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A sigh of relief could be heard from across the pond recently as the Supreme Court of the United States (a.k.a SCOTUS) confirmed that inter partes review proceedings before the Patent Trial and Appeal Board (“PTAB”) are not unconstitutional.  In a case where oral arguments were heard last November, the US (and indeed global) patent community waited patiently until 24 April 2018 for confirmation that the status quo in US patent proceedings would be maintained.

What are IPRs?

Much like post-grant opposition proceedings before the EPO in Europe, inter partes review  ("IPR") proceedings in the US review the patentability of claims already granted by the USPTO.  IPRs are heard by the PTAB, a body created by statute which includes statutory members and administrative patent judges. In Oil States the PTAB held that the asserted patent claims were invalid.

The escalation to SCOTUS

Appealing the invalidity decision of the PTAB, Oil States appealed to the Federal Circuit and ultimately the US Supreme Court, arguing that IPR proceedings before PTAB are contrary to the U.S. Constitution.  Specifically, Oil States argued that Article III, which vests judicial power in the courts, prohibits a non-Article III forum – such as the PTAB - from extinguishing private property rights in proceedings such as an IPR.  Oil States also argued that the Seventh Amendment required issues of patentability to be determined by jury trial, rather than in the PTAB forum (typically a three-judge panel).  

Article III – clear!  Seventh Amendment – clear!

Oil States' appeal was unsuccessful.  Here's why:

  • Patents are a “public franchise” and as such Congress can assign adjudication of them to a non-Article III tribunal.  
  • As a patent may be granted by a non-Article III tribunal, so can the review of one.
  • Patent claims are granted by the USPTO subject to the qualification that the USPTO has authority to re-examine (and revoke) the claims later in an IPR.
  • Just because patent validity had historically been an issue for the courts, it does not have to remain that way.

Comment

The IPR process has therefore now been confirmed as constitutional in that it is compatible with Article III and is not a violation of the right to a jury trial under the Seventh Amendment. However, the court expressly stated that it had only addressed the 'precise constitutional challenges that Oil States raised'. Back to your stations, then…at least for now.

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Background 

There has been a fundamental conflict between German media companies and providers of so-called advertising blockers used on the internet. 

Media companies finance their editorial services, among other things, by receiving payments from other companies for the publication of their advertisements on their websites. 

This was very common for a long time until the business model of advertising blockers developed. These prevent certain advertisements from being displayed on internet pages by using filter rules to identify and block server paths and file characteristics of advertising providers. The ad-blocking software most commonly used in Germany - Adblock Plus - can be downloaded for free. Website operators and advertising networks are able to register for a whitelist. Their advertisements that are classified as 'acceptable ads' will then not be blocked.  According to the applicable criteria, acceptable ads are static advertisements that contain only text and no eye-catching images, that do not hide the actual website content and that are also marked as advertising. 

Each website operator can participate in the whitelisting which is free of charge for small and medium-sized websites and blogs. Companies only have to pay for the activation of their advertising if they reach more than ten million additional advertising impressions per month via the whitelist. 

Decision of the German Federal Court of Justice  

In the proceedings brought by one of the largest publishing houses in Europe against the provider of Adblock Plus, the German Federal Court of Justice (Bundesgerichtshof) confirmed the legitimacy of ad-blocking software (judgment of 19 April 2018 - I ZR 154/16). It is the first decision of the highest German civil court in this area. The decision is in line with the judgments of the Higher Regional Courts of Hamburg and Munich and reverses the partial prohibition of Adblock Plus by the Higher Regional Court of Cologne. The Cologne court affirmed the fundamental legitimacy of ad-blockers but considered the business model of paid whitelisting to be inadmissible based on unfair competition law. 

The judgment of the Federal Court of Justice is based on the following reasoning: 

  1. The offer of the advertising blocker does not represent a deliberate obstruction of competitors. Its provider primarily pursues its own economic interests and does not intend to drive media companies out of business. It even generates revenue by including advertisers in the whitelist for a fee. The business model therefore presupposes the functionality of any websites. From the necessary weighing of interests it follows that it is reasonable for media companies, also with regard to the fundamental right of freedom of the press, to counter the impairments resulting from the use of the blocking software by taking defensive measures, such as blocking access to the website for users of ad-blocker software. 
  2. There is also no general market obstruction. A general market obstruction happens if a competitive behaviour which, although not unfair per se, is in itself dubious and creates a serious risk of significantly restricting competition. According to the court, the distribution of the advertising blocker software makes the business activities of media companies and other website operators more difficult, but does not threaten their business model of providing free content to their users itself. 
  3. The court has also rejected the notion of an aggressive commercial practice in relation to the advertisers even if they are offered a paid activation of "acceptable" advertising. The court justified this by arguing that not concluding a whitelisting agreement only leads to the status quo of a full blockade of their advertising being maintained, which is legitimate. It does not cause any further disadvantages for the advertiser apart from a contract (i.e. the whitelisting agreement) that will not be concluded. 

