IP SPOTLIGHT 20 APRIL 2020

CHINA BECOMES TOP PCT FILER

(i) engaging in misleading or deceptive conduct in breach of the ACL by misrepresenting to prospective franchisees that they would be charged in accordance with the disclosure document; and (ii) engaging in unconscionable conduct in breach of the ACL by deviating from the terms of the disclosure document in negotiating a purchase price, misrepresenting that the amount charged was solely for fit-out and set-up of a franchise, and misusing the funds to pay commissions to Ms Ali and Mr Cameron as if they were generally available funds to Geowash. In particular, the Federal Court found that the unconscionable conduct also breached the good faith obligation under the Franchising Code. – – misrepresentations on the Geowash website regarding the profitability and affiliations with other businesses in breach of provisions relating to misleading and deceptive conduct under the ACL (Website Misrepresentations), specifically that: (i) the prospective franchisees could make gross revenues of $70,216 in an average 28-day period; (ii) the prospective franchisees could make gross profits of $30,439 in an average 28-day period; and (iii) Geowash had commercial relationship or affiliation with well-known brands including Kia, Nissan, Ikea and Audi among others. THE ASSESSMENT OF PENALT I ES One notable outcome from the Geowash case is that the significant amounts of penalties imposed on the individual officers. In the Earlier Decision, the court held that Ms Ali and Mr Cameron both had the knowledge in the misrepresentations that they were making (except in Mr Cameron’s case, the court found that he was found not to be an accessory to the Website Misrepresentations). Ms Ali is the embodiment of the corporation as its sole director and was the main instigator of the conduct, the main actor in the conduct and a major beneficiary of the conduct… In the case of Mr Cameron, he was a substantial beneficiary of the conduct. The commissions paid to him (or to the family trust) represented a substantial part of the monies received by Geowash… [which] was used as a vehicle by which Ms Ali and Mr Cameron appropriated monies that ought to have been expended by Geowash on fit-out and set-up of franchises 19 In justifying the individual penalties, the court stated:

In addition, the court rejected the Respondents’ argument that the Unfair Dealings conduct was caused by one system of underlying conduct that contravened two penalty regimes (i.e. the ACL and the Franchising Code) and therefore the dealings with franchisees should be assessed as a single course of conduct where the applicable maximum penalty is for a single contravention. Instead, the court held that there were separate contraventions of the prohibition on unconscionable conduct and the good faith obligation in each of the dealings. KEY TAKEAWAYS – – As the Australian Competition and Consumer Commission’s ten compliance and enforcement priorities in 2020 include the protection of small businesses under the CCA with a focus on the Franchising Code, it is likely that there will be increased enforcement activities in relation to the good faith obligation and the Franchising Code in general. – – From the two cases, the good faith obligation requires, among others: (i) the parties to act honestly and with fidelity to the bargain concluded between the parties; (ii) a party to consider the legitimate interests of the other party although there is no requirement for the party to subordinate its legitimate interests; and (iii) not to engage in conduct that is dishonest, capricious, arbitrary or motivated by bad faith or a purpose which is antithetical to the franchise agreement or the Franchising Code. – – Franchisors’ conduct must not deviate from the content of disclosure documents without the franchisees’ knowledge and consent. – – Franchisors should establish and maintain procedures, policies and programs (and associated training and monitoring) to ensure that all representatives comply with the applicable laws including the Franchising.

In WIPOs recent 2019 report on PCT filings, China became the top filer of international patents filed with WIPO. China filed 58,990 patent applications compared to the US’s 57,840 applications. This is the first time that the US has dropped from 1st place since the PCT began operation in 1978.

In other news from WIPO, international patent applications filed via the PCT grew by 5.2% (265,800 applications) in 2019, while international trademark applications via the Madrid System for the International Registration of Marks increased by 5.7% (64,400 applications). Protection for industrial designs via the Hague System for the International Registration of Industrial Designs saw a 10.4% growth (21,807 designs), capping another record-setting year for WIPO’s global IP services.

COVID-19 CELL IMAGE Who owns the copyright?

Everyone has seen this image. It’s absolutely everywhere. Well, the image was created by the Centers for Disease Control and Prevention (CDC). As far as we can determine, the image is in the public domain and is free to download from the CDC’s image library, however, photo credit goes to Alissa Eckert and Dan Higgins of the CDC.

JAYDEN LEE Associate

19 [2020] FCA 23.

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