UK: In Short...Intellectual Property

Last Updated: 5 August 2003

By Charters Macdonald Brown, Simon Chalkley, John Reddington

gossIP

US Senate Ratifies Madrid Protocol

In October 2002, the United States Senate ratified the Madrid Protocol. This is a system administered by the World Intellectual Property Organisation whereby national trade mark registrations can be obtained in many different countries by filing a single application. Once the implementing legislation is in place (which should take about a year) it will be possible to obtain a US trade mark registration this way, and US applicants will be able to obtain overseas trade mark registrations using this system. Generally, the Madrid Protocol system is a simple and cost-effective way of securing international trade mark protection and is well worth considering whenever filing an overseas trade mark application. Another advantage is that additional countries can be added to the registration at any time.

Community Patent

On 4 March 2003 the Council agreed on a "common political approach" covering key issues. There will be a Community Patent Court established in Luxembourg by 2010, with exclusive jurisdiction in infringement proceedings and claims for invalidity, with a right of appeal to the Court of First Instance. Up until grant, the language regime for the Community Patent will be the same as the one provided for in the European Patent Convention. Upon grant, the applicant must file at the EPO a translation of the patent claims into all official Community languages. Renewal fees will not be more than the renewal fees for an average European Patent. In some cases, National Patent Offices may conduct search work on behalf of the EPO. There is no date by which Community Patents will be avail-able, but the UK Patent Office estimates that it is unlikely to be before 2007/2008.

  • Community Registered Design

Following the adoption by the Commission of the Implementing Regulation, it has been possible to make design applications for Community Registered Designs at OHIM since 1 January 2003, although they will be deemed to have been filed on 1 April 2003.

PARALLEL IMPORTS

  • Glaxo/Boehringer Ingelheim -v- Dowelhurst
  • 6 February 2003 (unreported)

This case, which for the last few years has been one of the most important in the UK and the EU as a whole for trade mark/branding issues in the pharmaceutical sector, may now be entering its final stages although appeals to the Court of Appeal are anticipated. The main issue is the ex-tent to which parallel importers can relabel or rebox pharmaceutical products (first put on the market in the EU) when importing them into another EU country.

National laws require the instructions for taking or using pharmaceutical products to be in the language of the country of import; as a result, all parallel imports within the EU have to be amended in some way. Originally, parallel importers chose to relabel imports but by 1999 numerous parallel importers had started to rebox, using the opportu-nity to develop their own house brands and get-up, often giving more prominence to their own brands than to those of the original manufacturer with the result that drugs originating from different pharmaceutical companies appeared to be originating from one source, the parallel importer. An obvious advantage of this was the "springboard" to be obtained when drugs went out of patent protection: the parallel importers’ reputation with patients, established on the back of their distinctive re-boxed brands, would allow the substitution of generics without any change being apparent to the patient. There was also a serious risk that some phar-maceutical companies’ trade marks would lose their distinctiveness and cease to perform their function as trade marks, making them vulnerable to validity attacks.

Glaxo Wellcome and SmithKlineBeecham (pre-merger), Boehringer Ingelheim and Eli Lilly separately commenced a number of proceedings to protect the integrity of their trade marks against two parallel importers, Dowelhurst and Swingward. The actions were consolidated and heard by Mr Justice Laddie in the High Court in January 2000. The initial decision was not favourable to the claimant pharmaceutical companies: the effect was that the parallel importers could rebox all products and in virtually whatever manner they liked. The judge did not accept that these repackaging activities caused any damage to the trade marks unless such damage was proven to be substantial; only then could the claimants restrict reboxing. The judge recognised that there were differing views in Europe and referred the relevant issues to the European Court of Justice. The ECJ gave judgment on 23 April 2002: it was much more favourable to the pharmaceutical companies’ position, regarding repackaging as inherently intrusive and damage to a trade mark owner’s marks would be assumed where there was repackaging. Only the least intrusive form of repackaging would be acceptable.

