FMCG Express - Navigating risk in commercial agreements - Top five HR issues for 2020 - Gadens Lawyers
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FMCG Express
Top five HR issues for 2020
Artificial intelligence -
do you own what you need?
Danger Ahead:
Navigating risk in commercial
agreements
August 2019 Edition
April 2020 Edition
Welcome to the April 2020 edition of In this issue
FMCG Express Managing coronavirus in the
4 workplace
Australian businesses are facing unprecedented
The events of 2020 so far are unprecedented and it is proving to be an challenges of the Novel Coronavirus
increasingly unpredictable time. When we started working on our first (COVID-19) outbreak. We have devised a guide
edition of FMCG Express for 2020, COVID-19 had yet to hit Australia at to serve as a foundation for business decisions
full force. Australia already had a tough start to the year with drought and regarding health and legal risk mitigation during
a devastating bushfire season. At that time, terms such as “COVID-19”, these uncertain times.
“social distancing” and “flattening the curve” had yet to enter our lexicon.
The COVID-19 pandemic has since changed things forever. Creative corporate restructures
6 in the retail industry: Woolworths
The impact on the FMCG, retail and hospitality sectors has been Liquor and Harris Scarfe
profound. Certain areas of the FMCG sector are currently booming, Following a swathe of retail businesses entering
while others are struggling or almost in hibernation. The manner in which into administration, we explore the case of two
businesses have changed their business models to help others at this major retailers who have pursued creative ways Cause marketing claims: the
time has been uplifting. Even McDonalds has pivoted into grocery basics of restructuring their businesses. dangers of using charity as a 16
in Australia. marketing tool
Chinese Trade Mark Protection 101 Many companies have announced significant
COVID-19 has raised a plethora of issues for our clients, especially those 8 Trade mark registration in China is extremely charitable donations and initiatives. There is a
in the FMCG sector, in a rapidly changing landscape. As employment law important, but is often overlooked until it is too risk of getting this publicity wrong; make sure
is a major issue at the moment, we have included an article on COVID-19 late. Here are some tips for protecting trade you get it right.
from one of our employment partners, Brett Feltham, in this edition. marks in China.
Please see our COVID-19 Hub for articles on a range of issues, from Danger Ahead: Navigating risk in
contract law, employment and privacy to temporary changes to insolvency Direct marketing – time to switch to commercial agreements 18
law to deal with the crisis. 10 an opt-in approach? Commercial agreements are becoming
It’s all but certain that big changes are coming lengthier and more complicated, creating a
Gadens has also had some changes in 2020. We welcomed our new to privacy law in Australia, and soon. Now is the ‘playbook’ can help an organisation to set out
CEO, Mark Pistilli, in March and he has immediately shown his excellent time to review your practices - it could bring a clauses and how to negotiate them.
leadership skills in steering us through these difficult times, particularly commercial advantage your way.
when we transitioned the entire firm to remote working. We have also When is a style name, product
welcomed three partners in the Corporate Team across Melbourne and Artificial intelligence – do you own description or sub-brand a 20
Sydney, along with a new IT/Privacy Partner, Dudley Kneller, who has 12 what you need? trade mark?
written an article for this issue of FMCG Express. There has been a shift in many industries The bikini battle and the beer brawl: two case
toward embracing the use of artificial studies that demonstrate the importance of
As always, please get in touch with any feedback and if you would like intelligence (AI). We look at how the FMCG “use as a trade mark”.
any further information on the issues discussed in this edition. industry is beginning to view AI technology.
Top five HR issues for 2020
From our homes to yours - take care of yourselves and each other and For the want of a nail, the shoe was 22
14
A run down of the top five issues facing
stay safe. lost... The Takata recall FMCG industry HR professionals in 2020.
The case of an automotive manufacturer and
the small defect that had severe impact. “The Big Print giveth and
Hazel McDwyer the small print taketh away”: 24
Editor Cyber insurance cover – some
background and basics
Cyber insurance policies - what are they and
why do businesses need them?
April 2020 Edition | 2
Managing coronavirus in the workplace Employee leave • Where an employee has undergone a period of self-
quarantine, consider whether they can only be able to
Brett Feltham, Partner • Employees who are diagnosed with COVID-19 will be return to the workplace upon receiving some form of
able to take their accrued paid personal/carer’s leave. medical clearance.
To assist FMCG employers we have created a guide • An employer may be able to provide a stand down • Consider what, if any, paid leave employees are able • Any employee who has developed any of the COVID-19
to serve as the foundation for business decisions direction to an employee (including to reduce hours of to access, in circumstances where they are required to symptoms, such as a respiratory complaint, should be
regarding health and legal risk mitigation arising from work and to reduce them to nil), where the employee self-quarantine but may not otherwise be sick themselves advised to seek expert medical assistance to obtain a
Novel Coronavirus (COVID-19) and when creating and cannot be usefully employed for the employee’s – advice should be sought in respect of particular diagnosis – if an employee starts to exhibit any of those
implementing business continuity plans as they relate normal days or hours because of changes to business circumstances. symptoms while at the workplace, they should be given
to management of employees. attributable to the COVID-19 pandemic or government • Employees may also take carer’s leave where they immediate medical assistance, with precautionary steps
initiatives to slow transmission. Changes to business need to provide care and support to a family member or being taken to isolate them from other employees.
