White SW Computer Law
|Intellectual Property, Information Technology & Telecommunications Lawyers|
Melbourne Office - PO Box 452, COLLINS STREET WEST Victoria 8007 Australia
Sydney Office - GPO Box 2506, SYDNEY New South Wales 2001 Australia
Telephone: Melbourne Office - +61 3 9629 3709 Sydney Office - +61 2 9233 2600
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What can you do when a business “opportunity” goes wrong? In the Supreme Court of New South Wales matter, Probiz Business Software & Anor ( "Probiz" ) v Magee & Ors ( "Magee" ), Probiz unsuccessfully appealed against an earlier decision made by the Consumer Claims Tribunal in favour of Magee. Magee had entered into an agreement to act as the NSW agent, distributing Probiz accounting software. The distribution business did not succeed due to an alleged failure by Probiz and its associated entities to comply with their obligations under the distribution agreement. Upon termination of the agreement, Magee did not receive the payments he was entitled to. Following legal advice, Magee chose to make a complaint to the Consumer Claims Tribunal who found in his favour. Probiz claimed, in its appeal, that Magee was not a consumer, that Probiz and associated entities were not suppliers and that the NSW Tribunal had no jurisdiction over an agreement which was governed by Victorian law, however, the Supreme Court did not agree with Probiz's arguments. Whether you are the distributor or the Supplier, you should ensure that there is adequate protection in your distribution agreement by using an appropriate termination clause stating the parties' rights and obligations upon termination. When a commercial relationship breaks down, the parties involved invariably have different views as to their entitlements.
In March 1998, the Supreme Court of Victoria heard an appeal in the matter of Switzerland Insurance Australia Ltd ( "SIA" ) v Dundean Distributors Pty Ltd ( "Dundean" ). Dundean held an insurance policy with SIA which included coverage for electronic equipment. As a result of a “brown-out”, a drop in voltage, which caused Dundean's computers to shut down and then restart when the voltage was restored to normal the hard disk in Dundean's insured computer equipment were corrupted. As a result of the corruption, important accountancy data was lost in addition to damage to software stored on the hard disk. The Court found that the insurance policy did not cover the data which was stored on the hard disks, but did allow Dundean's claim for $1,440.00 for either or both a new operating system and a new accountancy program. Dundean had claimed over $13,000.00 for the costs incurred in restoring most of the lost data but the Court found that the stored data could not be considered to be equipment capable of being damaged. The nature of software and associated stored data being intangible has lead to many legal arguments regarding whether is should be considered a “good” or a “service” in addition to the points raised in this case. Your insurance policy for both office contents and for professional indemnity insurance should be carefully examined if any claims in relation to software or stored data are likely to be made. Of course, as would have been the case in this matter, nothing beats a regular and reliable data backup system.
There are many cases involving a dispute over the use of trade marks on the Internet, however there is a limit to what will be considered infringing behavior. In the US case of Patmont Motor Werks, Inc ( "Patmont" ) v Gateway Marine, Inc, et al ( "Gateway" ) Patmont issued legal proceedings against Gateway and Anthony DeBartolo ( “AB” ) as a result of AB using Patmont's trade mark on a web site which mentioned Gateway's name and address as a contact point. AB's use of the trade mark was found by the Court to merely be descriptive of the type of motorized Scooters which he was offering for sale. AB and Patmont had also entered into an licensing agreement which had been terminated by AB. A clause of the agreement prohibited AB from using Patmont's trade mark as part of any e-mail address. The Court correctly found that AB's use of the trade mark Go-Ped as part of the URL www.idiosync.com/goped was not a breach of this term. The use of trade marks on your web site should be considered no differently to the use in any other form of advertising. If the trade mark is merely used to describe a product that you are legally selling, it would be difficult for the trade mark owner to claim that such use was an infringement of their rights. It is always good commercial practice to make a note on your web site or advertising material which states the owner of the trade marks which you have used. If you have any doubts as to whether your use of the trade mark would be permitted by the owner you should obtain written permission before the marks are used.
A common marketing technique is to label software as being compatible with another software program, which indicates to the consumer that the programs are interoperable or meet a certain standard. In the US, Sun MicroSystems, Inc ( “Sun” ) were successful in their application to obtain an injunction against Microsoft Corporation ( “Microsoft” ) which prevented Microsoft from labeling its Internet Explorer 4.0 or Software Developer's Kit for Java 2.0 as being JAVA compatible. In hearing Sun's application, the Court was required to carefully examine the Sun's Licence and Distribution Agreement and Trademark Licensing Agreement with Microsoft. The Court found that due to the fact that the Microsoft product failed to pass Sun's JAVA compatibility tests, it was not entitled to use the JAVA compatible logo on its products and had to withdraw its Internet Explorer 4.0 and Software Developer's Kit for Java 2.0 products from sale or obscure the JAVA compatible logo on the products' packaging, manual and advertising material. When entering into a software licensing agreement which permits the incorporation of other source code into your own or labeling your product as compatible with another, you should ensure that there are clearly defined clauses which dictate under which circumstances the agreement will be binding. The owner of the source code being incorporated or for which compatibility labeling is sought, should ensure that they have the right to terminate the agreement should the other party's conduct reflect poorly on your product. Further, you should always be careful that you do not mislead and deceive consumers or indicate that you have a sponsorship or affiliation that you do not have in breach of the Trade Practices Act.