AJPark

New Zealand's IP legislation update

Update on NZ copyright law

The provisions of New Zealand’s copyright law dealing with internet service providers (ISPs) are currently being redrafted and expected to be announced this week.

The original section 92A would have obliged ISPs to terminate accounts of repeat copyright infringers “in reasonable circumstances”.  However, section 92A was scrapped in March after opposition from critics who were concerned people would be cut off without proof of their guilt.

The Ministry of Economic Development has set up a working group of intellectual property and internet law experts.  This group is tasked with developing policy proposals and questions for consultation with stakeholders.  This will take place over a three-week period this month.

The Ministry will then seek Cabinet approval of the policy for dealing with online copyright infringement in August.  The Ministry anticipates a bill will be drafted in September or October.

Update on Patents Bill

Submissions on the Patents Bill closed on 2 July.  Dates for the select committee hearings have not yet been allocated. 

This bill is designed to replace the Patents Act 1953.  The Bill aims to update the New Zealand patent regime to ensure an appropriate balance between incentives for innovation and technology transfer and protecting the interests of the public, including the interests of Maori in traditional knowledge.

The select committee is expected to report back on 5 November.

Update on Trade Mark Amendment Bill

Submissions on the Trade Marks (International Treaties and Enforcement) Amendment Bill—which enables New Zealand to join the Madrid Protocol— closed in May.

The report from the foreign affairs and trade select committee is due 7 October.

This bill will amend the Trade Marks Act 2002 and the Copyright Act 1994. It will give effect to Government decisions relating to various international agreements, and will support the enforcement of criminal offence provisions related to counterfeit goods and pirated works.

News from Australia

The “Food Channel” case

The Federal Court of Australia has held that a person who applies to register a trade mark must be the owner of the mark.

The date for determining who owns the mark is the date the applicant files the application. If the applicant is not the owner of the mark, their application will fail. A registered trade mark will be invalid if the party that applies to register the mark is not the owner of the mark. This will apply even if the applicant assigns the mark to the owner.

This case is particularly relevant for businesses that want to file their trade mark application in the name of a third party ‘shell’ company to keep their business’s identity and activities confidential.

Background

The Food Channel Pty Ltd (the original applicant) filed a trade mark application for a FOOD CHANNEL logo. This application was later assigned to Food Channel Network Pty Ltd (the current applicant). Both the original applicant and the current applicant were owned and operated by Paul Lawrence.

The application was opposed by Television Food Network, G.P. (the opponent). The opponent relied on a number of grounds, including that the applicant was not the owner of the trade mark.

Ownership

The opponent pointed to Mr Lawrence’s own evidence, in which he claimed that the current applicant created the trade mark. The Judge held this to be enough to discharge the opponent’s initial onus and the evidentiary onus then shifted to Mr Lawrence to establish that the original applicant was the owner.

The Judge commented that Mr Lawrence tended to confuse his own business interests with those of his companies, and appeared to randomly use companies and trade marks depending on the circumstances. Ultimately this may have proved fatal to Mr Lawrence’s case.

The Judge commented that, while the evidence suggested the original applicant was the owner of the trade mark, the evidence also made establishing ownership difficult (other than, possibly, that the owner was Mr Lawrence himself). The Judge held that partly because of the ‘confusion’ around Mr Lawrence’s evidence, he had failed to prove that the original applicant was the owner and that the owner was using or intended to use the trade mark.

In essence, this defect in ownership was fatal to the application.  And the subsequent assignment did not ‘cure’ the application.

Jonathan Aumonier-Ward is an associate in the trade mark team in our Wellington office.  Contact Jonathan on +64 4 498 3461 or email jonathan.aumonierward@ajpark.com.

Organic claims a grey area in New Zealand

Organic products can attract a premium, with many consumers prepared to spend more on a product they perceive to be natural and healthy.  But, as Kate McHaffie explains, businesses wanting to tap into this rapidly growing market need to exercise caution when using the ‘organic’ label.

Like ‘natural’, the term ‘organic’ is not legally defined in New Zealand. And there does not seem to be any internationally accepted definition of ‘organic’. However, organic production will typically involve little or no use of artificial additives, synthetic fertilisers, or synthetic pesticides.

Organic certifications and standards

Some organic producers choose to comply with independently developed standards, giving consumers certainty as to how the product has been grown, processed, or manufactured.

