UK: IP Bulletin – March 2011 Edition - Cases From February 2011

KEY CASES AND DEVELOPMENTS

• Media CAT Ltd v Adams and others, Patents County Court – permission to discontinue action refused. The Patents County Court has held that an attempt to discontinue claims was an abuse of process. The court also made other observations of interest concerning infringement by using a P2P filing-sharing network, infringement by authorisation, an order preventing letters threatening proceedings for copyright infringement, and management of Norwich Pharmacal orders. More >>>
• Virgin Atlantic Airways Ltd v Delta Airways Inc, Court of Appeal – summary judgment. The Court of Appeal has reversed the High Court decision granting summary judgment to the defendant in a case concerning a patent owned by Virgin for a system of aircraft passenger seats. More >>>

PATENTS

Court of Appeal – summary judgment
Virgin Atlantic Airways Ltd v Delta Airways Inc, [2011] EWCA Civ 162, 23 February 2011
The Court of Appeal has reversed the High Court decision (see last month's Bulletin) granting summary judgment to the defendant in a case concerning a patent owned by Virgin for a system of aircraft passenger seats.

In the High Court, Arnold J had concluded that Virgin had no real prospect of establishing infringement pursuant to section 60(1)(a) on the basis that Claim 1 was limited to a seating system comprising seat units assembled and arranged on an aircraft.

The fact that seat units had been made and supplied within the UK which were capable of being assembled and arranged on an aircraft in the claimed manner was not enough, as the seat units had not been assembled and arranged on an aircraft in the UK. Virgin appealed and the Court of Appeal, in a unanimous judgment given by Jacob LJ, allowed the appeal and referred the case back to the High Court for trial.

The Court of Appeal disagreed with Arnold J's construction of claims for "A passenger seating system for an aircraft", and held that a purposive construction did not limit the claim to the seating system actually installed on an aircraft.

The court said that it is classical patent law that "for" claims are normally construed as meaning "suitable for", and this was supported by recent UK and EPO case law. Even without this authority establishing a very strong presumption, a skilled man reading the claim in context would expect it to mean "suitable for". They were not the words anyone would naturally use to claim an aircraft fitted with a system.

Draft Patents County Court (Financial Limits) Order 2011
http://www.legislation.gov.uk/ukdsi/2011/9780111507155/contents

The draft Patents County Court (Financial Limits) Order 2011 has been laid before Parliament. It introduces a limit of £500,000, excluding interest, on the value of claims in patent and design cases which may be heard in the Patents County Court.

EPO – overview of patent litigation in Europe
EPO, Patent litigation in Europe, November 2010
http://www.epo.org/service-support/publications/studies/litigation.html

The EPO has published the second edition of Patent Litigation in Europe. This provides an overview of the national patent litigation systems across the EPO's 38 Contracting States. It includes descriptions of the different national revocation, nullity and infringement procedures, and details of the courts at first instance and appeal.

The survey can be accessed by completing a form on the EPO's website.

TRADE MARKS

High Court - post-sale confusion
Datacard Corporation v Eagle Technologies Ltd [2011] EWHC 244 (Pat), Arnold J, 14 February 2011
In the High Court, Arnold J has held that ECJ case law supports the proposition that post-sale confusion can be relied upon as demonstrating the existence of a likelihood of confusion under Article 5(1)(b). He also reviewed recent ECJ case law and its effect with regard to the distinction between Article 5(1)(a) and Article 5(1)(b).

The claimant, DataCard Corporation, alleged that the defendant, Eagle Technologies Limited, had infringed two patents and two registered trade marks owned by DataCard. This part of the Bulletin deals only with the trade mark aspects.

DataCard is one of the biggest suppliers of card printers and related products, including printer ribbons. Card printers are used to print on plastic cards such as credit cards. It markets its desktop card printers and ribbons under a number of trade marks, including the word mark DATACARD. It owns registrations for DATACARD for goods in classes 7 and 9, including printers and printer parts.

Eagle sells card printers and printer ribbons manufactured by various manufacturers, including DataCard. It also sells compatible printer ribbons under the PLUS-RIBBON mark ie that work in a particular manufacturer's printer, but are made by someone else.

Eagle used DATACARD on websites to describe its inking ribbons, which were compatible with Datacard's printers, and on packaging labels for the inking ribbons.

In particular, Eagle described Plus-Ribbon products for DataCard printers on its website homepage as "DATACARD PLUS RIBBON"".

