IPToolbox Intellectual Property Protection Infringements of IP Rights Infringements of IP Rights What this module is about Developing an infringement strategy. Obtaining insurance to cover the legal costs of IP infringement actions. Issues involved in bringing legal proceedings. The steps involved in prosecuting an infringer of your IP rights. Strategies for avoiding infringement of IP rights owned by other people. Particular issues relating to the Internet. Infringements of IP Rights Enforcing your rights An owner of IP rights is given exclusive rights relating to particular property. For example, those rights could be the exclusive rights to make copies of an image (copyright), to use a sign or logo in trade (trade marks) or to manufacture an invention (patents). When a person other than the owner of the IP rights attempts to exercise the same rights without permission they infringe the IP rights of the owner. For example, a person who copies an image infringes copyright in that image. Taking action against a person who infringes your IP rights is known as enforcement. In many respects the value of IP rights is directly related to the ability of the owner to enforce them. Rights which cannot be enforced may be considered worthless because ownership of them does not prevent other people from using them in any practical sense. Equally, the effective enforcement of IP rights is necessary to maintain their value in legal terms, as an ongoing deterrent and the ability to attract commercial value. Infringements of IP Rights An infringement strategy Determining whether there has been an infringement of IP rights and what legal action is appropriate can be a complex exercise. It is recommended that you consult a lawyer who understands these matters before taking any infringement action or establishing an infringement strategy. In some cases, by simply threatening someone with infringement proceedings you can incur a serious legal liability. IP rights are most effective when they are enforced as part of an infringement strategy. An infringement strategy is not simply an intention to commence legal proceedings when you believe your IP rights are infringed. It involves a strategic assessment of your IP rights and setting parameters for beginning (and ending) infringement action. There will be cases where your IP rights have been infringed but you may be advised by your lawyer not to bring legal proceedings against the infringer. This may be the result of particular difficulties: In proving the existence or ownership of the IP rights; In proving infringement; or The fact that the costs of the proceedings outweigh the value of succeeding in the infringement action. An owner of IP rights should develop an infringement strategy which is appropriate for the particular IP rights held and the owner's particular needs. For example, the infringement strategy should specify: Pro-active measures to be used to limit the incidence of infringements. These can include the use of software access codes or passwords, or physical protection measures or data 'seeding' to enable easy detection of infringements; The methods which will be used to detect infringements. Detection methods could range from periodic review of competitor's products and advertising to campaigns specifically targeted at identifying infringements and infringers; The process which will be used to select targets for infringement action and the type of action against each target. For example, in the case where there are potentially too many infringements to prosecute, such as home taping of sound recordings, the strategy may specify the size and type of targets that will be pursued. In other cases the threshold may be set according to the financial resources of the infringer; The budgets for infringement action. All legal proceedings are potentially expensive and infringement actions can be amongst the most expensive. If you are unsuccessful not only will you have incurred your own legal costs, you will usually be liable for some or all of the legal costs of the person you alleged was an infringer; and Setting goals for infringement action. These goals can include obtaining injunctions, recovering damages or deterrence through the use of publicity. The infringement strategy guide offered here is necessarily general and is not intended as an alternative to obtaining specific legal advice in relation to a particular situation of infringement. This module will also help you identify the type of information you will need to provide to a potential legal adviser and what you can expect in return. Infringements of IP Rights IP insurance The costs of enforcing IP rights can be very high. Factors which contribute to the costs include: The costs of proving the existence of IP rights and identifying creators and prior owners of the rights. In intellectual property cases, defendants are entitled to challenge the existence of IP rights just as they are able to challenge whether they infringed those rights. This challenge can add significantly to the costs of the case; The costs of gathering specialist evidence. Often an owner of IP rights will find it necessary to retain expert witnesses and investigators to gather evidence for infringement proceedings. Expert witnesses usually charge fees on an hourly basis in addition to incidental costs. Investigators may charge for surveillance, trap purchases and photographic or video evidence; and The costs of a general nature associated with all legal proceedings. Most intellectual property infringement cases are brought in the Federal Court of Australia and most plaintiffs are represented by lawyers and barristers, usually skilled in IP law. Legal fees can amount to hundreds of thousands of dollars. Any plaintiff who brings proceedings in the Federal Court must also be prepared to pay court fees for filing certain documents, fees for hearings in court and other procedural steps. The costs of enforcing IP rights can deter owners of IP rights from starting infringement proceedings. One way of obtaining some protection from these costs is to obtain an insurance policy to cover the costs of legal proceedings. Such a policy is sometimes known as