D13.4 S.52 Revocation relating to Entitled Persons

D13.4.1  Overview

D13.4.1  Overview

S.52 is a post-Registration mechanism for dealing with issues of entitlement after Registration. It may be assumed that the great majority of disputes over entitlement that are dealt with before the Registrar will be dealt with under this provision.

As a result of a s.52 request, the Registrar may make a written declaration identifying the entitled persons at the time the design was first registered. A declaration can arise when:

• One or more of the specified entitled persons was not entitled; and/or
• One or more persons were also an entitled person.

Where the Registrar makes a declaration, the original design must be revoked [s.52(3)]. However the properly entitled persons may be entitled to file a new design application – with the priority date of the original application being preserved. [s.55].  This is discussed in D13.5 below.

D13.4.2  Process for handling s.52 requests

A request under s.52 is fundamentally an inter partes dispute involving a hearing. In this regard, regulation 11.24 applies. That is, (and subject to any specific requirements of the regulations) the practice and procedure for the purpose of enabling the application to be decided is to be determined by the Registrar

The issues surrounding regulation 11.24 were discussed [in the context of an identical provision in the Patents Act 1990 for dealing with the practice and procedure with inter alia ownership disputes] in Somnomed Ltd v Commissioner of Patents [2006] FCA 765 (23 June 2006). In that case, the delegate directed the parties file their evidence in parallel. However the patent applicant wanted the requestor to file his evidence first – and sought AD(JR) review. The Court stated:

[19] ….  the determination of the Deputy Commissioner was no more than a procedural ruling. It did not affect the rights of any party including Somnomed. The determination of the Deputy Commissioner on 6 July 2005 is not a decision made under an enactment within the meaning of s 3 of the ADJR Act. No review is possible under s 5 of the ADJR Act because there is no reviewable decision.

….

[23] In my opinion, there was no breach of the rules of natural justice nor did the Deputy Commissioner commit an error of law. The procedure adopted by the Deputy Commissioner requires Somnomed to provide and therefore reveal the material it relies on in resisting Mr Mehta's application at the time his material is furnished. However, Somnomed would subsequently have the opportunity to provide further material to contest or contradict Mr Mehta's material. It will have the opportunity both to advance its case and to meet the case of Mr Mehta. On its face, this is an unexceptionable procedure and cannot, in my opinion, be said to constitute a denial of procedural fairness.

[24] A possible qualification of this observation might have arisen if Somnomed had a right recognised by the Patents Act and the procedure proposed by the Deputy Commissioner itself derogated from or denied that right. But that is not the case. The Patents Act permits an application under s 36. It confers a right on a person to make the application. In any such application, the Commissioner must be satisfied that specified circumstances exist before exercising the power conferred by that section. Plainly, the person who seeks the exercise of the power must persuade the Commissioner that circumstances exist authorising its exercise. I do not think it is helpful, in this context, to speak of an onus of proof. The burden of proof in relation to an administrative decision of the type presently under consideration is the burden to persuade the decision maker so that the requisite level of satisfaction is reached. It is not a legal burden in the sense used in the context of adversarial litigation. There is an accepted and uncontroversial line of authority that it is inappropriate to draw too close a parallel between the adversarial process in judicial proceedings and decision making authorised by legislation.

D13.4.2.1  The requirement of the request

Under regulation 4.12, and application made under s.51 for revocation under s.52 must:

…

(b) include a statement of the grounds on which the application is made

That statement should outline the basis of the application sufficient for the Registrar to form the view that a plausible case for revocation under s.52 may exist.

There is a difference between setting out the basis of the case, and providing evidence to support the case. For example, if the case was based on an alleged breech of a written agreement, the statement should identify the existence of that agreement and its significance to the case; however a copy of that agreement would not normally be provided with the statement, but as part of the evidence (which is filed at a later time).

• Where that statement is insufficient to demonstrate the existence of a plausible case, the Registrar may ask the applicant to provide further information setting out the grounds in greater detail.

Where the applicant insists on pursuing the application in circumstances where the registrar is not convinced that there is a plausible case to be answered, the Registrar may likely require the applicant file all its evidence in support of their application before requiring the owner to file its evidence in support of its claim to entitlement.

