Fordham IP Conference 2011, New York City

June 2, 2011

By Vicki Huang

The Fordham IP conference – “Learn, Debate, Have Fun” – was held on 28 – 29th April 2011 in New York City.  The conference attracted many academics, practitioners, government officials, and members of the judiciary from Europe, the USA and of course Australasia.  This combination triggered a lot of informed debate and it was refreshing to hear input from all sides of contentious issues including views from the bench.

Many of the sessions have been covered by our friends at IPKAT here, here, here, here, here and here.  In addition to those sessions, the Fortnightly Review was lucky to attend several specific sessions on copyright and trade mark law and highlights are outlined below.

In a session on “US Copyright Developments”, Thomas Kjellberg updated the audience on copyright cases against “suburban” downloaders where damages peaked at over $1 million dollars. These cases such as Capital Records v Thomas Rassett have sparked a debate as to whether such awards violate due process.  Kjellberg also discussed the case of Penguin v American Buddha. In that case, American Buddha (a religious not-for-profit), posted ebooks on its website. One of the issues for the court was locating the site of the injury. Was it in New York (home of the plaintiff), or Arizona (the site of the uploader) or Texas (the site of the server)?  The court held that because the location of the infringer may be remote, it would not be fair to use the infringer’s location as the locus of harm. Therefore, even though there was no downloading evidence in New York, that was not to say there was “no injury” in New York.  Rather the test should assess the intent of the infringer.

In a session on “EU and US Initial Interest Confusion in Trade Mark Law”, The Hon. Mr Justice Arnold discussed the development of the doctrine and its actionability under Article 9(1)(b).  He went on to discuss several cases including the recent case of Och-Ziff Management Europe Ltd.  Daniel Glazer discussed US developments with a focus on the expansion of the doctrine to the internet, where trademarks are used in domain names or in meta tags or keywords.  The panel discussed the fine line between confusion and diversion and the fact that US courts are really trying to protect senior mark good will and against unfair competition.  The panel debated what was permissible and indeed healthy free riding.  They also debated the merits of using the initial interest confusion doctrine to police domain names.  The panel agreed that in the current era, consumers are used to deceitful metatags and more wary of commercialised hyperlinks so confusion is a lot less likely. Professor Anne Bartow argued that one can no longer assume that consumers are unsophisticated.  She went on to query whether the law should remedy a situation where there is confusion that is cured before the point of sale.

In a session discussing dilution Law in the European Union & the United States, Trevor Cook (Bird and Bird) began with a discussion of the EU’s approach.  He noted the over-intellectualisation of simple legal tests which was a common complaint in several other panels.  Professor Marshall Leaffer discussed US developments in dilution and the case of Visa v JSL Corp.  In that case, Professor Leafer argued that the question of likelihood of confusion – which is a question of fact – was approached in a fast and loose manner. He also said that the case highlighted that the evidence required to prove a dilution case was very unclear. A European speaker helpfully reminded the audience that reconciling EU and US policy and legal approaches was not simple as there is no unfair competition law in the UK and some other EU states.

The well-attended sunrise seminar on “Rule of Law on the Internet: Feasible or Fantasy”, started with views from Richard Cotton of NBC Universal Media.  He stated that the question was not “whether” we should have a rule of law on the internet, but rather “when” and “how”.  He discussed a fundamental problem being one of attitude, with many downloaders thinking that “if it’s so easy to pirate, it can’t be wrong”.  Piracy is moving from being treated as a nuisance, to a problem that the FBI and homeland security are now enforcing against.

In terms of legitimizing tools, he discussed the development of ancillary markets and goods such as Netflix, and Xbox live which are robust and legitimate markets that rely on internet streaming technologies.  In his view, encouragement of these delivery models will give illegal downloaders a legitimate alternative.  However, he emphasised that the challenge will be to create a culture that will accept copyright piracy as a wrong and likened this to being a parent training a recalcitrant child.

Justice Peter Charleton commented that the EU has compulsory anonymity on internet. And that a cultural problem was that anti-globalism is a big movement so that theft from “anonymous capitalist” was thought to be ok. The panel agreed that IP theft was like drug addiction where demand generates supply.

In the session, “Enforcement Issues Including New Government Initiatives”, Stevan Mitchell (the ESA) and Peter Fowler (USPTO Enforcement) discussed the extent of the enforcement problem.  Twenty five per cent of all internet traffic globally involves unauthorized distribution of copyright files.  One assessment had 43 illegal downloading websites register 146 million hits per day.  Bottom line is that there is a huge appetite for TV and film downloading.  Peter Fowler emphasised the need for cultural change akin to the shift that led to seatbelt wearing.  He also discussed the US “Operation in our Sites” which had been seizing domain names of illegal download sites.  He emphasized that the academic debate over whether creative adaptations should be free was moot as copyright infringement is illegal and a crime.  For enforcement officers there was no debate.  He also highlighted a shift in counterfeiting.  Counterfeiters are now trying to make higher profits by making goods as close as possible to the real luxury item and selling goods on deceptive websites at matching prices (as opposed to a severely discounted price that would indicate a “fake”) in order the maximise profits.

Other paths of enforcement include cooperative agreements between registries to seize domain names.  Importantly it is also to target 3rd party providers eg agents for service and paypal.  If money supply can be cut off, then enforcement agencies will try to do so.

In the session “Trademark Law: Smell and Look-a-likes: a Comparative Analysis” Anna Carboni presented an update on smell and look alike cases including the controversial L’Oreal v Bellure case.  Carboni highlighted the fact that the British Brands study showed the customers can be easily confused by look alike packaging. The panel including Robert Burrell pointed out that surveys used in the British Brands study and other surveys used to support a senior mark owner are flawed due to the prevalence of leading questions.  On another point, Jane Ginsburg re-emphasised that “lured” does not mean confused.  Consumers learn for example, that supermarket shelves are stocked with similar looking house brands.  The Hon. Justice Robin Jacobs agreed saying that judges shop and are also aware of brand generics.  The question should be whether reasonable customers are likely to be confused and whether the company intended to confuse consumers.  Justice Jacobs observed that brand owners are now scared to sue “home brands” which are put out by supermarkets because supermarkets may retaliate and not stock the senior brand.

