The Handshake

Three’s not always a crowd - three things you need to know about the new crowd-sourced funding regime

2017-09-22T15:04:00.000+10:00

The new crowd-sourced funding (CSF) regime will officially come into effect at the end of this month.

As detailed in one of our earlier posts, the CSF regime allows eligible companies to make offers of fully paid ordinary shares to investors through a platform which must be operated by an intermediary who holds an Australian financial services licence from ASIC.

1. So what happens now?

To facilitate implementation of the CSF regime as soon as possible, ASIC will begin accepting applications from potential CSF intermediaries from 29 September 2017.

In the meantime, if you are considering taking advantage of the CSF regime, you should consider what (if anything) you need to do to ensure you are eligible to do so.

2. How do I know if I am eligible?

The CSF regime is currently only available to Australian unlisted public companies with less than $25 million in gross assets and $25 million in annual turnover.

At the time of writing, a further bill has also been introduced to parliament which proposes to:

expand the eligibility for the CSF regime to proprietary companies that meet certain eligibility requirements including:

maintaining a minimum of two directors
preparing annual financial and directors’ reports in accordance with accounting standards
ensuring their financial reports are audited once they raise $3 million or more under the CSF regime, and
complying with the existing related party transaction rules that apply to public companies.

provide that proprietary companies with shareholders who acquire shares through a CSF offer are not subject to takeovers rules
add special investor protection provisions for proprietary companies accessing the CSF regime, and
remove the temporary corporate governance concessions detailed below.

Assuming the bill is passed, these changes will take effect six months after the bill receives royal assent. Until then, the current legislation provides corporate governance concessions to new public companies or companies that have recently become public where the company has been established or converted for the purpose of utilising the CSF regime. ASIC has released an updated Form 206 (Application for change of company type) which allows an existing company to be converted specifically to enable it to take advantage of the new CSF regime.

3. How much money will I be able to raise?

Eligible companies can raise up to $5 million, with a limited investment of $10,000 per investor, in any 12 month period.

However, you should also be aware that, in making an offer under the CSF regime:

you will need to use a specific offer document that complies with the CSF legislation
the offer can only remain open for a maximum of three months
the offer can only be published on one platform
you can only have one offer open at any one time, and
you may also make an offer relating to ordinary shares in the company outside of the CSF regime (bearing in mind the $5 million annual cap).

For more information, please contact:

ACCC not putting up with any rubbish in small business contracts

2017-09-15T12:11:00.001+10:00

The Australian Competition & Consumer Commission (ACCC) has taken court action against JJ Richards & Sons Pty Ltd (JJ Richards), a major Australian waste collection business, alleging that a number of clauses in its standard form waste collection contracts with small businesses are unfair. This is the first time the consumer watchdog has taken action to enforce the new unfair contract terms provisions in the Australian Consumer Law (ACL) for a small business contract, since the law was extended to protect small businesses on 12 November 2016.

What happened?
On 6 September 2017, the ACCC initiated proceedings in the Federal Court against JJ Richards, one of Australia’s largest privately owned waste management companies. It alleges that eight clauses in JJ Richards’ standard form commercial waste collection contract are ‘unfair’ under the ACL and therefore void when contracting with small businesses. The clauses in question:

bind customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term
allow JJ Richards to unilaterally increase its prices
exclude JJ Richards’ liability where its performance is “prevented or hindered in any way”
allow JJ Richards to charge customers for services not rendered for reasons outside the customer’s control
grant JJ Richards exclusive rights to remove waste from a customer’s premises
allow JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days
create an unlimited indemnity in favour of JJ Richards, and
prevent customers from terminating their contracts if they have payments outstanding and entitle JJ Richards to continue charging customers equipment rental after the termination of the contract.

The ACCC is seeking a declaration that the terms are unfair and therefore void, as well as an injunction to prevent JJ Richards from relying on such terms in small business contracts in the future. If the relevant contracts are capable of operating without the unfair terms, they will remain on foot and bind the parties.

Why is this important?
The ACCC Deputy Chair Dr Michael Schaper believes that this should be a reminder to large businesses to review their standard form contracts to ensure the terms are not unfair to small businesses. If a court finds key terms of your standard form contracts to be unfair, they will not be binding, which may leave your business open to significant risk. For example, if a liability or indemnity is struck down, you may be left without any limitation of liability or indemnity against your losses.

Many of the clauses the ACCC alleges are unfair are the kinds of clauses the ACCC has flagged it considers are likely to be unfair. However, it is interesting that the ACCC has also alleged that an exclusivity clause is unfair. Normally, exclusivity clauses would be attacked as anti-competitive under the competition law, but only if they substantially lessen competition in the overall market. Here, the ACCC is saying that even if they are not anti-competitive, it thinks they may still be unfair. If successful on this point, this will be a further major restriction on the kinds of clauses that can be imposed on consumers and small businesses.

A term will be considered unfair if it:

would cause significant imbalance in the rights and obligations of the parties
is not reasonably necessary to protect the legitimate interests of the business advantaged by the term, and
would cause detriment to a party if applied or relied upon.

The ACCC has released a Report which identifies terms that are likely to be considered unfair across a range of industries, and provides guidance for how businesses can minimum risks of infringing the unfair contract terms regime.

If you have any questions about these proceedings or how to ensure your business is compliant with the unfair contract terms regime please contact Paul McLachlan, Alex Hutchens or Belinda Breakspear. We have been assisting a number of our clients to review and rewrite their standard form consumer and small business contracts to remove unfair terms.

New Balance Chinese trade mark win – kicking a goal for damages in China

2017-09-14T15:05:00.000+10:00

A Chinese court recently ruled three local shoemakers have infringed the New Balance ‘NB’ logo and must pay US $1.5 million in damages and legal costs. The case is significant as it is reportedly the largest amount awarded to a foreign business in a Chinese trade mark dispute. The infringing shoemakers manufactured shoes under a brand called ‘New Boom’ and were found by the court to have damaged the reputation of New Balance and confused consumers due to the high similarity of their logos to the New Balance ‘NB’ logo and brand.

Critics have often maintained China’s intellectual property system does not sufficiently protect foreign brands; however this recent decision is certainly a step in the right direction.

Under the Chinese system, the first party to file for a trade mark is awarded protection. In Australia, on the other hand, the first party to use the trade mark is awarded protection (unless there is no prior use, in which case registration is awarded on a first come first served basis). The way the Chinese system operates means it is vital brands register the trade mark in China as soon as possible, before expanding into the Chinese market. Otherwise, the brand may find the trade mark has already been registered to a trade mark squatter, or to a party producing imitation goods.

In recent months, the Chinese Government has vowed to tackle the issue of intellectual property infringement caused by the legions of fake goods produced and offered for sale in the country. There have also been changes to Chinese trade mark law over the past few years to take on trade mark abuse. This decision indicates steps are being made to support foreign rights holders. It also provides reassurance for foreign brands looking to expand into the Chinese market and pursue an active brand protection strategy.

Mandatory Data Breach Notification scheme - 6 months to go!

