We will spare you the details of the appeal findings (if you are interested in the details, click here to get the full judgement) but in summary, the court dismissed the appeal by agreeing with the primary judge’s on the issue of damages. However, they also made it clear that, in contrast to the findings of the primary judge, they were not of the view that Woolworths could claim that it had a period of exclusivity in these circumstances without an express agreement otherwise. And therefore that Woolworths could not claim that the council had engaged in misleading and deceptive conduct.

Notwithstanding the result of the appeal, we were most interested in the comments of Sackville AJA that “… there might be circumstances in which an expectation of that kind, at least for a period, might be created even without an express exclusivity agreement” (our emphasis added).

So although in this case the evidence did not establish that there was the expectation of exclusivity that could be relied upon by Woolworths, the court was still opening the door to the suggestion that there could in fact be instances where exclusivity may be implied even without an express exclusivity agreement.

So what can you do to make sure you aren’t in the situation where a contracting party claims that you are under an obligation to exclusively negotiate with them?

1.   There are now circumstances where an expectation of exclusivity, at least for a period, might be reasonable, even in the absence of an exclusivity agreement.

2.   Be clear in your dealings – don’t say things that could lead to the impression that you intend to deal with only 1 supplier.

3.   Exercise restraint in making any representations at all as to how you intend to conduct a process, if indeed you might change your mind – if you start having conversations, even if you declare them to be “off the record”, about how you are going to conduct a process and you subsequently change that process, you are only inviting issues.

The main aspects of the amendments to this legislation involve:

• expanding the director penalty regime to superannuation guarantee amounts;
• ensuring that directors cannot have their director penalties remitted by placing their company into administration or liquidation when unpaid Pay As You Go (PAYG) withholding or superannuation guarantee amounts remain unpaid three months after the due date; and
• restricting access to PAYG withholding credits for company directors and their associates where the company has failed to pay withheld amounts to the Commissioner of Taxation.

These provisions are a part of a general bolstering of laws relating to director’s obligations. However, there are currently further bills being considered to counter phoenix activity known colloquially as the Phoenixing Bill and the Similar Names Bill.

The Phoenixing Bill proposes to give ASIC the power to wind up abandoned companies, with the aim of protecting workers entitlements.  The Similar Names Bill proposes to impose personal liability on directors for the debts of a company for 5 years if it has a similar name to a failed liquidated company.

And Treasury has closed submissions on the exposure draft of a further bill, the Personal Liability for Corporate Fault Reform Bill 2012.  This is being described as the first tranche of proposed changes to commonwealth legislation relating to directors’ liability.  The aim of these reforms is to harmonise the approach in the imposition of personal criminal liability or corporate fault across Australian jurisdictions.

So it’s safe to say there is a lot of activity in this area at the moment- keep watching this space if you are a director because this applies to you!

Aussie DJ Jaime Fernandez came under fire for his distortion of a recording by internationally known rapper and hip-hop artist ‘Pitbull’. Fernandez took a promotional recording submitted by Pitbull, and used audio editing software to mix the recording with a song that had been release by Pitbull earlier. Fernandez then added the mixed song to his website, where it could be streamed by the public, and also played it in public during DJ performances.

This case is interesting in that the claims raised against Fernandez were not just on the basis of copyright infringement, but also moral rights infringement.

In Australia, the Copyright Act protects moral rights by providing these three rights, and they are:

1. The right of attribution of authorship;
2. The right not to have authorship of work falsely attributed; and
3. The right of integrity of authorship. This right aims to protect creators from their work being used in a derogatory way that might negatively affect their reputation.

In this case, Fernandez’s mixing of the recordings was viewed by the courts as “derogatory treatment”, and they awarded $10,000 in damages for the breach of Pitbull’s moral rights, and $2,312 in damages to the owners of the copyright (a reminder that very often the economic rights in copyright are held by someone different to the author, who is the holder of the moral rights).

This is a great illustration of how the moral rights protections work in Australia, and a good reminder to be cautious if you ever deal with other people’s works.