New Zealand producers can seek internationally recognised organic certification through various locally administered certification schemes.  These schemes require compliance with stringent standards, and involve regular auditing of products and production.

Standards New Zealand has developed a domestic standard for organic production (NZS 8410). This is a voluntary standard proposed as a benchmark for industry certification.

Misleading or deceptive use of ‘organic’

Producers can label their products ‘organic’ (but not ‘certified organic’) without having to comply with any of these certifications or standards. 

However, the product must still comply with the Fair Trading Act, which prohibits misleading or deceptive conduct in trade. Unfortunately, there are no clear rules about what qualities an uncertified product must have to legitimately be labelled ‘organic’.

The Commerce Commission considers that ‘organically grown’ products must have been produced without the use of chemicals, pesticides, or artificial fertilisers. The Commission has said that it would be misleading to claim a product as organic if the product contains only one organic element. Further, the Commission has said that a product labelled ‘organic’ must be 100% organic through the entire chain, from farmyard to shop shelf.

This includes any ingredients that are added to that product.  In this respect, the Commerce Commission’s requirements for the use of ‘organic’ appear to be stricter than those imposed by the various organic certification schemes.

The Commerce Commission has successfully prosecuted a butcher for misleading and deceptive conduct for selling sausages labelled ‘organic’ when only the meat was organic, not the meal and other ingredients.

Guidelines for using ‘organic’

Your consumers may understand ‘organic’ differently to you.  By labelling a product ‘organic’ without referring to any independent standard, you may lead consumers to believe that the product has qualities that it does not. 

Even if this does not lead to liability under the Fair Trading Act, you risk consumer dissatisfaction.

The following are some guidelines on how to avoid creating a misleading impression with your ‘organic’ claims:

• Don’t refer to your product as ‘certified organic’ unless you are currently certified by an independent certifier. State which certification your product holds. If you only have partial certification, don’t imply otherwise.
• Make sure you can substantiate any claim you make regarding the organic character of your product. 
• Most organic certification schemes permit the certified product to contain a small proportion of non-organic ingredients.  However, if your product is not certified organic, the safest option is not to label it ‘organic’ if it contains non-organic ingredients. 
• Consider what the consumer will expect based on your organic claims. Does your product match up to those expectations?

Kate McHaffie is a litigation specialist based in our Wellington office.  Contact Kate on +64 4 474 0897 or email: kate.mchaffie@ajpark.com

Drafting commercial agreements - getting expert assistance pays in the long run

In times like these, it can be tempting to cut back on costs.  But, as Guy Smith explains, the importance of getting specialist advice and having clear and unambiguous agreements drafted is highlighted by cases such as Oxonica Energy Ltd v Neuftec Ltd.

Background

Oxonica and Neuftec are two British technology companies.  Oxonica is a spin-off from Oxford University, and Neuftec is the operating company of two scientists – Bryan Morgan and Ronendra Hazarika.

In 2001, Neuftec and Oxonica signed two commercial agreements, a License Deed and a Main Agreement. Their aim was to license the use of Neuftec’s intellectual property to Oxonica to develop and commercialise a new type of fuel additive called Envirox. 

Five years into this arrangement, in 2006, Oxonica found itself on the verge of a deal with a major fuel producer. It had also, over the course of some time, found an alternative source for a product similar to, but not the same as, Envirox. Oxonica signed the deal with the fuel producer for the new product, called Envirox 2.

Neuftec claimed royalties on all sales of Envirox 2 but was told by Oxonica that royalties were not payable because, in its view, Envirox 2 fell outside scope of Neuftec’s granted national patents and national patent applications.

The drafting

The question was what royalties were payable?  The License Deed said royalties were payable on the sale of “Licensed Products”.  It defined these as:

• “Licensed Products means any product, process or use falling within the scope of claims in the Licensed Application or Licensed Patent.”

Licensed Application and Licensed Patent were defined as:

• “Licensed Application means the application appended in the Schedule hereto [i.e. the PCT] and any continuation, continuation-in-part or divisional applications thereof as well as foreign counterparts and re-issues thereof.”
  
• “Licensed Patent means any patent issuing from the Licensed Application thereof as well as foreign counterparts and re-issues thereof.”

It was accepted by the parties that Envirox 2 fell within the scope of the broadest claims included in the original PCT application filed by Neuftec.

However, it fell outside the scope of the broadest claims of at least some of the national patents applied for and granted to Neuftec.  Those claims were narrowed from the PCT claims.