Understand the risk to your workplace and could include, for example, less customers and the member of their household.
your overall obligations closing of stores. • Consider what happens once any such leave is Implement other preventative measures
• An employer may give a direction to an employee exhausted – some employers may grant special paid
• Keep updated on any changes to the current health about alternative duties to be performed (if they are leave to those employees, while other employees may be • Routinely maintain and thoroughly clean the workplace to
advice and information from the Federal Government, within the employee’s skill and competency, they are required to take unpaid leave. minimise the risk of workplace transmission.
state health agencies, and the World Health safe and they are reasonably within the scope of the • Promote and encourage maintenance of personal
Organisation. employer’s business operations) and/or the location of Establish or update policies and procedures hygiene at the highest standard and the use of
• All employers have obligations to ensure the health, the employee’s work (where the place is suitable and if handwashing facilities such as hand sanitisers.
safety and welfare of their employees and other persons not the employee’s home does not require unreasonable • It is important for employers to provide clear guidance • Provide proper safety equipment including hygiene
in their workplace, as far as is reasonably practicable travel, it is safe and reasonably within the scope of the to employees through their policies and procedures on products and offer employees on-site seasonal flu
– employers need to assess the risks arising in their employer’s business operations). when and how they can work from home or remotely, vacations.
workplace and eliminate those risks where possible, • An employer and an employee will also be able to make when they can take leave and so on. • Consider limiting the number of non-employees and
and where not possible, implement control measures to an agreement in relation to the days or times when • Re-review policies to ensure they are in compliance visitors to the workplace, and where it is necessary for
minimise those risks. the employee is to perform work (provided it does not with all applicable laws, including but not limited to such persons to be present, obtaining information from
• Responses to risks will necessarily change as new reduce the employee’s overall number of hours of work) occupational health and safety and discrimination laws them as to whether they have undertaken any recent
information becomes available. or for the employee to take annual leave (provided the – if the business undertook contingency planning and/or travel, and if so, where.
• Employers should consult with employees and others employee is left with at least two weeks’ leave and can implemented policies as a result of the past SARS, swine
with whom they work, and also other organisations who be taken at half pay). or avian flu outbreaks, then look to re-use that past work Other issues
they operate in close proximity to or within a shared • The Fair Work Commission made the decision to vary where possible.
space with. most modern awards as a response to COVID-19 to • Communicate and redistribute existing or new policies • Consider whether it is necessary to suspend or limit
• Consider how any updated information or emergency allow employees to access two weeks’ unpaid ‘pandemic and procedures to employees in order to be effective. business travel, and look for ways in which meetings can
notification can be provided to employees either using leave’ and enable them to take annual leave at half pay. be conducted other than face-to-face through the use of
present systems or introducing new systems. Continuous and ongoing communication is technology.
Employees working from home or remotely key • For employees undertaking non-work related travel,
JobKeeper Payment scheme and Fair Work Act employees should be advised to exercise caution and
changes • A primary control measure for infection control is social • Educate employees of the potential impacts of adopt a practical, common-sense approach.
distancing, that is reducing and restricting physical COVID-19 to ensure that they are well informed and are • Unfortunately there has been a reported increase in
• The JobKeeper Payment scheme is designed to help contact and proximity between persons. taking appropriate and proportionate steps to protect unlawful discrimination and vilification being directed
employers who qualify to retain staff during the downturn • It is reasonable for an employer to direct its employees themselves and their family members from risk of at certain racial and national groups perceived to be
caused by the COVID-19 pandemic and support business to inform it as soon as possible where they are unable infection. more likely to have contracted COVID-19 or to be in
recovery when conditions improve. JobKeeper payments to attend work because of contracting COVID-19 or the • Employers should circulate information to employees contact with someone who has – remind employees
are payable to eligible employers for a maximum of 6 need to self-quarantine. and provide education on sound hygiene practices, discriminatory behaviour will not be tolerated and may
months in respect of each eligible employee employed • It is also likely to be a lawful and reasonable direction respiratory etiquette, and other prevention measures. be considered serious misconduct (businesses can be
as at 1 March 2020 and who is retained by the employer for an employer to direct an employee to not attend its • It is critical that employees are instructed to inform vicariously liable for conduct of their employees who
(including employees who are stood down without pay). workplace – where it is necessary to do so, an employer management if they believe that they may have been discriminate against other employees).
• Qualifying employers will receive a payment (in arrears) should check relevant industrial instruments and exposed to COVID-19 or show symptoms of infection,
of $1,500 per fortnight for each eligible employee, which employment contracts to ensure that it is able to require and ensure there is clarity around any request or
must be then paid to the employee. The JobKeeper an employee to work from home or a different location. imposed period of self-quarantining.
Payment may also be available to self-employed • Where home-based or remote working is possible • Any decision on whether an employee is fit to work This article has been based on a more comprehensive article
workers/contractors. and being considered, employers need to ensure that should be based on expert medical information and which we recently published - read more here.
• The Fair Work Act has also been temporarily amended to employees have all the necessary equipment in order advice.
assist employers who qualify for the JobKeeper Payment to allow them to work effectively – it is critical that • Some employees may feel a heightened sense of For more information, please contact Brett Feltham on
scheme to better deal with the economic impact of employers test their IT and other services prior to any anxiety as a result of COVID-19 and/or that they are at +61 2 9163 3007.
COVID-19 by increasing the flexible approach that can implementation. a heightened, personal risk of the effects of infection –
be adopted. There are strict conditions which must be consider how those employees can be supported from a
met. well-being perspective and direct them to any employee
assistance program which is in place.
April 2020 Edition | 4
Creative corporate restructures in the retail industry:
Woolworths Liquor and Harris Scarfe
Penny Telfer, Senior Associate
Following the tsunami of retail businesses entering into In a strategic move as part of the purchase, Allegro also
administration, landlords across the country must be purchased the debt of both businesses. With the benefit of
concerned about the future occupation of their retail assets. hindsight, it became apparent that Allegro acquired both
Many landlords have been in the process of re-weighting the business and the debts in a calculated move to hold on
their portfolios. However, it remains to be seen whether this to the Best & Less business and only hold on to the Harris
represents a good strategy in the longer term, particularly Scarfe business if landlords were prepared to accept heavily
when acquiring such assets at a premium. discounted rents. Failing this, it seems the strategy was
for Harris Scarfe to be restructured via a receivership and
Against this backdrop, we have seen very significant administration regime under the Corporations Act.
activity by two major retailers who have pursued creative
ways of restructuring their businesses. Whilst the methods Typically, leases require Landlord consent to a change in
employed are both unusual and in some senses draconian, control such as transpired in this transaction. However,
they do appear to have facilitated the desired result in an the parties proceeded with the transaction without seeking
ever changing landscape. We think it likely that more retail Landlord consent and effected a discreet change in
businesses with the benefit of creative advisors will follow suit control. This was followed (very) shortly thereafter by brief
in the immediate future. consultations with Landlords and the swift entry of Harris
Scarfe into receivership and voluntary administration.
