Intellectual Property - Recent changes in Law & Their Effect on Your Business

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• Community Patent: The European Parliament has accepted amendments to the draft Community Patent Regulation on the crucial issues of language, the judicial system and the role of national patent offices. It is expected that the Council will approve the amendments at their meeting in May and adopt the Regulation as amended. Once this is done the path will be clear for the introduction of the Community Patent.
• Glaxo -v- Dowelhurst: The European Court of Justice delivered its jugdment in this pharmaceutical parellel import case (Case C-143/00) referred from the High Court. Gouldens represented Glaxo. A full briefing note can be found in the accompanying Stop Press. The full judgment can be found at: http://europa.eu.int/cj/en/jurisp/index.htm
• The Copyright, etc and Trade Marks (Offences and Enforcement) Bill: received its second reading in the House of Lords on 10 May. It has now been committed to a Committee of the Whole House. No amendments have yet been tabled to the Bill as received from the Commons. The Bill amends the Copyright, Designs and Patents Act 1988 in respect of criminal offences, search warrants, powers of seizure and orders for forfeiture and the Trade Marks Act 1994 in respect of search warrants and powers of seizure and other related matters.
• The Patents Act 1977 (Amendment) (No.2) Bill: which amends the Patents Act by introducing a power for the courts to award additional damages in infringement actions received its first reading in the House of Commons on 24 April. The provisional date for the second reading is 19 July.

In Issue 23 we reported on the High Court decision in Guild -v- Eskandar Limited. In that case the Claimant, Mrs Guild, proved subsistence and infringement of (unregistered) design right in three designs from her range of distinctive knitwear "inspired from ethnic or peasant dress". The designs were remarkably simple: they were based on "a big rectangular shape", about 100cm across at their widest, which when laid flat were "symmetrical, untailored and unstructured" but, when worn, "draped and flowed over the body". Despite their simplicity, the Claimant’s garments retailed at about £1,000 each. The Court of Appeal has now overturned both the finding of design right subsistence and the finding of infringement.

Dealing with subsistence of design right, the Court of Appeal held that the trial judge’s conclusion that the designs were "original in the copyright sense" was wrong. The designs had been developed by Mrs Guild from an earlier design by a Mr Gigli. The trial judge found that Mrs Guild was responsible for the differences between Mr Gigli’s and Mrs Guild’s designs and that those variations involved sufficient skill and labour to give rise to originality. The Court of Appeal disagreed. The evidence did not support either of those findings and the judgment contained internal inconsistencies on this point. The judge was wrong in principle on the issue of originality and design right did not subsist.

The Court of Appeal went on to deal with infringement and held that the judge had erred in finding that the "inevitable inference" from the similarities between the Claimant’s and Defendant’s garments was that the Defendant must have copied the Claimant’s designs.

The Vice Chancellor pointed out that:

Lord Justice Rix added:

The samples of Mrs Guild’s garments available in court were not made to her original designs and there were no design drawings or sketches in evidence. The trial judge nevertheless decided that one of the Defendant’s garments was made to Mrs Guild’s original design with only "minor" alterations and inferred that the Defendant’s other garments were also copies. The Court of Appeal said these findings were wrong. The Defendant’s garments were dissimilar in design and Mrs Guild had not discharged the considerable burden of proof of copying. Therefore, even if the Court of Appeal was wrong to find that design right did not subsist, the Defendant had in any event not infringed any such design right as no copying had been proved.

This decision highlights two points of caution for claimants in (unregistered) design right actions. First, the threshold of originality is not as low as the first instance decision appeared to suggest. There is a real evidential burden to be discharged by a claimant on this issue, whether or not a defendant argues that the design was in any event commonplace. Second, the burden of proving copying is very much on the claimant, and the court should not be too ready to infer copying.

Whilst (unregistered) design right often proves to be a useful right, owners of novel designs should give careful consideration at an early stage to whether (unregistered) design right will give sufficient protection for their important designs. In some cases registered design protection will be available (and there is now a twelve month "grace period" after first marketing in which to obtain it). If Mrs Guild had been able to obtain registered design protection, that would have removed from her the burden of proving subsistence of design right and of proving copying, and the problems she encountered in respect of copying would not have arisen. The key issue would have become the validity of the registration, and the evidential burden on that issue would have been on the Defendant.

