Information Law

Problem

Your friend Nelson Paradise has a dream of making it big in the makeup world. Finally after months of hard work in his laboratory together with his scientist father and mother Sam and Sal Paradise he has hit on the perfect formula for a 24 hour long lasting luscious lipstick. He proposes to name the product “Geisha”. Nelson’s business plans are not known to anyone other than his mum and dad and his good friends Zac and Suze. The special formula is stored in a disc drive that he keeps safely in his wallet.
In May 2012 Nelson arranges a private meeting with Sam Whiplash the CEO of Revelation Cosmetics Limited. Nelson is optimistic that Revelation will want to pay him millions in royalties to market and sell his fabulous product idea. At the meeting Nelson delivers an impressive power point presentation to Sam including details of his proposed brand name, marketing strategy and his special lipstick formula and unique production process. Sam says that he is very interested but needs a month to think about the proposal.
By September Nelson hasn’t heard anything from Sam but with the help of some money from his parents he sets up a website geishalips.com.au and begins marketing and selling Geisha lipsticks on-line.
During the first months sales are slow and Nelson fears his product will fail. At $30.00 a lipstick Geisha lipsticks are quite a lot pricier than other comparable 24 hour lipsticks. However Nelson has had excellent reviews in fashion magazines about his fantastic product and he is hopeful that sales will take off.
One night while watching a performance of the pop diva Lady G on TV Nelson hits on a fantastic idea for a marketing campaign which he is sure will kick start sales. He works feverishly for the next 24 hours producing a large advertisement for the front page of the website. The advertisement is as follows:

LONG LASTING PERFECT POUTS LIKE LADY G’S DON’T USUALLY COME CHEAP.

BUT FOR THE MONTH OF DECEMBER WE CAN GIVE YOU THE LOOK OF A SUPERSTAR FOR A FRACTION OF THE REGULAR COST.
FOR JUST $100.00 WE ARE OFFERING YOU THE CHANCE TO PURCHASE THE “DIVA SUITE” COMPRISING LADY G’S FOUR FAVOURITE GEISHA LIPSTICKS IN FUSCHIA, ROSE, MANDARIN AND FIRE. THIS IS A FABULOUS DISCOUNT OF 50%. OFF RETAIL PRICE. HURRY BEFORE THE LADY HERSELF BUYS UP ALL OUR STOCKS!
Note the image of Lady G used for the advertisement is obtained by Nelson under license from TOPPIX photos. Toppix own the copyright in the image and have right to license it to Nelson.
At first it seems the advertisement will indeed save the fortunes of Geisha lipsticks. Orders flood the site and soon Nelson runs out of stocks of the Fire lipstick. Rather than disappoint customers he decides to replace “Fire” with the “Flame” lipstick which is a different colour red. Unfortunately this doesn’t go down well with disappointed customers who begin bombarding Nelson with requests for their money back and threatening to report him to the ACCC.
To make matters worse Nelson reads in Vogue magazine that Revelation Cosmetics is about to launch a new 24 hour long lasting lipstick called “Kabuki”. Nelson phones Sam immediately and accuses him of stealing his marketing ideas, his special formula and unique production process. Sam replies “So what if I did? It’s not as if you patented them?”
Meanwhile Lady G who has never used a Geisha lipstick in her life has seen Nelson’s advertisement and is very upset, believing that it “cheapens” her name and image. She has sought the advice as to her solicitors Messrs Slime and Bucket as to whether she can take legal action against Nelson to stop the advertisement.
In this assignment you must answer the following questions:
1. What legal risks (if any) are faced by Nelson in respect of the advertisement for Geisha lipsticks? Make sure that you identify all possible causes of action, the parties whom may bring action and the possible remedies they may seek against Nelson? (20 marks)
2. Can Nelson prevent Revelation Limited from launching Kabuki lipsticks using his business plans and special formula? Again make sure you identify the causes of action and possible remedies (10 marks).
You should support your answer with reference to applicable legislation and case law.