The case came back to the High Court in London on 6 February 2003 for a final judgment which, based on the boxes in issue in these particular proceedings, favours the parallel importers in so far as it allows them to rebox, as opposed to restricting them to relabelling. The judge found as a fact that there was strong resistance from a significant pro-portion of consumers to relabelled as opposed to reboxed product and that effective market access would be denied un-less the parallel importers were allowed to rebox; however, the particular forms of reboxing used by the parallel importers (in particular, the co-branding), were found to go beyond what is necessary to gain effective market access. Alterations designed to secure commercial advantage are not allowed.

In summary, the effect of this latest judgment is that pharmaceutical companies can object to certain changes, such as: use of the parallel importer’s house style for the get-up of the packs; removal of the trade mark owner’s mark or name from the front of the pack; prominent use of the parallel importer’s name on the front of packs or use of capital letters for their name on the side of the boxes; and placement of the parallel importer’s name prominently on blister packs for drugs inside the boxing.

The judge has indicated that an acceptable form of reboxing might be to produce a "lookalike" box incorporating the necessary changes but otherwise looking like the original manufacturer’s pack. In our view however, this is probably the most obtrusive form of reboxing because it requires patients to have to scrutinise the box carefully to establish whether it is original; no longer can they rely on a glance to satisfy themselves that what they are receiving has been boxed by the trade mark owner or under its control: one of the principal objectives of trade marks.

An alternative form of reboxing would be a completely plain box which depicts nothing but the claimant’s trade mark and information required by the Paranova guidelines (e.g. name of manufacturer, name of importer etc) and regulations.

The position now is that, if parallel importers are allowed to rebox products, they can only do so in a very limited way and cannot use reboxing as an excuse to develop their own branding. Parallel importers are also required to give notice to pharmaceutical companies before any repackaged products are marketed; this requirement is one of substance designed to enable trade mark owners to protect their marks.

The effect of failure to give notice will be that repackaged products infringe the original manufacturer’s trade marks.

Jones Day Gouldens acts for GlaxoSmithKline and Boehringer Ingelheim in these proceedings.

TRADE MARKS

  • Arsenal Football Club -v- Matthew Reed

2003 R.P.C. 9

On 12 November 2002 the European Court of Justice handed down its judgment in the trade mark infringement case Arsenal Football Club plc v Matthew Reed, the widely-publicised case of the street trader selling unauthorised merchandise bearing various trade marks owned by Arsenal Football Club plc. There was no dispute that Mr Reed was using the identical trade marks in relation to identical goods, but he claimed that they were being used, on scarves, hats and similar goods, as "badges of allegiance" rather than as trade marks to denote trade origin. To clarify this point he had displayed a notice stating that in the absence of any indications to the contrary the goods were not authorised merchandise. Mr Justice Laddie took the view that there was merit to this argument, and made a reference to the ECJ, essentially asking whether the defendant had a defence on the ground that the use of the marks did not indicate trade origin, but would be perceived as badges of support, loyalty or affiliation. In reply, the court held that the trade mark owner was entitled to prevent the unauthorised use and that it was "immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor".

Following the ECJ judgment the case came before Mr Justice Laddie again earlier this month. Despite the unequivocal guidance of the ECJ, Mr Justice Laddie found in favour of the defendant, Mr Reed, on the basis that in arriving at its judgment the ECJ had exceeded its jurisdiction by making findings of fact. Where the ECJ went too far, according to Mr Justice Laddie, was in ruling that, on the facts of this particular case, Mr Reed’s use of the ARSENAL marks was "such as to create the impression that there is a material link in the course of trade between the goods concerned and the proprietor". This was a finding of fact which contradicted the findings of fact reached by the UK National Court. On this basis Mr Justice Laddie concluded that the ECJ had exceeded its jurisdiction and opted to apply certain well-known and accepted principles of EU trade mark law, which had been referred to in the ECJ’s judgment, to the factual situation as he perceived it. Specifically, a trade mark owner may only exercise its right against third parties where use of a "sign" (an identical or similar mark) affects, or is liable to affect, the functions of the trade mark, "in particular its essential func-tion of guaranteeing to consumers the origin of the goods". Based on his perception of the defendant’s use of the marks as a badge of origin Mr Justice Laddie found that such use did not affect this essential function.