Outlook 

Even after this decision of the Federal Court of Justice, the debate has not ended... 

According to press reports, the publisher plans to lodge a constitutional complaint based on the violation of the freedom of press arguing that advertising blockers deliberately destroy the integrity of online media and their financing. In addition, the publisher sees this as an opportunity to take action against advertising lockers under copyright law because of a possible intervention in the programming code. 

On the other hand, there are many voices who believe that traditional companies such as publishing houses should - in times of disruptive business models - face the new challenges rather than defending, what some argue to be, their outdated business models. 

One thing is certain: the spread of advertising commonly perceived as being annoying and the associated increase in the use of ad-blockers together do not foster complimentary access to content on the internet. Even more than before, media companies may have to rely on paid content and pay-walls. As a consequence, there is a danger that not all parts of the population will have access to high-quality journalistic content. 

Perhaps a possible solution will be found outside of German court rooms. The "Coalition for better Ads", founded just a while ago, is a consortium of major advertisers, agencies, publishers and tech providers. This coalition aims to decrease the rising rate of ad-blocker users. Among other things, it wants to achieve this goal by reducing advertising formats that some users may find annoying. 

With thanks to associate Simon Pentzien, co-author of this blog.

 

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Background

Some companies create valuable brands with great ambition and perseverance, brands that are surrounded by an aura of luxury or have an image of absolute coolness.

In times of constantly increasing competition, it is a remarkable achievement to be the owner of a brand that stands out from other brands. Once acquired, companies try to defend this prestige by all means. This is quite understandable, especially considering the fact that many customers are only willing to pay a considerable premium because of the brand's reputation.

One way to deteriorate or damage a brand's reputation is if the products are presented in a context that does not correspond to its actual image. This is why brand manufacturers want to prevent their products from being sold online as well as offline in supposedly inappropriate environments. Within the official and authorised distribution channels of the brand manufacturers, they naturally have the necessary influence to ensure an appropriate presentation of the goods.

However, it has been a major problem for brand manufacturers long before the times of the internet that original products are offered through grey market dealers outside the authorised distribution channels.

A categorical prohibition of such sales would be the solution which, however, is contrary to the principle of trade mark exhaustion that is enshrined in both, EU trade mark law and in the national trade mark law systems. Accordingly, the trade mark manufacturer cannot prohibit the use of its trade mark if the goods have previously been placed on the market in the European Economic Area (EEA) by the manufacturer itself or with its consent.

Under very restrictive conditions, the principle of exhaustion does not apply, namely where there are legitimate reasons for the proprietor of the trade mark to oppose the continued marketing of the goods covered by the trade mark. This is the case, for example, if the condition of the goods is changed or impaired after they have been placed on the market.

There are other situations in which the trade mark owner can oppose distribution. For example, damage to the trade mark's reputation may in principle constitute a legitimate reason for a trade mark owner to oppose the resale of the prestigious goods. The Higher Regional Court of Düsseldorf, Germany, has recently dealt with a case of reputational damage in its judgment of 6 April 2018 (20 U 113/17):

Düsseldorf court's decision

The Japanese luxury cosmetics manufacturer Kanebo, whose products are marketed under a strictly regulated selective distribution system, was able to stop the sale of grey market goods by a retail chain which was not part of this system. The court has prohibited the retail chain throughout the EU from offering Kanebo luxury cosmetics in its stores and online shop.

The court considered that there was an exception to the principle of trade mark rights exhaustion in this case. It held that since Kanebo's luxury cosmetics were offered by the retail chain, reputational damage was caused. The sales environment, both online and offline, was not comparable to the luxurious environment in which the goods were offered by the manufacturer itself.

The court assessed the concrete circumstances in great detail and on a case-by-case basis. Among other things, it criticised the fact that the luxury articles were randomly located next to everyday and mass-produced products and also how they were offered, without any kind of prominent presentation of the goods. The possibility of financing also made them seem affordable for everyone and put them on the same level as the other items on offer, which significantly affected the prestige value of the goods.