an 'IP insurance policy'. Infringements of IP Rights What should the policy cover? There are insurance policies available which are capable of covering some or all of your legal costs. They are called 'legal expenses' policies. As their name suggests, they merely cover the costs of litigation, not damages. Policies vary from insurer to insurer. An IP insurer should be able to provide advise on what IP rights can be covered. In fact, insurance covering the full IP rights of the property owner is preferable to more selective patent-only protection as it gives greater legal scope for any future potential defence or enforcement action. An IP insurance policy would typically have the following features: It would only cover specifically identified IP. If the insured party specifies a particular patent for the purposes of the policy, the policy will only cover infringements relating to that patent, but no other IP rights. This restriction enables the insurer to charge an appropriate premium; It would cover expenses incurred prosecuting an infringer, known as 'pursuit expenses' or expenses incurred defending proceedings or both, depending on the needs of the policyholder. Insurers will control the payment of legal expenses and the decision to incur legal expenses. An insurer will usually need to be satisfied that the case has a good chance of success before funding legal action, particularly where pursuit expenses are involved. Your insurers will also reserve the right to withdraw funding if, for example, you do not accept reasonable settlement offers. However, insurers will not fund unlimited legal expenses. The extent of legal expenses the policy covers will be reflected in the insurance premium you pay. The longer the period of cover, the higher the amount of cover, the higher the premium payable; and It operates on an 'occurrence' basis. This means that, for the policy to provide cover, the infringement must have occurred during the period the policy is held, the insurer must be notified during that period, and any legal proceedings must be started during the same period. The policy will not cover legal proceedings arising from the infringement of IP rights which occur before the date the policy starts. Infringements of IP Rights Can you prove an infringement? This is a threshold issue that should be considered before any infringement action is taken, whether it involves legal proceedings or not. Failing to determine realistic prospects of proving infringement can have serious consequences. For example, if a threat of infringement is made which cannot be proved it may be deemed a 'groundless threat' of IP infringement. Under each of the Copyright Act 1968, Patents Act 1990, Trade Marks Act, Designs Act 1906 and Circuit Layouts Act 1989, groundless threats are prohibited and can result in liability for damages to any person affected by the groundless threat. It is always worth involving your lawyer in any decision to make an allegation of infringement of IP rights. Infringements of IP Rights Who can sue? Usually the plaintiff in an infringement action is the owner of the IP rights. In addition, under the Copyright Act 1968, Circuit Layouts Act 1989 and Patents Act 1990, an exclusive licensee of the rights is given the same right to sue an infringer of those rights as the owner. In the case of the Trade Marks Act 1995, an 'authorised user' is given an equivalent right to sue an infringer of the trade mark. A person who only has a licence for the IP rights cannot bring infringement proceedings. If the plaintiff is not the owner of the IP rights then the owner is required to participate in the infringement proceedings. An owner that supports the infringement proceedings will usually be named as a co-plaintiff, whereas an owner that does not, will be named as a defendant. Your lawyer will be able to advise you whether you are entitled to bring infringement action and whether other parties should be 'joined' in the action. Infringements of IP Rights What is the nature of the complaint? The particular IP rights involved govern the nature of the complaint. In most cases the nature and extent of the complaint which can be made, is governed by legislation. For example, a complaint in a copyright infringement action usually involves an allegation that the infringer has copied the protected work, or dealt (by importing, distributing or selling) in infringing copies of the protected work in breach of the exclusive rights of the owner of the copyright under the Copyright Act 1968 (For more information see Copyright). There are also complaints in IP matters, which are not defined in legislation. For example, in an action for breach of confidence the owner of confidential information (who may have disclosed that information under a confidentiality agreement) seeks to restrain another person from disclosing or improperly using the information (For more information see Protecting confidential information ). Infringements of IP Rights Is it too late? All IP rights must be exercised within six years of the infringement taking place. If the action for alleged infringement is not taken during this time, the rights of the owner will have been lost under the limitation statutes. Some additional procedural rights, such as the right to apply to a court for an injunction, must be exercised much more quickly. A court is likely to refuse to grant an owner of IP rights to an injunction where the owner has not started court proceedings quickly enough after becoming aware of the infringement. There are practical advantages for an owner of IP rights to bring an infringement action quickly, such as the benefit of surprise and the easier preparation of evidence, while documents and witnesses are more readily available. Infringements of IP Rights Is it worth the cost? At a minimum, before starting infringement proceedings you should weigh up: The value of the IP rights that you are about to take steps to protect or defend; The costs which will be involved in protecting or defending those IP rights; The financial and administrative impact the infringement proceedings will have on your business and personnel, and The extent to which, if at all, the