THE Australian Small Business and Family Enterprise Ombudsman, Kate Carnell has urged the Federal Government not to abolish the low-cost innovation patent regime. Ms Carnell said the impending move to do so would create a significant barrier to small businesses and Austalian innovation.

“It would be a mistake to phase out the innovation patent system without any replacement,” Ms Carnell said.

“Although we acknowledge the current system is not perfect, it’s the only viable way for SMEs to access temporary or short-term IP protections, which is essential, particularly when disputes arise. Abolishing the innovation patent system would effectively leave small businesses vulnerable to large businesses stealing their ideas and inventions. 

“Small businesses face significant hurdles when trying to protect their IP rights," Ms Carnell said. "They don’t have in-house lawyers or patent expertise and often experience difficulties in accessing risk capital.

“That’s why my office continues to strongly argue against phasing out the innovation patent regime and instead either improve the existing system or replace it with something better.

“Many small businesses rely on the innovation patent system to attract funding. Investors won’t even look at a company that doesn’t have those protections in place," she said.

“Standard patents are more expensive and can take over two years to get. It’s just not a viable option for small businesses that want to protect their products.

“The fact is, by phasing out the innovation patent system, many of these small businesses will look to import products rather than innovate and that has serious ramifications for Australia’s economy," Ms Carnell said.

“This week the Senate will debate the innovation patent as part of a suite of proposed intellectual property law changes and I urge them to support amendments stopping the abolition of the innovation patent regime.” 

www.asbfeo.gov.au

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Religious discrimination Bill a potential minefield for sponsors like Qantas

INSTITUTE of Certified Management Accountants (ICMA) CEO Janek Ratnatunga is urging Australian finance professionals to pay close attention to the Australian Government’s draft Religious Discrimination Bill – and particular attention to what is being called the ‘Folau Clause’.

Professor Ratnatunga said the Folau Clause relates to the case of sacked top-level Australian rugby union player Israel Folau, whose comments on his private social media account, based on his religious beliefs, led to the termination of his contract with Rugby Australia.

Under the Folau Clause, additional requirements will be imposed upon businesses with annual revenue of at least $50 million when it comes to standards of dress, appearance or behaviour that limit religious expression. 

The Bill states that such restrictions must be shown to be necessary to “avoid unjustifiable financial hardship on the business”. The process of calculating potential financial hardship will fall on financial professionals, particularly management accountants.

Prof. Ratnatunga said, “The application of the ‘Folau Clause’ means organisations will have to prove that their social media rules relating to religious expression, and subsequent actions taken, are in place to protect their brand.

“However, as the impact of individual social media activity on brand reputation is impossible to quantify, the draft bill instead defines the impact on the brand in financial terms, i.e. as causing ‘unjustifiable financial hardship on the business’.”

In the case of Rugby Australia, Prof. Ratnatunga said, its primary revenue is derived from ticket sales, broadcast rights, government grants and sponsorships.

“The revenue source that has garnered the most attention for potentially unjustifiable financial impact is corporate sponsorship, which accounts for 22 percent of Rugby Australia’s total income,” Prof. Ratnatunga said. “Rugby Australia’s major sponsor, Qantas, clearly has to distance itself from the Folau case, as it may be considered an accessory to any breach and become a target for legal action if Rugby Australia is found guilty of wrongful dismissal.”

Prof. Ratnatunga believes this poses a conundrum for sponsors like Qantas.

“For example, if the Folau case arose after the Bill was passed in its current form, Rugby Australia would have to prove that Qantas was going to discontinue sponsorship, thereby demonstrating ‘financial hardship’. At the same time, Qantas would have to reject any such claim, or face the consequences of Mr Folau winning his case and citing them as an accessory to any breach.”

WARNINGS FOR SPORT, UNIVERSITIES

Prof. Ratnatunga warned, if the Bill passes, corporates will need to be extremely careful of sponsorship agreements. This would also be true of organisations such as universities, which have been the subject of much debate regarding external sponsors and their influence on free speech.

Prof. Ratnatunga provided a hypothetical example of a University of Melbourne academic posting a private social media comment that is “very supportive of the Dalai Lama returning to Tibet and rejuvenating Buddhism there”. If this led to the possibility of losing sponsorship from the Confucius Institute, would Melbourne University be justified in terminating that academic’s contract under the Folau Clause?

Prof. Ratnatunga said, “Again, what if an academic in a university that is sponsored by the Ramsay Centre for Western Civilisation posted the following comment on social media: ‘The only thing Western civilisation has done is spread Christianity with the gun.? Would the university be justified in terminating that academic’s contract under the Folau Clause?”

Prof. Ratnatunga posed a final question: “Should corporates offer their views on social issues unrelated to their core businesses?