Woolworths Group Limited – Liquor business
The strategy used by the parties in this instance has been
The first example is the restructuring of the Woolworths drinks a bitter pill to swallow for many landlords who were no
and hospitality business to separate it from the Woolworths doubt in a flurry to have their leases reviewed and rights
business under the “Endeavour Drinks” umbrella. Rather than identified to challenge the change in control, only to have
seeking to assign the leases to a new entity in the normal their efforts torpedoed by the appointment of receivers and
way, Woolworths proceeded with the restructure by way of a administrators.
lesser used restructuring mechanism contained in Part 5.1 of
the Corporations Act 2001 (Cth) (Act). The administrators of Harris Scarfe will have no doubt
received a barrage of complaints from unsecured creditors
This form of scheme involves application to the Court for a as Allegro stands in the prime position as a secured creditor.
Court ordered arrangement which effectively orders a transfer And, against this backdrop, the administrators will be
of assets (and liabilities) to the new entity and enables the searching for a buyer of the viable portion of the Harris Scarfe
applicant to bypass all of the normal assignment provisions business.
contained in the affected leases (in this case numerous).
It also has the effect of releasing Woolworths from its No doubt some will query the veracity of the Act, which was
obligations once transfer has occurred. originally designed for altruistic purposes to enable corporate
entities to trade out of a bad place. It seems now that with
In making a decision under this Part of the Act, a Court is some creative application, it can equally well be used to
required to consider the interests of affected third parties enable a corporation to offload underperforming stores (at the
such as landlords. In this instance, Woolworths, were able expenses of landlords) and repackage the viable portion of
to demonstrate to the Court that the restructure would not the business for sale.
detrimentally impact third parties and presumably the financial
standing of the proposed new entity has posed little if any Gadens has one of the largest retail leasing practices in the
obstacle to the application. country and notwithstanding our extensive experience, we
rarely see the Corporations Act coming into view in our day to
Harris Scarfe day practice. Having the above two scenarios landing on our
desks within a month of each other late last year is indicative
The Woolworths strategy can be contrasted with the equally of the brave new world our retail clients have been propelled
bullish strategy adopted in the purchase of Best & Less into in recent times.
and Harris Scarfe in Australia by the Allegro funds umbrella
(Allegro) via a share sale in Greenlit Brands Pty Limited. For more information, please contact Penny Telfer on
+61 3 9252 2502.
April 2020Edition
April 2020 Edition| 6| 6
Chinese Trade Mark Protection 101
Hazel McDwyer, Partner and Teresa Elmey, Trade Mark Attorney
With China being one of the biggest Similar to domain name squatters, For these reasons, it is important to Made in China In the case of basketball star If your trade mark is a made up
markets either by way of selling unfortunately, this opens the door for take steps to protect your brands in Michael Jordan, it took him years of word, it may be a trade mark needs
or manufacturing products, trade rogue third parties to potentially seek China as soon as possible, and well Even if you only plan to manufacture legal battles against China-based to be created from several Chinese
mark registration there is extremely registration of your trade marks in an before any discussion with potential products in China for export, it is sportswear company, Qiaodan Sports characters and it would be important
important and often overlooked, until it attempt to extort funds by trying to manufacturers or distributors. If equally important to obtain trade mark Co to partially win the right to stop to select characters that have suitable
is too late. Chinese trade mark law can sell the trade marks back to you, or China is even considered a possible protection there. In December 2019, the Chinese characters for his name, and positive meanings to Chinese
be far from straightforward and should use the trade marks to trade off the jurisdiction of interest within three the Chinese Supreme Court ruled that “Qiaodan” which is the Chinese word speaking consumers.
be considered well before entering the reputation of your business, which years, it is worthwhile seeking applying a trade mark to products in for “Jordan” and pronounced “Chee
Chinese market. also has the danger of harming your registration, knowing you have the manufacturing process, even if ow-dahn”. Qiaodan Sports was not In a more recent case closer to home,
valuable reputation. Trade mark three years to use the mark before only for the purposes of export, will only preventing Michael Jordan from Southcorp Brands PL (Southcorp)
There have been many instances squatters have been known to monitor it becomes vulnerable to non-use distinguish the products’ origin and being able to use his own name in was successful in Australian
where businesses have filed trade overseas online trade mark databases cancellation. therefore constitutes trade mark use. China, but no doubt trading off his infringement proceedings when it
mark applications in China only to anticipating a company’s entry into extremely valuable reputation as well. alleged Australian Rush Rich Winery
discover that they cannot use their China and filing those trade marks With over seven million trade mark It will not be enough to rely on any Qiaodan Sports had, in the meantime, Pty Ltd (ARRW) was infringing its
own trade mark because a third first, to see how much money they applications having been filed in 2018 overseas registered rights you may built up a multi million dollar business. trade mark for the Chinese characters
party has beaten them to it, leaving can extort from trade mark owners alone, and over 22 million registered have in the countries to which your “奔富”, pronounced “Bēn Fù” in
them to face costly litigation, lengthy to get their own trade marks back, trade marks on the Chinese Trade products are being exported and, In coming up with a suitable Cantonese and Mandarin and being
procedures to cancel existing trade knowing companies will realise this is Mark Register, this highlights the aside from the significant risks Chinese name, there are several the translation of “Penfolds”.
