In March 2019, whilst on a trip to Thailand, Pippa, a graphic designer, enjoyed a blue-coloured tea drink. Pippa loved the blue colour of the tea and found out that it was due to the addition of a powder made from the dried flowers of a plant native to Thailand, called the Butterfly Pea plant. Pippa also learned that the Butterfly Pea plant is said to have health-benefitting properties. Pippa was so excited by this Butterfly Pea plant and the powder made from the plant and thought it could become a popular product in Australia. Pippa purchased a few bags of FLYING PIGEON brand Butterfly Pea flower powder to take back to Australia to start her new business venture. FLYING PIGEON is a registered trade mark in Australia and Thailand, owned by Flying Pigeon PLC. When Pippa arrived back in Australia, she started experimenting making various bubble-tea drinks with the FLYING PIGEON Butterfly Pea powder, taste-testing the results with her gym training buddy, Achara. Achara thinks the Pippa is onto a potential small business idea and wants to help her friend. Achara is a scientist who works as a food-technologist for a multi-national health food and health supplement company, Vitarium Ltd. Achara has been working full-time for Vitarium for 5 years, having started working at Vitarium as soon as she graduated from her bachelor's degree majoring in food science and nutrition. In April 2019, Achara offers to help Pippa with developing her recipes in her spare time as she is interested in the health-benefits of the Butterfly Pea powder. Using her food-technologist skills, Achara spends her weekends working on formulating various blends of the powder to maximise the health benefits, resulting in a blend that changes the nature of the Butterfly Pea powder so that the vitamins in the powder are more readily absorbed in the body for muscle-building. There was some old equipment that had been set aside to be thrown out sitting in a storeroom at Vitarium, so Achara took that equipment home and set up a small lab in her kitchen for her Butterfly Pea powder experiments. Achara kept records of the formulas for the blend she worked on in a personal notebook. Pippa uses the blend formulated by Achara to create a range of protein balls. In the meantime, Pippa works on creating a brand name and a logo for her bubble-teas and protein balls. In June 2019, Pippa settles on the brand name SEAHORSE and designs a logo as well: In July 2019, Pippa decides it is time to get some product feedback from other people, so she prints some stickers with the logo and SEAHORSE wording, and hands out samples of her out bubble-teas and protein balls packaged with the stickers to friends at the gym and asks them to taste-test them. Pippa's friends love the taste of the drinks and super smooth and creamy texture of the protein balls, so Pippa decides to set up a market stall at a monthly food market. Pippa has her first stall selling her SEAHORSE brand bubble-teas and protein balls in September 2019. Pippa's stall is a great success, so Pippa continues operating her stall at the food market. Achara is excited that the protein balls made using the powder blend she developed are big-sellers, so she is happy to keep making the powder blend for Pippa in her kitchen lab set-up, using raw materials paid for by Pippa. Pippa's stall is so popular that her monthly market customers ask if they can buy the Butterfly Pea powder to make their own drinks and protein balls at home. Customers also ask if they can order the powder online. Pippa realises she needs to ramp up her business and start selling packaged Butterfly Pea powder as well as the bubble-teas and protein balls. To do that, Pippa needs a steady supply of stock. In January 2020, Pippa contacts the FLYING PIGEON company in Thailand and negotiates an exclusive licence to import and sell packaged FLYING PIGEON Butterfly Pea powder in Australia. 2022 Subject CODE LLB3331 LLB331 LAW331 Wollongong and Regional Spring 2022 REMOTE Page 3 of 5 Pippa decides she needs to protect her brand, and in January 2020 she files an application to register the trade mark SEAHORSE for teas and plant-based supplements. This trade mark application was subsequently accepted for registration by IP Australia. In March 2020, Pippa sets up a company, Seahorse Industries Pty Ltd, of which Pippa is the sole director. By way of thanks for her help with the powder blend, Pippa gives Achara 10% of the shares in Seahorse Industries Pty Ltd. In April 2020, Seahorse Industries Pty Ltd engages a website designer, Zoltan, to create a website for the SEAHORSE business. Pippa provides Zoltan with some of the photos she has taken in the past of her products at her market stall to include on the website, as well as photographs of the packaged FLYING PIGEON Butterfly Pea powder provided to her by Flying Pigeon PLC as part of her licensing deal. The Website Development Agreement between Zoltan and Seahorse Industries Pty Ltd includes the following: Proprietary Rights 1.1 All Intellectual Property Rights in any material that is newly created by Zoltan under this Agreement and any adaptations, translations and derivative works in it, are and shall remain the exclusive property of Zoltan or shall vest in or be transferred to Zoltan immediately upon creation, as the case may be. 1.2 Subject to the payment of all fees, and expenses due under this Agreement, Zoltan grants Seahorse Industries Pty Ltd a non-exclusive, non-transferrable, non-sublicensable right to use and reproduce any Content that has been newly created by Zoltan on the Website for the purpose of publishing the Website. 1.3 Seahorse Industries Pty Ltd is solely responsible to ensure that it has secured the appropriate rights to use, copy, adapt, translate, publish or otherwise deal with any Content that was not newly created by Zoltan under this Agreement. 1.4 Except for the rights expressly granted by Zoltan to Seahorse Industries Pty Ltd under this Agreement: (a) Zoltan reserves all right, title and interest in and to the Website and all Intellectual Property Rights in the Website; (b) no right, title or ownership interest in or to the Website whether by implication, estoppel or otherwise, is granted, assigned or transferred to Seahorse Industries Pty Ltd under or in connection with this Agreement. Zoltan builds the website and, as part of that process, registers the domain seahorseindustries.com.au for the website. In February 2021, Pippa discovers that a patent application for the Butterfly Pea powder blend has been published by IP Australia, naming Achara as the owner and inventor of the powder blend. Unknown to Pippa, Achara had filed a complete patent application for her powder blend in August 2019. Pippa is furious.

Question 1

At this point in time:

a. what do you consider to be the key areas of intellectual property assets related to the Seahorse Industries business?

b. what you see to be the key legal risks in Seahorse's intellectual property assets?

c. what steps would you take to manage these risks if you acted for Seahorse Industries Pty Ltd?

in the meantime, Achara's employer Vitarium Ltd also learns about the patent application Achara has filed for the Butterfly Pea blend, and Achara then confesses to her work supervisor about her home lab set-up and her home blending experiments. Vitarium Ltd has been developing processes to improve the way vitamins used in Vitarium's food supplements are absorbed in the body since January 2019. The processes have been maintained by Vitarium Ltd as a trade secret.

Question 2

What advice would you provide to Vitarium Ltd's CEO in regard to:

a. any breach by Achara of her obligations to Vitarium Ltd, as her employer;

b. the ownership and named inventor of the patent application

c. if Achara is granted the patent, any potential grounds for challenging the validity of the patent application.