Determining a party’s entitlement to Intellectual Property (IP) rights can at times provide even the most experienced IP practitioner with a good measure of discomfort. Any guidance provided by the judiciary on how to tackle an entitlement tussle is accordingly most welcome. Foster’s Australia Limited v Cash’s (Australia) Pty Ltd  FCA 527 is such a morsel. The case in particular addresses entitlement issues that may arise in a group of companies where IP is generated by one company in the group, but the rights in such IP vest in another company in the group.
Foster’s Australia Limited (“FAL”) is a member of the Foster’s Group of companies (“the Foster’s Group”) well known for its beer and wine products. FAL brought an action against Cash’s (Australia) Pty Ltd (“Cash’s”) based upon the infringement of, amongst other rights, two registered designs (“the registered designs”). Cash’s responded by arguing that the registered designs were invalid and liable to be revoked as application to register the designs had not been made in the name of FAL, but in the name of Foster’s Group Limited (“FGL”) another company in the Foster’s Group. FAL was a wholly-owned subsidiary of FGL and an operating entity within the Foster’s Group. At an operational level the board of FGL controlled the activities of FAL.
In 2008 FAL and Dot Design Pty Ltd (“Dot”) executed a Services Agreement relating to the design and manufacture of bar taps and handles. The Services Agreement stipulated that any IP rights generated by Dot during the performance of the Services Agreement would belong to FAL. During 2009 application was made in the name of FGL to register certain designs which had been created in terms of the Services Agreement. Those designs proceeded to registration and are the registered designs in dispute.
During 2010 it was discovered that the designs had erroneously been applied for and registered in the name of FGL, rather than FAL. FAL and FGL subsequently executed an assignment transferring the registered designs to FAL. That assignment was subsequently recorded on the Register of Designs.
Cash’s argued, by reason of s 13(1) and (4) of the Designs Act 2003 (Cth) that FGL was never entitled to be entered on the Register of Designs as the registered owner and that the registered designs were always vulnerable to revocation under s 93(1), 3(b) and (d) of the Designs Act.
As an initial matter the court held [at par 120] that it was open to FGL to file the design applications pursuant to s 21(1) of the Designs Act. In particular, the court confirmed [at par 119] “in principle, any person may be named as applicant, provided the entitled person is entered in the register as the owner”.
S 13(1) and 4 of the Designs Act further provides that “(1)[a] person mentioned in any of the following paragraphs is entitled to be entered on the Register as the registered owner of a design that has not yet been registered:
(a) the person who created the design (the designer);
(b) if the designer created the design in the course of employment, or under a contract, with another person-the other person, unless the designer and the other person have agreed to the contrary;
(c) a person who derives title to the design from a person mentioned in paragraph (a) or (b), or by devolution by will or by operation of law;
(d) a person who would, on registration of the design, be entitled to have the exclusive rights in the design assigned to the person;
(e) the legal personal representative of a deceased person mentioned in paragraph (a), (b), (c) or (d)
S 93 sets out the grounds upon which a party may rely to bring an action for the revocation of a design:
(3) The grounds on which a court may revoke the registration of the design are:
(b) that one or more of the original registered owners was not an entitled person in relation to the design when the design was first registered; or
(d) that the registration of the design was obtained by fraud, false suggestion
The court noted [at par 129] that there “is authority that would justify the attribution of a constructive trust in the circumstances that have arisen in this case. In Edwards v Liquid Engineering 2003 Pty Ltd (2008) 77 IPR 115 (‘Edwards’) at 131 , Gordon J cited Figgins Holdings Pty Ltd v Registrar of Trade Marks (1995) 59 FCR 147 at 149 (‘Figgins’) in support of the proposition that:
[W]here an application for registration is made by other than the true owner, the court may rectify the situation by imposing a constructive trust on the application and subsequent registration from the date on which the application was lodged and additionally or alternatively rectifying the register through substitution of the true owner’s name”.
Kenny J proceeded to hold [at pars 134 and 135] that “… FGL was a constructive trustee for FAL of the design registration applications and the designs registration until the execution of the Designs Assignment on 12 July 2010. It was thereafter open to FAL to file the form titled ‘Request to Assign Ownership or to Record an Interest’, as a result of which the Registrar recorded the assignment and FAL became duly registered as the designs owner. As already stated, this involves no fraud on the Registrar or the public. Revocation would, on the other hand, occasion clear injustice and work substantial prejudice to FAL.
I would also reject Cash’s submission that the designs registration should be revoked on the basis of s 93(3)(d). There is insufficient evidence that any misrepresentation was a materially inducing factor leading to the registration of the Registered Designs. There was no evidence from the Registrar that any misrepresentation by FAL or FGL was material in any way to the registration of the Registered Designs. In any event, where, as I have held, FGL was a constructive trustee for FAL of the design registration applications and the designs registrations until the execution of the Designs Assignment on 12 July 2010, FGL did not misrepresent its entitlement to be registered, since its entitlement was as constructive trustee for FAL.”
It is encouraging that the court held that on the facts a constructive trust existed between entities in this group of companies and that the registered designs in question were not invalid due to an oversight at the time the design applications were filed. However, this is also a timely reminder to in-house counsel to ensure that the necessary procedures and policies are in place to ensure that IP rights are applied for and held in the appropriate corporate entities of a group. It is also important that such an IP holding structure is clearly and timely communicated to the group’s IP advisers.