A number of new legislation will take effect in 2015.  To begin our new year, from 1 January 2015, the current Franchising Code of Conduct will be repealed, and a new Franchising Code of Conduct will replace it.  The new Code is the outcome of an extensive review, and the Franchise Council of Australia (FCA) has worked collaboratively with both the previous and current Governments during the lengthy consultation process.  The FCA has welcomed the upcoming release of the new Code, stating that it was pleased to see that much of the contribution made by its members had been taken into account.

The ACCC continues to be the regulator responsible for this mandatory industry code that applies to the parties to a franchise agreement.  According to the ACCC, the new Franchising Code of Conduct will:

• introduce an obligation under the Code for parties to act in good faith in their dealings with one another;
• introduce financial penalties and infringement notices for serious breaches of the Code;
• require franchisors to provide prospective franchisees with a short information sheet outlining the risks and rewards of franchising;
• require franchisors to provide greater transparency in the use of and accounting for money used for marketing and advertising and to set up a separate marketing fund for marketing and advertising fees;
• require additional disclosure about the ability of the franchisor and a franchisee to sell online; and
• prohibit franchisors from imposing significant capital expenditure except in limited circumstances.

The ACCC’s website provides some very useful information for franchisors and franchisees alike, including access to the updated Franchisor Compliance Manual and the Franchisee Manual.  These ACCC manuals are compulsory reading for parties to any franchise agreement as they cover, among other things, the rights, responsibilities and obligations of the parties, and how to resolve disputes under the Code.

We can help you understand, apply and implement new legislation in 2015 and beyond - just contact us for assistance.

What is passing off?  Revlon’s Mitchum Clinical deodorant v Unilever's Rexona and Dove deodorants

To put simply, passing off is where there is a misrepresentation that a business’ goods or services are those of another business.  Under an action for passing off, protection is given to those who have developed goodwill or reputation.  For a claim of passing off to be successful, the claimant has to prove that a misrepresentation has been made by another in the course of trade to actual or prospective customer that injures and causes damage the claimant's business, goodwill or reputation.  The misrepresentation can be one that relates to the likeness of a product or the trade name of a service provider.

On 19 August 2014, Gleeson J of the Federal Court of Australia (FCA) handed down the latest judgement in this area of law - Unilever Australia Ltd v Revlon Australia Pty Ltd (No 2) [2014] FCA 875.  You can read the full judgment on the FCA’s website. 

The parties involved, being Unilever and Revlon, are competitors in the supply of deodorant products.  Unilever's deodorants are branded Rexona and Dove, where as Revlon's deodorant is branded Mitchum Clinical.  The initial action was by Unilever, who claimed that Revlon breached the Australian Consumer Law in terms of the representations Revlon made in advertising and on the packaging of Revlon’s deodorant.  In response to Unilever’s claim, Revlon counter-claimed that Unilever breached the Australian Consumer Law in the same way, and in addition, engaged in passing off.  Revlon wanted to obtain an injunction so as to restrain Unilever from selling or marketing Rexona clinical protection products in Revlon’s new packaging.

In his judgement, Gleeson J explained why Revlon was unsuccessful in restraining Unilever in the use of the particular packaging.  In essence, it was determined that it would be unlikely that a reasonable consumer would confuse the packaging of the two competing brands.  It other words, Revlon failed to demonstrate that Revlon’s packaging had become so distinctive that in the minds of the potential customer that Revlon had acquired trade reputation associated with it.

This is an interesting case to read, with important lessons to be learnt.  In matters relating to consumer protection, for lawyers acting for SMEs and large corporations alike, it is worth remembering that, in addition to proving deception or that confusion has been caused, actual proof of damage is required to succeed in an action for passing off.  

This post first appeared on CPD Interactive's "Legal Natter's Blog".

The Personal Property Securities Amendment (Motor Vehicles) Regulation 2014 (Cth) was registered on 1 April 2014.  It will commence in 3 months on 1 July 2014.  The new Regulation narrows the definition of motor vehicle for the purposes of the Personal Property Securities Act 2009 (Cth) (PPS Act). 

The new Regulation has a grand total of only 4 pages, which includes the cover page and the contents page.  The operative provisions consist of merely a few lines on the last page, which repeals paragraph 1.7(2)(b) of the current Regulation and substitutes the existing wording with this wording “(b) is capable of a speed of at least 10 km/h; and (ba) has one or more motors that have a total power greater than 200W” (emphasis added).

