UK: Intellectual Property Update Spring 2008: Focus On The UK

Last Updated: 23 May 2008
Article by Ralph Cox

PATENTS

No need for a rule of law on entitlement - so ruled the House of Lords (Lord Hoffmann again) in Yeda v Rhone-Poulenc1 overturning a Court of Appeal decision in an earlier action2 concerning the entitlement to a patent under the Patents Act 1977. The Court of Appeal had held that the person claiming entitlement had to "invoke some other rule of law to establish his entitlement". Lord Hoffmann disagreed.

The factual background to the Yeda action is somewhat complicated but in essence Yeda exploits inventions and technology developed by an Israeli research institute. The institute had found an effective combination treatment for cancer, written up the results for publication and sent a draft to a Professor Schlessinger, who had supplied some of the monoclonal antibodies used in the experiments. Professor Schlessinger worked for a company that then became part of Rhone-Poulenc. Before the institute's article was published, Rhone-Poulenc applied for a patent naming Professor Schlessinger and his team as inventors. Yeda sued claiming entitlement as assignee of the institute's rights in the invention.

The action was further complicated by Yeda initially pleading co-entitlement to the patent but later deciding this was over-generous to Professor Schlessinger. Following established case law on the need to contribute to the inventive concept to be entitled to a patent, Lord Hoffmann agreed - Professor Schlessinger's contribution was limited to claim integers reflecting the known prior art. Yeda was therefore allowed to amend its case to argue sole entitlement to the patent.

Lord Hoffmann then held that there was nothing in the Patents Act saying that an inventor's entitlement depended on anything other than being the inventor. The Court of Appeal was wrong in requiring an inventor to have to rely on a separate cause of action against the incorrect patentee. A rule of law or agreement would need to exist to give someone secondary ownership (such as an employer over an employee's invention) but that was irrelevant to an inventor's primary right to the patent. By clarifying the law in the area, the decision should simplify and so reduce the costs of entitlement disputes. The decision also illustrates the risks an inventor takes if he discloses his idea to another before applying for a patent. Further, if Professor Schlessinger had not been considered bound by a duty of confidence, no one would have been able to patent the invention - the institute's draft article would have been a novelty destroying prior disclosure.

Progress on Community patents and patents court. Our Autumn 2007 Update commented that it was difficult to see the Community patent system coming to fruition in the near future. It now looks somewhat more likely due to the efforts of the Slovenian Presidency which took over the rotating presidency of the EU from Portugal in January 2008. The Portugal Presidency set up a series of working parties to which the Slovenian Presidency has recently put a working document on the Community patent3.

The working document tackles the 2 issues that have held up progress to date: translation of patent claims and the distribution of renewal fees. To try to steer a course between the prohibitive costs of translating claims into all 23 official languages of the EU and national pride in languages the working document proposes two alternative solutions. The first is for a "flexible" Community patent: applicants would be able to decide which languages to file claim translations in. The resultant patent would only be enforceable in those member states with the official languages of the translations. Businesses could therefore decide patent-by-patent how to trade off geographical coverage against translation costs. The second proposal is to make translation into all official languages affordable by use of a low cost, mainly automated, central translation service. It is further suggested that automated translations could be "made available to any interested party by a simple click via the website of the central service concerned". The working document acknowledges that significant work would be necessary to build up dictionaries of technical terms and that possible inaccuracies mean translations could be used for information only (as anyone who has tried to use the EPO's current automated translation service will appreciate). While this option has the benefit of reserving full translation costs to the very small percentage of patents that are ever litigated, it will also require third parties wanting to assess potential infringement to bear translation costs themselves.

The working document is due to be discussed at inter-governmental meetings on 29 and 30 May 2008. France, which succeeds Slovenia in the Presidency, is reportedly keen to keep the momentum going. But the hope expressed by some politicians that political agreement on the Community patent can be reached by the end of the year seem optimistic if the past 30 years of missed opportunities are any guide.