marks, or having to rebrand entirely a cheaper and less difficult option over essential need to seek protection associated with infringing other’s rights considerations. In particular, seeking
specifically for the Chinese market. litigating a bad faith action through the sooner rather than later in case you within China mentioned above, if you trade mark protection for both the In this case, ARRW was exporting
courts. are faced with issues and end up do not have appropriate registered translation in Chinese characters wine to China bearing the Chinese
First to File needing to select a different brand for rights, your products could now be as well as the Romanized or pinyin characters 奔富. The Australian
This can be extremely frustrating, the Chinese market. stopped by Chinese customs from version, being how the Chinese Federal Court agreed with Southcorp
Unlike Australia which is a ‘first to not to mention expensive and leaving China. characters are pronounced. In and found that the trade marks
use’ jurisdiction, Chinese trade mark inconvenient to essentially ‘buy back’ Jordan’s case, while he was able to PENFOLDS, Bēn Fù and 奔富 all
If you do not have the appropriate
law works on a ‘first to file’ basis, your own trade mark, litigate or have
trade mark rights and are found Chinese Language Trade stop Qiaodan Sports from using the have the same meaning to Cantonese
meaning any prior use of your trade to come up with an entirely different
to be infringing a third party’s Marks translation of the name Jordan in and Mandarin speaking consumers,
mark is unlikely to assist in obtaining brand specifically for the Chinese Chinese characters, it was far from rendering all three trade marks to
rights, the consequences can
registration if a third party has beaten market. Consumers in China who only speak a ‘slam dunk’ in that he was initially be substantially identical with or
be significant, including being
you to filing. a Chinese language may be less likely unable to prevent them from using the deceptively similar to each other and
prevented from manufacturing
to recognise an English language pinyin version “Qiaodan”. a clear infringement by ARRW. It was
and trading within the Chinese
trade mark. Therefore it is important noted that infringement would occur
market, as well as from importing
to consider protecting the translation However, China’s Supreme Court just even if it were only Chinese speaking
to and exporting out of China
or transliteration of your trade mark ruled in favour of Jordan in March consumers being misled.
under your trade mark.
so it may be recognised by Chinese 2020 to prohibit Qiaodan Sports from
speaking consumers, distributors and using the Chinese translation of his This is a good example of why it is
manufacturers. This can also avoid the name, ending an eight year legal important to seek broad protection
costly exercise of litigation should a battle. for not only the English version of
third party attempt to use the Chinese your trade marks, but the Chinese
equivalent of your trade mark. character mark and pinyin version as
well.
When selecting such marks, it is important to seek local advice not only to ensure the correct language and Chinese
characters are being used, but to also be aware of to whom you are disclosing such information. We have a trusted
network of expert agents in China who can assist with such matters, so please get in contact if we can assist you.
For more information, please contact Hazel McDwyer on +61 2 9163 3052.
April 2020 Edition | 8
Direct marketing - time to switch to an opt-in It also seems unlikely that any “grandfathering” exemption for
existing databases would apply when the change takes effect
If a company switches to an opt-in approach now (and clearly
records which members of its database provide this opt-in
approach?
in Australia. Otherwise, companies that have taken a “riskier” consent), it will probably be able to build its database on that
(i.e. opt-out) approach to obtaining consents up to that time basis for a year or two before any change is implemented
would receive what some might regard as an unfair benefit, at the Commonwealth level. It will not have to get caught up
David Smith, Partner which they might be able to exploit for some years into the amongst the flurry of emails referred to above, when the law
future. does change. One might reasonably expect that the company
will receive more “opt-ins” by “organically” requesting them
Therefore, it would appear likely that before the change takes over the next couple of years at the point of collecting a
effect, we will see a flurry of emails by companies to their person’s data (e.g. when they enter a promotion) than in
Changes to privacy law are coming One of the ACCC’s recommendations is that the Privacy Act databases requesting consumers to “reply yes” to remain on response to an email of the type referred to above, sent
1988 (Cth) is amended to strengthen consent requirements. the database. A consumer receiving numerous emails of this shortly before the change to the law takes effect.
It seems almost certain that big changes to privacy and spam Under the ACCC’s proposal privacy settings enabling the type may well decide to ignore some or all of them. Instead,
law will happen in Australia within the next 1-2 years. collection of user data would be required to be pre-selected to we suggest that a company could consider changing its In this way a company might obtain a material commercial
There has been a tide of significant changes to privacy law “off” and unbundled with consents for any data collection for approach now. advantage by switching its approach now rather than later.
in other jurisdictions, most notably the European Union, the purposes of supplying the core consumer-facing service
through the General Data Protection Regulation (GDPR), and (such as offering the opportunity to enter a promotion).
California.
Consent would require “ticking a website, actively selecting
In Australia, much of the impetus for reform has come from a setting that enables the collection of personal information, Pros and cons
the Australian Competition and Consumer Commission or another statement or conduct that clearly indicates the
consumer’s acceptance of the collection, use or disclosure of Of course, switching now is not a risk-free option from a business perspective. An argument could be made that it
(ACCC). The ACCC issued its final report on its Digital
their personal information”. Silence or a pre-ticked box would is better to persist with a “robust” (i.e. an opt-out) approach to obtaining consents for as long as practically possible,
Platforms Inquiry in July 2019.
not suffice. bearing in mind that while a change to the law within the next 2 years or so seems very likely, it is not a certainty. This
The Commonwealth Government supports many of is a judgement every business will have to make for itself.
the ACCC’s recommendations on privacy law, and has While the ACCC speaks specifically about the Privacy Act,
announced a program for developing and implementing we assume it intends the same consent requirements would
specific responses. Most notably, the Government will apply under the Spam Act. A more detailed version of this article is available here.
undertake a review of the Privacy Act, to be commenced David Smith, Partner
in 2020 and completed in 2021, “to ensure it empowers The Government supports the above recommendation in For more information, please contact David Smith on +61 3 9252 2563.
consumers, protects their data and best serves the Australian principle.
economy”. For more on the Government’s position, see
our earlier article. The GDPR also changed the requirements for a valid
“consent”. The relevant definition in the GDPR states:
Benefits of changing your commercial
practices now – opt-in versus opt-out ‘consent’ of the data subject means any freely
given, specific, informed and unambiguous
Companies often run promotions and competitions in indication of the data subject’s wishes by which
connection with their products. Apart from boosting sales, he or she, by a statement or by a clear affirmative
these activities aim to build the companies’ direct marketing action, signifies agreement to the processing of
databases. personal data relating to him or her.