What the ECJ may have intended to say was that in any case where a third party is using a sign identical to the registered trade mark in relation to identical goods, a risk of con-fusion must be presumed, and there will be infringement irrespective of whether the use of the mark is intended as a badge of allegiance. Instead of this, the ECJ said that in the present factual situation, Mr Reed’s use of the trade marks is "such as to create the impression that there is a material link in the course of trade between the goods concerned and the trade mark proprietor". The question of the impression created by Mr Reed’s use of the marks, however, is a question of fact, which Mr Justice Laddie had already decided differently.

Being aware of the restrictive approach of the UK High Court to trade mark owners’ rights, the ECJ appears to have been careless in the wording of its judgment, producing further uncertainty. For the time being, the case has been decided in favour of the defendant, although it is understood that an appeal has been lodged. It remains to be seen how the Court of Appeal will reconcile Mr Justice Laddie’s decision with the clear intention of the ECJ.

  • "HAVE A BREAK"

Nestle -v- Mars UK Ltd [2002] EWHC 2533

In 1995, Nestle applied to register "HAVE A BREAK" as a UK trade mark for various confectionery goods. Mars opposed this application, claiming that the trade mark did not comply with various sections of the Trade Marks Act 1994, including that it lacked any inherent distinctive character and that it was purely descriptive of characteristics of confectionery goods. The Hearing Officer did not agree that "HAVE A BREAK" was purely descriptive of confectionery, but he did agree that the mark lacked inherent distinctive character, so Nestle’s application failed. Nestle appealed the Hearing Officer’s decision.

In the appeal to Mr Justice Rimer, Nestle claimed that the Hearing Officer did not apply the law correctly in consid-ering whether the mark "HAVE A BREAK" had a distinctive character as a trade mark. Nestle claimed that the recent Baby Dry case meant that, if a mark was not exclusively descriptive of the relevant products, it must automatically be a distinctive trade mark. Mr Justice Rimer did not agree; in his judgment, if a mark is not found to be exclusively descriptive of the relevant products, a separate issue as to whether the mark is inherently distinctive still arises. The question of distinctive-ness is one which has to be independently considered, depending on the particular facts. The Hearing Officer was found to have applied the law correctly in this respect, and so the appeal failed on this ground.

Nestle also claimed that, even if its mark did lack inherent distinctiveness, it had acquired distinctiveness through extensive use of its mark. The Hearing Officer dismissed this claim because Nestle had not used its mark "HAVE A BREAK" independently, without the additional words "…HAVE A KITKAT".

This case suggests that it might now be more difficult to register slogans as UK trade marks. In order to be registrable, a slogan must not be descriptive of the relevant goods or services, but it now seems it must also have an additional element of distinctiveness before it will be accepted. The more inventive or fanciful the slogan, the more likely it is to be accepted as a UK registered trade mark.

  • Reed Executive Plc and another -v-Reed

Business information Ltd and others

[2002] EWHC 2772 (Ch)

This was a hearing on the heads of damage available to the claimants and whether an enquiry as to damages was appropriate. The claimants had successfully sued the defendants for trade mark infringement and for passing off following the use of the trade mark "Reed" in the defendants’ totaljobs.com website. Infringement was caused not only by visible use of the mark, but also by the fact that the mark was used invisibly in the totaljobs.com source code. This caused some people who searched for Reed to "click through" to the totaljobs.com site.

The claimants had, by the time of the hearing, incurred around £300,000 in costs gathering evidence as to the damage caused by the infringement. They no longer sought injunctive relief as the Judge, Pumfrey J, had expressed the view in his original judgment that a case for the grant of an injunction had not been established.

Pumfrey J held that there should be an inquiry as to damages for the visible use on the totaljobs.com site but was much more circumspect about the invisible use.

Where the claimant cannot show a loss of sales or business, as in this case, the question of damages must be approached on the user basis. The defendant pays for the use he has made of the sign in addition to any damage he may have caused to the goodwill of the claimant. This amount is based on a hypothetical licensing agreement between the claimant and defendant as willing parties.

The investigation concerning the click throughs should go no further. The number of infringing click throughs was negligible and the cost of their investigation would be entirely disproportionate. Pumfrey J, horrified by the costs of investi-gation so far incurred, outlined that it was the duty of the court not to involve the litigants in very expensive disputes about trivial matters.

