Who controls the copyright in your online posts, really?

Posted on by influence legal.

In a recent article we looked at how important it is for artists and content creators to ensure they have a written, signed contract for any licence agreement. A recent New York case highlights the strict licensing terms on social media platforms and the trade-off between exposure for your content, against control of your works.

Sinclair v Mashable – what happened?

Stephanie Sinclair is a renowned photographer whose portfolio includes works featured in The New York Times, Time Magazine and National Geographic. Like many creators, Sinclair uses Instagram as a platform to share her works.

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Do you understand what you’re agreeing to when you upload content?

Sinclair uploaded one of her photographs (an image of a mother and child in Guatemala) to her Instagram account. She was then contacted by digital media and news website, Mashable, offering $50 in exchange for a licence to use the photograph for a story on female photographers. Sinclair declined the offer.

Undeterred by the refusal, Mashable went ahead and used it anyway, taking advantage of Instagram’s API to embed her post of the photo in their website. Mashable didn’t make a copy of the photo – just linked back to the photo on Instagram – but the overall effect was the same. When Mashable refused to remove the embedded post, Sinclair commenced proceedings for copyright infringement.

A not-so picture perfect judgment

On face value, it might seem fairly straightforward that by using Sinclair’s copyright work without her permission, Mashable had infringed her copyright.

However, in this case, the devil was in the details – specifically, in Instagram’s Terms of Service (TOS).

Judge Kimba Woods found that by creating an Instagram account, Sinclair had agreed to Instagram’s TOS. These TOS included a term granting Instagram a “non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide licence to the Content.”

The judge determined that when Sinclair posted the photo to her public Instagram profile, she had “granted Instagram the right to sublicence the photograph, and Instagram validly exercised that right by granting Mashable a sublicense to embed and display the Photograph on their website.”

Even though Sinclair had refused to license the photo directly, Mashable could still validly obtain a sub-license from Instagram to embed the photo.

Private v public

Sinclair argued that Instagram’s TOS were unfair. Users must decide between either:

  • choosing to have a private profile and losing out on the advantages of sharing their works on the biggest photo sharing platform in the world, or
  • choosing to have a public profile in exchange for surrendering rights in their uploaded content to Instagram.

In her judgment, Judge Woods acknowledged the difficulty of this position, but determined that Instagram’s TOS were binding:

“Instagram’s dominance of photograph- and video-sharing social media, coupled with the expansive transfer of rights that Instagram demands from its users, means that [Sinclair]’s dilemma is a real one… But by posting the photograph to her public Instagram account, Plaintiff made her choice. This court cannot release her from the agreement she made.”

What does this mean for you?

As an artist or content creator, it is likely that you will rely on social media as a major platform for sharing your work. And while it is incredibly important to share your work with the public, there is another very important thing to consider; and it’s also one of the most ignored – the fine print.

The terms and conditions for online platforms, including Instagram, often contain broad terms applying to any content you upload – including the right to sub-license to third-party websites.

Sinclair’s case serves as a great reminder that when signing up to any online sharing platform, it is always worth taking the time to understand the terms you are agreeing to. You may not be able to negotiate the terms, but you can choose which works you share and make sure you retain practical control over valuable content.

Author: Blake Motbey, Associate

Licensing your copyright? Get it in writing!

Posted on by influence legal.

As an artist or content creator, licensing your artworks and content can be one of your most important and rewarding streams of income. As well as getting your work out there, ensuring that you are paid appropriately and your works are protected arejust as important.

Make sure your licence contracts are in writing.

Unfortunately, many artists and creators often make unwritten or informal arrangements when licensing their copyrighted works to others.  Whether this is based on the assumption that it’s unnecessary to enter into a contract, that it’s safer to work under an informal agreement, or simply trusting that the licensee will do the right thing, operating without expressly written terms can pose significant risks for artists and creators .

The recent case of Hardingham v RP Data Pty Ltd demonstrates just how easily issues can arise from informal or unwritten copyright licencing arrangements – especially if your works are being uploaded to third party websites.

Hardingham v RP Data – what was the issue?

Mr Hardingham is a professional photographer who provided photographs and floorplans to real estate agencies to be used in marketing campaigns for the agencies’ listed properties, including for listings on realestate.com.au, which had standard terms for agents. These terms include a broad licence of uploaded content.