UK boy band, One Direction, have been sued by another band of the same name based in California who claim that they have been using the name since 2009, and filed a trademark application in February. They US group claim that the use of the name is causing substantial confusion and damage. The UK band is owned by Simon Cowell’s company Syco Entertainment as well as Sony Music Entertainment. The US group is claiming more than $1m in damages, as well as three times the profits of the new boy band.

We don’t know what legal advice the UK One Direction group had prior to launching the band, but we think that the situation could have been managed better or even avoided relatively easily if a proper search had been conducted prior to launching the band. And, as in this case, if the potential market is international, the searching should have involved checking international trademark registers.

The UK group now faces potentially being forced to either change their name, or having to pay large sums of money for a license to use the name. And now that the US group have filed court papers, the UK group have no choice but to defend the lawsuit, and no doubt huge legals for the costly and stressful experience of attempting to resolve a dispute in court.

The trademark registration system is first in best dressed, and this situation would’ve been different if the UK group had filed an application before the US group.

Give us a call if you are interested in registering your brand as a trademark. It’s definitely cheaper than defending yourself in court, or the alternatives.

The courts have decided that in certain circumstances, even if the parties haven’t expressly said that they are negotiating exclusively, a court may decide that they are![i] This is a timely reminder to be careful in drafting clear terms in tender documents to ensure that there is no confusion about the exclusivity of negotiations.  Read on if you’re interested in knowing what the factors were in this case that swayed the judges.

The case[ii] involved negotiations between Woolworths and the Port Macquarie Council (Council) to develop land into a supermarket.  The Council invited tenders for the purchase of the land, and the Council conditionally accepted an offer from Woolworths.  The negotiations between the Council and Woolworths eventually stalled. The Council then went to Coles to negotiate a possible deal, but there was still no sale.

In a small but significant turn of events, the Council decided to run another tender process, and both Coles and Woolworths showed interest.  Woolworths was shortlisted. After long negotiations, the negotiations got stuck over 2 “deal breaking issues” as viewed by Woolworths.  While the negotiations with Woolworths over the deal breakers continued, the Council began negotiations again with Coles.  This was actually their “back up plan”, unbeknownst to Woolworths, and Council eventually sold to Coles.

As it turns out, Woolworths weren’t too happy that they lost the deal, and they sued the Council, on the grounds that the Council’s failure to inform them that they were negotiating at the same time with Coles was misleading and deceptive conduct under the Fair Trading Act 1987.  The crux of Woolworth’s position was that if they had known that there was a potential competitor in the tender, it would have negotiated differently on the ‘deal breakers’.

And the court surprisingly agreed with Woolworths.

What was key in this case in giving rise to the decision was that:

• during the tender process only one bidder had been chosen for negotiations, even though the tender documents didn’t say that Council would negotiate with only one party
• Woolworth’s bid had been approved by Council, even though that was subject to continuing negotiations
• there was considerable cost to Woolworths even after being shortlisted to secure the final deal
• the previous actions of Council when the first round of tenders stalled showed that the Council would only involve negotiations with other potential buyers by opening up a new tender

So what does this mean for you???

Clearly now care has to be taken during a tender, as there could be instances where it is reasonable for a potential buyer (or seller) to expect that the negotiations are exclusive, even if the parties haven’t specifically agreed that it will be.  Therefore, care should be taken to not act in a way that it could be implied that negotiations are exclusive.  Instead, the position should be reserved and options kept open.  And great care should be taken to draft clear terms in tender documents to ensure that parties are clear on this issue.

We have confirmed with the Office of the Treasury, that the draft bills have now been withdrawn from parliament, and will be reviewed taking into account public submissions. A decision is expected in the next couple of weeks, at which point the government is likely to publish a revised exposure draft bill for public consultation.

You may recall that the bill sought to make directors personally liable for unpaid super and GST if they were more than 3 months late in submitting and paying their BAS. These provisions were a part of a general bolstering of laws relating to director’s obligations. However, there are currently further bills being considered to counter phoenix activity known colloquially as the Phoenixing Bill and the Similar Names Bill.

