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

From 1 July 1998, the transfer of Intellectual Property rights including, amongst other things business names; patents; registered designs; and copyright will necessitate the payment of stamp duty of up to 5.5% of the consideration. If the Intellectual Property relates to both New South Wales and other jurisdictions, the duty payable may be able to be reduced by apportionment. If you are considering transferring or acquiring intellectual property or entering into a software development agreement in NSW, you may want to carefully consider the timing of your transaction in light of these changes. It is also expected that other states may introduce similar stamp duty changes.

We recommend that you seek urgent advice in this matter if you have transactions which may be affected.

In some disputes, the Court will order the “discovery” of documents by one party to another party if the disclosure of the information will enable a decision to be made as to whether legal proceedings should be issued or not. The Federal Court heard such an application in Ni-Tech Pty Ltd v Bruce Peter Parker & Ors. Ni-Tech is a software development company and Parker was a co-founder and ex-employee of Ni-Tech. Following the cessation of his employment by Ni-Tech, Parker worked for the MFX Software Group of companies. Subsequent to Parker's employment, MFX announced the launch of a software product that Ni-Tech considered to be similar in functionality to its own products. Ni-Tech made an application to the Court that MFX “discover” its source code so that it could be analysed for similarities to its own source code. In such matters, the Court must decide whether: the applicant has reasonable cause to believe that it has a cause of action to bring before the Court; and whether the applicant has not been able to obtain sufficient information from reasonable inquiries to make the decision of whether to commence legal proceedings or not; and whether the other party is likely to have or is likely to have had possession of any documentation which would assist the applicant to make the decision as to whether to issue legal proceedings or not. In this matter, the Court decided that if it could be shown that the confidentiality of MFX's source code would not be breached, it would order that the source code be provided to an independent party who would be able to analyse the source code from the programs concerned to determine whether there had been any duplication of Ni-Tech's source code in MFX's software.

An application for Preliminary Discovery can be a cost effective mechanism to better determine the strength of your copyright infringement claim against another party but as stated above, the Court must be satisfied that the information is not otherwise available to the party making the application.

The High Court of Australia allowed an Appeal in the matter of Phonographic Performance Company of Australia Limited ( "PPCA" ) v Federation of Australian Commercial Television Stations in May 1998 and found that the broadcasting of a film by a television station also constituted a broadcast of sound recordings, in this case a musical composition, which forms part of the film's sound track. PPCA successfully argued that a sound recording, which is entitled to copyright protection as a distinct work, should be considered separately from the film's sound track. The result of this decision is that parties which broadcast works such as films or multimedia works need to consider whether they have obtained the permission to broadcast the work from the owners of each of the copyright works embodied in the work and whether it will be necessary to pay royalties to each of the owners.

This decision will not only effect large operations such as the television stations, but small businesses should consider their use of works, such as multimedia presentations which use sound recordings, and determine whether any additional royalty payments are payable if the work is broadcast.

The US Courts continue to provide most of the decisions in the area of legal jurisdiction over Internet based activities. In the recent case of SF Hotel Company , L.P. v Energy Investments, Inc, Bengt Horenberg, Sierra Beach Hotel, Inc, Claese Johansen, Inge Pettersson, and Gene Tracy the Court analysed the level of interaction required to use various web sites and the resulting legal jurisdiction which was applicable. In cases where a web site requires the visitor to knowingly and repeatedly interact with the web site owner, jurisdiction is likely to be found to be in the web site owner's favour. On the other hand, a web site that acts a passive mechanism to supply information is unlikely to give the web site owner the right to assert their legal jurisdiction. In this case, information was supplied about the defendants' hotel using a passive web site which made no provision for direct communications between the hotel owners and the web site visitor. The Kansas Court concluded that it did not have jurisdiction over the defendants who were all located in Florida and defendant's motion to have the case dismissed was granted.

In commencing litigation, it is important to consider the most appropriate Court in which the dispute should be heard. If the Court is chosen merely to suit the Plaintiff, the Defendant may be able to have the matter stuck out for lack of jurisdiction, as in this case, or have the proceeding transferred to a Court more favourable to the Defendant. You should ensure that all contracts which you prepare clearly specifies which Court you want to have jurisdiction over the agreement. This is particularly important when interstate or international customers are involved.