However, these photographs and floorplans were then reproduced and uploaded by a third-party company, RP Data, under a separate sub-licensing agreement with realestate.com.au.

Mr Hardingham commenced court proceedings claiming that RP Data had infringed his copyright in his images and floorplans.

Well if Hardingham didn’t license the works to RP Data, they shouldn’t be able to use his works, right?

Unfortunately for Mr Hardingham, this was not the case.

While it may have been his initial intentions that the licence granted to the agencies was for house marketing purposes only, and that no sub-licence could be granted, the court took a different view.

As there was no formal written contract between Hardingham or his company and the agencies, the court relied on evidence surrounding the context and the commercial arrangements between each of the parties. The court said that these factors meant that realestate.com.au had a licence, and was able to grant a sub-licence to RP Data. This right was either:

  • inferred from the conduct of the parties’, or
  • implied into the agreements in order to give business efficacy to the agreements.

The lack of any formal or written licensing agreement between Mr Hardingham and the agencies was a crucial factor that allowed for the legal sub-licence of the works.

Get on the same page – literally!

Without a formal licensing agreement, you are putting yourself at the risk of your works or content being used or reproduced without your permission. As a result, you can incur significant financial loss by missing out on important licensing fees you would otherwise have negotiated for.

So, if you are an artist, creative or content creator and are planning to license your copyright works to others, you should always make sure you have the crucial terms of your licence arrangement set out in a written, signed contract.

If you’d like to put together a standard licence for your works, contact us.

Author: Blake Motbey, Associate

Highlights of 2019 and areas to watch in 2020

Posted on by influence legal.

 

Looking back on 2019

First major fines under the GDPR

If the introduction of the EU General Data Protection Regulation (GDPR) was the talking point for the world of privacy of 2018, the first rounds of serious fines issued under the regulation were definitely the talk of 2019.

We saw a number of unprecedented fines being given in response to the biggest privacy breaches and data leaks of the year, including:

  • hotel giant Marriott was fined $197 million for an ongoing data breach that exposed 5 million unencrypted passwords, 8 million credit card records, and impacted 30 million EU residents.
  • British Airways faced a record fine of $328 million for cyber-attack on their website which resulted in about 500,000 customer records, including credit card details, names, addresses and email addresses being extracted by the attackers.
  • Google was fined $80 million by France’s data regulator, CNIL, for failing to comply with its GDPR obligations due to a lack of transparency and consent in relation to Google’s advertising personalisation.

The nature and scale of the penalties enforced in 2019 indicate that the risks of non-compliance for international businesses, including Australian businesses, with an EU presence, is only likely to increase in 2020.

Mandatory text for defect warranties

In June 2019, we saw changes to Australian Consumer Law as amendments to the  Competition and Consumer Regulations 2010 (Cth) introduced new mandatory wording to be used by suppliers providing warranties against defects for services (or goods and services together). This amendment expands the scope of defect warranties for consumers as the ACL previously only prescribed mandatory text for warranties relating to goods.

The new mandatory wording can be found on the Australian Competition & Consumer Commission (ACCC) website, here.

Amendments to Whistleblower Legislation

More than two years after its introduction to Parliament, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (the Act) came into effect on 1 July 2019.

The Act made significant amendments to the Corporations Act 2001 (Cth) and Taxation Administration Act 1953 (Cth), increasing both the protections afforded to whistleblowers and providing greater accountability companies to ensure compliance with whistleblowing obligations.

The key features of these amendments included:

  • widening the definitions of ‘eligible whistleblowers’ and ‘eligible recipients’,
  • expanding the range of misconduct,
  • permitting anonymous disclosures,
  • implementing a whistleblower complaint policy for certain entities, and
  • increasing both civil and criminal penalties.

AI in Public Sector

Some significant implications of public sector use of AI and automation technologies were highlighted during the year.

In this case of Pintarich v Deputy Commissioner of Taxation, the Federal Court of Australia found that Mr. Pintarich remained liable for interest charges on a tax liability, even though he received a computer-generated letter remitting his liability from the Deputy Commissioner of Taxation.

Because of the automated nature of the computer-generated letter, the court ruled that there was no mental process involved in reaching the conclusion, and accordingly, Pintarich could not rely upon the letter.