The order system on Eagle's website included a page displaying various icons consisting of logos of printer manufacturers, including DataCard's logo. Clicking on this could take the customer eventually to a page including Plus-Ribbon products, described as "Datacard Plus-Ribbon"" with the same "Product ID" and "Manufacturer P/N" as the part number used by DataCard for its equivalent ribbon.

DataCard-manufactured products were not identified as such. They were described generically with a "Product ID" and a "Manufacturer P/N", accompanied by images of generic ribbons rather than by images of a DataCard box. The Product IDs were different to those used for the Plus-Ribbon products which were based on the original Datacard numbers.

The large label on the front of the box sent to the customer containing the Plus-Ribbon product included the Product ID, a description of the type of ribbon, printer model, and in small font the words "Datacard card printers" or "Data Card Card Printers". There was no statement as to who made the ribbon or the country where it was manufactured. A smaller label stated: "Shelf Life – 1 Year P/N: RBC035-0100 Type: YMCK-K-135 Brand: Datacard Made in USA".

Eagle denied infringing the trade marks, and in the alternative, defended on the basis that it was necessary for it to use the trade mark to indicate that its ribbons were compatible with DataCard's printers under Article 6(1)(c) of the Trade Marks Directive.

The High Court held that Eagle's use infringed Datacard's rights under Article 5(1)(b) (identical or similar sign and goods where there exists a likelihood of confusion). The labels were likely to have led unsuspecting consumers into believing that the products originated from DataCard. On the website, the average end user searching for a replacement DataCard ribbon would be likely to be confused by the descriptions "DATACARD PLUS-RIBBON"/"Datacard Plus-Ribbon" into thinking that Plus-Ribbon was a subsidiary brand of DataCard's or that there was some other trade connection between the Plus-Ribbon products and DataCard.

The likelihood of confusion would be increased by Eagle's failure to use the trade marks to describe the DataCard products, and Eagle's use of a Product ID which reproduced the DataCard part number for the Plus-Ribbon products, but not for the DataCard products.

The claim under Article 5(1)(a) failed because the goods could not be said to be identical. Arnold J applied Omega Engineering Inc v Omega SA which established that where the specification of a trade mark expressly incorporates a reference to the class, as in this case, the question whether any particular goods fall within the specification is to be answered by reference to the Registrar's practice at the date of registration. In this case, the relevant date was 14 September 1989. At that time, Eagle's products were either in class 16 (inking ribbons) or class 2 (toners for photocopiers or in cartridges), but not to class 7 and 9, since their purpose was merely to be a carrier for the inks.

Arnold J found that Eagle's Article 6(1)(c) defence failed because Eagle's use of the signs was not in accordance with honest practices in industrial and commercial matters: the manner of the use gave the impression that there was, or at least might be, a commercial connection between the supplier of the Plus-Ribbon products (Eagle) and DataCard.

Arnold J said that, on balance, the ECJ case law supported the proposition that post-sale confusion can be relied upon as demonstrating the existence of a likelihood of confusion under

Article 5(1)(b). The ECJ's comments in Arsenal appeared to acknowledge the relevance of post-sale confusion when considering the impact of the use of the sign, and the reasoning in Anheuser-Busch was essentially the same as in Arsenal. He also noted that the Supreme Court of the Netherlands had held that post-sale confusion could be relied upon under Article 5(1)(b) in Benetton v G-Star (8 September 2006, NJ 2006, 492).

Arnold J extensively reviewed recent ECJ case law and its effect with regard to the distinction between Article 5(1)(a) and Article 5(1)(b).

Advocate General Opinion – Counterfeit Goods Regulation
Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Ltd and others, Nokia Corporation v Her Majesty's Commissioners of Revenue and Customs, Joined cases C-446/09 and 495/09, 3 February 2011
Advocate General Cruz Villalon has given his opinion on a question referred by Court of Appeal on the interpretation of the Counterfeit Goods Regulation - see July 2009 and January 2010 for reports of High Court and Court of Appeal decisions respectively.

In July 2009, Nokia Corporation lost its application for judicial review of a decision of HMRC not to continue to detain or suspend the release of a consignment of counterfeit telephones which were in the UK in transit from Hong Kong to Colombia. The key issue concerned the correct interpretation of the definition of "counterfeit goods" in the new Customs Regulation, and whether it encompassed goods which were in transit.

