In this edition:

Proposed amendments to Copyright Act 1994
Following the Cabinet Economic Growth and Infrastructure Committee's recommended amendments to the Copyright Act 1994 last year, the Copyright (Infringing File Sharing) Amendment Bill was recently introduced to Parliament. The Bill amends the Act to provide new enforcement measures against online copyright infringers who infringe copyright by downloading material using peer-to-peer file sharing technology. more ...

Copyright in databases
In the recent decision of Telstra Corporation Limited v Phone Directories Company Pty Ltd, the Federal Court of Australia followed the decision of the High Court of Australia in IceTV Pty Ltd v Nine Network Australia Pty Ltd. IceTV represented a significant departure from the previous approach to copyright in databases. It remains to be seen whether New Zealand courts will follow its lead. more ...

Submissions on Anti-Counterfeiting Trade Agreement
The public has the opportunity to make submissions in relation to the enforcement of intellectual property rights in the digital environment to help develop the Anti-Counterfeiting Trade Agreement ("ACTA"). more ...

Accounts of profits for infringement of trade mark
The Court of Appeal has sent a clear warning to would-be trade mark infringers that trade mark owners can receive an account of profits for the entire period of trade mark infringement, even if the trade mark owner is unaware of the infringement, does not take immediate action or is not in a position to use their trade marks. more ...

Trade Marks (International Treaties And Enforcement) Amendment Bill
The Foreign Affairs, Defence and Trade Committee reported back on the Trade Marks (International Treaties and Enforcement) Amendment Bill ("Bill"). It recommended passing the Bill with a number of amendments. more ...

Patents Bill 2008
The Patents Bill 2008 ("Bill") continues to progress through the Commerce Select Committee. Once enacted it will overhaul the outdated Patents Act 1953. Many of the changes are long overdue to bring New Zealand's patent regime in line with our major trading partners. However, some of the proposed amendments may be received less enthusiastically in this already complex area of law. more ...

Unsolicited Electronic Messages Act 2007 - Two fined for role in global spamming operation 
The Department of Internal Affairs has recently reported that 213 spam complaints were received in February 2010 and 20 formal warnings have been issued this year to date. This activity follows two New Zealanders being handed considerable fines late last year for their role in what has been described as the largest pharmaceutical spamming operation in the history of the internet. more ...

Copyright Act 1994 v Personal Property Securities Act 1999
In Viacom Global (Netherlands) B.V. v Scene 1 Entertainment Limited (In Receivership), the High Court considered whose rights prevailed in the context of a receivership - the copyright owner (Viacom) or a party with a perfected security interest. more ...

Following the Cabinet Economic Growth and Infrastructure Committee's recommended amendments to the Copyright Act 1994 last year, the Copyright (Infringing File Sharing) Amendment Bill was recently introduced to Parliament.  The Bill amends the Act to provide new enforcement measures against online copyright infringers who infringe copyright by downloading material using peer-to-peer file sharing technology.

The Act's current civil enforcement measures are considered ineffective in preventing or remedying unauthorised file sharing. As the law presently stands, a copyright owner can already issue civil proceedings against an infringer. However, a copyright owner is required to seek an order from the Court to acquire the identity of the alleged infringer from the internet service providers ("ISPs") before it can take infringement proceedings against the offender. As a result, the costs involved to enforce copyright are often much higher than the damages that would be awarded.

The Bill repeals the controversial section 92A (which, due to industry and internet user concerns, has never been brought into force) and replaces it with a system which aims to:

The Bill introduces a "three strikes" notice regime under which, at the instigation of the copyright owner, three notices (a detection notice, a warning notice and an enforcement notice) are sent via the relevant ISP to the alleged infringer. 

It is intended that the first notice, the detection notice, will deter infringers and educate the public as to the liability involved with file sharing. The warning notice and enforcement notice are to be sent if another infringement has occurred at least three weeks after the previous notice was issued.  The warning notice and enforcement notice will list the alleged copyright infringements and provide a warning of the consequences if further infringement occurs.

The Bill allows for account holders to challenge a notice and provides an opportunity for copyright owners to either accept or reject any challenge.

After an enforcement notice is issued, the copyright owner may take enforcement action by seeking an order from the Copyright Tribunal for a fine of up to $15,000 and/or an order from the District Court requiring the ISP to suspend the infringers account for up to six months.