infringing party has the financial resources to defend the action or to pay damages and costs. Also keep in mind that court proceedings are almost always expensive and time-consuming. Favourable judgments can sometimes be appealed by the unsuccessful party leading to delays of years before a conclusion is reached and damages paid for infringement. That said, it makes sense to take action to protect your IP rights if they are valuable and integral to your business. Infringements of IP Rights Things to consider when litigating Before starting court proceedings: Identify your goals clearly. Decide whether the proceedings are intended to obtain financial compensation for infringement, an order to restrain further infringement, or both. Usually both remedies will be sought; Decide who you intend to sue. More than one person is often liable for IP infringements. For example, a company which infringes copyright in photography, and the directors who control the company may be simultaneously liable for the same infringement. In many cases it is important to sue the directors personally to avoid them leaving the company as a shell and forming a new company to carry out further infringements; Consider the positive and negative impact of publicity which may result from legal proceedings. The evidence given in court and documents tendered in court become publicly available and, unless they have been covered by a confidentiality order, lose any conditions associated with confidentiality; and Review all relevant documents, including contracts, licences and correspondence. Identify whether contractual documents prevent you from bringing proceedings at all, or proceedings in the court you have identified for the action. Some contracts require the parties to participate in mediation or other forms of dispute resolution before legal proceedings can be brought. Others require that a notice of default is issued before any legal action is taken. Infringements of IP Rights So you have decided to take action Letter of demand Although it is not strictly a legal requirement (expect where specified in a contract), it is usual practice for an owner of IP rights to issue a letter of demand to a person suspected of infringing the IP rights. An effective letter of demand will: Identify the issuer's entitlement to make the demands, as the owner or exclusive licensee of the rights; Set out all of the infringing conduct, with written examples if available; Specify the legal reason why there has been an infringement, such as the specific sections of the Copyright Act 1968 which have been infringed; Require undertakings within a specified period of time from the infringer that they will stop infringing, deliver up to the owner all infringing property, and provide information to the owner to enable a claim for compensation to be calculated; and Conclude by stating that if the demands are not met, the issuer will initiate legal proceedings without further notice. Frequently an infringer will stop infringing once they receive a letter of demand, without legal proceedings being issued. Courts will almost always expect this to have happened to clearly notify the person against whom the allegation of infringement is made. Some IP legislation, such as the Copyright Act 1968, reduces the amount of damages courts can impose on infringers, if the courts are satisfied the infringers did not know and could not be expected to have known they were infringing your rights. In such cases, the damages could be minimal or nil. Conversely, if infringement continues after the letter is received, the courts will then take this into account when assessing damages, sometimes increasing the damages the infringer is ordered to pay. If you receive a letter of demand, do not respond until you have consulted your lawyer. If this is impractical, because you cannot see a lawyer straight away or because the time stipulated in the letter for response is too short, then: Acknowledge to the claimant or their lawyer (as appropriate) that you have received the letter; Inform the person sending the letter that you are going to seek legal advice; Request that the writer of the letter takes no further steps against you without giving you prior notice in writing; and Collate all documents relevant to the allegations and see your lawyer as soon as possible. Surprise may be the best tactic Sometimes surprise is the best tactic. In some cases, giving the infringer notice of a claim gives them time to hide or destroy evidence and prejudice your case against them. In these circumstances it might be appropriate to go to court without giving notice to the infringer. The court has the power to order an interim injunction. This may be an order that the alleged infringers stop their infringing action pending the outcome of a trial (which can take many months). The following are examples of applications made on an urgent basis. Anton Piller order This is a civil equivalent of a search warrant. It allows the owner to make a search of an infringer's premises and seize specifically identified items. It is granted when the court is persuaded that there is a serious risk that papers or evidence will be destroyed or removed. Anton Piller orders are not easily obtained from a court. To obtain an Anton Piller order, you must demonstrate a prima facie case of infringement and potentially serious or actual damage. There must be clear, strong evidence that the alleged infringer is likely to possess relevant documents or evidence which they are likely to destroy or conceal if the infringer had prior notice of the proceedings. Anton Piller orders are often used in actions against former employees who have joined competitors or set up business in competition. By way of example, a form of Anton Piller order has been used to stop the sale of bootleg merchandise at music concerts. Orders were directed at a group of people selling merchandise bearing either infringing trade marks or artwork that infringed copyright. This was a type of roaming Anton Piller order known as a 'John Doe' order. It has been used in Australia and elsewhere to seize copy merchandise being sold outside Metallica and Paul McCartney concerts. Anton