2017-09-01T08:30:00.000+10:00

The much-anticipated mandatory data breach notification scheme will take effect in February 2018. Under this new legislation, all organisations and federal agencies that are subject to the Privacy Act will need to promptly notify the OAIC and any affected individuals of any unauthorised access to, or unauthorised disclosure of, personal information that is likely to result in serious harm i.e. “eligible data breach”. Failure to do so may result in fines of up to $1.8 million.

Are you prepared? With just 6 months to go, you should be reviewing your data security processes and procedures to ensure they are adequately protecting the personal information you hold. You should also implement a data breach response plan, and educate relevant people in your organisation accordingly, to ensure you respond promptly to any data breach with minimal impact on your business operations.

For enquiries, please contact:

Alex Hutchens

Belinda Breakspear

Paul McLachlan

Will McCullough

Life’s not a beach in Bondi Beach trade mark dispute

2017-08-17T15:30:00.001+10:00

The news broke this month that multinational retail giant Abercrombie and Fitch has trade marked the name ‘Bondi Beach’ in the US. It was discovered by the Sydney-based toiletries company Bondi Wash who filed a trade mark to protect its name in the US, but was initially blocked because it was too similar to Abercrombie and Fitch’s trade mark. The US retailer has no presence in, or connection with, the iconic beach or Australia generally, but allegedly had a beauty range which it named “Bondi Beach”.

Bondi Wash challenged the trade mark on the basis that it was no longer in-use, but the cancellation action has since been withdrawn after Abercrombie and Fitch refused to back down.

Why is this an issue?

This has sparked concern in Australia, as many people were previously unaware that foreign companies could obtain exclusive rights to use Australian words and the names of iconic Australian places in overseas jurisdictions. This is not the only iconic Australian place name that has been trade marked by foreign companies in the US. Uluru is registered to a carpet company and Kakadu is registered to a cosmetics company.

In Australia common place names, such as iconic beaches or cities, will be rejected as trade marks because they should be available for all traders to use to describe their goods and services. Companies may however, in some circumstances, successfully register trade marks including common place names if the names are combined with something more distinctive such as another word or a logo, or the trade marks have been extensively used. As a result, there are a broad range of Australian companies that incorporate ‘Bondi’ into their brand names and trade marks.

While under US law geographical names can be refused registration if the location is known and understood by the relevant segment of US consumers, the United States Patent and Trademark Office examiner presumably took the view that ‘Bondi Beach’ was not of sufficient significance to US consumers, or that the mark had acquired a secondary meaning. Australian businesses such as Bondi Wash or Bondi Sands may therefore find difficultly operating under their brand names without infringement claims, and incur significant legal costs when they look to expand overseas.

Waverly Mayer Sally Betts has said that “it’s an Australian beach so I don’t believe anyone in another country should be able to trade mark it.” The Waverly Council has since brought this to the attention of the Federal Trade Minister’s office, and while they have no legal standing, a letter is reportedly being drafted to Abercrombie and Fitch asking them to voluntarily relinquish its trade mark on Bondi Beach. At this stage however, their only chance is to appeal to the retailer’s good will.

Scammers hit ASIC customers

2017-07-19T14:46:00.000+10:00

Small businesses are a ready target for scammers, with the latest scam targeting innocent companies trying to do the right thing.

‘ASIC’ email scam
ASIC announced today that scammers pretending to be from ASIC have been contacting Registry customers by email, requesting that they pay fees and provide personal information to renew their business or company name (click here to view an example of a scam email). It has also been reported that these phishing emails may contain malware and links to invoices with false payment details.

ASIC has advised that emails are most likely to be a scam if they ask you to:

make a payment over the phone
make a payment to receive a refund, or
provide your credit card or bank details directly by email or phone.

If you think you have received a scam email, ASIC has requested recipients to immediately forward the entire email to ReportASICEmailFraud@asic.gov.au or contact ASIC on 1300 300 630.

Trade mark scam
Similar phishing emails are often sent to trade mark registrants asking them to provide personal information and pay fees associated with trade marks or domain names. Further information is contained in our previous article on this scam (please click here to read).

Small business
The ACCC Scamwatch website contains useful information on common scams and steps you can take to protect your small business.

For enquiries, please contact:

Belinda Breakspear

Reece Walker

Ben Wood

Plant breeder's rights now apply in Norfolk Island

2017-07-17T14:00:00.000+10:00

As of 1 July 2017, the Plant Breeder’s Rights Act 1994 (Cth) (PBR Act) now applies in Norfolk Island. The PBR Act provides a system of registration and exclusive commercial rights for new plant varieties.

Norfolk Island is a small island off the coast of Australia, located approximately 1,600km northeast of Sydney between Australia, New Zealand and New Caledonia. The island is part of the Australian Commonwealth and has many unique historical relics and native flora and fauna species.

Norfolk Island previously had no system for protecting new plant varieties; however Australia’s other intellectual property systems applied there.

The change is part of the Australian Government’s reforms in Norfolk Island and aims to provide residents with the same rights as those in other parts of Australia. The application of the PBR Act will assist with fostering plant breeding and innovation on the island.

For enquiries please contact:

EU data protection laws overhauled - does this affect my business in Australia?

2017-07-04T14:00:00.000+10:00

If you have an establishment in the European Union (EU), offer goods and services in the EU, or monitor the behaviour of individuals in the EU, then the answer is probably yes, and you should certainly read on.

The new EU General Data Protection Regulation (GDPR) comes into effect on 25 May 2018, and for many businesses all around the world, is driving a focus on understanding and updating their data handling practices to ensure they are ready to comply. This is because not only can the GDPR apply to businesses outside of the EU, but there are also significant penalties for non-compliance (up to €20 million or 4% of global annual turnover for the preceding financial year in certain circumstances).

So, with a little over 10 months to go before the new regime applies, we recommend that Australian businesses think about whether they are caught, and if so, start planning for the legal and operational changes that are required to comply with GDPR.

Some familiar concepts
There are many similarities between the GDPR and the Australian Privacy Act 1988 (Cth), including:

The need for transparency and the importance of privacy by design.
The need to be able to demonstrate compliance with certain privacy principles.
The GDPR concept of personal data is largely analogous with the Australian concept of personal information. The GDPR also has extra protections dealing with special categories of information that are similar to Australian sensitive information (e.g. information dealing with race, gender, health, political opinion etc.).
The importance of consent when dealing with personal data.

This makes the initial task of understanding what sort of data is caught, and therefore whether GDPR is likely to be relevant to the data that your business handles, a relatively straightforward process. Having passed through that gating process, the question then becomes one of whether you have sufficient nexus with the EU and EU citizens’ data or behaviour to be caught, and if so, what different obligations apply.

