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Why an entitled person is important - the Designs Act 2003 (Cth)

Section 13 of the Designs Act 2003 (Cth) (”the Act”) specifies who is entitled to be registered as the registered owner of a design.  Those people include:

• (a) the person created the design (the designer);
• (b) if the designer created the design in the course of employment, or under a contract, with another person-the other person, unless the designer and the other person have agreed to the contrary;
• (c) a person who derives title to the design from a person mentioned in paragraph (a) or (b), or by devolution by will or by operation of law;
• (d) a person who would, on registration of the design, be entitled to have the exclusive rights in the design assigned to the person.

 

Incorrectly identifying the entitled person can have severe consequences, as a certified registered design may be revoked by a Court under section 93(3) of the Act if:

• one or more of the original registered owners was not an entitled person in relation to the design when the design was first registered; or
• each of the original registered owners was an entitled person in relation to the design when the design was first registered, but another person or persons were entitled persons in relation to the design at that time.

Nb: original registered owner, in relation to a design, means each person entered in the Register as the registered owner at the time the design was first registered.

 

The Court’s findings

Mr Collymore’s employment contract did not specify whether he or Metroll would own any designs or inventions he created which related to Metroll’s business.  Metroll argued that its ownership of the designs should be implied, because Mr Collymore created the design “in the course of his employment”.  The Court disagreed with Metroll.  Instead, the Court accepted Mr Collymore’s evidence that he created the designs outside of the course of his employment.  The Court also accepted Mr Collymore had told Metroll that he owned the designs and that he proposed to charge Metroll a royalty for the use of his modular tank designs. 

 

Evidentiary issues

The Court rejected various pieces of evidence given on behalf of Metroll as to what was discussed in certain meetings regarding the creation and ownership of the designs.  In particular, evidence was given for Metroll from one person that a “tank-making team”, of which Mr Collymore was said to be a part, was given instructions to create the tank designs.  However, that evidence was not corroborated by anyone else who was said to be part of the “tank-making team”.  The Court said

“Their absence is unexplained, and I infer that none of those witnesses would have provided evidence helpful to Metroll.” (at [34]).

 

Conclusions

In practice, a design application may proceed to registration in a matter of weeks if registration of the design is requested at the time of filing the application.  It is therefore very important to know who is an entitled person(s) under the Act before filing any design application.  If an entitled person is left off or incorrectly included in an application, the design application could quickly proceed to registration and may ultimately be susceptible to revocation. 

 

Of course, ownership of intellectual property should always be clarified as early as possible, such as by including relevant provisions in employment contracts. 

 

This case also shows that when ownership of intellectual property, such as designs, inventions or copyright, is unclear, people’s recollections of discussions which took place many years before may become very important in resolving any ownership dispute.  If contemporaneous notes of relevant conversations and meetings exist, such documents may end up being very important when people have different recollections of what was previously discussed.

 

A further point to be taken from this case is that design registrations may provide effective protection of designs which, at least at first glance, look relatively simple.

Condoms are medical devices under the TG Act and must be registered on the Australian Therapeutic Goods Register (“ATGR”) before being imported into Australia.  Failure to register such goods before importation gives rise to civil and criminal liability under the TG Act.   

The Delegate found the assessment as to whether use of the mark was contrary to law was to be undertaken as at the priority date but looking forward to prospective conduct after registration was effected.  So whilst there had been no importation of the condoms as at the priority date, it was a relevant consideration that the Applicant had later imported the condoms in breach of the TG Act. 

In his decision, the Delegate noted that an applicant for trade mark registration may file an application whilst it is still finalising business arrangements, such as, obtaining the appropriate regulatory approvals.  The Delegate considered a number of earlier decisions where an applicant’s use of a trade mark would have been contrary to law unless the necessary approvals, licences or permissions were obtained.  In those cases, the Delegate found the applicants had been given the ‘benefit of the doubt’ in the sense that it was presumed an applicant would obtain the necessary approvals before actual use of the trade mark commenced. 

The present case was distinguished as the importation of the condoms had already occurred and the mark had been used illegally.  The Delegate also accepted Virgin Enterprises’ submissions that the labelling for the imported condoms did not comply with the TG Act’s labelling requirements.  Registration of the trade mark was therefore refused on the basis its use was, on the balance of probabilities, in contravention of the TG Act which was said to have the result of “effectively determin[ing] the hypothetical question of whether use of the mark would be contrary to law as of [the Priority Date]”.
 
Virgin Enterprises also attacked the application on the basis that the Applicant had no intention to use the trade mark at the time of filing, which is a ground of opposition pursuant to s.59 of the Trade Marks Act.  Virgin Enterprises had undertaken various investigations which had found inter alia: there was no listing on the ATGR for the condoms; the Applicant’s principal place of business was a residence with no apparent commercial activity taking place; and no contact details or a website could be located for the Chinese manufacturer. 

The Delegate accepted the Applicant’s evidence that it intended to sell condoms bearing the trade mark to various hotels and pubs throughout Australia despite the lack of documentary evidence to support this statement.  He also accepted that the Applicant’s relationship with its Chinese manufacturer had broken down so the Applicant was unable to produce invoices or shipping documents to support its statement.  Virgin Enterprises’ evidence of the apparent lack of business activity was not considered sufficient to find the Applicant did not have an intention to use the trade mark at the time of filing of its application.

This decision illustrates the importance of obtaining advice from a lawyer or trade mark attorney who can identify all relevant grounds of opposition, based on the circumstances of use and adoption of a particular trade mark.

The evidence of Larrikin, the copyright owner, was to the effect that taking into account percentages that were agreed in other instances of sampling, a fair remuneration for the licence to use the copyright in Kookaburra for the purpose of writing and exploiting Down Under negotiated on an arm’s length basis between willing parties would have been a royalty in the order of between 25% and 50% of the total income of Down Under. Reference was made to a number of examples where royalties in the range of 20 to 40% had been negotiated. However, following cross-examination, it became apparent that these supposed “comparables” involved factual circumstances significantly different to those in the present case. By contrast, the respondents pointed to examples of royalty arrangements involving a figure of 5% or less.

In calculating an appropriate royalty by considering a hypothetical bargain between the copyright owner and potential licensee, Jacobson J considered the musical significance of Kookaburra in Down Under, the thematic significance, the significance of certain performances of Men at Work front man Colin Hay in which he would sing the words of Kookaburra during Down Under and the visual association with Kookaburra as found in the Down Under music video.

Each of these considerations was found to point toward an appropriate royalty being at the lowest end of the scale. In relation to the musical significance of the part of Kookaburra reproduced in Down Under, the Court placed significant emphasis on the fact that the resemblance between the two was not identified for over twenty years and was only made apparent to Larrikin by a third party.

The Court concluded that:

Although the quotation from Kookaburra in the 1981 recording is, in my view, sufficient to constitute an infringement of copyright, other factors are to be taken into account in assessing the percentage interest payable in a hypothetical licensing bargain.

The most obvious factor is the difficulty in detecting the similarity between the flute riff and the bars from Kookaburra. A further strong indicator of a low percentage is to be found in a qualitative and quantitative consideration of Kookaburra’s contribution to Down Under, looked at a whole.

Accordingly, Jacobson J considered “the figures put forward by Larrikin to be excessive, overreaching and unrealistic” and found that a figure of 5% of the income paid by APRA and AMCOS was an appropriate calculation of damages.