As automation technologies become more widespread in the public sector, and automated programs begin to replace human mental processes in complex decision making, it will be interesting to see the implications of this case on administrative decision-making in 2020 and beyond. Recent developments include an issue, identified in January this year, with inaccurate ATO general interest charge notices.

Areas to watch this year

Government action in response to the ACCC’s Digital Platform Inquiry

In July, the ACCC released its final report for the Digital Platforms Inquiry, providing a number of recommendations concerning the market dominance of large digital platforms – namely, Google and Facebook. These recommendations included wide ranging regulatory changes to multiple areas, including competition and consumer law, privacy, copyright, and media regulation.

In light of the report, the Federal Government has provided its response, supporting 6 of the 23 recommendations made by the ACCC. The response outlines the government’s commitment to:

  • Allocating $26.9million over four years to establish a new special unit in the ACCC to monitor and report on the state of competition and consumer protection in digital platform markets.
  • Tasking the ACCC to facilitate the development of a voluntary code of conduct to address bargaining power concerns between digital platforms and media businesses.
  • Reforming media regulation to cover both online and offline delivery of media content to Australian consumers.
  • Further strengthening Privacy Act protections, subject to consultation and design of specific measures as well as conducting a review of the Privacy Act.

Introduction of the Consumer Data Right

In August 2019, the Federal Government passed the Treasury Laws Amendment (Consumer Data Right) Bill 2019 (CDR), amending the Competition and Consumer Act 2010 (Cth), Australian Information Commissioner Act 2010 (Cth) and Privacy Act 1988 (Cth).

The CDR will give consumers the right to safely access certain data about them held by businesses, allowing them to better access information on the products available to them, as well as being able to direct that this information be transferred to accredited, trusted third parties of their choice.

In December, the ACCC announced an updated timeline for the launch of the CDR. The launch has now been pushed back from February to July 2020 for the banking sector.  

The ACCC also announced that it would amend the CDR rules to reflect the revised timetables and consult other phases of the CDR, including its introduction into the energy and telecommunication sectors.

Reforming Australia’s designs system

Australia’s current design system has not been reviewed since the introduction of the Designs Act 2003 (Cth) in 2004. In response to recent concerns regarding its effectiveness and suitability, IP Australia has now commenced a two-phase approach to provide reforms to the system.

The first phase involves progressing and implementing the accepted recommendations from the former Advisory Council on Intellectual Property’s (ACIP) review of the Designs Act. IP Australia is aiming to introduce changes based on these recommendations in 2020.

The proposed changes fall into three topics:

  • examining the scope of design protection,
  • providing early flexibility for designers, and
  • simplifying and clarifying the designs system.

IP Australia aims to introduce changes based on these recommendations this year. 

In the second phase, as part of its ‘Designs Review Project’, IP Australia has also begun a more holistic review considering broad and longer-term reforms to Australia’s designs system. IP Australia will continue its research and consultation with stakeholders throughout 2020, with the aim to further understand and improve design innovation, commercialisation, and the overall designs economy in Australia.

Author: Blake Motbey, Associate

 

When a patent troll’s business doesn’t go according to plan

Posted on by influence legal.

Earlier this year, concern spread among users of open source software following claims by an IP licensing business (also known as a non-practising entity (NPE), or, to those on the receiving end of a claim, a patent troll) that use of popular open source components infringed the NPE’s patents.

Sound View Innovations, established in 2013, had acquired a number of the patents of AT&T Bell Labs and Lucent Technologies from Alcatel Lucent at the end of that year. Since then, Sound View has acquired over 1000 patents. It has become well-known as an NPE after commencing proceedings against online platforms including Facebook, Hulu, Twitter, media companies such as CBS and then broadening its claim base to retailers such as Walmart and airlines such as Delta in 2019.

Sound View’s claims involved open source components including:

  • jQuery, a JavaScript Library that handles HTML client side scripting across web browsers,
  • Apache HBase, a database management system real-time read/write access to data,
  • Apache Hadoop, which allows distributed processing of large data sets, and
  • Apache Storm, a distributed real-time computational system.
Patent trolls may have suffered some setbacks, but
they are still lurking.

These components, especially jQuery, are widely used in cloud stacks across a large number of online platforms, media companies and customer-facing organisations.