The Phoenixing Bill proposes to give ASIC the power to wind up abandoned companies, with the aim of protecting workers entitlements. The Similar Names Bill proposes to impose personal liability on directors for the debts of a company for 5 years if it has a similar name to a failed liquidated company.

And Treasury has just closed submissions on the exposure draft of a further bill, the Personal Liability for Corporate Fault Reform Bill 2012. This is being described as the first tranche of proposed changes to commonwealth legislation relating to directors’ liability. The aim of these reforms is to harmonise the approach in the imposition of personal criminal liability or corporate fault across Australian jurisdictions.

So it’s safe to say there is a lot of activity in this area at the moment- so keep watching this space if you are a director because this applies to you!

The ACCC has been pursuing Google for a while now for allowing ads of competitors to be shown when a search for a rival company is done. Google allows keywords to be bought by rival companies, as had occurred with Honda, Harvey World Travel, Alpha Dog Training and Just 4x4s, to name the examples from this most recent case.

What the court found was that Google were actively involved in the process of allowing advertisers to take advantage of their competitor’s keywords. Of course, Google’s defence has always been to argue that they are merely the hosting platform, and that it’s the advertiser that should be responsible for the advertisements that are created. And 5 years ago the courts initially agreed that although the ads were misleading and deceptive, it wasn’t actually Google’s responsibility.

But the courts this time round on appeal have disagreed. They have found that Google were “much more than a mere conduit” and that “a party may engage in misleading conduct …without an intention to mislead or deceive.” The Full Court found that even though it is the advertiser that picks the competitor’s keywords, it is Google’s response which is misleading, noting that “what is critical to the process is the triggering of the link by Google using its algorithms.” The issue is that it’s Google’s technology and their system that creates the search result, and Google’s staff are there to help advertisers take full advantage of that system. And this is precisely what’s got them in hot water when it comes to our Trade Practices laws.

This decision is an important warning if you are an SME using Google as an advertising platform, if you organise this sort of marketing on behalf of your clients, or if you believe your competitors might be making inappropriate use of your keywords.

As ACCC chairman Rod Sims has warned, “This is an important outcome because it makes it clear that Google and other search engine providers that use similar technology to Google will be directly accountable for misleading or deceptive paid search results.” So have a think about what you are doing with your keywords with search engine providers, and contact us if you have any concerns.

Before you discard this article thinking that the changes won’t impact your role, perhaps take a few seconds at least to skim the information – it might have more relevance than you think…

The ACL brings together a range of new extended rights for consumers. Interestingly the definition of “consumer” doesn’t just mean individuals who are the purchasers of the end products. It can also include businesses.

Given the extended rights for consumers in the new legislation, and the broad definition of who a consumer is, if your business provides goods or services, you might find that it is impacted by this legislation, and your arrangements with your suppliers.

What are the changes to consumer guarantees?

A seller of goods or services to a consumer will now be automatically liable to honour new guarantees to “consumers”, rather than simply being able to send the consumer on to the manufacturer.

Sellers are also provided with some extended rights against manufacturers or importers of goods, where the seller provides a remedy to a consumer for a problem which is caused by the manufacturer or importer.

We have included more information about the details of the changes in other articles, but in summary, while the “consumer guarantees” are similar in many ways to the old legislative provisions of “fitness for purpose” but they go further than those old provisions.

The consumer guarantees differ from the old laws in several significant ways:

1. The old concept of “merchantable quality” is out.   This has been replaced with a new term: “acceptable quality”.  What’s the difference?  The test for acceptable quality is based on the question: what would a “reasonable” consumer regard as acceptable in the particular circumstances?  I know, sounds a bit vague doesn’t it?
2. The consumer now gets its choice of remedies if there has been a “major” failure.  In real terms this means that if a customer claims a major failure they can force the supplier to give them a full refund or a replacement product.  And it’s the consumer’s choice.  So what is you have sold them a car, and it has issues after 2 years?  Can you be forced to give them a whole new car???  This is not a change to treat lightly.
3. Warranty periods have potentially been extended.  The new yardstick is “what would a reasonable consumer consider to be an acceptable length of time for that type of good to last?”  Not a definitive definition?
4. The requirement to provide spare parts and repair facilities has been extended.
5. Comments made by sales people may now be turned into guarantees that you will be bound to honour.