“Corporates are justified in ending sponsorship deals with individuals and other organisations for bad behaviour, sexual discrimination and the like, both publicly and privately, but threatening to end sponsorship agreements as a result of religious comments posted on private social media accounts by employees or other contractors on religious issues that have little or no relation to their core business is another matter,” he said.

www.cmawebline.org

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THE Small Business Fair Dismissal Code "in its current form, is not working in the way it was originally intended,” according to Australian Small Business and Family Enterprise Ombudsman, Kate Carnell.

Ms Carnell, has handed down a comprehensive review of the Small Business Fair Dismissal Code, recommending a suite of changes to help small business employers meet their obligations.

"It is ambiguous and open to interpretation, particularly by lawyers, which means too many small businesses are being pulled into unfair dismissal hearings which are costly and impact productivity," Ms Carnell said. 

“The vast majority of small business operators are hard-working Australians with good intentions.

“The recommendations in this review aim to give small business operators clear guidelines to deliver certainty around complying with the code.

“Importantly – the recommended amendments and checklists are designed to guide a small business employer through a fair dismissal process, not to make the dismissal process easier," Ms Carnell said.

“We know that small businesses do not make the decision to end a worker’s employment lightly. Research by the Fair Work Commission found one of the key challenges for small business operators was attracting and retaining good staff and that good employees were highly valued.

“Small businesses can’t afford to engage in costly and stressful legal action. They don’t have the support of a HR department when faced with the difficult decision to end a staff member’s employment," Ms Carnell said.

“That’s why it’s critical for the code to drive fairness, and set out clear expectations for small business employers.

“According to figures released by the Fair Work Commission, during the first three months of this year it received 3,583 unfair dismissal applications.

“Most were settled during mediation, but for the 172 cases that were presented to the Commission, 111 (65%) were dismissed because they were without merit or deemed legally invalid, meaning they should not have gone to the Commission in the first place," she said.

“By taking the ambiguous language out of the Code such as ‘reasonable grounds,’ ‘valid reason,’ and ‘reasonable chance’ and improving the checklist questions, small businesses will be in a much better position to comply.

“We want the Code to work, so that small businesses are doing the right thing and there’s less need to engage lawyers,” Ms Carnell said.

Ms Carnell said the review contains recommendations in three key areas:     

  • Amendments to ensure the code meets its intended functions and objectives and provides certainty on what is required of small business employers to ensure a dismissal is fair.
  • Improving small business education and awareness in relation to the Code and checklists to help them meet their obligations.
  • Clarifying the unfair dismissal claims process for small business employers and employees.

The Small Business Fair Dismissal Code was formed as part of a report 'Forward with Fairness: Labor’s plan for fairer and more productive Australian workplaces' in recognition that small business owners do not have the time or expertise to navigate the complex unfair dismissal system. When the code came into effect in 2009 under the Labor Government, the interpretation of the code was challenged in the courts and, on occasion, by members of the Fair Work Commission.

Ms Carnell said that created uncertainty for small business employers, as following the code was no longer a reliable way of ensuring a dismissal was going to be deemed fair.

In April 2018, the Australian Small Business and Family Enterprise Ombudsman released its report 'Workplace Relations- Simplification for Small Business'.  That report recommended ASBFEO lead a review of the Small Business Fair Dismissal Code and checklist.

www.asbfeo.gov.au

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THE INSTITUITE of Public Accountants (IPA) has expressed concerns about the upcoming repeal of the Competition and Consumer Act 2010 (CCA) Section 51(3) and its potential impact on small business.

The repeal of the section, to take effect on September 13, 2019, will mean that conduct involving intellectual property rights (IPR) will no longer be exempt from certain provisions in Part IV of the CCA, particularly in relation to granting a licence; making an assignment; or, 'entering into a contract, arrangement or understanding'.

"The IPA supports innovation as a means to boost small business productivity and intellectual property protection plays a major part in innovation and entrepreneurialism,” IPA chief executive officer, Andrew Conway said.

“Therefore, we remain cautious over the repeal and we encourage the ACCC to raise awareness amongst the small business community as to the consequences that may impact the sector. 

“While there are guidelines in relation to the repeal, these are for professional advisers, and not aimed at small business people.  We urge the ACCC to produce a simplified version accessible to small business operators.  It is essential that small businesses, that may be impacted by the repeal, clearly understand the implications and seek the appropriate legal advice as to their particular intellectual property needs.

“This repeal may have a direct impact on Section 45 of the CCA and as a result could stifle competition rather than encourage it,” Mr Conway said.

He said Section 45 of the CCA prohibits contracts, arrangements, understandings or concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market, even if that conduct does not meet the stricter definitions of other anti-competitive conduct such as cartels.