Sound View’s claims included that use of jQuery to create and process customisable data analysis and processing applications, and use of Apache Spark to perform real-time data stream processing, infringed patents in its portfolio.

The claims were alarming to both software providers and end users, as end users can be liable whether or not they developed the infringing material. Where software providers had accepted liability for open source usages by customers, they would be exposed to potential indemnity claims. Open source components are also often excluded from software providers’ warranties or indemnities, and in those cases the end users would have no recourse under their supplier contracts.

The industry view is that Sound View was targeting end users in the hope that they would pay licence fees rather than engage in the expensive process of defending the claims, which would require significant time in reviewing the technical issues. Both Twitter and LinkedIn settled claims early.

Some defendants, however, filed petitions for inter partes review to invalidate Sound View’s patents. Hulu, Disney, Time Warner and others successfully invalidated multiple claims. Unified Patents, an industry organisation targeting bad faith NPE conduct, also filed petitions for IPRs against several Sound View patents to protect the interests of its members.

Last month, the US Patent Trial and Appeal Board (PTAB) found against Sound View in relation to two further patent claims.

The patent in question involved a technique to enhance existing caches in a network, by employing helper machines to segment streaming media into smaller units according to placement and replacement policies.

This followed successes earlier in the year by Unified Patents, whose membership includes Cisco, Adobe, Red Hat and over 200 other tech companies.

The PTAB decision is a classic illustration of the time and expertise required to defend an NPE’s claim. The decision was based on the prior art, that is, the board found that similar material had been published before the patent was filed, so the patent was not inventive. Many of the Sound View decisions have involved complex evidence comparing the detail of the defendant’s use against the patent claim, or detailed research into the prior art, with arguments about the standard of evidence required to show prior publication.

As yet, there is no overall regulation preventing NPE behaviour, though some US states have regulated against bad faith patent claims. The US Supreme Court ruled in 2017 that legal action must be taken in the state where the defendant is located, rather than the most NPE-friendly forum. Industry bodies are continuing to lobby for greater regulation of bad faith claims. States such as California have called on the US Federal Government to minimise abusive patent litigation. Legislation to address the issue at the US Federal level has hit various hurdles, and there have also been challenges to the inter partes review process on constitutional grounds.

In Australia, patent trolls have not gained as large a foothold as they have in the US. Over the last few years, several reviews of the Australian patent system have focused on whether patents are being used to stifle innovation and creativity. Following those reviews, amending legislation to phase out the innovation patent system was introduced to the House of Representatives earlier this month.

A spokesperson for the Institute of Patent & Trade Mark Attorneys of Australia, however, recently described the justifications for removing innovation patents as “nonsense”.

How will courts respond to the AI apocalypse?

Posted on by influence legal.
How will existing laws react to increasing use of AI?

Well, perhaps that’s a slightly exaggerated headline. However, as developments in automation advance rapidly, courts will need to address the consequences of the use of artificial intelligence, from copyright and patent law, to privacy, negligence, taxation and administrative law.

Currently, the legal position on automation is a mixed bag. Copyright is unlikely to protect the output of an automated system. Privacy laws are constantly adapting to deal with the immense flow of personal information from large-scale data analysis. Professional services firms, while needing to embrace the possibilities of automated analysis of large volumes of information, also need to be cautious about over-reliance on AI-generated data when providing professional advice.

Two recent Australian cases have provided us with some insight into how the courts may apply existing laws in situations involving automation and AI, in the areas of administrative law and patent law.

Pintarich v Deputy Commissioner of Taxation

Mr Pintarich failed to file tax returns for his income between 2010 and 2013. He received an automated letter in the name of the Deputy Commissioner of the ATO that said that if he paid a lump sum by a fixed date, he would not need to pay his general interest charge (GIC) liability – about $335,000.

Not unreasonably, Mr Pintarich relied on the letter and did not pay the GIC. He borrowed money from the bank and paid the lump sum by the due date.

Subsequently, the ATO notified him that there was an error and he would have to pay the GIC. Mr Pintarich argued that the letter was a binding decision by the Deputy Commissioner.

The ATO argued that the relevant officer had entered information into a program and the letter had been automatically generated. They had no specific explanation for how the wording about the GIC had been included in the letter.