Kitchin J held that, for products bearing trade marks to be counterfeit goods, they must infringe someone's trade marks in the territory in question. He said that, as the CTM Regulation and the Trade Marks Directive made clear, a trade mark owner could only prevent another from using its mark "in the course of trade". As the telephones had not been put on the market in the UK, they were not counterfeit within the meaning of the new Regulation

On appeal, the Court of Appeal referred the following question to the ECJ:

The AG said that non-Community goods bearing a Community trade mark which are subject to customs supervision in a non-Member State and in transit from one non-member country to another non-member country may be seized by those customs authorities provided that there are sufficient grounds for suspecting that they are counterfeit goods and, in particular, that they are to be put on the market in the European Union, either in conformity with a customs procedure or by means of an illicit diversion, even though there is no evidence of their destination.

Regarding what constituted "suspicion", the AG concluded that for the customs authorities to be able lawfully to seize goods in transit, they had, at the very least, to have "the beginnings of proof", that is to say, some evidence that those goods may in fact infringe an intellectual property right.

For goods in transit, the most difficult thing was to prove the destination of the goods. The following circumstances could, in particular cases, lend substance to a well-founded suspicion that goods appearing in themselves to be counterfeit or pirated were to be placed on the market of the EU:

• The excessive duration of the transit;
• The kind and number of means of transport used;
• The greater or lesser difficulty of identifying the consignor of the goods; or
• The lack of information on their physical destination or consignee.

The AG also dealt with a question referred by the Belgian court concerning Article 6(2)(b) of the previous Customs Regulation and "production fiction". This is now set out more clearly in Article 10 of the current Customs Regulation. He said that "production fiction" does not apply i.e. verifying whether there had been intellectual property right infringement by goods in transit by applying the "production fiction" that the goods were manufactured in the member state in which they were situated.

Advocate General Opinion
Budějovický Budvar, národní podnik v Anheuser-Busch, Inc., Case C-482/09, 3 February 2011
Advocate General Trstenjak has given an opinion on questions relating to the nature of acquiescence in the use of a later trade mark, the time periods relating to such acquiescence, and the role of honest concurrent use in situations involving acquiescence. In effect, she recommends that the appeal in this case be upheld.

The Advocate General has given an opinion on several questions referred by the Court of Appeal (see October 2009 Bulletin) relating to loss of trade mark enforcement rights as a consequence of acquiescence in the use of a later trade mark.

Article 4(1)(a) of the Trades Mark Directive provides:

Article 4(2(a)(ii) provides that:

Article 9(1) provides that:

The American manufacturers, Anheuser-Busch Inc. (AB), and the Czech manufacturers, Budejovicky Budvar Narodni Podnik (BB), had both been selling "Budweiser" beer in the UK since the 1970s, In a passing off action brought by AB, the Court of Appeal held, in 1984, that both "Budweiser" brands were entitled to co-exist in the UK because a dual reputation had been established.

In 1979, AB applied to register BUDWEISER for "beer, ale and porter" which was opposed by BB. In 1989, BB applied to register BUDWEISER for "beer ale and porter; malt beverages" which was opposed by AB.

In March 2000, the Court of Appeal held that both AB and BB were entitled to register BUDWEISER as a trade mark in the UK. The decision was reached under the old (1938) UK Trade Marks Act which expressly allowed concurrent registration of the same or confusingly similar marks in circumstances where there was honest concurrent use or other special circumstances. Both AB's and BB's BUDWEISER marks were put on the register on 19 May 2000.

On 18 May 2005, four years and 364 days after the parties' BUDWEISER marks were put on the register, AB applied for a declaration that BB's BUDWEISER registration was invalid, pursuant to Article 4(1)(a) of the Directive. AB's case was that:

• Although both side's marks were put on the register on the same day, AB's was an "earlier trade mark" by virtue of Article 4(2), as its date of application was some ten years earlier.
• The marks and goods were identical and so, by virtue of Article 4(1)(a), BB's mark was liable to be declared invalid.
• There was no question of acquiescence because the five-year period provided by Article 9 had not quite expired.

The timing of the application was such that, although it was issued within the five-year period, it was not served on BB until after the five-year period had expired. This denied BB the opportunity to respond with a cross-application to have AB's 1979 BUDWEISER trade mark registration declared invalid on the basis of BB's ownership of a 1976 registration of the word BUD.

The High Court upheld the decision of the IPO hearing officer granting a declaration of invalidity, on the ground that BB's mark was identical with the earlier trade mark owned by AB, and was registered in respect of identical goods.

BB appealed to the Court of Appeal which stayed the proceedings and referred questions to the ECJ concerning the nature of acquiescence under the Directive, the time periods involved in applying Article 9(1), and the relevance (if any) of honest concurrent use.