The Tribunal will be a fast track process and will usually make decisions "on the papers" (ie without a hearing).  If there is a hearing, parties will generally be unable to be represented by a lawyer in an effort to keep hearings inexpensive for all parties involved. 

The Bill also amends the definition of an ISP for the purposes of the new provisions.  This is because, under the current definition of ISP, entities such as government departments, libraries, universities and schools, which are ill equipped to deal with the ISP's role under the Bill, would nevertheless be required to do so.   Only traditional ISPs, such as Telecom, will perform "evidence matching" and the issuing of notices.

As the bill has now been introduced into Parliament, it will be referred to Select Committee following its first reading.  A further opportunity to make submissions on the proposed amendments will be provided to the public.  It is intended that the bill will become law later this year.

In the recent decision of Telstra Corporation Limited v Phone Directories Company Pty Ltd, the Federal Court of Australia followed the decision of the High Court of Australia in IceTV Pty Ltd v Nine Network Australia Pty Ltd.  IceTV represented a significant departure from the previous approach to copyright in databases.  It remains to be seen whether New Zealand courts will follow its lead. 

Both cases concern the copyright protection of compilations.  Copyright only protects "original" works but it is not necessary that the work is the expression of original, inventive or creative thought.  Prior to IceTV v Nine Network, in both New Zealand and Australia, compilations such as databases had satisfied the test for originality where their form and arrangement was independently created using a more than minimal level of labour, skill or judgment.

By contrast, the United States requires a sufficient "spark of creativity" in order to warrant copyright protection.  A database will only be protected if there is an original or creative selection involved. For example, a telephone directory will not be protected by copyright in the United States if it is merely a collection of facts compiled without any creative selection.

IceTV v Nine Network and Telstra Corporation Limited demonstrate that Australia is now closely aligned with the US approach.  In IceTV v Nine Network, Nine Network created and supplied a weekly schedule of television programmes broadcast on its channel to organisations who used this material, together with material provided from other television networks, to produce aggregated guides. These aggregated guides were then subsequently published by various media outlets. 

IceTV operated a subscription-based electronic programme guide for television called the "IceGuide". IceTV used Nine Network's aggregate guides, without licence, to check against its own electronic guide and to amend it where there were any inconsistencies. 

Nine Network alleged that each weekly schedule was a compilation in which copyright subsisted.  It alleged IceTV infringed its copyright by taking part of the programme title and time information from the aggregated guides and including it in their IceGuide, and that this constituted a reproduction of a "substantial part" of the copyright work.

The High Court of Australia overturned a Federal Court ruling, which had applied the orthodox test, and unanimously held that a "substantial part" was not reproduced by IceTV as the part reproduced lacked the requisite originality. 

Although the weekly schedule originated from Nine Network, and involved the collection of information and creative material, the programme time and title information was not a form of expression which required significant effort or labour, given that the form of expression is essentially dictated by the information itself.

The High Court considered detailed and lengthy preparatory work involved in programme scheduling was directed at the business of Nine Network rather than the form of expression of the weekly schedule. As the programme time and title information can only be expressed in a small number of standard ways, this information lacked the requisite originality for IceTV's use to amount to infringement.

In Telstra Corporation Limited, Telstra and Sensis (Telstra's wholly owned subsidiary), who publish the White Pages and Yellow Pages across Australia, brought proceedings against Phone Directories for copyright infringement. Telstra and Sensis asserted that the White Pages and Yellow Pages were "original literary works" comprised of the listings, the enhancement of listings, arrangement of listings and, in the case of Yellow Pages, the headings and the arrangement of listings under the headings.

The Court followed IceTV v Nine Network and found that no copyright subsisted in the White Pages and Yellow Pages.  It focused on the issue of authorship and its relationship to originality.  As numerous un-identified people (including third party sources such as contractors) had contributed to the creation of the White Pages and Yellow Pages, the Court considered that the necessary human authorship could not be identified.  In New Zealand, the author of a database that is computer generated is deemed to be the person who undertakes the arrangements necessary for the creation of the database, and such a person may include a company (section 5, Copyright Act 1994). 