Some new concepts
There are some key differences between the Australian regime and the GDPR that could trip up an unwary business. Some of these differences are:

Australian businesses of any size may need to comply with the GDPR (as opposed to the limited exemptions from the Australian law for small business with an annual turnover of $3 million or less).
The concepts of data controllers and data processors will not be familiar to many Australian businesses, but these are fundamental to understanding the GDPR. You will need to identify which term applies to your business and (most likely) appoint a representative in an EU Member State to field communications from the EU regulator and individuals.
Under the GDPR, data controllers must notify the authorities of a data breach within 72 hours of becoming aware of the breach (exceptions apply). Under Australia’s new mandatory data breach notification laws (effective 22 February 2018) an entity will have to notify Australia’s Information Commissioner and affected individuals as soon as practicable (exceptions apply), which will in most cases be a more generous time frame than the 72 hours required by GDPR.
The GDPR contains a ‘right to be forgotten’. This is a right for an individual to require the deletion of their data on request in specific circumstances. There is no similar right under Australian law.
Australian businesses need to be aware of the fact that the relationship between a data controller and a data processor (as those terms are understood under the GDPR) needs to be recorded in a contract containing certain mandatory clauses.
Under the GDPR, an individual can require a data controller to provide the individual’s data in a commonly-used, machine readable format so that it can be ported to a new data controller.

Transferring overseas
Under chapter eight of the Australian Privacy Principles (APP), an entity transferring personal information from Australia must generally take reasonable steps to ensure that an overseas recipient does not breach the APP (and can be held responsible for the recipient’s failure to comply with the APP).

The GDPR requires that personal data can only be transferred outside of the EU to countries that provide an adequate level of data protection. Australian data protection laws are not currently listed as being adequate in this regard. This means that the transfer of certain information to Australia from the EU requires specific safeguards to be in place. These safeguards include (but are not limited to) the following:

binding corporate rules are in place for intra-group transfers, and
the data controller has entered into certain standard-form data protection clauses with the recipient.

Next steps
This note is not intended to be exhaustive. A good starting point if you think you might be affected by the GDPR is the resource prepared by the Office of the Australian Information Commissioner (click here). The next step is seeking legal advice, particularly if you are involved in international data transfer arrangements with EU Member States. If you are caught, there are significant legal and operational requirements which you will need to take into account.

We have experience in preparing policies and data sharing agreements that meet the requirements of both regimes (including to automatically accommodate the GDPR).

For further information on any of the issues raised in this alert please contact:

Australia to become a destination of choice for clinical trials

2017-05-08T09:44:00.001+10:00

The National Health and Medical Research Council has established the Clinical Trials Ready initiative in an effort to make Australia a destination of choice for conducting clinical trials. Clinical trials offer significant contributions to the economy, providing incentive for making the Australian industry more competitive internationally.

The initiative aims to identify potential sites that are ready, willing and able to conduct clinical trials in a safe and transparent environment. It is hoped that this will improve overall transparency and make the approval process more efficient.

A draft proposal of how the initiative may look is currently in the hands of members of the advisory group and jurisdictional representatives. It is expected more progress will be made in the coming months with a second meeting of the advisory group.

If you would like any advice in relation to clinical trials in Australia please contact our Intellectual Property team.

Belinda Breakspear

John Kettle

Melinda Kastanya

Equity crowd funding finally past the post - but is it a dodo?

2017-03-23T12:20:00.000+10:00

It is good to see that the equity crowd funding laws have finally been cleared for Australia, with the Senate having passed the Bill on Monday. This was following finalisation of the debate on proposed cooling off rights for retail investors (which was ultimately extended from 48 hours to five days). The laws allow unlisted public companies with less than $25 million in assets and turnover to raise up to $5 million in funds in this way.

As per our earlier blogs, a key potential chink in the armour of the new laws is its limited application to public companies and not proprietary (private) companies, which represent 99% of small businesses.

This has been recognised by various stakeholders, including Labor, with Opposition digital economy spokesman Ed Husic suggesting that amendments will be required in the near term and suggesting that “any future changes will make today's new dodo of a system extinct within the year, as smaller business opt for a better alternative.”

However, Mr Husic’s concerns of a soon to be superseded system may be misplaced. While Finance Minister Mathias Cormann has insisted that work is already underway to extend the laws to proprietary companies, it is difficult to be filled with confidence given the time it has taken for the passage of the Bill on Monday (following two years of industry consultations, and nearly three years since the initial recommendations by CAMAC and equivalent laws were passed in New Zealand). It is also unlikely to be an easy process, requiring changes to the very nature of what a proprietary company represents under current laws.

In the meantime, the new laws are certainly an important first step to ensuring that Australia keeps up with its foreign counterparts when it comes to equity crowd funding. The new laws are expected to come into effect within the next six months.

For a reminder on some of the key requirements, see our previous blogs:

Crowd funding given the nod by Senate committee - 17 February 2017
Equity crowd funding back on the agenda - 29 November 2016

A $1.5 million price tag for unlawfully exploiting Aboriginal intangible heritage

2017-03-17T11:39:00.001+10:00

Nine out of 10 Australians agree that Aboriginal art is an important part of Australian culture.¹ This recognition, however, is not always reflected in laws that would ordinarily be expected to protect Australian cultural heritage. The significant value of Aboriginal art and tradition, both financially and culturally, makes it a target for exploitation within the Australian and overseas markets, and not always lawfully.

While works by individual artists are generally protected by copyright, there are limited statutory rights for the broader protection of what is characterised as ‘intangible’ cultural heritage. Whilst this remains the position in every Australian jurisdiction, the State of Victoria has now broken ranks.

In August 2016, Part 5A of the Aboriginal Heritage Act 2006 (Victoria) (the Act) was introduced to provide Victoria’s traditional owners with more control over their ‘intangible heritage’. Usually known for dealing with the protection of ‘tangible’ cultural heritage, such as ancestral remains, objects or places, the Act extends protection to ‘Aboriginal intangible heritage’. According to the Victorian Minister for Aboriginal Affairs, after Quebec, the State of Victoria is the second Commonwealth jurisdiction to establish such protections for Aboriginal heritage.

The Act broadly defines ‘Aboriginal intangible heritage’ as ‘any knowledge of or expression of Aboriginal tradition other than Aboriginal cultural heritage’ and includes oral traditions, performing arts, stories, rituals, festivals, social practices, craft, visual arts and environmental and ecological knowledge.

The new laws prohibit ‘knowingly’ exploiting registered Aboriginal intangible heritage for commercial purposes without the consent of traditional owners, with penalties of $273,000 for individuals or $1.5 million for corporations. In addition, ‘reckless’ use of registered intangible heritage without consent attracts fines of $183,000 for individuals and $911,000 for corporations. The Act also provides the right for traditional owners in Victoria to enter into and register ‘Aboriginal intangible heritage agreements’ addressing the protection, management and compensation payable for a party’s use of registered intangible heritage.

The new laws will provide Victoria’s traditional owners with the opportunity to control their intangible heritage, together with the prospect of economic benefits through contracts with third parties seeking to use and commercialise Aboriginal intangible heritage. The laws are in contrast to the existing Copyright Act 1968 (Cth) which does not extend protection to Aboriginal communal works nor traditions or practices that have been known and passed down through generations over thousands of years. Indeed, copyright purists may point to this constituting a blurring of the idea/expression dichotomy but that is an analysis for another day.

What does this mean for you if you deal in Aboriginal art?
If your business operates within the Aboriginal art and cultural space, consideration should be given to the ways in which your business obtains, develops and commercialises Aboriginal intangible heritage, particularly intangible heritage belonging to traditional owner groups in Victoria. As a matter of good business and cultural practice (and to avoid potential penalties), this means developing appropriate protocols and policies that comply with the Part 5A provisions, including how consent for commercialising registered Aboriginal intangible heritage is obtained from relevant traditional owner groups and maintained over time.