• Where the Registrar has formed a view that there is a plausible case (or the applicant wishes to pursue the case irregardless), the registrar will notify the owner of the application and request an indication be provided within 1 month of whether they wish to contest the application.

In the event the owner does not wish to contest the application, the Registrar may be in a position to deal with the dispute on an ex parte basis – that is, issue a declaration and revoke the Design without a full evidentiary process or hearing.

D13.4.2.2  Filing evidence

When it is known whether the owner will be contesting the request, the Registrar will set the regime for the evidence. Typically that regime will be:

• Each party to prepare their evidence in support of their claim to entitlement, and to file the original plus one copy with the Registrar within 2 months.
• When each party has filed their evidence, the Registrar will send the copy to the other party. Each party will then prepare their evidence in response, and file the original plus one copy with the Registrar within 2 months. The Registrar will forward a copy of the evidence in response to the other party.
• The matter will then be set for hearing.

This regime takes into account the fact that the owner of record ought to know the basis of their entitlement to the design – even though that entitlement has not been set out in detail in the design application.

However (and as noted above) in some circumstances the Registrar may require the requestor to provide their evidence first – in which case the owner will be required to provide evidence in answer, and the requestor may be given an opportunity to file evidence in response.

The evidence in proceedings before the Registrar is in the form of declarations. Regulation 11.26 sets out the requirements for a declaration. It may be noted that a declaration made under a State or Federal Statutory Declarations Act will almost certainly meet these requirements, as will a court affidavit.

Parties may request the Registrar allow further time for the preparation of evidence, or permit a party to file further evidence. Such requests will be dealt with on their merits under the broad exercise of discretionary powers of the Registrar, noting that the Registrar expects the parties to be forthcoming with relevant evidence. In particular, the deliberate withholding of relevant material until the last possible moment in the proceedings will not be viewed favourably.

D13.4.2.3  Production of Documents

Under s127(1)(c), the Registrar has the power to require the production of documents or articles. As at 2006 that power has rarely been invoked by the Registrar. However it may be assumed that the practice of the Registrar will have regard to the practice of the Registrar of Trade Marks and/or the Commissioner of Patents. In particular:

• The threshold for issuing a notice requiring the production of documents or articles is whether the document or article could be relevant to the proceedings;
• Providing the Registrar is so satisfied, the notice will be executed and given to the person requesting the production. It is for that person to ensure the notice is timely served on the named person.
• A request to issue a notice to produce is dealt with ex parte. Any objection to the notice by the recipient is dealt with in the context of whether there is a lawful excuse for not complying with the notice. [Note s.134(2)].
• Where a notice is to be served on a non-party to the proceedings, the degree of particularity required is generally greater than for a notice to be served on a party to the proceedings.
• Many objections to a notice to produce relate to an unduly broad scope of the notice; where possible, the Registrar will encourage the parties to reach agreement between themselves over what will be produced – which is often much less than the literal scope of the notice.
• If necessary, the Registrar will conduct a hearing to determine whether there is a lawful excuse for not producing. At this stage, the threshold for requiring production is higher than the mere could be relevant; material that would not be relevant will not be ordered to be produced.
• The cost of complying with a notice to produce can be quite significant, and the Designs Act does not provide for any compensation for those compliance costs. This issue can arise in the context of whether there is a lawful excuse for not complying with the notice to produce. However the Registrar will encourage the parties to reach agreement between themselves about the documents to be produced, thereby avoiding the costs and inconvenience of a formal determination – if that is appropriate.

It should be noted that the enforcement provisions associated with s.134 are in the province of a court – and a hearing about lawful excuse is not about forcing production. Rather it is in the context that it is open for the Registrar, when determining the principle matter, to draw an adverse inference from the non-production in the absence of a lawful excuse.

Requests for the Registrar to issue a notice to produce should be made as early as possible in the proceedings.

D13.4.2.4  Cross-examination of witnesses – issuing a notice to appear.

