Overview

A recent case Primary Health Care Ltd v Commissioner of Taxation [2010]  FCA 419 highlighted the importance of “independent intellectual effort” in copyright cases.

Facts

The beneficial owner of a trust, the applicant, purchased certain medical and dental practices on behalf of the trust. The applicant alleged to obtain the copyrights interest as part of the purchase of practices, which fell under computable income and as such was allowed for tax deductions from the net revenue of the trust. In this case, Copyright was claimed for the following:

• Prescriptions
• Health summaries
• Referral letters
• Consultation notes of the acquired medical and dental practices.

Findings

It was noted by Justice Stone that for a medical record to qualify as literary work it should contain some individual intellectual effort and so could copyright exist. All medical records that were claimed for copyrights were assessed by Justice Stoneas follows:

Consultation notes that had only one author was considered continuous narrative, which displayed independent intellectual effort and so was qualifying for copyright protection. However, the consultation notes that had multiple authors were restricted.

Prescription consisted only of the names of medications, dosage and standard directions therefore was not qualified for copyright protection and also health summaries that had a list of previous illnesses and actions were restricted.

The referral letters contained intellectual independent effect and content were driven by the purpose of the letters so it qualified for copyright protection.

Outcome

Justice Stone found that in medical records like prescriptions, health summaries, referral letters and consultation notes do not involuntarily attract copyrights. So she determined that such records should be examined on a case by case basis which also displays the level of independent intellectual effort that would justify classifying the record as an original literary workfor the purposes of the Copyright Act 1968.

A significant part of the recent changes to the unfair dismissal rights for the employees of small businesses under the Fair WorkAct 2009 (the Act) was instituting Small Business Fair Dismissal Code Checklist (the Code). This was in response tolatest decisions of Fair Work Australia (FWA).

All small business must be aware of these changes, as they will have a direct impact on the measures involving termination of employees in small business, mainly redundancies.

This new change in law is designed to give small businesses (employing less than 15employees) with an easy set of procedures for the fair termination of employees. The Code came into effect on 1 July 2009. The Code mainly gives two set of guidelines. Firstly, the minimum employment term has been doubled to 12 months; the employees cannot file a claim for unfair dismissal for this period. Secondly, if small business owners carefully follow these simple set of guidelines for the fair termination of employees from the Code, it will automatically guarantee that any dismissal of an employee is not unfair.

Key Changes                        

The focus of the changes to the Code’s checklist is mainly on redundancies and the rights of an employee. Below is the summary of the latest changes to the Code:

Complying with s 389 of the Act – One of the changes include compliance with s 389 all the employers shall comply with all the requirements of this section to make sure that the termination was a fair discharge.

The checklist also consists of another question to remind small business owners that they must follow the consultation clause which states that the before taking a finaldecision of terminating an employee, the employers must consult either the employee or his/her representative.

Earlier, the checklist asked a simple question to the employers: If the employment was dismissed because of a genuine redundancy? Now this question has been extended to “'In other words, was the dismissal because you didn't require the person's job to be done by anyone because of changes in the operational requirements of your business?'.

Another change to the Code is related to the rights of an employee. Before the final decision regarding the termination, every employee must be provided with a support person to attend the discussion relating to the redundancy issues.

Although,it is true that if the small business employers comply with the Code when dismissing an employee, the dismissal will be considered fair. But the preamble of the checklist evidently states that compliance with the Checklist does not necessarily mean compliance with the Code.

The below link from the FWA website provides the checklist of how the small business owners need toreflect on termination of any employment.

http://www.fairwork.gov.au/termination/small-business-fair-dismissal-code/pages/default.aspx

A recent Mantra case provides relief to brand owners seeking to register color asa trademark (TM). Federal Court decision of MarsAustralia Pty Ltd v Société des Produits Nestlé SA [2010] FCA 639 (Mantracase), Mars Australia Pty Ltd (Mars) was allowed to register its color called 'Whiskas Purple’, which it uses in its “Whiskas” brand of cat food as a TM.

Background

Mars,the owner of the well-known cat food Whiskas had used its Whiskas Purple color on its cat food products.

Mars applied for registering 'Whiskas Purple' as a TM. Although at first, the application was accepted, the registration was later abandoned by the trademark authorities due to opposition from Nestle. Nestle contested that the color purple was not able to differentiate Mars’ products from those of other traders.

Mars further appealed in the Federal Court, which later accepted the Mars’s contention that colour could indeed function as a TM of a product. Mars submitted significant evidence to prove the same. Mars proved that:

Mars had used its colour 'Whiskas Purple' in Australia since 2000 and it had been greatly endorsed and promoted.

The colour had been used as the leading colour across the entire variety of Mars’ cat food products;

Mars also made clear that the color 'Whiskas Purple' was created and carefully chosen for the Mars Group in Europe to form a stronger brand name identity for Whiskas.

Federal Court Decision

The court allowed Mars application to proceed to registering its shade of purple as its TM. The Court further held that Mars had implemented a completely new color and had heavily endorsed it from the outset in its packaging and advertising supplies up to the time that Mars filed its TM application.