In reviewing the License Deed, the Deputy Judge noted a series of small but significant drafting issues that complicated its interpretation.  Errors by the draftsman demonstrated, according to the Deputy Judge, a lack of understanding of the field. 

The main issue related to the use of “or” in the definition of Licensed Product. Oxonica argued this meant the two terms Licensed Application and Licensed Patent were exclusive.  In other words, once a Licensed Patent was granted in a country, that governed whether royalties should be paid and any application, including the PCT application, was no longer relevant. 

It argued it shouldn’t have to pay royalties on the basis of claims in a PCT application as they were generally broader than any national office will allow and therefore it would have to pay royalties when other competitors would not. 

In support of Oxonica’s argument, the Court noted that, because “Licensed Application” was defined so broadly, on one reading it would be possible to keep filing continuation or continuation-in-part applications on very broad terms to artificially broaden the scope of products caught by the royalty payment.

Neuftec argued that the terms Licensed Application or Licensed Patent were not exclusive and royalties were payable if a product was covered by the claims of a granted patent, or an application (including the PCT), or any of them. It placed weight on the fact that know-how was also being licensed so it made sense to use the claims in the PCT application as a line in the sand in terms of what was caught and what wasn’t.

In assessing these arguments, the Court stated that the draftsman’s lack of clarity led it to the conclusion that the parties intentions were unlikely to have been clearly set out.  It responded to that conclusion by looking into the circumstances surrounding the agreements in an effort to try and decipher a meaning that accorded with “business common sense.”

Outcome and lessons to be learnt

The Court ultimately determined that Oxonica was liable to pay Neuftec royalties on all sales of Envirox 2 because it fell within the scope of the claims of the PCT application. The Deputy Judge felt the claims in the PCT application were an appropriate yardstick and appeared to be swayed in part because know-how was also being licensed and therefore Oxonica had some advantage over its competitors. This mitigated the fact that it had to pay royalties on a product that competitors could sell in some countries without infringing Neuftec’s patents.

Although the decision is under appeal, the lesson to be learned from the case is simple. Investing early on in the drafting of documents puts commercial relationships on a robust footing. 

It can also avoid a Court trying to make sense of a contract that should have set out the parties’ intentions more clearly in the first place.

Guy Smith is a commercial lawyer in our Wellington office.  Contact Guy on +64 4 498 3401 or email guy.smith@ajpark.com.

New Zealand lags behind in R&D stakes

May’s budget satisfied many of those concerned with the potential of growing deficits and falling credit ratings. However, as Jonas Holland states, it has been met with disappointment within the New Zealand R&D sector.  Particularly given the substantial recent investments in R&D expenditure in Australia, the US and elsewhere. 

The budget was widely anticipated to see what the National-led government would provide for the R&D sector following its scrapping of the R&D tax credits and the Fast Forward Fund. What it provided was a modest increase of just $318 million over four years.

More than half of that increase ($190 million) is for the government’s new Primary Growth Partnership Fund. The fund is intended to attract matching funding from the private sector for investment in R&D in the primary sector. 

The scheme’s focus on encouraging private sector participation in R&D in the primary sector has been welcomed. However, it has been widely seen as the ‘poor cousin’ of the similarly focused $700 million Fast Forward Fund of the Labour government. 

The scheme is to be administered by a panel established by the Minister of Agriculture and Forestry, presumably, to help provide a suitable primary sector focus (however, it is not clear what, if any, focus the Ministry will provide in the aquaculture component of the scheme).  The panel represents yet another government agency from which research and development funding can be sought and ignores calls for consolidation and simplification of crown funding channels and processes.

When it scrapped the R&D tax credit, National said it would instead focus on retaining research and development capability, particularly within areas of fundamental research. Increases to the Crown Research Institute (CRI) Capability Fund and Marsden Fund reflect this intention but seem inadequate to make any substantial impact within the sector.

The CRI Capability Fund has been increased to allow additional funding for each of the eight CRIs of between $700,000 and $2.2 million.  No doubt the CRIs will welcome these increases and will work hard to put these amounts to good use.  However given the financial pressures on some of the CRIs in recent years, it seems likely that these increases may do little more than help them plug holes in their balance sheets. 

Similarly, while ‘blue sky’ researchers have welcomed the $36 million increase over four years to the Marsden Fund, the total size of the Fund is still proportionally far smaller than comparable funds offshore. The increase will be very quickly eaten up by a sector hungry for, what are still, very scarce funds.