Outlook for other branded goods

It is important to understand that the court did not under any circumstances establish a general prohibition regarding the sale of parallel imported products, but considered individually whether the distribution was unlawful in the specific sales set-up.

The question of how this decision will affect the development of future case law is an interesting one. So far, the clear emphasis of the decision is on so-called luxury goods. Recently, the European Court of Justice (CJEU), in its decision in Coty Germany GmbH v Parfümerie Akzente GmbH in December 2017, considered a restriction of free trade by restricting internet distribution via third-party platforms to be in conformity with antitrust law if this was necessary to safeguard the luxury image of goods from a selective distribution system. (See our blog here on this CJEU decision.)

But what makes goods luxury goods?

The CJEU says it is "not just the result of their material characteristics, but also of the allure and prestigious image which bestow on them an aura of luxury". This definition allows for many possible interpretations, particularly because the CJEU considers that the goods are also purchased because of their prestige character, not alone or above all because of it.

The Düsseldorf Court's decision certainly offers potential for brand manufacturers of other very high-quality products, such as technical devices with a certain prestigious image, to test in court if the sale, both online and offline, of goods re-imported via the grey market can be successfully prohibited, if these goods were sold in an inferior sales environment.

With thanks to associate Simon Pentzien, co-author of this blog.

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With special thanks to trainee, Jonathan Peters, for his contribution to this blog.

The EU General Court ("GC") recently dismissed a trade mark invalidity appeal made by Safe Skies, a US-based luggage lock manufacturer.

Background

The trade mark in dispute was TSA LOCK registered in July 2006 in classes 6, 18 and 20 for metal and non-metal locks and bags. The mark is owned by Travel Sentry Inc, a company that develops and licenses security standards.

In 2014, Travel Sentry's competitor Safe Skies LLC applied for a declaration that the TSA LOCK mark was invalid, on grounds including that it was devoid of distinctive character, descriptive, and intended to deceive the public. Safe Skies' application was rejected by the Cancellation Division. The Fourth Board of Appeal ("BoA") subsequently dismissed its appeal finding that the arguments with regard to deceptiveness lacked substance, and that Safe Skies had failed to establish that the sign was descriptive or lacked distinctiveness.

General Court's ruling

The GC dismissed Safe Skies' appeal. The key elements of its judgment were that:

  • It was clear from settled case law that the GC could not be required to carry out afresh the examination which the original examiner conducted, its role being to assess whether the BoA had erred in its findings.
  • Safe Skies had produced evidence that post-dated the original decision, which it was not the court's function to review. In the absence of Safe Skies providing any specific reason why the court should take such new evidence into account, the evidence would be excluded.
  • The relevant date for the purpose of assessing an application for invalidity was the filing date of the contested mark, namely 7 July 2005 in this case. This was despite Safe Skies' contention that the date should be that of the registration of the contested mark (10 July 2006). Evidence adduced by Safe Skies, dated after the filing date, could therefore not be taken into account in the GC's assessment.
  • The identification of the relevant public made by the BoA was correct – there was no evidence, contrary to claims by Safe Skies, that the BoA focused its assessment on the general public without taking into account both the public at large and business professionals like manufacturers and travel luggage retailers.
  • The BoA had not been required to give express reasons for its findings in relation to the probative force of each item of evidence, as Safe Skies argued. Rather, the statement of reasons contained in the contested decision had been sufficient.
  • Ultimately, the BoA was correct in finding that Safe Skies had failed to prove that the contested mark was devoid of distinctive character at the time of filing, or that it was likewise descriptive or deceptive.

Comment 

It may seem surprising that TSA LOCK has been afforded protection as a trade mark, as many might assume that it is a generic standard for luggage locks that are approved by the US border authority, the Transportation Security Administration. It seems that the GC decision largely depended upon challenges to the admissibility of the evidence, primarily around the probative value of that evidence, the relevant dates and the relevant public. 

It appears that Travel Sentry benefited from the delay in Safe Skies taking any action against the registration, having taking the invalidity action some eight years after TSA LOCK was first registered. Additionally, there was either a failure by Safe Skies to recognise that any evidence would need to predate the application date, or evidence they tried to find was unavailable. 

The weakness of Safe Skies' case would seem to be corroborated by the fact that it tried to file new evidence and failed. To increase its chances of success, it could have focused on obtaining better evidence – items it produced were criticised and disregarded by the GC for being undated or illegible – and made more of the admissibility of the evidence that it put before the GC for the first time. Safe Skies did not seem to give any reasons for its admissibility and it seems that it was excluded because the GC determined that its function was not 'to review the facts in the light of documents produced for the first time before it'. 