As regards a Community patents court, the Portuguese Presidency presented a working paper with its proposals in October 20074. In a November progress report5, the Presidency stated that broad agreement had been reached on most proposals though reservations still existed, in particular on splitting infringement and validity actions and the language arrangements. The Commission has emphasised that split validity and infringement proceedings are not compulsory the aim is to give flexibility. While a split system is used in Germany, it makes less sense when courts in separate countries may be involved with potentially a number of different languages being used by the parties and judges. As well as increased costs, there is increased risk of contradictory constructions of a patent's claims being reached. On languages the proposals are for the central division of the court to use the language of the patent whereas national divisions use the language of the member state in which they are located unless agreed otherwise. It is understood that the Slovenian Presidency is pushing hard to resolve these and other issues and also for the Community patents court to be implemented separately to the Community patent if necessary to avoid delay.

TRADE MARKS

Damage by co-branding and de-branding - Lord Justice Jacob observes in the opening paragraphs of his February judgment in Boehringer v Swingward6, that "European trade mark law seems to have arrived at such a state of uncertainty that no one really knows what the rules are, outside the obviously core case of straightforward infringement". Perhaps a little pessimistic but there is justification for the view in light of the Boehringer case. After 2 references to the ECJ there is still no clear answer on whether or not co-branding or de-branding of goods by parallel importers is in principle likely to damage a trade mark's reputation or not. The reason for the continuing uncertainty is the ECJ's puzzling acceptance of a reference in an altogether separate action7.

The Boehringer case concerns the parallel importation of branded pharmaceuticals into the UK which need to be repackaged for regulatory and market acceptability. The repackaging can result in either the manufacturer's trade marks being removed completely from the external packaging (de-branding) or the parallel importer's mark or get up being used prominently alongside the manufacturer's marks (co-branding). The second ECJ reference established that there was no irrebutable presumption of damage by de-branding or co-branding: it was a question of fact for the courts to decide in the circumstances of each case. This was the question before the Court of Appeal.

The claimants argued that in light of the second ECJ decision the concept of damage went wider than had been thought such that de-branding or co-branding were in principle likely to damage a trade mark's reputation so that there was no need to assess their actual effects. The Court of Appeal dismissed the notion as it would be to reinstate the irrebutable presumption the ECJ had specifically rejected. Secondly, Jacob LJ observed that retailers such as Harrods and Berry Brothers & Rudd are apt to put their name on everything they sell. A lot of traders would therefore be in trouble if this "harmless" activity were illegal. Turning to de-branding, Jacob LJ could see the commercial concern of consumers becoming familiar with the generic names for drugs (they would more readily accept a generic version when the drug came off patent). But there was no damage to the trade marks. Traders had no right to insist that their marks stayed on their goods in the aftermarket. Therefore if the claimants' marks got some continued exposure, even if alongside the importer's marks, they were getting more than they were entitled to and so there could be no damage.

These findings would have decided the case in favour of the parallel importers were it not for the third ECJ reference. Jacob LJ considered the questions asked in the reference had been answered by the ECJ second decision in the Boehringer case but the ECJ had allowed a part of it: whether there is a principle of "minimum intervention" which should be added to the already existing principles to be observed by a parallel importer when repackaging pharmaceuticals set out in Bristol-Meyers Squibb v Paranova8. The Court of Appeal has therefore deferred making its final decision until the ECJ has given its answer to this reference.

Keywords do not constitute trade mark use - so found the High Court granting summary judgment against a Mr Wilson, the owner of a Community trade mark for MR SPICY, who alleged Yahoo infringed it through its "sponsored listings" search results9. Mr Wilson had discovered that typing MR SPICY into Yahoo's search engine brought up Sainsbury's and Pricegrabber.com's websites in the sponsored listings. Neither listing actually used the words "Mr Spicy" and the evidence was that neither Sainsbury nor Pricegrabber.com had bought it as a keyword. They had only purchased "spicy". Therefore the only person who had actually used the trade mark was Mr Wilson himself when he did the search that prompted his action.