So what does this mean?  The current definition of motor vehicle provides that a motor vehicle is personal property built to be propelled wholly on land, by a motor that forms part of the property, and that either is capable of a speed of at least 10km/h, or has one or more motors that have a total power greater than 200W.  The amended definition will provide that personal property must have both of these characteristics to qualify as a motor vehicle.

And what impact will this have?  The Explanatory Statement (ES) to the new Regulation explains the impact in one succinct statement – “The narrowing of the definition reduces the number of goods that will be motor vehicles, which in turn will reduce the number of security interests which may require the making of separate registrations against the serial number of the goods involved rather than only a registration against the party granting the security interest.”

The ES also explains that the objective here is to “reduce the costs of complying with the PPS Act for small and medium equipment hire businesses whilst still maintaining the utility of the Register as a record of interests in personal property for third parties”.

Both the Regulation and the ES can be accessed here.

It is fair to say this is probably the first of a series of changes about to take place.  The PPS Act is now over 2 years old.  Last week, on 4 April 2014, the Commonwealth Attorney-General, Senator the Hon George Brandis QC, said it is timely to review the PPS Act’s effect to ensure it is meeting its objective of providing greater certainty to lenders and helping business, especially small business, to access finance.  The Government is undertaking a review into the PPS Act, and an interim report is due on 31 July 2014.  The interim report will focus on issues raised in relation to small businesses.  The final report is due on 30 January 2015.  Time will tell whether and how the review and the recommendations that follow will change Australia’s personal property securities regime.

This post first appeared on CPD Interactive's "Legal Natter's Blog".

Inaugural blog post to answer frequently asked SME questions

At Legal Know-How, we work with many small and medium enterprises (SMEs) and we get asked a lot of legal and business questions. From time to time, we will answer a frequently asked SME question via this blog. You can filter our blog post by choosing "SME Q&A series" to quickly locate and read the relevant posts.

IP rights

In the past fortnight alone, we have been asked on 3 separate occasions on matters relating to intellectual property rights. Intellectual Property, or "IP", is a term that describes the application of the mind or one's intellect to create or develop something new or original. IP Australia is the Australian Government agency that administers IP rights and legislation relating to trade marks, patents, designs and plant breeder's rights. Copyright and circuit layout rights are also IP rights but they are considered "automatic rights", in that they do not need to be registered. 

Why is IP important to SMEs?

Why is IP so important? IP Australia summarised the reason very well in just 1 sentence - "IP is an important asset in today's knowledge economy and should be strategically managed." IP certainly is important to large corporations, but it is equally important to SMEs.

Copyright, trade marks and patents are probably the 3 most asked about categories of IP rights, and below is an outline on each.

Copyright
From the time an original idea is documented, it is automatically protected by copyright in Australia. This means that the copyright owner does not need to specifically apply for copyright protection. It is important to remember that copyright protects the original expression of an idea, as opposed to and distinct from the original idea itself.  

While not strictly necessary, it is wise to mark any original work with the copyright symbol ©. This could help deter others from infringing on the copyright owner's copyright. It is also wise to keep a contemporaneous and comprehensive record of the creative process. This could help prove that the copyright owner indeed is the copyright owner.

The Australian Copyright Council has a "find an answer" page that contains user-friendly information sheets about copyright. This can be a handy resource for SMEs.

Trade marks

IP Australia provides a concise definition of trade mark - "A trade mark is a way of identifying a unique product or service and it can be your most valuable marketing tool. Sometimes called a brand, your trade mark is your identity - the way you show your customers who you are." Some common categories of trade marks include a word (such as "Coca Cola"), a logo (such as QANTAS' "flying kangaroo") and a phrase (such as Nike's "just do it").

People often associate or identify a quality or a reputation with goods and services bearing a particular trade mark. A trade mark can be very valuable to a SME, and the more successful the SME, the more valuable its trade mark becomes.

Registration is not a prerequisite to use a trade mark but there are certainly benefits of registering a trade mark. A key benefit is that the registered trade mark holder has the exclusive right to use the trade mark as specified in the registration.  