What does this mean for you if you are a member of a traditional owner group?
If you are a traditional owner group in Victoria, consideration should be given to the registration of your intangible heritage so that it is afforded protection under the new laws. This is particularly the case if traditional owner groups are negotiating with third parties who want to use and commercialise traditional knowledge or other intangible heritage. Traditional owner groups should also take advice on registering ‘Aboriginal intangible heritage agreements’ as set out in the new Part 5A provisions.

To avoid breaching any statutory obligations, or to further understand the benefit of the new laws, you should seek expert advice.

Stephanie Parkin

This article was prepared and written by Stephanie Parkin (07 3233 8835 or sparkin@mccullough.com.au) a commercial lawyer in McCullough Robertson’s Intellectual Property and Competition team and a descendent of the Quandamooka people of Minjerribah (North Stradbroke Island).

¹ Australia Council for the Arts 2015, Arts Nation: An Overview of Australian Arts, 2015 Edition, System, Australia.

Privacy law update - data breaches must now be notified

2017-02-16T15:48:00.001+10:00

It is time to review your cyber security posture

In brief

Australia’s federal privacy laws are set for their most significant amendment since the introduction of the Australian Privacy Principles in 2012.

On Monday, Parliament passed the Privacy Amendments (Notifiable Data Breaches) Bill 2016 (the Bill), which will make it mandatory for entities regulated by the Privacy Act to notify of any data breach that is likely to result in serious harm.

These amendments have been a long time coming. They were originally recommended as part of the Australian Law Reform Committee’s 2008 report on Australia’s privacy laws, and then were proposed as part of the legislative package of changes in 2015 that required telecommunications providers to store metadata.

The passing of the bill is good news for individuals, as it dramatically improves the transparency around data breaches that have a likelihood of serious harm. Until now, the voluntary nature of data breach notification laws has meant that only a fraction of all breaches have been notified, making it more difficult for individuals to take basic self-help steps in response to a breach, like changing their passwords.

Of course, this means that affected entities must have in place measures to deal with these new obligations.

The good news is that there is a 12-month grace period in which to prepare. During this time, the focus should not only be on what processes are required in order to notify if required, but also to take steps to ensure that security and processes are optimised so that the chance of a breach is reduced to begin with. This is the best way to avoid the procedural, reputational and potentially financial consequences of a breach.

In detail

The amendments require notification where there has been an ‘eligible data breach’. This occurs where there is either unauthorised access to, or disclosure of, personal information (including some deemed forms of personal information), or loss of information that is likely to lead to unauthorised access or disclosure (breach), and that breach would lead a reasonable person to conclude that it is likely to result in serious harm to the affected individuals. Harm can take many forms, including physical, emotional, reputational or financial.

The duty to notify is not absolute, however. There are some exceptions. The first is in the definition of ‘eligible data breach’ itself. While there is a degree of objectivity, there will clearly be the need to make an assessment about the likely seriousness of any breach. There is a non-exhaustive list of matters to consider in this regard, but if there is no likely risk of serious harm, then no notification is required.

If a party suspects there has been a breach but does not yet have grounds to believe it has occurred, it must conduct an assessment rather than immediately notifying. Typically, it is expected this assessment should occur within 30 days.

Further, if there has been a breach, but the party has taken steps to remove the effect of the breach before harm occurs (for instance, because a lost device can be remotely wiped), then the breach need not be notified.

Also, if there are multiple parties involved in a breach – for instance, through an outsourcing or cloud arrangement – only one party needs to make the notification.

Finally, there are some exceptions for law enforcement and government agencies.

If you do have to notify, then there are issues of timing and form that must be addressed. You must prepare a notice that covers specified matters, and provide it to the Australian Information Commissioner (the Commissioner) as soon as reasonably practicable. That is a variable time frame that will depend on the particular circumstances, and it may be that we receive guidance from the Commissioner in due course about what is expected.

The notice must contain:

the identity and contact details of your business
a description of the breach
the type of information that was disclosed, and
recommendations about the steps individuals should take in response to the breach.

In addition to providing it to the Commissioner, you must also notify the affected individuals using the usual method of communication between you and the individual, and if you are unable to individually notify, publish the notice on your website and take reasonable steps to publicise the notification.

If you fail to comply with the new notification obligations, then the usual range of remedies under the Privacy Act are available, including investigation by the Commissioner, court-enforceable undertakings, orders for compensation, and penalties of up to $1.8 million.

What to do now

Clearly this new regime involves a significant changing of the privacy landscape. Businesses will be more publicly accountable for data breaches, and must be far more open with individuals in their communications about data breaches.

While to an extent this will inevitably lead to a ‘normalisation’ of breach notifications, this is cold comfort for anyone having to go through the notification process. It will be critical to be ready to deal with notification obligations swiftly and professionally, and so we recommend taking the next 12 months to put in place a data breach response plan to ensure the procedural aspects of notification and breach response are addressed. More importantly still, we also recommend recognising that prevention is better than cure, and taking the opportunity to review your cyber security posture generally to reduce the risk of a breach happening in the first place.

Our privacy experts can help you at every stage of the process.

Who can help

If you need assistance regarding insurance solutions to transfer the costs associated of complying with this legislation, contact our Allegiant IRS team:

Adam Battista
+61 7 3102 5666
adam.battista@allegiantirs.com.au

Anthony Auzmendi
+61 7 3106 4292
anthony.auzmendi@allegiantirs.com.au

Goodbye ATMOSS, hello ‘Australian Trade Mark Search’

2017-02-10T13:17:00.000+10:00

On Saturday 11 February 2017, trade mark professionals will bid farewell to ATMOSS (the current trade mark searching system), as IP Australia launches the new ‘Australian Trade Mark Search’. After the launch, users will be automatically redirected from ATMOSS to the Australian Trade Mark Search. Key features include new text searches, wildcards and image searching. The new system is more user friendly, will improve efficiencies in searching, and will assist practitioners more broadly with trade mark filing strategy and advice.

If you have any queries relating to the new system or need advice regarding trade marks, please contact:

Belinda Breakspear

It’s a case of better the Kylie you know as trade mark battle ends

2017-02-10T10:26:00.000+10:00

Australian pop-star Kylie Minogue’s long running battle with reality tv-star Kylie Jenner, and Jenner’s attempt to trade mark the name ‘Kylie’ appears to have ended.

Kylie Jenner, the youngest of the Kardashian clan, submitted a U.S. trade mark application in 2015 to protect her first name in relation to advertising and endorsement services.

Minogue’s representative business, KBD, retaliated by filing a notice of opposition to the application on the basis that Minogue is an “internationally renowned performing artist, humanitarian, and breast cancer activist known worldwide simply as ‘Kylie’” while Jenner is “a secondary reality television personality”. The notice went on to argue that the Kylie trade mark would likely cause confusion with, and tarnish, Minogue’s long list of existing trade mark registrations including Kylie Minogue Darling, Kylie Minogue and her website kylie.com.

However, on 19 January 2017 Minogue withdrew her opposition, indicating the parties may have reached a settlement over the famous ‘Kylie’ name.