The Advocate General considered that acquiescence required a conscious decision to refrain from the assertion of a right to prevent use of the later mark, and that the five-year acquiescence period should be deemed to run from the date when the later mark became registered or (if later) the date when the person alleged to have acquiesced could show that it first learned of the later registered mark.

The period should be deemed to run even if the applicant had not yet achieved registration of the earlier mark relied on.

The Advocate General also recommended that Article 4(1)(a) of the Trade Marks Directive should not be applied in the main invalidity proceedings, as this would mean interfering with the Court of Appeal judgment in 2000 which had permitted registration of a later mark on the strength of honest concurrent use, a doctrine of English law which she deemed to be incompatible with the Directive.

She said that if the Court of Appeal were to apply Article 4(1)(a) in the main invalidity proceedings, this would have an adverse retroactive effect on the legitimate expectations of the proprietor whose trade mark was under attack, and would be contrary to the principle of legal certainty.

In effect, she recommends that the appeal in this case be upheld.

COPYRIGHT

Patents County Court – permission to discontinue action refused
Media CAT Ltd v Adams and others, [2011] EWPCC 6, HHJ Colin Birss QC, 8 February 2011
The Patents County Court has held that an attempt to discontinue claims was an abuse of process. The court also made other observations of interest concerning infringement by using a P2P filing-sharing network, infringement by authorisation, an order preventing letters threatening proceedings for copyright infringement, and management of Norwich Pharmacal orders.

The claimant, Media CAT Limited, commenced actions against 27 individuals for copyright infringement in pornographic films as a result of the use of peer-to-peer (P2P) file-sharing software on the internet.

Prior to commencing the actions, Media CAT had instructed a company to monitor the alleged infringement of the films. This company produced a list linking a film, an IP address on a particular date and time, and a P2P network. They used this list to obtain Norwich Pharmacal orders requiring the internet service providers to provide the names and addresses of the subscribers.

Many thousands of letters before action were sent by Media CAT's solicitors, ACS:Law, demanding £495 in compensation to avoid legal proceedings. The letters alleged infringement either directly by the recipient of the letter or by authorising third parties to infringe.

After unsuccessfully applying for default judgment, ACS:Law then sought to discontinue the cases by serving notices of discontinuance. They stated that Media CAT would reissue the claims. They claimed that this was to reformulate the Claim and ensure that service of it was correct. Fresh warning letters were sent by a third company, GCB Ltd.

CDPA 1988 s.102(1) provides that:

CPR 19.3(1) provides that:

CPR 38.2(2)(c) provides that:

CPR 38.7 provides that:

CDPA s.16(2) provides that it is a primary infringement of copyright to, among other things, authorise another to do an act which infringes copyright.

The court considered the status of Media CAT which was, at best, a company with a contract which gives it "all rights necessary to allow [Media CAT] to inquire claim demand and prosecute through the civil courts where necessary any person or persons identified as having made available for download a film for which [an agreement] has expressly licensed". This was included in an agreement between Media CAT and Sheptonhurst Ltd, according to which, Sheptonhurst was the owner of copyright in the films. The agreement also purported to give Media CAT the "sole and exclusive right to demand collect and receive all revenues in respect of illegal file sharing". Under the agreement, 65% of the revenues went to ACS:Law, 15% to Media CAT and 20% to Sheptonhurst.

The court said that the extent to which it is legally possible for Media CAT to acquire the rights it claims in relation to copyright is open to question and has not been tested in court.

The court's conclusions concerning the notices of discontinuance were:-

1. As the actions were copyright claims by a person claiming (at best) to be a licensee, permission under CDPA s102 should have been obtained by Media CAT to proceed with the action without joining the copyright owner. Taking the step of serving these notices without permission is a breach of s102, and the notices of discontinuance should be set aside as an abuse of process.
2. Also, in the cases in which a defence has been filed, the notices of discontinuance are abusive because they would give the copyright owners a collateral advantage stemming from a breach of the statute (s102 of the 1988 Act) and the avoidance of a mandatory rule (CPR r19.3). They avoid being a party at the point the case is discontinued and therefore avoid being subject to r38.7. That way the copyright owner avoids the need for the court's permission to reissue the claims in those cases where a defence has been served. It is an advantage which is unwarranted in the circumstances.
3. The notices of discontinuance provided unwarranted collateral advantages to the financial beneficiaries under the agreements (Media CAT, ACS:Law, Sheptonhurst). The unwarranted advantage is that the notices avoid judicial scrutiny of the claims which, despite the purported discontinuance, were being pressed ahead in correspondence against many other individuals.