In the session “Adwords: a Comparative Analysis” Professor Marshall Leaffer discussed the proposition that after the case of Rescue.com, selling trademarks as keywords is “use in commerce” and subject to the Lanham Act.  Professor Barton Beebe discussed the increase in consumer sophistication and that the legal question had moved on from “use” to “likelihood of confusion” and in the future will be preoccupied with predicting levels of consumer sophistication.

Prof. Dr. Peter Ruess presented a convincing case for protection of well-known brands.  Interestingly calling it naïve to use the phrase “comparative advertising” in cases that were clearly “bait and switch”.  The panel seemed divided on the line between “genuine” comparative advertising and the misappropriation of goodwill.  Ruess argued that using the goodwill of a senior mark to lure a customer is not comparative advertising and is not in the public interest.  Professor Beebe argued that encouraging free competition is in the public interest.  The panel seemed divided between recognising the property rights of high investing brand owners and free competition.

Overall this was a fascinating and informative conference.  The program and list of speakers can be found here.  Proceedings of the conference will also be published in an upcoming volume.

Vicki Huang is a Research Associate with IPRIA and a Lecturer at Deakin Law School

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Weapons in the Piracy Wars: COICA and Domain Name Seizures

March 17, 2011

By Jake Goldenfein

You may have encountered this image if you recently tried to stream a sporting event online. Domain name seizures in the US occur under civil forfeiture and seizure provisions in the Crimes and Criminal Procedure title of the United States Code. Being territorially restricted, those provisions allow the US Immigration and Customs Enforcement agency (ICE) to distrain websites with a .com, .net or .org suffix.

Recent seizures of websites linking streamed sporting events (conveniently 10 days before the Super Bowl) were the directive of phase 3 of ICE’s Operation ‘In Our Sites,’ which began in June 2010. The mandate of ‘In Our Sites’ goes beyond sporting events however, and has targeted websites connected to counterfeit goods, child pornography and first-run movies. Although the process and propriety of those seizures have been questioned, presently working its way through the US political system is the Combating Online Infringement and Counterfeits Act (COICA) that will provide an expedited process to block domains and extend ICE’s reach to content hosted outside the US.

COICA (S. 3804) would authorise the Attorney General to obtain injunctions in rem against websites ‘dedicated to infringing activities.’ Sites are defined as dedicated to infringing activities if ‘primarily designed’, have ‘no demonstrable commercially significant purpose or use other than,’ or are ‘marketed by its operator,’ as offering copyright infringing goods.

Effectively, COICA creates an internet blacklist with ‘offending’ websites added by Court order. Originally there was a second blacklist controlled by the Attorney General without judicial oversight, however that was jettisoned in the bill’s latest iteration. By obtaining a Federal Court injunction, the Attorney General orders U.S. domain name registrars to stop resolving blacklisted domains, leading users instead to an error message.

For infringing domains outside of the U.S, the bill demands internet service providers block offending foreign addresses. This does not prevent access outside of U.S territory, but rather is aimed at preventing the importation into the US (censoring) of goods and services offered by websites deemed ‘dedicated’ to infringing activities.

Introduced by Democratic Senator Patrick Leahy in September, the bill received unanimous approval by the Senate Judiciary Committee in November 2010 under Leahy’s chair. Not surprisingly three of Leahy’s top five campaign contributors are large media organisations. Yet substantial opposition from various groups including Internet Engineers, Human Rights Groups, the Net Coalition, some Senators, and law professors has been successful in preventing the bill passing a full vote on the Senate floor, leading to another Judiciary Committee hearing on 16 February, which led to discussion of substantial modification, and likely a follow-up hearing.

Arguments against the bill include:

  • Blacklisting of websites by Justice Department officials without sufficient judicial oversight offends due process and threatens legitimate political speech.
  • Definitions within the bill, including ‘facilitating infringement’ and ‘dedicated to infringing activities’ are very broad.
  • Blacklisting for copyright infringement purposes may undermine U.S. secondary liability law as well as existing copyright exceptions, limitations and defences.
  • The censorship process causes entire domains to vanish, not just infringing pages or files.
  • The bill creates precedent for internet censorship, and congress should consider the effect for countries less protective of citizens’ rights of free expression.
  • The extraterritorial reach of the court prevents a full and fair trial with all interested parties present.
  • The bill may affect legitimate digital services such as cyberlockers if the Department of Justice decides that piracy is ‘central’ to their businesses.
  • Blacklisting may apply to sites that discuss and advocate for P2P technology or piracy because they sometimes link tools and information intended for file sharing, despite the otherwise political nature of their speech.
  • Censorship may undermine the stability of the internet by encouraging the use of circumvention measures and rerouting internet traffic away from the U.S.

But perhaps the most compelling arguments are found in the joint letter from 49 legal academics in the U.S. Citing jurisprudence, they contend ‘the bill amounts to a constitutional abridgment of freedom of speech because it directs courts to impose “prior restraints” on speech, which are the most serious and least tolerable infringement of First Amendment rights.’ They argue such cases ‘require a court, before the material is completely removed from circulation to make a final determination that material is unlawful after an adversary hearing.’

Contrary to that requirement, the professors claim ‘the Act permits the issuance of speech-suppressing injunctions without any meaningful opportunity for any party to contest the Attorney General’s allegations of unlawful content’ because of inadequate notice provisions and the capacity to enter injunctions ex parte. Requiring the shut down of entire domains rather than blocking specific content is described in the letter as ‘burning down the house to roast the pig.’

More profound however, is the academics’ claim that the bill’s ‘egregious Constitutional infirmities… will not survive judicial scrutiny’ suggesting its significance ‘is entirely symbolic.’ This would be the first time the US would require internet service providers to block speech because of its content. Enjoining ISPs to police users’ activities is an issue of growing judicial significance, not simply in circumstances like the iiNet case in Australia, but also for a range of future measures, including filtering, censorship and levying, that may require ISP cooperation.

Content industries have sought this law for years, and view the new capabilities as a magic bullet for copyright enforcement, with the MPAA and RIAA extensively lobbying for its passage. Lauding the legislation, the bill’s proponents emphasize the derisory economic consequences affected by infringing rogue sites. Previous MPAA interim boss Bob Pisano defended the bill, claiming targeted sites ‘exist for one purpose only – to make a profit using the internet to distribute the stolen and counterfeited goods and ideas of others,’ and that the ‘economic impact of these activities – millions of lost jobs and dollars – is profound.’ Pisano argues the First Amendment was not intended as a shield for those who steal, irrespective of the means. ‘Theft is theft, whether it occurs in a dark alley or in the ether, and to attempt to distinguish the two is to undermine the most basic tenets of our criminal laws.’