The nature of s.52 disputes is such that cross-examination of witnesses may be appropriate. That power has rarely been invoked by the Registrar. However it may be assumed that the practice of the Registrar will have regard to the practice of the Registrar of Trade Marks and/or the Commissioner of Patents. In particular:

• Proceedings before the Registrar are primarily conducted on the basis of documentary evidence. Consequently the Registrar will entertain issuing a summons for a person who has provided declaratory evidence to be cross examined on that evidence [see reg 11.25]; however the Registrar will not entertain issuing a summons to a person who has not provided declaratory evidence, nor entertain a process of examination-in-chief of a witness for the purpose of introducing substantially new evidence.
• The threshold for issuing a summons to appear as a witness is whether cross-examination could be relevant to the proceedings;
• Providing the Registrar is so satisfied, the summons will be executed and given to the party requesting the production. It is for that party to ensure the summons is timely served on the named person, and offering reasonable expenses to appear. Note that the offer needs to be enforceable for it to be effective. In situations involving long-distance travel, it may be appropriate for the party to provide the person with a non-refundable ticket.
• Any objection to the summons by the recipient is dealt with in the context of whether there is a lawful excuse for not complying with the summons. [Note s.134(2)].
• The Registrar will not draw an adverse inference from the non-appearance of a witness without first being satisfied that the summons was in fact received by the witness; was served with adequate time to allow the person to reasonable arrange their affairs to attend the hearing; and that an enforceable offer to pay reasonable expenses was made.

For an example of a contested summons to appear as a witness (involving travel from the United Kingdom, reasonable expenses, medical issues, and offer to be examined by video link) see the two decisions in Airsense Technology Ltd v Vision Systems Ltd 62 IPR 409 and 62 IPR 413.

A declarant who attends a hearing might be called for cross examination – even though they have not received a written summon to witness – as happened in Glass Block Constructions (Aust) Pty Ltd v Armourglass Australia Pty Ltd [2005] ADO 1 (6 January 2005)

D13.4.2.5  The hearing and decision.

The hearing will be held in Canberra, although it may be held at a state office if the parties so agree, and agree to share the travel costs of the hearing officer.

The conduct of the hearing is under the full control of the Registrar’s delegate (the hearing officer). Typically the party who initiated the s.52 matter will present their case first. The owner will then present their case, and respond to the applicant’s case. And finally the applicant will have a short opportunity to reply to the owner’s case. However the hearing officer may vary this in appropriate circumstances.

The fundamental determination to be made by the Registrar is the identity of the person or persons where entitled persons at the time the Design was registered. If those names do not match up with the names of the owners as registered at that time (either by reason of someone being included who shouldn’t, or someone not being included who should), the basic ground for making a declaration under s.52 has been established.

It may be noted that while as a general principle a person challenging the entitlement in a design has a burden of demonstrating their entitlement in the design, the owner of record also has the burden of establishing their entitlement. The following observation in George Stack  v Davies Shephard Pty Ltd and GSA Industries (Aust) Pty Ltd [1996] APO 1; (1996) AIPC 91-241; 34 IPR 117 applies mutatis mutandis to applications made under the Designs Act 2003:

A patent may only be granted to an eligible person (section 15). When granting a patent, the Commissioner normally does not require proof of entitlement; rather the patent is granted on the basis of the prima facie claim to entitlement that the applicant provides in the 'notice of entitlement' required by regulation 3.1(2). In my view, where there is proper cause to query the entitlement of the patentee it is incumbent upon them to provide substantiation of their asserted entitlement to the grant of a patent. Inability to substantiate entitlement must prima facie leave it open to find that the patentee was not entitled to be granted the patent.

A finding of there being a mismatch between the identity of the entitled persons at registration, and the persons actually registered as owners at that time, does not automatically result in the Registrar making a written declaration – the issuance of that declaration involves a discretionary element. Factors that might be relevant to the exercise of the discretion would include the conduct of one or more of the parties – including conduct that might result in an estoppel in pais as arose in Costa v G R and I E Daking Pty Ltd (1994) 29 IPR 241. See Allen Hardware Products Pty Ltd v Tclip Pty Ltd [2008] ADO 8, paras 28 – 31.

If the Registrar issues a written declaration under s.52(1), an immediate consequence is that the design is revoked – s.52(2).

The Registrar has the power to award costs in respect of the hearing. Usually costs area awarded against the party who is unsuccessful. The costs are taxed in accordance with Schedule 3 of the regulations.