However, the Court held that even if those who contributed to each work were capable of being identified, the White Pages and Yellow Pages could not be considered as original works because they did not involve "independent intellectual effort" and/or the exercise of "sufficient effort of a literary nature", as a majority of the work was computer automated and the human intervention was regulated by established rules, policies and guidelines. 

This approach does not appear to take into account the significant expense, time, effort and labour that is expended into creating compilations such as the White Pages and Yellow Pages.  This is also in stark contrast to the Federal Court of Australia's 2002 decision in Desktop Marketing v Telstra which appeared to adopt the "sweat of the brow" approach to find that the requisite originality could be met as a result of the "industrious collection" of collecting, verifying and assembling data for Telstra's phone directories. 

Although the New Zealand Court of Appeal confirmed in the 2004 decision of The University of Waikato v Benchmarking Services Limited that copyright protection for compilations may exist where a sufficient degree of time, labour, skill or judgment has been expended, it may be that the Courts will align themselves with the Australian position in future decisions.

In the meantime, where only a limited originality is involved, it is all the more important for database owners to consider their strategy in protecting their intellectual property.  For example, database owners may take measures to maintain confidentiality or, where that is not possible, impose contractual constraints on use.

The public has the opportunity to make submissions in relation to the enforcement of intellectual property rights in the digital environment to help develop the Anti-Counterfeiting Trade Agreement ("ACTA").

By way of background, it is intended that ACTA will be an international treaty that provides enforcement mechanisms to better protect against counterfeit goods and piracy. New Zealand, as well as a number of countries including the United States and members of the European Union, are taking part in negotiations to develop ACTA.  Negotiations began in 2008 and it is hoped that an agreement will be reached amongst the participating countries this year.

The New Zealand public has been involved throughout the negotiations via a public consultation process and information on the progress of negotiations has been made publicly available.

New Zealand is hosting the eighth round of negotiations in April and this round of public consultations concerns what should be included in ACTA's digital enforcement provisions.

The Ministry of Economic Development's invitation for submissions highlights a number of issues including:

• whether internet service providers ("ISPs") should be covered by safe harbours for certain infringing activities;
• whether ACTA parties should be required to ensure that civil remedies are available against an ISP to compensate for damage resulting from infringing activities when an ISP did not take appropriate measures to prevent the infringing activity;
• under what circumstances intellectual property right holders should be able to expeditiously obtain information from an ISP about the identity of the user who is engaging in infringing activity on the internet;
• whether ACTA parties should be required to promote the development of relationships between ISPs and intellectual property right holders to deal effectively with internet based intellectual property infringement;
• what enforcement measures ACTA should have for remedying and deterring the circumvention of technological protection measures used to prevent infringing activity, such as unauthorised copying of a copyright work; and
• what enforcement measures ACTA should contain for remedying and deterring the removal or modification of copyright management information (such as the identification of the copyright owner and the terms and conditions of use) that is attached to a copyright work.

Interestingly, there is some overlap with these issues identified and the amendments to section 92A set out in the Copyright (Infringing File Sharing) Amendment Bill as discussed above.  However, the section 92A review was independent to the ACTA process and was not as a result of the ACTA negotiations. 

Once ACTA has been agreed to, New Zealand will decide whether to be a party to the treaty.    ACTA will be submitted to Parliament and an opportunity to make submissions will be provided when ACTA is reviewed by the Select Committee. If New Zealand decides to become a party to ACTA it will need to ensure that all our domestic laws are consistent with the treaty.

The closing date for submissions is 31 March 2010.

The Court of Appeal has sent a clear warning to would-be trade mark infringers that trade mark owners can receive an account of profits for the entire period of trade mark infringement, even if the trade mark owner is unaware of the infringement, does not take immediate action or is not in a position to use their trade marks. 

In Intellectual Property Development Corporation Pty Ltd v Primary Distributors New Zealand Limited the Court of Appeal ordered an Auckland company to produce the figures for the profit generated during the entire period of trade mark infringement, even though the trade mark owner was aware of the infringement and took no action.