Clearly rhetoric laden, such speech reverts back to the questionable conflation of tangible and intellectual goods, and co-opts morality for its justification without acknowledging the concomitant censorship issues. However, other Hollywood groups have claimed that concerns of unlawful censorship are an ‘absurd misrepresentation of civic rights’.

For organisations like MPAA and RIAA who maintain a controversial program of prosecuting online copyright infringement, the new law would amount to another weapon in the arsenal of content protection. But beyond copyright, the bill highlights emerging issues in digital censorship and jurisdiction by entrenching in U.S law filtering of international content that offends local laws – a dangerous precedent that may expand to other types of speech. Passage of this bill would mark a substantial shift in lawmakers’ willingness to regulate cyberspace and a fortiori against the principle of the Single Global Internet.

Jake Goldenfein is a PhD candidate at the Melbourne Law School

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ACTA: new (leaked) text, new issues…

July 15, 2010

By Kim Weatherall

What a surprise! Despite the best efforts of at least one negotiating party, the ACTA (Anti-Counterfeiting Trade Agreement) text has leaked, again.  This post looks at last night’s leak, and at the negotiations.  In short, though: the text is an improvement that continues to have significant problems.  The negotiations face some significant obstacles right now – but continue at break-neck speed, and I have this sinking feeling that ACTA could be spawning at least one evil little mini-me already…

Background

For those of you who haven’t been following this particular obsession of mine (see my April 9 and April 23 posts), ACTA is the Anti-Counterfeiting Trade Agreement – a plurilateral agreement being negotiated between Australia, Canada, the EU (represented by the European Commission, and the EU President), Japan, the Republic of Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the United States.  The DFAT website on the agreement with background is here.  In theory, ACTA is meant to be targeted at establishing “a new standard of intellectual property (IP) enforcement to combat the high levels of commercial scale trade in counterfeit and pirated goods worldwide”.  In reality, it’s a comprehensive re-write of IP enforcement obligations at an international level, with something close to a rightsholders’ wishlist and little protection for end users or the rest of us.

The ninth round of ACTA negotiations took place in Lucerne, Switzerland on 28 June to 1 July 2010. You can basically ignore the press release: the latest one is here.  In April, the parties decided to release a draft text, which has been comprehensively analysed (and criticised).  If you’re interested, there’s a very long section-by-section analysis of the last draft text available online.

At the latest round, the parties decided not to release a text – but, surprise surprise, one has leaked already, this one dated 1 July.  This post analyses some of the changes.

So, what’s changed?

There are basically 4 big ticket, big controversy issues in ACTA that have been getting attention in international circles, and where we need to see whether anything has changed.

  1. Expansion of criminal liability in IP;
  2. statutory damages (that is, ‘fixed’ amounts for damages that in some cases have led to very significant awards, like the US$200,000+ award against one US woman for file-sharing around 25 songs;
  3. ISP liability and what ISPs have to do to get protection from liability (three strikes; notice and takedown; etc etc); and
  4. The possible impact on access to medicines and the trade in generic drugs

Internationally, ‘anti-circumvention’ (digital lock) provisions are also controversial, but I won’t go in to them because Australia already has (and, through AUSFTA, is committed to) very strong provisions in that area.

Criminal Liability (leaked text page 15)

The criminal provisions are quite different to what we saw in the last text.  The last text looked like the AUSFTA provisions – and would extend criminal liability to non-commercial acts of sufficient scale (read, file-sharing) and single acts of infringement for commercial gain.  These provisions are gone, replaced with a requirement that parties apply criminal liability to “acts carried out in the context of commercial activity for direct or indirect economic or commercial advantage”, with a provision that would allow countries to exclude end consumers from criminal liability. The exclusion is a notable improvement on the previous draft which would have required criminalising lots of end users (although it wouldn’t help in Australia, because of AUSFTA).

Liability under the new text is still very broad. The reference to ‘commercial activity for direct or indirect economic or commercial advantage’ could be interpreted as covering single acts (eg, a business is found using one unlicensed copy of software), and has plenty of scope to catch legitimate businesses acting in good faith, who might have published a book believing they have a fair use or fair dealing defences, but who are certainly engaging in ‘commercial activity’.

As Daniel Gervais notes in the third edition of his book on the TRIPS Agreement, the references in TRIPS Article 61 to ‘wilful’ acts ‘on a commercial scale’ is “not synonymous with commercial activity.  It requires that the activity have a demonstrable, significant commercial impact” (emphasis added).  In a footnote, Gervais also notes that the TRIPS expression “corresponds to what have been referred to as ‘professional infringers’”.  In my view, TRIPS is perfectly adequate; it should be left as is.

Statutory Damages (leaked text page 7)

The provision on damages has changed too.  The April ACTA draft seemed to have moved away from requiring countries to adopt statutory damages, and, in particular, it seemed to allow Australia to retain its system of ‘additional’ (effectively punitive) damages. There’s some flexibility there still. Statutory damages are not required, but a country is left with a choice: statutory damages or other ‘presumptions’, or additional damages (to what end is entirely unclear; there’s no requirement that the damages be punitive for example or deterrent).

ACTA will still restrict what a country can do to protect end-users (ie teenagers, grandparents and anyone else with an internet connection) from excessive damages awards should they be caught infringing and have the misfortune to be sued.  There is nothing in the text that limits the rules to exclude damages for ‘innocent infringers’. I’m a little unsure whether this means Australian law would have to change (it depends on whether the current Australian limit of additional damages to ‘flagrant’ infringement is ‘implicit’ in the reference to ‘additional’ damages).  In short, I can see the provision is pretty vague, but I don’t like it. I think it achieves very little if you’re serious about increasing enforcement, but it does restrict policy freedom in the cases that ACTA isn’t meant to be targeted at – end users and consumers.

ISP Liability, Safe Harbours, Three Strikes

ACTA has a strong focus on intermediary/secondary liability.  This is the big factor distinguishing ACTA from previous multilateral agreements that don’t touch on this at all. There seems to have been quite a bit of progress on ISP liability.  Not all of it good.