Jenner is not the first celebrity to attempt to trade mark her name. While rapper 50 Cent successfully trade marked his name, Beyonce and Jay Z’s 2012 application for their daughter’s name ‘Blue Ivy’ was rejected because it is also the name of a wedding planning company. Celebrities often secure trade mark registration in the U.S. on the basis their name has acquired a “secondary meaning” i.e. has become closely associated with a particular product or service such as an entertainment service.

In Australia, you can register a personal name as a trade mark, provided that trade mark is inherently adapted to distinguish the goods or services in question, and there are no prior conflicting trade marks e.g. fashion designer Collette Dinnigan has registered her full name, and the Bradman Foundation has registered both 'Bradman' and 'Don Bradman' as a trade mark. However, common names are likely to be rejected on the basis that other traders need to use the name (but all is not lost if you can provide substantial evidence of use).

Belinda Breakspear

Eliza Humble

Unfair contract terms regime

2016-11-22T13:57:00.005+10:00

The long-awaited laws protecting small businesses from unfair terms have taken effect across Australia. As of 12 November 2016, any terms that are ‘unfair’ in new or renewed contracts could be deemed void and unenforceable. While we are yet to see how the courts and tribunals will interpret this new legislation, the ACCC released a report last week providing a breakdown of some common worrying terms identified in the advertising, telecommunications, retail leasing, independent contracting, franchising, waste management and agriculture industries. The report provides practical guidance on how businesses can comply with these new laws including practical examples of the kinds of changes the ACCC recommends businesses make.

What contracts are affected?
The new legislation covers standard form small business contracts. More specifically:

contracts for the supply of goods, services, financial services or financial products or a sale or grant of an interest in land
that are entered into or renewed on or after 12 November 2016 (including variations and automatic or periodic rollovers)
where at least one of the parties is a business that employs less that 20 people (including casual staff employed on a regular or systematic basis)
where the contract is considered to be a ‘standard form contract’ i.e. it has been prepared by one party to the contract and is not subject to negotiation between the parties (offered on a ‘take it or leave it’ basis), and
the upfront price payable under the contract does not exceed $300,000 (or $1 million if the contract is for more than 12 months).

What kind of terms will be considered ‘unfair’?
To be ‘unfair’ under the Australian Consumer Law (ACL) a term must:

cause a significant imbalance in the parties' rights and obligations arising under the contract
not be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term (nb this is presumed unless the advantaged party proves otherwise), and
cause detriment (financial or otherwise) to a party if it were to be applied or relied on.

A term must satisfy all three elements to be deemed unfair. In making a determination, a court or tribunal must consider the transparency of the term (i.e. is it expressed in reasonably plain language, legible, presented clearly and readily available to any party affected by the term) and the contract as a whole.

ACCC’s report
In preparation for the laws taking effect, the ACCC examined standard form contracts across a range of industries and identified a number of terms that are likely to raise concerns in all contracts, as well as those in specific industries.

The most commonly-occurring problems in the reviewed contracts, across all industries, were terms that allowed the contract provider:

To unilaterally vary all terms (or at least those that have a significant bearing on the contractual arrangement, or which could cause detriment if varied) in an unconstrained manner. The ACCC recommended removing these terms or balancing them with a reasonable notice period and a right to end the agreement if the small business does not agree to the variation.
Potentially broad and unreasonable powers to protect themselves against loss or damage at the expense of the small business by imposing broad indemnities or excessive limitations of liabilities. The ACCC considers that these terms should only be used to the extent reasonably necessary to protect the larger business’s legitimate interests, and
An unreasonable ability to cancel or end an agreement as it suits them. The fair position will depend on the circumstances but the ACCC recommends that contract providers should generally give small businesses the right to rectify a breach, increase the length of an existing rectification period, and limit grounds for termination to those that are reasonable.

The ACCC considers such terms are likely to raise concerns under the unfair contract terms law because, in most circumstances, they will go beyond what is reasonably necessary to protect a business’s legitimate interests.

In a number of specific industries the ACCC found that automatic rollover clauses, while not necessarily unfair, could be reason for concern. To ensure they are enforceable under the new regime, the ACCC recommended ensuring small businesses receive reasonable notice that the contract is about to renew and the ability to exit the renewed contract without penalty. Further, early termination charges in the telecommunications contracts are also predicted to be deemed unfair, unless they reflect a genuine estimate of the carrier’s losses if a customer terminates their contract.

Next steps
The ACCC has strongly encouraged all businesses to review their standard form contracts for clauses that may be considered unfair under these new laws. If you would like any further guidance on this, or are concerned about any specific contracts or clauses, please contact us immediately as enforcing these laws will be a priority for the ACCC in the near future, particularly for the kinds of clauses flagged above.

The consequences of not updating your contracts could be significant. If a limitation or exclusion of liability clause is found to be void, this means rather than capping or excluding liability, your contract will leave you with unlimited liability.

Lower costs for brand protection in Australia - IP Australia fee changes

2016-09-06T11:46:00.000+10:00

IP Australia has announced changes to the official fees for trade mark applications and renewals in Australia, to take effect from 10 October 2016. Changes to Madrid Protocol applications designating Australia are scheduled to take effect from 28 October 2016.

The good news is that the $300 per class registration fee for trade marks will be removed, which brings IP Australia in line with a majority of countries.

The removal of the registration fee has been partially offset by an increase in trade mark application fees from $200 to $330 per class of goods and services claimed. The trade mark renewal fee will also increase from $300 per class to $400 per class. Several opposition fees have also been removed.

The changes mean the overall cost for seeking trade mark registration in Australia has decreased.

Depending on when your trade mark is next due for renewal, there may be some costs savings if you renew before 10 October 2016. Please contact us for further information.

If you require assistance with trade mark applications, trade mark renewals or general advice in matters relating to intellectual property, please contact a member of our trade marks team.

Cotton On in the wrong with trade mark infringement?

2016-07-29T09:23:00.000+10:00

Cotton On is facing litigation in the Federal Court of Australia from a sole trader in the United States who claims that the 1,400 store clothing chain copied her trade mark protected brand, ‘LETTUCE TURNIP THE BEET.’

New York designer Elektra Prinz Gorski filed an application with the Federal Court of Australia in April this year for loss and damage, claiming that Cotton On knew or ought to have known that Cotton On’s t-shirt products bearing the phrase ‘LETTUCE TURNIP THE BEET’ infringed Ms Gorski’s trade mark and copyright.

Gorski’s ‘LETTUCE TURNIP THE BEET’ brand is a registered trade mark in Australia, which is searchable from the public IP Australia database. Cotton On denies replicating Gorski’s work and asserts it is merely an amusing pun. Yet Gorksi claims that a senior designer of Cotton On ‘repinned’ Gorski’s work and slogan on Pinterest prior to the alleged infringing t-shirts being manufactured and produced by Cotton On.

Cotton On has stated it intends to vigorously defend the proceedings despite Gorski owning a registered trade mark.

The circumstances demonstrate the difficulty small fashion labels, designers and sole traders face in protecting their intellectual property in a social media market. Having a registered trade mark and filing early will place fashion labels in the best possible position to enforce their brand. When creating and designing new labels, designers should also arrange for IP checks to be undertaken with the view to not stepping on third party registered rights.