The interesting aspect of the decision, however, is the application of the European Court of Justice's decision in Arsenal10 and in particular its statement that "The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark having regard to its functions [as a guarantee of origin and quality]". Accordingly, even if Yahoo, Sainsbury or Pricegrabber.com had bought the keyword "Mr Spicy" there would have been no use as a trade mark and so no infringement. This decision therefore adds to the obiter comments by Lord Justice Jacob in Reed11 in which he doubted that use of trade marks as metatags was trade mark use at all though he ultimately reserved his position. Reed was not referred to in Wilson.

OHIM12 makes record profits - OHIM's annual report for 2007, published on 6 March 2008, shows that in 2007 CTM applications rose by 13% (to around 90,000) and Community Registered Design applications by 10% (to 80,000). This high demand has resulted in an income of around €200m compared with an expenditure of around €138m. Accumulated profits apparently now stand at about €300m. As OHIM is a non-profit organisation, it is currently in discussions with the European Commission over a fee reduction in order to pass some of the surplus back to applicants (as happened in 2005 and last year). However, OHIM President Wubbo de Boer has commented in interviews that a number of member states are resisting the fee reduction for fear that their national trade mark offices will be undercut leading to reduced revenues to government coffers.

OHIM search system modified - after consulting trade mark practitioners and other users of the Community trade mark system, which showed that searches after an application had been filed were generally regarded as too late, OHIM modified its search system with effect from 10 March 2008. Under the old system, once OHIM had examined an application for a Community mark it was sent to various national registries for reports listing confusingly similar marks on their registers. Now national search reports will only be conducted if requested when filing an application at OHIM and on payment of an additional fee of €192. However, as countries such as France, Germany and Italy have opted out of the search system its usefulness is limited. Requesting a search will also delay the advertisement of an application, and so registration of the mark (assuming no opposition is filed in response to the advertisement), by about 4 months by comparison to when no search is requested.

Fast-track examination of UK trade mark applications - the Gowers Report on the intellectual property framework in the UK13, issued in December 2006, recommended a fast-track system for trade marks aimed at businesses with short timescales to launch of a product. The UK IPO responded and its fast-track service became available on 7 April 2008. To use it applications have to be filed electronically and select fast-track examination when filed. There is also an additional fee of £300 on top of the standard filing fees. The service cannot be used for applications for a series of marks. If the filing formalities are complied with, the application will be examined and a report sent to the applicant within 10 business days (as opposed to the average 4-6 weeks). If the UK-IPO fails to meet this deadline it will refund the £300 fee.

The additional fee, the fact that trade marks when granted take effect from the date of filing and that fast-track applications are still subject to the full three month opposition period before they proceed to registration all make it difficult to see the attraction of the fast-track procedure.

DESIGNS

No innocent infringement of Community designs. Jimmy Choo brought an action for infringement of Community registered and unregistered design rights against Towerstone regarding a handbag the latter had sold in its Oxford Street store14. The infringement test is whether the defendant's product creates a "different overall impression" on the informed user to the protected design. Towerstone argued its bag did create a different impression because of its inferior quality, relying on a Court of Appeal decision in Procter & Gamble15 which said that a 'poor quality' imitation if it does not convey the same impression would fail on its own lack of merits and so the courts should not be concerned that it may escape infringement. The court dismissed Towerstone's argument as, while it could apply on a comparison of the bags themselves, when quality differences would be discernible, they were not discernible when comparing Towerstone's bag against Jimmy Choo's design drawings. This aspect of the decision draws some of the sting for design holders of the P&G decision and suggests an advantage to design applications based on drawings rather than product photos (though it should be noted that the P&G registered design was also based on drawings).