For one thing, third party liability is still in the text (Article 2.18.2 page 19).  This is bad, and takes ACTA well beyond its remit, which is supposed to be enforcement, not substantive law.  Not just that, but I think the provision (at least, if it includes the proposed footnote) is inconsistent with Australia’s present law of authorisation, certainly in copyright and probably in patent and trade mark too. A few thoughts:

  • Interestingly, the majority of countries (excluding Japan, EU and Switzerland) seem to want to confine the provision to copyright, excluding the question of third party liability for trade mark, patent, designs etc.  This is good.  At least in Australia, authorisation in IP outside the direct area of copyright is a less settled and almost certainly different;
  • The US and Mexico want a footnote that seeks to define third party liability. Define it, not just give examples of what might be covered. And define it in a way that doesn’t match Australian law. The footnote seems to require liability for ‘knowingly and materially aiding any act of copyright infringement’.  Under Australian law, you can ‘aid’ infringement and even know about it, but if you don’t have the power to actually prevent it, or if you’ve taken reasonable steps, say, to reduce infringement you won’t be liable;
  • Still, as before, the footnote also says that “the application of third party liability may include consideration of exceptions or limitations to exclusive rights that are confined to certain special cases…” (etc etc). I have no idea what this meaningless language is trying to say; and
  • There seems to be no requirement on the face of the text that the direct infringement occur. Australian law generally requires proof of actual direct infringement before there is third party liability (see eg WEA v Hanimex)

In addition, provisions on granting injunctions against intermediaries whose services are used for infringement are still in there. I’ve argued at some length this is a bad idea in a treaty.

Regarding safe harbours for ISPs, it looks like the EU has proposed a compromise position, and it has some improvements from last time (for a detailed consideration of the previous version, see Margot Kaminski on Balkinization).  Importantly, there is no longer any language anything akin to ‘three strikes’ language that might require ISPs to start sending letters followed by termination of internet service. There is no requirement, as was found in the previous draft, that the ISP have a policy “to address the unauthorized storage or transmission of materials protected by copyright or related rights”; no requirement to terminate repeat infringers or the like.

This of course won’t stop individual countries introducing three-strikes type laws – but it will mean ACTA doesn’t require it.  The closest the proposal comes to having such a requirement is the provision saying that Parties “shall endeavour to promote the development of mutually supportive relationships between online service providers and right holders to deal effectively with patent, industrial design, trademark and copyright or related rights infringement which takes place by means of the Internet…”. This is a Japanese proposal, and doesn’t look like much of an obligation, although no doubt it will be used rhetorically sometime. I don’t think it should be there, but I don’t think it goes near 3 strikes either.

Access to Medicines

The final ‘big ticket item is the question of the impact of ACTA on access to medicines and the trade in legitimate generic pharmaceuticals. This is something of a ‘hot button’ issue at the moment in international IP owing to Europe’s practice of halting shipments ‘in transit’ (ie going from one developing country to another) on the basis of infringement of EU IP rights (even though the goods never enter the EU market and even where there’s no infringement of rights in the exporting or importing country).  Brazil and India have initiated a dispute in the WTO about this practice.  Since earlier drafts of ACTA included provisions on applying border measures, to goods in-transit, to protect patents, and no reference to things like the WTO Declaration on Public Health, there have been legitimate concerns that access to medicines was going to be hindered by ACTA.

Where are we at now? Well, there is now reference to parties taking measures ‘necessary to protect public health and nutrition’ upfront in the text, so that’s an improvement.  And according to the press release the border measures will not be required to be applied to cases of suspected patent infringement.  On the other hand, several countries still want the provisions applied to ‘in transit goods’, and the text still allows a country to stop goods in-transit, on the basis that the goods infringe IP in the transit country, even where they do not infringe rights in either the exporting or importing country.  And several of the seized shipments in Europe were stopped on trade mark, not patent issues. So I don’t think the concerns have entirely gone away by any means.

In addition to these ‘big ticket’ areas, the other issue that’s been troubling critics has been the lack of balance in the earlier ACTA drafts and the agreement’s potential impact on fundamental rights and liberties.  To put it bluntly, there were all kinds of rights for right holders, and almost no acknowledgment that IP is about a balance of interests; that consumers and other users have rights too, and that right holders sometimes abuse their rights and that needs to be controlled. It was said in the last draft that there would be more provisions on the other side of the balance.

The new leaked text does have more detailed general principles upfront, including ‘public interest’ principles in draft.  The provision on protecting privacy has been expanded. ACTA raises a lot of privacy issues because it anticipates the release of information about individuals to right holders to facilitate enforcement: in litigation evidence-gathering, by ISPs, by police to their colleagues overseas.  Some of this information would be considered private: names, addresses…activities online… . So privacy is important. The text itself is pretty much what you’d expect: that is, it leaves it to individual countries to work out how they want to protect privacy. As I’ve said in my ACTA megapaper analysing the last public draft, this won’t help Australians all that much because our protection for private information isn’t all that strong and is based only in legislation (we have no higher constitutional or human rights principles to appeal to).  But it’s good to have it in there.

Finally, too, there is some text:

  • On the importance of ‘a balance of rights and obligations’, and to allow parties to adopt measures to protect public interests in health, nutrition, and socio-economic and technological development (Art 1.X.1-1.X.2 p3); and
  • Acknowledging that “appropriate measures … may be needed <strong>to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade</strong> or adversely affect the international transfer of technology” (Art 1.X.3 p3).

Bizarrely, this provision seems to be controversial: proposed by Australia, NZ, Singapore and Canada, there’s another bloc wanting it removed: Japan, Mexico, Korea and the US. Again, why? If ACTA is, as the negotiators keep saying, meant to be consistent with TRIPS and consistent with the WTO Declaration on TRIPS and Public Health, and will allow countries to respect fundamental rights and liberties, why protest these principles? Why even, as the EU wants to do, demote them to the level of ‘preambular statements’? (I will say though I’m pleased that Australia is on the side of the forces for good here – you go AG’s!). All I can say is that if this language, or something like it, isn’t included in the final agreement, it’s going to be embarrassing – and confirm a lot of suspicions about what the agreement is all about…

Where to from here? Hypocrisy, Red Lines, Racing Negotiations and the potential for ACTA-Spawn

So where to from here? The parties are still talking about concluding negotiations by the end of the year.  According to IP Watch, some of the negotiators have seen “a real acceleration” in the more recent rounds of negotiations, and Prof Geist has opined that we could in fact see conclusion of the negotiations this year. Perhaps this is why the tension between some of the negotiating parties is bursting out a little in public.