Registration fees for trade marks vary and the current fees can be accessed here. The registration process can take around 8 months to complete. Once registered, the trade mark can bear to symbol ®. An unregistered trade mark or one that is being registered can bear the symbol ™.

Patent

IP Australia defines patent as "a right granted for a device, substance, method or process that you have invented that is new when compared with what is already known. A patent is legally enforceable. It gives you the exclusive right to commercially exploit your invention for the life of the patent."

The invention claimed in a standard patent has to be totally new, it cannot be an obvious thing for someone in the same industry to do (this is called satisfying the "inventive step") and it has to be able to be made or used in that industry.  

Of the 2 types of patents available, standard patents has an application process which is quite involved and also quite time consuming. For example, the examination stage alone can take from six months to several years. A registered patent does give the patent owner long-term protection and control over the invention. As an example, pharmaceutical companies often patent their inventions relating to pharmaceutical substances.

The other type of patent is an innovation patent. It is for the protection of inventions that do not satisfy the "inventive step" for standard patents. Innovation patents have to satisfy the "innovative step" instead, which means the subject matter must be different and improved from what is known before.

IP Australia states that an innovation patent is usually granted within a month of filing the complete application, so it is a relatively quick (and less expensive) way to obtain protection for a new device, substance, method or process. However, IP Australia also warns that, while there is no mandatory examination before an innovation patent is granted, it is only legally enforceable if it has been examined and certified. Accordingly, it is advisable to request that an innovation patent be examined.

Again, registration fees for patents vary and the current fees can be accessed here. 

A word of warning - do not disclose an invention or innovation before filing a patent application. If the invention or innovation has to be discussed (such as with a sponsor or an investor), only do so with a confidentiality agreement. "Going public" without a non-disclosure arrangement in place can risk a patent application being rejected.

We can help you understand your IP rights and, importantly, we can quickly provide you with a confidentiality agreement to protect your interest - just contact us for assistance.

The Personal Property Securities Act 2009 (Cth) (PPSA) created a new comprehensive national regime for personal property securities in Australia.  The definition of security interest under the PPSA covers “traditional” security interests such as fixed and floating charges over the assets of companies (now known as general security interests) to interests which were not considered security interests in the pre-PPSA era.  An example here would be retention of title arrangements.

Under the PPSA, transitional security interests (TSIs) are those created under a security agreement which was entered into before 30 January 2012.  TSIs enjoy a two-year honeymoon period where they are “temporarily perfected”, which means that a TSI maintains its pre-PPSA priority as against post-PPSA perfected security interests.  30 January 2014 marks the end of this honeymoon period, and secured parties who have TSIs should consider registering them on the Personal Property Securities Register (PPSR) before 30 January 2014 so as to preserve the priority of the TSI.  A number of fees apply to using the PPSR, but registration of a TSI on does not attract any fee.  The Registrar gave examples of transactions which may have created TSIs.  They include leasing and hiring arrangements, retention of title supplies, and certain commercial consignment arrangements.

If you are a secured party with a TSI or your client falls under this description, now is the time to review the security interest in question and to take any necessary action to protect and preserve its priority.

This post first appeared on CPD Interactive's "Legal Natter's Blog".

In a judgment handed down on 28 July 2013 in the Supreme Court of Victoria, a guarantor contended that there was no evidence that he had executed the guarantee in question because his signature was not witnessed, and as such he was not personally liable. 

In trying to get out of a guarantee that he gave as director of the borrower company, the guarantor’s defence did not involve denying that the document bore his signature or that he did not give a guarantee, but rather that the guarantee was not “properly and duly executed”. This defence did not sit well with the judge who said “whatever that means”. The judge also noted that there was no evidence that might otherwise explain what looked like a routinely executed guarantee was not what it seemed to be. By now you would have guessed the judge’s decision - that the guarantor was liable and he had to honour the guarantee.

This case dealt with a number of complex legal issues but this aspect of the case is easy to understand. The moral of the story is this – providing a guarantee is serious business. Financiers often require the directors of a company borrower (SMEs as well as big corporations) to give personal guarantees before providing finance for business purposes. It will be wise for a guarantor to seek independent legal advice (and perhaps independent financial advice too) before entering into a guarantee. And the courts are probably not going to be sympathetic to a guarantor who tries to escape his or her obligations, especially when the basis of the defence is unrelated to the authenticity of the signature but a technicality regarding the manner in which the signature was witnessed. 