Piller orders allow the aggrieved party to obtain evidence of the suspected infringing conduct. However, this is only the first part of the proceedings. You will still need to fulfil all the formal pre-and post-trial procedures, and all other aspects of the alleged infringement still need to be proven in court. Application for preliminary discovery An owner of IP rights may not know the identity of an infringer, without having access to information and documents not in the owner's possession. An order for preliminary discovery requires a person (who may not end up being a defendant, but merely someone who has relevant information or documents) to give information about possible infringers to a plaintiff. In one example, the English Customs Office kept records of people importing a patented chemical from overseas. The plaintiff knew its rights were being infringed, but did not know the identity of the infringers. The Customs Office was required to disclose the importers' names, allowing the plaintiff to bring an action against those importers. Application for interim injunction This is an application to the court to immediately stop certain behaviour or to require a person to do certain things. A court will issue an injunction when it believes there is a serious issue to be tried and monetary damages would not be an adequate remedy. If an injunction is issued the infringing conduct, although yet unproven, must be stopped immediately. Interim injunctions are usually ordered for short periods of time, often one or two days, after which the parties are required to attend court to determine whether or not the injunction should be continued. It is a condition imposed by the court for all interim injunctions, including an Anton Piller order, that the owner of the IP rights give an undertaking to the court to compensate any person adversely affected by the injunction if it is later found that the injunction should not have been ordered. This is known as an undertaking as to damages. Infringements of IP Rights What must be proven? To establish legal action against an alleged infringer, the IP owner must prove that: Rights actually exist under the relevant legislation; That he/she owns those rights or are otherwise entitled to act on behalf of the owner, for example as the exclusive licensee of the rights; The precise property in respect of those rights actually exist; The infringer's product is a copy of the whole or a substantial part of the owner's product; and The infringer made its product without the licence or authority of the owner of the IP rights. Do the rights exist? Unlike some rights to physical property, IP rights do not continue indefinitely. The various statutes under which IP rights are created specify the periods during which the rights exist. At expiry, people are generally free to use the IP rights without infringement. For example, the Copyright Act 1968 provides that a book's copyright continues for the life of the author plus 70 years. In relation to a film, copyright continues for 70 years after being first made available to the public. Protection granted under the Designs Act 2003 lasts 16 years from the application date. A first step in any proposed litigation is to be satisfied that IP rights actually exist for the relevant product or good. This is straightforward, particularly where the rights are subject to registration, as is the case with patents, designs, plant breeder's rights and trade marks. For each of these forms of intellectual property, copies of certificates of registration show whether rights exist or have expired. Proving the existence of copyright is not as simple because there is no registration procedure and no certificates to prove its existence (See What IP means to you ). To prove that copyright exists it is usually necessary to prove each of the following: The identity of the author or maker of the copyright material, The nationality or residence of that author or maker, The location in which it was made; and The date or calendar year in which it was made. Who owns the rights? Only the owner of the IP rights (or someone entitled to act on the owner's behalf) can bring infringement proceedings. It is usually necessary to prove that the person bringing the proceedings is the owner of the rights. Again, in circumstances where the rights are subject to registration, establishing ownership is straightforward. In general terms, the author or maker of copyright material is regarded under the Copyright Act 1968 as the owner of that material, unless the material was produced by an employee, and then the employing company would hold the copyright. If the author/maker is not the person bringing the proceedings, then it is necessary to prove that there were written assignment(s) of that IP interest from the author/maker to the person claiming ownership. Each link in the 'chain' of transfer of title must be established by documents. What is protected? In any infringement proceedings, the material or product covered by the particular IP rights must be precisely identified. It is easy to establish the precise nature of property subject to registration. In the case of a patent, the exact scope of the invention will be exhaustively described. In the case of rights not subject to registration, such as copyright, the property being protected must be objectively identified. For example, in the case of a recording this is often done by providing the court with a copy of the relevant master tape. In the case of a novel, the author's original manuscript would suffice. In some cases, only a part of a product may be protected. Patent specifications, for instance, often cover only a small part of a product - the patentable invention may be an enhancement to an existing product and the patent granted only for that enhancement. This means that if someone copies the product, except for that enhancement, that copying will not constitute an infringement. However, depending on the circumstances, you may have other causes of action, such as an action for misleading and deceptive conduct under the Trade Practices Act 1974 (if consumers, for example, are misled into thinking that the copy product