The Court considered that for the letter to be considered a valid decision by the Deputy Commissioner, it required two elements:

1.         A mental process of reaching a conclusion; and

2.         An objective manifestation of that conclusion.

Given the automated nature of the letter, the majority ruled that there was no mental process involved in reaching the conclusion, and accordingly, the letter was not a valid decision. Unfortunately for Mr Pintarich, the GIC was held to be payable.

The possible consequences of requiring a mental element for an administrative decision are extensive: as automation technologies become more widespread in the public sector, and automated programs begin to replace human mental processes in complex decision making, to what extent will administrative decision makers be able to rely on their ‘subjective’ mental processes compared to their ‘objective’ output to reverse an automated decision? How will constituents know which correspondence to rely on?

Interestingly, having disagreed with the majority judgment, Justice Kerr highlighted the importance of the law needing to reflect the current technological landscape, saying:

“the expectation that a ‘decision’ will usually involve human mental processes of reaching a conclusion prior to an outcome being expressed by an overt act is being challenged by automated ‘intelligent’ decision making systems that rely on algorithms to process applications and make decisions.”

Rokt Pte Ltd v Commissioner of Patents

In 2013, tech-start up Rokt applied for a patent for a computer-implemented system and method for linking web users to online advertising. The method involved using an understanding of customer psychology, linking engagement information, data ranking algorithms and real-time data manipulation, to present ads to customers who were more likely to engage with them. The Commissioner of Patents determined that the invention was not patentable.

Computer-implemented inventions have often failed patentability tests. A patent must involve a method of manufacture, as well as other elements; an improvement in technology can be considered as a method of manufacture, but not simply the use of computing as a tool. So, using a computer to implement an existing method is not patentable. Overturning the Commissioner’s decision, the Federal Court considered that Rokt’s development integrated different pre-existing elements in a novel way to solve a technical problem, and so it qualified as an improvement in technology.

This decision reflects an understanding of how the changing effects of advancing technologies require the evolution of how we apply legal principles.

While the decision has provided some short-term clarity regarding patentability of computer-implemented inventions, it is now under appeal. By the time we have a decision, I may have been replaced by an article-writing robot …

If you have any questions about legal protection for your AI developments, or privacy requirements for large-scale data handling, contact us before it’s too late!

Author: Blake Motbey, Pararobot

Ready for whistleblower protection?

Posted on by influence legal.

More than 2 years after the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 was introduced, it’s finally set to come into effect on Monday 1 July 2019.

The Act will apply to disclosures made on or after the commencement date, but can also apply to conduct which occurred before commencement.

The Act has made significant amendments to the Corporations Act 2001 (Cth) and Taxation Administration Act 1953 (Cth). It increases the protections afforded to whistleblowers,  and requires companies to have greater accountability for whistleblowing obligations.

Are you ready for your new whistleblowing obligations?

Why are whistleblowers important?

Whistleblowers perform an integral role by disclosing misconduct such as mismanagement, fraud, corruption, or other wrongdoings, ensuring that companies and organisations are held accountable for their actions under the law, and that employees, customers, and shareholders are protected.

So, it is vital to guarantee strong protections for whistleblowers, especially confidentiality of identity and safety from retaliation.

What are the key changes under the legislation?

The key features of the new legislation include:

  • Widening the definition of ‘eligible whistleblowers’: The range of people who may now make disclosures and be eligible for protection has been extended to include officers, current and former employees, contractors and their relatives.
  • Widening the definition of ‘eligible recipients’ of disclosures: The range of people who may be recipients of disclosures now include senior managers, directors, and auditors.
  • Expanding the range of misconduct: The Act has expanded the types of disclosures that will be protected as ‘misconduct’ or ‘an improper state of affairs or circumstances’ (however, there is an exclusion for most disclosures of personal work-related grievances).
  • Allowing anonymous disclosures.
  • Increasing whistleblower protection: The Act provides stronger protection for whistleblowers,  by expanding the prohibition against victimisation or detriment, and eliminating the requirement of whistleblowers to act in good faith to be protected (however, reasonable grounds to suspect misconduct is required.)
  • Increasing penalties: There are significant civil and criminal penalties for individuals and companies for non-compliance and breach of the new legislation.
  • Implementing whistleblower policy requirement: The Act now requires some entities to implement a compliant whistleblower policy.

What is the whistleblower policy requirement?