“Without the ability to control how intellectual property is to be used, a licensor may be reluctant to licence the intellectual property at all. This will be detrimental for downstream competition and may also deter innovation," Mr Conway said.

“Small businesses will not be in a position to determine whether such a condition is likely to substantially lessen competition in the relevant market, in order to have certainty about their legal position.

“To prevent small business taking an overly cautious approach, the ACCC could introduce a class exemption that would create some certainty in how to deal with licensing and transfers of IPR so as not to infringe the CCA.  The European Commission has a block exemption that applies to technology transfer agreements and a similar approach could be taken here in Australia.

“The IPA Deakin SME Research Centre will be monitoring the implications of the repeal and consider if such class exemptions are appropriate in this regard,” Mr Conway said.

www.publicaccountants.org.au

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THE Australian Small Business and Family Enterprise Ombudsman, Kate Carnell has encouraged eligible small businesses impacted by financial misconduct as far back as January 1, 2008, to lodge a complaint with the Australian Financial Complaints Authority (AFCA).

From July 1, eligible small businesses will only have a one year window to apply to AFCA regarding complaints dating back to January 1, 2008.

“This is a positive step forward for small businesses who have fallen victim to financial misconduct, as AFCA previously only took complaints going back six years,” Ms Carnell said. 

“It’s a very simple process that involves clicking the yellow 'Make a complaint' button on the AFCA website.

“Small businesses could be awarded up to $1 million in compensation if their claim is successful, and the maximum compensation for primary producers is $2 million.”

A small business is eligible to apply if:

  • it has less than 100 employees
  • the complaint relates to loans under $5 million
  • the submission is about a financial entity that was a member of AFCA at the time of the complaint
  • the small business has not already had their case heard by the Financial Ombudsman or a court.

“It is unfortunate that AFCA is bound by the $5 million limit as we know of a range of cases where the small business loan was over this amount and those businesses have nowhere to go – no access to justice,” Ms Carnell said.

“These businesses don’t have the resources to take financial misconduct to court and they deserve justice too.”

AFCA will refer the complaint back to the financial firm to resolve and if the financial firm is unable to satisfactorily resolve a legacy complaint, AFCA will begin investigating from October 1, 2019.

Before small businesses submit their complaint they are encouraged to:

  • identify the financial firm to which they have the complaint
  • identify the main issues as part of the complaint
  • identify the losses incurred and what outcome is sought
  • collect any relevant documents that support the complaint. However it is not mandatory to have all of the documentation.

“This will go some way to providing access to justice and redress to many small businesses, but we will continue to put pressure on the government to adopt Ramsay’s supplementary report on a scheme for small businesses with complaints relating to loans over $5 million that includes options such as an independent forum to hear past disputes or government supported legal funding,” Ms Carnell said.

www.asbfeo.gov.au

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IT IS NOT UNCOMMON in the commercial world, when customers are unexpectedly inconvenienced, for compensation to be offered so it’s time for the Australian Taxation Office (ATO) to recognise the damage caused by technology outages, according to the Institute of Public Accountants (IPA).

“We recognise the fact that the ATO has worked hard to fix system faults that have been a blight on its operations in recent years,” IPA chief executive officer, Andrew Conway said. 

“System downtimes such as that experienced last week comes at a huge expense for many of our members and quite simply, a mere apology doesn’t go far enough.

“The Scheme for Detriment caused by Defective Administration (CDDA) is currently under review by the government," he said.

“The existing framework provides little scope for intermediaries such as tax agents to make a claim.  It is not fit for purpose, especially in light of accountants facing rising costs from increased regulation and compliance requirements. 

“Practitioners who lose productivity time need to be compensated.  It is real time and it’s real income that is lost.  Time is an accountant’s commodity.

“Tax practitioners have faced loss of income, lost productivity, psychological injury from stress and anxiety and reputational damage from system outages and where the digital journey has not gone smoothly; all matters outside of their control," Mr Conway said.

“Public accountants have to work double time to make up for the time lost caused by the ATO’s system failures, robbing them of family time on weekends and causing them significant stress.

“While we understand that outages are a fact of life, unless the provider is adversely impacted and share the pain, there will not be a change in their approach," he said.

"Consideration should also be given to blanket redress arrangements in the event of a future digital disruption. 

"We recognise that it can be difficult to quantify the non-economic losses and the fact that not all intermediaries are equally affected.  This should not be a reason for not providing redress,” Mr Conway said.

www.publicaccountants.org.au

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BUSINESSES who provide warranties in relation to either products or services have until the end of the week to bring those warranties into line with changes to the Australian Consumer Law (ACL).