Interestingly, $32 million of the $318 budget increase is for research “focused on New Zealand’s health and social wellbeing, including the improved efficiency and productivity of the District Health Board services”.  While no doubt important, there must have been some discussion whether this amount would have been better included within the Ministry of Health budget.

The budget includes $4 million over four years for prizes for key scientists which will provide welcome incentives and rewards for New Zealand’s top scientists.  Finally, the budget provides $16 million as a capital investment in the KAREN network.

Notably, there has not been any increase to the Public Benefit Research Fund which is the core funding for research undertaken at New Zealand universities. Universities have also been struck by a modest 1.95% CPI increase in funding and the removal of funding under the Tripartite arrangement designed to ensure competitive salaries for university staff.

By comparison, the recent Australian federal government budget boosts funding for science and innovation by AUD$3.1 billion over four years, including increases in direct government investment and increased tax credits of between 40 and 45%. 

Notwithstanding this ever-increasing gap in funding, tax incentives and R&D infrastructure between New Zealand and Australia, the Australian government is itself concerned that Australia is falling behind the rest of the world. An assessment that only makes New Zealand’s position all the more concerning.

Bill English clearly had a difficult task reducing deficits and maintaining New Zealand’s credit rating under the budget.  However, it is crucial that New Zealand does not fall further behind in its R&D investment.  New Zealand’s future depends on its export growth.

Jonas Holland is an associate in our commercial team.  Contact Jonas on +64 4 474 0896 or email: jonas.holland@ajpark.com.

Client profile: Formway

Congratulations to New Zealand company Formway Design, and their US partner Knoll, for winning a gold award at the recent NeoCon trade show in Chicago.

Their new BE™ office chair won the best task seating category. 

It is the second time a Formway designed chair has won gold at NeoCon, the biggest trade show in the US. In 2002, the LIFE™ chair received a gold award and subsequently became the seat of choice for former United States president Bill Clinton and Apple CEO Steve Jobs.

Every year, between 100,000 and 150,000 LIFE chairs are sold in the US, made under licence by Formway’s partner Knoll.

Knoll, one of the top three commercial office furniture makers in the States, is also licensed to manufacture and distribute the BE chair throughout most of the world, where it will be known as the GENERATION BY KNOLL™ chair. 

A J Park is proud to have been associated with Formway for many years. The firm was involved in the licensing, freedom to operate, branding, and patent and design work for the BE chair, which was four years in the making.

Partner Michael Brown even took part in the research which involved a camera in his office for a few days to assess how he ‘used’ his chair in his everyday work.

The BE chair responds to people’s need for flexibility in a chair.  It’s ideal for open plan offices, especially when people are doing collaborative work. 

The new BE chair is available in the States from this month, and in New Zealand and Australia from September.

'What's your Problem, New Zealand?' finalists announced

Ten finalists were selected from more than 100 entries for the competition that gives New Zealand enterprises the chance to win up to $1 million in research and development (R&D) services from Industrial Research Limited (IRL).

The competition, called 'What’s your problem, New Zealand?', seeks to raise the profile of R&D.  It also encourages New Zealand firms to improve long-term productivity and profitability through increased R&D investment. 

A J Park is providing intellectual property advice to help the finalists complete the next stage of the competition. 

The ten finalists are:

• Dynamic Controls
• Fisher & Paykel Appliances
• Gallagher Group
• Glidepath
• Group3 Technology
• Mars Petcare NZ
• Pacific Edge Biotechnology
• PowerShield
• Pultron Composites
• Resene Paints.

The winning entry will be announced in late August.

A J Park introduces RSS feed

Our lawyers and patent attorneys have extensive experience across a wide range of industries and technologies. We contribute legal columns for several trade publications and are regularly approached to provide expert commentary on IP issues.

New content is published on the A J Park website regularly and we have developed an RSS (Really Simple Syndication) feed to allow subscribers to receive timely updates when articles or news releases are published.

We encourage you to subscribe to this RSS feed so we can keep you informed on IP issues. You can subscribe by clicking on the RSS feed logo on the A J Park home page - http://ajpark.com/index.php.

If you are interested in expert opinion on any IP issues, please contact our Marketing Communications Executive, Miranda Gregg on +64 4 474 0932 or email miranda.gregg@ajpark.com.