If you require assistance with any aspect of trade mark or intellectual property law, please contact our team:

A bite out of Apple

2016-07-26T11:12:00.000+10:00

US technology giant Apple has lost its latest court battle over the rights to use the ‘iPhone’ trade mark in China.

The circumstances are not foreign to Apple - in 2012, the company paid $60 million to settle a similar dispute regarding the right to use the ‘iPad’ name in China.

In this matter, Apple applied for the ‘iPhone’ trade mark in China in 2002 for computer hardware and software in China. However, Chinese company Xintong Tiandi applied for a trade mark for leather goods bearing the word ‘iPhone’, which was approved before Apple’s 2002 application.

According to Chinese law, to enforce their trade mark rights Apple was required to prove that the ‘iPhone’ brand was well-known within the Chinese borders ahead of Xintong Tiandi’s registration. As Apple did not begin selling iPhones in mainland China until 2009, the Beijing Municipal High People’s Court dismissed Apple’s appeal on the basis that it could not prove that the ‘iPhone’ brand was well-known in China at the relevant time.

Apple intends to request a retrial with the Supreme People’s Court of China.

The ‘first to file’ nature of the trade mark system in China is such that unrelated third parties can secure trade mark registrations for trade marks of foreign traders if they file in China first. Foreign businesses often fail to take adequate precautions to protect their intellectual property in China. Major international brands and celebrities such as New Balance and Michael Jordan have faced similar difficulties with securing trade mark registrations in China. Where a product is expected to have global reach, early registration of trade marks in China is critical.

Brand owners should also keep records of evidence of trade mark use and well known reputation along with arranging for a trade mark watching service to monitor new applications for similar marks that should be opposed. Filing the English translation of the brand only may not be sufficient and expert advice should be sought on filing the Chinese character and translation equivalents to ensure broad protection.

McCullough Robertson offers a full service trade marks practice and can assist you with seeking trade mark protection for your brand in China. For more information or assistance protecting your intellectual property in China, please contact us:

British and Australian financial regulators sign agreement to support innovative businesses

2016-03-31T12:04:00.001+10:00

Under a new world-first agreement, innovative fintech companies in Australia and the United Kingdom will have more support from financial regulators as they attempt to enter the others’ market.

Click here to read more.
Alex Hutchens, Ben Wood

Significant Change - Australian Government’s effect on competition

2016-03-16T17:09:00.000+10:00

Significant Change - Australian Government’s effect on competition

Paul McLachlan, John Kettle, Alex Hutchens

The Australian Government announced today that it will amend section 46 of the Competition and Consumer Act 2010 (Cth) so that it is illegal for powerful companies to act anti-competitively. Specifically, the law will prohibit a company with substantial market power from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition in a market.

It is not an exaggeration to say that this is the most substantial reform of Australia’s competition law since the introduction of the Trade Practices Act in 1974.

McCullough Robertson advocated for a change to the law in the consultation on the proposed changes. Most Australian firms have lobbied for there to be no change.

The current section 46 requires that the company with market power have ‘taken advantage’ of its market power for particular purposes. The High Court has interpreted that obligation so that it is very difficult to prove a misuse of market power where the company could have engaged in the same conduct even if it did not have market power. In practice, this has proved to be a very high hurdle, with courts usually finding that the firm’s conduct did not need and rely on the market power. Despite widespread concerns about the power of large suppliers/customers in various industries, the ACCC has rarely succeeded in any prosecutions it has brought under the section.

The proposed section 46 will lower that hurdle substantially. In many of the cases the ACCC has lost, the court has still found there to be a collective arrangement that substantially lessened competition (breaching other provisions of the Act). Now, there will be no need to prove the existence of an agreement. Any unilateral conduct by a firm with market power will be illegal if it has the effect of substantially lessening competition in a market (or is likely to): even where the effect is an unintended consequence, and even if the conduct was conduct that small firms can and do engage in.

This will bring Australian law much closer to the way competition law applies to single firm conduct in the European Union. The experience in the European Union is that cases based on abuse of dominance are common (both by the European Commission and by private litigants) and have a strong success rate.

The reform implements the recommendations of last year’s Harper Review in full, after a further consultation by the Australian Government on this change specifically. It recognises that when firms with market power engage in conduct, it can have vastly different effects on competition than when small firms engage in the same conduct. Australian law has never recognised that distinction to date.

Please contact Paul, John or Alex for any information or discussion on this or any other competition issue.

Alex Hutchens

Paul McLachlan

John Kettle

2015 IPO update

2015-12-18T09:51:00.001+10:00

Tips and trends for companies considering an IPO

Reece Walker, Derek Pocock, Ben Wood

2015 has been a good year for IPOs in Australia, with a number of sizeable listings, including the recent $2.3 billion listing of Link Group. It has also seen a continuation in the trend of small and mid cap technology companies finding their place on the Australian Securities Exchange (ASX).

The technology, media and telecommunications (TMT) industry has had a strong run of listings in 2015, including the $2.1 billion listing of accounting software developer MYOB Group earlier this year.

We have also experienced a steady stream of IPO activity, including advising on 4 IPOs in the TMT space this year (for OtherLevels, Superloop, Over the Wire, and Megaport). With our involvement on a number of floats, we have also continued to see strong appetite from institutions as well as retail investors, validated through an increase in broker-firm offer rounds which are steadily becoming a recognised feature of many offers.

For a company at the right stage of development, there are a number of advantages to being listed. An IPO presents an attractive option to raising growth capital and increasing a company’ profile. However, there is far more to a successful IPO than market timing alone.

Set out below are some tips for companies that may be considering an IPO.

Plan for the IPO

A company should allow four to six months for the completion of the IPO process (and potentially more time depending on the complexity and scale of the capital raising).

Be ready to float

Act like a listed company ahead of time. Some tips include:

operating as if a public company ahead of time (and converting from a proprietary company at the right time if needed)
ensure the board has an appropriate spread of independent non-executive directors with a mix of expertise
analyse and critique the company’s governance culture and implement new practices where necessary to do so
ensure the company’s financial information is on track. If the company intends to list under ASX's profit test, it will need to provide unqualified audited financial statements for the past three years, and
review the company’s D&O insurance arrangements.

Take note of ASX listing requirements

will the company fall under the profit test or asset test? Note the specific requirements of each test under the ASX Listing Rules, and
take note of the spread requirements for listing (a minimum of between 300 and 400 holders depending on the number of shares held by related parties).

Assess the cost and viability of listing

assess the costs of underwriters, accountants, corporate advisers and legal advisers, and
take into account fees for initial listing fees, annual listing fees and other administrative fees (e.g. prospectus printing).

Get the right team

in addition to appropriate advisers, it is equally important to ensure sufficient resources are available to maintain the day-to-day business of the company while the board and management are focused on the IPO.

Consider existing shareholders

educate existing shareholders on the potential for all or a portion of their shares to be subject to escrow restrictions
consider whether any shareholders wish to sell all or part of their holding as part of the IPO, and
consider expectations of shareholders after listing (e.g. profitability and dividends) and how this fits in with the company’s business plan.