Primary Distributors New Zealand Limited ("PDNZ") had been the exclusive distributor of Hefty-brand products in New Zealand.  Hefty products included cling-film, kitchen papers and other domestic products.  When the Hefty trade mark owner went into liquidation in March 2005 the administrators agreed to sell the trade marks to Intellectual Property Development Corporation Pty Ltd ("IPD").  The sale eventually took place in December 2005.  PDNZ continued importing and distributing Hefty-labelled products despite its agreement to do so ending in June 2005 and despite it being informed in February 2006 that the Hefty trade marks had been sold to another party.

In the High Court proceedings, PDNZ accepted that it had infringed IPD's trade marks and IPD sought an account of profits. The critical issue was whether IPD was entitled to an order that PDNZ account for all profits made on the sale of Hefty-labelled products in breach of the Hefty trade marks.

PDNZ conceded the claim for an account of profits up to 31 August 2005, but resisted the claim for an account of profits in respect of sales of imported Hefty-labelled products from 31 August 2005 to when infringement ceased, on the basis of acquiescence or waiver by IPD.  PDNZ also asked the Court to exercise its discretion not to order an account of profits for that period because IPD had neglected to take action immediately after it became aware of the infringement.

The Court of Appeal overturned the High Court decision and held that the account of profits should have been ordered for the whole period claimed.  In making its decision the Court of Appeal noted that:

• mere delay is not a bar to a trade mark owner seeking a remedy, unless the delay is inordinate or unless something more is present.  In this case, the delay of five months (from when it was held IPD became aware of the trade marks infringement and when it wrote to PDNZ demanding that it cease infringement) comes nowhere near the type of delay contemplated by the Court as being inordinate;
• the High Court was wrong to view IPD's "failure to protest" as a "reward" as it presupposed that there is a duty on trade mark owners to protest.  Rather, not requiring PDNA to account for its profits in the first half of 2006 was effectively rewarding PDNZ for its knowing infringement; and
• the fact that IPD was not in a position to use the trade marks during the entire period was irrelevant.  The focus is on the wrongful actions of the infringer and not the position, the actions or the omissions of the owner.

The Court of Appeal's decision is a clear signal that trade mark owners can receive an account of profits for the entire period of trade mark infringement, and it is irrelevant whether or not trade mark owners are in a position to use their trade marks or whether there is a delay in taking immediate action.

The Foreign Affairs, Defence and Trade Committee reported back on the Trade Marks (International Treaties and Enforcement) Amendment Bill ("Bill").  It recommended passing the Bill with a number of amendments.  

The Bill is an omnibus Bill to amend the Trade Marks Act 2002 and Copyright Act 1994.  It gives effect to the government's decision to accede to the Madrid Protocol.  Accession to this international agreement will allow a trade mark owner to protect its trade mark overseas by filing an application with the Intellectual Property Office of New Zealand ("IPONZ") and designating one or more overseas countries that are also members of the Madrid Protocol and where protection is sought. Similarly, those who own overseas trade marks will be able to use the Madrid Protocol to protect their intellectual property in New Zealand without having to lodge individual applications for trade marks in New Zealand. The Bill also ratifies the Singapore Treaty on the Law of Trade Marks, which also established an international framework for harmonization of trademark registration procedures. 

The Bill also gives effect to New Zealand's accession to the Nice Agreement Concerning the International Classification of Goods and Services for the purposes of the Registration of Marks.  While New Zealand has informally followed the guidelines of the Nice Agreement since its inception, it has never officially been a party.

A key aim of the Bill is to combat counterfeiting.  It provides for the appointment, and prescribes the mandate and functions of enforcement officers who will enforce the criminal offence sections of both the Copyright Act 1994 and the Trade Mark Act 2002. The impetus behind this has been the frustration with lack of action to prevent and punish breaches of the criminal provisions in these statutes - mainly concerning counterfeit and pirated goods. The Bill proposes to extend the mandate of the National Enforcement Unit (an existing division within the Ministry of Economic Development) to include the ability to enforce relevant provisions in both statutes. In keeping with this more robust approach to penalties, the Bill also extends the powers of the New Zealand Customs Service.  The amendments proposed by the Select Committee would entitle enforcement officers to, amongst other things, obtain production orders where they suspect a person might have documents which are evidence of, or of significant relevance to, investigation of an offence against the Acts, as customs officers can under the Bill.

The proposed forfeiture provisions would result in seized items being returned to the trademark or copyright holder as opposed to the Crown to ensure that infringing goods and copies are not disposed of in a way which would adversely affect the owner. 