Note: An action under s.52 is not an ‘opposition’. Consequently items 1 and 2 of Part 1 of Schedule 3 do not apply. [Those items only apply to actions under s.137(6).]

The written decision should be issued within 3 months of the hearing. However it will take longer if, as a result of matters raised at the hearing, the parties are given an opportunity to file more material.

The decision is appellable to the Federal Court [s.52(7)]. The time for filing an appeal is set in the Federal Court Rules. Generally, it is 21 days from the date of the decision. [O58 R4].

D13.4.3  Typical disputes

There is currently very little direct precedent for S.52 matters. Allen Hardware Products Pty Ltd v Tclip Pty Ltd [2008] ADO 8 was the first contested matter under s.52 of the 2003 Act to be decided. [Glass Block Constructions (Aust) Pty Ltd v Armourglass Australia Pty Ltd [2005] ADO 1 was decided under the assignment provisions of the 1906 Act.] There have been numerous decisions under the equivalent provisions in the Patents Act 1990 that provide an indication of the types of disputes that can arise.

The Designs Act has an apparently significant difference from the Patents Act 1990 – in that s.13(1)(b) of the Designs Act expressly deals with the situation of a design being created in the course of employment or contract. The effect of this provision is:

• By default, ownership of a design lies with an employer, or a person who contracts another person to create the design; and
• The default position on ownership can be varied by way of agreement between the parties.

However in the context of employment, the purpose of this elaboration is merely to make clear that the usual principle of the design being owned by the employer can be excluded or modified by agreement, rather than establishing any new principle of entitlement. [See paragraphs 7.6 and 7.7 and Recommendation 66 of the ALRC report into the Designs system.]

The following is a summary of issues that can arise:

• An employee authors a design in their own time, and the contract of employment does not deal with intellectual property issues. The employer is likely to be the entitled person if the design related to matters which the employee was expected to do as part of their work duties. However an employee whose duties did not involve suggesting or developing new designs is entitled to a design developed in their spare time – even if that design related to the business of the employer. Collymore and Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2008] ADO 9, Spencer Industries v Collins [2003] FCA 542, 58 IPR 425.
• A design is disclosed in circumstances where there is an implied fetter of confidentiality, and that confidentiality is breeched. Allen Hardware Products Pty Ltd v Tclip Pty Ltd [2008] ADO 8
• A director of a company has fiducial obligations to that company, such that any design directly relevant to the business of the company, but made by that director in their own time, may belong to the company.
• Where a person develops a design as an employee – such that the employer is entitled to the design – and seeks Design protection in their own name only, do they have the express consent of their employer? In particular, failure of the employer to respond to requests for consent (while extremely frustrating to the designer) does not constitute consent. [Eg Pancreas Technologies Pty Ltd v The State of Queensland acting through Queensland Health [2005] APO 1]
• A ‘former employee’ files design applications a few weeks or months following cessation of employment. The former employer may have reason to believe that the designs were authored while the person was still an employee (and hence belong to the company as employer) – but were deliberately hidden from the employer. The person will likely assert that the designs were created after cessation of employment. These situations often depend heavily on circumstantial evidence; in particular, a former employee who did create the designs whilst still an employee may well have destroyed any direct evidence from the employer’s records prior to departure.
• Employee/employer arrangements must be ‘real’. For example, the fact that prisoners were paid a weekly allowance by a prison authority did not mean that the prisoners were employees of that the prison authority. [Eg Eddie Kwan, John Pierre Le Sands and Paul N Van Draanen v The Queensland Corrective Services Commission and The Queensland Spastic Welfare League [1994] APO 53; (1994) AIPC 91-113; 31 IPR 25]
• The Design came about as part of a project with many contributors. If all potential contributors worked for the same applicant, the rights of the applicant exist through employment contracts. However if some contributors were employed by a different person who was not named as an applicant, the applicant of record may not have good title to the design.
• The Design came about as part of a collaborative project. While the Design might have been created by a single individual, the ownership of the rights in the design may be determined on the basis of the collaboration. [Eg Commonwealth Scientific and Industrial Research Organisation et al [1995] APO 16; 31 IPR 67; (1995) AIPC 91-171]