InIP: What's happening in intellectual property - February 2024

Your regular wrap-up of some of the world's leading and intriguing IP stories 10 min read

Same battle, new round: 'The Agency' v 'The North Agency' trade mark dispute

By Ioana Sabau

In June 2023, we reported on a ruling by the Federal Court of Australia that clarified how courts may evaluate deceptive similarity following the High Court's decision in Self Care IP Holdings v Allergan Australia Pty Ltd [2023] HCA 8 (Self Care). The Federal Court case principally concerned whether the use of a word mark, 'THE NORTH AGENCY', infringed 'THE AGENCY' composite mark (shown below) registered for real estate services. On appeal, the Full Federal Court approved the trial judge's analysis, finding no appealable error in Justice Jackman's reasoning or the outcome of the proceeding.

The Full Federal Court emphasised that the registration of 'THE AGENCY' composite mark granted the owner the exclusive right to use the words 'THE AGENCY' as depicted in the registered stylised form of the mark, rather than the right to use the words on their own.

The appellants asserted six grounds of appeal and argued that the primary judge failed to consider that a number of persons would not share his Honour's impression of the marks. Justices Yates, Markovic and Kennett remarked that this argument was reiterated by the appellants throughout their grounds of appeal. The Full Federal Court noted that while 'minds may well differ' in the outcome of the objective inquiry required to assess deceptive similarity, a primary judge is required to give effect to their findings, and not the findings of some other subset of persons. Their Honours rejected all grounds of appeal and found no appealable error.

The case is an important reminder for trade mark owners to understand the scope of protection for their registered marks prior to commencing proceedings for deceptive similarity.  

You can read Justices Yates, Markovic and Kennett's decision, The Agency Group Australia Limited v H.A.S. Real Estate Pty Ltd [2023] FCAFC 203, here.

A healthy win for Grill'd: 'HFC' triumphs in trade mark dispute with KFC

By Emma Kong and Nick Li

In Grill'd IP Pty Ltd v KFC THC V Ltd [2023] ATMO 192, the Delegate of the Registrar of Trade Marks rejected fast food chain KFC's opposition to burger chain Grill'd's application to register the mark 'HFC' (used to refer to its 'Healthy Fried Chicken' products). It was found that when compared with KFC's registered marks for the sign 'KFC' alone, 'HFC' was neither substantially identical nor deceptively similar. The Delegate also dismissed KFC's claims that the mark 'HFC' would be likely to deceive or cause confusion, that its registration would be contrary to the Australian Consumer Law or the tort of passing off, and that Grill'd's application was made in bad faith.

Regarding substantial identity and deceptively similarity (section 44 of the Trade Marks Act 1995 (Cth) (the Act)), KFC argued that 'KFC' and 'HFC' were visually, aurally, and conceptually identical or similar. However, the Delegate favoured Grill'd's submission that since both marks were initialisms, with each letter pronounced individually, they were less likely to be imperfectly recalled. He therefore found that the marks were neither substantially identical nor deceptively similar.

As to deception or confusion (s60 of the Act), Grill'd conceded the substantial reputation of the mark 'KFC'. However, the Delegate found that, in spite of the closeness of the parties' goods and services, this substantial reputation only weighed against deception or confusion.

Regarding bad faith, KFC contended that Grill'd knew of its substantial reputation and exploited this by using 'HFC' in marketing campaigns alongside other well-known KFC indicia. However, the Delegate accepted that the indicia were used for comparative advertising, and found that since Grill'd's application did not facilitate use of the indicia, the application was not filed in bad faith.

This decision highlights two things. First, it may be more difficult to oppose a trade mark on the basis of substantial identity or deceptive similarity where the mark is an initialism; and, second, increasing reputation above a certain point can, paradoxically, decrease a mark's ability to deceive or cause confusion.

AI and IP regulatory round-up

By Max Jones

Governments around the world continue to grapple with the IP implications of artificial intelligence. Below are the latest notable developments.