Overall, there is no surprise as to the ultimate result. The GC finding that the relevant date for the purpose of assessing validity was the application date and not the registration date is well established in case law. Moreover, Safe Skies was on the back foot challenging the validity of the registration on absolute grounds, once it has already been determined by the EUIPO. The difficulty with EUIPO proceedings is that the evidence has to be front loaded at the time of initiating the proceedings, but often there is some practical difficulty in assembling all of the evidence before the case commences. 

We are aware that Safe Skies has also a pending revocation action against the same registration.

 

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The US Court of Appeals for the Ninth Circuit has recently ruled that an animal may have constitutional standing but lacks the necessary statutory standing to file law suits for copyright infringement. The judgment follows a law suit filed by the People for the Ethical Treatment of Animals (PETA) seeking confirmation that an animal could author a valid copyright work and, therefore, file a lawsuit for copyright infringement against a defendant third party.

Background

In 2011, British nature photographer, David Slater, released various photographs of monkeys which had been taken in Indonesia. The process involved positioning a camera on a tripod.  However, the monkeys were the ones that actually took the photographs through playing with the release button which Mr Slater had set up and left unattended.  One of the shots showed a monkey peering into the lens, giving rise to the "monkey selfie".

The monkey selfie was subsequently uploaded to various third party websites on the basis that the author of the photograph is the original owner and, in this case, the author was a monkey. Therefore, it was argued that copyright could not subsist because the author was not human and the photograph simply formed part of those works freely available in the public domain.

When Mr Slater released a book containing copies of the monkey selfie in 2014, PETA filed a law suit requesting that the monkey, whom they named Naruto, be assigned the copyright for the photograph and that PETA be appointed to administer the relevant proceeds. Under US law, the "next friend" principle allows a person or group to sue in the name of another person who is unable to do so.   Asides the long flight time and expensive air fare, Naruto was fairly unlikely to travel to the US to enforce his rights.  Having been dismissed by the Northern District of California, PETA appealed to the Court of Appeals for the Ninth Circuit.

Judgment

The Court held that Naruto had Article III standing to bring the law suit - as an animal, he had a case or controversy under the US Constitution allowing him to bring a law suit. This had been decided under earlier US case law relating to a law suit brought to protect the interests of dolphins, whales and porpoises.

However, Naruto lacked statutory standing to bring a copyright infringement law suit under the US Copyright Act. This is because the Act does not expressly authorise animals to file copyright law suits.  Similarly, the wording of the statute persuaded the Court that no statutory standing was intended by the legislators.  For instance, the ability of an author's children, widow or widower to inherit certain rights all imply humanity and thus exclude animals who do not marry or have heirs.  Unfortunately for Naruto, his offspring will not be inheriting his monkey selfie.

Comment

The judgment should not come as a shock and would have likely been decided the same way under UK law. However, it does raise interesting questions and pushes the boundaries of concepts such as the subsistence of copyright through originality, authorship, ownership, implied assignment and licences, and infringement.

One interesting question is the protection Berne Convention signatory states should afford to copyright works which come to subsist in other signatory states. More specifically, would Indonesia have recognised Naruto's copyright in the monkey selfie?

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Football megastar, Lionel Messi ("Messi"), has been successful before the General Court of the European Union ("GC) in the latest round of a six and a half year legal battle to register the logo featuring his name shown below as a European Union Trade Mark ("EUTM") for sporting equipment and clothing.

Background

Messi applied to the European Union Intellectual Property Office ("EUIPO") to register the logo above bearing his name on 8 August 2011 for a range of goods in Classes 3, 9, 14, 16, 25 and 28. Full details of Messi's EUTMs for the above logo (there now being two due to a divisional application filed in November 2014) can be seen here and here. Messi's application was accepted and published for third parties to oppose on 23 August 2011.

On 23 November Mr Jamie Masferrer Coma and, latterly, J.M.-E.V. e Hijos S.r.l. who took assignment of Mr Masferrer Coma's rights in May 2012 (the "Opponent"), opposed the registration of Messi's application for "life-saving apparatus and instruments" in Class 9, "clothing, footwear, headgear" in Class 25 and "gymnastic and sporting articles not included in other classes" in Class 28. The opposition was filed on the basis that the Opponent believed there was a likelihood of confusion between Messi's application and the Opponent's two earlier registrations for MASSI which between them cover clothing, shoes, bicycle helmets, protective clothing and gloves amongst other goods in Classes 9, 25 and 28.