contains the enhancement and is therefore equivalent to the owner's product). For more information on Trade Marks and the Trade Practices Act 1974 see IP Australia's website. Is it a copy? To establish infringement, it is necessary to show that the infringer has copied the whole or a substantial part of the owner's product or material. In some cases, this is self-evident. A clear example is a person who copies a film. A quick visual comparison between the owner's film and the infringer's film will establish whether or not one is a copy of the other. In other cases, the answer may not be so clear. This is particularly so with complex and technical patent specifications where it is necessary to obtain expert assistance to analyse the various elements of the infringer's product and compare those with the specific scope of protection afforded by the patent. Another example would be where only elements of a film or script are copied and the infringing film does not bear any visual similarity to the original. Was the infringement authorised? An owner of IP rights is required to prove that an infringer did not have permission or consent to exercise those rights, unless the infringer does not contest this issue. This is not always easy to prove for an owner of rights. The task is easier if you have a documented system for granting licences and approvals to third parties and personnel responsible for implementing the system. This allows you to say that such a system is in place and that the nominated person has searched his or her files and found no record of any requests for a licence or grant of a licence. This process should satisfy the court that no such licence was granted. Infringements of IP Rights What happens when court proceedings start? Understanding what is required in formal court proceedings will help you make an informed decision about whether or not to litigate. In this section we briefly outline the possible course a trial will take and the tools both parties can use to best represent their sides of the case. When litigation starts, irrespective of whether an injunction has been sought or granted, it is usual for the court to set a timetable for the completion of steps required to prepare the case for trial. These four main steps are: 1. Statement of Claim This is the document which officially starts proceedings. It is drafted and filed by the owner of the IP rights (usually by their lawyer) and sets out the facts supporting the infringement allegation and the remedies sought. The party serving the statement of claim must clearly articulate the complaint. For example, in a copyright claim, it should clearly set out all the facts upon which a claim to ownership is made (such as, when, where and by whom the work was created and how the owner of the rights came to be the owner if they did not create the work) and the actions of the defendant that are alleged to constitute the infringement. This ensures that the defendants are fully aware of the precise nature and extent of the claim made against them so they can properly defend themselves. 2. Defence The party who allegedly did the infringement files the defence document with the court. This document replies to each of the allegations made in the Statement of Claim by admitting the allegation is correct, not admitting it is correct, or denying it. The difference between 'not admitting' and 'denying' is a subtle one. By not admitting a fact, the defendant is simply requiring the plaintiff to prove that fact, but the defendant will probably not seek to introduce evidence to actively disprove the fact. With a denial, on the other hand, a defendant will typically seek to lead evidence to show that the alleged fact is untrue. This establishes the 'facts in dispute', in other words, the allegations about which the parties disagree, and which will be determined by the Court. 3. Discovery Both parties must inform each other of the relevant documents they have in their possession and those to which they can get access. The documents must be disclosed even if they assist the other party in succeeding in its claim against you. Each party is obliged by law to inform the other party about these documents to ensure they are not taken by surprise at the hearing of the claim. For this reason it is essential that all documents in the possession, custody or power of the parties be retained until the hearing is over. 4. Affidavits These are written statements of evidence sworn on oath and signed by the person who makes them. They detail everything that person knows about the complaint. They are usually drafted by, or in consultation with, a lawyer to ensure all relevant evidence is obtained and all issues addressed. Preparing affidavits may involve tracking down former employees or business partners. Infringements of IP Rights Strategic options Either party may strategically use the following options in the litigation process: The alleged infringer may apply for what is known as 'security for costs' against the owner to ensure their legal costs are paid if they successfully defend the action. The owner may be compelled to provide an amount as security, often in the form of a bank guarantee, to cover the alleged infringer's recoverable costs in defending the action if the infringer can persuade the court that the owner has insufficient funds to meet a costs award and/or if the owner resides outside Australia. The court will decide whether it thinks the sum is sufficient. Typically, the owner will not be entitled to proceed with the litigation unless and until the security, if ordered by the court, is provided. No similar right exists for an owner to obtain security for costs from an alleged infringer; An offer of compromise or offer of payment gives the alleged infringer the possibility of limiting the amount of costs they may have to pay, or the owner an avenue through which to recover full costs at the end of the trial. Either party can, at any stage, make an offer to settle the claim. If the infringer makes the offer and it is rejected, and the owner gets a judgement for that amount or less, the court may order the owner to pay the infringer's party/party costs from the