Consider incentive and share option plans

both long and short-term incentive plans should appropriately incentivise and reward key employees, while managing tax outcomes for both the company and its employees.

Critically evaluate the company’s business model

including key model dependencies of the business and risks specific to the business.

Take care with prospectus drafting

ensure clear, concise and effective writing
provide investors and their advisers with all the information they would reasonably require to make an informed assessment on:

rights and liabilities attaching to the securities being offered, and
assets and liabilities, financial position and performance, profits and losses and prospects of the company.

have appropriate due diligence and verification procedures.

Consider the use of investor presentation and pre-marketing

consider the potential for an investor presentation and/or pathfinder prospectus.
ensure consideration is made with regard to IPO advertising restrictions.
if pre-marketing materials will be used, commence the due diligence and verification process early.
ensure continuity of the company’s message between pre-marketing materials and the prospectus.

Determine the offer structure

Consider:

public or broker firm offer?
priority offers such as an employee priority round, and
if the offer will include a sell down of existing shareholders’ shares.

You should carefully evaluate whether your business is ‘IPO ready’ having regard to the factors above and implement any necessary changes to your business now, to assist with the IPO process.

Reece Walker

Derek Pocock

Ben Wood

Welcome to the ideas boom

2015-12-08T16:13:00.000+10:00

Top 10 initiatives from the Turnbull government’s $1b Innovation Statement

Alex Hutchens, Reece Walker

Prime Minister Malcolm Turnbull and Minister for Industry, Innovation and Science Christopher Pyne yesterday unveiled the Federal Government’s highly-anticipated Innovation Statement with the comment, “welcome to the ideas boom”.

As the Turnbull government's first major policy document, it is expected to involve the investment of $1.1b over four years across a range of industries. Mr Turnbull believes the plan will drive innovation in government, promote a culture of entrepreneurship and place innovation at the heart of everything we do in Australia.

Australian businesses, particularly start-up companies and those in the technology sector are set to benefit from the initiatives. We have highlighted our top 10 opportunities below.

1. Innovation and Science Australia

The Prime Minister announced that Innovation and Science Australia will be the new national innovation agency responsible for the long-term direction of the innovation plan, headed by Australia’s newly appointed Chief Scientist, Alan Finkle. StartupAUS has been campaigning for this for some time and believe it demonstrates the government’s genuine commitment to developing a ‘comprehensive national innovation and entrepreneurship policy’.

2. Fear of failure

Steps will be taken to encourage reasonable risk-taking and address Australians’ ‘fear of failure’ by reducing the default bankruptcy period from three years to one, bringing in new laws to encourage crowd-funding and introducing new tax offsets for early-stage investments. There will also be a ban on contractual clauses that allow an agreement to be terminated solely due to insolvency if a company is being restructured.

3. Relax the same business test

There are plans to replace the ‘same business test’ with a more flexible ‘predominantly similar business test’, allowing businesses to change their business model more easily by writing their previous operations off as an R&D cost. This will reduce the tax exposure of start-ups that wish to change their strategy after learning more about their market (i.e. ‘pivoting’).

4. Incentives for investment

The government will introduce new incentives for investors including a 20% tax offset on investments in start-ups (capped at $200,000 per investor per year), and a 10 year capital gains tax exemption if the investment is held for three years. Further, Early Stage Venture Capital Limited Partnerships (ESVCLP) may now have a maximum fund size of $200,000 (up from $100,000) and may receive a 10% non-refundable tax offset on capital invested in start-up companies. The government has also designated $106m in tax incentives for ‘angel’ investors, who provide seed funding in the early years of a venture's creation.

5. CSIRO

A $200m CSIRO Innovation Fund will be created to support investments in spin-off and start-up companies. The CSIRO will also get an extra $20m to help commercialise research outcomes.

6. Commercialising research

The government will put $10m towards a $250m Biomedical Translation Fund which is aimed at getting ideas from the laboratory to market.

7. Talent and Skill

$51m will be invested in coding programs in schools over the next five years to introduce online computing challenges, ICT summer schools, and an annual ‘Cracking the Code’ national competition, as well as providing the necessary support for teachers. A further $13m will be invested in supporting greater participation of girls and women in research and STEM (science, technology, engineering and mathematics) industries and $48m in encouraging students to participate in science and maths.

8. Entrepreneur Visa

The innovation statement outlines plans to create an ‘Entrepreneur Visa’ giving pathways to permanent residency to migrants who start a successful business or who are postgraduate researchers with qualifications in STEM and information technology. This visa, which will be available in November next year, is aimed at encouraging innovative talent from all over the world to move to Australia and entice exchange students to stay in Australia after graduating.

9. Cyber Security

The government plans to spend $30m establishing the Cyber Security Growth Centre to create business opportunities for cyber security agencies to enter the rapidly-growing market estimated to be worth more than $97b. The industry-lead body will also develop a national cyber security strategy which will be released next year.

10. Research infrastructure

The prime minister also announced that $2.3b will be invested into research infrastructure, including $1.5b for the National Collaborative Research Infrastructure Strategy, $520m for the Australia Synchrotron and $294m for the Square Kilometre Array.

Supporting innovation

At McCullough Robertson, we have a history of helping start-up companies and innovative ideas to grow. We support and nurture emerging industries such as life sciences, biotechnology and information technology. We expect to hear more detail on the Federal Government’s plans during coming weeks and will keep you updated.

For more information on the initiatives visit www.innovation.gov.au.

Alex Hutchens

Reece Walker

A not-so-safe harbour

2015-10-19T11:50:00.001+10:00

Alex Hutchens, John Kettle, Paul McLachlan, William McCullough

It is impossible to avoid the frenzy that has been kicked up by the European Court of Justice’s (ECJ) decision of 6 October 2015 in Case C-362/14 Maximillian Schrems v Data Protection Commissioner.

What is/was the Safe Harbour?

Like Australia, the Member States of European Union (EU) are subject to strict data protection regulations. Generally speaking, personal data cannot be transferred out of a Member State unless the destination country has adequate protection for the data in question. Over a decade ago, the United States of America (US) and European Commission entered into the ‘Safe Harbour Agreement’ which meant that data could be shared where both companies comply with the Safe Habour Agreement.

All was well and good and many big businesses (including Amazon and Google) relied on the enforceability and protection of the Safe Harbour Agreement.

So what happened?

Edward Snowden let the cat out of the bag when he revealed that the National Security Agency (NSA) was carrying out widespread surveillance of digital communications (including EU-residents’ personal data). One of the many consequences of this was that an Austrian law student called Maximillian Schrems complained that his Facebook data should not be sent by Facebook’s Irish Subsidiary to servers in the US for processing. He argued that the law and practice of the United States do not offer sufficient protection against surveillance by the public authorities of the data transferred to that country. This may be somewhat of an understatement; as the German Chancellor Angela Merkel put it when it came out that the she had been spied on, ‘spying among friends’ was ‘unacceptable’.

On 23 September 2015 Advocate General Bot release a non-binding but very influential opinion re-stating the findings of earlier courts that ‘the law and practice of the United States allow the large-scale collection of the personal data of citizens of the EU which is transferred, without those citizens benefiting from effective judicial protection’. AG Bot went on to say ‘the access enjoyed by the United States intelligence services to the transferred data constitutes an interference with the right to respect for private life and the right to protection of personal data’.