In recent years, many companies have taken an “opt-out” Shortly before the GDPR took effect many companies sent
approach to building their databases. This might, for example, emails to their marketing databases, asking individuals
involve: to respond affirmatively if they wished to remain on the
• stating in the terms of the promotion that by entering, database. This had to occur because the GDPR did not grant
individuals consent to join the marketing database; any exemption to the new consent requirement, for existing
• including a similar statement in the “legal copy” on any databases where consent may not have been obtained to that
advertising for the promotion; and standard. Many individuals (including in Australia) received
• including a similar statement on the entry form where a large number of these requests at around the same time,
entrants complete their personal information. shortly before the GDPR commenced.
When a company subsequently sends direct marketing It seems almost inevitable that the ACCC’s recommendation
communications to a person who entered the promotion, for strengthening consent requirements, or something similar,
it includes an unsubscribe message. The company then will be given legislative effect in Australia within the next few
honours any “opt-out” request by that person. years and quite possibly, in 2021.
April 2020 Edition | 10The use of artificial intelligence (AI) has been embraced The requirement for human authorship was considered as far
by many industries, with the FMCG industry being no back as 2010 by the Federal Court of Appeal which held, in
exception. If you are in the FMCG industry, you may agreement with the trial judge, that copyright did not subsist in
have noticed a shift in how AI is viewed within your Telstra’s White and Yellow Pages as the extraction process to
Artificial intelligence – do you own what you need? organisation. Many FMCG businesses are starting to
consider AI as a business necessity, rather than an
produce the directories, was a largely computerised process.
The trial judge, considered that the directories were not
innovation to gain competitive edge. ‘original works’, explaining:
AI has many functions in an FMCG context, but in particular, “…A majority of the creation process of the WPD
Donna Bartlett, Partner and Aya Lewih, Lawyer it is used to enable the driving of efficiencies in the supply and the YPD was heavily automated. Human
chain and provide insight to emerging and trending consumer intervention was regulated and controlled
behaviour patterns. AI programs which pull together data from according to either the various computer
a range of sources are particularly favoured, empowering systems in place including the Rules… Very
businesses to make data driven decisions. few people had any part to play in the final
presentation of the Works or the particular
While the benefits of AI to the FMCG industry are clear – the form of expression of the information. Those
use of AI also raises a range of issues around ownership of people, again, could not have been said to have
outputs from the AI program and its use. exercised ‘independent intellectual effort’ and / or
‘sufficient effort of a literary nature’…”
What is AI?
Telstra Corp Ltd v Phone Directories Co Pty Ltd [2010] FCA 44 [at
At a high level, AI refers to the branch of computer science
338].
aimed at making machines learn how to carry out tasks in
a manner that simulates human intelligence and behaviour.
Protecting AI Output
A particular subset of AI, which is the focus of this article, is
machine learning, which refers to AI programs that learn and
Given the lack of certainty around intellectual property
improve from experience through access to data rather than
protection for computer-generated outputs, there is
from being programmed to do so.
recognition in Australia and globally of the need to review
intellectual property laws to address ownership and protection
What is AI Output? issues in the era of AI technology. Until such reforms in the
law take place, appropriate terms in contractual arrangements
In the context of machine learning, we are referring to
are necessary to clarify the position for your business.
AI Output as both the learning and improvement in the
AI program that derives from the data it receives (i.e. the
The particular contractual terms required will depend on the
enhancements, modifications and improvements to the
manner in which the AI program is being provided to your
AI program) as well as the actual outputs from the use of
business. For example, if the AI program is licensed, it is
the AI program. AI Output is arguably the most valuable
important that the licence agreement addresses the following:
component of the AI program to your business. The learning
• who owns the data inputs used to ‘teach’ the AI program;
an AI program gains from the data provided to it drives how
• who owns the AI Outputs; and
valuable and tailored the use of the AI program becomes to a
• who owns the enhancements, modifications and
particular organisation.
improvements to the AI program which result from use of
the data and the machine learning by the AI program.
The ownership position
The licence agreement should also address rights and
The code in the AI program itself will generally attract
restrictions, including confidentiality obligations in respect of
intellectual property protection as an ‘original literary work’
access, use, reproduction and modification of the AI Output.
under applicable intellectual property laws. It is less clear
however whether this same protection will extend to the AI
By utilising appropriate contractual protections, your business
Output. This is due to the AI Output, when it is a computer-
can obtain the necessary rights in respect of its AI Output to
generated work, having no identifiable human author. In
maximise the value of the investment into AI and to protect
Australia, and other jurisdictions, copyright protection requires
your business from competitors exploiting your AI Output to
the creation of original works expressed in material form –
their own advantage.
however, a human author must create these works.
For more information, please contact Donna Bartlett on
+61 2 9163 3025.
April 2020 Edition | 12For the want of a nail, the shoe was lost …. Compulsory vs voluntary recalls – what’s the
difference?