The EUIPO and Board of Appeal decisions

The EUIPO found in the Opponent's favour at first instance as they concluded that there was a likelihood of confusion between the marks. Their view was that the dominant elements of the two marks, namely MASSI and MESSI were nearly identical visually and phonetically and covered identical or, at the very least, highly similar goods. The EUIPO did consider the conceptual comparison between the two marks and found that in relation to the part of the public that associated the marks with different meanings (the two marks were found to have various meanings in different EU Member States) the marks were not conceptually similar. For the remaining part of the public, they found that neither sign conveyed any meaning and that the marks therefore had no concept in common. This reasoning was confirmed by the Board of Appeal upon appeal by Messi and the appeal was dismissed.

Dissatisfied with the decision, Messi appealed to the GC.

General Court decision

The GC annulled the EUIPO's decision and ruled that Messi's application should be allowed to proceed to registration. The GC did not have an issue with the EUIPO's decision in respect of the visual and phonetic similarities between MASSI and MESSI, but believed the EUIPO had erred in the conceptual comparison of the marks in three aspects:

  1. The GC found that it was wrong of the EUIPO to consider that Messi's reputation only extended to the part of the public who was interested in football or sport in general. The GC held that Messi is a well-known public figure generally due to his presence on television and regular discussions surrounding him in the media in the EU;
  2. The GC said the EUIPO should have examined whether a significant part of the public would not make a conceptual comparison between MESSI and the name of the famous footballer; and
  3. The GC said the conceptual comparison had to be framed in terms of the goods covered by the marks at issue, in particular sports equipment and clothing, even if those were not limited to the sports equipment and clothing for football. The GC held it was highly unlikely that the average consumer of sports equipment and clothing would not, in the vast majority of cases, directly associate the term MESSI with the famous footballer.

The GC's conclusion was that, even though the marks MASSI and MESSI were similar overall, the conceptual differences counteracted the visual and phonetic similarities. The GC believed that a significant part of the relevant public would associate MESSI with the famous footballer and would therefore view the term MASSI as conceptually different. The GC ruled that the degree of similarity between the two marks was not high enough to lead the relevant public to believe that the goods at issue came from the same undertaking or economically linked undertakings. Consequently the GC found the EUIPO was wrong to refuse Messi's application.

The GC's decision may be appealed to the Court of Justice of the European Union so we shall wait to see if this is the end of the matter, or if the Opponent tries to take the matter to a penalty shootout.

Comments

This very much appears to be a case of 'too famous to be confused' and is likely to be a defence that is available to only a few businesses or personalities. However, this does highlight the importance of carefully considering who your relevant public is. Successfully framing your relevant public to your advantage may make it more likely that you will be able to argue you are 'too famous to be confused' amongst that select group. The case also highlights that marks may be visually and phonetically similar, but that there might be ultimately no likelihood of confusion due to conceptual differences between the two marks.

We are sure this trade mark win ranks right up there for Messi with all the La Liga, Copa del Rey, Champions League and countless other awards and accolades he has achieved throughout his career.

 

 

 

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The Minister for Intellectual Property, Sam Gyimah MP, has announced this afternoon (26 April 2018) that the UK has ratified the Unified Patent Court Agreement (UPCA). This is exciting news for patent owners in the UK and across Europe and coincides with World IP Day.

For further details see the government's press release today and our most recent blog about the UPCA.

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Are the English courts the right forum for claims of patent infringement when the relief sought is the determination of a global FRAND licence? This was the question that Mr Justice Carr recently had to consider in Conversant Wireless Licensing SARL v Huawei Technologies Co. Ltd & Ors [2018] EWHC 808 (Pat) (16 April 2018).

In this case Conversant, a Luxembourg company, had asserted its patents against four defendants: the Chinese companies Huawei and ZTE (who manufacture and sell mobile phone devices globally) and their respective English subsidiaries.  The relief sought by Conversant was the determination of FRAND terms for patents in its global standard-essential patent (SEP) portfolio.

The defendants contended that:-

  • As the claims were in substance and effect claims for infringement of foreign patents the validity of which was in dispute, the English court had no jurisdiction.
  • Alternatively, the English court should decline jurisdiction as England was not the proper or appropriate forum (forum non conveniens); China was the natural forum.