The fact that the click through rate was so close to zero was a valuable indication of the advantage which the defen-dants derived from their infringement and should inform the amount they had to pay as a result. An inquiry as to the invisible use should still be held but on the basis of a vanishingly small number of click throughs, and it would be stayed pending an appeal to the Court of Appeal.

This judgment illustrates the difficulty of obtaining remedies either by way of an injunction or damages for infringements based on infringing website click throughs unless they have widespread effect. It also indicates the regard which the court will have to disproportionate costs incurred in attempting to prove damages.

COPYRIGHT

  • USP Strategies Plc ("USP")

(1) Unicorn Strategies Plc ("Unicorn")

(2) -v- London General Holdings Limited ("LGH")

(1) AON Warranty Group Limited

(2) AON Warranty Services Limited

(3) [2002] EWHC 2557

LGH administered an insurance-based extended warranty scheme for Scottish Power. Changes to the tax regime which made insurance-based schemes less profitable led Scottish Power to tender for alternative scheme providers. Unicorn, which had designed a non-insurance-based scheme, secured the contract.

Unicorn produced two draft documents relating to the operation of the scheme: a Collections Account Agreement ("CAA") and a Service Agreement ("SA"). Before disclosing these documents to Scottish Power and LGH (which was involved in administering the new scheme), Unicorn required all parties to enter into a mutual confidentiality agreement. During discussions regarding the new scheme, redrafts were produced by each party. The final drafts were based upon LGH’s drafts.

The defendants and the claimants subsequently found themselves in competition to supply a similar scheme to Powerhouse. Although the claimants ultimately secured the contract, during negotiations the defendants provided a copy of the final Scottish Power documents to Powerhouse (with the parties’ names obscured). The claimants claimed that this was a breach of confidence and also a breach of copyright in the original CAA and SP.

The defendants argued that the confidentiality agreement protected only Unicorn’s original drafts and not subsequent drafts. The defendants also argued that certain ambiguities in the confidentiality agreement should be construed against the claimants. The Judge felt that the agreement must be construed so as to make commercial sense. He stated that "it makes no sense to suppose that as soon as Unicorn’s drafts were amended in any way they became available for LGH to use as it pleased." It was held that the publication of the final version of the CAA disclosed confidential information contained in Unicorn’s original draft, therefore such publication was a breach of the confidentiality agreement.

On the issue of copyright infringement, the Judge found that Unicorn held the copyright in the original draft of the CAA. Unicorn, LGH and possibly Scottish Power held copy-right in the final draft. The Judge noted that it was common ground that when work goes through successive stages in writing, copyright continues to subsist in earlier versions. Furthermore, it was also common ground that one joint owner cannot exploit copyright without the consent of others, whilst observing that no counterclaim had been submitted by the defendants as co-owner of copyright in the final version (which had been used by both parties in subsequent tenders).

On the question of whether the documents disclosed to Powerhouse reproduce a substantial part of the original CAA, the Judge considered the cases of Designer’s Guild -v- Russell Williams, stating that the whole of each work must be looked at, and also Ladbrokes -v- William Hill, stating that "the result depends much more on quality rather than quantity of what has been taken". In respect of the CAA, the Judge felt that a substantial part of the original document was reproduced in the document disclosed to Powerhouse and therefore the claimants’ copyright was infringed. On the facts, the Judge did not feel any significant reproduction of either party’s draft was involved in the final SA as disclosed.

Amongst other arguments, the Judge rejected the defence that it is customary that legal documents can be freely used as precedents. He stated that irrespective of the position in the legal profession, "there is no custom in the business world enabling one company to use copyright documents, for which another company has paid, without that company’s permission".

This case illustrates that care must be taken in respect of disclosure of documents; a redrafted document will benefit from the protection of a confidentiality agreement if it contains confidential information which was protected as such under the original draft. Also, copyright will continue to subsist in the original drafts of an amended document; therefore, later drafts may infringe such copyright if they reproduce a substantial part of the original.

FURTHER INFORMATION

In Short...Intellectual Property is a publication of Jones Day Gouldens and should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at its discretion. The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship.

In Short...Intellectual Property is prepared by Jones Day’s London IP practice which has over 25 years’ experience and can provide assistance and advice across all areas of IP. The London practice is part of Jones Day’s international IP group which has over 150 lawyers world wide.

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