While other companies in Australia have used a range of shades of purple on their own pet food products, the shade of purple in Mars’s case was used to signify specific range within a product. On the other hand, Mars had used its colour 'Whiskas Purple' as abrand in its own right.

Lessonfor Brand Owners

The lesson from this case is that it is vital that all the Brand Owners must apply for registration of their TM in case they use color as a feature of their mark. However, it should be noted that registering a single color would not be easily obtained.

It is vital to build a fine branding plan from the beginning to make sure that the TM is endorsed and used widely. It should be ensured that the uniqueness of the TM color could be established. 

In an ideal world and a new decade, everyone would win the lottery and in this financial slowdown, all your money problems would disappear. While there isn’t much Sajen Legal can do about the first one, we can certainly offer you advice to help you protect your personal and professional financial portfolio, banishing those economic woes.

Individuals as well as companies, big and small, were hit by the Global Financial Crisis. Some have emerged stronger from the slowdown, substituting cynicism with a new hope. Others are still struggling. Bankruptcy, although no new phenomenon, became commonplace at the end of the previous decade. 2008-09 alone witnessed 32,909 insolvency activities as reported by the Insolvency and Trustee Service. Of course, it was one of the key factors which resulted in the global credit crunch but Global Crisis or not, bankruptcy can hit anyone, anytime, anywhere.

A debtor may become bankrupt voluntarily or involuntarily. The former occurs when an Official Receiver accepts a bankruptcy petition presented by the debtor himself. The latter occurs when the court upon the petition of a creditor, makes a sequestration order against the debtor’s estate.

Bankruptcy is usually synonymous with an individual, whereas, insolvency applies to a company. However, in both situations, control of property owned by the indebted person or company is vested with either a liquidator or trustee in Bankruptcy. While some are still awaiting their discharge, a combination of sound financial planning for your future, right choices and invaluable advice could help you not only avoid bankruptcy but also encourage you, your business and household to flourish this year and others to come.

Common financial questions posed in the New Year include, ‘Should I buy a car or a house?’ Global markets are improving, albeit sluggishly, but is it advisable to secure a loan for buying an asset which depreciates eventually or would it be wiser to invest in property?

Investment goals play an important role here. If the purpose is to gain returns on the appreciation of the value of the assets, then it is practical to invest in assets such as stocks, unit trusts, mutual funds or property. A car, on the other hand is a depreciating asset and unless it is being used as a minicab or transportation service, it is not going to attract any income.

Other questions include, ‘Can I start a business without any capital’? The new era injects fresh inspiration into entrepreneurs and enthusiasts but some worry about a lack of capital and their ability to secure loans. Accompanied with this worry is the bigger apprehension of failing to make repayments and the dreaded option of bankruptcy.

Of course these are a few of the many important questions when making new plans. However, a secure plan needs to cover all avenues, not just the obvious ones. Where does one start? How can a business revive itself?

Apart from cost cutting, lay offs, outsourcing, reduced luxury holidays or spa memberships, businesses and individuals in order to financially revive themselves at the office or home could adopt the following simple but prudent tips:

• Set personal and professional goals and then zero in on what matters
• Use a budget and stick to it
• Create an emergency fund
• Reconsider unaffordable assets
• Resist taking out too many loans
• Settle, manage or consolidate your debts
• Understand your target audience
• Exploit your competitive gaps
• Think beyond pricing
• Acquire new skills

These are a few simple ways in which an individual or company can consciously avoid bankruptcy. For instance, proper planning and continually revisiting your business plan can help maximize opportunities in an evolving marketplace. Flexibility is also the key here, both in planning and in your approach. Of course your financial and legal advisors will offer you more structured and detailed advice but relying on your own resources and judgment will go a long way in saving you several pennies. Hiring good people is one example. Investing in the right people can define the difference between success and failure. Better customer relationships will also be built if internal relations are healthy.

At Sajen Legal, we offer our clients advice in times of difficulty, when faced with a serious order such as bankruptcy. We also strive to offer advice in preempting and avoiding such situations. Looking ahead, there is no shortage of good ideas and good people, opportunities and challenges. Implementing, attracting and boldly facing them will mark the beginning of a new era for individuals, families and companies.

Forrest Gump was right. ‘Life is like a box of chocolates – you never know what you’re going to get!’ In the intellectual property game this is especially true for the chocolate industry and big brand names such as Mars, Cadbury and Sweet Rewards.

Mars Australia, in Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606 has recently filed an infringement suit alleging Sweet Reward’s packaging of its chocolate malt balls are confusing and misleading consumers. Mars has also claimed a passing off suit against Sweet Rewards. It also alleges infringement of two registered packaging trade marks for Maltesers.

The claim was dismissed by both the Federal Court at first instance and soon after by the Full Federal Court.

Perram J. of the Federal Court of Australia echoed a simple test, placing reliance upon consumer perception that it was”unlikely that an ordinary consumer of chocolate confectionary could mistake something which is not called a Malteser for a Malteser. In that sense, Mars is a victim of its own success.”

