Q&A: Australian litigation update

Article  \  7 Dec 2015

How does Australia compare to the rest of the world when dealing with enforcement of IP rights? It appears to be a litigious market - is this the case? If so, why? How effective are dispute resolution measures in resolving matters outside of the courtroom?

Australia is not a particularly litigious market in that, IP cases represent only a small percentage of all cases started. However, the majority of IP infringement cases that are started have merit and Australians are very protective of their rights and are eager to use the court system to resolve disputes.

In Australia the relevant legislation prohibits the making of unjustified threats of legal proceedings in relation to copyright, patent, trade mark and design infringement. This means that potential applicants are normally satisfied they can prove the rights claimed before sending the initial cease and desist letter.

According to a recent survey on litigation trends, 25% of all respondents believed that the number of disputes/proceedings would increase in the next 12 months. If this trend is true, then companies face significant challenges ahead with higher regulatory oversight and investigations, higher litigation budgets, as well as the focus of the business being distracted. The same survey indicates that outside the IP space, class actions in Australia have increased in the last 12 months.

The Federal Court of Australia (FCA) is committed to resolving disputes quickly, inexpensively and efficiently. The Court has the power to order parties to mediation, arbitration or other forms of alternative dispute resolution. Even where not ordered, the Court will sometimes strongly recommend alternative dispute resolution. It is interesting to note that of approximately 102 IP-related cases started between June and December 2013 in the FCA or Federal Circuit Court (FCC), only 18 were still open in February 2014.

What are some key developments with IP legislation in Australia that has an impact on litigation?

The FCA has introduced a fast track system for IP cases, other than patents. There are no pleadings in such matters. A scheduling conference with legal representatives occurs within six weeks of the proceedings being started with an expected hearing date of two to five months after that. Judgments are issued within six weeks of the hearing.

Since 2013, the FCC, which was established in 1999 to provide a simple and accessible alternative to FCA proceedings - has jurisdiction to hear trade mark and design related matters. Although the rules and procedures are generally the same as those in the FCA, the initial filing fees are lower and as judges with specialised IP knowledge are appointed, it is anticipated that more litigants will take this option.

Two other changes in the trade mark area also occurred in 2013. Additional damages for trade mark infringement were introduced, as were substantial changes to practice and procedure before the Trade Marks Office. Both changes have lead many practitioners to speculate that appeals from the Trade Marks Office will increase. As new trade mark cases are commenced and reach final decisions, the impact of these changes will be able to be gauged.

What are main differences between Australia and other countries' IP litigation procedures?

Although most jurisdictions have similar practices and procedures, in Australia, when commencing proceedings in the FCA or FCC, an applicant must file a 'Statement of Genuine Steps'. This Statement sets out what steps the applicant has taken to resolve the dispute and if no steps were taken, an explanation of why not. For example, an urgent injunctive relief may have been required. Failure to show reasonable attempts to resolve the dispute may have cost consequences later in the proceedings.

Australian damages appear high. Is this the norm and does it help prevent further infringement?

Many Australian practitioners would think that damages awards in Australia are low when compared to other jurisdictions such as the United States. Applicants often have difficulty in proving actual damage especially when they have not as yet begun to sell their goods into the market and cannot prove loss of sales or reputation.

The awarding of additional damages has helped applicants recoup some losses as the quantum of proven actual damage is not relevant to the quantum of additional damages. In Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq)(2007), for example, an award of AU$40,000 additional damages for copyright infringement was increased to AU$200,000 on appeal. In the more recent copyright infringement case of Vertical Leisure Limited & Anor v Skyrunner Pty Ltd & Anor  (2014) AU$44,800 was considered appropriate as damages for loss of profit, AU$50,000 for loss of reputation and AU$300,000 by way of additional damages.

It is also important to note that the hearing for damages is separate to the infringement/validity hearing. In most cases, once the FCA has delivered a judgment on infringement and validity, the parties will come to their own private arrangement on the appropriate damages award. It is rare to have a hearing on the quantum of damages, so there is very little case law to provide feedback on what the FCA would in fact award if asked to rule on the question of damages.                                                              

Australia has been cracking down on piracy and copyright theft. What has been implemented, and what effect will this have on digital piracy, ISPs, the media and entertainment industries ?

On 27 June 2015, theCopyright Amendment (Online Infringement) Act 2015came into effect. This Act introduces a new section 115A into theCopyright Act 1968(Cth) and allowing copyright owners to obtain injunctions against a carriage service provider (CSP). There is now a requirement for CSPs to take reasonable steps to disable access to the online location (where that online location is outside Australia), where the online access' primary purpose is to infringe or facilitate the infringement of copyright, regardless of where the infringement occurs.

Debate surrounding the introduction of the new section centred largely on the film, television and music industries. However, the changes apply equally to software (including games), photographs, and other copyright-protected works.