Takata’s troubles continue
The Takata Recall A voluntary recall involves the supplier of a consumer product
On 17 December 2019 the ACCC announced that
approximately 78,000 further vehicles manufactured by Audi,
commencing a recall and taking action to remove and retrieve BMW, Ford, Honda, Mazda, Mitsubishi, Suzuki and Toyota
Antoine Pace, Partner and Zein Jomaa, Lawyer
unsafe products from consumers and the marketplace. between 1996 and 2000 were fitted with defective airbags
In consultation with the ACCC, suppliers will typically separate to those subject to the Takata Recall. This is known
dictate the manner and timing of the recall. Voluntary recall as the Takata NADI 5-AT airbag, and suffers from a similar
notifications are most conveniently submitted by suppliers defect.
The Takata Recall – the problem The recall notice for the Takata Recall or their representatives through the ACCC Product Safety
Australia portal which also satisfies the mandatory notification All eight manufacturers have each since commenced
Few recalls in recent times have received as much publicity On 27 February 2018 the responsible Minister issued a requirement under section 128(2) of the ACL. voluntary recalls with current remediation efforts ranging from
as the recall of vehicles installed with defective safety airbags compulsory recall notice pursuant to section 122 of the airbag replacements (BMW) to vehicle buy backs (Audi, Ford,
manufactured and supplied by Takata, demonstrating that a Australian Consumer Law (ACL) in Schedule 2 of the In contrast, a compulsory recall empowers the responsible Honda, Mazda, Mitsubishi, Suzuki and Toyota).
defect in a relatively small component in a motor vehicle (or Competition and Consumer Act 2010 (Cth) regarding Minister to
any goods) can have potentially severe impacts. defective Takata airbags, which commenced on 1 March 2018 You can check if your motor vehicle is subject to this most
(the Takata Recall). “order a supplier to recall goods that may cause recent recall here.
At its core, the defect arose from an instability in the injury to any person if it appears to the Minister
propellant used to inflate the airbag. As a result, when the The compulsory recall notice was issued because the that the supplier has not taken satisfactory action Sale or advertising of recalled products
airbag is triggered and deployed during a collision, it may responsible Minister had formed the view based on evidence to prevent the goods from causing injury”
deploy with too much explosive force, rupturing the airbag provided by the Australian Consumer and Competition The sale or advertising of products that are the subject of
inflator housing so that sharp metal fragments are ejected, Commission (ACCC) that: (see the ACCC’s “Consumer Product Safety Recall an active recall may give rise to the imposition of pecuniary
potentially injuring or killing vehicle occupants. • a reasonably foreseeable use of vehicles with defective Guidelines”). Unlike a voluntary recall, the responsible penalties. On 31 January 2020 the ACCC announced that
Takata airbags may cause injury to drivers and/or Minister will dictate the manner and timing of the recall. three corporations had paid penalties amounting to $63,000
The manufacturer of the airbags has filed for bankruptcy passengers; and for selling or advertising vehicles that were subject to the
protection in various jurisdictions, resulting in the vehicle • one or more suppliers of vehicles with defective Takata This has been evidenced throughout the Takata Recall, in Takata Recall.
manufacturers being left primarily liable for the defect in the airbags had not taken satisfactory action to prevent those which the responsible Minister has:
vehicles themselves. vehicles causing injury to drivers and/or passengers. • determined that the replacement of defective airbags to Lessons to be learned
be the most appropriate form of remediation; and • Any “consumer goods” (see section 3 of the ACL) that
Prior to the responsible Minister issuing the compulsory recall Consumers are being urged to take immediate steps to • imposed a recall and replacement timetable on suppliers are defective and that may give rise to a safety risk to
notice, a number of vehicle manufacturers and importers have their airbags replaced and to stop driving their vehicles to facilitate the recall in a timely fashion. members of the public must be recalled under the ACL.
in Australia had undertaken voluntary recalls, but the immediately if their car is under “critical” recall. Takata airbags • Voluntary and compulsory recalls significantly differ from
response from the automotive industry was not uniform, with in the “critical” category pose a heightened risk of injury or Domestic and global implications of the Takata one another with the former allowing greater flexibility
inconsistent treatment between brands leading to consumer death. Recall – the numbers and control in determining the manner and timing of a
confusion. recall.
The ACCC has reported that: • Persons selling products that are subject to an active
• the Takata Recall is the world’s largest automotive recall recall must cease selling or advertising such products.
with an estimated 100 million affected vehicles worldwide • The manufacture, importation or sale of unsafe products
and is the most significant compulsory recall in Australia’s can give rise to liability not under the ACL, but under
history with over 4 million affected Takata airbag inflators various other laws (including the law of negligence) as
and involving more than 3 million vehicle recalls; well.
• defective Takata airbags have resulted in at least 29 • The most insignificant components can give rise to a risk
deaths including at least one in Australia and over 320 and consequently a recall. But for the nail (i.e. the airbag
injuries worldwide including at least one serious injury in inflator propellant), the horse and rider, and so the battle,
Product recalls and the role of the ACCC Australia. were lost (i.e. vehicle had to be taken off the road to be
remediated or scrapped).
The ACCC monitors and facilitates consumer product recalls in The ACCC has also reported that approximately 3.56 million • It may be prudent to include product recall and indemnity
accordance with the ACL. Generally, a product recall is initiated when a airbags have been replaced however approximately 300,000 clauses in product manufacture and distribution
consumer product is identified as having a safety risk to members of the airbags are yet to be replaced. agreements, requiring the manufacturer to assist the
public. This can occur on a compulsory or voluntary basis. distributor in the event of a recall.
Product recalls can be extremely costly with the average cost • It is also very important for suppliers to engage
of a significant recall amounting to US$12 million and “ripple collaboratively, as far as possible, with the ACCC before
effect” events potentially costing billions. commencing a recall particularly where recalls have
commenced globally to ensure compliance with domestic
You can check if your motor vehicle is subject to the Takata requirements.
Recall here.
For more information, please contact Antoine Pace on
+61 3 9612 8411.