date of the offer. Party/party costs are the costs assessed by the court as being reasonable to recover from the other party and are usually significantly less than the actual costs incurred by that party. It is not unusual for party/party costs to be up to 50 percent less than actual costs incurred. This means that even a successful party could be significantly out of pocket after the conclusion of a litigation. If the owner makes an offer and it is rejected, and the owner eventually obtains a judgement for that amount or more, the court may require the infringer to pay the owner's full costs from the date of the offer, not just the owners party/party costs to which it would ordinarily be entitled; or A notice to admit facts is a procedure where parties may limit the hearing to clearly defined issues. A failure to admit facts which are genuinely not in dispute, may increase the costs for a party. If the party on whom the notice is served does not admit the specific fact, and that fact is subsequently proven at trial, the party on whom the notice is served has to bear the cost of proving that fact, irrespective of whether the party who made the request achieves overall success in the case. Infringements of IP Rights Remedies A number of remedies may be sought in IP litigation. Generally, legislation provides that either damages or an account of profits may be sought where an IP infringement action is successful. The most common remedies, which are explained below, are damages, account of profits, delivery up and final injunction. Damages Damages compensate the owner for the loss suffered as a result of the infringement. Of course, if the owner is not successful, no damages will be awarded and, in all likelihood, the owner will have to pay the defendant's party/party costs of the litigation. Under certain IP legislation, such as the Copyright Act 1968 and the Circuit Layouts Act 1989, damages are not available where the infringing party had no grounds for suspecting, or was unaware that its conduct constituted an infringement. In this situation, the owner is limited to obtaining an account of profits (discussed below). Under the Designs Act 2003 if the party in breach had no knowledge it was committing a breach of that legislation the court may refuse to award damages. There are no strict rules as to how the courts assess damages in IP litigation, but there are general guidelines on which damages can be calculated. These are: Prejudice to owner's interests; Loss of profit by the owner; Account of profits made by infringer; Presumed licence fee; and Conversion damages are awarded when the court deems the infringing articles to have been the owner's property, which the infringer has, in effect, stolen. The amount of damages is usually referable to the amount that the infringer realised on the sale of the articles. Account of profits Where the infringers have sold or benefited financially from the infringing goods, the Court may order that they pay the IP owner a sum equivalent to the profits they made from using the IP. Delivery up In cases of copyright infringement, the copyright owner is deemed to be the owner of the infringing goods. In delivery up, the owner is entitled to have those goods rather than have them destroyed. Final injunction Once infringement is proved, a permanent injunction preventing the infringer from undertaking any further infringing conduct follows as a matter of course. The infringer will not be able to continue their conduct without a licence to do so from the IP owner. Infringements of IP Rights Criminal liability Certain breaches - piracy and forgery - of the Copyright Act 1968 and the Trade Marks Act 1995 constitute criminal offences. Under the Trade Marks Act 1995, it is an offence to: Alter or remove a trade mark knowing it is a registered trade mark; Make a die or equipment which can help in falsifying or removing a trade mark; and Sell, possess, distribute or import a good knowing that the trade mark has been falsified or removed. The Copyright Act 1968 similarly provides for criminal sanctions. Under this Act it is an offence to (amongst other things): Knowingly import, possess, sell, distribute or commercially deal with an infringing copy; Offer for sale infringing copies of computer programs; and Transmit a computer program to enable it to be copied when received. The Copyright Act 1968 provides for individuals to be fined up to $50,000 and for corporations to be fined up to $250,000. The possible term of imprisonment is up to five years. The penalties under the Trade Marks Act 1995 are sentences up to two years and fines of up to $55,000. The PBR Act 1994 provides for individuals to be fined up to $55,000 and for corporations to be fined up to $275,000. The possible term of imprisonment is six months. Infringements of IP Rights Customs initiative A trade mark or copyright owner can summon the help of Customs to prevent infringing goods from being imported into Australia. This provision is primarily designed to temporarily stop the importation and distribution of goods which were manufactured overseas without the approval of the IP owner while the IP owner seeks orders from the Court permanently preventing them from being imported. To obtain Customs help, the owner must lodge a notification (which sets out the nature of the IP owned) and a security deposit with Customs, setting out the nature of the IP rights. Customs officers will seize any goods infringing either the copyright or the trade marks covered by the notification. The owner/exclusive licensee/authorised user then has 10 days to take action against the importer. During that time, Customs will detain the products. At the end of 10 days the goods will be released to the importer unless the owner/ exclusive licensee/authorised user has initiated legal proceedings and has obtained an appropriate order from the court. The notification is in reasonably standard form and does not require much information other than the claim of the IP rights. At first glance, this may seem to invest an IP rights owner with significant power over an importer. However, it is important to remember two limiting factors: The seizure is only