Fundamental to the defendants' contentions was the China-centric nature of their businesses.  Both Huawei and ZTE manufactured the allegedly infringing products in China, and China represented their biggest market: respectively 56% and 60% of worldwide sales, in contrast to respectively 1% and 0.07% in the UK.  According to Huawei, if Conversant's Chinese patents were not infringed or were invalid, then 75% of Conversant's worldwide royalty claim under a FRAND licence would fall away.   Unsurprisingly, therefore, Huawei and ZTE had commenced proceedings in China seeking to establish invalidity and non-infringement, or determinations of FRAND terms in respect of those Chinese patents.  The outcome of the Chinese proceedings was not expected for another year or so.

It is the case that the English court cannot determine the validity of foreign patents, including the Chinese patents.  Events in China therefore could have a substantial impact on global FRAND royalties.  This did not, however, trouble the judge.  In the well-known FRAND case of Unwired Planet v Huawei (about which we have reported previously, here, here and here) the FRAND terms set by the court provided for a variation in royalty rates in the event that patents in other jurisdictions were held to be invalid or not infringed.  Mr Justice Carr concluded that with such a mechanism there would be no injustice to Huawei and ZTE if the English proceedings were to continue.  Should the Chinese court conclude that some or all of the Chinese patents are invalid or infringed then the worldwide FRAND terms decided upon by the English court would adjust accordingly.  Although Huawei and ZTE criticised the adjustment clause in the Unwired FRAND licence (which Conversant had adopted in their proposed worldwide licence) the judge held that was a criticism of the clause and not a basis for depriving the English court of jurisdiction.

The court therefore concluded that the case should continue in the English court.   At the heart of the case were allegations relating to infringement and validity of British patents which only could be dealt with by the English court.   Against that backdrop, the English Court was as well placed as the Chinese court (and indeed other courts) to reach a determination of a global FRAND licence, it being recognised that such a global FRAND licence would need to include provisions enabling it to flex in light of external events, such as findings of invalidity and non-infringement in China (or elsewhere).

Comment

Given the manufacturing and level of sales in China, superficially the defendants' arguments might have some attraction.  However, if it were the case (as the defendants contended) that a court in one jurisdiction should not determine global FRAND terms because the validity of some or all of the underlying SEP patents is in issue in another jurisdiction, then this could operate to prevent the courts in any jurisdiction being able to determine global FRAND terms.  From the earliest FRAND/SEP cases, the English courts have shown a flexibility and pragmatism to deal with such cases and this continues with this latest judgment.  

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Following on from our recent blog here on the European Commission's revised draft withdrawal agreement which covered the protection and enforcement of trade marks, designs and database rights (19 March 2018), the European Commission issued a notice to stakeholders, about 10 days later on 28 March (conveniently just before everybody went off on their Easter holidays!) setting out the impact of Brexit in the field of copyright (which also touched on database rights again).

The notice confirms that subject to any transitional arrangements contained in a withdrawal agreement, as of the withdrawal date (30 March 2019 00.00h), EU rules will no longer apply to the UK. This notice should be read with the caveat that a further deal may (and should) still be struck in this area to assuage some of the complexities highlighted below.

The notice addresses the following points:

The main international (multilateral) copyright treaties will govern the EU-UK copyright relationship

As EU copyright directives and regulations will no longer be applicable after 30 March 2019, the international framework will govern the protection and enforcement of copyright between the UK and the EU. The UK and the EU are contracting parties to many of the main international copyright treaties, such as, the World Intellectual Property Organisation (WIPO) Copyright Treaty (WCT), the Agreement on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the WIPO Performances and Phonograms Treaty (WPPT).

However, these international treaties do not provide for the same level of protection in relation to various rights and related exceptions and limitations. The EU body of law also lays down various special rules, cross-border measures and management of rights for rightsholders or users in the EU, which have no counterpart in the international treaties. This means there will be the following consequences in the copyright arena:

Broadcasters – country of origin principle

The Satellite and Cable Directive (93/83/EEC) aims to make things simpler for service providers wishing to develop cross-border business in the context of satellite broadcasting and cable retransmission. The directive establishes what is known as the 'country of origin principle' which allows broadcasting organisations to broadcast throughout the EU but requiring only one licence from the country of origin of the satellite broadcast and not from all the countries where their signal is received.

As of the withdrawal date, however, in the absence of any other agreement, the UK will no longer be able to benefit from this principle which means that any UK broadcaster will not only be subject to the relevant UK copyright law, but also the copyright law in all those other EU countries where their signal is being received. Likewise, EU broadcasters providing cross-border services to UK customers will have to secure clearance of the rights of all relevant rightsholders in the UK. This will undoubtedly make clearance of such rights much more time-consuming and costly than it is now.

