent on the delay, which makes pursuit of the remedy inequitable. The court held that the doctrine of laches did not apply because the delay of six months was not of sufficient length to amount to laches.
Lessons for trade mark owners
Once a trade mark owner becomes aware of possible trade mark infringement, it is imperative that it takes immediate action. This case suggests that rights to an account of profits will be at risk if a trade mark owner delays taking action after it becomes aware of an infringement. In addition, failure to take steps to prevent the continued infringement also risks damaging the value of the brand in the marketplace (and thus affects the calculation of any damage). This case also acts as a reminder that it can be essential to retain evidence of, and document, the infringement.
This newsletter is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.
|