April 2020 Edition | 14Cause marketing claims: the dangers
of using charity as a marketing tool
Edward Martin, Partner
Reflecting back on the devastating summer that was 2019/20, it has been heartening, and at
times moving, to see the response of corporate Australia to those worst affected.
Many companies have announced significant charitable Cause marketing case law
donations and initiatives, which seem indicative of
their commitment to corporate social responsibility and The most important guidance around cause marketing is
corporate culture. Not the point obviously, but these likely to come from relevant ss18 and 21 case law.
efforts are good for the brand and good marketing
generally. An example of a cause marketing case is currently
playing out in the Federal Court as in December 2019,
There is, however, a risk of businesses getting publicity the ACCC commenced proceedings against eyewear
around charity wrong, so it is important to take some company Oscar Wylee for alleged misleading or false
care when announcing and engaging in these kinds of representations about its charitable donations and
initiatives. affiliations. The case is due to come before the Court in
September although the timing and nature of any hearing
Regulatory Guidance is likely to be affected by the strains that the COVID-19
pandemic has placed on the Court.
There are no specific guidelines directed to advertising
donations of profits or advertising a charity affiliation from Oscar Wylee ran a ‘Buy 1 pair, give 1 pair’ campaign
the Australian Consumer and Competition Commission and issued marketing materials that said every time a
(ACCC), the Advertising Standards Board or the consumer bought a pair of glasses from Oscar Wylee,
Australian Association of National Advertisers. That said: it would donate a pair of glasses to someone in need.
• While the ACCC does provide guidelines for The ACCC alleges that only 3,000 pairs of glasses were
charities that outline their obligations under the donated, despite over 320,000 pairs of glasses having
Australian Consumer Law (ACL), the document is been sold.
not directed towards companies engaging in one-off
or short term donation or fundraising campaigns. So- The ACCC also alleges that although Oscar Wylee
called ‘cause marketing’ claims against companies represented that it had ‘partnered’ with a charity to help
are instead primarily made under ss 18 and 21 of build sustainable eye care programs in Cambodia, the
the ACL for misleading or deceptive conduct where actual association with the charity was limited to a
the fundraising activity is in the course of trade or one-off donation of $2,000 and 100 frames.
commerce.
• In NSW, other than one-off advertisements that If the case proceeds to trial (noting that the parties were
a portion of profits will be donated, under the ordered to mediate), the Court may have an opportunity
Charitable Fundraising Act 1991 (NSW) companies to provide some judicial clarity around approaching
wishing to embark on a marketing campaign with cause marketing but, in any event, the commencement
a charity partner would need to enter into a written of this case alone provides a salutary lesson for FMCG
agreement with the charity partner and include companies.
details of the intended distributions of the funds raise
in the marketing campaign. For more information, please contact Edward Martin
on +61 2 9163 3086.
March2020
April 2020Edition
Edition| 16
| 16Danger Ahead: Navigating risk in commercial
agreements
Breanna Davies, Special Counsel
You don’t need to be a High Court judge to recognise 1 | Indemnities Where indemnities are expressed to apply mutually, the If you have limited negotiating power to amend your
that the average commercial agreement is becoming overall outcome may not be mutual in circumstances where commercial agreement, the inclusion of such limitations on
lengthier and more complicated, and there seem to If there are no indemnity provisions in an agreement, then one party has significantly more exposure to a claim being your liability may be an effective way to minimise your risk. In
be more and more of them coming across everyone’s any claim by a party pursuant to that agreement would simply made against it pursuant to those indemnities. Therefore, if your internal contract negotiation guide it can be useful to set
desk. be for breach of contract (and, where successful, the remedy you are a party providing the services or selling assets don’t out options for these limitations of liability. For example, we
is most typically an award of damages). Alternatively if the blindly concede on mutual broad form indemnities. are finding that an exclusion for consequential loss is likely to
The challenge for an organisation to mitigate the risk of that agreement does contain indemnities, then a contractual claim be accepted, but the drafting of the definition of consequential
exposure is immense, and can be overwhelming. Many may potentially be made on an indemnity basis. Indemnities If indemnities are included in final agreements, please also loss is then hotly debated.
organisations do not have the time, energy or budget to could cover losses connected with damage to property, be aware of any obligations to notify and consult with your
outsource the review of all of these agreements to external personal injury, intellectual property breach, or even for loss insurers to confirm that risk is insurable. If you cannot insure
legal advisors or even to specialist in-house legal counsel suffered as a result of breach of contract. The latter turns against an indemnity risk, you may need to walk away from 3 | Final thoughts
(particularly when such lengthy agreements may relate to what would typically be a contractual breach claim, into an the transaction. In our experience there is usually a path
what appear to be financially insignificant transactions). indemnity claim. forward. • Consider a playbook or internal guide to have
pre-mandated positions on commonly negotiated terms.
While the key risk drivers will be different depending on the Being able to make an indemnity claim gives specific 2 | Limitations of liability • Ensure that there is recurrent team training so that
industry and the tolerance of each organisation, there are advantages for the claimant by generally providing them contractual risks are understood and escalation protocols
some legal drafting points that we suggest you should always compensation for all loss suffered, and allowing them to There are various ways that liability can be limited under an are in place.
take heed of. This may also be of assistance in preparing pursue the matter as a claim in debt. Depending on the agreement, for example by: • Seek legal advice to ensure that precedent contracts
an internal contract playbook, or a guide to streamline your drafting of the indemnity, it is possible that loss or damage • excluding defined heads of consequential loss; are updated, and that any requested unusual terms
contract review and approval processes, where you need to which does not usually flow from a breach of contract, or • including time limits for the making of claims and financial are negotiated in the most favourable position for your
explain to your team why a certain position is taken. which was not contemplated by the parties at the time limits on claims (including liquidated damages or limited organisation.
the contract was entered, may be recoverable under an to a multiple of fees received);
A playbook is a helpful tool to allow an organisation to set out indemnity. • including an obligation to mitigate loss (particularly For more information, please contact Breanna Davies on
frequently negotiated clauses (especially in internal precedent relevant when considering indemnities); or +61 2 9163 3017.
contracts), explain why the provision is included and then set If there are indemnities in your agreement they should • limiting claim amounts to insurance proceeds.
out the parameters by which the final document may deviate be reviewed carefully. If you are the party most likely to
from the preferred precedent position. Such a guide can be be affected by those indemnities (eg you are the party
helpful so that those team members (both legal and providing the services) then you may wish to consider if those
non-legal) understand how they may negotiate the clauses indemnities can be deleted entirely, amended to limit the
without needing to liaise directly with legal on each occasion. scope, or that relevant and appropriate limitations on your
liability can be included.