US negotiator Stan McCoy has said that “there was some progress on ACTA in Lucerne, but not as much the U.S. had hoped”, and the EU negotiators have been accusing the US of ‘hypocrisy’ and drawing ‘red lines’.  To an outsider, it looks like they’re getting to crunch time: and the question of exactly how far they’re willing to compromise has to be faced – but they will be faced, because everyone involved wants to move on after over 2.5 fairly intense negotiating years and more rounds in 2010 than one would care to count. Me? I think they’ll reach agreement, and soon, and they’ve all committed too much to see it fall over.

But regardless of what happens in the ACTA negotiations, I have a feeling that we’ll be seeing something very close to these provisions again real soon.  Because there is another set of negotiations going on at the moment: the Trans-Pacific Partnership negotiations. The TPP is supposed to be “a high-quality, comprehensive 21st century Free Trade Agreement (FTA) that increases economic integration in the Asia-Pacific region”.  That is trade-diplomat-code-speak for “it’s an FTA with everything, like the AUSFTA”. And that means IP will be in it.

The TPP involves Australia, Brunei, Chile, New Zealand, Singapore, Peru, the United States and Vietnam.  So looking at that, you have Australia, NZ, Singapore, and the US who are all in both.  Peru and Chile are already party to an FTA with the US, which means that it’s likely they can sign up to quite a lot of what you’d find in ACTA.  That leaves Brunei, and Vietnam… who I don’t imagine will be focusing strong efforts on the IP aspects.  And you can bet that at least some significant portion of the people doing the negotiating on behalf of the ACTA countries on IP issues is also in the TPP IP negotiations.  Sheer practicality I suspect means they’ll be starting with some bastardised evil-spawn combination of the US FTAs and ACTA. The mega-long IP chapter from hell, I’m predicting. I can feel that strange combination of glazed eyes and boiling blood starting already. Grrr.

Kimberlee Weatherall is a Senior Lecturer at the University of Queensland

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In this edition (#9)…

June 17, 2010

The recent order to increase music fees paid by gyms by 1500% sparked leading fitness chain Fitness First to dump licensed music from its aerobics classes.  In “Muscular Melodies” Assoc. Prof David Brennan explains the rationale behind the Tribunal’s pricing decision and the impact the decision may have on the competitive fitness market.

Also in this edition, Karen Abidi profiles the recent Victorian decision to destroy forged artworks of Charles Blackman and Robert Dickerson.  The decision underscores the fact that absence of knowledge is no defence to a misleading and deceptive conduct claim and that dealers cannot “turn a blind eye” to art of questionable provenance.

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Law Destroys Fake Art

June 17, 2010

By Karen Abidi, lawyer

Art forgery is a radical misrepresentation of an artist’s work, said Justice Vickery of the Victorian Supreme Court earlier this month, in Charles Blackman and Ors v Peter Gant and Anor [2010] VSC 229.  He ordered the destruction of fake art purporting to be by the renowned Australian artists Robert Dickerson and Charles Blackman.

Fake art is said to represent 10 per cent of the Australian art market. It damages the artists’ reputations and the market for their genuine works.  It also harms art buyers and the broader art industry, as the circulation of fakes creates uncertainty and lack of confidence in the art market. 

The artworks in this case were two drawings falsely attributed to Blackman, called “Street Scene with a Schoolgirl” and “Three Schoolgirls”, and one drawing falsely attributed to Dickerson, called “Pensive Woman”.  Click here for images.  They were not copies of the artists’ actual works, and therefore there was no issue of copyright infringement. They were drawn in the style of these artists, with false signatures.  The judge stated that they were deliberately contrived to mislead the unsuspecting public.

The artists were the plaintiffs in the case.  When the buyer of the fakes, an inexperienced art purchaser, found out that the drawings were forgeries, he returned them and received a refund.  He suffered no loss and was not a party to the legal proceedings.  The defendant was Peter Gant, a Carlton gallery owner, who gave valuations of the three drawings (of amounts reflecting that they were genuine) and was the seller of one of them.

Dickerson, now elderly, gave evidence at the trial that he did not draw Pensive Woman.  He said he felt “a bit sick” when he first saw the work, and described it as “very bad work” and “bloody awful”.  Blackman was unfit to give evidence at the trial, as he is afflicted by a form of brain damage that affects short-term memory.  Expert evidence was given that the schoolgirl drawings were un-Blackman like and poorly drawn.  The judge was left in no doubt that the art works were “fakes masquerading as the genuine article”.

The judge stated that a valuation not only gives a market value for the art, it also certifies its authenticity.  A valuation is a representation that the art is by the particular artist.  The giving of the valuations, and the sale of one of the drawings, was held to constitute misleading and deceptive conduct by Mr Gant in trade or commerce, in breach of section 9 of the Fair Trading Act (Vic) 1999.  The judge ordered that the drawings be delivered to the artists for destruction.  Robert Dickerson said that he would rip up the fake with his bare hands.

The judge made no finding that Mr Gant knew the drawings were forgeries or that he acted other than innocently.  A person may engage in misleading and deceptive conduct in breach of the Fair Trading Act even if they act honestly and reasonably.

Following this decision, art dealers, galleries and auction houses that sell and value art will need to be confident of the authenticity of the art they are dealing with.  There can be no “turning a blind eye” to art of questionable provenance.  Since this court case, a Whitely said to be fake was withdrawn from auction in Melbourne, and another Whitely and a Dickerson of questionable provenance have been reported.  This decision gives artists legal ground on which to seek to prevent trade in their fake art, and fosters certainty and confidence in the Australian art market.

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L’Oreal v Bellure: ‘a depressing decision’?

June 3, 2010

by Peiwen Chen

Dr Dev Gangjee, from the London School of Economics, spoke at the public seminar hosted by IPRIA and Blake Dawson on 10 May 2010, following the European Court of Justice’s (ECJ) decision in L’Oreal v Bellure.  The ECJ concluded that free riding, or ‘taking advantage’ of the reputation enjoyed by an earlier trade mark (L’Oreal) is actionable per se. The decision, a ‘depressing’ and ‘worrying movement’ in Dr Gangjee’s view, is a major victory for trade mark owners as it offers broader protection to well known brands.  The rationalisation of the judgment is also interesting as the concept of unfair advantage arguably resembles the ‘gains’ central to restitution law.