The FC A recently made orders requiring six internet service providers (ISPs) to provide preliminary discovery of the names and physical addresses of account holders associated with 4,726 particular IP addresses. In Dallas Buyers Club LLC v iiNet Limited  [2015] FCA 317, the applicants claimed that they had identified account holders who had infringed the copyright in their film, Dallas Buyers Club, by sharing the film online using BitTorrent, a peer-to-peer file sharing network. The applicants sought discovery of the identity of each of those account holders from the ISPs, on the basis that those account holders might either be infringing the applicants' copyright using BitTorrent, or may be able to help the applicants in identifying the actual infringers.

This decision is the first of this magnitude in Australia and suggests that the courts will afford little tolerance to online infringers. The case may well act as a deterrent to potential online infringers who might have previously formed a view that privacy obligations would protect their identity. The courts have however, acknowledged the need to balance the rights of rights holders and the privacy of individuals. 

Should Australian brand owners be worried about trade mark squatting?

All brand owners need to be aware of the possibility of trade mark squatting. With the introduction of the new gTLDs, there are even more domain names available that pose potential risks. It is important that brand owners obtain registrations for their trade marks in Australia so that they can either bring an action for trade mark infringement or make a complaint to au. Domain Administration Limited (auDA) - the industry self-regulatory body for the .au domain space. Complaints to auDA are a simple and cost effective way of having the infringing domain name taken down. However, if an organisation wants the domain name transferred, a formal complaint needs to be made. 

Any comment on plain packaging litigation cases?

Australia is still waiting on the outcome of various actions taken before the World Trade Organisation concerning the legality of Australia's plain packaging laws. Five countries have challenged the laws, however, in June 2015, the Ukraine suspended its proceedings hoping to find a mutually acceptable agreement. The plain packaging laws have been in place since 1 December 2012 with various cancer organisations pointing to studies that show plain packaging is working. 

What cases should we watch for developments in the trade marks space?

In May 2015, Moroccanoil Israel Ltd commenced trade mark infringement proceedings against Aldi Foods Pty Ltd. The two companies have already been involved in proceedings in the United Kingdom, where Moroccanoil was unsuccessful in establishing that Aldi's sale of its 'Miracle Oil' hair product amounted to actionable passing off. Although it's unclear from the court documents whether the trade marks involved are the same, the information to hand points in the affirmative.

In Australia, Morroccanoil has trade mark registrations for its Moroccanoil M device labels. In addition, Aldi is opposing Moroccanoil's application for the word mark MORROCANOIL. The parties appear to have failed at settling their differences at mediation in July 2015 so the matter will now proceed towards a hearing.

In light of the recent decision in Verrocchi v Direct Chemist Outlet Pty Ltd  [2015] concerning validity of the trade mark 'Is This Australia's Cheapest Chemist' , and the get up of chemist's stores, a decision concerning the Aldi product similarity to that of Moroccanoil will be very interesting.

Australians love David versus Goliath fights, and in this one Qantas Airways Ltd has appealed a decision of the Registrar of Trade Marks in an effort to stop an individual, Luke Edwards, from registering his kangaroo silhouette device in class 25 for clothing.

Qantas based its opposition on a number of 'flying kangaroo' marks including this one, registered for merchandising services. 

Crown Resorts Ltd, owned by James Packer, has commenced proceedings against Crown Group Holdings Pty Ltd and 34 other companies in that group to stop use of 'Crown'. Iwan Sunito is a property developer and wants his companies to use the 'Crown' brand for their luxury apartments. The applicants claim the respondents are trading off the Crown Resorts' reputation in their casinos and hospitality services. The two parties are also involved in opposition proceedings before the Trade Marks Office over the use of 'Crown'. This case will join a number of recent decisions concerning use of a trade mark in relation to buildings where CAIRNS HARBOUR LIGHTS was considered descriptive, while HARBOUR LIGHTS was not.

Do you have any other observations about the IP landscape in Australia?

We opened our Sydney office in 2013, and in the relatively short period of time since, we have seen quite significant shifts in the IP landscape in Australia, driven largely by legislative changes that will lead to further harmonisation of the profession across Australia and New Zealand.

We're seeing a consolidation of firms and investment in peripheral companies (such as patent analytic software companies) brought about by the ability of Australian firms to raise capital through listing.

The market for providing intellectual property registration services to multinationals has also been heavily impacted by regulation in recent years. Accession to the Madrid Protocol, as well as the upcoming 'single desk' for filing patent applications, along with the potential for an 'e-PCT' are all driving consolidation of international work into a smaller number of firms.

It is not all pessimism though. Those firms with a good base of local clients are somewhat insulated from these international changes, and in fact can benefit from them in some respects.  

Our work in the last 12 months has seen a real focus on dispute resolution. We have been involved in a large number of Australian Federal Court disputes, our staff size has increased by 150%, and we have accrued the representation of a large number of new clients. 


An edited version of this article first appeared in the October 2015 issue of Managing IP.