Public companies, large proprietary companies, and registrable superannuation entities must now implement and maintain a compliant whistleblower policy.

The whistleblower policy must contain the following information:

  • the protections available to whistleblowers;
  • to whom disclosures are to be made, and how they can be made;
  • how the company will support and protect whistleblowers;
  • the process of investigation for into disclosures by the company;
  • how the company will ensure fair treatment of employees of the company who are mentioned in disclosures; and
  • how the policy is to be made available.

The Act has a 6 month transitional period for entities to implement the policy. Accordingly, the last date to ensure your policy is in place is 1 January 2020.

Penalties

There are substantial penalties (both civil and criminal) for the contravention of the new whistleblower protection laws under the Act.

Failure to implement a compliant whistleblower policy may attract a penalty of 60 penalty units (currently $12,600).

However, the most significant penalties arise from breach of confidentiality of the identity of a whistleblower, or victimising (or threatening to victimise) a whistleblower.

The civil penalties for these breaches are:

For an individual, the greater of:

  • 5,000 penalty units ($1.05 million); or
  • 3 times the benefit derived or detriment avoided.

For companies, the greater of:

  • 50,000 penalty units ($10.5m);
  • 3 times the benefit derived or detriment avoided; or
  • 10% of the body corporate’s annual turnover, up to 2.5 million penalty units (currently $210m).

The breaches may also attract criminal penalties for individuals, being:

Breach of confidentiality of identity of a whistleblower:

  • Under the Corporations Act: 6 months imprisonment or 30 penalty units ($6,300) or both;
  • Under the Taxation Administration Act: 6 months imprisonment or 60 penalty units ($12,600) or both.

Victimisation (or threatened victimisation of whistleblower):

  • Under the Corporations Act: 2 years imprisonment or 120 penalty units ($25,200) or both;
  • Under the Taxation Administration Act: 2 years imprisonment or 240 penalty units ($50,400) or both.

What now?

If your entity is covered, the first thing to do is to implement a compliant whistleblower policy.

As part of the policy, given the increased protections and widening of definitions under the new laws, we recommend that you incorporate training to ensure your personnel understand the new obligations under the Act. This is especially important for those people who will be ‘eligible recipients’ of disclosure under the expanded definition.

If you need any assistance in preparing a compliant whistleblower policy, or would like some further information and guidance on how these new whistleblower protection laws may affect your entity, please contact us.

Author: Blake Motbey, Paralegal.

Don’t let your defect warranties be defective

Posted on by influence legal.

Do you provide services directly to customers? Or do you supply both goods and services together? And when you do, do you also offer a defect warranty for your services?

If you’ve answered yes to the above, here is one last question: are you aware of the recent changes to the mandatory wording requirements for defect warranties under the Australian Consumer Law?

Changes? What changes?

The Australian Consumer Law (ACL) currently requires that defect warranties for the supply of goods include mandatory wording.

However, from 9 June 2019, recent changes will now require mandatory wording for services as well as goods.  

So, if you provide services (or goods and services together) and offer consumers a defect warranty, you will need to update your documentation to comply with this change.

Time to review your warranty documents

What is a defect warranty?

Under the ACL, consumers are given a bundle of automatic rights in relation to the goods and services they purchase. These are known as consumer guarantees. These guarantees protect consumers if they are sold faulty products or services, giving them remedies against the supplier, including the right to repair, replacement, or refund.

Alongside these consumer guarantees, suppliers and manufacturers often offer defect warranties in respect of the quality and standard of their goods and/or services.

A defect warranty is a promise that, if a customer receives defective goods and/or services, the supplier will:

  • repair or replace the products;
  • resupply or fix a problem with the services; or
  • compensate the customer.

The ACCC provides the following example:

“A consumer purchases a motor vehicle that comes with a three year or 100,000km written warranty outlining what the manufacturer will do if there are certain problems with the vehicle. This is a warranty against defects and must comply with the requirements of the ACL.”

It’s important to note that a defect warranty need not be set out on a warranty card, or similar. It might be in any of your business documentation, such as your consumer contracts, terms & conditions, receipts, or even on product packaging.

What is the mandatory wording?

The reason for the inclusion of the mandatory wording is to ensure that consumers are informed of their rights under the ACL and are aware that the consumer guarantees cannot be excluded by the warranty.