1. L’Oreal v Bellure

Bellure produced a range of smell-alike fragrances in look-alike packaging where the scent itself was not the subject of intellectual property protection, such as ‘Miracle’ by Lancome.  Bellure’s fragrances were priced at the lower end of market and were sold in discount stores and street markets.  Hence, the probability of confusion with the genuine fragrance was not likely.  However, to emphasise olfactory equivalence, it created comparison lists to promote its imitations in the form of ‘if you like Lancome Miracle, try our cheaper equivalent’.

L’Oreal brought proceedings against Bellure on two grounds, that (1) Bellure’s perfumes damaged L’Oreal’s business by creating confusion; and (2) Bellure had taken a ‘free ride’ on the L’Oreal’s investment in branding and marketing.  Whilst L’Oreal failed on the basis of consumer confusion and the tort of passing off, it succeeded in establishing infringement under Articles 5(1)(a) and (2) of the Trade Marks Directive on the basis of double identity and free riding.

Article 5(1)(a) grants a trade mark proprietor exclusive rights against a defendant who made use of another’s identical trade mark in relation to identical goods without obtaining permission; whilst Article 5(2) protects against ‘dilution’ of these registered marks which enjoy a reputation.  Prohibiting Bellure’s use of comparison lists and similar packaging, the ECJ formally recognised the trade mark law as encompassing a ‘communication, investment or advertising’ function.  Prohibition against taking unfair advantage of repute prevents exploitation through the ‘transfer of image’ of the trade mark.  Therefore, the unfairness resulted from the defendant’s exploitation, without compensation to L’Oreal, of L’Oreal’s marketing efforts and brand value.

2. Why ‘depressing’?

Dr Gangjee points out that the ECJ has essentially recognised property rights in reputation per se.  The ECJ’s conclusion that Article 5(2) focuses on the advantage gained by the third party rather than detriment caused to the trade mark itself, effectively recognised the investment in creating a stylish brand image.  As Dr Gangjee correctly notes, what we have at stake is a restriction to references and allusions which are otherwise useful, whether it be to signal competitive substitutability or to further innovate and learn.  Granting ‘reputation’ property rights to one group takes away the freedom of others, which invites Dr Gangjee (and many other academics at the seminar) to question whether this protection is justified.

The case is also ‘depressing’ for Dr Gangjee as it suggests a trend towards a ‘box-ticking’ formalism in the European courts.  He drew our attention to the fact that EU courts are not meant to be politically neutral.  He considered the ECJ judgment lacked explanation and justification for reaching the conclusion it did in this case.  Dr Gangjee also noted that a lack of political neutrality is heightened by the institutional flaw in the lack of dissent within the European courts and the inconsistency of decision-making by the various levels of court.  Dr Gangjee emphasises the fact that European courts do not follow each other’s decisions.  In this case, the trial court accepted L’Oreal’s argument whilst the UK Court of Appeal argued that some additional elements beyond mere advantage that make a defendant’s use of the trade mark unfair is necessary to establish infringement.  In contrast, the ECJ preferred an advantage-based approach to trade mark protection, choosing to recognise explicitly the function of trade mark signs as style and luxury indicators, whose ‘image’ will be protected independently.  The absence of consistency between the upper and lower European courts is ‘worrying’ as it has implications for legal certainty.

3. What ‘Advantage’?

Dr Gangjee’s ‘depressive’ take on the case is understandable from an academic’s perspective, as the rationale and basis for the ECJ’s decision is not immediately clear.  It seems to carry with it the suggestion that a defendant’s advantage in always unfair.  Whilst the resemblance of the defendant’s packaging to the registered marks arguably confers an advantage on the defendants as they can charge at a higher cost, the court seems to have failed to explain why it was unfair. It leaves the question open of ‘what advantage’ is not unfair in any given trade mark case. There seems to be a presumption that any defendant has gained advantage without consolidation of any harm which may or may not be caused to the claimant.  According to this reasoning, proprietary rights should theoretically extend to circumstances where producers introduce new products into the market.  Yet, as Dr Gangjee stresses, we make no general attempt to intervene in cases where a person introduces a new product to the market.  No compensation is given to first-movers for their marketing effort in introducing a new product to the market that benefit subsequent producers.

4. Crossing paths with Restitution?

Whilst Dr Gangjee highlighted the danger of the ECJ decisions crossing into the realm of unfair competition laws and principles. There is indeed some similarity in the approach of the ECJ to determining the meaning of Article 5(2) and that of the unjust enrichment enquiry.  The unjust enrichment enquiry asks whether the defendant has been enriched by the receipt of a benefit at the claimant’s expense and whether it would be unjust to allow the defendant to retain the benefit.  Applying these questions to the L’Oreal case, it would give a similar outcome to what the ECJ arrived at: Bellure is enriched by the imitation of the ‘image’ of L’Oreal perfumes and the use of comparison lists at the expense of L’Oreal, such that it would be unjust to allow Bellure to continue replicating fragrances for its own benefit without compensation to L’Oreal.

L’Oreal appears to be among other ECJ decisions that resemble the gain-based unjust enrichment concept.  For example, in Mango Sport System v Diknak, the Office for Harmonisation in the Internal Market (OHIM) Board of Appeal held that the sole criterion for a finding of unfair advantage is benefit to the defendants without any correspondent effort or investment.

Perhaps the most important distinction between the ECJ’s judgment and unjust enrichment principles is the requirement of ‘unjust factors’ in restitution.  Whilst the ‘advantage’ in the L’Oreal case can easily be said to be a ‘benefit’ to the claimant, the ‘unfair’ element does not correlate to the ‘unjust factors’ imbedded in unjust enrichment law.  Therefore, unless the ‘transfer of image’ without authorisation becomes a policy-motivated unjust factor under unjust enrichment, we are unlikely to see trade mark protection broaden through restitution principles.