Collective Rights Management (online rights in musical works)

Article 30 of the Collective Rights Management Directive (2014/26/EU) will no longer apply as of the withdrawal date which means that a collective management organisation will no longer be obliged to represent a collective management organisation based in the UK for multi-territorial licensing for the online rights of musical works and vice versa.

Orphan Works

Currently, under the Orphan Works Directive (2012/28/EU), certain EU institutions benefit from the mutual recognition of orphan works (books, newspapers and articles for which no copyright holder can be located). This means that there are common rules on the digitisation and online display of orphan works across all member states, so once a work is officially recognised as an orphan work (if a compulsory search has not been able to locate or identify the copyright holder), then that work can be made available online across the EU.

As of the withdrawal date, however, this mutual recognition mechanism will no longer apply between the UK and the EU and so orphan works recognised in the UK will no longer be recognised in the EU and vice versa. Therefore cultural institutions in the EU using orphan works from the UK and making them available online will no longer be able to do so and vice versa.

Access to published works for the blind, visually impaired or otherwise print-disabled persons

Directive (EU) 2017/1564 lays down a framework to improve the availability of books, including e-books, journals, newspapers, magazines and sheet music (online or offline) in formats which are accessible to the blind, visually impaired or otherwise print-disabled persons. Such accessible formats include braille, large print, adapted e-books and audio books. However, post-Brexit, blind, visually impaired or otherwise print-disabled persons in the UK will no longer be able to rely on the Directive to obtain accessible format copies from authorised entities in the EU and vice versa.

Also of relevance is Regulation (EU) 2017/1563 which governs the cross-border exchange of accessible format copies of certain copyright-protected works between the EU and 'third countries' that have ratified the Marrakesh Treaty. The UK, however, is not currently a party to the Marrakesh Treaty so cannot rely on this either.    

Online content portability

Regulation ((EU) 2017/1128) (which came into effect recently on 1 April 2018) introduced a common approach in the EU to cross border portability of online content services, by ensuring that subscribers to portable content services which are lawfully provided in their member state of residence can access and use those services when temporarily present in another member state. For example, if someone has paid to access a Danish Scandi drama in Denmark, they will also be able to watch it in Belgium.    

As of the withdrawal date, however, people in the UK will no longer be able to benefit from their digital content subscriptions when travelling to other EU countries. It will also mean that any UK providers of digital content will need to comply with the laws of the relevant member state where it wishes to offer services to its subscribers and clear all relevant rights for those member states.  

Sui generis database right

UK nationals who do not have their habitual residence in the EU and companies/firms incorporated in the UK will no longer enjoy protection for their database rights in respect of databases in the EU. Likewise, nationals of EU member states and companies/firms incorporated in the EU will no longer enjoy protection for their databases in the UK.

This must also be read in conjunction with the provision (agreed in principle) in the European Commission's revised draft withdrawal agreement which states that where a database right has arisen before the end of the transition period, the UK will continue to benefit from a right with the 'same level of protection' as the EU database right after the transition period (Article 54).

Comment    

Whilst this document highlights some areas of concern that stakeholders need be aware of in terms of copyright, it is a brief document and does not indicate how they can, or will be addressed. It simply indicates what will happen if some kind of agreement is not reached. It seems that the impact of Brexit on copyright is not getting the same level of attention as some of the other IP rights which could be incredibly detrimental to the creative industries. On a general level, the Government's White Paper on the Repeal Bill published at the end of March 2017 stated that the Repeal Bill would preserve the laws that have already been made in the UK to implement EU obligations from EU Directives. Even with that mechanism, however, there will still be gaps in copyright law and where the international copyright treaties cannot bridge those gaps, the impact on businesses, particularly those engaging in cross-border and multi-territorial licensing activities, will be huge. We have to hope that behind the scenes, steps are being taken to rectify these gaps.

The UK Government has indicated that the UK and EU negotiating teams aim to finalise the entire withdrawal agreement by October 2018 which will confirm any transitional arrangements. If the current proposals for a transitional period from 29 March 2019 to 31 December 2020 are set in stone, this should, at least, buy the relevant law makers and any interested parties lobbying extra time to consider and negotiate a more harmonised approach for copyright in the UK and EU.

We will be sure to update you when we have any further information or clarification.

 

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Nestlé's struggle to register its four-finger bar as a shape mark has just suffered another blow as Advocate General Wathelet has recommended that the CJEU dismisses its appeal against the EU General Court's decision, which essentially found that it had not acquired distinctive character across the entire EU. In this blog we take a brief look at the opinion and what it may mean in practice to brand owners.