The Full Federal Court, in dismissing the appeal brought by Mars, held that using similar packaging and pictures in the same industry was commonplace. However, this decision has been criticized for its simplicity in overseeing the efforts and resources which are invested by brand owners in creating their brand image.

Rhonda Steele, Marketing Property Manager of MARS Bars, for Asia and Australia shares some wisdom with competitors. She states that, ‘to adequately protect your intellectual property rights it's very important to do your thinking early and to conduct thorough searches - both of the trade marks register and the market place - so that you can be confident of launching your new product without fear of infringing someone else's rights.'

Rhonda further asserts that this might be more problematic for small companies. Prior to registering a mark and securing your intellectual rights, a substantial sum of money is invested in product development and package design. If it is found that a new product violates prior rights, these resources are then unfortunately wasted.

However, this is not the end of the saga. Once a mark is registered, what follows identifies the survival and success of the company and its rights.

In contrast, interestingly enough, Cadbury and Darrell Lea, faced with a similar dispute over trade mark branding and imaging in a passing off case, have settled their differences over the colour purple.

No longer is a device, name, or actual product the only important considerations in this battleground. Colour too is involved. Cadbury has six colour trade marks registered. The realm of intellectual property rights are sophisticated enough to warrant such registrations. Where does it end?

These controversies show that the outcome is not always predictable. Mars has been marketing Maltesers since 1989 and Sweet Rewards has introduced Malt Balls in 2005. It is also not always the case that the earlier mark holder will receive more protection and patronage from its market.

Whilst it is safe to assume that every consumer loves chocolate, what goes on behind the scenes is not as lovable, calories aside. Consumers have the luxury of choice. It is their very choice and perception of these brands, along with statutory authorities and rules governing this area of the law, which make a difference at the end of these intellectual property disputes.

The regular tribulations of the Global Financial Crisis in the guise of unemployment and financial struggles have been dwarfed by a more sophisticated evil. Fraudulent activities and organized misbehavior disguised under a trend, known as ‘Phoenix activity’, although not a new trend, is gaining momentum in Australia in recent times. What is Phoenix activity? Phoenix, the largest city in the US, also known as the Valley of the Sun and the Phoenix activity in Australia, echo the same philosophy to the mythological creature. The emergence of a new entity through fire and difficult times resurfaces to live again and start afresh. These Phoenix companies are ‘revived’ by directors who transfer assets of an indebted company into a ‘new’ company, with a similar name and identical activities of the previous company, doing business incognito but essentially are run by the same directors.

Further, the directors place the initial company into administration or liquidation with no assets to pay creditors, whilst enjoying the fruit of the Phoenix or new company. However, ASIC has been quick to catch on to such fraudulent gimmicks. It has been successful in removing 40 directors from office who have intentionally avoided their responsibilities and have defrauded their creditors.

The Australian Taxation Office and Treasury fear annual costs to be around $700 million to $1.3 billion in resolving these cases. An enforcement program is in place, which is funded by the Assetless Administration Fund.

ASIC Chairman, Mr Jeffrey Lucy, explained that the purpose of the Fund was to assist liquidators to discharge their duties in conducting thorough investigations and compiling reports, which would enable ASIC to implement enforcement proceedings.

However, this is not enough. Bridging the regulatory gap, protecting creditors and discouraging Phoenix activity, needs more stringent strategies in place. Whilst the Fund and the Corporations Act, among other statutory sources, serve in achieving these objectives, the Treasury has proposed stricter changes, which if implemented, will significantly alter the personal liability of directors.

The proposed paper, "Action Against Fraudulent Phoenix Activity"^[1] , recommends several key changes. To cite a few, for instance, the current taxation rules entitle the Commissioner to preempt tax liabilities by requesting a bond from a director where he foresees or considers a risk of Phoenix activity. The new rules recommend widening this preemption by including other liabilities. Further, a high penalty is also to be imposed for failing to provide such a bond.

Other changes apply to payment of liabilities. For example, the Director Penalty Notice is to be replaced with an automatic penalty and personal liability on the director after 3 months from the due date for payment of statutory liabilities. Earlier, directors were liable for just PAYG. Under the new regime, directors will also be held personally labile for outstanding superannuation, GST, excise and income tax.

The ideal outcome would be for a reduced number of Phoenix activities and directors who are more honest and diligent in their conduct and duties. Until this positive change completely sets in, ASIC will continue intervening but earlier on this time with the help of the stricter proposed rules, the Assetless Administration Fund and the information provided by liquidators. Directors, instead of feeling scared and threatened should view these changes positively and seek to turn around their companies and avoid severe legal penalties.

ASIC’s surveillance initiative ensures that company officers barred from running their companies comply with their disqualification or else they will face the threat of criminal proceedings.

It has been a little over a year since the Global Financial Crisis. The Australian economy is emerging boldly. This should inject a new impetus to companies and directors who are struggling to provide opportunities for genuine growth and trade and to discourage any unwanted Phoenixes. On the one hand, strict rules will punish dishonest directors but the innocent ones along with their creditors may wrongfully and unfairly bear the brunt of such a strict regime.

^[1] http://www.treasury.gov.au/contentitem.asp?NavId=002&ContentID=1647