temporary and if proceedings are not commenced in a court within 10 days of the seizure of the goods, they will be returned to the importer. The commencement of proceedings can, of course, be quite expensive. However, if the proceedings are not commenced, then you will find it difficult to enlist Customs assistance in the future; and The security deposit is put in place to cover Customs costs and any liability it might incur to an importer, arising out of any seizure. In other words, if Customs suffers any costs or loss as a result of the seizure, you will be obliged to repay those costs to them out of the security deposit and then reinstate the security deposit. For these reasons, the notification should only be exercised when you are reasonably confident that there has been an infringement and that you are prepared to incur the costs of proceeding to court action in order to enforce your rights. Infringements of IP Rights An infringement avoidance strategy A basic infringement avoidance strategy involves: Avoiding the use of any material which is sourced from another person without obtaining a specific permission. Permission is often referred to as a clearance in relation to IP rights. You should be vigilant in always asking about the source of any material which is provided to you and the clearance, if any, of rights in that material. Material which is easily available, for example on the internet, may be protected by IP rights; Maintaining documents which record any permissions or steps taken to try to confirm your ownership of the rights or your entitlement to use them may help you to prove that any infringement was innocent, rather than deliberate, and this could substantially reduce any liability if you have infringed. For example, under the Copyright Act 1968 although knowledge of an infringement is not necessary to prove infringement of copyright, knowledge does have a major impact on the damages a court will award. If a court finds that an infringer did not know and had no reason to believe that there would be an infringement, the court cannot order the infringer to pay damages. Instead, the infringer is ordered to pay to the owner of copyright the value of any profits obtained from the infringement. Conversely, if an infringer is found to have knowingly and deliberately infringed copyright, the court may award damages at an increased amount beyond the value of the copyright material which has been taken; If possible, you should immediately stop any conduct which is alleged to be infringing, without admissions, until you have obtained legal advice which confirms your rights to continue. By stopping the conduct you will remove the major impetus for the owner of the IP rights to commence legal action - to obtain an interim injunction. It will also prevent you from creating further infringements which could be the subject of a claim for damages; and Obtaining legal advice about any threat you receive. Many threats of infringement will not be able to succeed if they are examined closely. This could be because the IP rights do not exist, the rights are owned by a person other than the one making the threat against you or infringement cannot be proved. Unjustified or invalid claims of copyright infringement are prohibited under statutes such as the Copyright Act 1968 and may cause the person issuing the threat to be liable to compensate you for the consequences of making the threat. If you receive a threat of infringement which cannot result in successful infringement action, you should respond by requiring undertakings from the person issuing the threat not to repeat the threat and to pay compensation to you for any loss you have suffered as a result. Infringements of IP Rights What about the internet? The Internet is changing the nature of commercial relationships. IP protection applies, but because of its global nature, enforcing IP rights is difficult. When your IP rights are infringed over the internet, the extent of infringement by (usually) an individual infringer may not justify the cost of bringing infringement proceedings. Users of the internet are unlikely to be pursued for downloading infringing copies of material. On the other hand, if a group of individual infringers is sufficiently large, as a whole they could substantially infringe your rights. In some cases it may be too difficult to identify a large, but disaggregated body of individual infringers to take any infringement proceedings. For example, music can be transmitted over the internet. Madonna took advantage of this practice of 'audio streaming' to release her single Frozen. The cost of taking action against one person who makes an unauthorised copy of this single from the internet would not be justified. However, if that one person makes multiple copies and distributes the single commercially, then they would be seriously infringing the copyright owner's rights, and it may be commercially viable to take action. Various US music industry organisations now employ people to monitor and 'surf' the internet for the purposes of identifying internet sites that offer music on-line without a licence from the copyright owner. Infringing music is often in the form of an MP3 digital file. The internet presents challenges to the enforcement of IP rights. It is often difficult to identify infringers or infringing web sites outside Australia and it can be legally complicated to bring an action when the person is in a different country which has different laws. Another complication is that 'cyber law' (law relating to breaches in cyberspace, which is the home of the internet) is still developing. It has rarely been considered by the Courts and parliaments around the world are still deciding how best to reconcile the conflicting aims of protecting commercial and personal interests on the internet while promoting the further development and creative use of technology. The following is a brief discussion of some of the ways in which IP may arise in cyberspace and how you can use the internet to commercial advantage without surrendering your IP rights. Infringement in cyberspace While there is no established infringement strategy to protect your IP rights