Australia: The Federal Government consulted with industry stakeholders on copyright issues associated with AI at a roundtable on copyright in December 2023. As an outcome, the Attorney-General announced that the Government would establish a copyright and AI reference group, as a standing mechanism for ongoing engagement with stakeholders. We are yet to see any further developments concerning the reference group. Earlier this year, the Industry and Science Minister, Ed Husic, confirmed the Government's intention to regulate the use of AI in specific high-risk settings, through either changes to existing laws or the creation of new AI-specific laws. His announcement mentioned the possibility of introducing requirements relating to transparency of AI model design and data underpinning AI applications, labelling of AI systems in use and/or watermarking of AI-generated content. It did not otherwise explore IP issues between content owners and AI developers.

European Union: AI regulation has progressed quickly in the EU, with all 27 Member States recently endorsing the final text of a fairly comprehensive 'AI Act', which will introduce transparency requirements for providers of general-purpose AI models. This includes obligations to make available detailed summaries of the content used to train those models, and other technical documentation concerning training and testing processes; as well as requirements to comply with national copyright laws and disclose the use of deep fakes, alongside a range of other security and safety requirements. The Act is legally a 'regulation', which means it will have direct effect in member states. In a similar vein to the General Data Protection Regulation (the EU's privacy law), the AI Act will apply even to businesses outside the EU if the output their system produces is intended to be used in the EU. The AI Act is therefore likely to impact any AI business with global reach. It is expected to be passed in the coming months, with most of the obligations to begin applying a year or two later, in 2025 or 2026.

United Kingdom: The UK Intellectual Property Office's attempts to broker a deal between creative industry stakeholders and AI companies regarding use of copyright materials to train AI models have come to a standstill. The Government recently announced that while the process 'provided a valuable forum for stakeholders to share their views … it is now clear that the working group will not be able to agree an effective voluntary code'.

United States: Meanwhile, in the US, there are numerous reform initiatives going on at the federal and state levels. The US Copyright Office's ongoing inquiry will be one to watch closely. The US Patent and Trademark Office recently published guidance for AI-assisted inventorship, which states that 'while AI-assisted inventions are not categorically unpatentable, the inventorship analysis should focus on human contributions, as patents function to incentivise and reward human ingenuity', and also confirms that in the US, an AI system cannot be named as the inventor of a patent.

What's the going rate for conscious and contumelious disregard? Now we know…and it’s a lot!

By Nick Li

In the latest in the series of judgments in the dispute between Directed and Hanhwa Korea, the Federal Court in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 10) [2023] FCA 1656 awarded the applicant $139.3 million in compensatory damages (plus interest), and $3.5 million in exemplary damages (against the Hanwha parties for inducing breach of contract), with a further $250,000 additional damages for copyright infringement. This is in addition to the $3.27 million in secret commission payments that the applicant had already clawed back in the substantive proceedings.

Directed and Hanhwa Korea both operate in the same industry, of supplying audio-visual technology for trucks. Directed controlled most of the Australian and New Zealand market for supply of AV units to original equipment manufacturers (including UD, Fuso and Mercedes). Among other things, Justice Beach found that Hanwha was paying secret commissions to two employees at Directed, in return for confidential information about opportunities to access Directed's customer base.

Further, His Honour found that the respondents' conduct showed a conscious and contumelious disregard of another's rights, and that exemplary damages were appropriate to punish them and to deter others from committing similar conduct in the future. The court ordered:

• $2 million in exemplary damages against the Korean Hanhwa companies;
• $1.5 million in exemplary damages against the managing director of the Hanhwa companies; and
• $250,000 in additional damages for copyright infringement against one of the Directed employees who had engaged in the conduct.

The court noted that the quantum of exemplary damages was 'designed significantly to hurt', holding that the Hanhwa parties had induced the directed employees to engage in egregious conduct against their employer.

UK Supreme Court denies patent application with AI machine named as inventor

By Paul Mersiades and Nicola McManis

The Supreme Court of the United Kingdom has unanimously held that an AI system cannot be named as the inventor on a patent application under the Patents Act 1977 (UK) in Thaler v Comptroller-General of Patents, Designs and Trade Marks [2023] UKSC 49. This long-awaited decision is the latest in a series of test cases Dr Stephen Thaler has filed around the world, seeking to patent inventions generated by his AI system, ‘DABUS’.