Continuous use of an unregistered mark is one defence to infringement under the Trade Marks Act.  The proposed amendment increases the protection to registered trade mark owners by providing that both the owner of a registered mark and an infringing unregistered mark can rely on use by a predecessor in title.  At present, the owner of the registered mark cannot rely on use by a predecessor in title but the owner of the unregistered mark can.

The proposed amendments would also clarify the powers of the Commissioner of Trade Marks. 

The Bill expands s 97A to provide that a trade mark is not infringed by the use of that mark in relation to goods which have been put on the market anywhere in the world under that mark by the owner, with the owner's express or implied consent or by an associated person of the owner.  The latter appears to be intended to prevent trade mark owners from stopping otherwise legitimate parallel importing by transferring registration of the trade mark to an associated person.

The Bill is now progressing towards its second reading. 

The Patents Bill 2008 ("Bill") continues to progress through the Commerce Select Committee.  Once enacted it will overhaul the outdated Patents Act 1953.  Many of the changes are long overdue to bring New Zealand's patent regime in line with our major trading partners.  However, some of the proposed amendments may be received less enthusiastically in this already complex area of law. 

The Bill requires that patent applicants must establish that their claimed invention is absolutely novel (currently an invention is only required to be novel within the territory of New Zealand).  Under the new regime the Patent Commissioner ("Commissioner") will have the power to refuse a patent application if the claimed invention is obvious or not useful.  A patent is useful if it has a specific, credible and substantial utility.    

The Bill also introduces a Maori Advisory Committee to advise whether a claimed invention is derived from Maori traditional knowledge or from indigenous plants or animals and, if so, whether commercial exploitation of the invention is likely to be contrary to Maori values. 

One area of potential controversy is the removal of third party challenges prior to the grant of a patent.  Under the Patents Act 1953, pre-grant oppositions are regularly used to limit the scope of overly-broad patent applications before they progress to grant.  This mechanism has successfully operated to prevent unjustifiable interference with the operation of established businesses.  In the place of pre-grant opposition the Bill introduces a limited re-examination process.  Under the new process any person may assert that an invention is not novel or does not involve an inventive step.  The Commissioner must then consider the assertion and, if requested, must re-examine the complete specification. 

Re-examination has proved to be unpopular in other common law jurisdictions (Australia for example has chosen to maintain pre-grant opposition).  The usual objection is based on a concern that the Commissioner will be less willing to revisit granted patents than to consider oppositions to applications that are still under examination.  Counterbalancing this concern, at least in part, is the introduction of a tougher balance of probabilities test at the examination stage (currently applicants are given the "benefit of the doubt" as to whether their claimed invention is patentable). 

For the first time in New Zealand's patent law history the Bill defines the rights granted to a patentee and what amounts to infringement.  This is a welcome development that will serve to confirm and clarify the existing common law position. 

An area of concern, however, is the move to define a broad offence of contributory infringement.  The Bill provides that an infringement occurs if a person supplies another person with a means of putting an invention into effect and knows, or ought reasonably to know, that the means are suitable and intended for putting the invention into effect.  There is an exception for the supply of staple commercial products. 

On its face the Bill reverses the common law position, in which the mere facilitation of an infringement (ie supplying a party with the means to infringe) does not incur contributory liability.  This change has the potential to catch those who supply customised products (such as tailored software solutions or a unique part within a supply chain) and who ought to have known that they were contributing to a product that infringes a patent.  This may prove to be unduly harsh, particularly given that the simple act of marking a product with its patent number is deemed notice of the patent even if the person deemed to have such notice is unaware of the existence of the product.    

The Commerce Select Committee is scheduled to report back on 30 March 2010.

The Department of Internal Affairs has recently reported that 213 spam complaints were received in February 2010 and 20 formal warnings have been issued this year to date.  This activity follows two New Zealanders being handed considerable fines late last year for their role in what has been described as the largest pharmaceutical spamming operation in the history of the internet. 

In relation to the pharmaceutical spamming operation, the Department of Internal Affairs issued proceedings against three defendants seeking payment of pecuniary penalties under section 45 of the Unsolicited Electronic Messages Act 2007 for breach of sections 9-11 because the messages were unsolicited, did not include accurate sender information and did not contain a functional unsubscribe facility.