The existing mandatory wording for defect warranties for goods is:

“Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.”

The new mandatory wording for services is as follows:

For the supply of services only:

“Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value

You are also entitled to be compensated for any other reasonably foreseeable loss or damage.

If the failure does not amount to a major failure, you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.”

For the supply of goods and services together:

“Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.”

Are there any other warranty requirements?

The ACL also requires that your warranty documentation is in clear and plain language that is easy for consumers to read and understand. You must also provide a number of specific details into the warranty document, including:

  • the business contact details, such as the business name, address, phone number, and e-mail address;
  • information of how a consumer may make a claim under the warranty, and what the business must do to honour the warranty;
  • the remedies available for defects; and
  • the warranty period.

What should you do now?

With the 9 June 2019 deadline right upon us, we recommend you review and update your warranty documentation to ensure you have included all the relevant mandatory text.

If you have any concerns or questions about how these changes may affect you, or if you would like more information about compliance with the ACL, please contact us.

Author: Blake Motbey, Paralegal.

Time to review your IP arrangements

Posted on by influence legal.

In February this year, the Federal Parliament passed the Treasury Laws Amendment (2018 Measures No. 5) Bill 2018 (Act), repealing the intellectual property exemptions under section 51(3) of the Competition & Consumer Act 2010 (Cth) (CCA).

The repeal is set to come into effect on 13 September 2019.

What’s section 51(3)?

Section 51(3) covered contractual terms in licences and assignments of patents, designs, copyright and EL rights, and specified agreements in relation to trade marks.

Do your IP contracts need review?

The section provided a limited exemption for IP rightsholders, to allow them to make arrangements that would otherwise be prohibited under the CCA. So, for example, a generally anti-competitive term, or a cartel provision, which met the requirements of section 51(3), would be permitted.

The background of the section was the perceived conflict between the monopoly rights of IP rightsholders, and the competition provisions under the CCA, meaning that IP rights needed this exemption.

What’s the background to the changes?

Section 51(3) has had a life under the microscope, with consistent review and advocation for its repeal for quite some time. It was reviewed in the Hilmer Report, as well as in a number of subsequent competition reviews.

More recently, the Productivity Commission’s Inquiry into Intellectual Property Arrangements, released in late 2016, considered the balance between access to ideas and products, and the encouragement of innovation and investment.

The report recommended the repeal of section 51(3) on the basis that IP rights did not have significant competition implications, and issues only arose where there were few substitutes or where IP rights aggregation could create market power.

The Commission considered that there would be increasing benefits to repeal, especially in the pharmaceutical and communications markets, as the level of licensing and cross-licensing rises in the future.

 Where does this issue arise?

There have been very few cases where section 51(3) has been considered – in fact the ACCC stated in its 2016 submission to the Productivity Commission that it was not aware of any cases where section 51(3) had been used successfully as a defence.

That said, it’s anecdotally clear that IP rightsholders have relied on knowing that section 51(3) was there, in structuring agreements, and there are several situations where regulators and courts have considered a tension between IP rights and competition regulation. These include:

  • Exclusive dealing – such as where rightsholders impose restrictions on distributors about their permitted suppliers or customers. For example, in Transfield v Arlo [(1979) 144 CLR 83 at 108, the Court considered whether Transfield was obliged to sell exclusively promote and sell Arlo’s steel pole. Wilson J was of the view that if a contract clause requiring a licensee to use its ‘best endeavours’ to sell a patented product meant that the licensee could not sell competing products, it would have been protected by section 51(3).
  • Geo-blocking – where rightsholders impose geographical restrictions on the basis of consumer nationality or location. The EU recently regulated geo-blocking with Regulation 2018/302. The European Commission subsequently found that clothing company, Guess, violated the regulation by restricting authorised retailers from selling cross-border to consumers within the EU single Market, allowing them to maintain artificially high retail prices.
  • Assignments-back – In the US, Pilkington Glass was found to have built up a dominant position in the glass manufacturing market by requiring licensees to assign back improvements to Pilkington’s processes. Consequently, the court prohibited Pilkington from imposing territorial and use limitations on their US licensees, allowing them instead to manufacture and sublicence anywhere in the world, free of charge, using the technology in the licences.

What will happen when the repeal comes into effect?