Contact us if you need advice on going guarantor.

FoFA reform – what is it?

The Australian Government has placed a great deal of information relating to the Future of Financial Advice (FoFA) reforms on a dedicated website. The Government stated that FoFA reforms focus on two things, firstly, improving the quality of financial advice, and secondly, expanding the availability of more affordable forms of advice. The ultimate goal of the reforms is to improve investor protection and instil confidence in the financial advice industry.

Overall benefits of FoFA

According to the Government, the overall benefits of the reforms for consumers are:

What - better quality advice
Why - consumeers can trust that the advice they receive is not influenced by product commissions

What - a more competitive advice market
Why - greater fee transparency means advisers will have to compete for clients on cos

What - a reduction in product fee
Why - product manufacturers have to compete on cost as they cannot pay advisers to sell their products

What - greater availability of low-cost advice on single issues
How - through the expansion of scaled advice

What - less rogue advisers in the industry
Why - ASIC has greater powers to remove licensees and individual advisers from the industry

The “best interest duty” for retail clients starts 1 July 2013

The “best interest duty” is a key FoFA measure commencing on day one of the new 2013/14 financial year. Essentially, when providing advice to retail clients, financial advisers now have a statutory duty to act in the clients’ best interests and place the interests of the client ahead of their own interests. 

A SME can be a retail client

“Retail client” is defined in section 761G of the Corporations Act 2001 (Cth) and Chapter 7, Part 7.1, Division 2 of the Corporations Regulations 2001 (Cth). The statutory definition of “retail client” is not the easiest to understand, but the recent ASIC Regulatory Guide 139 (June 2013) provides some helpful commentary:

“RG 139.82 - The definition of retail client varies depending on whether the relevant financial product is a general insurance product, a superannuation product, a retirement savings account product (within the meaning of the Retirement Savings Accounts Act 1997), or any other type of financial product.

RG 139.83 A small business may be a retail client. A ‘small business’ is defined in s761G as a business employing fewer than (a) 100 people (if the business manufactures goods or includes the manufacture of goods); or (b) 20 people (otherwise).”

There are other criteria for a SME to qualify as a retail client. It is wise for SMEs to seek confirmation from their financial advisers regarding whether they are being treated as retail clients.

SMEs and FoFA

Many SMEs can expect to reap some benefits of FoFA reform. For example, the reforms should provide greater protection for SMEs who are consumers of financial products and services. These can include commercial lending products and business insurance products. But a potential down side of this is that the providers of financial advice have more compliance matters to deal with, so unless these providers choose to absorb any increase in costs due to regulatory compliance, such costs may well be passed onto the consumer of the advice. 

Are you a small business borrower? You should know about this new ASIC report on EDR schemes. The ASIC report was released on 13 June following public consultation which highlighted that:

1. simpler and lower value small business lending disputes can he handled by the lender's external dispute resolution (EDR) schemes, but
   
2. more complex and high value small business lending disputes are more appropriately addressed in court.

What is EDR? Basically it is an alternative to going to court. Using ASIC's own definition, an EDR scheme is a free, independent dispute resolution service that can help borrowers if they have a complaint or dispute with one of its members (for example, a credit provider or broker), or if borrowers are having difficulties repaying their loan. It should be noted here that, before an EDR scheme can consider a complaint or dispute, (using the above example) the credit provider or broker must be given an opportunity to resolve the dispute with the borrower directly.

The new ASIC report, together with updated regulatory guidance, refined the rules for access to EDR schemes for small business borrowers. Here are the key points of ASIC's release (extracted from ASIC's website):

1. Small business borrowers will continue to be able to take disputes with their lender to the lender's EDR scheme.
   
2. Even where the lender has already commenced court proceedings against them, if the credit contract is $2 million or less, the small business borrower will continue to be able to take the matter to the EDR scheme.
   
3. Where the loan exceeds $2 million and the lender has already commenced proceedings in a court, the small business borrower will not have access to EDR. This restriction commences from 1 January 2014.
   

It is wise to have some knowledge of how EDR schemes work. Click here to read more about EDR schemes and here to read more about ASIC's latest release.