Court Cases on the Export Grant Scheme Involving Intellectual Property
Intellectual Property has proven a difficult fit for an Export Grant
scheme designed with the export of goods primarily in mind. There has been
a number of landmark Court decisions considering the relevant sections of
the Export Market Development Act as it applies to the export of intellectual
property.
Nomad Films International Pty Ltd v Export Development Grants Board (Austrade)
Prior to this landmark 1986 decision, Austrade's view was that only a copyright
owner could lodge and receive export grants. Under this decision of the full
Federal Court, it was held that should a copyright owner appoint an exclusive
licensee of copyright, then the exclusive licensee of copyright was entitled
to lodge and receive an export grant to the exclusion of the copyright owner.
It was also held that the licensee could be a licensee in respect of one of
the bundle of copyright rights held. Copyright may be held in a song, in a
film, in a sound recording, in a literary work. Provided that the rights
are held as an exclusive licensee in respect of one of the above rights, this
would be sufficient to lodge and receive an export grant. Rights could also
be held in respect of trademarks and other intellectual property such as know-how.
Film Funding and Management Pty Ltd v Austrade
This is a 1989 decision of the Federal Court. It was held that a licence
to market a copyright must be an exclusive licence of the copyright. In the
film industry it is common that a distributor will hold a licence to market
the film, but this decision held that this may not be sufficient to enable
an export grant to be claimed. In general terms the exclusive licensee of
copyright or owner of copyright is the only person who can claim an export
grant. A licence to market a film is not a licence sufficient to lodge and
receive an export grant. The decision of Nomad Films International was accepted
and followed by the Court.
Hot Shoe Shuffle v Austrade
In this 1997 decision, performer/producer David Atkins lodged a grant application
for marketing costs incurred in staging the musical "Hot Shoe Shuffle" in
London. It was held that the costs were eligible to be claimed, on the basis
that David Atkins' company Hot Shoe Shuffle held the rights to stage the musical
and that it incurred the marketing costs to promote the sale of the musical
to third party producers for productions in other overseas markets. Austrade
had refused to pay the grant on a number of grounds, one of which was that
the amount spent was not reasonable. The Tribunal held that the disallowance
of expenditure on the basis that it was unreasonable, should be only on the
basis that "no Court should seek to replace the individual's judgement with
his own" and "one must ask whether the promotion or marketing expenditure
was agreeable to reason, or whether having regard to the purpose for which
it was incurred, it was irrational, absurd or ridiculous".
Australian Trade Commission v Disktravel
This 1999 decision of the Full Federal Court involved the export of computer software. A company
had developed software, which was used to create a travel and tourism advertising
system, utilising CD technology. The CD's created a comprehensive database
of travel and tourism information, known as the travel vision system. The
intention of the exporter was to licence the rights to the "platform" and
to build a local database for each country and in turn obtain revenue from
sale of advertising on the system. It was a business of electronic publishing
and distribution using third party experience and expertise to provide the
necessary information for participating countries. There would be sub-licence
fees and royalties obtained from various overseas markets for the use of the intellectual
property.
In the judgement, the Court endorsed dicta in Parker Pen and Miller
Poahan Coal in determining the purpose for expenditure to be incurred. It
noted that although Parker Pen said the purpose "must be someone's purpose",
it also noted that "if objective facts cast doubt upon the credibility
or reliability of a statement, then it is up to the Court to consider all
the circumstances and include whether the requisite purpose had been established.
Objective facts are usually more reliable then statements of purpose intent
or state of mind".
The Court then considered whether there was in existence eligible industrial
property rights (intellectual property) for the purpose of the Export Grant
legislation. It was noted that computer programs are protected under the Copyright
Act as a literary work. It was noted that the company claiming the grant had
acquired a distribution right from the originating owner of the intellectual
property and that part of this distribution right authorised it to distribute
discs to travel agents. It was noted however, that it did not acquire any
copyright, nor did the agreement authorise this company to dispose of any
rights comprised in the copyright. There was therefore no right comprised
in the relevant copyright set out in the licensing agreements, which enabled the company to lodge
and receive an export grant based on the export of intellectual property.
It was noted that although the export grant claimant failed to establish eligible
industrial property rights, the Court left open the question of whether it
was disposing of eligible know-how.
French J in analysing the decision of Nomad Films and Film Funding Limited
felt that in relation to copyright, ownership meant an exclusivity of right,
the exclusive right to do something. He felt that ownership meant the rights
held to the exclusion of others, which are capable of sale or grant or assignment
or supply. In his Honour's view, copyright in relation to works as eligible
rights, refers to the right to undertake all or any of the acts comprised
in copyright. He felt the proper construction was closer to the judgement
of Northrop J in Nomad Films. He noted that in the facts of the case,
the income to be gained by the exporter was income from advertising fees.
Although noting the arrangements where the discs were supplied to travel agents
may amount to a rental right under the Copyright Act, the drafting of the
agreements do not reflect this. His Honour felt that despite references to
copyright in the licence agreement, no right to exclusively undertake an act of copyright
under the Copyright Act could be identified as passing to the claimant.
With no eligible intellectual property right able to be disposed of, there was no basis to claim an export
grant.
Summary
In summary, all of the above case law confirms that for an exporter to lodge
an export grant based on the disposal of intellectual property, an exclusive
licence of one of the rights comprised in copyright must be held with an intention
to dispose of that right to a third party overseas. An economic interest in
copyright such as a marketing or distribution right, even if that right is
held to the exclusion of all others, will not be sufficient to ground a successful
export grant application.