Australia: Security Over Registered Designs

Last Updated: 14 October 2004
Article by Angela Flannery

Most Read Contributor in Australia, November 2016

Key Point

  • New Commonwealth legislation offers protection to holders of security interests in registered designs.

What is a registered design?

A "design" is the original visual appearance of an article. Examples of registered designs include Ken Done sheets and Speedos. Designs may be protected through registration under the Designs Act 2003 ("2003 Act"), which replaced the Design Act 1906 ("1906 Act") with effect from 17 June 2004. The repealed legislation continues to apply in certain respects to designs registered, or applications made, prior to its repeal however the following discussion will focus on the 2003 Act.

The stated purpose of the Commonwealth Government in introducing the new legislation was to streamline the registration process and to provide for better enforcement and dispute resolution procedures, stricter eligibility and infringement tests and, finally, clearer definitions.

A design will be registrable on the Register of Designs if it is both new and distinctive (see section 15(1) of the 2003 Act), which should be contrasted with the 1906 Act which required the design to only be either new or original. Registration is not compulsory (see section 21 of the 2003 Act) but does provide certain protections (see for example section 10, which sets out the exclusive rights which an owner has and Chapter 6 which deals with infringement proceedings). Registration may continue for a period of up to 10 years (see sections 46 and 47). The validity of registration may be challenged (see Part 3, Division 4 of Chapter 4 and Chapter 5 of the 2003 Act) and accordingly registration of a design should not be seen as conclusive evidence of ownership.

Can you take security?

When considering whether it is possible to take security over any form of asset, the first question which needs to be asked is whether it is possible to assign that asset. If an asset is incapable of assignment, it is very unlikely that you could take security over that asset or, if taking security was possible, it would be of little value (other than as a defensive mechanism) as it would not be possible to dispose of the secured "asset" on enforcement.

Is assignment possible?

The interest of an owner in a registered design is personal property and assignment of that interest is possible. An assignment may be of all or part of the owner's interest and may also be limited to a particular place (see sections 10(2), 11(1) and 11(3) of the 2003 Act). An assignment must be in writing signed by the assignor and the assignee (see section 11(2)).

Security interests

It is possible to grant a legal mortgage of a registered design by complying with the assignment requirements prescribed in the 2003 Act. As in the case of other intellectual property rights, it is necessary to examine whether this is appropriate as if the design is to be used on an ongoing basis by the mortgagor, it will be necessary for the mortgagee to grant a licence back to the mortgagor to provide for this. A charge or equitable mortgage, which it is possible to grant, may (subject to the discussion below) better suit the interests of the parties.

Registration requirements and priority

Designs Act 2003

It is useful to contrast the provisions of the 1906 Act and the 2003 Act when considering registration requirements and priorities of security interests. Section 38A of the 1906 Act required security interests to be registered as it provided:

"Where a person becomes entitled as mortgagee, licensee or otherwise to an interest in a registered design, he shall apply to the Registrar to register his title, and the Registrar shall, on receipt of the application, and on proof to the satisfaction of the Registrar of the title of the applicant, cause notice of the interest to be entered in the register, together with particulars of the instrument creating the interest."

The consequences of failure to register were not specified except that section 38B of the 1906 Act provided that if an instrument or the interest it created was not registered then, unless the court otherwise directed, that instrument or interest would not be admissible in evidence as proof of title or to an interest in a design.

The 1906 Act also did not contain express priority rules. Instead section 25C(2) of the 1906 Act provided that general law ownership rules would apply in the same way as to other choses in action. Section 279(5)(b) of the Corporations Act provides that the Corporations Act priority rules do not affect the operation of the Designs Act. The view could be taken that the 1906 Act was silent on priorities and therefore the Corporations Act regime was applicable or that section 25C(2) of the 1906 Act expressly incorporated the general law priority regime (as part of the laws applicable to ownership generally) and therefore caused the priority provisions of the Corporations Act to be ousted.

The 2003 Act provides a different regime. The first point of difference in that, interestingly, no express reference is made to the registration of security interests.

Instead section 114(1) provides that the owner of a registered design, or an assignee, may request the Registrar to record the assignment of an interest in the design. This will be broad enough to permit a request for registration of a mortgage. Arguably charges do not involve the assignment of an interest as such and therefore may not be able to be registered under section 114(1). If registration of a charge is not possible, given the operation of section 12 of the 2003 Act (described below), it would be preferable to take a legal mortgage over the relevant design.

Although not compulsory, a failure to register under the 2003 Act has significant consequences. In particular:

  • under section 119, if an instrument is not registered it will not be admissible in court in evidence of proof of title to a design or an interest in a design except if the court otherwise directs or in an application for rectification of the Register; and
  • section 12 of the 2003 Act, which had no equivalent in the 1906 Act, will apply. Section 12 states that the registered owner of a design may deal with that design free from all interests other than as registered on the register, subject to a number of exceptions. The exceptions are that protection is not provided to a person who deals with the registered owner otherwise than as a purchaser in good faith for value and without notice of any fraud on the part of the owner and also equities in relation to the design may be enforced against the owner (except to the prejudice of a purchaser in good faith and for value).

    Accordingly, section 12 offers protection (in certain circumstances) to the holder of a registered security interest as against an unregistered, but prior, transferee of that design it also protects that holder in relation to subsequent dealings with the design. In light of the terms of section 12 (which mirror provisions contained in the Patents Act 1990), it will be no surprise that it is recommended the holder of a security interest over a registered design registers this under the 2003 Act.

Corporations Act

As in the case of trade marks and patents, section 262(1)(e) of the Corporations Act requires the registration of charges and mortgages over registered designs granted by companies. Therefore the holder of such a security interest will be required to register under the Corporations Act regime.

As noted above, section 279(5)(b) of the Corporations Act applies to the Designs Act. As a result, all disputes involving priority between interests (whether those interests are security interests or not), where at least one of those interests is obtained or purported to be obtained from the registered owner under the Designs Act, would be dealt with under the Designs Act. In any event, a dispute between the holder of a security interests and the holder of another type of interest could only be dealt with under the Designs Act as the Corporations Act regime deals only with priority between competing security interests.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.