When the repeal takes effect this September it will operate retrospectively, meaning p

We can anticipate that with this change, the ACCC will have an increased focus on IP-heavy arrangements and compliance activities to ensure businesses understand their new obligations under the CCA.

The ACCC has stated that they are in the process of writing guidelines to assist businesses in complying with the repeal, but while we wait for these, we can expect that agreements including the following aspects will be of interest:

  • Exclusive arrangements, territory restrictions, geo-blocking and assignments-back, as mentioned above;
  • Licences that impose quantity restrictions on the licensees, split licensees’ rights by reference to customers, or involve bid-rigging;
  • Bundling and third-line forcing, where the licensee has to accept other products from the licensor or a third party;
  • Patent pooling arrangements – these are agreements where companies with related patents cross-license them to each other and agree on the terms of licence agreements to parties outside the pool; and
  • Clauses that provide for a first mover advantage or “pay for delay”, where one party pays the other to agree not to commercialise a product or move into a market.

Now is the time to review

With the commencement date fast approaching there is still a window of time to ensure that your existing IP arrangements will comply with the repeal.

If you have any concerns or questions about the potential impact of the repeal on your IP licensing, assignment or distribution arrangements, please contact us.

Author: Blake Motbey, Paralegal.

What are you implying?

Posted on by influence legal.

There are several ways for terms be implied into a commercial contract. Terms can be implied:

  • by law – such as the consumer protection provisions of the Australian Consumer Law or the implied duty of good faith; or
  • by fact, where a term is reasonable, equitable, obvious and necessary to give business efficacy to the contract.

The recent case of Rehau v AAP Industries provides a useful reminder that key terms can be implied into a contract, with significant effect.

The facts


Terms that you may not have intended can be implied into your contract

AAP Industries, a manufacturer of plumbing products, and Rehau, a wholesale supplier, were in dispute over a supply agreement dated 1999.

AAP Industries had agreed to supply 9 specified plumbing products to Rehau at a fixed price. The initial term of the agreement was 12 months with automatic renewals.

In 2013, after trying to renegotiate prices, Rehau stopped ordering the products. AAP Industries claimed that this was a breach of the agreement.

AAP Industries argued that although the agreement didn’t state so expressly, it contained an implied exclusivity clause, requiring Rehau to purchase the products only from AAP Industries.

The decision

Both the primary judge and the Court of Appeal agreed with AAP Industries.

The court’s view was that even though there was no exclusivity clause, the agreement, when construed as a whole, required Rehau to purchase the products exclusively from AAP Industries.

The main provisions that were considered included:

  • AAP Industries had to reserve production capacity to meet Rehau’s requirements and to plan raw material to meet Rehau’s deadlines.
  • AAP Industries had to maintain 2 months’ buffer stock free of charge.
  • Any failure by AAP Industries to meet a delivery deadline would constitute default of performance, entitling Rehau to withdraw from the Contract.
  • The agreement renewed automatically unless a party gave 3 months’ notice.

The court said that these terms meant it was equitable and reasonable to find that exclusivity was implied. The court also said that the agreement didn’t make sense without exclusivity as otherwise AAP Industries would have to hold buffer stock and reserve capacity with no corresponding obligation on Rehau to buy.

Sackville AJA noted the case of Colonial Ammunition Co v Reid, which stated that where a written agreement contains express terms relating to a party, the court should only find an implied obligation for the same party in the clearest case. In this case, the court considered that the proper construction of the contract was sufficiently clear to warrant the implication of exclusivity.

“Shall”

This case also highlights the importance of plain language drafting. Issues about interpreting “shall” vs “will” have a lengthy history.

In this case, the provision that stated “Rehau shall purchase the

[plumbing products]

from AAP” was interpreted as an obligation on Rehau to purchase the products at the fixed price. A non-legal reader could easily think this was a statement of intention, not obligation.

This finding was made even though the fixed price was not actually set out in the document.

Takeaways

The key takeaways from this case are:

  • You can exclude implied terms and warranties (to the extent permitted by law) in a general clause, but it works even better to add clear statements on important issues – for example, that the agreement is non-exclusive.
  • If you use plain language drafting, your business is more likely to understand its obligations and be able to head off potential disputes.

If you would like us to review your standard contracts with these takeaways in mind, contact us.