The next issue was whether Towerstone had infringed innocently. Regulation 6/2002, which brought in the Community design regime, left it to individual member states as to whether to allow an innocent infringement defence. While the court could see no possible policy reason for the UK government enacting the defence for the UK registered and unregistered design rights but not the Community design rights, that was what the relevant legislation clearly did and so had to be followed. Further the court could not get round Parliament's clear intentions behind that legislation by recourse to the discretionary defence under the Enforcement of IP Rights Directive 2004/48 and nor were there "special reasons" against an award of damages, the only let out under Regulation 6/2002. Towerstone was therefore liable in damages while, in light of the decision, Parliament may want to revisit its Community designs legislation.

A load of balls - a narrow but interesting point came before the Court of Appeal on the construction of the Regulation 6/2002. The case, Green Lane v PMS16, concerned spiky plastic balls sold by Green Lane for use in tumble driers (apparently helping soften fabrics and reduce drying time). Green Lane obtained a series of Community registered designs for them. PMS had previously sold a similar product as massage balls but, after registration of Green Lane's designs started selling for other uses. Green Lane sued for infringement by those wider uses, though accepting that PMS could continue selling massage balls under the Article 22 (rights of prior use). PMS countered that Green Lane's registrations were invalid as a result of its prior use.

The issue on which a preliminary ruling was sought was therefore whether the novelty requirement for Community designs was absolute and, particularly, the scope of the exception provided by Article 7 regarding prior designs that "could not reasonably have become known in the normal course of business to the circles specialised in the sector concerned, operating within the Community". Specifically, were the "circles" and "sector" those concerned with the prior design or with the registered design (an applicant has to indicate the products upon which he intends to apply his design). The Court of Appeal agreed with the High Court that it was clearly the former. There was no basis for Green Lanes arguments that the protection afforded by a design right should be as wide as possible nor that the indication of products was for anything but classification purposes.

Further, Green Lane's argument that the prior art was limited to the same sector as the registered designs led to a number of absurd results. For example, a canny applicant for a multi-purpose design could apply indicating use "A". When that right expired, he could reapply for use "B" and so on for successive 25 year periods. None of his prior uses would count as prior art against the next application whereas, because infringement is as not limited by use, he could stop anyone else using the design on any product in any sector. It therefore clearly made sense that if the monopoly given by a design is over any kind of goods, then the prior art should extend to all types of goods as well (subject to the Article 7 exception for art obscure even in its own sector).

While firm in its decision, the Court of Appeal recognised the difficulties it creates for designers searching for prior art , especially as little art is registered. However, it considered that the clarity absolute novelty gives in the great majority of cases is worth the occasional harsh decision when unexpected prior art materialises.

MISCELLANEOUS

No rights for brand owners to take private action against look-a-like packaging - the UK Government's response to the consultation on the draft implementing regulations for the Unfair Commercial Practices Directive ("UCPD") was published on 4 February 2008 and the draft regulations themselves, the Consumer Protection from Unfair Trading Regulations 2008 (the "Regulations"), were laid before Parliament on 3 March.

The UCPD harmonises EU member states' unfair trading laws and introduces a general prohibition on traders treating consumers unfairly. Included in the annexed list of practices to be outlawed is "13. Promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by the same manufacturer when it is not". This provision was welcomed by brand owners as providing a new right to assert against look-a-like packaging. With some notable exceptions, such as the Jiff lemon and Penguin biscuit cases17, it has traditionally been difficult for brand owners to use trade mark law or passing off to prevent others from adopting own-label packaging sufficiently similar to the lead brand that it encroaches on their goodwill and reputation with consumers (trade marks for the shapes and colours of products particularly being notoriously difficult to obtain). However, despite the Government-commissioned Gowers' Report recognising the difficulties facing brand owners, and noting that the UCPD would tackle the issue, the Government has decided not to allow brand owners the right to bring private actions against practices within prohibition 13. Enforcement is instead restricted to the Office of Fair Trading and Trading Standards. With their limited budgets, and higher priorities such as anti-counterfeiting, it fair to assume that these agencies will not take much interest in look-a-like packaging.