in cyberspace, there are a number of actions you can take to protect your IP in the cyber world. Protecting copyright in cyberspace The best way to protect your IP on the internet is to take active measures to prevent its misuse. You can do this by including a section on your website, which details the terms and conditions for the use of your material. This will usually take the form of a clearly visible notice at the start or end of a document, which states that use can be made of information only if proper acknowledgment is given. The notice may limit the use, which may be made of the information to non-commercial purposes. Once your business is on-line, you will also need to ensure your website recognises other people's IP. If you want to use other people's copyright material, get their permission and comply with their conditions of use. Several technological tools are available to protect content on the internet. One tool 'watermarks' an image, identifying the holders of copyright, its country of origin and the permitted uses. This means that the content owners will always be acknowledged and the proper uses for the material are apparent. Protecting trade marks and trade names A trade mark used in cyberspace can be protected by registration and prosecution under the Trade Marks Act 1995. However, be aware that registering a trade mark does not automatically mean that name can be used in the domain name for your internet web page or your business name. Domain names are the distinctive names chosen to identify internet web pages and email addresses. For example, the domain name for IP Australia's is www.ipaustralia.gov.au. You will need to investigate both the domain name registry as well as the business/company name registry to ensure your desired trade mark can be reflected in your company name and web page. In Australia, Melbourne IT, which can be found at http://www.melbourneit.com.au/, is responsible for registering .com domain names. Domain name registration is usually for two years at a time. Once your domain name is registered, no one else can register that name during that period. For more information on domain names see IP Australia's website If you want your internet address to reflect your trade mark or company name, you will need to investigate the Australian Securities and Investment Commission (ASIC) registry before you commit to either the domain or company name. To search business or company names, go to www.asic.gov.au, click on ASIC searches, and type in your desired name. All businesses and companies carrying that name will appear, and further searches will indicate whether those names are still registered or have lapsed (See The Power of IP database searching). There are tools which direct people browsing the internet to particular pages of a web site. This means that disclaimers and advertising on previous pages may be circumvented and the business's revenue and liability of the business compromised. If possible, the disclaimer and other notices should be included at the commencement of each section or a link to such notices included at the foot of each page. Keep up-to-date The internet is constantly and rapidly changing. It is important to keep informed of developments on the internet, particularly technological measures that protect content. Regular surfing of related sites, and remaining vigilant about the uses to which others put your material, will help you enforce your rights and fulfill the commercial potential offered by the internet. Infringements of IP Rights Questions for your adviser Below is a basic list of questions for your legal adviser before you begin any infringement proceedings: What is the status of my IP rights? Can I exercise my IP rights against the infringer? Has there been an infringement of my IP rights? What orders should I seek in the infringement proceedings? Do I have grounds to seek an interim injunction or other urgent order? How much will infringement proceedings cost? Barristers fees? Legal fees? Other costs? What damages can I recover if I am successful in the infringement proceedings? What evidence will I need to prove my case? How long will the case take before it is completed? Find out what type of adviser you need. Infringements of IP Rights Summary of key concepts Develop an infringement strategy to set the parameters for enforcing your IP rights. An infringement strategy involves deciding who to sue, when to issue proceedings and the budgets which will apply. Where it is available, obtain insurance to cover the legal costs of IP infringement actions. IP infringement proceedings can be expensive to run particularly if the existence of your IP rights is in doubt or is challenged by the infringer. You should consider which type of policy will provide you with the most appropriate coverage. Before you issue proceedings you should issue a letter of demand to the infringer which clearly establishes your right to sue the infringer and the demands you expect the infringer to comply with in order to avoid infringement proceedings being issued. In prosecuting an infringer of your IP rights, set the goals you intend to achieve and have an understanding of the procedures involved in litigation. If you are in any doubt about what will be involved, ask your lawyer to explain the litigation process and how it will affect you. Avoiding infringement of IP rights owned by other people involves making enquiries to determine what IP rights exist. This is easier with IP rights which are registered, such as patents and trade marks, and more difficult with unregistered rights such as copyright. Never use material which you have obtained from other people without asking whether you have permission or clearance to use it. The internet raises particular issues and challenges for the enforcement of IP rights. There is no principle that material available on the internet is in the public domain. Electronic material and data can be protected by copyright and processes used on the internet can be protected by patents. As the internet is a constantly changing environment, you should make sure you are aware of developments which could have an impact on you or your business.