April 2020 Edition | 18When is a style name, product description or
sub-brand a trade mark?
Kerry Awerbuch, Partner and Madeleine McMaster, Associate
Good brand management dictates that all signs, such as words and graphics, The beer brawl La Sirène’s defence was successful, with Justice O’Bryan
used to identify a product are reviewed prior to use to understand whether finding:
the proposed usage is “use as a trade mark” and if so, whether the sign is In Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd [2020] • the use of the words “La Sirène” was sufficiently
available for use or already in use by a third party. FCA 82, Melbourne-based brewer, Urban Alley Brewery Pty prominent to convey the source of origin of the product
Ltd (Urban Alley), sold beer under its URBAN ALE trade (this was irrespective of the large format of the words
mark, which was registered in class 32 for “Beer”. URBAN PALE);
“Use as a trade mark” is an important concept in trade mark Pinnacle’s DELPHINE trade mark was registered in class • each of the words (“urban” and “pale”) were descriptive
law. It is not possible to infringe a third party trade mark 25 in relation to clothing, headwear and swimwear. Pinnacle La Sirène Pty Ltd (La Sirène), sold and continues to sell when used in relation to beer and therefore less likely to
unless the threshold requirement of “use as a trade mark” is alleged Triangl’s use amounted to trade mark infringement. a significant number of beer products under labels which function as a trade mark. Consumers would understand
met. Further, trade mark registrants must ensure they use Triangl denied infringement on the basis that the use of the incorporate the “La Sirène” trade mark. In 2016, La Sirène the name to indicate the nature and style of the beer (i.e.
their trade marks “as a trade mark” to remove the risk of style name “Delphine” was not use “as a trade mark”. Triangl launched a new pale ale product. The label for the product “urban” signifies that it is an inner-city craft beer, and
successful non-use cancellation actions being run against argued it was common practice in the industry to use female incorporated the words “Farmhouse Style Urban Pale by La “pale” indicates the style of beer, being pale ale); and
them. names as style names (and in fact, was a practice adopted Sirène” with the words URBAN PALE prominently featured, in • other use by La Sirène of the URBAN PALE name was
by Pinnacle itself). Further, consumers understood the brand the following format: always closely associated with the La Sirène brand (i.e.
Two recent Federal Court decisions are of interest to “Triangl” as the badge of origin in the context in question. on its website and Instagram account).
businesses that use prominent style names or product names
to differentiate their products. Both decisions make it clear Justice Murphy found Triangl’s use of “Delphine” as a style Key principles
that not all style names or product descriptions operate as name was not use as a trade mark and therefore did not
“trade marks”, but the context of use, industry norms, the infringe Pinnacle’s trade mark registration for DELPHINE on It is important to view style names, product descriptions and
nature of the sign and the purpose of use are all relevant the basis that: sub-brands objectively to understand whether they are being
considerations. • Triangl did not intend to use the style name “Delphine” used “as a trade mark”, in particular:
to distinguish its products from the products of other • Consider the context. How will a consumer understand
The bikini battle traders. The intended use was as a reference point for the word or sign to function? Is the font size and style
consumers to distinguish between goods in its range; prominent? Is there a more prominent core brand that
In Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA • the context of the use meant that TRIANGL was always consumers will understand to function as the sole badge
1662, Pinnacle Runway Pty Ltd (Pinnacle) brought an action the dominant sign, whether on the webpages or in EDMs of origin?
for infringement of its trade mark, DELPHINE, against Triangl sent to subscribers, with the “Delphine” style name listed • Consider the industry. Is it common to use a series of
Limited (Triangl). in smaller font; and names or terms to distinguish between products in a
• there is a widespread industry practice of using style range? If so, a name or term within a range is less likely
Triangl sold a range of floral bikinis under the “Triangl” brand, names for fashion garments, in particular female names, to be used, or understood to be used, as a trade mark.
using various female names as style names in the range. It such that consumers do not consider style names to • What is the sign? Distinctive signs, including made-up
used the style name “Delphine” for three of the bikinis in a have any particular trade mark significance. words, are far more likely to function as a trade mark
series of website and electronic direct mail (EDM) contexts, than a term that describes the qualities or characteristics
including as shown below: Pinnacle has appealed the decision, despite Justice Murphy of the product.
describing the initial proceedings as “ill-advised”. • What is the purpose of the usage? While the question
of trade mark use is primarily an objective one, if the
purpose of a sign is to distinguish between products in
Urban Alley commenced proceedings for trade mark a range, or to describe the features of a product, rather
infringement on the basis that the use of URBAN PALE than to distinguish the product from those of another
infringed its rights in the URBAN ALE trade mark. trader, the usage is less likely to be understood as “use
as a trade mark”.
There was no dispute on the question of whether URBAN
PALE was substantially identical with or deceptively similar For more information, please contact Kerry Awerbuch on
to URBAN ALE. However, La Sirène argued that its use of +61 3 9252 2573.
URBAN PALE was not “use as a trade mark”.
April 2020 Edition | 20You can also read