5. Concluding thoughts

Dr Gangjee’s concluding thoughts stressed that legal intervention should go no further than required to provide incentive to invest.  From an economic perspective, he notes that the L’Oreal decision fails to recognise the negative impact such a decision may have on the competitive common market.  The shift towards favouring trade marks with a reputation has also meant that European courts have had to retreat from an historical formalism and adopt outcome-based decision-making approach.  Without the development of substantial defences to counter this broad expansion of trade mark protection, Dr Gangjee insists that the ECJ’s decision is ‘largely depressing’.  This sentiments appears to be shared by Lord Justice Jacob from the UK Court of Appeal, stating that the L’Oreal decision is not only anti-competitive but it also contravenes the basic right to freedom of speech.  According to Lord Justice Jacob, truth in the marketplace is also desirable particularly where Bellure’s motive for speaking the truth is their own commercial gain.  Free speech is important in a liberal democratic society.  If L’Oreal really suggests a trend towards favouring trade mark owners at the cost of free speech, then the ECJ decision is indeed quite ‘depressing’.

Peiwen Chen is a graduate of the Melbourne Law School

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In this edition (#5)…

April 23, 2010

In this edition, Senior Lecturer Kim Weatherall reflects on the Anti-Counterfeiting Trade Agreement (ACTA), post-negotiations.  And, Associate Professor Melissa deZwart and lawyer Vicki Huang look at the new Digital Economy Act (UK) in light of the iiNet decision and the outlook on attempts to clamp down on online piracy.

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ACTA reaches a critical new stage

April 23, 2010

By Kim Weatherall

What a difference a fortnight can make!

Two weeks ago on this Review, I noted that we had no (official) access to the text of the Anti-Counterfeiting Trade Agreement, or ACTA.  As of Thursday this week, though, we do (available here), following a decision by the negotiators last week to meet the demands of civil society and politicians for transparency.

There has been a reasonable amount of commentary already from the likes of Michael Geist, Margot Kaminski at Yale, and Sean Flynn at American University.  In fact, Michael Geist has a useful blogpost with links to commentary across the web.

This official text is perhaps most interesting in showing where the negotiators have got to since January.  My summary?  There are some improvements: there seems to have been some attempt to respond to industry and civil society concerns; and so some (definitely not all) of the nastiest stuff has been taken out and new flexibilities are proposed, if not yet agreed.

The language that had been interpreted as potentially imposing ‘three strikes’ legislation (or graduated response) – that is, requiring ISPs to engage in a process of graduated responses to file-sharing by customers in response to copyright owner complaints culminating in suspension or termination of internet service – that’s kind of gone.  It was in a footnote to the text that now starts on page 19 of the official draft text, and it used to refer (back in January) to ISPs having a policy for the termination of repeat infringers. Now the text just says (on page 21) that at least “one delegation proposes to include language in this footnote to provide greater certainty that their existing national law complies with this requirement”.  In other words, I think that the US, and probably Australia, and maybe another country want confirmation that their domestic requirement for a termination policy complies with the language of ACTA. But they won’t tell us what that text is right now – maybe its not been drafted yet.

There are some general provisions at the front now (at least proposed) referring to important concepts like the protection of privacy and confidential information, proportionality, and that the agreement does not require countries to redistribute scarce enforcement resources to prioritise IP over everything else (my paraphrase).

The statutory damages provision now includes a proposal to allow additional damages instead.  As I’ve explained at length elsewhere additional damages are better than statutory damages, largely because they allow courts to decide who is an appropriate person to be punished (rather than the rightsholders): they put in place more discretion.  That said, they can be pretty darn arbitrary. But better.

There’s a proposal to allow countries to choose whether to apply border measures to patent and design infringements rather than mandating their coverage.  As I’ve noted before, inclusion of patents is problematic because of the potential impact on legitimate businesses including generic pharmaceutical manufacturers.

On the other hand, some of the material I described as concerning in the post a fortnight ago, and in a more lengthy paper that’s available online, is still there.

There is still a proposal to allow rightsholders (and, by the way, rightsholders includes representative groups like the RIAA or MPAA) to get injunctions against intermediaries whose services are used by third parties to infringe – even where the intermediary is not itself liable – thus potentially turning the ISP into the enforcement arm of the rightsholders and courts.

There is still a provision that seems to be proposing the creation or ‘confirmation’ of secondary liability – something not found in international treaties anywhere else and something that is entirely about substantive law, not enforcement, and so inappropriate here.

The draft still proposes an elaborate ACTA superstructure which, for reasons Geist has explained, is pretty darn concerning.  Let’s face it: bodies like this need to justify their own existence and will create work for themselves.  Including working groups for new and even more exciting enforcement provisions into the future.

There’s a nasty possibility that Kaminski points out: they’re debating criminalizing “[i]nciting, aiding and abetting” infringement.  These provisions are both up for debate, and should not be included in the final draft if ISPs don’t want to become subject to criminal investigations.

And there’s still plenty of provisions where the possibility of applying the provisions to patent is still on the table, albeit with border measures those measures are optional.

And there’s more.  This post can only touch on the kinds of detail we are seeing in this proposal.  There is much yet to work through. At least we now have something to go on.

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Anti-Counterfeiting Trade Agreement Negotiations Enter the Next Round: but will this ACTA have a finale?

April 9, 2010

By Kim Weatherall

Next week in Wellington, negotiators from a select group of like-minded countries – US, the European Union, Japan, Switzerland, New Zealand, Canada, Mexico, Australia, South Korea, Morocco and Singapore – will meet in what will be the eighth round of negotiations aimed at producing an ‘Anti-Counterfeiting Trade Agreement’ (ACTA). These negotiations are both troubling, and troubled – and I’d like, in this post, to explain why.

The Goals

According to all the official documentation, the goals of the proposed ACTA are to establish an international framework for efforts to more effectively combat the proliferation of counterfeiting and piracy in three ways: by enhancing cooperation between the various agencies in the participating countries; by establishing ‘a set of enforcement best practices that are used by authorities’ (whatever that means) and by setting out a legal framework of enforcement measures. The underlying belief seems to be that existing international treaty provisions on IP enforcement are relatively general and weak. And while it might seem a bit strange to negotiate a treaty on combating counterfeiting without including the major source countries for counterfeit products, there are two good reasons for doing so. First, counterfeit-receiving countries can do quite a lot without cooperation: they can seize goods at the border, share intelligence, apply penalties and remedies to internal acts, and so on. Second, an ACTA could establish a ‘benchmark’ with other countries joining at a later point.

While ACTA is supposed to be about counterfeiting and piracy, and not about private, non-commercial activities of individuals or raising general IP standards, there has long been concern on the part of civil society groups that it would end up being much more extensive than that, and might make already strong IP laws even stronger, at the expense of individuals, consumers, and civil liberties generally.

