influence updates

NAIDOC Week and the recognition of Indigenous Cultural & Intellectual Property (ICIP)

This year we are celebrating NAIDOC Week from 8 – 15 November 2020. NAIDOC Week was once a day celebrated by Aboriginal and Torres Strait Islander peoples but has now become an important week for all Australians to celebrate and appreciate Aboriginal and Torres Strait Islander people, history and culture.

2020 National NAIDOC logo
2020 National NAIDOC logo

The NAIDOC Week theme for this year is ‘Always Was, Always Will Be’ which focuses on Aboriginal and Torres Strait Islander peoples’ continuous connection to country and culture. The richness and survival of Aboriginal and Torres Strait Islander culture is essential. However, Australian law fails to recognise properly the importance of Aboriginal and Torres Strait Islander culture and Aboriginal and Torres Strait Islander peoples’ rights to protect their intellectual property, which is also known as Indigenous Cultural and Intellectual Property (ICIP).

ICIP encompasses different aspects of Indigenous culture, including, stories, symbols, sacred sites, dances, ceremonies etc. While you could write a story and it would fall under copyright, if it meets the specific requirements under the Copyright Act 1968 (Cth), there are roadblocks which prohibit ICIP from being protected by copyright. In particular, the requirements of ‘material form’ (e.g. written down or recorded) and there being an ‘author’ poses problems as Aboriginal and Torres Strait Islander stories are told orally, and a community may be the owner of a story rather than a person. The duration of copyright which can last for 25, 50 or 70 years after the creator’s death, the first year of publication/broadcast, since being made or made public, depending on the work is also problematic for ICIP. We know that Aboriginal and Torres Strait Islander people and culture have been around for more than 65,000 years, which means that particular ICIP may be older than the current duration period of copyright.

Aboriginal and Torres Strait Islander people and various organisations have advocated for the recognition of ICIP in Australia. Dr Terri Janke and Company have done great work to educate people about the importance of recognising and respecting ICIP as well as protocols to follow regarding the use of ICIP. Also, in 2016, the Arts Law Centre of Australia, Indigenous Art Code and Copyright Agency started the ‘Fake Arts Harms Culture campaign’, which highlighted issues with fake Aboriginal and Torres Strait Islander art and the lack of protection of ICIP. In September 2020, the ‘Australian Government response to the House of Representatives Standing Committee on Indigenous Affairs—Report on the impact of inauthentic art and craft in the style of First Nations peoples’ recognised the problems with current intellectual property laws and the need start looking into the development of ICIP legislation. While the Government has said this will be a long process, hopefully, we will see the introduction of ICIP laws sooner rather than later.

Author: Sharna White, Graduate Lawyer

influence legal acknowledges the Traditional Custodians of Country across Australia. We recognise the strength, resilience and capacity of Aboriginal and Torres Strait Islander Peoples and pay respect to Elders past and present.

When the copyright owner can’t be found

Whether it is a photograph you would like to use on your website, or an artwork you wish to print onto merchandise, it’s always best practice to seek permission from the copyright owner to use their work. What happens when you want to use a work protected by copyright and cannot find the copyright owner, even after making every effort to find them? These are known as orphan works.

Orphan works and how the Copyright Act deals with them

influence legal book search
What happens when you can’t find the copyright owner?

Currently, the Copyright Act does not provide any specific protection for those using orphan works. If a copyright owner turns up even after the user has made reasonable efforts to find them, then the user is at risk of an infringement claim.

This issue has been reviewed in several enquiries, including the Australian Law Reform Commission Inquiry into Copyright and the Digital Economy and Productivity Commission Inquiry into Intellectual Property Arrangements.

The Federal Government’s Copyright Access Reforms – what does this mean?

On 13 August 2020, the Federal Government announced that one of their five reforms to the Copyright Act is the establishment of “a limited liability scheme for use of orphan works”.

The Government indicated that the scheme will benefit the copyright owner and the person using an orphan work. The proposed amendment will allow orphan works to be used without the risk of copyright infringement provided that the person intending to use the work conducts “a reasonably diligent search” and attributes the creator “as far as reasonably possible”.

If the copyright owner does appear then the person using the orphan work will be entitled to use the work, if both parties can agree on “reasonable terms”. If this cannot be achieved, the copyright owner can apply for an injunction to prevent future use of the work.

These reforms will be an area to watch this year, as the Government anticipates the release of an exposure draft bill later this year. It will be interesting to see if and how “a reasonably diligent search” is defined, as they have suggested that specific sectors and industries develop policies about a “diligent search”.

Author: Sharna White, Graduate Lawyer

Update – control of online content

Our last article looked at the issue of control of copyright on social media platforms following the recent case, Sinclair v Mashable.

Only 2 months after the Sinclair decision, the U.S. District Court for the Southern District of New York has revised its position in a new case, McGucken v Newsweek.

A tale of two cases

In very similar conditions to Sinclair, Newsweek had published an article featuring an embedded Instagram post of photographer, Elliot McGucken, without his permission.

Instagram embed
Instagram has released a statement on its embeds API

Relying on the ruling in Sinclair, Newsweek argued that because the image was posted to McGucken’s ‘public’ profile, it could rely upon Instagram’s terms of service.

However, despite the Sinclair decision, the court refused to dismiss McGucken’s case. While the court did accept that Instagram has the right to sublicense publicly posted photographs to other users, it concluded that there was insufficient evidence to prove that Instagram had sub-licensed the photo to Newsweek.

Instagram weighs in

Instagram has released a statement clarifying its position on the issue, stating:

“While our terms allow us to grant a sub-license, we do not grant one for our embeds API… Our platform policies require third parties to have the necessary rights from applicable rights holders. This includes ensuring they have a license to share this content, if a license is required by law.”

So, the court’s decision combined with Instagram’s statement on the issue has now emphatically altered the legal position set out in Sinclair.

What does this mean for you?

Photographers and other creators wishing to have stronger control over their copyright when sharing their photographs online will welcome this development.

However, this decision also serves as a strong warning to businesses (especially digital media outlets) to ensure they obtain the correct permissions before using or embedding a photographer’s work onto their website.

Who controls the copyright in your online posts, really?

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.

influence legal apps
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

Welcome to the team Sharna!

Sharna White has joined our team as a graduate lawyer. Sharna has worked as a paralegal at the Australian Broadcasting Corporation and the Arts Law Centre of Australia, and has also completed an internship at Allens.

Sharna is interested in intellectual property and information technology and is excited to be part of the influence legal team. 

Licensing your copyright? Get it in writing!

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

 

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

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?

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?

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.