Dr Thaler is an American computer scientist who sought UK patents for two inventions: a beverage container and a search-and-rescue device. He asserts that DABUS devised them with only a minimal set of inputs and without express instructions to invent. In 2019, the UK Intellectual Property Office (the UKIPO) denied the applications because the named inventor was not a human being. Dr Thaler appealed the decision to the UK High Court of Justice and the UK Court of Appeal, both of which upheld the UKIPO. In 2023, the Supreme Court heard Dr Thaler's final appeal.

The Supreme Court agreed with the lower courts, finding that the correct interpretation and application of the relevant provisions of the UK Patents Act required that an inventor must be a natural person. The court also held that there is no mechanism under UK law by which rights to the invention could have transferred to Dr Thaler, and therefore rejected his argument that, as the AI system's owner, creator and user, he was entitled to a patent for an invention it created.

This decision confirms that UK patent law is aligned with that of most jurisdictions, including the European Patent Office, the US and Australia, where, in 2022, the High Court refused Dr Thaler's application for special leave to appeal a decision of the Full Federal Court that determined that DABUS could not be the named inventor on a patent application (Allens acted for Dr Thaler in the Australian proceedings). Notably, the Supreme Court expressly stated that this appeal was not concerned with the issue of whether technical advances generated by AI-powered machines should be patentable. The recent and rapid development of computational creativity, including in generative AI applications such as ChatGPT, has heightened the urgency for legislatures around the world to consider how best to incentivise the creation of machines that innovate and to confront the question 'Can AI be an inventor?'.

Japan and South Korea to accept letters of consent for the registration of trade marks

By Ye Rin Yoo

The Japan Patent Office (the JPO) and Korean Intellectual Property Office (the KIPO) will soon accept a letter of consent as a basis for accepting a trade mark for registration in the face of an earlier conflicting trade mark. This change will become effective in Japan from 1 April 2024 and in South Korea from 1 May 2024.

In some jurisdictions (including Australia and New Zealand), a trade mark cannot be registered in the face of an earlier conflicting – identical or similar – trade mark held by a different person or entity. The relevant trade marks office examines an application for the registration of a trade mark for any conflict with an earlier trade mark and, if it finds one, raises a citation objection to registration, based on that earlier trade mark. The applicant is then required to address that objection within a prescribed period.

The ways in which that kind of objection can be addressed differ from jurisdiction to jurisdiction. Some (like Australia and New Zealand) recognise a 'letter of consent system', where the trade marks office accepts such a letter from the holder of the earlier trade mark as sufficient to overcome the objection. Other jurisdictions do not accept a letter of consent at all. Currently in Japan and South Korea, the applicant has to resort to 'assign-back strategies', where the trade mark is assigned to the other person or entity; then, once accepted, 'assigned back' to the original holder. This, of course, is less straightforward and more risky, costly and time-consuming than a letter of consent system.

As far as we know, the JPO and KIPO will accept a letter of consent in the following circumstances.

We are awaiting further guidelines from the JPO and KIPO on the circumstances in which a letter of consent will be accepted – including as to the appropriate form of the letter of consent. For example, in Australia, it must contain sufficient details of the trade mark and earlier trade mark but must not contain any condition. However, it seems that the threshold for accepting a letter of consent will be higher in South Korea, and even higher in Japan, compared with other jurisdictions. In Australia and New Zealand, a letter of consent is accepted in basically any circumstances, regardless of the extent of the similarities between the trade marks, and the likelihood of consumer deception or confusion.

In addition to the letter of consent system, both Japan and South Korea will introduce a ground for third parties to cancel a trade mark that has been accepted on the basis of a letter of consent, in certain circumstances of unfair competition or consumer confusion.

Overall, the introduction of a letter of consent system will be a welcome change for those applying for trade marks in Japan and South Korea, but we should expect higher thresholds than in Australia and New Zealand. We anticipate more details will be available leading up to April/May 2024 – in the meantime, any applicants for trade marks in South Korea who want the option of submitting a letter of consent may wish to consider extending their application past 1 May 2024.