The court also commented that the Particulars of Claim were based on untested legal and factual propositions and issues of technology. The Judge emphasised that Polydor Limited and others v Brown and others did not show that using P2P software amounted to copyright infringement. He said that, assuming that the defendant in Polydor was identified as a possible infringer using a similar technique to that used in this case, there was other evidence in Polydor.

The Particulars of Claim mentioned unsecured internet connections and tied in with that alleged infringement by the defendant either by infringing themselves or "by allowing others to do so". However, the word used in CDPA s16(2) is "authorising" and not "allowing". They are by no means the same and the difference may be very important if the allegation is about unauthorised use of an internet router by third parties. Media CAT's monitoring exercise did not identify the individual who actually did anything. All the IP address identified was an internet connection, which was likely today to be a wireless home broadband router.

The judge said that he had considered that this might be a proper case, in the light of the letters written for Media CAT by GCB, in which to make a novel order requiring Media CAT to stop writing any further letters at least until they had returned to court with a properly pleaded Particulars of Claim. Such an order would be an extraordinary order to make. He considered that he had jurisdiction to make such an order because the origin of the letter-writing campaign was a series of Norwich Pharmacal orders. An order restraining the use of the information disclosed under the Norwich Pharmacal order could be nothing more than an order varying the original orders. However, as Media CAT subsequently ceased trading, he said that that there would be no point in making such an order.

He also commented that when a Norwich Pharmacal order was sought of the kind made in this case, it might be worth considering how to manage the subsequent use of the identities of the individuals disclosed.

Patents County Court – copyright licence
Deakin and another (t/a Faith Image Source) v Card Rax Ltd and others [2011] EWPCC 3, HHJ Fysh QC, 1 February 2011
The Patents County Court has found there to be infringement in a dispute concerning copyright licences for greeting cards. The case raised a number of issues, including what the express and implied terms of the licences were, whether a bailment action could succeed, joint tortfeasorship and additional damages.

This case concerned a dispute over the terms of copyright licences to use artwork for greeting cards produced by the claimant, and whether they had been breached so that the defendants had infringed copyright.

The case was factually complex. There was no formal agreement between the parties and the only written terms of their dealings were the invoices. Therefore, the court had to undertake lengthy examination of the express and implied terms in the licences. The court said that a party asserting custom or trade usage as an implied term bore the heavy burden of proving it. Evidence that a certain practice had taken place in a particular field of business in the recent past was not enough; evidence of widespread and historic usage in the business or industry was required.

The court found that certain of the claimants' claims for copyright infringement were made out, including that cards featuring certain designs were sold outside the licence period.

However, the court rejected the claims for infringement of copyright based on failure to pay invoices which led the claimants to purport to terminate the licences. The court followed an Australian case, Ng v Clyde Securities Ltd, [1976] 1 NSWLR 443, and held that the unpaid fees for the copyright licences gave rise to a debt and not a right to revoke the licence.

A claim of joint tortfeasorship against a director of the defendant companies who was not involved in its day-to-day running was rejected. The words "authorise", "procure" and "common design" all demanded some positive act on the part of an alleged joint tortfeasor and the individual's state of mind was relevant. "Joint tortfeasance by omission" might be possible, but was not available in this case.

The court also rejected a claim that the defendants had breached their duty of care as bailees because they had failed to return all of the claimant artist's original artwork. The onus was on the bailee to show that it had complied with the duty of care. However, the bailee was not under an absolute duty of care: the bailee had to take reasonable care of the goods. What was reasonable also depended on the nature and value of the goods and on the nature and size of the bailee's undertaking – in this case that of a small-sized card manufacturer. The issue was essentially for the court, to be answered as a sort of jury question. The judge said that he had no doubt that the defendants took reasonable care of the original artwork in this case.

A claim for additional damages under CDPA s.97 was refused. There had been no mindless infringement or massive abuse of the claimants' rights such as by the extensive reproduction of works without permission. The defendants had not knowingly sold out-of-licence material and what was done did not amount to a "couldn't care less" attitude to copyright. Save as to the wrapping paper (and unlike most cases of copyright infringement) there was no question of any deliberate copying. Neither had there been evidence of an intention to obtain (or the actual obtaining of) any unusual pecuniary advantage or commercial benefit from the infringements that would not be covered by a regular award of damages.

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