White SW Computer Law Intellectual Property, Information Technology & Telecommunications Newsletter - August 1998

In the matter of Tom Thompson v Handa-Lopez, Inc, ( “HL” ) a matter heard by the United States District Court in Texas, Thompson had won $193,728.40 by playing the games on HL's “World's Largest” Internet Casino. HL refused to pay Thompson his winnings so Thompson sued HL in the Texas District Court. HL claimed that Thompson was not able to commence proceedings as the contract Thompson agreed to contained a clause, which stated that any disputes “… shall be governed by the laws of the State of California …”. The Texan Courts found that this clause in the agreement did not prevent a law suit being filed in a state other than California. The interactive nature of the web site also provided the necessary business contact in Texas. HL's motion to have the matter struck out due to lack of jurisdiction failed. Clauses that confer jurisdiction or limit liability need to be carefully worded to be effective.

If your customer does not consent to the jurisdiction of the Courts in your location, you could have to face an expensive law suit commenced overseas. A limitation of liability clause, which is worded too broadly, may be totally struck from the agreement leaving you with no limitation of liability at all.

On 1 September 1998, legislative changes to combat sales tax fraud in the personal computer industry came into effect. All importers, dealers and manufacturers of certain personal computers and related equipment will now have to become accredited with the Tax Office before they can deal in those goods on a tax free basis. The two types of accreditation application forms: one for dealers and one for end-users are available electronically and can be submitted at any time. Further details can be obtained from the Australian Tax Office web site: www.ato.gov.au . Certain parties will still be able to purchase personal computers and related equipment including:

• accredited purchasers
• registered end-users (eg. primary producers) who purchase less than $6,000 of these goods tax free in a year,if their purchase falls within the “Low Purchase Value” test; and
• certain parties such as public hospitals which are entitled to an exemption and are not importing.

If you knowingly sell personal computers or related equipment tax free to a party who is not exempted from paying the sales tax, you may be liable, amongst other things, to pay the tax yourself.

The Australian Copyright Act does not afford protection to an idea, but instead to the form of expression of the idea. The Federal Court examined this issue in the matter of Coogi Australia Pty Ltd v Hysport International Pty Ltd. Hysport used a computerised knitting machine to knit fabric, which Coogi claims was an infringement of its copyright in both the fabric and the computer program used to manufacture the fabric. Hysport had used a program written in a different language to that used by Coogi. The computer program used by Hysport was a variation of another program written by examining the Coogi fabric and analysing the stitches required to create a similar fabric. The Court held that Hysport had not infringed Coogi's copyright in the fabric or the copyright in the computer program used in manufacturing the fabric. It was considered that the evidence relied upon by Coogi, that the two computer programs were similar at the functional level of expression, was not relevant to the question of copyright infringement.

In order to protect the ideas involved in your business' copyright works, employees should be requested to sign a confidentiality agreement in which they agree not to divulge or use information outside your business. However, once an idea is in the public domain, it is difficult to prevent your idea being adapted and expressed in a different form.

In the US case Playboy Enterprises Inc v Calvin Designer Label & Ors Playboy sued Calvin for its use of meta tags on its web site. Meta tags are invisible codes embedded in the computer code used to create web sites. Playboy claimed that Calvin was using Playboy's trade marks Playboy and Playmate without Playboy's authorisation as part of Calvin's domain names www.playboyxxx.com and www.playmatelive.com; as part of the name of their web site service Playmate Live Magazine; and as part of their advertising slogan “Get it all here @ Playboy”. Playboy also alleged that Calvin had repeatedly used the trade mark Playboy embedded in the computer code of its web site so that the word did not appear on the user's screen but was detectable by search engines in an attempt to attract additional visitors to the Calvin web site. The Court ordered that Calvin be barred from using the Playboy and Playmate trade marks as part of their domain name; as part of the name of their web site service; in meta tags on their web site; or in connection with the advertising or promotion of their web sites.

The Internet enables many scenarios that result in an infringement of intellectual property rights on a global scale. As the scope of the infringement increases, so do the potential damages for which you may be sued increase. Any use of third party intellectual property on your web site should be authorised by the owner to avoid expensive litigation potentially in a foreign jurisdiction.

In the Federal Court matter, Paramount Pictures Corporation v Starwon Enterprises Pty Ltd and Ors Starwon and its Directors were sued by Paramount for allegedly infringing Paramount's registered trade mark “Star Trek”. Starwon is an Internet Service Provider based in Western Australia and registered the business name “Star Trek Net Services”. Starwon also allegedly: uses signage including the words “Star Trek” at its premises; uses advertising and promotional material including the words “Star Trek”; and uses the words “Star Trek” at its web site. Paramount initiated legal action in New South Wales, the location of its authorised distributors, but has no presence in Australia itself. Starwon made an application to the Court to have the matter transferred to the Western Australian Courts as the alleged actions all occurred in that state. Starwon also made an application to the Court that Paramount be ordered to pay security for costs to the Court, in the anticipation that Starwon will be successful in defending the matter and may have difficulty obtaining payment of its costs from a foreign corporation with no presence in Australia. Starwon were successful in there application for security for costs, with Paramount being ordered to pay $15,000 to the Court. A decision regarding the transfer of the matter has been held over until there is further evidence before the Court to allow it to determine the proper place for the matter to be held.

In intellectual property infringement matters, as a defendant you may have little say in where legal proceedings will be heard. However, in agreements with clients, you should specify that any disputes arising in relation to your contract be heard by the Courts in your jurisdiction wherever possible to avoid having to litigate in an interstate or international Court.