White SW Computer Law Intellectual Property, Information Technology & Telecommunications Newsletter - October 1997

Many publishers of newspapers, magazines and other publications reproduce articles from their publications in electronic form such as onto CD-ROMS or on their web site. In the August 97, US Court of Appeal case of Tasini and Ors v The New York Times Co and Ors a group of six freelance writers sued a number of publishers for copyright infringement arising either from reproducing their articles on a CD-ROM or an on-line text retrieval system. The Court found that the selling of the articles for inclusion in a data base of all articles featured in the original publications and the publication of these data bases did not constitute a copyright infringement as the CD and the online service were a revision of the original published edition which was within the rights of the Publisher. The entries in the data bases referred to the specific location of each article within the original publication and the articles were not altered from the original version. This Court decision will probably be the first of many which examine the question of electronic reproduction as compared to print publication. Publishers should ensure that their rights to electronic reproduction are clarified by obtaining the written permission from authors at the time of original publication. Although this decision went in favour of the publishers, there are many variables, which in different circumstances may have swung the decision in favour of the authors.

In the matter of Australian Competition & Consumer Commission v International Technology Holdings Pty Ltd ( "ITH" ), ITH who marketed a mechanical car parking system was found to have engaged in misleading and deceptive conduct by claiming that it was the intellectual property owner when in fact it was not. When dealing in intellectual property, it is important to ensure that you are the intellectual property owner before making any representation that you are the owner. In addition, any intellectual property assignment or licence should, amongst other things, clearly specify the property involved. Once a dispute has arisen, it will be unlikely that all parties will agree as to the meaning of any ambiguous terms.

When you are engaged in litigation and decide to settle your matter before it is heard by the Court, an agreement as to who should be responsible for each party's costs may not be agreed despite all other issues being resolved and agreed. In such a case, as seen in Helen Reddy v Anton Hughes & Ors, a Judge will have to consider issues such as the reasonableness of the party who commenced the litigation and the conduct of the parties prior to the commencement of litigation. In this matter, which involved the unauthorised manufacture and distribution of video tapes of a concert performed by Reddy, Hughes made several attempts to settle the matter which were not explored by Reddy, however, a formal offer to settle was not given. The Judge decided that each party should bear their own costs. When you litigate it is important to attempt to settle the matter as soon as possible. Calling off all negotiations with the other side or only making informal offers to settle the matter may result in an unfavourable costs order being made by the Court.

A distribution agreement should include clauses that protect the parties' interests. For example, as the supplier you should ensure that a distribution agreement specifies, amongst other things, a minimum sales requirement, the notice the distributor must give before termination the agreement and a restraint of trade clause to prevent the distributor dealing in similar clauses. Without any valid restraint of trade clause, you may find your market share is eroded by your distributor who may operate or plan to establish a rival business in the same territory, once it has established a strong network of contacts. Such an occurrence was examined in the matter of C-Shirt Pty Ltd v Barnett Marketing & Management Pty Ltd and Ors in which Barnett acted as a distributor for C-Shirt. It appears that C-Shirt had taken no steps to protect its market share either by inclusion of a restraint of trade clause in an agreement or specifying a minimum required sales level. In fact C-shirt did not even require a list of all outlets to which their goods were sold. Barnett, while still acting as distributor for C-Shirt, began to manufacture and market a competing product range. C-Shirt failed in its claims of: breach of contract; infringement of registered trade marks; passing off; breach of fiduciary obligation and succeeded in certain parts if its claims of: misleading and deceptive conduct; and deceit. Ultimately, however, C-Shirt was unable to prove it suffered and loss and damage by the acts of its distributor and was left empty handed at the end of the litigation. When preparing a legal document, or entering into contractual arrangements, you should aim to protect yourself against the worse case scenario. Many amicable business relationships deteriorate rapidly to a point where any agreement in place is terminated. What protection does your agreement give you on termination?

Due to the massive proliferation of web sites, there is a great deal of competition to attract potential visitors to your site in preference to numerous other sites which may have similar information. One method used is to include “meta tags” on the pages, which constitute your site. Meta tags are a form of computer code, which is analysed by the search engines, but not visible in the normal viewing layout of a web site page. Commonly, meta tags will include subject headings which you anticipate people will use to find the information contained on your web site. An American law firm, Oppedahl & Larson, which offers information in regard to intellectual property law on its web site, issued a complaint against a number of domain name owners who used the words “Oppedahl” and “Larson” in their meta tags. Effectively the domain name owners were profiting from the reputation of Oppedahl & Larson and diverting visitors who were attempting to visit the Oppedahl & Larson site to their own sites instead. Although the Internet is often described as being a lawless jurisdiction, the laws which protect intellectual property still apply. The damages which may potentially flow from an infringement of intellectual property on the Internet may be far greater than other forms of infringement because the potential audience is so large and the speed of transmission so great. Tempting though it may be to profit from other successful web sites, care should be taken not to infringe copyright, trade marks or other intellectual property.

In the US Court of Appeal matter of Softel Inc v Dragon Medical and Scientific Communications Inc and Ors, Softel successfully appealed an earlier decision which denied copyright existed in a software program due to the fact that its component computer code elements were not copyrightable. The Court of Appeal found that together external files structures, English language commands, functional modules and a hierarchical series of menus with a touch screen may be capable of being copyright works. This is an interesting decision for software developers, which must be considered in any possible infringement claim. When developing software, it is important to distinguish between devising an alternative method to performing a certain task from “evolving” an existing method when determining your exposure to a claim for copyright infringement. It is always important to obtain professional advice if you have any doubt.

We all know how the word “free” can be effectively used to catch the attention of potential customers. Businesses who use this technique need to ensure that their statements do not contravene the Trade Practices Act by making a misleading representation regarding the effect of any condition of supply or use of goods or services. It is common practice to offer “freebies” on web sites, but in some cases these “freebies” are supplied subject to another form of payment being made. This was re-examined upon appeal in the matter of Nationwide News Pty Ltd v Australian Competition and Consumer Commission. Nationwide published advertisements in newspapers and on television and radio. The promotion was for a “free” mobile telephone “subject to conditions”. It was held that the term “subject to conditions” would have been more likely to have been interpreted as meaning that there was a finite number of telephones available, or similar, rather than meaning that the person accepting the telephone would have to agree to a large financial outlay for the provision of mobile telephone services. Therefore, the Court found that the advertisement was misleading with respect to the conditions of the supply of the telephone. Nationwide News was fined $120,000.00 for engaging in such conduct. When offering free goods or services on your web site or in other advertising, you should ensure that any associated financial outlay is explained clearly to avoid misleading customers as to the true nature of your offer. The penalty for making such a misleading representation can be up to $200,000.00.