The decision will leave the UK as the only country in the EU without a private right of action against copycat packaging. Although before Parliament, the Regulations cannot be amended - only approved or rejected. Rejection is unlikely so it is anticipated that the Regulations will be approved in time for the intended implementation date of 26 May 2008. A ray of hope for brand-owners is the Government's indication that its decision to preclude private actions will be formally reviewed three years after the Regulations come into force.

Commission White Paper on damages actions for anti-competitive behaviour. The Commission published its Green Paper on damages action back in December 2005 so the White Paper, published on 3 April 200818, has been long awaited. Its aims are to codify ECJ jurisprudence, harmonise national laws to the current level of best practice existing within the EU and overall to improve the abilities of those that suffer from the effects of anti-competitive behaviour to obtain effective redress through the courts. The general consensus is that the White Paper is more modest in its recommendations for achieving these objectives than some had expected or feared but, for that reason and its recognition of established litigation cultures and principles, the recommendations are more likely to be accepted by national governments.

A particular fear allayed by the White Paper is that the Commission is against any US-style multiple damages - the system is to provide compensation not to punish offenders. It is also clear that the Commission does not see private damages actions as replacing enforcement of competition law by public bodies (such as the Office of Fair Trading in the UK). To the contrary, the emphasis is on "follow on" actions for damages based on a finding of breach of competition rules by the Commission or a national competition authority. Leniency programmes are also to be protected.

Other aspects of the White Paper's recommendations are to improve mechanisms for collective redress through representative actions, allow more extensive disclosure that is currently usual before national courts, encourage early settlement and introduce a 2 year limitation period for a damages action from a final decision on a competition breach.

The proposals are under consultation to 15 July 2008 but it is not expected to result in any significant changes. The next step would then be to convert the recommendations into EU legislation for subsequent implementation into national law. This will obviously take time but for the most part UK law is already consistent with the proposals and will become more so as and when Office of Fair Trading recommendations19 on collective redress, costs and protection of leniency programmes come into effect.

Footnotes

1. Yeda Research and Development Company Limited v Rhone-Poulenc Rorer International Holdings Inc. & Ors [2008] 1 All E.R. 425

2. Markem Corp v Zipher Ltd [2005] RPC 31

3. Working Document 28 February 2008, 6985/08

4. 30 October 2007 14492/07

5. 15 November 2007 15162/07

6. Boehringer Ingelheim KG & Ors v Swingward Ltd & Ors [2008] ETMR 36

7. Wellcome v Paranova (Case C-276/05)

8. Joined Cases C-427/93, C-429/93 and C-436/93 [1996] ECR-I-3457

9. Wilson v Yahoo! UK Ltd and Overture Services Ltd [2008] EWHC 361 (Ch)

10. Arsenal Football Club plc v Matthew Reed [2003] ETMR 19

11. Reed Executive v Reed Business [2004] RPC 40

12. The Community registry Office for Harmonization in the Internal Market (Trade Marks)

13. Andrew Gowers was appointed by Gordon Brown, when Chancellor of the Exchequer, to review the IP framework in the UK and made 54 recommendations for improving it - see our Winter Update 2007

14. J Choo (Jersey) Ltd v Towerstone Ltd & Ors [2008] EWCA 346

15. Relying on a prior Court of Appeal decision in Procter & Gamble v Reckitt Benckiser [2008] FSR 8

16. Green Lane Products Ltd v PMS International Group Plc & Ors [2008] EWCA Civ 358

17. Reckitt & Coleman Products Ltd v Borden Inc. [1990] WLR 491 and United Biscuits (UK) Ltd v ASDA Stores Ltd [1997] RPC 513

18. White Paper on Damages Actions for Breach of the EC antitrust rules (COM(2008) 165, 2.4.2008)

19. Private actions in competition law: effective redress for consumers and business (November 2007)

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