According to intellectual property law specialist at Mullins, based in Brisbane, Andrew Nicholson, if warranties and not brought into line with the ACL requirements that take effect this Sunday, June 9, 2019, they could face substantial penalties and fines – potentially up to 10 percent of annual turnover. 

Mr Nicholson said promises provided by suppliers (or manufacturers) to consumers about what they will do if goods have a fault are commonly known as ‘warranties against defects’. Those warranties are voluntary and, if given, will apply in addition to any consumer guarantees under the ACL.

Warranties against defects must also comply with prescribed requirements and include standard text from June 9, 2019.

Mr Nicholson released a detailed explanation of how the system now works.

The warranties which are required to be given are divided into three categories and are different for each of:

  • Defects for goods only
  • Defects for services only
  • Defects for goods and services

CONSEQUENCES OF NON-COMPLIANCE

Penalties of up to $50,000 can be imposed for failing to include the prescribed text. Additional penalties can also be imposed if the text used is misleading about consumers’ rights, entitlements under warranty or guarantee provisions up to $10,000,000, or 10 percent of the annual turnover of the supplier in the past 12 months.

Businesses should review any document which contains a warranty against defects (such as terms and conditions, packaging, website, etc.) to ensure that it includes the new prescribed text. Warranty documents provided by sellers and manufacturers should:

  • Be transparent.
  • Concisely state what the business must do (for example, repair or replace the goods); and what the consumer must do to entitle the consumer to claim the warranty, for example, cease using the goods when a fault arises or contact the supplier or manufacturer and point to the defect.
  • Prominently state the following information about the person who gives the warranty: the person’s name, the person’s business address, the person’s telephone number, and the person’s email address (if any).
  • State the period or periods within which a defect in the goods or services to which the warranty relates must appear if the consumer is to be entitled to claim the warranty.
  • Set out the procedure for the consumer to claim the warranty including the address to which a claim may be sent.
  • State who will bear the expense of claiming the warranty and if the expense is to be borne by the person who gives the warranty—how the consumer can claim expenses incurred in making the claim.
  • State the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates.

ADDITIONAL OBLIGATIONS UNDER CONSUMER GUARANTEES

Any warranties should also be consistent with consumer guarantees, which automatically apply to goods and services purchased by consumers under the ACL. Manufacturers and importers must also comply with certain consumer guarantees and they cannot be excluded by agreement or under any terms of sale.

The guarantees include that those goods must:

  • be of acceptable quality.
  • be fit for purpose.
  • satisfy any express warranty (such as warranties against defects).
  • have spare parts and repair facilities available for a reasonable period of time, unless otherwise advised.

WHERE GUARANTEES ARE NOT MET

Consumers are entitled to a remedy, which could be either a repair, replacement or refund and compensation for any consequential loss, depending on the circumstances. For minor problems, the seller can choose whether to take a replacement, repair or refund the goods. For major problems the consumer can choose to reject the goods and obtain a full refund or replacement, or keep the goods and seek compensation for the reduction in value.

APPROACHING THE MANUFACTURER DIRECTLY

Consumers are entitled to approach manufacturers directly for a remedy and may take action against manufacturers to recover costs, which include an amount for reduction in the product’s value and in some cases compensation for damages or loss.

If the problem is the manufacturer’s fault, the consumer is still entitled to ask the seller to provide a remedy, and the seller must oblige. The manufacturer must then reimburse the seller, including for any compensation paid to the consumer for reasonably foreseeable consequential losses.

Consumer guarantees won’t apply where a consumer simply changes their mind. However, as suppliers must comply with consumer guarantees, signs which provide blanket statements such as ‘No refunds’ are unlawful because there may be instances where the consumer is still entitled to a remedy.

MISLEADING STATEMENTS

“Finally, it is important not to mislead consumers about their rights,” Mr Nicholson said.

“Within the last week, Jetstar was ordered to pay almost $2 million dollars in penalties for misleading passengers about their right to refunds on cheap fares, by indicating that only more expensive fares were refundable,” he said.

“That is misleading as, under the ACL, customers whose flights were cancelled or significantly delayed due to reasons within Jetstar’s control are entitled to refunds.

“Sellers must not tell customers they should approach the manufacturer or importer of the goods for assistance. Customers are entitled to deal with the seller, and sellers must deal with the problem when approached.

“Sellers also must not suggest that their consumer guarantees are limited to any warranty period. The consumer guarantees apply regardless of any warranties which have been given and may apply for a longer period than an express warranty, depending on the quality of the goods, sale price and consumer expectations.”

www.mullinslawyers.com.au

Andrew Nicholson is a partner with law firm Mullins based in Brisbane. He is a specialist in intellectual property and commercial law. Mullins is an Industry Expert member of Queensland Leaders, helping to foster the upcoming generation of leading companies in Queensland.

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