The first Claimant was the Formula 1 racing driver "Eddie Irvine". The other Claimants were companies through or with whom he was contracted to offer various services including "endorsement" services.

Talksport was a radio station which originally had broadcast news and talk-back programmes. It decided to refocus on news and talk programmes about sport.

Among other things it obtained the rights to cover the F1 Grand Prix World Championship in 1999. To advertise its change in direction Talksport embarked on a promotion campaign. Three boxed packs were produced the second of which consisted of a box picturing an F1 car and photos of some of the famous drivers including Eddie Irvine. Inside the box was a brochure. The photo on the front of the brochure was of Eddie Irvine. There was no issue of copyright infringement because the photo had been obtained from a photograph agency - however, as purchased from the agency the photo showed Eddie Irvine talking on a mobile phone whereas the Talksport version showed him holding a portable radio to which the words "Talk Radio" had been added.

Eddie Irvine claimed that the distribution of the "doctored" photo amounted to passing off because it gave the impression that he had in some way endorsed Talksport.

The judge discussed the history of an action for passing off and concluded that the law of passing off is now of wide scope and if someone acquires a valuable reputation or goodwill will protect it from unauthorised use by anyone else. The law will not allow anyone else to use another’s goodwill so as to reduce its exclusivity. It is not necessary for the claimant and the defendant to share a common field of business activity or even that sales of the claimant’s product will be reduced either substantially or directly at least in the short term. There must still be a misrepresentation since it is the misrepresentation that allows a defendant to make use of the claimant’s goodwill.

The judge further recognised that it is now common practice for famous people to exploit their name and reputation by endorsement of a wide variety of products or services way beyond their own field of activity. There was no good reason the judge said "why the law of passing off in its modern form and in modern circumstances should not apply to cases of false endorsement."

To succeed in a false endorsement case however, the claimant must be able to show two facts: firstly, that at the time of the matters complained of he had a significant reputation or goodwill; and, secondly that the defendant’s actions "gave rise to a false message which would be understood by a not insignificant section of his market that his goods has been endorsed, recommended or are approved of by the claimant".

The "doctored" photo did give rise to a false impression that Eddie Irvine had in some way endorsed Talksport. Eddie Irvine did have a valuable reputation and Talksport had wrongly taken the benefit of that reputation. Eddie Irvine was therefore entitled to damages. He had not claimed an injunction because it had been made clear that no further copies of the brochure and offending photo would be distributed.

On 25th April 2002 the Court of Appeal reversed a finding of the Patents County Court that a patent was obvious. It is very rare for the Court of Appeal to interfere with a trial judge’s findings on obviousness because, usually this is a question of fact to be determined by the trial judge who hears and evaluates evidence given by witnesses at trial. This case is therefore very significant.

The patent in issue was for a selectively coated cable tie. At trial, the judge found that the patent was infringed but that the patent was invalid for being obvious on the basis of common general knowledge. The trial judge rejected all of Band-It’s alleged prior art and its arguments that the patent was not novel. He also rejected both side’s expert evidence. Hence, in determining the obviousness issue, he was left with only secondary evidence from persons working in the cable tie industry as to what they did or would have done at the relevant time. Without reference to this evidence, the judge did not assume the mantle of the unimaginative skilled man in the art and just decided that the patent was obvious. He then looked to Panduit’s secondary evidence to see whether or not this evidence rebutted his presumption of obviousness. He concluded that it did not.

The Court of Appeal found this approach to be erroneous. It held that the onus of proof was on Band-It to prove that the patent was obvious. Reversing the burden of proof as the judge had done, was incorrect. The Court of Appeal then went on to consider the evidence served on behalf of Band-It and found that the evidence did not establish that the patent was obvious.

In fact the impression of the Court was that the secondary evidence supported Panduit’s submissions that the patent was not obvious. However, it was not a matter for Panduit as the patentee to prove. It was for Band-It, having raised obviousness as an attack on the patent, to prove it.