The writing was on the wall, but it took until 6 October 2015 for the ECJ to reach its decision. In summary:

‘The United States authorities were able to access the personal data transferred from the Member States to the United States and process it in a way incompatible, in particular, with the purposes for which it was transferred, beyond what was strictly necessary and proportionate to the protection of national security. Also, the Commission noted that the persons concerned had no administrative or judicial means of redress enabling, in particular, the data relating to them to be accessed and, as the case may be, rectified or erased.’

The ECJ found that the US surveillance compromised the essence of the EU fundamental rights to respect for private life and effective judicial protection.

What does this actually mean?

A quirk of the European Economic Area (EEA) legal system is that the ECJ does not decide the dispute itself. It is for the national court or tribunal to deal with the case in accordance with the ECJ’s decision, which is similarly binding on other national courts or tribunals before which a similar issue is raised. That said, it is pretty clear that the Safe Harbour Agreement is history.

One of the most likely consequences is that the EU and US will reach a new, stricter agreement in the near future.

Does this actually matter… my business is in Australia?

Australian companies that are responsible for the transfer of EU citizens’ personal data to the US will be impacted by this decision if either party relies on the Safe Harbour Agreement.

There is no immediate impact for Australian businesses who are not seeking to rely on the Safe Harbour Agreement to transfer personal data between EU and US operations. However, privacy and data retention remain topical issues, with mandatory data retention legislation recently passed for telecommunications carriers, and proposed mandatory data breach legislation still expected this year.

What should we be doing?

For starters, no new agreements should be entered into that provide that the parties may rely on the Safe Harbour Agreement as sufficiency of adequate protection of data sent from the EU to US.

If, in existing arrangements, either party relies on the Safe Harbour Agreement as adequate protection then this approach needs to be urgently reconsidered. The alternatives include agreeing a different way to share data with US entities such as model clauses approved by the relevant authorities (although query whether there is actually any way to contractually prevent the NSA from intercepting data), getting data subjects’ permission to the export of their data or ceasing to export the data to the US.

Apple facing damages bill for patent infringement

2015-10-19T10:23:00.000+10:00

Alex Hutchens, John Kettle, Paul McLachlan, Eliza Humble

Apple Inc could be facing up to $US862 million in damages after a US Federal jury ruled on 13 October 2015 that it infringed a patent owned by the licensing arm of the University of Wisconsin.

The case

The Wisconsin Alumni Research Foundation (WARF) sued Apple in January 2014 alleging infringement of its patent rights in technology known as “Table Based Data Speculation Circuit for Parallel Processing Computer” which improves processor efficiency and performance. WARF believes Apple incorporated the technology into processors (A7, A8 and A8Cx) found in iPhone 5s, 6, 6 Plus, as well as several versions of the iPad without permission.

According to court papers, Cupertino, California-based Apple denied the infringement arguing that the patent is invalid.

The jury in Madison Wisconsin found that the patent, filed in 1998, was valid and that it was used by Apple without the necessary permission.

What’s next?

The jury must now decide on damages, which the US District Judge who is presiding over the case predicts could amount to up to $US862.4 million (around $AUD1,100 million).

The jury will then determine whether Apple infringed the patent wilfully, which could lead to enhanced penalties. This is a contentious issue following WARF’s allegations that Apple ignored their offers to license the patent for a fee.

To add to Apple’s concerns, WARF launched another lawsuit against Apple last month which targets the chips used in the Apple’s newest models, the iPhone 6S, 6S Plus and the iPad Pro.

While this is unlikely to make a significant financial impact on Apple, who reported a quarterly net profit of $US10,700 million in July, this is a salutary reminder to look before you leap. By getting freedom to operate searches done in the key countries in which you are going to launch a product or service, will minimise your exposure to potential IP infringement actions once the product or service is launched.

High Court ruling on the patentability of human genes

2015-10-07T16:38:00.000+10:00

Malcolm McBratney

Today’s landmark decision by the High Court in D'Arcy v Myriad Genetics Inc & Anor [2015] HCA 35 (7 October 2015) essentially prohibits patent protection for human genetic material and genetic sequences. The decision reverses the 15 February 2013 Full Federal Court ruling, which found that United States company Myriad Genetics Inc’s (Myriad) patent on the isolated BRCA1 gene, associated mutations and utilisation of the sequence for diagnostic purposes was valid.

Background

In D’Arcy v Myriad Genetics Inc [2014] FCAFC 115, the Full Federal Court of Australia’s unanimously held that Myriad Genetics Inc’s patent claims regarding particular isolated BRCA1 gene were patentable subject matter in Australia.

The Full Court held that the ‘isolated’ nucleic acids (Invention) was chemically, structurally and functionally different from a nucleic acid inside a human cell. The nucleic acids had been ‘isolated’ in the sense that the naturally occurring materials were extracted from the cells, thereby creating an artificial state of affair for economic benefit. On this basis, the Full Court found that the Invention was a ‘manner of manufacture’ and thereby patentable.

This decision was at odds with the leading U. S. Supreme Court’s decision of 2013 that similar patent claims were invalid, on the basis that such claims were to a ‘product of nature’ and were therefore not patentable.

High Court’s decision

Today, the High Court unanimously allowed the appeal from the decision of the Full Court of the Federal Court and held that the BRCA1 gene was not a ‘patentable invention’ within the meaning of s 18(1)(a) of the Patents Act 1990 (Cth) (Act). Section 18(1)(a) of the Act requires that, for an invention to be patentable, it must be ‘a manner of manufacture’ within the meaning of s 6 of the Statute of Monopolies.

The High Court held that, having regard to the relevant factors, an isolated nucleic acid, coding for the BRCA1 protein, with specified variations, is not a manner of manufacture. Although it may be said that the Invention claimed might be, in a formal sense, a product of human action, it was the existence of the chemical information stored in the relevant sequences that was an essential element of the Invention as claimed. That information is the same information as that contained in the DNA of the person from which the nucleic acid is isolated and cannot properly be said to have been manufactured.

The Court also considered that to attribute patentability to the Invention would involve an extension of the concept of a manner of manufacture, which was not appropriate for judicial determination.

Where to now?

This decision raises important concerns about the impact on gene-based medical therapies and life sciences industry at large.

Our patent system is based on the premise that patent exclusivity is needed to promote invention and innovation. This is the basis on which supporters of gene patenting have long contended that patents for human genes will have a positive effect on genetic innovation, research and development in the private sector. Restricting patent protection for biological inventions may therefore undermine incentives for a wide range of entities to invest in biotechnology companies, which may ultimately hinder progress in research and development. Further, restricting the patentability of human genetic material has the potential to not only impact investment and commercialisation in the domestic biotech industry, but also foreign investment in Australia.

While this decision has brought the Australian position in line with the US position, its effect on investment and commercialisation in Australia is yet to be seen. It will be important for biotechnology companies to understand how this decision impacts their research and commercialisation going forward.

While this ruling provides some certainty on the criteria that we might use to decide whether something is patent-eligible, the decision may leave some room for patents on genetic material that have been further isolated from the natural occurring substances or organisms.

Malcolm McBratney