September 2003

IP & IT law update: cybersquatters, patents, and IP policies

From a legal standpoint, there has been a veritable hive of activity relating to intellectual property and information technology laws. Business may need to take note of some of the following items.

Cyber-squatters lose, but it's better to be safe than sorry

In 1997, Duncan Freeman registered two domain names: starbuckscoffee.com and frappuccino.com. On 5 January 1998, Starbucks Corporation, the owner of a large and expanding retail coffee shop empire, wrote to Mr Freeman, objecting to the registrations.

Mr Freeman refused to transfer the domains, so Starbucks notified the dispute to the relevant domain name registrar, Network Solutions Inc. In April and May 1998, NSI suspended use of the domains in accordance with then current NSI policy. The suspension lasted until February 2000, when the NSI policy was replaced by ICANN's Uniform Domain Name Dispute Resolution Policy (UDRP). From February 2000 to April 2003, Starbucks did nothing to pursue transfer of the domain names. In April 2003, Starbucks lodged notice of the dispute with the World Intellectual Property Organisation's (WIPO) Arbitration and Mediation Centre. Mr Freeman claimed, in addition to allegedly more substantive defences (which the WIPO panel found not to be credible, and did not accept), that Starbucks had waived its claims by doing nothing for more than three years.

The result: on 9 July 2003, Starbucks received an order that the domain names be transferred from Mr Freeman.

In related good news for legitimate traders and trade mark owners, the Federal Court recently held that cyber-squatting infringes the Trade Practices Act's provisions that prohibit conduct in trade or commerce that is likely to mislead or deceive people.

The case involved two domain names in the '.com.au' DNS, registered by Resource Capital Australia Pty Ltd through its sole director, Marcus Stephen Boland. The names were csrsugar.com.au and constructionmaterials.com.au.

Publicly-listed CSR Limited was the proprietor of a number of registered trade marks including "CSR" and "CSR Sugar", in relation to sugar and sweetening agents, and "CSR" was also a registered trade mark in relation to construction materials.

Mr Boland's company sought to sell the names to CSR, and claimed the names were only registered to protect CSR's shareholders (because CSR had failed to register the names, Mr Boland claimed this meant the listed company was disregarding the interests of its shareholders).

The Federal Court had little trouble granting injunctions to CSR, after finding that CSR had developed a considerable reputation in connection with the refining and sale of sugar and sugar products, and that Mr Boland's company was in the business of registering domain names and turning those names to account ? an activity that was held to be conduct in trade or commerce.

The conclusion: It is easier to register a '.com' domain name than it is to register a '.com.au' domain name, but this hasn't prevented numerous instances of cyber-squatting in the '.com.au' DNS. So it is worth noting that the UDRP provisions apply to names registered in the '.com.au' DNS.

Taking a lesson from the Starbucks case, if a cyber-squatter has poached domain names from your business, it may not be too late to take recovery action under the UDRP. If you are asked to pay for the handover of the names, the squatter may well be susceptible to Court action in Australia.

Even though these examples are indicative of a trend against those who seek to highjack others' business names or trade marks, it is better to avoid the time and resources required to deal with cyber-squatters. We recommend clients ensure that relevant trade marks and domain names are available, before launching any new brand or re-branding exercise, particularly as your preferred names may also be preferred by another legitimate trader - and cyber-squatting may be of little or no help in those cases.

E-commerce patents strikes fear into the hearts of all businesses online

A Canadian-based company, that has been granted an e-commerce patent in the USA, Singapore and New Zealand (amongst others) has also filed for registration in Australia. An industry commentator, Mr Tutaki, heard of the application and lodged an opposition at the eleventh hour.

Unlike the (in)famous case of the hyper-linking patent previously granted to British Telecom in the USA, and which BT has expressly indicated it would not enforce (principally because to do so would have crippled the World Wide Web): the Canadian patent owner (which is headed by a patent attorney) and has said it plans to enforce the patent. New Zealand media reports say the Canadian company has had its lawyers send letters of demand to businesses in New Zealand operating e-commerce web sites claiming substantial licence fees, and it looks like being a test bed for the plaintiff company.

Patent case - judgment against Microsoft shakes the IT community

The Internet industry has been hit by a second 'heart-stopper' based on patent laws: Microsoft's recent loss in a patent infringement lawsuit brought against the software behemoth in the USA by the University of California and Eolas Technologies Inc.

The suit was based on US patent number 5,838,906 - developed by a team led by Eolas' President, Michael Doyle, at the University of California. In summary, the patent covers technology that enables small computer programs (aka "plug-ins" or "applets") to be embedded in web pages so that they may interact with web browsers such as Microsoft's Internet Explorer.

The jury awarded damages of US$520.6 million against Microsoft. In response, industry media have reported that Microsoft said it will be making changes to Internet Explorer that may affect "a large number of existing web pages", though it stands by its claims that it did not infringe the patent.

We won't comment on the underlying patent law, or the practices that allow these patents to be granted ? that's an article in it's own right - but if you are planning to implement, or have already implemented a transactional or 'interactive' web presence, then you should seek contractual reassurance from your software developers so that you minimise the impact these cases may have on your own web presences; and pay close attention to these cases.

Porn at work is a sackable offence - but employers still need IT use policies

The New South Wales Industrial Relations Commission recently decided a case involving an employee who had downloaded pornographic material onto his employer's computer systems.

The Commission was prepared to believe that the employee wasn't aware of the employer's policy against this kind of behaviour, but that was no answer to instant dismissal by the employer because it had taken reasonable steps to bring its IT policy to the attention of its employees.

The case is a salutary reminder that a prudent employer should:

  • adopt a written policy governing use of its IT assets. We suggest the policy cover not only the use of computers with Internet access, but other technology. For example, an employee who is responsible for a motor vehicle accident whilst using a mobile phone (on a work-related call) may expose the employer to a claim ? where death or serious personal injury results, the employer's exposure to an allegation of vicarious liability may be very substantial.

  • take reasonable steps to bring the policy to the attention of employees. Where practicable, we suggest employees be asked to sign a 'receipt' indicating they have had the policy brought to their attention, and it should be available on the employer's 'intranet' where one exists.