In addition, the Court considered that this case was the same as in Dyson -v- Hoover where the "mind set" of the person skilled in the art had been considered relevant and that the judge had failed to take this "mind set" into account when deciding the question of obviousness. Had the judge taken on the mantle, which he did not, of the man skilled in the art he should have considered that there were a number of considerations e.g. the need to avoid galvanic reactions, the facilitating of handling in cold weather, that pointed away from a selectively coated cable tie. These considerations amounted to the mind set of the person skilled in the art and should have been taken into account by the judge in considering whether or not the patent was obvious.

This case is a warning shot to all first instance judges that the burden or onus of proof cannot be ignored. One of the Patent Court Judges once remarked that "onus is for wimps". If so it is clear from this decision that in the Court of Appeal "wimps win" and the onus of proof is a very important part of the English justicesystem.

Panduit was advised by Gouldens and Band-It by Linklaters.

The introduction of the Community Patent now looks likely in the forseeable future. The original Commission proposal for a Community Patent was published in August 2000 and since then the draft regulation has been the subject of much debate and amendment.

Three issues have caused the delay - the languages to be used, the judicial system to be put in place, and the future role of national patent offices after introduction of a Community Patent.

As originally proposed a patentee will file his patent application at the European Patent Office designating the Community as a territory. (The Community will accede to the Munich Convention which created the European Patent system). The Patent, when granted will be a Community Patent covering all the Member States of the Community . It will not be possible to have both a Community Patent and a European Patent designating some of the Member States of the Community or both a national patent in a Member State and a Community Patent. The European Patent will continue to exist but patentees will have to choose between a Community Patent and a European Patent if wanting cover only in the Community.

The procedure to grant and the rules relating to patentability of the Community Patent will be the same as that for the present European Patent. Once the Community Patent is granted, its life will be regulated by the Community Patent Regulation. It will be unitary in nature and be of the same effect throughout the Community. It will only be capable of being granted, transferred, declared invalid or allowed to lapse in respect of the whole Community although it will be able to be licensed for the whole or part of the Community.

The language issue looks to have been resolved by a compromise along the lines of that in place for the Community Trade Mark. Applications may be submitted in any of the Community’s official languages, but the applicant will also have to indicate a second language, to be the "procedural language" from one of five languages: English, German, French, Italian and Spanish, which it would be willing to use for opposition, revocation or invalidity proceedings. If the application is filed in a language other than those five, the European Patent Office will arrange to translate it into the procedural language chosen by the applicant.

The judicial system looks to be less certain than originally proposed. The Commission had planned for all proceedings relating to the Community Patent to be heard by a new European Chamber for Intellectual Property. This would have provided immediate certainty of decisions throughout the Community. However, the European Parliament has recommmended that first instance hearings should take place in Community Patent Courts designated by each Member State and only appeals be heard by the European Chamber for Intellectual Property.

The Parliament has indicated that there should be no more than two courts designated as Community Patent Courts in each Member State so as to ensure that the courts have the necessary expertise. It will also be possible for Member States to agree that a Community Patent Court in one of them shall be the Community Patent Court for a number of them. However, it is clear that the system will not be anywhere near as certain and efficient as it would have been had the European Chamber had sole jurisdiction. There is still room for conflicting decisions in the local courts with certainty only coming at appeal level which could take some years.

The Parliament has also sought to safeguard the role of national patent offices by calling for them to retain an important role in the processing of applications for the Community Patent. It envisages them receiving applications, forwarding them to the EPO and providing advisory services and information about the Community Patent. They may also undertake some of the search and research operations in connection with the applications although under a system of quality control from the EPO. How well this will work in practice remains to be seen.

The Council will meet in May, and it is thought that they will then adopt the draft regulation as amended by the Parliament thus opening the way to the introduction of the Community Patent.

The Rugby Football Union ("RFU"), with Nike European Operations Netherlands BV named as second claimant, failed in their action for trade mark infringement, passing off and breach of contract against Cotton Traders Ltd ("CT"), arising from its sale of "Classic English Rugby Jerseys" bearing the classic English rugby rose ("Classic Rose").