So what does all of this mean for you?

1. Some of your purchases might possibly now be viewed as a consumer purchase and you might have some of these protections in your purchases.
2. It is critical for you to be aware of your extended liabilities under this legislation with your customers so that you can make the appropriate changes to your supply agreements.

You should consider at least the following changes to your supply arrangements:

• The length of warranties provided to you by your suppliers (do they match up with your company’s increased warranty obligations to their customers?)
• Your supplier’s obligation to make repair facilities and spare parts available (do these obligations line up with your company’s obligations relating to spare parts?)
• Remove any express warranties, unless it’s your intention to honour these
• In your supply contracts remove choice of law clauses which nominate another jurisdiction where Australia would otherwise be the proper jurisdiction for the contract

What do I have to do now?

Any contracts for the supply of goods to “consumers” will need to be reviewed with careful attention on any exclusion clauses, limitation of liability clauses, entire agreement clauses, and express warranties.

And, importantly for anyone involved in purchasing, your contracts with your suppliers should also now be reviewed to ensure that you have protection from them that mirrors your increased obligations under the ACL.

Contact us if you need our help in reviewing your current client terms, your supplier terms and otherwise helping to ensure that you are complying with the new laws, and in protecting your liability.

The ACCC has already handed down millions of dollars’ worth of penalties under the new laws, from the smaller end such as cafes and restaurants, fashion retailers and car dealers, up to larger corporations such as Optus, which received 27 infringement notices for its “Max Cap” plans in relation to false and misleading representations in advertisements.

The ACCC warns that there are still a large number of SMEs, and retailers in particular, that don’t understand their obligations under the new laws yet.

If you are a supplier of goods or services you need to understand these new laws and how they apply to you immediately!

Snapshot of the ACL

From 1 January 2010 the existing Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010.  The ACL applies to the supply of goods or services, the sale of land, and the supply of financial products and services, to all “consumers”, which has slightly varying meanings throughout the application of the Act, but can mean consumers as individuals, as well as (in some instances) other businesses.

The general standards of business conduct that will now be governed by the ACL will include:

• Consumer guarantees
• Standard form contracts, and ensuring they don’t contain unfair terms
• Safety of products and services
• Rules on sales practices, including those on prices, consumer information, lay-by agreements and unsolicited consumer agreements.

If you are in business, and you haven’t already, you will need to:

• Understand which areas of your business will be affected by the ACL
• Understand the risks of non-compliance
• Assess which areas or contracts will need to be reviewed and amended.

Let us know if you have any concerns about how the new legislation might impact you or your business.

An American court has had to consider these issues when DC Comics recently launched a legal action against car maker Mark Towle, owner of “Gotham Garages”, for his customised car creations.

Can there be copyright in the Batmobile?

The answer to this question is yet to be decided, but the debate has raised some interesting questions.  Can copyright exist in a utilitarian object?  Is the Batmobile a work of art?  Could you be in the line of fire if you create a “Batsuit” for your next fancy dress party… ?

In Australia, copyright protection doesn’t usually cover artistic works that are purely functional.  The criteria for copyright to exist are that the work must be an artistic work, that is, a work of artistic craftsmanship.  To be considered a work of artistic craftsmanship, the work must display aesthetic appeal and craftsmanship.  And Australian courts have shown that this doesn’t mean it has to be handmade.

In America copyright can’t exist in a “useful article”, which by definition is an object that has an intrinsic utilitarian function.  And a classic example of this is the body of a car.  But copyright CAN exist in the pictorial, graphic or sculptural authorship of the car that can be separate to the utilitarian aspects of the object, but that doesn’t necessarily mean that the author then has exclusive rights to make cars from that pictorial representation of the car.

The decision will have big implications for the film merchandising industry, which is worth billions.  It is yet to be seen how the American courts decide this issue, so stay tuned!