One of the ringleaders was earlier ordered to pay a $100,000 pecuniary penalty.  In setting the penalty for the remaining two, Justice French considered that, given the scale of the spamming activity (the New Zealand component alone involved more than two million unsolicited emails to New Zealand addresses over a four month period) a starting point of the maximum penalty of $200,000 was appropriate.  There were two significant mitigating factors:

• the fact that the activity began at a time that it was not illegal to send unsolicited electronic messages; and
• co-operation with the authorities.

One of the ring leaders of the operation was sentenced to a $100,000 pecuniary penalty.  The third defendant, whose offending was on a lesser scale, was ordered to pay a $50,000 pecuniary penalty.  By contrast, one of the ringleaders was recently ordered to pay US$15.5 million dollars in respect of the same SPAM operation by a US Federal Judge.

In Viacom Global (Netherlands) B.V. v Scene 1 Entertainment Limited (In Receivership), the High Court considered whose rights prevailed in the context of a receivership - the copyright owner (Viacom) or a party with a perfected security interest. 

In 2008, Viacom (as licensor) and Scene 1 (as licensee) entered into an exclusive Licence Agreement to market Viacom's products in New Zealand.  In 2009, Viacom terminated the Licence Agreement on the grounds that Scene 1 had failed to replenish a letter of credit, failed to pay for recordings, and had then been placed in receivership.  Viacom demanded payment and delivery up of all recordings held by Scene 1 pursuant to the agreement.  At the time, Scene 1 had warehoused approximately 580,000 DVDS.  Before it went into receivership, Scene 1 had entered into an agreement to sell approximately half of the stock.  Viacom considered the sale to be at reduced prices and was concerned about the damage to its brand and relationship with other retailers if the stock were sold at reduced prices. 

The receiver's position was that the Bank was entitled to sell all of the stock, pursuant to the security given by Scene 1 under a general security deed.  Viacom maintained that it had a prior right to the stock arising from its ownership of copyright in the DVDs.  It sought an interim injunction restraining Scene 1 from selling the stock and requiring it to deliver up the unsold stock.  The Licence Agreement provided that Viacom retained title to the stock.   However, significantly, Viacom's interest under the Licence Agreement was not registered under the Personal Property Securities Act 1999. 

Viacom claimed that the Receivers were bound by their Licence Agreement and, failing that, that they had no right to deal with the stock pursuant to the Copyright Act.

Viacom alleged that, notwithstanding all of the stock had been lawfully imported into New Zealand pursuant to the Licence Agreement, the receivers no longer had a licence having disclaimed the Licence Agreement.  Accordingly, in Viacom's submission, any dealing with this stock amounted to a breach of copyright.

The Receivers submitted that the only way Viacom could have retained control of the stock was by way of a retention of title.  However, because its interests under the Licence Agreement had never been registered under the PPSA, it did not have an enforceable retention of title.  Unless Viacom could point to an obligation that the bank is bound by, or prove that it ranked ahead of the bank's security, the Receivers were not required to have Scene 1 perform the Licence Agreement.  Although that may have meant that that Scene 1 was in breach of the Licence Agreement, that was irrelevant to the question of whether the Receivers were entitled to sell the stock because the bank's interest had priority. 

In any event, the stock did not amount to "infringing copies" under the Copyright Act so there could be no breach.  The stock had been lawfully imported and the Copyright Act makes no distinction between import and sale - the stock did not infringe when imported and could not therefore infringe when sold.  Since Viacom could not show that the sale of stock would breach copyright, it could not rely on copyright to try to defeat the bank's priority over the stock.  The Copyright Act did not provide Viacom with the "super priority" it needed over the bank and the interim injunction was discharged and the DVDs sold. 

Viacom applied for a stay of execution which was dismissed by the Court of Appeal.  While taking care not to pre-empt the outcome of any appeal, the Court of Appeal observed that Viacom's argument was so novel that the High Court had found that Viacom had no serious question to be tried on its injunction application.  The protections conferred on copyright holders under the Act do not confer priority over prior registered security holders under the PPSA.  Had Viacom registered its interest under the licence agreement under the PPSA, the outcome may well have been different.

© Russell McVeagh 2009. All rights reserved. www.russellmcveagh.com