Quick recap of the case so far

In 2002, Nestlé applied to register as an EU trade mark the below three-dimensional sign, corresponding to its ‘Kit Kat 4 fingers’ product:

In 2007, Cadbury Schweppes (now Mondelez UK Holdings & Services) applied for a declaration of invalidity, which was initially rejected by the EUIPO. However in December 2016, the EU General Court annulled the EUIPO’s decision (see our blog here for the details of this decision). The court considered that the EUIPO had erred in law in finding that the mark at issue had acquired distinctive character through use in the EU, when Nestlé had proved this for only part of the territory of the EU.

Although Nestlé had demonstrated that the shape mark had acquired distinctive character through use in 10 countries (Denmark, Germany, Spain, France, Italy, the Netherlands, Austria, Finland, Sweden, and the UK), the General Court held that EUIPO could not validly conclude its examination without ruling on the relevant public’s perception of the mark in the other four member states (Belgium, Ireland, Greece and Portugal) and without analysing the evidence adduced in respect of those countries. (At the date of filing, the EU consisted of 15 member states.)

Key issue at the appeal

Nestlé argued that the General Court was wrong to hold that the owner of an EU trade mark must show that its trade mark has acquired distinctive character through use in each of the member states separately. It submitted that the General Court’s interpretation is incompatible with the unitary character of the EU trade mark and the very existence of a single market.

Interestingly MARQUES, the European Association of Trade Mark Owners, was granted permission to intervene and submit observations at the hearing in support of Nestlé.

Opinion of Advocate General Wathelet

Advocate General (AG) Wathelet spent some time looking at the CJEU's earlier decision in 2012 in Chocoladefabriken Lindt & Sprüngli v OHIM (concerning the shape of a chocolate rabbit) and said that this case would give the CJEU a further chance to clarify parts of that decision. In that earlier case the CJEU had said that it would be unreasonable to require proof of acquired distinctive character for each individual member state. The AG emphasised that this did not imply that the trade mark applicant could leave out entire regions and markets. In his view, account must be taken of the geographical size and the distribution of the regions in which acquired distinctive character has been positively established, to ensure that the evidence from which an extrapolation is made for the whole of the EU relates to a quantitatively and geographically representative sample.

The AG added that the existence of the single market within the EU does not imply the non-existence of national or regional markets. In this regard, evidence adduced for some national markets might suffice to cover other markets for which (quantitatively sufficient) evidence has not been adduced. To provide quantitatively and geographically sufficient evidence of the acquisition of a distinctive character through use throughout the EU, account must be taken, for each product or service, of this diversity within the EU. In that sense, a trade mark cannot be an EU trade mark with a unitary character if the relevant public in part of the EU does not perceive it as an indication of the commercial origin of the goods or services which it covers.

Turning to Nestlé's position, the AG noted that while Nestlé had provided market research for all member states (apart from Luxembourg), it was clear from the General Court’s decision that the information provided for Belgium, Ireland, Greece and Portugal was not sufficient to establish that the relevant public in those countries identified Nestlé as the commercial origin of the shape. Even though the General Court was, in principle, required to examine whether the acquisition of a distinctive character through use in those five member states could be extrapolated from the evidence provided for the other national or regional markets, Nestlé had not included such evidence in the case file. In the absence of such evidence, the General Court had had no option but to annul the EUIPO's decision.

Consequently, the AG proposed that the CJEU dismiss Nestlé's appeal. (See here for a link to the opinion).

Comment

Although the AG's opinion is not binding on the CJEU, it is likely that the court will follow his opinion and dismiss Nestlé's appeal. For Nestlé this will be a further set-back in its attempts to protect the four-finger shape mark. In May 2017, the UK Court of Appeal confirmed that the shape had not acquired distinctiveness and therefore could not be registered for the corresponding UK mark (see our blog here).

Of particular interest are the AG's comments in relation to acquired distinctive character and whether it is necessary for a trade mark owner to prove this in each and every member state across the EU. He seems to have adopted a more pragmatic approach taking into account in practice how goods are marketed across the EU. The example he gives is: if for goods/ services covered by a trade mark, Luxembourg is part of the same market as Belgium, France or Germany, and sufficient evidence has been provided for one of those countries, it would not be necessary to provide specific evidence for Luxembourg.

The AG's practical approach is a positive sign for brand owners and we hope that it can be adopted by the CJEU.

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