There has been no official release of any proposed text for the ACTA: the negotiations, while not secret, are in substance being treated as confidential. But there have been leaks of various proposals, from which it is possible to get a picture of what is being proposed.

Troubling?

The picture that emerges from the various leaked documents (which can all be accessed at American University’s IP Enforcement website) is of a proposed Agreement that is wide-ranging and arguably over-inclusive, and which, in particular, extends its reach well beyond what most people would think of as ‘counterfeiting and piracy’. There are provisions on damages and how they should be assessed; the powers courts should have to issue injunctions or make orders for the collection of evidence, the process for customs to seize, retain, and perhaps destroy infringing goods and implements; and extensive provisions on IP in a digital context: provisions on online service provider liability and ‘safe harbours’; for prohibiting circumvention of technical measures, and institutional provisions to set up an ‘ACTA Oversight Council’ to supervise ACTA implementation, facilitate amendments, and establish working groups and generally monitor the application of the treaty provisions.

For Australia, many of the provisions that we see in the leaked texts are not particularly new: quite a few mirror more or less closely what we have already agreed to and implemented as a result of the Free Trade Agreement with the US back in 2004. So the anti-circumvention provisions (requiring countries to ban people from ‘circumventing’ technical measures used to protect copyright works) are nothing particularly new or exciting for us – in fact, they are positively generous and flexible compared to what we are already committed to.

However, a number of the proposals are troubling, if only because they would, if included in a final agreement, require changes to our law or at least muddy our legal waters:

  1. A proposal to introduce statutory damages: if compulsory, this could create a risk of oppressive damages awards and create a tool to hold infringers in terrorem by threatening large payouts if they do not settle early;
  2. A proposal to extend criminal liability to ‘ordinary’ trade mark infringement (in Australian law terms, in cases where there is deceptive similarity between the registered and the alleged infringing mark) – at the moment, we have criminal provisions for counterfeit trade mark use. This could create new uncertainties for legitimate businesses;
  3. A right to obtain information from infringers about others involved in the infringement that looks like it might encourage fishing expeditions;
  4. A provisional power to seize evidence – not, on the face of it, subject to the careful protections built in to the already rather stringent Anton Piller (search orders) process;
  5. A proposal to extend border seizures to patent infringements – which I imagine would be controversial; and
  6. A new criminal provision: to make ‘camcording in cinemas’ a criminal act

There’s more too. Most concerning are a few bits of language that can only be described as a hotch potch. One is a proposal to apply the Berne Convention ‘three step test’ – usually used to limit the exceptions to copyright a country can introduce – but maybe used here to limit the exceptions to damages or secondary liability. Oh, and a very ham-fisted attempt to ‘define’ the extent of the law of secondary liability (in Australian terms, authorisation liability) (which no doubt, just like the attempt to ‘codify’ authorisation law in the Digital Agenda Act, would cause another decade of uncertainty for Australian law).

Some of the ‘house of horrors’ fears about the ACTA are not borne out by the leaked texts. It seems like the governments don’t want to have customs start searching our iPods at the border, nor are they determined to seize them on the streets (good thing too). And the anti-circumvention provisions, as I mentioned, are positively gentle compared to what we’ve seen in other treaties. But there’s enough niggling little details, and little shifts, and troubling provisions, in there to make you wonder whether the whole thing is just a bad idea.

Troubled…

Something else, however, emerges from the various leaked texts which is interesting to observe: namely, the differences that exist as between the various negotiating parties. If the various comments on the text leaked in January are in any way accurate, Japan appears to be in fundamental disagreement in the digital area: they seem to want to be stricter on ISPs (requiring them to act on infringement unless it is technically impossible) but easier on people who want to circumvent technological protection measures (they don’t ban, and don’t want to ban, circumvention of access controls). Europe and the US seem to be fairly diametrically opposed on the role of damages: in the US, statutory damages are clearly punitive in nature; the EU does not see ‘punishment’ as a role of damages in IP. And no one, it seems, can agree on anti-camcording laws or what they should look like. In many, many cases, provisions that one country or group want to make mandatory, others want to be an optional extra (usually, because it doesn’t fit their law: like Australia with statutory damages). That goes for most of the provisions that I’ve outlined up there. For pretty much all of them, there’s someone who wants to strike it out or make it optional.

So we end up in this rather strange position. If all those provisions go in, we have something to be worried about and we’ve got a load of provisions that are going to create a chilling effect on individuals and legitimate businesses. Nasty stuff. But if all the qualifications go in, and ‘shall’ gets replaced en masse with ‘may’ – then we end up with … not much?

Why bother?

And this, in itself, raises a question. If these countries can’t agree; if there is this much contention, two and a half years or so since negotiations started – what, exactly, are we doing here? And if we smooth over all the disagreements, and ‘vague-up’ the language sufficiently that everyone can agree… will we have achieved anything concrete at all? I’m not so sure. I can’t help but feel we’re heading towards a whole lotta optional extras and not a lot of substance.

Now, the obvious response to this is – well, so what? That’s good, right? No nasty stuff that makes Australia change its laws (again)? So what if the negotiators get together and, in the end, have 40 pages or so of treaty with 3 provisions of compulsory simple stuff and 35 pages of optional extras?

Well, personally, I think there is a so what here. Because you know what that means? A whole lot of complication, a lot of hard to understand jargon, a lot of ill-will (because this stuff is controversial and it’s generating a lot of bad press for IP law generally) – and IP owners who don’t make a single dollar more, meaning we don’t get a single extra book, or movie, or innovative new product out of this treaty. And in the end, isn’t that what this is all meant to be about? Encouraging creativity and innovation?

And then there’s the secondary effect. That you set up a standard – ok, it’s optional, but it’s there – and when the trainers come to the developing countries – or, indeed, developed countries the next time someone gets their bee in a bonnet about something – to write their shiny new IP laws, this treaty is held up as the shining example of a perfect IP enforcement system. And the people are told – look, you want all the optional extras, right? They’re features, right? And more features are good???

I think, if I were a negotiator, I would be taking a long hard look at what is in the treaty, and I would be asking: is this really worth it? Is it worth the criticism and the ill-will and the conspiracy theories, and is it going to make creators any richer. Cause if not? I’d be spending the Wellington hotel bills on better arts grants and fund a few science projects.

ACTA. I’m not sure if it’s going to have a finale. And if it does, I’m not sure whether it’s going to be the 1812, or a fade-out. Watch this space.

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