RFU claimed proprietary and goodwill rights in the Classic Rose, as the governing body of English rugby. Since the 1980s, CT, along with many other companies, had sold Classic Jerseys. RFU, other than sending letters of demand on some occasions, did not go any further to try to stop their widespread sale. It had attempted to obtain a UK registration for the Classic Rose, and failed on the grounds that it was not sufficiently distinctive for registration. It subsequently registered a similar version of the rose as a Community Trade Mark in 1998, in order to control its use and licensing. CT was granted a licence between 1991 and 1997 to sell jerseys bearing a redesigned rose on behalf of RFU, and Nike subsequently became the exclusive licensee. CT did not sell Classic Jerseys during its licence period, but began reselling them when its licence ended.

CT counter-claimed that the CTM was not validly registered, arguing that it did not comply with Articles 7(1)(a)-(d) of the Council Regulation 40/94/EC given it:

(a) was not capable of distinguishing the goods or services of one undertaking from those of other undertakings;

(b) was devoid of any distinctive character; (c) consisted exclusively of signs which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods, or other characteristics of the goods or service; and

(d) consisted exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade.

CT succeeded in its counter-claim and the RFU’s claims were dismissed. Lloyd J found that the mark, at the application date, was not regarded as a sign of trade origin, did not serve to distinguish RFU’s goods from those of other traders and was not recognised by the public as denoting goods originating from RFU. Nor at the time of the challenge had the mark acquired distinctiveness accruing to RFU, as it was primarily seen by the average consumer as a national emblem or symbol denoting either England as a country or the English Rugby Team. From the point of view of sponsors, licensees and advertisers, the value of the mark consisted of its connection with the English rugby team rather than with the RFU. Further, as the mark was not used on swing tags or neck labels, it was not seen by consumers as representing the source of the garments.

As a consequence, the RFU’s infringement action failed. No goodwill in the mark had accrued to the RFU and as a result there could be no passing off action. The RFU also failed in its claims under the licence agreement.

The decision in effect means that the RFU cannot claim a monopoly in the Classic Rose and the Classic Jersey. While in this case the Classic Rose became a generic symbol many years before, the decision illustrates the need for companies to continually reinforce their ownership of brands that are in danger of becoming generic. If this has already occurred, as in the present case, it will be necessary for that party to develop supplemental trade marks in order to control the use and licensing of its marks, and to separate its branding from that of the generic mark.

Lloyd J distinguished the validity issues in this case from those arising in the recent decision of Arsenal Football Club v Reed [2001] RPC 922. Arsenal’s trade marks are associated with the football team, which represents the Arsenal Football Club, and are therefore distinctive of the Club. By contrast, the mark in this case signifies the English Rugby team, which in turn represents the country rather than the RFU. This judgement did not consider the issue of the use of trade marks as badges of loyalty, although the Classic Rose is clearly used in that manner.

The decision also demonstrates the need for caution in developing surveys directed at members of the public, with questions such as "what does this logo mean to you?" (implying that the logo was a trade mark) and "would you expect anyone to be responsible for the licensing of sportswear under this logo, and if so, who?" seen as leading. Further, the evidence implied that the surveys were not always carried out in strict compliance with the questionnaires. These actions decreased the value of the survey evidence.

• Judicial Review proceedings have been issued against Customs and Excise by the UK ISP Freeserve. The proceedings are in respect of Customs and Excise’s exemption of AOL from accounting for VAT in the UK. Towards the end of 1997 Customs and Excise decided that internet packages which involve the supply of some content in addition to the provision of internet access, would not be taxed as a supply of a telecommunications service and accordingly, the ‘effective use and enjoyment’ provisions contained in the Telecoms legislation would not apply.
• In February, the European Commission published its draft directive on the patentability of computer software programmes. The draft Directive states the requirement that in order to involve an inventive step, and thus be patentable in theory, a computer program must make a non-obvious technical contribution to the state of the art. In doing this, the Commission effectively replaces the existing exclusionary wording of the European Patent Convention (EPC) that computer programs are not patentable. The draft Directive gives a presumption that computer programs are now inherently patentable provided that they demonstrate the non-obvious technical contribution to the state of the art (although there are no clear guidelines on what this contribution should entail). As the Directive is only in draft form we shall wait with interest to see how it progresses.
• The government’s plans for radical reform of gambling legislation have been welcomed by the industry. The reforms look certain to follow the recommendations put forward in Sir Alan Budd’s report last year. The online and offline gambling and gaming industry will eagerly await the new proposals. We will report further once the White Paper has been released.